Teva Pharmaceutical Industries Ltd. (NYSE: TEVA, TASE: TEVA)
today reported results for the quarter ended March 31, 2017.
Revenues $5.6 billion Cash flow from
operations $0.5 billion GAAP EPS $0.57 Non-GAAP EPS
$1.06
“In the three months since I have stepped in as the Interim CEO,
we have worked tirelessly to ensure that we extract synergies
related to the Actavis Generics transaction, drive additional
efficiencies throughout the organization, support cash generation,
pay down debt, deliver on the promise of the specialty pipeline and
execute key generic launches,” stated Dr. Yitzhak Peterburg,
Interim Chief Executive Officer. “We are pleased that the
transaction synergies and additional cost reductions are on track,
and we now expect to realize cumulative net synergies and cost
reduction of approximately $1.5 billion by the end of 2017, an
increase of $200 million compared to our previous guidance.
Notably, we have reduced our gross debt by $1.2 billion in the
quarter. We are also pursuing the sale of certain non-core assets,
including our global Women’s Health business and our Oncology and
Pain business in Europe, to pay down debt. In Specialty, we have
received several important approvals, including the recent approval
and launch of AUSTEDO™ for Huntington's disease.”
Dr. Peterburg continued, “Looking forward to the rest of 2017,
we are reaffirming our full-year outlook. While we have several
challenges facing us, including the U.S Generics market dynamics
and greater instability in the Venezuela market, we are very
confident that the global business we have built will allow Teva to
thrive in the future as the leader in the generics industry. I
would like to thank the employees of Teva for their hard work and
dedication to continuing to deliver on our commitment to patients
around the world.”
Dr. Peterburg concluded, “I would also like to thank Eyal
Desheh, whose planned departure we announced a few weeks ago, for
his contributions to Teva’s growth and success throughout his
tenure. We are pleased to announce that Michael McClellan will
serve as the Interim CFO, effective July 1, 2017. For the last two
years, Mike has served as the CFO of our Global Specialty Medicines
division. Prior to joining Teva, Mike was the U.S. CFO at Sanofi,
where his career spanned over 20 years in roles of increasing
responsibility in global finance and healthcare. I am confident
Mike will be an excellent addition to our team. Eyal and Mike will
work closely together to ensure a smooth transition. As we have
stated previously, we expect our new CEO to have a significant role
in identifying a permanent successor.”
First Quarter 2017
Results
Revenues in the first quarter of 2017 were $5.6 billion,
up 17% compared to the first quarter of 2016, primarily due to the
inclusion of the Actavis Generics business, following the closing
of the acquisition on August 2, 2016. Excluding the impact of
foreign exchange fluctuations, revenues increased 22%.
Exchange rate differences between the first quarter of
2017 and the first quarter of 2016 reduced revenues by $254
million, GAAP operating income by $78 million and non-GAAP
operating income by $81 million. Changes in exchange rates used for
the Venezuelan bolivar, as well as inflation-driven price increases
in Venezuela, decreased revenues by $217 million, GAAP operating
income by $71 million and non-GAAP operating income by $67 million,
compared to results in the first quarter of 2016. In light of the
economic conditions in Venezuela, the changes in revenues and
operating profit in Venezuela have been excluded from any
discussion of currency effects.
GAAP gross profit was $2.8 billion in the first quarter
of 2017, up 1% compared to the first quarter of 2016. GAAP gross
profit margin was 50.1% in the first quarter of 2017, compared
to 58.0% in the first quarter of 2016. Non-GAAP gross profit
was $3.2 billion in the first quarter of 2017, up 6% from the first
quarter of 2016. Non-GAAP gross profit margin was 56.8% in
the first quarter of 2017, compared to 62.7% in the first quarter
of 2016. The decrease in gross profit margin, on both a GAAP and a
non-GAAP basis, was the result of the addition of the low-margin
Anda distribution business, as well as lower margins in both the
generic and specialty medicines businesses.
Research and Development (R&D) expenses for the first
quarter of 2017 amounted to $457 million, up 17% compared to the
first quarter of 2016, mainly due to the inclusion of R&D
expenses for the Actavis Generics business. R&D expenses
excluding equity compensation expenses and purchase of in-process
R&D in the first quarter of 2017 were $446 million, or 7.9% of
quarterly revenues, compared to $375 million, or 7.8%, in the first
quarter of 2016. R&D expenses related to our generic medicines
segment were $191 million, an increase of 48% compared to $129
million in the first quarter of 2016, mainly due to the inclusion
of R&D expenses for the Actavis Generics business. R&D
expenses related to our specialty medicines segment were $255
million, an increase of 7% compared to $239 million in the first
quarter of 2016, mainly due to increased expenses for the
development of late-stage migraine (TEV-48125, fremanezumab) and
pain (fasinumab) products.
