- Revenues of $4.5 billion
- Free cash flow of $704 million
- GAAP diluted loss per share of
$0.27
- Non-GAAP diluted EPS of $0.68
- Spend base reduction of $1.8 billion in
the first nine months of 2018; on-track to achieve $3.0 billion by
the end of 2019
- AJOVY™ (fremanezumab) was approved by
the FDA in September 2018 and immediately launched
- Raising 2018 full year guidance:
- Non-GAAP EPS guidance raised to
$2.80-2.95 from $2.55-2.80
- Free cash flow guidance raised to
$3.6-3.8 billion from $3.2-3.4 billion
Teva Pharmaceutical Industries Ltd. (NYSE: TEVA, TASE: TEVA)
today reported results for the quarter ended September 30,
2018.
Mr. Kåre Schultz, Teva’s President and CEO, said, “I am very
satisfied with our progress and we are meeting all our key targets.
We received FDA approval for AJOVY™ in September for the preventive
treatment of migraine and we are seeing very good signs of a
successful launch. We continue to see strong growth for AUSTEDO®,
while COPAXONE® continues to maintain its market share. Our
restructuring plan has already resulted in a significant cost
reduction of $1.8 billion in the first nine months of the year and
we are on track to achieve a reduction of $3.0 billion by the end
of 2019, while continuing to pay down our debt. Given the solid
third quarter results, we have decided to raise our 2018 full year
guidance. ”
Third Quarter 2018 Consolidated
Results
Revenues in the third quarter of 2018 were $4,529
million, a decrease of 19%, or 18% in local currency terms,
compared to the third quarter of 2017, mainly due to generic
competition to COPAXONE, price erosion in our U.S. generics
business and loss of revenues following the divestment of certain
products and discontinuation of certain activities.
Exchange rate differences between the third quarter of
2018 and the third quarter of 2017 negatively impacted our revenues
and GAAP operating income by $80 million and $34 million,
respectively. Our non-GAAP operating income was negatively impacted
by $37 million.
GAAP gross profit was $2,021 million in the third quarter
of 2018, a decrease of 24% compared to the third quarter of 2017.
GAAP gross profit margin was 44.6% in the third quarter of
2018, compared to 47.2% in the third quarter of 2017. Non-GAAP
gross profit was $2,305 million in the third quarter of
2018, a decline of 23% from the third quarter of 2017. Non-GAAP
gross profit margin was 50.9% in the third quarter of 2018,
compared to 53.1% in the third quarter of 2017. The decrease in
gross profit margin, on both a GAAP and a non-GAAP basis, resulted
primarily from a decline in COPAXONE revenues due to generic
competition, price erosion in our U.S. generics business and the
loss of revenue following the sale of our women’s health
business.
Research and Development (R&D) expenses for the third
quarter of 2018 were $311 million, a decrease of 41% compared to
the third quarter of 2017. R&D expenses excluding equity
compensation expenses and other expenses were $243 million, or 5.4%
of quarterly revenues in the third quarter of 2018, compared to
$367 million, or 6.5%, in the third quarter of 2017. The decrease
in R&D expenses resulted primarily from pipeline optimization,
phase 3 studies that have ended and related headcount
reduction.
Selling and Marketing (S&M) expenses in the third
quarter of 2018 were $743 million, a decrease of 12% compared to
the third quarter of 2017. S&M expenses excluding amortization
of purchased intangible assets, equity compensation expenses and
other expenses were $678 million, or 15.0% of quarterly revenues,
in the third quarter of 2018, compared to $788 million, or 14.0%,
in the third quarter of 2017. The decrease was mainly due to cost
reduction and efficiency measures as part of the restructuring
plan.
General and Administrative (G&A) expenses in the
third quarter of 2018 were $309 million, a decrease of 17% compared
to the third quarter of 2017. G&A expenses excluding equity
compensation expenses and other expenses were $284 million in the
third quarter of 2018, or 6.3% of quarterly revenues, compared to
$360 million, or 6.4% in the third quarter of 2017. The decrease
was mainly due to cost reduction and efficiency measures as part of
the restructuring plan.
GAAP other income in the third quarter of 2018 was $35
million compared to $4 million in the third quarter of 2017.
Non-GAAP other income in the third quarter of 2018 was $4
million, same as in the third quarter of 2017.
GAAP operating income in the third quarter of 2018 was
$16 million, compared to $378 million in the third quarter of 2017.
Non-GAAP operating income in the third quarter of 2018 was
$1,104 million, a decrease of 25% compared to the third quarter of
2017. Non-GAAP operating margin was 24.4% in the third
quarter of 2018 compared to 26.2% in the third quarter of 2017.
EBITDA (non-GAAP operating income, which excludes
amortization and certain other items, as well as depreciation
expenses) was $1,253 million in the third quarter of 2018, a
decrease of 23% compared to $1,618 million in the third quarter of
2017.
