Teva Reports Fourth Quarter and Full Year 2021 Financial Results

TEL AVIV, Israel--(BUSINESS WIRE)-- Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) today reported results for the year and the quarter ended December 31, 2021.

View the Highlights: Q4 and Full Year 2021 Business Results Infographic

• Q4 2021 and FY 2021 highlights:

• 2022 business outlook:
  • Revenues are expected to be $15.6 - $16.2 billion
  • Non-GAAP diluted EPS is expected to be $2.40 - $2.60
  • Free cash flow is expected to be $1.9 - $2.2 billion

"In 2021 Teva delivered solid results, generating strong cash flow and improving our profitability. While COVID-19 continued to impact patient behavior and global prescribing patterns, we continued to optimize our supply chain and manufacturing capabilities to provide essential medicines to the millions of patients who rely on us throughout the world. We improved our gross and operating margin and reduced our net debt, keeping us on our path to achieve our 2023 long-term goals", said Mr. Kåre Schultz, Teva’s President and CEO.

Mr. Schultz continued: "Looking forward to 2022, we expect to see continued growth of our key products AUSTEDO® and AJOVY®, as well as to continue to advance our core business through the launch of high quality generic medicines around the world. We are also excited about the expected FDA approval and launch of Risperidone LAI, an important treatment for patients suffering from schizophrenia.

Regarding the recently announced settlement in the opioid-related litigation in Texas, Mr. Schultz stated, "I'm very pleased with the agreement we reached with the state of Texas, the second most populous state in the U.S. Not only does it mark a further step in resolving our legacy opioids litigations more broadly, but importantly also makes critical medicines part of the solution when addressing the opioids epidemic. While the agreement includes no admission of wrongdoing, it remains in our best interest to put these cases behind us and continue to focus on the patients we serve every day.”

2021 Annual Consolidated Results

Revenues in 2021 were $15,878 million, a decrease of 5%, in U.S. dollars or 6% in local currency terms, compared to 2020, mainly due to lower revenues from COPAXONE®, generic products in the U.S., generic products in Japan resulting from the divestment of a majority of the generic and operational assets of our Japanese business venture and Anda, partially offset by higher revenues from AUSTEDO and AJOVY. Revenues continued to be affected by the ongoing impact of the COVID-19 pandemic on markets and on customer stocking and purchasing patterns.

Exchange rate movements during 2021, including hedging effects, positively impacted revenues by $232 million, GAAP operating income by $49 million and non-GAAP operating income by $55 million, each as compared to 2021.

GAAP gross profit was $7,594 million in 2021, a decrease of 2% compared to 2020. GAAP gross profit margin was 47.8% in 2021, compared to 46.4% in 2020. Non-GAAP gross profit was $8,612 million in 2021, a decrease of 1% compared to 2020. Non-GAAP gross profit margin was 54.2% in 2021, compared to 52.4% in 2020. This increase in both GAAP and non-GAAP gross profit as a percentage of revenues was mainly due to higher profitability in North America, resulting from higher revenues from AUSTEDO and AJOVY and a favorable mix of generic products, as well as higher profitability in Europe and International Markets, partially offset by lower revenues from COPAXONE due to generic competition.

GAAP Research and Development (R&D)expenses in 2021 were $967 million, a decrease of 3% compared to 2020. Non-GAAP R&D expenses in 2021 were $933 million, or 5.9% of revenues, compared to $941 million, or 5.6% of revenues, in 2020. The decrease in non-GAAP R&D expenses in 2021, compared to 2020, was mainly due to a decrease in the pain and neuropsychiatry therapeutic areas, partially offset by higher R&D expenses related to generic products including biosimilars.

GAAP Selling and Marketing (S&M)expenses in 2021 were $2,429 million, a decrease of 3% compared to 2020. Non-GAAP S&M expenses were $2,297 million, or 14.5% of revenues, in 2021, compared to $2,322 million, or 13.9% of revenues, in 2020.

GAAP General and Administrative (G&A) expenses in 2021 were $1,099 million, a decrease of 6% compared to 2020. Non-GAAP G&A expenses were $1,029 million in 2021, or 6.5% of revenues, compared to $1,115 million, or 6.7% of revenues, in 2020.

