JERUSALEM--(BUSINESS WIRE)--Teva Pharmaceutical Industries Ltd. (NYSE: TEVA, TASE: TEVA) today reported results for the quarter ended June 30, 2017.
“Second quarter results were lower than we anticipated due to the performance of our U.S. Generics business and the continued deterioration in Venezuela. These factors also led to a lowering of our outlook for the remainder of the year. All of us at Teva understand the frustration and disappointment of our shareholders in light of these results,” stated Dr. Yitzhak Peterburg, Interim President and CEO. “In our U.S. Generics business, we experienced accelerated price erosion and decreased volume mainly due to customer consolidation, greater competition as a result of an increase in generic drug approvals by the U.S. FDA, and some new product launches that were either delayed or subjected to more competition.”
Dr. Peterburg continued, “Given the current environment, we have had to take swift and decisive actions. We are focused on executing meaningful cost reductions, rationalizing our assets and maximizing their value, actively pursuing divestiture opportunities and strengthening our balance sheet. We will continue to take action to aggressively confront our challenges.”
Dr. Peterburg concluded, “The other parts of our business are performing well and in line with our expectations. In our Specialty business, we have achieved several very significant milestones, including the positive phase III results for our anti-CGRP asset fremanuzemab in both chronic and episodic migraine, and the approval and subsequent launch of Austedo™ in Huntington Disease and its pending approval in Tardive Dyskinesia. The FDA has also accepted the Biologics License Applications that Teva has submitted for review with its partner, Celltrion, Inc., for biosimilar versions of both Rituxan® and Herceptin®. In our Generics business, our deep R&D capabilities and strong pipeline of new products in the U.S. where we have more than 300 ANDAs under review at the FDA, of which more than 100 are first-to-file, and our broad geographical footprint, will help us weather the current conditions in the U.S. market.”
Second Quarter 2017 Results
Revenues in the second quarter of 2017 were $5.7 billion, up 13% compared to the second 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 17%.
Exchange rate differences between the second quarter of 2017 and the second quarter of 2016 reduced revenues by $218 million, GAAP operating income by $62 million and non-GAAP operating income by $56 million.
Adjustments of the exchange rates used for the Venezuelan bolivar resulted in a decrease of $183 million in revenues, a decrease of $47 million in GAAP operating income and a decrease of $38 million in non-GAAP operating income, compared to results in the second quarter of 2016. In light of the political and 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 second quarter of 2017, down 2% compared to the second quarter of 2016. GAAP gross profit margin was 49.6% in the second quarter of 2017, compared to 57.1% in the second quarter of 2016. Non-GAAP gross profit was $3.2 billion in the second quarter of 2017, up 2% from the second quarter of 2016. Non-GAAP gross profit margin was 56.8% in the second quarter of 2017, compared to 62.5% in the second 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 our generic medicines business, as well as higher amortization expenses which impacted our GAAP results only.
Research and Development (R&D) expenses for the second quarter of 2017 amounted to $486 million, up 30% compared to the second 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 second quarter of 2017 were $450 million, or 7.9% of quarterly revenues, compared to $370 million, or 7.3%, in the second quarter of 2016. R&D expenses related to our generic medicines segment were $200 million, an increase of 49% compared to $134 million in the second 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 $250 million, an increase of 6% compared to $235 million in the second quarter of 2016, mainly due to increased expenses for the development of late-stage migraine (fremanezumab) and pain (fasinumab) products.
Selling and Marketing (S&M) expenses in the second quarter of 2017 amounted to $960 million, an increase of 1% compared to the second quarter of 2016. S&M expenses excluding amortization of purchased intangible assets and equity compensation expenses were $906 million, or 15.9% of revenues, in the second quarter of 2017, compared to $898 million, or 17.8% of revenues, in the second quarter of 2016. S&M expenses related to our generic medicines segment were $425 million, an increase of 4% compared to $410 million in the second quarter of 2016, mainly due to the inclusion of the S&M expenses of the Actavis Generics business, partially offset by cost reduction and efficiency measures, as well as a decrease of expenses in Venezuela due to exchange rate adjustments. S&M expenses related to our specialty medicines segment were $439 million, down 8% compared to $478 million in the second quarter of 2016, mainly due to cost reduction and efficiency measures in our commercial operations, aligning with the life cycle of our product portfolio.
General and Administrative (G&A) expenses in the second quarter of 2017 amounted to $272 million, compared to $311 million in the second quarter of 2016. The lower G&A expenses in the second quarter of 2017 were mainly due to income from an upfront payment from Otsuka related to the out-license of fremanezumab in Japan, income related to divestiture of products and income from legal settlements, partially offset by the increased expenses related to the Actavis Generics acquisition. G&A expenses excluding equity compensation expenses and income from certain divestments were $274 million in the second quarter of 2017, or 4.8% of quarterly revenues, compared to $299 million, or 5.9% in the second quarter of 2016.
During the second quarter of 2017, Teva identified certain developments in the U.S. market that caused it to revisit management’s assumptions regarding the market dynamics of the U.S. generics unit. Based on the revised discounted cash flows analysis, the Company recorded a goodwill impairment charge of $6.1 billion related to the U.S. generics reporting unit in the second quarter of 2017.
GAAP operating loss in the second quarter of 2017 was $5.7 billion, compared to operating income of $0.4 billion in the second quarter of 2016. Non-GAAP operating income in the second quarter of 2017 was $1.6 billion, up 1% compared to the second quarter of 2016. Non-GAAP operating margin was 28.1% in the second quarter of 2017 compared to 31.4% in the second quarter of 2016.
EBITDA (non-GAAP operating income - which excludes amortization and certain other items - as well as excluding depreciation expenses) was $1.75 billion in the second quarter of 2017, up 3% compared to $1.7 billion in the second quarter of 2016.
GAAP financial expenses for the second quarter of 2017 were $238 million, compared to $105 million in the second quarter of 2016. Non-GAAP financial expenses were $235 million in the second quarter of 2017, compared to $6 million in the second quarter of 2016. The increase in our financial expenses is due mainly to interest expenses related to the debt raised to finance the acquisition of Actavis Generics, which increased by $151 million in the second quarter of 2017, compared to the second quarter of 2016.
GAAP income taxes for the second quarter of 2017 amounted to a benefit of $22 million. In the second quarter of 2016, income taxes amounted to $29 million, or 11% on pre-tax income of $256 million. Non-GAAP income taxes for the second quarter of 2017 amounted to $230 million on pre-tax non-GAAP income of $1.4 billion, for a quarterly tax rate of 17%. Non-GAAP income taxes in 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%.
GAAP net loss attributable to ordinary shareholders and GAAP diluted EPS loss were $6.0 billion and $5.94, respectively, in the second quarter of 2017, compared to net income attributable to ordinary shareholders of $188 million and diluted EPS of $0.20, in the second quarter of 2016. Non-GAAP net income attributable to ordinary shareholders for calculating diluted EPS and non-GAAP diluted EPS were $1.0 billion and $1.02, respectively, in the second quarter of 2017, compared to $1.2 billion and $1.25 in the second quarter of 2016.
