- Revenues of $4.3 billion
- GAAP diluted loss per share of
$0.10
- Non-GAAP diluted EPS of $0.60
- Free cash flow of $360 million
- Spend base reduction of $2.5 billion
since initiation of the restructuring plan in 2018; on-track to
achieve $3.0 billion by the end of 2019
- Full year 2019 revenues and EPS
guidance reaffirmed
Teva Pharmaceutical Industries Ltd. (NYSE: TEVA, TASE: TEVA)
today reported results for the quarter ended March 31, 2019.
Mr. Kåre Schultz, Teva’s President and CEO, said, “The second
year of our two-year restructuring program got off to a promising
start. We are on track to reduce our total cost base by $3 billion
by the end of 2019 and we have achieved a reduction of $2.5 billion
to date, while continuing to lower our debt. “
Mr. Schultz continued: “We faced the expected loss of
exclusivities of key products COPAXONE® and ProAir® to generic
competition. Our focus is on stabilizing our global generics
business and ensuring the success of our long-term organic growth
drivers, especially AJOVY® and AUSTEDO®. Both products continue to
gain momentum since their initial launches and we are making the
necessary investments to be able to bring them to markets outside
of the U.S. as well as explore additional indications.”
First Quarter 2019 Consolidated
Results
Revenues in the first quarter of 2019 were $4,295
million, a decrease of 15%, or 12% in local currency terms,
compared to the first quarter of 2018, mainly due to generic
competition to COPAXONE® and a decline in revenues from our
respiratory products and U.S. generics business.
Exchange rate differences between the first quarter of
2019 and the first quarter of 2018 negatively impacted our revenues
and GAAP operating income by $177 million and $49 million,
respectively. Our non-GAAP operating income was negatively impacted
by $58 million.
GAAP gross profit was $1,856 million in the first quarter
of 2019, a decrease of 20% compared to the first quarter of 2018.
GAAP gross profit margin was 43.2% in the first quarter of
2019, compared to 45.7% in the first quarter of 2018. Non-GAAP
gross profit was $2,150 million in the first quarter of
2019, a decline of 18% from the first quarter of 2018. Non-GAAP
gross profit margin was 50.1% in the first quarter of 2019,
compared to 51.7% in the first quarter of 2018. The decrease in
gross profit margin was mainly due to lower profitability in North
America resulting mainly from a decline in COPAXONE revenues due to
generic competition and lower revenues of certain other specialty
products.
Research and Development (R&D) expenses in the first
quarter of 2019 were $261 million, a decrease of 18% compared to
the first quarter of 2018. Non-GAAP R&D expenses were $255
million, or 5.9% of quarterly revenues in the first quarter of
2019, compared to $289 million, or 5.7%, in the first quarter of
2018. The decrease in R&D expenses resulted primarily from
pipeline optimization, phase 3 studies that have ended and related
headcount reductions.
Selling and Marketing (S&M) expenses in the first
quarter of 2019 were $648 million, a decrease of 12% compared to
the first quarter of 2018. Non-GAAP S&M expenses were $602
million, or 14.0% of quarterly revenues, in the first quarter of
2019, compared to $682 million, or 13.5%, in the first quarter of
2018. The decrease was mainly due to cost reduction and efficiency
measures as part of the restructuring plan.
General and Administrative (G&A) expenses in the
first quarter of 2019 were $292 million, a decrease of 11% compared
to the first quarter of 2018. Non-GAAP G&A expenses were $280
million, or 6.5% of quarterly revenues, in the first quarter of
2019, compared to $322 million, or 6.4%, in the first quarter of
2018. The decrease was mainly due to cost reduction and efficiency
measures as part of the restructuring plan.
GAAP other income in the first quarter of 2019 was $6
million, compared to $203 million in the first quarter of 2018.
Non-GAAP other income in the first quarter of 2019 was $6
million, compared to $110 million in the first quarter of 2018.
Other income in the first quarter of 2018 was primarily the result
of higher Section 8 recoveries from multiple cases in Canada and
net gain related to the divestment of our women’s health
business.
GAAP operating income in the first quarter of 2019 was
$134 million, compared to $1,525 million in the first quarter of
2018. Non-GAAP operating income in the first quarter of 2019
was $1,019 million, a decrease of 29% compared to $1,435 million in
the first quarter of 2018. The decrease in non-GAAP operating
income was mainly due to lower profits in North America resulting
mainly from a decline in COPAXONE revenues due to generic
competition, lower revenues of certain other specialty products in
North America and lower other income, partially offset by cost
reductions and efficiency measures as part of the restructuring
plan.
EBITDA (non-GAAP operating income, which excludes
amortization and certain other items, as well as depreciation
expenses) was $1,154 million in the first quarter of 2019, a
decrease of 27% compared to $1,587 million in the first quarter of
2018.
