- Revenues of $4.3 billion
- GAAP diluted loss per share of $0.29
- Non-GAAP diluted EPS of $0.58
- Free cash flow of $551 million
- Spend base reduction of $2.9 billion since initiation of the
restructuring plan in 2018; on-track to achieve $3.0 billion by the
end of 2019
- Full year 2019 business outlook revised to:
- Net revenues of $17.2 - $ 17.4 billion (prior $17.0 - $ 17.4
billion)
- Operating income of $4.0 - $ 4.2 billion (prior $3.8 - $
4.2 billion)
- EBITDA of $4.5 - $ 4.8 billion (prior $4.4 - $ 4.8
billion)
- EPS of $2.30 - $2.50 (prior $2.20 - $2.50)
- Free cash flow of $1.7 - $2.0 billion (prior
$1.6 - $2.0 billion)
Teva Pharmaceutical Industries Ltd. (NYSE: TEVA, TASE: TEVA)
today reported results for the quarter ended September 30,
2019.
Mr. Kåre Schultz, Teva’s President and CEO, said, "During the
third quarter, we continued to make significant progress in
achieving our 2019 goals. Free cash flow was especially strong in
the quarter, totaling $550 million. Our North American generics
business continued its steady trend, achieving sales of $914
million, supported by 39 new product launches in the first nine
months of 2019, including generic EpiPen® Jr. Among our branded
products, AUSTEDO® continues to demonstrate consistent growth, and
AJOVY® maintained its U.S. market share and is being introduced in
the EU."
Mr. Schultz added: "We remain on track to achieve our two-year
restructuring target of a $3 billion spend base reduction. Looking
ahead, we are committed to driving long-term shareholder value by
maximizing profits from existing core businesses, increasing sales
of new brands and products, executing our biosimilar/biologics
strategy, delivering manufacturing efficiencies, and generating
strong free cash flow for debt repayment."
Third Quarter 2019 Consolidated
Results
Revenues in the third quarter of 2019 were $4,264
million, a decrease of 6%, or 5% in local currency terms, compared
to the third quarter of 2018, mainly due to generic competition to
COPAXONE®, a decline in revenues from BENDEKA® / TREANDA® and
certain other specialty products in the United States, as well as a
decline in revenues in Russia and Japan, partially offset by higher
revenues from AUSTEDO®, AJOVY® and QVAR® in the United States.
Exchange rate differences between the third quarter of
2019 and the third quarter of 2018 negatively impacted our revenues
and GAAP operating income by $55 million and $19 million,
respectively. Our non-GAAP operating income was negatively impacted
by $22 million.
GAAP gross profit was $1,830 million in the third quarter
of 2019, a decrease of 7% compared to the third quarter of 2018.
GAAP gross profit margin was 42.9% in the third quarter of
2019, compared to 43.7% in the third quarter of 2018. Non-GAAP
gross profit was $2,103 million in the third quarter of
2019, a decline of 7% compared to the third quarter of 2018.
Non-GAAP gross profit margin was 49.3% in the third quarter
of 2019, compared to 49.9% in the third quarter of 2018. The
decrease in gross profit as a percentage of revenues was mainly due
to lower profitability in North America, resulting mainly from a
decline in COPAXONE revenues due to generic competition, partially
offset by higher profitability in Europe, resulting mainly from
lower cost of goods sold related to network optimization.
GAAP Research and Development (R&D) expenses in the
third quarter of 2019 were $240 million, a decrease of 23% compared
to the third quarter of 2018. Non-GAAP R&D expenses were
$242 million, or 5.7% of quarterly revenues, in the third quarter
of 2019, compared to $243 million, or 5.4%, in the third quarter of
2018. The decrease in R&D expenses resulted from cost of labor
reductions, pipeline optimization and project terminations,
partially offset by increased investment in early stage
projects.
GAAP Selling and Marketing (S&M) expenses in the
third quarter of 2019 were $595 million, a decrease of 15% compared
to the third quarter of 2018. Non-GAAP S&M expenses were
$551 million, or 12.9% of quarterly revenues, in the third quarter
of 2019, compared to $634 million, or 14.0%, in the third 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
third quarter of 2019 were $285 million, a decrease of 8% compared
to the third quarter of 2018. Non-GAAP G&A expenses were
$270 million, or 6.3% of quarterly revenues, in the third quarter
of 2019, compared to $284 million, or 6.3%, in the third 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 third quarter of 2019 was $14
million, compared to $35 million in the third quarter of 2018.
Non-GAAP other income in the third quarter of 2019 was $11
million, compared to $4 million in the third quarter of 2018.
