-
2023 revenues of $15.8 billion reflect an increase of 7% in local currency terms, compared to 2022
- AUSTEDO® – exceeding $1.2 billion in annual revenues, up 28% from 2022; strong growth expected to continue in 2024 with expected revenues of ~$1.5 billion;
- AJOVY® – global annual revenues of $435 million, up 16% from 2022;
- Generics business continues to stabilize, back to revenue growth
- Q4 2023 and full year 2023 figures include the impact of the $500 million upfront payment received in connection with the collaboration on our anti-TL1A asset
- Ongoing net debt reduction – reduced to $16.6 billion as of December 31, 2023
-
Pivot to Growth strategy in action:
- Teva api Intended divestiture will allow us to focus on our core business strengths and capital allocation towards growth engines and innovation
- Exclusive collaboration with Sanofi on anti TL1-A (TEV-‘574) entered into in October 2023
- Funding agreement with Royalty Pharma on olanzapine LAI (TEV-’749)
- License agreement with Biolojic Design on a BD9 multibody for potential treatment of Atopic Dermatitis and Asthma
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2024 Business Outlook:
- Revenues of $15.7 – $16.3 billion
- Non-GAAP operating income of $4.0-$4.5 billion
- Adjusted EBITDA of $4.5 – $5.0 billion
- Non-GAAP diluted EPS of $2.20 – $2.50
- Free cash flow of $1.7 – $2.0 billion
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, 2023.
- Q4 2023 and Full Year 2023 Highlights:
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|
Q4 2023 |
FY 2023 |
||
|
Revenues |
|
$4.5 billion |
$15.8 billion |
|
|
GAAP diluted earnings (loss) per share |
|
$0.41 |
$(0.50) |
|
|
Non-GAAP diluted EPS |
|
$1.00 |
$2.56 |
|
|
Cash flow generated from operating activities |
|
$1,184 million |
$1,368 million |
|
|
Free cash flow |
|
$1,486 million |
$2,387 million |
Mr. Richard Francis, Teva’s President and CEO, said: “2023 has been a year of significant advances for Teva, a year in which we gained momentum on our Pivot to Growth strategy, and achieved strong growth on our key innovative brands, accelerated our late-stage pipeline assets, and brought our generics business back to growth.
Mr. Francis continued, “In 2024, we look forward to seeing continued progress across our key innovative growth drivers, while also executing on our high-value, complex generics business with new product launches, and achieving the exciting clinical milestones of our late-stage pipeline assets.”
Pivot to Growth Strategy
In May 2023, we introduced our new “Pivot to Growth” strategy, which is based on four key pillars: (i) delivering on our growth engines, mainly AUSTEDO, AJOVY, UZEDY® and our late-stage pipeline of biosimilars; (ii) stepping up innovation through delivering on our late-stage innovative pipeline assets as well as building up our early-stage pipeline organically and potentially through business development activities; (iii) sustaining our generics medicines powerhouse with a global commercial footprint, focused portfolio, pipeline and manufacturing footprint; and (iv) focusing our business by optimizing our portfolio and global manufacturing footprint to enable strategic capital deployment to accelerate our near and long-term growth engines and reorganizing certain of our business units to a more optimal structure, while also reorganizing key business units to enhance operational efficiency.
Revision of Previously Reported Consolidated Financial Statements
In connection with the preparation of our consolidated financial statements as of and for the fiscal year ended December 31, 2023, we determined that there were errors in a single contingent consideration liability and related expenses in connection with estimated future royalty payments, along with corresponding deferred tax adjustments, that aggregated into an understatement of $132 million in the contingent consideration liability, of which $98 million related to 2022 and $34 million related to 2023. These errors resulted from the exclusion of royalty payments that should have been included in the fair value re-measurement calculation of the contingent consideration liability at each reporting period, as of and for the year ended December 31, 2022 and the quarterly and year-to-date periods ended June 30, September 30 and December 31, 2022, and March 31, June 30 and September 30, 2023. These errors did not impact our actual royalty payments, as well as our total cash flows from operating activities, financing activities and investing activities for the periods stated above.
We assessed the materiality of these errors, individually and in the aggregate, considering both qualitative and quantitative factors, and determined that these errors were not material to any of the prior periods. However, the aggregate amount of errors in 2022 is material to the consolidated statements of income (loss) for fiscal year 2023. Therefore, we have corrected these errors as a revision to our previously issued consolidated financial statements. This revision did not impact our non-GAAP results.
