Teva Pharmaceutical Industries Ltd. Posts Strong First-Quarter Earnings: Is the Stock Now a Buy?

The world's largest generic and specialty drugmaker Teva Pharmaceutical Industries Ltd. released its first-quarter earnings this morning before the bell, handily exceeding consensus for both revenue and non-GAAP diluted earnings per share. Digging into the details, the pharma company posted non-GAAP diluted EPS of $1.36, beating consensus by $0.11. Revenue for the quarter came in at $5 billion, topping the Street's estimate by $16 million.

Teva is a key name within the pharmaceutical industry as a whole, so let's dig deeper into its first-quarter results to see how the company generated this earnings beat, and what may be on the horizon for its shareholders.

Generic drug sales came in much better than expectedUnlike the past couple of quarters where generic drugs dipped and specialty products had to make up the difference, the opposite was true in the first-quarter of 2015.

The recent launch of generic Nexium and Lovaza boosted the unit's sales by 9% (18% on local currency terms) to $2.6 billion for the quarter, compared to a year ago.

Perhaps even more importantly, the unit's profitability jumped by a noteworthy 23% to $1.3 billion, relative to the same period a year ago. This increase is the direct result of a major reduction in sales and marketing expenses for generic medicines, down 10% from a year ago.

Specialty medicine sales crater; hit by falling Copaxone salesOn the flip side, specialty medicines missed the marked in a big way. Key CNS drugs like Copaxone, Azilect, and Nuvigil all saw their sales slip by high single or double-digits in the first-quarter.

Sales of the multiple sclerosis drug Copaxone, the drugmaker's most important product revenue-wise, dropped by 14% to $1.22 billion for the three-month period. Management cited inventory issues associated with the launch of the higher 40 mg/mL dose as the reason for the drop, which seems on target given that this higher dosing regimen accounted for 66% of total U.S.prescriptions during the quarter.

In the same breath, however, management noted that Sandoz announced earlier this month that it had obtained final approval of its ANDA for a generic version of the once daily Copaxone 20 mg/mL formulation. As such, Teva's "dosing defense" against generic rivals is about to be put to the test.

Oncology sales, usually a bright spot for Teva, also came in weaker than expected. Total oncology sales amounted to $264 million in the first-quarter, representing essentially no growth from the first-quarter of 2014. The segment's flat trajectory year-over-year is the result of lagging sales for Treanda. Treanda posted sales of$157 million for the three-month period, a decrease of 13% from a year ago. Per the release, management cited the new liquid form and subsequent stocking issues as the primary reason for the marked drop.

There was some good news emanating from Teva's specialty medicines during the first-quarter, though. Sales of newer respiratory drugs like ProAir and Qvar climbed by 15% to $265 million, compared to a year ago, helping to partially offset the losses in CNS and oncology medicines.

Is Teva a compelling buy after this strong first-quarter?I have to I'm not personally rushing in to buy Teva. There is no way to tell how well Copaxone's new higher-dose formulation will ultimately protect it from generics. And if payers do favor the cheaper generic low dose form, Copaxone's sales will most certainly crater.

I'm also not particularly impressed with Teva's pursuit of Mylan, especially at the proposed price of $50 billion. Mylan has issues of its own, and therefore probably shouldn't warrant a premium tender offer of about 28% at current levels. In short, this move looks like an act of desperation, stemming from the generic threat to Copaxone.

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George Budwell has no position in any stocks mentioned. The Motley Fool recommends Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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