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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 | |
---|---|---|---|---|---|---|---|---|
0.03 | 0.21% | 14.01 | 5,740 | 09:28:40 |
Teva Pharmaceutical Industries Ltd. (NYSE: TEVA, TASE: TEVA) today reported results for the quarter ended September 30, 2020.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20201105005182/en/
Mr. Kåre Schultz, Teva's President and CEO, said, “Teva's business and operations have shown resilience as the COVID-19 pandemic continues to impact the world. The quarter saw continued strong performance from our key growth drivers, led by AUSTEDO® and the biosimilar TRUXIMA®, while the market share of AJOVY® continued to grow in the U.S. and Europe. During this quarter we also launched our digital inhalers AirDuo® Digihaler® and ArmonAir® Digihaler® in the U.S. The DigiHaler® portfolio is now the first and only family of digital inhalers with built-in sensors available to patients."
Mr. Schultz continued, "Over the past three years we have reduced our net debt by more than $10 billion to $23.8 billion. This debt reduction, and the continued improvement of our profitability, keeps us on track to achieve our long-term financial targets by the end of 2023."
Third Quarter 2020 Consolidated Results
Revenues in the third quarter of 2020 were $3,978 million, a decrease of 3% in both U.S. dollar and local currency terms, compared to the third quarter of 2019. This decrease was mainly due to lower revenues from generics, OTC and COPAXONE® in all regions and lower revenues from QVAR® and BENDEKA®/TREANDA® in our North America segment, as well as reduced demand for certain products resulting from the impact of the COVID-19 pandemic, partially offset by higher revenues from AUSTEDO and AJOVY.
Exchange rate differences between the third quarter of 2020 and the third quarter of 2019, including hedging effects, positively impacted our revenues by $14 million and negatively impacted our GAAP and non-GAAP operating income by $18 million and $13 million, respectively.
GAAP gross profit was $1,852 million in the third quarter of 2020, an increase of 1% compared to the third quarter of 2019. GAAP gross profit margin was 46.6% in the third quarter of 2020, compared to 44.7% in the third quarter of 2019. The increase in gross profit margin was mainly due to higher profitability in North America resulting from the change in mix of products as well as operational cost efficiencies and network optimization, partially offset by lower sales of COPAXONE and other specialty products in all segments. Non-GAAP gross profit was $2,084 million in the third quarter of 2020, a decrease of 1% compared to the third quarter of 2019. Non-GAAP gross profit margin was 52.4% in the third quarter of 2020, compared to 51.4% in the third quarter of 2019.
GAAP Research and Development (R&D) expenses in the third quarter of 2020 were $258 million, an increase of 7% compared to the third quarter of 2019. Non-GAAP R&D expenses were $233 million, or 5.8% of quarterly revenues, in the third quarter of 2020, compared to $242 million, or 5.9%, in the third quarter of 2019. In the third quarter of 2020, our R&D expenses related primarily to specialty product candidates in the pain, respiratory and neuropsychiatry therapeutic areas, with additional activities in selected other areas and generic products including biosimilars. Our higher R&D expenses in the third quarter of 2020, compared to the third quarter of 2019, were mainly due to an upfront payment made in the third quarter of 2020.
GAAP Selling and Marketing (S&M) expenses in the third quarter of 2020 were $605 million, an increase of 2% compared to the third quarter of 2019. Non-GAAP S&M expenses were $566 million, or 14.2% of quarterly revenues, in the third quarter of 2020, compared to $551 million, or 13.5%, in the third quarter of 2019.
GAAP General and Administrative (G&A) expenses in the third quarter of 2020 were $279 million, a decrease of 2% compared to the third quarter of 2019. Non-GAAP G&A expenses were $269 million, or 6.8% of quarterly revenues, in the third quarter of 2020, compared to $270 million, or 6.6%, in the third quarter of 2019.
We recorded a goodwill impairment charge of $4,628 million related to our North America reporting unit in the third quarter of 2020, in connection with current market capitalization influenced by uncertainty regarding the timeframe for resolution of certain litigations.
Other income in the third quarter of 2020 was $8 million, compared to $14 million in the third quarter of 2019.
GAAP operating loss in the third quarter of 2020 was $4,342 million, compared to GAAP operating loss of $81 million in the third quarter of 2019. This decrease was mainly due to the goodwill impairment charge and higher intangible asset impairment in the third quarter of 2020, partially offset by lower legal settlements and loss contingencies charges in the third quarter of 2020.
Non-GAAP operating income in the third quarter of 2020 was $1,025 million, a decrease of 3%, compared to $1,051 million in the third quarter of 2019.
EBITDA (non-GAAP operating income, which excludes amortization and certain other items, as well as depreciation expenses) was $1,153 million in the third quarter of 2020, a decrease of 3% compared to $1,183 million in the third quarter of 2019.
GAAP financial expenses were $117 million in the third quarter of 2020, compared to $211 million in the third quarter of 2019. Non-GAAP financial expenses were $241 million in the third quarter of 2020, compared to $208 million in the third quarter of 2019.
