[November 02, 2017] |
|
Teva Reports Third Quarter 2017 Financial Results
Teva Pharmaceutical Industries Ltd. (NYSE: TEVA, TASE: TEVA) today
reported results for the quarter ended September 30, 2017.
Revenues in the third quarter of 2017 were $5.6 billion, up 1%
compared to the third quarter of 2016. Excluding the impact of foreign
exchange fluctuations, revenues increased 4%.
Exchange rate differences between the third quarter of 2017 and
the third quarter of 2016 reduced revenues by $169 million, GAAP
operating income by $32 million and non-GAAP operating income by $17
million.
Adjustments of the exchange rates used for the Venezuelan bolivar
resulted in a decrease of $243 million in revenues, a decrease of $25
million in GAAP operating income and a decrease of $15 million in
non-GAAP operating income, compared to results in the third quarter of
2016. In light of the political and economic conditions in Venezuela, we
exclude the quarterly changes in revenues and operating profit in
Venezuela from any discussion of local currency results.
GAAP gross profit was $2.6 billion in the third quarter of 2017,
down 6% compared to the third quarter of 2016. GAAP gross profit
margin was 47.1% in the third quarter of 2017, compared to 50.4% in
the third quarter of 2016. Non-GAAP gross profit was $3.0 billion
in the third quarter of 2017, a decline of 12% from the third quarter of
2016. Non-GAAP gross profit margin was 53.0% in the third quarter
of 2017, compared to 61.0% in the third quarter of 2016. The decrease in
gross profit margin, on both a GAAP and a non-GAAP basis, was the result
of lower gross profit and profitability of both our generic medicines
and our specialty medicines businesses, as well as the addition of the
low-margin Anda distribution business. GAAP results were impacted by
lower inventory step-up expenses and lower amortization expenses, which
mitigated some of the decrease.
Research and Development (R&D) expenses for the third quarter
of 2017 amounted to $545 million, down 18% compared to the third quarter
of 2016 due to lower expenditure related both to generic and specialty
medicines as well as lower other R&D expenses. R&D expenses excluding
equity compensation expenses and other R&D expenses were $381 million,
or 6.8% of quarterly revenues in the third quarter of 2017, compared to
$406 million, or 7.3%, in the third quarter of 2016. R&D expenses
related to our generic medicines segment were $162 million, a decrease
of 12% compared to $185 million in the third quarter of 2016, mainly due
to portfolio optimization and various efficiency measures. R&D expenses
related to our specialty medicines segment were $217 million, a decrease
of 5% compared to $228 million in the third quarter of 2016, mainly due
to portfolio optimization activities which compensated for the increased
expenses related to our late-stage product candidates.
Selling and Marketing (S&M) expenses in the third quarter of
2017 amounted to $860 million, a decrease of 9% compared to the third
quarter of 2016. S&M expenses excluding amortization of purchased
intangible assets and equity compensation expenses were $805 million, or
14.3% of revenues, in the third quarter of 2017, compared to $889
million, or 16.0% of revenues, in the third quarter of 2016. S&M
expenses related to our generic medicines segment were $377 million, a
decrease of 11% compared to $423 million in the third quarter of 2016,
mainly due to lower expenses in Venezuela following exchange rate
adjustments as well as certain efficiency measures, partially offset by
the inclusion of the S&M expenses of the Actavis Generics business for a
full quarter. S&M expenses related to our specialty medicines segment
were $388 million, down 15% compared to $458 million in the third
quarter of 2016, mainly due to cost reduction and efficiency measures in
our commercial operations, aligning with the life cycle of our product
portfolio.
General and Administrative (G&A) expenses in the third
quarter of 2017 amounted to $330 million, compared to $310 million in
the third quarter of 2016. G&A expenses excluding equity compensation
expenses were $318 million in the third quarter of 2017, or 5.7% of
quarterly revenues, compared to $304 million, or 5.5% in the third
quarter of 2016.
GAAP operating income in the third quarter of 2017 was $378
million, compared to operating income of $765 million in the third
quarter of 2016. Non-GAAP operating income in the third quarter
of 2017 was $1.5 billion, a decrease of 18% compared to the third
quarter of 2016. Non-GAAP operating margin was 26.2% in the third
quarter of 2017 compared to 32.2% in the third quarter of 2016.
EBITDA (non-GAAP operating income, which excludes amortization
and certain other items, as well as excluding depreciation expenses) was
$1.6 billion in the third quarter of 2017, down 16% compared to $1.9
billion in the third quarter of 2016.
GAAP financial expenses for the third quarter of 2017 were $259
million, compared to $150 million in the third quarter of 2016. Non-GAAP
financial expenses were $229 million in the third quarter of 2017,
compared to $151 million in the third quarter of 2016. The increase in
our non-GAAP financial expenses is due mainly to higher expenses related
to net foreign exchange losses and financial derivatives, as well as
higher interest expenses related to the debt raised to finance the
acquisition of Actavis Generics.
GAAP income taxes for the third quarter of 2017 amounted to a
benefit of $494 million. In the third quarter of 2016, income taxes
amounted to $207 million, or 34% on pre-tax income of $615 million. Non-GAAP
income taxes for the third quarter of 2017 amounted to $135 million
on pre-tax non-GAAP income of $1.2 billion, for a quarterly tax rate of
11%. Non-GAAP income taxes in the third quarter of 2016 amounted to $261
million on pre-tax non-GAAP income of $1.6 billion, for a quarterly tax
rate of 16%.
We expect our annual non-GAAP tax rate for 2017 to be 15%, lower than
our previous estimates. This is due to changes in the geographical mix
of income we expect to generate this year. Our non-GAAP tax rate for
2016 was 17%.
GAAP net income attributable to ordinary shareholders and GAAP
diluted EPS were $530 million and $0.52, respectively, in the third
quarter of 2017, compared to $348 million and $0.35, respectively, in
the third quarter of 2016. Non-GAAP net income attributable to
ordinary shareholders for calculating diluted EPS and non-GAAP
diluted EPS were $1.0 billion and $1.00, respectively, in the third
quarter of 2017, compared to $1.4 billion and $1.31 in the third quarter
of 2016.
For the third quarter of 2017, the weighted average outstanding
shares for the fully diluted earnings per share calculation on both
a GAAP and a non-GAAP basis was 1,017 million. For the third quarter of
2016, this was 984 million shares on a GAAP basis, and 1,044 million
shares on a non-GAAP basis. For the three months ended September 30,
2017, the mandatory convertible preferred shares amounting to 59.4
million weighted average shares, had an anti-dilutive effect on earnings
per share and were therefore excluded from the outstanding shares
calculation.
As of September 30, 2017, the fully diluted share count for calculating
Teva's market capitalization was approximately 1,083 million shares.
Non-GAAP information: Net non-GAAP adjustments in the third
quarter of 2017 were $482 million. Non-GAAP net income and non-GAAP EPS
for the quarter were adjusted to exclude the following items:
-
Impairment of long-lived assets of $408 million, mainly an impairment
of product rights and R&D assets related to the Actavis Generics
acquisition;
-
Amortization of purchased intangible assets totaling $357 million, of
which $310 million is included in cost of goods sold and the remaining
$47 million in selling and marketing expenses;
-
Other R&D expenses of $150 million;
-
Restructuring expenses of $72 million;
-
Acquisition, integration and related expenses, including contingent
consideration, of $49 million;
-
Equity compensation expenses of $32 million;
-
Financial expenses of $30 million;
-
Other non-GAAP items of $44 million;
-
Legal settlements and loss contingencies benefit of $20 million;
-
Minority interest adjustment of negative $11 million; and
-
Tax benefit of $629 million, including the effect of a one- time tax
benefit associated with the utilization of Actavis Generics historic
capital losses.
Teva believes that excluding such items facilitates investors'
understanding of its business. See the attached tables for a
reconciliation of the GAAP results to the adjusted non-GAAP figures.