GAAP Financial expenses were $218 million in the first
quarter of 2019, compared to $271 million in the first quarter of
2018.
Non-GAAP financial expenses were $220 million in the
first quarter of 2019, compared to $203 million in the first
quarter of 2018. The increase in non-GAAP financial expenses was
mainly due to increased interest expense as a result of the $4.4
billion bond issuance in March 2018, partially offset by reduced
financial expenses as a result debt repayments during 2018.
In the first quarter of 2019, we recognized a tax
expense of $9 million, or 11%, on pre-tax loss of $84
million. In the first quarter of 2018, we recognized a tax expense
of $46 million on pre-tax income of $1,254 million. Our tax rate
for the first quarter of 2019 was mainly affected by impairments,
amortization and interest disallowance as a result of the U.S. Tax
Cuts and Jobs Act. Non-GAAP income taxes for the first
quarter of 2019 were $125 million, or 16%, on pre-tax non-GAAP
income of $799 million. Non-GAAP income taxes in the first quarter
of 2018 were $211 million, or 17%, on pre-tax non-GAAP income of
$1,232 million. Our non-GAAP tax rate for the first quarter of 2019
was mainly affected by the mix of products sold in different
geographies.
GAAP net loss attributable to ordinary shareholders and
GAAP diluted loss per share in the first quarter of 2019
were $105 million and $0.10, respectively, compared to income of
$1,055 million and diluted earnings per share of $1.03 in the first
quarter of 2018. Non-GAAP net income attributable to
ordinary shareholders and non-GAAP diluted EPS in the first
quarter of 2019 were $654 million and $0.60, respectively, compared
to $954 million and $0.94 in the first quarter of 2018.
The weighted average diluted outstanding shares used for
the fully diluted share calculation on a GAAP basis for the three
months ended March 31, 2019 and 2018 were 1,090 million and
1,020 million shares, respectively. In the first quarter of
2019, the weighted average outstanding shares for the fully
diluted EPS calculation on a non-GAAP basis was 1,093 million,
compared to 1,020 million in the first quarter of 2018. The
increase was mainly due to the conversion of the mandatory
convertible preferred shares to ordinary shares on December 17,
2018.
As of March 31, 2019 and 2018, the fully diluted share count for
purposes of calculating our market capitalization was approximately
1,107 million and 1,095 million, respectively. Non-GAAP
information: Net non-GAAP adjustments in the first quarter of
2019 were $759 million. Non-GAAP net income and non-GAAP EPS for
the first quarter of 2019 were adjusted to exclude the following
items:
- Impairment of long-lived assets of $489
million comprised mainly of impairment of intangible assets of
product rights and IPR&D assets related to the Actavis Generics
acquisition;
- Amortization of purchased intangible
assets amounting to $283 million, of which $248 million is included
in cost of goods sold and the remaining $35 million in S&M
expenses;
- Legal settlements and loss
contingencies of $57 million;
- Equity compensation expenses of $34
million;
- Restructuring expenses of $32
million;
- Contingent consideration income of $71
million;
- Minority income of $8 million;
- Other non-GAAP items of $59 million;
and
- Income tax of $116 million.
Teva believes that excluding such items facilitates investors'
understanding of its business. See the attached tables for a
reconciliation of the GAAP results to the adjusted non-GAAP
figures. Investors should consider non-GAAP financial measures in
addition to, and not as replacement for, or superior to, measures
of financial performance prepared in accordance with GAAP.
Cash flow generated from operations during the first
quarter of 2019 was $112 million, compared to $1,496 million in the
first quarter of 2018.
Free cash flow (cash flow generated from
operations net of capital expenditures and deferred purchase price
cash component collected for securitized trade receivables) was
$360 million in the first quarter of 2019, compared to $1,894
million in the first quarter of 2018. The higher free cash flow in
the first quarter of 2018 was mainly due to the proceeds from the
working capital adjustment with Allergan and the legal settlement
with Rimsa. In addition, the lower cash flow in the first quarter
of 2019 was mainly due to lower revenues from COPAXONE, as well as
a decline in sales of certain other specialty products and generic
products.
As of March 31, 2019, our debt was $28,624 million,
compared to $28,916 million as of December 31, 2018, mainly due to
favorable exchange rates, as well as the repurchase and
cancellation of $126 million of our $1,700 million 1.7% senior
notes due July 2019. The portion of total debt classified as
short-term as of March 31, 2019 was 10%, compared to 8% as of
December 31, 2018. The increase in 2019 was due to a net increase
in current maturities.
Segment Results for the First Quarter
2019
North America Segment
Our North America segment includes the United States and
Canada.
