01—Abstract
Summary
Summary of the 10-K filed February 10, 2021. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited's 10-K for fiscal 2020 reports net revenues of $16,659 milliona, down 1% in both U.S. dollar and local currency terms from $16,887 million in 2019, mainly due to lower oncology, COPAXONE and certain respiratory revenues, partly offset by higher AUSTEDO and AJOVY revenues.
The company posted a net loss attributable to Teva of $3,990 millionb, driven largely by a $4,628 million goodwill impairment in the North America reporting unit, recorded in the third quarter of 2020 following a 25% decline in market capitalization and uncertainty around opioid and price-fixing litigation. Operating loss was $3,572 million, compared with an operating loss of $443 million in 2019. Cash flow from operations improved to $1,216 million from $748 million, and free cash flow was $2,110 million as defined by the company.
Total debt decreased to $25,919 millionc from $26,908 million, and total equity fell to $11,061 million from $15,063 million. Teva has not paid dividends since December 2017. The filing also details substantial legal exposure, including a criminal indictment of Teva USA under the Sherman Act, a DOJ civil complaint under the Anti-Kickback Statute, and a provision of $1,625 million for legal settlements and loss contingencies, with a nationwide opioid settlement framework still under negotiation.
Segment profit was $2,421 milliond in North America (up 7%), $1,331 million in Europe (up 1%) and $474 million in International Markets (up 2%). Management expects Teva to exceed debt covenant thresholds in the RCF within one year, and cites a $1,405 million beneficial interest collected from securitized receivables as a contributor to free cash flow.
02—Key points
Key Highlights
- Net revenues of $16,659 million, down 1% in both U.S. dollar and local currency terms versus 2019
- Net loss attributable to Teva of $3,990 million, versus a net loss of $999 million in 2019
- Goodwill impairment charge of $4,628 million in the North America reporting unit, recorded in Q3 2020
- Operating loss of $3,572 million; intangible asset impairments of $1,502 million
- Cash flow from operating activities of $1,216 million and free cash flow of $2,110 million (company-defined)
- Total debt reduced to $25,919 million from $26,908 million; total equity declined to $11,061 million
- Teva USA indicted on criminal felony Sherman Act charges on August 25, 2020, and a DOJ civil Anti-Kickback Statute complaint was filed in August 2020
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2020, Teva Pharmaceutical Industries lost $0.24.
- Revenue$16.66B100.0%
- Cost of revenue−$8.93B53.6%
- Gross profit$7.73B46.4%
- Operating costs−$11.30B67.8%
- Operating income−$3.57B21.4%
- Interest, other & tax−$418.0M2.5%
- Net income−$3.99B24.0%
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 10, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $16.66B$16.89B | −1.4% |
| Cost of Revenue | $8.93B$9.35B | −4.5% |
| Gross Profit | $7.73B$7.54B | +2.5% |
| Operating Income | -$3.57B-$443.00M | −706.3% |
| Interest Expense | $901.00M$822.00M | +9.6% |
| Net Income | -$3.99B-$999.00M | −299.4% |
| EPS (Basic) | $-3.64$-0.91 | −300.0% |
| EPS (Diluted) | $-3.64$-0.91 | −300.0% |
| Shares Outstanding (Basic) | 1.09B1.09B | +0.4% |
| Shares Outstanding (Diluted) | 1.09B1.09B | +0.4% |
05—Questions
Frequently Asked Questions
Why did Teva report such a large loss in 2020?
The loss was driven mainly by a $4,628 million goodwill impairment charge in the North America reporting unit, recorded in the third quarter of 2020. The filing cites a 25% decline in market capitalization from Q2 to Q3 2020, plus longer expected timeframes for resolving the opioids litigation and the company's indictment and DOJ lawsuit. Intangible asset impairments of $1,502 million also contributed.
How did Teva's core segments perform in 2020?
North America revenues were $8,447 million, down 1%, with segment profit up 7% to $2,421 million on higher gross margin and lower R&D. Europe revenues were $4,757 million, down 1% (down 2% in local currency), with segment profit up 1% to $1,331 million. International Markets revenues were $2,154 million, down 4% (flat in local currency), with segment profit up 2% to $474 million.
What is the company's debt and liquidity position?
Total debt was $25,919 million at December 31, 2020, versus $26,908 million a year earlier. Cash, cash equivalents and investments were $2,478 million. The $2.3 billion revolving credit facility was undrawn at year-end and at the filing date. The company states it expects sufficient cash to meet debt service within one year and expects to stay within RCF covenant thresholds, though its covenants tighten over time. On February 1, 2021, $491 million of convertible debentures were redeemed by holders.
What are the major legal risks disclosed?
The filing discloses a criminal indictment of Teva USA for alleged generic drug price-fixing, a DOJ civil complaint alleging Anti-Kickback Statute violations tied to donations to patient assistance programs, and numerous state and private antitrust suits. It also describes more than 3,000 opioid-related complaints, with a nationwide settlement framework still under negotiation and a provision of $1,625 million recorded for legal settlements and loss contingencies.
What is the outlook for 2021 according to the filing?
The company states it does not currently anticipate a material negative impact on its 2021 financial results from the COVID-19 pandemic. It lists factors expected to affect 2021, including continued success of AUSTEDO and AJOVY, key generic launches, expected COPAXONE sales declines from generic competition, currency fluctuations, and ongoing plant optimization. It also notes that the sale of most of the generic and operational assets of its Japan business venture was completed on February 1, 2021.
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