StockSelector.com
  Research, Select, & Monitor Thursday, October 17, 2019 9:47:18 PM ET  
Trade Ideas The Market Industries Stocks Portfolio

 
Ticker Lookup
Teva Pharmaceutical Industries, Ltd$7.77$.8211.80%

  Quote | Ranking | Chart | Valuations | Sentiment | Industry | News | Earnings | Analysts | More...

Your Target?

 Teva Reports Second Quarter 2019 Financial Results
   Wednesday, August 07, 2019 7:00:00 AM ET
  • 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

JERUSALEM--(BUSINESS WIRE)--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.”

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.

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.

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.

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.

 

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.
 

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)
GAAPExcluded for non-GAAP measurementNon-GAAP
 
Amortization of
purchased
intangible assets
Legal settlements
and loss
contingencies
Impairment of
long-lived assets
Restructuring
costs
Costs related to
regulatory actions
taken in facilities
Equity
compensation
Contingent
consideration
Gain on sale of
business
Other non GAAP
items
Other itemsCorresponding
tax 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)
GAAPExcluded for non-GAAP measurementNon-GAAP
 
Amortization of
purchased
intangible assets
Legal settlements
and loss
contingencies
Impairment of
long-lived assets
Acquisition,
integration and
related expenses
Restructuring
costs
Costs related to
regulatory actions
taken in facilities
Equity
compensation
Contingent
consideration
Gain on sale of
business
Other non GAAP
items
Other itemsCorresponding tax
effect
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)
GAAPExcluded for non-GAAP measurementNon-GAAP
 
Amortization of
purchased
intangible assets
Legal settlements
and loss
contingencies
Impairment of
long-lived assets
Acquisition,
integration and
related expenses
Restructuring
costs
Costs related to
regulatory actions
taken in facilities
Equity
compensation
Contingent
consideration
Other non GAAP
items
Other itemsCorresponding
tax 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)
GAAPExcluded for non-GAAP measurementNon-GAAP
 
Amortization of
purchased
intangible assets
Legal settlements
and loss
contingencies
Impairment of
long-lived assets
Other R&D
expenses
Acquisition,
integration and
related expenses
Restructuring
costs
Costs related to
regulatory actions
taken in facilities
Equity
compensation
Contingent
consideration
Other non GAAP
items
Other itemsCorresponding
tax 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

 

 

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

Source: Teva Pharmaceutical Industries Ltd.



Register |  Password |  Feedback |  Copyright |  Usage Agreement |  Privacy Policy |  Advertising |  About Us |  Contact Us |  FAQ 

Past performance is not indicative of future results

StockSelector.com, the StockSelector.com logo, and News Selects are trademarks of StockSelector.com.
Copyright © 1998 - 2019 StockSelector.com. All rights reserved.