Teva Pharmaceutical Industries Limited's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Teva Pharmaceutical Industries Limited (TEVA)

Q1 2012 Earnings Call

May 09, 2012 8:30 am ET


Kevin Mannix - Director of Investor Relations - Teva North America

Shlomo Yanai - Chief Executive Officer and President

Eyal Desheh - Chief Financial Officer

Jeremy Levin -

William S. Marth - Chief Executive Officer of Teva Americas and President of Teva Americas

Robert Koremans -

Michael Hayden -

Unknown Executive -

Gerard W.M. Van Odijk - Former Chief Executive Officer of Teva Europe and President of Teva Europe


Christopher Schott - JP Morgan Chase & Co, Research Division

Aaron Gal - Sanford C. Bernstein & Co., LLC., Research Division

Traver A. Davis - Piper Jaffray Companies, Research Division

Corey B. Davis - Jefferies & Company, Inc., Research Division

David G. Buck - The Buckingham Research Group Incorporated

Gregory B. Gilbert - BofA Merrill Lynch, Research Division

Limor Gruber - Psagot Investment House Ltd., Research Division

Frank H. Pinkerton - SunTrust Robinson Humphrey, Inc., Research Division

Elliot Wilbur - Needham & Company, LLC, Research Division

Douglas D. Tsao - Barclays Capital, Research Division

Marc Goodman - UBS Investment Bank, Research Division

Florent Cespedes - Exane BNP Paribas, Research Division

Jason M. Gerberry - Leerink Swann LLC, Research Division

Shibani Malhotra - RBC Capital Markets, LLC, Research Division



Ladies and, gentlemen, thank you for standing by. Welcome to the Teva Pharmaceutical Industries Ltd. First Quarter 2012 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, May 9, 2012.

I'll now hand over the call to Mr. Kevin Mannix, VP, Head of Investor Relations. Mr. Mannix, would you like to begin?

Kevin Mannix

Thank you, Rachel. Good morning, good afternoon, everyone. Thank you for joining us today to review Teva's first quarter 2012 earnings results.

I’m joined today by our President and CEO, Shlomo Yanai; Teva's incoming President and CEO, Dr. Jeremy Levin; our CFO, Eyal Desheh; Bill Marth, President and CEO of Teva Americas; Rob Koremans, President and CEO of Teva Europe; Dr. Michael Hayden, President of Global R&D and Chief Scientific


Shlomo will begin by providing an overview of the quarter, followed by Eyal. We'll then provide additional details on our consolidated financial results. Finally, we will hear from our new CEO, Jeremy Levin, before opening the call to a question-and-answer period.

Before we start, I’d like to remind you that our discussions during this conference call will include forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ are discussed in Teva’s report on Form 20-F and Form 6-K.

Also, the discussions during this conference call will include certain financial measures that were not prepared in accordance with Generally Accepted Accounting Principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in Teva’s earnings release issued earlier this morning, which can also be found on our website,

With that, I will now turn the call over to Shlomo. Shlomo, if you would please?

Shlomo Yanai

Thank you, Kevin. Welcome, everyone, and thank you for joining us today as we review Teva's results for the first quarter of 2012.

I'm pleased to report that the year is off to a solid start for Teva. Compared to the first quarter of 2011, sales were up by 25% to reach $5.1 billion. Quarterly operating profit grew by 42% to $1.6 billion, and net income increased by 39% to $1.3 billion. This brought us to EPS of $1.47, up 41% over the first quarter of 2011.

During the quarter, we undertook an important initiative to streamline some of our commercial arrangements in the U.S. In the near and midterm, these changes will yield important financial benefits for Teva.

During Q1, however, these moves had a negative impact on revenues of approximately $180 million. Revenues were also impacted by currency exchange rates during the quarter of $81 million.

I would like to discuss just a few highlights from our major businesses during the quarter, and Eyal will elaborate later on all of our businesses in a greater detail in his remarks.

This was the second consecutive quarter of solid results in our U.S. generics business. Teva's world-class generics R&D, broad product portfolio, continuing improvements in service levels and deep customer relationships have enabled us to bounce back to enjoy growth of 29% year-over-year. During the first quarter, we launched 7 new generic products, representing over $10 billion in branded sales in the U.S. market, and a number of these launches were either exclusive, semi-exclusive or in limited competition markets.

In Europe, in spite of rough macroeconomic conditions, sales grew by 3% during the quarter in local currencies to $1.3 billion. We saw a significant increase in sales of our branded products due primarily to the inclusion of products we acquired from Cephalon, as well as the take-back of Copaxone distribution and marketing rights from Sanofi.

In fact, in the EU countries, where we recently took back Copaxone sales and marketing rights, however, its growth in units is about 7%. This offset lower generic sales due to the ongoing macroeconomic conditions and health care reforms in key European markets. Our strategy of diversifying our business in Europe geographically and from a product standpoint, as well as our significant footprint in the continent has helped us to successfully mitigate some of the prevailing pressures.

During Q1, we continue to enjoy strong growth in our Rest of World markets, particularly in Eastern Europe and Latin America. Sales totaled $1 billion, up 23% in local currencies. And in Japan, Teva has introduced a new face to the market, with the integration of Teva's existing businesses into one new company, Teva Taiyo. We are very pleased with the enthusiastic response the Teva brand is receiving in Japan.

2012 was off to a great start for Teva's branded business, with strong sales of our major branded products. As you have seen in our press release, sales of Teva's portfolio of branded products enjoyed 54% increase in sales year-over-year, thanks to a combination of organic growth, the addition of Cephalon products and positive sales synergies of the major Cephalon products with Provigil, Nuvigil and Treanda growing organically, on average, 22% year-over-year.

I am pleased to report that the integration of Cephalon into Teva is growing even more quickly than we anticipated, and synergies remain in line with our expectations.

Copaxone remains the market leader in the U.S., retaining over 40% market share and continues to grow outside the U.S. in terms of value and units sold. Outside the U.S., in-market sales grew by 15% in value and 26% in units sold over the first quarter of 2011. Copaxone remains the leading global therapy for the treatment of MS.

Teva's global respiratory business grew by 4% over the first quarter of 2011. In the U.S., market share for both ProAir and Qvar continue to grow during Q1, with Qvar further strengthening its #2 position in the growing inhale corticosteroid market. We are very excited about our recent launch of Qnasal and have received U.S. approval for our ProAir dose counter, which we expect to launch this fall.

Finally, I am pleased to report that as part of our strategy to turn our women's health business into a global franchise, we have launched our women's health product, ZOELY, in select EU countries and have submitted Seasonique for approval in the EU.

As you all know, I will be stepping down today after 5 deeply rewarding years as President and CEO of Teva. When I joined Teva, the company was already a generics powerhouse, with annual revenues of over $8 billion. The growth strategy we have implemented over these last 5 years has turned Teva into a larger, highly diversified global pharmaceutical company. As CEO, it has been extremely gratifying to lead Teva through this exciting period in its history. At a personal level, it has been a true privilege to work with Teva outstanding management team and employees to create a stronger and more balanced Teva.

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