In connection with these errors, management identified a material weakness in our internal controls over financial reporting as of December 31, 2023. We are in the process of implementing a remediation plan to address the material weakness.
The tables below present the impact of the revision on previously reported line items discussed within this press release:
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|
Three months ended |
|
Year ended, |
||||||||||
|
|
December 31, 2022 |
|
December 31, 2022 |
||||||||||
|
|
As |
Adjustment |
As revised |
|
As |
Adjustment |
As revised |
||||||
|
Other asset impairments, restructuring and other items |
132 |
|
85 |
|
217 |
|
|
414 |
|
98 |
|
512 |
|
|
Operating income (loss) |
(855 |
) |
(85 |
) |
(940 |
) |
|
(2,099 |
) |
(98 |
) |
(2,197 |
) |
|
Income (loss) before income taxes |
(1,100 |
) |
(85 |
) |
(1,185 |
) |
|
(3,065 |
) |
(98 |
) |
(3,163 |
) |
|
Income taxes (benefit) |
154 |
|
(5 |
) |
149 |
|
|
(638 |
) |
(5 |
) |
(643 |
) |
|
Net income (loss) |
(1,254 |
) |
(80 |
) |
(1,333 |
) |
|
(2,406 |
) |
(93 |
) |
(2,499 |
) |
|
Net income (loss) attributable to Teva |
(1,221 |
) |
(80 |
) |
(1,301 |
) |
|
(2,353 |
) |
(93 |
) |
(2,446 |
) |
|
Earnings (loss) per share attributable to ordinary shareholders: |
|
|
|
|
|
|
|
||||||
|
Basic |
(1.10 |
) |
(0.07 |
) |
(1.17 |
) |
|
(2.12 |
) |
(0.08 |
) |
(2.20 |
) |
|
Diluted |
(1.10 |
) |
(0.07 |
) |
(1.17 |
) |
|
(2.12 |
) |
(0.08 |
) |
(2.20 |
) |
|
|
|
|
|
|
|
|
|
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2023 Annual Consolidated Results
The data presented in this press release with respect to operating income (loss), income (loss) before income taxes, income taxes (benefit), net income (loss) attributable to Teva and earnings (loss) per share for prior periods have been revised to reflect a revision in relation to a contingent consideration and related expenses as explained above.
Revenues in 2023 were $15,846 million, an increase of 6%, in U.S. dollars or 7% in local currency terms, compared to 2022. This increase was mainly due to an upfront payment received in connection with the collaboration on our anti-TL1A asset, higher revenues from generic products in our International Markets and Europe segments, higher revenues from our innovative products AUSTEDO and AJOVY, the sale of certain product rights in our Europe segment, as well as higher revenues from Anda, partially offset by lower revenues from COPAXONE®, API sales to third parties, BENDEKA® and TREANDA®, and generic products in our North America segment.
Exchange rate movements during 2023, including hedging effects, negatively impacted revenues by $172 million, operating income by $111 million and non-GAAP operating income by $108 million, each as compared to 2022.
Gross profit was $7,645 million in 2023, an increase of 10% compared to 2022. Gross profit margin was 48.2% in 2023, compared to 46.7% in 2022. The increase in gross profit margin was mainly due to an upfront payment received in connection with the collaboration on our anti-TL1A asset and higher revenues from AUSTEDO in our North America segment, as well as the sale of certain product rights in our Europe segment, partially offset by higher cost of goods sold, mainly driven by higher costs due to inflationary and other macroeconomic pressures, and lower revenues from COPAXONE. Non-GAAP gross profit was $8,470 million in 2023, an increase of 5.1% compared to 2022. Non-GAAP gross profit margin was 53.5% in 2023, compared to 54.0% in 2022. The decrease in non-GAAP gross profit margin was mainly due to higher cost of goods sold, mainly due to inflationary and other macroeconomic pressures and lower revenues from COPAXONE, partially offset by an upfront payment received in connection with the collaboration on our anti-TL1A asset and higher revenues from AUSTEDO in our North America segment, as well as the sale of certain product rights in our Europe segment.
