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Analyzing Teva Pharmaceutical’s Expenses

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May. 6 2019, Published 2:23 p.m. ET

Expenses in the first quarter

In the first quarter, Teva Pharmaceutical (TEVA) reported total non-GAAP expenses of $3.28 billion—a decline of 9.72% YoY (year-over-year). Among the total expenses, the company has spent $2.14 billion as COGS (cost of goods sold) and $602 million as S&M (selling and marketing) expenses—a decline of 12.34% and 11.73% YoY, respectively. The company also spent $255 million on R&D (research and development) expenses and $280 million on G&A (general and administrative) expenses—a decline of 11.76% and 13.04% YoY, respectively.

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Analysts’ projections

Analysts expect Teva Pharmaceutical’s S&M expenses to change YoY by -5.59% to $2.57 billion in fiscal 2019, -1.36% to $2.53 billion in fiscal 2020, and -1.55% to $2.49 billion in fiscal 2021.

Teva Pharmaceutical’s S&M expenses are expected to change YoY by -1.30% to $653.38 million in the second quarter, -5.46% to $641.00 million in the third quarter, and -15.43% to $649.50 million in the fourth quarter of fiscal 2019.

The company’s G&A expenses are expected to change YoY by -10.56% to $1.10 billion in fiscal 2019, -2.99% to $1.07 billion in fiscal 2020, and 0.13% to $1.07 billion in fiscal 2021.

Analysts expect Teva Pharmaceutical’s G&A expenses to change YoY by -7.02% to $271.50 million in the second quarter, -5.24% to $269.13 million in the third quarter, and -17.61% to $271.88 million in the fourth quarter of fiscal 2019.

For Teva Pharmaceutical, analysts expect the R&D expenses to change YoY by -7.97% to $1.01 billion in fiscal 2019, -1.92% to $994.68 million in fiscal 2020, and -0.99% to $984.86 million in fiscal 2021.

Analysts expect Teva Pharmaceutical’s R&D expenses to change YoY by -9.66% to $253.85 million in the second quarter, 2.26% to $248.49 million in the third quarter, and -13.40% to $250.28 million in the fourth quarter of fiscal 2019.

Restructuring targets

According to the first-quarter earnings conference call, Teva Pharmaceutical is on track to achieve its fiscal 2019 spend base target of $13.3 billion, which is $3.0 billion lower than its fiscal 2017 spend base of $16.3 billion. The company has been advancing towards the target by reducing its full-time employees by ~10,000 and by consolidating its manufacturing and administrative sites.

At the end of the first quarter, the company reported total spending of $13.8 billion for the past four quarters, which is $2.5 billion lower than the spend base in fiscal 2017. According to the first-quarter earnings investor presentation, based on annualization of the first-quarter spending, Teva Pharmaceutical is on track to beat its $3.0 billion cost reduction target.

To learn more about Teva Pharmaceutical’s restructuring plan, read What Teva Pharmaceutical Predicts for Expenses in 2018.

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