Q4 2022 Teva Pharmaceutical Industries Ltd Earnings Call
Speaker 1: After the nationwide opioid litigation settlement, we announced last month that we are moving on with these settlements after receiving poor support from the state of Teddy Generals.
Speaker 2: We are already settled with 49er to 50 state and the final process for the state subdivisions has begun and given the very positive response from state, we remain optimistic that the settlements will gather similar support for the region. Moving on to the next slide to look at our revenue and how it's developing. Overall, you'll see a fairly stable business with the portfolio products in geographical aspect, the point of saving and expensive growth is that the
Speaker 3: I'd like to point out that in 2022 Q4 was the strongest quarter in terms of revenue similar to previous years. If you exclude the impact of FX revenues in Q4 2022 were actually up 1% compared to the fourth quarter of 2021. So in local currency terms we had a nice single digit growth in both Europe and international markets.
Speaker 4: Moving to the next light and expanding on the common I just made on Europe .
Speaker 5: It's a monkey that I'm very positive about. Europe is good, stable business, the tevvah.
Speaker 6: In markets like Europe , if you have a good pipeline, a good go-to-market model, the business is predictable and it can drive continued growth. And we believe we have all of those elements in our European business.
Speaker 7: We have good portfolio, good pipeline and strong leadership in many of the markets.
Speaker 8: And this also supports a good margin profile, as you can see from the slide.
Speaker 9: And this is all paying out well as you can see, revenues grew in Europe in the fourth quarter, 4% in local currency terms.
Speaker 10: which we were very pleased about.
Speaker 11: Now, moving on to a stator, our next slide.
Speaker 12: Quarter 4 was a record quarter for Esteto as we continue to see strong growth in both total and new prescriptions.
Speaker 13: Revenue is free 20% for the full year and 22% in the fourth quarter.
Speaker 14: I'm happy to see strong continued development with nice increases in both revenue and the numbers of descriptions.
Speaker 15: The L.E. will elaborate on it when we talk about our 2023 outlook.
Speaker 16: better understand the potential of a steno. I'd like to take a look at the next slide.
Speaker 17: As you can see, there are approximately 7185,000 patients suffering from cardiac dyskinesis in the US.
Speaker 18: But unfortunately, only 15% of these patients are diagnosed.
Speaker 19: and then even more disappointing 5% of getting treatment. So clearly there is a lot of onment need.
Speaker 20: And of course we're working hard to broaden that base making sure they can benefit the product reaches more patients who need this therapy.
Speaker 21: This will drive increased prescriptions and also present a significant long-term growth potential.
Speaker 22: Now moving on to Jovis.
Speaker 23: Full year, our revenue has been more than 20% globally. This was despite the foreign exchange headwinds we faced in Europe and international markets.
Speaker 24: Now I think Adobe is a great example of Teva's strong commercial and execution capabilities.
Speaker 25: As you know, Adobe was not first to market in the US and Europe , but was still capturing really strong market share and actually second in Europe . So that's very impressive and another proof point for me that the innovative and commercial go-to-market capabilities of Teva are strong.
Speaker 26: What we see now in the US is really about slow growth is around the injectable anti-CDRP therapies and while most of the growth in migraine spaces driven by the all therapies.
Speaker 27: Outside the US we expect the Joby to benefit from continued patient growth and launches and additional come to Europe and international markets.
Speaker 28: Now moving on to the pipeline, the next slide please.
Speaker 29: In my six weeks at TAVA, I've met with R&D teams. I have to say I'm very impressed with the capabilities and the people we have.
Speaker 30: I was also pleasantly surprised by our innovative pipeline. We plan on sharing more details on it when we discuss our updated strategy around mid-year.
Speaker 31: Now let me highlight a couple of exciting assets that are under regulatory review.
Speaker 32: Firstly, our biosummark to Humira is expected to launch in July 2023 pending FDA approval, which I'll talk about in a bit more detail in a few minutes.
I'm also happy that the FDA has accepted for review the BLA for our biosomestilara and we anticipate that the review will be completed in the second half of this year.
Moving to our innovative medicine pipeline, as I said before, we are building a strong foundation for the schizophrenia franchise.
You study an important product for patients suffering from schizophrenia, which I will elaborate on in the next slide, and a lanspine long actin, another exciting prospect in the treatment for schizophrenia. We recently moved into a phase 3 trial.
