Teva Pharmaceutical Industries Ltd (TEVA)

[midastouch017]

Teva Reports First Quarter 2006 Results; Results include IVAX for the first time

Last Update: 7:05 AM ET May 10, 2006

JERUSALEM, Israel, May 10, 2006 (BUSINESS WIRE) -- Teva Pharmaceutical Industries Ltd. (TEVA : teva pharmaceutical inds ltd adr
-- Quarterly Sales Increased 28% to $1,672 Million
-- Reported Loss of $1,009 Million and Loss per Share of $1.40 Includes One-time Charges Related to the IVAX Acquisition
-- Adjusted First Quarter (before one-time charges)* Net Income of $286 Million, up 10% and Adjusted* Fully Diluted EPS of $0.37
today reported results for the quarter ended March 31, 2006, its first reported quarter since completing the IVAX acquisition on January 26, 2006. These results included IVAX as of February 1, 2006.
The first quarter 2006 US GAAP results, which include a write off of $1.2 billion of in-process R&D and $64 million of inventory step-up in connection with the IVAX acquisition, amounted to a loss of $1,009 million, or $1.40 per share. Teva believes that excluding the one-time charges from the first quarter results represents a better indicator of the underlying trends in the Company's operations. Adjusted (before one-time charges)* net income for the first quarter of 2006 was $286 million, up 10% over the comparable quarter of 2005 and adjusted* fully diluted EPS reached $0.37, compared to $0.38 in the comparable quarter.
In accordance with US GAAP, Teva began expensing stock options in the first quarter of 2006. The reported diluted loss per share and adjusted fully diluted EPS both include approximately 1 cent per share expense related to this effect.
Israel Makov, Teva's President and Chief Executive Officer, commented on today's results: "We are very pleased with the results of this special quarter in which we began, and have made excellent progress in, the integration of IVAX into Teva. Today, Teva's scope, scale, and geographic reach are unmatched in the industry--and this allows us to create exceptional value for patients, for customers, and for our shareholders."
Mr. Makov added, "This was an especially good quarter for Copaxone(R), which continues to break sales records and to outpace the growth of the global MS market. We are very excited about 2006, which we believe will be a great year for Teva."
Net Sales in the first quarter of 2006 increased 28% over the comparable quarter last year to $1,672 million, net of $39 million negative currency impact. IVAX' sales which are included in the above figure amounted to $329 million.
North American pharmaceutical sales (including Copaxone(R)) accounted for 57% of the Company's total pharmaceutical sales and reached $851 million in the quarter, compared to $730 million in the first quarter of 2005, an increase of 17%. Sales benefited in the first quarter from the inclusion of 2 month of IVAX' sales and 23 new products that were not sold in the comparable quarter of 2005, the most significant being azithromicin and fexofenadine and from increased Copaxone(R) sales. As of May 1, 2006, 151 product applications awaiting final FDA approval. Collectively, the brand products covered by these 151 applications have annual U.S. sales of approximately $92 billion. Teva believes it is the first to file on 52 of these applications relating to products whose annual U.S. branded sales are over $39 billion.
Pharmaceutical sales in Europe (including Copaxone(R)), which accounted for 26% of the Company's total pharmaceutical sales, increased 17% in the quarter to $381 million. The increase is due to the inclusion of IVAX sales (for two months), higher generic sales and increased Copaxone(R) sales.
Global in-market sales of Copaxone(R) during the first quarter were $329 million, an increase of 29% over the first quarter of 2005, positioning Copaxone(R) as the second largest MS therapy worldwide, in terms of sales. U.S. in-market sales increased by 36% to $221 million. In-market sales outside the U.S., mainly in Europe and Canada, increased by 17% to $108 million.
Azilect(R) -Azilect(R) is now available in ten EU markets and the process for inclusion of Azilect(R) in the list of reimbursed products is ongoing in several of these markets .
Total API sales, including internal sales to Teva's pharmaceutical businesses, reached $368 million, an increase of 45% over the first quarter of 2005. API sales to third parties reached $149 million, an increase of 26% over the first quarter of 2005. The substantial increase in internal sales reflects the increasing extent of vertical integration, particularly as it relates to anticipated major product launches commencing in the second quarter of 2006.
Adjusted Gross profit margin, excluding the one-time inventory step-up that increased such quarter's cost of goods, was 47.1% in the first quarter of 2006 compared with a gross profit margin of 46.3% for the first quarter of 2005 and 47.2% for 2005.
Net R&D (after third party participations) grew 17% and reached $103 million (6.1% of net sales) reflecting mainly the addition of IVAX R&D spending.
Selling, General and Administrative (SG&A) represented 18.9% of net sales, amounted to $316 million in the first quarter of 2006, as compared to 14.1% of net sales and $185 million in the first quarter of 2005. This higher level primarily reflects the inclusion of IVAX with its higher SG&A expenses level due to the higher weights of its branded business and branded generic market as well as expensing of employees stock options for the first time and the profit split with a partner.
The Tax rate provided for the first quarter of 19% of pre-tax income represents our estimate of the annual rate of tax for 2006 compared with a rate of 18% for the whole of 2005. This reflects both a different mix of income sources and the inclusion of IVAX with its higher tax rate.
Cash flow generated from operating activities for the first quarter of 2006 was $288 million. Cash and marketable securities amounted to $1.5 billion as of March 31, 2006.
Shareholders Equity at March 31, 2006 reached $9.2 billion, up by $3.2 billion from December 31, 2005, reflecting mainly the shares issued to IVAX shareholders, net of the reported US GAAP loss during the first quarter.
Share Count - For the first quarter of 2006, the share count for the fully diluted EPS calculation was 788 million shares.
Outlook - 2006 guidance will be discussed on the conference call. Details are provided below.
Dividend
The Board of Directors, at its meeting on May 9, 2006, declared a cash dividend for the first quarter of 2006 of NIS 0.34 (approx. 7.6 cent according to the rate of exchange on May 9, 2006) per ADR. The record date will be May 16, 2006 (the ex-date will be May 17, 2006), and the payment date will be May 31, 2006. Tax will be withheld at a rate of 16%.
Conference Call
Teva will host a conference call to discuss the Company's first quarter results on Wednesday, May 10, 2006 at 08:30 a.m. EST. The call will be webcast and can be accessed through the Company's website at www.tevapharm.com. Following the conclusion of the call, a replay of the webcast will be available within 24 hours at the Company's web site. Alternatively, a replay of the call will be available until May 17, 2006 at midnight (ET). For international callers please dial (201)-612-7415, From the USA dial ++1-(877)-660-6853. To access the replay please enter both Account #: 3055 and Conference ID#: 201219.
* For a reconciliation of net income and EPS to the adjusted numbers, see attached table.