GAAP financial expenses for the third quarter of 2018
were $229 million, compared to $259 million in the third quarter of
2017. Non-GAAP financial expenses were $236 million in the
third quarter of 2018, compared to $229 million in the third
quarter of 2017.
In the third quarter of 2018, we recognized a tax benefit
of $26 million, or 12%, on pre-tax loss of $213 million. In the
third quarter of 2017, we recognized a tax benefit of $494 million,
on pre-tax income of $119 million. Our tax rate for the third
quarter of 2018 was mainly affected by the mix of products sold in
different geographies. Non-GAAP income taxes for the third
quarter of 2018 were $85 million, or 10%, on pre-tax non-GAAP
income of $868 million. Non-GAAP income taxes in the third quarter
of 2017 were $135 million, or 11%, on pre-tax non-GAAP income of
$1,241 million.
We expect our annual non-GAAP tax rate for 2018 to be 14%, which
is lower than our previous projection. This is due to changes in
the geographical mix of income we expect to earn this year. Our
non-GAAP tax rate for 2017 was 15%.
GAAP net loss attributable to ordinary shareholders and
GAAP diluted loss per share in the third quarter of 2018
were $273 million and $0.27, respectively, compared to income of
$530 million and $0.52 in the third quarter of 2017. Non-GAAP
net income attributable to ordinary shareholders and
non-GAAP diluted EPS in the third quarter of 2018 were $694
million and $0.68, respectively, compared to $1,012 million and
$1.00 in the third quarter of 2017.
For the third quarter of 2018, the weighted average
outstanding shares for the fully diluted EPS calculation on
a GAAP basis was 1,018 million, compared to 1,017 million for the
third quarter of 2017. The weighted average outstanding
shares for the fully diluted EPS calculation on a non-GAAP
basis was 1,022 million, compared to 1,017 million for the third
quarter of 2017. Additionally, no account was taken of the
potential dilution by the mandatory convertible preferred shares,
amounting to 66 million shares (including shares that may be issued
due to unpaid dividends to date) for the three months ended
September 30, 2018 and 59 million shares for the three months ended
September 30 2017, as well as for the convertible senior debentures
for the respective periods, since both had an anti-dilutive effect
on EPS.
As of September 30, 2018, the fully diluted share count for
purposes of calculating our market capitalization was approximately
1,111 million.
Non-GAAP information: Net non-GAAP adjustments in the
third quarter of 2018 were $967 million. Non-GAAP net income and
non-GAAP EPS for the third quarter were adjusted to exclude the
following items:
- Impairment of long-lived assets of $521
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 totaling $297 million, of which $246 million is included in
cost of goods sold and the remaining $51 million in S&M
expenses;
- Restructuring expenses of $88
million;
- In Process R&D of $60 million;
- Equity compensation expenses of $45
million;
- Contingent consideration of $29
million;
- Other non-GAAP items of $38 million;
and
- Tax benefit of $111 million.
Teva believes that excluding such items facilitates investors'
understanding of its business. See the attached tables for a
reconciliation of the GAAP results to the adjusted non-GAAP
figures. Investors should consider non-GAAP financial measures in
addition to, and not as replacement for, or superior to, measures
of financial performance prepared in accordance with GAAP.
Cash flow generated from operations during the third
quarter of 2018 was $421 million, compared to $795 million in the
third quarter of 2017. The decrease was mainly due to lower net
income, higher beneficial interest collected in exchange for
securitized trade receivables and higher payments related to the
restructuring plan during the third quarter of 2018.
Free cash flow (cash flow generated from
operations net of capital expenditures and deferred purchase price
cash component collected for securitized trade receivables) was
$704 million in the third quarter of 2018, compared to $920 million
in the third quarter of 2017. The decrease was mainly due to lower
net income.
As of September 30, 2018, our debt was $29,489 million,
compared to $30,237 million as of June 30, 2018. The decrease was
mainly due to the $405 million debt tender offer completed in
September 2018 as well as repayment at maturity of our CHF 300
million 0.125% senior notes. The portion of total debt classified
as short-term as of September 30, 2018 was 9%, compared to 4% as of
June 30, 2018, due to a net increase in current maturities.
Segment Results for the Third Quarter
2018
Due to the organizational changes announced in November 2017, we
began reporting our financial results under a new structure in the
first quarter of 2018, consisting of the following segments:
a) North America segment, which includes the United States and
Canada.
b) Europe segment, which includes the European Union and certain
other European countries.
c) International Markets segment, which includes all countries
other than those in our North America and Europe segments.
In addition to these three segments, we have other activities,
primarily the sale of API to third parties and certain contract
manufacturing services.
Segment profit is comprised of gross profit for the segment,
less R&D, S&M, G&A expenses and other income related to
each segment. Segment profit does not include amortization and
certain other items.
