United States Generic Medicines Revenues
In the second quarter of 2017, we led the U.S. generic market in total prescriptions and new prescriptions, with approximately 586 million
total prescriptions, representing 15.2% of total U.S. generic prescriptions according to IMS data. We seek to continue our U.S. market leadership based on our ability to introduce new generic equivalents for brand-name products on a timely basis,
with a focus on complex generics and other high-barrier products that we believe will create more value for patients and customers, our strong emphasis on customer service, the breadth of our product line, our commitment to quality and regulatory
compliance and our cost-effective production.
Revenues from generic medicines in the United States during the second quarter of 2017 were
$1.3 billion, an increase of 45%, compared to the second quarter of 2016. The increase resulted mainly from the inclusion of Actavis Generics revenues and products sold in the second quarter of 2017 that were not sold in the second quarter of 2016,
partially offset by a decline in sales due to increased competition, mainly to budesonide (the generic equivalent of Pulmicort®) and aripiprazole (the generic equivalent of Abilify®) and loss of revenues following our divestment of certain products in connection with the Actavis Generics acquisition.
Among the most significant generic products we sold in the United States in the second quarter of 2017 were Concerta® authorized generic (methylphenidate extended-release tablets), as well as generic versions of Cubicin® (daptomycin injection), Glucophage® XR (metformin hydrochloride extended-release tablets) and Gleevec® (imatinib mesylate tablets).
In the second quarter of 2017, we recorded an impairment charge of $6.1 billion on the goodwill allocated to our U.S. generics reporting unit.
See note 7 to our consolidated financial statements.
During the second quarter of 2017, Teva identified certain developments in the U.S.
market that negatively impacted our outlook for our U.S. generics business. These developments included:
||Customer consolidation into larger buying groups |
We sell our products primarily to a
limited number of wholesalers and large retail chains that we consider to be our major customers. There are currently four large Group Purchasing Organizations (GPOs) that account for approximately 85% of generics purchases in the U.S.
market. In the second quarter of 2017, we saw the completion of a significant and challenging request for proposal of one of these GPOs as well as an announcement of another purchasing alignment. Expecting the trend of aggressive pricing
activities following these events, led us to the conclusion that price erosion would be higher than anticipated.
||Accelerated FDA approvals for additional generic versions of off-patent medicines competitors |
In the second quarter of 2017, consistent with its stated objective of approving more generics products and reducing the backlog of pending
approval requests, the FDA approved a significant number of generic products, primarily for products where generic competition already exists. We expect such additional competition to further contribute to higher than anticipated price erosion in
our base portfolio. We expect this trend of FDA approval of a greater number of competing generic versions of pharmaceutical products to continue in the coming years.
||Delay in new launches of certain of our generic products |
While we have the most
extensive pipeline of generic products in the industry, a further review of the pipeline in the second quarter of 2017 led Teva to the conclusion that certain 2018 and 2019 launches were going to be delayed beyond anticipated timing. In
addition, those delays may not realize the same economic value due to increased competition. Therefore for those years, launches will not be sufficient to completely offset the accelerated price erosion resulting from the pricing pressures and
accelerated generics approvals described above.
As a result of these factors we recorded an impairment charge of $6.1 billion on the
goodwill allocated to our U.S. generics reporting unit. If actual sales growth and operating margins were to vary from our assumptions, we could face additional impairment of goodwill allocated to our U.S. generics reporting unit in the future. See
the risks to our U.S. generics reporting unit described in our Cautionary Note Regarding Forward-Looking Statements above, in Item 3 Risk Factors in our Annual Report on Form 20-F for the year ended December 31, 2016
and note 7 to our consolidated financial statements.