Teva Reports Second Quarter 2012 Results

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) today reported results for the quarter ended June 30, 2012.

Highlights:

• Net revenues of $5.0 billion, compared to $4.2 billion in the second quarter of 2011, an increase of 19%.
• Net revenues organic growth of 3% compared to the second quarter of 2011, and 7% excluding the effect of generic competition on Provigil ^®.
• GAAP net income and GAAP diluted EPS of $863 million and $0.99, an increase of 50% and 55%, respectively, compared to $576 million and $0.64 in the second quarter of 2011. Non-GAAP operating income of $1.4 billion, an increase of 27% compared to $1.1 billion in the second quarter of 2011.
• Non-GAAP net income and Non-GAAP diluted EPS of $1.1 billion and $1.28, an increase of 14% and 16%, respectively, compared to $1.0 billion and $1.10 diluted EPS in the second quarter of 2011.
• Cash flow from operations of $1.2 billion and free cash flow of $709 million.
• Company reaffirms full year 2012 guidance.

“This was a significant quarter for Teva as we remain on track to reach our financial goals for the year,” stated Dr. Jeremy Levin, Teva’s President and CEO. “The U.S. generics business continued to recover with a positive trend, our global branded division experienced strong growth, and our European generics business, while down from last year’s second quarter results due to macroeconomic conditions, showed solid sequential growth from the first quarter of this year. Overall, we continue to see tremendous opportunities ahead, and look forward to rebuilding shareholder value over time.”

Revenues by Geography for the Second Quarter 2012 ¹

Net revenues in the United States in the second quarter were $2.5 billion (representing 49% of total revenues), an increase of 28% compared to the second quarter of 2011, primarily as a result of strong revenues of both our generic medicines, including the launch of four new medicines, and our branded medicines, as well as the inclusion of Cephalon.

Net revenues in Europe in the second quarter were $1.5 billion (representing 30% of total revenues), unchanged compared to the second quarter of 2011, and an increase of 12% in local currency terms. Revenues in Europe this quarter benefited from the inclusion of Cephalon’s revenues as well as stronger revenues from some of our branded medicines, primarily Copaxone ^®. We grew our revenues in several markets in Europe, including Italy and Spain, where revenues in local currency terms increased approximately 10% and 6%, respectively. These positives were offset by the negative effect on our revenues of foreign currencies (primarily declines in the value of the euro and Hungarian forint), and to a lesser extent by lower generics sales due to ongoing macro-economic conditions and healthcare reforms in key European markets.

Net revenues in the Rest of the World (ROW) in the second quarter totaled $1.1 billion (representing 21% of total revenues), up 30% compared to the second quarter of 2011. In local currency terms, ROW revenues grew by 36%. The growth in revenues resulted primarily from sales in Russia and other Eastern European countries, Latin America and Israel, as well as from the inclusion of Cephalon and Taiyo, our Japanese acquisition.

		Three Months Ended June 30,										Percentage Change 2012 from 2011		Percentage Change 2012 from 2011
		2012			2011			% of 2012		% of 2011
			U.S. $ in millions											in local currencies
United States:
Generic		$	1,054		$	908		21%		22%		16%		16%
Branded			1,365			1,009		27%		24%		35%		35%
Others			45			1		1%		§		ℓ		ℓ
Total United States			2,464			1,918		49%		46%		28%		28%
Europe*:
Generic			884			999		18%		24%		(12%)		(1%)
Branded			402			275		8%		6%		46%		63%
Others			187			204		4%		5%		(8%)		9%
Total Europe			1,473			1,478		30%		35%		§		12%
Rest of the World:
Generic			676			497		13%		12%		36%		40%
Branded			182			140		4%		3%		30%		45%
Others			199			179		4%		4%		11%		19%
Total Rest of the World			1,057			816		21%		19%		30%		36%
Total Revenues		$	4,994		$	4,212		100%		100%		19%		24%
*All members of the European Union as well as Switzerland and Norway.
§ Less than 0.5%
ℓ Over 100%

Revenues by Product Line for the Second Quarter 2012

Generic medicines net revenues in the second quarter were $2.6 billion (including API sales to third parties of $200 million), an increase of 9% compared to $2.4 billion in the second quarter of 2011. Generics revenues consisted of:

• U.S. revenues of $1.1 billion, an increase of 16% compared to the second quarter of 2011. The U.S. generics business benefited from the launch of four new generic medicines during the quarter, as well as continued benefits from first quarter launches which included several medicines that were either exclusive or semi-exclusive or otherwise had limited competition. Medicines launched in the first quarter included generic versions of Lexapro ^®, Provigil ^®, Prometrium ^®, Avalide ^®, Avapro ^®, Seroquel ^® and Zyprexa ^®.
• European revenues of $884 million, a decrease of 12%, or only 1% in local currency terms, compared to the second quarter of 2011. The slight decrease year over year, despite continued economic and regulatory pressures in some key markets in Europe, demonstrates our balanced and diversified business model in the region and the contribution of Mepha. Compared to the first quarter of 2012, our revenues this quarter increased 14% due to several successful multi-country launches, including generic versions of Lipitor ^® and Atacand ^®, and overall improved performance.
• ROW revenues of $676 million, an increase of 36%, or 40% in local currency terms, compared to the second quarter of 2011. The ROW generics business had a strong quarter in Eastern Europe and Latin America, coupled with the inclusion of Taiyo in Japan, and slightly offset by a decrease in generics sales in Canada and the negative effect of foreign currencies.

		Three Months Ended June 30,								Percentage Change 2012 from 2011
		2012		2011		% of 2012		% of 2011
		U.S. $ in millions
Generic Medicines		2,614		2,404		52%		57%		9%
API		200		183		4%		4%		9%

Branded medicines net revenues in the second quarter were $1.9 billion, an increase of 37% compared to $1.4 billion in the second quarter of 2011. Branded revenues consist of:

• U.S. revenues of $1.4 billion, an increase of 35% compared to the second quarter of 2011.
• European revenues of $402 million, an increase of 46%, or 63% in local currency terms compared to the second quarter of 2011.
• ROW revenues of $182 million, an increase of 30%, or 45% in local currency terms compared to the second quarter of 2011.

Branded revenues comprised 39% of total revenues in the quarter, compared to 34% in the second quarter of 2011.

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