Investors should consider non-GAAP financial measures in addition to,
and not as replacement for, or superior to, measures of financial
performance prepared in accordance with GAAP.
Cash flow from operations generated during the third quarter of
2017 was $1.1 billion, compared to $1.5 billion in the third quarter of
2016. The decrease was mainly due to the impact of changes in working
capital which increased by $0.3 billion.
Free cash flow, excluding net capital expenditures, was $0.9 billion,
compared to $1.2 billion in the third quarter of 2016.
Total balance sheet assets amounted to $86.1 billion as of
September 30, 2017, compared to $86.4 billion as of June 30, 2017.
As of September 30, 2017, our debt was $34.7 billion, compared to
$35.1 billion at June 30, 2017. The decrease was mainly due to $0.6
billion of debt repayments of our 5 year term loan, our revolving credit
facility and other short term loans, partially offset by foreign
exchange fluctuations of $0.2 billion. The portion of total debt
classified as short-term at September 30, 2017 was 8%.
Total shareholders' equity was $30.3 billion as of September 30,
2017, compared to $29.6 billion as of June 30, 2017.
Segment Results for the Third Quarter 2017
Beginning in the fourth quarter of 2016, our OTC business, conducted
primarily through PGT, is included in our generic medicines segment.
This segment also includes chemical and therapeutic equivalents of
originator medicines in a variety of dosage forms and our API
manufacturing business.
All data presented has been conformed to the new segment structure.
Generic Medicines Segment
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Three Months Ended September 30,
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2017
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2016
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U.S. $ in millions / % of Segment Revenues
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Revenues
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$
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3,007
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100.0%
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$
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3,259
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100.0%
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Gross profit
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1,158
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38.5%
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1,590
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48.8%
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R&D expenses
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162
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5.4%
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185
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5.7%
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S&M expenses
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377
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12.5%
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423
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13.0%
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Segment profit*
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$
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619
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20.6%
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$
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982
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30.1%
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__________
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* Segment profit consists of gross profit for the segment, less R&D
and S&M expenses related to the segment. Segment profit does not
include G&A expenses, amortization and certain other items.
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Generic Medicines Revenues
Generic medicines revenues in the third quarter of 2017 were $3.0
billion, a decrease of 8% compared to the third quarter of 2016.
Generic revenues consisted of:
-
U.S. revenues of $1.2 billion, down 9% compared to the third quarter
of 2016, mainly due to challenging market dynamics including pricing
declines resulting from customer consolidation into larger buying
groups and accelerated FDA approvals for additional generic versions
of competing off-patent medicines, partially offset by the inclusion
of three months of Actavis Generics revenues in this quarter, compared
to two months in the third quarter of 2016.
-
European revenues of $985 million, an increase of 6%, or 1% in local
currency terms, compared to the third quarter of 2016, mainly due to
the inclusion of three months of Actavis Generics revenues, compared
to two months only in the third quarter of 2016.
-
ROW revenues of $843 million, a decrease of 18% compared to the third
quarter of 2016. In local currency terms, revenues increased 5%,
mainly due to the inclusion of three months of Actavis Generics
revenues, compared to two months only in the third quarter of 2016.
-
OTC revenues (which are included in the market revenues above) were
$306 million, down 22% compared to the third quarter of 2016. In local
currency terms, revenues increased 15%, mainly due to the inclusion of
three months of Actavis Generics revenues, compared to two months only
in the third quarter of 2016. In-market sales of our joint venture,
PGT Healthcare, were $372 million in the third quarter of 2017, down
25% compared to the third quarter of 2016, due to the reduction of
sales in Venezuela.
-
API sales to third parties (which are included in the market revenues
above) were $171 million, down 10% compared to the third quarter of
2016.
Generic medicines revenues comprised 54% of our total revenues in the
quarter, compared to 59% in the third quarter of 2016.
Generic Medicines Gross Profit
Gross profit of our generic medicines segment in the third quarter of
2017 was $1.2 billion, a decrease of 27% compared to the third quarter
of 2016. The lower gross profit was mainly due to higher production
expenses, market dynamics in the United States and lower revenues in
Venezuela following the currency devaluation.
Gross profit margin for our generic medicines segment in the third
quarter of 2017 decreased to 38.5% from 48.8% in the third quarter of
2016.
The decrease in gross profit margin was due to lower profitability in
our U.S. and ROW markets, partially offset by improved profitability of
our European markets.
Generic Medicines Profit
Our generic medicines segment generated profit of $619 million in the
third quarter of 2017, a decrease of 37% compared to the third quarter
of 2016. Generic medicines profitability as a percentage of generic
medicines revenues was 20.6% in the third quarter of 2017, down from
30.1% in the third quarter of 2016.
Specialty Medicines Segment
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Three Months Ended September 30,
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2017
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2016
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U.S. $ in millions / % of Segment Revenues
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Revenues
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$
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2,034
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100.0%
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$
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2,048
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100.0%
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Gross profit
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1,757
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86.4%
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1,783
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87.1%
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R&D expenses
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217
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10.7%
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228
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11.1%
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S&M expenses
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388
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19.1%
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458
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22.4%
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Segment profit*
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$
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1,152
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56.6%
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$
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1,097
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53.6%
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__________
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* Segment profit consists of gross profit for the segment, less R&D
and S&M expenses related to the segment. Segment profit does not
include G&A expenses, amortization and certain other items.
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Specialty Medicines Revenues
Specialty medicines revenues in the third quarter of 2017 were $2.0
billion, down 1% compared to the third quarter of 2016. U.S. specialty
medicines revenues were $1.5 billion, down 4% compared to the third
quarter of 2016. European specialty medicines revenues were $447
million, an increase of 10%, or 5% in local currency terms, compared to
the third quarter of 2016. ROW specialty revenues were $94 million, up
12%, in both dollar and local currency terms, compared to the third
quarter of 2016.
Specialty medicines revenues comprised 36% of our total revenues in the
quarter, compared to 37% in the third quarter of 2016.
The decrease in specialty medicines revenues compared to the third
quarter of 2016 was primarily due to lower sales of our CNS products,
which were largely offset by higher sales in all other therapeutic areas.
The following table presents revenues by therapeutic area and key
products for our specialty medicines segment for the three months ended
September 30, 2017 and 2016:
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Three Months Ended
September 30,
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Change
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2017
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2016
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2017 - 2016
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U.S. $ in millions
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CNS
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$
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1,146
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$
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1,302
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(12%)
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Copaxone®
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987
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1,061
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(7%)
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Azilect®
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36
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101
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(64%)
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Nuvigil®
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21
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21
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0%
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Respiratory
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351
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270
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30%
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ProAir®
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155
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118
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31%
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QVAR®
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95
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|
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96
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(1%)
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Oncology
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302
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|
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269
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12%
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Treanda® and Bendeka®
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181
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149
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21%
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Women's Health
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119
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109
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9%
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Other Specialty
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116
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98
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18%
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Total Specialty Medicines
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$
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2,034
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$
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2,048
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(1%)
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Global revenues of Copaxone® (20 mg/mL and 40
mg/mL), the leading multiple sclerosis therapy in the U.S. and globally,
were $1.0 billion, a decrease of 7% compared to the third quarter of
2016.
In October 2017, the FDA approved a generic version of Copaxone®
40 mg /mL and an additional generic version of Copaxone® 20
mg/mL. A generic version of Copaxone® 40 mg /mL was launched
in the U.S. market. In the EU, a hybrid version of Copaxone®
40 mg/mL was approved.
Copaxone® revenues in the United States, were $802 million, a
decrease of 8% compared to the third quarter of 2016, due to lower
volumes of Copaxone® 20 mg/mL, negative net pricing effects,
mainly as a result of an increase in managed care rebate accruals for
inventory in the channel following the FDA approvals for additional
generic competition, partially offset by a price increase of 7.9% in
January 2017 for both the 20 mg/mL and 40 mg/mL versions. At the end of
the third quarter of 2017, according to September 2017 IMS data, our
U.S. market shares for the Copaxone® products in terms of new
and total prescriptions were 25.6% and 28.7%, respectively. Copaxone®
40 mg/mL accounted for over 85% of total Copaxone®
prescriptions in the U.S.