GAAP operating loss in the third quarter of 2019 was $81
million, compared to GAAP operating income of $16 million in the
third quarter of 2018. Non-GAAP operating income in the
third quarter of 2019 was $1,051 million, a decrease of 5% compared
to $1,104 million in the third quarter of 2018. The decrease in
non-GAAP operating income was mainly due to lower profits in North
America, mainly resulting from a decline in COPAXONE revenues due
to generic competition and lower revenues from certain other
specialty products in North America, partially offset by cost
reductions and efficiency measures as part of the restructuring
plan and higher revenues from AUSTEDO.
EBITDA (non-GAAP operating income, which excludes
amortization and certain other items, as well as depreciation
expenses) was $1,183 million in the third quarter of 2019, a
decrease of 6% compared to $1,254 million in the third quarter of
2018.
GAAP financial expenses were $211 million in the third
quarter of 2019, compared to $229 million in the third quarter of
2018.
Non-GAAP financial expenses were $208 million in the
third quarter of 2019, compared to $236 million in the third
quarter of 2018. The decrease in non-GAAP financial expenses was
mainly due to lower interest expenses resulting from debt
prepayments during the period, as well as gains on our hedging and
derivatives activities.
In the third quarter of 2019, we recognized a tax expense
of $11 million, on pre-tax loss of $292 million. In the third
quarter of 2018, we recognized a tax benefit of $26 million, or
12%, on pre-tax loss of $213 million. Our tax rate for the third
quarter of 2019 was mainly affected by impairments, amortization,
legal settlements with low corresponding tax effect and interest
disallowance in connection with the U.S. Tax Cuts and Jobs Act.
Non-GAAP income taxes for the third quarter of 2019 were $183
million, or 22%, on pre-tax non-GAAP income of $843 million.
Non-GAAP income taxes in the third quarter of 2018 were $85
million, or 10%, on pre-tax non-GAAP income of $868 million. Our
non-GAAP tax rate for the third quarter of 2019 was mainly affected
by legal settlements with low corresponding tax effect, interest
expense disallowance and other changes to tax positions and
deductions.
We expect our annual non-GAAP tax rate for 2019 to be 18%, which
is higher than our previous projections and our non-GAAP tax rate
for 2018. This is due to legal settlements with low corresponding
tax effect, interest expense disallowance and other changes to tax
positions and deductions.
GAAP net loss attributable to ordinary
shareholders was $314 million in the third quarter of 2019,
compared to net loss of $273 million in the third quarter of 2018.
Non-GAAP net income attributable to ordinary shareholders
and non-GAAP diluted EPS in the third quarter of 2019 were
$637 million and $0.58, respectively, compared to $694 million and
$0.68 in the third quarter of 2018. The decrease in non-GAAP net
income and EPS in the third quarter of 2019 is mainly due to higher
tax expenses and lower operating profit, partially offset by lower
finance expenses.
The weighted average diluted shares outstanding used for
the fully diluted share calculation for the three months ended
September 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 September 30, 2019 and 2018 were
1,093 million and 1,022 million shares, respectively. The increase
was mainly due to the conversion of the mandatory convertible
preferred shares to ordinary shares on December 17, 2018.
As of September 30, 2019 and 2018, the fully diluted share count
for purposes of calculating our market capitalization was
approximately 1,107 million and 1,111 million shares,
respectively.
Non-GAAP information: Net non-GAAP adjustments in the
third quarter of 2019 were $951 million. Non-GAAP net income and
non-GAAP EPS for the third quarter of 2019 were adjusted to exclude
the following items:
- Legal settlements and loss contingencies of $468 million,
mainly related to the reserve update in connection with the opioids
cases;
- Amortization of purchased intangible assets amounting to $255
million, of which $220 million is included in cost of goods sold
and the remaining $35 million in S&M expenses;
- Impairment of long-lived assets of $204 million, comprised
mainly of impairment of intangible assets of product rights and
IPR&D assets in connection with the Actavis Generics
acquisition;
- Restructuring expenses of $61 million;
- Contingent consideration expenses of $51 million, mainly
related to bendamustine;
- Equity compensation expenses of $35 million;
- Minority income of $12 million;
- Other non-GAAP expenses of $61 million; and
- Income tax of $172 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 operating activities during the
third quarter of 2019 was $325 million, compared to $421 million in
the third quarter of 2018. The decrease in the third quarter of
2019 was mainly due to lower revenues and a reduction in sales
reserves associated with the revenue decline.
Free cash flow (cash flow generated from operating
activities, net of cash received for capital investments and
beneficial interest collected in exchange for securitized trade
receivables) was $551 million in the third quarter of 2019,
compared to $704 million in the third quarter of 2018. The decrease
in free cash flow was mainly due to the reasons mentioned above, as
well as higher capital investments during the third quarter of 2019
compared to the third quarter of 2018.
As of September 30, 2019, our debt was $26,942 million,
compared to $28,726 million as of June 30, 2019. The decrease was
mainly due to repayment at maturity of our $1,556 million 1.7%
senior notes and exchange rate 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.
During the third quarter of 2019 we borrowed $500 million under
the RCF and subsequently repaid $400 million of such borrowings. As
of September 30, 2019, $100 million was outstanding under the RCF.