For the second 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. For the second quarter of 2016, this was 920 million shares on a GAAP basis, and 979 million shares on a non-GAAP basis. For the three months ended June 30, 2017, no account was taken of the potential dilution resulting from the conversion of the mandatory convertible preferred shares amounting to 59.4 million weighted average shares, since they had an anti-dilutive effect on earnings per share.
As of June 30, 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 second quarter of 2017 were $7.1 billion. Non-GAAP net income and non-GAAP EPS for the quarter were adjusted to exclude the following items:
- A goodwill impairment charge of $6.1 billion related to the U.S. generics reporting unit;
- Amortization of purchased intangible assets totaling $411 million, of which $367 million is included in cost of goods sold and the remaining $44 million in selling and marketing expenses;
- Legal settlements and loss contingencies of $324 million;
- Contingent consideration of $140 million mainly related to Bendeka® royalties;
- Impairment of long-lived assets of $145 million;
- Restructuring expenses of $98 million, mainly related to the integration of Actavis Generics and other efficiency measures;
- Equity compensation expenses of $35 million;
- Acquisition, integration and related expenses of $33 million;
- Purchase of in-process R&D of $26 million;
- Costs related to regulatory actions taken in facilities of $15 million;
- Other non-GAAP items of $15 million;
- Minority interest adjustment of negative $20 million; and
- Corresponding tax benefit of $252 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 from operations generated during the second quarter of 2017 was $741 million, compared to $963 million in the second quarter of 2016. The decrease was mainly due to a payment of $113 million, made during the quarter, related to the ciprofloxacin settlement, as well as the effect of an $88 million positive impact of inventory balances in the second quarter of 2016, which did not recur in the second quarter of 2017.
Free cash flow, excluding net capital expenditures, was $567 million, compared to $796 million in the second quarter of 2016.
Total balance sheet assets amounted to $86.4 billion as of June 30, 2017, compared to $91.3 billion as of March 31, 2017. The decrease was mainly due to the goodwill impairment charge booked during the quarter.
As of June 30, 2017, our debt was $35.1 billion, compared to $34.6 billion at March 31, 2017. The increase was mainly due to foreign exchange fluctuations of $0.6 billion, partially offset by a repayment in the amount of $0.3 billion of our revolving credit facility and other short term loans. The portion of total debt classified as short-term at June 30, 2017 was 4%.
Total shareholders’ equity was $29.6 billion as of June 30, 2017, compared to $35.7 billion as of March 31, 2017. The decrease was mainly due to $6.0 billion of net loss during the quarter.
Segment Results for the Second Quarter 2017
Beginning in the fourth quarter of 2016, our OTC business, conducted primarily through PGT, is included in our generic medicines segment. This segment also includes chemical and therapeutic equivalents of originator medicines in a variety of dosage forms and our API manufacturing business.
All data presented has been conformed to the new segment structure.
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Generic Medicines Segment |
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| Three Months Ended June 30, | ||||||||||||||
| 2017 | 2016 | |||||||||||||
| U.S. $ in millions / % of Segment Revenues | ||||||||||||||
| Revenues | $ | 3,078 | 100.0% | $ | 2,557 | 100.0% | ||||||||
| Gross profit | 1,316 | 42.8% | 1,148 | 44.9% | ||||||||||
| R&D expenses | 200 | 6.5% | 134 | 5.3% | ||||||||||
| S&M expenses | 425 | 13.9% | 410 | 16.0% | ||||||||||
| Segment profit* | $ | 691 | 22.4% | $ | 604 | 23.6% | ||||||||
| * 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 2017 were $3.1 billion, an increase of 20% compared to the second quarter of 2016, reflecting the inclusion of the Actavis Generics business.
Generic revenues consisted of:
- U.S. revenues of $1.3 billion, an increase of 45% compared to the second quarter of 2016, mainly due to the inclusion of Actavis Generics.
- European revenues of $957 million, an increase of 24%, or 28% in local currency terms, compared to the second quarter of 2016, mainly due to the inclusion of Actavis Generics.
- ROW revenues of $831 million, a decrease of 7% compared to the second quarter of 2016. In local currency terms, revenues increased 13%, mainly due to the inclusion of Actavis Generics.
- OTC revenues (which are included in the market revenues above) were $283 million, up 6% compared to $266 million in the second quarter of 2016, mainly due to the inclusion of Actavis Generics, partially offset by lower revenues in Venezuela. In local currency terms, revenues increased 40%. PGT’s in-market sales were $301 million in the second quarter of 2017, down 20% compared to results in the second quarter of 2016.
- API sales to third parties (which are included in the market revenues above) were $204 million, down 1% compared to the second quarter of 2016.
Generic medicines revenues comprised 54% of our total revenues in the quarter, compared to 51% in the second quarter of 2016.
Generic Medicines Gross Profit
Gross profit of our generic medicines segment in the second quarter of 2017 was $1.3 billion, an increase of 15% compared to the second quarter of 2016. The higher gross profit was mainly a result of the inclusion of Actavis Generics.
Gross profit margin for our generic medicines segment in the second quarter of 2017 decreased to 42.8% from 44.9% in the second quarter of 2016. The decrease in gross profit margin was due to lower profitability in our U.S. and ROW markets, partially offset by improved profitability of our European markets.
Generic Medicines Profit
Our generic medicines segment generated profit of $691 million in the second quarter of 2017, an increase of 14% compared to the second quarter of 2016. Generic medicines profitability as a percentage of generic medicines revenues was 22.4% in the second quarter of 2017, down from 23.6% in the second quarter of 2016.
|
Specialty Medicines Segment |
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| Three Months Ended June 30, | ||||||||||||||
| 2017 | 2016 | |||||||||||||
| U.S. $ in millions / % of Segment Revenues | ||||||||||||||
| Revenues | $ | 2,065 | 100.0% | $ | 2,271 | 100.0% | ||||||||
| Gross profit | 1,851 | 89.6% | 1,978 | 87.1% | ||||||||||
| R&D expenses | 250 | 12.1% | 235 | 10.4% | ||||||||||
| S&M expenses | 439 | 21.2% | 478 | 21.0% | ||||||||||
| Segment profit* | $ | 1,162 | 56.3% | $ | 1,265 | 55.7% | ||||||||
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| * 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 second quarter of 2017 were $2.1 billion, down 9% compared to the second quarter of 2016. U.S. specialty medicines revenues were $1.5 billion, down 13% compared to the second quarter of 2016. European specialty medicines revenues were $419 million, an increase of 1%, or 5% in local currency terms, compared to the second quarter of 2016. ROW specialty revenues were $110 million, up 29%, or 33% in local currency terms, compared to the second quarter of 2016.
Specialty medicines revenues comprised 36% of our total revenues in the quarter, compared to 45% in the second quarter of 2016.