Research and Development (R&D) expenses, net in 2023 were $953 million, an increase of 14% compared to $838 million in 2022, as we continue to execute on our Pivot to Growth strategy. Our higher R&D expenses, net, in 2023, compared to 2022, were mainly due to an increase related to our late-stage innovative pipeline in neuroscience (mainly neuropsychiatry), in immunology and immuno-oncology, partially offset by a decline in various generics projects, as well as lower R&D expenses related to our biosimilar products pipeline. Additionally, in 2022 our R&D expenses were lower due to an adjustment in payments pursuant to a contract with one of our R&D partners. Our R&D expenses, net in 2023 were also impacted by reimbursements from our strategic partnerships entered into in 2023.
Selling and Marketing (S&M) expenses in 2023 were $2,336 million, an increase of 3% compared to 2022.
General and Administrative (G&A) expenses in 2023 were $1,162 million, a decrease of 2% compared to 2022.
Other income in 2023 was $49 million, compared to $107 million in 2022.
Operating income was $433 million in 2023, compared to operating loss of $2,197 million in 2022. Operating income as a percentage of revenues was 2.7% in 2023, compared to operating loss as a percentage of revenues of 14.7% in 2022. This increase was mainly due to higher goodwill impairment charges and legal settlements and loss contingencies in 2022. Non-GAAP operating income was $4,361 million in 2023, or 27.5% of revenues compared to $4,139 million, or 27.7% of revenues in 2022. The decrease in non-GAAP operating margin was mainly impacted by lower gross profit margin, as discussed above, partially offset by lower operating expenses as a percentage of revenues.
Adjusted EBITDA was $4,818 million in 2023, compared to $4,598 million in 2022.
In 2023, financial expenses, net were $1,057 million, compared to $966 million in 2022. Financial expenses in 2023 were mainly comprised of net-interest expenses of $961 million. Financial expenses in 2022 were mainly comprised of net-interest expenses of $921 million.
In 2023, we recognized a tax benefit of $7 million, or 1%, on a pre-tax loss of $624 million. In 2022, we recognized a tax benefit of $643 million, or 20%, on a pre-tax loss of $3,163 million. Our tax rate for 2023 was lower than in 2022 mainly due to higher goodwill impairment charges in 2022 that did not have a corresponding tax effect. Non-GAAP tax rate for 2023 was 13.0%, compared to 11.7% in 2022. Our non-GAAP tax rate in 2023 was mainly affected by the mix of products we sold, net deferred tax benefits from intellectual property related integration plans and carryforward losses, adjustment to valuation allowances on deferred tax assets and interest expense disallowances.
Net loss attributable to Teva and loss per share in 2023 were $559 million and $0.50, respectively, compared to net loss attributable to Teva of $2,446 million and loss per share of $2.20 in 2022. This change in net income was mainly due to higher goodwill impairment charges and legal settlements and loss contingencies in 2022, partially offset by higher tax benefits in 2022. Non-GAAP net income attributable to Teva and non-GAAP diluted earnings per share in 2023 were $2,898 million and $2.56, respectively, compared to $2,812 million and $2.52 in 2022.
As of December 31, 2023 and 2022, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,157 million and 1,143 million shares, respectively.
Non-GAAP information: net non-GAAP adjustments in 2023 were $3,458 million. Non-GAAP net income attributable to Teva and non-GAAP diluted EPS for the year were adjusted to exclude the following items:
- Amortization of purchased intangible assets totaling $616 million, of which $549 million is included in cost of goods sold and the remaining $67 million in S&M expenses;
- Legal settlements and loss contingencies of $1,043 million;
- Goodwill impairment charges of $700 million;
- Impairment of long-lived assets of $378 million.
- Restructuring expenses of $111 million;
- Costs related to regulatory actions taken in facilities of $4 million;
- Equity compensation expenses of $121 million;
- Contingent consideration expenses of $548 million;
- Gain on sale of business of $3 million;
- Accelerated depreciation of $80 million;
- Financial expenses of $66 million;
- Items attributable to non-controlling interests of $92 million;
- Other non-GAAP items of $330 million; and
- Corresponding tax effects and unusual tax items amounted to income of $446 million.
We believe that excluding such items facilitates investors’ understanding of our business including underlying performance trends, thereby improving the comparability of our business performance results between reporting periods.
