☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Israel | Not Applicable | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
American Depositary Shares, each representing one Ordinary Share | TEVA | New York Stock Exchange |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
TABLE OF CONTENTS
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INTRODUCTION AND USE OF CERTAIN TERMS
Unless otherwise indicated, all references to the “Company,” “we,” “our” and “Teva” refer to Teva Pharmaceutical Industries Limited and its subsidiaries, and references to “revenues” refer to net revenues. References to “U.S. dollars,” “dollars,” “U.S. $” and “$” are to the lawful currency of the United States of America, and references to “NIS” are to new Israeli shekels. References to “ADS(s)” are to Teva’s American Depositary Share(s). References to “MS” are to multiple sclerosis. Market data, including both sales and share data, is based on information provided by IQVIA, a provider of market research to the pharmaceutical industry (“IQVIA”), unless otherwise stated. References to “R&D” are to Research and Development, references to “IPR&D” are to in-process R&D, references to “S&M” are to Selling and Marketing and references to “G&A” are to General and Administrative. Some amounts in this report may not add up due to rounding. All percentages have been calculated using unrounded amounts. This report on Form 10-K contains many of the trademarks and trade names used by Teva in the United States and internationally to distinguish its products and services. Any third-party trademarks mentioned in this report are the property of their respective owners.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTOR SUMMARY
In addition to historical information, this Annual Report on Form 10-K, and the reports and documents incorporated by reference in this Annual Report on Form 10-K, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management’s current beliefs and expectations and are subject to substantial risks and uncertainties, both known and unknown, that could cause our future results, performance or achievements to differ significantly from that expressed or implied by such forward-looking statements. You can identify these forward-looking statements by the use of words such as “should,” “expect,” “anticipate,” “estimate,” “target,” “may,” “project,” “guidance,” “intend,” “plan,” “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. Important factors that could cause or contribute to such differences include risks relating to:
our ability to successfully compete in the marketplace, including: that we are substantially dependent on our generic products; consolidationconcentration of our customer base and commercial alliances among our customers; delays in launches of new generic products; the increase in the number of competitors targeting generic opportunities and seeking U.S. market exclusivity for generic versions of significant products; our ability to develop and commercialize biopharmaceutical products; competition for our specialty products, including AUSTEDO
our substantial indebtedness, which may limit our ability to incur additional indebtedness, engage in additional transactions or make new investments, may result in a furtherfuture downgrade of our credit ratings; and our inability to raise debt or borrow funds in amounts or on terms that are favorable to us;
our business and operations in general, including: uncertainty regarding the COVID-19 pandemicimpact of global economic conditions and other macroeconomic developments and the governmental and societal responses thereto; our ability to successfully execute and maintain the activities and efforts related to the measures we have takenwidespread outbreak of an illness or may take in response to the COVID-19 pandemic and associated costs therewith;any other communicable disease, or any other public health crisis; effectiveness of our optimization efforts; our ability to attract, hire, integrate and retain highly skilled personnel; manufacturing or quality control problems; interruptions in our supply chain;chain or problems with internal or third party manufacturing; disruptions of information technology systems; breaches of our data security; variations in intellectual property laws; challenges associated with conducting business globally, including political or economic instability, major hostilities or terrorism; coststerrorism, such as the ongoing conflict between Russia and delays resulting fromUkraine and the extensive pharmaceutical regulation to which we are subject or delaysstate of war declared in governmental processing time due to travel and work restrictions caused by the COVID-19 pandemic; the effects of reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage;
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Israel; costs and delays resulting from the extensive pharmaceutical regulation to |
• | compliance, regulatory and litigation matters, including: failure to comply with complex legal and regulatory environments; the effects of governmental and civil proceedings and litigation which we are, or in the future become, party to; the effects of reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage; increased legal and regulatory action in connection with public concern over the abuse of opioid medications; our ability to timely make payments required under our nationwide opioids settlement agreement and provide our generic version of Narcan® (naloxone hydrochloride nasal spray) in the amounts and at the times required under the terms of such agreement; scrutiny from competition and pricing authorities around the world, including our ability to comply with and operate under our deferred prosecution agreement (“DPA”) with the U.S. Department of Justice (“DOJ”); potential liability for intellectual property right infringement; product liability claims; failure to comply with complex Medicare, |
the impact of the state of war declared in Israel and the military activity in the region, including the risk of disruptions to our operations and facilities, such as our manufacturing and R&D facilities, located in Israel, the impact of our employees who are military reservists being called to active military duty, and the impact of Environmental, Socialthe war on the economic, social and Governance (“ESG”) issues;political stability of Israel;
other financial and economic risks, including: our exposure to currency fluctuations and restrictions as well as credit risks; potential impairments of our intangiblelong-lived assets; the impact of geopolitical conflicts including the state of war declared in Israel and the conflict between Russia and Ukraine; potential significant increases in tax liabilities (including as a result of potential tax reform in the United States); andliabilities; the effect on our overall effective tax rate of the termination or expiration of governmental programs or tax benefits, or of a change in our business; and our ability to remediate any material weaknesses;
and other factors discussed in this Annual Report on Form 10-K, including in the sections captioned “Risk Factors.” Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statements or other information contained herein, whether as a result of new information, future events or otherwise. You are cautioned not to put undue reliance on these forward-looking statements.
PART I
ITEM 1. BUSINESS
Business Overview
We are a global pharmaceutical company, committed to helping patients around the world to access affordable medicines and benefit from innovations to improve their health. Our mission is to be a global leader in generics, specialtyinnovative medicines and biopharmaceuticals, improving the lives of patients.
We operate worldwide, with headquarters in Israel and a significant presence in the United States, Europe and many other markets around the world. Our key strengths include our world-leading generic medicines expertise and portfolio, focused specialtyinnovative medicines portfolio and global infrastructure and scale.
Teva was incorporated in Israel on February 13, 1944 and is the successor to a number of Israeli corporations, the oldest of which was established in 1901.
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Our Business Segments
We operate our business through three segments: North America, Europe and International Markets. Each business segment manages our entire product portfolio in its region, including generics, specialtywhich includes biosimilars and over-the-counter (“OTC”) products.products, as well as innovative medicines. This structure enables strong alignment and integration between operations, commercial regions, R&D and our global marketing and portfolio function, optimizing our product lifecycle across therapeutic areas.
In addition to these three segments, we have other activities, primarily the sale of active pharmaceutical ingredients (“API”) to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis.
For information regarding our major customers, see note 19 to our consolidated financial statements.
Below is an overview of our three business segments.
North America
Our North America segment includes the United States and Canada.
We are one of the leading generic pharmaceutical companies in the United States. We market over 550approximately 500 generic prescription products in more than 1,6001,400 dosage strengths, packaging sizes and forms, including oral solid dosage forms, injectable products, inhaled products, transdermal patches, liquids, ointments and creams. Most of our generic sales in the United States are made to retail drug chains, mail order distributors and wholesalers.
Our wholesale and retail selling efforts are supported by participation in key pharmaceutical conferences as well as focused advertising in professional journals and on leading pharmacy websites. We continue to strengthen consumer awareness of the benefits of generic medicines through partnerships and digital marketing programs.
Our specialtyinnovative medicines portfolio in North America focuses onincludes three main areas: central nervous system (“CNS”), respiratoryoncology and oncology.
Our CNS portfolio includes AJOVY for the preventive treatment of migraine in adults, AUSTEDO® (deutetrabenazine) tablets for the treatment of neurodegenerative and movement disorders – chorea associated with Huntington’s disease and tardive dyskinesia, and COPAXONE, which is still among the leading productsAJOVY® (fremanezumab-vfrm) injection for the preventive treatment of multiple sclerosis (“MS”)migraine in North America since it launched nearly 25 years ago. In August 2021,adults, UZEDY® (risperidone) extended-release injectable suspension, which was approved by the FDA accepted the new drug application (“NDA”) for risperidone LAIon April 28, 2023 for the treatment of schizophrenia based on phase 3 datain adults, and launched in the U.S. in May 2023, and COPAXONE®(glatiramer acetate) injection for the treatment of relapsing forms of multiple sclerosis (“MS”).
We maintain a meaningful presence in oncology, including both innovative and generic medicines (including biosimilars). In 2019, we launched Truxima®(rituximab-abbs) injection for intravenous use, our first oncology biosimilar product in the United States. BENDEKA® (bendamustine HCl) is a liquid, low-volume (50 mL) and short-time 10-minute infusion formulation of bendamustine hydrochloride that we licensed from two pivotal studies.
We are committed to maintainingmaintain a leading presence in the respiratory marketbusiness by delivering a range of medicines for the treatment of asthma and chronic obstructive pulmonary disease (“COPD”), including ProAir
Anda, our distribution business in the United States, distributes generic specialtyand innovative medicines and OTC pharmaceutical products from Teva and various third partythird-party manufacturers to independent retail pharmacies,
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pharmacy retail chains, hospitals and physician offices in the United States. Anda is able to compete in the secondary distribution market by maintaining high inventory levels for a broad offeringportfolio of products, competitive pricing and offering next day delivery throughout the United States.
Europe
Our Europe segment includes the European Union, the United Kingdom and certain other European countries.
We are one of the leading generic pharmaceutical companies in Europe. We are among the top three generic pharmaceutical companies in a number of European markets, including some of the largest markets in the European Union. No single country in Europe represents more than 20% of our total European generic revenues, and therefore weWe are not highlysubstantially dependent on any single country thatin Europe for our total generic European revenues which could be affected by pricing reforms or changes in regulations and public policy.
Despite their diversity and highly fragmented nature, the European markets share many characteristics that allow us to leverage our pan-European presence and broad portfolio. Global customers are important partners in our generic business and are expanding across Europe, although customer consolidation is lower than in the United States. We are one of a few generic pharmaceutical companies with a pan-European footprint, while most of our competitors focus on a select few markets or business lines.
Our OTC portfolio in Europe includes global brands such as SUDOCREM
Our specialtyinnovative medicines portfolio in Europe focuses on three main areas: CNS (including migraine), respiratory and oncology. Our leading product in Europe, COPAXONE, continues to be among the leadingprimary products for the treatment of MS, though new treatments are being introduced to various markets in Europe. AJOVY was granted EU marketing authorization in 2019 and, as of December 31, 2021,2023, we have launched AJOVY in most European countries and we are moving forward with plans to launch in other European countries.
International Markets
Our International Markets segment includes all countries in which we operate other than those in our North America and Europe segments. The International Markets segment includes more than 35 countries, covering a substantial portion of the global pharmaceutical market.
The countries in our International Markets segment include highly regulated, pure generic markets, such as Israel, branded generics orientedgenerics-oriented markets, such as Russia and certain Latin America markets, and hybrid markets, such as Japan. Each market’s strategy is built upon differentiation and filling the unmet needs of that market. Our integrated sales force enables us to extract synergies across our branded generic, OTC and specialtyinnovative medicines product offerings and across various channels (e.g., retail, institutional).
In Japan, one of our key markets within our International Markets segment, we operate a majority of our business through a business venture with Takeda Pharmaceutical Companies Limited (“Takeda”), in which we own a 51% stake and Takeda owns the remaining 49%.
Our specialtyinnovative medicines portfolio in our International Markets segment focuses on three main areas: CNS, respiratory and oncology. By the end of 2023, we launched AJOVY in certain countries within our International Markets segment, such as Japan, Australia, Israel, South Korea, Brazil and others. AUSTEDO was launched in China and Israel during 2021 and in Brazil in 2022.
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Pivot to Growth Strategy
In May 2023, we introduced our new “Pivot to Growth” strategy, which is based on four key pillars: (i) delivering on our growth engines, mainly AUSTEDO, AJOVY, UZEDY and our late-stage pipeline of biosimilars; (ii) stepping up innovation through delivering on our late-stage innovative pipeline assets as well as building up our early-stage pipeline organically and potentially through business development activities; (iii) sustaining our generics medicines powerhouse with a global commercial footprint, focused portfolio, pipeline and manufacturing footprint; and (iv) focusing our business by optimizing our portfolio and global manufacturing footprint to enable strategic capital deployment to accelerate our near and long-term growth engines and reorganizing certain of our business units to a more optimal structure, while also reorganizing key business units to enhance operational efficiency.
Our Product Portfolio and Business Offering
Our product and service portfolio includes generic medicines, biopharmaceuticals, specialtyinnovative medicines, OTC products, a distribution business, API and contract manufacturing. Each region manages the entire range of products and services offered in its region and our global marketinggenerics, biosimilars and portfolio function optimizesinnovative franchise units optimize our pipeline and product lifecycle across therapeutic areas. In most markets in which we operate, we use an integrated and comprehensive marketing model, offering a broad portfolio of products, including specialty,innovative medicines, generic products, biosimilars and OTC products.
Generic Medicines
Generic medicines are the chemical and therapeutic equivalents of originator medicines and are typically more affordable in comparison to the originator’s products. Generics are required to meet similar governmental requirements as their brand-name equivalents, such as those relating to current Good Manufacturing Practices (“cGMP”), manufacturing processes and health authorities’ inspections, and must receive regulatory approval prior to their sale in any given country. Generic medicines may be manufactured and marketed if relevant patents on their brand-name equivalents (and any additional government-mandated market exclusivity periods) have expired or have been challenged or otherwise circumvented.
We develop, manufacture and sell generic medicines in a variety of dosage forms, including tablets, capsules, injectables, inhalants, liquids, transdermal patches, ointments and creams. We offer a broad range of basic chemical entities, as well as specialized product families, such as sterile products, hormones, high-potency drugs and cytotoxic substances, in both parenteral and solid dosage forms. We also offer generic products with medical devices and combination products.
Our generics business has a wide-reaching commercial presence. We have a top three leadership position in many countries, including the United States and some key European markets. We have a robust product portfolio, comprehensive R&D capabilities and product pipeline and a global operational network, which enables us to execute key generic launches to further expand our product pipeline and diversify our revenue stream. We use these capabilities to help overcome price erosion in our generics business.
When considering whether to develop a generic medicine, we take into account a number of factors, including our overall strategy, regional and local patient and customer needs, R&D and manufacturing capabilities, regulatory considerations, commercial factors and the intellectual property landscape. We will challenge patents when appropriate if we believe they are either invalid or would not be infringed by our generic version. We may seek alliances to acquire rights to products we do not have in our portfolio, to share development costs or litigation risks, or to resolve patent and regulatory barriers to entry.
We have been optimizing our global generics portfolio particularly in the United States, through product discontinuation and price adjustments, with a focus on increasing profitability.high-value generics, including complex generics. This resulted in the restructuring
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and optimization of our generics business, including our manufacturing and supply network, includingand the closure or divestment of a significant number of manufacturing plants around the world. We are continuing our ongoing efforts regarding network consolidation activities.
In markets such as the United States, the United Kingdom, Canada, the Netherlands and Israel, generic medicines may be substituted by the pharmacist for their brand name equivalent or prescribed by International Nonproprietary Name (“INN”). In these so-called “pure generic” markets, physicians and patients have little control over the choice of generic manufacturer, and consequently generic medicines are not actively marketed or promoted to physicians or consumers. Instead, the relationship between the manufacturer and pharmacy chains, and distributors, health funds and other health insurers is critical. Many of these markets have automatic substitution models when generics are available as alternatives to brands. In Russia, Turkey, Ukraine, Kazakhstan and certain Latin American and European countries, generic medicines are generally sold under brand names alongside the originator brand. These markets are referred to as “branded generic” markets and in certain cases are “out of pocket” markets in which consumers can pay for a particular branded generic medicine (as opposed to government or privately funded medical health insurance), often at the recommendation of their physician. Branded generic products are actively promoted and a sales force is necessary to create and maintain brand awareness. Other markets, such as Germany, Japan, France, Italy and Spain, are hybrid markets with elements of both approaches.
Our position in the generics market is supported by our global R&D function, as well as our API R&D and manufacturing activities, which provide significant vertical integration for our products.
For information about our product launches and pipeline of generic medicines in North America and Europe, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment Information—North America Segment” and “Item 7—Management’s Discussions and Analysis of Financial Condition and Results of Operations—Segment Information—Europe Segment.”
Biologic medicines are large and complex medicines produced by or made from living cells or organisms, often produced using cutting-edge biotechnological methods. Biosimilars are highly similar to the reference biologic, in both structure and function (e.g., pharmacodynamics, pharmacokinetics, safety, efficacy and immunogenicity) and, for any approved uses, have no clinically meaningful differences from the reference product in terms of safety, purity, and potency.
In November 2019 and February 2020, we launched Truxima® (rituximab-abbs), a biosimilar to Rituxan
In January 2020 and March 2020, we launched Herzuma
During the third quarter of clinical trials and regulatory review worldwide, including phase 3 clinical trials2022, the European Commission granted a marketing authorization for biosimilars to Prolia
Innovative Medicines
Our specialtyinnovative medicines business which is focused on delivering innovative solutions to patients and providers via medicines, devices and services in key regions and markets around the world, and includes our core therapeutic areas of CNS (with a strong emphasis on MS, neurodegenerative disorders, neuropsychiatry, movement disorders, migraine and migraine)MS) and respiratory medicines (with a focus on asthma and COPD). We also have specialty productsinnovative medicines in oncology and selected other areas.
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We deploy medical and sales and marketing professionals within specific therapeutic areas who seek to address the needs of patients and healthcare professionals. We tailor our patient support, payer relations and medical affairs activities to the distinct characteristics of each therapeutic area and medicine.
The U.S. market is the most significant market in our specialtyinnovative medicines business. In Europe and International Markets, we leverage existing synergies between our specialtyinnovative medicines business and our generics and OTC businesses. Our specialtyinnovative medicines presence in International Markets is mainly built on our CNS, respiratory and oncology medicines.
We have built specialized “Patient Support Programs” to help patients adhere to their treatments, improve patient outcomes and, in certain markets, to ensure timely delivery of medicines and assist in securing reimbursement. These programs reflect the importance we place on supporting patients and ensuring better medical outcomes for them. Patient Support Programs are currently operated in many countries around the world in multiple therapeutic areas. We believe that it is important to provide a range of services and solutions tailored to meet the needs of patients according to their specific condition and local market requirements. We believe this capability provides an important competitive advantage in the specialtyinnovative medicines market.
Below is a description of our key specialty products:
CNS (including Movement Disorders and Migraine)
Our
AUSTEDO
AUSTEDO (deutetrabenazine) is a deuterated form of a small molecule inhibitor of vesicular monoamine 2 transporter, or VMAT2, that is designed to regulate the levels of a specific neurotransmitter, dopamine, in the brain. The FDA granted deutetrabenazine New Chemical Entity exclusivity until April 2022 and Orphan Drug exclusivity for the treatment of chorea associated with Huntington’s disease until AprilOctober 2024.
AUSTEDO was launched in the U.S. in 2017. It is indicated for the treatment of chorea associated with Huntington’s disease and for the treatment of tardive dyskinesia in adults, which is a debilitating, often irreversible movement disorder caused by certain medications used to treat mental health or gastrointestinal conditions.
