Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA) today reported results for the quarter ended March 31, 2012.
Highlights:
- Net revenues of $5.1 billion, compared to $4.1 billion in the first quarter of 2011, an increase of 25%.
- Non-GAAP operating income of $1.6 billion, an increase of 42% compared to $1.1 billion in the first quarter of 2011.
- Non-GAAP net income and Non-GAAP EPS of $1.3 billion and $1.47 diluted earnings per share, an increase of 39% and 41%, respectively, compared to $0.9 billion and $1.04 diluted earnings per share in the first quarter of 2011.
"2012 is off to a good start for Teva," commented Shlomo Yanai, Teva's President and CEO. "We enjoyed a quarter of strong growth for our branded products, in our US generics business, and in the developing markets Teva operates in. All of these served to offset weaker generics sales in Europe, which resulted primarily from the macro-economic conditions in that region."
Mr. Yanai continued: "After five extremely rewarding years as Teva's CEO, I will be stepping down today. It has been an immense privilege to lead Teva's outstanding global team through such an exciting period. Together we turned Teva into a highly diversified global pharmaceutical company, with an expanded geographical footprint and additional lines of business. Over the last few months I have had the great pleasure of working closely with my successor, Dr. Jeremy Levin, to ensure a smooth transition. I am very confident that Jeremy will lead Teva to even new heights and I wish him every success."
Revenues by Geographies for the First Quarter 20121
Net revenues in the United States in the first quarter were $2.8 billion (representing 54% of total revenues), an increase of 46% compared to the first quarter of 2011, primarily as a result of strong revenues of both generic products, including the launch of seven new products not sold in the first quarter of 2011, and branded products, primarily due to the inclusion of Cephalon.
Net revenues in Europe in the first quarter were $1.3 billion (representing 26% of total revenues), a decrease of 2% compared to the first quarter of 2011, and an increase of 3% in local currency terms. Revenues in Europe this quarter benefited from the inclusion of Cephalon products and sales synergies following the successful integration of the acquisition, as well as stronger revenues from some of our legacy branded products, primarily Copaxone®, for which we successfully completed the take-back in Europe this quarter and grew sales of the product. These offset lower generic sales due to the ongoing macro-economic conditions and healthcare reforms in key European markets. Our strategy of diversifying our business in Europe, geographically and from a product standpoint, as well as our significant footprint in the continent, has helped us successfully mitigate some of prevailing pressures.
Net revenues in the Rest of the World (ROW, which includes Canada, Israel, certain markets in Eastern Europe, Latin America and Asia) in the first quarter totaled $1 billion (representing 20% of total revenues), up 21% compared to the first quarter of 2011. In local currency terms, ROW revenues grew by 23%. The growth in revenues resulted primarily from the inclusion of Taiyo and Cephalon, as well as from strong performance in Eastern Europe, Latin America and Israel.
Revenues by Product Lines for the First Quarter 2012
Generic products net revenues in the first quarter were $2.6 billion (including API net revenues of $199 million), an increase of 12% compared to $2.3 billion in the first quarter of 2011. Generic revenues consisted of U.S. revenues of $1.2 billion, an increase of 29% compared to the first quarter of 2011, European revenues of $775 million, a decrease of 15% (12% in local currency terms), and ROW revenues of $623 million, an increase of 30%. The U.S. generics business benefited from the launch of seven new generic products, including several that were either exclusive, semi-exclusive or in limited competition markets. Products launched included escitalopram, modafinil, progesterone, irbesartan and irbesartan/HCTZ, quetiapine and olanzapine ODT. In addition, the U.S. generics business continued to benefit from our agreement with Ranbaxy relating to its launch of generic Lipitor®. The European generics business declined primarily as a result of continued economic and regulatory pressures. The ROW generics business had a strong quarter in Eastern Europe and Latin America, coupled with the inclusion of Taiyo in Japan, and slightly offset by a decrease in generics sales in Canada.
Branded products net revenues in the first quarter were $2.1 billion, an increase of 54% compared to $1.4 billion in the first quarter of 2011. Branded revenues consisted of U.S. revenues of $1.5 billion, an increase of 60% compared to the first quarter of 2011, European revenues of $365 million, an increase of 43%, and ROW revenues of $212 million, an increase of 32%. Branded revenues comprised 41% of total revenues in the quarter, compared to 33% in the first quarter of 2011.
The increase in branded products revenues over the first quarter of 2011 was primarily due to the inclusion of Cephalon sales (mainly Provigil® with $291 million in revenues, Treanda® with $148 million and Nuvigil® with $84 million).
In addition, most of Teva's major branded products had strong revenues. Global revenues recorded by Teva for Copaxone®, the leading multiple sclerosis therapy in the U.S. and globally, increased 8% to $909 million compared to $838 million in the first quarter of 2011, in part because of the successful take-back from Sanofi in Europe and increased sales in ROW. Global in-market sales of Copaxone® increased 4% to $941 million. In the U.S., in-market sales slightly decreased 1% to $617 million, as a result of the renegotiation of certain distribution services agreements so as to establish a new fee structure, partially offset by price increases. In-market sales outside the U.S. grew 14% to $324 million, mainly in Europe, Russia and several markets in Latin America. Azilect® revenues recorded by Teva increased 9% to $72 million, while global in-market revenues increased 7% to $96 million, primarily due to volume growth in several European countries including France, Spain and Italy. Respiratory products revenues were up 4% to $190 million, driven primarily by higher global sales of Qvar® that reached $63 million this quarter, partially off-set by lower sales of ProAir® due to the renegotiation of the distribution sales agreements in the U.S. The total impact of this renegotiation on the sales of branded products in the U.S. this quarter was approximately $180 million.
OTC net revenues in the quarter were $196 million, an increase of 7%, or 10% in local currency terms, compared to $184 million in the first quarter of 2011.
Other net revenues in the quarter were $215 million, mostly from the distribution of third party products in Israel and Hungary, compared to $210 million in the first quarter of 2011.
Key Metrics for the First Quarter 2012
Exchange rate differences between this quarter and the first quarter of 2011 reduced our revenues by approximately $81 million, while having a minor positive impact on operating income. The impact on revenues resulted primarily from the weakening of certain currencies (primarily the Euro) relative to the U.S. dollar.
Non-GAAP Information Non-GAAP net income and non-GAAP EPS for the quarter are adjusted to exclude the following items:
- Amortization of purchased intangible assets totaling $414 million, of which $402 million are included in cost of sales and the remaining $12 million in selling and marketing expenses;
- Inventory step-up of $56 million in connection with the Cephalon acquisition;
- Costs related to regulatory actions taken in facilities of $38 million, which relate primarily to our Irvine and animal health plants;
- Impairment of long-lived assets of $87 million;
- Acquisitions, restructuring and other expenses of $43 million related primarily to the Cephalon and Taiyo acquisitions;
- Legal settlements of $19 million mainly relating to U.S. product liability matters; and
- Related tax benefits of $216 million.
Teva believes that excluding such items facilitates investors' understanding of the Company's business. See the attached tables for a reconciliation of U.S. GAAP results to the adjusted non-GAAP figures.
GAAP net income and GAAP EPS were $859 million and $0.97 in the quarter, respectively, compared with $761 million and $0.84 in the first quarter of 2011.
Non-GAAP operating income this quarter was $1.6 billion, up 42% compared to the first quarter of 2011. GAAP operating income totaled $928 million, compared to $867 million in the first quarter of 2011.