- Revenues of $4.3 billion
- GAAP diluted loss per share of $0.63
- Non-GAAP diluted EPS of $0.60
- Spend base reduction of $2.7 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 June 30, 2019.
Mr. Kåre Schultz, Teva’s President and CEO, said, “During the
second quarter, portfolio optimization and new launches stabilized
our North American generics business, COPAXONE® performed above
expectations and AUSTEDO® achieved a very strong growth rate. We
continue to focus our efforts on growth for AJOVY® in the US and
are excited by the early momentum of the product’s recent launches
in the EU.”
Mr. Schultz continued: “We are on track to achieve the targets
of our two year restructuring plan and based on our good results
for the first half of the year we are reaffirming our full year
guidance.”
Second Quarter 2019 Consolidated
Results
Revenues in the second quarter of 2019 were $4,337
million, a decrease of 8%, or 5% in local currency terms, compared
to the second quarter of 2018, mainly due to generic competition to
COPAXONE®, as well as declines in revenues from TREANDA®/BENDEKA®,
certain other specialty products in the U.S., our Europe segment
and Japan, partially offset by higher revenues from AUSTEDO®,
AJOVY® and QVAR® in the United States.
Exchange rate differences between the second quarter of
2019 and the second quarter of 2018 negatively impacted our
revenues and GAAP operating income by $125 million and $41 million,
respectively. Our non-GAAP operating income was negatively impacted
by $47 million.
GAAP gross profit was $1,893 million in the second
quarter of 2019, a decrease of 7% compared to the second quarter of
2018. GAAP gross profit margin was 43.7% in the second
quarter of 2019, compared to 43.2% in the second quarter of 2018.
Non-GAAP gross profit was $2,188 million in the second
quarter of 2019, a decline of 6% compared to the second quarter of
2018. Non-GAAP gross profit margin was 50.5% in the second
quarter of 2019, compared to 49.7% in the second quarter of 2018.
The increase in gross profit as a percentage of revenues was mainly
due to higher profitability in Europe, partially offset by lower
profitability in North America, resulting mainly from a decline in
COPAXONE revenues due to generic competition.
GAAP Research and Development (R&D) expenses in the
second quarter of 2019 were $276 million, a decrease of 5% compared
to the second quarter of 2018. Non-GAAP R&D expenses were $271
million, or 6.2% of quarterly revenues in the second quarter of
2019, compared to $281 million, or 6.0%, in the second quarter of
2018. The decrease in R&D expenses resulted primarily from
pipeline optimization and related headcount reductions.
GAAP Selling and Marketing (S&M) expenses in the
second quarter of 2019 were $666 million, a decrease of 2% compared
to the second quarter of 2018. Non-GAAP S&M expenses were $621
million, or 14.3% of quarterly revenues, in the second quarter of
2019, compared to $634 million, or 13.5%, in the second quarter of
2018. The decrease was mainly due to cost reduction and efficiency
measures as part of the restructuring plan.
GAAP General and Administrative (G&A) expenses in the
second quarter of 2019 were $296 million, a decrease of 6% compared
to the second quarter of 2018. Non-GAAP G&A expenses were $286
million, or 6.6% of quarterly revenues, in the second quarter of
2019, compared to $292 million, or 6.2%, in the second 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 second quarter of 2019
was $9 million, compared to $96 million in the second quarter of
2018. We did not have Non-GAAP other income in the second
quarter of 2019, compared to $106 million in the second quarter of
2018. Other income in the second quarter of 2018 was primarily the
result of legal recovery of lost profits, where U.S. patent
infringement litigation had previously prevented a product’s
sales.
GAAP operating loss in the second quarter of 2019 was
$644 million, compared to $14 million in the second quarter of
2018. Non-GAAP operating income in the second quarter of
2019 was $1,011 million, a decrease of 18% compared to $1,238
million in the second 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 the lack of other income, partially offset by
cost reductions and efficiency measures as part of the
restructuring plan and higher revenues of AUSTEDO.
EBITDA (non-GAAP operating income, which excludes
amortization and certain other items, as well as depreciation
expenses) was $1,144 million in the second quarter of 2019, a
decrease of 18% compared to $1,387 million in the second quarter of
2018.
GAAP financial expenses were $206 million in the second
quarter of 2019, compared to $236 million in the second quarter of
2018.
Non-GAAP financial expenses were $198 million in the
second quarter of 2019, compared to $238 million in the second
quarter of 2018. The decrease in non-GAAP financial expenses was
mainly due to gains on our hedging and derivatives activities,
lower interest expenses resulting from debt prepayments during the
period, as well as increased financial income derived from higher
average cash balances.
