Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) today reported
results for the quarter ended June 30, 2016.
Q2 2016 Revenues $5.0 billion GAAP EPS
$0.20 Non-GAAP EPS $1.25
Non-GAAP EPS adjusted to exclude the
impactof the December 2015 equity offerings
$1.43
- On August 2, Teva completed the Actavis
Generics acquisition
- On August 3, Teva agreed to acquire
Anda for $500 million
“We are pleased with our performance this quarter and the steps
we are taking to transform our business, notably the recent
completion of our acquisition of Actavis Generics and the proposed
purchase of Anda Inc. We have brought together two leading
businesses with complementary strengths, R&D capabilities,
product pipelines and portfolios, geographical footprints,
operational networks and cultures. The result is a stronger, more
competitive Teva, well positioned to thrive in an evolving global
marketplace,” stated Erez Vigodman, President and CEO.
Vigodman continued, “Going forward we are focused on the
integration of Actavis Generics, delivering on our operational and
financial targets and on the ongoing development and
commercialization of the more than 35 innovative products in our
pipeline. We plan to use our strong cash flow to pay down debt and
continue to invest in attractive specialty products. We are excited
about our future and our ongoing pursuit to increase access to
important medicines for patients around the world."
Second Quarter 2016
Results
Revenues in the second quarter of 2016 amounted to $5.0
billion, up 1% compared to the second quarter of 2015. Excluding
the impact of foreign exchange fluctuations, revenues increased
4%.
Exchange rate differences between the second quarter of
2016 and the second quarter of 2015 reduced revenues by $141
million, GAAP operating income by $55 million and non-GAAP
operating income by $52 million.
GAAP gross profit was $2.9 billion in the second quarter
of 2016, down 1%, compared to the second quarter of 2015. GAAP
gross profit margin was 57.1% in the quarter, compared to
58.4% in the second quarter of 2015. Non-GAAP gross profit
was $3.2 billion in the second quarter of 2016, up 1% from the
second quarter of 2015. Non-GAAP gross profit margin was
62.5% in the second quarter of 2016, compared to 62.8% in the
second quarter of 2015.
Research and Development (R&D) expense (excluding
equity compensation expenses and purchase of in-process R&D) in
the second quarter of 2016 amounted to $370 million, compared to
$357 million in the second quarter of 2015. R&D expenses were
7.3% of revenues in the quarter, compared to 7.2% in the second
quarter of 2015. R&D expenses related to our generic medicines
segment amounted to $125 million, compared to $134 million in the
second quarter of 2015, a decrease of 7%. R&D expenses related
to our specialty medicines segment amounted to $245 million, an
increase of 11% compared to $220 million in the second quarter of
2015, mainly due to increased development costs related to assets
acquired through the Labrys and Auspex transactions.
Selling and Marketing (S&M) expenses (excluding
amortization of purchased intangible assets and equity compensation
expenses) amounted to $898 million, or 17.8% of revenues, in the
second quarter of 2016, compared to $846 million, or 17.0% of
revenues, in the second quarter of 2015. S&M expenses related
to our generic medicines segment amounted to $333 million, a
decrease of 1% compared to $335 million in the second quarter of
2015, but an increase of 7% in local currency terms. The increase
in local currency terms was mainly due to the additional costs
related to our acquisition of Rimsa in the first quarter of 2016
and to the commencement of activities of our business venture in
Japan. S&M expenses related to our specialty medicines segment
amounted to $478 million, an increase of 5% in both U.S. dollar and
local currency terms compared to $457 million in the second quarter
of 2015, mainly due to increased royalties on sales.
General and Administrative (G&A) expenses (excluding
equity compensation expenses) amounted to $299 million in the
second quarter of 2016, or 5.9% of revenues, compared to $307
million and 6.2% in the second quarter of 2015.
GAAP operating income was $0.4 billion in the second
quarter of 2016, down 45% compared to $0.7 billion in the second
quarter of 2015. Quarterly non-GAAP operating income was
$1.6 billion, down 2% compared to the second quarter of 2015.
EBITDA (non-GAAP operating income, which excludes
amortization and certain other items, and excluding depreciation
expenses for the period) amounted to $1.7 billion, down 1% compared
to the second quarter of 2015.
GAAP financial expenses for the second quarter of 2016
amounted to $105 million, compared to $41 million in the second
quarter of 2015. The increase in expenses is mainly the result of
an impairment of our investment in Mesoblast. Non-GAAP financial
expenses amounted to $6 million in the second quarter of 2016,
compared to $41 million in the second quarter of 2015.
GAAP income tax expenses for the second quarter of 2016
amounted to $29 million, or 11% on pre-tax income of $256 million.
In the second quarter of 2015, the provision for income taxes
amounted to $88 million, or 14% on pre-tax income of $621 million.
The provision for non-GAAP income taxes for the second
quarter of 2016 amounted to $333 million on pre-tax non-GAAP income
of $1.6 billion, for a quarterly tax rate of 21%. The provision for
non-GAAP income taxes in the second quarter of 2015 was $345
million on pre-tax non-GAAP income of $1.6 billion, for a quarterly
tax rate of 22%. While the tax rate may fluctuate quarterly, we
expect our annual non-GAAP tax rate for 2016 to be 21%, similar to
the rate in 2015.