Selling and Marketing (S&M) expenses in the first
quarter of 2017 amounted to $971 million, an increase of 16%
compared to the first quarter of 2016. S&M expenses excluding
amortization of purchased intangible assets and equity compensation
expenses were $907 million, or 16.1% of revenues, in the first
quarter of 2017, compared to $821 million, or 17.1% of revenues, in
the first quarter of 2016. S&M expenses related to our generic
medicines segment were $400 million, an increase of 16% compared to
$345 million in the first quarter of 2016, mainly due to the
inclusion of the S&M expenses of the Actavis Generics business
and the launch of our business venture in Japan in the second
quarter of 2016. S&M expenses related to our specialty
medicines segment were $461 million, up 1% compared to $457 million
in the first quarter of 2016.
General and Administrative (G&A) expenses in the
first quarter of 2017 amounted to $236 million, compared to $304
million in the first quarter of 2016. G&A expenses excluding
equity compensation expenses were $222 million in the first quarter
of 2017, or 3.9% of quarterly revenues, compared to $294 million,
or 6.1% in the first quarter of 2016. The lower G&A expenses in
the first quarter of 2017 mainly reflect income related to a legal
recovery in Canada and income from milestone payments from the
AttenukineTM out-license, partially offset by expenses related to
the Actavis Generics business.
GAAP operating income in the first quarter of 2017 was
$0.9 billion, down 23% compared to $1.2 billion in the first
quarter of 2016. GAAP operating margin was 15.9% in the
first quarter of 2017 compared to 24.2% in the first quarter of
2016. Non-GAAP operating income in the first quarter of 2017
was $1.6 billion, up 6% compared to $1.5 billion in the first
quarter of 2016. Non-GAAP operating margin was 28.8% in the
first quarter of 2017 compared to 31.7% in the first quarter of
2016.
EBITDA (non-GAAP operating income - which excludes
amortization and certain other items - as well as excluding
depreciation expenses) was $1.8 billion in the first quarter of
2017, up 9% compared to $1.6 billion in the first quarter of
2016.
GAAP financial expenses for the first quarter of 2017
were $207 million, compared to $298 million in the first quarter of
2016. Non-GAAP financial expenses were $235 million in the
first quarter of 2017, compared to $52 million in the first quarter
of 2016, mainly due to higher interest expenses related to the debt
raised to finance the acquisition of Actavis Generics.
GAAP income taxes for the first quarter of 2017 amounted
to $54 million, or 8% on pre-tax income of $688 million. In the
first quarter of 2016, GAAP income taxes amounted to $228 million,
or 26% on pre-tax income of $867 million. Non-GAAP income
taxes for the first quarter of 2017 amounted to $240 million on
pre-tax non-GAAP income of $1.4 billion, for a quarterly tax rate
of 17%. Non-GAAP income taxes in the first quarter of 2016 amounted
to $302 million on pre-tax non-GAAP income of $1.5 billion, for a
quarterly tax rate of 21%.
GAAP net income attributable to ordinary shareholders and
GAAP diluted EPS were $580 million and $0.57, respectively,
in the first quarter of 2017, compared to $570 million and $0.62,
respectively, in the first quarter of 2016. Non-GAAP net
income attributable to ordinary shareholders for calculating
diluted EPS and non-GAAP diluted EPS were $1.1 billion and
$1.06, respectively, in the first quarter of 2017, compared to $1.2
billion and $1.20, respectively, in the first quarter of 2016.
For the first quarter of 2017, the weighted average
outstanding shares for the fully diluted earnings per share
calculation on both a GAAP and a non-GAAP basis was 1,017 million.
The weighted average diluted shares outstanding used for the fully
diluted share calculation for the first quarter of 2016 was 920
million shares on a GAAP basis and 979 million on a non-GAAP basis.
The increase in the number of shares resulted mainly from the
issuance of shares to Allergan in August 2016 in connection with
the closing of the Actavis Generics acquisition. For the three
months ended March 31, 2017, no account was taken of the potential
dilution resulting from the conversion of the mandatory convertible
preferred shares amounting to 59 million weighted average shares,
since they had an anti-dilutive effect on earnings per share.
