Sometimes, using equity to grow can come back to
bite you.
Teva Pharmaceuticals ' (Nasdaq: TEVA)
acquisition of Barr Pharmaceuticals helped boost its net
income in the third quarter, but its earnings per share fell
as that larger pie was split into a greater number of
pieces.
Excluding one-time charges, though, the acquisition seems
to be benefiting the generic-drug maker more than it's
hurting it. Revenue was up 25% during the quarter, thanks to
the acquired products, and adjusted EPS were up 16% year over
year. The Barr acquisition should really show up in the
bottom line next year. The company is guiding for 2010
adjusted EPS to be 34% higher at the midrange of
projections.
Teva may be the world's largest generic-drug maker,
topping generic sales by
Novartis (NYSE: NVS) and
Mylan (Nasdaq: MYL), but its branded business
continues to help drive a greater portion of revenue growth
for the company. Sales of multiple sclerosis treatment
Copaxone rose 38% year over year, and they may be able to
maintain that growth as
Biogen Idec (Nasdaq: BIIB) and
Elan (NYSE: ELN) continue to struggle with
Tysabri's side effect
issues. Teva's respiratory-drug business is also growing
at a healthy 37% clip, and Barr's women's-health business
contributed 10% more sales to the combined entity than it did
to Barr last year.
Which begs the question: What will Teva buy next? The
company has made no secret of its plans to continue its
extrinsic growth. But will it continue down the path of
generic-drug acquisitions, or move further into the
higher-growth branded-drug arena? The rumor farm isn't much
help. There are hints that the company's interested in buying
Protalix BioTherapeutics (NYSE: PLX), if
Pfizer (NYSE: PFE) doesn't do so first. It
might also bid on German generic-drug maker Ratiopharm.
Whatever Teva buys, as long as the acquisition starts
adding to the bottom line in the first year after the
acquisition, investors should be
happy.
This article was originally published as
Nice Quarter, Teva. What Will You Buy Next?on
Fool.com
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