For the second quarter of 2016, the weighted average
outstanding shares for the fully diluted earnings per share
calculation was 920 million on a GAAP basis and 979 million on a
non-GAAP basis. The average weighted diluted shares outstanding
used for the fully diluted share calculation for the second quarter
of 2015 were 859 million shares, on both a GAAP and a non-GAAP
basis. The increase in the number of shares resulted from our
December 2015 equity offerings, with the number of shares on a
non-GAAP basis including the potential dilution resulting from our
mandatory convertible preferred shares, which had a dilutive effect
on our non-GAAP earnings per share.
Excluding the impact of the December 2015 equity offerings to
finance the Actavis Generics acquisition, the weighted average
outstanding shares for the fully diluted earnings per share
calculation on a non-GAAP basis for the second quarter of 2016 was
860 million shares.
As of June 30, 2016, the fully diluted share count for
calculating Teva's market capitalization was approximately 995
million shares.
GAAP net income attributable to Teva and GAAP diluted
EPS were $254 million and $0.20, respectively, in the second
quarter of 2016, compared to $539 million and $0.63, respectively,
in the second quarter of 2015. Non-GAAP net income and
non-GAAP diluted EPS were $1.2 billion and $1.25,
respectively, in the second quarter of 2016, compared to $1.2
billion and $1.43 in the second quarter of 2015. Non-GAAP EPS
adjusted to exclude the December 2015 equity offerings was
$1.43.
Non-GAAP information: Net non-GAAP adjustments in the
second quarter of 2016 amounted to $974 million. Non-GAAP net
income and non-GAAP EPS for the quarter were adjusted to exclude
the following items:
- Impairment of long-lived assets of $572
million mainly related to Revascor® and Zecuity®;
- Amortization of purchased intangible
assets totaling $193 million, of which $146 million is included in
cost of goods sold and the remaining $47 million in selling and
marketing expenses;
- Legal settlements and loss
contingencies of $166 million mainly related to a settlement in
principle reached in connection with the aripiprazole
litigation;
- Financial expenses of $99 million
related to the impairment of our investment in Mesoblast;
- Inventory step-up of $85 million;
- Acquisition, integration and
restructuring expenses of $82 million;
- Other write-offs associated with the
impairment of Zecuity® and other items of $57 million;
- Costs related to regulatory actions
taken in facilities of $39 million;
- Equity compensation of $28
million;
- Minority interest adjustment of
negative $43 million; and
- Related tax benefit of $304
million.
The non-GAAP data presented by Teva are the results used by
Teva's management and board of directors to evaluate the
operational performance of the company, to compare against the
company's work plans and budgets, and ultimately to evaluate the
performance of management. Teva provides such non-GAAP data to
investors as supplemental data and not in substitution or
replacement for GAAP results, because management believes such data
provides useful information to investors and facilitates investors'
understanding of its business. See the attached tables for a
reconciliation of the U.S. GAAP results to the adjusted non-GAAP
figures.
Cash flow from operations generated during the second
quarter of 2016 amounted to $1.0 billion, a decrease of 35%
compared to the second quarter of 2015. The decrease was mainly due
to an increase in accounts receivables, net of SR&A, partially
offset by an increase in accounts payable. Free cash flow,
excluding net capital expenditures, amounted to $0.8 billion, a
decrease of 40% compared to the second quarter of 2015.
Cash and investments at June 30, 2016 increased to $8.2
billion, compared to $7.2 billion at March 31, 2016.
Total shareholders’ equity was $32.0 billion at June 30,
2016, compared to $30.6 billion at March 31, 2016.
Segment Results for the Second Quarter
2016
Generic Medicines Segment
Three Months Ended June 30, 2016
2015 U.S.$ in millions / % of Segment Revenues
Revenues $ 2,294 100.0% $ 2,466
100.0% Gross profit 1,072 46.7% 1,198 48.6% R&D expenses 125
5.4% 134 5.4% S&M expenses 333 14.5% 335 13.6% Segment profit*
$ 614 26.8% $ 729 29.6% * Segment profit consists of gross
profit for the segment, less R&D and S&M expenses related
to the segment. Segment profit does not include G&A expenses,
amortization and certain other items.
Generic Medicines Revenues
Generic medicines revenues in the second quarter of 2016
amounted to $2.3 billion, a decrease of 7% compared to the second
quarter of 2015. In local currency terms, revenues decreased
4%.
Generic revenues consisted of:
- U.S. revenues of $892 million, a
decrease of 33% compared to the second quarter of 2015. The
decrease resulted mainly from a decline in sales of aripiprazole
(Abilify®), esomeprazole (Nexium®) and budesonide (Pulmicort®) due
to loss of exclusivity.
- European revenues of $660 million, a
decrease of 1%, in both U.S. dollar and local currency terms,
compared to the second quarter of 2015. This resulted mainly from
our strategy of pursuing profitable and sustainable business in the
region along with higher API sales to third parties.
- ROW revenues of $742 million, an
increase of 56%, or 71% in local currency terms, compared to the
second quarter of 2015. The increase in local currency terms was
mainly due to higher revenues in Japan from our new business
venture with Takeda, which commenced operations in April 2016, as
well as an increase in revenues in Venezuela and Canada.
- API sales to third parties of $207
million (which is included in the market revenues above), an
increase of 13%, compared to the second quarter of 2015, with
higher revenues in both Europe and the United States.
Generic medicines revenues comprised 46% of our total revenues
in the quarter, compared to 50% in the second quarter of 2015.
Generic Medicines Gross Profit
Gross profit from our generic medicines segment in the second
quarter of 2016 amounted to $1.1 billion, a decrease of 11%
compared to the second quarter of 2015. The lower gross profit was
mainly a result of the lower sales of aripiprazole (Abilify®) and
esomeprazole (Nexium®) in the United States, which are both high
gross profit products. This decrease was partially offset by higher
gross profit of our ROW and European markets and of our API
business. Gross profit margin for our generic medicines segment in
the second quarter of 2016 decreased to 46.7%, from 48.6% in the
second quarter of 2015.