AUSTEDO was launched in China for the treatment of chorea associated with Huntington’s disease and for the treatment of tardive dyskinesiaIsrael in early 2021. In October 2021 we received marketing approval for both indicationsand in Brazil.Brazil in 2022. We continue with additional submissions in various other countries around the world.
AUSTEDO is protected in the United States by seven12 Orange Book patents expiring between 2031 and 2038 and in Europe by two patents expiring in 2029.2038. We received notice letters from two ANDA filers regarding the filing of their ANDAs with paragraph (IV) certifications for certain of the patents listed in the Orange Book for AUSTEDO. On July 1, 2021, we filed claims against two generic ANDA filers, Aurobindo and Lupin, in the U.S. District Court for the District of New Jersey. In addition, Apotex filed a petition for inter partes review (“IPR”) by the Patent and Trial Appeal Board (“PTAB”) of the patent covering the deutetrabenazine compound that expires in 2031. On March 9, 2022, the U.S. Patent and Trademark Office denied Apotex’s petition and declined to institute a review of the deutetrabenazine patent. On April 29, 2022 and June 8, 2022, we reached agreements with Lupin and Aurobindo, respectively, to sell their generic products beginning in April 2033, or earlier under certain circumstances. There are no further patent litigations pending regarding AUSTEDO.
AUSTEDO XR (deutetrabenazine) extended-release tablets was approved by the FDA on February 17, 2023, and became commercially available in the U.S. in May 2023. AUSTEDO XR is a new once-daily
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formulation indicated in adults for tardive dyskinesia and chorea associated with Huntington’s disease, additional to the |
AJOVY
AJOVY (fremanezumab-vfrm) injection is a fully humanized monoclonal antibody that binds to calcitonin gene-related peptide (“CGRP”) and it is indicated for the preventive treatment of migraine in adults. AJOVY was launched in the U.S. in 2018 and was approved in Canada in April 2020.
During 2019, AJOVY was granted a marketing authorization in the European Union by the European Medicines Agency (“EMA”) in a centralized process and began receiving marketing authorizations in various countries in our International Markets segment. By the end of 2023, we launched AJOVY in most European countries and in certain countries within our International Markets segment, such as Japan, Australia, Israel, South Korea, Brazil and others. We are moving forward with plans to launch in other countries around the world.
Our auto-injector device for AJOVY became commercially available in the U.S. in April 2020 and in Canada in April 2021. We have also received approval from the EMA for AJOVY’s auto-injector submission in the European Union in October 2019, and we commenced launch in March 2020.
AJOVY is the only anti-CGRP subcutaneous product indicated for quarterly treatment.
AJOVY is protected worldwide by patents expiring in 2026 at the earliest; extensions have been granted in several countries, including the United States and in Europe, until 2031. Additional patents relating to the use of AJOVY in the treatment of migraine have also been issued in the United States and will expire between 2035 and 2039. Such patents are also pending in other countries. AJOVY will also be protected by regulatory exclusivity for 12 years from marketing approval in the United States (obtained in September 2018) and 10 years from marketing approval in Europe (obtained in April 2019).
In October 2017, we filed a lawsuit in the U.S. District Court for the District of Massachusetts alleging that Eli Lilly & Co.’s (“Lilly”) marketing and sale of its galcanezumab product for the treatment of migraine infringes nine Teva patents, including three method of treatment patents and six composition of matter patents. Lilly then submitted IPR petitions to the PTAB, challenging the validity of the nine Teva patents. The PTAB issued decisions upholding the three method of treatment patents but finding the six composition of matter patents invalid, which decisions were affirmed by the Court of Appeals for the Federal Circuit on August 16, 2021. A jury trial regarding the three method of treatment patents resulted in a verdict in Teva’s favor on November 9, 2022, in which the three method of treatment patents were determined to be valid and infringed by Lilly, and Teva was awarded $176.5 million in damages. On September 26, 2023, the U.S. District Court for the District of Massachusetts issued a decision that reversed the jury’s verdict and damages award, finding Teva’s method of treatment patents to be invalid. Teva is appealing this decision and filed a Notice of Appeal on October 24, 2023.
On June 8, 2021, we filed a second lawsuit in the U.S. District Court for the District of Massachusetts alleging that Lilly’s marketing and sale of galcanezumab product infringes two patents related to the treatment of refractory migraine. This second litigation was stayed pending resolution of Lilly’s IPR petitions challenging the patentability of these two patents. On September 25, 2023, the PTAB issued its written decision invalidating these two patents. On October 11, 2023, the PTAB issued its written decision invalidating a third patent also related to the treatment of refractory migraine based on another Lilly IPR petition. Teva did not appeal the PTAB decision and on November 28, 2023, the patent litigation involving the refractory migraine patents was dismissed.
In addition, in 2018 we entered into separate agreements with Alder Biopharmaceuticals, Inc. and Lilly resolving the European Patent Office oppositions that they filed against our AJOVY patents. The settlement agreement with Lilly also resolved Lilly’s action to revoke the patent protecting AJOVY in the United Kingdom.
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UZEDY
• | UZEDY (risperidone) extended-release injectable suspension was approved by the FDA on April 28, 2023 for the treatment of |
COPAXONE
COPAXONE (glatiramer acetate injection) continues to play a majoran important role in the treatment of MS in the United States (according to IQVIA data as of late 2021).2023) and in Europe. COPAXONE is indicated for the treatment of patients with relapsing forms of MS (“RMS”), including the reduction of the frequency of relapses in relapsing-remitting multiple sclerosis (“RRMS”), including in patients who have experienced a first clinical episode and have MRI features consistent with MS.
COPAXONE is believed to have a unique mechanism of action that works with the immune system, unlike many therapies that are believed to rely on general immune suppression or cell sequestration to exert their effect. COPAXONE provides a proven mix of efficacy, safety and tolerability.
In certain European countries, Teva remains in litigation against generic companies on an additional COPAXONE 40 mg/mL patent that expires in 2030.
• | In December 2018, Teva sued Pharmascience regarding its application to sell a generic version of COPAXONE in Canada. In January 2022, the Canadian Federal Court of Appeals affirmed Teva’s victory against Pharmascience, holding the 2030 dosing regimen patent valid and infringed. Pharmascience’s appeal to the Supreme Court of Canada was dismissed on September 29, 2022. On October 28, 2022, the Re-examination Board at the Canadian Patent Office also upheld the validity of the 2030 dosing regimen patent and allowed a number of additional claims. |
• | The market for MS treatments continues to develop, particularly with the approval of generic versions of COPAXONE. Oral treatments for MS, such as Tecfidera®, Gilenya® and Aubagio®, continue to present significant and increasing competition. COPAXONE also continues to face competition from existing injectable products, as well as from monoclonal antibodies, such as Ocrevus® and Kesimpta®. |
Oncology
Our specialty
BENDEKA and TREANDA
• | BENDEKA (bendamustine hydrochloride) injection and TREANDA (bendamustine hydrochloride) for injection are approved in the United States for the treatment of patients with Chronic Lymphocytic Leukemia (“CLL”) and patients with indolent B-cell Non-Hodgkin’s Lymphoma (“NHL”) that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen. We launched BENDEKA in the United States in January 2016. It is a liquid, low-volume (50 mL) and short-time 10-minute infusion formulation of bendamustine hydrochloride that we licensed from Eagle. |
• | BENDEKA faces direct competition from Belrapzo®(a ready-to-dilute bendamustine hydrochloride product from Eagle) and from Vivimusta®. Other competitors to BENDEKA include combination therapies such as R-CHOP (a combination of cyclophosphamide, vincristine, doxorubicin and |
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prednisone in combination with rituximab) and CVP-R (a combination of cyclophosphamide, vincristine and prednisolone in combination with rituximab) for the treatment of NHL, as well as a combination of fludarabine, doxorubicin and rituximab for the treatment of CLL and newer targeted oral therapies, such as ibrutinib, idelilisib and venetoclax. The orphan drug exclusivity that had attached to bendamustine products expired in December 2022. |
In April 2019, we signed an amendment to the license agreement with Eagle extending the royalty term applicable to the United States to the full period for which we sell BENDEKA and increased the royalty rate. In consideration, Eagle agreed to assume a portion of BENDEKA-related patent litigation expenses.
There are 1617 patents listed in the U.S. Orange Book for BENDEKA with expiryexpiration dates betweenin 2026 and 2031. In September 2019, a patent infringement action against four of six ANDA filers for generic versions of BENDEKA was tried inApril 2020, the U.S. District Court for the District of Delaware. On April 27, 2020, the district court upheldDelaware issued a trial decision upholding the validity of all of the asserted patents and foundfinding that all four ANDA filers for generic versions of BENDEKA infringe at least one of the patents. Three of the four ANDA filers appealed the district court decision. Teva settled with one of the three ANDA filers that appealed the district court’s decision, and on August 13, 2021, the Federal Circuit issued a Rule 36 affirmance of the district court decision with respect to the other two filers. On December 14, 2021, Apotex filed a Petition for a Writ of Certiorari with the U.S. Supreme Court.such decision. Litigation against the fifth ANDA filer was dismissed after the withdrawal of its patent challenge, and on October 18, 2021, the case against a sixth ANDA filer was also settled. Recent suits
Teva also settled litigations against twothree 505(b)(2) applicants, Hospira, Inc. (“Hospira”), Dr. Reddy’s Laboratories (“DRL”) and Accord Healthcare (“Accord”). Based on these settlement agreements, the three 505(b)(2) filers, of 505(b)(2) NDAs referencing BENDEKA are also in initial stages of litigation.
In addition to the settlement with Eagle regarding its bendamustine 505(b)(2) NDA, between 2015 and 2020, we reached final settlements with 22 ANDA filers for generic versions of the lyophilized form of TREANDA and one 505(b)(2) NDA filer for a generic version of the liquid form of TREANDA, providing for the launch of generic versions of TREANDA prior to patent expiration. Currently, there are multiple generic TREANDA products on the market.
Respiratory
Our
We are committed to maintaining a leadingmeaningful presence in the respiratory market by delivering a range of medicines for the treatment of asthma and COPD. Our portfolio is centered on optimizing respiratory treatment for patients and healthcare providers through the development and commercialization of innovative delivery systems and therapies that help address unmet needs.
The key areas of focus for our respiratory R&D isare the development of differentiated respiratory therapies for patients using innovative delivery systems to deliver chemical and biological therapies. Our device strategy is
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Our portfolio of inhalers utilizing innovative MDPI U.S.) was launched in the U.S. in September 2020. It is a formulation of long acting inhaled corticosteroid (“ICS”) using our MDPI device, indicated for maintenance treatment of asthma as prophylactic therapy in patients 12 years of age and older.
• | ProAir RespiClick (albuterol sulfate) inhalation powder is a breath-actuated, multi-dose, dry-powder, short-acting beta-agonist inhaler for the treatment or prevention of bronchospasm with reversible obstructive airway disease and for the prevention of exercise-induced bronchospasm in patients four years of age and older. ProAir Digihaler is a digital version allowing users to capture and share inhaler use data. |
• | AirDuo RespiClick (fluticasone propionate and salmeterol inhalation powder) (and its authorized generic) is a combination of an inhaled corticosteroid and a long-acting beta-agonist bronchodilator, approved in the United States for the treatment of asthma in patients aged 12 years and older who are uncontrolled on an ICS or whose disease severity clearly warrants the use of an ICS/long-acting beta2-adrenergic agonist combination. AirDuo Digihaler is a digital version allowing users to capture and share inhaler use data. |
• | DuoResp Spiromax (budesonide and formoterol) is a combination of inhaled corticosteroid and long-acting beta-agonist bronchodilator. It is approved in the EU for: |
(i) | Asthma - DuoResp Spiromax is indicated in adults and adolescents (12 years and older) for the regular treatment of asthma, where use of a combination (inhaled corticosteroid and long-acting ß2 adrenoceptor agonist) is appropriate; in patients not adequately controlled with inhaled corticosteroids and “as needed” inhaled short-acting ß2 adrenoceptor agonists; or in patients already adequately controlled on both inhaled corticosteroids and long-acting ß2 adrenoceptor agonists; and |
(ii) | COPD - DuoResp Spiromax is indicated in adults, aged 18 years and older for the symptomatic treatment of patients with COPD with forced expiratory volume in 1 second (FEV1) < 70% predicted normal (post bronchodilator) and a history of repeated exacerbations, who have significant symptoms despite regular therapy with long-acting bronchodilators. GoResp Digihaler is a digital version allowing users to capture and share inhaler use data. |
Additional products in our respiratory portfolio include:
QVAR (beclomethasone dipropionate HFA) is indicated as a maintenance treatment for asthma as a prophylactic therapy in patients five years of age or older. QVAR is also indicated for asthma patients who require systemic corticosteroid administration, where adding QVAR may reduce or eliminate the need for systemic corticosteroids. Three generic manufacturers have filed ANDAs for the metered-dose inhaler (“MDI”) presentation of QVAR. Teva filed suit against two of those ANDA filers in the U.S. District Court for the District of New Jersey. A settlement was reached with one of those two filers on December 5, 2022, and a trial was held against the other during November 2022. Teva prevailed at trial, with the court finding the asserted patents to be valid. This matter is currently on appeal, and a decision on the appeal is not expected until late 2024. |
• | QVAR RediHaler (beclomethasone dipropionate HFA) inhalation aerosol, a BAI, is indicated for the maintenance treatment of asthma as a prophylactic therapy in patients four years of age and older. In January 2024, Teva received notice of a Paragraph IV challenge to the QVAR RediHaler patents from an ANDA filer. |
• | BRALTUS (tiotropium bromide) is a long-acting muscarinic antagonist, indicated for adult patients with COPD, delivered via the Zonda® inhaler. It was launched in Europe in August 2016. |
• | Osteoarthritic Pain | ||||||||
CINQAIR/CINQAERO (reslizumab) injection is a humanized interleukin-5 antagonist monoclonal antibody for add-on maintenance treatment of adult patients with severe asthma and | |||||||||
(beclomethasone dipropionate HFA)(U.S.) |
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For information on available evidence obtained to date. The core efficacy data has already been obtained to support potential fasinumab regulatory filings. Long-term safety data is expected to be discussed with the FDA in 2022.
Other Activities
We have other sources of revenues, primarily the sale of APIs to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis.
We produce approximately 350 APIs for our own use and for sale to third parties in many therapeutic areas. APIs used in pharmaceutical products are subject to regulatory oversight by health authorities. We utilize a variety of production technologies, including chemical synthesis, semi-synthetic fermentation, enzymatic synthesis, high potency manufacturing, plant extract technology, peptide synthesis, vitamin D derivatives synthesis and peptide synthesis.steroids. Our advanced technology and expertise in the field of solid state particle technology enable us to meet specifications for particle size distribution, bulk density, specific surface area and polymorphism, as well as other characteristics.
We provide contract manufacturing services related to products divested in connection with the sale of certain business lines, as well as other miscellaneous items. Our other activities are not included in our North America, Europe and International Markets segments described above.
Research and Development
Our R&D activities span the breadth of our business, including innovative medicines, generic medicines (finished goods and API), biosimilars specialty medicines and OTC medicines.
All of our R&D activities are concentrated under one global group with overall responsibility for generics,innovative medicines, generic medicines and biosimilars, and specialty, enabling better focus and efficiency.
Our innovative R&D product pipeline is focused on biologic and small molecule products. Innovative medicines development activities include preclinical assessment (including toxicology, pharmacokinetics, pharmacodynamics and pharmacology studies), clinical development (including pharmacology and the design, execution and analysis of global safety and efficacy trials), as well as regulatory strategy to deliver registration of our pipeline products. We develop novel innovative medicines in our core therapeutic and disease focus for Teva is the development of new generic medicines. areas. We have neuroscience projects in areas such as neuropsychiatry, migraine and movement disorders/neurodegeneration. Our immunology projects include both novel compounds and delivery systems designed to address unmet patient needs.
We develop generic products for our North America, Europe and International Markets segments. Our focus is on developinghigh-value generics and complex formulations with complex technologies, which have higher barriers to entry. Generic R&D activities, which are carried out in development centers located around the world, include product formulation, analytical method development, stability testing, management of bioequivalence, bio-analytical studies, other clinical studies and registration of generic drugs in all of the markets where we operate. We also operate several clinics where most of our bioequivalentbioequivalence studies are performed as well as most of our phasePhase 1 studies for specialtyinnovative medicines and biosimilar products. We have more than 1,100 generic products in our pre-approved global pipeline, which includes products in all stages of the approval process: pre-submission, post-submission and after tentative approval.
In addition, our generic R&D supports our OTC business in developing OTC products, as well as in overseeing the work performed by contract developers.
Our current R&D capabilities include solid oral dosage forms (such as tablets and capsules), inhalation, semi-solid and liquid formulations (such as ointments and creams), sterile formulations and other dosage forms, and delivery systems, such as matrix systems, special coating systems for sustained release products, orally disintegrating systems, sterile systems, such as vials, syringes, blow-fill-seal systems, long-acting release
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We pursue biosimilar pipeline projects in other therapeutic and disease areas that leverage our global R&D and commercial areas of expertise. Biosimilar development activities, such as analytical method development, testing for analytical biosimilarity, pre-clinical work, chemical manufacturing and control, clinical studies and regulatory strategy, are conducted in Teva’s various global development sites.
Our API R&D division focuses on the development of processes and physical compound characterization for the manufacturing of APIs, including intermediates, synthetic and fermentation products, for both our generic and proprietary drugs. Our facilities in various locations worldwide include two large development centers focusing on synthetic products, threefour centers with specific expertise specializing in fermentation and semi-synthetic products, a center for oligonucleotides and peptides and centers for high-potency APIs. Our substantial investment in API R&D generates a steady flow of API products, supporting the timely introduction of generic products to market in compliance with increasing regulatory requirements. The API R&D division also seeks methods to continuously reduce API production costs, enabling us to improve our cost structure.
While our focus is on internal growth that leverages our R&D capabilities, we have entered into, and expect to pursue, in-licensing, acquisition, collaboration, funding and other partnership opportunities to supplement and expand our existing specialtyinnovative medicines and biosimilar pipeline (e.g., the transactions with Alvotech, Modag, Sanofi, Royalty Pharma and Modag)Biolojic). In parallel, we evaluate and expand the development scope of our existing R&D pipeline products as well as our existing products for submission in additional markets.markets and additional indications.
Innovative Medicines Pipeline
Below is a description of key products in our innovative medicines pipeline as of January 29, 2024:
Phase 2 | Phase 3 | Under Regulatory Review | ||||
Neuroscience | Olanzapine LAI (TEV-‘749) Schizophrenia (September 2022) | |||||
Immunology | Anti-TL1A (TEV-’574) (1) Inflammatory Bowel Disease | ICS/SABA (TEV-’248) Respiratory (February 2023) | ||||
Emrusolmin (TEV-‘286) Multiple System Atropy | ||||||
Other | Digihaler® formoterol dihydrate) (EU) (2) |
(1) | In collaboration with Sanofi. |
(2) | Approved and launched in the U.K. Under EU regulatory review. |
During 2023, the development of deutetrabenazine for dyskinesia in cerebral palsy was discontinued.