Both the Lanzaphene and your study represent complementary approaches to schizophrenia at patient management by addressing unmet needs in the long-acting market and together with the STEDO which treats tardive dyskinesia, a side effect of schizophrenia treatment. We are building a strong franchise.
We should get you to get out of here. We should get you to get out of here.
So moving on to the next slide to talk about your study.
As you know we have recently admitted the files of the FDA for a review and expect to have a decision in the first half of this year.
So just to frame the market landscape, there are approximately 2 million treated schizophrenia patients in the US and approximately 10% of them receive long-acting injectable products.
And this long-acting category has grown steadily.
In terms of sales, the overall schizophrenia long-acting market in 2021 was estimated to be 4 billion.
Now, relative to other therapies in the market, you study our product will have more patient friendly injection mechanism, which is subcutaneous, a small needle and is lower volume and it comes in a ready to use pre-filtrate. Basically an easy and effective way to get your therapy.
And we're very much looking forward to bringing these benefits to the patients who are suffering from schizophrenia and who need stable therapy to avoid relapses.
Given these pro-propelled advantages, we have decided we are targeting about a 20% market share over time.
Now let's talk about Humira, which I know has been getting a lot of attention recently and is the largest product in history to face bias in the competition with annual revenues of over 17 billion.
Now based on our most recent updates from our partner, Albatet, we're preparing for the launch on the 1st of July this year.
The FDA has confirmed that the target date for the decision on Alpha-Tex application is April 13th of this year.
The FJ has also confirmed that the date provided by off-dakes sufficient to support a determination of interchangeability.
And approval of course requires a satisfactory satisfactory outcome from the upcoming facility inspection or re-inspections should I say, which is scheduled for March.
It should be noted that while we are still waiting for the approval in the US, Altetex by similar to you America has come to be marketed in 17 countries around the world, including Canada and US markets across Europe .
Now, to be clear, we have risk adjusted its contribution to our 2023 guide similar to the way we risk adjust other significant launches in the US market.
That said, we believe biosimilar to Emhira, like other biosimilar products, will continue to be an important part of our portfolio beyond 2023.
Now moving on to the next slide.
ESG is everyone's business attempt. Let me be clear about that.
The board and the executive management team firmly believe that ESG is critical and inseparable to our long-term sustainability and success.
Of the last few teams, last few years, the teams worked hard to lay strong ESD foundations and formalised our ESD strategy.
We have set ambitious and meaningful targets that are tied to our business, enhanced the reporting and disclosures and strengthened our governance.
Our ESG strategy focuses on advancing health and equity through our medicines, minimizing the impact of our operations and products on the planet, and dedicating the company to quality ethics and transparency.
So now let's talk about our 2027 7 long term targets.
But first of all, I'd like to say, as I said in the beginning, I do think the management team has done a great job over the last few years to get the company back to a solid foundation.
As we define our strategy going forward over the next few months, we will look for the opportunities to prioritize and to reallocate the best position in tapethals for long term growth and success.
We'll come back and share that with you, but I'll use your round with you. Please stay tuned, and I'm very much looking forward to it.
But with regard to these long term financial targets, these will remain in place. With that, I will hand over to Eli to walk you through the financials. Thank you Richard and good morning and good afternoon to everyone. I'll begin my review of our 2022 financial results with my main focus being on the fourth quarter performance. We hope you enjoyed starting your fall 2020 financials to see down payment!
This will be followed by an introduction to our 20239 gas outlook and some of the important assumptions behind it.
beginning on flight 16.
I would like to start with our Q4 Gap Performance.
Revenues in the fourth quarter of 2022 were 3.9 billion, representing a decrease of 5% or increase of 1% in local currency terms, compared to the fourth quarter of 2021.
This increase was mainly due to high revenue from under generic products in our Europe segment, Ostedo, GenoJovie, partially offset by lower revenue from generic products and certain respiratory products in our North America segment, as well as compact them.
In Q4 2022, we recorded a gap operating loss of 865 million compared to operating income of 78 million in Q4 2021.
We had a net loss of 1.2 billion compared to 159 million in Q4 2021 and a gap loss per share of $1.10 compared to 14 cents in the same period a year ago.
Gap operating loss, net loss, and loss per share were mainly due to goodwill impairment charges in the fourth quarter of 2022, partially offset by lower legal settlements and loss contingencies.