In the second quarter of 2019, we recognized a tax
benefit of $179 million, or 21%, on pre-tax loss of $850
million. In the second quarter of 2018, we recognized a tax benefit
of $76 million, or 30%, on pre-tax loss of $250 million. Our tax
rate for the second 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 second quarter of 2019 were $134 million, or 16%, on pre-tax
non-GAAP income of $812 million. Non-GAAP income taxes in the
second quarter of 2018 were $127 million, or 13%, on pre-tax
non-GAAP income of $1,000 million. Our non-GAAP tax rate for the
second quarter of 2019 was mainly affected by the mix of products
sold in different geographies and the enactment of the U.S. Tax
Cuts and Jobs Act.
Net loss attributable to ordinary shareholders was $689
million in the second quarter of 2019, compared to net loss of $241
million in the second quarter of 2018. Non-GAAP net income
attributable to ordinary shareholders and non-GAAP diluted
EPS in the second quarter of 2019 were $653 million and $0.60,
respectively, compared to $794 million and $0.78 in the second
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 June 30, 2019 and 2018 were 1,092 million and 1,018
million shares, respectively. The weighted average outstanding
shares for the fully diluted EPS calculation on a non-GAAP
basis for the three months ended June 30, 2019 and 2018 were 1,093
million, and 1,021 million, respectively. The increase was mainly
due to the conversion of the mandatory convertible preferred shares
to ordinary shares on December 17, 2018.
As of June 30, 2019 and 2018, the fully diluted share count for
purposes of calculating our market capitalization was approximately
1,107 million and 1,109 million, respectively.
Non-GAAP information: Net non-GAAP adjustments in the
second quarter of 2019 were $1,342 million. Non-GAAP net income and
non-GAAP EPS for the second quarter of 2019 were adjusted to
exclude the following items:
- Legal settlements and loss contingencies of $646 million,
mainly related to the $85 million settlement paid in the litigation
brought by the Oklahoma Attorney General and an estimated provision
made for certain other opioid cases;
- Impairment of long-lived assets of $609 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 $285
million, of which $249 million is included in cost of goods sold
and the remaining $35 million in S&M expenses;
- Restructuring expenses of $47 million;
- Equity compensation expenses of $35 million;
- Contingent consideration expenses of $24 million;
- Minority income of $8 million;
- Other non-GAAP items expenses of $17 million; and
- Income tax of $312 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 used in operating activities during the second
quarter of 2019 was $227 million, compared to cash flow generated
from operating activities of $162 million in the second quarter of
2018.
Free cash flow (cash flow generated from
operations net of cash received for capital investments and
beneficial interest collected in exchange for securitized trade
receivables) was $168 million in the second quarter of 2019,
compared to $559 million in the second quarter of 2018. The
decrease in cash flow in the second quarter of 2019 was mainly due
to lower revenues, timing of certain customer payments and credits
and payments of U.S. customer rebates paid this quarter, primarily
related to managed care and Medicaid.
As of June 30, 2019, our debt was $28,726 million,
compared to $28,624 million as of March 31, 2019. The increase was
mainly due to exchange rates fluctuations.
During the first quarter of 2019, we repurchased and canceled
approximately $126 million principal amount of our $1,700 million
1.7% senior notes due July 2019.
During the second quarter of 2019, we repurchased and canceled
approximately $18 million principal amount of our $1,574 million
1.7% senior notes due July 2019.
In July 2019, we repaid at maturity our $1,556 million 1.7%
senior notes.
In April 2019, the Company entered into a $2.3 billion unsecured
syndicated revolving credit facility (“RCF”), which replaced the
previous $3 billion RCF. The RCF can be used for general corporate
purposes, including repaying existing debt. As of June 30, 2019, no
amounts were outstanding under the RCF. As of the date of this
press release, $500 million was outstanding under the RCF.
The portion of total debt classified as short-term as of June
30, 2019 was 10%, similar to March 31, 2019.
Segment Results for the Second 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 June 30, 2019
and 2018:
Three months ended June
30,
2019
2018
(U.S. $ in millions / % of
Segment Revenues)
Revenues
2,071
100
%
2,263
100.0
%
Gross profit
1,067
51.5
%
1,179
52.1
%
R&D expenses
175
8.5
%
182
8.0
%
S&M expenses
269
13.0
%
272
12.0
%
G&A expenses
117
5.6
%
103
4.6
%
Other income
2
§
(100
)
(4.4
%)
Segment profit*
504
24.3
%
722
31.9
%
* Segment profit does not include
amortization and certain other items.
§ Represents an amount less than 0.5%.
