Teva Pharmaceutical Industries Limited · TASE:TEVA

Teva Pharmaceutical Industries — Q4 2018 Earnings Presentation

38 slides from Teva Pharmaceutical Industries's earnings presentation, Feb 13, 2019

  1. Slide 1: Fourth Quarter 2018 Results

    Teva Pharmaceutical Industries Ltd. Fourth Quarter 2018 Results February 13, 2019

  2. Slide 2: Cautionary Note Regarding Forward-Looking Statements

    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 uncertainti

  3. Slide 3: Kåre Schultz, Chief Executive Officer

    Kåre Schultz Chief Executive Officer

  4. Slide 4: 2018 Highlights

    2018 Highlights  Met or exceeded all components of 2018 financial guidance including:  Revenues of $18.9 billion  Non-GAAP EPS of $2.92  Free cash flow of $3.7 billion  Deployed new unified and simplified organizational structure – One Teva  Significant spend base reduction of ~$2.2 billion in

  5. Slide 5: Spend Base: 2018 vs. 2017

    Spend Base: 2018 vs. 2017 $ billions -2.2 (-13%) • On track to achieve $3B in spend 16.3 (2.3) base reduction by YE 2019; ~$2.2B already achieved in 2018 0.1 14.1 • FTE reduced by ~10,300 since the start of the restructuring plan • Reduced the number of manufacturing facilities by 7 in 2018 to 73; 1

  6. Slide 6: FY 2018 Net Debt Movements

    FY 2018 Net Debt Movements $ billions -4.4 (-14%) 4.5 (4.2) 31.5 (3.4) (0.8) 27.1 (0.4) Net Debt December 31, March 2018 Senior Notes Term Loans Increase in FX Fluctuations December 31, 2017 New Issuance Repayment Repayment Cash Balances & Other, Net 2018 Gross Debt 32.5 28.9 Cash Balance 1.0 1.8 |6

  7. Slide 7: AJOVY TRx Uptake Remains Strong

    AJOVYTM TRx Uptake Remains Strong AJOVYTM Weekly Normalized TRx Count AJOVYTM NBRx Share* Highlights 7,000 40%  Normalized TRx Share† of ~19% 6,017 6,000 35%  ~11% of launch-to-date AJOVYTM TRx’s are Quarterly 30% 29% 5,000 27%  Over 6,400 unique HCPs* have 25% prescribed AJOVYTM 4,000 20% 3,000

  8. Slide 8: AUSTEDO Continues to Grow

    AUSTEDO® Continues to Grow AUSTEDO® Unique Patients Austedo® Revenues By Quarter Highlights Dispensed Per Quarter ($ million) 12,000 68  $204M in Net Sales for 2018 10,500 62  Over 10,000 unique patients 10,000 dispensed in Q4 2018 7,600  Favorable national formulary 8,000 44 coverage 6,000 5,600

  9. Slide 9: COPAXONE (U.S. only)

    COPAXONE® (U.S. only) COPAXONE® TRx Count Per Quarter COPAXONE® Revenues By Quarter Highlights (‘000s) ($ million) 200  $1.697B in Net Sales for 2018 842 168 782 802  Continue to be one of the leading MS 163 161 160 143 therapies in U.S. 128 129 621  COPAXONE® 2018 exit TRx share 119 112 ~21.8% 1

  10. Slide 10: 2019 Areas of Focus

    2019 Areas of Focus Revenue Generating Expense Management Debt Reduction — AJOVY™ and AUSTEDO®: — Achieving restructuring — Committed to utilizing cash Full organizational focus for ongoing launch success target: spend base reduction flow to pay down debt of $3 billion vs. 2017 — $1.7 billion schedu

  11. Slide 11: Long-term Financial Targets

    Long-term Financial Targets To be achieved within 3-5 years Operating Income Margin*1 Cash-to-earnings*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 •

  12. Slide 12: Michael McClellan, Chief Financial Officer

    Michael McClellan Chief Financial Officer

  13. Slide 13: Q4 2018 Summary

    Q4 2018 Summary $ millions, except EPS Q4 2018 Q4 2017 Q4 2018 Q4 2017 GAAP Non-GAAP Revenues 4,559 5,398 4,559 5,398 Operating income (loss) (3,164) (13,017) 946 1,385 Net income (loss) attributable to Teva (2,886) (11,535) 597 1,014 (2.85) (11.41) 0.53 0.93 Earnings (loss) per share ($) 1,031M 1,0

  14. Slide 14: Q4 2018 Non-GAAP Adjustments

    Q4 2018 Non-GAAP Adjustments $ millions Q4 2018 Highlights Goodwill impairment 2,727 International Markets, Medis Other impairment items 990 Japan, International Markets, US and Europe intangibles Amortization 257 Restructuring 46 Legal settlements 31 Equity compensation plans 30 Other items 36 Incl

