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Teva Reports Third Quarter 2012 Results

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Net Revenues Total $5.0 Billion, up 14%

Non-GAAP EPS of $1.28, up 2%

JERUSALEM--(BUSINESS WIRE)--Nov. 1, 2012-- Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) today reported results for the quarter ended September 30, 2012.

Highlights:

  • Net revenues of $5.0 billion, compared to $4.3 billion in the third quarter of 2011, an increase of 14%.
  • Net revenues organic growth of 1.3% compared to the third quarter of 2011, and 6% organic growth excluding the effect of generic competition on Provigil®.
  • GAAP net income (loss) and GAAP diluted EPS of $(79) million and $(0.09) compared to $916 million and $1.03, respectively, in the third quarter of 2011. GAAP net income was affected primarily by two significant charges: provision for a loss contingency of $670 million relating to pending patent litigation and impairment, mostly related to in-process R&D, of $481 million.
  • Non-GAAP operating income of $1.4 billion, an increase of 6% compared to $1.3 billion in the third quarter of 2011. Non-GAAP net income of $1.1 billion, unchanged compared to the third quarter of 2011. Non-GAAP diluted EPS of $1.28, an increase of 2% compared to $1.25 in the third quarter of 2011.
  • Cash flow from operations of $1 billion, an increase of 117% compared to $482 million in the third quarter of 2011. Free cash flow of $577 million compared to $2 million in the third quarter of 2011.
  • Sales of Copaxone®, the leading multiple sclerosis therapy in the U.S. and globally, increased 13% to $1.05 billion compared to $928 million in the third quarter of 2011.
  • U.S. generics net revenues of $1.1 billion, an increase of 24% compared to $863 million in the third quarter of 2011.
  • Full year 2012 net revenues expected to be between $20.1 and 20.7 billion and non-GAAP diluted EPS to be between $5.32 - 5.38.

"We are pleased to report solid operating results for the quarter and look forward to closing the year within the guidance we provided in May," stated Dr. Jeremy Levin, President and CEO of Teva. “In addition we were also encouraged by results from the ongoing development of both Copaxone® and laquinimod and pleased by the approval of Synribo®. These successes underpin our commitment to provide the best therapeutic options to multiple sclerosis and other patients worldwide,"

Revenues by Geographies for the Third Quarter 20121

Net revenues in the United States in the third quarter were $2.6 billion (52% of total revenues), an increase of 33% compared to the third quarter of 2011, driven by the inclusion of Cephalon as well as strong revenues of both branded and generic medicines.

Net revenues in Europe in the third quarter were $1.4 billion (28% of total revenues), an increase of 1% compared to the third quarter of 2011, or 13% in local currency terms. Revenues in Europe this quarter benefited from the inclusion of Cephalon medicines as well as stronger revenues from some of our legacy branded medicines, primarily Copaxone®, following the take-back of marketing and distribution rights. This growth was offset by the negative effects of foreign currency (primarily the euro), and to a lesser extent by lower generic sales due to ongoing macro-economic conditions and healthcare reforms in key European markets which increased generic penetration while lowering prices of generic medicines. We are tightly managing our strategy and commercial model in Europe to adapt to these conditions.

Net revenues in the Rest of the World in the third quarter totaled $1.0 billion (20% of total revenues), a decrease of 3% compared to the third quarter of 2011. In local currency terms, ROW revenues grew by 1%. In addition to negative foreign currency effects, the slight decline in revenues resulted from weaker performance in Canada, which had an unusually high quarter last year, partially offset by continued solid and profitable growth in Russia and other Eastern European countries, Latin America and Israel, as well as by the inclusion of Cephalon.