Biosimilar Products Pipeline
We have additional biosimilar products in development internally and with our partners that are in various stages of clinical trials and regulatory review worldwide, including Phase 3 clinical trials for biosimilars to
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Prolia® / Xgeva® (denosumab), Xolair® (omalizumab), Eylea® (afilbercept) and Simponi® (golimumab), biosimilars to Stelara® (ustekinumab) and to Humira® (adalimumab), each of which are currently under U.S. regulatory review.
Operations
We operate our business globally and believe that our global infrastructure provides us with the following capabilities and advantages:
global R&D facilities that enable us to have a broad global generic pipeline and product line, as well as a focused pipeline of specialty products;innovative medicines;
API manufacturing capabilities that offer a stable, high-quality supply of key APIs, vertically integrated with our pharmaceutical operations;
pharmaceutical manufacturing facilities approved by the FDA, EMA and other regulatory authorities located around the world, which offer a broad range of production technologies and the ability to concentrate production in order to achieve high quality and economies of scale; and
high-volume, technologically advanced distribution facilities for solid dosage forms, injectable and blow-fill-seal, which are available mainly in North America, Europe, Latin America, India and Israel, and thatwhich allow us to deliver new products to our customers quickly and efficiently, providing a cost-effective, safe and reliable supply.
These capabilities provide us with the means to respond on a global scale to a wide range of therapeutic and commercial requirements of patients, customers and healthcare providers.
Pharmaceutical Production
We operate 4036 finished dosage and packaging pharmaceutical plants in 27 countries. These plants manufacture solid dosage forms, sterile injectables, liquids, semi-solids, inhalers, transdermal patches and other medicinal products. In 2021,2023, we produced approximately 7677 billion tablets and capsules and approximately 680573 million sterile units.
The manufacturing sites located in North America, Europe, Latin America, India and Israel make up the majority of our production capacity.
We use several external contract manufacturers to achieve operational and cost benefits. We continue to strengthen our third partythird-party operations unit to strategically work with our supplier base in order to meet cost, supply security and quality targets on a sustainable basis in alignment with our global procurement organization.
Our policy is to maintain multiple supply sources for APIs to appropriately mitigate risk in our supply chain to the extent possible. However, our ability to do so may be limited by regulatory and other requirements.
In recent years, we closed or divested a significant number of manufacturing plants in the United States, Europe, Israel and Japan in connection with a restructuring plan. We are continuing our ongoing efforts to consolidate our manufacturing and supply network.
Raw Materials for Pharmaceutical Production
In general, we purchase our raw materials and supplies required for the production of our products in the open market. For some products, we purchase such raw materials and supplies from one source (the only source available to us) or a single source (the only approved source among many available to us), thereby requiring us to obtain such raw materials and supplies from that particular source. We attempt, ifmitigate, where possible, to mitigate our raw material supply risks through inventory management and alternative sourcing strategies. See also “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Macroeconomic and Geopolitical Environment.”
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We source a large portion of our APIs from our own manufacturing facilities. Additional APIs are purchased from suppliers located in Europe, Asia and the United States.Americas. We have implemented a supplier audit program to ensure that our suppliers meet our high standards and are able to fulfill the requirements of our global operations.
We currently have 13 API production facilities, producing approximately 350 APIs in various therapeutic areas. Our API intellectual property portfolio includes hundreds of granted patents and pending applications worldwide.
We have expertise in a variety of production technologies, including chemical synthesis, semi-synthetic fermentation, enzymatic synthesis, high-potency manufacturing, plant extract technology, peptides synthesis, vitamin D derivatives synthesis and prostaglandins synthesis.steroids. Our advanced technology and expertise in the field of solid state particle technology enable us to meet specifications for particle size distribution, bulk density, specific surface area and polymorphism, as well as other characteristics.
Our API facilities are required to comply with applicable cGMP requirements under U.S., European, Japanese and other applicable quality standards. Our API plants are regularly inspected by the FDA, European agencies and other authorities, as applicable.
Patents and Other Intellectual Property Rights
We rely on a combination of patents, trademarks, copyrights, trade secrets and other proprietary know-how and regulatory exclusivities, as well as contractual protections, to establish and protect our intellectual property
Environment, Health and Safety
We are committed to business practices that promote socially and environmentally responsible economic growth. During 2021,2023, we continued to make significant progress on our ESG strategy.
On Environment, Health and Safety (“EHS”), among other things, in 2021:
we continued the implementation of our global EHS management system in all countries where we operate, which promotes proactive compliance with applicable EHS requirements, establishes EHS standards throughout our global operations and helps drive continuous improvement in our EHS performance;
• | proactively evaluated EHS compliance through self-evaluation and an internal audit program in addition to some external audits, addressing non-conformities through appropriate corrective and preventative action; |
developed EHS compliance through self-evaluationleading indicators to drive consistent work patterns of high performing organizations; and an internal and external audit program, addressing non-conformities through appropriate corrective and preventative action; and
continued to promote climate change mitigation and adaptation strategy according to international standards.
Please see the section entitled “Environmental” from our Teva 2020Teva’s 2022 ESG Progress Report (which is located on our website) for more detailed information regarding our environmental goals.goals and activities. Nothing on our website, including our 2020Teva’s 2022 ESG Progress Report or sections thereof, shall be deemed incorporated by reference into this Annual Report or any other filing with the U.S. Securities and Exchange Commission.
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Quality
We are committed not only to complying with quality requirements but to developing and leveraging quality as a competitive advantage. In 2021,2023, we completed numerous inspections by various regulatory agencies of our finished dosage pharmaceutical and API plants and we actively engaged in discussions with authorities to mitigate drug shortages and participated in several industry-wide task forces. We continue to focus on maintaining a solid and sustainable quality compliance foundation, as well as making quality a priority to foster continuous compliance. We seek to ensure that quality is an embedded part of our corporate culture and is reflected in all of our daily operations, delivering reliable and high quality products.
Competition
Sales of generic medicines have benefitted from increasing awareness and acceptance on the part of healthcare insurers and institutions, consumers, physicians and pharmacists around the world. Factors contributing to this increased awareness are the passage of legislation permitting or encouraging generic substitution and the publication by regulatory authorities of lists of equivalent pharmaceuticals, which provide physicians and pharmacists with generic alternatives. In addition, various government agencies and many private managed care or insurance programs encourage the substitution of brand-name pharmaceuticals with generic products as a cost-savings measure in the purchase of, or reimbursement for, prescription pharmaceuticals.
In the United States, we are subject to competition in the generic drug market from domestic and international generic drug manufacturers and brand-name pharmaceutical companies through introduction of
The European market continues to be even more competitive, especially in terms of pricing, higher quality standards, customer service and portfolio relevance. We are one of only a few companies with a pan-European footprint, while most of our European competitors focus on a limited number of selected markets or business lines. Our leadership position in Europe allows us to be a reliable partner to fulfill the needs of patients, physicians, pharmacies, customers and payers.
In our International Markets, our global scale and broad portfolio give us a significant competitive advantage over local competitors, allowing us to optimize our offerings through a combination of high qualityhigh-quality medicines and unique go-to-market approaches.
Furthermore, in significant markets such as Japan and Russia, governments have issued or are in process of issuing regulations designed to increase generic penetration. Specifically, in Japan, ongoing regulatory pricing reductions and generic competition to off-patented products have negatively affected our sales in Japan. These conditions result in intense competition in the generic market,generics, with generic companies competing for advantage based on pricing, time to market, reputation and customer service.
The biosimilars marketbusiness is also highly competitive and continues to evolve as intellectual property protections for biological products continue to expire in the United States. While we believe that our biologics knowledge and experience provide us with competitive advantages, we anticipate significant competition in the biosimilar space. Risks related to commercialization of our prospective biosimilars include the number of competitors, potential for steeper than anticipated price erosion, and intellectual property challenges that may impact timely commercialization. There is also a risk of lower or slower uptake due to various factors that may differ among biosimilars such as competitive practices, physician hesitancy to prescribe biosimilars for certain therapeutic areas, and level of financial incentives (payer or government). We anticipate that the downward pressure on uptake may ease in the future as physicians and payers become increasingly aware of the benefits of biosimilars and more comfortable prescribing them.
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Our specialtyinnovative medicines business faces intense competition from both specialtyinnovative and generic pharmaceutical companies. The specialtyOur innovative medicines business may continue to be affected by price reforms and changes in the political landscape, following recent public debate in the United States.landscape. We believe that our primary competitive advantages include our commercial marketing teams, global R&D capabilities, the body of scientific evidence substantiating the safety and efficacy of our various medicines, our patient-centric solutions, physician and patient experience with our medicines and our medical capabilities, which are tailored to our product offerings, regional and local markets and the needs of our stakeholders.
Human Capital Management
Our People
Our employees are the heart of our Company. In the highly competitive pharmaceutical industry, it is imperative that we attract, develop and retain top talent on an ongoing basis. To do this, we seek to make Teva an inclusive, diverse and safe workplace, with meaningful compensation, benefits and wellnesswellbeing programs, and offeringwe offer training and leadership development programs that foster career growth.
Oversight
Our Human Resources and Compensation Committee, Compliance Committee and Board of Directors play key roles in overseeing culture and talent at Teva and devote time throughout the year to human capital strategy and
Employees
As of December 31, 2021,2023, Teva’s global workforce consisted of 37,53737,851 employees.
As a global company, we have employees in 58 countries around the world, representing a wide range of nationalities. In certain countries, we are party to collective bargaining agreements with certain groups of employees.
The following table presents our workforce headcount by employment type:
December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Full-time | 34,713 | 37,100 | 38,130 | |||||||||
Part-time | 1,266 | 1,272 | 1,158 | |||||||||
Contractor | 1,558 | 1,844 | 1,497 | |||||||||
Total | 37,537 | 40,216 | 40,785 | |||||||||
Total full time equivalent | 37,037 | 39,717 | 40,039 |
December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Full-time | 35,001 | 34,004 | 34,713 | |||||||||
Part-time | 1,471 | 1,121 | 1,266 | |||||||||
Contractor | 1,379 | 1,701 | 1,558 | |||||||||
Total | 37,851 | 36,826 | 37,537 | |||||||||
Total full time equivalent | 37,226 | 36,520 | 37,037 |
The following table presents our workforce headcount by geographic area (excluding contractors):
December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
North America | 6,330 | 6,099 | 6,302 | |||||||||
Europe | 18,602 | 17,834 | 18,122 | |||||||||
International Markets (excluding Israel) | 8,155 | 7,952 | 7,955 | |||||||||
Israel | 3,385 | 3,240 | 3,600 | |||||||||
Total (excluding contractors) | 36,472 | 35,125 | 35,979 |
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December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
North America | 6,302 | 6,918 | 7,336 | |||||||||
Europe | 18,122 | 18,569 | 18,207 | |||||||||
International Markets (excluding Israel) | 7,955 | 9,210 | 9,408 | |||||||||
Israel | 3,600 | 3,675 | 4,337 | |||||||||
Total (excluding contractors) | 35,979 | 38,372 | 39,288 |
We monitor our employee turnover on an ongoing basis, as it is an important indicator in connection with our human capital management that informs our understanding of our retention, recruitment and talent engagement. Recently, we have been monitoring our turnover rates even more closely due to the current labor market dynamics and the increased external competition for talent observed globally.
Inclusion and Diversity
Teva’s Board of Directors and executive management view inclusion and diversity areas essential to our ability to innovate and to grow our business.business, leveraging our diverse workforce to deliver on business excellence and innovation. We strive to create and sustain an inclusive and diverse work environment.
We foster an inclusive work environment that allows all people to express themselves and realize their full potential. Teva’s Position on Inclusion and Diversity outlines our commitment to establishing an enabling environment across all business units. Our Inclusion and Diversity (“I&D”) framework, governed by our I&D task force,global team, provides a foundation for embedding I&D across our business. Our dedicated global I&D lead is responsible for the execution of the global I&D framework, including strategy and initiatives, partnerships and alignment of activities across regions and business units.
We focus on genderare committed to pay equity at all levels and increase manager awareness by providing relevant trainingwe conduct equitable pay research and report our findings annually in connection with our Progress ESG Report. For example, in 2022, the most recent year for which findings are available, we conducted comprehensive equitable pay research among 100% of our employees, and found that among those in the same level, function/profession and location, we pay our women employees an average of 0.4% more than our male employees in terms of annual performance and compensation cycle. base salaries. Because pay differences are often created when employees are hired or promoted, we are introducing tools to help avoid pay differences at these stages.
In addition, we support recruitment, development and retention of individuals with diverse backgrounds. Our I&D task forceglobal team monitors and assesses our I&D programs and efforts, using regular surveys and feedback to strengthen and adapt our programs, as needed. We seek to support our inclusive and diverse culture through employee resource groups (“ERGs”), mentoring programs sponsorship, and training, among other things. For instance, we developed a global mentoring program for women, aimed at advancing women to senior leadership positions.
In the U.S., the Teva Employee Resource Group Network represents ten distinct ERGs, which have a key role in creating a culture of inclusion and bringing together
In Israel, we have developed a mentoring programpartner with several providers, including the Israeli Center for Supported Employment and the National Institute of Neuropsychological Rehabilitation, to foster inclusion across leadership, create a pipelineensure our opportunities are available to all and help identify suitable positions for employees ofpeople with different levels and encourage talent diversity. abilities.
In addition, we provided mandatory training for all employees and managers globally on unconscious biasfostering inclusive behavior and psychological safety and we include an inclusive leadership module in all Teva global leadership development programs.
The following table presents percentage of our global employee population identifying as female and male, as of December 31, 2021:2023:
Female | Male | |||||||
Total employees | 47 | % | 53 | % | ||||
Managers | 49 | % | 51 | % | ||||
Senior management | 29 | % | 71 | % |
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Female | Male | |||||||
Total employees | 46 | % | 54 | % | ||||
Managers | 48 | % | 52 | % | ||||
Senior management | 29 | % | 71 | % |
Health and Safety
The health safety and well-beingsafety of our employees is critical to our ability to supply medicines to our patients. Our Environment, Health, Safety and Sustainability Policy and global Environment Health and Safety Management System guide our employee health and safety practices. We have implemented this system, which often exceeds regulatory requirements, to provide a global standard of care.
As a result of the state of war declared in Israel in October 2023 and the military activity in the region, the health, safety and well-beingwellbeing of our employees as they face both mental and physical challenges related to the COVID-19 pandemic. OurIsrael-based employees have demonstrated great resilience during the pandemicbeen a top priority. We provided support through mental health professionals, training for managers, designated support groups, and initiatives to support our employees’ families. In addition, we increased support of an emergency supply of medicines to hospitals, pharmacies and patients and we continue to provide resources to support their well-being.
Employee Career Growth, Training and Development
We invest in employee career growth and development at Teva in order to remain competitive in our industry.Teva. Our talent development programs also benefit employees individually by providing them with the resources they need to enhance their professional and management abilities, develop leadership skills and achieve their career aspirations.
We maintain a range of learning resources to support employees of all levels in developing skills and contributing to Teva’s strategy, ultimately driving business performance. Much of our employee training is
Our Teva Grow program for employees provides development in essential soft skills, success in a global setting and company knowledge. We also provide an extensive catalog of lessons from an online learning platform. For Teva managers, we refreshed our development programs to develop the skills, capabilities and mindset required of managers, taking into account the challenges of a disruptive environment.
We focus on succession planning through global and localbusiness unit talent review processes that identify and accelerate successors’ readiness to fill senior positions across Teva. In order to measure our success, at promoting talent from inside our organization, we track the proportion of positions filled with internal candidatessuccessors and other related statistics.
Compensation, Benefits and Wellness
We provide competitive compensation, health and retirement programs for our employees. We offer variable pay in the form of bonuses and stock-based compensation for eligible employees and have one global annual bonus plan.
In 2023, we continued to focus on employee wellbeing. In addition to having our second global wellbeing month dedicated to raising awareness of the importance of wellbeing, we leveraged practical tools and local programs weto address the physical, financial, social and mental health needs of our employees and their families. We offer programs and initiatives that promote healthy diet, physical activity and mental well-being, such as annual medical check-ups and examinations across many markets.wellbeing. For example, our organizations in many countries introduced or expanded employee assistance programs (EAPs) to cover psychological support and counseling for employees and their families. In Europe,families and we launched a health and well-being program for all employees, sharing new activities and information across the region. The program has five key pillars, comprisedincluded wellbeing as part of stress management, sleep, relaxation, nutrition and movement.
Employee Engagement and Satisfaction
We have been monitoring employee morale during this time in many ways, including by conducting our human capital strategies are effective and are resonating with our employees, and where we can improve, we conduct an annual employee survey. In 2020, in the midst2023, we achieved 86% response rate, an increase of the COVID-19 pandemic, 86% of our employees completed the survey. In 2021, we saw the same high participation rate of 86%.3% compared to 2022. Results
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of the survey show that employee engagement levels continue to be high.have remained high and improved. Employees feel connected with Teva’s missionpurpose and values, are confident in Teva’s positive impact on society, and believe they are treated with respect. In addition, they feel they are able to be themselves at work, they are treated fairly regardless of personal background or characteristics, and that Teva promotes a culture of diversity and inclusiveness.
Management reviews the survey results closely to determine areas for improvement and creates action plans to address any gaps. Survey results are communicated to employees though global communications and town halls and shared with our Board of Directors.
Please see the section entitled “Social” from our Teva 20202022 ESG Progress Report (which is located on our website) for more detailed information regarding our Human Capital programs and initiatives. Nothing on our website, including our 20202022 ESG Progress Report or sections thereof, shall be deemed incorporated by reference into this Annual Report or any other filing with the Securities and Exchange Commission.
Regulation
United States
Food and Drug Administration and the Drug Enforcement Administration
All pharmaceutical manufacturers selling products in the United States are subject to extensive regulation by the United States federal government, principally by the FDA and the Drug Enforcement Administration (“DEA”), and, to a lesser extent, by state and local governments. The Federal Food, Drug, and Cosmetic Act, the Controlled Substances Act (“CSA”) and other federal and state statutes and regulations govern or influence the development, manufacture, testing, safety, efficacy, labeling, approval, storage, distribution, recordkeeping, advertising, promotion, sale, import and export of our products. Our facilities are periodically inspected by the FDA, which has extensive enforcement powers over the activities of pharmaceutical manufacturers. Noncompliance with applicable requirements may result in fines, criminal penalties, civil injunction against shipment of products, recall and seizure of products, total or partial suspension of production, sale or import of products, refusal of the government to enter into supply contracts or to approve NDAs, ANDAs or BLAs and criminal prosecution by the U.S. Department of Justice (“DOJ”). The FDA also has the authority to deny or revoke approvals of marketing applications and the power to halt the operations of non-complying manufacturers. Any failure to comply with applicable FDA policies and regulations could have a material adverse effect on our operations.
