47 slides from Teva Pharmaceutical Industries's earnings presentation, Feb 12, 2020
Slide 1: Fourth Quarter 2019 Results
Teva Pharmaceutical Industries Ltd. Fourth Quarter 2019 Results February 12, 2020
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
Slide 3: Kåre Schultz, Chief Executive Officer
Kåre Schultz Chief Executive Officer
Slide 4: Strong Results and Execution in 2019
Strong Results and Execution in 2019 Financial Highlights Business Highlights Met all components of 2019 guidance − AUSTEDO® rapid growth continues including: − Launched AJOVY® in the EU; − Revenues of $16.9 billion* Autoinjector approved in the U.S. − Non-GAAP EBITDA of $4.7 billion − Continued to
Slide 5: 2018-2019: Restructuring >$3bn
2018-2019: Restructuring 13 10 >$3bn manufacturing sites in manufacturing sites spend base the process of being closed or divested reduction achieved closed or divested 40 ~13,000 offices and full time employee full operational laboratories closed reduction capacity maintained
Slide 6: The Scope of Restructuring
The Scope of Restructuring * * ** * * * ** ** ** ** * * ***** * ** * ** * *** * **** * * *** * ** * * * * ** *
Slide 7: Net Debt Development
Net Debt Development $ billions $34 $32 $30 $28 $26 $24 $22 $20 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 |7|
Slide 8: Successful Refinancing
Successful Refinancing Liquidity and cash flow will cover bond repayments due in the next 3 years Net debt to EBITDA ratio is declining Q219 - 5.72x Q319 - 5.62x Q419 - 5.32x |8|
Slide 9: Debt Structure as of December 31, 2019
Debt Structure as of December 31, 2019 $ billions 4.3 4.0 3.5 2.9 2.7 2.0 2.1 2.0 1.8 0.8 0.8 20 21 22 23 24 25 26 27 28 … 36 … 46 |9|
Slide 10: Gross Margin Improvement Program focused on 5 key levers
Gross Margin Improvement Program focused on 5 key levers E2E Operational supply & quality chain Agile excellence integration operating Procurement Network model and cost optimization & organization excellence restructuring | 10 |
Slide 11: Operating Margin Expansion
Operating Margin Expansion Non-GAAP operating margin % 28% 28.0% 27.8% 26% 25.9% 24.5% 24% 2017 2018 2019 2023 | 11 | * Operating margin for 2017-2019 reflects a revision related to the Israeli distribution business, with a change from gross to net basis.
Slide 12: Growth Drivers
Growth Drivers J AJOVY L (fremanezumab-vfrm) Austedo . injection 225 mg/1.5 mL S ‘ =Austedo r deutetrabenazine AJOvY® ea ( mg, 9mg benazine) —_ o==3 fora vey ——— Se eeeeecenens til [12] teva
Slide 13: Additional Development for Movement Disorders
Additional Development for Movement Disorders − Epidemiology: 840,000 patients in the U.S. of which 52% are Tourette pediatric (aged 6-16) and 25% diagnosed with TS.1 − Target Population is 61,000 diagnosed, pediatric patients with Syndrome moderate-severe symptoms.1 (TS) − Potentially the first-in-
Slide 14: AJOVY: Extending Outside the US