 
  Three Months Ended

September 30,

   

Percentage
Change

Percentage
Change

2012   2011 % of 2012   % of 2011

2012 from
2011

2012 from
2011

U.S. $ in millions in local currencies
United States:
Generic $1,074 $863 22% 20% 24% 24%
Branded 1,468 1,090 29% 25% 35% 35%
Others 59 2 1% § α α
Total United States 2,601 1,955 52% 45% 33% 33%
Europe*:
Generic 798 917 16% 21% (13%) (3%)
Branded 376 242 8% 6% 55% 73%
Others 183 185 4% 4% (1%) 12%
Total Europe 1,357 1,344 28% 31% 1% 13%
Rest of the World:
Generic 620 695 12% 16% (11%) (8%)
Branded 177 132 4% 3% 34% 42%
Others 217 218 4% 5% § 7%
Total Rest of the World 1,014 1,045 20% 24% (3%) 1%
Total Revenues $4,972 $4,344 100% 100% 14% 19%
 
*All members of the European Union as well as Switzerland and Norway.
§ Less than 0.5%
α Over 1000%
 

Revenues by Product Lines for the Third Quarter 2012

Generic medicines net revenues in the third quarter were $2.5 billion (including API sales of $195 million), an increase of 1% compared to the third quarter of 2011. Generic revenues consisted of:

  • U.S. revenues of $1.1 billion, an increase of 24% compared to the third quarter of 2011. The U.S. generics business continued its positive trend benefiting from the launch of nine new medicines this quarter, including generic versions of Actos® and Actoplus met®, as well as continued benefits from several launches in the first half of 2012, which included several medicines that were either exclusive, semi-exclusive or in limited competition markets such as the generic versions of Lexapro® and Provigil®.
  • European revenues of $798 million, a decrease of 13%, or 3% in local currency terms, compared to the third quarter of 2011. This decrease was caused primarily by ongoing macro-economic conditions and healthcare reforms in key European markets. To address these conditions, we are adjusting our market strategy in Europe to focus more on profitable and sustainable growth rather than market share. This adjustment is reflected, for example, in a more selective approach to participation in tenders in Germany, which resulted in lower revenues from tender sales. The decrease this quarter also reflects the fact that revenues in the comparable quarter last year were high as a result of the launch of a generic version of Lipitor® (atorvastatin) in the U.K. The decrease was partially offset by the inclusion of the generic activities of Cephalon in Europe.
  • ROW revenues of $620 million, a decrease of 11%, or 8% in local currency terms, compared to the third quarter of 2011. We had strong performance in Israel, Russia, and other Eastern European markets, which was offset by a decrease in generics sales in Canada, which were unusually high in the third quarter of 2011, and were also impacted by government-imposed price reforms and a small decline in market share this quarter.
     

Three Months Ended
September 30,

     

Percentage
Change

2012   2011 % of 2012   % of 2011 2012 from 2011
U.S. $ in millions
 
Generic Medicines 2,492 2,475 50 % 57 % 1 %
API 195 183 4 % 4 % 7 %
 

Branded medicines net revenues in the third quarter were $2.0 billion, an increase of 38% compared to $1.5 billion in the third quarter of 2011. Branded revenues consisted of:

  • U.S. revenues of $1.5 billion, an increase of 35% compared to the third quarter of 2011.
  • European revenues of $376 million, an increase of 55%, or 73% in local currency terms, compared to the third quarter of 2011.
  • ROW revenues of $177 million, an increase of 34%, or 42% in local currency terms, compared to the third quarter of 2011.

Branded revenues comprised 41% of total revenues in the quarter, compared to 34% in the third quarter of 2011.

The increase in branded medicines revenues from the third quarter of 2011 was primarily due to the inclusion of Cephalon's medicines (mainly Treanda® with $160 million, Nuvigil® with $94 million and Provigil®, with $53 million) and strong sales of Teva legacy medicines, primarily Copaxone®.

Global revenues recorded by Teva for Copaxone®, the leading multiple sclerosis therapy in the U.S. and globally, increased 13%, or 15% in local currency terms, to $1.05 billion compared to $928 million in the third quarter of 2011. The increase primarily resulted from the successful take-back of marketing and distribution rights in Europe and increased sales in ROW markets. In the U.S., sales increased 3% to $775 million, as a result of a price increase taken earlier this year. Sales outside the U.S. were $271 million, an increase of 54% or 68% in local currency terms, compared to the third quarter of 2011, mainly as a result of the take-back and unusually strong sales in Russia.

Azilect® revenues recorded by Teva increased 8% to $77 million, while global in-market revenues increased 6% to $103 million, primarily due to increased demand in the U.S. and Europe.

