Teva Pharmaceutical Industries Ltd. Reports Second Quarter Earnings Per ADR Up 32% Ticker Last Change TEVA $61.75 $-1.31 Quotes 20 min delay. Monday July 31 5:12am Source: BusinessWire JERUSALEM--(BUSINESS WIRE)--July 31st, 2000--Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA) today reported that net income (before one-time charges) for the quarter ended June 30, 2000, reached $44.7 million compared with $31.1 million reported in the second quarter of 1999 (up 44%) and earnings per ADR (before a one-time charge) were $0.33 (up 32%). Total sales for the second quarter 2000 rose 51% to 444.0 million. 59% of these sales were in North America, 24% in Europe, 14% in Israel and 3% in the rest of world. The one-time charge relates to the purchase of in-process R&D, in the amount of $35.7 million, mainly due to the acquisition of Novopharm. Including this one-time charge, net income for the quarter totaled $9.0 million and earnings per ADR amounted to $0.06. The operations of Novopharm, acquired in early April 2000, were consolidated for the first time in the reported quarter. The operations of Copley were consolidated for the first time in Q4 of 1999, and thus were not included in the comparable quarter of 1999. Net income for the first six months of 2000 (before the one-time charge) reached $82.6 million, up 39% from the comparable period of 1999 and earnings per ADR for the six months (before the one-time charge), totaled $0.63, an increase of 31%. Total sales for the first half of 2000 rose 34% to $781.3 million. Eli Hurvitz, President and Chief Executive Officer, commented: "We are pleased with our quarterly and 6 month results - the second quarter was complex, including the integration of Novopharm, several generic product launches and extensive innovative R&D activities. Nevertheless, we again exceeded market expectations." Total pharmaceutical sales for the second quarter which constituted approximately 90% of Teva's total revenue, rose 63% and reached $397.4 million. North America Pharmaceutical Sales reached $239.5 million, up 114% compared to the second quarter of 1999. This increase is due mainly to the consolidation of Novopharm and Copley but also reflects significant sales of new products which have been launched since late 1999. Newly launched products include the generic versions of Voltaren XR(R), Adalat CC(R) 30mg (both supplied by Biovail) Hytrin(R), Cylert(R), which were launched prior to the second quarter and Nizoral(R) 2% Cream, Betapace(R), and Actigall(R), in the second quarter. During the 2nd quarter Teva received final approvals for the generic version of Relafen(R) 500mg and 750mg and Nolvadex(R) 10mg which are Paragraph IV filings. Subsequent to the end of the quarter, Biovail received tentative approval for the generic version of Procardia XL(R) 30mg and 60mg which will be exclusively marketed by Teva. For the 60mg strength, Teva will have 180 days of marketing exclusivity. At the end of the quarter, 50 applications were awaiting FDA final approval including 13 tentative approvals (2 of which are Biovail's) awaiting expiration of either patents or pediatric exclusivity. About half were submitted under paragraph IV, thus, in some of these products, in which Teva was the first to submit an application to the FDA, Teva may be granted a six month exclusivity period. Total annual sales for these 50 products, in terms of branded drugs, reach approximately $14 billion. Pharmaceuticals sales in Europe in the reported quarter reached $93.4 million, up 29%. This increase from the comparable quarter reflects the first time consolidation of Human Serum & Pharmaceutical Manufacturing Co. Ltd, the Hungarian subsidiary of Novopharm. Sales in the rest of Europe increased in terms of the Euro but due to a 9% devaluation of the Euro, sales decreased in dollar terms by 7%. Governmental imposed price constraints, both in Hungary and the U.K, were partially offset by sales of products launched during the first quarter of 2000. At the end of the quarter, 139 product applications were awaiting approval from the Regulatory Authorities in various countries in Europe, mainly in Hungary, the U.K. and the Netherlands. Eli Hurvitz further commented: "The geographic mix of our business serves as a balance, enabling us to maintain our overall growth rates. We intend to pursue further opportunities for acquisitions both in Europe and North America as the industry consolidation continues." Pharmaceutical sales in Israel in the reported quarter amounted to $56.4 million, up 9% from the comparable period. During the second quarter of 2000, Copaxone(R) global in-market sales reached $59.4 million, up 56% as compared with the second quarter of 1999. About 85% of these sales were generated in the U.S. where Copaxone(R), according to IMS, continued to strengthen its number two position in the MS market, exceeding a 25% market share. Active Pharmaceutical Ingredients (API) sales to third parties decreased by 6% to $41.2 as compared with the second quarter of 1999. However, that was compensated by higher margins and increased sales to Teva's pharmaceutical units. Total API sales increased 8% and totaled $76.6 million. Gross profit totaled $168.3 million and the gross