01—Abstract
Summary
Summary of the 20-F filed February 22, 2010. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited, the Israeli global generic drug maker, reported record 2009 results in this Form 20-F.
Net sales rose to $13.90 billiona, an increase of approximately $2,814 million, or 25%, over 2008, driven mainly by the first-time inclusion of Barr Pharmaceuticals' sales and strong performance across all geographic regions. Net income attributable to Teva reached a record $2.00 billion, compared with $609 million in 2008, which was depressed by $1,402 million of in-process R&D write-offs tied to acquisitions. Diluted earnings per share were $2.23, versus $0.75 in 2008.
Operating income rose to $2.41 billionb from $1.15 billion, and financial debt to equity leverage fell to 23% from 34%. Copaxone, the company's leading multiple sclerosis drug, grew global in-market sales by 25% to $2.83 billion and accounted for about 18% of net sales. The filing also highlights a 2015 strategic goal of $31 billion in revenue and $6.8 billion in non-GAAP net income.
Management flagged material risks, including generic price erosion, reliance on a few large U.S. customers (one accounted for 16% of 2009 sales), pending patent litigation against Copaxone generics, government drug-pricing lawsuits, and a $315 millionc charge in the fourth quarter related to a drug pricing settlement and reserves. For 2010, the company guided to net R&D of 6% to 6.5% of sales, selling and marketing of 16% to 18%, and financial expenses of $150 million to $170 million, and it expected to stop paying sanofi-aventis termination payments on North American Copaxone sales from April 1, 2010. Dividends were paid quarterly, with $528 million paid in 2009.
02—Key points
Key Highlights
- Net sales of $13.90 billion in 2009, up 25% from $11.09 billion in 2008, with the first-time inclusion of Barr's sales.
- Net income attributable to Teva of $2.00 billion (diluted EPS $2.23), a record, compared with $609 million (diluted EPS $0.75) in 2008.
- Non-GAAP net income of $3.03 billion (diluted EPS $3.37), versus $2.49 billion in 2008, excluding amortization, legal settlements, impairments and other items.
- Copaxone global in-market sales grew 25% to $2.83 billion, about 18% of 2009 net sales; Azilect in-market sales rose 39% to $243 million.
- Gross margin fell to 53.0% from 53.8%, reflecting $302 million of inventory step-up charges from the Barr acquisition and higher amortization of product rights.
- Financial debt to equity leverage declined to 23% from 34%, and Moody's raised Teva's credit rating from Baa1 to A3 in January 2010.
- Legal settlements, impairment, restructuring and acquisition costs totaled $638 million, including a roughly $315 million charge for drug pricing litigation and settlements.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Teva Pharmaceutical Industries kept $0.12.
- Revenue$16.12B100.0%
- Cost of revenue−$8.75B54.3%
- Gross profit$7.37B45.7%
- Operating costs−$4.96B30.8%
- Operating income$2.40B14.9%
- Interest, other & tax−$405.0M2.5%
- Net income$2.00B12.4%
Where FY2009 revenue went
$16.12B- Operating costs: $7.18B, 45% of revenue
- Cost of revenue: $6.53B, 41% of revenue
- Net income: $2.00B, 12% of revenue
- Interest, other & tax: $405.0M, 2.5% of revenue
Kept 12% as net incomeNet income $2.00B · 12%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 22, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $16.12B$11.09B | +45.4% |
| Cost of Revenue | $6.53B$5.12B | +27.7% |
| Gross Profit | $7.37B$5.97B | +23.4% |
| Operating Income | $2.40B$1.15B | +110.0% |
| Interest Expense | $230.00M$201.00M | +14.4% |
| Net Income | $2.00B$609.00M | +228.4% |
| EPS (Basic) | $2.29$0.78 | +193.6% |
| EPS (Diluted) | $2.23$0.75 | +197.3% |
| Shares Outstanding (Basic) | 872.00M780.00M | +11.8% |
| Shares Outstanding (Diluted) | 896.00M820.00M | +9.3% |
05—Questions
Frequently Asked Questions
What drove the growth in Teva's 2009 sales?
Net sales grew $2,814 million, or 25%, mainly because Barr's sales were included for the first time. Strong performance across North America, Europe and International also contributed, along with new U.S. generic launches such as Adderall XR, Eloxatin and Ortho Tri-Cyclen Lo, and continued growth in Copaxone and ProAir sales.
Why did net income jump so much in 2009?
The 2008 results included $1,402 million of in-process R&D write-offs, mainly from the Barr, CoGenesys and Bentley acquisitions. Those charges were largely absent in 2009, when acquisition R&D write-offs were only $23 million, which lifted net income to $2.00 billion from $609 million.
How concentrated is Teva's revenue?
Copaxone accounted for about 18% of 2009 net sales, and one major customer represented 16% of total consolidated sales. The filing notes that consolidation among U.S. retail chains and wholesalers gives these customers greater pricing leverage.
What are the main risks to Copaxone's future sales?
Sandoz/Momenta filed an ANDA in July 2008 and Mylan filed one in October 2009 for generic versions of Copaxone, and both are being challenged in litigation. The filing says generic competition could arrive before 2014 if Teva's patents are successfully challenged, and it cites growing competition from other MS therapies and oral products in development.
What guidance did Teva give for 2010?
Teva expects net R&D of 6% to 6.5% of net sales, selling and marketing of 16% to 18%, and G&A of 5% to 5.5% of sales. Financial expenses are expected at $150 million to $170 million, and the company will stop sanofi-aventis termination payments on North American Copaxone sales starting April 1, 2010. It also expects significant variance between the first quarter and the rest of the year.
06—Continue