As of March 31, 2017, the fully diluted share count for
calculating Teva's market capitalization was approximately 1,082
million shares.
Non-GAAP information: Net non-GAAP adjustments in the
first quarter of 2017 were $499 million. Non-GAAP net income and
non-GAAP EPS for the quarter were adjusted to exclude the following
items:
- Amortization of purchased intangible
assets totaling $320 million, of which $267 million is included in
cost of goods sold and the remaining $53 million in selling and
marketing expenses;
- Restructuring expenses of $130 million,
mainly related to the integration of Actavis Generics and other
efficiency measures;
- Inventory step-up of $64 million,
related mainly to the Actavis Generics acquisition;
- A capital loss from currency
translation of $52 million, as a result of the reclassification of
currency translation adjustments from accumulated other
comprehensive income to the statements of income, related to the
divestiture of certain assets and operations of Actavis Generics in
the U.K. and Ireland;
- Acquisition and related expenses
including contingent consideration of $44 million;
- Equity compensation expenses of $36
million;
- Costs related to regulatory actions
taken in facilities of $34 million;
- Legal settlements and loss
contingencies of $20 million;
- Impairment of long-lived assets of $11
million;
- Other non-GAAP items of $15
million;
- Financial income of $28 million;
- Minority interest adjustment of
negative $13 million; and
- Corresponding tax benefit of $186
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.
Cash flow from operations generated during the first
quarter of 2017 was $0.5 billion, compared to $1.4 billion in the
first quarter of 2016. The decrease was mainly due to higher
payments for legal settlements of $0.6 billion, primarily the FCPA
settlement with the SEC and DOJ and payments related to the
ciprofloxacin settlement, as well as $0.3 billion related to the
final settlement of our forward starting interest rate swaps and
treasury lock agreements that matured during the first half of
2016. Free cash flow, excluding net capital expenditures, was $0.3
billion, compared to $1.2 billion in the first quarter of 2016.
Segment Results for the First Quarter
2017
Beginning in the fourth quarter of 2016, our OTC business,
conducted primarily through PGT, as well as our API manufacturing
business, are included in our generic medicines segment, which
includes chemical and therapeutic equivalents of originator
medicines in a variety of dosage forms.
All data presented has been conformed to the new segment
structure.
Generic Medicines Segment
Three Months Ended March 31, 2017
2016 U.S.$ in millions / % of Segment Revenues
Revenues $ 3,058 100.0% $ 2,458 100.0%
Gross profit 1,370 44.8% 1,123 45.7% R&D expenses 191 6.2% 129
5.3% S&M expenses 400 13.1% 345 14.0% Segment profit* $ 779
25.5% $ 649 26.4% * 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 first quarter of 2017 were
$3.1 billion, an increase of 24% compared to the first quarter of
2016, reflecting the inclusion of the Actavis Generics
business.
Generic revenues consisted of:
- U.S. revenues of $1.4 billion, an
increase of 41% compared to the first quarter of 2016, mainly due
to the inclusion of Actavis Generics.
- European revenues of $988 million, an
increase of 25%, or 31% in local currency terms, compared to the
first quarter of 2016, mainly due to the inclusion of Actavis
Generics.
- ROW revenues of $689 million, in line
with results in the first quarter of 2016, but an increase of 27%
in local currency terms. The increase in local currency terms was
mainly due to the inclusion of the results of our Japanese business
venture with Takeda, which commenced operations in April 2016 as
well as the inclusion of Actavis Generics.
- OTC revenues (which are included in the
market revenues above) were $264 million, a decrease of 10%
compared to $292 million in the first quarter of 2016. In local
currency terms, revenues increased 25%. PGT’s in-market sales were
$318 million in the first quarter of 2017, compared to $411 million
the first quarter of 2016.
- API sales to third parties (which are
included in the market revenues above) were $197 million, in line
with results in the first quarter of 2016.
Generic medicines revenues comprised 54% of our total revenues
in the quarter, compared to 51% in the first quarter of 2016.
Generic Medicines Gross Profit
Gross profit of our generic medicines segment in the first
quarter of 2017 was $1.4 billion, an increase of 22% compared to
$1.1 billion in the first quarter of 2016. The higher gross profit
was mainly a result of the inclusion of Actavis Generics and our
business venture with Takeda in Japan, both of which impacted the
current quarter but not the first quarter of 2016.