FDA approval is required before any “new drug” (including generic versions of previously approved drugs) may be marketed, including new strengths, dosage forms and formulations of previously approved drugs. Applications for FDA approval must contain information relating to bioequivalence (for generics), safety, toxicity and efficacy (for new drugs), product formulation, raw material suppliers, stability, manufacturing processes, packaging, labeling and quality control. FDA procedures generally require that commercial manufacturing equipment be used to produce test batches for FDA approval. The FDA also requires validation of manufacturing processes so that a company may market new products. The FDA conducts pre-approval and post-approval reviews and plant inspections to implement these requirements.
The federal CSA and its implementing regulations establish a closed system of controlled substance distribution for legitimate handlers. The CSA imposes registration, security, recordkeeping and reporting, storage, manufacturing, distribution, importation and other requirements upon legitimate handlers under the oversight of the DEA. The DEA categorizes controlled substances into one of five schedules—Schedule I, II, III, IV, or V—with varying qualifications for listing in each schedule. Facilities that manufacture, distribute, conduct chemical analysis, import or export any controlled substance must register annually with the DEA. The DEA performs an inspection of all entities requesting a DEA registration prior to issuing a controlled substance registration for review of the facility and material security, material handling procedures, record keeping, and
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reporting procedures. The DEA also performs cyclical inspections of all DEA registrants to review accountability, record keeping, and security. Failure to maintain compliance with applicable requirements, particularly as manifested in the loss or diversion of controlled substances, can result in enforcement action, such as civil penalties, refusal to renew necessary registrations or the initiation of proceedings to revoke those registrations. In certain circumstances, violations could lead to criminal prosecution.
The Drug Price Competition and Patent Term Restoration Act (the “Hatch-Waxman Act”) established the procedures for obtaining FDA approval for generic forms of brand-name drugs. This act also provides market exclusivity provisions that can delay the approval of certain NDAs and ANDAs. One such provision allows a five-year period of data exclusivity for NDAs containing new chemical entities and a three-year period of market exclusivity for NDAs (including different dosage forms) containing new clinical trial(s) essential to the approval of the application. The Orphan Drug Act grants seven years of exclusive marketing rights to a specific drug for a specific orphan indication.use. The term “orphan drug” refers, generally, to a drug that treats a rare disease affecting fewer than 200,000 Americans. Market exclusivity provisions are distinct from patent protections and apply equally to patented and non-patented drug products. Another provision of the Hatch-Waxman Act extends certain
Under the Hatch-Waxman Act, any company submitting an ANDA or an NDA under Section 505(b)(2) of the Food, Drug, and Cosmetic Act (i.e., an NDA that, similar to an ANDA, relies, in whole or in part, on FDA’s prior approval of another company’s drug product; also known as a “505(b)(2) application”) must make certain certifications with respect to the patent status of the drug for which it is seeking approval. In the event that such applicant plans to challenge the validity or enforceability of an existing listed patent or asserts that the proposed product does not infringe an existing listed patent, it files a “Paragraph IV” certification. In the case of ANDAs, the Hatch-Waxman Act provides for a potential 180-day period of generic exclusivity for the first company to submit an ANDA with a Paragraph IV certification. This filing triggers a regulatory process in which the FDA is required to delay the final approval of subsequently filed ANDAs containing Paragraph IV certifications until 180 days after the first commercial marketing. For both ANDAs and 505(b)(2) applications, when litigation is brought by the patent holder, in response to this Paragraph IV certification, the FDA generally may not approve the ANDA or 505(b)(2) application until the earlier of 30 months or a court decision finding the patent invalid, not infringed or unenforceable. Submission of an ANDA or a 505(b)(2) application with a Paragraph IV certification can result in protracted and expensive patent litigation.
Products manufactured outside the United States and marketed in the United States are subject to all of the above regulations, as well as to FDA, DEA and U.S. customs regulations at the port of entry. Products marketed outside the United States that are manufactured in the United States are additionally subject to various export statutes and regulations, as well as regulation by the country in which the products are to be sold.
Our products also include biopharmaceutical products that are comparable to brand-name biologics, as well as products that are approved as biosimilar versions of brand-name biological products. While regulations are still being developed by the FDA relating to the Biologics Price Competition and Innovation Act of 2009, which created a statutory pathway for the approval of biosimilar versions of brand-name biological products and a process to resolve patent disputes, the FDA has issued guidance to provide a roadmap for development of biosimilar products.
In August 2017,September 2022, the FDA user fee reauthorization legislation, known as the FDAUser Fee Reauthorization Act of 20172022 (“FDARA”FUFRA”) was enacted in the United States. The agreementsFUFRA authorizes the FDA to collect user fees from parties that submit drug, biosimilar or medical device product applications for pharmaceuticals, biosimilars and medical devices were negotiated with industry representatives overreview or that are named in approved applications as the coursesponsor of 2016 to establish the amounts regulated companies would paycertain products. These fees are used by the FDA to support the product review process at the agency. Various fees must be paid by these manufacturers at different times, such as annually and with the submission of different types of applications. In return for this additional funding, the FDA has entered into agreements with each of the affected industries (known as the “user fee agreements”) that commit the agency to interacting with manufacturers and reviewing applications such as NDAs, ANDAs and BLAs in certain ways, and taking action on those applications
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at certain times. The agency is obligated to set specific timelines to communicate with companies, meet with company product sponsors during the review process and take action on their applications. On the generics side, FDARA established a new 180-day exclusivity for certain generic drugs that are no longer protected by exclusivity or patents, as well as new programs for enhanced and priority review of certain generic drug applications. On the branded side, this was the sixth agreement between the industry and the FDA.
The user fee agreement for biosimilars was reauthorized for the second time as well.
The Patient Protection and Affordable CareInflation Reduction Act (“ACA”IRA”) of 2010 represented the most significant health care reform in the United States in over thirty years. It2022 was passed to require individuals to have health insurance and to control the rate of growth in healthcare spending through, among other things, stronger prevention and wellness measures, increased access to primary care, changes in healthcare delivery systems and the creation of health insurance exchanges. Enrollment in the health insurance exchanges began in October 2013. However, the
The tax is specified by statute to be approximately $2.8 billion in 2019IRA also imposes rebate requirements on manufacturers of single-source generics and eachother drugs covered under Medicare Part B and Part D where the price increases of the drug outpaces inflation. Multisource generics and all products with an average manufacturer’s price less than $100 per year, thereafter. The tax is apportioned to qualifying pharmaceutical companies based on an allocation of their governmental programs as a portion of total pharmaceutical government programs.
The CMS administers the Medicaid drug rebate program, in which pharmaceutical manufacturers pay quarterly rebates to each state Medicaid agency. Generally, for generic drugs marketed under ANDAs, manufacturers (including Teva) are required to rebate 13% of the average manufacturer price, and for products marketed under NDAs or BLAs, manufacturers are required to rebate the greater of 23.1% of the average manufacturer price or the difference between such price and the commercial best price during a specified period. An additional rebate for products marketed under ANDAs, NDAs or BLAs is payable if the average manufacturer price increases at a rate higher than inflation and other methodologies apply to new formulations of existing drugs.
All state Medicaid programs have implemented voluntary supplemental drug rebate programs that may provide states with additional manufacturer rebates in exchange for preferred status on a state’s formulary or for patient populations that are not included in the traditional Medicaid drug benefit coverage. In addition, a number of states, including New York, have enacted legislation that requires entities to pay assessments or taxes on the sale or distribution of opioid medications in order to address the misuse of prescription opioid medications.
Europe
General
In Europe, marketing authorizations for pharmaceutical products may be obtained either through a centralized procedure involvingfor a license valid in all member countries of the European Union, which is granted by the EMA, or licenses granted by the national competent authorities via a mutual recognition procedure which requires submission of applications in other chosen member states following approval by a so-called reference member state, a decentralized procedure that entails simultaneous submission of applications to chosen member states or occasionally through a local national procedure.
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During 2021,2022, we continued to register products in the European Union, primarily using the decentralized procedure (simultaneous submission of applications to chosen member states). We continue to use, on occasion, the mutual recognition and centralized procedures.
The European pharmaceutical industry is highly regulated and much of the legislative and regulatory framework is driven by the European Commission, together with the European Parliament and the European Commission.Council of Europe. This has many benefits, including the potential to harmonize standards across the complex European market, but it also has the potential to create complexities affecting the entire European market.
European Union
The medicines regulatory framework of the European Union requires that medicinal products, including generic versions of previously approved products and new strengths, dosage forms and formulations of
In order to control expenditures on pharmaceuticals, most member states of the European Union regulate the pricing of such products and in some cases limit the range of different forms of a drug available for prescription by national health services. These controls can result in considerable price differences among member states.
In addition to patent protection, exclusivity provisions in the European Union may prevent companies from applying for marketing approval for a generic product for eight years (or ten years for orphan medicinal products) from the date of the first marketing authorization of the original product in the European Union. Further, the generic product will be barred from market entry (marketing exclusivity) for a further two years, with the possibility of extending the market exclusivity by one additional year under certain circumstances.
The term of certain pharmaceutical patents may be extended in the European Union by up to five years upon grant of Supplementary Patent Certificates (“SPC”). The purpose of this extension is to increase effective patent life (i.e., the period between grant of a marketing authorization and patent expiry)expiration) to 15 years.
Subject to the respective pediatric regulation, the holder of an SPC may obtain a further patent term extension of up to six months under certain conditions. This six-month period cannot be claimed if the license holder claims a one-year extension of the period of marketing exclusivity based on the grounds that a new pediatric indication brings a significant clinical benefit in comparison with other existing therapies.
In July 2019, the SPC Manufacturing Waiver Regulation came into force in the European Union (subject to certain conditions) allowing products manufactured prior to SPC expiryexpiration to be exempt from SPC infringement if such products are manufactured for export to non-European Union markets or for launch in the European Union upon expiryexpiration of the SPC. This waiver will applyapplies from July 2, 2022 to all SPCs that comecame into effect after July 1, 2019 or, if the SPC was applied for after July 1, 2019, from the date the SPC comes into effect.
Orphan designated products, which receive, under certain conditions, a blanket period of ten years of market exclusivity, may receive an additional two years of exclusivity instead of an extension of the SPC if the requirements of the pediatric regulation are met. The criteria and protection period for orphan designated products are currently under review by the European Commission, as part of the review of the general pharmaceutical legislation referred to above.
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The legislation also allows for R&D work during the patent term for the purpose of developing and submitting registration dossiers.
In 2016, the United Kingdom conducted a referendum and voted to leaveNovember 2020 the European Union, also known as “Brexit.Commission published a “Pharmaceutical strategy for Europe,” On March 29, 2017,which sets out a suite of policies that will shape the United Kingdom government invoked Article 50future European regulatory environment. These wide-ranging policies represent a multi-year program aimed, through review and revision of the Lisbon Treatyexisting legislation, to exit the European Union. On January 31, 2020, the United Kingdom left the European Union,provide a flexible regulatory system that, amongst other things, will lead to accelerated availability of medicines and entered a transition periodpromote sustainability of 11 months. that system.
On December 24, 2020, the United Kingdom and European Union agreed on a new Trade and Cooperation Agreement and on December 31, 2020, the United Kingdom formally left the transition period. The TradeEuropean Union (also known as “Brexit”). Legislative changes are expected as the UK government begins to enact national legislation in place of certain provisions which derive from EU legislation. Although certain regulatory and Cooperation Agreement is comprehensive, but does not cover all areas of regulation pertinent to the pharmaceutical industry, so certain complexities remain. Wetechnical challenges remain, we continue to have processes and contingencies in place to minimize their impact, and to maintain our ability to supply medicines to patients in the United Kingdom, and to supply medicines made in the United Kingdom to other markets.
Medical Devices
Although not subject to FDA regulation as standalone medical devices, certain of our products are regulated as medical devices in the European Union. In 2017, the European Union adopted the European Union Medical Device Regulation (“EU MDR”), replacing the prior European Union Medical Device Directive (“EU MDD”) framework. The EU MDR specifies new risk classification rules, as well as changes to clinical studies, post-marketing surveillance, device traceability and oversight by notified bodies. The EU MDR became applicable on May 26, 2021. DevicesTransitional provisions (which were extended in early 2023) apply to the marketing of devices certified under the prior EU MDD regime may continue to be first placedunder certain conditions and depending on the market whilst their certificates remain valid provided there are no significant changes in the design or intended purpose; however, any devices placed on the market for the first time after May 27, 2024 must comply in full with EU MDR. From May 27, 2025 all medical devices sold in the European Union must be fully MDR compliant.device’s risk classification. In the U.K., the EU MDD, as adopted into U.K. law, remains applicable to all medical devices.
International Markets
In addition to regulations in the United States and Europe, we, and our partners, are subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales, marketing and distribution of our products. Such regulations may be similar or, in some cases, more stringent than those applicable in the United States and Europe.
Whether or not we, or our partners, obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of such product in those countries. The requirements and processes governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In addition, we, and our partners, may be subject to foreign laws and regulations and other compliance requirements, including, without limitation, anti-kickback laws, false claims laws and other fraud and abuse laws, as well as laws and regulations requiring transparency of pricing and marketing information and governing the privacy and security of personal information. SeveralThe vast majority of the countries in which we market our products have enacted and/or amended privacy regulation. In 2021, new privacy legislation took effect in The People Republic of China, South Africa and Belarus. We and our partners are implementing measures as needed to comply with such privacy requirements.
If we, or our partners, fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Miscellaneous Regulatory Matters
We are subject to various national, regional and local laws of general applicability, such as laws regulating working conditions. We are also subject to country specific data protection laws and regulations applicable to the
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collection and processing of personal data around the world. In addition, we are subject to various national, regional and local environmental protection laws and regulations, including those governing the emission of material into the environment.ESG related matters, such as mandatory reporting and due diligence obligations. We are also subject to various national, regional and local laws regulating how we interact with healthcare professionals and representatives of government that impact our promotional and other commercial activities. Additionally, we may be subject in the future to various new national, regional and local laws and regulations, such as the NIS2 Directive, and the EUCyber Resilience Act, the Digital Services Act, the Data Act, the Data Governance Act, the California Climate Corporate Date Accountability Act, the California Climate-Related Financial Risk Act, the EU’s Directive No. 2464/2022 on Corporate Sustainability Reporting (“CSRD”), the European Health Data Space or the revision of the European Pharmaceutical Legislation (both not yet agreed), which could impact our business activities.
Data exclusivity provisions exist in many countries around the world and may be introduced in additional countries in the future, although their application is not uniform. In general, these exclusivity provisions prevent
In July 2020, the European Court of Justice whichin a case known as “Schrems II”, invalidated the adequacy of the EU-US Privacy Shield Certification Programme under the EU General Data Protection Regulation (“GDPR”), and called into question the European Data Protection Board has clarified that companies must verify, on a case-by-case basis, andframework in collaboration withwhich personal data importerscan be transferred from the EU to outside the EEA, whether the law of the importer’s country ensures a level of protection for the personal data that is essentially equivalent to the EEA’s protections. If not, data exporters will need to assess whether they can implement supplementary measures to help ensure the requisite level of protection.EU. As a result, companies are now required to conduct and document comprehensive data transfer assessments, before allowing any personal data to flow from the EU to outside the EU under one of the permitted mechanisms of Chapter V of the GDPR, and if supplementary measures cannot address an adequate level of protection, then such transfers shall be restricted. Teva continues to align our data mapping documentation and conduct such data transfer assessments in line with these requirements and to update existing Standard Contractual Clauses allowing for data transfers to align with the new templates released byIn July 2023, the European Commission determined that the Data Privacy Framework (“DPF”), a replacement for the invalidated EU-US Privacy Shield, ensures an adequate level of protection for EU personal data transferred to the United States. Today, many other countries outside the EU are also implementing their own personal data transfer framework, and as such we continue to monitor global developments to address requirements regarding international data transfers. On December 8, 2023, the EU Council, Parliament and Commission reached an agreement on the proposed EU Artificial Intelligence Act, which will regulate companies’ use of artificial intelligence systems. We are continuously monitoring developments and the final act to understand the impact on our business and operations and we have already begun preparing for this.
In the United States, the legislative and regulatory landscape for data privacy and protection continues to evolve with an increasing focus on privacy and data protection issues. There are numerous federal and state laws and regulations governing the collection, use, processing and protection of personal data. Most states have data security breach laws requiring data protection measures and potentially requiring notification to regulators and impacted consumers. The Federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (collectively, “HIPAA”) mandates the adoption of specific standards for electronic transactions and code sets that are used to transmit certain types of health information. HIPAA also sets forth federal rules protecting the privacy and security of protected health information (“PHI”). The law provides both criminal and civil fines and penalties for covered entities that fail to comply with HIPAA. In 2009, the law was amended to impose certain of the HIPAA privacy and security requirements directly upon business associates of covered entities and significantly increased the monetary penalties for violations of HIPAA. During 2022, certain of Teva’s U.S. entities have become subject to HIPAA as business associates. We have established administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of PHI maintained or transmitted by such entities.
Numerous states have or are in 2021.the process of enacting state level data privacy laws and regulations governing the collection, use and processing of personal data. Additionally, the California Consumer Privacy Act (“CCPA”) established a privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California, imposing special rules on the collection of consumer data from minors, and creating a new and potentially severe statutory
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damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. Further, the California Privacy Rights Act (“CPRA”), effective January 1, 2023 (with certain provisions having retroactive effect to January 1, 2022), creates additional obligations with respect to processing and storing personal information. While clinical trial data and information governed by HIPAA are currently exempt from the current versions of the CCPA and CPRA, other personal information may be applicable and possible changes to the CCPA and CPRA may broaden its scope.
In October 2015, the European Commission adopted regulations providing detailed rules for the safety features appearing on the packaging of medicinal products for human use. This legislation, part of the Falsified Medicines Directive (“FMD”), is intended to prevent counterfeit medicines entering into the supply chain and will allow wholesale distributors and others who supply medicines to the public to verify the authenticity of the medicine at the level of the individual pack. The safety features comprise a unique identifier and a tamper-evident seal on the outer packaging, which are to be applied to certain categories of medicines. FMD is effective as of February 2019. Teva’s packaging sites, distribution centers and contract manufacturing operators (“CMOs”) for the European market comply with this new requirement.
In November 2013, the federal Drug Supply Chain Security Act (the “DSCSA”) became effective in the United States, mandating an industry-wide, national serializationelectronic, interoperable system forto trace prescription drugs through the pharmaceutical packagingdistribution supply chain with a ten-year phase-in process. By November 2018, all manufacturers and re-packagers were required to mark each prescription drug package with a unique serialized code. Per the enhanced drug distribution security section of DSCSA, manufacturers were required by November 2023 to have systems and processes in place to verify product at the package level and electronically provide package level serial number details to downstream trading partners. Although the FDA announced in August 2023 a one-year of enforcement discretion for these enhanced requirements, Teva’s packing sites, distribution centers and CMOs for the U.S. market comply with the new requirements. In addition, under the DSCSA, Teva is required by November 2023, to provide to downstream trading partners, serial number specific transaction details. This will require additional modification to the packing sites, distribution centers and CMOs for the U.S. market. Subsequently,Additionally, in February 2019, the EU enacted the Falsified Medicines Directive (“FMD”), traceability requirements for drug products, which Teva complies with as well. Other countries are following suit with variations of two main requirements: (i) to be able to associate the unit data with the uniquely-identified shipping package, or (ii) to report the data for tracking and tracing of products, reimbursements and other purposes. Certain countries, such as Russia, China, Korea, Turkey, Argentina, Brazil and India (for exported products), already have laws mandating serialization and aggregation and we are working to comply with these requirements. Other countries, including India (domestic market), Indonesia, Kazakhstan, Malaysia, Taiwan, Ukraine and other Latin American countries are currently considering mandating similar requirements.
