Teva Reports First Quarter 2022 Financial Results

• Revenues of $3.7 billion
• GAAP diluted loss per share of $0.86
• Non-GAAP diluted EPS of $0.55
• Cash flow used in operating activities of $49 million
• Free cash flow of $117 million
• 2022 revenue outlook revised lower to reflect ongoing impact of foreign exchange fluctuations; COPAXONE^® outlook revised lower mainly to reflect increased competition and foreign exchange fluctuations; all other key components reaffirmed:
  • Revenues of $15.4 - $16.0 billion vs. previous range of $15.6 - $16.2 billion
  • COPAXONE revenues of approximately $750 million vs. previous outlook of approximately $850 million
  • Adjusted EBITDA of $4.7 - $5.0 billion
  • Non-GAAP diluted EPS of $2.40 - $2.60
  • Free cash flow of $1.9 - $2.2 billion

TEL AVIV, Israel--(BUSINESS WIRE)--Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) today reported results for the quarter ended March 31, 2022.

Mr. Kåre Schultz, Teva's President and CEO, said, 2022 is off to a solid start with the successful launch of a first generic version of Revlimid^® in the United States, and gains in market share for AJOVY^® both in the United States and in Europe, where it has solidified its leadership position as the second leading brand. AUSTEDO^® continues to grow as more patients with tardive dyskinesia are being diagnosed and are receiving treatment. We are also pleased to continue resolving opioid-related litigations with recent settlements in Florida and Rhode Island including the provision of lifesaving opioid treatments and recovery medicines for those who need them."

Mr. Schultz continued: "While easing of COVID-19 related restrictions has led to positive momentum in our European business, we are seeing fluctuations of foreign exchange rates, and have therefore lowered our 2022 revenue outlook, while reaffirming our earnings and cash flow guidance."

First Quarter 2022 Consolidated Results

Revenues in the first quarter of 2022 were $3,661 million, a decrease of 8%, or 5% in local currency terms, compared to the first quarter of 2021. This decrease was mainly due to lower revenues in our North America segment primarily related to generic products and COPAXONE, partially offset by higher revenues from Anda and generic products in our Europe segment.

Exchange rate movements during the first quarter of 2022, including hedging effects, negatively impacted our revenues by $133 million and our GAAP and non-GAAP operating income by $56 million and $59 million, respectively.

GAAP gross profit was $1,740 million in the first quarter of 2022, a decrease of 7% compared to the first quarter of 2021. GAAP gross profit margin was 47.5% in the first quarter of 2022, compared to 47.2% in the first quarter of 2021. The increase in gross profit margin was mainly driven by our network consolidation activities, as well as a change in product portfolio mix in our International Markets segment, partially offset by the unfavorable mix of generic products in our North America segment and lower revenues from COPAXONE. Non-GAAP gross profit was $1,986 million in the first quarter of 2022, a decrease of 7% compared to the first quarter of 2021. Non-GAAP gross profit margin was 54.2% in the first quarter of 2022, compared to 53.8% in the first quarter of 2021.

GAAP Research and Development (R&D) expenses in the first quarter of 2022 were $225 million, a decrease of 11% compared to the first quarter of 2021. Non-GAAP R&D expenses were $221 million, or 6.0% of quarterly revenues, in the first quarter of 2022, compared to $244 million, or 6.1%, in the first quarter of 2021. In the first quarter of 2022, our R&D expenses related primarily to specialty product candidates in neuroscience (such as migraine, movement disorders/ neurodegeneration and neuropsychiatry, including post-approval commitments), immunology (such as respiratory medicines) and selected other areas, as well as generic products including biosimilars. Our lower R&D expenses in the first quarter of 2022, compared to the first quarter of 2021, were mainly due to a decrease in neuroscience (in the pain and migraine and headache therapeutic areas), as well as various generics projects.

GAAP Selling and Marketing (S&M) expenses in the first quarter of 2022 were $584 million, flat compared to the first quarter of 2021. Non-GAAP S&M expenses were $552 million, or 15.1% of quarterly revenues, in the first quarter of 2022, compared to $549 million, or 13.8%, in the first quarter of 2021.

GAAP General and Administrative (G&A) expenses in the first quarter of 2022 were $296 million, an increase of 2% compared to the first quarter of 2021. Non-GAAP G&A expenses were $252 million, or 6.9% of quarterly revenues, in the first quarter of 2022, compared to $278 million, or 7%, in the first quarter of 2021.

GAAP other income and Non-GAAP other income in the first quarter of 2022 was $52 million, compared to $5 million in the first quarter of 2021. Other income in the first quarter of 2022 was mainly the result of settlement proceeds in our International Markets segment.