Gross profit margin for our generic medicines segment in the
first quarter of 2017 decreased to 44.8% from 45.7% in the first
quarter of 2016.
Generic Medicines Profit
Our generic medicines segment generated profit of $779 million
in the first quarter of 2017, an increase of 20% compared to the
first quarter of 2016. Generic medicines profitability as a
percentage of generic medicines revenues was 25.5% in the first
quarter of 2017, down from 26.4% in the first quarter of 2016.
Specialty Medicines Segment
Three Months Ended March 31, 2017
2016 U.S.$ in millions / % of Segment Revenues
Revenues $ 2,020 100.0% $ 2,152 100.0%
Gross profit 1,754 86.8% 1,871 86.9% R&D expenses 255 12.6% 239
11.1% S&M expenses 461 22.8% 457 21.2% Segment profit* $ 1,038
51.4% $ 1,175 54.6% * 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.
Specialty Medicines Revenues
Specialty medicines revenues in the first quarter of 2017 were
$2.0 billion, down 6% compared to the first quarter of 2016. U.S.
specialty medicines revenues were $1.5 billion, down 11% compared
to the first quarter of 2016. European specialty medicines revenues
were $438 million, an increase of 11%, or 17% in local currency
terms, compared to the first quarter of 2016. ROW specialty
revenues were $90 million, up 11%, or 9% in local currency terms,
compared to the first quarter of 2016.
Specialty medicines revenues comprised 36% of our total revenues
in the quarter, compared to 45% in the first quarter of 2016.
The decrease in specialty medicines revenues compared to the
first quarter of 2016 was primarily due to lower sales of our CNS
and respiratory products, partially offset by a payment of $75
million which we received in connection with our agreement to sell
our royalties and other rights in Ninlaro® (ixazomib) to a
subsidiary of Takeda.
The following table presents revenues by therapeutic area and
key products for our specialty medicines segment for the three
months ended March 31, 2017 and 2016:
Three Months Ended
March 31,
Percentage Change 2017 2016
2017 - 2016 U.S. $ in millions CNS $ 1,138 $ 1,323
(14%) Copaxone® 970 1,006 (4%) Azilect® 60 113 (47%) Nuvigil® 17
103 (83%) Respiratory 304 366 (17%) ProAir® 121 173 (30%) QVAR® 98
134 (27%) Oncology 270 268 1% Treanda® and Bendeka® 157 155 1%
Women's Health 124 110 13% Other Specialty* 184 85
116%
Total Specialty Medicines $ 2,020
$ 2,152 (6%) * Includes a $75 million payment
related to the Ninlaro® transaction in the first quarter of 2017.
Global revenues of Copaxone® (20 mg/mL and 40
mg/mL), the leading multiple sclerosis therapy in the U.S. and
globally, were $970 million in the first quarter of 2017, a
decrease of 4% compared to the first quarter of 2016.
Copaxone® revenues in the United States, were $782 million, a
decrease of 5% compared to the first quarter of 2016, mainly due to
lower volumes of Copaxone® 20 mg/mL, partially offset by a price
increase of 7.9% for both Copaxone® products in January 2017. At
the end of the first quarter of 2017, according to March 2017 IMS
data, our U.S. market shares for the Copaxone® products in terms of
new and total prescriptions were 25.4% and 28.4%, respectively.
Copaxone® 40 mg/mL accounted for over 85% of total Copaxone®
prescriptions in the U.S.
Copaxone® revenues outside the United States were $188 million,
an increase of 2%, or 5% in local currency terms, compared to the
first quarter of 2016 mainly due to higher volumes. Over 70% of the
total European Copaxone® prescriptions are now filled with the 40
mg/mL version.
Our global Azilect® revenues were $60 million, a decrease
of 47% compared to the first quarter of 2016 following the
introduction of generic competition to Azilect® in the United
States in 2017.
Revenues of our respiratory products were $304 million,
down 17% compared to results in the first quarter of 2016.
ProAir® revenues in the first quarter of 2017 were
$121 million, down 30% compared to the first quarter of 2016, due
to lower volumes mainly from wholesaler and retailer inventory
reductions and net pricing effects. QVAR® global
revenues were $98 million in the first quarter of 2017, down 27%
compared to the first quarter of 2016, primarily due to net pricing
effects and wholesaler and retailer inventory reductions in the
United States.
Revenues of our oncology products were $270 million in
the first quarter of 2017, up 1% compared to the first quarter of
2016. Combined revenues of Treanda® and Bendeka® were
$157 million, up 1% compared to the first quarter of 2016.
