01—Abstract
Summary
Summary of the 20-F filed February 17, 2012. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited reported net revenues of $18.3 billiona for 2011, up from $16.1 billion in 2010, driven mainly by the full-year inclusion of ratiopharm, the October 2011 acquisition of Cephalon, and Japanese acquisitions including Taiyo.
Net income attributable to Teva was $2.76 billionb, compared with $3.33 billion in 2010, and diluted EPS was $3.09 versus $3.67. Operating income fell to $3.1 billion from $3.9 billion, reflecting higher operating expenses, amortization of acquired intangibles, legal settlements of $901 million in legal settlements, acquisition, restructuring and other expenses, and impairment charges. On a non-GAAP basis the company reported diluted EPS of $4.97 for 2011 versus $4.54 in 2010.
Total debt rose to $14.5 billionc at December 31, 2011 from $6.9 billion a year earlier, following financing of the Cephalon acquisition, which cost approximately $6.5 billion in cash. Financial leverage increased from roughly 24% to 39%. Cash flow from operating activities was $4.1 billion, similar to 2010.
The company repurchased about $899 milliond of shares in 2011 and authorized a new $3 billion repurchase program in December 2011. The quarterly dividend for Q4 2011 was NIS 1.00 per share, up 25% from NIS 0.8 in prior quarters. The filing highlights concentration and regulatory risks.
Copaxone, the leading innovative product, faces possible generic challenges before its patents expire in 2014, and Provigil faces US competition starting April 2012, which management expects to materially reduce its revenues. Teva also disclosed significant product liability and patent litigation, including a propofol judgment total of approximately $800 million and a Wyeth/Protonix claim of roughly $2.1 billion. The company faces ongoing FDA remediation at its Irvine facility, with full production expected to resume in the second half of 2012.
02—Key points
Key Highlights
- Net revenues rose 14% to $18.3 billion in 2011; U.S. revenues declined 6% to $8.8 billion, while Europe grew 43% to $5.7 billion and Rest of World grew 39% to $3.9 billion.
- Net income attributable to Teva fell to $2.76 billion from $3.33 billion; diluted EPS was $3.09 versus $3.67 in 2010.
- Non-GAAP diluted EPS was $4.97 for 2011 compared with $4.54 for 2010, according to the company's supplemental reconciliation.
- Copaxone global in-market sales reached a record $3.9 billion, up 18%; the company assumed European marketing responsibility from Sanofi on February 1, 2012.
- Total debt increased to $14.5 billion from $6.9 billion, with financial leverage rising from about 24% to 39%, largely due to the Cephalon acquisition financing.
- The company repurchased about $899 million of shares in 2011 and authorized a new $3 billion repurchase program in December 2011.
- Operating income fell to $3.1 billion from $3.9 billion, reflecting $901 million of legal settlements, acquisition, restructuring and impairment expenses and higher amortization.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Teva Pharmaceutical Industries kept $0.15.
- Revenue$18.31B100.0%
- Cost of revenue−$8.80B48.0%
- Gross profit$9.52B52.0%
- Operating costs−$6.41B35.0%
- Operating income$3.11B17.0%
- Interest, other & tax−$350.0M1.9%
- Net income$2.76B15.1%
Where FY2011 revenue went
$18.31B- Cost of revenue: $8.80B, 48% of revenue
- Other operating costs: $6.39B, 35% of revenue
- Net income: $2.76B, 15% of revenue
- R&D: $15.0M, 0.1% of revenue
- Interest, other & tax: $350.0M, 1.9% of revenue
Kept 15% as net incomeR&D $15.0M · 0.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 17, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $18.31B$16.12B | +13.6% |
| Cost of Revenue | $8.80B$7.06B | +24.7% |
| Gross Profit | $9.52B$9.06B | +5.0% |
| R&D Expenses | $15.00M— | — |
| Operating Income | $3.11B$3.87B | −19.7% |
| Interest Expense | $234.00M$202.00M | +15.8% |
| Net Income | $2.76B$3.33B | −17.2% |
| EPS (Basic) | $3.10$3.72 | −16.7% |
| EPS (Diluted) | $3.09$3.67 | −15.8% |
| Shares Outstanding (Basic) | 890.00M896.00M | −0.7% |
| Shares Outstanding (Diluted) | 893.00M921.00M | −3.0% |
05—Questions
Frequently Asked Questions
Why did reported net income decline in 2011 despite higher revenues?
Revenues grew 14% to $18.3 billion, but operating expenses rose sharply with the ratiopharm, Cephalon, Taiyo and Theramex acquisitions. The company also recorded higher legal settlement expenses, amortization of acquired intangibles, and impairment charges, mainly related to its U.S. animal health business and a divestiture tied to the Cephalon deal. Reported net income attributable to Teva fell to $2.76 billion from $3.33 billion.
What is the outlook for Provigil and Copaxone?
The filing states that Provigil faces competition in the United States beginning in April 2012, and that its revenues will materially decline as a result. For Copaxone, the company expects higher sales in 2012 from the completed takeback of European marketing from Sanofi. However, Copaxone faces intense competition from oral therapies, and its patents may be challenged, with generic competition possible before 2014.
How much debt did Teva take on and what does it mean for leverage?
Total debt increased by $7.6 billion in 2011 to $14.5 billion, mainly financing the Taiyo and Cephalon acquisitions. The financial leverage ratio rose from roughly 24% to 39%. The company expects to repay $1.0 billion and refinance $2.6 billion of short-term debt in 2012, and states it is currently in compliance with its financial covenants.
What major litigation exposures does the filing disclose?
The filing discloses several material matters, including propofol product liability cases in which juries awarded approximately $800 million in compensatory and punitive damages across three completed trials, with one case settled. In the Wyeth/Protonix patent litigation, Wyeth filed expert reports in January 2012 asserting damages of approximately $2.1 billion, which Teva disputes. Teva also faces government investigations, antitrust matters involving Provigil, and metoclopramide product liability claims.
06—Continue