Copaxone® revenues outside the United States were $185
million, down 1%, compared to the third quarter of 2016. Over 75% of
European Copaxone® prescriptions are now filled with the 40
mg/mL version.
Our global Azilect® revenues were $36 million, a
decrease of 64% compared to the third quarter of 2016 following the
introduction of generic competition to Azilect® in the United
States in 2017.
Revenues of our respiratory products were $351 million, up 30%
compared to the third quarter of 2016 mainly due to higher sales of
ProAir® as well as the launches of Braltus® and
Cinqair®/Cinqaero®. ProAir®
revenues in the third quarter of 2017 were $155 million, up 31% compared
to the third quarter of 2016, mainly due to higher positive net pricing
effects and higher volumes sold. QVAR® global
revenues were $95 million in the third quarter of 2017, down 1% compared
to the third quarter of 2016.
Revenues of our oncology products were $302 million in the third
quarter of 2017, up 12% compared to the third quarter of 2016. Combined
revenues of Treanda® and Bendeka®
were $181 million, up 21% compared to the third quarter of 2016, mainly
due to higher volumes sold related to timing of purchases.
During September 2017, we entered into several agreements to sell
certain non-core specialty products, including our global women's health
business. On November 1, we announced the completion of the Paragard®
divestiture to CooperSurgical. The remaining transactions are expected
to close during the remainder of 2017 and in 2018.
Specialty Medicines Gross Profit
Gross profit of our specialty medicines segment was $1.8 billion, a
decrease of $26 million compared to the third quarter of 2016. Gross
profit margin for our specialty medicines segment in the third quarter
of 2017 was 86.4%, compared to 87.1% in the third quarter of 2016.
Specialty Medicines Profit
Our specialty medicines segment profit was $1.2 billion in the third
quarter of 2017, up 5% compared to the third quarter of 2016.
Specialty medicines profit as a percentage of segment revenues was 56.6%
in the third quarter of 2017, compared to 53.6% in the third quarter of
2016.
The increase in profit and profitability was driven by lower S&M and R&D
expenses, partially offset by lower gross profit.
The following tables present details of our multiple sclerosis franchise
and of our other specialty medicines for the three months ended
September 30, 2017 and 2016:
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Multiple Sclerosis
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Three months ended September 30,
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2017
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2016
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U.S.$ in millions / % of MS Revenues
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Revenues
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$
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987
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100.0%
|
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$
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1,061
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100.0%
|
Gross profit
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|
|
906
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|
91.8%
|
|
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982
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|
92.6%
|
R&D expenses
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|
16
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1.6%
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|
|
20
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1.9%
|
S&M expenses
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64
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6.5%
|
|
|
76
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7.2%
|
MS profit
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$
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826
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83.7%
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$
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886
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83.5%
|
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Other Specialty
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Three months ended September 30,
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2017
|
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2016
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U.S.$ in millions / % of Other Specialty Revenues
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Revenues
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$
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1,047
|
|
100.0%
|
|
$
|
987
|
|
100.0%
|
Gross profit
|
|
|
851
|
|
81.3%
|
|
|
801
|
|
81.2%
|
R&D expenses
|
|
|
201
|
|
19.2%
|
|
|
208
|
|
21.1%
|
S&M expenses
|
|
|
324
|
|
31.0%
|
|
|
382
|
|
38.7%
|
Other Specialty profit
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|
$
|
326
|
|
31.1%
|
|
$
|
211
|
|
21.4%
|
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|
|
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Other Activities
Other revenues (primarily sales of third-party products for which
we act as distributor, mostly in the United States via Anda, contract
manufacturing services related to products divested in connection with
the Actavis Generics acquisition and other miscellaneous items) were
$569 million in the third quarter of 2017, compared to $256 million, in
the third quarter of 2016. The increase was mainly related to the
inclusion of Anda's revenues beginning in the fourth quarter of 2016.
Revenues from these other activities comprised 10% of our total revenues
in the quarter, compared to 5% in the third quarter of 2016.
Updated 2017 Financial Outlook
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FY 2017
|
|
Implied Q4 2017 Outlook
|
Revenues
|
|
$22.2-22.3 billion
(previously $22.8-23.2 billion)
|
|
$5.3-5.4 billion
|
Non-GAAP EPS
|
|
$3.77-3.87
(previously $4.30-4.50)
|
|
$0.70-0.80
|
Cash flow from operations
|
|
$3.15-3.3 billion
(previously $4.4-4.6 billion)
|
|
$0.85-1.0 billion
|
|
|
|
|
|
Our 2017 financial outlook was lowered to reflect the following:
-
An earlier than expected, at-risk launch of a generic competitor to
Copaxone® 40 mg/mL, with an expected impact on EPS of
approximately 30 cents; and
-
Lower than expected contribution from new generic launches in the U.S.
We now project approximately $400 million of revenues from new product
launches in the year, compared to the previous projection of $500
million; and
-
Increased price erosion and volume declines in our U.S. Generics
business including increased competition to our largest product, the
Concerta® authorized generic; and
-
Lower cash flow from operations due to a reduction in net income and a
delay in the resolution of our working capital dispute with Allergan,
which is now scheduled to conclude in 2018.
These estimates reflect management's current expectations for Teva's
performance in 2017. Actual results may vary, whether as a result of
exchange rate differences, market conditions or other factors. In
addition, the non-GAAP measures exclude the amortization of purchased
intangible assets, costs related to certain regulatory actions,
inventory step-up, legal settlements and reserves, impairments and
related tax effects.
Dividends
On October 31, 2017, the Board of Directors declared a cash dividend of
$0.085 per ordinary share for the third quarter of 2017. For holders of
our ordinary shares that are traded on the Tel Aviv Stock Exchange, the
dividend will be converted into new Israeli shekels based on the
official exchange rate as of November 2, 2017. The record date will be
November 28, 2017, and the payment date will be December 12, 2017. Tax
will be withheld at a rate of 15%.
On October 31, 2017, the Board of Directors also declared a cash
dividend of $17.50 per Mandatory Convertible Preferred Share for the
third quarter of 2017. The record date will be December 1, 2017 and the
payment date will be December 15, 2017. Tax will be withheld at a rate
of 15%.
Conference Call
Teva will host a conference call and live webcast along with a slide
presentation on Thursday, November 2, 2017 at 8:00 a.m. ET to discuss
its third quarter 2017 results and overall business environment. A
question & answer session will follow.
In order to participate, please dial the following numbers (at least 10
minutes before the scheduled start time): United States 1-866-869-2321;
Canada 1-866-766-8269 or International +44(0) 203 0095710; passcode:
91932782. For a list of other international toll-free numbers, click here.
A live webcast of the call will also be available on Teva's website at: www.ir.tevapharm.com.
Please log in at least 10 minutes prior to the conference call in order
to download the applicable audio software.
Following the conclusion of the call, a replay of the webcast will be
available within 24 hours on the Company's website. The replay can also
be accessed until November 30, 2017, 9:00 a.m. ET by calling United
States 1-866-247-4222; Canada 1-866-878-9237 or International +44(0)
1452550000; passcode: 91932782.
About Teva
Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) is a leading
global pharmaceutical company that delivers high-quality,
patient-centric healthcare solutions used by approximately 200 million
patients in 60 markets every day. Headquartered in Israel, Teva is the
world's largest generic medicines producer, leveraging its portfolio of
more than 1,800 molecules to produce a wide range of generic products in
nearly every therapeutic area. In specialty medicines, Teva has the
world-leading innovative treatment for multiple sclerosis as well as
late-stage development programs for other disorders of the central
nervous system, including movement disorders, migraine, pain and
neurodegenerative conditions, as well as a broad portfolio of
respiratory products. Teva is leveraging its generics and specialty
capabilities in order to seek new ways of addressing unmet patient needs
by combining drug development with devices, services and technologies.
