Teva Pharmaceutical Industries Limited · TASE:TEVA
Teva Pharmaceutical Industries — Q2 2018 Earnings Presentation
37 slides from Teva Pharmaceutical Industries's earnings presentation, Aug 2, 2018
Slide 1: Teva Pharmaceutical Industries Ltd. Q2 2018
Teva Pharmaceutical Industries Ltd. Q2 2018 August 2, 2018
Slide 2: Cautionary Note Regarding Forward-Looking Statements
2 Cautionary Note Regarding Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management’s current beliefs and expectations and are subject to substantial risks and uncertain
Slide 3: Kåre Schultz, Chief Executive Officer
Kåre Schultz Chief Executive Officer
Slide 4: Quarterly highlights
4 Quarterly highlights Q2’18 figures include: Revenues of $4.7 billion GAAP diluted loss per share of $0.24 and non-GAAP diluted EPS of $0.78 Free cash flow of $ 0.6 billion Restructuring program on schedule: Significant spend base reduction of over $1 billion since start of year North A
Slide 5: Copaxone Maintaining Share in the U.S.
5 Copaxone® Maintaining Share in the U.S. Total Glatiramer Acetate Weekly TRx Volume Global Copaxone Revenues by quarter $ million US EU INTL Total GA Weekly TRx Volume 42 34 138 Total GA TRx COPAXONE Brand TRx Glatopa TRx Mylan GA TRx 150 14,000 45 155 12,000 30 38 10,000 153 140 8,000 842 802 6,00
Slide 6: AUSTEDO continues to grow
6 AUSTEDO® continues to grow AUSTEDO® Unique Patients Dispensed Per Quarter Austedo® revenues by quarter 6,000 5,600 $ million 44 5,000 4,100 30 4,000 Patient Dispenses 2,900 3,000 17 2,000 1,321 1,000 724 6 1 0 Austedo *Q1 unique patient dispensed count changed to 4,100 from 3,310 previously report
Slide 7: fremanezumab
7 fremanezumab PDUFA action date for fremanezumab is set for September 16, 2018; we are preparing to launch the product immediately following approval FDA pre-approval inspection (PAI) completed in July 2018 European Medicines Agency (EMA) accepted the Marketing Authorization Application (MAA)
Slide 8: Strategy principles
Strategy principles One company Organic growth Leadership in Generics Biologics as core R&D platform Targeted investments
Slide 9: Generics – our way forward
Generics – our way forward Portfolio Profitability Biosimilars Proactive portfolio Improve pricing, Build a Biosimilars selection and grow top and bottom pipeline and management line from existing manufacturing products capabilities Keep focus on first to market and high-barrier Benefit fr
Slide 10: Specialty – our way forward
Specialty – our way forward Commercial R&D Ensure the commercial success of Build a Biologics platform: expand our core assets in-house Biologics capabilities Continue to build our commercial Focus the inhaler technologies on capabilities in new franchises and lifecycle management opportunit
Slide 11: Long term financial targets
Long term financial targets To be achieved within 3-5 years Operating Income Margin*1 Cash-to-earning*2 Net debt/EBITDA*3 27% >80% <3X Committed to utilizing cash flow to pay down debt; we do not plan to raise equity • 1 Operating income margin = Non-GAAP operating income divided by net revenues • 2
Slide 12: Progress made so far
Progress made so far Restructuring program on schedule Net debt down to $28.4 billion Raised 2018 guidance Revenue, FCF and EPS on track Non-GAAP EPS Copaxone® maintaining share in the U.S. Free Cash flow Austedo® continues to grow Preparing for fremanezumab
Slide 13: Michael McClellan, Chief Financial Officer
Michael McClellan Chief Financial Officer
Slide 14: Q2 2018 Summary