 

Three Months Ended
September 30,

Percentage
Change

2012   2011   % of 2012   % of 2011

2012 from
2011

U.S. $ in millions
 
Branded Medicines 2,021 1,464 41% 34% 38%
CNS 1,366 999 28% 23% 37%
Copaxone® 1,046 928 21% 21% 13%
Provigil® 53 - 1% - -
Azilect® 77 71 2% 2% 8%
Nuvigil® 94 - 2% - -
Respiratory 201 210 4% 5% (4%)
ProAir™ 109 113 2% 3% (4%)
Qvar® 62 67 1% 2% (7%)
Women's Health 96 123 2% 3% (22%)
Oncology 221 29 4% 1% 662%
Treanda® 160 - 3% - -
Other Branded 137 103 3% 2% 33%
 

OTC net revenues in the quarter were $252 million, an increase of 38%, or 46% in local currency terms, compared to $183 million in the third quarter of 2011, primarily due to sales of OTC products in the U.S. to The Procter & Gamble Company, pursuant to a manufacturing agreement, which commenced in the fourth quarter of 2011, and growth in sales in Latin America and Europe. During the quarter, our joint venture, PGT Healthcare, launched the Vicks® product line in Hungary and the Czech Republic.

Other net revenues in the quarter were $207 million, mostly from the distribution of third-party products in Israel and Hungary, compared to $222 million in the third of 2011.

 

Three Months Ended
September 30,

Percentage
Change

2012   2011   % of 2012   % of 2011

2012 from
2011

U.S. $ in millions
 
All Others 459 405 9% 9% 13%
OTC 252 183 5% 4% 38%
Other Revenues 207 222 4% 5% (7%)
 

Key Metrics for the Third Quarter 2012

Exchange rate differences between this quarter and the third quarter of 2011 reduced our revenues by approximately $202 million, while having a minor positive impact on operating income. The impact on revenues resulted primarily from the weakening of certain currencies (primarily the Hungarian forint, euro, Israeli shekel and Russian ruble) relative to the U.S. dollar.

Non-GAAP Information This quarter, we had net non-GAAP charges of $1.2 billion, consisting primarily of a provision for loss contingency of $670 million and impairments of $481 million, mostly related to in-process R&D. Accordingly, non-GAAP net income and non-GAAP EPS for the quarter are adjusted to exclude these and certain other items, as follows:

  • Provision for loss contingency in an amount of $670 million related to the pantoprazole patent infringement litigation, in light of a recent court ruling in an unrelated case pertaining to one of Teva's patent infringement defenses, which made management change its views regarding probability. However, Teva still vigorously disputes the plaintiffs' damage claims as well as the initial jury verdict of infringement;
  • Impairment of $481 million, which is a result of our on-going review of our R&D portfolio, and mostly related to in-process R&D: obatoclax for the treatment of small cell lung cancer, due to a decision to return it to pre-clinical phase of development; CEP-37247 anti-tumor necrosis factor for the treatment of sciatica, because the initial results of clinical trials indicate a low probability of success; and armodafinil (Nuvigil®) for the treatment of bi-polar disorder, following an earlier than previously expected launch of a generic version;
  • Amortization of purchased intangible assets totaling $299 million of which $288 million is included in cost of goods sold and the remaining $11 million in selling and marketing expenses;
  • Costs of $25 million related to regulatory actions, primarily to our injectables and animal health facilities;
  • Legal settlements of $19 million;
  • Acquisitions, restructuring and other benefits of $34 million related to changes in the fair value of contingent consideration, primarily on obatoclax, partially offset by expenses related to the Cephalon acquisition; and
  • Related tax benefits of $269 million.

Teva believes that excluding such items facilitates investors' understanding of the Company's business. See the attached tables for a reconciliation of U.S. GAAP results to the adjusted non-GAAP figures.

GAAP net income (loss) and GAAP EPS were $(79) million and $(0.09) in the quarter compared to $916 million and $1.03, respectively, in the third quarter of 2011.

Quarterly non-GAAP operating income was $1.4 billion, up 6% compared to the third quarter of 2011. Quarterly GAAP operating loss was $0.1 billion compared to income of $1.0 billion in the third quarter of 2011.

Non-GAAP gross profit margin was 58.6% in the quarter, compared to 56.4% in the third quarter of 2011. This reflects an increased contribution from sales of branded medicines, primarily due to the integration of Cephalon, and higher sales of Copaxone®, partially offset by higher sales of medicines with lower gross margins, especially in Europe. GAAP gross profit margin was 52.3% in the quarter, compared to 51.7% in the third quarter of 2011.

