01—Abstract
Summary
Summary of the 20-F filed February 27, 2009. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited reported record 2008 net sales of $11.085 billiona, up approximately 18% from $9.408 billion in 2007, driven by higher generic sales in the U.S., a record number of new U.S. product launches, and strong growth in branded products.
Net income fell to $635 millionb from $1.952 billion in 2007, reflecting $1.806 billion in charges, including a $1.402 billion write-off of in-process research and development primarily related to the Barr acquisition, $375 million in other-than-temporary impairment of financial assets (mainly auction rate securities), and $107 million in impairment of intangible assets. Diluted earnings per share were $0.78 versus $2.38 in 2007; on a non-GAAP basis, excluding these items, net income was $2.374 billion and diluted EPS was $2.86. The company completed the acquisition of Barr Pharmaceuticals, Inc. on December 23, 2008, for approximately $4.6 billion in cash and 69 million ADSs, with a total accounting value of $7.5 billion and approximately $1.5 billion of Barr net debt.
Barr's results are included in Teva's income statement only from January 1, 2009, and the company guided to higher 2009 interest expense of $200c-$250 million, amortization of intangibles of approximately $475 million, and a $270 million inventory step-up. Total assets rose to $32.904 billion from $23.412 billion, long-term debt increased to $5.537 billion from $3.347 billion, and shareholders' equity reached $16.300 billion. Operating cash flow was $3.231 billion, up from $1.813 billion.
Teva's core franchise remains its generic business, supplemented by Copaxone for multiple sclerosis, whose global in-market sales grew 32% to $2.26 billiond, and Azilect for Parkinson's disease. Key risks noted in the filing include the pending Sandoz/Momenta ANDA challenge to Copaxone, which triggers a stay of FDA approval until the earlier of January 2011 or a favorable district court decision, pricing pressure from consolidation of U.S. customers, currency exposure (over 40% of revenues are from outside the United States), and ongoing antitrust and drug-price-reporting litigation.
02—Key points
Key Highlights
- Net sales rose 18% to a record $11.085 billion in 2008, with growth across all business units, including higher U.S. generic sales and a record number of new U.S. product launches.
- Reported net income fell to $635 million from $1.952 billion, largely due to $1.806 billion in charges, including a $1.402 billion in-process R&D write-off tied mainly to Barr and CoGenesys.
- Non-GAAP net income, excluding the listed items, was $2.374 billion, or $2.86 per diluted share, compared with $0.78 reported.
- Acquired Barr Pharmaceuticals on December 23, 2008, for about $4.6 billion in cash and 69 million ADSs (accounting value $7.5 billion); Barr results are consolidated from January 1, 2009.
- Copaxone global in-market sales grew 32% to $2.26 billion and became the leading global MS therapy; Azilect in-market sales rose 46% to $175 million.
- Gross margin increased to 53.8% from 51.8%, partly reflecting Teva's assumption of Copaxone distribution in North America; R&D rose 35% to $786 million.
- Working capital fell to $2.945 billion from $4.488 billion, and total long-term debt increased to $5.537 billion from $3.347 billion, with $1.75 billion of bridge loans due November 2009.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Teva Pharmaceutical Industries kept $0.05.
- Revenue$11.09B100.0%
- Cost of revenue−$5.12B46.2%
- Gross profit$5.97B53.8%
- Operating costs−$4.82B43.5%
- Operating income$1.15B10.3%
- Interest, other & tax−$536.0M4.8%
- Net income$609.0M5.5%
Where FY2008 revenue went
$11.09B- Cost of revenue: $5.12B, 46% of revenue
- Operating costs: $4.82B, 44% of revenue
- Net income: $609.0M, 5.5% of revenue
- Interest, other & tax: $536.0M, 4.8% of revenue
Kept 5.5% as net incomeNet income $609.0M · 5.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 27, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $11.09B$9.41B | +17.8% |
| Cost of Revenue | $5.12B$4.53B | +12.9% |
| Gross Profit | $5.97B$4.88B | +22.4% |
| Operating Income | $1.15B$2.40B | −52.2% |
| Interest Expense | $201.00M— | — |
| Net Income | $609.00M$1.91B | −68.2% |
| EPS (Basic) | $0.78$2.49 | −68.7% |
| EPS (Diluted) | $0.75$2.36 | −68.2% |
| Shares Outstanding (Basic) | 780.00M768.00M | +1.6% |
| Shares Outstanding (Diluted) | 820.00M830.00M | −1.2% |
05—Questions
Frequently Asked Questions
Why did net income drop so sharply in 2008 despite higher sales?
Net income fell to $635 million from $1.952 billion mainly because of $1.806 billion in charges. These included a $1.402 billion write-off of acquired in-process R&D, primarily related to the Barr and CoGenesys acquisitions, $375 million of impairment of financial assets (mainly auction rate securities), and $107 million of intangible asset impairments. Excluding these items, non-GAAP net income was $2.374 billion.
What did the Barr acquisition cost and what does it mean for 2009?
Teva acquired Barr Pharmaceuticals on December 23, 2008, for about $4.6 billion in cash and 69 million ADSs, valued for accounting purposes at $7.5 billion, with Barr's net debt of about $1.5 billion. For 2009, the company expects an inventory step-up of about $270 million, amortization of intangibles of about $475 million, interest expense of $200-$250 million, and a diluted share count of about 915 million.
How concentrated is Teva's revenue in its key products and customers?
Sales of one pharmaceutical product represented approximately 16% of total 2008 net sales to unaffiliated customers. One major customer accounted for 13% of consolidated sales, and the balance due from the largest customer was 21% of gross trade accounts receivable at December 31, 2008.
What is the main risk to Copaxone's exclusivity?
In July 2008, Sandoz Inc. together with Momenta Pharmaceuticals filed an ANDA for a generic version of Copaxone seeking approval before Teva's patents expire. Teva sued in August 2008, which triggers a stay of FDA approval until the earlier of January 2011 or a district court decision in favor of the ANDA filer. The Orange Book patents expire on May 24, 2014.
What did Teva pay in dividends and how did its balance sheet change?
Teva paid $388 million in dividends in 2008, compared with $299 million in 2007. The fourth-quarter 2008 dividend was declared at NIS 0.60 per share (14.7 cents). Total assets rose to $32.904 billion from $23.412 billion, and shareholders' equity increased to $16.300 billion, mostly due to shares issued for the Barr acquisition.
06—Continue