North America Segment
Our North America segment includes the United States and
Canada.
The following table presents revenues, expenses and profit for
our North America segment for the three months ended September 30,
2018 and 2017:
Three months ended September 30, 2018
2017 (U.S.$ in
millions / % of Segment Revenues) Revenues $ 2,265 100%
$ 3,043 100% Gross profit 1,232 54.4% 1,833 60.2% R&D expenses
158 7.0% 230 7.6% S&M expenses 301 13.3% 325 10.7% G&A
expenses 128 5.7% 149 4.9% Other income (4) § (1) §
Segment profit* $ 649 28.7% $ 1,130 37.1% * Segment profit
does not include amortization and certain other items. The data
presented for prior periods have been conformed to reflect the
changes to our segment reporting commencing in the first quarter of
2018.
§ Represents an amount less than 0.5%.
Revenues from our North America segment in the third
quarter of 2018 were $2,265 million, a decrease of $778 million, or
26%, compared to the third quarter of 2017, mainly due to a decline
in revenues of COPAXONE, as well as a decline in revenues in our
U.S. generics business, a decline in revenues of ProAir and QVAR
and the loss of revenues from the sale of our women’s health
business, partially offset by higher revenues from AUSTEDO® and our
distribution business. Revenues in the United States, our
largest market, were $2,125 million in the third quarter of 2018, a
decrease of $772 million, or 27%, compared to the third quarter of
2017.
Revenues by Major Products and Activities
The following table presents revenues for our North America
segment by major products and activities for the three months ended
September 30, 2018 and 2017:
Three months ended September
30, Percentage
Change
2018 2017 2017-2018 (U.S.$ in
millions) Generic products $ 922 $ 1,233 (25%) COPAXONE
463 819 (43%) BENDEKA / TREANDA 161 179 (10%) ProAir 107 155 (31%)
QVAR 36 83 (57%) AUSTEDO 62 6 870% Distribution 333 294 13%
Generic products revenues in our North America segment in
the third quarter of 2018 decreased by 25% to $922 million,
compared to the third quarter of 2017, mainly due to price erosion
in our U.S. generics business, additional competition to
methylphenidate extended-release tablets (Concerta® authorized
generic) and portfolio optimization primarily as part of the
restructuring plan.
In the third quarter of 2018, we led the U.S. generics market in
total prescriptions and new prescriptions, with approximately 547
million total prescriptions, representing 14.1% of total U.S.
generic prescriptions according to IQVIA data. COPAXONE
revenues in our North America segment in the third quarter of 2018
decreased by 43% to $463 million, of which $446 million were
generated in the United States, compared to the third quarter of
2017, mainly due to generic competition in the United States.
BENDEKA® and TREANDA® combined
revenues in our North America segment in the third quarter of 2018
decreased by 10% to $161 million, compared to the third quarter of
2017, mainly due to lower volumes, partially offset by higher
pricing.
ProAir® revenues in our North America segment in
the third quarter of 2018 decreased by 31% to $107 million,
compared to the third quarter of 2017, mainly due to lower net
pricing.
QVAR® revenues in our North America segment in the third
quarter of 2018 decreased by 57% to $36 million, compared to the
third quarter of 2017. The decrease in sales was mainly due to
lower volumes in this quarter following wholesaler stocking in the
first quarter of 2018 in connection with the launch of QVAR®
RediHaler™. QVAR maintained its second-place position in the
inhaled corticosteroids category in the United States.
AUSTEDO® revenues in our North America segment in
the third quarter of 2018 were $62 million.
Distribution revenues in our North America segment in the
third quarter of 2018 generated by Anda increased by 13% to $333
million, compared to the third quarter of 2017.
North America Gross Profit
Gross profit from our North America segment in the third quarter
of 2018 was $1,232 million, a decrease of 33% compared to $1,833
million in the third quarter of 2017. The decrease was mainly due
to lower revenues from COPAXONE and generic products.
Gross profit margin for our North America segment in the third
quarter of 2018 decreased to 54.4%, compared to 60.2% in the third
quarter of 2017. This decrease was mainly due to lower COPAXONE
revenues.
North America Profit
Profit from our North America segment in the third quarter of
2018 was $649 million, a decrease of 43% compared to $1,130 million
in the third quarter of 2017. The decrease was mainly due to lower
revenues from COPAXONE and generic products, partially offset by
cost reductions and efficiency measures as part of the
restructuring plan.
Europe Segment
Our Europe segment includes the European Union and certain other
European countries.