Net Research & Development (R&D) expenditures in the quarter (excluding purchase of in-process R&D) totaled $319 million, or 6.4% of revenues, compared to $227 million, or 5.2% of revenues in the third quarter of 2011. The increase in R&D spending primarily reflects the inclusion of Cephalon. Gross R&D, before reimbursement from third parties for certain R&D expenses, totaled approximately $354 million, or 7.1% of revenues.

Selling and Marketing expenditures (excluding amortization of purchased intangible assets) totaled $903 million, or 18.2% of revenues, in the quarter, compared to $796 million, or 18.3% of revenues in the third quarter of 2011. The increase was primarily due to the inclusion of Cephalon and the take-back of Copaxone® in Europe, partially offset by exchange rate differences, and in the U.S., lower royalty payments made on generic medicines.

General and Administrative (G&A) expenditures totaled $292 million in the quarter, or 5.9% of revenues, compared with $112 million, or 2.6% of revenues, for the third quarter of 2011. The increase was primarily due to gains recorded in the third quarter of 2011 that reduced our expenses in that quarter, as well as higher expenses in the current quarter due to the inclusion of Cephalon.

Finance expenses totaled $73 million in the quarter, compared with $67 million in the third quarter of 2011. The increase is mainly due to higher interest expenses resulting from the additional debt incurred in connection with the acquisitions of Cephalon and Taiyo, partially offset by gains from exchange rate fluctuations and hedging activity during the quarter, compared with losses in the third quarter of 2011.

The provision for non-GAAP tax for the quarter amounted to $212 million on pre-tax non-GAAP income of $1.3 billion. The provision for tax in the third quarter of 2011 was $119 million on pre-tax income of $1.2 billion. We expect a slightly higher annual tax rate for 2012 compared to the annual tax rate in 2011, primarily as a result of the change in geographic and product mix following the Cephalon acquisition.

Cash flow from operations during the quarter was approximately $1.0 billion, compared to $482 million in the third quarter of 2011, an increase of 117%. Free cash flow, excluding net capital expenditures and dividends was $577 million, a significant increase compared to $2 million in the third quarter of 2011, when cash flow was unusually low due to several one-time events. Cash and marketable securities on September 30, 2012 amounted to $2.0 billion.

During the quarter, there were no share repurchases. Since the beginning of 2012, Teva has repurchased 15.4 million shares for approximately $667 million as part of a $3.0 billion share repurchase plan authorized in December 2011. As a result of the repurchases, the fully diluted share count at September 30, 2012, was reduced by approximately 10 million shares from December 31, 2011.

For the third quarter of 2012, the weighted average share count for the fully diluted earnings per share calculation was 869 million on a GAAP basis and 870 million on a non-GAAP basis. At September 30, 2012, the share count for calculating Teva's market capitalization was approximately 868 million.

Total equity at September 30, 2012, was $23.1 billion, an increase of $0.2 billion compared to $22.9 billion at June 30, 2012. The increase in total equity is primarily a result of currency translation adjustments, partially offset by dividend declared and the GAAP net loss of $79 million.

Dividend

The Board of Directors, at its meeting on October 30, 2012, declared a cash dividend for the third quarter of 2012 of NIS 1.00 (approximately 25.7 cents according to the rate of exchange on October 30, 2012) per share.

The record date will be November 15, 2012, and the payment date will be December 3, 2012. Tax will be withheld at a rate of 20.7%.

Conference Call

Teva will host a conference call to discuss its third quarter 2012 results on Thursday, November 1, 2012, at 8:00 a.m. Eastern Daylight Time. The call will be webcast and can be accessed through the Company's website at www.tevapharm.com, or by dialing 1.888.771.4371 (U.S. and Canada) or 1.847.585.4405 (International). The conference ID is 33556091. Following the conclusion of the call, a replay will be available within 24 hours at the Company's website at www.tevapharm.com. A replay will also be available until November 8, 2012, at 11:59 p.m. ET, by calling 1.888.843.7419 (U.S. and Canada) or 1.630.652.3042 (International). The Conference ID is 33556091#.