The Google impairment charges were mainly related to exchange rate fluctuations in our international market and updates projection in our Teva Tafi business.
The strengthening of the US dollar versus other currencies during the fourth quarter of 2022, including hedging effects, negatively impacted our revenue and gap operating income by 217 million and 132 million respectively compared to the fourth quarter of 2021.
Turning to slide 17, you can see that the total NAN-GAAP adjustments in the fourth quarter of 2022 were 2 billion and this is versus 1 billion in Q4 2021. The most notable NAN-GAAP adjustment was a good relief permit charges of 1.3 billion which was a good relief permit
14.9 billion, a decrease of 6% or 1% in local currency terms compared to 2021.
For the full year, we saw the same trend regarding US dollar appreciation, which including hedging effects negatively impacted revenues by 780 million compared to 2021.
Now let's move down to the P&L and look at the margin.
Our NAND gas gross profit margin was 54.2% compared to 56.1% in Q4 2021. The decrease in NAND gas gross profit margin was mainly due to the high revenue with lower profitability from the Andas in our North America segment, partially offset by high revenue from OSTO in our North America segment, and lower productivity from the Andas in our North America segment.
and a favorable mix of generic products in our Europe segment. Our NAS gap operating margin in Q422 was 29.1% versus 30.4% in Q421. This decrease was mainly driven by lower gross profit margin mentioned above, partially offset by lower operating expenses, which I will discuss in the next slide.
2022 for
Year 9 Gap Operating Margin was 27.7% similar level as in 2021.
We ended the quarter with a non-GAAP earnings per share of 71 cents compared to 77 cents in Q4 2021, mainly due to the negative impact from foreign exchange fluctuations and the lower gross profit, partially offset by lower operating expenses as well as lower tax rate.
Now, let's take a look at our spend base on slide 19.
As you can see, our quarterly spend base declined by 97 million and increased by 38 million net of F6.
For the full year 2022, our total spend base declined by $639 million or $174 million in net of effects. Annual decrease in our spend base was due to a lower cost of goods sold related to lower annual revenue as well as ongoing active management of operating expenses.
Looking ahead to 2023, we expect the Operating Pen Bay to remain at the level of 11 billion as we continue with our ongoing efforts to transform our global operational network and ongoing active management of operating standards.
If you look at slide 20
We continue our journey to improve margins by reaching 28% operating margin by end of 2023. We continue our journey to improve margins by reaching 28% operating margin by end of
despite some of the macroeconomics had been related to the inflectorary pressures.
And while we continue to face these pressures, our ongoing efforts to reduce and optimize our cost of goods sold and operating expenses are expected to continue to help us partially mitigate this global macroeconomic headwind.
As Richard mentioned earlier, you continue to target 30% of the operating margins by end of 2027.
Turning to free cashflow on flight 21.
Our fee cash flow in the fourth quarter of 2022 was 1.1 billion. The increase in our fee cash flow in the fourth quarter of 2022 compared to the fourth quarter of 2021 resulted mainly from the sale of a council civil bond under a U.S. Security Security Section Society entered in November 2022.
partially offset by changes in working capital terms.
For the full year 2022, pre-cash flow was $2.2 billion, an increase of 2% compared to 2021 and on the high end of our 2022 guidance.
Free cash flow in 2022 was largely affected by the sale of a council suitable under a new US accreditation facility entered into in November 2022. Parts re-opted by an increase in inventory levels, lower proceeds from the investitories of business and other assets as well as higher payments.
18.4 billion compared to 20.9 billion at the end of 2021. The decrease in our growth debt in 2022 was mainly due to the debt repayment partially be altered by a change rate fluctuation.
The decrease in our nebbedet was mainly due to our free cash flow generation during the year.
Our net debt to EBD ratio continues to decrease coming in 4 times for Q4 2022.
Looking at slide 23.
Death reduction continues to be our primary focus. As you can see, we will make significant progress in the last six years as we have committed to reduce the level of the death we had on our balance sheet. During these six years, we have paid back approximately 20 billion to our...
bondholders including interest payments and we expect our net debt to further decline as we continue to make progress towards 2027 long term targets.
Turning to slide 24.
which represent our upcoming debt maturity.
If you recall, we did a 5 billion SLB refinancing to address the 22, 23, and 24 maturities back in November 2021.
