Teva Pharmaceutical Industries Ltd. (NASDAQ:TEVA) today reported results for the quarter ended September 30, 2009.
Third Quarter Highlights:
- Net sales of $3.55 billion, up 25% compared to the third quarter of 2008.
- Non-GAAP net income of $806 million, up 28% compared with the third quarter of 2008. GAAP net income totaled $649 million compared with $631 million in the comparable quarter in 2008.
- Non-GAAP diluted EPS of $0.89, up 16% compared with the third quarter of 2008. GAAP diluted EPS totaled $0.72, compared with $0.77 in the comparable quarter in 2008.
- Non-GAAP operating income of $997 million, up 42% compared to the third quarter of 2008. GAAP operating income totaled $753 million, compared with $622 million in the comparable quarter in 2008.
- Record global in-market sales of Copaxone® of $776 million, up 38% compared to the third quarter of 2008. Copaxone® continues to be the leading MS therapy in the U.S. and globally.
- Record quarterly cash flow from operations of $1,025 million.
“This was another very strong quarter for Teva, with record-breaking financial results across the board," commented Shlomo Yanai, Teva's President and Chief Executive Officer. “In fact, for the first time, we crossed the billion dollar mark in quarterly cash flow from operations. All of our business units and geographies continued to grow during the quarter, with especially strong sales of Copaxone®, which continued to strengthen its position as the world’s leading therapy for the treatment of multiple sclerosis, and of ProAir™, the leading Albuterol inhaler in the U.S.”
Mr. Yanai continued: “This is the time of year when we develop our workplan and update our strategy for the next few years. The process this year is an especially inspiring one, as the more closely we analyze the opportunities ahead, the more excited we become about Teva’s future—which, in both the near and long-term, looks very bright.”
Net sales for the quarter increased 25% to $3,550 million, compared to $2,842 million in the third quarter of 2008. The acquisition of Barr contributed to the growth in sales in all of Teva's geographies, particularly in the U.S., Russia, Poland, Germany, and Croatia.
Exchange rate differences negatively impacted sales in the third quarter of 2009 by approximately $160 million, or 6%, as compared to the third quarter of 2008. The negative impact on sales resulted primarily from the strengthening of the U.S. Dollar relative to the Hungarian Forint, Russian Ruble, Euro, British Pound, Polish Zloty and Israeli Shekel in the third quarter of 2009 compared with the comparable quarter in 2008. Foreign currency differences between the third quarter of 2009 and the third quarter of 2008 adversely affected operating profit by approximately $25 million. The negative impact on operating profit resulted primarily from the strengthening of the U.S. Dollar relative to the Russian Ruble, British Pound and Polish Zloty, where we have higher sales than expenses, partially offset by modest devaluation of the Israeli Shekel against the U.S. Dollar, where we have higher expenses than sales.
Non-GAAP net income for the third quarter of 2009 totaled $806 million, an increase of 28%, while non-GAAP diluted earnings per share were $0.89, an increase of 16% compared to the comparable quarter in 2008. The share count used for the fully diluted earnings per share for the third quarter of 2009 increased by approximately 78 million shares compared to that of the third quarter of 2008 due, primarily, to the shares issued in connection with the acquisition of Barr. On a U.S. GAAP basis, net income for the third quarter totaled $649 million compared with $631 million in the third quarter of 2008, while diluted earnings per share were $0.72, compared with $0.77 in the third quarter of 2008.
Non-GAAP net income and non-GAAP EPS for the third quarter of 2009 are adjusted to exclude the following items:
- Amortization of purchased intangible assets and inventory step up of $147 million;
- Restructuring charges of $47 million;
- Impairment of assets of $37 million;
- Legal settlements of $13 million; and
- A related tax benefit of $87 million.