Specialty Medicines Gross Profit
Gross profit of our specialty medicines segment was $1.8
billion, a decrease of $117 million compared to the first quarter
of 2016. Gross profit margin for our specialty medicines segment in
the first quarter of 2017 was 86.8%, compared to 86.9% in the first
quarter of 2016.
Specialty Medicines Profit
Our specialty medicines segment profit was $1.0 billion in the
first quarter of 2017, down 12% compared to the first quarter of
2016.
Specialty medicines profit as a percentage of segment revenues
was 51.4% in the first quarter of 2017, down from 54.6% in the
first quarter of 2016.
The following tables present details of our multiple sclerosis
franchise and of our other specialty medicines for the three months
ended March 31, 2017 and 2016:
Multiple Sclerosis Three months
ended March 31, 2017 2016 U.S.$
in millions / % of MS Revenues
Revenues $ 970 100.0% $ 1,006 100.0% Gross profit 888 91.5% 919
91.4% R&D expenses 22 2.3% 25 2.5% S&M expenses 124
12.7% 89 8.9% MS profit $ 742 76.5% $
805 80.0%
Other Specialty Three
months ended March 31, 2017 2016
U.S.$ in millions / % of Other Specialty Revenues
Revenues $ 1,050 100.0% $ 1,146 100.0% Gross profit 866 82.5% 952
83.1% R&D expenses 233 22.2% 214 18.7% S&M expenses
337 32.1% 368 32.1% Other Specialty profit $
296 28.2% $ 370 32.3%
Other Activities
Other revenues (primarily sales of third-party products
for which we act as distributor, mostly in the United States via
Anda, contract manufacturing services related to products divested
in connection with the Actavis Generics acquisition and other
miscellaneous items) were $552 million in the first quarter of
2017, compared to $200 million, in the first quarter of 2016. The
increase was mainly related to the inclusion of Anda's revenues
beginning in the fourth quarter of 2016.
Revenues from these other activities comprised 10% of our total
revenues in the quarter, compared to 4% in the first quarter of
2016.
Dividends
On May 10, 2017, the Board of Directors declared a cash dividend
of $0.34 per ordinary share for the first quarter of 2017. 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 May 11, 2017. The
record date will be June 5, 2017, and the payment date will be June
22, 2017. Tax will be withheld at a rate of 15%.
On May 10, 2017, the Board of Directors also declared a cash
dividend of $17.50 per Mandatory Convertible Preferred Share for
the first quarter of 2017. The record date will be June 1, 2017 and
the payment date will be June 15, 2017. 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, May 11, 2017 at 8:00 a.m. ET. to
discuss its first quarter 2017 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
1-866-869-2321; Canada 1-866-766-8269 or International +44(0) 203
0095710; passcode: 97789997. 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 June 11, 2017, 9:00 a.m. ET by
calling United States 1-866-247-4222; Canada 1-866-878-9237 or
International +44(0) 1452550000; passcode: 97789997.
About Teva
Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) is a
leading global pharmaceutical company that delivers high-quality,
patient-centric healthcare solutions used by approximately 200
million patients in 100 markets 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 the world-leading innovative treatment for
multiple sclerosis as well as late-stage development programs for
other disorders of the central nervous system, including movement
disorders, migraine, pain and neurodegenerative conditions, as well
as a broad portfolio of respiratory products. Teva is leveraging
its generics and specialty capabilities in order to seek new ways
of addressing unmet patient needs by combining drug development
with devices, services and technologies. Teva's net revenues in
2016 were $21.9 billion. For more information, visit
www.tevapharm.com.