As of the date hereof, no amounts are outstanding under the
RCF.
As of September 30, 2019, the portion of total debt classified
as “short-term” was 12%, similar to such portion as of June 30,
2019.
Segment Results for the Third 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 September 30,
2019 and 2018:
Three months ended September
30,
2019
2018
(U.S. $ in millions / % of
Segment Revenues)
Revenues
$
2,051
100%
$
2,265
100.0%
Gross profit
1,048
51.1%
1,196
52.8%
R&D expenses
156
7.6%
158
7.0%
S&M expenses
219
10.7%
265
11.7%
G&A expenses
112
5.5%
128
5.7%
Other (income) expense
(5)
§
(4)
§
Segment profit*
$
565
27.5%
$
649
28.7%
* 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 third
quarter of 2019 were $2,051 million, a decrease of $214 million, or
9%, compared to the third quarter of 2018. The decrease in the
third quarter of 2019 was mainly due lower revenues from COPAXONE
and certain other specialty products, partially offset by higher
revenues from AUSTEDO, AJOVY and QVAR.
Revenues in the United States, our largest market, were
$1,906 million in the third quarter of 2019, a decrease of $219
million, or 10%, compared to the third 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
September 30, 2019 and 2018:
North America
Three months ended September
30,
Percentage
Change
2019
2018
2019-2018
(U.S. $ in millions)
Generic products
$
914
$
922
(1%)
COPAXONE
271
463
(41%)
BENDEKA/TREANDA
124
161
(23%)
ProAir*
71
107
(34%)
QVAR
60
36
68%
AJOVY
25
-
NA
AUSTEDO
105
62
71%
Anda
351
333
5%
Other
131
182
(28%)
Total
$
2,051
$
2,265
(9%)
_________
* Does not include sales of ProAir
authorized generic, which are included under generic products.
Generic products revenues in our North America segment in
the third quarter of 2019 were $914 million flat compared to the
third quarter of 2018, due to new generic product launches, offset
by market dynamics, including product mix and price erosion in our
U.S. generics business.
In the third quarter of 2019, we led the U.S. generics market in
total prescriptions and new prescriptions, with approximately 391
million total prescriptions (based on trailing twelve months),
representing 10.6% of total U.S. generic prescriptions according to
IQVIA data.
COPAXONE revenues in our North America segment in the
third quarter of 2019 decreased by 41% to $271 million, compared to
the third quarter of 2018, mainly due to generic competition in the
United States.
COPAXONE revenues in the United States were $257 million in the
third quarter of 2019.
BENDEKA and TREANDA combined revenues in our North
America segment in the third quarter of 2019 decreased by 23% to
$124 million, compared to the third quarter of 2018, mainly due to
the June 2018 launch of Belrapzo® (a ready-to-dilute bendamustine
hydrochloride) by Eagle Pharmaceuticals, Inc.
ProAir revenues in our North America segment in the third
quarter of 2019 decreased by 34% to $71 million, compared to the
third 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 third
quarter of 2019 increased by 68% to $60 million, compared to the
third quarter of 2018 (which was a transition period due to the
launch of QVAR® RediHaler™.)
AJOVY revenues in our North America segment in the third
quarter of 2019 were $25 million. AJOVY, a preventive treatment of
migraine in adults, was approved by the FDA and launched in the
United States in September 2018.
AUSTEDO revenues in our North America segment in the
third quarter of 2019 increased by 71% to $105 million, compared to
$62 million in the third quarter of 2018.
Anda revenues in our North America segment in the third
quarter of 2019 increased by 5% to $351 million, compared to $333
million in the third quarter of 2018, mainly due to higher
volumes.
North America Gross Profit
Gross profit from our North America segment in the third quarter
of 2019 was $1,048 million, a decrease of 12%, compared to $1,196
million in the third quarter of 2018. The decrease was mainly due
to lower revenues from COPAXONE and certain other specialty
products, partially offset by higher revenues from AUSTEDO, QVAR
and AJOVY.
Gross profit margin for our North America segment in the third
quarter of 2019 decreased to 51.1%, compared to 52.8% in the third
quarter of 2018. The decrease was mainly due to lower revenues from
COPAXONE and certain other specialty products, partially offset by
higher gross profit margins from generic products.
North America Profit
Profit from 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 third quarter of
2019 was $565 million, a decrease of 13%, compared to $649 million
in the third quarter of 2018. The decrease was mainly due to lower
revenues from COPAXONE and certain other specialty products,
partially offset by higher revenues from AUSTEDO, QVAR and AJOVY,
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 September 30, 2019
and 2018:
Three months ended September
30,
2019
2018
(U.S. $ in millions / % of
Segment Revenues)
Revenues
$
1,163
100%
$
1,212
100%
Gross profit
662
56.9%
676
55.8%
R&D expenses
63
5.4%
62
5.1%
S&M expenses
206
17.7%
242
20.0%
G&A expenses
56
4.9%
74
6.1%
Other (income) expense
(4)
§
1
§
Segment profit*
$
340.86
29.3%
$
297.00
24.5%
___________
* Segment profit does not include
amortization and certain other items. § Represents an amount less
than 0.5%.