The following table presents revenues, expenses and profit for
our Europe segment for the three months ended September 30, 2018
and 2017:
Three months ended September 30, 2018
2017 (U.S.$ in
millions / % of Segment Revenues) Revenues $ 1,212
100.0% $ 1,380 100% Gross profit 683 56.4% 721 52.2% R&D
expenses 62 5.1% 101 7.3% S&M expenses 249 20.5% 289 20.9%
G&A expenses 74 6.1% 90 6.5% Other expenses 1 § - §
Segment profit* $ 297 24.5% 241 17.5%
* Segment profit does not include
amortization and certain other items. The data presented for prior
periods have been conformed to reflect the changes to our segment
reporting commencing in the first quarter of 2018.
§ Represents an amount less than 0.5%.
Revenues from our Europe segment in the third quarter of 2018
were $1,212 million, a decrease of $168 million, or 12%, compared
to the third quarter of 2017. In local currency terms, revenues
decreased by 11%, mainly due to the loss of revenues from the
closure of our distribution business in Hungary, the sale of our
women’s health business and a decline in COPAXONE revenues,
partially offset by new generic product launches.
Revenues by Major Products and Activities
The following table presents revenues for our Europe segment by
major products and activities for the three months ended September
30, 2018 and 2017:
Three months ended September
30, Percentage
Change
2018 2017 2017-2018 (U.S.$ in
millions) Generic products $ 845 $ 871 (3%) COPAXONE 124
150 (17%) Respiratory products 93 90 3%
Generic products revenues in our Europe segment in the
third quarter of 2018, including OTC products, decreased by 3% to
$845 million, compared to the third quarter of 2017. In local
currency terms, revenues decreased by 1%, mainly due to the loss of
revenues from the termination of the PGT joint venture and generic
price reductions, partially offset by new generic product
launches.
COPAXONE revenues in our Europe segment in the third
quarter of 2018 decreased by 17% to $124 million, compared to the
third quarter of 2017. In local currency terms, revenues decreased
by 16%, mainly due to price reductions resulting from the entry of
competing glatiramer acetate products.
Respiratory products revenues in our Europe
segment in the third quarter of 2018 increased by 3% to $93
million, compared to the third quarter of 2017. In local currency
terms, revenues increased by 4%, mainly due to the launch of
BRALTUS® in 2017.
Europe Gross Profit
Gross profit from our Europe segment in the third quarter of
2018 was $683 million, a decrease of 5% compared to $721 million in
the third quarter of 2017. The decrease was mainly due to the loss
of revenues from the sale of our women’s health business and a
decline in COPAXONE revenues. Gross profit margin for our Europe
segment in the third quarter of 2018 increased to 56.4%, compared
to 52.2% in the third quarter of 2017. This increase was mainly due
to the lower cost of goods and the closure of our distribution
business in Hungary.
Europe Profit
Profit from our Europe segment in the third quarter of 2018 was
$297 million, an increase of 23% compared to $241 million in the
third quarter of 2017. The increase was mainly due to cost
reductions and efficiency measures as part of the restructuring
plan.
International Markets Segment
Our International Markets segment includes all countries other
than those in our North America and Europe segments. The key
markets in this segment are Japan, Israel and Russia.
During the fourth quarter of 2017, we deconsolidated our
subsidiaries in Venezuela from our financial results. Consequently,
results of operations of our subsidiaries in Venezuela are not
included in the third quarter of 2018.
The following table presents revenues, expenses and profit for
our International Markets segment for the three months ended
September 30, 2018 and 2017:
Three months ended September 30, 2018
2017
(U.S.$ in millions / % of Segment Revenues) Revenues
$ 726 100.0% $ 882 100% Gross profit 301 41.5% 351 39.8% R&D
expenses 21 2.9% 35 4.0% S&M expenses 120 16.5% 158 17.9%
G&A expenses 37 5.1% 51 5.8% Other income - § (3)
§ Segment profit* $ 123 16.9% $ 110 12.5%
* Segment profit does not include
amortization and certain other items. The data presented for prior
periods have been conformed to reflect the changes to our segment
reporting commencing in the first quarter of 2018.
§ Represents an amount less than 0.5%.
Revenues from our International Markets segment in the
third quarter of 2018 were $726 million, a decrease of $156
million, or 18%, compared to the third quarter of 2017. In local
currency terms, revenues decreased 12% compared to the third
quarter of 2017, mainly due to lower sales in Japan and Russia, the
effect of the deconsolidation of our subsidiaries in Venezuela and
the loss of revenues from the sale of our women’s health
business.