Teva's net revenues in 2016 were $21.9 billion. For more information,
visit www.tevapharm.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, which
are based on management's current beliefs and expectations and are
subject to substantial risks and uncertainties, both known and unknown,
that could cause our future results, performance or achievements to
differ significantly from that expressed or implied by such
forward-looking statements. Important factors that could cause or
contribute to such differences include risks relating to:
-
our generics medicines business, including: that we are
substantially more dependent on this business, with its significant
attendant risks, following our acquisition of Allergan plc's worldwide
generic pharmaceuticals business ("Actavis Generics"); our ability to
realize the anticipated benefits of the acquisition (and any delay in
realizing those benefits) or difficulties in integrating Actavis
Generics; the increase in the number of competitors targeting generic
opportunities and seeking U.S. market exclusivity for generic versions
of significant products; price erosion relating to our generic
products, both from competing products and as a result of increased
governmental pricing pressures; and our ability to take advantage of
high-value biosimilar opportunities;
-
our specialty medicines business, including: competition for our
specialty products, especially Copaxone®, our
leading medicine, which faces competition from existing and potential
additional generic versions and orally-administered alternatives; our
ability to achieve expected results from investments in our product
pipeline; competition from companies with greater resources and
capabilities; and the effectiveness of our patents and other measures
to protect our intellectual property rights;
-
our substantially increased indebtedness and significantly
decreased cash on hand, which may limit our ability to incur
additional indebtedness, engage in additional transactions or make new
investments, and may result in a downgrade of our credit ratings;
-
our business and operations in general, including: uncertainties
relating to our recent senior management changes; our ability to
develop and commercialize additional pharmaceutical products;
manufacturing or quality control problems, which may damage our
reputation for quality production and require costly remediation;
interruptions in our supply chain, including due to labor unrest;
disruptions of our or third party information technology systems or
breaches of our data security; the failure to recruit or retain key
personnel, including those who joined us as part of the Actavis
Generics acquisition; the restructuring of our manufacturing network,
including potential related labor unrest or workers' strikes; the
impact of continuing consolidation of our distributors and customers;
variations in patent laws that may adversely affect our ability to
manufacture our products; our ability to consummate dispositions on
terms acceptable to us; adverse effects of political or economic
instability, major hostilities or terrorism on our significant
worldwide operations; and our ability to successfully bid for suitable
acquisition targets or licensing opportunities, or to consummate and
integrate acquisitions;
-
compliance, regulatory and litigation matters, including: costs and
delays resulting from the extensive governmental regulation to which
we are subject; the effects of reforms in healthcare regulation and
reductions in pharmaceutical pricing, reimbursement and coverage;
potential additional adverse consequences following our resolution
with the U.S. government of our Foreign Corrupt Practices Act
investigation; governmental investigations into sales and marketing
practices; potential liability for sales of generic products prior to
a final resolution of outstanding patent litigation; product liability
claims; increased government scrutiny of our patent settlement
agreements; failure to comply with complex Medicare and Medicaid
reporting and payment obligations; and environmental risks;
-
other financial and economic risks, including: our exposure to
currency fluctuations and restrictions as well as credit risks; the
significant increase in our intangible assets, which may result in
additional substantial impairment charges; potentially significant
increases in tax liabilities; and the effect on our overall effective
tax rate of the termination or expiration of governmental programs or
tax benefits, or of a change in our business;
and other factors discussed in our Annual Report on Form 20-F for the
year ended December 31, 2016, including in the section captioned "Risk
Factors," and in our other filings with the U.S. Securities and Exchange
Commission, which are available at www.sec.gov
and www.tevapharm.com.
Forward-looking statements speak only as of the date on which they are
made, and we assume no obligation to update or revise any
forward-looking statements or other information contained herein,
whether as a result of new information, future events or otherwise. You
are cautioned not to put undue reliance on these forward-looking
statements.
|
|
|
|
Consolidated Statements of Income
|
(Unaudited, U.S. dollars in millions, except
share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net revenues
|
|
|
|
5,610
|
|
|
5,563
|
|
|
16,926
|
|
|
15,411
|
|
Cost of sales
|
|
|
|
2,967
|
|
|
2,762
|
|
|
8,643
|
|
|
6,942
|
|
Gross profit
|
|
|
|
2,643
|
|
|
2,801
|
|
|
8,283
|
|
|
8,469
|
|
Research and development expenses
|
|
|
|
545
|
|
|
663
|
|
|
1,488
|
|
|
1,427
|
|
Selling and marketing expenses
|
|
|
|
860
|
|
|
940
|
|
|
2,791
|
|
|
2,731
|
|
General and administrative expenses
|
|
|
|
330
|
|
|
310
|
|
|
838
|
|
|
925
|
|
Impairments, restructuring and others
|
|
|
|
550
|
|
|
(410
|
)
|
|
1,209
|
|
|
421
|
|
Legal settlements and loss contingencies
|
|
|
|
(20
|
)
|
|
533
|
|
|
324
|
|
|
674
|
|
Goodwill impairment charge
|
|
|
|
-
|
|
|
-
|
|
|
6,100
|
|
|
-
|
|
Operating (loss) income
|
|
|
|
378
|
|
|
765
|
|
|
(4,467
|
)
|
|
2,291
|
|
Financial expenses - net
|
|
|
|
259
|
|
|
150
|
|
|
704
|
|
|
553
|
|
Income (loss) before income taxes
|
|
|
|
119
|
|
|
615
|
|
|
(5,171
|
)
|
|
1,738
|
|
Income taxes (benefit)
|
|
|
|
(494
|
)
|
|
207
|
|
|
(462
|
)
|
|
464
|
|
Share in (profits) losses of associated companies, net
|
|
|
|
3
|
|
|
(2
|
)
|
|
10
|
|
|
(11
|
)
|
Net income (loss)
|
|
|
|
610
|
|
|
410
|
|
|
(4,719
|
)
|
|
1,285
|
|
Net Income (loss) attributable to non-controlling interests
|
|
|
|
15
|
|
|
(2
|
)
|
|
11
|
|
|
(17
|
)
|
Net income (loss) attributable to Teva
|
|
|
|
595
|
|
|
412
|
|
|
(4,730
|
)
|
|
1,302
|
|
Dividends on preferred shares
|
|
|
|
65
|
|
|
64
|
|
|
195
|
|
|
196
|
|
Net income (loss) attributable to Teva's ordinary shareholders
|
|
|
|
530
|
|
|
348
|
|
|
(4,925
|
)
|
|
1,106
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to ordinary shareholders:
|
|
Basic ($)
|
|
0.52
|
|
|
0.35
|
|
|
(4.85
|
)
|
|
1.18
|
|
|
|
Diluted ($)
|
|
0.52
|
|
|
0.35
|
|
|
(4.85
|
)
|
|
1.17
|
|
Weighted average number of shares (in millions):
|
|
Basic
|
|
1,017
|
|
|
979
|
|
|
1,016
|
|
|
935
|
|
|
|
Diluted
|
|
1,017
|
|
|
984
|
|
|
1,016
|
|
|
942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income attributable to ordinary shareholders:*
|
|
|
|
1,012
|
|
|
1,300
|
|
|
3,126
|
|
|
3,568
|
|
Non-GAAP net income attributable to ordinary shareholders for
diluted earnings per share:**
|
|
|
1,012
|
|
|
1,364
|
|
|
3,126
|
|
|
3,764
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP earnings per share attributable to ordinary
shareholders:*
|
|
Basic ($)
|
|
1.00
|
|
|
1.33
|
|
|
3.08
|
|
|
3.81
|
|
|
|
Diluted ($)**
|
|
1.00
|
|
|
1.31
|
|
|
3.07
|
|
|
3.76
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP average number of shares (in millions):
|
|
Basic
|
|
1,017
|
|
|
979
|
|
|
1,016
|
|
|
935
|
|
|
|
Diluted
|
|
1,017
|
|
|
1,044
|
|
|
1,017
|
|
|
1,001
|
|
|
|
|
|
|
|
|
|
|
|
|
* See reconciliation attached.