In the third quarter of 2020, we recognized a GAAP tax expense of $16 million, on pre-tax loss of $4,459 million. In the third quarter of 2019, we recognized a tax expense of $11 million, on pre-tax loss of $292 million. Our tax rate for the third quarter of 2020 was mainly affected by the goodwill impairment charge that does not have a corresponding tax effect and other changes to tax positions and deductions. Non-GAAP income taxes for the third quarter of 2020 were $133 million, or 17%, on pre-tax non-GAAP income of $784 million. Non-GAAP income taxes in the third quarter of 2019 were $183 million, or 22%, on pre-tax non-GAAP income of $843 million.
We expect our annual non-GAAP tax rate for 2020 to be 17-18%, unchanged from our outlook provided in February 2020.
GAAP net loss attributable to Teva and GAAP diluted loss per share were $4,349 million and $3.97 respectively, in the third quarter of 2020, compared to GAAP net loss and GAAP diluted loss per share of $314 million and $0.29 in the third quarter of 2019. This decrease was mainly due to the goodwill impairment charge and higher intangible asset impairment charges in the third quarter of 2020, partially offset by lower legal settlements and loss contingencies in the third quarter of 2020. Non-GAAP net income attributable to Teva and non-GAAP diluted EPS in the third quarter of 2020 were $637 million and $0.58, respectively, compared to $637 million and $0.58 in the third quarter of 2019.
The weighted average diluted shares outstanding used for the fully diluted share calculation for the three months ended September 30, 2020 and 2019 was 1,096 million and 1,092 million shares, respectively. The weighted average diluted shares outstanding used for the fully diluted share calculation on a non-GAAP basis for the three months ended September 30, 2020 and 2019 was 1,100 million and 1,093 million shares, respectively.
As of September 30, 2020 and 2019, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,118 million and 1,107 million, respectively.
Non-GAAP information: Net non-GAAP adjustments in the third quarter of 2020 were $4,986 million. Non-GAAP net income and non-GAAP EPS for the third quarter of 2020 were adjusted to exclude the following items:
Teva believes that excluding such items facilitates investors’ understanding of its business. For further information, see the tables below for a reconciliation of the U.S. GAAP results to the adjusted non-GAAP figures and the information under “Non-GAAP Financial Measures.” Investors should consider non-GAAP financial measures in addition to, and not as replacement for, or superior to, measures of financial performance prepared in accordance with GAAP.
Cash flow generated from operating activities during the third quarter of 2020 was $307 million, compared to $325 million in the third quarter of 2019. The decrease in the third quarter of 2020 was mainly due to an increase in inventory during the third quarter of 2020 compared to a decrease in inventory in the third quarter of 2019.
Free cash flow (cash flow generated from operating activities, net of cash received for capital investments and beneficial interest collected in exchange for securitized trade receivables) was $506 million in the third quarter of 2020, compared to $551 million in the third quarter of 2019. The decrease in the third quarter of 2020 resulted mainly from lower cash flow generated from operating activities.
As of September 30, 2020, our debt was $25,621 million, compared to $26,266 million as of June 30, 2020. This decrease was mainly due the repayment at maturity of our €1,010 million 0.375% senior notes in July 2020, partially offset by exchange rate fluctuations. The portion of total debt classified as short-term as of September 30, 2020 was 8%, compared to 6% June 30, 2020. Our average debt maturity was approximately 6 years as of September 30, 2020, compared to 6.1 years as of June 30, 2020. Our financial leverage was 71% as of September 30, 2020, compared to 64% as of June 30, 2020.
Segment Results for the Third Quarter of 2020
North America Segment
Our North America segment includes the United States and Canada.
The following table presents revenues, expenses and profit for our North America segment for the three months ended September 30, 2020 and 2019:
Three months ended September 30,
2020
2019
(U.S. $ in millions / % of Segment Revenues)
Revenues.............................................................................................................................................................................
$
2,017
100%
$
2,051
100%
Gross profit..........................................................................................................................................................................
1,056
52.4%
1,048
51.1%
R&D expenses......................................................................................................................................................................
155
7.7%
156
7.6%
S&M expenses......................................................................................................................................................................
250
12.4%
219
10.7%
G&A expenses......................................................................................................................................................................
97
4.8%
112
5.5%
Other (income) expense..........................................................................................................................................................
(5)
§
(5)
§
Segment profit*....................................................................................................................................................................
$
560
27.7%
$
565
27.5%
* 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 third quarter of 2020 were $2,017 million, a decrease of $34 million, or 2%, compared to the third quarter of 2019, mainly due to a decrease in revenues of COPAXONE and BENDEKA/TREANDA, partially offset by higher revenues from AUSTEDO, generic products and AJOVY. Our North America segment has experienced some reductions in volume due to less physician and hospital activity during the COVID-19 pandemic, but has also experienced increase in demand for certain products related to the treatment of COVID-19 and its symptoms. In addition, the ability to promote our new specialty products, primarily AJOVY and AUSTEDO, has been impacted by less physician visits by patients and less physician interactions by our sales personnel.
Revenues in the United States, our largest market, were $1,887 million in the third quarter of 2020, a decrease of $20 million, or 1%, compared to the third quarter of 2019.
Revenues by Major Products and Activities
The following table presents revenues for our North America segment by major products and activities for the three months ended September 30, 2020 and 2019:
Three months ended September 30,
Percentage Change
2020
2019
2019-2020
(U.S. $ in millions)
Generic products.........................................................................................................................................................................