  15. Slide 15: Q4 2018 Non-GAAP Summary

    Q4 2018 Non-GAAP Summary $ billions, except EPS Q4 2018 Q4 2017 Change Revenues 4.6 5.4 (16%) 2.3 2.7 Gross profit (15%) 51.1% 50.9% 0.9 1.4 Operating income (32%) 20.8% 25.7% EBITDA 1.1 1.5 (29%) Net income 0.6 1.0 (41%) 0.53 0.93 EPS ($) (43%) 1,034M shares 1,018M shares Free cash flow* 0.5 0.9 (4

  16. Slide 16: Q4 2018 Foreign Exchange Impact

    Q4 2018 Foreign Exchange Impact $ millions Q4 2018 Q4 2017 Diff FX Effect Diff net FX Revenues 4,559 5,398 (839) (100) (739) Operating income (3,164) (13,017) 9,853 (13) 9,866 GAAP Operating income 946 1,385 (439) (17) (422) Non-GAAP | 16 |

  17. Slide 17: Revenues by Activity and Geographical Area

    Revenues by Activity and Geographical Area $ millions Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 North America Segment 2,689 2,531 2,263 2,265 2,238 Generic Medicines 1,224 1,088 947 922 1,099 Copaxone 641 476 464 463 356 Treanda and Bendeka 158 181 160 161 140 ProAir 102 130 115 107 45 QVAR 48 107 30 36 9 Auste

  18. Slide 18: Free Cash Flow

    Free Cash Flow $ millions 1,894 934 704 559 522 Free cash flow* Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 CAPEX, Net** )245( )46( )129( (119) (208) Securitization re-class 320 444 526 402 363 Operating cash flow 859 1,496 162 421 367 • * Free Cash Flow includes cash flow generated from operating activ

  19. Slide 19: 2018 Guidance Development

    2018 Guidance Development February May August November $ billion except EPS FY 2017 FY 2018 Guidance Guidance Guidance Guidance Revenues 22.4 18.3–18.8 18.5-19.0 18.5-19.0 18.6-19.0 18.9 Non-GAAP Operating income 6.1 4.0–4.3 4.2-4.5 4.3-4.6 4.6-4.8 4.7 Non-GAAP EBITDA 6.7 4.7–5.0 4.9-5.2 5.0-5.3 5.2

  20. Slide 20: 2019 Outlook - Main Assumptions

    2019 Outlook - Main Assumptions Product / Business FY 2018 Commentary for 2019 Global Copaxone $2.4B Continued generic erosion; Sales ~$1.5B ProAir® HFA $397M Significant erosion due to introduction of Gx Albuterol AJOVY™ $3M Continued ramp up of sales in the U.S. to ~$150m AUSTEDO® $204M Continued

  21. Slide 21: 2019 Outlook - Additional Assumptions

    2019 Outlook - Additional Assumptions Commentary for 2019 Foreign Exchange Negative impact of approximately $0.3B on sales, and $0.1B on operating profit vs. 2018 Non-GAAP Other Income Significant decline vs. 2018 actual of $0.2B Non-GAAP Tax Rate ~16% vs. 2018 actual of 14% CAPEX At similar level v

  22. Slide 22: 2019 Non-GAAP Outlook

    2019 Non-GAAP Outlook $ billions, except EPS 2019 Outlook FY 2018 Revenues 17.0-17.4 18.9 Operating Income 3.8 – 4.2 4.7 EBITDA 4.4 – 4.8 5.3 EPS ($) 2.20-2.50 2.92 1,096M shares 1,024M shares Free Cash Flow* 1.6-2.0 3.7 • * Free Cash Flow includes cash flow generated from operating activities net o

  23. Slide 23: Teva

    teva

  24. Slide 24: Additional Information

    Additional Information teva

  25. Slide 25: Quarterly EBITDA

    Quarterly EBITDA $ millions 1,534 1,587 1,387 1,254 1,091 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 EBITDA is based on non-GAAP operating income (which excludes amortization and certain other items) and excludes depreciation expenses | 25 |

  26. Slide 26: Q4 2018 Revenues Trend

    Q4 2018 Revenues Trend $ millions 5,398 349 (6%) 5,065 342 (7%) 4,701 4,559 910 (17%) 4,529 321 (7%) 750 (15%) 326( 7%) 377 (8%) 789 (17%) 726 (16%) 740 (16%) 1,450 1,442 (27%) (28%) 1,328 1,212 1,204 (28%) (27%) (26%) 2,689 2,531 (50%) 2,263 2,265 2,238 (50%) Other Activities (48%) (50%) (49%) Inte

  27. Slide 27: Q4 2018 Revenues

    Q4 2018 Revenues $ millions 5,398 312 (6%) 349 (6%) 882 (16%) 4,559 910 (17%) 377 326 (8%) (7%) 1,380 740 726 (16%) (16%) 1,450 (25%) (27%) 1,204 1,212 (26%) (27%) 3,043 2,689 (54%) 2,265 2,238 (50%) Other Activities (50%) (49%) International markets Europe North America Q4-17 Q4-18 | 27 |