Revenues from our North America segment in the second
quarter of 2019 were $2,071 million, a decrease of $192 million, or
8%, compared to the second quarter of 2018, mainly due to a decline
in revenues of COPAXONE, TREANDA/BENDEKA and certain other
specialty products, partially offset by higher revenues from our
Anda business, QVAR, AUSTEDO and AJOVY. Revenues in the United
States, our largest market, were $1,927 million in the second
quarter of 2019, a decrease of $203 million, or 10%, compared to
the second 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
June 30, 2019 and 2018:
Three months ended
June 30,
Percentage
Change
2019
2018
2019-2018
(U.S. $ in millions)
Generic products
$
946
$
947
§
COPAXONE
274
464
(41
%)
TREANDA/BENDEKA
115
160
(28
%)
ProAir*
65
115
(44
%)
QVAR
60
30
103
%
AJOVY
23
-
NA
AUSTEDO
96
44
117
%
Anda
351
320
10
%
Other
141
183
(23
%)
Total
$
2,071
$
2,263
(8
%)
* Does not include sales of ProAir
authorized generic, which are included under generics
§ Represents an amount less than 0.5%.
Generic products revenues in our North America segment in
the second quarter of 2019 were $946 million flat compared to the
second quarter of 2018, mainly due to new generic product launches,
offset by market dynamics, including product mix and price erosion
in our U.S. generics business.
In the second quarter of 2019, we led the U.S. generics market
in total prescriptions and new prescriptions, with approximately
404 million total prescriptions (based on trailing twelve months),
representing 11% of total U.S. generic prescriptions according to
IQVIA data.
COPAXONE revenues in our North America segment in the
second quarter of 2019 decreased by 41% to $274 million, compared
to the second quarter of 2018, mainly due to generic competition in
the United States.
COPAXONE revenues in the United States were $260 million in the
second quarter of 2019.
BENDEKA and TREANDA combined revenues in our North
America segment in the second quarter of 2019 decreased by 28% to
$115 million, compared to the second 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
second quarter of 2019 decreased by 44% to $65 million, compared to
the second quarter of 2018, mainly due to lower volumes as well as
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 second
quarter of 2019 increased by 103% to $60 million, compared to the
second quarter of 2018, which was a transition period due to the
launch of QVAR RediHaler™.
AJOVY revenues in our North America segment in the second
quarter of 2019 were $23 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
second quarter of 2019 increased by 117%, to $96 million, compared
to $44 million in the second quarter of 2018.
Anda revenues in our North America segment increased by
10% to $351 million in the second quarter of 2019, compared to the
second quarter of 2018 mainly due to higher volumes.
North America Gross Profit
Gross profit from our North America segment in the second
quarter of 2019 was $1,067 million, a decrease of 9%, compared to
$1,179 million in the second 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, partially offset by
increases in sales of AUSTEDO, QVAR and AJOVY. Gross profit margin
for our North America segment in the second quarter of 2019
decreased to 51.5%, compared to 52.1% in the second quarter of
2018. The decrease was mainly due to lower revenues from COPAXONE
and certain other specialty products, partially offset by improved
gross profit margin of generic products.
North America Profit
Profit of our North America segment consists of gross profit
less R&D expenses, S&M expenses, G&A expenses and any
other income related to this segment. Segment profit does not
include amortization and certain other items.
Profit from our North America segment in the second quarter of
2019 was $504 million, a decrease of 30%, compared to $722 million
in the second 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 non-recurrence of other income,
partially offset by increases in sales of AUSTEDO and QVAR, as well
as 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 June 30, 2019 and
2018:
Three months ended June
30,
2019
2018
(U.S. $ in millions / % of
Segment Revenues)
Revenues
1,183
100
%
1,328
100
%
Gross profit
674
56.9
%
727
54.7
%
R&D expenses
70
5.9
%
73
5.5
%
S&M expenses
216
18.3
%
233
17.5
%
G&A expenses
70
5.9
%
78
5.9
%
Other income
1
§
(3
)
§
Segment profit*
316
26.7
%
346
26.1
%
___________
* Segment profit does not include
amortization and certain other items.
§ Represents an amount less than 0.5%.
Revenues from our Europe segment in the second quarter of 2019
were $1,183 million, a decrease of 11% or $145 million, compared to
the second 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 and the
termination of the PGT joint venture, 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 June 30,
2019 and 2018:
Three months ended
June 30,
Percentage
Change
2019
2018
2018-2019
(U.S. $ in millions)
Generic products
$
844
$
907
(7
%)
COPAXONE
107
140
(24
%)
Respiratory products
89
106
(16
%)
Other
143
175
(18
%)
Total
$
1,183
$
1,328
(11
%)
Generic products revenues in our Europe segment in the
second quarter of 2019, including OTC products, decreased by 7% to
$844 million, compared to the second quarter of 2018. In local
currency terms, revenues decreased by 1% compared to the second
quarter of 2018, mainly due to the loss of revenues from the
termination of the PGT joint venture and volume decline due to
specific market conditions in various European Union countries,
partially offset by new generic product launches.