For a reconciliation of the U.S. GAAP results to the adjusted non-GAAP figures and for additional information, see the tables below and the information included 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 2023 was $1,368 million, compared to $1,590 million in 2022. The decrease in 2023 resulted mainly from the sale of accounts receivables under our U.S. securitization facility during 2022 and higher payments of legal settlements in connection with the opioids litigation in 2023, partially offset by changes in working capital items, including positive impacts of accounts payables and accounts receivables in 2023, as well as higher tax payments in 2022.
During 2023, we generated free cash flow of $2,387 million, which we define as comprising $1,368 million in cash flow generated from operating activities, $1,477 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program) and $68 million proceeds from sale of businesses and long lived assets, partially offset by $526 million in cash used for capital investments. During 2022, we generated free cash flow of $2,243 million, which we define as comprising $1,590 million in cash flow generated from operating activities, $1,140 million in beneficial interest collected in exchange for securitized accounts receivables and $68 million proceeds from sale of businesses and long lived assets, partially offset by $548 million in cash used for capital investments and $7 million in cash used for acquisition of businesses, net of cash acquired. The increase in 2023 resulted mainly from higher beneficial interest collected in exchange for securitized accounts receivables under our EU securitization, partially offset by lower cash flow generated from operating activities.
As of December 31, 2023, our debt was $19,833 million, compared to $21,212 million as of December 31, 2022. This decrease was mainly due to $1,646 million senior notes repaid at maturity, partially offset by $302 million of exchange rate fluctuations. Additionally, during the first quarter of 2023, we repurchased $2,506 million aggregate principal amount of notes upon consummation of a cash tender offer, and issued $2,445 million of sustainability-linked senior notes net of issuance costs. In July 2023, a total amount of $700 million was withdrawn under our $1.8 billion unsecured syndicated sustainability-linked revolving credit facility, entered into in April 2022, as amended in February 2023 (“RCF”), of which $200 million was repaid in September 2023 and the remaining amount of $500 million was repaid in the fourth quarter of 2023. As of December 31, 2023 and as of the date of this press release, no amounts were outstanding under the RCF. The portion of total debt classified as short-term as of December 31, 2023 was 8%, compared to 10% as of December 31, 2022. Our average debt maturity was approximately 5.9 years as of December 31, 2023, compared to 5.8 years as of December 31, 2022.
In October 2023, Israel was attacked by a terrorist organization and entered a state of war. As of the date of this press release, the situation is evolving. Israel is included in Teva’s International Markets segment results. Teva’s global headquarters and several manufacturing and R&D facilities are located in Israel. Currently, such activities in Israel remain largely unaffected. Teva continues to maintain contingency plans with backup production locations for key products. During the year ended December 31, 2023, the impact of this war on Teva’s results of operations and financial condition was immaterial, but such impact may increase, which could be material, as a result of the continuation, escalation or expansion of such war.
Fourth Quarter 2023 Consolidated Results
The data presented in this press release with respect to operating income (loss), income (loss) before income taxes, income taxes (benefit), net income (loss) attributable to Teva and earnings (loss) per share for prior periods have been revised to reflect a revision in relation to a contingent consideration and related expenses as explained above.
Revenues in the fourth quarter of 2023 were $4,457 million, an increase of 15% in U.S. dollars or 14% in local currency terms compared to the fourth quarter of 2022. This increase was mainly due to an upfront payment received in connection with the collaboration on our anti-TL1A asset, the sale of certain product rights in our Europe segment, higher revenues from generic products in our International Markets segment and from AUSTEDO in our North America segment, partially offset by lower revenues from generic products and Anda in our North America segment, and from COPAXONE.
Exchange rate movements during the fourth quarter of 2023, net of hedging effects, positively impacted our revenues by $17 million, compared to the fourth quarter of 2022. Exchange rate movements during the fourth quarter of 2023, net of hedging effects, positively impacted our operating income and non-GAAP operating income by $11 million and $12 million, respectively, compared to the fourth quarter of 2022.
Gross profit in the fourth quarter of 2023 was $2,416 million, an increase of 36% compared to $1,770 million in the fourth quarter of 2022. Gross profit margin was 54.2% in the fourth quarter of 2023, compared to 45.6% in the fourth quarter of 2022. Non-GAAP gross profit was $2,592 million in the fourth quarter of 2023, an increase of 23% compared to the fourth quarter of 2022. Non-GAAP gross profit margin was 58.2% in the fourth quarter of 2023, compared to 54.2% in the fourth quarter of 2022. The increase in both gross profit margin and non-GAAP gross profit margin was mainly driven by an upfront payment received in connection with the collaboration on our anti-TL1A asset and a favorable mix of products in our North America segment, as well as the sale of certain product rights in our Europe segment, partially offset by higher cost of goods sold, mainly driven by higher costs due to inflationary and other macroeconomic pressures.