About Teva

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as specialty pharmaceuticals and active pharmaceutical ingredients. Headquartered in Israel, Teva is a world leading generic drug maker, with a global product portfolio of more than 1,300 molecules and a direct presence in about 60 countries. Teva's branded businesses focus on CNS, oncology, pain, respiratory and women's health therapeutic areas. Teva currently employs approximately 46,000 people around the world and reached $18.3 billion in net revenues in 2011.

Teva’s Safe Harbor Statement under the U.S. Private Securities Litigation Reform Act of 1995:

The following discussion and analysis contains forward-looking statements, which express the current beliefs and expectations of management. Such statements involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks relating to: our ability to develop and commercialize additional pharmaceutical products, competition from the introduction of competing generic equivalents and due to increased governmental pricing pressures, the effects of competition on sales of our innovative medicines, especially Copaxone® (including competition from innovative orally-administered alternatives as well as from potential generic equivalents), potential liability for sales of generic medicines prior to a final resolution of outstanding patent litigation, including that relating to our generic version of Protonix®, the extent to which we may obtain U.S. market exclusivity for certain of our new generic medicines, the extent to which any manufacturing or quality control problems damage our reputation for high quality production and require costly remediation, our ability to identify, consummate and successfully integrate acquisitions (including the acquisition of Cephalon), our ability to achieve expected results through our innovative R&D efforts, dependence on the effectiveness of our patents and other protections for innovative medicines, intense competition in our specialty pharmaceutical businesses, uncertainties surrounding the legislative and regulatory pathway for the registration and approval of biotechnology-based medicines, our potential exposure to product liability claims to the extent not covered by insurance, any failures to comply with the complex Medicare and Medicaid reporting and payment obligations, our exposure to currency fluctuations and restrictions as well as credit risks, the effects of reforms in healthcare regulation and pharmaceutical pricing and reimbursement, adverse effects of political instability and adverse economic conditions, major hostilities or acts of terrorism on our significant worldwide operations, increased government scrutiny in both the U.S. and Europe of our agreements with brand companies, interruptions in our supply chain or problems with our information technology systems that adversely affect our complex manufacturing processes, the impact of continuing consolidation of our distributors and customers, the difficulty of complying with U.S. Food and Drug Administration, European Medicines Agency and other regulatory authority requirements, potentially significant impairments of intangible assets and goodwill, potential increases in tax liabilities resulting from challenges to our intercompany arrangements, the termination or expiration of governmental programs or tax benefits, any failure to retain key personnel or to attract additional executive and managerial talent, environmental risks, and other factors that are discussed in our Annual Report on Form 20-F for the year ended December 31, 2011 and in our other filings with the U.S. Securities and Exchange Commission (“SEC”). Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statements or other information contained in this report, whether as a result of new information, future events or otherwise.

1 For a full analysis of our quarterly revenues by geography and by product line, beginning in Q4 2010, please visit our website at www.ir.tevapharm.com

                   

Consolidated Statements of Income

(Unaudited, U.S. dollars in millions, except share and per share data)

 
Three months ended

 

Nine months ended

September 30,

 

September 30,

2012 2011 2012 2011
Net revenues 4,972 4,344 15,068 12,636
Cost of sales 2,371   2,098   7,201   6,002  
Gross profit 2,601 2,246 7,867 6,634
Research and development expenses – net 324 242 914 724
Selling and marketing expenses 914 806 2,823 2,442
General and administrative expenses 292 112 920 617
Loss contingencies, Impairments, Settlements and other 1,131   51   1,335   352  
Operating income (loss) (60 ) 1,035 1,875 2,499
Financial expenses – net 73   67   240   85  
Income (loss) before income taxes (133 ) 968 1,635 2,414
Provision for income tax expense (benefit) (57 ) 33 (27 ) 109
Share in losses of associated companies – net 8   17   32   42  
Net income (loss) (84 ) 918 1,630 2,263
Net (income) loss attributable to non-controlling interests 5   (2 ) 13   (10 )
Net income (loss) attributable to Teva (79 ) 916   1,643   2,253  
 
Earnings (loss) per share attributable to Teva: Basic ($) (0.09 ) 1.03   1.88   2.52  
Diluted ($) (0.09 ) 1.03   1.88   2.51  
Weighted average number of shares (in millions): Basic 869   888   873   892  
Diluted 869   890   875   896  
                               
Non-GAAP net income attributable to Teva:* 1,112   1,111   3,529   3,031  
 
Non-GAAP earnings per share attributable to Teva: Basic ($) 1.28   1.25   4.04   3.40  
Diluted ($) 1.28   1.25   4.03   3.38  
 
Weighted average number of shares (in millions): Basic 869   888   873   892  
Diluted 870   890   875   896  
                               
 
* See reconciliation attached.
 