|
|
**Dividends on the mandatory convertible preferred shares of $196
and $64 million for the nine months and the three months ended
September 30, 2016, respectively, are added back to non-GAAP net
income attributable to ordinary shareholders, since such preferred
shares had a dilutive effect on non-GAAP earnings per share.
|
|
|
|
|
Condensed Consolidated Balance Sheets
|
(U.S. dollars in millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2017
|
|
2016
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
680
|
|
988
|
Trade receivables
|
|
7,424
|
|
7,523
|
Inventories
|
|
5,060
|
|
4,954
|
Prepaid expenses
|
|
1,203
|
|
1,629
|
Other current assets
|
|
581
|
|
1,293
|
Assets held for sale
|
|
1,278
|
|
841
|
Total current assets
|
|
16,226
|
|
17,228
|
Deferred income taxes
|
|
536
|
|
625
|
Other non-current assets
|
|
1,049
|
|
1,235
|
Property, plant and equipment, net
|
|
8,001
|
|
8,073
|
Identifiable intangible assets, net
|
|
20,878
|
|
21,487
|
Goodwill
|
|
39,392
|
|
44,409
|
Total assets
|
|
86,082
|
|
93,057
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Short-term debt
|
|
2,731
|
|
3,276
|
Sales reserves and allowances
|
|
7,662
|
|
7,839
|
Trade payables
|
|
2,370
|
|
2,157
|
Employee-related obligations
|
|
718
|
|
859
|
Accrued expenses
|
|
2,577
|
|
3,405
|
Other current liabilities
|
|
847
|
|
836
|
Liabilities held for sale
|
|
38
|
|
116
|
Total current liabilities
|
|
16,943
|
|
18,488
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
Deferred income taxes
|
|
4,914
|
|
5,413
|
Other taxes and long-term liabilities
|
|
1,959
|
|
1,639
|
Senior notes and loans
|
|
31,971
|
|
32,524
|
Total long-term liabilities
|
|
38,844
|
|
39,576
|
Equity:
|
|
|
|
|
Teva shareholders' equity
|
|
28,671
|
|
33,337
|
Non-controlling interests
|
|
1,624
|
|
1,656
|
Total equity
|
|
30,295
|
|
34,993
|
Total liabilities and equity
|
|
86,082
|
|
93,057
|
|
Condensed Consolidated Cash Flow
|
(Unaudited, U.S. Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
610
|
|
|
410
|
|
|
(4,719
|
)
|
|
1,285
|
|
Net change in operating assets and liabilities
|
|
(44
|
)
|
|
1,047
|
|
|
(755
|
)
|
|
1,100
|
|
Items not involving cash flow
|
|
551
|
|
|
4
|
|
|
7,802
|
|
|
1,415
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
1,117
|
|
|
1,461
|
|
|
2,328
|
|
|
3,800
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
(218
|
)
|
|
(32,301
|
)
|
|
572
|
|
|
(34,943
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
(825
|
)
|
|
25,372
|
|
|
(3,244
|
)
|
|
25,918
|
|
|
|
|
|
|
|
|
|
|
Translation adjustment on cash and cash equivalents
|
|
7
|
|
|
41
|
|
|
36
|
|
|
(164
|
)
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
81
|
|
|
(5,427
|
)
|
|
(308
|
)
|
|
(5,389
|
)
|
|
|
|
|
|
|
|
|
|
Balance of cash and cash equivalents at beginning of period
|
|
599
|
|
|
6,984
|
|
|
988
|
|
|
6,946
|
|
|
|
|
|
|
|
|
|
|
Balance of cash and cash equivalents at end of period
|
|
680
|
|
|
1,557
|
|
|
680
|
|
|
1,557
|
|
|
|
|
|
|
|
|
|
|
Non GAAP reconciliation items
|
(Unaudited, U.S. Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
(U.S. $ in millions)
|
|
|
|
|
|
|
|
|
|
Gain on sales of business and long-lived assets
|
|
-
|
|
|
(693
|
)
|
|
-
|
|
|
(693
|
)
|
Amortization of purchased intangible assets
|
|
357
|
|
|
429
|
|
|
1,088
|
|
|
811
|
|
Restructuring expenses
|
|
72
|
|
|
115
|
|
|
300
|
|
|
154
|
|
Inventory step-up
|
|
-
|
|
|
152
|
|
|
67
|
|
|
243
|
|
Equity compensation expenses
|
|
32
|
|
|
31
|
|
|
103
|
|
|
83
|
|
Costs related to regulatory actions taken in facilities
|
|
(1
|
)
|
|
46
|
|
|
48
|
|
|
123
|
|
Acquisition, integration and related expenses
|
|
31
|
|
|
85
|
|
|
87
|
|
|
184
|
|
Other R&D expenses
|
|
150
|
|
|
252
|
|
|
176
|
|
|
262
|
|
Contingent consideration
|
|
18
|
|
|
34
|
|
|
179
|
|
|
85
|
|
Legal settlements and loss contingencies
|
|
(20
|
)
|
|
533
|
|
|
324
|
|
|
674
|
|
Goodwill impairment charge
|
|
|
|
-
|
|
|
6,100
|
|
|
-
|
|
Impairment of long-lived assets
|
|
408
|
|
|
29
|
|
|
564
|
|
|
614
|
|
Other non-GAAP items
|
|
45
|
|
|
16
|
|
|
121
|
|
|
75
|
|
Financial expense (income)
|
|
30
|
|
|
(1
|
)
|
|
5
|
|
|
344
|
|
Minority interest
|
|
(11
|
)
|
|
(22
|
)
|
|
(44
|
)
|
|
(65
|
)
|
Tax benefit
|
|
(629
|
)
|
|
(54
|
)
|
|
(1,067
|
)
|
|
(432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017
|
|
Three Months Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollars and shares in millions (except per share amounts)
|
|
|
|
|
GAAP
|
|
Non-GAAP Adjustments
|
|
Dividends on Preferred Shares
|
|
Non-GAAP
|
|
% of Net Revenues
|
|
GAAP
|
|
Non-GAAP Adjustments
|
|
Dividends on Preferred Shares
|
|
Non-GAAP
|
|
% of Net Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (1)
|
|
2,643
|
|
331
|
|
|
|
|
2,974
|
|
53
|
%
|
|
2,801
|
|
592
|
|
|
|
|
3,393
|
|
61
|
%
|
|
|
Operating income (loss) (1)(2)
|
|
378
|
|
1,092
|
|
|
|
|
1,470
|
|
26
|
%
|
|
765
|
|
1,029
|
|
|
|
|
1,794
|
|
32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to ordinary shareholders (1)(2)(3)(4)
|
|
530
|
|
482
|
|
|
|
|
1,012
|
|
18
|
%
|
|
348
|
|
952
|
|
|
64
|
|
1,364
|
|
25
|
%
|
|
|
Earnings per share attributable to ordinary shareholders - diluted
(5)
|
|
0.52
|
|
0.48
|
|
|
|
|
1.00
|
|
|
|
0.35
|
|
0.96
|
|
|
|
|
1.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amortization of purchased intangible assets
|
|
|
|
310
|
|
|
|
|
|
|
|
|
|
|
387
|
|
|
|
|
|
|
|
|
|
Inventory step-up
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
Costs related to regulatory actions taken in facilities
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
Equity compensation expenses
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
Other COGS related adjustments
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Gross profit adjustments
|
|
|
|
331
|
|
|
|
|
|
|
|
|
|
|
592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
Restructuring expenses
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
Amortization of purchased intangible assets
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
Equity compensation expenses
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
Acquisition, Integration and related expenses
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
Other R&D expenses
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
252
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
Legal settlements and loss contingencies
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
533
|
|
|
|
|
|
|
|
|
|
Impairment of long-lived assets
|
|
|
|
408
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
Gain on sales of business and long-lived assets
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
(693
|
)
|
|
|
|
|
|
|
|
|
Other operating related adjustments
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
761
|
|
|
|
|
|
|
|
|
|
|
437
|
|
|
|
|
|
|
|
|
|
Operating income adjustments
|
|
|
|
1,092
|
|
|
|
|
|
|
|
|
|
|
1,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
Financial expense (income)
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
Tax effect
|
|
|
|
(629
|
)
|
|
|
|
|
|
|
|
|
|
(54
|
)
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
Net income adjustments
|
|
|
|
482
|
|
|
|
|
|
|
|
|
|
|
952
|
|
|
|
|
|
|
|
|
|
|
(4)
|
|
For the three months ended September 30, 2017, no account was taken
of the potential dilution of the accrued dividend to preferred
shares amounting to $65 million, since it had an anti-dilutive
effect on loss per share. Dividends on the mandatory convertible
preferred shares of $64 million for the three months ended September
30, 2016, are added back to non-GAAP net income attributable to
ordinary shareholders, since such preferred shares had a dilutive
effect on non-GAAP earnings per share.