GAAP other income in 2021 was $98 million, compared to $40 million in 2020. Non-GAAP other income in 2021 was $48 million, compared to $31 million in 2020.

GAAP operating income was $1,716 million in 2021, compared to an operating loss of $3,572 million in 2020. GAAP operating loss in 2020 was mainly affected by goodwill impairment charges and intangible asset impairments. Non-GAAP operating income was $4,401 million in 2021, or 27.7% of revenues compared to $4,388 million, or 26.3% of revenues in 2020.

EBITDA (defined as operating income, excluding amortization and depreciation expenses) was $3,046 million in 2021, compared to negative EBITDA of $2,007 million in 2020. Adjusted EBITDA (defined as non-GAAP operating income excluding depreciation expenses) was $4,911 million in 2021, compared to $4,912 million in 2020.

In 2021, GAAP financial expenses were $1,058 million, compared to $834 million in 2020. Non-GAAP financial expenses were $930 million in 2021, compared to $918 million in 2020.

In 2021, we recognized a GAAP tax expense of $211 million, or 32%, on a pre-tax income of $658 million. In 2020, we recognized a tax benefit of $168 million, or 4%, on a pre-tax loss of $4,406 million. Our tax rate for 2020 was lower than in 2021 mainly due to a goodwill impairment charge that did not have a corresponding tax effect. Non-GAAP income taxes for 2021 were $570 million on non-GAAP pre-tax income of $3,471 million. Non-GAAP income taxes in 2020 were $577 million on non-GAAP pre-tax income of $3,470 million. The non-GAAP tax rate for 2021 was 16.4%, similar to 16.6% in 2020.

GAAP net income attributable to Teva and GAAP diluted earnings per share in 2021 were $417 million and $0.38, respectively, compared to net loss of $3,990 million and diluted loss per share of $3.64 in 2020. Non-GAAP net income attributable to Teva and non-GAAP diluted earnings per share in 2021 were $2,855 million and $2.58, respectively, compared to $2,830 million and $2.57 in 2020.

The weighted average diluted shares outstanding used for the fully diluted share calculation on a GAAP basis for 2021 and 2020 were 1,107 million and 1,095 million shares, respectively. The weighted average diluted outstanding shares used for the fully diluted earnings per share calculation on a non-GAAP basis for 2021 and 2020 were 1,107 million and 1,099 million shares, respectively.

As of December 31, 2021 and 2020, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,128 million and 1,117 million shares, respectively.

Non-GAAP information: Net non-GAAP adjustments in 2021 were $2,438 million. Non-GAAP net income and non-GAAP EPS for the year were adjusted to exclude the following items:

• Amortization of purchased intangible assets totaling $802 million, of which $702 million is included in cost of goods sold and the remaining $99 million in S&M expenses;
• Legal settlements and loss contingencies of $717 million;
• $584 million impairment of long-lived assets comprised mainly of impairments of identifiable intangible assets totaling $424 million ($297 million of product rights and trade names and $127 million of in process R&D assets) and tangible assets impairments in our Europe and North America segments;
• Restructuring expenses of $133 million;
• Financial expenses of $128 million, mainly related to revaluation of marketable securities;
• Equity compensation expenses of $118 million;
• Costs related to regulatory actions taken in facilities of $23 million;
• Purchase of in process R&D of $15 million;
• Contingent consideration expense of $7 million;
• Divested gain in amount of $51 million;
• Other non-GAAP items of $337 million;
• Minority interest adjustment of $15 million; and
• Related tax effect of $360 million.

Teva believes that excluding such items facilitates investors’ understanding of its business. For further information, see below the U.S. GAAP to adjusted non-GAAP reconciliation tables under “Financial Tables” and the information under “Non-GAAP Financial Measures.” Investors should consider non-GAAP financial measures in addition to, and not as replacement for, or superior to, measures of financial performance prepared in accordance with GAAP.

Cash flow generated from operating activities in 2021 was $798 million, compared to $1,216 million in 2020. This decrease was mainly due to lower profit in our North America segment during 2021.