$
928
$
914
2%
AJOVY.....................................................................................................................................................................................
35
25
42%
AUSTEDO.................................................................................................................................................................................
168
105
60%
BENDEKA/TREANDA...............................................................................................................................................................
105
124
(15%)
COPAXONE..............................................................................................................................................................................
236
271
(13%)
ProAir*.....................................................................................................................................................................................
50
71
(30%)
QVAR.......................................................................................................................................................................................
42
60
(29%)
Anda ........................................................................................................................................................................................
341
351
(3%)
Other........................................................................................................................................................................................
113
131
(14%)
Total.........................................................................................................................................................................................
$
2,017
$
2,051
(2%)
* Does not include revenues from the ProAir authorized generic, which are included under generic products.
Generic products revenues in our North America segment (including biosimilars) in the third quarter of 2020 were $928 million, an increase of 2% compared to the third quarter of 2019. This increase was mainly due to higher revenues from TRUXIMA and from our ProAir® authorized generic, partially offset by lower volume of other generic products.
On September 30, 2020, we launched emtricitabine and tenofovir disoproxil fumarate tablets, 200mg/300mg (the generic equivalent of Truvada®), and efavirenz, emtricitabine and tenofovir disoproxil fumarate tablets (the generic equivalent for Atripla®) for the prevention and treatment of HIV, respectively. We did not recognize revenues for these products in the third quarter of 2020.
In the third quarter of 2020, we led the U.S. generics market in total prescriptions and new prescriptions, with approximately 365 million total prescriptions (based on trailing twelve months), representing 10.0% of total U.S. generic prescriptions according to IQVIA data.
AJOVY revenues in our North America segment in the third quarter of 2020 were $35 million, an increase of $10 million, or 42% compared to the third quarter of 2019, mainly due to growth in volume in the third quarter of 2020.
AUSTEDO revenues in our North America segment in the third quarter of 2020 increased by 60% to $168 million, compared to $105 million in the third quarter of 2019. This increase was mainly due to growth in volume in the third quarter of 2020.
BENDEKA and TREANDA combined revenues in our North America segment in the third quarter of 2020 decreased by 15% to $105 million, compared to the third quarter of 2019, mainly due to the emergence of alternative novel therapies and continued competition from Belrapzo® (a ready-to-dilute bendamustine hydrochloride product from Eagle Pharmaceuticals, Inc.).
COPAXONE revenues in our North America segment in the third quarter of 2020 decreased by 13% to $236 million, compared to the third quarter of 2019, mainly due to generic competition in the United States.
ProAir revenues in our North America segment in the third quarter of 2020 decreased by 30% to $50 million, compared to the third quarter of 2019. 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. In July 2020, we announced the launch of ProAir® Digihaler® (albuterol sulfate 117 mcg) inhalation powder, which is the first and only digital rescue inhaler with built-in sensors which connects to a companion mobile application and provides inhaler use information to people with asthma and COPD. In September 2020, we announced the launch of AirDuo Digihaler (fluticasone propionate and salmeterol) inhalation powder and the launch of ArmonAir Digihaler (fluticasone propionate) inhalation powder, two digital maintenance inhalers for adolescent and adult patients with asthma.
QVAR revenues in our North America segment in the third quarter of 2020 decreased by 29% to $42 million, compared to the third quarter of 2019, mainly due to increased price competition and lower volumes.
Anda revenues in our North America segment in the third quarter of 2020 decreased by 3% to $341 million, compared to $351 million in the third quarter of 2019, mainly due to slightly lower demand.
North America Gross Profit
Gross profit from our North America segment in the third quarter of 2020 was $1,056 million, an increase of 1%, compared to $1,048 million in the third quarter of 2019.
Gross profit margin for our North America segment in the third quarter of 2020 increased to 52.4%, compared to 51.1% in the third quarter of 2019. This increase was mainly due to the change in mix of products.
North America Profit
Profit from 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 third quarter of 2020 was $560 million, flat compared to $565 million in the third quarter of 2019, mainly due to lower revenues, offset by a change in mix of products.
Europe Segment
Our Europe segment includes the European Union and certain other European countries.
The following table presents revenues, expenses and profit for our Europe segment for the three months ended September 30, 2020 and 2019:
Three months ended September 30,
2020
2019
(U.S. $ in millions / % of Segment Revenues)
Revenues.............................................................................................................................................................................
$
1,116
100%
$
1,163
100%
Gross profit..........................................................................................................................................................................
637
57.1%
662
56.9%
R&D expenses......................................................................................................................................................................
60
5.4%
63
5.4%
S&M expenses......................................................................................................................................................................
200
17.9%
206
17.7%
G&A expenses......................................................................................................................................................................
66
5.9%
56
4.9%
Other (income) expense..........................................................................................................................................................
(1)
§
(4)
§
Segment profit*....................................................................................................................................................................
$
312
28.0%
$
341
29.3%
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than 0.5%.
Revenues from our Europe segment in the third quarter of 2020 were $1,116 million, a decrease of 4%, or $47 million, compared to the third quarter of 2019. In local currency terms, revenues decreased by 7%, mainly due to reduced demand for certain products resulting from the COVID-19 pandemic. The COVID-19 pandemic has led to a decline in doctor and hospital visits by patients resulting in fewer prescriptions during the third quarter of 2020. This decrease is also attributed to price declines for oncology products as a result of generic competition and a decline in COPAXONE revenues due to competing glatiramer acetate products.