Research and Development (R&D) expenses, net in the fourth quarter of 2023 were $227 million, an increase of 8% compared to $210 million in the fourth quarter of 2022, as we continue to execute on our Pivot to Growth strategy. The increase in R&D expenses, net in the fourth quarter of 2023 was mainly due to an increase related to our late-stage innovative pipeline in neuroscience (mainly neuropsychiatry), in immunology and immuno-oncology, partially offset by a decline in various generics projects, as well as lower R&D expenses related to our biosimilar products pipeline. Our R&D expenses, net in the fourth quarter of 2023 were also impacted by reimbursements from our strategic partnerships entered into in 2023.
Selling and Marketing (S&M) expenses in the fourth quarter of 2023 were $610 million, an increase of 11% compared to the fourth quarter of 2022.
General and Administrative (G&A) expenses in the fourth quarter of 2023 were $291 million, an increase of 1% compared to the fourth quarter of 2022.
Other income in the fourth quarter of 2023 was $6 million, compared to $19 million in the fourth quarter of 2022.
Operating income in the fourth quarter of 2023 was $755 million, compared to an operating loss of $940 million in the fourth quarter of 2022. Operating income as a percentage of revenues was 17.0% in the fourth quarter of 2023, compared to operating loss of 24.2% in the fourth quarter of 2022. This increase was mainly due to goodwill impairment charges in the fourth quarter of 2022 and higher gross profit in the fourth quarter of 2023, partially offset by higher other assets impairments, restructuring and other items in the fourth quarter of 2023. Non-GAAP operating income in the fourth quarter of 2023 was $1,546 million representing a non-GAAP operating margin of 34.7% compared to non-GAAP operating income of $1,130 million representing a non-GAAP operating margin of 29.1% in the fourth quarter of 2022. The increase in non-GAAP operating margin in the fourth quarter of 2023 was mainly impacted by higher non-GAAP gross profit margin, as discussed above, as well as lower operating expenses as a percentage of revenues.
Adjusted EBITDA was $1,660 million in the fourth quarter of 2023, an increase of 34%, compared to $1,240 million in the fourth quarter of 2022.
Financial expenses, net in the fourth quarter of 2023 were $249 million, compared to $245 million in the fourth quarter of 2022. Financial expenses, net in the fourth quarter of 2023 and 2022, were mainly comprised of net interest expenses of $238 million and $222 million, respectively.
In the fourth quarter of 2023, we recognized a tax expense of $43 million on a pre-tax income of $507 million, mainly due to adjustments to valuation allowances on deferred tax assets. In the fourth quarter of 2022, we recognized a tax expense of $149 million on a pre-tax loss of $1,185 million. Non-GAAP tax rate in the fourth quarter of 2023 was 13.1%, compared to 11.0% in the fourth quarter of 2022. Our non-GAAP tax rate in the fourth quarter of 2023 was mainly affected by the generation of profits in various jurisdictions with different tax rates, adjustments to valuation allowances on deferred tax assets, interest expense disallowances, tax benefits in Israel and other countries, as well as infrequent or non-recurring items. Our non-GAAP tax rate in the fourth quarter of 2022 was mainly affected by the mix of products we sold, interest expense disallowances and adjustments to valuation allowances on deferred tax assets.
Net income attributable to Teva and diluted earnings per share in the fourth quarter of 2023 were $461 million and $0.41, respectively, compared to net loss of $1,301 million and loss per share of $1.17, respectively, in the fourth quarter of 2022. The higher net income in the fourth quarter of 2023 was mainly due to higher operating income in 2023, as discussed above. Non-GAAP net income attributable to Teva and non-GAAP diluted earnings per share in the fourth quarter of 2023 were $1,135 million and $1.00, respectively, compared to $791 million and $0.
Contacts
IR Contacts
Ran Meir
(215) 591-8912
Yael Ashman
+972 (3) 914 8262
Sanjeev Sharma
(267) 658-2700
PR Contacts
Kelley Dougherty
(973) 832-2810
Eden Klein
+972 (3) 906 2645