01—Abstract
Summary
Summary of the 10-K filed February 12, 2018. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited reported a 2017 net loss attributable to Teva of $16.3 billiona (net loss attributable to ordinary shareholders of $16.5 billion, or $16.26 per diluted share), compared with net income of $329 million in 2016.
The loss was driven primarily by goodwill impairments of $17.1 billionb, mainly tied to the U.S. generics reporting unit, and $3.8 billion of long-lived asset impairments. Net revenues were $22.4 billion, up 2% from $21.9 billion in 2016, while operating loss was $17.5 billion versus operating income of $2.2 billion the prior year. Total debt stood at $32.5 billion at December 31, 2017, and the company suspended dividends on its ordinary shares and ADSs in December 2017.
In December 2017 the company announced a comprehensive restructuring plan intended to reduce its total cost base by $3 billionc by the end of 2019, including a reduction of 14,000 positions (over 25% of the workforce) and the closure or divestment of a significant number of manufacturing plants and R&D facilities. Kåre Schultz became President and CEO effective November 1, 2017. The company also reorganized into one commercial organization across three regions, and it sold several non-core businesses, including PARAGARD for $1.1 billion and PLAN B ONE-STEP for $675 million.
The filing highlights continued pressure on the generics business, particularly in the United States, and on COPAXONE, the company's leading specialty medicine, which faces generic competition following FDA approval of generic versions in October 2017. Credit ratings were downgraded to non-investment grade by Fitch, Moody's and S&P during 2017 and early 2018, and the company reported that it was in compliance with its financial covenants as of December 31, 2017.
02—Key points
Key Highlights
- Net loss attributable to Teva of $16.3 billion in 2017, versus net income of $329 million in 2016; diluted loss per share of $16.26.
- Goodwill impairments of $17.1 billion in 2017, including $6.1 billion in Q2 and $11.0 billion in Q4, mainly related to the U.S. generics reporting unit.
- Net revenues of $22.4 billion, up 2% (6% in local currency) from 2016; generic medicines revenues were $12.3 billion and specialty medicines revenues were $7.9 billion.
- Total debt of $32.5 billion at December 31, 2017, down from $35.8 billion a year earlier; the company repaid $4.4 billion of net debt during 2017.
- Restructuring plan announced December 2017 targets a $3 billion cost base reduction by end of 2019 and a reduction of 14,000 positions (over 25% of workforce).
- COPAXONE faces generic competition after FDA approval of generic versions in October 2017; COPAXONE revenues in the U.S. fell 12% to $3.0 billion in 2017.
- Dividends on ordinary shares and ADSs were suspended in December 2017; credit ratings were downgraded to non-investment grade by Fitch, Moody's and Standard & Poor's.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2017, Teva Pharmaceutical Industries lost $0.73.
- Revenue$22.39B100.0%
- Cost of revenue−$11.77B52.6%
- Gross profit$10.62B47.4%
- Operating costs−$28.10B125.5%
- Operating income−$17.48B78.1%
- Interest, other & tax$1.22B5.4%
- Net income−$16.27B72.7%
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 12, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $22.39B$21.90B | +2.2% |
| Cost of Revenue | $11.24B$10.25B | +9.6% |
| Gross Profit | $10.62B$11.65B | −8.9% |
| R&D Expenses | $175.00M$422.00M | −58.5% |
| Operating Income | -$17.48B$2.15B | −911.7% |
| Interest Expense | $875.00M$546.00M | +60.3% |
| Net Income | -$16.27B$329.00M | −5043.8% |
| EPS (Basic) | $-16.26$0.07 | −23328.6% |
| EPS (Diluted) | $-16.26$0.07 | −23328.6% |
| Shares Outstanding (Basic) | 1.02B955 | +106387334.6% |
| Shares Outstanding (Diluted) | 1.02B961 | +105723105.0% |
05—Questions
Frequently Asked Questions
Why did Teva report such a large net loss in 2017?
The loss was driven mainly by goodwill impairments of $17.1 billion, primarily tied to the U.S. generics reporting unit due to price erosion, customer consolidation, and accelerated generic approvals. Other asset impairments, restructuring and other items totaled $5.1 billion, including $3.8 billion of long-lived asset impairments. These non-cash charges produced an operating loss of $17.5 billion.
What is the status of Teva's debt and credit ratings?
Total debt was $32.5 billion at December 31, 2017. About $3.7 billion of debt is subject to net debt to EBITDA covenants, and the company stated it was in compliance with all applicable financial ratios as of year-end and amended the covenant in February 2018. Fitch, Moody's and Standard & Poor's downgraded the company's ratings to non-investment grade between November 2017 and February 2018.
What does the restructuring plan involve?
The plan, announced December 2017, aims to reduce the total cost base by $3 billion by the end of 2019 and to reduce the workforce by 14,000 positions. It includes optimizing the generics portfolio (especially in the United States), closing or divesting a significant number of manufacturing plants and R&D facilities, and reviewing R&D programs. The company expects additional restructuring charges in 2018 and 2019, mainly for severance.
Will Teva pay dividends going forward?
The company announced an immediate suspension of dividends on its ordinary shares and ADSs in December 2017 and suspended dividends on its mandatory convertible preferred shares in the fourth quarter of 2017 due to its accumulated deficit. The filing states the company does not expect to pay dividends in the near future. Dividends on the preferred shares are to be evaluated quarterly.
How significant is COPAXONE to Teva's results?
COPAXONE accounted for approximately 17% of Teva's 2017 revenues and a significantly higher percentage of its profits and cash flow. Global COPAXONE revenues were $3.8 billion in 2017, down 10% from 2016, and the company stated that a substantial reduction in patients treated due to generic versions would likely have a material adverse effect on its financial results.
06—Continue