Teva Pharmaceutical Industries Limited

Consolidated Statements of Income (Loss)
(Unaudited, in millions, except earnings (loss) per ADR )

January -
March
------------------
U.S. Dollars
------------------
2006 2005
--------- --------

NET SALES 1,672.5 1,304.9
COST OF SALES 949.1 701.2
--------- --------
GROSS PROFIT 723.4 603.7
R&D EXPENSES - net 102.8 88.2
SG&A EXPENSES 315.6 184.6
--------- --------
305.0 330.9
ACQUISITION OF R&D IN PROCESS 1,248.0
RESTRUCTURING EXPENSES 2.8
--------- --------
OPERATING INCOME (LOSS) (945.8) 330.9
FINANCIAL EXPENSE - net 14.3 0.4
--------- --------
INCOME (LOSS) BEFORE TAXES (960.1) 330.5
INCOME TAXES 48.2 71.1
--------- --------
(1,008.3) 259.4
PROFIT OF ASSOCIATED COMPANIES 0.5 0.1
MINORITY INTERESTS 0.9 0.4
--------- --------
NET INCOME (LOSS) (1,008.7) 259.1
========= ========
EARNINGS (LOSS) PER ADR:
Basic ($) (1.40) 0.42
========= ========
Diluted ($) (1.40) 0.38
========= ========
WEIGHTED AVERAGE NUMBER OF ADRs:
Basic 721.9 620.4
========= ========
Diluted 721.9 683.8
========= ========

