TEVA Pharmaceutical (NASDAQ: TEVA), the world's biggest generic drugmaker, reported that third-quarter net income fell to $525 million, or 64 cents a share, from $606 million, or 74 cents, in the year-earlier period. Sales reached $2.37 billion from $2.29 billion. Consensus estimates of 63 cents of profit on sales of $2.41 billion was expected. While TEVA was a bit light on the revenue line, it beat by a penny on EPS, in large part due to stronger than expected margins.

With a very strong pipeline, and expanding margins, TEVA continues to be the leading large pharma play out there. The stock is trading down today for two reasons. Up more than 50% year to date, the stock was priced for a blowout earnings report, which we didn't get. More importantly, CFO Dan Suesskind announced his retirement. In the company for over 30 years, he is the face of the company to investors, and his departure leaves many nervous. Hi replacement, current Checkpoint (NASDAQ: CHKP) CFO, Eyal Desheh, is no slouch. He knows TEVA well, having worked there for six years and as CFO of a NASDAQ 100 high-tech company, he is well-known on the Street.

For those looking for a long-term pharma play, consider buying TEVA on any weakness.

Disclosure: Author holds both TEVA and CHKP as of 10/30/07.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com.

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It peeves me just a little bit that in spite of some significant moves, there seems to be a lack of positive press for Kroger Co. (NYSE: KR). Oh, they received a good bit of spin out of their move to sign on to a series of directives promoting "best practices" for keeping tobacco out of the hands of minors, but those headlines were garnered in the interest of ivory tower politicos fanning their own egos, not in true recognition of Kroger itself.

What really gets me miffed though, is that the introduction of a $4 generic drug program at 76 of Kroger's pharmacies went virtually unnoticed by all except possibly a few hardcore AP writers who, after all, are responsible to report on just about everything.

So in the interest of "broad coverage," I now give you the link to the story at RetailingToday.com (registration required). I think the quip there provides a good, quick revelation regarding Kroger's generic drug efforts and it also makes a nice comparison between where Kroger is headed in the pharmaceutical business and how Wal-Mart (NYSE: WMT) is faring so far in that regard. We might note at this time that Wal-Mart has initiated a second price tier in its discount drug program.

Of additional interest in the Kroger camp was the recent indication by Jim Cramer that Kroger could be moving as high as $36. I won't disagree with that. Note that KR ended trading on 10-26-07 at $28.68, and was headed downward. Amid an overall positive attitude about the company, I believe that this puppy has room to run!

European pharmaceutical giant GlaxoSmithKline PLC (NYSE: GSK) stated today that its Q3 profit dropped 5.8% on slowing sales of its Avandia product along with stiffer competition from generic versions of many of its popular products. This was to be expected, as it was mentioned in GSK's last quarterly results as a warning on future guidance. But the firm is not sitting still while some of its sales are being taken by generic competitors, that's for sure.

The world's second-largest drugmaker after U.S.-based Pfizer, Inc. (NYSE: PFE) said that it will be rolling out a $3 billion program designed to cut costs amid an expected drop in 2008's profit due to -- you guessed it -- generic competition. The company is expecting the sales decline in its Avandia diabetes drug product to continue into next year as well.

Avandia, once one of GSK's most promising products, saw sales plummet off the deep end in the latest quarter. In the U.S., the drug saw a 48% decline. The drop was partly due to safety concerns around the drug that arose this summer after a negative article in The New England Journal of Medicine affected prescriptions globally. GSK CEO Jean-Pierre Garnier said job losses will be unavoidable, but did not go into specifics. However, GSK did reaffirm its outlook for the current fiscal year, saying that EPS growth of between 8% and 10% would be expected at constant exchange rates.

Pfizer (NYSE: PFE) saw a sharp drop in its third-quarter profit, as the world's largest drugmaker's net income declined 77% for its most recently completed quarter. Two big takeaways here: Pfizer exited the Exubera inhaled-insulin product market (taking a $2.8 billion charge in the process) and the company faced more severe generic product competition as well.

