On January 31, 2024 Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) reported results for the year and the quarter ended December 31, 2023 (Press release, Teva, JAN 31, 2024, View Source [SID1234639752]).
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Q4 2023 and Full Year 2023 Highlights:
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:
Three months ended
Year ended,
December 31, 2022
December 31, 2022
As
previously
reported
Adjustment
As revised
As
previously
reported
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
)
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 $0.71, respectively, in the fourth quarter of 2022.
Non-GAAP information: net non-GAAP adjustments in the fourth quarter of 2023 were $674 million. Non-GAAP net income attributable to Teva and non-GAAP diluted EPS for the fourth quarter were adjusted to exclude the following items:
Amortization of purchased intangible assets of $144 million, of which $129 million is included in cost of sales and the remaining $16 million in S&M expenses;
Legal settlements and loss contingencies of $34 million;
Impairment of long-lived assets of $68 million;
Restructuring expenses of $18 million;
Costs related to regulatory actions taken in facilities of $2 million;
Equity compensation expenses of $28 million;
Contingent consideration expenses of $408 million;
Accelerated depreciation of $6 million;
Financial expenses of $13 million;
Items attributable to non-controlling interests in an amount of $1 million;
Other non-GAAP items of $81 million; and
Corresponding tax effects and unusual tax items of $128 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 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 generated from operating activities during the fourth quarter of 2023 was $1,184 million, compared to $973 million in the fourth quarter of 2022. The increase in the fourth quarter of 2023 resulted mainly from changes in working capital items, including positive impacts of accounts receivables and accounts payables, partially offset by 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. Cash flow generated from operating activities in the fourth quarter of 2023 included an upfront payment of $500 million received in connection with the collaboration on our anti-TL1A asset.
During the fourth quarter of 2023, we generated free cash flow of $1,486 million, which we define as comprising $1,184 million in cash flow generated from operating activities, $421 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program), partially offset by $120 million in cash used for capital investments, compared to $1,140 million in the fourth quarter of 2022. The increase resulted mainly from higher cash flow generated from operating activities.
Segment Results for the Fourth Quarter of 2023
North America Segment
Our North America segment includes the United States and Canada. As part of a recent shift in executive management responsibilities, commencing January 1, 2024, Canada will be reported as part of our International Markets segment.
The following table presents revenues, expenses and profit for our North America segment for the three months ended December 31, 2023 and 2022:
Three months ended December 31,
2023
2022
(U.S. $ in millions / % of Segment Revenues)
Revenues
$
2,365
100%
$
2,002
100%
Gross profit
1,470
62.2%
1,085
54.2%
R&D expenses
147
6.2%
131
6.6%
S&M expenses
261
11.0%
209
10.4%
G&A expenses
97
4.1%
113
5.7%
Other income
(1
)
§
(2
)
§
Segment profit*
$
966
40.9%
$
633
31.6%
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than 0.5%.
Revenues from our North America segment in the fourth quarter of 2023 were $2,365 million, an increase of 18% compared to the fourth quarter of 2022, mainly due to an upfront payment in connection with the collaboration on our anti-TL1A asset and higher revenues from AUSTEDO, partially offset by a lower revenues from generic products, COPAXONE and BENDEKA and TREANDA, as well as from Anda.
Revenues in the United States, our largest market, were $2,265 million in the fourth quarter of 2023, an increase of $352 million, or 18%, compared to the fourth quarter of 2022.
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 December 31, 2023 and 2022:
Three months ended
December 31,
Percentage
Change
2023
2022
2023-2022
(U.S. $ in millions)
Generic products
$
754
$
818
(8%)
AJOVY
63
75
(17%)
AUSTEDO
408
344
18%
BENDEKA and TREANDA
53
75
(29%)
COPAXONE
78
101
(24%)
Anda
394
450
(13%)
Other
617
138
347%
Total
$
2,365
$
2,002
18%
* Other revenues mainly related to an upfront payment of $500 million received in the fourth quarter of 2023 in connection with the collaboration on our anti-TL1A asset.
Generic products revenues in our North America segment in the fourth quarter of 2023 decreased by 8% to $754 million, compared to the fourth quarter of 2022, mainly due to increased competition to parts of our portfolio.
In the fourth quarter of 2023, our total prescriptions were approximately 78 million representing 8% of total U.S. generic prescriptions according to IQVIA data.
AJOVY revenues in our North America segment in the fourth quarter of 2023 were $63 million compared to $75 million in the fourth quarter of 2022. This decrease was mainly due to lower volumes and unfavorable net pricing.
AUSTEDO revenues in our North America segment in the fourth quarter of 2023 were $408 million, compared to $344 million in the fourth quarter of 2022. This increase was mainly due to growth in volume including the launch of AUSTEDO XR in May 2023.
BENDEKA and TREANDA combined revenues in our North America segment in the fourth quarter of 2023 decreased by 29% to $53 million, compared to the fourth quarter of 2022, mainly due to generic bendamustine products entry into the market.
