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Production quality control issues drag on Teva Q1 sales

By Nick Taylor+

12-May-2011

Quality issues slowed first quarter revenue growth at Teva but, with one plant resuming shipping and another awaiting re-inspection, sales are expected to pick up.

Manufacturing quality control concerns restricted production at Teva plants in Irvine, California and Jerusalem, Israel and knocked $100m (€70m) off first quarter revenues. Teva has worked to correct the problems and the Irvine plant is due to begin shipping products in the coming days.

It’s product by product working hand in hand with the agency. We are shipping what the agency drug shortage is asking us to ship first and that’s why we are bringing up the lines the way we are”, said Bill Marth, CEO of Teva Americas, in a conference call with investors.

Vincasar (vincristine) will be the first product shipped, followed shortly by Zanosar (streptozotocin). Bringing all products back online is expected to take the rest of the year.

Teva has also been making changes at its plant in Jerusalem. The US Food and Drug Administration (FDA) sent the facility a warning letter in January 2011 and Teva has responded with corrective actions.

We of course have to wait until the FDA officially comes to do the requested re-inspection but to be very simple and very clear, I think we did all the corrective actions that we think we had to do and I think this is behind us”, said Shlomo Yanai, CEO of Teva, in a conference call with analysts.

Q1 results

Double-digit year-on-year growth meant net sales in the quarter passed the $4bn mark. Growth in operating income was more modest as higher expenditure, across a number of areas, partly offset the rise in revenue.

Sales of active pharmaceutical ingredients (API) to third parties grew 32 per cent year-on-year to $184m. “The API unit, although small, is doing well”, said Eyal Desheh, chief financial officer at Teva, in the analyst conference call.

Shares in Teva closed up 3.20 per cent at $48.65.

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