The decrease in specialty medicines revenues compared to the second quarter of 2016 was primarily due to lower sales of our CNS and oncology 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 June 30, 2017 and 2016:
|
Three Months Ended June 30, |
Change |
||||||||||
| 2017 | 2016 | 2017 - 2016 | |||||||||
| U.S. $ in millions | |||||||||||
| CNS | $ | 1,158 | $ | 1,415 | (18%) | ||||||
| Copaxone® | 1,023 | 1,141 | (10%) | ||||||||
| Azilect® | 34 | 108 | (69%) | ||||||||
| Nuvigil® | 14 | 51 | (73%) | ||||||||
| Respiratory | 322 | 313 | 3% | ||||||||
| ProAir® | 123 | 135 | (9%) | ||||||||
| QVAR® | 107 | 116 | (8%) | ||||||||
| Oncology | 280 | 334 | (16%) | ||||||||
| Treanda® and Bendeka® | 163 | 207 | (21%) | ||||||||
| Women's Health | 115 | 117 | (2%) | ||||||||
| Other Specialty* | 190 | 92 | 107% | ||||||||
| Total Specialty Medicines | $ | 2,065 | $ | 2,271 | (9%) | ||||||
| * Includes a $75 million payment related to the Ninlaro® transaction in the second 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 $1.0 billion, a decrease of 10% compared to the second quarter of 2016.
Copaxone® revenues in the United States, were $843 million, a decrease of 12% compared to the second quarter of 2016, mainly due to lower volumes of Copaxone® 20 mg/mL as well as negative net pricing effects despite a price increase of 7.9% for both Copaxone® products in January 2017. At the end of the second quarter of 2017, according to June 2017 IMS data, our U.S. market shares for the Copaxone® products in terms of new and total prescriptions were 26.5% and 28.8%, respectively. Copaxone® 40 mg/mL accounted for over 85% of total Copaxone® prescriptions in the U.S.
Copaxone® revenues outside the United States were $180 million, down 3%, compared to the second quarter of 2016. Over 75% of European Copaxone® prescriptions are now filled with the 40 mg/mL version.
Our global Azilect® revenues were $34 million, a decrease of 69% compared to the second quarter of 2016 following the introduction of generic competition to Azilect® in the United States in 2017.
Revenues of our respiratory products were $322 million, up 3% compared to the second quarter of 2016, mainly due to the launches of Braltus® and Cinqair®/Cinqaero®. ProAir® revenues in the second quarter of 2017 were $123 million, down 9% compared to the second quarter of 2016, mainly due to higher positive net pricing effects in the second quarter of 2016, partially offset by higher volumes. QVAR® global revenues were $107 million in the second quarter of 2017, down 8% compared to the second quarter of 2016, primarily due to negative net pricing effects, partially offset by higher volumes.
Revenues of our oncology products were $280 million in the second quarter of 2017, down 16% compared to the second quarter of 2016. Combined revenues of Treanda® and Bendeka® were $163 million, down 21% compared to the second quarter of 2016, mainly due to higher volumes sold in the second quarter of 2016 as part of the launch promotion activities for Bendeka®.
Specialty Medicines Gross Profit
Gross profit of our specialty medicines segment was $1.9 billion, a decrease of $127 million compared to the second quarter of 2016, mainly due to the decrease in revenues of our specialty medicines. Gross profit margin for our specialty medicines segment in the second quarter of 2017 was 89.6%, compared to 87.1% in the second quarter of 2016. The improvement in profitability is mainly due to the finalization of an ongoing vendor dispute which reduced cost of goods sold in the quarter.
Specialty Medicines Profit
Our specialty medicines segment profit was $1.2 billion in the second quarter of 2017, down 8% compared to the second quarter of 2016.
Specialty medicines profit as a percentage of segment revenues was 56.3% in the second quarter of 2017, compared to 55.7% in the second quarter of 2016.
The following tables present details of our multiple sclerosis franchise and of our other specialty medicines for the three months ended June 30, 2017 and 2016:
| Multiple Sclerosis | ||||||||||||||
| Three months ended June 30, | ||||||||||||||
| 2017 | 2016 | |||||||||||||
| U.S.$ in millions / % of MS Revenues | ||||||||||||||
| Revenues | $ | 1,023 | 100.0% | $ | 1,141 | 100.0% | ||||||||
| Gross profit | 937 | 91.6% | 1,029 | 90.2% | ||||||||||
| R&D expenses | 20 | 2.0% | 20 | 1.8% | ||||||||||
| S&M expenses | 92 | 9.0% | 81 | 7.1% | ||||||||||
| MS profit | $ | 825 | 80.6% | $ | 928 | 81.3% | ||||||||
| Other Specialty | ||||||||||||||
| Three months ended June 30, | ||||||||||||||
| 2017 | 2016 | |||||||||||||
| U.S.$ in millions / % of Other Specialty Revenues | ||||||||||||||
| Revenues | $ | 1,042 | 100.0% | $ | 1,130 | 100.0% | ||||||||
| Gross profit | 914 | 87.7% | 949 | 84.0% | ||||||||||
| R&D expenses | 230 | 22.1% | 215 | 19.0% | ||||||||||
| S&M expenses | 347 | 33.3% | 397 | 35.2% | ||||||||||
| Other Specialty profit | $ | 337 | 32.3% | $ | 337 | 29.8% | ||||||||
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 $543 million in the second quarter of 2017, compared to $210 million, in the second 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 second quarter of 2016.
Outlook for 2017 Non-GAAP Results
We have lowered our outlook for 2017 Non-GAAP results to revenues of $22.8 – $23.2 billion, from a previously expected range of $23.8 – $24.5 billion. Non-GAAP EPS for 2017 is now expected to be $4.30 – $4.50, based on a weighted average number of shares of 1,076 million, down from a previously expected range of $4.90 – $5.30.
This adjusted outlook takes into consideration the impact of increased price erosion in our U.S. Generics business, which is expected to be in a high single digits rate through the remainder of the year, and delays in generic launches in the U.S. Lastly, this outlook reflects the continued deterioration of political and economic conditions in Venezuela.
The revised guidance ranges assume no generic competition to Copaxone® 40mg in the United Stated in 2017.
| billions, except EPS |
2017 Business Outlook |
Updated 2017 Business Outlook |
||||
| Net revenues | 23.8 - 24.5 | 22.8 - 23.2 | ||||
| Gross profit (%) | 57% - 58% | 56% - 57% | ||||
| R&D | 1.75 - 1.85 | 1.6 - 1.7 | ||||
| S&M | 3.4 - 3.55 | 3.45 - 3.55 | ||||
| G&A | 1.0 - 1.1 | 1.1 - 1.2 | ||||
| Operating income ($B) | 7.4 - 7.8 | 6.6 - 6.8 | ||||
| EBITDA | 8.0 - 8.4 | 7.2 - 7.4 | ||||
| Finance expenses | 0.8 - 0.85 | 0.8 - 0.9 | ||||
| Tax (%) | 17% - 18% | 16.5 - 17.5% | ||||
| Number of shares (M) | 1,076 | 1,076* | ||||
| EPS | 4.90 - 5.30 | 4.30 - 4.50 | ||||
| Cash flow from operations | 5.7 - 6.1 | 4.4 - 4.6 | ||||
| * If annual EPS is below $4.37, the mandatory convertible preferred shares will be anti-dilutive and the number of shares will be 1,017 with no impact on guided EPS of $4.30-$4.50. |
These estimates reflect management's current expectations for Teva's performance in 2017. 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.
