Teva Pharmaceutical reported results for the quarter ended March 31, 2017.

Revenues in the first quarter of 2017 were $5.6 billion, up 17% compared to the first quarter of 2016, primarily due to the inclusion of the Actavis Generics business, following the closing of the acquisition on August 2, 2016. Excluding the impact of foreign exchange fluctuations, revenues increased 22%.

Exchange rate differences between the first quarter of 2017 and the first quarter of 2016 reduced revenues by $254 million, GAAP operating income by $78 million and non-GAAP operating income by $81 million. Changes in exchange rates used for the Venezuelan bolivar, as well as inflation-driven price increases in Venezuela, decreased revenues by $217 million, GAAP operating income by $71 million and non-GAAP operating income by $67 million, compared to results in the first quarter of 2016. In light of the economic conditions in Venezuela, the changes in revenues and operating profit in Venezuela have been excluded from any discussion of currency effects.

GAAP gross profit was $2.8 billion in the first quarter of 2017, up 1% compared to the first quarter of 2016. GAAP gross profit margin was 50.1% in the first quarter of 2017, compared to 58.0% in the first quarter of 2016. Non-GAAP gross profit was $3.2 billion in the first quarter of 2017, up 6% from the first quarter of 2016. Non-GAAP gross profit margin was 56.8% in the first quarter of 2017, compared to 62.7% in the first quarter of 2016. The decrease in gross profit margin, on both a GAAP and a non-GAAP basis, was the result of the addition of the low-margin Anda distribution business, as well as lower margins in both the generic and specialty medicines businesses.

Research and Development (R&D) expenses for the first quarter of 2017 amounted to $457 million, up 17% compared to the first quarter of 2016, mainly due to the inclusion of R&D expenses for the Actavis Generics business. R&D expenses excluding equity compensation expenses and purchase of in-process R&D in the first quarter of 2017 were $446 million, or 7.9% of quarterly revenues, compared to $375 million, or 7.8%, in the first quarter of 2016. R&D expenses related to our generic medicines segment were $191 million, an increase of 48% compared to $129 million in the first quarter of 2016, mainly due to the inclusion of R&D expenses for the Actavis Generics business. R&D expenses related to our specialty medicines segment were $255 million, an increase of 7% compared to $239 million in the first quarter of 2016, mainly due to increased expenses for the development of late-stage migraine (TEV-48125, fremanezumab) and pain (fasinumab) products.

Selling and Marketing (S&M) expenses in the first quarter of 2017 amounted to $971 million, an increase of 16% compared to the first quarter of 2016. S&M expenses excluding amortization of purchased intangible assets and equity compensation expenses were $907 million, or 16.1% of revenues, in the first quarter of 2017, compared to $821 million, or 17.1% of revenues, in the first quarter of 2016. S&M expenses related to our generic medicines segment were $400 million, an increase of 16% compared to $345 million in the first quarter of 2016, mainly due to the inclusion of the S&M expenses of the Actavis Generics business and the launch of our business venture in Japan in the second quarter of 2016. S&M expenses related to our specialty medicines segment were $461 million, up 1% compared to $457 million in the first quarter of 2016.

General and Administrative (G&A) expenses in the first quarter of 2017 amounted to $236 million, compared to $304 million in the first quarter of 2016. G&A expenses excluding equity compensation expenses were $222 million in the first quarter of 2017, or 3.9% of quarterly revenues, compared to $294 million, or 6.1% in the first quarter of 2016. The lower G&A expenses in the first quarter of 2017 mainly reflect income related to a legal recovery in Canada and income from milestone payments from the AttenukineTM out-license, partially offset by expenses related to the Actavis Generics business.

GAAP operating income in the first quarter of 2017 was $0.9 billion, down 23% compared to $1.2 billion in the first quarter of 2016. GAAP operating margin was 15.9% in the first quarter of 2017 compared to 24.2% in the first quarter of 2016. Non-GAAP operating income in the first quarter of 2017 was $1.6 billion, up 6% compared to $1.5 billion in the first quarter of 2016. Non-GAAP operating margin was 28.8% in the first quarter of 2017 compared to 31.7% in the first quarter of 2016.

GAAP financial expenses for the first quarter of 2017 were $207 million, compared to $298 million in the first quarter of 2016. Non-GAAP financial expenses were $235 million in the first quarter of 2017, compared to $52 million in the first quarter of 2016, mainly due to higher interest expenses related to the debt raised to finance the acquisition of Actavis Generics.

GAAP income taxes for the first quarter of 2017 amounted to $54 million, or 8% on pre-tax income of $688 million. In the first quarter of 2016, GAAP income taxes amounted to $228 million, or 26% on pre-tax income of $867 million. Non-GAAP income taxes for the first quarter of 2017 amounted to $240 million on pre-tax non-GAAP income of $1.4 billion, for a quarterly tax rate of 17%. Non-GAAP income taxes in the first quarter of 2016 amounted to $302 million on pre-tax non-GAAP income of $1.5 billion, for a quarterly tax rate of 21%.