GAAP operating loss in the first quarter of 2022 was $713 million, compared to operating income of $434 million in the first quarter of 2021. GAAP operating loss in the first quarter of 2022 was mainly affected by legal settlements and loss contingencies, primarily related to an update of the estimated settlement provision recorded in connection with the remaining opioid cases. Non-GAAP operating income in the first quarter of 2022 was $1,013 million, a decrease of 6%, compared to $1,077 million in the first quarter of 2021. This decrease in non-GAAP operating income was mainly due to lower profit in our North America segment, partially offset by higher profit in our Europe and International Markets segments. Non-GAAP operating margin was 27.7% in the first quarter of 2022, compared to 27.1% in the first quarter of 2021.

EBITDA (defined as operating income (loss), excluding amortization and depreciation expenses) was negative $390 million in the first quarter of 2022, compared to EBITDA of $809 million in the first quarter of 2021. Adjusted EBITDA (defined as non-GAAP operating income excluding depreciation expenses) was $1,135 million in the first quarter of 2022, a decrease of 6% compared to $1,206 million in the first quarter of 2021.

GAAP financial expenses, net were $258 million in the first quarter of 2022, compared to $290 million in the first quarter of 2021. Financial expenses in the first quarter of 2022, were mainly comprised of interest expenses of $238 million. Financial expenses in the first quarter of 2021 were mainly comprised of interest expenses of $239 million and loss on revaluations of marketable securities of $64 million. Non-GAAP financial expenses, net were $247 million in the first quarter of 2022, compared to $227 million in the first quarter of 2021.

In the first quarter of 2022, we recognized a GAAP tax expense of $2 million, on pre-tax loss of $971 million. In the first quarter of 2021, we recognized a tax expense of $62 million, on pre-tax income of $144 million. Our tax rate for the first quarter of 2022 was mainly affected by legal settlement charges and interest expense disallowances. Non-GAAP income taxes in the first quarter of 2022 were $142 million, or 18.5%, on pre-tax non-GAAP income of $766 million. Non-GAAP income taxes in the first quarter of 2021 were $146 million, or 17%, on pre-tax non-GAAP income of $851 million. Our non-GAAP tax rate in the first quarter of 2022 was mainly affected by the mix of products we sold and interest expense disallowances.

We expect our annual non-GAAP tax rate for 2022 to be 18%-19%, unchanged from our outlook provided in February 2022.

GAAP net loss attributable to Teva and GAAP diluted loss per share were $955 million and $0.86, respectively, in the first quarter of 2022, compared to net income of $77 million and diluted earnings per share of $0.07 in the first quarter of 2021. Non-GAAP net income attributable to Teva and non-GAAP diluted earnings per share in the first quarter of 2022 were $609 million and $0.55, respectively, compared to $699 million and $0.63 in the first quarter of 2021.

The weighted average diluted shares outstanding used for the fully diluted share calculation for the three months ended March 31, 2022 and 2021 was 1,107 million shares. The weighted average diluted shares outstanding used for the fully diluted share calculation on a non-GAAP basis for the three months ended March 31, 2022 and 2021 was 1,112 million and 1,107 million shares, respectively.

As of March 31, 2022 and 2021, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,145 million and 1,130 million, respectively.

Non-GAAP information: Net non-GAAP adjustments in the first quarter of 2022 were $1,564 million. Non-GAAP net income and non-GAAP EPS for the first quarter of 2022 were adjusted to exclude the following items:

• Legal settlements and loss contingencies of $1,124 million;
• Amortization of purchased intangible assets of $200 million, of which $178 million is included in cost of sales and the remaining $22 million in S&M expenses;
• Impairment of long-lived assets of $165 million, comprised mainly of impairment of intangible assets of product rights assets in connection with the Actavis Generics acquisition;
• Restructuring expenses of $57 million;
• Contingent consideration expense of $33 million, mainly related to an increase in future royalties;
• Equity compensation expenses of $24 million;
• Finance expenses of $11 million;
• Other items of $91 million; and
• Income tax of $140 million.

Teva believes that excluding such items facilitates investors’ understanding of its business.

Commencing in the first quarter of 2022, we no longer exclude IPR&D acquired in development arrangements from our non-GAAP financial measures. In our comparable non-GAAP financial measures for the first quarter of 2021, we excluded $5 million IPR&D acquired in development arrangements. We are not recasting the non-GAAP presentation for the first quarter of 2021 since the adjustment is not significant. We are making this change to our presentation of non-GAAP financial measures to improve comparability of our non-GAAP presentation to those of other companies in the pharmaceutical industry that are making a similar change to their presentations beginning in the first quarter of 2022.