Available Information
Our main corporate website address is http://www.tevapharm.com. Copies of our Quarterly Reports on Form 10-Q, Annual Report on Form 10-K and Current Reports on Form 8-K filed or furnished to the U.S. Securities and Exchange Commission (the “SEC”), and any amendments to the foregoing, will be provided without charge to any shareholder submitting a written request to our company secretary at our principal executive offices or by sending an email to TevaIR@tevapharm.com. All of our SEC filings are also available on our website at http://www.tevapharm.com, as soon as reasonably practicable after having been electronically
Our 20212023 ESG Progress report, which will provide enhanced ESG disclosures, is expected to be published in May 2022.2024. Information in our ESG Progress Report shall not be deemed incorporated by reference into this Annual Report or any other filing with the SEC.
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ITEM | RISK FACTORS |
Our business faces significant risks. You should carefully consider all of the information set forth in this Annual Report and in our other filings with the SEC, including the following risk factors which we face and which are faced by our industry. Our business, financial condition and results of operations could be materially adversely affected by any of these risks. This report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements as a result of certain factors including the risks described below and elsewhere in this report and our other SEC filings. For a summary of the risk factors included in this Item 1A and for further details on our forward-looking statements, see “Forward-Looking Statements and Summary of Risk Factors”Factor Summary” on page 1.
Risks related to our ability to successfully compete in the marketplace
Sales of our generic medicines comprise a significant portion of our business, and we are subject to the significant risks associated with the generic pharmaceutical business.
Sales of our generics medicines have historically represented and are expected to continue to represent a significant portion of our business. In 2021,2023, total revenues from sales of our generic medicines in all our business segments were $8,986$8,734 million, or 57%55% of our total revenues. GenericAs part of our Pivot to Growth strategy, we intend to focus on a prioritized portfolio and pipeline of high-value generics opportunities. However, generic pharmaceuticals are, as a general matter, less profitable than specialty pharmaceuticals,innovative medicines, and have faced price erosion in each of our business segments, placing even greater importance on our ability to continually introduce new products. We have becomeAlthough we intend to invest in the development of more dependent on sales ofcomplex, high-value generics products such as drug device combinations and long-acting injectables, there is no assurance as to when we will be successful in achieving our generics medicines and are increasingly subject to market and regulatory factors and other risks affecting generic pharmaceuticals worldwide.
We also expect to continue to experience significant adverse challenges in the U.S. generics market deriving from limitations on our ability to influence generic medicine pricing in the long term and a decrease in value from future launches and growth. These and other challenges have required us to recognize significant goodwill impairments in past years. If we experience further difficulty in this market, this may continue to adversely affect our revenues and profits from our North America business segment or cause us to recognize one or more goodwill impairments relating to this reporting unit.
Sales of our generic products may be adversely affected by the continuing consolidationconcentration of our customer base and commercial alliances among our customers.
A significant portion of our sales are made to relatively few U.S. retail drug chains, wholesalers, managed care purchasing organizations, mail order distributors and hospitals. These customers have undergone significant consolidation and formed various commercial alliances, in recent years, which may continue to increase the pricing pressures that we face in the United States. Additionally, the emergenceThe presence of large buying groups, and the prevalence and influence of managed care organizations and similar institutions, have increased pressure on price, as well as terms and conditions required to do business. Certain of theseThere are three large Group Purchasing Organizations (“GPOs”) have been making aggressive requests for pricing proposals and established commercial alliances resulting in greater bargaining power. Due to such consolidation and subsequent changes in these commercial alliances, there are three large GPOs that account for approximatelymore than 80% of generics purchases in the United States.States in 2023, which provides each of them with significant bargaining power. Additionally, our customers may form commercial alliances which result in heightened pricing pressure and competition in the markets in which we operate. For example, several major hospital systems in the United States formed a nonprofit company in 2018 to manufacture their own generics medicines. We expect the trend of increased pricing pressures from our customers and price erosion in the U.S. generics market to continue.
Our net sales may also be affected by fluctuations in the buying patterns of retail chains, mail order distributors, wholesalers and other trade buyers,our significant customers, whether resulting from seasonality, pricing, wholesaler buying decisions or other factors. Our business was also impacted by increased volatility in demand due in large part to the COVID-19 pandemic and fluctuations in overall market prescription volumes, which may continue in 2022. In addition, since a significant portion of our U.S. revenues is derived from relatively few key customers, any financial difficulties experienced by a single key customer, or any delay in receiving payments from such a customer, or any significant reduction in or loss of business with such a customer could have a material adverse effect on our business, financial condition and results of operations. For a description of our net sales from our major customers, see note 19 to our consolidated financial statements.
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Our revenues and profits from generic products may decline as a result of competition from other pharmaceutical companies and changes in regulatory policy.
Our generic drugs face intense competition. Prices of generic drugs may, and often do, decline, sometimes dramatically, especially as additional generic pharmaceutical companies (including low-cost generic producers based in China and India) receive approvals and enter the market for a given product and competition intensifies. Consequently, our ability to sustain our sales and profitability on any given product over time is affected by the number of companies selling such product, including new market entrants, and the timing of their approvals. The goals established under the Generic Drug User Fee Act, and increased funding of the FDA’s Office of Generic Drugs, have led to more and faster generic approvals, and consequently increased competition for some of our products. The FDA has stated that it has established new steps to enhance competition, promote access and lower drug prices and is approving record-breakingincreasing numbers of generic applications. While these FDA improvements are expected to benefit Teva’sour generic product pipeline, they will also benefit competitors that seek to launch products in established generic markets where Tevawe currently offersoffer products.
Furthermore, brand pharmaceutical companies continue to manage products in a challenging environment through marketing agreements with payers, pharmacy benefits managers and generic manufacturers. For example, brand companies often sell or license their own generic versions of their products, known as “authorized generics,” either directly or through other generic pharmaceutical companies (so-called “authorized generics”).companies. No significant regulatory approvals are required for authorized generics, and brand companies do not face any other significant barriers to entry into such market. Brand companies may seek to delay introductions of generic equivalents through a variety of commercial and regulatory tactics. Many pharmaceutical companies increasingly have used state and
In addition, the U.S. Congress and various state legislatures in the United States have passed, or have proposed passing, legislation that could have an adverse impact on pharmaceutical manufacturers’ ability to (i) settle litigation initiated pursuant to the Hatch-Waxman Act and Biologics Price Competition and Innovation Act (“BPCIA”); (ii) secure the full benefit of first-to-file regulatory approval status secured under the Hatch-Waxman Act; and (iii) changerecover their investments into the valuedevelopment of the brand products prior to the launch ofan innovative, generic versions.or biosimilar product. Hatch-Waxman and BPCIA create various pathways for generic drug manufacturers to secure accelerated approvals of their abbreviated new drug applications and abbreviated biologics license applications. The new laws and proposals from the federal and state governments could serve to change, directly and indirectly, the Hatch-Waxman Act and BPCIA, including the incentives to develop generic and biosimilar products, as well as the ability of generic manufacturers to accelerate the launch of their new generic and biosimilar products. They also could impact the ability of brand manufacturers to protect their investments in the
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intellectual property associated with their branded specialty and innovative biologic products. Teva continuesAdditionally, the enactment of the Inflation Reduction Act of 2022 (the “IRA”) represents the most significant pharmaceutical pricing reform in the United States to date and includes legislative changes that could lead to greater pricing pressures on our products such as amendments to (i) eliminate the “donut hole” under the Medicare Part D program beginning in 2025; (ii) modify the “noninterference” provisions of the Medicare Part D enabling statute to require the U.S. Department of Health and Human Services (“HHS”) to negotiate the prices of a subset of drugs and biologics with the highest annual expenditures under Medicare Parts B and D; and (iii) impose manufacturer rebates on certain single-source Part B and Part D drugs when prices rise faster that the rate of inflation.
A number of state legislatures have also begun considering legislation that would implement IRA-like frameworks for state regulated insurance markets. We continue to monitor these legislative developments and evaluate whether any changes to our business practices and operations are necessary in order to comply with such legislative reforms and advocate for policies that support both innovation and access to high quality medicines for patients.
We have experienced, and may continue to experience, delays in launches of our new generic products.
Although we believe we have one of the most extensive pipelines of generic products in the industry, in recent years we were unable to successfully execute a number of generic launches and these challenges may continue in the foreseeable future. As a result of delays we have experienced in the timing of launches, we may not be able to realize the economic benefits anticipated in connection with our planned launch timing. If we cannot execute timely launches of new products, we may not be able to offset the increasing price erosion on existing products in the United States resulting from pricing pressures and accelerated generics approvals for competing products. Such unsuccessful launches can be caused by many factors, including, the impact of the COVID-19 pandemic, delays in regulatory approvals, lack of operational or clinical readiness or patent litigation. Failure or delays to execute launches of new generic products could have a material adverse effect on our business, financial condition and results of operations.
We may be unable to take advantage of the increasing number of high-value biopharmaceuticalbiosimilars opportunities.
We aim to be a global leader in biopharmaceuticals. We are developing a productAs part of our Pivot to Growth strategy, we intend to capitalize on our late-stage pipeline and manufacturing capabilities forof biosimilar products, which are expected to make up an increasing proportion of the high-value generic opportunities in the coming years.products. The development, manufacture and commercialization of biopharmaceuticalbiosimilar products require specialized expertise and are very costly and subject to complex regulation, which is still evolving.evolving regulation. Due to the complex process and significant financial and other resources required to develop biosimilars, obstacles and delays, including budget constraints may arise, thatwhich increase the cost of development or force us to abandon a potential product in which we may have invested substantial amounts of time and resources. We were behind many of our competitors in developing biopharmaceuticalshave made and are making and still requirewill continue to make significant investments and collaborations with third parties to benefitcapitalize on biosimilar opportunities. However, the market for biosimilar products, in particular for key lifecycle products, is facing increasingly intense competition, including from thesenew market entrants, growing pricing pressures, as well as from existing innovative products that maintain a significant market share, and there is no assurance that we will be able to successfully capitalize on biosimilar opportunities. Failure to develop and commercialize biopharmaceuticalsbiosimilars, either by us or through collaborations with third parties, could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our specialty pharmaceutical productsinnovative medicines face intense competition from companies that have greater resources and capabilities.
We face intense competition to our specialty pharmaceutical products. Manyinnovative medicines. As part of our Pivot to Growth strategy, we intend to deliver on our growth engines, mainly AUSTEDO, AJOVY and UZEDY, and step up the innovation of our late-stage innovative pipeline assets. However, many of our competitors are larger and/or have substantially more experience in the development, acquisition and marketing of branded, innovative and consumer-oriented
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products. They may be able to respond more quickly to new or emerging market preferences or to devote greater resources to the development and marketing of new products and/or technologies than we can. As a result, any products and/or innovations that we develop may become obsolete or noncompetitive before we can recover the expenses incurred in connection with their development. In addition, we must demonstrate the benefits of our products relative to competing products that are often more familiar or otherwise better established to physicians, patients and third-party payers. If competitors introduce new products or new variations on their existing products, our marketed products, even those protected by patents, may be replaced in the marketplace or we may be required to lower our prices. For example:
our future success depends on our ability to maximize the growth and commercial success of AUSTEDO.AUSTEDO and AUSTEDO XR. If our revenues derived from AUSTEDO and AUSTEDO XR do not increase as expected or if we lose market share to competing therapies, it may have an adverse effect on our results of operations.operations;
AJOVY faces strong competition from two products that were introduced into the market around the same time and are competing for market share in the same space, as well as from other emerging competing therapies, including oral calcitonin gene-related peptide (“CGRP”)CGRP products;
UZEDY is a later entrant which faces competition from four well-established products. Additionally, two branded and one generic risperidone long-acting injectable have or are in the process of launching, which may impact UZEDY’s growth;
COPAXONE faces increasing competition from generic versions in the U.S. and competing glatiramer acetate products in Europe, as well as from orally-administered therapies. Following the approval of generic competition, COPAXONE’s revenues and profitability have decreased. We expect thisthe trend of decreasing revenues and profitability for COPAXONE to continue in the future,future; and
there is a trend in the innovative medicines industry of seeking to “outsource” drug development by acquiring companies with promising drug candidates and we face substantial competition from historically innovative companies, as well as companies with greater financial resources than us, for such acquisition targets.
In order to remain competitive, we must invest significant resources to expand our pipeline for innovative medicines and biosimilars, both through our own efforts and through collaborations with, and in-licensing or acquisition of products from, third parties. We have entered into, and expect to pursue, in-licensing, acquisition, collaboration, funding and partnership opportunities to supplement and expand our existing innovative medicines and biosimilar pipeline, such as our collaborations with Alvotech, Modag, Sanofi, Royalty Pharma and Biolojic. However, there is no assurance that such collaborations will achieve the results we expect and we or our counterparties could fail to perform the obligations thereunder, including due to the failure to obtain regulatory approvals and increasing competition, pricing pressures and other financial constraints.
Furthermore, the development of innovative medicines involves lengthier and more complex processes and greater expertise and resources than those used in the development of generic medicines. For example, the time from discovery to commercial launch of an innovative medicine can be 15 years or more and involves multiple stages, including intensive preclinical and clinical testing and highly complex, lengthy and expensive regulatory approval processes, which vary from country to country. The longer it takes to develop a new product, the less time that remains to recover development costs and generate profits. During each stage, we may encounter obstacles that delay the development process and increase expenses, potentially forcing us to abandon a potential product in which we may have invested substantial amounts of time and resources. These obstacles may include preclinical failures, difficulty enrolling patients in clinical trials, delays in completing formulation and other work needed to support an application for approval, adverse reactions or other safety concerns arising during clinical testing, insufficient clinical trial data to support the safety or efficacy of the product candidate, widespread supply chain breakdowns, delays as a significant effectresult of new requirements implemented by health authorities such as the U.S. FDA and EMA requirement on our financial resultsmaterial use, and cash flow.delays or failures to obtain required regulatory
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approvals for the product candidate or the facilities in which it is manufactured. In addition, our specialty productsinnovative medicines require much greater use of a direct sales force than does our core generics business. Our ability to realize significant revenues from direct marketing and sales activities depends on our ability to attract and retain qualified sales personnel. Competition for qualified sales personnel is intense. We may also need to enter into co-promotion, contract sales force or other such arrangements with third parties, for example, where our own direct sales force is not large enough or sufficiently well-aligned to achieve maximum market penetration. Any failure to attract or retain qualified sales personnel or to enter into third-party arrangements on favorable terms could prevent us from successfully maintaining current sales levels or commercializing new innovative and specialty products. Furthermore, due to the impact of the COVID-19 pandemic, the ability to promote our new specialty products, primarily AJOVY and AUSTEDO, has been impacted by fewer physician visits by patients and fewer physician interactions with our sales personnel as well as the reluctance of physicians to introduce new medication at a time when access to patients may be restricted.
If generic or biosimilar products that compete with any of our specialty productsinnovative medicines are approved and sold, sales of our specialty productsinnovative medicines will be adversely affected.
Certain of our leading specialtyinnovative medicines face patent challenges and impending patent expirations. For example,expirations and some have recently become susceptible to generic competition, such as TREANDA in January 2019, we launched our own ProAir authorized generic in the United States following the launch of a generic version of Ventolin
Our success depends on our ability to develop and commercialize additional pharmaceutical products.
Our financial results depend upon our ability to develop and commercialize additional generic, specialtyinnovative, biosimilar and biosimilargeneric products in a timely manner, particularly in light of the increasing generic competition to COPAXONE, generic and other competition to our respiratory products, such as ProAir, patent challenges to our specialty products, such as AUSTEDO, and impending patent expirations facing certain of our other specialty medicines, such as TREANDA.manner. Commercialization requires that we successfully develop, test and manufacture pharmaceutical products. All of our products must receive regulatory approval and meet, (andand continue to comply with)with, regulatory and safety standards; if health or safety concerns arise with respect to a product, we may be forced to withdraw it from the market. Developing and commercializing additional pharmaceutical products is also subject to difficulties relating to the availability, on commercially reasonable terms, of raw materials, including API and other key ingredients; preclusion from commercialization by the proprietary rights of others; the costs of manufacture and commercialization; costly legal actions brought by our competitors that may delay or prevent development or commercialization of a new product; and delays and costs associated with the approval process of the FDA and other U.S. and international regulatory agencies.
The development and commercialization process, particularly with respect to specialtyinnovative medicines and biosimilar medicines, as well as the complex generic medicines that we increasingly focus on, is both time-consuming and costly, and involves a high degree of business risk. Our products currently under development, including deutetrabenazine for dyskinesia in cerebral palsy, risperidone LAI for schizophrenia and anle138b for MSA, if and when fully developed and tested, may not perform as we expect. Necessary regulatory approvals may not be obtained in a timely manner, if at all, and we may not be able to produce and market such products successfully and profitably. Delays in any part of the process or our inability to obtain regulatory approval of our products could adversely affect our operating results by restricting or delaying our introduction of new products.
We depend on the effectiveness of our patents, confidentiality agreements and other measures to protect our intellectual property rights.
The success of our specialtyinnovative medicines business depends substantially on our ability to obtain patents and to defend our intellectual property rights. If we fail to protect our intellectual property adequately, competitors may
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covering our specialtyinnovative medicines, and have filed, and expect to continue to file, patent applications seeking to protect newly developed technologies and products in various countries, including the United States. Currently pending patent applications may not result in issued patents or be approved on a timely basis or at all. Any existing or future patents issued to or licensed by us may not provide us with any competitive advantages for our products or may be challenged or circumvented by competitors or governments.
Efforts to defend the validity of our patents are expensive and time-consuming, and there can be no assurance that such efforts will be successful. Our ability to enforce our patents also depends on the laws of individual countries and each country’s practices regarding the enforcement of intellectual property rights. The loss of patent protection or regulatory exclusivity on specialtyinnovative medicines, including potential challenges to our Orange Book patent listings in the United States, could materially impact our business, results of operations, financial condition and prospects.
We also rely on trade secrets, unpatented proprietary know-how, trademarks, regulatory exclusivity and continuing technological innovation that we seek to protect, in part by confidentiality agreements with licensees, suppliers, employees and consultants. These measures may not provide adequate protection for our unpatented technology. If these agreements are breached, it is possible that we will not have adequate remedies. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. Furthermore, our trade secrets and proprietary technology may otherwise become known or be independently developed by our competitors or we may not be able to maintain the confidentiality of information relating to such products. If we are unable to adequately protect our technology, trade secrets or proprietary know-how, or enforce our intellectual property rights, our results of operations, financial condition and cash flows could suffer.