The following table presents revenues, expenses and profit for
our North America segment for the three months ended March 31, 2019
and 2018:
Three months ended March 31, 2019
2018 (U.S.$ in millions / % of Segment
Revenues) Revenues 2,047 100 % 2,531 100.0
% Gross profit 1,039 50.8 % 1,403 55.5 % R&D expenses 165 8.1 %
188 7.4 % S&M expenses 268 13.1 % 276 10.9 % G&A expenses
112 5.5 % 126 5.0 % Other income (4 ) § (102 ) (4.0 %) Segment
profit 498 24.3 % 915 36.2 %
Revenues from our North America segment in the first
quarter of 2019 were $2,047 million, a decrease of $484 million, or
19%, compared to the first quarter of 2018, mainly due to a decline
in revenues of COPAXONE, our U.S. generics business, BENDEKA® /
TREANDA® and QVAR®, partially offset by higher revenues from our
Anda business, AUSTEDO® and AJOVY®. Revenues in the United
States, our largest market, were $1,911 million in the first
quarter of 2019, a decrease of $479 million, or 20%, compared to
the first quarter of 2018.
Revenues by Major Products and Activities
The following table presents revenues for our North America
segment by major products and activities for the three months ended
March 31, 2019 and 2018:
North America
Three months endedMarch
31,
PercentageChange
2019 2018 2018-2019 (U.S.$ in
millions) Generic products $ 966 $ 1,088 (11%) COPAXONE
208 476 (56%) BENDEKA / TREANDA 122 181 (33%) ProAir 59 130 (55%)
QVAR 64 107 (41%) AJOVY 20 - NA AUSTEDO 74 30 151% Anda 379 331 14%
Other 155 188 (18%) Total 2,047 2,531 (19%)
Generic products revenues in our North America segment in
the first quarter of 2019 decreased by 11% to $966 million,
compared to the first quarter of 2018, mainly due to market
dynamics, price erosion in our U.S. generics business and portfolio
optimization, partially offset by new generic product launches.
In the first quarter of 2019, we led the U.S. generics market in
total prescriptions and new prescriptions, with approximately 436
million total prescriptions (based on trailing twelve months),
representing 12% of total U.S. generic prescriptions according to
IQVIA data.
COPAXONE revenues in our North America segment in the
first quarter of 2019 decreased by 56% to $208 million, compared to
the first quarter of 2018, mainly due to generic competition in the
United States.
COPAXONE revenues in the United States were $194 million in the
first quarter of 2019.
BENDEKA and TREANDA combined revenues in our North
America segment in the first quarter of 2019 decreased by 33% to
$122 million, compared to the first quarter of 2018, mainly due to
lower volumes and lower pricing, resulting partly from the June
2018 launch of a ready-to-dilute bendamustine hydrochloride by
Eagle Pharmaceuticals, Inc.
ProAir revenues in our North America segment in the first
quarter of 2019 decreased by 55% to $59 million, compared to the
first quarter of 2018, mainly due to lower volumes and lower net
pricing. In January 2019, we launched our own ProAir authorized
generic in the United States, following the launch of a generic
version of Ventolin® HFA, another albuterol inhaler. Revenues from
our ProAir HFA authorized generic are included in "generic
products" above.
QVAR revenues in our North America segment in the first
quarter of 2019 decreased by 41% to $64 million, compared to the
first quarter of 2018. The decrease in sales in the first quarter
of 2019 was mainly due to higher than normal volumes during the
first quarter of 2018 in connection with the launch of QVAR®
RediHaler™ and lower net pricing.
AJOVY revenues in our North America segment in the first
quarter of 2019 were $20 million. AJOVY was approved by the FDA and
launched in the United States in September 2018 for the preventive
treatment of migraine in adults.
AUSTEDO revenues in our North America segment in the
first quarter of 2019 were $74 million, compared to $30 million in
the first quarter of 2018.
Anda revenues in our North America segment increased by
14% to $379 million in the first quarter of 2019, compared to the
first quarter of 2018 mainly due to higher volumes.
North America Gross Profit
Gross profit from our North America segment in the first quarter
of 2019 was $1,039 million, a decrease of 26% compared to $1,403
million in the first quarter of 2018. The decrease was mainly due
to lower revenues from COPAXONE, as well as a decline in sales of
certain other specialty products and generic products, partially
offset by higher sales of AUSTEDO and AJOVY.
Gross profit margin for our North America segment in the first
quarter of 2019 decreased to 50.8%, compared to 55.5% in the first
quarter of 2018. The decrease was mainly due to lower revenues from
COPAXONE and certain other specialty products, partially offset by
generic products and Anda.