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 generics medicines business,
including: that we are substantially more dependent on this
business, with its significant attendant risks, following our
acquisition of Allergan plc’s worldwide generic pharmaceuticals
business (“Actavis Generics”); our ability to realize the
anticipated benefits of the acquisition (and any delay in realizing
those benefits) or difficulties in integrating Actavis Generics;
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
generic products, both from competing products and as a result of
increased governmental pricing pressures; and our ability to take
advantage of high-value biosimilar opportunities;
- our specialty medicines business,
including: competition for our specialty products, especially
Copaxone®, our leading medicine, which faces competition from
existing and potential additional generic versions and
orally-administered alternatives; our ability to achieve expected
results from investments in our product pipeline; competition from
companies with greater resources and capabilities; and the
effectiveness of our patents and other measures to protect our
intellectual property rights;
- our substantially increased
indebtedness and significantly decreased cash on hand, which may
limit our ability to incur additional indebtedness, engage in
additional transactions or make new investments, and may result in
a downgrade of our credit ratings;
- our business and operations in general,
including: uncertainties relating to our recent senior management
changes; our ability to develop and commercialize additional
pharmaceutical products; 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,
including those who joined us as part of the Actavis Generics
acquisition; the restructuring of our manufacturing network,
including potential related labor unrest; the impact of continuing
consolidation of our distributors and customers; variations in
patent laws that may adversely affect our ability to manufacture
our products; adverse effects of political or economic instability,
major hostilities or terrorism on our significant worldwide
operations; and our ability to successfully bid for suitable
acquisition targets or licensing opportunities, or to consummate
and integrate acquisitions;
- 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; potential additional adverse
consequences following our resolution with the U.S. government of
our FCPA investigation; governmental investigations into sales and
marketing practices; potential liability for sales of generic
products prior to a final resolution of outstanding patent
litigation; 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; the significant increase in our intangible
assets, which may result in additional substantial impairment
charges; potentially 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 our Annual Report on Form 20-F
for the year ended December 31, 2016 (“Annual Report”), including
in the section captioned “Risk Factors,” and in our other filings
with the U.S. Securities and Exchange Commission, which are
available at www.sec.gov and www.tevapharm.com. Forward-looking
statements speak only as of the date on which they are made, and we
assume no obligation to update or revise any forward-looking
statements or other information contained herein, whether as a
result of new information, future events or otherwise. You are
cautioned not to put undue reliance on these forward-looking
statements.
Consolidated
Statements of Income
(Unaudited, U.S.
dollars in millions, except share and per share data)
Three months ended March 31,
2017 2016 Net revenues 5,630 4,810
Cost of
sales 2,811 2,019
Gross profit 2,819 2,791
Research
and development expenses 457 389
Selling and marketing
expenses 971 839
General and administrative expenses 236
304
Impairments, restructuring and others 240 119
Legal
settlements and loss contingencies 20 (25)
Operating
income 895 1,165
Financial expenses – net 207 298
Income before income taxes 688 867
Income taxes 54
228
Share in (profits) losses of associated companies – net
(7) 6
Net income 641 633
Net loss attributable to
non-controlling interests (4) (3)
Net income attributable to
Teva 645 636
Dividends on preferred shares 65 66
Net
income attributable to ordinary shareholders 580 570
Earnings per
share attributable to ordinary shareholders: Basic ($)
0.57 0.62
Diluted ($) 0.57 0.62
Weighted average number
of shares (in millions): Basic 1,016 913
Diluted
1,017 920
Non-GAAP
net income attributable to ordinary shareholders:* 1,079 1,106
Non-GAAP net income attributable to ordinary shareholders for
diluted earnings per share:** 1,079 1,172
Non-GAAP
earnings per share attributable to ordinary shareholders:*
Basic ($) 1.06 1.21
Diluted ($)** 1.06 1.20
Non-GAAP average number of shares (in millions):
Basic 1,016 913
Diluted 1,017 979
* See reconciliation
attached. **Dividends on the mandatory convertible preferred shares
of $66 million for the three months ended March 31, 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.
Condensed
Consolidated Balance Sheets
(U.S. dollars in
millions)
(Unaudited)
March 31, December 31,
2017 2016 ASSETS Current assets: Cash
and cash equivalents 900 988 Trade receivables 7,264 7,523
Inventories 4,999 4,954 Prepaid expenses 960 1,362 Other current
assets 669 1,293 Assets held for sale 43 841
Total current
assets 14,835 16,961
Deferred income taxes 747 725
Other non-current assets 1,319 1,235
Property, plant and
equipment, net 8,160 8,073
Identifiable intangible assets,
net 21,189 21,487
Goodwill 45,026 44,409
Total
assets 91,276 92,890
LIABILITIES AND EQUITY
Current liabilities: Short-term debt 1,942 3,276 Sales
reserves and allowances 7,500 7,839 Trade payables 2,378 2,157
Employee-related obligations 660 859 Accrued expenses 2,500 3,405
Other current liabilities 923 867 Liabilities held for sale - 116
Total current liabilities 15,903 18,519
Long-term
liabilities: Deferred income taxes 5,291 5,215 Other taxes and
long-term liabilities 1,643 1,639 Senior notes and loans 32,694
32,524
Total long-term liabilities 39,628 39,378
Equity: Teva shareholders’ equity 34,023 33,337
Non-controlling interests 1,722 1,656
Total equity 35,745
34,993
Total liabilities and equity 91,276 92,890
Condensed
Consolidated Cash Flow
(Unaudited, U.S.