COPAXONE revenues in our Europe segment in the second
quarter of 2019 decreased by 24% to $107 million, compared to the
second quarter of 2018. In local currency terms, revenues decreased
by 19%, mainly due to price reductions resulting from the entry of
competing glatiramer acetate products.
Respiratory products revenues in our Europe segment in
the second quarter of 2019 decreased by 16% to $89 million,
compared to the second quarter of 2018. In local currency terms,
revenues decreased by 11%, mainly due to lower sales in the United
Kingdom.
Europe Gross Profit
Gross profit from our Europe segment in the second quarter of
2019 was $674 million, a decrease of 7% compared to $727 million in
the second quarter of 2018. The decrease was mainly due to a
decline in COPAXONE revenues, and the impact of currency
fluctuations, partially offset by new generic product launches.
Gross profit margin for our Europe segment in the second quarter
of 2019 increased to 56.9%, compared to 54.7% in the second quarter
of 2018. The increase was mainly due to lower cost of goods sold
related to the termination of the PGT joint venture and network
optimization.
Europe Profit
Profit of our Europe segment consists of gross profit less
R&D expenses, S&M expenses, G&A expenses and any other
income related to this segment. Segment profit does not include
amortization and certain other items.
Profit from our Europe segment in the second quarter of 2019 was
$316 million, a decrease of 9% compared to $346 million in the
second quarter of 2018. The decrease was mainly due to lower
revenues and the impact of currency fluctuations, partially offset
by impact of 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 June
30, 2019 and 2018:
Three months ended June
30,
2019
2018
(U.S. $ in millions / % of
Segment Revenues)
Revenues
741
100
%
789
100
%
Gross profit
312
42.1
%
328
41.5
%
R&D expenses
24
3.2
%
25
3.2
%
S&M expenses
119
16.1
%
130
16.4
%
G&A expenses
34
4.7
%
37
4.7
%
Other income
(1
)
§
(3
)
§
Segment profit*
136
18.3
%
139
17.6
%
__________
* Segment profit does not include
amortization and certain other items.
§ Represents an amount less than 0.5%.
Revenues from our International Markets segment in the second
quarter of 2019 were $741 million, a decrease of $48 million, or
6%, compared to the second quarter of 2018. In local currency
terms, revenues decreased 2% compared to the second 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 June 30, 2019 and 2018:
Three months ended
June 30,
Percentage
Change
2019
2018
2018-2019
(U.S. $ in millions)
Generic products
$
489
$
537
(9
%)
COPAXONE
13
22
(40
%)
Distribution
164
154
6
%
Other
75
76
(1
%)
Total
$
741
$
789
(6
%)
Generic products revenues in our International Markets
segment in the second quarter of 2019, which include OTC products,
decreased by 9% to $489 million, compared to the second quarter of
2018. In local currency terms, revenues decreased by 4%, mainly due
to lower sales in Japan resulting from generic competition to
off-patented products, partially offset by higher sales in
Russia.
COPAXONE revenues in our International Markets segment in
the second quarter of 2019 decreased by 40% to $13 million,
compared to the second quarter of 2018. In local currency terms,
revenues decreased by 28%.
Distribution revenues in our International Markets
segment in the second quarter of 2019 increased by 6% to $164
million, compared to the second quarter of 2018. In local currency
terms, revenues increased by 7%.
International Markets Gross Profit
Gross profit from our International Markets segment in the
second quarter of 2019 was $312 million, a decrease of 5% compared
to $328 million in the second quarter of 2018.
Gross profit margin for our International Markets segment in the
second quarter of 2019 increased to 42.1%, compared to 41.5% in the
second quarter of 2018. The increase was mainly due to lower cost
of goods and portfolio optimization, mainly in Russia and
Israel.
International Markets Profit
Profit of our International Markets segment consists of gross
profit less R&D expenses, S&M expenses, G&A expenses
and any other income related to this segment. Segment profit does
not include amortization and certain other items.
Profit from our International Markets segment in the second
quarter of 2019 was $136 million, a decrease of 2% compared to $139
million in the second quarter of 2018. The decrease was mainly due
to lower sales in Japan resulting from 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 second quarter
of 2019 were $342 million, an increase of 6% compared to the second
quarter of 2018. In local currency terms, revenues increased by
10%, mainly due to higher revenues from API sales to third
parties.