North America Profit
Profit from our North America segment in the first quarter of
2019 was $498 million, a decrease of 46% compared to $915 million
in the first quarter of 2018. The decrease was mainly due to lower
revenues from COPAXONE, a decline in sales of certain other
specialty products and generic products and lower other income,
partially offset by cost reductions and efficiency measures as part
of the restructuring plan.
Europe Segment
Our Europe segment includes the European Union and certain other
European countries.
The following table presents revenues, expenses and profit for
our Europe segment for the three months ended March 31, 2019 and
2018:
Three months ended March 31, 2019
2018 (U.S.$ in millions / % of Segment Revenues)
Revenues 1,264 100% 1,442 100% Gross
profit 730 57.8% 792 55.0% R&D expenses 66 5.2% 73 5.1% S&M
expenses 215 17.0% 250 17.4% G&A expenses 48 3.8% 91 6.3% Other
income (1) § 1 § Segment profit 403
31.9% 377 26.1%
Revenues from our Europe segment in the first quarter of 2019
were $1,264 million, a decrease of 12% or $178 million, compared to
the first quarter of 2018. In local currency terms, revenues
decreased by 5%, mainly due to a decline in COPAXONE revenues due
to the entry of competing glatiramer acetate products, the
termination of the PGT joint venture and the sale of our women’s
health business, partially offset by new generic product
launches.
Revenues by Major Products and Activities
The following table presents revenues for our Europe segment by
major products and activities for the three months ended March 31,
2019 and 2018:
Europe
Three months endedMarch
31,
PercentageChange
2019 2018 2018-2019 (U.S.$ in
millions) Generic products $ 919 $ 997 (8%) COPAXONE 114 153
(26%) Respiratory products 91 113 (19%) Other 140 179 (22%) Total $
1,264 $ 1,442 (12%)
Generic products revenues in our Europe segment in the
first quarter of 2019, including OTC products, decreased by 8% to
$919 million, compared to the first quarter of 2018. In local
currency terms, revenues were flat compared to the first quarter of
2018, mainly due to the loss of revenues from the termination of
the PGT joint venture, partially offset by new generic product
launches.
COPAXONE revenues in our Europe segment in the first
quarter of 2019 decreased by 26% to $114 million, compared to the
first quarter of 2018. In local currency terms, revenues decreased
by 20%, mainly due to price reductions resulting from the entry of
competing glatiramer acetate products.
Respiratory products revenues in our Europe segment in
the first quarter of 2019 decreased by 19% to $91 million, compared
to the first quarter of 2018. In local currency terms, revenues
decreased by 13%, mainly due to lower volumes in the U.K.
Europe Gross Profit
Gross profit from our Europe segment in the first quarter of
2019 was $730 million, a decrease of 8% compared to $792 million in
the first quarter of 2018. The decrease was mainly due to a decline
in COPAXONE revenues, the loss of revenues resulting from the sale
of our women’s health business and the impact of currency
fluctuations, partially offset by new generic product launches and
lower cost of goods sold.
Gross profit margin for our Europe segment in the first quarter
of 2019 increased to 57.8%, compared to 55.0% in the first quarter
of 2018. The increase was mainly due to the termination of the PGT
joint venture.
Europe Profit
Profit from our Europe segment in the first quarter of 2019 was
$403 million, an increase of 7% compared to $377 million in the
first quarter of 2018. The increase was mainly due to lower cost of
goods sold related to the termination of the PGT joint venture and
cost reductions and efficiency measures as part of the
restructuring plan.
International Markets Segment
Our International Markets segment includes all countries other
than those in our North America and Europe segments. The key
markets in this segment are Israel, Japan and Russia.
The following table presents revenues, expenses and profit for
our International Markets segment for the three months ended March
31, 2019 and 2018:
Three months ended March 31, 2019
2018 (U.S.$ in millions / % of Segment Revenues)
Revenues 668 100% 750 100% Gross profit
269 40.3% 313 41.8% R&D expenses 22 3.3% 24 3.2% S&M
expenses 115 17.2% 134 17.9% G&A expenses 36 5.3% 41 5.5% Other
income (0) § (8) (1.1%) Segment profit 97
14.5% 122 16.3%
Revenues from our International Markets segment in the first
quarter of 2019 were $668 million, a decrease of $82 million, or
11%, compared to the first quarter of 2018. In local currency
terms, revenues decreased by 3% compared to the first quarter of
2018, mainly due to lower sales in Japan, partially offset by
higher sales in Russia.