Free cash flow (cash flow generated from operating activities, net of cash used for capital investments and beneficial interest collected in exchange for securitized trade receivables) was $2,196 million in 2021, compared to $2,110 million in 2020. The increase in 2021 resulted mainly from higher cash generated from divestitures of businesses and other assets, partially offset by lower cash flow generated from operating activities.

As of December 31, 2021, our debt was $23,043 million, compared to $25,919 million as of December 31, 2020. This decrease was mainly due to $4,008 million repurchased upon consummation of a cash tender offer, $3,167 million senior notes repaid at maturity and $710 million of exchange rate fluctuations, partially offset by $4,973 million of issued sustainability-linked senior notes net of issuance costs. The portion of total debt classified as short-term as of December 31, 2021 was 6%, compared to 12% as of December 31, 2020, due to a repayment of debt, partially offset by a reclassification of upcoming maturities in 2022. Our average debt maturity was approximately 6.4 years as of December 31, 2021, compared to 5.8 years as of December 31, 2020.

Fourth Quarter 2021 Consolidated Results

Revenues in the fourth quarter of 2021 were $4,100 million, a decrease of 8% in both U.S. dollars and local currency terms compared to the fourth quarter of 2020, mainly due to lower revenues from generic products in North America and COPAXONE, partially offset by higher revenues from AUSTEDO and AJOVY. Revenues continued to be affected by the ongoing impact of the COVID-19 pandemic on markets and on customer stocking and purchasing patterns.

Exchange rate differences between the fourth quarter of 2021 and the fourth quarter of 2020, net of hedging effects negatively impacted revenues by $19 million and positively impacted our GAAP operating income by $15 million. Our non-GAAP operating income was positively impacted by $12 million.

GAAP gross profit was $2,050 million in the fourth quarter of 2021, flat compared to the fourth quarter of 2020. GAAP gross profit margin was 50% in the fourth quarter of 2021, compared to 46% in the fourth quarter of 2020. Non-GAAP gross profit was $2,301 million in the fourth quarter of 2021, a decrease of 1% compared to the fourth quarter of 2020. Non-GAAP gross profit margin was 56.1% in the fourth quarter of 2021, compared to 52.3% in the fourth quarter of 2020. The increase in non-GAAP gross profit margin in the fourth quarter of 2021 resulted mainly from higher revenues from AUSTEDO and AJOVY, higher gross profit margin in our Europe and International Markets segments, partially offset by lower revenues from COPAXONE in North America due to generic competition.

GAAP Research and Development (R&D)expenses in the fourth quarter of 2021 were $244 million, a decrease of 17% compared to the fourth quarter of 2020. Non-GAAP R&D expenses were $229 million, or 5.6% of quarterly revenues, in the fourth quarter of 2021, compared to $254 million, or 5.7% of quarterly revenues, in the fourth quarter of 2020. The decrease in R&D expenses in the fourth quarter of 2021 was mainly due to a decrease in the pain and neuropsychiatry therapeutic areas, partially offset by higher R&D expenses related to generic products including biosimilars.

GAAP Selling and Marketing (S&M)expenses in the fourth quarter of 2021 were $632 million, a decrease of 7% compared to the fourth quarter of 2020. Non-GAAP S&M expenses were $600 million, or 14.6% of quarterly revenues in the fourth quarter of 2021, compared to $627 million, or 14.1% of quarterly revenues in the fourth quarter of 2020.

GAAP General and Administrative (G&A) expenses in the fourth quarter of 2021 were $276 million, a decrease of 15% compared to the fourth quarter of 2020. Non-GAAP G&A expenses were $244 million, or 6% of quarterly revenues in the fourth quarter of 2021, compared to $312 million, or 7% of quarterly revenues in the fourth quarter of 2020.

GAAP other income in the fourth quarter of 2021 was $26 million, compared to $10 million in the fourth quarter of 2020. Non-GAAP other income in the fourth quarter of 2021 was $19 million, compared to $5 million in the fourth quarter of 2020.

GAAP operating income in the fourth quarter of 2021 was $78 million, compared to $406 million in the fourth quarter of 2020. This decrease was mainly due to higher legal settlements and loss contingencies in the fourth quarter of 2021. Non-GAAP operating income in the fourth quarter of 2021 was $1,248 million, an increase of 9% compared to the fourth quarter of 2020.