Dollars in millions)
Three months ended March 31, 2017
2016 Operating activities: Net income 641 633
Net change in operating assets and liabilities (463) 189
Items not involving cash flow 292 554
Net
cash provided by operating activities 470 1,376
Net
cash provided by (used in) investing activities 1,182 (2,417)
Net cash provided by (used in) financing activities
(1,768) 267
Translation adjustment on cash and cash
equivalents 28 (208)
Net change in cash and
cash equivalents (88) (982)
Balance of cash and cash
equivalents at beginning of period 988 6,946
Balance of cash and cash equivalents at end of period 900
5,964
Non GAAP
reconciliation items
(Unaudited, U.S.
Dollars in millions)
Three Months Ended
March 31,
2017
2016
U.S. $ in millions
Amortization of purchased intangible assets 320 189
Restructuring expenses 130 19 Inventory step-up 64 6 Capital loss
from currency translation 52 - Equity compensation expenses 36 24
Costs related to regulatory actions taken in facilities 34 38
Acquisition, integration and related expenses 23 47 Contingent
consideration 21 51 Legal settlements and loss contingencies 20
(25) Impairment of long-lived assets 11 13 Other non-GAAP items 15
2 Financial expense (income) (28) 246 Minority interest (13) -
Corresponding tax benefit (186) (74)
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 March 31, 2017 Three Months Ended March 31,
2016 U.S. dollars and shares in millions (except per share
amounts) GAAP
Non-GAAPAdjustments
Dividends
onPreferredShares
Non-GAAP
% of NetRevenues
GAAP
Non-GAAPAdjustments
Dividends
onPreferredShares
Non-GAAP
% of NetRevenues
Gross profit (1) 2,819 377 3,196 57% 2,791 225 3,016 63%
Operating income (1)(2) 895 726 1,621 29% 1,165 361 1,526 32% Net
income attributable to ordinary shareholders (1)(2)(3)(4) 580 499
1,079 19% 570 536 66 1,172 24%
Earnings per share attributable to
ordinary shareholders - diluted (5)
0.57 0.49 1.06 0.62 0.58 1.20 (1) Amortization of
purchased intangible assets 267 178 Inventory step up 64 6 Costs
related to regulatory actions taken in facilities 34 38 Equity
compensation expenses 5 3 Other COGS related adjustments 7 -
Gross profit adjustments 377 225 (2) Restructuring
expenses 130 19 Amortization of purchased intangible assets 53 11
Capital loss on currency translation 52 - Equity compensation
expenses 31 21 Acquisition, Integration and related expenses 23 47
Contingent consideration 21 51 Legal settlements and loss
contingencies 20 (25 ) Impairment of long-lived assets 11 13 Other
operating related adjustments 8 (1 ) 349 136
Operating income adjustments 726 361
(3) Financial expense (income) (28 ) 246 Tax effect (186 ) (74 )
Impairment of equity investment—net -
3 Minority interest (13 ) - Net income adjustments
499 536 (4) Dividends on the mandatory
convertible preferred shares of $66 million for the three months
ended March 31, 2016 are added back to non-GAAP net income
attributable to ordinary shareholders, since such preferred shares
had a dilutive effect on non-GAAP earnings per share. (5)
The non-GAAP weighted average number of shares was 1,017 and 979
million for the three months ended March 31, 2017 and 2016,
respectively. The non-GAAP weighted average number of shares for
the three months ended March 31, 2017 does not take into account
the potential dilution of the mandatory convertible preferred
shares (amounting to 59 million weighted average shares), which
have anti dilutive effect on non-GAAP earnings per share. Non-GAAP
earnings per share can be reconciled with GAAP earnings per share
by dividing each of the amounts included in footnotes 1-4 above by
the applicable weighted average share number.
