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BHC or Teva: Who Is Controlling Expenses Better?

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Expense guidance for fiscal 2018

In its fourth-quarter earnings investor presentation, Bausch Health Companies (BHC) guided for adjusted non-GAAP SG&A (selling, general, and administrative) expenses of $2.45 billion and R&D (research and development) expenses of $455 million for fiscal 2019. The company has also guided for fiscal 2019 gross margin to fall in the range of 71% to 72%.

According to the company’s fourth-quarter earnings investor presentation, Teva Pharmaceutical (TEVA) reduced its spending base YoY by $2.2 billion in fiscal 2018 and plans to reduce overall spending by an additional $0.8 billion in fiscal 2019. As part of its ongoing restructuring program, Teva Pharmaceutical has been reducing its headcount and number of manufacturing facilities as well as divesting its non-core businesses. The company expects to reach its operating income margin target of 27% in the next three to five years.

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Wall Street projections

Wall Street analysts have projected Bausch Health Companies’ SG&A expense to sales percentage to be 29.07%, 28.63%, and 28.38% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively. Wall Street analysts have projected Teva Pharmaceutical’s SG&A expense to sales percentage to be 21.25%, 20.77%, and 20.44% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

Wall Street analysts have projected Bausch Health Companies’ R&D expense to sales percentage to be 5.35%, 5.32%, and 5.07% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively. Wall Street analysts have projected Teva Pharmaceutical’s R&D expense to sales percentage to be 5.94%, 5.78%, and 5.64%, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

Bausch Health Companies is expected to dedicate a higher percentage of its total sales to SG&A activities from fiscal 2019 to fiscal 2021. Teva Pharmaceutical, however, is expected to dedicate a higher percentage of its sales for research activities from fiscal 2019 to fiscal 2021.

Next, we will discuss dividend, free cash flow, and debt trends for Bausch Health Companies and Teva Pharmaceutical for fiscal 2019.

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