COPAXONE revenues in our North America segment in the fourth quarter of 2023 decreased by 24% to $78 million, compared to the fourth quarter of 2022, 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 fourth quarter of 2023 decreased by 13% to $394 million, compared to the fourth quarter of 2022, mainly due to lower demand.
North America Gross Profit
Gross profit from our North America segment in the fourth quarter of 2023 was $1,470 million, an increase of 36% compared to the fourth quarter of 2022.
Gross profit margin for our North America segment in the fourth quarter of 2023 increased to 62.2%, compared to 54.2% in the fourth quarter of 2022. This increase was mainly due to an upfront payment in connection with the collaboration on our anti-TL1A asset as discussed above, partially offset by higher costs due to inflationary and other macroeconomic pressures.
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 fourth quarter of 2023 was $966 million, an increase of 53% compared to $633 million in the fourth quarter of 2022. Profit increased mainly due to higher revenues, partially offset by higher S&M expenses.
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 December 31, 2023 and 2022:
Three months ended December 31,
2023
2022
(U.S. $ in millions / % of Segment Revenues)
Revenues
$
1,344
100%
$
1,129
100%
Gross profit
783
58.3%
669
59.3%
R&D expenses
52
3.9%
55
4.9%
S&M expenses
203
15.1%
187
16.6%
G&A expenses
67
5.0%
63
5.6%
Other income
§
§
(2
)
§
Segment profit*
$
461
34.3%
$
366
32.4%
___________
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than $0.5 million or 0.5%, as applicable.
Revenues from our Europe segment in the fourth quarter of 2023 were $1,344 million, an increase of $215 million, or 19%, compared to the fourth quarter of 2022. In local currency terms, revenues increased by 10%, mainly due to higher revenues from OTC products and AJOVY, partially offset by lower revenues from COPAXONE and certain other respiratory products. Our higher revenues in the fourth quarter of 2023 were also driven by the sale of certain product rights.
In the fourth quarter of 2023, revenues were positively impacted by exchange rate fluctuations of $100 million, including hedging effects, compared to the fourth quarter of 2022. Revenues in the fourth quarter of 2023 included $20 million from a negative hedging impact, which are included in "Other" in the table below.
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 December 31, 2023 and 2022:
Three months ended
December 31,
Percentage
Change
2023
2022
2023-2022
(U.S. $ in millions)
Generic products
$
938
$
914
3%
AJOVY
45
35
31%
COPAXONE
56
61
(8%)
Respiratory products
70
75
(7%)
Other
234
43
443%
Total
$
1,344
$
1,129
19%
* "Other" revenues were mainly related to the sale of certain product rights.
Generic products revenues (including OTC and biosimilar products) in our Europe segment in the fourth quarter of 2023, increased by 3% to $938 million, compared to the fourth quarter of 2022. In local currency terms, revenues decreased by 3%, mainly due to price reductions related to generic products launched in 2022, partially offset by OTC price increases.
AJOVY revenues in our Europe segment in the fourth quarter of 2023 increased by 31% to $45 million, compared to the fourth quarter of 2022. In local currency terms, revenues increased by 26%, due to higher volumes.
COPAXONE revenues in our Europe segment in the fourth quarter of 2023 decreased by 8% to $56 million, compared to the fourth quarter of 2022. In local currency terms, revenues decreased by 13% mainly due to price reductions and a decline in volumes resulting from competing glatiramer acetate products and availability of alternative therapies.
Respiratory products revenues in our Europe segment in the fourth quarter of 2023 decreased by 7% to $70 million, compared to the fourth quarter of 2022. In local currency terms, revenues decreased by 12%, mainly due to net price reductions and lower volumes.
Europe Gross Profit
Gross profit from our Europe segment in the fourth quarter of 2023 was $783 million, an increase of 17% compared to $669 million in the fourth quarter of 2022.
Gross profit margin for our Europe segment in the fourth quarter of 2023 decreased to 58.3%, compared to 59.3% in the fourth quarter of 2022. This decrease was mainly due to higher cost of goods sold mainly due to inflationary and other macroeconomic pressures, and a negative impact of hedging activities, partially offset by revenues from the sale of certain product rights in the fourth quarter of 2023.
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 fourth quarter of 2023 was $461 million, an increase of 26% compared to $366 million in the fourth quarter of 2022. This increase was mainly due to higher gross profit.
International Markets Segment
Our International Markets segment includes all countries other than those in our North America and Europe segments.
As part of a recent shift in executive management responsibilities, commencing January 1, 2024, Canada will be reported under our International Markets segment and will no longer be included as part of our North America segment.
The following table presents revenues, expenses and profit for our International Markets segment for the three months ended December 31, 2023 and 2022:
Three months ended December 31,
2023
2022
(U.S. $ in millions / % of Segment Revenues)
Revenues
$
502
100%
$
482
100%
Gross profit
272
54.3%
253
52.6%
R&D expenses
20
3.9%
18
3.7%
S&M expenses
110
21.9%
112
23.2%
G&A expenses
30
6.0%
30
6.3%
Other income
(4
)
(0.8%)
§
§
Segment profit*
$
116
23.2%
$
93
19.4%
__________
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than $0.5 million or 0.5%, as applicable.