Generic Medicines Profit
Our generic medicines segment generated profit of $614 million
in the second quarter of 2016, a decrease of 16% compared to the
second quarter of 2015. Generic medicines profitability as a
percentage of generic medicines revenues was 26.8% in the second
quarter of 2016, down from 29.6% in the second quarter of 2015. The
decrease was primarily due to the lower gross profit of the
segment.
Specialty Medicines Segment
Three Months Ended June 30, 2016
2015 U.S.$ in millions / % of Segment Revenues
Revenues $ 2,271 100.0% $ 2,090 100.0% Gross
profit 1,978 87.1% 1,808 86.5% R&D expenses 245 10.8% 220 10.5%
S&M expenses 478 21.0% 457 21.9% Segment profit* $ 1,255 55.3%
$ 1,131 54.1% * Segment profit is comprised of gross profit
for the segment, less R&D and S&M expenses related to the
segment. Segment profit does not include G&A expenses,
amortization and certain other items.
Specialty Medicines Revenues
Specialty medicines revenues in the second quarter of 2016
amounted to $2.3 billion, an increase of 9% compared to the second
quarter of 2015. U.S. specialty medicines revenues amounted to $1.8
billion, up 9% compared to the second quarter of 2015. European
specialty medicines revenues amounted to $414 million, an increase
of 10%, or 9% in local currency terms, compared to the second
quarter of 2015. ROW specialty revenues amounted to $85 million,
down 6%, though up 5% in local currency terms, compared to the
second quarter of 2015.
Specialty medicines revenues comprised 45% of our total revenues
in the quarter, compared to 42% in the second quarter of 2015.
The increase in specialty medicines revenues compared to the
second quarter of 2015 was due to higher revenues in all our core
therapeutic areas.
The following table presents revenues by therapeutic area and
key products for our specialty medicines segment for the three
months ended June 30, 2016 and 2015:
Three Months Ended
June 30,
PercentageChange
2016 2015 2016 - 2015 U.S. $ in
millions CNS $ 1,415 $ 1,353 5% Copaxone® 1,141 1,054 8%
Azilect® 108 105 3% Nuvigil® 51 91 (44%) Respiratory 313 253 24%
ProAir® 135 128 5% QVAR® 116 83 40% Oncology 334 293 14% Treanda®
and Bendeka™ 207 179 16% Women's Health 117 110 6% Other Specialty
92 81 14%
Total Specialty Medicines $
2,271 $ 2,090 9%
Global revenues of Copaxone® (20 mg/mL and 40
mg/mL), the leading multiple sclerosis therapy in the U.S. and
globally, amounted to $1.1 billion, an increase of 8% compared to
the second quarter of 2015.
Copaxone® revenues in the United States amounted to $955
million, an increase of 10% compared to the second quarter of 2015.
The increase was mainly due to a reduction of sales in the Medicaid
channel, resulting in both lower rebates in the current quarter and
a positive change in the estimate for rebates in prior quarters, as
well as the impact of a price increase of 7.9% in January 2016 on
both Copaxone® products. At the end of the second quarter of 2016,
according to June 2016 IMS data, our U.S. market shares for the
Copaxone® products in terms of new and total prescriptions were
24.9% and 29.1%, respectively. Copaxone® 40 mg/mL accounted for 82%
of total Copaxone® prescriptions in the U.S.
Copaxone® revenues outside the United States amounted to $186
million, an increase of 1%, or 3% in local currency terms, compared
to the second quarter of 2015 due to higher volumes in certain
European and ROW markets.
Our global Azilect® revenues amounted to $108 million, an
increase of 3% compared to the second quarter of 2015. Global
in-market sales decreased 9% due to generic competition in certain
European markets.
Revenues of our respiratory products amounted to $313
million, up 24% compared to the second quarter of 2015.
ProAir® revenues in the quarter amounted to $135
million, up 5% compared to the second quarter of 2015, due to
positive price effects, partially offset by lower volumes.
QVAR® global revenues amounted to $116 million in the
second quarter of 2016, up 40% compared to the second quarter of
2015, mainly due to positive price effects.
Revenues of our oncology products amounted to $334
million in the second quarter of 2016, up 14% from the second
quarter of 2015. Revenues of Treanda® and Bendeka™
amounted to $207 million, an increase of 16% compared to the second
quarter of 2015, mainly due to higher volumes sold.
Specialty Medicines Gross Profit
Gross profit from our specialty medicines segment amounted to
$2.0 billion, an increase of $170 million compared to the second
quarter of 2015. Gross profit margin for our specialty medicines
segment in the second quarter of 2016 was 87.1%, compared to 86.5%
in the second quarter of 2015.
Specialty Medicines Profit
Our specialty medicines segment profit amounted to $1.3 billion
in the second quarter of 2016, up 11% compared to the second
quarter of 2015, mainly due to higher gross profit, which was
partially offset by increases in S&M and R&D expenses.
Specialty medicines profit as a percentage of segment revenues
was 55.3% in the second quarter of 2016, up from 54.1% in the
second quarter of 2015.
