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Name | Symbol | Market | Type |
---|---|---|---|
Teva Pharmaceutical Industries Ltd | NYSE:TEVA | NYSE | Depository Receipt |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.01 | 0.07% | 14.07 | 617 | 09:01:41 |
Teva Pharmaceutical Industries Ltd. (NYSE: TEVA, TASE: TEVA) today reported results for the quarter ended June 30, 2019.
Mr. Kåre Schultz, Teva’s President and CEO, said, “During the second quarter, portfolio optimization and new launches stabilized our North American generics business, COPAXONE® performed above expectations and AUSTEDO® achieved a very strong growth rate. We continue to focus our efforts on growth for AJOVY® in the US and are excited by the early momentum of the product’s recent launches in the EU.”
Mr. Schultz continued: “We are on track to achieve the targets of our two year restructuring plan and based on our good results for the first half of the year we are reaffirming our full year guidance.”
Second Quarter 2019 Consolidated Results
Revenues in the second quarter of 2019 were $4,337 million, a decrease of 8%, or 5% in local currency terms, compared to the second quarter of 2018, mainly due to generic competition to COPAXONE®, as well as declines in revenues from TREANDA®/BENDEKA®, certain other specialty products in the U.S., our Europe segment and Japan, partially offset by higher revenues from AUSTEDO®, AJOVY® and QVAR® in the United States.
Exchange rate differences between the second quarter of 2019 and the second quarter of 2018 negatively impacted our revenues and GAAP operating income by $125 million and $41 million, respectively. Our non-GAAP operating income was negatively impacted by $47 million.
GAAP gross profit was $1,893 million in the second quarter of 2019, a decrease of 7% compared to the second quarter of 2018. GAAP gross profit margin was 43.7% in the second quarter of 2019, compared to 43.2% in the second quarter of 2018. Non-GAAP gross profit was $2,188 million in the second quarter of 2019, a decline of 6% compared to the second quarter of 2018. Non-GAAP gross profit margin was 50.5% in the second quarter of 2019, compared to 49.7% in the second quarter of 2018. The increase in gross profit as a percentage of revenues was mainly due to higher profitability in Europe, partially offset by lower profitability in North America, resulting mainly from a decline in COPAXONE revenues due to generic competition.
GAAP Research and Development (R&D) expenses in the second quarter of 2019 were $276 million, a decrease of 5% compared to the second quarter of 2018. Non-GAAP R&D expenses were $271 million, or 6.2% of quarterly revenues in the second quarter of 2019, compared to $281 million, or 6.0%, in the second quarter of 2018. The decrease in R&D expenses resulted primarily from pipeline optimization and related headcount reductions.
GAAP Selling and Marketing (S&M) expenses in the second quarter of 2019 were $666 million, a decrease of 2% compared to the second quarter of 2018. Non-GAAP S&M expenses were $621 million, or 14.3% of quarterly revenues, in the second quarter of 2019, compared to $634 million, or 13.5%, in the second quarter of 2018. The decrease was mainly due to cost reduction and efficiency measures as part of the restructuring plan.
GAAP General and Administrative (G&A) expenses in the second quarter of 2019 were $296 million, a decrease of 6% compared to the second quarter of 2018. Non-GAAP G&A expenses were $286 million, or 6.6% of quarterly revenues, in the second quarter of 2019, compared to $292 million, or 6.2%, in the second quarter of 2018. The decrease was mainly due to cost reduction and efficiency measures as part of the restructuring plan.
GAAP other income in the second quarter of 2019 was $9 million, compared to $96 million in the second quarter of 2018. We did not have Non-GAAP other income in the second quarter of 2019, compared to $106 million in the second quarter of 2018. Other income in the second quarter of 2018 was primarily the result of legal recovery of lost profits, where U.S. patent infringement litigation had previously prevented a product’s sales.
GAAP operating loss in the second quarter of 2019 was $644 million, compared to $14 million in the second quarter of 2018. Non-GAAP operating income in the second quarter of 2019 was $1,011 million, a decrease of 18% compared to $1,238 million in the second quarter of 2018. The decrease in non-GAAP operating income was mainly due to lower profits in North America resulting mainly from a decline in COPAXONE revenues due to generic competition, lower revenues of certain other specialty products in North America and the lack of other income, partially offset by cost reductions and efficiency measures as part of the restructuring plan and higher revenues of AUSTEDO.
EBITDA (non-GAAP operating income, which excludes amortization and certain other items, as well as depreciation expenses) was $1,144 million in the second quarter of 2019, a decrease of 18% compared to $1,387 million in the second quarter of 2018.
GAAP financial expenses were $206 million in the second quarter of 2019, compared to $236 million in the second quarter of 2018.
Non-GAAP financial expenses were $198 million in the second quarter of 2019, compared to $238 million in the second quarter of 2018. The decrease in non-GAAP financial expenses was mainly due to gains on our hedging and derivatives activities, lower interest expenses resulting from debt prepayments during the period, as well as increased financial income derived from higher average cash balances.