Revenues by Major Products and Activities
The following table presents revenues for our Europe segment by major products and activities for the three months ended September 30, 2020 and 2019:
Three months ended September 30,
Percentage Change
2020
2019
2019-2020
(U.S. $ in millions)
Generic products.........................................................................................................................................................................
$
824
$
836
(1%)
COPAXONE..............................................................................................................................................................................
101
106
(5%)
Respiratory products....................................................................................................................................................................
77
87
(12%)
AJOVY.....................................................................................................................................................................................
8
1
NA
Other........................................................................................................................................................................................
106
134
(21%)
Total.........................................................................................................................................................................................
$
1,116
$
1,163
(4%)
Generic products revenues in our Europe segment in the third quarter of 2020, including OTC products, decreased by 1% to $824 million, compared to the third quarter of 2019. In local currency terms, revenues decreased by 6% compared to the third quarter of 2019, mainly due to a reduced demand for certain products resulting from the COVID-19 pandemic. The COVID-19 pandemic has led to a decline in doctor and hospital visits by patients resulting in fewer prescriptions during the third quarter of 2020.
COPAXONE revenues in our Europe segment in the third quarter of 2020 decreased by 5% to $101 million, compared to the third quarter of 2019. In local currency terms, revenues decreased by 9%, due to price reductions and a decline in volume resulting from competing glatiramer acetate products.
Respiratory products revenues in our Europe segment in the third quarter of 2020 decreased by 12% to $77 million, compared to the third quarter of 2019. In local currency terms, revenues decreased by 15%, mainly due to reduced demand resulting from the impact the COVID-19 pandemic had on purchasing patterns. The COVID-19 pandemic led to increased demand in the first quarter and a correlating decrease in the following quarters.
AJOVY revenues in our Europe segment in the third quarter of 2020 were $8 million, compared to $1 million in the third quarter of 2019.
Europe Gross Profit
Gross profit from our Europe segment in the third quarter of 2020 was $637 million, a decrease of 4% compared to $662 million in the third quarter of 2019. This decrease was mainly due to lower revenues, as discussed above.
Gross profit margin for our Europe segment in the third quarter of 2020 increased to 57.1%, compared to 56.9% in the third quarter of 2019.
Europe Profit
Profit from 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 third quarter of 2020 was $312 million, a decrease of 8%, compared to $341 million in the third quarter of 2019. This decrease was mainly due to lower revenues, as discussed above.
International Markets Segment
Our International Markets segment includes all countries in which we operate other than those in our North America and Europe segments. The key markets in this segment are Japan, Russia and Israel.
On July 30, 2020, we entered into an agreement to sell the majority of the generic and operational assets of our business venture in Japan. We expect this transaction to close by early 2021. The closing of the transaction is subject to customary closing conditions.
The following table presents revenues, expenses and profit for our International Markets segment for the three months ended September 30, 2020 and 2019:
Three months ended September 30,
2020
2019**
(U.S. $ in millions / % of Segment Revenues)
Revenues.............................................................................................................................................................................
$
529
100%
$
565
100%
Gross profit..........................................................................................................................................................................
275
52.0%
295
52.2%
R&D expenses......................................................................................................................................................................
17
3.2%
21
3.7%
S&M expenses......................................................................................................................................................................
101
19.1%
114
20.1%
G&A expenses......................................................................................................................................................................
33
6.3%
32
5.6%
Other (income) expense..........................................................................................................................................................
(1)
§
(1)
§
Segment profit*....................................................................................................................................................................
$
125
23.6%
$
130
23.0%
§ Represents an amount less than 0.5%.
* Segment profit does not include amortization and certain other items.
**The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.
Revenues from our International Markets segment in the third quarter of 2020 were $529 million, a decrease of $35 million, or 6%, compared to the third quarter of 2019. In local currency terms, revenues decreased by 1% compared to the third quarter of 2019, mainly due to lower sales in Japan resulting from regulatory price reductions and generic competition to off-patented products, as well as loss of revenues from the sale of certain assets in the Israeli market, partially offset by higher revenues in other markets. Revenues in the third quarter of 2020 were also impacted by reduced demand for certain products resulting from the impact of the COVID-19 pandemic. The COVID-19 pandemic has led to a decline in doctor and hospital visits by patients resulting in fewer prescriptions during the third quarter of 2020.
Revenues by Major Products and Activities
The following table presents revenues for our International Markets segment by major products and activities for the three months ended September 30, 2020 and 2019:
Three months ended
September 30,
Percentage Change
2020
2019*
2019-2020
(U.S. $ in millions)
Generic products.........................................................................................................................................................................
$
429
$
474
(10%)
COPAXONE..............................................................................................................................................................................
14
20
(27%)
Other........................................................................................................................................................................................
86
71
21%
Total.........................................................................................................................................................................................
$
529
$
565
(6%)
*The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.
