Teva Pharmaceutical Gaps Lower After Profit, Guidance Bomb

The drugmaker cited generic competition for Copaxone

The shares of Teva Pharmaceutical Industries Ltd (NYSE:TEVA) have plunged 10% out of the gate to trade at $17.17, after the generic drugmaker reported a fourth-quarter adjusted profit miss of 53 cents per share. And while revenue of $4.6 billion was slightly more than expected, the figure was 16% lower year-over-year due to increased generic competition for the company's multiple sclerosis drug Copaxone.

Additionally, Teva Pharmaceutical said it expects adjusted 2019 earnings per-share to arrive between $2.20 and $2.50 on revenue ranging between $17 billion and $17.4 billion, lower than analysts are projecting. CEO Kare Schultz said in a statement that "2019 will be the trough for our business, a year in which we will experience similar challenges to those of 2018 including the continued erosion of Copaxone in the U.S. and Europe as well as the introduction of generics in the ProAir market."

Analysts have yet to adjust their ratings, though, Cantor Fitzgerald reiterated its "neutral" recommendation and $25 price target in a note, saying, "We like Teva's stock and believe that there is a lot of value to be unlocked," though this could take time. Overall, 13 of 15 analysts maintain a "hold" or "strong sell" rating, while the average 12-month price target sits all the way up at $22.48.

Options traders, meanwhile, loaded up on long calls ahead of earnings. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TEVA's 10-day call/put volume ratio of 3.66 ranks in the 94th annual percentile.

Looking at the charts, TEVA shares rallied hard off their late-December annual low at $14.59, but peaked in the round $20 region -- home to an early December bear gap -- shortly after UBS called the stock "cheap." Since their Feb. 5 peak at $20.21, the security has shed 15%.