Dividends
On July 31, 2017, the Board of Directors declared a cash dividend of $0.085 per ordinary share for the second 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 August 3, 2017. The record date will be August 29, 2017, and the payment date will be September 14, 2017. Tax will be withheld at a rate of 15%.
On July 31, 2017, the Board of Directors also declared a cash dividend of $17.50 per Mandatory Convertible Preferred Share for the second quarter of 2017. The record date will be September 1, 2017 and the payment date will be September 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, August 3, 2017 at 7:30 a.m. ET to discuss its second 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: 52029560. 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 be accessed until September 3, 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: 52029560.
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, including due to labor unrest; 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, including a potential workers’ strike; the impact of continuing consolidation of our distributors and customers; variations in patent laws that may adversely affect our ability to manufacture our products; our ability to consummate dispositions on terms acceptable to us; 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 | Six months ended | ||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
| Net revenues | 5,686 | 5,038 | 11,316 | 9,848 | |||||||||||||||
| Cost of sales | 2,865 | 2,161 | 5,676 | 4,180 | |||||||||||||||
| Gross profit | 2,821 | 2,877 | 5,640 | 5,668 | |||||||||||||||
| Research and development expenses | 486 | 375 | 943 | 764 | |||||||||||||||
| Selling and marketing expenses | 960 | 952 | 1,931 | 1,791 | |||||||||||||||
| General and administrative expenses | 272 | 311 | 508 | 615 | |||||||||||||||
| Impairments, restructuring and others | 419 | 712 | 659 | 831 | |||||||||||||||
| Selling and marketing expenses | 324 | 166 | 344 | 141 | |||||||||||||||
| Goodwill impairment charge | 6,100 | - | 6,100 | - | |||||||||||||||
| Operating Income (Loss) | (5,740 | ) | 361 | (4,845 | ) | 1,526 | |||||||||||||
| Financial expenses – net | 238 | 105 | 445 | 403 | |||||||||||||||
| Income (loss) before income taxes | (5,978 | ) | 256 | (5,290 | ) | 1,123 | |||||||||||||
| Provision for income taxes | (22 | ) | 29 | 32 | 257 | ||||||||||||||
| Share in losses of associated companies- net | 14 | (15 | ) | 7 | (9 | ) | |||||||||||||
| Net income (loss) | (5,970 | ) | 242 | (5,329 | ) | 875 | |||||||||||||
| Net income attributable to non-controlling interests | - | (12 | ) | (4 | ) | (15 | ) | ||||||||||||
| Net income (loss) attributable to Teva | (5,970 | ) | 254 | (5,325 | ) | 890 | |||||||||||||
| Dividends on preferred shares | 65 | 66 | 130 | 132 | |||||||||||||||
| Net income (loss) attributable to Teva's ordinary shareholders | (6,035 | ) | 188 | (5,455 | ) | 758 | |||||||||||||
| Earnings (loss) per share attributable to ordinary shareholders: | Basic ($) | (5.94 | ) | 0.21 | (5.37 | ) | 0.83 | ||||||||||||
| Diluted ($) | (5.94 | ) | 0.20 | (5.37 | ) | 0.82 | |||||||||||||
| Weighted average number of shares (in millions): | Basic | 1,017 | 914 | 1,016 | 914 | ||||||||||||||
| Diluted | 1,017 | 920 | 1,016 | 922 | |||||||||||||||
| Non-GAAP net income attributable to ordinary shareholders:* | 1,035 | 1,162 | 2,114 | 2,268 | |||||||||||||||
| Non-GAAP net income attributable to ordinary shareholders for diluted earnings per share:** | 1,035 | 1,228 | 2,114 | 2,400 | |||||||||||||||
| Non-GAAP earnings per share attributable to ordinary shareholders:* | Basic ($) | 1.02 | 1.27 | 2.08 | 2.48 | ||||||||||||||
| Diluted ($)** | 1.02 | 1.25 | 2.08 | 2.45 | |||||||||||||||
| Non-GAAP average number of shares (in millions): | Basic | 1,017 | 914 | 1,016 | 914 | ||||||||||||||
| Diluted | 1,017 | 979 | 1,017 | 981 | |||||||||||||||
| * 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, | |||||
| 2017 | 2016 | |||||
|
ASSETS |
||||||
| Current assets: | ||||||
| Cash and cash equivalents | 599 | 988 | ||||
| Trade receivables | 7,320 | 7,523 | ||||
| Inventories | 5,132 | 4,954 | ||||
| Prepaid expenses | 871 | 1,362 | ||||
| Other current assets | 652 | 1,293 | ||||
| Assets held for sale | 21 | 841 | ||||
| Total current assets | 14,595 | 16,961 | ||||
| Deferred income taxes | 773 | 725 | ||||
| Other non-current assets | 1,245 | 1,235 | ||||
| Property, plant and equipment, net | 8,043 | 8,073 | ||||
| Identifiable intangible assets, net | 21,664 | 21,487 | ||||
| Goodwill | 40,035 | 44,409 | ||||
| Total assets | 86,355 | 92,890 | ||||
| LIABILITIES AND EQUITY | ||||||
| Current liabilities: | ||||||
| Short-term debt | 1,246 | 3,276 | ||||
| Sales reserves and allowances | 7,565 | 7,839 | ||||
| Trade payables | 2,278 | 2,157 | ||||
| Employee-related obligations | 712 | 859 | ||||
| Accrued expenses | 2,758 | 3,405 | ||||
| Other current liabilities | 898 | 867 | ||||
| Liabilities held for sale | - | 116 | ||||
| Total current liabilities | 15,457 | 18,519 | ||||
| Long-term liabilities: | ||||||
| Deferred income taxes | 5,446 | 5,215 | ||||
| Other taxes and long-term liabilities | 2,038 | 1,639 | ||||
| Senior notes and loans | 33,806 | 32,524 | ||||
| Total long-term liabilities | 41,290 | 39,378 | ||||
| Equity: | ||||||
| Teva shareholders’ equity | 27,994 | 33,337 | ||||
| Non-controlling interests | 1,614 | 1,656 | ||||