API sales to third parties in the second quarter of 2019
were $204 million, an increase of 10%, in both U.S. dollar and
local currency terms, compared to the second quarter of 2018.
Conference Call
Teva will host a conference call and live webcast along with a
slide presentation on Wednesday, August 7, 2019 at 8:00 a.m. ET to
discuss its second 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: 8260368
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: 8260368.
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;
implementation of a new enterprise resource planning system that,
if deficient, could materially and adversely affect our operations
and/or the effectiveness of our internal controls; 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 second 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
Six months ended
June 30,
June 30,
2019
2018
2019
2018
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net revenues
4,337
4,701
8,632
9,766
Cost of sales
2,443
2,668
4,883
5,418
Gross profit
1,893
2,033
3,749
4,348
Research and development expenses
276
290
537
607
Selling and marketing expenses
666
682
1,313
1,420
General and administrative expenses
296
316
589
645
Intangible assets impairment
561
521
1,030
727
Goodwill impairment
-
120
-
300
Other asset impairments, restructuring and other items
101
194
103
695
Legal settlements and loss contingencies
646
20
703
(1,258)
Other income
(9)
(96)
(15)
(299)
Operating income (loss)
(644)
(14)
(510)
1,511
Financial expenses – net
206
236
425
507
Income (loss) before income taxes
(850)
(250)
(934)
1,004
Income taxes
(179)
(76)
(170)
(30)
Share in losses (income) of associated companies- net
-
(8)
4
66
Net income (loss)
(671)
(166)
(768)
968
Net income attributable to non-controlling interests
18
10
26
24
Net income (loss) attributable to Teva
(689)
(176)
(794)
944
Dividends on preferred shares
-
65
-
130
Net income (loss) attributable to Teva's ordinary
shareholders
(689)
(241)
(794)
814
Earnings (loss) per share attributable to ordinary
shareholders: Basic ($)
(0.63)
(0.24)
(0.73)
0.80
Diluted ($)
(0.63)
(0.24)
(0.73)
0.80
Weighted average number of shares (in millions):
Basic
1,092
1,018
1,091
1,018
Diluted
1,092
1,018
1,091
1,020
Non-GAAP net income attributable to ordinary
shareholders:*
653
794
1,306
1,748
Non-GAAP net income attributable to ordinary shareholders for
diluted earnings per share:
653
794
1,306
1,748
Non-GAAP earnings per share attributable to ordinary
shareholders:* Basic ($)
0.60
0.78
1.20
1.72
Diluted ($)
0.60
0.78
1.20
1.71
Non-GAAP average number of shares (in millions):
Basic
1,092
1,018
1,091
1,018
Diluted
1,093
1,021
1,093
1,020
* See reconciliation attached.
Condensed Consolidated Balance Sheets
(U.S. dollars in millions)
(Unaudited)
June 30,
December 31,
2019
2018
ASSETS Current assets: Cash and cash equivalents
2,165
1,782
Trade receivables
5,260
5,822
Inventories
4,850
4,731
Prepaid expenses
1,069
899
Other current assets
437
468
Assets held for sale
24
92
Total current assets
13,805
13,794
Deferred income taxes
317
368
Other non-current assets
721
731
Property, plant and equipment, net
6,732
6,868
Operating lease right-of-use assets
500
-
Identifiable intangible assets, net
12,435
14,005
Goodwill
24,913
24,917
Total assets
59,424
60,683
LIABILITIES & EQUITY Current liabilities:
Short-term debt
2,771
2,216
Sales reserves and allowances
6,054
6,711
Trade payables
1,806
1,853
Employee-related obligations
587
870
Accrued expenses
2,335
1,868
Other current liabilities
899
804
Total current liabilities
14,452
14,322
Long-term liabilities: Deferred income taxes
1,698
2,140
Other taxes and long-term liabilities
1,642
1,727
Senior notes and loans
25,955
26,700
Operating lease liabilities
426
-
Total long-term liabilities
29,721
30,567
Equity: Teva shareholders’ equity
14,122
14,707
Non-controlling interests
1,128
1,087
Total equity
15,251
15,794
Total liabilities and equity
59,424
60,683
TEVA PHARMACEUTICAL INDUSTRIES LIMITED CONSOLIDATED
STATEMENTS OF CASH FLOWS (U.S. dollars in millions)
(Unaudited)
Six months ended
Three months ended
June 30,
June 30,
2019
2018
2019
2018
Operating activities: Net income (loss)
$
(768
)
$
968
$
(671
)
$
(166
)
Adjustments to reconcile net income (loss) to net cash provided by