Revenues from our Europe segment in the third quarter of 2019
were $1,163 million, a decrease of 4% or $49 million, compared to
the third quarter of 2018. In local currency terms, revenues were
flat, mainly due to strong new generic product launches and higher
sales of OTC products, mostly offset by lower revenues from
COPAXONE due to competing glatiramer acetate products.
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 September
30, 2019 and 2018:
Europe
Three months ended September
30,
Percentage
Change
2019
2018
2018-2019
(U.S. $ in millions)
Generic products
$
836
$
845
(1%)
COPAXONE
106
124
(14%)
Respiratory products
87
93
(7%)
Other
134
150
(10%)
Total
$
1,163
$
1,212
(4%)
Generic products revenues in our Europe segment in the
third quarter of 2019, including OTC products, decreased by 1% to
$836 million, compared to the third quarter of 2018. In local
currency terms, revenues increased by 4% compared to the third
quarter of 2018, mainly due to strong new generic product launches
and higher sales of OTC products.
COPAXONE revenues in our Europe segment in the third
quarter of 2019 decreased by 14% to $106 million, compared to the
third quarter of 2018. In local currency terms, revenues decreased
by 10%, mainly due to price reductions, as well as volume decline
resulting from competing glatiramer acetate products.
Respiratory products revenues in our Europe segment in
the third quarter of 2019 decreased by 7% to $87 million, compared
to the third quarter of 2018. In local currency terms, revenues
decreased by 2%, mainly due to lower sales in the United
Kingdom.
Europe Gross Profit
Gross profit from our Europe segment in the third quarter of
2019 was $662 million, a decrease of 2% compared to $676 million in
the third quarter of 2018. The decrease was mainly due to lower
revenues from COPAXONE and the impact of currency fluctuations,
partially offset by new generic product launches.
Gross profit margin for our Europe segment in the third quarter
of 2019 increased to 56.9%, compared to 55.8% in the third quarter
of 2018. The increase was mainly due to lower cost of goods sold
related to network optimization.
Europe Profit
Profit from 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 third quarter of 2019 was
$341 million, an increase of 15%, compared to $297 million in the
third quarter of 2018. The increase was mainly due to strong new
generic product launches, cost reductions and efficiency measures
as part of the restructuring plan, partially offset by the impact
of currency fluctuations.
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
September 30, 2019 and 2018:
Three months ended September
30,
2019
2018
(U.S. $ in millions / % of
Segment Revenues)
Revenues
$
736
100%
$
726
100%
Gross profit
295
40.1%
301
41.4%
R&D expenses
21
2.8%
21
2.9%
S&M expenses
114
15.4%
120
16.5%
G&A expenses
32
4.3%
37
5.1%
Other (income) expense
(1)
§
-
§
Segment profit*
$
130
17.7%
$
123
16.9%
__________
* 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 third
quarter of 2019 were $736 million, an increase of $10 million, or
1%, compared to the third quarter of 2018. In local currency terms,
revenues increased 1% compared to the third quarter of 2018, mainly
due to higher distribution activities in Israel, partially offset
by lower sales in Japan and 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 September 30, 2019 and 2018:
International markets
Three months ended September
30,
Percentage
Change
2019
2018
2018-2019
(U.S. $ in millions)
Generic products
$
474
$
498
(5%)
COPAXONE
20
14
39%
Distribution
176
149
18%
Other
66
65
3%
Total
$
736
$
726
1%
Generic products revenues in our International Markets
segment in the third quarter of 2019, which include OTC products,
decreased by 5% to $474 million, compared to the third quarter of
2018. In local currency terms, revenues decreased by 5%, mainly due
to lower sales in Japan resulting from generic competition to
off-patented products, as well as lower sales in Russia.
COPAXONE revenues in our International Markets segment in
the third quarter of 2019 increased by 39% to $20 million, compared
to $14 million in the third quarter of 2018. In local currency
terms, revenues increased by 46%.
Distribution revenues in our International Markets
segment in the third quarter of 2019 increased by 18% to $176
million, compared to $149 million in the third quarter of 2018. In
local currency terms, revenues increased by 15%, mainly due to
agreements with new distribution partners.
International Markets Gross Profit Gross profit from our
International Markets segment in the third quarter of 2019 was $295
million, a decrease of 2% compared to $301 million in the third
quarter of 2018.
Gross profit margin for our International Markets segment in the
third quarter of 2019 decreased to 40.1%, compared to 41.4% in the
third quarter of 2018. The decrease was mainly due to changes in
product mix.