| Total equity | 29,608 | 34,993 | ||||
| Total liabilities and equity | 86,355 | 92,890 | ||||
|
Condensed Consolidated Cash Flow |
||||||||||||||||
|
(Unaudited, U.S. Dollars in millions) |
||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Operating activities: | ||||||||||||||||
| Net income | (5,970 | ) | 242 | (5,329 | ) | 875 | ||||||||||
| Net change in operating assets and liabilities | (248 | ) | (144 | ) | (711 | ) | 45 | |||||||||
| Items not involving cash flow | 6,959 | 865 | 7,251 | 1,419 | ||||||||||||
| Net cash provided by operating activities | 741 | 963 | 1,211 | 2,339 | ||||||||||||
| Net cash provided by (used in) investing activities | (392 | ) | (225 | ) | 790 | (2,642 | ) | |||||||||
| Net cash provided by (used in) financing activities | (651 | ) | 279 | (2,419 | ) | 546 | ||||||||||
| Translation adjustment on cash and cash equivalents | 1 | 3 | 29 | (205 | ) | |||||||||||
| Net change in cash and cash equivalents | (301 | ) | 1,020 | (389 | ) | 38 | ||||||||||
| Balance of cash and cash equivalents at beginning of period | 900 | 5,964 | 988 | 6,946 | ||||||||||||
| Balance of cash and cash equivalents at end of period | 599 | 6,984 | 599 | 6,984 | ||||||||||||
| Non GAAP reconciliation items | ||||||||||||||||
|
(Unaudited, U.S. Dollars in millions) |
||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| U.S. $ in millions | U.S. $ in millions | |||||||||||||||
| Amortization of purchased intangible assets | 411 | 193 | 731 | 382 | ||||||||||||
| Restructuring expenses | 98 | 20 | 228 | 39 | ||||||||||||
| Inventory step-up | 3 | 85 | 67 | 91 | ||||||||||||
| Equity compensation expenses | 35 | 28 | 71 | 52 | ||||||||||||
| Costs related to regulatory actions taken in facilities | 15 | 39 | 49 | 77 | ||||||||||||
| Acquisition, integration and related expenses | 33 | 62 | 56 | 99 | ||||||||||||
| In Process Research and Development | 26 | - | 26 | 10 | ||||||||||||
| Contingent consideration | 140 | - | 161 | 51 | ||||||||||||
| Legal settlements and loss contingencies | 324 | 166 | 344 | 141 | ||||||||||||
| Goodwill impairment charge | 6,100 |
- |
6,100 |
- |
||||||||||||
| Impairment of long-lived assets | 145 | 572 | 156 | 585 | ||||||||||||
| Other non-GAAP items | 9 | 57 | 76 | 59 | ||||||||||||
| Financial expense (income) | 3 | 99 | (25 | ) | 345 | |||||||||||
| Minority interest | (20 | ) | (43 | ) | (33 | ) | (43 | ) | ||||||||
| Corresponding tax benefit | (252 | ) | (304 | ) | (438 | ) | (378 | ) | ||||||||
| Three Months Ended June 30, 2017 | Three Months Ended June 30, 2016 | ||||||||||||||||||||||||||||||||||||
| U.S. dollars and shares in millions (except per share amounts) | |||||||||||||||||||||||||||||||||||||
| GAAP |
Non-GAAP Adjustments |
Dividends on Preferred Shares |
Non-GAAP |
% of Net Revenues |
GAAP |
Non-GAAP Adjustments |
Dividends on Preferred Shares |
Non-GAAP |
% of Net Revenues |
||||||||||||||||||||||||||||
| Gross profit (1) | 2,821 | 406 | 3,227 | 57 | % | 2,877 | 273 | 3,150 | 63 | % | |||||||||||||||||||||||||||
| Operating income (loss) (1)(2) | (5,740 | ) | 7,337 | 1,597 | 28 | % | 361 | 1,222 | 1,583 | 31 | % | ||||||||||||||||||||||||||
| Net income (loss) attributable to ordinary shareholders (1)(2)(3)(4) | (6,035 | ) | 7,070 | 1,035 | 18 | % | 188 | 974 | 66 | 1,228 | 24 | % | |||||||||||||||||||||||||
| Earnings (loss) per share attributable to ordinary shareholders - diluted (5) | (5.94 | ) | 6.96 | 1.02 | 0.20 | 1.05 | 1.25 | ||||||||||||||||||||||||||||||
| (1) | Amortization of purchased intangible assets | 367 | 146 | ||||||||||||||||||||||||||||||||||
| Inventory step up | 3 | 85 | |||||||||||||||||||||||||||||||||||
| Costs related to regulatory actions taken in facilities | 15 | 39 | |||||||||||||||||||||||||||||||||||
| Equity compensation expenses | 7 | 3 | |||||||||||||||||||||||||||||||||||
| Other COGS related adjustments | 14 | - | |||||||||||||||||||||||||||||||||||
| Gross profit adjustments | 406 | 273 | |||||||||||||||||||||||||||||||||||
| (2) | Restructuring expenses | 98 | 20 | ||||||||||||||||||||||||||||||||||
| Amortization of purchased intangible assets | 44 | 47 | |||||||||||||||||||||||||||||||||||
| Equity compensation expenses | 28 | 25 | |||||||||||||||||||||||||||||||||||
| Acquisition, Integration and related expenses | 33 | 62 | |||||||||||||||||||||||||||||||||||
| In process research and development | 26 | - | |||||||||||||||||||||||||||||||||||
| Contingent consideration | 140 | - | |||||||||||||||||||||||||||||||||||
| Legal settlements and loss contingencies | 324 | 166 | |||||||||||||||||||||||||||||||||||
| Goodwill impairment charge | 6,100 | - | |||||||||||||||||||||||||||||||||||
| Impairment of long-lived assets | 145 | 572 | |||||||||||||||||||||||||||||||||||
| Other operating related adjustments | (7 | ) | 57 | ||||||||||||||||||||||||||||||||||
| 6,931 | 949 | ||||||||||||||||||||||||||||||||||||
| Operating income adjustments | 7,337 | 1,222 | |||||||||||||||||||||||||||||||||||
| (3) | Financial expense (income) | 3 | 99 | ||||||||||||||||||||||||||||||||||
| Tax effect | (252 | ) | (304 | ) | |||||||||||||||||||||||||||||||||
| Impairment of equity investment—net |
2 |
- | |||||||||||||||||||||||||||||||||||
| Minority interest | (20 | ) | (43 | ) | |||||||||||||||||||||||||||||||||
| Net income adjustments | 7,070 | 974 | |||||||||||||||||||||||||||||||||||