   

Condensed Balance Sheets

(U.S. dollars in millions)

   
September 30, December 31,
2012 2011
ASSETS Unaudited Audited
Current assets:
Cash and cash equivalents 1,432 1,096
Accounts receivable 5,782 6,213
Inventories 5,461 5,012
Deferred taxes and other current assets 2,308 2,132
Total current assets 14,983 14,453
Long-term investments and receivables 1,208 991
Deferred taxes, deferred charges and other assets 148 142
Property, plant and equipment, net 6,281 5,947
Identifiable intangible assets, net 8,295 10,316
Goodwill 18,665 18,293
Total assets 49,580 50,142
 
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt and current maturities of long term liabilities 571 3,749
Convertible senior debentures - short term 531 531
Sales reserves and allowances 4,823 4,428
Accounts payable and accruals 3,143 3,572
Other current liabilities 1,557 1,396
Total current liabilities 10,625 13,676
Long-term liabilities:
Deferred income taxes 1,914 2,610
Other taxes and long term payables 1,281 1,277
Senior notes and loans 12,688 10,236
Total long term liabilities 15,883 14,123
Equity:
Teva shareholders’ equity 22,934 22,195
Non-controlling interests 138 148
Total equity 23,072 22,343
Total liabilities and equity 49,580 50,142
 
               

Condensed Cash Flow

(Unaudited, U.S. Dollars in millions)

 
Three months ended Nine months ended
September 30,   September 30,
2012 2011 2012 2011
Operating activities:

Net income (loss)

(84 ) 918 1,630 2,263
Net change in operating assets and liabilities 475 (597 ) 130 (7 )
Items not involving cash flow 657 161 1,235 450
       
Net cash provided by operating activities 1,048 482 2,995 2,706
 
Net cash used in investing activities (249 ) (1,194 ) (725 ) (2,110 )
 
Net cash provided by (used in) financing activities (570 ) 698 (1,944 ) (756 )
 
Translation adjustment on cash and cash equivalents 15 (40 ) 10 (3 )
       
Net change in cash and cash equivalents 244 (54 ) 336 (163 )
 
Balance of cash and cash equivalents at the beginning of period 1,188 1,139 1,096 1,248
       
Balance of cash and cash equivalents at the end of period 1,432   1,085   1,432   1,085  
 
       
Revenues by Product line
(Unaudited)
           
Three Months Ended Percentage
September 30, Change
2012 from
2012 2011 % of 2012 % of 2011 2011
U.S. $ in millions
 
Generic Medicines 2,492 2,475 50 % 57 % 1 %
API 195 183 4 % 4 % 7 %
Branded Medicines 2,021 1,464 41 % 34 % 38 %
CNS 1,366 999 28 % 23 % 37 %
Copaxone® 1,046 928 21 % 21 % 13 %
Provigil® 53 - 1 % - -
Azilect® 77 71 2 % 2 % 8 %
Nuvigil® 94 - 2 % - -
Respiratory 201 210 4 % 5 % (4 %)
ProAir™ 109 113 2 % 3 % (4 %)
Qvar® 62 67 1 % 2 % (7 %)
Women's Health 96 123 2 % 3 % (22 %)
Oncology 221 29 4 % 1 % 662 %
Treanda® 160 - 3 % - -
Other Branded 137 103 3 % 2 % 33 %
All Others 459 405 9 % 9 % 13 %
OTC 252 183 5 % 4 % 38 %
Other Revenues 207 222 4 % 5 % (7 %)
Total 4,972 4,344 100 % 100 % 14 %
 
               
Revenues by Product line
(Unaudited)
   
Nine Months Ended Percentage
September 30, Change
2012 from
2012 2011 % of 2012 % of 2011 2011
U.S. $ in million
 