The following tables present details of our multiple sclerosis
franchise and of our other specialty medicines for the three months
ended June 30, 2016 and 2015:
Multiple Sclerosis Three months ended June
30, 2016 2015 U.S.$ in
millions / % of MS Revenues
Revenues $ 1,141 100.0% $ 1,054 100.0% Gross profit
1,029 90.2% 953 90.4% R&D expenses 20 1.8% 26 2.5% S&M
expenses 81 7.1% 88 8.3%
MS profit $ 928 81.3% $ 839 79.6%
Other Specialty Three months ended June 30,
2016 2015 U.S.$ in millions / % of Other Specialty
Revenues Revenues $ 1,130 100.0% $ 1,036 100.0% Gross
profit 949 84.0% 855 82.5% R&D expenses 225 19.9% 194 18.7%
S&M expenses 397 35.2% 369
35.6% Other Specialty profit $ 327 28.9% $ 292
28.2%
Other Activities
Our OTC revenues related to PGT amounted to $262 million,
an increase of 25% compared to $210 million in the second quarter
of 2015. In local currency terms, revenues increased 58%, mainly
due to inflation in Venezuela. PGT’s in-market sales amounted to
$379 million in the second quarter of 2016, an increase of $54
million compared to the second quarter of 2015.
Other revenues amounted to $211 million in the second
quarter of 2016, mostly from the distribution of third-party
products in Israel and Hungary, compared to revenues of $200
million, in the second quarter of 2015.
FY 2016 Financial
Outlook
- We expect revenues for 2016 to be
$22.0-22.5 billion.
- Non-GAAP EPS for 2016 is expected to be
$5.20-5.40, based on a weighted average number of shares of 1,021
million.
- Cash flow from operating activities for
2016 is expected to be $5.7-6.1 billion.
These estimates reflect management's current expectations for
Teva's performance in 2016. Actual results may vary, whether as a
result of exchange rate differences, market conditions or other
factors. In addition, the non-GAAP figures exclude the amortization
of purchased intangible assets, costs related to certain regulatory
actions, inventory step-up, legal settlements and reserves,
impairments and related tax effects.
Dividends
On August 1, 2016, the Board of Directors declared a cash
dividend of $0.34 per ordinary share for the second quarter of
2016. For holders of our ordinary shares that are traded on the Tel
Aviv Stock Exchange, the dividend will be converted into new
Israeli shekels based on the official exchange rate as of August 4,
2016. The record date will be August 22, 2016, and the payment date
will be September 8, 2016. Tax will be withheld at a rate of
15%.
On August 1, 2016, the Board of Directors further declared a
quarterly cash dividend of $17.50 per mandatory convertible
preferred share. The record date will be September 1, 2016 and the
payment date will be September 15, 2016. Tax will be withheld at a
rate of 15%.
Conference Call
Teva will host a conference call and live webcast along with a
slide presentation on Thursday, August 4, 2016 at 8:00 a.m. ET. to
discuss its second quarter 2016 results and overall business
environment. A question & answer session will follow.
In order to participate, please dial the following numbers (at
least 10 minutes before the scheduled start time): United States
1-866-254-0808; Canada 1-866-607-2172 or International +44(0) 1452
541003; passcode: 52122137. For a list of other international
toll-free numbers, click here.
A live webcast of the call will also be available on Teva's
website at: www.ir.tevapharm.com. Please log in at least 10 minutes
prior to the conference call in order to download the applicable
audio 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 September 4, 2016, 9:00 a.m. ET
by calling United States 1-866-247-4222; Canada 1-866-878-9237 or
International +44(0) 1452550000; passcode: 52122137.
About Teva
Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) is a
leading global pharmaceutical company that delivers high-quality,
patient-centric healthcare solutions to millions of patients every
day. Headquartered in Israel, Teva is the world’s largest generic
medicines producer, leveraging its portfolio of more than 1,800
molecules to produce a wide range of generic products in nearly
every therapeutic area. In specialty medicines, Teva has a
world-leading position in innovative treatments for disorders of
the central nervous system, including pain, as well as a strong
portfolio of respiratory products. Teva integrates its generics and
specialty capabilities in its global research and development
division to create new ways of addressing unmet patient needs by
combining drug development capabilities with devices, services and
technologies. Teva's net revenues in 2015 amounted to $19.7
billion. For more information, visit www.tevapharm.com.