Generic products revenues in our International Markets segment in the third quarter of 2020, which include OTC products, decreased by 10% to $429 million, compared to the third quarter of 2019. In local currency terms, revenues decreased by 4%, mainly due to lower sales in Japan resulting from regulatory price reductions and generic competition to off-patented products. Revenues in the third quarter of 2020 were also impacted by reduced demand for certain products resulting from the impact of the COVID-19 pandemic. The COVID-19 pandemic has led to a decline in doctor and hospital visits by patients resulting in fewer prescriptions during the third quarter of 2020.
COPAXONE revenues in our International Markets segment in the third quarter of 2020 decreased by 27% to $14 million, compared to $20 million in the third quarter of 2019. In local currency terms, revenues decreased by 14%.
AJOVY On May 12, 2017, we entered into a license and collaboration agreement with Otsuka Pharmaceutical Co., Ltd. (“Otsuka”) providing Otsuka with an exclusive license to conduct phase 2 and 3 clinical trials for AJOVY in Japan and, once approved, to commercialize the product in Japan. On July 29, 2020, Otsuka submitted an application to obtain manufacturing and marketing approval for AJOVY in Japan. As a result, Otsuka paid Teva a milestone payment of $15 million in the third quarter of 2020, which was recorded as revenue under “Other” in the table above.
International Markets Gross Profit
Gross profit from our International Markets segment in the third quarter of 2020 was $275 million, a decrease of 7% compared to $295 million in the third quarter of 2019.
Gross profit margin for our International Markets segment in the third quarter of 2020 decreased to 52.0%, compared to 52.2% in the third quarter of 2019. This decrease was mainly due to a different portfolio mix.
International Markets Profit
Profit from 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 third quarter of 2020 was $125 million, a decrease of 4%, compared to $130 million in the third quarter of 2019. This decrease was mainly due to lower sales in Japan, partially offset by lower S&M expenses.
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 third quarter of 2020 were $316 million, an increase of 1% compared to the third quarter of 2019. In local currency terms, revenues decreased by 1%.
API sales to third parties in the third quarter of 2020 were $175 million, flat in both U.S. dollar and local currency terms, compared to the third quarter of 2019.
Conference Call
Teva will host a conference call and live webcast including a slide presentation on November 5, 2020 at 8:00 a.m. ET to discuss its third quarter of 2020 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 Passcode: 7275239.
A live webcast of the call will 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 required software.
Following the conclusion of the call, a replay of the webcast will be available within 24 hours on the Company's website or by calling United States 1-866-331-1332; International +44 (0) 3333 009785; passcode: 7275239.
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 3,500 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 third quarter of 2020 and in our Annual Report on Form 10-K for the year ended December 31, 2019, 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 Nine months ended September 30, September 30,2020
2019
2020
2019
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net revenues.................................................................................................................................3,978
4,093
12,206
12,420
Cost of sales..................................................................................................................................2,126
2,264
6,528
6,841
Gross profit...................................................................................................................................1,852
1,830
5,678
5,579
Research and development expenses.............................................................................................258
240
704
778
Selling and marketing expenses.....................................................................................................605
595
1,815
1,908
General and administrative expenses............................................................................................279
285
846
873
Intangible assets impairments.......................................................................................................509
177
1,278
1,206
Goodwill impairment....................................................................................................................4,628
-
4,628
-
Other asset impairments, restructuring and other items...............................................................(98)
160
404
263
Legal settlements and loss contingencies.......................................................................................21
468
10
1,171
Other income ..............................................................................................................................(8)
(14)
(30)
(29)
Operating (loss) income.................................................................................................................(4,342)
(81)
(3,978)
(591)
Financial expenses, net.................................................................................................................117
211
565
635
Income (loss) before income taxes.................................................................................................(4,459)
(292)
(4,543)
(1,226)
Income taxes (benefit)...................................................................................................................16
11
(147)
(159)
Share in (profits) losses of associated companies- net....................................................................(136)
4
(135)
8
Net income (loss)...........................................................................................................................(4,340)
(307)
(4,261)
(1,076)
Net income (loss) attributable to non-controlling interests.............................................................10
7
(121)
33
Net income (loss) attributable to Teva ..........................................................................................(4,349)
(314)
(4,140)
(1,108)
Earnings (loss) per share attributable to Teva: Basic ($)(3.97)
(0.29)
(3.78)
(1.02)
Diluted ($)(3.97)
(0.29)
(3.78)
(1.02)
Weighted average number of shares (in millions): Basic1,096
1,092
1,095
1,091
Diluted1,096
1,092
1,095
1,091
Non-GAAP net income attributable to Teva:*637
637
2,077
1,943
Non-GAAP net income attributable to Teva for diluted earnings per share:637
637
2,077
1,943
Non-GAAP earnings per share attributable to Teva:* Basic ($)0.58
0.58
1.90
1.78
Diluted ($)0.58
0.58
1.89
1.78
Non-GAAP average number of shares (in millions): Basic1,096
