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Teva Pharmaceutical Industries Annual Report, Year Ended Dec 31, 2003

Filing Date
Filed March 15, 2004
Period End
December 31, 2003
Security
TEVA
In the record · 2016–202610-K1110-Q278-K283

TEVA filed 11 annual reports (10-K), 27 quarterly reports (10-Q) and 283 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Material agreement8-K · Nov ’19Nov ’19
  3. Leadership change8-K · Feb ’22Feb ’22
  4. Material agreement8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 20-F filed March 15, 2004. Cited figures are marked; the original filing is the authoritative source.

Teva Pharmaceutical Industries Limited's annual report on Form 20-F for the year ended December 31, 2003 reports net sales of $3.28 billiona, up from $2.52 billion in 2002, and net income of $691.0 million, compared with $410.3 million in 2002.

Diluted earnings per ADR were $2.39b, versus $1.52 in 2002. Before one-time items (a $100 million gain from the GlaxoSmithKline litigation settlement and $7.4 million in restructuring charges, net of tax $73 million in 2003), net income was $617.8 million and diluted earnings per ADR were $2.14. Operating income rose to $877.4 million from $524.0 million.

Gross margin improved to 46.4% of sales from 43.5% in 2002, driven by product mix, Copaxone® sales, and the vertically integrated API division. The central event after year-end was the January 22, 2004 closing of the acquisition of Sicor Inc., at a purchase price of about $3.46 billionc, paid with $2.0 billion in cash and $1.4 billion in Teva ADRs. The filing states that the deal is the largest acquisition Teva has undertaken, that it was funded partly through $1.13 billion of short-term bank borrowings later refinanced with convertible senior debentures, and that it is expected to be accretive to earnings per ADR within 12 months.

The filing notes that a substantial one-time write-off of in-process R&D is expected in the first quarter of 2004, and that Sicor's inventory step-up will weigh on early-2004 gross margins. Risk factors highlighted in the filing include dependence on Copaxone®, which lost its U.S. orphan drug exclusivity on December 20, 2003; competition from generics and branded companies; the concentration of Sicor's sales in one product, propofol; integration risk; and pending litigation, including a Biovail arbitration seeking recovery of a $98 milliond deduction and a Quebec class action. Management states that no provision has been made for the pending matters described, and that it believes none will have a material adverse effect on financial condition.

02—Key points

Key Highlights

  1. Net sales rose to $3,276.4 million in 2003 from $2,518.6 million in 2002; North America accounted for 63% of revenue.
  2. Net income was $691.0 million, up from $410.3 million; diluted EPS per ADR was $2.39 versus $1.52, and $2.14 before one-time items.
  3. Copaxone® in-market global sales reached $720 million in 2003, with a U.S. market share of 28.4% by year-end; U.S. orphan exclusivity expired December 20, 2003.
  4. Gross margin improved to 46.4% from 43.5%, reflecting product mix, the API division's vertical integration, and favorable currency movements.
  5. The Sicor acquisition closed January 22, 2004 for about $3.46 billion ($2.0 billion cash and $1.4 billion in ADRs), the largest deal in Teva's history.
  6. Debt financing for Sicor included $1.076 billion net proceeds from new convertible senior debentures; convertible debentures due 2022 and 2021 became dilutive in 2003.
  7. Pending litigation includes a Biovail arbitration over a $98 million deduction and a RICO claim; management says no provision has been recorded for these matters.

03—Questions

Frequently Asked Questions

  1. How did Teva's profitability change in 2003?

    Net income rose 68.4% to $691.0 million, and operating income rose to $877.4 million from $524.0 million. The filing attributes gains to higher generic sales from eleven new product launches, Copaxone® growth, and a $100 million one-time GSK litigation settlement gain. Before one-time items, net income was $617.8 million.

  2. What was the Sicor acquisition and how was it paid for?

    Teva acquired Sicor Inc., a generic injectables and API company, on January 22, 2004 for about $3.46 billion. Teva paid $2.0 billion in cash, financed by $1.13 billion in short-term bank borrowings that were repaid from convertible debenture proceeds, plus about $890 million of existing cash, and issued about 23.3 million ADRs valued at $1.4 billion.

  3. What are the main risks to Teva's business?

    The filing cites dependence on Copaxone® competition from interferon therapies and possible generic challenges after its orphan exclusivity expired; intense generic competition and price erosion; regulatory and FDA risk; integration of Sicor; reliance of Sicor on propofol for a large share of sales; and product liability and patent litigation exposure.

  4. How does the Sicor acquisition affect 2004 results?

    The filing says Sicor's results will be consolidated from January 22, 2004 and will significantly increase revenues. It expects a one-time write-off of in-process R&D in the first quarter, a short-term gross margin drag from inventory step-up, and accretion to earnings per ADR within 12 months. Interest expense will rise on the new $1.1 billion convertible debentures.

04—Continue

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