Teva's Safe Harbor Statement under the U. S. Private
Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements, which
are based on management’s current beliefs and expectations and
involve a number of known and unknown risks and uncertainties that
could cause our future results, performance or achievements to
differ significantly from the results, performance or achievements
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 develop and commercialize
additional pharmaceutical products; competition for our specialty
products, especially Copaxone® (which faces competition from
orally-administered alternatives and a generic version); our
ability to integrate the acquisition of Allergan plc’s worldwide
generic pharmaceuticals business (“Actavis Generics”) and to
realize the anticipated benefits of such acquisition (and the
timing of realizing such benefits); the fact that following the
consummation of the Actavis Generics acquisition, we are dependent
to a much larger extent than previously on our generic
pharmaceutical business; potential restrictions on our ability to
engage in additional transactions or incur additional indebtedness
as a result of the substantial amount of debt incurred to finance
the Actavis Generics acquisition; the fact that for a period of
time following the consummation of the Actavis Generics
acquisition, we will have significantly less cash on hand than
previously, which could adversely affect our ability to grow; ; the
possibility of material fines, penalties and other sanctions and
other adverse consequences arising out of our ongoing FCPA
investigations and related matters; our ability to achieve expected
results from investments in our pipeline of specialty and other
products; our ability to identify and successfully bid for suitable
acquisition targets or licensing opportunities, or to consummate
and integrate acquisitions; the extent to which any manufacturing
or quality control problems damage our reputation for quality
production and require costly remediation; increased government
scrutiny in both the U.S. and Europe of our patent settlement
agreements; our exposure to currency fluctuations and restrictions
as well as credit risks; the effectiveness of our patents,
confidentiality agreements and other measures to protect the
intellectual property rights of our specialty medicines; the
effects of reforms in healthcare regulation and pharmaceutical
pricing, reimbursement and coverage; competition for our generic
products, both from other pharmaceutical companies and as a result
of increased governmental pricing pressures; governmental
investigations into sales and marketing practices, particularly for
our specialty pharmaceutical products; adverse effects of political
or economic instability, major hostilities or acts of terrorism on
our significant worldwide operations; interruptions in our supply
chain or problems with internal or third-party information
technology systems that adversely affect our complex manufacturing
processes; significant disruptions of our information technology
systems or breaches of our data security; competition for our
specialty pharmaceutical businesses from companies with greater
resources and capabilities; the impact of continuing consolidation
of our distributors and customers; decreased opportunities to
obtain U.S. market exclusivity for significant new generic
products; potential liability in the U.S., Europe and other markets
for sales of generic products prior to a final resolution of
outstanding patent litigation; our potential exposure to product
liability claims that are not covered by insurance; any failure to
recruit or retain key personnel, or to attract additional executive
and managerial talent; any failures to comply with complex Medicare
and Medicaid reporting and payment obligations; significant
impairment charges relating to intangible assets, goodwill and
property, plant and equipment; the effects of increased leverage
and our resulting reliance on access to the capital markets;
potentially significant increases in tax liabilities; 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; variations in patent laws that may adversely affect our
ability to manufacture our products in the most efficient manner;
environmental risks; and other factors that are discussed in our
Annual Report on Form 20-F for the year ended December 31, 2015 and
in our filings with the U.S. Securities and Exchange Commission
(the "SEC").
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 advised, however, to consult any additional disclosures we
make in our reports to the SEC on Form 6-K. Also note that we
provide a cautionary discussion of risks and uncertainties under
“Risk Factors” in our Annual Report on Form 20-F for the year ended
December 31, 2015. These are factors that we believe could cause
our actual results to differ materially from expected results.
Other factors besides those listed could also adversely affect us.
This discussion is provided as permitted by the Private Securities
Litigation Reform Act of 1995.
Consolidated
Statements of Income
(Unaudited, U.S.
dollars in millions, except share and per share data)
Three months ended
Six months ended
June 30, June 30, 2016
2015 2016 2015 Net revenues 5,038 4,966
9,848 9,948
Cost of sales 2,161 2,064 4,180 4,210
Gross
profit 2,877 2,902 5,668 5,738
Research and development
expenses 375 386 764 718
Selling and marketing expenses
952 860 1,791 1,782
General and administrative expenses 311
325 615 632
Impairments, restructuring and others 712 285
831 584
Legal settlements and loss contingencies 166 384 141
611
Operating income 361 662 1,526 1,411
Financial
expenses – net 105 41 403 233
Income before income taxes
256 621 1,123 1,178
Income taxes 29 88 257 192
Share in
(profits) losses of associated companies – net (15) (6) (9) 3
Net income 242 539 875 983
Net loss attributable to
non-controlling interests (12) - (15) (2)
Net income
attributable to Teva 254 539 890 985
Dividends on preferred
shares 66 - 132 -
Net income attributable to ordinary
shareholders 188 539 758 985
Earnings per share attributable to ordinary
shareholders: Basic ($) 0.21 0.64 0.83 1.16
Diluted
($) 0.20 0.63 0.82 1.15
Weighted average number of shares
(in millions): Basic 914 849 914 850
Diluted 920
859 922 859
Non-GAAP net income attributable to
ordinary shareholders:* 1,162 1,230 2,268 2,395
Non-GAAP net
income attributable to ordinary shareholders for diluted earnings
per share:** 1,228 1,230 2,400 2,395
Non-GAAP
earnings per share attributable to ordinary shareholders:*
Basic ($) 1.27 1.45 2.48 2.82
Diluted ($)** 1.25 1.43
2.45 2.79
Weighted average number of shares (in
millions): Basic 914 849 914 850
Diluted 979 859
981 859 * See reconciliation attached. **Dividends on the
mandatory convertible preferred shares of $132 and $66 million for
the six months and the three months ended June 30, 2016,
respectively, are added back to non-GAAP net income attributable to
ordinary shareholders, since such preferred shares had a dilutive
effect on non-GAAP earnings per share.
Condensed
Consolidated Balance Sheets
(U.S. dollars in
millions)
(Unaudited)
June 30, December
31, 2016 2015 ASSETS Current
assets: Cash and cash equivalents 6,984 6,946 Accounts
receivable 5,374 5,350 Inventories 3,921 3,966 Deferred income
taxes 801 735 Other current assets 1,264 1,401
Total current
assets 18,344 18,398
Other non-current assets 2,639
2,591
Property, plant and equipment, net 6,693 6,544
Identifiable intangible assets, net 9,544 7,675
Goodwill 20,700 19,025
Total assets 57,920 54,233
LIABILITIES AND EQUITY Current
liabilities: Short-term debt 2,882 1,585 Sales reserves and
allowances 6,196 6,601 Accounts payable and accruals 3,855 3,594
Other current liabilities 1,478 1,225
Total current
liabilities 14,411 13,005
Long-term liabilities:
Deferred income taxes 2,097 1,748 Other taxes and long-term
liabilities 1,353 1,195 Senior notes and loans 8,036 8,358
Total
long-term liabilities 11,486 11,301
Equity: Teva
shareholders’ equity 30,150 29,769 Non-controlling interests 1,873
158
Total equity 32,023 29,927
Total liabilities and
equity 57,920 54,233
Condensed
Consolidated Cash Flow
(Unaudited, U.S.