operations: Net change in operating assets and liabilities
(1,056
)
(1,268
)
(251
)
(676
)
Impairment of long-lived assets
1,097
980
608
548
Depreciation and amortization
893
986
450
479
Deferred income taxes – net and uncertain tax positions
(362
)
(489
)
(329
)
(268
)
Stock-based compensation
64
77
30
47
Other items
11
44
(72
)
60
Net gain from sale of long-lived assets and investments
6
(88
)
8
18
Goodwill impairment
-
300
-
120
Impairment of equity investment
-
94
-
-
In-process research and development
-
54
-
-
Net cash provided by (used in) operating activities
(115
)
1,658
(227
)
162
Investing activities: Beneficial interest
collected in exchange for securitized trade receivables
746
970
384
526
Purchases of property, plant and equipment
(237
)
(299
)
(112
)
(136
)
Proceeds from sales of business, investments and long-lived assets
134
841
121
17
Other investing activities
59
(11
)
36
(1
)
Purchases of investments and other assets
(1
)
(56
)
-
-
Net cash provided by investing activities
701
1,445
429
406
Financing activities: Repayment of senior notes and
loans and other long-term liabilities
(157
)
(6,289
)
(31
)
(46
)
Tax withholding payments made on shares and dividends
(52
)
(22
)
-
-
Other financing activities
(13
)
(10
)
(3
)
(5
)
Net change in short-term debt
(2
)
(261
)
(1
)
-
Proceeds from senior notes and loans, net of issuance costs
-
4,435
-
(5
)
Net cash used in financing activities
(224
)
(2,147
)
(35
)
(56
)
Translation adjustment on cash and cash equivalents
21
(58
)
25
(69
)
Net change in cash and cash equivalents
383
898
192
443
Balance of cash and cash equivalents at beginning of period
1,782
963
1,973
1,418
Balance of cash and cash equivalents at end of period
$
2,165
$
1,861
$
2,165
$
1,861
Non-cash financing and investing activities:
Beneficial interest obtained in exchange for securitized trade
receivables
$
770
$
968
$
374
$
417
Three Months Ended June 30, 2019 U.S. $ and shares in
millions (except per share amounts) GAAP Excluded for non-GAAP
measurement Non-GAAP Amortization ofpurchasedintangible
assets Legal settlementsand losscontingencies Impairment
oflong-lived assets Restructuringcosts Costs related toregulatory
actionstaken in facilities Equitycompensation
Contingentconsideration Gain on sale ofbusiness Other non GAAPitems
Other items Correspondingtax effect Cost of sales
2,443
249
12
7
26
2,149
R&D expenses
276
6
-
271
S&M expenses
666
35
10
621
G&A expenses
296
12
(2)
286
Other (income) expense
(9)
(9)
(0)
Legal settlements and loss contingencies
646
646
-
Other assets impairments, restructuring and other items
101
48
47
24
(18)
-
Intangible assets impairment
561
561
-
Financial expenses, net
206
8
198
Income taxes
(179)
(312)
134
Net income (loss) attributable to non-controlling interests
18
(8)
26
Total reconciled items
285
646
609
47
12
35
24
(9)
6
(0)
(312)
EPS - Basic
(0.63)
1.23
0.60
EPS - Diluted
(0.63)
1.23
0.60
The non-GAAP diluted weighted average number of shares was
1,093 million for the three months ended June 30, 2019.
Six
Months Ended June 30, 2019 U.S. $ and shares in millions
(except per share amounts) GAAP Excluded for non-GAAP
measurement Non-GAAP Amortization ofpurchasedintangible
assets Legal settlementsand losscontingencies Impairment
oflong-lived assets Acquisition,integration andrelated expenses
Restructuringcosts Costs related toregulatory actionstaken in
facilities Equitycompensation Contingentconsideration Gain on sale
ofbusiness Other non GAAPitems Other items Corresponding taxeffect
Unusual tax item* Cost of sales
4,883
497
16
14
61
4,294
R&D expenses
537
11
0
525
S&M expenses
1,313
71
20
-
1,223
G&A expenses
589
24
(1)
566
Other (income) expense
(15)
(9)
(6)
Legal settlements and loss contingencies
703
703
-
Other assets impairments, restructuring and other items
103
68
2
79
(47)
1
(0)
Intangible assets impairment
1,030
1,030
-
Financial expenses, net
425
6
419
Corresponding tax effect
(170)
(490)
61
259
Share in losses of associated companies – net
4
-
4
Net income (loss) attributable to non-controlling interests
26
(16)
42
Total reconciled items
568
703
1,097
2
79
16
69
(47)
(9)
60
(10)
(490)
61
EPS - Basic
(0.73)
1.93
1.20
EPS - Diluted
(0.73)
1.93
1.20
The non-GAAP diluted weighted average number of
shares was 1,091 million for the six months ended June 30, 2019.
