Why did Teva's GAAP net loss remain large despite an improved operating result?

The GAAP net loss attributable to Teva was $846 million in Q2 2024. Operating loss narrowed to $5 million from $654 million, but income taxes rose to a $630 million expense on a pre-tax loss of $246 million. The filing attributes the tax expense mainly to a settlement agreement with the Israeli Tax Authorities, which increased total income taxes by $506 million, and to impairments.

What drove revenue growth in the quarter?

The filing attributes revenue growth mainly to higher generic product revenues in all segments and to AUSTEDO in the United States and International Markets segments. U.S. generic product revenue rose 16% to $1,023 million, led by lenalidomide capsules. Europe generic revenue rose 7% in U.S. dollars and 8% in local currency terms.

How did Teva's non-GAAP profitability compare with the prior year?

Non-GAAP net income attributable to Teva was $697 million, or $0.61 per diluted share, compared with $629 million, or $0.56, in Q2 2023. Non-GAAP operating income was $1,056 million, a 25.3% margin, compared with $1,011 million and 26.1% a year earlier. The filing says the margin decline was mainly due to higher operational expenses as a percentage of revenues.

What changed in the 2024 outlook and pipeline?

Teva raised its July 2024 outlook for revenues to $16.0-$16.4 billion from $15.7-$16.3 billion, AUSTEDO revenue to about $1.6 billion from about $1.5 billion, COPAXONE revenue to about $450 million from about $400 million, and diluted EPS to $2.30-$2.50 from $2.20-$2.50. The company also said top-line results for duvakitug (Anti-TL1A) are now expected in Q4 2024, with full data expected next year.

What is the status of the planned API business divestiture?

On January 31, 2024, Teva announced its intention to divest its API business through a sale, with completion expected in the first half of 2025. The filing states there can be no assurance regarding the ultimate timing or structure of a potential divestiture, or that it will be agreed or completed at all. Q2 2024 revenues from other activities, which include API sales, were $249 million.

TEVA 8-K: Earnings & Results

01—Abstract

Summary

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

Teva Pharmaceutical Industries Ltd. reported second-quarter 2024 results on July 31, 2024, in a press release furnished as Exhibit 99.1.

Revenues were $4,164 million^a, up 7% in U.S. dollars and 11% in local currency compared to Q2 2023. The company cited growth in generic products across all regions and in AUSTEDO, whose U.S. revenue reached $407 million, up 32%. GAAP operating loss narrowed to $5 million from $654 million a year earlier, largely because of lower legal settlement charges and a lower goodwill impairment.

GAAP net loss attributable to Teva was $846 million^b, or $0.75 per share, compared with $872 million, or $0.78 per share, in Q2 2023. Non-GAAP diluted EPS was $0.61, versus $0.56 a year earlier. GAAP results were weighed down by a tax expense of $630 million on a pre-tax loss of $246 million.

The filing states that a settlement agreement with the Israeli Tax Authorities increased total income taxes by $506 million^c in the quarter. Operating cash flow was $103 million and free cash flow was $324 million, both lower than in Q2 2023, mainly due to working capital changes and higher tax payments. Debt fell to $18,640 million from $19,833 million at year-end 2023, following repayment of $956 million of 6% senior notes.

Teva raised its full-year 2024 outlook. Revenue guidance is now $16.0^d-$16.4 billion, up from $15.7-$16.3 billion.

AUSTEDO revenue is now expected at about $1.6 billion, Adjusted EBITDA at $4.6-$5.0 billion, and non-GAAP diluted EPS at $2.30-$2.50, up from $2.20-$2.50. The company also said it accelerated the duvakitug (Anti-TL1A) development timeline, with top-line results now expected in Q4 2024.

02—Key points

Key Highlights

Q2 2024 revenues of $4,164 million, up 7% in U.S. dollars and 11% in local currency versus Q2 2023
AUSTEDO U.S. revenue of $407 million, up 32% year over year; full-year AUSTEDO revenue outlook raised to about $1.6 billion
GAAP loss per share of $0.75 versus $0.78 in Q2 2023; non-GAAP diluted EPS of $0.61 versus $0.56
Income tax expense of $630 million on a pre-tax loss of $246 million, including a $506 million increase from a settlement agreement with the Israeli Tax Authorities
Full-year 2024 guidance raised: revenues $16.0-$16.4 billion, Adjusted EBITDA $4.6-$5.0 billion, non-GAAP diluted EPS $2.30-$2.50
Operating cash flow of $103 million and free cash flow of $324 million, both below Q2 2023 levels of $324 million and $632 million
Total debt reduced to $18,640 million from $19,833 million at December 31, 2023, after repaying $956 million of 6% senior notes

03—Questions

Frequently Asked Questions

Why did Teva's GAAP net loss remain large despite an improved operating result?
The GAAP net loss attributable to Teva was $846 million in Q2 2024. Operating loss narrowed to $5 million from $654 million, but income taxes rose to a $630 million expense on a pre-tax loss of $246 million. The filing attributes the tax expense mainly to a settlement agreement with the Israeli Tax Authorities, which increased total income taxes by $506 million, and to impairments.
What drove revenue growth in the quarter?
The filing attributes revenue growth mainly to higher generic product revenues in all segments and to AUSTEDO in the United States and International Markets segments. U.S. generic product revenue rose 16% to $1,023 million, led by lenalidomide capsules. Europe generic revenue rose 7% in U.S. dollars and 8% in local currency terms.
How did Teva's non-GAAP profitability compare with the prior year?
Non-GAAP net income attributable to Teva was $697 million, or $0.61 per diluted share, compared with $629 million, or $0.56, in Q2 2023. Non-GAAP operating income was $1,056 million, a 25.3% margin, compared with $1,011 million and 26.1% a year earlier. The filing says the margin decline was mainly due to higher operational expenses as a percentage of revenues.
What changed in the 2024 outlook and pipeline?
Teva raised its July 2024 outlook for revenues to $16.0-$16.4 billion from $15.7-$16.3 billion, AUSTEDO revenue to about $1.6 billion from about $1.5 billion, COPAXONE revenue to about $450 million from about $400 million, and diluted EPS to $2.30-$2.50 from $2.20-$2.50. The company also said top-line results for duvakitug (Anti-TL1A) are now expected in Q4 2024, with full data expected next year.
What is the status of the planned API business divestiture?
On January 31, 2024, Teva announced its intention to divest its API business through a sale, with completion expected in the first half of 2025. The filing states there can be no assurance regarding the ultimate timing or structure of a potential divestiture, or that it will be agreed or completed at all. Q2 2024 revenues from other activities, which include API sales, were $249 million.

04—Continue

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