International Markets Profit
Profit from 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 third
quarter of 2019 was $130 million, an increase of 6%, compared to
$123 million in the third quarter of 2018. The increase was mainly
due to cost reductions and efficiency measures as part of the
restructuring plan.
Other Activities
We have other sources of revenue, 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 third quarter
of 2019 were $314 million, a decrease of 4% compared to the third
quarter of 2018. In local currency terms, revenues decreased by
2%.
API sales to third parties in the third quarter of 2019
were $176 million, an increase of 3% in both U.S. dollar and local
currency terms, compared to the third quarter of 2018.
Conference Call
Teva will host a conference call and live webcast along with a
slide presentation on Thursday, November 7, 2019 at 8:00 a.m. ET to
discuss its third 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: 5965257.
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 November 30, 2019, 9:00 a.m. ET
by calling United States 1 (866) 331-1332 or International +44 (0)
3333009785; passcode: 5965257.
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 3,500
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, including changes to our senior
management team; 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: our
ability to reach a final resolution of the remaining opioid-related
litigation; 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 third 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 Nine months ended September 30,
September 30,
2019
2018
2019
2018
(Unaudited) (Unaudited) (Unaudited)
(Unaudited) Net revenues
4,264
4,529
12,896
14,295
Cost of sales
2,435
2,552
7,318
7,970
Gross profit
1,830
1,977
5,579
6,325
Research and development expenses
240
311
778
918
Selling and marketing expenses
595
699
1,908
2,119
General and administrative expenses
285
309
873
954
Intangible assets impairment
177
519
1,206
1,246
Goodwill impairment
-
-
-
300
Other asset impairments, restructuring and other items
160
139
263
834
Legal settlements and loss contingencies
468
19
1,171
(1,239)
Other income
(14)
(35)
(29)
(334)
Operating income (loss)
(81)
16
(591)
1,527
Financial expenses – net
211
229
635
736
Income (loss) before income taxes
(292)
(213)
(1,226)
791
Income taxes (benefit)
11
(26)
(159)
(56)
Share in losses of associated companies- net
4
10
8
76
Net income (loss)
(307)
(197)
(1,076)
771
Net income attributable to non-controlling interests
7
11
33
35
Net income (loss) attributable to Teva
(314)
(208)
(1,108)
736
Dividends on preferred shares
-
65
-
195
Net income (loss) attributable to Teva's ordinary
shareholders
(314)
(273)
(1,108)
541
Earnings (loss) per share attributable to ordinary
shareholders: Basic ($)
(0.29)
(0.27)
(1.02)
0.53
Diluted ($)
(0.29)
(0.27)
(1.02)
0.53
Weighted average number of shares (in millions):
Basic
1,092
1,018
1,091
1,018
Diluted
1,092
1,018
1,091
1,020
Non-GAAP net income attributable to ordinary
shareholders:*
637
759
1,944
2,637
Non-GAAP net income attributable to ordinary shareholders for
diluted earnings per share:
637
694
1,944
2,442
Non-GAAP earnings per share attributable to ordinary
shareholders:* Basic ($)
0.58
0.68
1.78
2.40
Diluted ($)
0.58
0.68
1.78
2.39
Non-GAAP average number of shares (in millions):
Basic
1,092
1,018
1,091
1,018
Diluted
1,093
1,022
1,093
1,020
* See reconciliation attached.
Condensed Consolidated Balance Sheets
(U.S. dollars in millions)
September 30,
December 31,
2019
2018
ASSETS (Unaudited) (Audited) Current
assets: Cash and cash equivalents
1,241
1,782
Trade receivables
5,254
5,822
Inventories
4,636
4,731
Prepaid expenses
976
899
Other current assets
416
468
Assets held for sale
18
92
Total current assets
12,542
13,794
Deferred income taxes
331
368
Other non-current assets
727
731
Property, plant and equipment, net
6,643
6,868
Operating lease right-of-use assets
468
-
Identifiable intangible assets, net
11,878
14,005
Goodwill
24,657
24,917
Total assets
57,246
60,683
LIABILITIES & EQUITY Current liabilities:
Short-term debt
3,130
2,216
Sales reserves and allowances
6,137
6,711
Trade payables
1,688
1,853
Employee-related obligations
583
870
Accrued expenses
1,748
1,868
Other current liabilities
820
804
Total current liabilities
14,107
14,322
Long-term liabilities: Deferred income taxes
1,462
2,140
Other taxes and long-term liabilities
2,546
1,727
Senior notes and loans
23,812
26,700
Operating Lease Liabilities
394
-
Total long-term liabilities
28,215
30,567
Equity: Teva shareholders’ equity
13,790
14,707
Non-controlling interests
1,134
1,087
Total equity
14,925
15,794
Total liabilities and equity
57,246
60,683
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in