Revenues by Major Products and Activities
The following table presents revenues for our International
Markets segment by major products and activities for the three
months ended September 30, 2018 and 2017:
Three months ended September
30, Percentage
Change
2018 2017 2017-2018 (U.S.$ in
millions) Generic products $ 498 $ 629 (21%) COPAXONE 14 18
(24%) Distribution 149 146 2%
Generic products revenues in our International Markets
segment in the third quarter of 2018, which include OTC products,
decreased by 21% to $498 million, compared to the third quarter of
2017. In local currency terms, revenues decreased by 15%, mainly
due to lower sales in Japan resulting from regulatory pricing
reductions and generic competition to off-patented products, lower
sales in Russia and the effect of the deconsolidation of our
subsidiaries in Venezuela.COPAXONE revenues in our
International Markets segment in the third quarter of 2018
decreased by 24% to $14 million, compared to the third quarter of
2017. In local currency terms, revenues decreased by 2%.
Distribution revenues in our International Markets
segment in the third quarter of 2018 increased by 2% to $149
million, compared to the third quarter of 2017. In local currency
terms, revenues increased by 4%.
International Markets Gross Profit
Gross profit from our International Markets segment in the third
quarter of 2018 was $301 million, a decrease of 14% compared to
$351 million in the third quarter of 2017. Gross profit margin for
our International Markets segment in the third quarter of 2018
increased to 41.5%, compared to 39.8% in the third quarter of 2017.
The increase was mainly due to higher gross profit resulting from
changes in the product mix in certain countries, mainly Israel,
Russia and Mexico, as well as lower cost of goods, partially offset
by the Venezuela deconsolidation and lower revenues in Japan.
International Markets Profit
Profit from our International Markets segment in the third
quarter of 2018 was $123 million, compared to $110 million in the
third quarter of 2017. The increase was mainly due to cost
reductions and efficiency measures as part of the restructuring
plan.
Profit as a percentage of International Markets revenues in the
third quarter of 2018 was 16.9%, compared to 12.5% in the third
quarter of 2017. This increase was mainly due to lower operating
expenses as part of the restructuring plan.
Other Activities
We have other sources of revenues, primarily the sale of API to
third parties and certain contract manufacturing services. These
other activities are not included in our North America, Europe or
International Markets segments.
Our revenues from other activities in the third quarter of 2018
increased by 4% to $326 million, compared to the third quarter of
2017. In local currency terms, revenues increased by 7%.
API sales to third parties in the third quarter of 2018 were
$171 million, flat compared to the third quarter of 2017. In local
currency terms, revenues increased by 1%.
Updated 2018 Non-GAAP Results
Outlook
Updated
GuidanceNovember 2018
GuidanceAugust
2018
Revenues $18.6-19.0 billion $18.5-19.0 billion Non-GAAP Operating
Income $4.6-4.8 billion $4.3-4.6 billion EBITDA $5.2-5.4 billion
$5.0-5.3 billion Non-GAAP EPS $2.80-2.95 $2.55-2.80 Weighted
average number of shares 1,027 million 1,027 million Free cash flow
$3.6-3.8 billion $3.2-3.4 billion
These estimates reflect management's current expectations for
Teva's performance in 2018. Actual results may vary, whether as a
result of exchange rate differences, market conditions or other
factors. In addition, the non-GAAP measures 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.
See “Non-GAAP Financial Measures” below.
Conference Call
Teva will host a conference call and live webcast along with a
slide presentation on Thursday, November 1, 2018 at 8:00 a.m. ET to
discuss its third quarter 2018 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: 7193665
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, 2018, 9:00 a.m. ET by
calling United States 1 (866) 331-1332 or International +44 (0)
3333009785; passcode: 7193665.
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 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 2017 were $22.4 billion. For
more information, visit www.tevapharm.com.
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 new 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; 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; governmental investigations
into sales 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 our Annual Report on Form 10-K
for the year ended December 31, 2017, including the sections
thereof captioned "Risk Factors" and "Forward Looking Statements,"
and in our subsequent quarterly reports on Form 10-Q and other
filings with the 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 Nine months ended
September 30, September 30, 2018 2017
2018 2017 (Unaudited) (Unaudited)
(Unaudited) (Unaudited) Net revenues 4,529
5,617 14,295 16,987
Cost of sales 2,508 2,967
7,865 8,643
Gross profit 2,021 2,650 6,430
8,344
Research and development expenses 311 531 918 1,432
Selling and marketing expenses 743 843 2,224 2,745
General and administrative expenses 309 372 954 1,101
Other asset impairments, restructuring and other items 658
550 2,080 1,209
Goodwill impairment - - 300 6,100
Legal
settlements and loss contingencies 19 (20 ) (1,239 ) 324
Other income (35 ) (4 ) (334 ) (100 )
Operating income
(loss) 16 378 1,527 (4,467 )
Financial expenses – net
229 259 736 704
Income (loss) before
income taxes (213 ) 119 791 (5,171 )
Tax benefits
(26 ) (494 ) (56 ) (462 )
Share in losses of associated
companies, net 10 3 76 10
Net
income (loss) (197 ) 610 771 (4,719 )
Net income
attributable to non-controlling interests 11 15
35 11
Net income (loss) attributable to Teva
(208 ) 595 736 (4,730 )
Dividends on preferred
shares 65 65 195 195
Net income
(loss) attributable to Teva's ordinary shareholders (273 ) 530
541 (4,925 )
Earnings per share
attributable to ordinary shareholders: Basic ($) (0.27 )
0.52 0.53 (4.85 )
Diluted ($) (0.27 ) 0.52
0.53 (4.85 )
Weighted average number of shares (in
millions): Basic 1,018 1,017 1,018
1,016
Diluted
1,018 1,017 1,020
1,016
Non-GAAP net
income attributable to ordinary shareholders:* 694 1,012
2,442 3,126
Non-GAAP net income
attributable to ordinary shareholders for diluted earnings per
share: 694 1,012 2,442 3,126
Non-GAAP earnings per share attributable to ordinary
shareholders:* Basic ($) 0.68 1.00 2.40
3.08
Diluted ($) 0.68 1.00 2.39
3.07
Non-GAAP average number of shares (in
millions): Basic 1,018 1,017 1,018
1,016
Diluted
1,022 1,017 1,020
1,017 * See reconciliation
attached.