EBITDA (defined as operating income, excluding amortization and depreciation expenses) was $397 million in the fourth quarter of 2021, compared to EBITDA of $808 million in the fourth quarter of 2020. Adjusted EBITDA (defined as non-GAAP operating income excluding depreciation expenses) was $1,373 million in the fourth of 2021, an increase of 8%, compared to $1,277 million in the fourth quarter of 2020.

GAAP financial expenses for the fourth quarter of 2021 were $253 million, compared to $268 million in the fourth quarter of 2020. Non-GAAP financial expenses were $229 million in the fourth quarter of 2021, compared to $235 million in the fourth quarter of 2020. Financial expenses in the fourth quarter of 2021 and 2020, were mainly comprised of interest expenses of $225 million and $224 million, respectively.

In the fourth quarter of 2021, we recognized a GAAP tax benefit of $24 million on a pre-tax GAAP loss of $175 million. In the fourth quarter of 2020, we recognized a GAAP tax benefit of $22 million on pre-tax GAAP income of $138 million. Non-GAAP income taxes for the fourth quarter of 2021 were $153 million, or 15%, on pre-tax non-GAAP income of $1,019 million. Non-GAAP income taxes in the fourth quarter of 2020 were $141 million, or 16%, on pre-tax non-GAAP income of $905 million.

GAAP net loss attributable to Teva and GAAP diluted loss per share in the fourth quarter of 2021 were $159 million and $0.14, respectively, compared to GAAPnet incomeattributable to Teva and GAAPdiluted earnings per share of $150 million and $0.14, respectively, in the fourth quarter of 2020. Non-GAAP net income attributable to Teva and non-GAAP diluted earnings per share in the fourth quarter of 2021 were $854 million and $0.77, respectively, compared to $753 million and $0.68, respectively, in the fourth quarter of 2020.

The weighted averagediluted shares outstanding used for the fully diluted share calculation for the three months ended December 31, 2021 and 2020 was 1,103 million shares and 1,100 million shares, respectively. The weighted average diluted shares outstanding used for the fully diluted share calculation on a non-GAAP basis for the three months ended December 31, 2021 and 2020 was 1,108 million and 1,100 million shares, respectively.

Non-GAAP information: Net non-GAAP adjustments in the fourth quarter of 2021 were $1,012 million. Non-GAAP net income and non-GAAP EPS for the fourth quarter were adjusted to exclude the following items:

• Legal settlements and loss contingencies of $604 million;
• Amortization of purchased intangible assets of $188 million, of which $165 million is included in cost of sales and the remaining $24 million in S&M expenses;
• $183 million impairment of long-lived assets comprised of impairments of identifiable intangible assets totaling $129 million and $54 million of tangible assets;
• Restructuring expenses of $37 million;
• Finance expenses of $25 million;
• Contingent consideration of $14 million;
• Purchase of in process R&D of $10 million;
• Equity compensation expenses of $32 million;
• Costs related to regulatory actions taken in facilities of $5 million;
• Divested gain in amount of $5 million;
• Minority interest adjustment of $5 million;
• Other non-GAAP items of $103 million; and
• Related tax effect of $178 million.

Teva believes that excluding such items facilitates investors' understanding of its business. For further information, see below the U.S. GAAP to adjusted non-GAAP reconciliation tables under “Financial Tables” and the information under “Non-GAAP Financial Measures.” Investors should consider non-GAAP financial measures in addition to, and not as replacement for, or superior to, measures of financial performance prepared in accordance with GAAP.

Cash flow generated from operating activities during the fourth quarter of 2021 was $456 million, compared to $331 million in the fourth quarter of 2020. The increase was mainly due to higher profit in the fourth quarter of 2021.

Free cash flow (cash flow generated from operating activities, net of cash used for capital investments and beneficial interest collected in exchange for securitized accounts receivables) was $716 million in the fourth quarter of 2021, compared to $471 million in the fourth quarter of 2020. The increase resulted mainly from higher cash flow generated from operating activities.