1,092
1,095
1,091
Diluted1,100
1,093
1,099
1,093
* See reconciliation attached. Condensed Consolidated Balance Sheets (U.S. dollars in millions) September 30, December 31,2020
2019
ASSETS (Unaudited) (Audited) Current assets: Cash and cash equivalents.................................................................1,827
1,975
Accounts receivables, net of allowance for credit losses of $117million and $135 million as of September 30, 2020 and December 31, 20194,385
5,676
Inventories.......................................................................................4,516
4,422
Prepaid expenses..............................................................................895
870
Other current assets..........................................................................423
434
Assets held for sale..........................................................................113
87
Total current assets........................................................................12,160
13,464
Deferred income taxes....................................................................509
386
Other non-current assets.................................................................822
591
Property, plant and equipment, net.................................................6,152
6,436
Operating lease right-of-use assets..................................................557
514
Identifiable intangible assets, net....................................................9,308
11,232
Goodwill.........................................................................................20,228
24,846
Total assets.....................................................................................49,737
57,470
LIABILITIES & EQUITY Current liabilities: Short-term debt.................................................................................2,106
2,345
Sales reserves and allowances...........................................................4,998
6,159
Accounts payables............................................................................1,716
1,718
Employee-related obligations.............................................................601
693
Accrued expenses.............................................................................1,735
1,869
Other current liabilities.....................................................................946
889
Total current liabilities...................................................................12,103
13,674
Long-term liabilities: Deferred income taxes......................................................................874
1,096
Other taxes and long-term liabilities...................................................2,181
2,640
Senior notes and loans.......................................................................23,515
24,562
Operating lease liabilities..................................................................472
435
Total long-term liabilities................................................................27,042
28,733
Equity: Teva shareholders’ equity9,593
13,972
Non-controlling interests...................................................................999
1,091
Total equity.....................................................................................10,592
15,063
Total liabilities and equity...............................................................49,737
57,470
TEVA PHARMACEUTICAL INDUSTRIES LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in millions) (Unaudited) Nine months ended Three months ended September 30, September 30,2020
2019
2020
2019
Operating activities: Net income (loss)....................................................................................................................(4,261)
$(1,076)
(4,339)
$(308)
Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation and amortization................................................................................................1,162
1,306
381
413
Impairment of long-lived assets and assets held for sale........................................................6,314
1,302
5,194
205
Net change in operating assets and liabilities.........................................................................(1,627)
(784)
(625)
272
Deferred income taxes – net and uncertain tax positions.........................................................(656)
(652)
(154)
(290)
Stock-based compensation......................................................................................................91
99
29
35
Net loss (gain) from investments and from sale of long lived assets ....................................(232)
10
(256)
4
Research and development in process....................................................................................40
-
40
-
Other items .............................................................................................................................54
5
37
(6)
Net cash provided by operating activities...........................................................................885
210
307
325
Investing activities: Beneficial interest collected in exchange for securitized accounts receivables......................1,102
1,108
333
362
Purchases of property, plant and equipment............................................................................(402)
(406)
(143)
(169)
Proceeds from sale of long-lived assets................................................................................54
167
9
33
Other investing activities........................................................................................................(32)
56
(42)
(2)
Net cash provided by investing activities............................................................................722
925
157
224
Financing activities: Repayment of senior notes and loans and other long-term liabilities......................................(1,871)
(1,715)
(1,171)
(1,558)
Net change in short-term debt.................................................................................................115
96
115
96
Tax withholding payments made on shares and dividends......................................................-
(52)
-
-
Other financing activities........................................................................................................(4)
(14)
(1)
1
Net cash used in financing activities....................................................................................(1,760)
(1,685)
(1,057)
(1,461)
Translation adjustment on cash and cash equivalents........................................................5
9
18
(12)
Net change in cash and cash equivalents.............................................................................(148)
(541)
(575)
(924)
Balance of cash and cash equivalents at beginning of period.............................................1,975
1,782
2,402
2,165
Balance of cash and cash equivalents at end of period....................................................... $1,827
$1,241
$1,827
$1,241