We continue to assess market conditions for opportunities through finance upcoming maturities.
Given the interest rate environment, we expect this to result in a higher financial expenses in 2023, which I will discuss in a few moments.
Looking at the Keshe conversion on Flight 25.
We established a target of 80% by end of 2023.
In 2022, we made further progress on this.
And as we keep focusing on our networking capital enhancement, our efforts to optimize our working capital terms in light of our revenue mix is key for our liquidity.
We are really happy to see that it came in at 80% up from 77% in 2021.
As Richard mentioned earlier, we'll continue to manage our business and working capital with a focus on generating cash to earnings at this level.
Now, let's turn our attention to our 2023 Nung Gap Outlook.
which we are introducing for the first time today.
Here in slide 26 you will find the five main components of our outlook. Revenues, operating income, adjusted EBITDA, earning per share and a free cash flow, as well as additional components including expected revenue range for key products.
Our company works hard throughout 2022, navigating and addressing the ongoing impact of the geopolitical and macroeconomic headwind. We expect this volatile environment in the markets to continue in 2023, based on leading leading global financial institutions forecast.
With this in mind, we begin with 2023 total revenue, which we expect to be between 14.8 billion and 15.4 billion. This is very much in line with our revenue levels in 2022.
We expect continuous momentum of a saddle with a total annual revenue to grow to approximately 1.2 billion or 24% in 2023. Furthermore, Adobe is expected to benefit from continuous patient growth in the US, Europe and international market. Global Salesforce Adobe are expected to be approximately 400 million.
So V is greater than the offset effect by the decline in copatant cells.
Our non-gap operating income is expected to be between 4 billion and 4.4 billion, and our non-gap adjusted EBDA is expected to be between 4.5 billion and 4.9 billion. As discussed earlier, we continue to explore opportunities to refine our...
upcoming debt maturities to align our debt maturity profile for the coming years with our cooperation and performance.
There could be a meaningful step up in our finance expenses if we were to pursue any refinancing due to the higher interest rate environment. We expect an increase of approximately 100 million, which is 1 billion in 2023.
Looking at our tax rate in 2022, our non-gap tax rate was 11.7%. As we look ahead to 2023, we expect our tax rates to be in the range of 14-17%. You might recall that our non-gap tax rate in 2022 was below our initial guidance. Thank you.
as it was mainly affected by realization of loss related to an investment in one of our US subsidiaries.
This expected increase in our financial extent, the tax rate expected.
to have significant impact on our EPI-2023 outlook in comparison to 2022. This brings us to the expected earnings per share in the range of $2.25 to $2.55 using a share count of approximately 1.1 billion shares.
2023 Pre-Cash Loan is expected to be in the range of 1.7 billion to 2.1 billion. This guidance reflects our expected higher sounds expenses which I have outlined before, as well as increased legal expenses related to the nationwide opioid settlement.
As you know, we do not provide quarterly guidance, but I thought it would be helpful to share with you how we are thinking about the progression of both revenue and earnings throughout the year.
Based on our expectation today, we anticipate that similar to the progress in 2022, the first quarter will be the launch of our four quarters of February and February .
with a gradual pickup in the second quarter.
I hope this color will assist you with your modeling.
This concludes my review of the 7th result for the 4th quarter and fiscal year 2022. And now I will hand it back to Richard for a summary.
Thanks, Ali. Before moving to the Q&A, I'd just like to summarise some key points.
So I'm happy with the progress that has been made so far and I want to congratulate the entire team, all my colleagues across the globe on a solid Q4 and full year 2022.
Aesthetto and Agerbi continue to drive growth and as I mentioned before there is still a large unmet need that will drive growth in the future for Aesthetto in the US. Agerbi continues to see good traction particularly in Europe and international markets.
We have strong performance in Europe and international markets and our European business is Stony Graham with leadership positions in most markets.
We have an exciting pipeline across any of the dimensions by some of the engineers. These interesting and differentiated assets will set us up for future growth.
We remain committed to our long-term financial goals around growth, improving margin and driving down debt.
And finally, I look forward to sharing with you sometime in mid-year.
our updated strategy to ensure how we can position Teva for long-term success.
With that, thank you for listening and I'll now hand you back to the operator for a Q&A.
With that, thank you for listening and I'll now hand you back to the operator for a Q&A.
Nadia, we're ready for the Q&A phase.
Thank you.