01—Abstract
Summary
Summary of the 20-F filed February 29, 2008. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited reported net sales of $9.41 billiona for 2007, up from $8.41 billion in 2006, and net income of $1.95 billion, compared with $546 million in 2006.
Diluted earnings per share were $2.38b, against $0.69 in 2006. The 2006 results were depressed by a $1.295 billion write-off of in-process R&D, largely tied to the Ivax acquisition, and by other charges. Gross margin rose to 51.8% of sales from 50.7%, while SG&A increased to 20.2% of sales from 18.7%.
Research and development expenses were $581 millionc, up 17%, and the company says it will raise its R&D target to 7.5% of sales from 6%. The company describes itself as the leading generic drug company in the world and in the United States, with 18% of U.S. generic prescriptions in 2007. Its innovative franchise centers on Copaxone for multiple sclerosis, with in-market global sales of $1.713 billion in 2007, and on Azilect for Parkinson's disease, with 2007 sales of $120 million.
Teva launched 25 generic products in the U.S. during 2007, including Protonix and Lotrel. It also set a strategic goal of doubling the size of the business by 2012 to $20 billiond in revenue, with net income margins above 20%. In February 2008 it acquired CoGenesys for $400 million to expand its biogenerics business.
The filing also flags risks. Copaxone's U.S. sales are subject to a planned shift in distribution from Sanofi-Aventis to Teva in April 2008, which the company expects to raise reported revenue while producing little net income change over two years.
Other risks include generic price erosion, patent litigation, and U.S. drug-pricing and Medicaid reimbursement reforms. The company paid $299 million in dividends in 2007 and repurchased $152 million of shares.
02—Key points
Key Highlights
- Net sales rose 12% to $9.41 billion in 2007, driven largely by organic growth.
- Net income was $1.95 billion, or $2.38 diluted EPS, versus $546 million ($0.69) in 2006, which included a $1.295 billion in-process R&D write-off.
- Gross profit margin improved to 51.8% of sales from 50.7%.
- Copaxone in-market global sales reached a record $1.713 billion, up 21%, and it became the leading MS therapy in the U.S. in dollar terms.
- Teva holds 18% of total U.S. generic prescriptions and launched 25 U.S. generic products in 2007.
- Strategic target to double the business to $20 billion in revenue by 2012, with net income margins above 20%.
- Teva will raise its R&D spending target to 7.5% of sales from 6%, and SG&A rose to 20.2% of sales.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2007, Teva Pharmaceutical Industries kept $0.20.
- Revenue$9.41B100.0%
- Cost of revenue−$4.53B48.2%
- Gross profit$4.88B51.8%
- Operating costs−$2.48B26.4%
- Operating income$2.40B25.5%
- Interest, other & tax−$481.0M5.1%
- Net income$1.91B20.3%
Where FY2007 revenue went
$9.41B- Cost of revenue: $4.53B, 48% of revenue
- Operating costs: $2.48B, 26% of revenue
- Net income: $1.91B, 20% of revenue
- Interest, other & tax: $481.0M, 5.1% of revenue
Kept 20% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2007filed February 29, 2008Financial Statements
| Revenue | $9.41B |
| Cost of Revenue | $4.53B |
| Gross Profit | $4.88B |
| Operating Income | $2.40B |
| Net Income | $1.91B |
| EPS (Basic) | $2.49 |
| EPS (Diluted) | $2.36 |
| Shares Outstanding (Basic) | 768.00M |
| Shares Outstanding (Diluted) | 830.00M |
05—Questions
Frequently Asked Questions
Why did net income rise so sharply in 2007?
Net income was $1.952 billion in 2007 compared with $546 million in 2006. The 2006 figure was reduced by a $1.277 billion write-off of acquired in-process R&D, mainly from the Ivax acquisition, along with an inventory step-up and other charges. Teva's 2007 operating results were not burdened by comparable one-time items.
What is the outlook for Copaxone?
Copaxone in-market sales rose 21% to $1.713 billion in 2007. Teva expects to take over U.S. and Canadian distribution from April 2008, recording the full in-market sales net of a payment equal to 25% of those sales for two years. Management expects the higher reported revenue to be largely offset by higher SG&A, leaving net income little changed during that period.
What are the main risks to Teva's generic business?
The filing cites price erosion as more generic competitors enter a product, reduced profits when U.S. market exclusivity ends, patent litigation that could result in damages if Teva sells before final resolution, and consolidation among U.S. customers. It also notes that U.S. Medicaid reimbursement changes under the Deficit Reduction Act could reduce reimbursement rates for some products.
How much did Teva return to shareholders in 2007?
Teva paid $299 million in dividends in 2007, up from $229 million in 2006, and spent $152 million to repurchase about 4 million shares. The fourth-quarter 2007 dividend was NIS 0.45 per share, up from an average of NIS 0.40 for the first three quarters of 2007.
06—Continue