TEVA, ME, 8-Ks, and comment letters
Welcome to our weekly reports featuring impactful and unusual disclosures as extracted by Hudson Labs' algorithms.
Filings from the week of February 5 - February 11.
ME's ($2.8B) largest customer has an aging receivables balance and TEVA's ($9.8B) Irving facility is still shut down after "objectional" conditions were found in August.
Top Red Flags from last week
ASML HOLDING NV (ASML) | 20-F | $300B The company launched their "Speak-up & Non-retaliation" program at the end of October 2021. They’ve completed investigations for 5 of 10 complaints received to date, and have terminated one employee as a result.
INNOVAGE HOLDING CORP (INNV) | 10-Q | $575M This month, the DOJ initiated a civil investigative demand under the False Act regarding the Company’s PACE program. The PACE program is currently under investigation by the Colorado Attorney General.
DUCK CREEK TECHNOLOGIES INC (DCT) | 8-K | $3.6B C-suite changes are afoot at DCT, with their COO stepping down, their CRO taking on the COO role, and their CFO delaying his retirement as the search for a successor continues.
23ANDME HOLDING CO (ME)
10-Q | Market Cap: $2.8B
23andMe’s largest customer has an aging receivables balance: One customer accounts for 78% of the total receivable balance (~$18B) at December 31, roughly double sales made to the customer in the past quarter [1].
The company has recognized $7.7M in revenue from the Lemonaid acquisition since it’s closing in November 2021, accounting for more than half of 23andMe’s modest 2.5% quarter on quarter revenue growth [2].
Related party revenues make up ~15% of total sales.
Related party expenses (in R&D and CGS) are roughly ~75% of related party revenues.
A foundation affiliated with the company’s CEO subscribed to 10% of PIPE Investment shares [3].
- The company lists sales to Customer C as 17% of sales for the 3 months ended December 31. Since total revenues for the quarter were $56.9B (for nine months, $171.3B), Customer C sales were $9.6B (for 9 months, $32.6B).
- “From the closing of the Lemonaid Acquisition date through December 31, 2021, the Company recognized revenue of $7.7 million and net loss of $8.2 million related to Lemonaid Health.”
- “The Anne Wojcicki Foundation, which subscribed for 2,500,000 shares of the Company’s Class A common stock, is affiliated with the Company’s CEO and therefore a related party.“
TEVA PHARMACEUTICAL INDUSTRIES LTD (TEVA)
10-K | Market Cap: $9.8B
In June 2021, the Company suspended manufacturing and release of products at its Irvine facility.
In August 2021, the FDA classified the site as Official Action Indicated (OAI), a classification given when “significant objectionable conditions or practices were found” [3]. Manufacture and release of products has not resumed.
Teva has reached a settlement agreement with Texas and a tentative agreement with Louisiana regarding each state’s opioid-related claims. The Texas settlement includes a $150M payout over 15 years, and provision of naloxone valued at $75M over $10 years [1]. The Louisiana agreement includes a $15M payout over 18 years, and $3M in naloxone [2]. Estimates for pending claims have been updated.
- “On August 20, 2021, the FDA completed its inspection and issued a Form FDA-483 to the Irvine facility with ten observations and, on December 17, 2021, the FDA notified the Company that the inspection classification of this site is OAI.“... “In addition, Teva has been in discussions with the FDA Drug Shortage Staff (DSS) and FDA Office of Manufacturing Quality (OMQ) to recommence the distribution, release and manufacture of certain medically necessary products from the site under defined controls and protocols to minimize the impact on public health."
- “Under the terms of the settlement, Teva will pay Texas $150 million over a 15-year time period and will provide its recently launched, lifesaving medicine generic Narcan® (naloxone hydrochloride nasal spray), valued at $75 million (wholesale acquisition cost) over 10 years.”
- “Under the terms of the settlement, Teva will pay Louisiana $15 million over an 18-year period and will provide buprenorphine naloxone (sublingual tablets) valued at $3 million (wholesale acquisition cost).”
In the comments
Last week saw additional comments released by the SEC on prior year 10-Ks. Requests for additional disclosures give us hints at what we can expect to see in 10-Ks filed this week:
AVANOS MEDICAL INC (AVNS) | $1.6B The SEC requested additional disclosures and discussion around operating expenses, GAAP earnings, divestiture charges, and accounting for returns and rebates.
GOLDEN ENTERTAINMENT INC (GDEN) | $1.6B We’re expecting more information on gaming licenses (including the differences between participation agreements, space lease agreements, and revenue share provisions), EBIDTA reconciliations, and segment reporting.
About us: Hudson Labs extracts red flags from SEC filings based on learned associations with downside outcomes. Our institutional dashboard analyzes annual and quarterly statements,and 8-Ks for over 8,000 tickers. We process filings and render analysis in real-time. Connect with us on Twitter.
