Teva Pharmaceutical Industries Ltd (TEVA) 2003 Q4 法說會逐字稿

Thank you for standing by and welcome to the IVAX Corporation fourth quarter and year-end 2003 earnings conference call. [OPERATOR INSTRUCTIONS] I would now like to turn the conference over to our host, Chairman and Chief Executive Officer of IVAX Corporation, Dr. Phillip Frost.

Please go ahead.

Good morning.

I'd like to welcome you to our conference call and web cast to discuss the company's fourth quarter and year 2003 financial results, which were reported earlier today.

In the event you have not received this press release it is available on line at our website at www.ivax.com.

Please note that the format of today's conference call will be listen only.

Joining me this morning are Neil Flanzraich, our Vice Chairman and President;

Tom Beier, our Senior Vice President of Finance and Chief Financial Officer; and David Malina, our Director of Investor Relations.

At this time I'll turn over the call to David for a required item and then Neil will give additional comments about our business.

After that Tom will provide a review of our fourth quarter 2003 and total 2003 results.

David?

Good morning.

I'd like to remind you that statements in this conference call are forward-looking and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve risks and uncertainties that may affect IVAX' business and prospects and cause results to differ significantly from those expressed or implied in this conference call.

You should consider the economic, competitive, governmental, technological, and other factors discussed in IVAX' annual report on form 10-K and other filings with the Securities and Exchange Commission.

Neil?

Thank you, David.

And good morning.

Let me give you some comments on our fourth quarter and year 2003 results.

Today IVAX Corporation reported fourth quarter 2003 net revenues of $399 million.

The highest quarterly revenues in IVAX' history and a 23% increase over our net revenues of $325.2 million in the fourth quarter of 2002.

Net income for the fourth quarter was $29.3 million or 15 cents a share, compared to net income of $36.8 million or 19 cents a share in the fourth quarter of 2002.

Net revenues for the year 2003 were $1.42 billion.

Also a record for IVAX and an increase of 19% over net revenues of $1.2 billion in 2002.

Net income for 2003 was $121.3 million, or 61 cents per share, including income from discontinued operations of $22.2 million or 11 cents per share, compared to net income of $122.8 million or 62 cents a share in 2002.

We are pleased by our fourth quarter and year 2003 record revenues.

IVAX' gross profit margin increased to 45.4% in the fourth quarter of 2003, over 42.5% in the same quarter in 2002 and our gross profit margin for the year 2003 was 45% as compared to 44.6% in 2002.

IVAX experienced strong growth in all its major business operations.

For the fourth quarter, North American net revenues were up 22%, European net revenues were up 39%, and Latin American net revenues were up 22%.

For the year 2003, North American revenues were up 28%, European net revenues were up 17%, and Latin American net revenues were up 10% reaching a record $251.9 million.

For IVAX, 2003 was a year of investment in our future.

In the fourth quarter 2003, we invested 48% more in sales and marketing and 61% more in R&D than in the same quarter last year.

For the year 2003, we invested 26% more in sales and marketing and 42% more in R&D than in 2002.

These investments were used to advance IVAX' proprietary and generic pipelines and to increase our brand sales forces in Europe and the U.S., and we expect our businesses will continue to benefit for years to come.

Despite these investments, our income from operations increased by 28% in the fourth quarter and 15% for the year 2003 over the same periods last year.

IVAX' net income for the fourth quarter was lower than the comparable 2002 period in part because in the fourth quarter of 2002, IVAX received a $20 million dollar payment under a collaboration agreement.

No such collaboration payment was received in the fourth quarter of 2003.

Let us briefly review some of the drivers of our business in the fourth quarter 2003 and the year 2003.

IVAX' brand generic -- IVAX' brand equivalent or generic business subsidiary, IVAX pharmaceuticals, had an exceptional fourth quarter and year.

Following the fourth quarter, first to file approval for Metformin ER and two approvals last week for Benazepril HCl and Benazepril HCl Hydrochlorothiazide, our generic pipeline stood at 44 ANDA's pending with the FDA of which ten are potentially first to file with over $13.5 billion in related brand sales.

That is, it stood at that level until we just learned this morning that the -- we have received final approval and confirmation of our first to file status from the FDA for our ANDA for Glyburide/Metformin HCl tablets.

This is the generic equivalent of Glucovance® which is an marketed by Bristol-Myers Squibb as an initial and second line therapy for Type 2 diabetes.

U.S. sales for Glucovance® were almost $500 million in 2003.

A press release on this approval and confirmation of our first to file status is going out as we speak.

Most of our pipeline is kept very confidential, but some of our generic opportunities have gotten a lot of attention, lately.

And these include IVAX' generic equivalents of the following drugs: Ziprexa®, Eli Lilly's anti-psychotic drug, which has annual U.S. sales of more than $3 billion. -- The trial of IVAX' patent challenge for this product concluded February 12th, last Friday.