profit margin was 37.9% this quarter as compared to the 41.1% margin in the second quarter of 1999. This decrease is almost entirely attributable to the first time consolidation of Novopharm and its subsidiaries. Gross Research and Development (R&D) expenses amounted to $30.1 million, an increase of 35% compared to the same period last year. Over half of this increase is due to higher expenses in innovative R&D (mainly Copaxone(R) and the advanced CNS projects). Net R&D expenses (after participations) totaled $26.3 million. The increase in net R&D expenses (24%) was at a lower rate than the increase in gross R&D due to higher participations by strategic partners in the innovative R&D projects. Gross R&D expenses do not include the acquisition of in-process R&D resulting mainly from the acquisition of Novopharm which was recorded as one-time charge in this quarter and amounted to $35.7 million. Selling, General and Administration (SG&A) expenses totaled $73.1 million in the reported quarter compared to $54.8 million in the comparable quarter last year. This increase is mainly due to the inclusion of Copley's and Novopharm's SG&A expenses (including amortization of goodwill resulting from their acquisition). However, SG&A as a percentage of sales decreased from 18.6% to 16.5%. Financial Expenses-net, amounted to $12.2 million. This reflects an increase of 78% from the second quarter of 1999, mainly due to interest costs arising from the acquisitions of Copley and Novopharm. The Rationalization process relating to Copley's operations continued during the second quarter of 2000 as products are gradually being transferred from Copley's main plant in Boston to other Teva production sites. Operations at Novopharm's North Carolina plant have been curtailed, and Teva has began to implement a rationalization plan for Novopharm's plants in Canada. Teva's Finance Committee, recommended to the Board of Directors to declare a regular cash dividend of NIS 0.225 (approx. $ 0.055) per ADR with respect to the second quarter of 2000. The final declaration of the dividend and the record and payment dates is expected to be determind at the Board meeting to be held on August 21, 2000. Teva Pharmaceutical Industries Ltd. is Israel's largest pharmaceutical company, with over 80% of its sales outside Israel, mainly in North-America and Europe. The Company develops, manufactures and markets generic and branded human pharmaceuticals and active pharmaceutical ingredients. Safe Harbor Statement: This report contains forward-looking statements, which express the beliefs and expectations of management. Such statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause the Company's future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward looking statements. Important factors that could cause or contribute to such differences include the impact of pharmaceutical industry regulation, the difficulty of predicting FDA and other regulatory authority approvals, the regulatory environment and changes in the health policies and structure of various countries, acceptance and demand for new pharmaceutical products and new therapies, the impact of competitive products and pricing, the availability and pricing of ingredients used in the manufacture of pharmaceutical products, uncertainties regarding market acceptance of innovative products newly launched , currently being sold or in development , the impact of restructuring of clients , reliance on strategic alliances , fluctuations in currency, exchange and interest rates , operating results , the impact of the year 2000 issue and other factors that are discussed in the Company's Annual Report on Form 20-F and the Company's other filings with the U.S. Securities and Exchange Commission. Notice of Conference Call - Q2 Financial Results Monday, July 31, 2000 10:00 a.m. Eastern Time From the UNITED STATES & CANADA, please dial 212-699 - Pass Code: "TEVA" -0- *T Safe Harbor Statement: This report contains forward-looking statements, which express the beliefs and expectations of management. Such statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause the Company's future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward looking statements. Important factors that could cause or contribute to such differences include the impact of pharmaceutical industry regulation, the difficulty of predicting FDA and other regulatory authority approvals, the regulatory environment and changes in the health policies and structure of various countries, acceptance and demand for new pharmaceutical products and new therapies, the impact of competitive products and pricing, the availability and pricing of ingredients used in the manufacture of pharmaceutical products, uncertainties regarding market acceptance of innovative products newly launched , currently being sold or in development , the impact of restructuring of clients , reliance on strategic alliances , fluctuations in currency, exchange and interest rates , operating results , the impact of the year 2000 issue and other factors that are discussed in the Company's Annual Report on Form 20-F and the Company's other filings with the U.S. Securities and Exchange Commission. Teva Pharmaceutical Industries