01—Abstract
Summary
Summary of the 20-F filed February 15, 2011. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited reported record 2010 results driven by the August 2010 acquisition of ratiopharm, which was financed largely with $5.2 billiona in cash.
Net sales rose 16% to $16,121 millionb, operating income increased 61% to $3,871 million, and net income attributable to Teva reached a record $3,331 million, or $3.67 diluted EPS, compared with $2.23 in 2009. Cash flow from operating activities was a record $4,136 million, up 23%. Growth was broad-based across North America ($9,988 million, up 16%) and Europe ($3,947 million, up 21%), with the U.S. generics business, Copaxone® (in-market sales of $3,316 million, up 17%) and Azilect® (up 31%) as key contributors.
The filing also flags material risks. Copaxone®, about 18%c of 2010 net sales, faces patent challenges from Sandoz/Momenta and Mylan/Natco, with generic entry possible before 2014. The FDA issued a complete response letter in December 2010 on the lower-volume Copaxone® formulation, and a warning letter on the Jerusalem oral solid dose facility was received January 31, 2011.
A jury award in the propofol litigation exceeded $500 milliond, and Teva posted a bond of about $580 million to stay execution pending appeal. Management guided 2011 net sales to $18.5 billion to $19.0 billion and non-GAAP EPS to $4.90 to $5.20, while noting the extraordinary 2010 U.S. generics increase is not expected to repeat.
For 2010, Teva reported total debt of $6,881 million against total equity of $22,002 million, and it paid $668 million in dividends. The company also completed the Théramex (January 2011) and Corporación Infarmasa (January 2011) acquisitions after year-end.
02—Key points
Key Highlights
- Net sales rose 16% to $16,121 million in 2010, driven by the consolidation of ratiopharm from August 2010 and strong performance across all regions.
- Operating income increased 61% to a record $3,871 million; diluted EPS reached a record $3.67, up from $2.23 in 2009.
- Net income attributable to Teva reached a record $3,331 million, compared with $2,000 million in 2009.
- Copaxone® global in-market sales hit a record $3,316 million (up 17%), but the product, about 18% of net sales, faces patent challenges and possible generic entry before 2014.
- The ratiopharm acquisition for $5.2 billion in cash, plus the January 2011 Théramex and Infarmasa acquisitions, expanded Teva's European and international footprint; total debt rose to $6,881 million.
- Regulatory and litigation risks increased: a complete response letter for the lower-volume Copaxone® formulation, an FDA warning letter for the Jerusalem facility, and a propofol jury award above $500 million under appeal.
- 2011 guidance calls for net sales of $18.5 billion to $19.0 billion and non-GAAP EPS of $4.90 to $5.20, with the 2010 U.S. generics surge not expected to repeat.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Teva Pharmaceutical Industries kept $0.21.
- Revenue$16.12B100.0%
- Cost of revenue−$7.06B43.8%
- Gross profit$9.06B56.2%
- Operating costs−$5.19B32.2%
- Operating income$3.87B24.0%
- Interest, other & tax−$540.0M3.3%
- Net income$3.33B20.7%
Where FY2010 revenue went
$16.12B- Cost of revenue: $7.06B, 44% of revenue
- Operating costs: $5.19B, 32% of revenue
- Net income: $3.33B, 21% of revenue
- Interest, other & tax: $540.0M, 3.3% of revenue
Kept 21% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 15, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $16.12B$16.12B | 0.0% |
| Cost of Revenue | $7.06B$6.53B | +8.0% |
| Gross Profit | $9.06B$7.37B | +23.0% |
| Operating Income | $3.87B$2.40B | +61.0% |
| Interest Expense | $202.00M$230.00M | −12.2% |
| Net Income | $3.33B$2.00B | +66.6% |
| EPS (Basic) | $3.72$2.29 | +62.4% |
| EPS (Diluted) | $3.67$2.23 | +64.6% |
| Shares Outstanding (Basic) | 896.00M872.00M | +2.8% |
| Shares Outstanding (Diluted) | 921.00M896.00M | +2.8% |
05—Questions
Frequently Asked Questions
What drove Teva's revenue and earnings growth in 2010?
Net sales grew 16% to $16,121 million, mainly from the consolidation of ratiopharm beginning August 2010, higher U.S. generic sales including new launches such as Effexor XR® and Yaz®, and continued growth in Copaxone® and Azilect®. Operating income rose 61% to $3,871 million, helped by higher gross margin (56.2% versus 53.0%) and the end of the Sanofi-Aventis Copaxone® payments in the U.S. and Canada.
How much of Teva's sales depend on Copaxone®?
The filing states that Copaxone® was responsible for approximately 18% of net sales in 2010 and contributed disproportionately to profits and cash flows. Its patents have been challenged, and generic competition may arise before 2014, when the U.S. Orange Book patents would otherwise expire.
What did management guide for 2011?
Teva expects full-year 2011 net sales of $18.5 billion to $19.0 billion and non-GAAP EPS of $4.90 to $5.20. It expects results to be stronger in the second half of 2011 and says the extraordinary increase in U.S. generics sales in 2010 is not expected to repeat. Fully diluted shares are expected to be 900 million to 910 million.
What were the main legal and regulatory risks disclosed?
Key items include patent challenges to Copaxone® and Azilect®, a complete response letter from the FDA in December 2010 on the lower-volume Copaxone® formulation, a January 31, 2011 FDA warning letter for the Jerusalem oral solid dose facility, and a 2010 jury verdict in the propofol case, where Teva posted a bond of approximately $580 million pending appeal. Teva also faces ongoing antitrust scrutiny in the U.S. and EU.
How did Teva's balance sheet and cash flow change in 2010?
Total assets rose to $38,152 million from $33,210 million, mainly due to the ratiopharm acquisition and goodwill. Total debt increased to $6,881 million from $5,612 million. Operating cash flow was a record $4,136 million, and Teva paid $668 million in dividends and repurchased about 1.9 million shares for $99 million.
06—Continue