Revenues by Major Products and Activities
The following table presents revenues for our International
Markets segment by major products and activities for the three
months ended March 31, 2019 and 2018:
International Markets
Three months endedMarch
31,
PercentageChange
2019 2018 2018-2019 (U.S.$ in
millions) Generic products $ 441 $ 488 (10%) COPAXONE 13
16 (18%) Distribution 151 153 (1%) Other 62 93 (33%) Total 668 750
(11%)
Generic products revenues in our International Markets
segment in the first quarter of 2019, which include OTC products,
decreased by 10% to $441 million, compared to the first quarter of
2018. In local currency terms, revenues decreased by 1%, mainly due
to lower sales in Japan resulting from regulatory pricing
reductions and generic competition to off-patent products,
partially offset by higher sales in Russia.
COPAXONE revenues in our International Markets segment in
the first quarter of 2019 decreased by 18% to $13 million, compared
to the first quarter of 2018. In local currency terms, revenues
increased by 3%.
Distribution revenues in our International Markets
segment in the first quarter of 2019 decreased by 1% to $151
million, compared to the first quarter of 2018. In local currency
terms, revenues increased by 4%.
International Markets Gross Profit
Gross profit from our International Markets segment in the first
quarter of 2019 was $269 million, a decrease of 14% compared to
$313 million in the first quarter of 2018.
Gross profit margin for our International Markets segment in the
first quarter of 2019 decreased to 40.3%, compared to 41.8% in the
first quarter of 2018. The decrease was mainly due to lower sales
in Japan, partially offset by higher sales in Russia.
International Markets Profit
Profit from our International Markets segment in the first
quarter of 2019 was $97 million, a decrease of 20% compared to $122
million in the first quarter of 2018. The decrease was mainly due
to lower sales in Japan resulting from regulatory pricing
reductions and generic competition to off-patent products,
partially offset by higher sales in Russia and cost reductions and
efficiency measures as part of the restructuring plan.
Other Activities
We have other sources of revenues, primarily the sale of APIs to
third parties, certain contract manufacturing services and an
out-licensing platform offering a portfolio of products to other
pharmaceutical companies through our affiliate Medis. Our other
activities are not included in our North America, Europe or
International Markets segments described above.
Our revenues from other activities in the first quarter
of 2019 were $317 million a decrease of 7% compared to the first
quarter of 2018. In local currency terms, revenues decreased by
5%.
API sales to third parties in the first quarter of 2019
were $187 million, an increase of 4% compared to the first quarter
of 2018. In local currency terms, revenues increased by 5%.
Conference Call
Teva will host a conference call and live webcast along with a
slide presentation on Thursday, May 2, 2019 at 8:00 a.m. ET to
discuss its first quarter 2019 results and overall business
environment. A question & answer session will follow.
United States 1 (866) 966-1396
International +44 (0) 2071 928000
Israel 1 (809) 203-624
For a list of other international toll-free numbers, click
here.
Passcode: 9470199
A live webcast of the call will also be available on Teva's
website at: ir.tevapharm.com. Please log in at least 10 minutes
prior to the conference call in order to download the applicable
software.
Following the conclusion of the call, a replay of the webcast
will be available within 24 hours on the Company's website. The
replay can also be accessed until August 30, 2019, 9:00 a.m. ET by
calling United States 1 (866) 331-1332 or International +44 (0)
3333009785; passcode: 9470199.
About Teva
Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) has
been developing and producing medicines to improve people’s lives
for more than a century. We are a global leader in generic and
specialty medicines with a portfolio consisting of over 35,000
products in nearly every therapeutic area. Around 200 million
people around the world take a Teva medicine every day, and are
served by one of the largest and most complex supply chains in the
pharmaceutical industry. Along with our established presence in
generics, we have significant innovative research and operations
supporting our growing portfolio of specialty and biopharmaceutical
products. Learn more at http://www.tevapharm.com
Some amounts in this press release may not add up due to
rounding. All percentages have been calculated using unrounded
amounts.
Non-GAAP Financial Measures
This press release contains certain financial information that
differs from what is reported under accounting principles generally
accepted in the United States ("GAAP"). These non-GAAP financial
measures, including, but not limited to, non-GAAP EPS, non-GAAP
operating income, non-GAAP gross profit, non-GAAP gross profit
margin, EBITDA, non-GAAP financial expenses, non-GAAP income taxes,
non-GAAP net income and non-GAAP diluted EPS are presented in order
to facilitates investors' understanding of our business. We utilize
certain non-GAAP financial measures to evaluate performance, in
conjunction with other performance metrics. The following are
examples of how we utilize the non-GAAP measures: our management
and board of directors use the non-GAAP measures to evaluate our
operational performance, to compare against work plans and budgets,
and ultimately to evaluate the performance of management; our
annual budgets are prepared on a non-GAAP basis; and senior
management’s annual compensation is derived, in part, using these
non-GAAP measures. See the attached tables for a reconciliation of
the GAAP results to the adjusted non-GAAP figures. Investors should
consider non-GAAP financial measures in addition to, and not as
replacements for, or superior to, measures of financial performance
prepared in accordance with GAAP. We are not providing forward
looking guidance for GAAP reported financial measures or a
quantitative reconciliation of forward-looking non-GAAP financial
measures to the most directly comparable GAAP measure because we
are unable to predict with reasonable certainty the ultimate
outcome of certain significant items without unreasonable
effort.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, which are based on management’s current beliefs and
expectations and are subject to substantial risks and
uncertainties, both known and unknown, that could cause our future
results, performance or achievements to differ significantly from
that expressed or implied by such forward-looking statements.