Generic drugs always hamper big pharma firms, and it's not going to get any easier in the next few years. Pfizer even lowered its 2007 net income forecast when it released Q3 results, partly on expanded generic competition. Try this on for size: Pfizer's Q3 profit came in at $761 million, down from $3.36 billion in the year-ago quarter. Sales fell 2% in the quarter to come in at $12 billion.

In what could be considered a lack of due diligence (oddly) or some terrible mis-forecasting, Pfizer's purchase of the worldwide rights to the Exubera product from Europe's Sanofi-Aventis in 2006 was a complete disaster. The $1.4 billion purchase produced Q2 revenue for Pfizer of $4 million. Let's see: even nominal growth rates would have given Pfizer perhaps $20 million in global annual revenue. Yikes -- that's more than a 20-year period for return there. Pfizer called Exubera numbers "disappointing," but I would call them "totally disastrous." Adding to the pain are the exclusivity losses for blockbuster products like Zithromax, Zoloft and Norvasc, but at least Pfizer sees the writing on the wall, what with 10,000 layoffs and everything.

It must not be much fun to compete with Wal-Mart (NYSE: WMT) in the prescription drugs business. The world's largest retailer keeps dropping prices.

Today, Wal-Mart said it would extend its $4 generic drug program to include a number of additional treatments for "problems including glaucoma, attention deficit disorder, fungal infections and acne," according to MarketWatch. For other items like birth control pills, it will charge $9 against a national average of $30.

Wal-Mart says that the program will save consumers $600 million over the next year, with some of the savings being tremendous. While antifungal Lamisil cost an average of $337.26 one month ago, its generic equivalent, terbinafine, sells at Wal-Mart for $4 for a commonly dispensed quantity of up to a 30-day supply, the company said.

The low-cost drugs raise the question of whether Wal-Mart makes money on them at all. It may use the price points to drive traffic to its stores. If so, companies like CVS Caremark (NYSE: CVS) would watch their stock prices take a beating.

The generic prices also raise the issue of unfair competition. If Wal-Mart does offer the drugs at below cost, is it building an antitrust case for other companies?

The new pricing may be good for consumers, but that doesn't mean the government won't look into it.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Teva Pharmaceutical Industries Ltd. (NASDAQ:TEVA), Israel-based world's largest generic drugmaker, reported fourth quarter net income of $460 million, or 56 cents per share, up from $305 million, or 45 cents per share, a year earlier. Excluding charges, Teva earned 53 cents per share, while analysts on average expected EPS of 58 cents and sales of $2.26 billion, according to Reuters Estimates. Sales during the quarter rose 63% to $2.28 billion.

But Teva shares have gained 2.3% on the Tel-Aviv Stock Exchange and are continuing to climb here and are now (noon) up 6% -- why?

Well, it is actually not surprising. Teva said it expects sales in 2007 to exceed $9 billion (up from $8.4 billion in 2006) and earnings per share to be in the range of $2.07 to $2.19. In 2008, CFO Dan Suesskind said "sales will surpass $10 billion and earnings per share will be above $2.50."

Teva has 162 product applications awaiting approval from the U.S. FDA. These have brand sales of over $92 billion. Teva doesn't only have the largest pipeline in the U.S. generic drug industry, but 42 of the applications are potentially first- to-file, meaning these drugs would have 180-day exclusive sales rights if approved. The outgoing President and CEO Israel Makov said the company expects to receive 30-40 approvals in 2007.

At $37.48, Teva is in the mid-range of its 52-week range of $29.22-43.90, but has performed very well in 2007, gaining 21%. Teva pays dividends and has been repurchasing shares.

My colleague Gary E. Sattler wrote earlier today about love-stocks, stocks to buy and hold for a lifetime, or nearly so. Well, for me, Teva is exactly one such stock.

Merck & Co. (NYSE:MRK) must now attract glass-is-half-full types as stockholders.

