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|February 22, 1999 10:19 a.m.|
|Teva Pharmaceutical Industries Ltd. Reports 1998 Year End and Fourth Quarter Financial Results|
| Fourth quarter normalized net income increased by 39%, excluding one-time charges|
Declares Regular Quarterly Cash Dividend
Jerusalem, Israel, February 22, 1999 -- Teva Pharmaceutical Industries Ltd., (Nasdaq: TEVIY) today reported financial results for the year and fourth quarter ended December 31, 1998.
For the year ended December 31, 1998, total consolidated sales amounted to $1.116 billion, as compared to $1.117 billion in 1997. On a normalized basis, (factoring out a number of restructuring and other special charges in both 1998 and 1997 as discussed below), net income in 1998 amounted to $97.3 million, or $1.60 per ADR, as compared to $122.5 million, or $1.98 per ADR, in 1997.
For the fourth quarter ended December 31, 1998, total consolidated sales amounted to $296.9 million, an increase of 2% over the comparable 1997 quarter. Net income on a normalized basis for the two comparative quarterly periods, amounted to $29.6 million for the fourth quarter of 1998, as compared to $21.2 million, an increase of 39%. Earnings per ADR on a normalized basis for the fourth quarter of 1998 were $0.51, as compared to $0.34 in the 1997 period.
Reported net income for the year ended 1998, amounted to $68.8 million, or $1.15 per ADR, compared to $101.5 million, or $1.65 per ADR, in 1997 (including non-recurring items in both periods).
Reported net income for the quarter amounted to $1.4 million, or $0.06 per ADR, as compared to $0.2 million, or $0.01 per ADR, in 1997 (including non-recurring items in both periods).
Presentation of normalized numbers for comparison purposes takes into account the following non recurring items:
Eli Hurvitz, President and Chief Executive Officer, commented, "1998 was a year of many significant accomplishments for Teva. We greatly increased our presence in Europe and progressed with our significant global rationalization program in order to improve the effectiveness and efficiency of our production facilities. This is expected to gradually save the Company over $20 million annually, with the full benefit achieved by the year 2000."
"We are continuing to explore avenues for further growth and expansion, including joint ventures, acquisitions and mergers. In addition, Teva is examining alternative ways of financing our Innovative R&D program that will be cost effective to the Company," said Mr. Hurvitz. "Sales of Copaxone® in the U.S. and Canada increased significantly during 1998. This increase reflects the increased marketing efforts initiated earlier in the year, the increased experience of the neurologist community with the product, and the consistent sustained benefits demonstrated in the five year extended use studies of Copaxone®."
A double blind MRI clinical trial was completed during the fourth quarter of 1998 showing significant positive results. The data has been thoroughly analyzed and will be presented at the spring 1999 American Academy of Neurology meeting in Toronto, Canada.
"Copaxone® is approved in 13 markets including Australia, our most recent approval this month. The U.S. accounts for 80% of Copaxone®'s overall sales. During the second quarter of 1998, Copaxone® also began for the first time to contribute to Teva's net income. The Copaxone® sales index (based on the average monthly sales of Copaxone® by HMR in the last quarter of 1997 =100) reached 307 in December 1998 after climbing to 250 in November 1998. In January 1999 the index dropped to 192 (the same trend as experienced in January 1998). The index at year's end indicates more than 200% growth when compared to the beginning of the year," concluded Mr. Hurvitz.
Teva's position in the development of an oral formulation of Copaxone® for the treatment of multiple sclerosis has been strengthened through an agreement reached with AutoImmune, Inc., a U.S. corporation. Teva has been granted exclusive worldwide rights to AutoImmune's patents both present and future relating to the oral treatment of multiple sclerosis.
In addition to the one time events highlighted above, comparisons of the results between 1998 and 1997 should also take into account the following:
Total pharmaceutical sales, which comprise about 78% of Teva's total sales, were $867.1 million in 1998, 1% less than in 1997. In the second half of 1998, subsequent to the Pharmachemie acquisition, 48% of these sales were made in the U.S., 29% in Europe and 19% in Israel.
Pharmaceutical sales in the U.S. totaled $434.5 million in 1998, an 11% decrease from the 1997 period. The decrease in sales predominantly reflects the lower Clonazepam sales (in value), of which about half were offset by net increased sales of other products (both price and volume), and the introduction of new products.
During the 1998 fiscal year, Teva received nine generic drug approvals from the FDA. Of these nine approvals, five are tentative and pending patent expirations. The other four were introduced during the year, with the most significant being the anti-arthritic drug Diclofenac Potassium, which was introduced in the third quarter of 1998. Teva presently has a total of 19 ANDAs pending with the FDA, including 7 of Biovail's controlled release products.
Pharmaceutical sales in Europe reached $214.8 million in 1998, as compared to $158.1 million in 1997. The increase was mainly due to the inclusion of Pharmachemie which was acquired in mid-1998.
Pharmaceutical sales in Israel were $181.7 million in 1998, down 8% from 1997. This reflects predominantly the above-mentioned change in the relationship with MSD in mid 1997, and the unusual devaluation of the Israel NIS in the second half of 1998, for which no price adjustments were authorized in Israel. However, in early 1999, a new annual contract was signed with the General Health Fund (GHF), the largest Israeli customer, which covers 1999 supplies and should compensate Teva for most of the impact of the unusual NIS devaluation experienced in 1998. In an effort to increase the effectiveness of Teva's Israeli operations during 1998, the Company's hospital supply business was consolidated into the pharmaceutical business, becoming a more effective marketing and sales organization with considerable cost savings.
Sales of the Active Pharmaceutical Ingredients (API) business to third parties reached $154 million in 1998, up 16% from 1997, and accounted for 14% of Teva's total sales. These sales represented only 60% of the API business output - the balance was used internally by the pharmaceutical business of Teva.
The consolidated gross profit margin for the year was 37.7%, as compared to 39% in 1997. However, in the fourth quarter of 1998 the gross margin reached 39.4%, compared to 36.8% in the corresponding quarter of 1997.
Total R&D expenses for the year, net of acquisition of rights in respect to products in R&D, amounted to $75.6 million, as compared to $76.6 million in 1997.
SG&A expenses in 1998 were 6% higher than in 1997. This reflects mainly the consolidation of Pharmachemie in mid-1998.
The rate of tax as applicable to the normalized income was 26% for fiscal 1998 (1997: 24%) and 30.2% for 1998's fourth quarter (1997: 27.8%). The higher rates in 1998 are the result of the unusual devaluation in Israel in the second half of the year, which increased the provision for taxes by an estimated $2 million for the third quarter and $3 million for the fourth quarter.
The Company has declared a fourth interim dividend of NIS 0.30 (about $0.07) per ADR (or a total of about $5 million). The record date for this dividend will be March 10, 1999 and the payment date March 25, 1999. Tax at the rate of 25% will be deducted at source.
Teva Pharmaceutical Industries Ltd., is Israel's largest pharmaceutical company, with more than three quarters of its sales outside Israel, mainly in the United States. The Company develops, manufactures, and markets generic and branded human pharmaceuticals, active pharmaceutical ingredients, medical disposables and veterinary products.
Safe Harbor Statement: This release 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 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 and other factors that are discussed in the Company's filings with the U.S. Securities and Exchange Commission.
Teva Pharmaceutical Industries Limited Condensed Consolidated Statements of Income (unaudited - in thousands, except earnings per ADR )
Teva Pharmaceutical Industries Limited Balance Sheet Data (unaudited - in thousands)