01—Abstract
Summary
Summary of the 10-K filed February 21, 2020. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited reported 2019 net revenues of $16.89 billiona, down from $18.27 billion in 2018, driven mainly by generic competition to COPAXONE, a decline in its U.S. generics business, BENDEKA/TREANDA and Japan, partially offset by higher revenues from AUSTEDO, AJOVY and QVAR in the United States.
The company posted a net loss attributable to Teva of $999 millionb, or $0.91 per diluted share, compared with a net loss of $2.15 billion in 2018. Operating loss narrowed to $443 million from $1.64 billion, mainly because 2018 included a $3.03 billion goodwill impairment and 2019 had no goodwill impairment, although 2019 included a $1.18 billion legal settlements and loss contingencies expense, mainly tied to remaining opioid cases. Cash flow weakened: operating cash flow was $748 million, down $1.70 billion or 69%, and free cash flow was $2.05 billion as defined by the company.
Total debt fell to $26.91 billionc from $28.92 billion, and the company stated it was in compliance with all applicable financial ratios at year end. Teva continued its restructuring plan announced in December 2017, which reduced the cost base by $3 billion and cut roughly 13,000 full-time-equivalent employees. The company has not paid dividends on its ordinary shares since December 2017.
Investors should note several risks disclosed in the filing: continuing COPAXONE erosion, the Davie, Florida FDA warning letter, a February 2020 negative trial result for AUSTEDO in Tourette syndrome with a $211 milliond expected impairment in the first quarter of 2020, and a broad set of U.S. antitrust, opioid and securities litigations. Teva's credit ratings are below investment grade at Fitch, Moody's and Standard & Poor's.
02—Key points
Key Highlights
- Net revenues fell to $16,887 million in 2019 from $18,271 million in 2018, a decrease of 8% in U.S. dollars and 5% in local currency terms.
- Net loss attributable to Teva was $999 million ($0.91 per diluted share) in 2019, versus a net loss of $2,150 million in 2018.
- No goodwill impairment was recorded in 2019, compared with a $3,027 million goodwill impairment in 2018; intangible asset impairments were $1,639 million.
- Legal settlements and loss contingencies were an expense of $1,178 million in 2019, mainly tied to remaining opioid cases, compared with income of $1,208 million in 2018.
- Operating cash flow was $748 million in 2019, a decrease of $1,698 million or 69%; the company defined free cash flow as $2,053 million.
- Total debt was $26,908 million at December 31, 2019, down from $28,916 million, mainly from senior notes repaid at maturity or prepaid.
- COPAXONE revenues fell to $1,512 million in 2019 from $2,365 million in 2018 due to generic competition, while AUSTEDO North America revenues rose 102% to $412 million.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, Teva Pharmaceutical Industries lost $0.06.
- Revenue$16.89B100.0%
- Cost of revenue−$9.35B55.4%
- Gross profit$7.54B44.6%
- Operating costs−$7.98B47.3%
- Operating income−$443.0M2.6%
- Interest, other & tax−$556.0M3.3%
- Net income−$999.0M5.9%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 21, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $16.89B$18.27B | −7.6% |
| Cost of Revenue | $9.35B$9.97B | −6.3% |
| Gross Profit | $7.54B$8.30B | −9.1% |
| Operating Income | -$443.00M-$1.64B | +72.9% |
| Interest Expense | $822.00M$920.00M | −10.7% |
| Net Income | -$999.00M-$2.15B | +53.5% |
| EPS (Basic) | $-0.91$-2.35 | +61.3% |
| EPS (Diluted) | $-0.91$-2.35 | +61.3% |
| Shares Outstanding (Basic) | 1.09B1.02B | +6.9% |
| Shares Outstanding (Diluted) | 1.09B1.02B | +6.9% |
05—Questions
Frequently Asked Questions
Why did Teva's revenues decline in 2019?
The filing attributes the decline mainly to generic competition to COPAXONE, a decline in revenues from the U.S. generics business, BENDEKA/TREANDA and Japan. Higher revenues from AUSTEDO, AJOVY and QVAR in the United States partially offset these decreases.
Did Teva's loss narrow in 2019?
Yes. The net loss attributable to Teva was $999 million in 2019, compared with $2,150 million in 2018. The filing notes that the 2018 operating loss was mainly driven by higher impairment charges, and 2019 recorded no goodwill impairment.
What is the main source of litigation-related risk disclosed?
The filing discloses a $1,178 million expense in 2019 for legal settlements and loss contingencies, mainly for an estimated settlement provision tied to remaining opioid cases. It also describes a nationwide settlement framework with a value of up to approximately $23 billion in buprenorphine naloxone and up to $250 million in cash over ten years, which the company says it cannot predict will be finalized.
Is Teva paying dividends?
No. The company states it has not paid dividends on its ordinary shares or ADSs since December 2017, and its 2019 Risk Factors say it does not expect to pay dividends in the near future.
What was the outlook for AUSTEDO after its trial results?
In February 2020, Teva received results showing that the Tourette syndrome clinical trials failed to meet their primary endpoints. The company said it will incur an intangible asset impairment of $211 million in the first quarter of 2020.
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