In the second quarter of 2019, we recognized a tax benefit of $179 million, or 21%, on pre-tax loss of $850 million. In the second quarter of 2018, we recognized a tax benefit of $76 million, or 30%, on pre-tax loss of $250 million. Our tax rate for the second quarter of 2019 was mainly affected by impairments, amortization and interest disallowance as a result of the U.S. Tax Cuts and Jobs Act. Non-GAAP income taxes for the second quarter of 2019 were $134 million, or 16%, on pre-tax non-GAAP income of $812 million. Non-GAAP income taxes in the second quarter of 2018 were $127 million, or 13%, on pre-tax non-GAAP income of $1,000 million. Our non-GAAP tax rate for the second quarter of 2019 was mainly affected by the mix of products sold in different geographies and the enactment of the U.S. Tax Cuts and Jobs Act.
Net loss attributable to ordinary shareholders was $689 million in the second quarter of 2019, compared to net loss of $241 million in the second quarter of 2018. Non-GAAP net income attributable to ordinary shareholders and non-GAAP diluted EPS in the second quarter of 2019 were $653 million and $0.60, respectively, compared to $794 million and $0.78 in the second quarter of 2018.
The weighted average diluted outstanding shares used for the fully diluted share calculation on a GAAP basis for the three months ended June 30, 2019 and 2018 were 1,092 million and 1,018 million shares, respectively. The weighted average outstanding shares for the fully diluted EPS calculation on a non-GAAP basis for the three months ended June 30, 2019 and 2018 were 1,093 million, and 1,021 million, respectively. The increase was mainly due to the conversion of the mandatory convertible preferred shares to ordinary shares on December 17, 2018.
As of June 30, 2019 and 2018, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,107 million and 1,109 million, respectively.
Non-GAAP information: Net non-GAAP adjustments in the second quarter of 2019 were $1,342 million. Non-GAAP net income and non-GAAP EPS for the second quarter of 2019 were adjusted to exclude the following items:
Teva believes that excluding such items facilitates investors' understanding of its business. See the attached tables for a reconciliation of the GAAP results to the adjusted non-GAAP figures. Investors should consider non-GAAP financial measures in addition to, and not as replacement for, or superior to, measures of financial performance prepared in accordance with GAAP.
Cash flow used in operating activities during the second quarter of 2019 was $227 million, compared to cash flow generated from operating activities of $162 million in the second quarter of 2018.
Free cash flow (cash flow generated from operations net of cash received for capital investments and beneficial interest collected in exchange for securitized trade receivables) was $168 million in the second quarter of 2019, compared to $559 million in the second quarter of 2018. The decrease in cash flow in the second quarter of 2019 was mainly due to lower revenues, timing of certain customer payments and credits and payments of U.S. customer rebates paid this quarter, primarily related to managed care and Medicaid.
As of June 30, 2019, our debt was $28,726 million, compared to $28,624 million as of March 31, 2019. The increase was mainly due to exchange rates fluctuations.
During the first quarter of 2019, we repurchased and canceled approximately $126 million principal amount of our $1,700 million 1.7% senior notes due July 2019.
During the second quarter of 2019, we repurchased and canceled approximately $18 million principal amount of our $1,574 million 1.7% senior notes due July 2019.
In July 2019, we repaid at maturity our $1,556 million 1.7% senior notes.
In April 2019, the Company entered into a $2.3 billion unsecured syndicated revolving credit facility (“RCF”), which replaced the previous $3 billion RCF. The RCF can be used for general corporate purposes, including repaying existing debt. As of June 30, 2019, no amounts were outstanding under the RCF. As of the date of this press release, $500 million was outstanding under the RCF.
The portion of total debt classified as short-term as of June 30, 2019 was 10%, similar to March 31, 2019.
Segment Results for the Second Quarter 2019
North America Segment
Our North America segment includes the United States and Canada.
The following table presents revenues, expenses and profit for our North America segment for the three months ended June 30, 2019 and 2018:
Three months ended June 30,
2019
2018
(U.S. $ in millions / % of Segment Revenues)
Revenues
2,071
100
%
2,263
100.0
%
Gross profit
1,067
51.5
%
1,179
52.1
%
R&D expenses
175
8.5
%
182
8.0
%
S&M expenses
269
13.0
%
272
12.0
%
G&A expenses
117
5.6
%
103
4.6
%
Other income
2
§
(100
)
(4.4
%)
Segment profit*
504
24.3
%
722
31.9
%
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than 0.5%.
Revenues from our North America segment in the second quarter of 2019 were $2,071 million, a decrease of $192 million, or 8%, compared to the second quarter of 2018, mainly due to a decline in revenues of COPAXONE, TREANDA/BENDEKA and certain other specialty products, partially offset by higher revenues from our Anda business, QVAR, AUSTEDO and AJOVY. Revenues in the United States, our largest market, were $1,927 million in the second quarter of 2019, a decrease of $203 million, or 10%, compared to the second quarter of 2018.