Risks related to our substantial indebtedness
We have substantial debt of $23,043 million as of December 31, 2021,outstanding, which requires significant interest and principal payments, requires compliance with certain covenants and restricts our ability to incur additional indebtedness or engage in other transactions.
As of December 31, 2023, we have consolidated debt was $23,043of $19,833 million atoutstanding, compared to $21,212 million outstanding as of December 31, 2021, compared to $25,919 million at December 31, 2020.2022. If we are unable to meet our debt service obligations and other financial obligations, we could be forced to restructure or refinance our indebtedness, and other financial transactions, seek additional debt or equity capital or sell our assets. We might thenmay be unable to obtain such financing or capital or sell our assets on satisfactory terms, if at all. Any refinancing of our indebtedness could be at significantly higher interest rates, incur significant transaction fees or include more restrictive covenants. See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity” and note 9 to our consolidated financial statements for a detailed discussion of our outstanding indebtedness.
Our unsecured syndicated sustainability-linked revolving credit facility (“RCF”) contains certain covenants, including certain limitations on incurring liens and indebtedness and maintenance of certain financial ratios, including the requirement to maintain compliance with a net debt to EBITDAmaximum leverage ratio, which becomes more restrictive over time. Under specified circumstances, including non-compliance with any of the covenants and the unavailability of any waiver, amendment or other modification thereto, we will not be able to borrow under the RCF. Additionally, violations of the covenants, under certain circumstances, would result in an event of default in all borrowings under the RCF and, when greater than a specified threshold amount as set forth in each series of senior notes and sustainability-linked senior notes is outstanding, could lead to an event of default under our senior notes and sustainability-linked senior notes due to cross acceleration provisions.
While we were in compliance with all applicable financial ratios. We continue to take steps to reduce our debt levels and improve profitability, if we fail to ensure continual compliance with thesatisfy our financial
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Our substantial net debt could also have other important consequences to our business, including, but not limited to:
Additionally, if the COVID-19 pandemic has a significant impact on our business and financial results for an extended period of time, our credit losses, liquidity and cash resources could be negatively impacted.impacted by macroeconomic pressures. We may be required to draw down funds from our RCF or pursue additional sources of financing to fund our operations, such as secured financing. If we seek secured financing in excess of the limitationlimitations in our existing debt instruments, we may have to secure our current outstanding debt as well. Capital and credit markets, which have been disrupted by the crisis and foreign exchangessuch macroeconomic pressures, have experienced increased volatility. As a result, access to additional financing may be challenging and is largely dependent upon evolving market conditions, and other factors, which could materially impact our business, results of operations, financial condition and prospects.
We may need to raise additional funds in the future, which may not be available on acceptable terms or at all.
We may consider issuing additional debt or equity securities in the future to refinance existing debt or for general corporate purposes, including to fund our growth strategies, and to fund potential acquisitions or investments. If we issue ordinary equity, convertible preferred equity or convertible debt securities to raise additional funds, our existing shareholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing shareholders. If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, requiring us to pay additional interest and potentially lowering our credit ratings. We may not be able to market such issuances on favorable terms, or at all, in which case, we may not be able to develop or enhance our products, execute our business plan, take advantage of future opportunities or respond to competitive pressures or unanticipated customer requirements.
If our credit ratings are further downgraded by leading rating agencies, we may not be able to raise debt or borrow funds in amounts or on terms that are favorable to us, if at all.
Our credit ratings impact the cost and availability of future borrowings and, accordingly, our cost of capital. Our ratings at any time will reflect each rating organization’s thenagency’s opinion of our financial strength, operating performance and ability to meet our debt obligations. In November 2017, Fitch Ratings Inc. (“Fitch”)
Any downgrade of our ratings to non-investment grade by Fitch, Moody’s and Standard & Poor’sthe rating agencies limits our ability to borrow at interest rates consistent with the interest rates that were available to us prior to such downgrades. This may limit our ability to sell additional debt securities or borrow money in the amounts, at the times or interest rates, or upon the terms and conditions that would have been available to us if our previous credit ratings had been maintained.
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Risks related to our general business and operations
Global economic conditions may negatively affect us and may magnify certain risks that affect our business.
In response to rising inflation in recent years, central banks in the markets in which we operate, including the United States Federal Reserve, have tightened their monetary policies and raised interest rates, and such measures may continue. Higher interest rates and volatility in financial markets could lead to additional economic uncertainty or recession. Increased inflation rates have increased our and our suppliers’ operating costs, including labor costs, raw materials costs, manufacturing costs and R&D costs. There is no assurance that we will be able to increase our pricing to offset our increased costs, or that our operations will not be materially impacted by rising inflation and its broader effects on the markets in which we operate in the future. In addition to rising inflation, the global economy has also been impacted by fluctuating foreign exchange rates and geopolitical tensions, which could result in supply chain disruptions. Supply chain disruptions could continue to result in delays in our production and distribution processes, R&D initiatives and our ability to timely respond to consumer demand. As we have substantial international operations, fluctuations in exchange rates between the currencies in which we operate and the U.S. dollar could increase our operating costs and adversely affect our results of operations, profits and cash flows. The duration and extent of rising inflation, higher interest rates, foreign exchange rate fluctuations, geopolitical tensions and other macroeconomic headwinds are uncertain and we cannot accurately predict whether we will be able to effectively mitigate their impact on our business.
Due to the complexity of our supply chain, we have experienced supply discontinuities due to macroeconomic issues, regulatory actions, including sanctions and trade restrictions, labor disturbances and approval delays, which impacted our ability to timely meet demand in certain instances. These adverse market forces have a direct impact on our overall performance. Any such disruptions could have a material adverse impact on our business and our results of operation and financial condition.
The widespread outbreak of an illness or any other communicable disease, or any other public health crisis, such as the COVID-19 pandemic and the governmental and societal responses thereto, could adversely affect our business, results of operations and financial condition.
Widespread outbreaks of disease or other public health crises and responses to curtailthereto have in the pandemic havepast and may in the future negatively impactedimpact the global economy, disrupteddisrupt global supply chains and createdcreate significant volatility and disruption of financial markets. The virus has spread globally, including toFor example, during the COVID-19 pandemic, we experienced disruptions in countries and regions wherein which we manufacture most of our products and conduct our clinical trials. The potential closuretrials, as well as changes in customer stocking and purchasing patterns. In response to the COVID-19 pandemic, we temporarily closed certain of our facilities orand faced other protectionist measures orand restrictions inhibitingimposed by government authorities to control the pandemic which inhibited our employees’ abilityaccess to access our facilities, may materially affectand caused certain delays and disruptions in our operations, including potentially interrupting our manufacturing, supply chain, clinical trial and pre-commercial launch activities.materials, supply. The COVID-19 pandemic has affected, and may in the future also affect our employees as well as employees and operations at third-party manufacturers or suppliers that have resulted in and maydelays in the future result in delays or disruptions in manufacturing and supply. The COVID-19 pandemic has also led to a new working environment, which may affect employee wellbeing and engagement, causing stress and fear of returning to work at the office. This in turn may result in lower productivity and motivation among employees.
In addition, the ability to promote certain specialty products has been impacted by fewer physician visits by patients and fewer physician interactions by our sales personnel. If these trends continue or worsen, our revenues could be adversely affected. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business, the value of our shares and our accessresponse to the capital and credit markets including our liquidity and cash resources. The new working environment, with many employees working remotely, has increased the exposure of many companies to cyber-attacks, including us, and data security breaches. If such breach were to occur, it may have a material adverse effect on our business, operations and reputation.
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Implementation of ongoing optimization efforts may adversely affect our business, financial condition and results of operations.
We have and will continue to implement changes to optimize our business operations and reallocate resources towards growth opportunities. As part of such optimization efforts, we may face wrongful termination, discrimination or other legal claims from employees affected by ongoing changes in our workforce. We may incur substantial costs defending against such claims, regardless of their merits, and such claims may significantly increase our severance costs. Additionally, we may see variances in the estimated severance costs depending on the category of employees and locations in which severance is incurred.
Upon the proposed divestiture of any facilityassets, including divestitures of business units as part of our Pivot to Growth strategy to focus on our core businesses, as well as divestitures of our facilities in connection with our ongoing plant optimization, we may not be able to divestconsummate such facilitydivestitures at a favorable price or in a timely manner. Any divestiture that we are unable to complete may cause additional costs associated with retaining, the facilityclosing or closing and disposing of the impacted businesses.
Any workforce reduction and site consolidation may result in the loss of numerous long-term employees, the loss of institutional knowledge and expertise, the reallocation of certain job responsibilities and the disruption of business continuity, all of which could negatively affect operational efficiencies and our ability to achieve growth and profitability through the development and sale of new pharmaceutical products.
Our continued success depends on our ability to attract, hire, integrate and retain highly skilled key personnel.
Given the size, complexity and global reach of our business and our multiple areas of focus, we are especially reliant upon our ability to recruit and retain highly qualified management and other key employees. Our ability to attract and retain such employees may be diminished by the financial, legal and regulatory challenges we have faced in recent years, the increased importance of delivering on corporate ESG initiativesgoals and their reputational impact as well as increased competition for talent. In addition, the success of our R&D activity depends on our ability to attract and retain sufficient numbers of skilled scientific personnel, which may be limited due to our R&D spending and programs. Changes in our management as a result of the appointment or departure of members of management and other key employees may also cause disruptions to our business and result in the loss of key personnel with institutional knowledge of our business, negative impacts on our relationships with existing employees and customers and increased operating costs related to integrating new personnel. Any difficulty in recruiting, hiring, integrating, retaining and motivating talented and skilled members of our organization may delayimpair or prevent the achievement of major business objectives.
The manufacture of our products is highly complex, and an interruption in our supply chain or problems with internal or third party information technology systemsmanufacturing could adversely affect our results of operations.
Our products are either manufactured at our own facilities or obtained through supply agreements with third parties. Many of our products are the result of complex manufacturing processes, and some require highly specialized raw materials. Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with or shortages of raw materials, natural disasters, and environmental factors. For some of our key raw materials, we have only a single, source of supply, and alternate sources of supply may not be readily available. If our supply of certain raw materials or finished products is interrupted from time to time, or proves insufficient to meet demand, our cash flows and results of operations could be adversely impacted. Additionally, any such supply interruption could result in a supply shortage to patients depending on the number of competitors able to meet the supply needs. Moreover, the streamlining of our manufacturing network may result in our product supply becoming more dependent on a smaller number of specific manufacturing plants. Our inability to timely manufacture any of our key products may result in claims and penalties from customers and could have a material adverse effect on our business, financial condition and results of operations as well as result in reputational harm.
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In recent years, medicine shortages have become an increasingly widespread problem around the world. We are working diligently across our supply chain to ensure continuous and stable supply. Many European countries are implementing legal and regulatory measures, such as mandatory stockpiling and high penalties in order to prevent supply disruptions. Such measures may lead to substantial monetary losses in case we experience long-term supply disruptions in the relevant territories.
We also rely on complex shipping arrangements to and from the various facilities of our supply chain. Customs clearance and shipping by land, air or sea routes rely on and may be affected by factors that are not in our full control or are hard to predict.
A significant portion of our costs is comprised of raw materials for our products as well as energy, transportation and labor costs for our manufacturing and operations. We have experienced increases in prices of raw materials, energy, labor and transportation. To the extent thattransportation, in part due to macroeconomic pressures. While we cannotseek to pass along such increased costs to our customers, there is no assurance that we will be able to successfully and promptly increase our pricing to offset such increased costs in the future. Our ability to increase our pricing may be limited or delayed by regulatory restrictions and we may only be able to increase our pricing to the extent our competitors also increase their prices, as any increase in our pricing exceeding that of our competitors could negatively impact our competitive position. Any failure to effectively and timely pass along our increased costs to our customers may adversely impact our results of operations and financial condition will be adversely affected.
Significant disruptions of our information technology systems could adversely affect our business.
We rely extensively on information technology systems in order to conduct business, including some systems that are managed by third-party service providers. These systems include but are not limited to, programs and processes relating to internal and external communications, ordering and managing materials from suppliers, converting materials to finished products, shipping products to customers, processing transactions, summarizing and reporting results of operations, processing payments to employees and vendors, calculating sales receivables, generating our financial results, and complying with information technology security compliance and other regulatory, legal or tax requirements. These information technology systems could be damaged or cease to function properly due to the poor performance or failure of third-party service providers, catastrophic events, power outages, network outages, failed upgrades or other similar events. If our business continuity plans do not effectively resolve such issues on a timely basis, we may suffer significant interruptions in conducting our business, which may adversely impact our business, financial condition and results of operations.
Furthermore, our systems and networks have been, and are expected to continue to be, the target of increasingly advanced and evolving cyber-attacks which may pose a risk to the security of our systems and the confidentiality, availability and integrity of our data, as well as disrupt our operations or damage our facilities or those of third parties. AsOur exposure to cybersecurity threats rapidly evolve in sophistication and become more prevalent, we are continually increasingrisks may be heightened by the global scope of our attention to these threats. We assess potential threats and vulnerabilities and make investments seeking to address them, including ongoing monitoring and updating of networks and systems, increasing specialized information security skills, deploying employee security training and updating our security policies. However, becauseoperations. Because the techniques, tools and tactics used in cyber-attacks frequently change and may be difficult to detect for periods of time, despite our attention to such threats and especially with the increasing use of artificial intelligence technology, we may face difficulties in anticipating and implementing adequate preventative measures or fully mitigating harms after such an attack. In addition, hardware, software or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. We outsource administration of certain functions to vendors that could be targets of cyber-attacks. Any manipulation, theft, loss and/or fraudulent use of customer, employee or proprietary data as a result of a cyber-attack targeting us or one of our third-party service providers could subject us to significant litigation, liability and costs, as well as adversely impact our reputation with customers and regulators, among others.regulators. A significant cyber-attack on our information technology systems may lead to substantial interruptions in our business, legal claims and liability, regulatory investigations and penalties, and reputational damage, which
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A significant data security breach could adversely affect our business and reputation.
In the ordinary course of our business, we collect and store sensitive data, in our data centers and on our networks, including intellectual property, proprietary business information and personally identifiable information (including of our employees, and of our customers, suppliers and business partners). We areAny data breach may subject us to civil fines and penalties, or regulatory fines or sanctions such as under the GDPR, or equivalent under relevant national laws, and regulations governing the collection, use and transmission of personal information, including health information. As the legislative and regulatory landscape for data privacy and protection continues to evolve around the world, there has been an increasing focus on privacy and data protection issues that may affect our business, including the U.S.’s federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as amended, (“HIPAA”),and other relevant state and federal privacy laws in the EU’s General Data Protection Regulation (“GDPR”),United States including the California Consumer Privacy Act (“CCPA”) and other laws and regulations including across our International Markets governingMarkets. Our failure, or the collection, use, disclosure and transmissionfailure of data in other jurisdictions. Although Teva is not currently HIPAA-regulated, certain Teva entities may be in the future, and, we do business with customers who are HIPAA-regulated. Increased focus on compliance with HIPAA and state laws that govern the privacy and security of medical data may impact our business.
We have procedures, tools, processes and services in place to detect and respond to cyber-attacks, data breaches, security incidents.incidents, and compromises of personal information. If our efforts to protect the security of personally identifiable information or other sensitive data are unsuccessful, a significantcyber-attack, data breach, security breachincident, or compromise of personal information may result in costly legal claims and liability, financial penalties, government enforcement actions, for example under the GDPR, private litigation, negative publicity or a reduction in supply of essential medicines to the public, each of which could further result in reputation or brand damage with customers, and our business, financial condition, results of operations or prospects could suffer.
We have significant operations globally, including in countries that may be adversely affected by political or economic instability, major hostilities or acts of terrorism, which exposes us to risks and challenges associated with conducting business internationally.
We are a global pharmaceutical company with worldwide operations. AlthoughAll but a majorityminor portion of our sales in 20212023 were in the United StatesNorth America and Western Europe, and an increasing portion of our sales and operational network are located in other regions. Certain of the regions such as Latin America, Central and Eastern Europe and Asia,in which we operate may be more susceptible to political and economic instability, such as the state of war declared in Israel in October 2023 and the military activity in the region, and the ongoing conflict between Russia and Ukraine, that could result in a loss of sales in such regions, includingregions. Our global headquarters and several manufacturing and R&D facilities are located in Israel and currently remain largely unaffected, and we have no manufacturing or R&D facilities in Russia or Ukraine. However, the duration, severity and the Ukraine. Other countriesglobal implications (including potential inflation and regions, such as the United States and Western Europe, also face potential instability due to politicaldevaluation consequences) of these and other developments. In addition,geopolitical conflicts that may arise in the United States, the executive administration has discussed,future, cannot be predicted at this time and could have an effect on our business, exchange rate exposure, supply chain, operational costs and commercial presence in some cases implemented, changes with respect to certain trade policies, tariffs and other government regulations affecting trade between the United States and other countries. these markets.
As a company that manufactures most of its products outside the United States, a “border adjustment tax” or other restriction on trade, if enacted by the United States, may have a material adverse effect on our business, financial condition and results of operations. In addition, given that a significant portion of our business is conducted in the European Union and the U.K., the formal change in the relationship betweendeparture of the U.K. andfrom the European Union caused by the U.K. referendum to leave the European Union, referred(referred to as “Brexit,”“Brexit”), may pose certain implications to our research, commercial and general business operations in the U.K. and the European Union, including the approval and supply of our products. On December 24, 2020, the United Kingdom and European Union agreed on a newThe Trade and Cooperation Agreement from December 2020, between the U.K. and on December 31, 2020, the United Kingdom formally left the transition period. The Trade and Cooperation AgreementEuropean Union, is comprehensive, but does not cover all areas of regulation pertinent to the pharmaceutical industry, so certain complexities remain. Thisremain, and the finalization of the long-term relationship between the United Kingdom and the European Union will dictate how both jurisdictions will be impacted and may result in an impact on our business operations in Europe.
Significant portions of our operations are conducted outside the markets in which our products are sold, and accordingly we often import a substantial number of products into such markets. We may, therefore, be denied access to our customers or suppliers or denied the ability to ship products from any of our sites as a result of a closing of the borders of the countries in which we sell our products, or in which our operations are located, due to economic, legislative, political and military conditions, including hostilities and acts of terror, in such
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countries. In addition, certain countries have put regulations in place requiring local manufacturing of goods, while foreign-made products are subject to pricing penalties or even bans from participation in public procurement auctions.