We were pleased with how our lawyers presented our case and we expect a decision later this year --;

Neurontin®, Pfizer's anti-seizure drug for epilepsy, which has annual U.S. sales of $2.4 billion;

Flonase®, GlaxoSmithKline's drug for rhinitis, which has annual sales of over $960 million;

Lexapro (TM), Forest Lab's antidepression drug, with annual U.S. sales of almost $1 billion. -- The trial in that case is scheduled to start in January 2005 --; and Zoloft®, Pfizer's antidepression drug, that has annual U.S. sales of over $2.8 billion.

We expect to submit a substantially increased number of ANDA's in 2004.

This expansion in our generic pipeline is due to increased internal development as well as collaborations with major international pharmaceutical companies such as [Sipla], [Zasabashi], and [Gedeon Richter].

To support our growing U.S. generic business IVAX has aggressively expanded its finished dosage manufacturing capacity.

Also in 2003, we bought and upgraded an active pharmaceutical ingredients manufacturing facility, in Puerto Rico, that is now in production.

With IVAX' growing generic opportunity and increased manufacturing capacity, we expect significant growth for our U.S. generics business in 2004 and the ensuing years.

IVAX laboratories, IVAX' U.S. proprietary pharmaceuticals company, made a significant contribution to our North American operations sales.

QVAR®, the only CFC-free, aerosol, corticosteroid for asthma in the U.S. market went from a 2.7% market share at the end of 2002 to a 4.9% market share at the end of 2003 and in the most recent new RX weekly trends, achieved a 5.9% share.

The market share of NASAREL, our intra-nasal steroid for rhinitis, increased 50% over its share in the same quarter last year.

In February of 2003, we filed an NDA or New Drug Application for Volare HFA, a CFC-free formulation of Albuterol, the principle rescue medicine for asthma, in a standard metered dose inhaler and received an approvable letter from the FDA on December 1, 2003.

In September, 2003, IVAX also submitted an NDA for Volare HFA in IVAX' patented Easi-Breathe® breath activated inhaler.

Next month, the FDA will announce its tentative rule regarding the schedule for removing CFC Albuterol products from the U.S. market.

The rule will go through a comment period and the FDA has said that it will adopt a final rule in March, 2005.

IVAX believes its CFC-free Albuterol will take on significant added value when the CFC products are removed.

Worldwide sales of IVAX' respiratory products rose by 25% from $252 million to $316 million in 2003.

IVAX expects a continued growth of QVAR® and other respiratory products in the U.S. and Europe and the addition of new products from our pipeline: such as Volare MDI, Volare Easi-Breathe®, Airmax (TM) dry powder inhaler, and drew drugs we are developing for asthma and rhinitis to produce continued growth in the future.

Our European operations fourth quarter revenues increased by 39% over the same quarter in 2002.

In October, 2003, IVAX closed a transaction with the 3M company under which IVAX acquired exclusive rights, in nine western European countries, to QVAR® and another branded asthma product together with over 200 professionals to market and sell the products.

The sales of these products contributed to the success in the fourth quarter.

IVAX believes that the enhanced presence in Europe that we gained from this transaction with 3M will facilitate the sale of other IVAX products and further increase revenues and profitability.

As you know, IVAX has been working on a brand/generic version of Bristol-Myers Squibb's Taxol ® in Europe.

On January 23, 2004, IVAX received a positive opinion recommending the extension of invitation of IVAX' proprietary injectable Paclitaxol vaccine to include treatment of metastatic breast cancer and metastatic ovarian cancer in the 15 member states of the European Union.

IVAX expects final approval on these indications in a few months.

Annual European sales of Taxol ® are currently $400 million to $600 million with high margins.

For the second consecutive quarter, IVAX' Latin American operations net revenue increased by more than 20% over 2002.

Our Latin -- our businesses in Latin America increased their product lines and their market shares.

We expect a Latin American operations to continue to generate increased revenues and profits.

In 2003 we advanced our pipeline of proprietary drugs; including drugs for brain cancer, epilepsy, multiple sclerosis, and asthma.

In 2004 we may enter into new collaborations with other pharmaceutical companies that may result in payments to IVAX and help reduce R&D expenditures.

Because of the growing demand for our products, the benefits we expect from the investments in our business, and our great confidence in our pipelines and our people;

IVAX reiterates its earnings guidance for the full year of 2004 that we expect to meet or exceed earnings per share of 89 cents.

I will now turn the call over to Tom Beier for further discussion of our financial results.

Thank you, Neil, and good morning.

Today IVAX Corporation reported net income of $29.3 million or 15 cents per share for the fourth quarter ended December 31, 2003.

Net income for the comparable 2002 quarter was $36.8 million or 19 cents per share.

For the 12-month period ended December 31, 2003, IVAX reported net income of $121.3 million or 61 cents per share, compared to $122.8 million or 62 cents per share for the 2002 period.