Revenues by Major Products and Activities
The following table presents revenues for our North America segment by major products and activities for the three months ended June 30, 2019 and 2018:
Three months ended
June 30,
Percentage
Change
2019
2018
2019-2018
(U.S. $ in millions)
Generic products
$
946
$
947
§
COPAXONE
274
464
(41
%)
TREANDA/BENDEKA
115
160
(28
%)
ProAir*
65
115
(44
%)
QVAR
60
30
103
%
AJOVY
23
-
NA
AUSTEDO
96
44
117
%
Anda
351
320
10
%
Other
141
183
(23
%)
Total
$
2,071
$
2,263
(8
%)
* Does not include sales of ProAir authorized generic, which are included under generics
§ Represents an amount less than 0.5%.
Generic products revenues in our North America segment in the second quarter of 2019 were $946 million flat compared to the second quarter of 2018, mainly due to new generic product launches, offset by market dynamics, including product mix and price erosion in our U.S. generics business.
In the second quarter of 2019, we led the U.S. generics market in total prescriptions and new prescriptions, with approximately 404 million total prescriptions (based on trailing twelve months), representing 11% of total U.S. generic prescriptions according to IQVIA data.
COPAXONE revenues in our North America segment in the second quarter of 2019 decreased by 41% to $274 million, compared to the second quarter of 2018, mainly due to generic competition in the United States.
COPAXONE revenues in the United States were $260 million in the second quarter of 2019.
BENDEKA and TREANDA combined revenues in our North America segment in the second quarter of 2019 decreased by 28% to $115 million, compared to the second quarter of 2018, mainly due to lower volumes and lower pricing, resulting partly from the June 2018 launch of a ready-to-dilute bendamustine hydrochloride by Eagle Pharmaceuticals, Inc.
ProAir revenues in our North America segment in the second quarter of 2019 decreased by 44% to $65 million, compared to the second quarter of 2018, mainly due to lower volumes as well as lower net pricing. In January 2019, we launched our own ProAir authorized generic in the United States following the launch of a generic version of Ventolin® HFA, another albuterol inhaler. Revenues from our ProAir HFA authorized generic are included in “generic products” above.
QVAR revenues in our North America segment in the second quarter of 2019 increased by 103% to $60 million, compared to the second quarter of 2018, which was a transition period due to the launch of QVAR RediHaler™.
AJOVY revenues in our North America segment in the second quarter of 2019 were $23 million. AJOVY was approved by the FDA and launched in the United States in September 2018 for the preventive treatment of migraine in adults.
AUSTEDO revenues in our North America segment in the second quarter of 2019 increased by 117%, to $96 million, compared to $44 million in the second quarter of 2018.
Anda revenues in our North America segment increased by 10% to $351 million in the second quarter of 2019, compared to the second quarter of 2018 mainly due to higher volumes.
North America Gross Profit
Gross profit from our North America segment in the second quarter of 2019 was $1,067 million, a decrease of 9%, compared to $1,179 million in the second quarter of 2018. The decrease was mainly due to lower revenues from COPAXONE, as well as a decline in sales of certain other specialty products, partially offset by increases in sales of AUSTEDO, QVAR and AJOVY. Gross profit margin for our North America segment in the second quarter of 2019 decreased to 51.5%, compared to 52.1% in the second quarter of 2018. The decrease was mainly due to lower revenues from COPAXONE and certain other specialty products, partially offset by improved gross profit margin of generic products.
North America Profit
Profit of our North America segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.
Profit from our North America segment in the second quarter of 2019 was $504 million, a decrease of 30%, compared to $722 million in the second quarter of 2018. The decrease was mainly due to lower revenues from COPAXONE, as well as a decline in sales of certain other specialty products and non-recurrence of other income, partially offset by increases in sales of AUSTEDO and QVAR, as well as cost reductions and efficiency measures as part of the restructuring plan.
Europe Segment
Our Europe segment includes the European Union and certain other European countries.
The following table presents revenues, expenses and profit for our Europe segment for the three months ended June 30, 2019 and 2018:
Three months ended June 30,
2019
2018
(U.S. $ in millions / % of Segment Revenues)
Revenues
1,183
100
%
1,328
100
%
Gross profit
674
56.9
%
727
54.7
%
R&D expenses
70
5.9
%
73
5.5
%
S&M expenses
216
18.3
%
233
17.5
%
G&A expenses
70
5.9
%
78
5.9
%
Other income
1
§
(3
)
§
Segment profit*
316
26.7
%
346
26.1
%
___________
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than 0.5%.
Revenues from our Europe segment in the second quarter of 2019 were $1,183 million, a decrease of 11% or $145 million, compared to the second quarter of 2018. In local currency terms, revenues decreased by 5%, mainly due to a decline in COPAXONE revenues due to the entry of competing glatiramer acetate products and the termination of the PGT joint venture, partially offset by new generic product launches.
Revenues by Major Products and Activities
The following table presents revenues for our Europe segment by major products and activities for the three months ended June 30, 2019 and 2018:
Three months ended
June 30,
Percentage
Change
2019
2018
2018-2019
(U.S. $ in millions)
Generic products
$
844
$
907
(7
%)
COPAXONE
107
140
(24
%)
Respiratory products
89
106
(16
%)
Other
143
175
(18
%)
Total
$
1,183
$
1,328
(11
%)
Generic products revenues in our Europe segment in the second quarter of 2019, including OTC products, decreased by 7% to $844 million, compared to the second quarter of 2018. In local currency terms, revenues decreased by 1% compared to the second quarter of 2018, mainly due to the loss of revenues from the termination of the PGT joint venture and volume decline due to specific market conditions in various European Union countries, partially offset by new generic product launches.