millions) (Unaudited) Nine months ended
Three months ended September 30, September 30,
2019
2018
2019
2018
Operating activities: Net income (loss)
$
(1,076
)
$
771
$
(307
)
$
(197
)
Adjustments to reconcile net income (loss) to net cash provided by
operations: Depreciation and amortization
1,306
1,460
413
474
Impairment of long-lived assets
1,302
1,501
205
521
Net change in operating assets and liabilities
(784
)
(1,521
)
272
(253
)
Deferred income taxes – net and uncertain tax positions
(652
)
(650
)
(290
)
(161
)
Stock-based compensation
99
122
35
45
Net loss (gain) from sale of long-lived assets and investments
10
(53
)
4
35
Other items
5
(8
)
(6
)
(52
)
Goodwill impairment
-
300
-
-
Impairment of equity investment
-
103
-
9
In process research and development
-
54
-
-
Net cash provided by operating activities
210
2,079
325
421
Investing activities: Beneficial interest
collected in exchange for securitized trade receivables
1,108
1,372
362
402
Purchases of property, plant and equipment
(406
)
(438
)
(169
)
(139
)
Proceeds from sales of business, investments and long-lived assets
169
880
35
39
Other investing activities
59
34
-
45
Purchases of investments and other assets
(5
)
(56
)
(4
)
-
Net cash provided by investing activities
925
1,792
224
347
Financing activities: Repayment of senior notes and
loans and other long-term liabilities
(1,715
)
(6,989
)
(1,558
)
(700
)
Net change in short-term debt
96
(262
)
98
(1
)
Tax withholding payments made on shares and dividends
(52
)
(22
)
-
-
Other financing activities
(14
)
(13
)
(1
)
(3
)
Proceeds from senior notes and loans, net of issuance costs
-
4,434
-
(1
)
Net cash used in financing activities
(1,685
)
(2,852
)
(1,461
)
(705
)
Translation adjustment on cash and cash equivalents
9
(107
)
(12
)
(49
)
Net change in cash and cash equivalents
(541
)
912
(924
)
14
Balance of cash and cash equivalents at beginning of period
1,782
963
2,165
1,861
Balance of cash and cash equivalents at end of period
$
1,241
$
1,875
$
1,241
$
1,875
Non-cash financing and investing activities:
Beneficial interest obtained in exchange for securitized trade
receivables
$
1,123
$
1,345
$
353
$
377
Three Months Ended September 30, 2019 U.S. $ and
shares in millions (except per share amounts) GAAP Excluded for
non-GAAP measurement Non GAAP Amortization ofpurchasedintangible
assets Legalsettlements andlosscontingencies Impairment
oflong-lived assets Restructuringcosts Costs related
toregulatoryactions taken infacilities Equitycompensation
Contingentconsideration Gain on sale ofbusiness Other non GAAPitems
Other items Correspondingtax effect Cost of sales
2,435
220
11
7
35
2,162
R&D expenses
240
5
(7)
242
S&M expenses
595
35
9
551
G&A expenses
285
14
1
270
Other (income) expense
(14)
(3)
(11)
Legal settlements and loss contingencies
468
468
-
Other assets impairments, restructuring and other items
160
28
61
51
21
-
Intangible assets impairment
177
177
0
Financial expenses, net
211
3
208
Income taxes
11
(172)
183
Share in losses of associated companies – net
4
-
4
Net income (loss) attributable to non-controlling interests
7
(12)
19
Total reconciled items
255
468
204
61
11
35
51
(3)
51
(9)
(172)
EPS - Basic
(0.29)
0.87
0.58
EPS - Diluted
(0.29)
0.87
0.58
The non-GAAP diluted weighted average number of shares was
1,093 million for the three months ended September 30, 2019.
Nine Months Ended September 30, 2019 U.S. $ and shares in
millions (except per share amounts) GAAP Excluded for non-GAAP
measurement Non GAAP Amortization ofpurchasedintangible assets
Legalsettlements andlosscontingencies Impairment oflong-lived
assets Acquisition,integration andrelated expenses
Restructuringcosts Costs related toregulatoryactions taken
infacilities Equitycompensation Contingentconsideration Gain on
sale ofbusiness Other non GAAPitems Other items Correspondingtax
effect Unusual taxitem* Cost of sales
7,318
717
28
21
96
6,456
R&D expenses
778
17
(7)
768
S&M expenses
1,908
105
29
0
1,774
G&A expenses
873
37
0
836
Other (income) expense
(29)
(12)
(17)
Legal settlements and loss contingencies
1,171
1,171
-
Other assets impairments, restructuring and other items
263
96
2
140
4
22
-
-
Intangible assets impairment
1,206
1,206
-
Financial expenses, net
635
9
626
Income taxes
(159)
(662)
61
442
Share in losses of associated companies – net
8
-
8
Net income (loss) attributable to non-controlling interests
33
(28)
61
Total reconciled items
823
1,171
1,302
2
140
28
104
4
(12)
111
(19)
(662)
61
EPS - Basic
(1.02)
2.80
1.78
EPS - Diluted
(1.02)
2.80
1.78
The non-GAAP diluted weighted average number of
shares was 1,093 million for the nine months ended September 30,
2019. *Interest disallowance as a result of the U.S. Tax
Cuts and Jobs Act.