We face additional risks inherent in conducting business internationally, including compliance with laws and regulations of many jurisdictions that apply to our international operations. These laws and regulations include intellectual property laws, data privacy requirements, labor relations laws, tax laws, competition regulations, import and trade restrictions, economic sanctions, export requirements, the Foreign Corrupt Practices Act (“FCPA”), the UK Bribery Act 2010 and other similar local laws that prohibit corrupt payments to governmental officials or certain payments or remunerations and provisions of things of value to customers.customers and, in some cases, other private sector counterparties. Modifications of such laws or court decisions regarding such laws may adversely affect us and may impact our ability to continue our international operations. Given the high level of complexity of these laws, there is a risk that some provisions may be breached by us, for example through fraudulent or negligent behavior of individual employees (or third parties acting on our behalf), our failure to comply with certain formal documentation requirements, or otherwise. Actions by our employees, or by third-party intermediaries acting on our behalf, in violation of such laws, whether carried out in the United States or elsewhere in connection with the conduct of our business have exposed us, and may further expose us, to significant liability for violations of the FCPA or other anti-corruption laws. In 2016, we paid a monetary fine for FCPA violations and entered into a three yearthree-year deferred prosecution agreement with the DOJ, which included retaining an independent compliance monitor. The FCPA also requires us to keep and maintain accurate books and records and systems of internal controls to prevent bribery and corruption. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, requirements to obtain export licenses, cessation of business activities in sanctioned countries,
Our corporate headquarters and a sizable portion of our manufacturing activities are located in Israel. Our Israeli operations are dependent upon materials imported from outside Israel. Accordingly, our operations and information technology systems could be materially and adversely affected by acts of terrorism, including through cybersecurity threats, or if major hostilities were to occur in the Middle East or trade between Israel and its present trading partners were materially impaired, including as a result of acts of terrorism in the United States or elsewhere. The state of war declared in Israel in October 2023, and the military activity in the region, may result in disruption to our operations and facilities, such as our manufacturing and R&D facilities located in Israel, and impact our employees, some of which are military reservists being called to active military duty, and impact the economic, social and political stability of Israel.
We may not be able to find or successfully bid for suitable acquisition targets or licensing opportunities, or consummate and integrate future acquisitions.
In addition to pursuing organic growth opportunities, we intend to continue to evaluate and pursue potential acquisitions, strategic alliances, joint ventures and licenses, among other transactions, as part of our strategy to optimize our business and product portfolio and reallocate resources to fund growth. Relying on such transactions as sources of new innovative medicines, biosimilar and other products, or as a means of growth, involves risks that could adversely affect our future revenues and operating results. We may not be successful in seeking or consummating appropriate opportunities to enable us to execute our business strategy. We may not be able to pursue opportunities due to financial capacity constraints, we may not be able to obtain necessary regulatory approvals, and we may fail to consummate an announced acquisition. We may fail to integrate acquisitions successfully into our existing business, and could incur or assume significant debt and unknown or contingent liabilities, including, among others, patent infringement or product liability claims. In addition, we, or the partners with which we may enter into licensing or other collaboration agreements, may not be able to perform effectively under such agreements, impairing our ability to monetize opportunities related to them.
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We may decide to sell, close or otherwise divest business units, assets or facilities, and any failure to successfully and cost-effectively consummate such divestitures could adversely affect our prospects and opportunities for growth.
We will continue to consider selling, closing or otherwise divesting certain business units, assets and facilities as the focus of our business evolves, including as part of our Pivot to Growth strategy, if we determine that such assets are not critical to our strategy or we believe the opportunity to monetize the asset is attractive or for various other reasons, including for the reduction of indebtedness. For example, as previously announced, we intend to divest our API business in the first half of 2025, which divestiture is subject to various conditions, including reaching an agreement with a prospective purchaser on terms satisfactory to Teva, satisfying any conditions to closing the divestiture and obtaining any necessary approvals. We have also closed or divested a significant number of manufacturing plants and R&D facilities over the prior few years and may close or divest additional plants and facilities as part of our ongoing efforts regarding optimizing our business. There can be no assurance that we will be able to complete any divestitures of our business units, assets or facilities, including our intended divestiture of our API business, on the timing or upon the terms we expect, if at all. Such divestitures may also divert management’s attention from our core business operations, increase our expenses in the short-term and disrupt our relationships with existing employees, customers or suppliers.
We may fail to identify appropriate opportunities to divest assets on terms acceptable to us or may fail to transition employees and continuing operations from closed sites and disposed businesses efficiently. If divestiture opportunities are found, consummation of any such divestiture may be subject to closing conditions, including obtaining necessary regulatory approvals, and we may fail to consummate an anticipated divestiture. Although our expectation is to engage in asset sales only if they advance or otherwise support our overall strategy, any such sale could result in disruptions to our business operations, result in unanticipated expenses and reduce the size or scope of our business, the capabilities or durability of our manufacturing network, our market share in particular markets or our opportunities with respect to certain markets. If we are unable to complete our planned divestitures in a timely and cost-effective manner, or we do not realize the anticipated cost savings or other benefits of such transactions, our prospects and opportunities for growth may be negatively impacted.
Risks related to compliance, regulation and litigation
Our operations are subject to extensive pharmaceutical regulation, which can be costlycomplex legal and subjectregulatory environments. If we fail to comply with applicable laws and regulations we may suffer legal consequences that may have a material effect on our business, operations or reputation.
We operate around the world in complex legal and regulatory environments. For instance, we must comply with requirements of the FDA, EMA and other healthcare regulators with respect to disruption, delaysthe manufacture, labeling, sale, distribution, marketing, advertising, promotion and potential penalties.
Our business operations are subject to extensive regulation by the FDA and various other U.S. federal and state authorities, the EMA and other foreign regulatory authorities.authorities that establish requirements relating to, among other things, manufacturing practices, product labeling, and advertising and post marketing reporting, including adverse event reports and field alerts due to manufacturing quality concerns. The process of obtaining regulatory approvals to market a drug or medical device can be costly and time-consuming, and approvals might not be granted for future products, or additional indications or uses of existing products, on a timely basis, if at all. Delays in the receipt of, or
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failure to obtain approvals for, future products, or new indications and uses, could result in delayed realization of product revenues, reduction in revenues and substantial additional costs. For example, in the last threerecent years, we experienced delays in obtaining anticipated approvals for various generic and specialty products, and during 2020 and 2021 innovative medicines, some caused by the COVID-19 pandemic caused some delays in approvals due to travel and work restrictions. We may continue to experience similar delays.
Additionally, our facilities are subject to ongoing regulation, including periodic inspection by the FDA and other regulatory authorities, and we must incur expense and expend effort to ensure compliance with these complex regulations. Following an inspection, an agency may issue a notice listing conditions that are believed to violate cGMP or other regulations, or take other regulatory action, including issuing a warning letter for violations of “regulatory significance” that may result in enforcement action if not promptly and adequately corrected. In recent years, regulatory agencies around the world have increased their scrutiny of pharmaceutical manufacturers. This has resulted in requests for product recalls, temporary plant shutdowns to address specific issues and other remedial actions. Our manufacturing facilities, as well as those of our vendors and manufacturing partners, have also been the subject of increased regulatory oversight, leading to increased expenditures required to ensure compliance with new or more stringent production and quality control regulations. These regulatory actions have and may adversely impact our ability to supply various products around the world and to obtain approvals for new products manufactured at the affected facilities. If any regulatory body were to require one or more of our significant manufacturing facilities to cease or limit production, or to halt the approval of new or pending regulatory applications, our business and reputation could be adversely affected. In addition, because regulatory approval to manufacture a drug is site-specific, the delay and cost of remedial actions or obtaining approval to manufacture at a specific facility could have a material adverse effect on our business, financial condition and results of operations.
In addition, we are subject to regulations in various jurisdictions, including the Federal Drug Supply Chain Security Act in the U.S., the Falsified Medicines Directive in the European Union and many other such regulations in other countries that require us to develop electronic systems to serialize, track, trace and authenticate units of our products through the supply chain and distribution system. Compliance with these regulations may result in increased expenses for us or impose greater administrative burdens on our organization, and failure to meet these requirements could result in fines or other penalties.
Failure to comply with all applicable regulatory requirements may subject us to operating restrictions and criminal prosecution, monetary penalties and other disciplinary actions, including, sanctions, warning letters, product seizures, recalls, fines, injunctions, suspension, shutdown of production, revocation of approvals or the inability to obtain future approvals, or exclusion from future participation in government healthcare programs. Any of these events could disrupt our business and have a material adverse effect on our revenues, profitability and financial condition.
Governmental and related reductions in pharmaceutical pricing, reimbursementcivil proceedings and coverage, by governmental authorities and third-party payers may adversely affect our business.
In the futureordinary course of our business, operationswe are exposed to lawsuits, claims, proceedings and financial condition. In addition, “tender systems” for generic pharmaceuticals have been implemented (by both public and private entities) in a number of significant markets in which we operate, including in some European markets, in an effort to lower prices. Under such tender systems, manufacturers submit bids that establish prices for generic pharmaceutical products. These measures impact marketing practices and reimbursement of drugs and may further increase pressure on reimbursement margins. Certain other countries may consider the implementation of a tender system. Failing to win tenders or our withdrawal from participating in tenders, or the implementation of similar systems in other markets leading to further price declines, could have a material adverse effect on our business, financial position and results of operations.
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Due to increasing numbers of securities claims over the last several years and related payouts under insurance policies, in addition to increased settlement values in “event-driven” litigation and a growing number of plaintiff shareholder law firms eager to bring claims, premiums and deductibles for insurance, including D&O insurance, have been increasing and some insurers are reducing the number of companies they insure, causing the supply of insurance to lag behind demand. This could increase our premiums, reduce the scope and capacity of our coverage, and adversely affect our ability to maintain and renew our existing insurance policies on favorable terms or at all. While we continue to maintain insurance coverage intended to address certain risks, such coverage may be insufficient to cover claims and losses we face.
Healthcare reforms, and related reductions in pharmaceutical pricing, reimbursement and coverage, by governmental authorities and third-party payers may adversely affect our business.
The continuing increase in expenditures for healthcare has been the subject of considerable government attention almost everywhere we conduct business. Private health insurers and government health authorities continue to seek ways to reduce or contain healthcare costs, including by reducing or eliminating coverage for certain products and lowering reimbursement levels. The focus on reducing or containing healthcare costs has been fueled by controversies, political debate and publicity about prices for pharmaceutical products that some consider excessive, including Congressional and other inquiries into drug pricing, including with respect to our innovative medicines, which could have a material adverse effect on our reputation. In most of the countries and regions where we operate, including the United States, Western Europe, Israel, Russia, Japan, certain countries in Central and Eastern Europe and several countries in Latin America, pharmaceutical prices are subject to new government policies designed to reduce healthcare costs, and may be subject to additional regulatory efforts, funding restrictions, legislative proposals, policy interpretations, investigations and legal proceedings regarding pricing practices. These changes frequently adversely affect pricing and profitability and may cause delays in market entry, or decisions to forgo or discontinue development programs for our products. Certain U.S. states have implemented or are considering, pharmaceutical price controls or patient access constraints under the Medicaid program, and some jurisdictions have implemented or are considering price-control regimes that would apply to broader segments of their populations that are not Medicaid-eligible. Private third-party payers, such as health plans, increasingly challenge pharmaceutical product pricing, which could result in lower prices, lower reimbursement rates and a reduction in demand for our products. We cannot predict which additional measures may be adopted or the impact of current and additional measures on the marketing, pricing and demand for our products, which could have a material adverse effect on our business, financial condition and results of operations.
The U.S. Congress and various state legislatures in the United States continue to propose and enact legislative reforms to limit or reduce the cost of healthcare and regulate drug pricing practices. For example, the IRA introduced certain measures that, among other things, limit the price increases of prescription drugs and authorize the Medicare program to negotiate pricing for certain high-cost drugs, including physician-administered and self-administered drugs, that have been on the market for a minimum amount of time without generic competition. The IRA also includes reforms to Medicare benefit design, increasing a manufacturer’s coverage liability for applicable products. As the IRA was only recently enacted, we cannot accurately predict the impact it will have on the profitability of our products or our research and development initiatives. A number of state legislatures have also begun considering legislation that would implement IRA-like frameworks for state regulated insurance markets.
Increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries may result in increased pricing pressure by influencing the reimbursement policies of third-party payers. Healthcare reform legislation has increased the number of patients who have insurance coverage for our products, but provisions such as the assessment of a branded pharmaceutical manufacturer fee and an increase in the amount of rebates that manufacturers pay for coverage of their drugs by Medicaid programs may have an adverse effect on us. It is uncertain how current and future reforms in these areas will influence the future of our
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business operations and financial condition. In addition, “tender systems” for generic pharmaceuticals have been implemented (by both public and private entities) in a number of significant markets in which we operate, including in some European markets, in an effort to lower prices. Under such tender systems, manufacturers submit bids that establish prices for generic pharmaceutical products. These measures impact marketing practices and reimbursement of drugs and may further increase pressure on reimbursement margins. Certain other countries may consider the implementation of a tender system. Failing to win tenders or our withdrawal from participating in tenders, or the implementation of similar systems in other markets leading to further price declines, could have a material adverse effect on our business, financial position and results of operations.
Public concern over the abuse of opioid medications, including increased legal and regulatory action and the nationwide settlement could negatively affect our business.
Certain governmental and regulatory agencies are focused on the abuse of opioid medications in the United States. U.S. federal, state and local governmental and regulatory agencies are conductinghave conducted and may in the future conduct investigations of us, other pharmaceutical manufacturers and other supply chain participants with regard to the manufacture, sale, marketing and distribution of opioid medications. A number of state attorneys general, includingIn June 2023, we consummated a coordinated multistate effort, are investigating our marketing, sales and distribution of opioids, and we have received subpoenas from the DOJ seeking documents relatingnationwide settlement to the manufacture, marketing and sale of opioid medications. In addition, we are currently litigating civilsettle claims and administrative actions brought by various states and political subdivisions as well as private claimants, against various manufacturers, distributors and retail pharmacies throughout the United States in connection with our manufacture, marketing, sale and distribution of opioids. Also, several jurisdictionsThe payments required to be made under this settlement agreement and consumersothers may have an adverse impact on our operations and cash flows and there is no assurance that we will have the liquidity or other resources necessary to make such payments and provide supplies of our generic version of Narcan® (naloxone hydrochloride nasal spray) in the amounts and at the times required under the terms of our nationwide settlements. For further information, see “Opioids Litigation” in note 12b to our consolidated financial statements.
Additionally, we are defending claims and putative class action lawsuits in Canada have initiated litigation regarding opioids alleging similar claims as those in relation to the United States,manufacture, sale, marketing and we may be sued in other jurisdictions globally for similar claims as well.distribution of opioid medications. The loss or settlement of any such claims related to opioids could have a material adverse impact on our liquidity. For further information, see “Opioids Litigation” in note 12b to our consolidated financial statements.
In addition to the costs and potential consequences associated with defending the governmental investigations and legal proceedings, legislative, regulatory or industry measures to address the misuse of prescription opioid medications may also affect our business in ways that we are not able to predict. For example, a number of states, including New York, have enacted legislation that requires the payment of assessments or taxes on the sale or distribution of opioid medications in those states. If other statestates or local jurisdictions successfully enact similar legislation and we are not able to mitigate the impact on our business through operational changes or commercial arrangements, such legislation in the aggregate may have a material adverse effect on our business, financial condition and results of operations.
Furthermore, we utilize controlled substances in certain of our current products and products in development, and therefore must meet the requirements of the Controlled Substances Act of 1970 and related regulations administered by the DEA in the U.S., as well as the requirements of similar laws and regulations in other countries where we operate, relating to the manufacture, importation, shipment, storage, sale, and use of controlled substances. While we are committed to compliance and have robust compliance systems in place, riskrisks associated with these laws and regulations cannot be entirely eliminated by policies and procedures. The DEA and other regulatory agencies also set annual procurement quotas that limit the availabilityFor example, violations of the controlled substances used in certainControlled Substances Act of 1970 and related laws and regulations by direct customers (such as distributors and wholesalers), down-stream customers (such as pharmacies) and health-care providers may expose us to liability and penalties and could have a material adverse effect on our current products and products in development, and quota levels may impact our ability to meet commercial demand business, financial condition, results of operations, cash flows, and/or complete clinical trials.share price. In addition, prescription drug abuse and the diversion of opioids and other controlled substances are the frequent subject of public attention, which presents significant reputational risk.including, for example, past media reports over the appropriateness of prescription of medications used to treat attention deficit hyperactivity disorder (ADHD). The occurrence of any of the above risks could have a material adverse effect on our business, financial condition, reputations, results of operations, cash flows and/or share price.
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The pharmaceutical sector is facing increased government scrutiny from competition and pricing authorities around the world, which may expose us to significant damages and commercial restrictions that can materially and adversely affect our business.
We are required to comply with competition laws in the territories where we do business around the world. Compliance with these laws has been the subject of increasing focus and activity by regulatory authorities, both in the United States and Europe, in recent years. Alleged actions by our employees, in violation of such laws, or evolving interpretations of competition law as applicable to certain practices, have exposed us, and may further expose us, to investigations and legal proceedings, which may result in significant liability for violations of competition laws, which may have a material adverse effect on our reputation, business, financial condition and results of operations.
We arehave been and may in the future be subject to investigations, claims and proceedings relating to price fixing and violations of related laws and regulations, such as the Sherman Act. In August 2023, we reached a deferred prosecution agreement with the DOJ civil investigation and a criminal indictment charging Teva USA with criminal felony Sherman Act violations, that, if resultingto settle certain price-fixing charges brought against us in a conviction or guilty plea, could have a material adverse effect on our business, including monetary penalties, debarment from federally funded health care programs and reputational harm.2020. In addition, we are a party to numerous civil claims brought by state officials and private plaintiffs alleging that Teva, together with other pharmaceutical manufacturers, engaged in conspiracies to fix prices and/or allocate market share of generic products in the United States.
Following calls in recent years from policy makers and other stakeholders in many countries for governmental intervention to address the high prices of certain pharmaceutical products, we are currently, and may in the future be, subject to governmental investigations, claims or other legal or regulatory actions regarding our pricing and/or other alleged exclusionary practices. These include U.S. Congressional investigations regarding both our specialtyinnovative medicines and generic medicines, the European Commission’s inquiry into COPAXONE, and litigation concerning the U.K. Competition and Markets Authority’s inquiry regarding hydrocortisone. For example, in September 2020, the U.S. House Committee on Oversight and Reform held a hearing focused on pricing of branded medications, which focused in part on historic pricing of COPAXONE in the U.S., and subsequently issued a report with respect to COPAXONE’s pricing. It is not possibleAdditionally, on October 10, 2022, the European Commission issued a Statement of Objections, which sets forth its preliminary allegations that Teva had engaged in anti-competitive practices relating to predictCOPAXONE. In November 2023, the ultimate outcomeFTC notified Teva and other pharmaceutical companies as well as the FDA, under 21 CFR 314.53, that in the FTC’s view, certain of anyour and other pharmaceutical companies’ patents have been improperly listed in the Orange
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Book, resulting in potential delays to generic competition, and subsequently, certain members of the U.S. congress reiterated the concerns of the FTC. Any such investigations, claims or proceedings or what other investigations or lawsuits or regulatory responsesinvestigation may result from such assertions, which could have a material adverse effect on our reputation, business, financial condition and results of operations. For further information, see “Competition Matters” and “Government Investigations and Litigation Relating to Pricing and Marketing” in note 12b to our consolidated financial statements.