----------------------------------------------------------------------
NORMALIZED NET INCOME:* 286.1 259.1
========= ========
NORMALIZED EARNINGS PER ADR:*
Basic ($) 0.40 0.42
========= ========
Diluted ($) 0.37 0.38
========= ========
WEIGHTED AVERAGE NUMBER OF ADRs:
Basic 721.9 620.4
========= ========
Diluted 788.1 683.8
========= ========
----------------------------------------------------------------------
* See reconciliation attached


Teva Pharmaceutical Industries Limited

Reconciliation Between Reported and Normalized Net Income (Loss)
(Unaudited, in millions, except earnings (loss) per ADR )

January - March
---------------------
2006 2005
---------- ----------
U.S. Dollars
---------------------

REPORTED NET INCOME (LOSS) (1,008.7) 259.1
IVAX PURCHASE ACCOUNTING ADJUSTMENTS
ACQUIRED IN-PROCESS R&D 1,248.0
INVENTORY STEP - UP 63.6
RESTRUCTURING EXPENSES 2.8
TAX APPLICABLE (19.6)
---------- ----------
NORMALIZED NET INCOME 286.1 259.1
========== ==========

DILUTED EARNINGS (LOSS) PER ADR
REPORTED ($) (1.40) 0.38
========== ==========
NORMALIZED ($) 0.37 0.38
========== ==========


Teva Pharmaceutical Industries Limited

Balance Sheet Data
(Unaudited, in millions)

March 31 December 31
------------ ------------
2006 2005
------------ ------------
U.S. Dollars
-------------------------------------------- -------------------------
ASSETS
--------------------------------------------

CURRENT ASSETS 5,862.0 5,505.3
INVESTMENTS & OTHER ASSETS 592.7 410.6
FIXED ASSETS - net 2,062.8 1,360.9
INTANGIBLE ASSETS - net 9,845.1 3,110.6
------------ ------------
TOTAL ASSETS 18,362.6 10,387.4
============ ============




LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------------

CURRENT LIABILITIES 3,681.5 2,260.1
LONG-TERM LIABILITIES 5,442.4 2,077.0
MINORITY INTERESTS 21.1 8.0
SHAREHOLDERS' EQUITY 9,217.6 6,042.3
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 18,362.6 10,387.4
============ ============


Teva Pharmaceutical Industries Limited

Sales for the Quarter January - March 2006 (U.S. $ millions)
----------------------------------------------------------------------

Sales by Geographical Areas
----------------------------------------------------------------------

Sales For the Period 2006 2005 % Change % of Total
---------------------------- --------- --------- ---------- ----------

North America 958.5 788.6 21.5% 57.3%
Europe* 429.1 367.4 16.8% 25.7%
International 284.9 148.9 91.3% 17.0%
--------- --------- ---------- ----------
Total 1,672.5 1,304.9 28.2% 100.0%
========= ========= ========== ==========

Sales by Business Segments
----------------------------------------------------------------------

Sales For the Period 2006 2005 % Change % of Total
---------------------------- --------- --------- ---------- ----------

Pharmaceutical 1,489.4 1,181.7 26.0% 89.1%
A.P.I. 149.0 118.0 26.3% 8.9%
Veterinary and Other 34.1 5.2 555.8% 2.0%
--------- --------- ---------- ----------
Total 1,672.5 1,304.9 28.2% 100.0%
========= ========= ========== ==========

Pharmaceutical Sales
----------------------------------------------------------------------

Sales For the Period 2006 2005 % Change % of Total
---------------------------- --------- --------- ---------- ----------

North America 850.7 729.9 16.6% 57.1%
Europe* 380.5 326.3 16.6% 25.6%
International 258.2 125.5 105.7% 17.3%
--------- --------- ---------- ----------
Total 1,489.4 1,181.7 26.0% 100.0%
========= ========= ========== ==========

* Western Europe and Hungary



SOURCE: Teva Pharmaceutical Industries Limited

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