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How Much Is Teva Spending on Research and Development?

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Jan. 29 2016, Updated 7:04 p.m. ET

Teva’s research and development expenses

R&D (research and development) is an integral part of most pharmaceutical companies, as it helps drive future revenues. Teva Pharmaceutical Industries (TEVA) spent $361 million on R&D in 3Q15, or 7.5% of the company’s total revenues. It was an absolute decrease of 12% compared to R&D expenses for 3Q14. Higher R&D expenses in 3Q14 were due to an impairment expense related to the cancellation of the balugrastim project.

The above graph reflects 3Q15 R&D expenses as part of total revenues for Teva and some of its peers.

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In 3Q15, Teva’s R&D expenses for its generic segment were $132 million compared to $133 million in 3Q14. As a percentage, it was 6% in 3Q15 and 5.5% in 3Q14. For its specialty segment, Teva spent $220 million on R&D compared to $221 million in 3Q14. As a percentage, that’s 10.1% in 3Q15 and 10.2% in 3Q14.

Wall Street analysts expect no significant changes in Teva’s R&D expenses for 4Q15.

Peer comparison

Teva’s R&D expenses as a percentage of its total revenue for 3Q15 were 7.5%. Compared to some of its peers, Teva has the lowest R&D expense-to-revenue ratio. Bristol-Myers Squibb (BMY) had the highest R&D expense-to-revenue ratio at 31.8%. Merck & Co. (MRK) was 14.9%, and Pfizer (PFE) was 14.2%.

Investors can invest in the Health Care Select Sector SPDR ETF (XLV) for exposure to the healthcare sector.

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