| (4) | For the three months ended June 30, 2017, no account was taken of the potential dilution of the accrued dividend to preferred shares amounting to $65 million, since it had an anti-dilutive effect on loss per share. 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. | |
| (5) | The non-GAAP weighted average number of shares was 1,017 and 979 million for the three months ended June 30, 2017 and 2016, respectively. The non-GAAP weighted average number of shares for the three months ended June 30, 2017 does not take into account the potential dilution of the mandatory convertible preferred shares (amounting to 59.4 million weighted average shares), which have an 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. | |
| Six Months Ended June 30, 2017 | Six Months Ended June 30, 2016 | ||||||||||||||||||||||||||||||||||||
| U.S. dollars and shares in millions (except per share amounts) | |||||||||||||||||||||||||||||||||||||
| GAAP |
Non-GAAP Adjustments |
Dividends on Preferred Shares |
Non-GAAP |
% of Net Revenues |
GAAP |
Non-GAAP Adjustments |
Dividends on Preferred Shares |
Non-GAAP |
% of Net Revenues |
||||||||||||||||||||||||||||
| Gross profit (1) | 5,640 | 783 | 6,423 | 57 | % | 5,668 | 498 | 6,166 | 63 | % | |||||||||||||||||||||||||||
| Operating income (loss) (1)(2) | (4,845 | ) | 8,063 | 3,218 | 28 | % | 1,526 | 1,583 | 3,109 | 32 | % | ||||||||||||||||||||||||||
| Net income (loss) attributable to ordinary shareholders (1)(2)(3)(4) | (5,455 | ) | 7,569 | 2,114 | 19 | % | 758 | 1,510 | 132 | 2,400 | 24 | % | |||||||||||||||||||||||||
| Earnings (loss) per share attributable to ordinary shareholders - diluted (5) | (5.37 | ) | 7.45 | 2.08 | 0.82 | 1.63 | 2.45 | ||||||||||||||||||||||||||||||
| (1) | Amortization of purchased intangible assets | 634 | 324 | ||||||||||||||||||||||||||||||||||
| Inventory step up | 67 | 91 | |||||||||||||||||||||||||||||||||||
| Costs related to regulatory actions taken in facilities | 49 | 77 | |||||||||||||||||||||||||||||||||||
| Equity compensation expenses | 12 | 6 | |||||||||||||||||||||||||||||||||||
| Other COGS related adjustments | 21 | - | |||||||||||||||||||||||||||||||||||
| Gross profit adjustments | 783 | 498 | |||||||||||||||||||||||||||||||||||
| (2) | Legal settlements and loss contingencies | 344 | 141 | ||||||||||||||||||||||||||||||||||
| Contingent consideration | 161 | 51 | |||||||||||||||||||||||||||||||||||
| Acquisition and related expenses | 56 | 99 | |||||||||||||||||||||||||||||||||||
|
In process research and development |
26 | 10 | |||||||||||||||||||||||||||||||||||
| Equity compensation expenses | 59 | 46 | |||||||||||||||||||||||||||||||||||
| Restructuring expenses | 228 | 39 | |||||||||||||||||||||||||||||||||||
| Goodwill impairment charge | 6,100 | - | |||||||||||||||||||||||||||||||||||
| Impairment of long-lived assets | 156 | 585 | |||||||||||||||||||||||||||||||||||
| Amortization of purchased intangible assets | 97 | 58 | |||||||||||||||||||||||||||||||||||
| Other operating related expenses (income) | 53 | 56 | |||||||||||||||||||||||||||||||||||
| 7,280 | 1,085 | ||||||||||||||||||||||||||||||||||||
| Operating income adjustments | 8,063 | 1,583 | |||||||||||||||||||||||||||||||||||
| (3) | Financial expense | (25 | ) | 345 | |||||||||||||||||||||||||||||||||
| Tax effect | (438 | ) | (378 | ) | |||||||||||||||||||||||||||||||||
| Impairment of equity investment—net | 2 | 3 | |||||||||||||||||||||||||||||||||||
| Minority interest | (33 | ) | (43 | ) | |||||||||||||||||||||||||||||||||
| Net income adjustments | 7,569 | 1,510 | |||||||||||||||||||||||||||||||||||
| (4) | For the six months ended June 30, 2017, no account was taken of the potential dilution of the accrued dividend to preferred shares amounting to $130 million, since it had an anti-dilutive effect on loss per share. Dividends on the mandatory convertible preferred shares of $132 million for the six months ended June 30, 2016 are added back to non-GAAP net income attributable to ordinary shareholders, since such preferred shares had a dilutive effect on non-GAAP earnings per share. | |
| (5) | The non-GAAP weighted average number of shares was 1,017 and 981 million for the six months ended June 30, 2017 and 2016, respectively. The non-GAAP weighted average number of shares for the six months ended June 30, 2017 does not take into account the potential dilution of the mandatory convertible preferred shares (amounting to 59.4 million weighted average shares), which have an anti dilutive effect on non-GAAP earnings per share. Non-GAAP earnings per share can be reconciled with GAAP earnings per share by dividing each of the amounts included in footnotes 1-4 above by the applicable weighted average share number. | |
| Segment Information | ||||||||||||||||||||
| Generics | ||||||||||||||||||||
| Three months ended June 30, | Percentage Change | |||||||||||||||||||
| 2017 | 2016 | 2017 - 2016 | ||||||||||||||||||
| U.S.$ in millions / % of Segment Revenues | ||||||||||||||||||||
| Revenues | $ | 3,078 | 100.0 | % | $ | 2,557 | 100.0 | % | 20 | % | ||||||||||
| Gross Profit | 1,316 | 42.8 | % | 1,148 | 44.9 | % | 15 | % | ||||||||||||
| R&D Expenses | 200 | 6.5 | % | 134 | 5.3 | % | 49 | % | ||||||||||||
| S&M Expenses | 425 | 13.9 | % | 410 | 16.0 | % | 4 | % | ||||||||||||
| Segment Profit* | $ | 691 | 22.4 | % | $ | 604 | 23.6 | % | 14 | % | ||||||||||
| Specialty | ||||||||||||||||||||
| Three months ended June 30, | Percentage Change | |||||||||||||||||||