COPAXONE revenues in our Europe segment in the second quarter of 2019 decreased by 24% to $107 million, compared to the second quarter of 2018. In local currency terms, revenues decreased by 19%, mainly due to price reductions resulting from the entry of competing glatiramer acetate products.
Respiratory products revenues in our Europe segment in the second quarter of 2019 decreased by 16% to $89 million, compared to the second quarter of 2018. In local currency terms, revenues decreased by 11%, mainly due to lower sales in the United Kingdom.
Europe Gross Profit
Gross profit from our Europe segment in the second quarter of 2019 was $674 million, a decrease of 7% compared to $727 million in the second quarter of 2018. The decrease was mainly due to a decline in COPAXONE revenues, and the impact of currency fluctuations, partially offset by new generic product launches.
Gross profit margin for our Europe segment in the second quarter of 2019 increased to 56.9%, compared to 54.7% in the second quarter of 2018. The increase was mainly due to lower cost of goods sold related to the termination of the PGT joint venture and network optimization.
Europe Profit
Profit of our Europe segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.
Profit from our Europe segment in the second quarter of 2019 was $316 million, a decrease of 9% compared to $346 million in the second quarter of 2018. The decrease was mainly due to lower revenues and the impact of currency fluctuations, partially offset by impact of cost reductions and efficiency measures as part of the restructuring plan.
International Markets Segment
Our International Markets segment includes all countries other than those in our North America and Europe segments. The key markets in this segment are Israel, Japan and Russia.
The following table presents revenues, expenses and profit for our International Markets segment for the three months ended June 30, 2019 and 2018:
Three months ended June 30,
2019
2018
(U.S. $ in millions / % of Segment Revenues)
Revenues
741
100
%
789
100
%
Gross profit
312
42.1
%
328
41.5
%
R&D expenses
24
3.2
%
25
3.2
%
S&M expenses
119
16.1
%
130
16.4
%
G&A expenses
34
4.7
%
37
4.7
%
Other income
(1
)
§
(3
)
§
Segment profit*
136
18.3
%
139
17.6
%
__________
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than 0.5%.
Revenues from our International Markets segment in the second quarter of 2019 were $741 million, a decrease of $48 million, or 6%, compared to the second quarter of 2018. In local currency terms, revenues decreased 2% compared to the second quarter of 2018, mainly due to lower sales in Japan, partially offset by higher sales in Russia.
Revenues by Major Products and Activities
The following table presents revenues for our International Markets segment by major products and activities for the three months ended June 30, 2019 and 2018:
Three months ended
June 30,
Percentage
Change
2019
2018
2018-2019
(U.S. $ in millions)
Generic products
$
489
$
537
(9
%)
COPAXONE
13
22
(40
%)
Distribution
164
154
6
%
Other
75
76
(1
%)
Total
$
741
$
789
(6
%)
Generic products revenues in our International Markets segment in the second quarter of 2019, which include OTC products, decreased by 9% to $489 million, compared to the second quarter of 2018. In local currency terms, revenues decreased by 4%, mainly due to lower sales in Japan resulting from generic competition to off-patented products, partially offset by higher sales in Russia.
COPAXONE revenues in our International Markets segment in the second quarter of 2019 decreased by 40% to $13 million, compared to the second quarter of 2018. In local currency terms, revenues decreased by 28%.
Distribution revenues in our International Markets segment in the second quarter of 2019 increased by 6% to $164 million, compared to the second quarter of 2018. In local currency terms, revenues increased by 7%.
International Markets Gross Profit
Gross profit from our International Markets segment in the second quarter of 2019 was $312 million, a decrease of 5% compared to $328 million in the second quarter of 2018.
Gross profit margin for our International Markets segment in the second quarter of 2019 increased to 42.1%, compared to 41.5% in the second quarter of 2018. The increase was mainly due to lower cost of goods and portfolio optimization, mainly in Russia and Israel.
International Markets Profit
Profit of our International Markets segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.
Profit from our International Markets segment in the second quarter of 2019 was $136 million, a decrease of 2% compared to $139 million in the second quarter of 2018. The decrease was mainly due to lower sales in Japan resulting from generic competition to off-patent products, partially offset by higher sales in Russia and cost reductions and efficiency measures as part of the restructuring plan.
Other Activities
We have other sources of revenues, primarily the sale of APIs to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis. Our other activities are not included in our North America, Europe or International Markets segments described above.
Our revenues from other activities in the second quarter of 2019 were $342 million, an increase of 6% compared to the second quarter of 2018. In local currency terms, revenues increased by 10%, mainly due to higher revenues from API sales to third parties.
API sales to third parties in the second quarter of 2019 were $204 million, an increase of 10%, in both U.S. dollar and local currency terms, compared to the second quarter of 2018.
Conference Call
Teva will host a conference call and live webcast along with a slide presentation on Wednesday, August 7, 2019 at 8:00 a.m. ET to discuss its second quarter 2019 results and overall business environment. A question & answer session will follow.