Dollars in millions)
Three months ended
Six months ended
June 30, June 30, 2016
2015 2016 2015 Operating activities:
Net income 242 539 875 983
Net change in operating assets
and liabilities (136) 609 53 1,166
Items not involving cash
flow 857 332 1,411 685
Net cash
provided by operating activities 963 1,480 2,339 2,834
Net cash used in investing activities (225) (4,917) (2,642)
(5,136)
Net cash provided by financing activities 279
1,087 546 1,180
Translation adjustment on cash and cash
equivalents 3 22 (205) (36)
Net
change in cash and cash equivalents 1,020 (2,328) 38 (1,158)
Balance of cash and cash equivalents at beginning of
period 5,964 3,396 6,946 2,226
Balance of cash and cash equivalents at end of period 6,984
1,068 6,984 1,068
Non GAAP
reconciliation items
(Unaudited, U.S.
Dollars in millions)
Three months ended
Six months ended
June 30, June 30, 2016
2015 2016 2015 Impairment of long-lived assets
572 81 585 146 Amortization of purchased intangible assets 193 214
382 434 Legal settlements and loss contingencies 166 384 141 611
Inventory step-up 85 - 91 - Acquisition and related expenses 62 174
163 419 Other write-offs associated with the impairment of Zecuity®
53 - 53 - Costs related to regulatory actions taken in facilities
39 10 77 19 Equity compensation 28 31 52 58 Restructuring expenses
20 48 39 51 Other non-GAAP items 4 6 3 (6) Financial expense 99 -
345 143 Minority interest (43) - (43) - Corresponding tax benefit
(304) (257) (378) (465) 974 691 1,510 1,410
Reconciliation
between net income attributable to ordinary shareholders and
earnings per share
as reported under
US GAAP to non-GAAP net income attributable to ordinary
shareholders and earnings per share
Three months ended June 30, 2016 Three months
ended June 30, 2015 U.S. dollars and shares in millions
(except per share amounts) GAAP
Non-GAAPAdjustments
Dividends
onPreferredShares
Non-GAAP
% of NetRevenues
GAAP
Non-GAAPAdjustments
Non-GAAP
% of NetRevenues
Gross profit (1) 2,877 273 - 3,150 62.5% 2,902 218 3,120
62.8% Operating income (1)(2) 361 1,222 - 1,583 31.4% 662 948 1,610
32.4% Net income attributable to ordinary shareholders (1)(2)(3)(4)
188 974 66 1,228 24.4% 539 691 1,230 24.8% Earnings per share
attributable to ordinary shareholders - diluted (5) 0.20 1.05 -
1.25 0.63 0.80 1.43 (1) Amortization of
purchased intangible assets 146 206 Equity compensation 3 2 Other
COGS related adjustments 124 10 Gross profit adjustments 273 218
(2) Legal settlements and loss contingencies 166 384 Acquisition
and related expenses 62 174 Equity compensation 25 29 Restructuring
expenses 20 48 Impairment of long-lived assets 572 81 Amortization
of purchased intangible assets 47 8 Other operating related
adjustments 57 6 949 730 Operating income adjustments 1,222 948 (3)
Financial expense 99 - Tax effect (304) (257) Minority interest
(43) - Net income adjustments 974 691 (4) Dividends on the
mandatory convertible preferred shares of $66 million for the three
months ended June 30, 2016 are added back to non-GAAP net income
attributable to ordinary shareholders, since such preferred shares
had a dilutive effect on non-GAAP earnings per share, as described
in the following footnote. (5) The non-GAAP weighted average
number of shares was 979 and 859 million for the three months ended
June 30, 2016 and 2015, respectively. The non-GAAP weighted average
number of shares for the three months ended June 30, 2016 takes
into account the potential dilution of the mandatory convertible
preferred shares (amounting to 59 million weighted average shares),
which had a dilutive effect on non-GAAP earnings per share.
Non-GAAP earnings per share can be reconciled with GAAP earnings
per share by dividing each of the amounts included in footnotes 1-4
above by the applicable weighted average share number.