  28. Slide 28: Spend base trends (non-GAAP)

    Spend base trends (non-GAAP) $ millions Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 COGS 2,649 2,447 2,362 2,268 2,231 S&M 749 682 634 634 768 R&D 295 289 281 243 289 G&A 335 322 292 284 330 Other income (15) (110) (106) (4) (5) Total 4,013 3,630 3,463 3,425 3,613 | 28 |

  29. Slide 29: Q4 Non-GAAP Operating Income

    Q4 Non-GAAP Operating Income $ millions 1,385 155 (11%) 301 (22%) 946 28 (3%) 114 (12%) 253 (27%) 938 (68%) 551 (58%) Other Activities International Markets Europe North America -9 (-1%) Q4-17 Q4-18 Profit is presented on a non-GAAP basis. Percentages may not add up to 100% due to rounding | 29 |

  30. Slide 30: Quarterly Non-GAAP Operating Income

    Quarterly Non-GAAP Operating Income $ millions -371 -18 -18 25 -56 1,385 946 Q4-17 North America Europe International Other Activities Divestment & Q4-18 Markets Other Divestment & Other mainly includes Women’s Health divestment, closure of Hungary distribution activities, deconsolidation of Venezue

  31. Slide 31: Q4 2018 Non-GAAP Operating Income

    Q4 2018 Non-GAAP Operating Income $ millions 1,435 1,385 21 (1%) 122 (9%) 155 (11%) 1,238 31 (3%) 139 (11%) 1,104 301 (22%) 377 (26%) 35 (3%) 123 (11%) 946 28 (3%) 346 (28%) 114 (12%) 297 (27%) 253 (27%) 938 915 (68%) (64%) 722 649 (58%) 551 Other Activities (59%) (58%) International Markets Europe

  32. Slide 32: Quarterly GAAP Income Statement

    Quarterly GAAP Income Statement Q4-18 Q4-17 $ millions, except EPS Q4-18 Q4-17 Change Margins Margins Revenues 4,559 5,398 (16%) COGS 2,588 56.8% 2,954 54.7% (12%) Gross profit 1,971 43.2% 2,444 45.3% (19%) R&D 295 6.5% 346 6.4% (15%) S&M 797 17.5% 823 15.2% (3%) G&A 344 7.5% 350 6.5% (2%) Legal set

  33. Slide 33: 2018 GAAP Income Statement

    2018 GAAP Income Statement FY-18 FY-17 $ millions, except EPS FY-18 FY-17 Change Margins Margins Revenues 18,854 22,385 (16%) COGS 10,558 56.0% 11,770 52.6% (10%) Gross profit 8,296 44.0% 10,615 47.4% (22%) R&D 1,213 6.4% 1,778 7.9% (32%) S&M 2,916 15.5% 3,395 15.2% (14%) G&A 1,298 6.9% 1,451 6.5% (

  34. Slide 34: 2018 Non-GAAP Adjustments

    2018 Non-GAAP Adjustments $ millions FY 2018 Highlights Goodwill impairment 3,027 International Markets, Medis Other impairment items 2,594 U.S. intangible assets, Japan, production sites slated for closure Amortization 1,166 Restructuring 488 Equity compensation 152 In process R&D 83 Financial expe

  35. Slide 35: Consolidated Balance Sheet

    Consolidated Balance Sheet $ billions Dec 31, 2018 Dec 31, 2017 Diff Cash and Cash Equivalents 1.8 1.0 0.8 AR Trade 5.8 7.1 (1.3) Pre-paid Expenses and Other Current Assets 1.5 2.4 (0.9) Inventory 4.7 4.9 (0.2) Fixed Assets 6.9 7.7 (0.8) Intangible Assets 14.0 17.6 (3.6) Goodwill 24.9 28.4 (3.5) Oth

  36. Slide 36: Q4 2018 Cash Flow Bridge

    Q4 2018 Cash Flow Bridge $ millions -75 -91 145 Net of Securitization, change in WC: +$220m -208 -98 -44 363 -143 597 522 367 Net income Depreciation Legal Restructuring Other, Working capital Operating Securitization Capex , Free non-GAAP Settlements mainly tax cash flow reclass Net cash flow * Fre

  37. Slide 37: Liquidity

    Liquidity $ billions 31.5 29.3 Net Debt 28.4 27.6 27.1 6.7 6.5 6.1 5.8 5.3 EBITDA MAT Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Net Debt / EBITDA MAT 4.73 4.53 4.63 4.79 5.10 Net Debt / EBITDA MAT - adjusted ratio* 4.82 4.68 4.73 4.81 5.10 Leverage 63% 60% 61% 61% 65% * According to Teva's credit agre

  38. Slide 38: Updated Debt Maturities

    Updated Debt Maturities $ billions $8.5 billion USD 5.0 EUR 4.5 CHF 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 … 2036 … 2046 | 38 |

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