For further information, see the tables below for a reconciliation of the U.S. GAAP results to the adjusted non-GAAP figures 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 used in operating activities during the first quarter of 2022 was $49 million, compared to $405 million in the first quarter of 2021. The lower cash flow used in operating activities in the first quarter of 2022 was mainly due to changes in working capital items resulting from a decrease in accounts receivables net of SR&A in connection with the decrease in revenues.

Free cash flow (defined as cash flow used in operating activities, cash used for capital investments, beneficial interest collected in exchange for securitized accounts receivables, proceeds from divestitures of businesses and other assets and cash used for acquisition of businesses, net of cash acquired) was $117 million in the first quarter of 2022, compared to $59 million in the first quarter of 2021. The increase in the first quarter of 2022 resulted mainly from lower cash flow used in operating activities, partially offset by lower sales of assets.

As of March 31, 2022, our debt was $22,917 million, compared to $23,043 million as of December 31, 2021. This decrease was mainly due to exchange rate fluctuations. Our debt as of March 31, 2022 was effectively denominated in the following currencies: 61% in U.S. dollars, 36% in euros and 3% in Swiss francs. The portion of total debt classified as short-term as of March 31, 2022 was 9%, compared to 6% as of December 31, 2022. Our financial leverage was 69% as of March 31, 2022, compared to 67% as of December 31, 2021. Our average debt maturity was approximately 6.2 years as of March 31, 2022, compared to 6.4 years as of December 31, 2021.

In April 2022, we entered into an unsecured syndicated sustainability-linked revolving credit facility ("RCF") of $1.8 billion with a maturity date of April 2026, with two one-year extension options, which replaces Teva’s existing revolving credit facility. The RCF is linked to two sustainability performance targets. The RCF margin may increase or decrease depending on the Company's sustainability performance.

Segment Results for the First Quarter of 2022

North America Segment

Our North America segment includes the United States and Canada.

The following table presents revenues, expenses and profit for our North America segment for the three months ended March 31, 2022 and 2021:

Revenues from our North America segment in the first quarter of 2022 were $1,737 million, a decrease of $251 million, or 13%, compared to the first quarter of 2021, mainly due to a decrease in revenues from generic products and COPAXONE, partially offset by higher revenues from ANDA.

Revenues in the United States, our largest market, were $1,638 million in the first quarter of 2022, a decrease of $216 million or 12% compared to the first quarter of 2021.

Revenues by Major Products and Activities

The following table presents revenues for our North America segment by major products and activities for the three months ended March 31, 2022 and 2021:

Generic products revenues in our North America segment (including biosimilars) in the first quarter of 2022 were $899 million, a decrease of 15% compared to the first quarter of 2021, mainly due to increased competition on key products and lower volumes, partially offset by higher revenues from lenalidomide capsules (the generic version of Revlimid^®) and Truxima^®.

In the first quarter of 2022, our total prescriptions were approximately 302 million (based on trailing twelve months), representing 8.2% of total U.S. generic prescriptions according to IQVIA data.

On March 7, 2022 we announced the launch of the first generic version of Revlimid^® (lenalidomide capsules), in 5mg, 10mg, 15mg, and 25mg strengths, in the United States. These lenalidomide capsules are a prescription medicine used in adults for the treatment of (i) multiple myeloma in combination with the medicine dexamethasone, (ii) certain myelodysplastic syndromes, and (iii) mantle cell lymphoma following specific prior treatment.

AJOVY revenues in our North America segment in the first quarter of 2022 increased by 16% to $36 million, compared to the first quarter of 2021, mainly due to growth in volume.

AUSTEDO revenues in our North America segment in the first quarter of 2022 increased by 6%, to $154 million, compared to $146 million in the first quarter of 2021, mainly due to growth in volume.

BENDEKA and TREANDA combined revenues in our North America segment in the first quarter of 2022 decreased by 10% to $82 million, compared to the first quarter of 2021, mainly due to the availability of alternative therapies and continued competition from Belrapzo® (a ready-to-dilute bendamustine hydrochloride product from Eagle).

COPAXONE revenues in our North America segment in the first quarter of 2022 decreased by 48% to $86 million, compared to the first quarter of 2021, mainly due to generic competition in the United States and a decrease in glatiramer acetate market share due to availability of alternative therapies.

Anda revenues in our North America segment in the first quarter of 2022 increased by 18% to $342 million, compared to $289 million in the first quarter of 2021, mainly due to higher demand for COVID-related products.

