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Teva Pharmaceutical or Mylan: Which Is More Cost Optimal?

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Expense strategy

According to Teva Pharmaceutical’s (TEVA) 37th Annual J.P. Morgan Healthcare Conference transcript, the company reduced its spending base by $1.8 billion in the first nine months of 2018. The company expects to achieve its restructuring program target of a $3.0 billion reduction in its spending base in 2019.

Mylan (MYL) is also focusing on cost optimization by working on integrating its various businesses across the world as well as its acquired businesses to form One Mylan.

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Expense projections

Wall Street analysts expect Teva Pharmaceutical’s SG&A (selling, general, and administrative) expenses as a percentage of its revenues to be 20.99%, 19.65%, and 19.25%, respectively, in 2018, 2019, and 2020. On the other hand, Mylan is expected to report SG&A expenses as a percentage of its revenues of 19.49%, 19.26%, and 18.76%, respectively, in 2018, 2019, and 2020. Both companies are expected to reduce their SG&A-to-revenue percentages from 2018 to 2020. However, Mylan is expected to spend a lower percentage of its revenue on marketing and commercial activities than Teva.

Analysts expect Teva Pharmaceutical’s R&D (research and development) expenses as a percentage of its revenues to be 5.75%, 5.52%, and 5.42%, respectively, in 2018, 2019, and 2020. On the other hand, Mylan is expected to report R&D expenses as a percentage of its revenues of 5.37%, 5.53%, and 5.31%, respectively, in 2018, 2019, and 2020. Both companies are expected to dedicate a similar percentage of their revenues to R&D activities from 2018 to 2020.

In the next article, we’ll compare the shareholder value generated by Teva Pharmaceutical and Mylan in greater detail.

 

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