Who else but supreme optimists would buy stock in a drug maker facing more than 27,000 lawsuits regarding Vioxx, not including the Pennsylvania woman who recently dropped hers? Their faith that Merck will beat these cases is evident in the stock price.

Shares of Merck have jumped more than 39% over the past year, outperforming Pfizer Inc. (NYSE:PFE) Novartis AG (NYSE:NVS) and Schering-Plough Corp. (NYSE:SGP). Granted, beating Pfizer isn't that much of a victory, but still, that's a decent move.

Wall Street, which is awaiting Merck's fourth quarter results Jan. 30, expects the stock to climb further. The median target for Wall Street analysts is $48.50, according to Thomson Financial. Opinion, though, remains divided. Eleven analysts consider the shares either a strong buy or buy, 10 rate it a hold, and 3 a sell.

Merck has already said earnings this year are going to be lackluster and Wall Street is taking the company at its word. Analysts are forecasting earnings of 50 cents on sales of $5.38 billion, according to Thomson Financial. A year earlier, the company had a profit of 64 cents and revenue of $5.77 billion.

As Douglas McIntyre pointed out, Merck needs to convince investors that it's not Pfizer in the wake of that company's failed anti-cholesterol drugs. The Whitehouse, New Jersey-based company said last month that it will seek approvals for three important drugs this year and would have four more drugs in late-stage trials by mid-2007.

Also check out some other earnings reports that we're following, and let us know your thoughts on earnings expectations.

Like most of the Big Pharma companies, Merck & Co. (NYSE:MRK) needs a winner. Wall St. is scared witless that generic drug firms like Teva Pharmaceutical Industries (NASDAQ:TEVA) will scoop up all of the customers as drugs come off patent.

With Wal-Mart Stores, Inc. (NYSE:WMT) and every corner store offering $4 prescriptions for generic drugs, the sun may be setting on operations like Merck.

Merck is trying to get its new painkiller [subscription required], Arcoxia, out the door without physicians thinking it has health risks like the company's heart-unhealthy drug Vioxx.

Arcoxia is already controversial and it is not even for sale in the U.S. with some doctors thinking the drug could be as dangerous as Vioxx. However, a study presented at the recent American Heart Association conference indicated that the drug was fairly safe. Only 1% of the people on the drug suffered a heart attack, stroke, or death within the first year.

Great odds if you are not the patient who died.

Douglas McIntyre is a partner at 24/7 Wall St.

Wal-Mart Stores, Inc. (NYSE: WMT) just can't seem to let the media stop talking about its new sharply-reduced generic prescription drug program. First of all, this new prescription drug program for generic choices was supposed to be rolled out in the Tampa, Florida area only starting in early 2007. After competitor Target announced a similar program -- which cuts generic prescription drug prices on over 300 widely-prescribed drugs by up to 40% -- Wal-Mart then announced that it would roll out the program to all of Florida, immediately.

Then, grocery retailer Publix Markets announced a similar program as well. Now, in what seems like a perpetual game of retail oneupmanship, Wal-Mart has said that it will be expanding its new generic prescription drug program to 14 more states.

Wal-Mart announced that it would call for news conferences from states ranging from Alaska to Vermont, but did not elaborate on the reason except to say that the news conferences would involve a major "new customer initiative." Pretty deft, there. According to Wal-Mart, the reason for launching the new prescription drug pricing program is an effort to save working Americans money on health care. While that may be true, Wal-Mart critics said it was a stunt to draw in business and a grab for a bigger share of the drug business. Well, duh. This new initiative does both, yes?

Bristol-Myers Squibb (BMY) is expecting a competitor to produce a generic version of their popular drug Plavix, and is putting out the word it will vigorously defend its patent rights in the United States and abroad, they said in their quarterly filing with the SEC.

Shares fell $1.56, or 6.9%, to $21.21 in premarket activity after the comments were made. This follows a rough couple weeks for BMY as shares have dropped over 12% since the launching of a investigation in alleged anti-trust activity around this same drug. [The shares have remained at about $20.20 most of the day.]