United States
1 (866) 966-1396
International
+44 (0) 2071 928000
Israel
1 (809) 203-624
For a list of other international toll-free numbers, click here.
Passcode: 8260368
A live webcast of the call will also be available on Teva's website at: ir.tevapharm.com. Please log in at least 10 minutes prior to the conference call in order to download the applicable software.
Following the conclusion of the call, a replay of the webcast will be available within 24 hours on the Company's website. The replay can also be accessed until August 30, 2019, 9:00 a.m. ET by calling United States 1 (866) 331-1332 or International +44 (0) 3333009785; passcode: 8260368.
About Teva
Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) has been developing and producing medicines to improve people’s lives for more than a century. We are a global leader in generic and specialty medicines with a portfolio consisting of over 35,000 products in nearly every therapeutic area. Around 200 million people around the world take a Teva medicine every day, and are served by one of the largest and most complex supply chains in the pharmaceutical industry. Along with our established presence in generics, we have significant innovative research and operations supporting our growing portfolio of specialty and biopharmaceutical products. Learn more at http://www.tevapharm.com.
Some amounts in this press release may not add up due to rounding. All percentages have been calculated using unrounded amounts.
Non-GAAP Financial Measures
This press release contains certain financial information that differs from what is reported under accounting principles generally accepted in the United States ("GAAP"). These non-GAAP financial measures, including, but not limited to, non-GAAP EPS, non-GAAP operating income, non-GAAP gross profit, non-GAAP gross profit margin, EBITDA, non-GAAP financial expenses, non-GAAP income taxes, non-GAAP net income and non-GAAP diluted EPS are presented in order to facilitates investors' understanding of our business. We utilize certain non-GAAP financial measures to evaluate performance, in conjunction with other performance metrics. The following are examples of how we utilize the non-GAAP measures: our management and board of directors use the non-GAAP measures to evaluate our operational performance, to compare against work plans and budgets, and ultimately to evaluate the performance of management; our annual budgets are prepared on a non-GAAP basis; and senior management’s annual compensation is derived, in part, using these non-GAAP measures. See the attached tables for a reconciliation of the GAAP results to the adjusted non-GAAP figures. Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP. We are not providing forward looking guidance for GAAP reported financial measures or a quantitative reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP measure because we are unable to predict with reasonable certainty the ultimate outcome of certain significant items without unreasonable effort.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management’s current beliefs and expectations and are subject to substantial risks and uncertainties, both known and unknown, that could cause our future results, performance or achievements to differ significantly from that expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks relating to:
and other factors discussed in this press release, in our Quarterly Report on Form 10-Q for the second quarter of 2019 and in our Annual Report on Form 10-K for the year ended December 31, 2018, including in the sections captioned "Risk Factors” and “Forward Looking Statements.” Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statements or other information contained herein, whether as a result of new information, future events or otherwise. You are cautioned not to put undue reliance on these forward-looking statements.
Consolidated Statements of Income (U.S. dollars in millions, except share and per share data)Three months ended
Six months ended
June 30,
June 30,
2019
2018
2019
2018
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net revenues4,337
4,701
8,632
9,766
Cost of sales2,443
2,668
4,883
5,418
Gross profit1,893
2,033
3,749
4,348
Research and development expenses276
290
537
607
Selling and marketing expenses666
682
1,313
1,420
General and administrative expenses296
316
589
645
Intangible assets impairment561
521
1,030
727
Goodwill impairment-
120
-
300
Other asset impairments, restructuring and other items101
194
103
695
Legal settlements and loss contingencies646
20
703
(1,258)
Other income(9)
(96)
(15)
(299)
Operating income (loss)(644)
(14)
(510)
1,511
Financial expenses – net206
236
425
507
Income (loss) before income taxes(850)
(250)
(934)
1,004
Income taxes(179)
(76)
(170)
(30)
Share in losses (income) of associated companies- net-
(8)
4
66
Net income (loss)(671)
(166)
(768)
968
Net income attributable to non-controlling interests18
10
26
24
Net income (loss) attributable to Teva(689)