Segment Information Generics Three
months ended March 31, Percentage Change 2017
2016 2017 - 2016 U.S.$ in millions / % of Segment
Revenues Revenues $ 3,058 100% $ 2,458 100.0% 24% Gross
Profit 1,370 44.8% 1,123 45.7% 22% R&D Expenses 191 6.2% 129
5.3% 48% S&M Expenses 400 13.1% 345
14.0% 16% Segment Profit* $ 779 25.5% $ 649 26.4% 20%
Specialty Three months ended March 31,
Percentage Change 2017 2016 2017 - 2016
U.S.$ in millions / % of Segment Revenues Revenues $ 2,020
100% $ 2,152 100.0% (6%) Gross Profit 1,754 86.8% 1,871 86.9% (6%)
R&D Expenses 255 12.6% 239 11.1% 7% S&M Expenses 461
22.8% 457 21.2% 1% Segment Profit* $ 1,038
51.4% $ 1,175 54.6% (12%) * 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. Beginning in the
fourth quarter of 2016, our OTC business is included in our
generics medicines segment. The data presented have been conformed
to reflect these changes for all relevant periods.
Additional information
Multiple Sclerosis
Three months ended March 31, Percentage Change
2017 2016 2017 - 2016 U.S.$ in millions / %
of Segment Revenues Revenues $ 970 100.0% $ 1,006 100.0%
(4%) Gross profit 888 91.5% 919 91.4% (3%) R&D expenses 22 2.3%
25 2.5% (12%) S&M expenses 124 12.7% 89
8.9% 39% Segment profitability $ 742 76.5% $ 805
80.0% (8%)
Other Specialty Three
months ended March 31, Percentage Change 2017
2016 2017 - 2016 U.S.$ in millions / % of Segment
Revenues Revenues $ 1,050 100.0% $ 1,146 100.0% (8%)
Gross profit 866 82.5% 952 83.1% (9%) R&D expenses 233 22.2%
214 18.7% 9% S&M expenses 337 32.1% 368
32.1% (8%) Segment profitability $ 296 28.2% $ 370
32.3% (20%)
Reconciliation of our segment
profit to consolidated income before income taxes
Three months ended March 31, 2017 2016
U.S.$ in millions Generic medicines profit $
779 $ 649 Specialty medicines profit 1,038
1,175 Total segment profit 1,817 1,824 Profit (loss) of
other activities 26 (4 ) 1,843 1,820 Amounts
not allocated to segments: Amortization 320 189 General and
administrative expenses 236 304 Impairments, restructuring and
others 240 119 Inventory step-up 64 6 Costs related to regulatory
actions taken in facilities 34 38 Legal settlements and loss
contingencies 20 (25 ) Other unallocated amounts 34 24
Consolidated operating income
895 1,165 Financial expenses - net 207
298 Consolidated income before income taxes $
688 $ 867
Revenues by Activity and Geographical Area (Unaudited)
Three Months EndedMarch
31,
PercentageChange
PercentageChange
2017 2016 2017 - 2016 2017 - 2016
U.S. $ in millions
in localcurrencies
Generic Medicines United States $ 1,381 $ 976 41% 41% Europe* 988
790 25% 31% Rest of the World 689 692 § 27% Total
Generic Medicines 3,058 2,458 24% 34% Specialty Medicines United
States 1,492 1,677 (11%) (11%) Europe* 438 394 11% 17% Rest of the
World 90 81 11% 9% Total Specialty Medicines 2,020
2,152 (6%) (5%) Other Revenues United States 320 4 7900% 7900%
Europe* 78 51 53% 59% Rest of the World 154 145 6% 2%
Total Other Revenues 552 200 176% 175% Total Revenues
$ 5,630 $ 4,810 17% 22% * We define our European region as the
European Union and certain other European countries. § Less than
0.5%.
Revenues by Product line (Unaudited)
Three Months EndedMarch
31,
PercentageChange
2017 2016 2017 - 2016 U.S. $ in
millions Generic Medicines $ 3,058
$ 2,458 24%
OTC
264
292
(10%)
API
197 197 0%
Specialty Medicines 2,020 2,152
(6%) CNS 1,138 1,323 (14%) Copaxone® 970 1,006 (4%) Azilect®
60 113 (47%) Nuvigil® 17 103 (83%) Respiratory 304 366 (17%)
ProAir® 121 173 (30%) QVAR® 98 134 (27%) Oncology 270 268 1%
Treanda® and Bendeka® 157 155 1% Women's Health 124 110 13% Other
Specialty* 184 85 116%
All Others 552
200 176% Total $ 5,630 $
4,810 17%
* Includes a $75 million payment related
to the Ninlaro® transaction in the first quarter of 2017.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170511005467/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) 926-7246orUnited
StatesDenise Bradley, 215-591-8974
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