Gross profits amounted to $181 million in the quarter, compared with $138 million in the comparable 2002 quarter, as revenues grew 23% and gross profits 31% during the current quarter. [New] generic product launches in the U.S., and the acquisition of QVAR® and other respiratory products in Europe, were the main factors for higher sales and gross profits during the quarter.

The U.S. generic business continues to be very strong in terms of both demand and pricing.

While gross profits were significantly higher in the current quarter, compared to the 2002 quarter, these higher profits were partially offset by increased selling, and research and development expenses during the current quarter.

Our fourth quarter net revenues were $399 million, 23% over the $325 million reported during the fourth quarter of 2002, and 11% higher than $363 million reported for the prior quarter.

A breakdown of the revenues by region is as follows: North American net revenues increased 22% to $172 million in the current quarter, compared with $140 million in the 2002 fourth quarter, and equal to net revenues during the third quarter of 2003.

New generic product launches, a strong demand, and stable pricing continue[s] to be the drivers for the U.S. generic market.

European net revenues increased 39% to $164 million for the current quarter, compared with $118 million in the 2002 fourth quarter and was 32% higher than the $124 million in the previous quarter.

On October 1, 2003, we completed our previously announced agreement to acquire QVAR® and other branded respiratory products, along with their sales forces in nine countries in Europe.

The addition of these products, combined with an overall increase in sales and to a lesser extent a foreign currency benefit, were the primary reasons for the growth of revenue throughout the European operations.

Latin American net revenues increased 22% to $72 million for the fourth quarter, compared to $59 million in the 2002 comparable quarter and were 4% higher than the $69 million in the previous quarter.

The increase in net revenues during the current quarter was driven by both price and volume throughout Latin America.

Gross profit percent for the quarter was 45.4%.

This compares with 42.5% in the 2002 fourth quarter and 44.5% in the previous quarter.

Higher margins were driven by new generic product launches and the acquisition of QVAR® and other branded respiratory products.

Operating expenses increased 32% to $135 million from the 2002 fourth quarter and were 12% higher than the 2003 third quarter.

Selling expenses increased 48% over the prior year and 23% from the previous quarter.

These higher costs were associated with the acquisition of QVAR® and other respiratory products and the associated sales forces in the nine European countries.

In addition, we continued to expand our U.S. proprietary sales force, and our sales force in France, in anticipation of launching new products.

Research and development spending increased 61% during the current quarter over the prior quarter -- over the prior year quarter and 10% over the previous quarter as we continued to make investments in our new product pipeline.

For the year, our R&D expenses increased 42% to $108 million.

Despite these increases in selling and research and development expenses, income from operations increased 28% to $46 million, during the current quarter, and increased 15% to $173 million, for the year, as compared to 2002.

Other income and expenses includes: interest income of $900,000, interest expense of $11.3 million, and other income of $1.9 million, for a combined total other expense of $8.4 million for the fourth quarter of 2003.

This compares with other income of $18.1 million for the fourth quarter of 2002 and $5.1 million of other expense in the previous quarter.

Other income and expense for the 2002 fourth quarter, included a $20 million payment in connection with a collaboration agreement and $3.7 million of gains from the buy back of convertible debt.

This concludes my remarks at this time.

I'll turn it back to Dr. Frost for his closing comments.

Thank you, Tom.

Well, as you can see, 2003 was a year of continued base building.

So far as people are concerned, we are blessed with having terrific people at the management level and in the -- at the level of the infrastructure.

Frank Condella, who had been the country manager for the UK had has assumed additional responsibilities now, and he will oversee all of our European operations.

Hans Berner, who was the country manager for Argentina and has been doing a terrific job in spite of economic weakness in the country and devaluations and so forth, and has shown good results in spite of all of that adversity, has been promoted to be Director of Operations for all of Latin America reporting to Roberto Prego who's, again, doing a terrific job in that area, who remains the manager for all of Latin America.

So far as products are concerned as you heard, we filed during 2003, NDA's for the HFA Albuterol MDI and HFA Albuterol in our patented Easi-Breathe® format.

These are important events because when they get approved these products have the potential, we believe, to contribute importantly to our sales and earnings.

You also heard that we expanded our facilities during the year, particularly in Puerto Rico.

We expanded our capacity for manufacturing the products that are showing increased demand in every part of the country.

In fact, we will continue our expansion program to meet what we predict will be continuing increase in demand.

So far as marketing and sales is concerned, we made progress in expanding our U.S. sales force for branded products.

We now have 250 people calling on physicians and pharmacies around the country, and already see the results of the terrific job that they are doing in the form of dramatically increased sales of QVAR® and the other respiratory products that they're promoting. 2003, just to repeat, was a year of investment.

I'm really optimistic that this year we'll see the beginning of the results of this strategy.

I thank you for participating .

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International participants may dial 1-320-365-3844. [FURTHER OPERATOR INSTRUCTIONS] That does conclude our conference for today.

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