(176)
(794)
944
Dividends on preferred shares-
65
-
130
Net income (loss) attributable to Teva's ordinary shareholders(689)
(241)
(794)
814
Earnings (loss) per share attributable to ordinary shareholders: Basic ($)(0.63)
(0.24)
(0.73)
0.80
Diluted ($)(0.63)
(0.24)
(0.73)
0.80
Weighted average number of shares (in millions): Basic1,092
1,018
1,091
1,018
Diluted1,092
1,018
1,091
1,020
Non-GAAP net income attributable to ordinary shareholders:*653
794
1,306
1,748
Non-GAAP net income attributable to ordinary shareholders for diluted earnings per share:653
794
1,306
1,748
Non-GAAP earnings per share attributable to ordinary shareholders:* Basic ($)0.60
0.78
1.20
1.72
Diluted ($)0.60
0.78
1.20
1.71
Non-GAAP average number of shares (in millions): Basic1,092
1,018
1,091
1,018
Diluted1,093
1,021
1,093
1,020
* See reconciliation attached. Condensed Consolidated Balance Sheets (U.S. dollars in millions) (Unaudited)June 30,
December 31,
2019
2018
ASSETS Current assets: Cash and cash equivalents2,165
1,782
Trade receivables5,260
5,822
Inventories4,850
4,731
Prepaid expenses1,069
899
Other current assets437
468
Assets held for sale24
92
Total current assets13,805
13,794
Deferred income taxes317
368
Other non-current assets721
731
Property, plant and equipment, net6,732
6,868
Operating lease right-of-use assets500
-
Identifiable intangible assets, net12,435
14,005
Goodwill24,913
24,917
Total assets59,424
60,683
LIABILITIES & EQUITY Current liabilities: Short-term debt2,771
2,216
Sales reserves and allowances6,054
6,711
Trade payables1,806
1,853
Employee-related obligations587
870
Accrued expenses2,335
1,868
Other current liabilities899
804
Total current liabilities14,452
14,322
Long-term liabilities: Deferred income taxes1,698
2,140
Other taxes and long-term liabilities1,642
1,727
Senior notes and loans25,955
26,700
Operating lease liabilities426
-
Total long-term liabilities29,721
30,567
Equity: Teva shareholders’ equity14,122
14,707
Non-controlling interests1,128
1,087
Total equity15,251
15,794
Total liabilities and equity59,424
60,683
TEVA PHARMACEUTICAL INDUSTRIES LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in millions) (Unaudited)Six months ended
Three months ended
June 30,
June 30,
2019
2018
2019
2018
Operating activities: Net income (loss)$
(768
)
$
968
$
(671
)
$
(166
)
Adjustments to reconcile net income (loss) to net cash provided by operations: Net change in operating assets and liabilities(1,056
)
(1,268
)
(251
)
(676
)
Impairment of long-lived assets1,097
980
608
548
Depreciation and amortization
893
986
450
479
Deferred income taxes – net and uncertain tax positions
(362
)
(489
)
(329
)
(268
)
Stock-based compensation64
77
30
47
Other items
11
44
(72
)
60
Net gain from sale of long-lived assets and investments
6
(88
)
8
18
Goodwill impairment
-
300
-
120
Impairment of equity investment
-
94
-
-
In-process research and development
-
54
-
-
Net cash provided by (used in) operating activities
(115
)
1,658
(227
)
162
Investing activities: Beneficial interest collected in exchange for securitized trade receivables
746
970
384
526
Purchases of property, plant and equipment
(237
)
(299
)
(112
)
(136
)
Proceeds from sales of business, investments and long-lived assets134
841
121
17
Other investing activities
59
(11
)
36
(1
)
Purchases of investments and other assets(1
)
(56
)
-
-
Net cash provided by investing activities
701
1,445
429
406
Financing activities: Repayment of senior notes and loans and other long-term liabilities
(157
)
(6,289
)
(31
)
(46
)
Tax withholding payments made on shares and dividends(52
)
(22
)
-
-
Other financing activities
(13
)
(10
)
(3
)
(5
)
Net change in short-term debt(2
)
(261
)
(1
)
-
Proceeds from senior notes and loans, net of issuance costs
-
4,435
-
(5
)
Net cash used in financing activities(224
)
(2,147
)
(35
)
(56
)
Translation adjustment on cash and cash equivalents21
(58
)
25
(69
)
Net change in cash and cash equivalents383
898
192
443
Balance of cash and cash equivalents at beginning of period
1,782
963
1,973
1,418
Balance of cash and cash equivalents at end of period
$
2,165
$
1,861
$
2,165
$
1,861
Non-cash financing and investing activities: Beneficial interest obtained in exchange for securitized trade receivables
$
770
$
968
$
374
$
417
Three Months Ended June 30, 2019 U.S. $ and shares in millions (except per share amounts) GAAP Excluded for non-GAAP measurement Non-GAAP Amortization ofpurchasedintangible assets Legal settlementsand losscontingencies Impairment oflong-lived assets Restructuringcosts Costs related toregulatory actionstaken in facilities Equitycompensation Contingentconsideration Gain on sale ofbusiness Other non GAAPitems Other items Correspondingtax effect Cost of sales
2,443
249
12
7
26
2,149
R&D expenses276
6
-
271
S&M expenses666
35
10
621
G&A expenses296
12
(2)
286
Other (income) expense(9)
(9)
(0)
Legal settlements and loss contingencies646
646
-
Other assets impairments, restructuring and other items101
48
47
24
(18)