For Migraine Extending Outside the US − Launched with reimbursement in multiple markets throughout Europe − Available in multiple countries in Europe − Full reimbursement currently in 5 countries; reimbursement decisions expected for Europe additional countries in Q1 2020 − Approximately 3.7 million
Slide 15: Additional Development Programs
Additional Development Programs New indications development currently in phase II, results expected in 2021 Pediatrics (PEDS) – Post Approval Study Post Traumatic Headache (PTH): ̶ Approximately 1.9 million people in the US are estimated to develop PTH following a brain injury ̶ Potential to be the
Slide 16: Teva Specialty Product Pipeline
Teva Specialty Product Pipeline Biosimilars TECHNOLOGY PLATFORMS Novel Small Digital by development stage - February 2020 Biologics Molecules Respiratory Under Regulatory Approved: Pre-clinical Phase 1 Phase 2 Phase 3 Review Commercial Launch Planned for 2020 TEV-54242 TV-44749 Fasinumab2 HERZUMA® F
Slide 17: Global Generic Pipeline Potential
Global Generic Pipeline Potential 251 ANDAs awaiting FDA approval $210 billion 80% Projected originator value going of originator value nominated off patent in the US from 2020 to for Gx development at Teva 2030 Originator project pool ~500 Gx launches planned Number of originator R&D projects incre
Slide 18: Long-Term Financial Targets
Long-Term Financial Targets To be achieved by year-end 2023 Operating Income Margin (1)(2)(3) Cash-to-earnings (1)(4) Net debt/EBITDA (1)(5) 28% >80% <3X Committed to utilizing cash flow to pay down debt; we do not plan to raise equity (1) Free Cash Flow includes cash flow generated from operating a
Slide 19: Eli Kalif, EVP & Chief Financial Officer
Eli Kalif EVP & Chief Financial Officer
Slide 20: Q4 2019 Summary
Q4 2019 Summary $ millions, except EPS Q4 2019 Q4 2018 Q4 2019 Q4 2018 GAAP Non-GAAP Revenues* 4,468 4,418 4,468 4,418 Operating income (loss) 148 (3,164) 1,061 946 Net income (loss) attributable to Teva's ordinary 110 (2,940) 683 543 shareholders 0.10 (2.85) 0.62 0.53 Earnings (loss) per share ($)
Slide 21: Non-GAAP Adjustments
Non-GAAP Adjustments $ millions Q4 2019 FY 2019 Q4 Comments Mainly U.S. intangible assets related to the acquisition of Actavis Generics Impairment items* 477 1,653 ($259 million in Q4 2019) Amortization 290 1,113 Quarterly run-rate Restructuring 59 199 Contingent consideration* 51 151 Equity compen
Slide 22: Q4 2019 Non-GAAP Summary
Q4 2019 Non-GAAP Summary $ billions, except EPS Q4 2019 Q4 2018 Change Revenues* 4.5 4.4 1% 2.3 2.3 Gross profit (3%) 50.6% 52.7% 1.1 0.9 Operating income 12% 23.8% 21.4% EBITDA 1.2 1.1 10% Net income attributable to Teva's ordinary 0.7 0.5 26% shareholders 0.62 0.53 EPS ($) 1,094 million 1,034 mill
Slide 23: Revenue Revision
Revenue Revision Revenue revised for the Israeli distribution business from gross basis to net basis due to immaterial error in the presentation. Part of the International Markets reporting segment which facilitates distribution of Teva and third party products to pharmacies, hospitals and other
Slide 24: Revenue Revision Impact - 2017, 2018, 2019