14 Q2 2018 Summary $ millions, except EPS Q2 2018 Q2 2017 Q2 2018 Q2 2017 GAAP Non-GAAP Revenues 4,701 5,720 4,701 5,720 Operating income (loss) (14) (5,740) 1,238 1,597 Net income (loss) attributable to Teva (176) (5,970) 859 1,100 (0.24) (5.94) 0.78 1.02 Earnings (loss) per share ($) 1,018M 1,017M
Slide 15: Q2 2018 Non-GAAP Adjustments
15 Q2 2018 Non-GAAP Adjustments $ millions Q2 2018 Highlights Impairment 668 US intangible assets, Mexico reporting unit goodwill Amortization 302 Restructuring 107 Equity compensation plans 47 Legal Settlements 20 Other items 94 Mainly Contingent consideration on Bendeka Tax items effect (203) Tota
Slide 16: Q2 2018 Non-GAAP Summary
16 Q2 2018 Non-GAAP Summary $ billions, except EPS Q2 2018 Q2 2017 Change Revenues 4.7 5.7 (18%) Gross profit 2.4 3.3 (27%) 50.4% 57.0% Operating income 1.2 1.6 (22%) 26.3% 27.9% EBITDA 1.4 1.7 (20%) Net income 0.8 1.1 (22%) EPS ($) 0.78 1.02 (24%) 1,021M shares 1,017M shares Free cash flow* 0.6 0.6
Slide 17: Q2 2018 Foreign Exchange Impact
17 Q2 2018 Foreign Exchange Impact $ millions Q2 2018 Q2 2017 Diff FX Effect Diff net FX Revenues 4,701 5,720 (1,019) 92 (1,111) Operating income (loss) (14) (5,740) 5,726 14 5,712 GAAP Operating income 1,238 1,597 (359) 19 (378) Non-GAAP
Slide 18: Quarterly Revenues
18 Quarterly Revenues $ millions -766 48 -3 -58 5,720 -332 92 4,701 Q2-17 North America Europe International Other Activities Divestments & FX Q2-18 Markets Other * Segments and divestments data are net of the impact of foreign exchange fluctuations. ** Divestment & Other mainly includes Women’s Hea
Slide 19: Copaxone revenues and US market shares
19 Copaxone® revenues and US market shares $ millions / % market share 1,023 987 821 645 626 1,200 35% 30% 1,000 42 34 138 150 25% 800 45 155 20% 30 38 600 153 140 15% 400 843 802 10% 621 462 448 200 5% 0 0% Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 US EU ROW US TRx MS* Copaxone® family US TRx MS* Copaxone® 40m
Slide 20: Quarterly Non-GAAP Operating Income
20 Quarterly Non-GAAP Operating Income $ millions 1,597 7 (0%) 121 (8%) Other Activities 219 (14%) 1,238 International Markets 31 (3%) Europe 139 (11%) North America 346 (28%) 1,250 (78%) 722 (58%) Q2-17 Q2-18 Profit is presented on a non-GAAP basis. Percentages may not add up to 100% due to roundin
Slide 21: Spend Base: H1 2018 vs. H1 2017
21 Spend Base: H1 2018 vs. H1 2017 $ millions -1,059 (-13%) 8,152 (1,326) • On track to achieve $1.5B reduction 267 7,093 in spend base in 2018 • FTE reduced by ~8,3K since the start of the restructuring plan H1 2017 SB FX H1 2018 reduction headwind
Slide 22: Free Cash Flow
22 Free Cash Flow $ millions 1,894 Free Cash Flow* 920 934 567 559 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 CAPEX, Net Securitization re-class Operating cash flow • * Free Cash Flow includes cash flow generated from operating activities net of capital expenditures and deferred purchase price cash com
Slide 23: Q2 2018 Net Debt Movement
23 Q2 2018 Net Debt Movement $ billions 29.33 (0.44) (0.51) 28.38 Net Debt Mar 31, 2018 Net Cash generated FX & Other Jun 30, 2018 Gross Debt 30.75 30.24 Cash Balance 1.42 1.86 * Net Debt = Gross Debt – cash balance
Slide 24: 2018 Financial Outlook
2018 Financial Outlook teva
Slide 25: 2018 Non-GAAP Financial Outlook
25 2018 Non-GAAP Financial Outlook 2018 Outlook – May 2018 August 2018 Original (Feb Outlook Outlook 2018) Revenues 18.3-18.8 18.5-19.0 18.5-19.0 ($ billions) Non-GAAP Operating income 4.0-4.3 4.2-4.5 4.3-4.6 ($ billions) Non-GAAP EBITDA 4.7-5.0 4.9-5.2 5.0-5.3 ($ billions) Non-GAAP EPS 2.25-2.50 2.