Three Months Ended June 30, 2018 U.S. $ and shares in
millions (except per share amounts) GAAP Excluded for non-GAAP
measurement Non-GAAP Amortization ofpurchasedintangible
assets Legal settlementsand losscontingencies Impairment
oflong-lived assets Acquisition,integration andrelated expenses
Restructuringcosts Costs related toregulatory actionstaken in
facilities Equitycompensation Contingentconsideration Other non
GAAPitems Other items Correspondingtax effect Cost of sales
2,668
261
4
9
32
2,362
R&D expenses
290
9
-
281
S&M expenses
682
41
12
(5)
634
G&A expenses
316
17
7
292
Other (income) expense
(96)
10
(106)
Legal settlements and loss contingencies
20
20
-
Other assets impairments, restructuring and other items
194
27
3
107
47
10
-
Intangible assets impairment
521
521
-
Goodwill impairment
120
120
-
Financial expenses, net
236
(2)
238
Income taxes
(76)
(203)
127
Share in losses of associated companies – net
(8)
-
(8)
Net income (loss) attributable to non-controlling interests
10
(12)
22
Total reconciled items
302
20
668
3
107
4
47
47
54
(14)
(203)
EPS - Basic
(0.24)
1.02
0.78
EPS - Diluted
(0.24)
1.02
0.78
The non-GAAP diluted weighted average number of
shares was 1,021 million for the three months ended June 30, 2018.
Six Months Ended June 30, 2018 U.S. $ and shares in
millions (except per share amounts) GAAP Excluded for non-GAAP
measurement Non-GAAP Amortization ofpurchasedintangible
assets Legal settlementsand losscontingencies Impairment
oflong-lived assets Other R&Dexpenses Acquisition,integration
andrelated expenses Restructuringcosts Costs related toregulatory
actionstaken in facilities Equitycompensation
Contingentconsideration Other non GAAPitems Other items
Correspondingtax effect Cost of sales
5,418
525
5
15
64
4,809
R&D expenses
607
22
14
1
570
S&M expenses
1,420
87
21
(4)
1,316
G&A expenses
645
27
4
614
Other (income) expense
(299)
(83)
(216)
Legal settlements and loss contingencies
(1,258)
(1,258)
-
Other assets impairments, restructuring and other items
695
253
5
354
55
28
-
Intangible assets impairment
727
727
-
Goodwill impairment
300
300
-
Financial expenses, net
507
66
441
Corresponding tax effect
(30)
(368)
338
Share in losses of associated companies – net
66
94
(28)
Net income (loss) attributable to non-controlling interests
24
(20)
44
Total reconciled items
612
(1,258)
1,280
22
5
354
5
77
55
10
140
(368)
EPS - Basic
0.80
0.92
1.72
EPS - Diluted
0.80
0.91
1.71
The non-GAAP diluted weighted average number of
shares was 1,020 million for the six months ended June 30, 2018.
Segment Information
North America
Europe
International Markets
Three months ended June
30,
Three months ended June
30,
Three months ended June
30,
2019
2018
2019
2018
2019
2018
(U.S. $ in millions) (U.S. $ in millions)
(U.S. $ in millions) Revenues
$
2,071
$
2,263
$
1,183
$
1,328
$
741
$
789
Gross profit
1,067
1,179
674
727
312
328
R&D expenses
175
182
70
73
24
25
S&M expenses
269
272
216
233
119
130
G&A expenses
117
103
70
78
34
37
Other (income) expense
2
(100
)
1
(3
)
(1
)
(3
)
Segment profit
$
504
$
722
$
316
$
346
$
136
$
139
Segment Information
North America
Europe
International Markets
Six months ended June
30,
Six months ended June
30,
Six months ended June
30,
2019
2018
2019
2018
2019
2018
(U.S. $ in millions) (U.S. $ in millions)
(U.S. $ in millions) Revenues
$
4,118
$
4,794
$
2,448
$
2,770
$
1,409
$
1,539
Gross profit
2,107
2,582
1,404
1,519
582
641
R&D expenses
340
370
136
146
46
49
S&M expenses
537
548
431
483
234
264
G&A expenses
230
229
119
169
70
78
Other income
(2
)
(202
)
(1
)
(2
)
(1
)
(11
)
Segment profit
$
1,001
$
1,637
$
719
$
723
$
233
$
261
Reconciliation of our segment profit to consolidated
income before income taxes
Three months ended
June 30,
2019
2018
(U.S.$ in millions) North America profit
$
504
$
722
Europe profit
316
346
International Markets profit
136
139
Total segment profit
956
1,207
Profit of other activities
55
31
1,011
1,238
Amounts not allocated to segments: Amortization
285
302
Other asset impairments, restructuring and other items
101
194
Goodwill impairment
-
120
Intangible asset impairments
561
521
Gain from divestitures, net of divestitures related costs
(9
)
10
Costs related to regulatory actions taken in facilities