| 2017 | 2016 | 2017 - 2016 | ||||||||||||||||||
| U.S.$ in millions / % of Segment Revenues | ||||||||||||||||||||
| Revenues | $ | 2,065 | 100.0 | % | $ | 2,271 | 100.0 | % | (9 | %) | ||||||||||
| Gross Profit | 1,851 | 89.6 | % | 1,978 | 87.1 | % | (6 | %) | ||||||||||||
| R&D Expenses | 250 | 12.1 | % | 235 | 10.4 | % | 6 | % | ||||||||||||
| S&M Expenses | 439 | 21.2 | % | 478 | 21.0 | % | (8 | %) | ||||||||||||
| Segment Profit* | $ | 1,162 | 56.3 | % | $ | 1,265 | 55.7 | % | (8 | %) | ||||||||||
| * 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. |
| Segment Information | ||||||||||||||||||||
| Generics | ||||||||||||||||||||
| Six months ended June 30, | Percentage Change | |||||||||||||||||||
| 2017 | 2016 | 2017 - 2016 | ||||||||||||||||||
| U.S.$ in millions / % of Segment Revenues | ||||||||||||||||||||
| Revenues | $ | 6,136 | 100.0 | % | $ | 5,015 | 100.0 | % | 22 | % | ||||||||||
| Gross Profit | 2,686 | 43.8 | % | 2,271 | 45.3 | % | 18 | % | ||||||||||||
| R&D Expenses | 391 | 6.4 | % | 263 | 5.2 | % | 49 | % | ||||||||||||
| S&M Expenses | 825 | 13.4 | % | 755 | 15.1 | % | 9 | % | ||||||||||||
| Segment Profit* | $ | 1,470 | 24.0 | % | $ | 1,253 | 25.0 | % | 17 | % | ||||||||||
| Specialty | ||||||||||||||||||||
| Six months ended June 30, | Percentage Change | |||||||||||||||||||
| 2017 | 2016 | 2017 - 2016 | ||||||||||||||||||
| U.S.$ in millions / % of Segment Revenues | ||||||||||||||||||||
| Revenues | $ | 4,085 | 100.0 | % | $ | 4,423 | 100.0 | % | (8 | %) | ||||||||||
| Gross Profit | 3,605 | 88.2 | % | 3,849 | 87.0 | % | (6 | %) | ||||||||||||
| R&D Expenses | 505 | 12.3 | % | 474 | 10.7 | % | 7 | % | ||||||||||||
| S&M Expenses | 900 | 22.0 | % | 935 | 21.1 | % | (4 | %) | ||||||||||||
| Segment Profit* | $ | 2,200 | 53.9 | % | $ | 2,440 | 55.2 | % | (10 | %) | ||||||||||
| * 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 June 30, | Percentage Change | ||||||||||||||
| 2017 | 2016 | 2017 - 2016 | |||||||||||||
| U.S. $ in millions / % of Segment Revenues | |||||||||||||||
| Revenues | $ | 1,023 | 100.0 | % | $ | 1,141 | 100.0 | % | (10 | %) | |||||
| Gross profit | 937 | 91.6 | % | 1,029 | 90.2 | % | (9 | %) | |||||||
| R&D expenses | 20 | 2.0 | % | 20 | 1.8 | % | 0 | % | |||||||
| S&M expenses | 92 | 9.0 | % | 81 | 7.1 | % | 14 | % | |||||||
| Segment profitability | $ | 825 | 80.6 | % | $ | 928 | 81.3 | % | (11 | %) | |||||
| Other Specialty | |||||||||||||||
| Three months ended June 30, | Percentage Change | ||||||||||||||
| 2017 | 2016 | 2017 - 2016 | |||||||||||||
| U.S. $ in millions / % of Segment Revenues | |||||||||||||||
| Revenues | $ | 1,042 | 100.0 | % | $ | 1,130 | 100.0 | % | (8 | %) | |||||
| Gross profit | 914 | 87.7 | % | 949 | 84.0 | % | (4 | %) | |||||||
| R&D expenses | 230 | 22.1 | % | 215 | 19.0 | % | 7 | % | |||||||
| S&M expenses | 347 | 33.3 | % | 397 | 35.2 | % | (13 | %) | |||||||
| Segment profitability | $ | 337 | 32.3 | % | $ | 337 | 29.8 | % |
|
§ |
|||||
| § Less than 0.5%. | |||||||||||||||
| Additional information | |||||||||||||||
| Multiple Sclerosis | |||||||||||||||
| Six months ended June 30, | Percentage Change | ||||||||||||||
| 2017 | 2016 | 2017 - 2016 | |||||||||||||
| U.S. $ in millions / % of MS Revenues | |||||||||||||||
| Revenues | $ | 1,993 | 100.0 | % | $ | 2,147 | 100.0 | % | (7 | %) | |||||
| Gross profit | 1,825 | 91.6 | % | 1,948 | 90.7 | % | (6 | %) | |||||||
| R&D expenses | 42 | 2.1 | % | 45 | 2.1 | % | (7 | %) | |||||||
| S&M expenses | 216 | 10.9 | % | 170 | 7.9 | % | 27 | % | |||||||
| MS profit | $ | 1,567 | 78.6 | % | $ | 1,733 | 80.7 | % | (10 | %) | |||||
| Other Specialty | |||||||||||||||
| Six months ended June 30, | Percentage Change | ||||||||||||||
| 2017 | 2016 | 2017 - 2016 | |||||||||||||
| U.S. $ in millions / % of Other Specialty Revenues | |||||||||||||||
| Revenues | $ | 2,092 | 100.0 | % | $ | 2,276 | 100.0 | % | (8 | %) | |||||
| Gross profit | 1,780 | 85.1 | % | 1,901 | 83.5 | % | (6 | %) | |||||||
| R&D expenses | 463 | 22.1 | % | 429 | 18.8 | % | 8 | % | |||||||
| S&M expenses | 684 | 32.7 | % | 765 | 33.6 | % | (11 | %) | |||||||
| Other Specialty profit | $ | 633 | 30.3 | % | $ | 707 | 31.1 | % | (10 | %) | |||||
| Reconciliation of our segment profit | |||||||
| to consolidated income before income taxes | |||||||
| Three months ended | |||||||
| June 30, | |||||||
| 2017 | 2016 | ||||||
| U.S. $ in millions | |||||||
| Generic medicines profit | $ | 691 | $ | 604 | |||
| Specialty medicines profit | 1,162 | 1,265 | |||||
| Total segment profit | 1,853 | 1,869 | |||||
| Profit of other activities | 18 | 13 | |||||
| 1,871 | 1,882 | ||||||
| Amounts not allocated to segments: | |||||||
| Amortization | 411 | 193 | |||||
| General and administrative expenses | 272 | 311 | |||||
| Goodwill impairment charge | 6,100 | - | |||||
| Impairments, restructuring and others | 419 | 712 | |||||
| Inventory step-up | 3 | 85 | |||||
| Purchase of research and development in process | 26 | - | |||||
|
Costs related to regulatory actions taken in facilities |
15 | 39 | |||||
| Legal settlements and loss contingencies | 324 | 166 | |||||
| Other unallocated amounts | 41 | 15 | |||||
| Consolidated operating income (loss) | (5,740 | ) | 361 | ||||
| Financial expenses - net | 238 | 105 | |||||
| Consolidated income (loss) before income taxes | $ | (5,978 | ) | $ | 256 | ||
| Reconciliation of our segment profit | |||||||
| to Teva's consolidated income before income taxes | |||||||