Three Months Ended September 30, 2018
U.S. $ and shares in millions (except per share amounts)
GAAP Excluded for non-GAAP measurement Non GAAP Amortization
ofpurchasedintangible assets Legalsettlements andlosscontingencies
Impairment oflong-lived assets Other R&Dexpenses
Acquisition,integration andrelated expenses Restructuringcosts
Costs related toregulatoryactions taken infacilities
Equitycompensation Contingentconsideration Other non GAAPitems
Other items Correspondingtax effect Cost of sales
2,552
246
1
7
30
2,268
R&D expenses
311
60
7
1
243
S&M expenses
699
51
14
-
634
G&A expenses
309
17
8
284
Other (income) expense
(35)
(31)
(4)
Legal settlements and loss contingencies
19
19
-
Other assets impairments, restructuring and other items
139
2
4
88
29
16
-
Intangible assets impairment
519
519
-
Financial expenses, net
229
(7)
236
Income taxes
(26)
(111)
85
Share in losses of associated companies – net
10
9
1
Net income (loss) attributable to non-controlling interests
11
(12)
23
Total reconciled items
297
19
521
60
4
88
1
45
29
24
(10)
(111)
EPS - Basic
(0.27)
0.95
0.68
EPS - Diluted
(0.27)
0.95
0.68
The non-GAAP diluted weighted average number of
shares was 1,022 million for the three months ended September 30,
2018.
Nine months ended September 30, 2018 U.S. $
and shares in millions (except per share amounts) GAAP Excluded
for non-GAAP measurement Non GAAP Amortization
ofpurchasedintangible assets Goodwillimpairment Legalsettlements
andlosscontingencies Impairment oflong-lived assets Other
R&Dexpenses Acquisition,integration andrelated expenses
Restructuringcosts Costs related toregulatoryactions taken
infacilities Equitycompensation Contingentconsideration Gain onsale
ofbusiness Other non GAAPitems Other items Correspondingtax effect
Cost of sales
7,970
771
6
22
94
7,077
R&D expenses
918
82
21
2
813
S&M expenses
2,119
138
35
(4)
1,950
G&A expenses
954
44
12
898
Other (income) expense
(334)
(114)
(220)
Legal settlements and loss contingencies
(1,239)
(1,239)
-
Other assets impairments, restructuring and other items
834
255
9
442
84
44
-
Intangible assets impairment
1,246
1,246
-
Goodwill impairment
300
300
-
Financial expenses, net
736
59
677
Income taxes
(56)
(479)
423
Share in losses of associated companies – net
76
103
(27)
Net income (loss) attributable to non-controlling interests
35
(32)
67
Total reconciled items Total reconciled items
909
(1,239)
1,501
82
9
442
6
122
84
(114)
148
130
(479)
EPS - Basic
0.53
1.87
2.40
EPS - Diluted
0.53
1.86
2.39
The non-GAAP diluted weighted average number of
shares was 1,020 million for the nine months ended September 30,
2018.
Segment Information North America
Europe International Markets
Three months ended September
30,
Three months ended September
30,
Three months ended September
30,
2019
2018
2019
2018
2019
2018
(U.S. $ in millions)
(U.S. $ in millions)
(U.S. $ in millions)
Revenues
$
2,051
$
2,265
$
1,163
$
1,212
$
736
$
726
Gross profit
1,048
1,196
662
676
295
301
R&D expenses
156
158
63
62
21
21
S&M expenses
219
265
206
242
114
120
G&A expenses
112
128
56
74
32
37
Other (income) loss
(5
)
(4
)
(4
)
1
(1
)
-
Segment profit
$
565
$
649
$
341
$
297
$
130
$
123
Segment Information North America
Europe International Markets
Nine months ended September
30,
Nine months ended September
30,
Nine months ended September
30,
2019
2018
2019
2018
2019
2018
(U.S. $ in millions)
(U.S. $ in millions)
(U.S. $ in millions)
Revenues
$
6,169
$
7,059
$
3,611
$
3,982
$
2,145
$
2,265
Gross profit
3,155
3,778
2,066
2,195
877
942
R&D expenses
497
528
199
208
66
70
S&M expenses
756
813
637
725
348
384
G&A expenses
342
357
175
243
102
115
Other income
(6
)
(206
)
(5
)
(1
)
(2
)
(11
)
Segment profit
$
1,566
$
2,286
$
1,060
$
1,020
$
363
$
384
Reconciliation of our segment profit to consolidated
income before income taxes Three months ended
September 30,
2019
2018
(U.S.$ in millions)
North America profit
$
565
$
649
Europe profit
341
297
International Markets profit
130
123
Total segment profit
1,036
1,069
Profit of other activities
16
35
1,051
1,104
Amounts not allocated to segments: Amortization
255
297