Non-cash financing and investing activities: Beneficial interest obtained in exchange for securitized accounts receivables $1,055
$1,123
$327
$353
Three Months Ended September 30, 2020 U.S. $ and shares in millions (except per share amounts) GAAP Excluded for non-GAAP measurement Non-GAAP Amortization ofpurchasedintangibleassets Legal settlementsand losscontingencies Goodwillimpairment Impairment oflong livedassets OtherR&Dexpenses Restructuringcosts Costs related toregulatoryactions taken infacilities Equitycompensation Contingentconsideration Other non-GAAP items Otheritems Correspondingtax effect Cost of sales2,126
221
6
7
(2)
1,894
R&D expenses258
21
5
-
233
S&M expenses605
31
8
-
566
G&A expenses279
10
-
269
Other (income) expense(8)
-
(8)
Legal settlements andloss contingencies21
21
-
Other assetsimpairments,restructuring andother items(98)
56
9
(179)
15
-
Intangible assets impairments509
509
-
Goodwill impairment4,628
4,628
-
Financial expenses, net117
(124)
241
Income taxes16
(117)
133
Share in losses ofassociated companies– net(136)
(134)
(1)
Net income (loss)attributable to non-controlling interests10
(6)
15
Total reconciled items251
21
4,628
565
21
9
6
30
(179)
14
(264)
(117)
EPS - Basic(3.97)
4.55
0.58
EPS - Diluted(3.97)
4.55
0.58
The non-GAAP diluted weighted average number of shares was 1,100 million for the three months ended September 30, 2020. Nine Months Ended September 30, 2020 U.S. $ and shares in millions (except per share amounts) GAAP Excluded for non-GAAP measurement NonGAAP Amortization ofpurchasedintangible assets Legal settlements andloss contingencies Goodwillimpairment Impairment oflong-livedassets Restructuringcosts Costs related toregulatory actionstaken in facilities Equitycompensation Contingentconsideration Other nonGAAP items Otheritems Corresponding taxeffect Cost of sales6,528
663
17
19
30
5,799
R&D expenses704
14
3
687
S&M expenses1,815
95
25
-
1,695
G&A expenses846
31
12
803
Other (income) expense(30)
(3)
(27)
Legal settlements and loss contingencies10
10
-
Other assets impairments,restructuring and other items404
408
82
(96)
10
-
-
Intangible assets impairment1,278
1,278
-
Goodwill impairment4,628
4,628
-
Financial expenses, net565
(118)
683
Income taxes(147)
(583)
436
Share in losses of associatedcompanies – net(135)
(134)
(1)
Net income (loss) attributable tonon-controlling interests(121)
(174)
53
Total reconciled items758
10
4,628
1,686
82
17
90
(96)
52
(427)
(583)
EPS - Basic(3.78)
5.68
1.90
EPS - Diluted(3.78)
5.67
1.89
The non-GAAP diluted weighted average number of shares was 1,099 million for the nine months ended September 30, 2020. Three Months Ended September 30, 2019 U.S. $ and shares in millions (except per share amounts) GAAP Excluded for non-GAAP measurement Non-GAAP Amortization ofpurchasedintangible assets Legalsettlements andlosscontingencies Impairmentof long livedassets Restructuringcosts Costs related toregulatory actionstaken in facilities Equitycompensation Contingentconsideration Gain on sale ofbusiness Other non-GAAPitems Otheritems Correspondingtax effect Cost of sales**2,264
220
11
7
35
1,990
R&D expenses240
5
(7)
242
S&M expenses595
35
9
551
G&A expenses285
14
1
270
Other (income) expense(14)
(3)
(11)
Legal settlements andloss contingencies468
468
-
Other assets impairments,restructuring and other items160
28
61
51
21
-
Intangible assets impairments177
177
-
Financial expenses, net211
3
208
Income taxes11
(172)
183
Share in losses ofassociatedcompanies – net4
4
Net income (loss)attributable to non-controlling interests7
(12)
19
Total reconciled items255
468
204
61
11
35
51
(3)
51
(9)
(172)
EPS - Basic(0.29)
0.87
0.58
EPS - Diluted(0.29)
0.87
0.58
**The data presented for prior periods has been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information. The non-GAAP diluted weighted average number of shares was 1,093 million for the three months ended September 30, 2019. Nine months ended September 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-livedassets Acquisition,integration and relatedexpenses Restructuringcosts Costs related toregulatory actionstaken in facilities Equitycompensation Contingentconsideration Gain on sale ofbusiness Other nonGAAP items Otheritems Corresponding taxeffect Unusual taxitem* Cost of sales**6,841
717
28
21
96
5,978
R&D expenses778
17
(7)
768
S&M expenses1,908
105
29
1,774
G&A expenses873
37
-
836
Other (income) expense(29)
(12)
(17)
Legal settlementsand loss contingencies1,171
1,171
-
Other assetsimpairments,restructuring andother items263
96
2
140
4
22
-
Intangible assets impairment1,206
1,206
-
Financial expenses, net635
9
626
Income taxes(159)
(662)
61
442
Share in losses ofassociatedcompanies – net8
-
8
Net income (loss)attributable to non-controlling interests33
(28)
61
Total reconciled items823
1,171
1,302
2
140
28
104
4
(12)
111
(19)
(662)
61
EPS - Basic(1.02)
2.80
1.78
EPS - Diluted(1.02)
2.80
1.78
*Interest disallowance as a result of the U.S Tax Cuts and Jobs Act. **The data presented for prior periods has been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information. The non-GAAP diluted weighted average number of shares was 1,093 million for the nine months ended September 30, 2019. Segment Information North America Europe International Markets * Three months ended September 30, Three months endedSeptember 30, Three months endedSeptember 30,2020
2019
2020
2019
2020
2019
(U.S. $ in millions) (U.S. $ in millions) (U.S. $ in millions) Revenues...................... $2,017
$2,051
$1,116
$1,163
$529
$565
Gross profit..................1,056
1,048
637
662
275
295
R&D expenses..............155
156
60
63
17
21
S&M expenses.............250
219
200
206
101
114
G&A expenses..............97
112
66
56
33
32
Other (income) loss.....(5)
(5)
(1)
(4)
(1)
(1)
Segment profit............. $560
$565
$312
$341
$125
$130
*The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. Segment Information North America Europe International Markets * Nine months endedSeptember 30, Nine months endedSeptember 30, Nine months endedSeptember 30,2020
2019
2020
2019
2020
2019
(U.S. $ in millions) (U.S. $ in millions) (U.S. $ in millions) Revenues...................... $6,146
$6,169
$3,520
$3,611
$1,582
$1,668
Gross profit..................3,208
3,155
2,009
2,066
828
877
R&D expenses..............455
497
180
199
51
66
S&M expenses.............755
756
590
637
312
348
G&A expenses..............325
342
184
175
96
102
Other income...............(9)
(6)
(3)
(5)
(10)
(2)
Segment profit............. $1,682
$1,566
$1,058
$1,060
$378
$363
*The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. Reconciliation of our segment profit to consolidated income before income taxes Three months ended September 30,2020
2019
(U.S.$ in millions) North America profit................................................................... $560
$565
Europe profit................................................................................312
341