Revenue Revision Impact - 2017, 2018, 2019 2017 2018 2019 $ millions, except EPS 2017 2018 2019 Gross Gross Gross Revenues 22,385 21,853 18,854 18,271 17,530 16,887 Non-GAAP Operating 6,073 6,073 4,723 4,723 4,142 4,142 Income Non-GAAP EBITDA 6,684 6,684 5,319 5,319 4,685 4,685 Non-GAAP EPS 4.01 4.0
Slide 25: Free Cash Flow
Free Cash Flow $ millions 974 522 551 360 168 Free cash flow* Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 CAPEX, Net** (208) (114) 11 (136) 57 Securitization re-class 363 362 384 362 379 Operating cash flow 367 112 (227) 325 538 • | 25 | * Free cash flow includes cash flow generated from operating activ
Slide 26: Liquidity
Liquidity $ billions 27.1 26.7 26.6 Net Debt 25.7 24.9 EBITDA MAT 5.3 4.9 4.6 4.6 4.7 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Net Debt / EBITDA MAT 5.10 5.45 5.72 5.62 5.32 Leverage 65% 64% 65% 64% 64% | 26 | * Net Debt (Gross Debt – Cash Balance) divided by EBITDA MAT (non-GAAP); Teva's Net Debt/EB
Slide 27: 2019 Guidance Development
2019 Guidance Development 2019 February November Results $ billions except EPS FY 2018 FY 2019 Guidance Guidance Prior to Revision Revenues 18.3 17.0 - 17.4(1) 17.2 - 17.4(1) 17.5 (1) 16.9 Non-GAAP Operating Income 4.7 3.8 - 4.2 4.0 - 4.2 4.1 4.1 Non-GAAP EBITDA 5.3 4.4 - 4.8 4.5 - 4.8 4.7 4.7 Non-G
Slide 28: 2020 Outlook - Main Assumptions
2020 Outlook - Main Assumptions Product / Business FY 2019 Commentary for 2020 Global Copaxone $1.5 billion Continued generic erosion; revenues of ~$1.2 billion AUSTEDO® $412 million Continued increase of revenues in the U.S. to ~$650 million Global AJOVY® $96 million Continued increase of revenues
Slide 29: 2020 Non-GAAP Outlook
2020 Non-GAAP Outlook $ billions, except EPS 2020 Outlook FY 2019 Revenues* 16.6 - 17.0 16.9 Operating Income 4.0 - 4.4 4.1 EBITDA 4.5 - 4.9 4.7 EPS ($) 2.30 - 2.55 2.40 1,098 million shares 1,094 million shares Free Cash Flow** 1.8 - 2.2 2.1 • * Revenues reflect the revision related to the Israeli
Slide 30: teva
teva
Slide 31: Additional Information
Additional Information teva
Slide 32: 2019 Summary
2019 Summary $ millions, except EPS 2019 2018 2017 2019 2018 2017 GAAP Non-GAAP Revenues* 16,887 18,271 21,853 16,887 18,271 21,853 Gross profit 7,537 8,296 10,615 8,702 9,546 12,034 Operating income (loss) (443) (1,637) (17,484) 4,142 4,723 6,073 Net income (loss) attributable to Teva's (999) (2,39
Slide 33: Quarterly GAAP Income Statement
Quarterly GAAP Income Statement Q4 2019 Q4 2018 $ millions, except EPS Q4 2019 Q4 2018 Change Margins Margins Revenues* 4,468 4,418 1% COGS* 2,510 56.2% 2,447 55.4% 3% Gross profit 1,958 43.8% 1,971 44.6% (1%) R&D 232 5.2% 295 6.7% (21%) S&M 706 15.8% 797 18.0% (11%) G&A 318 7.1% 344 7.8% (7%) Legal
Slide 34: 2019 GAAP Income Statement
2019 GAAP Income Statement FY 2019 FY 2018 $ millions, except EPS FY 2019 FY 2018 Change Margins Margins Revenues* 16,887 18,271 (8%) COGS* 9,351 55.4% 9,975 54.6% (6%) Gross profit 7,537 44.6% 8,296 45.4% (9%) R&D 1,010 6.0% 1,213 6.6% (17%) S&M 2,614 15.5% 2,916 16.0% (10%) G&A 1,192 7.1% 1,298 7.