Important factors that could cause or contribute to such
differences include risks relating to:
- our ability to successfully compete in
the marketplace, including: that we are substantially dependent on
our generic products; competition for our specialty products,
especially COPAXONE®, our leading medicine, which faces competition
from existing and potential additional generic versions and
orally-administered alternatives; the uncertainty of commercial
success of AJOVY® or AUSTEDO®; competition from companies with
greater resources and capabilities; efforts of pharmaceutical
companies to limit the use of generics, including through
legislation and regulations; consolidation of our customer base and
commercial alliances among our customers; the increase in the
number of competitors targeting generic opportunities and seeking
U.S. market exclusivity for generic versions of significant
products; price erosion relating to our products, both from
competing products and increased regulation; delays in launches of
new products and our ability to achieve expected results from
investments in our product pipeline; our ability to take advantage
of high-value opportunities; the difficulty and expense of
obtaining licenses to proprietary technologies; and the
effectiveness of our patents and other measures to protect our
intellectual property rights;
- our substantial indebtedness, which may
limit our ability to incur additional indebtedness, engage in
additional transactions or make new investments, may result in a
further downgrade of our credit ratings; and our inability to raise
debt or borrow funds in amounts or on terms that are favorable to
us;
- our business and operations in general,
including: failure to effectively execute our restructuring plan
announced in December 2017; uncertainties related to, and failure
to achieve, the potential benefits and success of our senior
management team and organizational structure; harm to our pipeline
of future products due to the ongoing review of our R&D
programs; our ability to develop and commercialize additional
pharmaceutical products; potential additional adverse consequences
following our resolution with the U.S. government of our FCPA
investigation; compliance with sanctions and other trade control
laws; manufacturing or quality control problems, which may damage
our reputation for quality production and require costly
remediation; interruptions in our supply chain; disruptions of our
or third party information technology systems or breaches of our
data security; the failure to recruit or retain key personnel;
variations in intellectual property laws that may adversely affect
our ability to manufacture our products; challenges associated with
conducting business globally, including adverse effects of
political or economic instability, major hostilities or terrorism;
significant sales to a limited number of customers in our U.S.
market; our ability to successfully bid for suitable acquisition
targets or licensing opportunities, or to consummate and integrate
acquisitions; and our prospects and opportunities for growth if we
sell assets ;
- compliance, regulatory and litigation
matters, including: costs and delays resulting from the extensive
governmental regulation to which we are subject; the effects of
reforms in healthcare regulation and reductions in pharmaceutical
pricing, reimbursement and coverage; increased legal and regulatory
action in connection with public concern over the abuse of opioid
medications in the U.S.; governmental investigations into selling
and marketing practices; potential liability for patent
infringement; product liability claims; increased government
scrutiny of our patent settlement agreements; failure to comply
with complex Medicare and Medicaid reporting and payment
obligations; and environmental risks;
- other financial and economic risks,
including: our exposure to currency fluctuations and restrictions
as well as credit risks; potential impairments of our intangible
assets; potential significant increases in tax liabilities; and the
effect on our overall effective tax rate of the termination or
expiration of governmental programs or tax benefits, or of a change
in our business;
and other factors discussed in this press release, in our
Quarterly Report on Form 10-Q for the first quarter of 2019 and in
our Annual Report on Form 10-K for the year ended December 31,
2018, including in the sections captioned "Risk Factors” and
“Forward Looking Statements.” Forward-looking statements speak only
as of the date on which they are made, and we assume no obligation
to update or revise any forward-looking statements or other
information contained herein, whether as a result of new
information, future events or otherwise. You are cautioned not to
put undue reliance on these forward-looking statements.