Reconciliation
between net income attributable to ordinary shareholders and
earnings per share
as reported under
US GAAP to non-GAAP net income attributable to ordinary
shareholders and earnings per share
Six
months ended June 30, 2016 Six months ended June 30,
2015 U.S. dollars and shares in millions (except per share
amounts) GAAP
Non-GAAPAdjustments
Dividends
onPreferredShares
Non-GAAP
% of NetRevenues
GAAP
Non-GAAPAdjustments
Non-GAAP
% of NetRevenues
Gross profit (1) 5,668 498 - 6,166 62.6% 5,738 444 6,182
62.1% Operating income (1)(2) 1,526 1,583 - 3,109 31.6% 1,411 1,732
3,143 31.6% Net income attributable to ordinary shareholders
(1)(2)(3)(4) 758 1,510 132 2,400 24.4% 985 1,410 2,395 24.1%
Earnings per share attributable to ordinary shareholders - diluted
(5) 0.82 1.63 2.45 1.15 1.64 2.79 (1)
Amortization of purchased intangible assets 324 418 Costs related
to regulatory actions taken in facilities 77 19 Equity compensation
6 5 Other COGS related adjustments 91 2 Gross profit adjustments
498 444
(2)
Contingent consideration 51 262 Legal settlements and loss
contingencies 141 611 Acquisition and related expenses 109 157
Equity compensation 46 53 Restructuring expenses 39 51 Impairment
of long-lived assets 585 146 Amortization of purchased intangible
assets 58 16 Other operating related adjustments 56 (8) 1,085 1,288
Operating income adjustments 1,583 1,732
(3)
Financial expense 345 143 Tax effect (378) (465) Impairment of
equity investment—net 3 - Minority interest (43) - Net income
adjustments 1,510 1,410 (4) Dividends on the mandatory
convertible preferred shares of $132 million for the six months
ended June 30, 2016 are added to non-GAAP net income attributable
to ordinary shareholders, since such preferred shares had a
dilutive effect on non-GAAP earnings per share, as described in the
following footnote. (5) The non-GAAP weighted average number
of shares was 981 and 859 million for the six months ended June 30,
2016 and 2015, respectively. The non-GAAP weighted average number
of shares for the six months ended June 30, 2016 takes into account
the potential dilution of the mandatory convertible preferred
shares (amounting to 59 million weighted average shares), which had
a dilutive effect on non-GAAP earnings per share. Non-GAAP earnings
per share can be reconciled with GAAP earnings per share by
dividing each of the amounts included in footnotes 1-4 above by the
applicable weighted average share number.
Segment
Information
Generics Three months ended June 30,
Percentage Change 2016 2015 2016 - 2015
U.S.$ in millions / % of Segment Revenues Revenues $ 2,294
100% $ 2,466 100.0% (7%) Gross Profit 1,072 46.7% 1,198 48.6% (11%)
R&D Expenses 125 5.4% 134 5.4% (7%) S&M Expenses 333
14.5% 335 13.6% (1%) Segment Profit* $ 614
26.8% $ 729 29.6% (16%)
Specialty
Three months ended June 30, Percentage Change
2016 2015 2016 - 2015 U.S.$ in millions / % of
Segment Revenues Revenues $ 2,271 100% $ 2,090 100.0% 9%
Gross Profit 1,978 87.1% 1,808 86.5% 9% R&D Expenses 245 10.8%
220 10.5% 11% S&M Expenses 478 21.0% 457
21.9% 5% Segment Profit* $ 1,255 55.3% $ 1,131
54.1% 11% * Segment profit consists of gross profit, less S&M
and R&D expenses related to the segment.
Segment profitability does not include
G&A expenses, amortization and certain other items.
Segment Information
Generics Six months ended June
30, Percentage Change 2016 2015 2016 -
2015 U.S.$ in millions / % of Segment Revenues Revenues
$ 4,464 100.0% $ 5,087 100.0% (12%) Gross Profit 2,071 46.4% 2,482
48.8% (17%) R&D Expenses 261 5.8% 245 4.8% 7% S&M Expenses
612 13.8% 709 14.0% (14%) Segment
Profit* $ 1,198 26.8% $ 1,528 30.0% (22%)
Specialty Six months ended June 30, Percentage
Change 2016 2015 2016 - 2015 U.S.$ in
millions / % of Segment Revenues Revenues $ 4,423 100.0% $
4,046 100.0% 9% Gross Profit 3,849 87.0% 3,486 86.2% 10% R&D
Expenses 474 10.7% 435 10.8% 9% S&M Expenses 935
21.1% 943 23.3% (1%) Segment Profit* $ 2,440
55.2% $ 2,108 52.1% 16% * Segment profit consists of gross
profit, less S&M and R&D expenses related to the segment.
Segment profitability does not include
G&A expenses, amortization and certain other items.
Additional information
Multiple Sclerosis
Three months ended June 30, Percentage Change
2016 2015 2016 - 2015 U.S.$ in millions / %
of MS Revenues Revenues $ 1,141 100.0% $ 1,054 100.0% 8%
Gross profit 1,029 90.2% 953 90.4% 8% R&D expenses 20 1.8% 26
2.5% (23%) S&M expenses 81 7.1% 88
8.3% (8%) MS profit $ 928 81.3% $ 839 79.6% 11%
Other Specialty Three months ended June
30, Percentage Change 2016 2015 2016 -
2015 U.S.$ in millions / % of Other Specialty Revenues
Revenues $ 1,130 100.0% $ 1,036 100.0% 9% Gross profit 949
84.0% 855 82.5% 11% R&D expenses 225 19.9% 194 18.7% 16%
S&M expenses 397 35.2% 369 35.6% 8%
Other Specialty profit $ 327 28.9% $ 292 28.2% 12%
Additional information
Multiple Sclerosis Six
months ended June 30, Percentage Change 2016
2015 2016 - 2015 U.S.$ in millions / % of MS