Slide 35: Stabilized Net Revenue and Profitability (1/2)
Stabilized Net Revenue and Profitability (1/2)(1) Net Revenues* and Profitability (Non-GAAP) ($ millions) 5,475 5,258 4,916 4,551 4,418 4,468 4,386 4,149 4,177 4,093 53.5% 52.3% 53.3% 51.4% 51.6% 52.7% 51.8% 52.4% 51.4% 50.6% 26.8% 26.3% 29.2% 27.2% 25.2% 24.6% 25.7% 21.4% 24.2% 23.8% Q3 2017 Q4 201
Slide 36: Stabilized Net Revenue and Profitability (2/2)
Stabilized Net Revenue and Profitability (2/2)(1) Profits and EPS (Non-GAAP) ($ millions, EPS in $) 1,470 1,385 1,435 1,238 1,104 1,019 1,051 1,061 1,011 946 1,077 1,014 1,019 859 759 654 653 637 683 597 1.06 0.94 0.94 0.78 0.68 0.60 0.62 0.53 0.60 0.58 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 201
Slide 37: Q4 2019 Revenues Trend
Q4 2019 Revenues Trend $ millions 4,418 4,468 377 (9%) 4,149 4,177 4,093 332 (7%) 317 (8%) 342(8%) 314 (8%) 599 (14%) 578 (13%) 521 (13%) 582 (14%) 565 (14%) 1,184 1,204 1,264 1,183 1,163 (27%) (27%) (30%) (28%) (28%) 2,238 2,373 2,047 2,071 2,051 (53%) (51%) (49%) (50%) (50%) Other Activities Inter
Slide 38: Revenues by Activity and Geographical Area
Revenues by Activity and Geographical Area $ millions Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 FY 18 FY 19 North America Segment 2,238 2,047 2,071 2,051 2,373 9,297 8,542 Generic Medicines 1,099 966 946 914 1,137 4,056 3,963 COPAXONE 356 208 274 271 264 1,759 1,017 AJOVY 3 20 23 25 25 3 93 BENDEKA and TREANDA
Slide 39: Spend Base Restructuring Achievement
Spend Base Restructuring Achievement $ billions -3.0 15.8 • Teva achieved its restructuring target to reduce spend base level by $3 billion in two years, 12.8 12.7 concluding 2019 with a spend base level of $12.7 billion • FTE reduced by ~13,000 since the start of the restructuring plan • Reduced th
Slide 40: Spend Base Trend (Non-GAAP)
Spend Base Trend (Non-GAAP) $ millions Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 COGS 2,090 1,999 1,989 1,990 2,206 S&M 768 602 621 551 665 R&D 289 255 271 242 237 G&A 330 280 286 270 309 Other income (5) (6) (0) (11) (9) Total 3,472 3,130 3,167 3,042 3,406 | 40 |
Slide 41: Quarterly Non-GAAP Operating Income
Quarterly Non-GAAP Operating Income $ millions 5 -13 -11 135 1,061 946 Q4-18 North America Europe International Markets Other Activities Q4-19 | 41 |
Slide 42: Quarterly Non-GAAP Operating Income
Quarterly Non-GAAP Operating Income $ millions 1,051 1,061 1,019 1,011 16 (1%) 17 (2%) 946 21(2%) 55 (5%) 101 (10%) 97 (10%) 130 (12%) 28 (3%) 136 (13%) 114 (12%) 258 341 (24%) 403 (32%) 253 (27%) (40%) 316 (31%) 686 551 565 (65%) 498 504 (54%) Other Activities (58%) (50%) (49%) International Market
Slide 43: Quarterly EBITDA
Quarterly EBITDA $ millions 1,154 1,144 1,183 1,204 1,091 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 * EBITDA is based on non-GAAP operating income (which excludes amortization and certain other items, as well as depreciation expenses). | 43 |
Slide 44: Q4 2019 EBITDA to Free Cash Flow
Q4 2019 EBITDA to Free Cash Flow $ millions (230) (198) 57 176 (115) (59) (119) (51) 86 (329) 379 1,204 974 538 Non-GAAP Finance Tax payments Legal Restructuring WC & Other Securitization Operating Securitization Asset sales; Free EBITDA expenses settlements cash flow reclass Capex gross cash flow *
Slide 45: Consolidated Balance Sheet
Consolidated Balance Sheet $ billions Dec 31, 2019 Dec 31, 2018 Diff Cash and Cash Equivalents 2.0 1.8 0.2 AR Trade 5.7 5.8 (0.1) Pre-paid Expenses and Other Current Assets 1.9 1.5 0.4 Inventory 4.4 4.7 (0.3) Fixed Assets 6.4 6.9 (0.4) Intangible Assets 11.2 14.0 (2.8) Goodwill 24.8 24.9 (0.1) Other
Slide 46: 2019 Net Debt Movements
2019 Net Debt Movements $ billions -2.2 (-8%) -1.6 2.1 -2.4 -0.2 -0.2 Net Debt 27.1 24.9 December 31, Debt Maturities Nov’19 Debt Increase in FX & Other December 31, 2018 New Issuance Prepayments Cash Balance 2019 Gross Debt 28.9 26.9 Cash Balance 1.8 2.0 | 46 | * Net Debt = Gross Debt – Cash Balanc
Slide 47: Slide 47