Consolidated
Statements of Income
(U.S. dollars in
millions, except share and per share data)
Three months ended March 31, 2019
2018 (Unaudited) (Unaudited)
Net revenues 4,295 5,065
Cost of sales 2,440 2,750
Gross profit 1,856 2,315
Research and development
expenses 261 317
Selling and marketing expenses 648 738
General and administrative expenses 292 329
Intangible
assets impairment 469 206
Goodwill impairment - 180
Other asset impairments, restructuring and other items 1 501
Legal settlements and loss contingencies 57 (1,278)
Other
income (6) (203)
Operating profit 134 1,525
Financial
expenses – net 218 271
Income (loss) before income taxes
(84) 1,254
Income taxes 9 46
Share in losses of
associated companies- net 4 74
Net income (loss) (97)
1,134
Net income attributable to non-controlling interests 8
14
Net income (loss) attributable to Teva (105) 1,120
Dividends on preferred shares - 65
Net income (loss)
attributable to Teva's ordinary shareholders (105) 1,055
Earnings (loss) per
share attributable to ordinary shareholders: Basic ($)
(0.10) 1.04
Diluted ($) (0.10) 1.03
Weighted average
number of shares (in millions): Basic 1,090 1,017
Diluted 1,090 1,020
Non-GAAP net income
attributable to ordinary shareholders:* 654 954
Non-GAAP net
income attributable to ordinary shareholders for diluted earnings
per share: 654 954
Non-GAAP earnings per share
attributable to ordinary shareholders:* Basic ($) 0.60
0.94
Diluted ($) 0.60 0.94
Non-GAAP average number
of shares (in millions): Basic 1,090 1,017
Diluted 1,093 1,020 * See
reconciliation attached.
Condensed
Consolidated Balance Sheets
(U.S. dollars in
millions)
(Unaudited)
March 31, December 31, 2019 2018
ASSETS Current assets: Cash and cash equivalents
1,973 1,782 Trade receivables 5,108 5,822 Inventories 4,782 4,731
Prepaid expenses 969 899 Other current assets 438 468 Assets held
for sale 162 92
Total current assets 13,431 13,794
Deferred income taxes 351 368
Other non-current
assets 756 731
Property, plant and equipment, net 6,785
6,868
Operating lease right-of-use assets 517 -
Identifiable intangible assets, net 13,191 14,005
Goodwill 24,822 24,917
Total assets 59,854 60,683
LIABILITIES & EQUITY Current liabilities:
Short-term debt 2,790 2,216 Sales reserves and allowances 6,200
6,711 Trade payables 1,763 1,853 Employee-related obligations 633
870 Accrued expenses 1,869 1,868 Other current liabilities 773 804
Total current liabilities 14,028 14,322
Long-term
liabilities: Deferred income taxes 2,079 2,140 Other taxes and
long-term liabilities 1,669 1,727 Senior notes and loans 25,834
26,700 Operating Lease Liabilities 424 -
Total long-term
liabilities 30,005 30,567
Equity: Teva shareholders’
equity 14,732 14,707 Non-controlling interests 1,089 1,087
Total
equity 15,821 15,794
Total liabilities and equity 59,854
60,683
Condensed
Consolidated Cash Flow
(U.S. Dollars in
millions)
Three months ended March 31,
2019 2018 Unaudited
Unaudited Operating activities: Net income
(loss) (97 ) 1,134
Net change in operating assets and
liabilities (805 ) (592 )
Items not involving cash flow
1,014 954
Net cash provided by operating
activities 112 1,496
Net cash provided by investing
activities 272 1,039
Net cash used in financing
activities (189 ) (2,091 )
Translation adjustment on
cash and cash equivalents (4 ) 11
Net change
in cash and cash equivalents 191 455
Balance of cash
and cash equivalents at beginning of period 1,782 963
Balance of cash and cash equivalents at end of period
1,973 1,418
Three Months
Ended March 31, 2019 U.S. $ and shares in millions (except
per share amounts) GAAP Excluded for non
GAAP measurement Non GAAP
Amortization of Acquisition, Costs related to purchased intangible
Legal settlements and Impairment of integration and Restructuring
regulatory actions Equity Contingent Gain on sale Other non Other
Corresponding Unusual tax assets loss contingencies long-lived
assets related expenses costs taken in facilities compensation
consideration of business GAAP items items tax effect item* COGS
2,440 248 4 7 35 2,146 R&D 261 6 0 255 S&M 648 35 10 602
G&A 292 12 0 280 Other income (6) 0 (6) Legal settlements and
loss contingencies 57 57 - Other assets impairments, restructuring
and other items 1 20 2 32 (71) 19 - Intangible assets impairment
469 469 - Financial expenses 218 (2) 220 Income taxes 9 (55) (61)
125 Share in losses of associated companies – net 4 - 4 Net income
attributable to non-controlling interests 8
(8)
16 Total reconciled items 283 57
489 2 32 4 34 (71) 0
54 (10) (55) (61) EPS -
Basic (0.10) 0.70 0.60 EPS - Diluted (0.10) 0.70 0.60
* Interest disallowance as a result of the U.S. Tax Cuts and
Jobs Act.