Generic Medicines 7,723 7,214 51% 57% 7%
API 594 550 4% 4% 8%
Branded Medicines 6,044 4,239 40% 34% 43%
CNS 4,124 2,850 27% 23% 45%
Copaxone® 2,937 2,643 19% 21% 11%
Provigil® 392 - 3% 0% -
Azilect® 244 207 2% 1% 18%
Nuvigil® 269 - 2% 0% -
Respiratory 600 603 4% 5% §
ProAir™ 286 291 2% 2% (2%)
Qvar® 205 212 1% 2% (3%)
Women's Health 316 345 2% 3% (8%)
Oncology 627 78 4% 1% 704%
Treanda® 447 - 3% 0% -
Other Branded 377 363 3% 3% 4%
All Others 1,301 1,183 9% 9% 10%
OTC 667 548 5% 4% 22%
Other Revenues 634 635 4% 5% §
Total 15,068 12,636 100% 100% 19%
 
§ Less than 0.5%
 
       

Non GAAP reconciliation items

(Unaudited, U.S. Dollars in millions)

       
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
Amortization of purchased intangible assets - under cost of sales 288 151 957 454
Inventory step-up - under cost of sales - 19 63 44
Costs related to regulatory actions taken in facilities - under cost of sales 25 35 103 130
Amortization of purchased intangible assets - under selling and marketing expenses 11 10 31 27
Impairment of long-lived assets 481 16 576 30
Restructuring, acquisition and other expenses (39 ) 36 52 106
Purchase of research and development in process 5 15 5 15
Provision for loss contingency 670 - 670 30
Expense (income) in connection with legal settlements and reserves 19 (1 ) 37 186
Related tax effect (269 ) (86 ) (608 ) (244 )
 
           
Reconciliation between reported Net Income attributable to Teva and Earnings per share as reported under US GAAP to Non-GAAP Net Income attributable to Teva and Earnings per share
                   
Nine months ended September 30, 2012 Nine months ended September 30, 2011
U.S. dollars and shares in millions (except per share amounts)
Non-GAAP Non-

% of Net

Non-GAAP

Non-

% of Net

GAAP

Adjustments

GAAP

Revenues

GAAP

Adjustments

GAAP

Revenues

 
Gross profit (1) 7,867 1,123 8,990 60 % 6,634 628 7,262 57 %
Operating income (1)(2) 1,875 2,494 4,369 29 % 2,499 1,022 3,521 28 %
Net income attributable to Teva (1)(2)(3) 1,643 1,886 3,529 23 % 2,253 778 3,031 24 %
Earnings per share attributable to Teva - Diluted (4) 1.88 2.15 4.03 2.51 0.87 3.38
 
 
 

(1

)

Amortization of purchased intangible assets 957 454
Costs related to regulatory actions taken in facilities 103 130
Inventory step-up 63   44  
Gross profit adjustments 1,123 628
 

(2

)

Provision for loss contingency 670 30
Impairment of long-lived assets 576 30
Restructuring, acquisition and other expenses 57 121
Amortization of purchased intangible assets 31 27
Expense in connection with legal settlements and reserves 37   186  
1,371 394
   
Operating profit adjustments 2,494   1,022  
 

(3

)

Tax benefit (608 ) (244 )
Net income adjustments 1,886   778  
 
(4)   The weighted average number of shares was 875 and 896 million for the nine months ended September 30, 2012 and 2011, respectively. Non-GAAP earnings per share can be reconciled with GAAP earnings per share by dividing each of the amounts included in footnotes 1-3 above by the applicable weighted average share number.
 
  Reconciliation between reported Net Income attributable to Teva and Earnings per share as reported under US GAAP to Non-GAAP Net Income attributable to Teva and Earnings per share
                               
Three months ended September 30, 2012 Three months ended September 30, 2011
U.S. dollars and shares in millions (except per share amounts)
GAAP Non-GAAP Adjustments Non-GAAP % of Net Revenues GAAP Non-GAAP Adjustments Non-GAAP % of Net Revenues
 
