Teva Pharmaceutical Industries paid a record low in Israeli taxes in 2012, amounting to just $5 million, or 0.3% of its $1.6 billion in earnings in the country, according to its annual financial statements.
In 2011, Teva paid $71 million in taxes, 3.5% of its earnings in Israel.
The biggest reason for Teva's low tax rate is that it pays nothing to the state on profits from Copaxone, the proprietary drug for treating multiple sclerosis that is at the center of the company's business.
Teva is studying the implications of the November 2012 amendment to the Encouragement of Capital Investments Law, which would allow it to pay tax at a reduced rate until November 2013 on "trapped profits" - earnings that have accumulated without being paid out in dividends.
Teva says it will be required to pay a one-time tax amounting to $700 million if it decides to utilize the benefit.
Shrinking market share
Teva's report revealed that its share of the United States' generic drug market, its most important source of revenue, has continued shrinking. In 2012, a total of 530 million prescriptions were made out for Teva's generic drugs in the United States, 16.2% of all prescriptions for generic drugs in the market, as opposed to 524 million in 2011.
In 2012, Teva received 1,103 approvals for marketing generic drugs in Europe, with another 2,131 applications still awaiting approval at the end of the year. This compares with 1,241 approvals granted the previous year and 2,530 applications awaiting approval at the end of 2011.
The market potential for drugs awaiting approval fell from $77 billion at the end of 2011 to just $4 billion at the end of 2012.
Teva's floundering share price cut deep into employee benefits. The value of options exercised by company employees plunged to just $6 million in 2012 from $35 million in 2011 and $222 million in 2010. The value of options held by employees at the end of 2012, based on the stock's $37.34 share price at that time, fell to $15 million compared with $30 million at the end of 2011 and $220 million at the end of 2010.
The stock's drop in value also hurt senior company officials, who increased their holdings by 1.8 million shares in 2012 to 20.8 million, 2.42% of the overall company stock. Teva Chairman Phillip Frost increased his holdings by one million shares to 1.54%.