|
|
|
|
(5)
|
|
The non-GAAP weighted average number of shares was 1,017 and 979
million for the three months ended September 30, 2017 and 2016,
respectively. For the three months ended September 30, 2017, the
mandatory convertible preferred shares amounting to 59.4 million
weighted average shares had an anti-dilutive effect on earnings per
share and were therefore excluded from the outstanding shares
calculation. Non-GAAP earnings per share can be reconciled with GAAP
earnings per share by dividing each of the amounts included in
footnotes 1-4 above by the applicable weighted average share number.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2017
|
|
Nine Months Ended September 30, 2016
|
|
|
|
|
U.S. dollars and shares in millions (except per share amounts)
|
|
|
|
|
GAAP
|
|
Non-GAAP Adjustments
|
|
Dividends on Preferred Shares
|
|
Non-GAAP
|
|
% of Net Revenues
|
|
GAAP
|
|
Non-GAAP Adjustments
|
|
Dividends on Preferred Shares
|
|
Non-GAAP
|
|
% of Net Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (1)
|
|
8,283
|
|
|
1,114
|
|
|
|
|
9,397
|
|
56
|
%
|
|
8,469
|
|
1,090
|
|
|
|
|
9,559
|
|
62
|
%
|
|
|
Operating income (loss) (1)(2)
|
|
(4,467
|
)
|
|
9,155
|
|
|
|
|
4,688
|
|
28
|
%
|
|
2,291
|
|
2,612
|
|
|
|
|
4,903
|
|
32
|
%
|
|
|
Net income (loss) attributable to ordinary shareholders (1)(2)(3)(4)
|
|
(4,925
|
)
|
|
8,051
|
|
|
|
|
3,126
|
|
18
|
%
|
|
1,106
|
|
2,462
|
|
|
196
|
|
3,764
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to ordinary shareholders -
diluted (5)
|
|
(4.85
|
)
|
|
7.92
|
|
|
|
|
3.07
|
|
|
|
1.17
|
|
2.59
|
|
|
|
|
3.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amortization of purchased intangible assets
|
|
|
|
944
|
|
|
|
|
|
|
|
|
|
|
711
|
|
|
|
|
|
|
|
|
|
Inventory step-up
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
243
|
|
|
|
|
|
|
|
|
|
Costs related to regulatory actions taken in facilities
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
Equity compensation expenses
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
Other COGS related adjustments
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Gross profit adjustments
|
|
|
|
1,114
|
|
|
|
|
|
|
|
|
|
|
1,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
Legal settlements and loss contingencies
|
|
|
|
324
|
|
|
|
|
|
|
|
|
|
|
674
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
Acquisition and related expenses
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
Other R&D expenses
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
Equity compensation expenses
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
Restructuring expenses
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
Goodwill impairment charge
|
|
|
|
6,100
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Impairment of long-lived assets
|
|
|
|
564
|
|
|
|
|
|
|
|
|
|
|
614
|
|
|
|
|
|
|
|
|
|
Amortization of purchased intangible assets
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
Gain on sales of business and long-lived assets
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
(693
|
)
|
|
|
|
|
|
|
|
|
Other operating related expenses (income)
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,041
|
|
|
|
|
|
|
|
|
|
|
1,522
|
|
|
|
|
|
|
|
|
|
Operating income adjustments
|
|
|
|
9,155
|
|
|
|
|
|
|
|
|
|
|
2,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
Financial expense
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
344
|
|
|
|
|
|
|
|
|
|
Tax effect
|
|
|
|
(1,067
|
)
|
|
|
|
|
|
|
|
|
|
(432
|
)
|
|
|
|
|
|
|
|
|
Impairment of equity investment-net
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
Net income adjustments
|
|
|
|
8,051
|
|
|
|
|
|
|
|
|
|
|
2,462
|
|
|
|
|
|
|
|
|
|
|
(4)
|
|
For the nine months ended September 30, 2017, no account was taken
of the potential dilution of the accrued dividend to preferred
shares amounting to $195 million, since it had an anti-dilutive
effect on loss per share. Dividends on the mandatory convertible
preferred shares of $196 million for the nine months ended September
30, 2016 are added back to non-GAAP net income attributable to
ordinary shareholders, since such preferred shares had a dilutive
effect on non-GAAP earnings per share.
|
|
|
|
(5)
|
|
The non-GAAP weighted average number of shares was 1,016 and 935
million for the nine months ended September 30, 2017 and 2016,
respectively. For the nine months ended September 30, 2017, the
mandatory convertible preferred shares amounting to 59.4 million
weighted average shares had an anti-dilutive effect on earnings per
share and were therefore excluded from the outstanding shares
calculation. Non-GAAP earnings per share can be reconciled with GAAP
earnings per share by dividing each of the amounts included in
footnotes 1-4 above by the applicable weighted average share number.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Generics
|
|
|
Three months ended September 30,
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
2017 - 2016
|
|
|
(U.S.$ in millions / % of Segment Revenues)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
3,007
|
|
100.0%
|
|
$
|
3,259
|
|
100.0%
|
|
(8%)
|
Gross Profit
|
|
|
1,158
|
|
38.5%
|
|
|
1,590
|
|
48.8%
|
|
(27%)
|
R&D Expenses
|
|
|
162
|
|
5.4%
|
|
|
185
|
|
5.7%
|
|
(12%)
|
S&M Expenses
|
|
|
377
|
|
12.5%
|
|
|
423
|
|
13.0%
|
|
(11%)
|
Segment Profit*
|
|
$
|
619
|
|
20.6%
|
|
$
|
982
|
|
30.1%
|
|
(37%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty
|
|
|
Three months ended September 30,
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
2017 - 2016
|
|
|
(U.S.$ in millions / % of Segment Revenues)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,034
|
|
100.0%
|
|
$
|
2,048
|
|
100.0%
|
|
(1%)
|
Gross Profit
|
|
|
1,757
|
|
86.4%
|
|
|
1,783
|
|
87.1%
|
|
(1%)
|
R&D Expenses
|
|
|
217
|
|
10.7%
|
|
|
228
|
|
11.1%
|
|
(5%)
|
S&M Expenses
|
|
|
388
|
|
19.1%
|
|
|
458
|
|
22.4%
|
|
(15%)
|
Segment Profit*
|
|
$
|
1,152
|
|
56.6%
|
|
$
|
1,097
|
|
53.6%
|
|
5%
|
|
* Segment profit consists of gross profit for the segment, less R&D
and S&M expenses related to the segment. Segment profit does not
include G&A expenses, amortization and certain other items.