-
Intangible assets impairment561
561
-
Financial expenses, net206
8
198
Income taxes(179)
(312)
134
Net income (loss) attributable to non-controlling interests18
(8)
26
Total reconciled items285
646
609
47
12
35
24
(9)
6
(0)
(312)
EPS - Basic(0.63)
1.23
0.60
EPS - Diluted(0.63)
1.23
0.60
The non-GAAP diluted weighted average number of shares was 1,093 million for the three months ended June 30, 2019. Six Months Ended June 30, 2019 U.S. $ and shares in millions (except per share amounts) GAAP Excluded for non-GAAP measurement Non-GAAP Amortization ofpurchasedintangible assets Legal settlementsand losscontingencies Impairment oflong-lived assets Acquisition,integration andrelated expenses Restructuringcosts Costs related toregulatory actionstaken in facilities Equitycompensation Contingentconsideration Gain on sale ofbusiness Other non GAAPitems Other items Corresponding taxeffect Unusual tax item* Cost of sales4,883
497
16
14
61
4,294
R&D expenses537
11
0
525
S&M expenses1,313
71
20
-
1,223
G&A expenses589
24
(1)
566
Other (income) expense(15)
(9)
(6)
Legal settlements and loss contingencies703
703
-
Other assets impairments, restructuring and other items103
68
2
79
(47)
1
(0)
Intangible assets impairment1,030
1,030
-
Financial expenses, net425
6
419
Corresponding tax effect(170)
(490)
61
259
Share in losses of associated companies – net4
-
4
Net income (loss) attributable to non-controlling interests26
(16)
42
Total reconciled items568
703
1,097
2
79
16
69
(47)
(9)
60
(10)
(490)
61
EPS - Basic(0.73)
1.93
1.20
EPS - Diluted(0.73)
1.93
1.20
The non-GAAP diluted weighted average number of shares was 1,091 million for the six months ended June 30, 2019. Three Months Ended June 30, 2018 U.S. $ and shares in millions (except per share amounts) GAAP Excluded for non-GAAP measurement Non-GAAP Amortization ofpurchasedintangible assets Legal settlementsand losscontingencies Impairment oflong-lived assets Acquisition,integration andrelated expenses Restructuringcosts Costs related toregulatory actionstaken in facilities Equitycompensation Contingentconsideration Other non GAAPitems Other items Correspondingtax effect Cost of sales2,668
261
4
9
32
2,362
R&D expenses290
9
-
281
S&M expenses682
41
12
(5)
634
G&A expenses316
17
7
292
Other (income) expense(96)
10
(106)
Legal settlements and loss contingencies20
20
-
Other assets impairments, restructuring and other items194
27
3
107
47
10
-
Intangible assets impairment521
521
-
Goodwill impairment120
120
-
Financial expenses, net236
(2)
238
Income taxes(76)
(203)
127
Share in losses of associated companies – net(8)
-
(8)
Net income (loss) attributable to non-controlling interests10
(12)
22
Total reconciled items302
20
668
3
107
4
47
47
54
(14)
(203)
EPS - Basic(0.24)
1.02
0.78
EPS - Diluted(0.24)
1.02
0.78
The non-GAAP diluted weighted average number of shares was 1,021 million for the three months ended June 30, 2018. Six Months Ended June 30, 2018 U.S. $ and shares in millions (except per share amounts) GAAP Excluded for non-GAAP measurement Non-GAAP Amortization ofpurchasedintangible assets Legal settlementsand losscontingencies Impairment oflong-lived assets Other R&Dexpenses Acquisition,integration andrelated expenses Restructuringcosts Costs related toregulatory actionstaken in facilities Equitycompensation Contingentconsideration Other non GAAPitems Other items Correspondingtax effect Cost of sales5,418
525
5
15
64
4,809
R&D expenses607
22
14
1
570
S&M expenses1,420
87
21
(4)
1,316
G&A expenses645
27
4
614
Other (income) expense(299)
(83)
(216)
Legal settlements and loss contingencies(1,258)
(1,258)
-
Other assets impairments, restructuring and other items695
253
5
354
55
28
-
Intangible assets impairment727
727
-
Goodwill impairment300
300
-
Financial expenses, net507
66
441
Corresponding tax effect(30)
(368)
338
Share in losses of associated companies – net66
94
(28)
Net income (loss) attributable to non-controlling interests24
(20)
44
Total reconciled items612
(1,258)
1,280
22
5
354
5
77
55
10
140
(368)
EPS - Basic0.80
0.92
1.72
EPS - Diluted0.80
0.91
1.71
The non-GAAP diluted weighted average number of shares was 1,020 million for the six months ended June 30, 2018. Segment InformationNorth America
Europe
International Markets
Three months ended June 30,
Three months ended June 30,
Three months ended June 30,
2019
2018
2019
2018
2019
2018
(U.S. $ in millions) (U.S. $ in millions) (U.S. $ in millions) Revenues$
2,071
$
2,263
$
1,183
$
1,328
$
741
$
789
Gross profit
1,067
1,179
674
727
312
328
R&D expenses
175
182
70
73
24
25
S&M expenses
269
272
216
233
119
130
G&A expenses
117
103
70
78
34
37
Other (income) expense
2
(100
)
1
(3
)
(1
)
(3
)
Segment profit$
504
$
722
$
316
$
346
$
136
$
139
Segment Information
North America
Europe
International Markets
Six months ended June 30,
Six months ended June 30,
Six months ended June 30,
2019
2018
2019
2018
2019
2018
(U.S. $ in millions) (U.S. $ in millions) (U.S. $ in millions) Revenues$
4,118
$
4,794
$
2,448
$
2,770