Condensed
Consolidated Balance Sheets
(U.S. dollars in
millions)
(Unaudited)
September 30, December 31, 2018
2017 ASSETS Current assets: Cash and cash
equivalents 1,875 963 Trade receivables 5,665 7,128 Inventories
4,866 4,924 Prepaid expenses 911 1,100 Other current assets 483 701
Assets held for sale 81 566
Total current assets 13,881
15,382
Deferred income taxes 427 574
Other non-current
assets 722 932
Property, plant and equipment, net 7,101
7,673
Identifiable intangible assets, net 15,345 17,640
Goodwill 27,585 28,414
Total assets 65,061 70,615
LIABILITIES & EQUITY Current liabilities:
Short-term debt 2,673 3,646 Sales reserves and allowances 6,701
7,881 Trade payables 1,626 2,069 Employee-related obligations 712
549 Accrued expenses 2,232 3,014 Other current liabilities 886 724
Liabilities held for sale - 38
Total current liabilities
14,830 17,921
Long-term liabilities: Deferred income
taxes 2,478 3,277 Other taxes and long-term liabilities 1,803 1,843
Senior notes and loans 26,816 28,829
Total long-term
liabilities 31,097 33,949
Equity: Teva shareholders’
equity 17,730 17,359
Non-controlling interests
1,404 1,386
Total equity 19,134 18,745
Total liabilities
and equity 65,061 70,615
Condensed
Consolidated Cash Flow
(U.S. Dollars in
millions)
Three months ended Nine months ended
September 30, September 30, 2018 2017
2018 2017 Unaudited Unaudited
Unaudited Unaudited Operating activities:
Net income (loss) (197 ) 610 771 (4,719 )
Net change in
operating assets and liabilities (253 ) (366 ) (1,521 ) (1,717
)
Items not involving cash flow 871 551 2,829 7,802
Net cash provided by
operating activities 421 795 2,079 1,366
Net cash
provided by investing activities 347 104 1,792 1,534
Net cash used in financing activities (705 ) (825 ) (2,852 )
(3,244 )
Translation adjustment on cash and cash
equivalents (49 ) 7 (107 ) 36
Net change in cash and cash equivalents 14 81
912 (308 )
Balance of cash and cash equivalents at
beginning of period 1,861 599 963 988
Balance of cash and cash equivalents at end
of period 1,875 680 1,875 680
Three Months Ended September 30, 2018 U.S.
dollars and shares in millions (except per share amounts) GAAP
Excluded for non GAAP measurement Non 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
Gain on sale of business
Other non GAAP
items
Other items COGS 2,508 246 1 7 30 2,224 R&D 311 60 7 1 243
S&M 743 51 14 678 G&A 309 17 8 284
Other income
(35 ) (31 ) (4 ) Legal settlements and loss contingencies 19
19 - Impairments, restructuring and other 658 521 4 88 29 16
- Financial expenses 229 (7 ) 236 Corresponding tax effect
(26 ) (111 ) 85 Share in losses of associated companies – net 10 9
1 Net income attributable to non-controlling interests 11
(12 ) 23 Total reconciled
items 297 19 521 60
4 88 1 45
29 (31 ) 55
(121 ) EPS - Basic (0.27 ) 0.95 0.68 EPS - Diluted (0.27 )
0.95 0.68 The non-GAAP diluted weighted average
number of shares was 1,022 million for the three months ended
September 30, 2018. For the three months ended September 30, 2018,
the mandatory convertible preferred shares amounting to 66 million
weighted average shares had an anti-dilutive effect on earnings per
share and were therefore excluded from the outstanding shares
calculation.