International Markets profit.......................................................125
130
Total segment profit....................................................................997
1,036
Profit of other activities..............................................................28
16
1,025
1,051
Amounts not allocated to segments: Amortization251
255
Other asset impairments, restructuring and other items(98)
160
Intangible asset impairments509
177
Goodwill impairment4,628
-
Legal settlements and loss contingencies21
468
Other unallocated amounts55
73
Consolidated operating income (loss)(4,342)
(81)
Financial expenses - net117
211
Consolidated loss before income taxes $(4,459)
$(292)
Reconciliation of our segment profit to consolidated income before income taxes Nine months ended September 30,2020
2019
(U.S.$ in millions) North America profit................................................................... $1,682
$1,566
Europe profit................................................................................1,058
1,060
International Markets profit.......................................................378
363
Total segment profit....................................................................3,118
2,989
Profit of other activities..............................................................130
92
3,248
3,081
Amounts not allocated to segments: Amortization758
823
Other asset impairments, restructuring and other items404
263
Intangible asset impairments1,278
1,206
Goodwill impairment4,628
-
Legal settlements and loss contingencies10
1,171
Other unallocated amounts148
209
Consolidated operating income (loss)(3,978)
(591)
Financial expenses - net565
635
Consolidated income (loss) before income taxes $(4,543)
$(1,226)
Segment revenues by major products and activities (Unaudited) Three months ended September 30, PercentageChange2020
2019
2019-2020 (U.S.$ in millions) North America segment Generic products................................... $928
$914
2%
AJOVY.....................................................35
25
42%
AUSTEDO...............................................168
105
60%
BENDEKA/TREANDA..............................105
124
(15%)
COPAXONE.............................................236
271
(13%)
ProAir*...................................................50
71
(30%)
QVAR......................................................42
60
(29%)
Anda .....................................................341
351
(3%)
Other......................................................113
131
(14%)
Total.......................................................2,017
2,051
(2%)
Three months ended September 30, PercentageChange2020
2019
2019-2020 (U.S.$ in millions) Europe segment Generic products................................... $824
$836
(1%)
COPAXONE.............................................101
106
(5%)
Respiratory products............................77
87
(12%)
AJOVY.....................................................8
1
NA
Other......................................................106
134
(21%)
Total.......................................................1,116
1,163
(4%)
Three months ended September 30, PercentageChange2020
2019 *
2019-2020 (U.S.$ in millions) International Markets segment Generic products................................... $429
$474
(10%)
COPAXONE.............................................14
20
(27%)
Other......................................................86
71
21%
Total.......................................................529
565
(6%)
*The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. Revenues by Activity and Geographical Area (Unaudited) Nine months ended September 30, PercentageChange2020
2019
2019-2020 (U.S.$ in millions) North America segment Generic products................................... $2,804
$2,826
(1%)
AJOVY.....................................................98
68
45%
AUSTEDO...............................................451
276
64%
BENDEKA / TREANDA............................313
371
(16%)
COPAXONE.............................................671
753
(11%)
ProAir.....................................................175
194
(10%)
QVAR......................................................139
183
(24%)
Anda .....................................................1,141
1,080
6%
Other......................................................354
417
(15%)
Total.......................................................6,146
6,169
0%
Nine months ended September 30, PercentageChange2020
2019
2019-2020 (U.S.$ in millions) Europe segment Generic products................................... $2,593
$2,599
-
COPAXONE.............................................294
327
(10%)
Respiratory products............................263
267
(2%)
AJOVY.....................................................17
1
NA
Other......................................................352
416
(15%)
Total.......................................................3,520
3,611
(3%)
Nine months ended September 30, PercentageChange2020
2019 *
2019-2020 (U.S.$ in millions) International Markets segment Generic products................................... $1,304
$1,404
(7%)
COPAXONE.............................................38
46
(18%)
Other......................................................241
218
10%
Total.......................................................1,582
1,668
(5%)
*The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. Free cash flow reconciliation (Unaudited) Three months endedSeptember 30,2020
2019
(U.S. $ in millions) Net cash provided by operating activities......................................................307
325
Beneficial interest collected in exchange for securitized accountsreceivables, included in investing activities333
362
Capital investment...........................................................................................(143)
(169)
Proceeds from sale of long lived assets9
33
Free cash flow................................................................................................... $506
$551
Free cash flow reconciliation (Unaudited) Nine months endedSeptember 30,2020
2019
(U.S. $ in millions) Net cash provided by operating activities......................................................885
210
Beneficial interest collected in exchange for securitized accountsreceivables, included in investing activities1,102
1,108
Capital investment...........................................................................................(402)
(406)
Proceeds from sale of long lived assets54
167
Free cash flow................................................................................................... $1,639
$1,079
View source version on businesswire.com: https://www.businesswire.com/news/home/20201105005182/en/
IR Contacts United States Kevin C. Mannix (215) 591-8912 Israel Yael Ashman 972 (3) 926-7516 PR Contacts United States Kelley Dougherty (973) 832-2810 Israel Yonatan Beker 972 (54) 888 5898
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