Teva believes that excluding these items facilitates investors’ understanding of the trends in the Company’s underlying business. In the third quarter of 2008, non-GAAP net income and non-GAAP EPS excluded a settlement payment from an institution in connection with our auction rate securities portfolio, offset by amortization of purchased intangible assets, acquisition of in process R&D, impairment of financial assets, inventory step-up, and a related tax effect. See the attached table for a reconciliation of U.S. GAAP reported results to the adjusted non-GAAP figures.
Non-GAAP operating income (which excludes the amortization of purchased intangible assets and inventory step up, restructuring charges, impairment of assets and legal settlements, as detailed above) increased 42% to $997 million, compared with the third quarter of 2008. On a U.S. GAAP basis, operating income totaled $753 million, up 21% compared with the third quarter last year.
Pharmaceutical sales in North America for the third quarter reached $2,164 million, accounting for 63% of total pharmaceutical sales and representing an increase of 34% compared with the third quarter of last year. Quarterly sales benefited from the launch of generic versions of Ortho Tri-Cyclen® Lo (norgestimate/ethinyl estradiol) and Eloxatin® (oxaliplatin) in the quarter, as well as continued strong sales of generic versions of Lotrel® (amlodipine benazapril), Adderall XR® (amphetamine salts), Yasmin® (drospirenone and ethinyl estradiol), and Protonix® (pantoprazole) launched in previous quarters. The quarter's sales also reflected continued strong sales of Copaxone® and ProAir™.
As of October 23, 2009, Teva had 210 product applications awaiting final FDA approval, including 40 tentative approvals. Collectively, the brand products covered by these applications had annual U.S. sales of over $113 billion. Of these applications, 136 were “Paragraph IV” applications challenging patents of branded products. Teva believes it is the first to file on 83 of the 136 applications, relating to products with annual U.S. branded sales exceeding $54 billion.
Pharmaceutical sales in Europe in the third quarter of 2009 totaled $787 million, accounting for 23% of total pharmaceutical sales, and representing an increase of 15% compared with the third quarter of last year. In local currencies, sales in Europe grew 28% compared with the third quarter of 2008. The 28% growth in sales in local currencies was mostly attributable to strong generic sales in Germany, Spain and Poland.
Since the beginning of the year, Teva has received 880 generic approvals in Europe relating to 149 compounds in 313 formulations, including 7 EMEA approvals valid in all EU member states. In addition, as of September 30, 2009, Teva had 3,058 marketing authorization applications pending approval in 30 European countries, relating to 242 compounds in 508 formulations, including 14 applications pending with the EMEA.
International pharmaceutical sales in the third quarter of 2009 totaled $463 million, accounting for 14% of total pharmaceutical sales and representing an increase of 17% compared to the third quarter of 2008. In local currencies, international sales grew 33% compared with the third quarter of 2008. The 33% sales growth in international markets in local currencies was driven by increased sales in Russia, Croatia and Israel as well as in certain countries in Latin America.
Copaxone® continued to lead as the number one MS therapy in the U.S. and globally, with approximately 30% market share. Record in-market sales reached $776 million in the third quarter of 2009, an increase of 38% over the third quarter of 2008. In the U.S., in-market sales increased 53% to reach $540 million compared to the third quarter of 2008. In-market sales outside the U.S. totaled $236 million, up 12% compared to the third quarter of 2008. In local currencies, in-market sales of Copaxone® outside the U.S. grew 23%.
Global in-market sales of Azilect® reached $64 million in the quarter, a 39% increase over the comparable period in 2008. In local currencies, global in-market sales of Azilect® grew 45%. In the third quarter of 2009, Azilect® continued to increase its market share in the major European markets and the U.S.
Teva's global respiratory business reached sales of $243 million, up 37% compared to $177 million in the third quarter of 2008. The increase is attributable primarily to strong ProAir™ sales in the U.S. Teva’s respiratory sales in the U.S. totaled $166 million, up 66% compared to the comparable quarter in 2008. In the third quarter, Teva maintained its market leadership position with a 56% market share in the SABA (short acting beta agonist) market in the U.S.