12
4
Legal settlements and loss contingencies
646
20
Other unallocated amounts
59
81
Consolidated operating income (loss)
(644
)
(14
)
Financial expenses, net
206
236
Consolidated income (loss) before income taxes
$
(850
)
$
(250
)
Reconciliation of our segment profit to consolidated
income before income taxes
Six months ended
June 30,
2019
2018
(U.S.$ in millions) North America profit
$
1,001
$
1,637
Europe profit
719
723
International Markets profit
233
261
Total segment profit
1,954
2,621
Profit of other activities
76
52
2,029
2,673
Amounts not allocated to segments: Amortization
568
612
Other asset impairments, restructuring and other items
103
695
Goodwill impairment
-
300
Intangible asset impairments
1,030
727
Gain on divestitures, net of divestitures related costs
(9
)
(83
)
Other R&D expenses §
22
Costs related to regulatory actions taken in facilities
16
5
Legal settlements and loss contingencies
703
(1,258
)
Other unallocated amounts
129
142
Consolidated operating income (loss)
(510
)
1,511
Financial expenses, net
425
507
Consolidated income (loss) before income taxes
$
(934
)
$
1,004
§ Represents an amount less than $1 million.
Revenues by
Activity and Geographical Area (Unaudited)
Three months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
North America segment Generic products
$
946
$
947
§
COPAXONE
274
464
(41%)
TREANDA/BENDEKA
115
160
(28%)
ProAir*
65
115
(44%)
QVAR
60
30
103%
AJOVY
23
-
NA
AUSTEDO
96
44
117%
Anda
351
320
10%
Other
141
183
(23%)
Total
2,071
2,263
(8%)
Three months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
Europe segment Generic products
$
844
$
907
(7%)
COPAXONE
107
140
(24%)
Respiratory products
89
106
(16%)
Other
143
175
(18%)
Total
1,183
1,328
(11%)
Three months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
International Markets segment Generic products
$
489
$
537
(9%)
COPAXONE
13
22
(40%)
Distribution
164
154
6%
Other
75
76
(1%)
Total
741
789
(6%)
§ Represents an amount less than 0.5%. *Does not include
sales of ProAir authorized generic, which are included under
generics
Revenues by Activity and Geographical Area
(Unaudited)
Six months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
North America segment Generic products
$
1,913
$
2,035
(6%)
COPAXONE
482
940
(49%)
TREANDA/BENDEKA
229
341
(33%)
ProAir*
123
245
(50%)
QVAR
124
137
(10%)
AJOVY
43
-
N/A
AUSTEDO
171
74
130%
ANDA
729
651
12%
Other
305
372
(18%)
Total
4,118
4,794
(14%)
Six months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
Europe segment Generic products
$
1,763
$
1,904
(7%)
COPAXONE
221
293
(25%)
Respiratory products
181
219
(18%)
Other
283
354
(20%)
Total
2,448
2,770
(12%)
Six months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
International Markets segment Generic products
$
930
$
1,025
(9%)
COPAXONE
27
38
(31%)
Distribution
315
307
3%
Other
137
168
(19%)
Total
1,409
1,539
(8%)
*Does not include sales of ProAir authorized generic, which
are included under generics
Free cash flow reconciliation
(Unaudited)
Three months ended June
30,
2019
2018
(U.S. $ in millions) Net cash provided by
operating activities
(227
)
162
Beneficial interest collected in exchange for securitized trade
receivables, included in investing activities
384
526
capital expenditures
(112
)
(136
)
Proceeds from sale of property, plant and equipment, intangible
assets and companies
123
7
Free cash flow
$
168
$
559
Free cash flow reconciliation (Unaudited)
Six months ended June
30,
2019
2018
(U.S. $ in millions)
Net cash provided by operating activities
(115
)
1,658
Beneficial interest collected in exchange for securitized trade
receivables, included in investing activities
746
970
capital expenditures
(237
)
(299
)
Proceeds from sale of property, plant and equipment, intangible
assets and companies
134
124
Free cash flow
$
528
$
2,453
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190807005194/en/
IR Contacts United States Kevin C. Mannix (215)
591-8912
Ran Meir 972 (3) 926-7516
PR Contacts United States Kelley Dougherty (973)
832-2810
Israel Yonatan Beker 972 (54) 888 5898
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Teva Pharmaceutical Indu... (NYSE:TEVA)
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