Beginning in the fourth quarter of 2016, our OTC business is
included in our generics medicines segment. The data presented have
been conformed to reflect these changes for all relevant periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Generics
|
|
|
Nine months ended September 30,
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
2017 - 2016
|
|
|
(U.S.$ in millions / % of Segment Revenues)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
9,143
|
|
100.0%
|
|
$
|
8,274
|
|
100.0%
|
|
11%
|
Gross Profit
|
|
|
3,844
|
|
42.0%
|
|
|
3,861
|
|
46.7%
|
|
0%
|
R&D Expenses
|
|
|
553
|
|
6.1%
|
|
|
448
|
|
5.4%
|
|
23%
|
S&M Expenses
|
|
|
1,202
|
|
13.1%
|
|
|
1,178
|
|
14.3%
|
|
2%
|
Segment Profit*
|
|
$
|
2,089
|
|
22.8%
|
|
$
|
2,235
|
|
27.0%
|
|
(7%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty
|
|
|
|
|
Nine months ended September 30,
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
2017 - 2016
|
|
|
(U.S.$ in millions / % of Segment Revenues)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
6,119
|
|
100.0%
|
|
$
|
6,471
|
|
100.0%
|
|
(5%)
|
Gross Profit
|
|
|
5,362
|
|
87.6%
|
|
|
5,632
|
|
87.0%
|
|
(5%)
|
R&D Expenses
|
|
|
722
|
|
11.8%
|
|
|
702
|
|
10.8%
|
|
3%
|
S&M Expenses
|
|
|
1,288
|
|
21.0%
|
|
|
1,393
|
|
21.5%
|
|
(8%)
|
Segment Profit*
|
|
$
|
3,352
|
|
54.8%
|
|
$
|
3,537
|
|
54.7%
|
|
(5%)
|
|
* Segment profit consists of gross profit for the segment, less R&D
and S&M expenses related to the segment. Segment profit does not
include G&A expenses, amortization and certain other items.
Beginning in the fourth quarter of 2016, our OTC business is
included in our generics medicines segment. The data presented have
been conformed to reflect these changes for all relevant periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multiple Sclerosis
|
|
|
|
|
Three months ended September 30,
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
2017 - 2016
|
|
|
(U.S. $ in millions / % of Segment Revenues)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
987
|
|
100.0%
|
|
$
|
1,061
|
|
100.0%
|
|
(7%)
|
Gross profit
|
|
|
906
|
|
91.8%
|
|
|
982
|
|
92.6%
|
|
(8%)
|
R&D expenses
|
|
|
16
|
|
1.6%
|
|
|
20
|
|
1.9%
|
|
(20%)
|
S&M expenses
|
|
|
64
|
|
6.5%
|
|
|
76
|
|
7.2%
|
|
(16%)
|
Segment profitability
|
|
$
|
826
|
|
83.7%
|
|
$
|
886
|
|
83.5%
|
|
(7%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Specialty
|
|
|
|
|
Three months ended September 30,
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
2017 - 2016
|
|
|
(U.S. $ in millions / % of Segment Revenues)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,047
|
|
100.0%
|
|
$
|
987
|
|
100.0%
|
|
6%
|
Gross profit
|
|
|
851
|
|
81.3%
|
|
|
801
|
|
81.2%
|
|
6%
|
R&D expenses
|
|
|
201
|
|
19.2%
|
|
|
208
|
|
21.1%
|
|
(3%)
|
S&M expenses
|
|
|
324
|
|
31.0%
|
|
|
382
|
|
38.7%
|
|
(15%)
|
Segment profitability
|
|
$
|
326
|
|
31.1%
|
|
$
|
211
|
|
21.4%
|
|
55%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multiple Sclerosis
|
|
|
|
|
Nine months ended September 30,
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
2017 - 2016
|
|
|
(U.S. $ in millions / % of MS Revenues)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,980
|
|
100.0%
|
|
$
|
3,208
|
|
100.0%
|
|
(7%)
|
Gross profit
|
|
|
2,731
|
|
91.6%
|
|
|
2,930
|
|
91.3%
|
|
(7%)
|
R&D expenses
|
|
|
58
|
|
1.9%
|
|
|
65
|
|
2.0%
|
|
(11%)
|
S&M expenses
|
|
|
280
|
|
9.4%
|
|
|
246
|
|
7.7%
|
|
14%
|
MS profit
|
|
$
|
2,393
|
|
80.3%
|
|
$
|
2,619
|
|
81.6%
|
|
(9%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Specialty
|
|
|
|
|
Nine months ended September 30,
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
2017 - 2016
|
|
|
(U.S. $ in millions / % of Other Specialty Revenues)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
3,139
|
|
100.0%
|
|
$
|
3,263
|
|
100.0%
|
|
(4%)
|
Gross profit
|
|
|
2,631
|
|
83.8%
|
|
|
2,702
|
|
82.8%
|
|
(3%)
|
R&D expenses
|
|
|
664
|
|
21.2%
|
|
|
637
|
|
19.5%
|
|
4%
|
S&M expenses
|
|
|
1,008
|
|
32.0%
|
|
|
1,147
|
|
35.2%
|
|
(12%)
|
Other Specialty profit
|
|
$
|
959
|
|
30.6%
|
|
$
|
918
|
|
28.1%
|
|
4%
|
|
|
|
|
|
Reconciliation of our segment profit
|
to consolidated income before income taxes
|
|
|
Three months ended
|
|
|
September 30,
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
(U.S. $ in millions)
|
|
|
|
|
|
Generic medicines profit
|
|
$
|
619
|
|
|
$
|
982
|
|
Specialty medicines profit
|
|
|
1,152
|
|
|
|
1,097
|
|
Total segment profit
|
|
|
1,771
|
|
|
|
2,079
|
|
Profit of other activities
|
|
|
17
|
|
|
|
19
|
|
|
|
|
1,788
|
|
|
|
2,098
|
|
Amounts not allocated to segments:
|
|
|
|
|
Amortization
|
|
|
357
|
|
|
|
429
|
|
General and administrative expenses
|
|
|
330
|
|
|
|
310
|
|
Impairments, restructuring and others
|
|
|
550
|
|
|
|
(410
|
)
|
Inventory step-up
|
|
|
-
|
|
|
|
152
|
|
Other R&D expenses
|
|
|
150
|
|
|
|
252
|
|
Costs related to regulatory actions taken in facilities
|
|
|
(1
|
)
|
|
|
46
|
|
Legal settlements and loss contingencies
|
|
|
(20
|
)
|
|
|
533
|
|
Other unallocated amounts
|
|
|
44
|
|
|
|
21
|
|
|
|
|
|
|
Consolidated operating income
|
|
|
378
|
|
|
|
765
|
|
Financial expenses - net
|
|
|
259
|
|
|
|
150
|
|
Consolidated income before income taxes
|
|
$
|
119
|
|
|
$
|
615
|
|
|
|
|
|
|
|
Reconciliation of our segment profit
|
to Teva's consolidated income before income taxes
|
|
|
Nine months ended
|
|
|
September 30,
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
(U.S. $ in millions)
|
|
|
|
|
|
|
|
Generic medicines profit
|
|
$
|
2,089
|
|
|
$
|
2,235
|
|
Specialty medicines profit
|
|
|
3,352
|
|
|
|
3,537
|
|
Total segment profit
|
|
|
5,441
|
|
|
|
5,772
|
|
Profit of other activities
|
|
|
61
|
|
|
|
28
|
|
|
|
|
5,502
|
|
|
|