Revenues Revenues $ 2,147 100.0% $ 1,978 100.0% 9% Gross
profit 1,948 90.7% 1,772 89.6% 10% R&D expenses 45 2.1% 53 2.7%
(15%) S&M expenses 170 7.9% 223
11.3% (24%) MS profit $ 1,733 80.7% $ 1,496 75.6% 16%
Other Specialty Six months ended June
30, Percentage Change 2016 2015 2016 -
2015 U.S.$ in millions / % of Other Specialty Revenues
Revenues $ 2,276 100.0% $ 2,068 100.0% 10% Gross profit
1,901 83.5% 1,714 82.9% 11% R&D expenses 429 18.8% 382 18.5%
12% S&M expenses 765 33.6% 720
34.8% 6% Other Specialty profit $ 707 31.1% $ 612
29.6% 16%
Reconciliation of our segment profit to
Teva's consolidated income before income taxes
Three months ended June 30, 2016
2015 U.S.$ in millions Generic
medicines profit $ 614 $ 729 Specialty medicines profit
1,255 1,131 Total segment profit 1,869 1,860 Profit of other
activities 13 56 Total profit 1,882 1,916 Amounts not
allocated to segments: Amortization 193 214 General and
administrative expenses 311 325 Impairments, restructuring and
others 712 285 Legal settlements and loss contingencies 166 384
Other unallocated amounts 139 46 Consolidated operating income
361 662 Financial expenses - net 105 41
Consolidated income before income taxes $ 256 $ 621
Reconciliation of our segment profit to Teva's
consolidated income before income taxes
Six months ended June 30, 2016 2015
U.S.$ in millions
Generic medicines profit $ 1,198 $ 1,528 Specialty medicines
profit 2,440 2,108 Total segment profit 3,638 3,636
Profit of other activities 64 106 Total profit 3,702
3,742 Amounts not allocated to segments: Amortization 382 434
General and administrative expenses 615 632 Impairments,
restructuring and others 831 584 Legal settlements and loss
contingencies 141 611 Other unallocated amounts 207 70 Consolidated
operating income 1,526 1,411 Financial expenses - net
403 233 Consolidated income before income taxes $
1,123 $ 1,178
Revenues by Activity and Geographical
Area (Unaudited)
Three Months Ended
June 30,
PercentageChange
PercentageChange
2016 2015 2016 - 2015 2016 -
2015 U.S. $ in millions
in localcurrencies
Generic Medicines United States $ 892 $ 1,326 (33%) (33%) Europe*
660 665 (1%) (1%) Rest of the World 742 475 56% 71%
Total Generic Medicines 2,294 2,466 (7%) (4%) Specialty Medicines
United States 1,772 1,622 9% 9% Europe* 414 378 10% 9% Rest of the
World 85 90 (6%) 5% Total Specialty Medicines 2,271
2,090 9% 9% Other Revenues United States 3 4 (25%) (25%) Europe*
165 157 5% 5% Rest of the World 305 249 22% 50% Total
Other Revenues 473 410 15% 32% Total Revenues $ 5,038
$ 4,966 1% 4% * All members of the European Union, Switzerland,
Norway, Albania and the countries of former Yugoslavia.
Revenues by Activity and Geographical Area (Unaudited)
Six Months Ended June 30,
PercentageChange
PercentageChange
2016 2015 2016 - 2015 2016 - 2015
U.S. $ in millions
in localcurrencies
Generic Medicines United States $ 1,868 $ 2,765 (32 %) (32 %)
Europe* 1,331 1,345 (1 %) 0 % Rest of the World 1,265
977 29 % 41 % Total Generic Medicines 4,464 5,087 (12 %) (10 %)
Specialty Medicines United States 3,449 3,101 11 % 11 % Europe* 808
783 3 % 4 % Rest of the World 166 162 2 % 15 % Total
Specialty 4,423 4,046 9 % 10 % Other Revenues United States 7 7 0 %
0 % Europe* 335 339 (1 %) 0 % Rest of the World 619
469 32 % 51 % Total Other Revenues 961 815 18
% (13 %) Total Revenues $ 9,848 $ 9,948 (1 %) 1 % * All members of
the European Union, Switzerland, Norway, Albania and the countries
of former Yugoslavia.
Revenues by Product line
(Unaudited)
Three Months
Ended
June 30,
PercentageChange
2016 2015 2016 - 2015 U.S. $ in
millions Generic Medicines $ 2,294
$ 2,466 (7 %) API 207 183 13 %
Specialty Medicines 2,271 2,090 9
% CNS 1,415 1,353 5 % Copaxone® 1,141 1,054 8 % Azilect® 108
105 3 % Nuvigil® 51 91 (44 %) Respiratory 313 253 24 % ProAir® 135
128 5 % QVAR® 116 83 40 % Oncology 334 293 14 % Treanda® and
Bendeka™ 207 179 16 % Women's Health 117 110 6 % Other Specialty 92
81 14 %
All Others 473 410 15 %
OTC 262 210 25 % Other Revenues 211 200 6 %
Total $ 5,038 $ 4,966 1
% Revenues by Product line (Unaudited)
Six Months Ended June 30, Percentage
Change 2016 2015 2016 - 2015 U.S. $ in
millions Generic Medicines $ 4,464
$ 5,087 (12 %) API 404 340 19 %
Specialty Medicines 4,423 4,046 9
% CNS 2,738 2,573 6 % Copaxone® 2,147 1,978 9 % Azilect® 221
212 4 % Nuvigil® 154 176 (13 %) Respiratory 679 518 31 % ProAir®
308 252 22 % QVAR® 250 181 38 % Oncology 602 557 8 % Treanda® and
Bendeka™ 362 336 8 % Women's Health 227 239 (5 %) Other Specialty
177 159 11 %
All Others 961 815 18
% OTC 550 423 30 % Other Revenues 411 392 5 %
Total $ 9,848 $ 9,948 (1
%)
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160804005629/en/
Teva Pharmaceutical Industries Ltd.IR:United StatesKevin C.
Mannix, 215-591-8912Ran Meir,
215-591-3033orIsraelTomer Amitai, 972 (3)
926-7656orPR:IsraelIris Beck Codner, 972 (3)
926-7687orUnited StatesDenise Bradley, 215-591-8974
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