Ltd. Consolidated Statements of Income (in thousands, except earnings per ADR) Three months Six months ended ended ------------------ ------------------ June 30 ---------- ---------- ---------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- U.S. Dollars (unaudited) SALES 443,997 293,740 781,331 581,360 COST OF SALES 275,721 172,928 475,472 347,720 ---------- ---------- ---------- ---------- GROSS PROFIT 168,276 120,812 305,859 233,640 RESEARCH AND DEVELOPMENT EXPENSES: Total expenses 30,130 22,257 52,387 42,819 Less grants & participations 3,838 986 6,172 2,387 ---------- ---------- ---------- ---------- 26,292 21,271 46,215 40,432 SELLING, GENERAL AND ADMINISTRATION EXPENSES 73,145 54,794 134,807 107,492 ---------- ---------- ---------- ---------- 68,839 44,747 124,837 85,716 ACQUISITION OF RESEARCH AND DEVELOPMENT IN PROCESS 35,697 - 35,697 - ---------- ---------- ---------- ---------- OPERATING INCOME 33,142 44,747 89,140 85,716 FINANCIAL EXPENSES - net 12,152 6,816 22,041 13,011 OTHER INCOME - net 1,561 3,434 4,255 5,714 ---------- ---------- ---------- ---------- INCOME BEFORE TAXES 22,551 41,365 71,354 78,419 TAXES ON INCOME 13,428 10,329 24,508 19,652 ---------- ---------- ---------- ---------- 9,123 31,036 46,846 58,767 SHARE IN PROFITS (LOSSES) OF ASSOCIATED COMPANIES 418 100 659 332 MINORITY INTEREST - net (547) (2) (647) 297 ---------- ---------- ---------- ---------- NET INCOME 8,994 31,134 46,858 59,396 ========== ========== ========== ========== EARNINGS PER ADR ($) 0.06 0.25 0.36 0.48 NET ADJUSTED INCOME BEFORE DEDUCTING NON-RECURRING EXPENSES:(a) NET INCOME FOR THE PERIOD 44,691 31,134 82,555 59,396 EARNINGS PER ADR 0.33 0.25 0.63 0.48 WEIGHTED AVERAGE NUMBER OF ADR'S 134,801 125,926 130,708 125,828 ========= ========= ========= ========== (a) Note: 1. 1999 before deducting non-recurring expenses of $17,700 ($0.14 perADR) 2. Three months and nine months ended June 30, 2000: Before deducting non-recurring expenses of $35,697 ($0.27 per ADR) Both (1) & (2) are in respect of acquired Research & Development in process Teva Pharmaceutical Industries Ltd. Consolidated Statements of Income (in thousands, except earnings per ADR) Year ended ----------- Dec. 31 1999 U.S. Dollars (audited) SALES 1,282,406 COST OF SALES 767,627 ---------- GROSS PROFIT 514,779 RESEARCH AND DEVELOPMENT EXPENSES: Total expenses 91,622 Less grants & participations 9,780 ---------- 81,842 SELLING, GENERAL AND ADMINISTRATION EXPENSES 233,891 ---------- 199,046 ACQUISITION OF RESEARCH AND DEVELOPMENT IN PROCESS 17,700 ---------- OPERATING INCOME 181,346 FINANCIAL EXPENSES - net 30,165 OTHER INCOME - net 10,781 ---------- INCOME BEFORE TAXES 161,962 TAXES ON INCOME 44,335 ---------- 117,627 SHARE IN PROFITS (LOSSES) OF ASSOCIATED COMPANIES (550) MINORITY INTEREST - net 756 ---------- NET INCOME 117,833 ========== EARNINGS PER ADR ($) 0.94 NET ADJUSTED INCOME BEFORE DEDUCTING NON-RECURRING EXPENSES:(a) NET INCOME FOR THE PERIOD 135,533 EARNINGS PER ADR 1.08 WEIGHTED AVERAGE NUMBER OF ADR'S 125,880 ========== (a) Note: 1. 1999 before deducting non-recurring expenses of $17,700 ($0.14 perADR) 2. Three months and nine months ended June 30, 2000: Before deducting non-recurring expenses of $35,697 ($0.27 per ADR) Both (1) & (2) are in respect of acquired Research & Development in process Teva Pharmaceutical Industries Ltd. Balance Sheet Data ------------------ (in thousands) ------------------ June 30 Dec. 31 ------------- --------------- 2000 1999 1999 ------- ------- --------------- U.S. Dollars (unaudited) (audited) ASSETS ------------------ CURRENT ASSETS Cash and cash equivalents 93,409 55,869 77,177 Short-term investments 404 1,292 17,226 Accounts receivalbes: Trade 443,078 283,088 361,293 Other 149,543 81,987 103,309 Inventories 508,283 371,615 351,478 ------- ------- -------- Total current assets 1,194,717 793,851 910,483 INVESTMENTS AND NON-CURRENT RECEIVALBES: 38,991 32,581 31,681 PROPERTY, PLANT AND EQUIPMENT: Cost 962,636 763,012 856,493 Less accumulated depreciation 404,261 319,919 377,957 ------- ------- --------- 558,375 443,093 478,536 INTANGIBLE ASSETS -net 588,326 166,574 293,319 ------- ------- --------- 2,380,409 1,436,099 1,714,019 ======== ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term credit: mainly from banks 514,061 286,098 276,259 Accounts payable and accruals: Trade 133,813 104,849 114,454 Other 242,094 95,783 140,053 Proposed dividend 7,009 4,647 6,806 ------- ------- ------- Total current liabilities 896,977 491,377 537,572 LONG-TERM LIABILITIES: Deferred income taxes 28,212 32,831 31,687 Accrued employee rights upon retirement, net of amount funded 11,825 11,323 11,041 Loans and other liabilities 368,367 203,557 391,419 -------- ------- ------- Total long-term liabilities 408,404 247,711 434,147 -------- ------- ------- Total Liabilities 1,305,381 739,088 971,719 MINORITY INTEREST 7,366 504 17 SHAREHOLDERS' EQUITY 1,067,662 696,507 742,283 -------- ------- ------- 2,380,409 1,436,099 1,714,019 *T Contact: Teva Pharmaceutical Industries Ltd.   Dan Suesskind, 011/972-2-589-2840   Chief Financial Officer   Bill Fletcher, 215/256-8400   President and CEO Teva North America   Dorit Meltzer, 011/972-3-9267554   Director, Investor Relations