5,800
|
|
Amounts not allocated to segments:
|
|
|
|
|
|
Amortization
|
|
|
1,088
|
|
|
|
811
|
|
General and administrative expenses
|
|
|
838
|
|
|
|
925
|
|
Goodwill impairment charge
|
|
|
6,100
|
|
|
|
-
|
|
Impairments, restructuring and others
|
|
|
1,209
|
|
|
|
421
|
|
Inventory step-up
|
|
|
67
|
|
|
|
243
|
|
Other R&D expenses
|
|
|
176
|
|
|
|
262
|
|
Costs related to regulatory actions taken in facilities
|
|
|
48
|
|
|
|
123
|
|
Legal settlements and loss contingencies
|
|
|
324
|
|
|
|
674
|
|
Other unallocated amounts
|
|
|
119
|
|
|
|
50
|
|
|
|
|
|
|
|
Consolidated operating income (loss)
|
|
|
(4,467
|
)
|
|
|
2,291
|
|
Financial expenses - net
|
|
|
704
|
|
|
|
553
|
|
Consolidated income (loss) before income taxes
|
|
$
|
(5,171
|
)
|
|
$
|
1,738
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Activity and Geographical Area
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Percentage Change
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
|
2017 - 2016
|
|
2017 - 2016
|
|
|
(U.S. $ in millions)
|
|
|
|
|
in local currencies
|
Generic Medicines
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,179
|
|
$
|
1,293
|
|
|
(9%)
|
|
(9%)
|
Europe
|
|
|
985
|
|
|
933
|
|
|
6%
|
|
1%
|
Rest of the World
|
|
|
843
|
|
|
1,033
|
|
|
(18%)
|
|
5%
|
Total Generic Medicines
|
|
|
3,007
|
|
|
3,259
|
|
|
(8%)
|
|
(2%)
|
Specialty Medicines
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
1,493
|
|
|
1,558
|
|
|
(4%)
|
|
(4%)
|
Europe
|
|
|
447
|
|
|
406
|
|
|
10%
|
|
5%
|
Rest of the World
|
|
|
94
|
|
|
84
|
|
|
12%
|
|
12%
|
Total Specialty Medicines
|
|
|
2,034
|
|
|
2,048
|
|
|
(1%)
|
|
(2%)
|
Other Revenues
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
317
|
|
|
12
|
|
|
n/a
|
|
n/a
|
Europe
|
|
|
80
|
|
|
71
|
|
|
13%
|
|
6%
|
Rest of the World
|
|
|
172
|
|
|
173
|
|
|
(1%)
|
|
(6%)
|
Total Other Revenues
|
|
|
569
|
|
|
256
|
|
|
122%
|
|
117%
|
Total Revenues
|
|
$
|
5,610
|
|
$
|
5,563
|
|
|
1%
|
|
4%
|
|
*In light of the political and economic conditions in Venezuela,
we exclude the quarterly changes in revenues and operating profit
in Venezuela from any discussion of local currency results.
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Activity and Geographical Area
|
(Unaudited)
|
|
|
|
Nine Months Ended September 30,
|
|
|
Percentage Change
|
|
Percentage Change
|
|
|
|
2017
|
|
2016
|
|
|
2017 - 2016
|
|
2017 - 2016
|
|
|
|
(U.S. $ in millions)
|
|
|
|
|
in local currencies
|
Generic Medicines
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
$
|
3,850
|
|
$
|
3,161
|
|
|
22%
|
|
22%
|
Europe
|
|
|
|
2,930
|
|
|
2,494
|
|
|
17%
|
|
19%
|
Rest of the World
|
|
|
|
2,363
|
|
|
2,619
|
|
|
(10%)
|
|
14%
|
Total Generic Medicines
|
|
|
|
9,143
|
|
|
8,274
|
|
|
11%
|
|
18%
|
Specialty Medicines
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
4,521
|
|
|
5,007
|
|
|
(10%)
|
|
(10%)
|
Europe
|
|
|
|
1,304
|
|
|
1,214
|
|
|
7%
|
|
9%
|
Rest of the World
|
|
|
|
294
|
|
|
250
|
|
|
18%
|
|
18%
|
Total Specialty
|
|
|
|
6,119
|
|
|
6,471
|
|
|
(5%)
|
|
-5%
|
Other Revenues
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
941
|
|
|
19
|
|
|
n/a
|
|
n/a
|
Europe
|
|
|
|
237
|
|
|
176
|
|
|
35%
|
|
35%
|
Rest of the World
|
|
|
|
486
|
|
|
471
|
|
|
3%
|
|
(2%)
|
Total Other Revenues
|
|
|
|
1,664
|
|
|
666
|
|
|
150%
|
|
146%
|
Total Revenues
|
|
|
$
|
16,926
|
|
$
|
15,411
|
|
|
10%
|
|
14%
|
*In light of the political and economic conditions in Venezuela,
we exclude the quarterly changes in revenues and operating profit
in Venezuela from any discussion of local currency results.
|
|
|
|
|
|
|
|
Revenues by Product line
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
|
2017 - 2016
|
|
|
(U.S. $ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Generic Medicines
|
|
$
|
3,007
|
|
$
|
3,259
|
|
|
(8%)
|
OTC
|
|
|
306
|
|
|
391
|
|
|
(22%)
|
API
|
|
|
171
|
|
|
191
|
|
|
(10%)
|
Specialty Medicines
|
|
|
2,034
|
|
|
2,048
|
|
|
(1%)
|
CNS
|
|
|
1,146
|
|
|
1,302
|
|
|
(12%)
|
Copaxone®
|
|
|
987
|
|
|
1,061
|
|
|
(7%)
|
Azilect®
|
|
|
36
|
|
|
101
|
|
|
(64%)
|
Nuvigil®
|
|
|
21
|
|
|
21
|
|
|
0%
|
Respiratory
|
|
|
351
|
|
|
270
|
|
|
30%
|
ProAir®
|
|
|
155
|
|
|
118
|
|
|
31%
|
QVAR®
|
|
|
95
|
|
|
96
|
|
|
(1%)
|
Oncology
|
|
|
302
|
|
|
269
|
|
|
12%
|
Treanda® and Bendeka®
|
|
|
181
|
|
|
149
|
|
|
21%
|
Women's Health
|
|
|
119
|
|
|
109
|
|
|
9%
|
Other Specialty
|
|
|
116
|
|
|
98
|
|
|
18%
|
All Others
|
|
|
569
|
|
|
256
|
|
|
122%
|
Total
|
|
$
|
5,610
|
|
$
|
5,563
|
|
|
1%
|
|
|
|
|
|
|
|
Revenues by Product line
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
Percentage Change
|
|
|
2017
|
|
2016
|
|
|
2017 - 2016
|
|
|
(U.S. $ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Generic Medicines
|
|
$
|
9,143
|
|
$
|
8,274
|
|
|
11%
|
OTC
|
|
|
853
|
|
|
949
|
|
|
(10%)
|
API
|
|
|
572
|
|
|
595
|
|
|
(4%)
|
Specialty Medicines
|
|
|
6,119
|
|
|
6,471
|
|
|
(5%)
|
CNS
|
|
|
3,442
|
|
|
4,040
|
|
|
(15%)
|
Copaxone®
|
|
|
2,980
|
|
|
3,208
|
|
|
(7%)
|
Azilect®
|
|
|
130
|
|
|
322
|
|
|
(60%)
|
Nuvigil®
|
|
|
52
|
|
|
175
|
|
|
(70%)
|
Respiratory
|
|
|
977
|
|
|
949
|
|
|
3%
|
ProAir®
|
|
|
399
|
|
|
426
|
|
|
(6%)
|
QVAR®
|
|
|
300
|
|
|
346
|
|
|
(13%)
|
Oncology
|
|
|
852
|
|
|
871
|
|
|
(2%)
|
Treanda® and Bendeka®
|
|
|
501
|
|
|
511
|
|
|
(2%)
|
Women's Health
|
|
|
358
|
|
|
336
|
|
|
7%
|
Other Specialty*
|
|
|
490
|
|
|
275
|
|
|
78%
|
All Others
|
|
|
1,664
|
|
|
666
|
|
|
150%
|
Total
|
|
$
|
16,926
|
|
$
|
15,411
|
|
|
10%
|
|
* Includes aggregate payments of $150 million related to the
Ninlaro® transaction in the first half of 2017.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171102005626/en/
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