The non-GAAP diluted weighted average number of shares was 1,093
million for the three months ended March 31, 2019.
Three Months Ended March 31, 2018 U.S. $ and
shares in millions (except per share amounts) GAAP
Excluded for non GAAP measurement Non GAAP
Amortization of Acquisition, Costs related to
purchased intangible Legal settlements and Impairment of
integration and Restructuring regulatory actions taken Equity
Contingent Other non Other Corresponding assets loss contingencies
long-lived assets Other R&D expenses related expenses costs in
facilities compensation consideration GAAP items items tax effect
COGS 2,750 264 1 6 32 2,447 R&D 317 22 5 1 289 S&M 738 46 9
1 682 G&A 329 10 (3) 322 Other income (203) (93) (110) Legal
settlements and loss contingencies (1,278) (1,278) - Other assets
impairments, restructuring and other items 501 226 2 247 8 18 -
Intangible assets impairment 206 206 - Goodwill impairment 180 180
- Financial expenses 271 68 203 Income taxes 46 (165) 211 Share in
losses of associated companies – net 74 94 (20) Net income
attributable to non-controlling interests 14
(8)
22 Total reconciled items 310 (1,278) 612
22 2 247 1 30 8
(44) 154 (165) EPS - Basic 1.04 (0.10) 0.94
EPS - Diluted 1.03 (0.09) 0.94
The non-GAAP diluted weighted average number of shares was 1,020
million for the three months ended March 31, 2018.
Segment Information
North America Europe International
Markets Three months ended March 31, Three months
ended March 31, Three months ended March 31, 2019
2018 2019 2018
2019 2018 (U.S. $ in
millions) (U.S. $ in millions) (U.S. $ in
millions) Revenues $ 2,047 $ 2,531 $ 1,264 $ 1,442 $ 668
$ 750 Gross profit 1,039 1,403 730 792 269 313 R&D expenses 165
188 66 73 22 24 S&M expenses 268 276 215 250 115 134 G&A
expenses 112 126 48 91 36 41 Other (income) loss (4 )
(102 ) (1 ) 1 (0 ) (8 ) Segment profit $ 498
$ 915 $ 403 $ 377 $ 97 $ 122
Reconciliation of our segment profit
to consolidated income before income taxes Three months
ended March 31, 2019 2018
(U.S.$ in millions) North America profit $ 498
$ 915 Europe profit 403 377 International Markets profit 97
122 Total segment profit 998 1,414 Profit of other
activities 21 21 1,019 1,435 Amounts not allocated to
segments: Amortization 283 310 Other asset impairments,
restructuring and other items 1 501 Goodwill impairment - 180
Intangible asset impairments 469 206 Gain from divestitures, net of
divestitures related costs § (93 ) Other R&D expenses § 22
Costs related to regulatory actions taken in facilities 4 1 Legal
settlements and loss contingencies 57 (1,278 ) Other unallocated
amounts 70 61 Consolidated operating
income 134 1,525 Financial expenses -
net 218 271 Consolidated income (loss)
before income taxes $ (84 ) $ 1,254
§ Represents an amount less than $0.5
million.
Revenues by Activity and
Geographical Area (Unaudited)
Three months ended
March 31,
Percentage
Change
2019 2018 2018-2019 (U.S.$ in millions)
North America segment Generic products $ 966 $ 1,088 (11%)
COPAXONE 208 476 (56%) BENDEKA / TREANDA 122 181 (33%) ProAir 59
130 (55%) QVAR 64 107 (41%) AJOVY 20 - NA AUSTEDO 74 30 151% Anda
379 331 14% Other 155 188 (18%) Total
2,047 2,531 (19%)
Three months ended March 31,
Percentage
Change
2019 2018 2018-2019 (U.S.$ in millions)
Europe segment Generic medicines $ 919 $ 997 (8%) COPAXONE
114 153 (26%) Respiratory products 91 113 (19%) Other 140
179 (22%)
Total 1,264
1,442 (12%) Three months
ended March 31,
Percentage
Change
2019 2018 2018-2019 (U.S.$ in millions)
International Markets segment Generics medicines $ 441 $ 488
(10%) COPAXONE 13 16 (18%) Distribution 151 153 (1%) Other 62
93 (33%)
Total 668
750 (11%) Free cash flow
reconciliation Three months ended March 31, 2019
2018 (U.S. $ in millions)
Net cash provided by operating activities 112 1,496
Beneficial interest collected in exchange for securitized trade
receivables, included in investing activities 362 444 capital
expenditures (125 ) (163 ) Proceeds from sale of property, plant
and equipment, intangible assets and companies 11
117 Free cash flow $ 360 $ 1,894
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190502005334/en/
IR ContactsUnited StatesKevin C. Mannix(215)
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