Three Months Ended September 30, 2017 U.S.
dollars and shares in millions (except per share amounts) GAAP
Excluded for non GAAP measurement Non 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 items COGS 2,967 310 (1 ) 5 17 2,636 R&D 531
150 6 8 367 S&M 843 47 9 (1 ) 788 G&A 372 12 360
Other income
(4 ) (4 ) Legal settlements and loss contingencies (20 ) (20
) - Impairments, restructuring and other 550 408 31 72 18 21
- Financial expenses 259 30 229 Corresponding tax effect
(494 ) (629 ) 135 Share in losses of associated companies – net 3 -
3 Net income attributable to non-controlling interests 15
(11 ) 26 Total reconciled items 357
(20 ) 408 150
31 72 (1 ) 32
18 45 (610 )
EPS - Basic 0.52 0.48 1.00 EPS - Diluted 0.52 0.48 1.00
The non-GAAP diluted weighted average number of
shares was 1,017 million for the three months ended September 30,
2017. The non-GAAP weighted average number of shares for the three
months ended September 30, 2017 does not take into account the
potential dilution of the mandatory convertible preferred shares
(amounting to 59 million weighted average shares), which have an
anti-dilutive effect on non-GAAP earnings per share.
Nine Months Ended September 30, 2018 U.S.
dollars and shares in millions (except per share amounts) GAAP
results Excluded for non GAAP measurement Non GAAP Amortization of
purchased intangible assets Goodwill impairment 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 Gain on
sale of business Other non GAAP items Other items COGS 7,865 771 6
22 94 6,972 R&D 918 82 21 2 813 S&M 2,224 138 35 (4 ) 2,055
G&A 954 44 12 898
Other income
(334 ) (114 ) (220 ) Legal settlements and loss
contingencies (1,239 ) (1,239 ) - Impairments, restructuring
and other 2,080 1,501 9 442 84 44 - Goodwill impairment 300
300 - Financial expenses 736 59 677 Corresponding tax effect
(56 ) (479 ) 423 Share in losses of associated companies – net 76
103 (27 ) Net income attributable to non-controlling interests 35
(32 ) 67 Total reconciled items 909
300 (1,239 ) 1,501
82 9 442 6
122 84 (114 ) 148
(349 ) EPS - Basic 0.53 1.87 2.40 EPS -
Diluted 0.53 1.86 2.39 The non-GAAP diluted weighted
average number of shares was 1,020 million for the nine months
ended September 30, 2018. For the nine months ended September 30,
2018, the mandatory convertible preferred shares amounting to 68
million weighted average shares had an anti-dilutive effect on
earnings per share and were therefore excluded from the outstanding
shares calculation.
Nine Months
Ended September 30, 2017 U.S. dollars and shares in millions
(except per share amounts) GAAP results Excluded for non GAAP
measurement Non GAAP Amortization of purchased intangible assets
Goodwill impairment Legal settlements and loss contingencies
Impairment of long-lived assets Other R&D expenses Inventory
step-up Acquisition, integration and related expenses Restructuring
costs Costs related to regulatory actions taken in facilities
Equity compensation Contingent consideration Other non GAAP items
Other items COGS 8,643 944 67 48 18 37 7,529 R&D 1,432 176 17
19 1,220 S&M 2,745 144 30 (2 ) 2,573 G&A 1,101 38 (15 )
1,078
Other income
(100 ) 1 (101 ) Legal settlements and loss contingencies 324
324 - Impairments, restructuring and other 1,209 564 87 300
179 79 - Goodwill impairment 6,100 6,100 - Financial
expenses 704 5 699 Corresponding tax effect (462 ) (1,067 ) 605
Share in losses of associated companies – net 10 2 8 Net income
attributable to non-controlling interests 11
(44 ) 55
Total reconciled items 1,088 6,100 324
564 176 67
87 300 48 103
179 119 (1,104 )
EPS - Basic (4.85 ) 7.93 3.08 EPS - Diluted (4.85 ) 7.92 3.07
The non-GAAP diluted weighted average number of
shares was 1,016 million for the nine months ended September 30,
2017. The non-GAAP weighted average number of shares for the nine
months ended September 30, 2017 does not take into account the
potential dilution of the mandatory convertible preferred shares
(amounting to 59 million weighted average shares), which have an
anti-dilutive effect on non-GAAP earnings per share.
