Teva Pharmaceutical Industries CEO Discusses Q3 2010 Results - Earnings Call Transcript

Teva Pharmaceutical Industries (

TEVA

)

Q3 2010 Earnings Call

November 2, 2010 8:30 a.m. ET

Executives

Elana Holzman – IR

Shlomo Yanai – President and CEO

Eyal Desheh – CFO

Gerard Van Odijk – President and CEO, Teva Europe

Bill Marth – President and CEO, Teva North America

Analysts

Randall Stanicky – Goldman Sachs

Richard Silver – Barclays Capital

Ken Cacciatore – Cowen & Company

Chris Schott – JP Morgan Chase & Company

David Amssellem – Piper Jaffray

Mark Goodman – UBS

Gregg Gilbert – Bank of America Merrill Lynch

David Buck – Buckingham Research Group

Tim Chiang – CRT Capital

Elliot Wilbur – Needham and Company

John Boris – Citi Investment Research

Corey Davis – Jefferies & Co.

Michael Tong – Wells Fargo

Frank Pinkerton – SunTrust Robinson Humphrey

Presentation

Operator

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» Teva Pharmaceutical Industries Limited Q3 2009 Earnings Call Transcript

Greetings and welcome to the Teva Pharmaceutical Industries Ltd. Third Quarter 2010 Results Conference Call. [Operator Instructions.] It is now my pleasure to introduce your host, Ms. Elana Holzman, Senior Director of Investor Relations. Thank you, Ms. Holzman, you may begin.

Elana Holzman

Thank you operator. Good morning and good afternoon everyone. Welcome to Teva's third quarter 2010 earnings conference call. We hope you've had a chance to review our press release, which we issued earlier this morning. A copy of the press release is available on our website at www.tevapharm.com. Additionally, we are conducting a live webcast of this call that is also available on our website.

Today, we are joined by Shlomo Yanai, President and CEO; Eyal Desheh, Chief Financial Officer; Bill Marth, President and CEO of Teva Americas; and Gerard Van Odijk, President and CEO of Teva Europe.

Shlomo and Eyal will begin by providing an overview of our results. Please note that Shlomo will be referring in his prepared comments to non-GAAP gross margins, operating profit, net income and EPS. Eyal will provide additional detail on the items excluded from our non-GAAP results. We will then open the call for a question-and-answer period.

Before we proceed to the call, I would like to remind everyone that the Safe Harbor language contained in today's press release also pertains to this conference call and webcast. Shlomo?

Shlomo Yanai

Thank you Elana. Welcome everyone, and thank you for joining us today as we review Teva's results for the third quarter of 2010. This was an outstanding quarter for Teva, a quarter of record-breaking sales across all our geographies and major businesses, leading to record-breaking financial results across the board.

Net sales for the quarter reached $4.3 billion, representing 20% growth over Q3 '09. Quarterly operating profit reached $1.4 billion, a 44% increase over the third quarter of 2009. Net income in the quarter reached $1.2 billion, a 47% increase over Q3 '09. And all of this brought us to non-GAAP EPS of $1.30.

We also had record cash generation during the quarter, with $1.2 billion of operating cash flow and $66 million in free cash flow, an increase of 23% over Q3 '09.

The most important strategic achievement of the quarter was the closing of our acquisition of Ratiopharm on August 10, and as you know, last week we signed an agreement to acquire Theramex. I will elaborate on both of these a bit later.

It was an exceptional quarter for Teva in North America, where sales reached $2.7 billion, up 22% over the third quarter of 2009. [Inaudible] [general expense], which approximately $1.6 billion, up 34% over Q3 '09 on the strength of our launch of Venlafaxine ER, our generic [inaudible] and mixed amphetamine salts, our generic version of Pulmicort Respules, and Adderall XR.

It has been an especially great year so far for Teva in the U.S., where we have introduced 17 new generic products since January. While we are on the topic of U.S. generics, I would like to provide a quick update on the status of our pending generic Lovenox application.

We recently met with representatives from the FDA to discuss the status of our ANDA. During the meeting, we confirmed that our version of generic Lovenox meets the FDA's criteria to demonstrate chemical sameness, and accordingly that data related to immunogenicity are currently under the Office of Biological Products.

This was also an outstanding quarter for Teva in Canada, where our ability to capture market share in a competitive landscape and our closing of the Ratiopharm acquisition has made us the number one player in the Canadian generic market, based on the dollar share of the market.

Let's turn now to Europe, where, following the closing of our acquisition of Ratiopharm, sales crossed the $1 billion mark, up 21% over Q3 '09, or 33% in local currency terms. Sales were up in all major European markets, on the [inaudible] growth of the Ratiopharm business, and excellent growth of Teva's revenues in key markets like Italy, Spain, Poland, Portugal, and Hungary.

In several other markets, including Germany and France, we experienced pricing pressure during the quarter. In Germany, our largest market, certain reforms impacted our prices. Nevertheless, we are pleased to see continual growth of our Teva portfolio in Germany on top of the growth we experienced from the addition of Ratiopharm's business. The combination of the two businesses resulted in net growth in market share over Q3 '09.

Immediately upon our closing with Ratiopharm on August 10, our integration teams were hard at work, and I'm pleased to report that the integration is right on track. The more deeply we get to know Ratiopharm, the more excited we are about what our combined company can accomplish.

In addition to our leadership in Europe and all its key markets, we are very well-positioned to compete in every important business segment, from [inaudible] generics, to OTC, to hospitals, to specialty and innovative niche areas and biosimilars. We are confident that we will be able to achieve our objective of $400 million in synergies. In fact, we are already realizing synergies.

Some of you joined me last month on a visit to Ratiopharm's headquarters, and I think that the experience of meeting the outstanding Ratiopharm team, seeing the efficiency of the operation, and understanding the strength of Ratiopharm's market position and brand in Europe makes it clear why we are so enthusiastic about the possibilities that lie ahead for us for our company.

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