Gross profit (1) 2,601 313 2,914 59 % 2,246 205 2,451 56 %
Operating income (loss) (1)(2) (60 ) 1,460 1,400 28 % 1,035 281 1,316 30 %
Net income (loss) attributable to Teva (1)(2)(3) (79 ) 1,191 1,112 22 % 916 195 1,111 26 %
Earnings (loss) per share attributable to Teva - Diluted (4) (0.09 ) 1.37 1.28 1.03 0.22 1.25
 
 
 
(1 ) Amortization of purchased intangible assets 288 151
Costs related to regulatory actions taken in facilities 25 35
Inventory step-up -   19  
Gross profit adjustments 313 205
(2 ) Provision for loss contingency 670 -
Restructuring, acquisition and other expenses (34 ) 51
Amortization of purchased intangible assets 11 10
Impairment of long-lived assets 481 16
Expense (income) in connection with legal settlements and reserves 19   (1 )
1,147

76

Operating profit adjustments 1,460   281  
(3 ) Tax benefit (269 ) (86 )
Net income adjustments 1,191   195  
 
(4)   The weighted average number of shares was 870 and 890 million for the three months ended September 30, 2012 and 2011, respectively. Non-GAAP earnings per share can be reconciled with GAAP earnings per share by dividing each of the amounts included in footnotes 1-3 above by the applicable weighted average share number. For the third quarter of 2012 we took the Non-GAAP weighted average number of shares which is one million shares higher than the GAAP weighted average number of shares.
 
             
Revenues by Geographic Area

(Unaudited)

             
Three Months Ended Percentage Percentage
September 30, Change Change
2012 2011 % of 2012 % of 2011 2012 from 2011   2012 from 2011
U.S. $ in millions in local
currencies
United States:
Generic $ 1,074 $ 863 22 % 20 % 24 % 24 %
Branded 1,468 1,090 29 % 25 % 35 % 35 %
Others   59   2 1 % §   α   α  
Total United States 2,601 1,955 52 % 45 % 33 % 33 %
Europe*:
Generic 798 917 16 % 21 % (13 %) (3 %)
Branded 376 242 8 % 6 % 55 % 73 %
Others   183   185 4 % 4 % (1 %) 12 %
Total Europe 1,357 1,344 28 % 31 % 1 % 13 %
Rest of the World:
Generic 620 695 12 % 16 % (11 %) (8 %)
Branded 177 132 4 % 3 % 34 % 42 %
Others   217   218 4 % 5 % §   7 %
Total Rest of the World   1,014   1,045 20 % 24 % (3 %) 1 %
Total Revenues $ 4,972 $ 4,344 100 % 100 % 14 % 19 %
 
*All members of the European Union as well as Switzerland and Norway.
§ Less than 0.5%
α Over 1000%
 
           
Revenues by Geographic Area

(Unaudited)

             
Nine Months Ended Percentage Percentage
September 30, Change Change
2012 2011 % of 2012 % of 2011 2012 from 2011   2012 from 2011
U.S. $ in millions in local
currencies
United States:
Generic $ 3,347 $ 2,715 22 % 22 % 23 % 23 %
Branded 4,330 3,034 29 % 24 % 43 % 43 %
Others   140   6 1 % §   α   α  
Total United States 7,817 5,755 52 % 46 % 36 % 36 %
Europe*:
Generic 2,457 2,828 16 % 22 % (13 %) (5 %)
Branded 1,143 772 7 % 6 % 48 % 62 %
Others   546   566 4 % 5 % (4 %) 10 %
Total Europe 4,146 4,166 27 % 33 % § 9 %
Rest of the World:
Generic 1,919 1,671 13 % 13 % 15 % 17 %
Branded 571 433 4 % 3 % 32 % 41 %
Others   615   611 4 % 5 % 1 % 7 %
Total Rest of the World   3,105   2,715 21 % 21 % 14 % 19 %
Total Revenues $ 15,068 $ 12,636 100 % 100 % 19 % 23 %
 
*All members of the European Union as well as Switzerland and Norway.
§ Less than 0.5%
α Over 1000%

Source: Teva Pharmaceutical Industries Ltd.

Teva
IR:
Kevin C. Mannix
United States
(215) 591-8912
or
Joseph Marczely
United States
(267) 468-4281
or
Tomer Amitai
Israel
972 (3) 926-7656
or
PR:
Hadar Vismunski-Weinberg
Israel
972 (3) 926-7687
or
Denise Bradley
United States
(215) 591-8974