Slide 26: Q&A
Q&A teva
Slide 27: Additional Information
Additional Information teva
Slide 28: Quarterly EBITDA
28 Quarterly EBITDA $ billions 1.74 1.62 1.59 1.53 1.39 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 EBITDA is based on non-GAAP operating income (which excludes amortization and certain other items) and excludes depreciation expenses
Slide 29: Quarterly Revenue Breakdown by Segment
29 Quarterly Revenue Breakdown by Segment $ millions 5,720 371 (6%) Other activities 4,701 885 (15%) International markets 321 (7%) Europe 1,295 (23%) 789 (17%) North America 1,328 (28%) 3,169 (55%) 2,263 (48%) Q2-17 Q2-18 Percentages may not add up to 100% due to rounding.
Slide 30: Revenues by Activity and Geographical Area
30 Revenues by Activity and Geographical Area $ millions Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 North America segment 2,724 2,901 3,473 3,240 3,169 3,043 2,689 2,531 2,263 Generic Medicines 931 1,316 1,429 1,415 1,331 1,233 1,224 1,088 947 Copaxone 968 892 846 797 859 819 641 476 464
Slide 31: Quarterly GAAP Income Statement
31 Quarterly GAAP Income Statement $ millions, except EPS Q2-18 Q2-18 Q2-17 Q2-17 Change Margins Margins Revenues 4,701 5,720 (18%) COGS 2,640 56.2% 2,865 50.1% (8%) Gross profit 2,061 43.8% 2,855 49.9% (28%) R&D 290 6.2% 469 8.2% (38%) S&M 710 15.1% 944 16.5% (25%) G&A 316 6.7% 363 6.3% (13%) Legal
Slide 32: H1 2018 GAAP Income Statement
32 H1 2018 GAAP Income Statement $ millions, except EPS H1-18 H1-18 H1-17 H1-17 Change Margins Margins Revenues 9,766 11,370 (14%) COGS 5,357 54.9% 5,676 49.9% (6%) Gross profit 4,409 45.1% 5,694 50.1% (23%) R&D 607 6.2% 901 7.9% (33%) S&M 1,481 15.2% 1,902 16.7% (22%) G&A 645 6.6% 729 6.4% (12%) Le
Slide 33: H1 2018 Non-GAAP Adjustments
33 H1 2018 Non-GAAP Adjustments $ millions H1 2018 Highlights US intangible assets, Mexico reporting unit goodwill, termination of PGT Impairment items 1,374 Healthcare JV, production sites slated for closure Amortization 612 Restructuring 354 Equity compensation 77 Financial expenses 66 Early redem
Slide 34: Consolidated Balance Sheet
34 Consolidated Balance Sheet June 30, Dec 31, $ billions Diff 2018 2017 Cash and Cash Equivalents 1.9 1.0 0.9 AR Trade 6.1 7.1 -1.1 Pre-paid Expenses and Other Current Assets 1.8 2.4 -0.5 Inventory 5.0 4.9 0.0 Fixed Assets 7.2 7.7 -0.5 Intangible Assets 16.2 17.6 -1.4 Goodwill 27.6 28.4 -0.8 Other
Slide 35: Liquidity
35 Liquidity $ billions 34.5 34.0 Net Debt 31.5 29.3 28.4 7.5 7.2 EBITDA MAT 6.7 6.5 6.1 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Net Debt / EBITDA MAT 4.58 4.71 4.73 4.53 4.63 Net Debt / EBITDA MAT – adjusted ratio for Covenants* 4.82 4.68 4.73 Leverage 54% 53% 63% 60% 61% * According to Teva's cred
Slide 36: Q2-18 Cash Flow Bridge
36 Q2-18 Cash Flow* Bridge $ millions -300 149 Net of Securitization, no 205 material change in WC 208 143 129 859 576 526 559 162 Net income Depreciation Legal Restructuring Other Working capital Operating Securitization Capex , Free non-GAAP Settlements cash flow reclass Net cash flow • *Free Cash
Slide 37: Updated Debt Maturities
37 Updated Debt Maturities $ millions Revolver CHF EUR USD 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 18 19 20 21 22 23 24 25 26 27 28 … 36 … 46 In July 2018 Teva repaid $300m in Swiss Franc at maturity
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