North America Gross Profit

Gross profit from our North America segment in the first quarter of 2022 was $890 million, a decrease of 17%, compared to $1,074 million in the first quarter of 2021. This decrease was mainly due to lower gross profit from generic products and lower gross profit from COPAXONE.

Gross profit margin for our North America segment in the first quarter of 2022 decreased to 51.2%, compared to 54.0% in the first quarter of 2021. This decrease was mainly due to a change in the mix of generic products and COPAXONE.

North America Profit

Profit from our North America segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.

Profit from our North America segment in the first quarter of 2022 was $402 million, a decrease of 30% compared to $577 million in the first quarter of 2021, mainly due to lower revenues, as discussed above.

Europe Segment

Our Europe segment includes the European Union, the United Kingdom and certain other European countries.

The following table presents revenues, expenses and profit for our Europe segment for the three months ended March 31, 2022 and 2021:

Revenues from our Europe segment in the first quarter of 2022 were $1,156 million, a decrease of 5%, or $58 million, compared to the first quarter of 2021. In local currency terms, revenues increased by 3%. In the first quarter of 2021, our lower revenues were impacted by the implications of the COVID-19 pandemic. In the first quarter of 2022, our higher revenues were attributed to higher demand for generic and OTC products resulting mainly from the removal of restrictions related to doctor and hospital visits by patients that were previously implemented in response to the COVID-19 pandemic, as well as higher sales of cough and cold products. In the first quarter of 2022, revenues were negatively impacted by exchange rate fluctuations of $67 million, net of hedging effects.

Revenues by Major Products and Activities

The following table presents revenues for our Europe segment by major products and activities for the three months ended March 31, 2022 and 2021:

Generic products revenues in our Europe segment in the first quarter of 2022, including OTC products, increased by 1% to $876 million, compared to the first quarter of 2021. In local currency terms, revenues increased by 8%, mainly due to higher demand for generic and OTC products, resulting mainly from the removal of restrictions related to doctor and hospital visits by patients that were previously implemented in response to the COVID-19 pandemic, as well as higher sale of cough and cold products.

AJOVY revenues in our Europe segment in the first quarter of 2022 increased to $30 million, compared to $16 million in the first quarter of 2021, mainly due to growth in European countries in which AJOVY had previously been launched, as well as launches and reimbursements in additional European countries.

COPAXONE revenues in our Europe segment in the first quarter of 2022 decreased by 29% to $72 million, compared to the first quarter of 2021. In local currency terms, revenues decreased by 24%, due to price reductions and a decline in volume resulting from competing glatiramer acetate products.

Respiratory products revenues in our Europe segment in the first quarter of 2022 decreased by 24% to $71 million compared to the first quarter of 2021. In local currency terms, revenues decreased by 19%, mainly due to price reductions.

Europe Gross Profit

Gross profit from our Europe segment in the first quarter of 2022 was $694 million, an increase of 1% compared to $688 million in the first quarter of 2021.

Gross profit margin for our Europe segment in the first quarter of 2022 increased to 60.0%, compared to 56.6% in the first quarter of 2021. This increase was mainly due to lower cost of goods sold, mainly driven by our network consolidation activities, as well as a decrease in write-offs.

Europe Profit

Profit from our Europe segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.

Profit from our Europe segment in the first quarter of 2022 was $381 million, an increase of 13%, compared to $338 million in the first quarter of 2021. This increase was mainly due to higher gross profit and reduced expenses, as discussed above.

International Markets Segment

Our International Markets segment includes all countries in which we operate other than those in our North America and Europe segments. The key markets in this segment are Japan, Russia and Israel.

On February 1, 2021, we completed the sale of the majority of the generic and operational assets of our business venture in Japan.

In February 2022, Russia launched an invasion of Ukraine. As of the date of this press release, sustained conflict and disruption in the region is ongoing. Russia and Ukraine markets are included in our International Markets segment results. We have no manufacturing or R&D facilities in these markets. During the first quarter of 2022, the impact of this conflict on our International Markets segment results of operations and financial condition was immaterial.

The following table presents revenues, expenses and profit for our International Markets segment for the three months ended March 31, 2022 and 2021:

Revenues from our International Markets segment in the first quarter of 2022 were $492 million, flat compared to the first quarter of 2021. In local currency terms, revenues increased by 8% compared to the first quarter of 2021, mainly due to higher revenues in certain markets, partially offset by lower revenues in Japan resulting from the divestment mentioned above, as well as regulatory price reductions and generic competition to off-patented products.

IR Contacts
Ran Meir (267) 468-4475
Yael Ashman +972 (3) 914 8262

PR Contacts
Kelley Dougherty (973) 832-2810
Eden Klein +972 (3) 906 2645