Segment Information North
America Europe International Markets
Three months ended
September 30,
Three months ended
September 30,
Three months ended
September 30,
2018 2017 2018 2017 2018
2017 (U.S. $ in millions) (U.S. $ in
millions) (U.S. $ in millions) Revenues $ 2,265 $
3,043 $ 1,212 $ 1,380 $ 726 $ 882 Gross profit 1,232 1,833 683 721
301 351 R&D expenses 158 230 62 101 21 35 S&M expenses 301
325 249 289 120 158 G&A expenses 128 149 74 90 37 51 Other
income (loss) (4 ) (1 ) 1 - -
(3 ) Segment profit $ 649 $ 1,130 $ 297 $ 241
$ 123 $ 110
Segment
Information North America Europe
International Markets
Nine months ended
September 30,
Nine months ended
September 30,
Nine months ended
September 30,
2018 2017 2018 2017 2018
2017 (U.S. $ in millions) (U.S. $ in
millions) (U.S. $ in millions) Revenues $ 7,059 $
9,452 $ 3,982 $ 4,016 $ 2,265 $ 2,485 Gross profit 3,867 5,971
2,211 2,147 942 1,043 R&D expenses 528 777 208 312 70 129
S&M expenses 902 1,158 741 864 384 503 G&A expenses 357 432
243 258 115 144 Other income (206 ) (82 ) (1 )
(15 ) (11 ) (4 ) Segment profit $ 2,286
$ 3,686 $ 1,020 $ 728 $ 384 $ 271
Reconciliation of our
segment profit to consolidated income before income
taxes Three months ended September 30,
2018 2017 (U.S.$ in
millions) North America profit $ 649 $ 1,130 Europe
profit 297 241 International Markets profit 123
110 Total segment profit 1,069 1,481 Profit (loss) of
other activities 35 (11 ) 1,104 1,470 Amounts
not allocated to segments: Amortization 297 357 Other asset
impairments, restructuring and other items 658 550 Loss from
divestitures, net of divestitures related costs (31 ) - Other
R&D expenses 60 150 Costs related to regulatory actions taken
in facilities 1 (1 ) Legal settlements and loss contingencies 19
(20 ) Other unallocated amounts 84 56
Consolidated operating income 16 378
Financial expenses - net 229 259
Consolidated income (loss) before income taxes $ (213 ) $ 119
Reconciliation of our
segment profit to consolidated income before income
taxes
Nine months ended
September 30, 2018 2017 (U.S.$ in
millions) North America profit $ 2,286 $ 3,686 Europe
profit 1,020 728 International Markets profit 384
271 Total segment profit 3,690 4,685 Profit of other
activities 87 3 3,777 4,688 Amounts not
allocated to segments: Amortization 909 1,088 Other asset
impairments, restructuring and other items 2,080 1,209 Goodwill
impairment 300 6,100 Gain on divestitures, net of divestitures
related costs (114 ) - Inventory step-up - 67 Other R&D
expenses 82 176 Costs related to regulatory actions taken in
facilities 6 48 Legal settlements and loss contingencies (1,239 )
324 Other unallocated amounts 226 143
Consolidated operating income (loss) 1,527
(4,467 ) Financial expenses - net 736 704
Consolidated income (loss) before income taxes $ 791
$ (5,171 )
Revenues by Activity and Geographical
Area (Unaudited)
Three months ended September 30,
Percentage
Change
2018 2017 2017-2018 (U.S.$ in millions)
North America segment Generics medicines $ 922 $ 1,233 (25
%) COPAXONE 463 819 (43 %) Bendeka and Trenda 161 179 (10 %) ProAir
107 155 (31 %) QVAR 36 83 (57 %) AUSTEDO 62 6 870 % Distribution
333 294 13 %
Three months ended September
30,
Percentage
Change
2018 2017 2017-2018 (U.S.$ in millions)
Europe segment Generic medicines $ 845 $ 871 (3 %) COPAXONE
124 150 (17 %) Respiratory products 93 90 3 %
Three months ended September 30,
Percentage
Change
2018 2017 2017-2018 (U.S.$ in millions)
International Markets segment Generics medicines $ 498 $ 629
(21 %) COPAXONE 14 18 (24 %) Distribution 149 146 2 %
Revenues by Activity and Geographical Area (Unaudited)
Nine months ended
September 30,
Percentage
Change
2018 2017 2017-2018 (U.S.$ in millions)
North America segment Generics medicines $ 2,957 3,979 (26
%) COPAXONE 1,403 2,475 (43 %) Bendeka and Trenda 502 498 1 %
ProAir 352 399 (12 %) QVAR 173 265 (35 %) AUSTEDO 136 8 1708 %
Distribution 984 864 14 %
Nine months ended
September 30,
Percentage
Change
2018 2017 2017-2018 (U.S.$ in millions)
Europe segment Generic medicines $ 2,749 $ 2,543 8 %
COPAXONE 417 440 (5 %) Respiratory products 312 258 21 %
Nine months ended September 30,
Percentage
Change
2018 2017 2017-2018 (U.S.$ in millions)
International Markets segment Generics medicines $ 1,523 $
1,720 (11 %) COPAXONE 52 65 (20 %) Distribution 456 406 12 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181101005454/en/
IR ContactsKevin C. Mannix, (215) 591-8912orRan Meir, 972
(3) 926-7516orPR ContactsUnited StatesKelley
Dougherty, (973) 658-0237orIsraelYonatan Beker, 972 (54) 888
5898
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