$
1,409
$
1,539
Gross profit
2,107
2,582
1,404
1,519
582
641
R&D expenses
340
370
136
146
46
49
S&M expenses
537
548
431
483
234
264
G&A expenses
230
229
119
169
70
78
Other income
(2
)
(202
)
(1
)
(2
)
(1
)
(11
)
Segment profit$
1,001
$
1,637
$
719
$
723
$
233
$
261
Reconciliation of our segment profit to consolidated income before income taxes
Three months ended
June 30,
2019
2018
(U.S.$ in millions) North America profit$
504
$
722
Europe profit
316
346
International Markets profit
136
139
Total segment profit
956
1,207
Profit of other activities
55
31
1,011
1,238
Amounts not allocated to segments: Amortization
285
302
Other asset impairments, restructuring and other items
101
194
Goodwill impairment
-
120
Intangible asset impairments
561
521
Gain from divestitures, net of divestitures related costs
(9
)
10
Costs related to regulatory actions taken in facilities
12
4
Legal settlements and loss contingencies
646
20
Other unallocated amounts
59
81
Consolidated operating income (loss)
(644
)
(14
)
Financial expenses, net206
236
Consolidated income (loss) before income taxes
$
(850
)
$
(250
)
Reconciliation of our segment profit to consolidated income before income taxesSix months ended
June 30,
2019
2018
(U.S.$ in millions) North America profit$
1,001
$
1,637
Europe profit
719
723
International Markets profit
233
261
Total segment profit
1,954
2,621
Profit of other activities
76
52
2,029
2,673
Amounts not allocated to segments: Amortization
568
612
Other asset impairments, restructuring and other items
103
695
Goodwill impairment
-
300
Intangible asset impairments
1,030
727
Gain on divestitures, net of divestitures related costs
(9
)
(83
)
Other R&D expenses §22
Costs related to regulatory actions taken in facilities
16
5
Legal settlements and loss contingencies
703
(1,258
)
Other unallocated amounts129
142
Consolidated operating income (loss)
(510
)
1,511
Financial expenses, net
425
507
Consolidated income (loss) before income taxes
$
(934
)
$
1,004
§ Represents an amount less than $1 million. Revenues by Activity and Geographical Area (Unaudited)
Three months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
North America segment Generic products
$
946
$
947
§
COPAXONE274
464
(41%)
TREANDA/BENDEKA115
160
(28%)
ProAir*65
115
(44%)
QVAR60
30
103%
AJOVY23
-
NA
AUSTEDO96
44
117%
Anda351
320
10%
Other141
183
(23%)
Total2,071
2,263
(8%)
Three months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
Europe segment Generic products
$
844
$
907
(7%)
COPAXONE107
140
(24%)
Respiratory products89
106
(16%)
Other143
175
(18%)
Total1,183
1,328
(11%)
Three months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
International Markets segment Generic products
$
489
$
537
(9%)
COPAXONE13
22
(40%)
Distribution164
154
6%
Other75
76
(1%)
Total741
789
(6%)
§ Represents an amount less than 0.5%. *Does not include sales of ProAir authorized generic, which are included under generics Revenues by Activity and Geographical Area (Unaudited)Six months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
North America segment Generic products
$
1,913
$
2,035
(6%)
COPAXONE482
940
(49%)
TREANDA/BENDEKA229
341
(33%)
ProAir*123
245
(50%)
QVAR124
137
(10%)
AJOVY43
-
N/A
AUSTEDO171
74
130%
ANDA729
651
12%
Other305
372
(18%)
Total4,118
4,794
(14%)
Six months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
Europe segment Generic products
$
1,763
$
1,904
(7%)
COPAXONE221
293
(25%)
Respiratory products181
219
(18%)
Other283
354
(20%)
Total2,448
2,770
(12%)
Six months ended
June 30,
Percentage Change
2019
2018
2018-2019
(U.S.$ in millions)
International Markets segment Generic products
$
930
$
1,025
(9%)
COPAXONE27
38
(31%)
Distribution315
307
3%
Other137
168
(19%)
Total1,409
1,539
(8%)
*Does not include sales of ProAir authorized generic, which are included under generics Free cash flow reconciliation (Unaudited)Three months ended June 30,
2019
2018
(U.S. $ in millions) Net cash provided by operating activities(227
)
162
Beneficial interest collected in exchange for securitized trade receivables, included in investing activities
384
526
capital expenditures
(112
)
(136
)
Proceeds from sale of property, plant and equipment, intangible assets and companies123
7
Free cash flow
$
168
$
559
Free cash flow reconciliation (Unaudited)
Six months ended June 30,
2019
2018
(U.S. $ in millions)
Net cash provided by operating activities(115
)
1,658
Beneficial interest collected in exchange for securitized trade receivables, included in investing activities
746
970
capital expenditures
(237
)
(299
)
Proceeds from sale of property, plant and equipment, intangible assets and companies134
124
Free cash flow
$
528
$
2,453
View source version on businesswire.com: https://www.businesswire.com/news/home/20190807005194/en/
IR Contacts United States Kevin C. Mannix (215) 591-8912
Ran Meir 972 (3) 926-7516
PR Contacts United States Kelley Dougherty (973) 832-2810
Israel Yonatan Beker 972 (54) 888 5898
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