Other asset impairments, restructuring and other items
160
139
Intangible asset impairments
177
519
Gain on divestitures, net of divestitures related costs
(3
)
(31
)
Other R&D expenses (income)
(7
)
60
Costs related to regulatory actions taken in facilities
11
1
Legal settlements and loss contingencies
468
19
Other unallocated amounts
72
84
Consolidated operating income (loss)
(81
)
16
Financial expenses - net
211
229
Consolidated loss before income taxes
$
(292
)
$
(213
)
Reconciliation of our segment profit to consolidated
income before income taxes Nine months ended
September 30,
2019
2018
(U.S.$ in millions)
North America profit
$
1,566
$
2,286
Europe profit
1,060
1,020
International Markets profit
363
384
Total segment profit
2,989
3,690
Profit of other activities
92
87
3,081
3,777
Amounts not allocated to segments: Amortization
823
909
Other asset impairments, restructuring and other items
263
834
Goodwill impairment
-
300
Intangible asset impairments
1,206
1,246
Gain on divestitures, net of divestitures related costs
(12
)
(114
)
Other R&D expenses
(7
)
82
Costs related to regulatory actions taken in facilities
28
6
Legal settlements and loss contingencies
1,171
(1,239
)
Other unallocated amounts
201
226
Consolidated operating income (loss)
(591
)
1,527
Financial expenses - net
635
736
Consolidated income (loss) before income taxes
$
(1,226
)
$
791
Revenues by Activity and Geographical Area (Unaudited)
Three months ended
September 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
North America segment Generic products
$
914
$
922
(1
%)
COPAXONE
271
463
(41
%)
BENDEKA / TREANDA
124
161
(23
%)
ProAir
71
107
(34
%)
QVAR
60
36
68
%
AJOVY
25
-
NA
AUSTEDO
105
62
71
%
Anda
351
333
5
%
Other
131
182
(28
%)
Total
2,051
2,265
(9
%)
Three months ended September 30,
PercentageChange
2019
2018
2018-2019
(U.S.$ in millions)
Europe segment Generic medicines
$
836
$
845
(1
%)
COPAXONE
106
124
(14
%)
Respiratory products
87
93
(7
%)
Other
134
150
(10
%)
Total
1,163
1,212
(4
%)
Three months ended September 30,
PercentageChange
2019
2018
2018-2019
(U.S.$ in millions)
International Markets segment Generics medicines
$
474
$
498
(5
%)
COPAXONE
20
14
39
%
Distribution
176
149
18
%
Other
66
65
3
%
Total
736
726
1
%
Revenues by Activity and Geographical Area
(Unaudited)
Nine months ended September 30,
PercentageChange
2019
2018
2018-2019
(U.S.$ in millions)
North America segment Generic products
$
2,826
$
2,957
(4
%)
COPAXONE
753
1,403
(46
%)
BENDEKA / TREANDA
353
502
(30
%)
ProAir
194
352
(45
%)
QVAR
183
173
6
%
AJOVY
68
-
N/A
AUSTEDO
276
136
103
%
Anda
1,080
984
10
%
Other
436
554
(21
%)
Total
6,169
7,059
(13
%)
Nine months ended September 30,
PercentageChange
2019
2018
2018-2019
(U.S.$ in millions)
Europe segment Generic medicines
$
2,599
$
2,749
(5
%)
COPAXONE
327
417
(22
%)
Respiratory products
267
312
(14
%)
Other
417
504
(17
%)
Total
3,611
3,982
(9
%)
Nine months ended September 30,
PercentageChange
2019
2018
2018-2019
(U.S.$ in millions)
International Markets segment Generics medicines
$
1,404
$
1,523
(8
%)
COPAXONE
46
52
(12
%)
Distribution
491
456
8
%
Other
204
233
(13
%)
Total
2,145
2,265
(5
%)
Free cash flow reconciliation (Unaudited)
Three months endedSeptember 30,
2019
2018
(U.S. $ in millions)
Net cash provided by operating activities
325
421
Beneficial interest collected in exchange for securitized trade
receivables, included in investing activities
362
402
capital expenditures
(169
)
(139
)
Proceeds from sale of property, plant and equipment, intangible
assets and companies
33
20
Free cash flow
$
551
$
704
Free cash flow reconciliation (Unaudited)
Nine
months endedSeptember 30,
2019
2018
(U.S. $ in millions)
Net cash provided by operating activities
210
2,079
Beneficial interest collected in exchange for securitized trade
receivables, included in investing activities
1,108
1,372
capital expenditures
(406
)
(438
)
Proceeds from sale of property, plant and equipment, intangible
assets and companies
167
144
Free cash flow
$
1,079
$
3,157
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107005439/en/
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