| Six months ended | |||||||
| June 30, | |||||||
| 2017 | 2016 | ||||||
| U.S. $ in millions | |||||||
| Generic medicines profit | $ | 1,470 | $ | 1,253 | |||
| Specialty medicines profit | 2,200 | 2,440 | |||||
| Total segment profit | 3,670 | 3,693 | |||||
| Profit of other activities | 44 | 9 | |||||
| 3,714 | 3,702 | ||||||
| Amounts not allocated to segments: | |||||||
| Amortization | 731 | 382 | |||||
| General and administrative expenses | 508 | 615 | |||||
| Goodwill impairment charge | 6,100 | - | |||||
| Impairments, restructuring and others | 659 | 831 | |||||
| Inventory step-up | 67 | 91 | |||||
| Purchase of research and development in process | 26 | 10 | |||||
| Costs related to regulatory actions taken in facilities. | 49 | 77 | |||||
| Legal settlements and loss contingencies | 344 | 141 | |||||
| Other unallocated amounts | 75 | 29 | |||||
| Consolidated operating income (loss) | (4,845 | ) | 1,526 | ||||
| Financial expenses - net | 445 | 403 | |||||
| Consolidated income (loss) before income taxes | $ | (5,290 | ) | $ | 1,123 | ||
| Revenues by Activity and Geographical Area | ||||||||||||
| (Unaudited) | ||||||||||||
|
Three Months Ended |
Percentage |
Percentage |
||||||||||
| 2017 | 2016 | 2017 - 2016 | 2017 - 2016 | |||||||||
| U.S. $ in millions |
in local |
|||||||||||
| Generic Medicines | ||||||||||||
| United States | $ | 1,290 | $ | 892 | 45 | % | 45 | % | ||||
| Europe | 957 | 771 | 24 | % | 28 | % | ||||||
| Rest of the World | 831 | 894 | (7 | %) | 13 | % | ||||||
| Total Generic Medicines | 3,078 | 2,557 | 20 | % | 28 | % | ||||||
| Specialty Medicines | ||||||||||||
| United States | 1,536 | 1,772 | (13 | %) | (13 | %) | ||||||
| Europe | 419 | 414 | 1 | % | 5 | % | ||||||
| Rest of the World | 110 | 85 | 29 | % | 33 | % | ||||||
| Total Specialty Medicines | 2,065 | 2,271 | (9 | %) | (8 | %) | ||||||
| Other Revenues | ||||||||||||
| United States | 304 | 3 | n/a | n/a | ||||||||
| Europe | 79 | 54 | 46 | % | 50 | % | ||||||
| Rest of the World | 160 | 153 | 5 | % | 0 | % | ||||||
| Total Other Revenues | 543 | 210 | 159 | % | 156 | % | ||||||
| Total Revenues | $ | 5,686 | $ | 5,038 | 13 | % | 17 | % | ||||
| Revenues by Activity and Geographical Area | ||||||||||||
| (Unaudited) | ||||||||||||
| Six Months Ended June 30, |
Percentage |
Percentage |
||||||||||
| 2017 | 2016 | 2017 - 2016 | 2017 - 2016 | |||||||||
| U.S. $ in millions |
in local |
|||||||||||
| Generic Medicines | ||||||||||||
| United States | $ | 2,671 | $ | 1,868 | 43 | % | 43 | % | ||||
| Europe | 1,945 | 1,561 | 25 | % | 29 | % | ||||||
| Rest of the World | 1,520 | 1,586 | (4 | %) | 19 | % | ||||||
| Total Generic Medicines | 6,136 | 5,015 | 22 | % | 31 | % | ||||||
| Specialty Medicines | ||||||||||||
| United States | 3,028 | 3,449 | (12 | %) | (12 | %) | ||||||
| Europe | 857 | 808 | 6 | % | 11 | % | ||||||
| Rest of the World | 200 | 166 | 20 | % | 21 | % | ||||||
| Total Specialty | 4,085 | 4,423 | (8 | %) | -7 | % | ||||||
| Other Revenues | ||||||||||||
| United States | 624 | 7 | n/a | n/a | ||||||||
| Europe | 157 | 105 | 50 | % | 54 | % | ||||||
| Rest of the World | 314 | 298 | 5 | % | 1 | % | ||||||
| Total Other Revenues | 1,095 | 410 | 167 | % | 165 | % | ||||||
| Total Revenues | $ | 11,316 | $ | 9,848 | 15 | % | 20 | % | ||||
| Revenues by Product line | |||||||||
| (Unaudited) | |||||||||
|
Three Months Ended |
Percentage |
||||||||
| 2017 | 2016 | 2017 - 2016 | |||||||
| U.S. $ in millions | |||||||||
| Generic Medicines | $ | 3,078 | $ | 2,557 | 20 | % | |||
| OTC | 283 | 266 | 6 | % | |||||
| API | 204 | 207 | (1 | %) | |||||
| Specialty Medicines | 2,065 | 2,271 | (9 | %) | |||||
| CNS | 1,158 | 1,415 | (18 | %) | |||||
| Copaxone® | 1,023 | 1,141 | (10 | %) | |||||
| Azilect® | 34 | 108 | (69 | %) | |||||
| Nuvigil® | 14 | 51 | (73 | %) | |||||
| Respiratory | 322 | 313 | 3 | % | |||||
| ProAir® | 123 | 135 | (9 | %) | |||||
| QVAR® | 107 | 116 | (8 | %) | |||||
| Oncology | 280 | 334 | (16 | %) | |||||
| Treanda® and Bendeka® | 163 | 207 | (21 | %) | |||||
| Women's Health | 115 | 117 | (2 | %) | |||||
| Other Specialty* | 190 | 92 | 107 | % | |||||
| All Others | 543 | 210 | 159 | % | |||||
| Total | $ | 5,686 | $ | 5,038 | 13 | % | |||
|
|
|||||||||
| * Includes a $75 million payment related to the Ninlaro® transaction in the second quarter of 2017. |
| Revenues by Product line | |||||||||
| (Unaudited) | |||||||||
|
Six Months Ended June 30, |
Percentage |
||||||||
| 2017 | 2016 | 2017 - 2016 | |||||||
| U.S. $ in millions | |||||||||
| Generic Medicines | $ | 6,136 | $ | 5,015 | 22 | % | |||
| OTC | 547 | 558 | (2 | %) | |||||
| API | 401 | 404 | (1 | %) | |||||
| Specialty Medicines | 4,085 | 4,423 | (8 | %) | |||||
| CNS | 2,296 | 2,738 | (16 | %) | |||||
| Copaxone® | 1,993 | 2,147 | (7 | %) | |||||
| Azilect® | 94 | 221 | (57 | %) | |||||
| Nuvigil® | 31 | 154 | (80 | %) | |||||
| Respiratory | 626 | 679 | (8 | %) | |||||
| ProAir® | 244 | 308 | (21 | %) | |||||
| QVAR® | 205 | 250 | (18 | %) | |||||
| Oncology | 550 | 602 | (9 | %) | |||||
| Treanda® and Bendeka® | 320 | 362 | (12 | %) | |||||
| Women's Health | 239 | 227 | 5 | % | |||||
| Other Specialty* | 374 | 177 | 111 | % | |||||
| All Others | 1,095 | 410 | 167 | % | |||||
| Total | $ | 11,316 | $ | 9,848 | 15 | % | |||
|
|
|||||||||
| * Includes a $150 million payment related to the Ninlaro® transaction in the first six months of 2017. |