01—Abstract
Summary
Summary of the 10-Q filed May 8, 2024. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited reported first-quarter 2024 revenues of $3,819 milliona, up 4% in U.S. dollars and 5% in local currency from $3,661 million a year earlier.
Gross profit rose 12% to $1,771 millionb, and gross profit margin improved to 46.4% from 43.2%, which the company attributed mainly to a favorable product mix and lower operating costs. Despite this, the company posted an operating loss of $218 million, compared with a revised operating loss of $13 million in the prior year, driven mainly by $673 million of other asset impairments, restructuring and other items. Net loss attributable to Teva narrowed to $139 million from $220 million, or $0.12 per diluted share versus $0.20.
Non-GAAP diluted EPS was $0.48c, compared with $0.40 a year earlier. Balance sheet and liquidity remained pressured. Cash used in operating activities was $124 million, and free cash flow as defined by the company was $32 million.
Cash and cash equivalents fell to $2,991 milliond from $3,226 million, and total debt was $19,643 million versus $19,833 million at year-end 2023. Teva repaid $956 million of 6% senior notes at maturity in April 2024. The company's $1.8 billion revolving credit facility had no amounts outstanding; on May 3, 2024 it was amended to set a maximum leverage ratio of 4.00x for 2024 through the first quarter of 2026, stepping down to 3.50x from the first quarter of 2027.
The filing states that Teva cannot currently repurchase shares or pay dividends due to its accumulated deficit. The filing also highlights ongoing legal and control issues. Teva disclosed a material weakness in internal control over financial reporting related to its contingent consideration liability, which has not been remediated, and concluded that its disclosure controls were not effective as of March 31, 2024.
Legal exposure remains significant, including a nationwide opioid settlement of up to $4.25 billion spread over 13 years and a DOJ patient assistance program complaint seeking a maximum of over $1 billion in damages before trebling. Teva also announced its intention to divest its API business, with completion expected in the first half of 2025.
02—Key points
Key Highlights
- Revenues of $3,819 million rose 4% in U.S. dollars (5% in local currency), led by generic products across segments, AUSTEDO and AJOVY in Europe and International Markets.
- Gross profit margin improved to 46.4% from 43.2%, and gross profit increased 12% to $1,771 million.
- Operating loss widened to $218 million from a revised $13 million, mainly due to $673 million of other asset impairments, restructuring and other items; intangible asset impairments were $80 million.
- Net loss attributable to Teva was $139 million ($0.12 per diluted share), versus $220 million ($0.20) a year earlier; non-GAAP diluted EPS was $0.48 versus $0.40.
- Europe segment profit rose 22% to $423 million; United States segment profit was $350 million and International Markets segment profit was $117 million.
- Total debt declined to $19,643 million, and Teva repaid $956 million of 6% senior notes in April 2024; cash and cash equivalents were $2,991 million.
- Management identified a continuing material weakness in controls over the contingent consideration liability, and disclosure controls were concluded to be not effective as of March 31, 2024.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2024, Teva Pharmaceutical Industries lost $0.04.
- Revenue$3.82B100.0%
- Cost of revenue−$2.05B53.6%
- Gross profit$1.77B46.4%
- Operating costs−$1.99B52.1%
- Operating income−$218.0M5.7%
- Interest, other & tax$79.0M2.1%
- Net income−$139.0M3.6%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 8, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $3.82B$3.66B | +4.3% |
| Cost of Revenue | $2.05B$2.08B | −1.5% |
| Gross Profit | $1.77B$1.58B | +11.9% |
| Operating Income | -$218.00M-$13.00M | −1576.9% |
| Net Income | -$139.00M-$220.00M | +36.8% |
| EPS (Basic) | $-0.12$-0.20 | +40.0% |
| EPS (Diluted) | $-0.12$-0.20 | +40.0% |
| Shares Outstanding (Basic) | 1.12B1.11B | +0.7% |
| Shares Outstanding (Diluted) | 1.12B1.11B | +0.7% |
05—Questions
Frequently Asked Questions
Why did Teva report an operating loss despite higher revenues and gross profit?
The operating loss of $218 million was mainly driven by $673 million of other asset impairments, restructuring and other items, which included $599 million of tangible asset impairments largely tied to classifying a business in the International Markets segment as held for sale. Higher S&M expenses of $608 million, up 11.4%, also contributed, partly offset by higher gross profit and lower legal settlement charges.
How much liquidity does Teva have and how is its debt maturing?
Cash and cash equivalents were $2,991 million at March 31, 2024, and the company has a $1.8 billion sustainability-linked revolving credit facility with no amounts drawn. Short-term debt rose to $3,060 million, including $3,037 million of current maturities of long-term liabilities, and the company's average debt maturity was approximately 5.7 years.
What is the status of Teva's opioid-related obligations?
Teva has settled with all 50 U.S. states and the Tribes under a nationwide settlement of up to $4.25 billion over 13 years. Estimated cash payments are $418 million in 2024 (of which $74 million was paid as of March 31, 2024), $364 million in 2025, $368 million in 2026, $374 million in 2027 and $393 million in 2028. Baltimore and third-party payer cases remain pending, with the Baltimore trial scheduled for September 2024.
What are the key pending legal risks beyond opioids?
The DOJ patient assistance program complaint seeks a maximum of over $1 billion in damages, which would be trebled after an adverse verdict, plus potential statutory penalties; Teva updated its provision in the first quarter based on an offer to settle. Other matters include state attorneys general generic drug pricing litigation, a COPAXONE investigation by the European Commission, and a claim by Teva against Amarin regarding icosapent ethyl.
What strategic actions did Teva disclose that could change its portfolio?
Teva announced its intention to divest its API business, including its R&D, manufacturing and commercial activities, with completion expected in the first half of 2025, though the filing states there is no assurance on timing or structure. It also reported new licensing and collaboration arrangements, including an April 2024 agreement with mAbxience and a March 2024 clinical collaboration with Launch Therapeutics and Abingworth for ICS-SABA (TEV-248).
06—Continue