What drove Teva's 2023 revenue growth?

Revenues rose 6% in U.S. dollars and 7% in local currency to $15,846 million, mainly due to the upfront payment received for the anti-TL1A collaboration, higher generic product revenues in the International Markets and Europe segments, higher revenues from AUSTEDO and AJOVY, and the sale of certain product rights in Europe. These gains were partially offset by lower COPAXONE, API sales to third parties, BENDEKA and TREANDA revenues, and lower generic revenues in North America.

Why did Teva revise its previously reported financial statements?

Teva found errors in a contingent consideration liability and related expenses tied to estimated future royalty payments. The errors excluded royalty payments that should have been included in the fair value re-measurement, understating the liability by $132 million ($98 million related to 2022 and $34 million to 2023). The company judged the errors not material to prior periods but material to 2023 income statement comparisons for 2022. The revision did not affect actual royalty payments or total operating, investing, or financing cash flows, and did not affect non-GAAP results.

What is the material weakness and what is Teva doing about it?

In connection with the errors, management identified a material weakness in internal control over financial reporting as of December 31, 2023. The filing states that Teva is in the process of implementing a remediation plan to address it, and does not provide further details in this document.

What is the planned API business divestiture?

Teva announced its intention to divest its API business, including its R&D, manufacturing and commercial activities, through a sale. The divestment is expected to be completed in the first half of 2025. The company states there can be no assurance regarding the ultimate timing or structure of the divestiture or that it will be agreed or completed at all.

What does Teva expect for 2024?

Teva's 2024 outlook calls for revenues of $15.7 to $16.3 billion, non-GAAP operating income of $4.0 to $4.5 billion, adjusted EBITDA of $4.5 to $5.0 billion, non-GAAP diluted EPS of $2.20 to $2.50, and free cash flow of $1.7 to $2.0 billion. The outlook also expects AUSTEDO revenues of about $1.5 billion, AJOVY of about $500 million, UZEDY of about $80 million, and COPAXONE of about $400 million, with a tax rate of 14% to 17%.

TEVA 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 31, 2024. Cited figures are marked; the original filing is the authoritative source.

Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) reported full-year and fourth-quarter 2023 results in a press release furnished as Exhibit 99.1 to this Form 8-K.

For 2023, revenues were $15,846 million^a, up 6% in U.S. dollars and 7% in local currency. GAAP operating income was $433 million and net loss attributable to Teva was $559 million, or $0.50 per share. Non-GAAP diluted EPS was $2.56 and non-GAAP operating income was $4,361 million.

Growth drivers cited include AUSTEDO, with 2023 revenues exceeding $1.2 billion^b, and AJOVY, with global annual revenues of $435 million. Fourth-quarter 2023 revenues were $4,457 million, and the quarter included a $500 million upfront payment tied to the anti-TL1A collaboration with Sanofi. Net debt was reduced to $16.6 billion as of December 31, 2023.

The filing also discloses a revision of previously issued financial statements. Teva identified errors in a contingent consideration liability that understated the liability by $132 million^c, of which $98 million related to 2022 and $34 million to 2023. Management concluded the errors were not material to prior periods but that the 2022 amount is material to 2023 income statement comparisons.

The company identified a material weakness in internal control over financial reporting as of December 31, 2023 and is implementing a remediation plan. The company also announced its intention to divest its API business, with completion expected in the first half of 2025 and no assurance on timing or structure.

For 2024, Teva guided to revenues of $15.7 to $16.3 billion^d, non-GAAP operating income of $4.0 to $4.5 billion, non-GAAP diluted EPS of $2.20 to $2.50, and free cash flow of $1.7 to $2.0 billion. The filing notes that the war in Israel had an immaterial impact on 2023 results, though that could change if the conflict continues or escalates.

02—Key points

Key Highlights

2023 revenues of $15,846 million, up 6% in U.S. dollars and 7% in local currency terms versus 2022
GAAP net loss attributable to Teva of $559 million ($0.50 per share) for 2023, compared with a net loss of $2,446 million ($2.20 per share) in 2022; non-GAAP diluted EPS of $2.56
Fourth-quarter 2023 revenues of $4,457 million, including a $500 million upfront payment from the anti-TL1A collaboration with Sanofi
Net debt reduced to $16.6 billion as of December 31, 2023; total debt of $19,833 million versus $21,212 million a year earlier
Revision of previously reported results for a $132 million understatement of a contingent consideration liability; management identified a material weakness in internal control over financial reporting
Intention to divest the API business, with completion expected in the first half of 2025, subject to no assurance on timing or structure
2024 outlook: revenues of $15.7 to $16.3 billion, non-GAAP operating income of $4.0 to $4.5 billion, and free cash flow of $1.7 to $2.0 billion

03—Questions

Frequently Asked Questions

What drove Teva's 2023 revenue growth?
Revenues rose 6% in U.S. dollars and 7% in local currency to $15,846 million, mainly due to the upfront payment received for the anti-TL1A collaboration, higher generic product revenues in the International Markets and Europe segments, higher revenues from AUSTEDO and AJOVY, and the sale of certain product rights in Europe. These gains were partially offset by lower COPAXONE, API sales to third parties, BENDEKA and TREANDA revenues, and lower generic revenues in North America.
Why did Teva revise its previously reported financial statements?
Teva found errors in a contingent consideration liability and related expenses tied to estimated future royalty payments. The errors excluded royalty payments that should have been included in the fair value re-measurement, understating the liability by $132 million ($98 million related to 2022 and $34 million to 2023). The company judged the errors not material to prior periods but material to 2023 income statement comparisons for 2022. The revision did not affect actual royalty payments or total operating, investing, or financing cash flows, and did not affect non-GAAP results.
What is the material weakness and what is Teva doing about it?
In connection with the errors, management identified a material weakness in internal control over financial reporting as of December 31, 2023. The filing states that Teva is in the process of implementing a remediation plan to address it, and does not provide further details in this document.
What is the planned API business divestiture?
Teva announced its intention to divest its API business, including its R&D, manufacturing and commercial activities, through a sale. The divestment is expected to be completed in the first half of 2025. The company states there can be no assurance regarding the ultimate timing or structure of the divestiture or that it will be agreed or completed at all.
What does Teva expect for 2024?
Teva's 2024 outlook calls for revenues of $15.7 to $16.3 billion, non-GAAP operating income of $4.0 to $4.5 billion, adjusted EBITDA of $4.5 to $5.0 billion, non-GAAP diluted EPS of $2.20 to $2.50, and free cash flow of $1.7 to $2.0 billion. The outlook also expects AUSTEDO revenues of about $1.5 billion, AJOVY of about $500 million, UZEDY of about $80 million, and COPAXONE of about $400 million, with a tax rate of 14% to 17%.

04—Continue

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