01—Abstract
Summary
Summary of the 10-K filed February 19, 2019. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited reported a net loss attributable to Teva of $2.15 billiona for 2018, compared with a net loss of $16.27 billion in 2017, as revenues fell to $18.85 billion from $22.39 billion.
The decline was driven mainly by generic competition to COPAXONE, a decline in the U.S. generics business, and the divestment of certain products. Operating loss was $1.64 billionb, reflecting goodwill impairments of $3.03 billion (mainly International Markets) and intangible asset impairments of $1.99 billion, partially offset by a $1.21 billion income from legal settlements and loss contingencies. Cash flow from operating activities was $2.45 billion, and the company ended the year with total debt of $28.92 billion, down from $32.48 billion.
The filing describes a comprehensive restructuring plan announced in December 2017 intended to reduce the total cost base by $3 billionc by the end of 2019, with approximately 25% of the workforce to be reduced and about 10,300 full-time-equivalent employees already removed since the announcement. Restructuring expenses were $488 million in 2018. Dividends on ordinary shares have been suspended, and the company states it cannot repurchase shares due to its accumulated deficit.
Credit ratings were downgraded to non-investment grade by Fitch, Moody's and S&P during 2017 and early 2018. Key risks highlighted include continued price erosion in U.S. generics, the decline of COPAXONE following approval of generic versions, a February 2019 FDA warning letter for the Davie, Florida plant (with approximately $255 milliond in expected 2019 revenue from that site), the valsartan recall, and ongoing litigation including opioid-related and antitrust matters. The company's specialty pipeline includes AJOVY, launched in the U.S. in September 2018, and AUSTEDO, which generated $204 million in U.S. revenue in 2018.
02—Key points
Key Highlights
- Net revenues fell 16% to $18.85 billion in 2018 from $22.39 billion in 2017, mainly due to generic competition to COPAXONE and a decline in U.S. generics revenues.
- Net loss attributable to Teva was $2.15 billion in 2018, compared with $16.27 billion in 2017, which included large goodwill impairments.
- Goodwill impairments of $3.03 billion (primarily International Markets) and intangible asset impairments of $1.99 billion were recorded in 2018.
- COPAXONE revenues declined to $2.37 billion in 2018 from $3.80 billion in 2017 following generic entry in the United States and Europe.
- Total debt decreased to $28.92 billion at December 31, 2018 from $32.48 billion, with $4.43 billion of new notes issued in March 2018 and $7.45 billion of debt repaid during the year.
- Restructuring plan targets a $3 billion reduction in total cost base by the end of 2019; about 10,300 FTE employees have been removed since the plan's announcement.
- FDA issued a warning letter on February 5, 2019 for the Davie, Florida plant, which the company expects to generate approximately $255 million in 2019 revenues.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2018, Teva Pharmaceutical Industries lost $0.12.
- Revenue$18.27B100.0%
- Cost of revenue−$9.97B54.6%
- Gross profit$8.30B45.4%
- Operating costs−$9.93B54.4%
- Operating income−$1.64B9.0%
- Interest, other & tax−$513.0M2.8%
- Net income−$2.15B11.8%
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 19, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $18.27B$22.39B | −18.4% |
| Cost of Revenue | $9.97B$11.24B | −11.2% |
| Gross Profit | $8.30B$10.62B | −21.8% |
| R&D Expenses | $114.00M$175.00M | −34.9% |
| Operating Income | -$1.64B-$17.48B | +90.6% |
| Interest Expense | $920.00M$875.00M | +5.1% |
| Net Income | -$2.15B-$16.27B | +86.8% |
| EPS (Basic) | $-2.35$-16.26 | +85.5% |
| EPS (Diluted) | $-2.35$-16.26 | +85.5% |
| Shares Outstanding (Basic) | 1.02B1.02B | +0.5% |
| Shares Outstanding (Diluted) | 1.02B1.02B | +0.5% |
05—Questions
Frequently Asked Questions
Why did Teva's net loss narrow in 2018 compared with 2017?
Teva's net loss attributable to Teva was $2.15 billion in 2018, versus $16.27 billion in 2017. The 2017 result was driven by goodwill impairments of $17.10 billion, while 2018 impairments were $3.03 billion. The 2018 result was also helped by $1.21 billion of legal settlement income, including the Allergan working capital adjustment and the Rimsa settlement.
What is the outlook for COPAXONE, the company's leading specialty product?
COPAXONE revenues were $2.37 billion in 2018 compared with $3.80 billion in 2017, and the company expects them to continue decreasing following generic approvals. In October 2018 the U.S. Court of Appeals for the Federal Circuit found all claims at issue invalid for patents covering COPAXONE 40 mg/mL, and the company is evaluating further appeals.
Will Teva pay dividends or repurchase shares?
No. Teva announced an immediate suspension of dividends on ordinary shares and ADSs in December 2017, and the filing states it does not expect to pay dividends in the near future. The company did not repurchase shares during 2018 and states it currently cannot do so due to its accumulated deficit.
What is Teva's debt and credit rating situation?
Total debt was $28.92 billion at December 31, 2018. Fitch, Moody's and Standard & Poor's downgraded Teva to non-investment grade during 2017 and early 2018. The company states it was in compliance with all applicable financial ratios at year-end, and its $3 billion revolving credit facility was undrawn at December 31, 2018.
06—Continue