Revenues from our International Markets segment in the fourth quarter of 2023 were $502 million, an increase of $20 million, or 4%, compared to the fourth quarter of 2022. In local currency terms, revenues increased by 22% compared to the fourth quarter of 2022, mainly due to higher revenues in most markets, partially offset by regulatory price reductions and generic competition to off-patented products in Japan.
Revenues by Major Products and Activities
The following table presents revenues for our International Markets segment by major products and activities for the three months ended December 31, 2023 and 2022:
Three months ended
December 31,
Percentage
Change
2023
2022
2023-2022
(U.S. $ in millions)
Generic products
$
420
$
411
2%
AJOVY
13
13
§
COPAXONE
7
7
§
Other
62
51
23%
Total
$
502
$
482
4%
§ Represents an amount less than 0.5%.
Generic products revenues in our International Markets segment, including OTC products, were $420 million in the fourth quarter of 2023, an increase of 2% compared to the fourth quarter of 2022. In local currency terms, revenues increased by 24%, mainly due to higher revenues in most markets, partially offset by regulatory price reductions and generic competition to off-patented products in Japan.
AJOVY was launched by the end of 2023 in certain countries within our International Markets segment, including in Japan, Australia, Israel, South Korea, Brazil and others. We are moving forward with plans to launch AJOVY in other markets. AJOVY revenues in our International Markets segment in the fourth quarter of 2023 were $13 million, flat compared to the fourth quarter of 2022. In local currency terms, revenues increased by 7%.
COPAXONE revenues in our International Markets segment in the fourth quarter of 2023 were $7 million, flat compared to the fourth quarter of 2022. In local currency terms, revenues increased by 34%.
AUSTEDO was launched in 2021 in China and Israel and in Brazil in 2022, for the treatment of chorea associated with Huntington’s disease and for the treatment of tardive dyskinesia.
International Markets Gross Profit
Gross profit from our International Markets segment in the fourth quarter of 2023 was $272 million, an increase of 8% compared to $253 million in the fourth quarter of 2022.
Gross profit margin for our International Markets segment in the fourth quarter of 2023 increased to 54.3%, compared to 52.6% in the fourth quarter of 2022 mainly due to price increases largely as a result of higher costs due to inflationary pressure, a favorable mix of products sold, and a positive hedging impact.
International Markets Profit
Profit from our International Markets 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 International Markets segment in the fourth quarter of 2023 was $116 million, compared to $93 million in the fourth quarter of 2022. This increase was mainly due to higher gross profit.
Other Activities
We have other sources of revenues, primarily the sale of active pharmaceutical ingredients ("APIs") to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis. Our other activities are not included in our North America, Europe or International Markets segments.
Our revenues from other activities in the fourth quarter of 2023 were $246 million, a decrease of 10% compared to the fourth quarter of 2022. In local currency terms revenues decreased by 11%.
API sales to third parties in the fourth quarter of 2023 were $153 million, a decrease of 9% in both U.S. dollars and local currency terms, compared to the fourth quarter of 2022.
On January 31, 2024, we announced that we intend to divest our API business (including its R&D, manufacturing and commercial activities) through a sale, which divestment is expected to be completed in the first half of 2025. The intention to divest is in alignment with our Pivot to Growth strategy. However, there can be no assurance regarding the ultimate timing or structure of the potential divestiture or that a divestiture will be agreed or completed at all.
2024 Non-GAAP Outlook
$ billions, except diluted EPS or as noted
2024 Outlook
Revenues*
$15.7 – $16.3
AUSTEDO ($m)*
~1,500
AJOVY ($m)*
~500
UZEDY ($m)*
~80
COPAXONE ($m)*
~400
Operating Income
4.0 – 4.5
Adjusted EBITDA
4.5 – 5.0
Finance Expenses ($m)
~1,000
Tax Rate
14% – 17%
Diluted EPS ($)
2.20-2.50
Free Cash Flow**
1.7 – 2.0
CAPEX*
~0.5
Foreign Exchange
Volatile swings in FX can negatively
impact revenue and income
* Revenues and CAPEX presented on a GAAP basis.
** Free Cash Flow includes cash flow generated from operating activities net of capital expenditures and deferred purchase price cash component collected for securitized trade receivables
Annual Report on Form 10-K
Teva’s Annual Report on Form 10-K for the year ended December 31, 2023, which will be filed with the SEC, will include a complete analysis of the financial results for 2023 and will be available on Teva’s website: View Source, as well as on the SEC’s website: View Source
Conference Call
Teva will host a conference call and live webcast along with a slide presentation on Wednesday, January 31, 2024 at 8:00 a.m. ET to discuss its fourth quarter and annual 2023 results and overall business environment. A question & answer session will follow.
In order to participate, please register in advance here to obtain a local or toll-free phone number and your personal pin.
A live webcast of the call will be available on Teva’s website at: View Source/.
Following the conclusion of the call, a replay of the webcast will be available within 24 hours on Teva’s website.