קאר שולץ מנכל טבע צילום פאנדר
אדם כהן
05/11/2020
- Revenues of $4.0 billion
- GAAP diluted loss per share of $3.97
- Non-GAAP diluted EPS of $0.58
- Free cash flow of $506 million
- Full year 2020 business outlook revised:
- Net revenues of $16.5-16.8 billion
- EBITDA of $4.7 - $4.9 billion
- EPS of $2.40 - $2.55
- Free cash flow of $1.8 - $2.2 billion
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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:
- A goodwill impairment charge of $4,628 million related to our North America reporting unit in the third quarter of 2020;
- $565 million impairment of long-lived assets comprised mainly of impairments of identifiable intangible assets totaling $509 million ($360 million of IPR&D assets and $149 million of identifiable product rights);
- Amortization of purchased intangible assets of $251 million, of which $221 million is included in cost of sales and the remaining $31 million in S&M expenses;
- Contingent consideration income of $179 million, mainly related to a decrease in future royalties;
- Gain from equity investment of $134 million, reflecting the difference between the book value of our investment in American Well Corporation and its fair value as of the date it completed its initial public offering in September 2020;
- Finance income of $124 million, mainly related to the American Well equity holding;
- Purchase of in-process R&D of $21 million;
- Legal settlements and loss contingencies of $21 million;
- Equity compensation expenses of $30 million;
- Other items of $24 million; and
- Income tax of $117 million.
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.