Third parties may claim that we infringe their proprietaryintellectual property rights and we may prevent us from manufacturing and selling some of our products, and we have sold andor may in the future elect to sell products prior to the final resolution of outstanding patentintellectual property litigation, and, as a result, we may be prevented from manufacturing and selling some of our products and could be subject to liability for damages in the United States, Europe and other markets where we do business.
Our ability to introduce new products depends in large part upon the success of our challenges to patent rights held by third parties or our ability to develop non-infringing products. Based upon a variety of legal and commercial factors, we may elect to sell a product even though patent litigation is still pending, either before any court decision is rendered or while an appeal of a lower court decision is pending. The outcome of such patent litigation could, in certain cases, materially adversely affect our business. For further information, see “Intellectual Property Litigation” in note 12b to our consolidated financial statements.
If we sell products prior to a final court decision, whether in the United States, Europe or elsewhere, and such decision is adverse to us, we could be required to cease selling the infringing products, causing us to lose future sales revenue from such products and towe could face substantial liabilities for patent infringement, in the form of either payment for the innovator’s lost profits or a royalty on our sales of the infringing products. These damages may be significant and could materially adversely affect our business. In the United States, in the event of a finding of willful infringement, the damages assessed may be up to three times the profits lost by the patent owner. Because of the discount pricing typically involved with generic pharmaceutical products, patented brand products generally realize a significantly higher profit margin than generic pharmaceutical products. As a result, the damages assessed may be significantly higher than our profits. In addition, even if we do not suffer damages, we may incur significant legal and related expenses in the course of successfully defending against infringement claims.
We may be susceptible to significant product liability claims that are not covered by insurance.
Our business inherently exposes us to claims for injuries allegedly resulting from the use of our products. As our portfolio of available products expands, particularly with new specialty products,innovative medicines, we may experience increases in product liability claims asserted against us.
We maintain an insurance program, which may include commercial insurance, self-insurance (including direct risk retention), or a combination of both approaches, in amounts and on terms that it believes are reasonable and prudent in light of its business and related risks. Teva sells,We sell, and will continue to sell, pharmaceutical products that are not covered by its product liability insurance. In addition, itwe may be subject to claims for which insurance coverage is denied, as well as claims that exceed itsour policy limits. Product liability coverage for pharmaceutical companies is becoming more expensive and increasingly difficult to obtain. As a result, Tevawe may not be able to obtain the type and amount of insurance it desires,we desire, or any insurance on reasonable terms, in the markets in which it operates.we operate. For further information regarding our current material product liability cases, see note 12b to our consolidated financial statements.
Any failure to comply with the complex reporting and payment obligations under the Medicare and Medicaid programs may result in further litigation or sanctions, in addition to those that we have announced in previous years.
The U.S. laws and regulations regarding Medicare and/or Medicaid reimbursement and rebates and other governmental programs are complex. Some of the applicable laws may impose liability even in the absence of specific intent to defraud. The subjective decisions and complex methodologies used in making calculations
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under these programs are subject to review and challenge, and it is possible that such reviews could result in material changes. In addition, the U.S. government has alleged violations of the federal Anti-Kickback Statute, and related causes of action under the federal False Claims Act and state law in connection with Teva’s donations to patient assistance programs. Such allegations could, if proven or settled, result in additional monetary penalties (beyond the lawsuits we have already settled) and possible exclusion from Medicare, Medicaid and other programs. In addition, we are notified from time to time of governmental investigations regarding drug reimbursement or pricing issues. For further information, see “Government Investigations and Litigation Relating to Pricing and Marketing” in note 12b to our consolidated financial statements. Certain parts of Medicare benefits are under scrutiny, as the U.S. Congress looks for ways to reduce government spending on prescription medicines.
Sanctions and other trade control laws create the potential for significant liabilities, penalties and reputational harm.
As a company with global operations, we may beare subject to national laws as well as international treaties and conventions controlling imports, exports, re-export, transfer and diversion of goods (including finished goods, materials, APIs, packaging materials, other products and machines), services and technology. These include import and customs laws, export controls, trade embargoes and economic sanctions, restrictions on sales to parties that are listed on (or are owned or controlled by one or more parties listed on) denied party watch lists and anti-boycott measures (collectively “Customs and Trade Controls”). Applicable Customs and Trade Controls are administered by Israel’s Ministry of Finance, the U.S. Treasury’s Office of Foreign Assets Control, (OFAC), the U.S. Department of Commerce, other U.S. agencies and multiple other agencies of other jurisdictions around the world where we do business. Customs and Trade Controls relate to a number of aspects of our business, including most notably the sales of finished goods and API as well as the licensing of our intellectual property. Compliance with Customs and Trade Controls has been the subject of increasing focus and activity by regulatory authorities, both in the United States and elsewhere, in recent years, and requirements under applicable Customs and Trade Controls in general, change frequently. Sanctions imposed with respect to the ongoing conflict between Russia and Ukraine have been particularly dynamic and future geopolitical conflicts involving other jurisdictions may result in further changes to the sanctions environment. Any such changes to the sanctions environment may require us to withdraw from or limit our exposure to certain markets or to terminate certain business relationships in order to remain in compliance with applicable laws. Although we have policies and procedures designed to address compliance with Customs and Trade Controls, actions by our employees, by third-party intermediaries (such as distributors and wholesalers) or others acting on our behalf in violation of relevant laws and regulations may expose us to liability and penalties for violations of Customs and Trade Controls and accordingly may have a material adverse effect on our reputation and our business, financial condition and results of operations.
Our failure to comply with applicable environmental, health and safety laws and regulations worldwide could adversely impact our business and results of operations.
We are subject to laws and regulations concerning the environment, safety matters, regulation of chemicals and product safety in the countries where we manufacture and sell our products or otherwise operate our business. These requirements include regulation of the handling, manufacture, transportation, storage, use and disposal of materials, including the discharge of pollutants and pharmaceutical residues into the environment. If we fail to comply with these laws and regulations, we may be subject to enforcement proceedings including fines and penalties. In the normal course of our business, we are also exposed to risks relating to possible releases of hazardous substances into the environment, which could cause environmental or property damage or personal injuries, and which could require remediation of contaminated soil and groundwater. Under certain laws, we may be required to remediate contamination at certain of our properties, regardless of whether the contamination was caused by us or by previous occupants or users of the property. Climate change, and evolving laws, regulations and policies regarding climate change, could also pose additional legal or regulatory requirements related to greenhouse gas (“GHG”) emissions and climate risk reporting, carbon pricing, and mandatory reduction targets. These more stringent requirements could increase our costs of sourcing, production, and transportation, as well as
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have negative reputational impacts if we fail to meet such requirements. While we have set avalidated Science-Based TargetTargets for GHG reductions, failure to respond to risks regarding climate change may have a material adverse effect on our business, financial condition, results of operations and reputation.
Natural disasters and extreme weather events resulting from climate change, such as floods, heatwaves, blizzards, hurricanes, wildfires, the rise of sea level, and water stress, could impact our business activities and our ability to deliver our products to customers. We evaluate these risks in our supply planning, loss prevention and business continuity planning. The implementation of an Environmental, Health and Safety Management System across our facilities has resulted in the development of processes to prepare and respond to a range of natural emergencies that may occur, including extreme weather events. We have been placing increased attention on water management, implementing a scarcity-focused approach to water conservation to align with community needs and advance toward sustainable operations. If our planning and risk management regarding natural disasters and extreme weather events fail, our facilities could be impacted and our activities could be significantly disrupted.
Our business could be negatively impacted by ESG issues.
In recent years, there has been an increased focus from certain investors, employees, consumers, regulators (including the SEC), and other stakeholders concerning ESG matters. These matters can contribute to the long-term sustainability of companies’ performance and an inability to successfully perform on ESG matters can result in negative impacts to our reputation, recruitment, retention, operations, financial results, and the price of our shares.shares, and our ability to attract or retain certain types of customers and investors. From time to time, we announce certain initiatives, including goals, regarding our focus areas, which include environmental matters, responsible sourcing,procurement, promoting access to medicines, social investments, compliance and ethics and I&D. We could fail, or be perceived to fail, either in identifying our ESG focus areas, or in our achievement of suchour initiatives or goals, whether described in our announcements, our ESG progress report or otherwise, or we could fail to accurately report our progress on such initiatives and goals. Such failures could be due to changes in our business. For example,business or evolving regulations in the countries in which we operate, and any such failures or perceived failures could expose us to negative impacts, including government enforcement actions or private litigation. We have also issued sustainability-linked senior notes with targets that include improving access to medicines in low- and middle-income countries and reducing GHG emissions, and failure to achieve such targets could negatively impact our reputation and also result in increased payments to holders of such senior notes. Moreover, the standards by which ESG matters are measured are developing and evolving, and certain areas are subject to assumptions that could change over time.
A variety of organizations measure performance on ESG topics, including on topics such as the cost, even if unintended, of our actions on climate change and inequality in society. In addition, weWe could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly or far enough in connection with these matters. Any such ESG matters could have a material adverse effect on our reputation, business, financial condition and results of
Moreover, our selection of disclosure frameworks that seek to align with various reporting standards may change from time to time and may result in lack of meaningful or comparative data from period to period. Our interpretation of reporting standards may differ from those of others and such standards may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. Collecting, measuring, and reporting ESG information and metrics can be costly, difficult and time consuming, is subject to evolving reporting standards, and can present numerous operational, reputational, financial, legal and
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other risks, any of which could have a material impact, including on our business, financial condition, reputation and stock price. Inadequate processes to collect and review this data and information prior to disclosure could be subject to potential liability related to such information.
Furthermore, there are an increasing number of ESG-related regulatory disclosure regulations with which Teva may have to comply. For example, in December 2022, the European Union adopted Directive No 2464/2022 on Corporate Sustainability Reporting (“CSRD”). The CSRD introduces detailed sustainability reporting obligations, requiring in-scope companies to make sustainability reports in accordance with the European Sustainability Reporting Standards (“ESRS”), which include certain mandatory disclosures and other voluntary disclosures on impacts, risks,
Risks related to our financial condition
Because we have substantial international operations, our sales, profits and cash flow may be adversely affected by currency fluctuations and restrictions as well as credit risks.
Fluctuations in exchange rates between the currencies in which we operate in, and the U.S. dollar, may have a material adverse effect on our results of operations, the value of balance sheet items denominated in foreign currencies and our financial condition.
In 2021,2023, approximately 48%47% of our revenues were denominated in currencies other than the U.S. dollar. As a result, we are subject to significant foreign currency risks, including repatriation restrictions in certain countries, and may face heightened risks as we enter new markets. A substantial proportion of our sales, particularly in Latin America, Central and Eastern European countries and Asia, are recorded in local currencies, which exposes us to the direct risk of devaluations, hyperinflation or exchange rate fluctuations. In addition, although the majority of our operating costs are recorded in, or linked to, the U.S. dollar, in 2021,2023, we incurred a substantial amount of operating costs in currencies other than the U.S. dollar, which only partially offset the currency risk derived from our sales in non-U.S. dollars.
The imposition of price controls or restrictions on the conversion of foreign currencies could also have a material adverse effect on our financial results. In addition, operating internationally exposes us to credit risks of customers and other counterparties in a number of jurisdictions. Some of these customers and other counterparties may have lesser creditworthiness than others and the legal system for enforcing collections in such jurisdictions may be less well-developed.
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Our intangiblelong-lived assets may continue to lead to significant impairments in the future.
We regularly review our long-lived assets, including identifiable intangible assets, goodwill and property, plant and equipment, for impairment. Goodwill and acquired indefinite life intangible assets are subject to impairment review on an annual basis and whenever potential impairment indicators are present. Other long-lived assets are reviewed when there is an indication that impairment may have occurred. The amount of goodwill, identifiable intangible assets and property, plant and equipment on our consolidated balance sheet may increase following acquisitions or other collaboration agreements. Changes in market conditions, including further increases in discount rates, exchange rate fluctuations, or other changes in the future outlook of value may lead to further impairments in the future. In addition, the potential divestment of assets, including the closure or divestment of manufacturing plants and R&D facilities, headquarters and other office locations, may lead to additional impairments. Future events or decisions may lead to asset impairments and/or related charges. For assets that are not impaired, we may adjust the remaining useful lives. Certain non-cash impairments may result from a change in our strategic goals, business direction or other factors relating to the overall business environment. Any significant impairment could have a material adverse effect on our results of operations. See notes 6 and 7 in our consolidated financial statements, for descriptions of impairments of intangible assets and goodwill in recent periods.
Our tax liabilities could be larger than anticipated.
We are subject to tax in many jurisdictions, and significant judgment is required in determining our provision for income taxes. Likewise, we are subject to audit by tax authorities in many jurisdictions. In such audits, our interpretation of tax legislation may be challenged and tax authorities in various jurisdictions may disagree with, and subsequently challenge, the amount of profits taxed in such jurisdictions under our inter-company agreements.
Although we believe our estimates are reasonable, the ultimate outcome of such audits and related litigation could be different from our provision for taxes and may have a material adverse effect on our consolidated financial statements and cash flows.
The base erosion and profit shifting (“BEPS”) project undertaken by the Organization for Economic CooperationCo-operation and Development (“OECD”) may have adverse consequences to our tax liabilities. The BEPS project contemplates changes to numerous international tax principles, as well as national tax incentives, and these changes, when adopted by individual countries, could adversely affect our provision for income taxes. The first wave of BEPS recommendations has been implemented by countries in specific national tax laws, and the OECD is currently working on further initiatives that may further change current international tax principles. It remains difficultOn December 12, 2022, the EU Council announced that EU member states had reached an agreement to predictimplement at EU level the magnitudeminimum taxation component of 15% (“Pillar Two”) of the effectOECD’s reform of suchinternational taxation, commencing in 2024. We are currently monitoring the new rules and awaiting further guidance and country agreements, however, we do not expect the adoption of this guidance to have a material impact on ourthe Company’s consolidated financial results.
The termination or expiration of governmental programs or tax benefits, or a change in our business, could adversely affect our overall effective tax rate.
Our tax expenses and the resulting effective tax rate reflected in our consolidated financial statements may increase over time as a result of changes in corporate income tax rates, other changes in the tax laws of the various countries in which we operate or changes in our product mix or the mix of countries where we generate profit. We have benefited, and currently benefit, from a variety of Israeli and other government programs and tax benefits that generally carry conditions that we must meet in order to be eligible to obtain such benefits. If we fail to meet the conditions upon which certain favorable tax treatment is based, we would not be able to claim future
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tax benefits and could be required to refund tax benefits already received. Additionally, some of these programs and the related tax benefits are available to us for a limited number of years, and these benefits expire from time to time.
Any of the following could have a material effect on our overall effective tax rate:
Failure to establish and maintain effective internal control over financial reporting could have a material adverse effect on our ability to report our financial condition, results of operations, or cash flows accurately and on a timely basis and could harm our reputation.
As a publicly traded company, we are subject to the Securities Exchange Act of 1934 (the “Exchange Act”) and the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”). The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. As part of its annual review of the effectiveness of Teva’s internal control over financial reporting as of December 31, 2023, management identified a material weakness in our internal control over financing reporting. The identified material weakness will be considered remediated once additional internal controls are designed, implemented and operate effectively for a sufficient period of time to allow management to conclude that the material weakness has been fully remediated. However, there is no assurance as to when we will be able to fully remediate the identified material weakness or if additional material weaknesses will be identified. Any failure to implement remedial measures and to achieve and maintain effective internal control over financial reporting could have a material adverse effect on the market for our ordinary shares. For a discussion of our internal control over financial reporting and a description of the identified material weakness and remediation plan, see “Part II, Item 9A. Controls and Procedures” of this Annual Report on Form 10-K.
Risks related to equity ownership risks
Shareholder rights and responsibilities as a shareholder are governed by Israeli law, which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.
The rights and responsibilities of the holders of our ordinary shares are governed by our articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights
Provisions of Israeli law and our articles of association may delay, prevent or make difficult an acquisition of us, prevent a change of control and negatively impact our share price.
Israeli corporate law regulates acquisitions of shares through tender offers and mergers, requires special approvals for transactions involving directors, officers or significant shareholders, and regulates other matters
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that may be relevant to these types of transactions. Furthermore, Israeli tax considerations may make potential acquisition transactions unappealing to us or to some of our shareholders. For example, Israeli tax law may subject a shareholder who exchanges his or her ordinary shares for shares in a foreign corporation to taxation before disposition of the investment in the foreign corporation. These provisions of Israeli law may delay, prevent or make difficult an acquisition of our company, which could prevent a change of control and, therefore, depress the price of our shares.
Our ADSsAmerican Depositary Shares (“ADSs”) and ordinary shares are traded on different marketsstock exchanges and this may result in price variations.
Our ADSs have been traded in the United States since 1982, and on the New York Stock Exchange (the “NYSE”) since 2012, and our ordinary shares have been listed on the TASE since 1951. Trading in our securities on these markets takes place in different currencies (our ADSs are traded in U.S. dollars and our ordinary shares are traded in New Israeli Shekels), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Israel). As a result, the trading prices of our securities on these two markets may differ due to these factors. In addition, any decrease in the price of our securities on one of these markets could cause a decrease in the trading price of our securities on the other market.
It may be difficult to enforce non-Israeli judgments in Israeli courts against us, our officers and our directors.
We are incorporated in Israel. Certain of our executive officers and directors and our outside auditors are not residents of the United States, and a substantial portion of our assets and the assets of these persons are located outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to file or enforce an action against us or any of those persons under non-Israeli law in an Israeli court. In addition, an Israeli court may be deemed
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management Program Overview
As cybersecurity threats rapidly evolve in sophistication and become more prevalent, especially with the increasing use of artificial intelligence technology, we have implemented a cybersecurity risk management program as part of our oversight, evaluation and mitigation of enterprise-level risks. Our cybersecurity risk management program leverages a combination of processes, technologies and personnel with expertise in cybersecurity to comply with applicable regulations and detect and respond to cyber-attacks, data breaches, security incidents, and compromises of personal information, as well as to regularly and promptly inform management and our Board of Directors of any significant cybersecurity risks and developments.
Our cybersecurity risk management program is led by our global Chief Information Security Officer (“CISO”), who is directly responsible for establishing cybersecurity strategies and structures and managing ongoing cybersecurity risk management activities through our information security office, which is responsible for the day-to-day identification, monitoring and management of cybersecurity risks. Our CISO reports directly to our global Chief Information Officer (“CIO”). Our CISO has significant experience in managing cybersecurity risks at major global companies in the pharmaceutical and defense industries. Our CISO regularly meets with the CIO to provide updates on cybersecurity matters. Our CIO updates our executive management on a regular basis
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to share cybersecurity related matters and discuss strategies to proactively manage cybersecurity threats. Our CISO and CIO brief our Audit Committee on our cybersecurity and risk management programs.
Our information security office is supported by a team consisting of personnel with experience and expertise in cybersecurity risk management strategies, execution and operations, with domain expertise in cloud services security, infrastructure and operational technology security, cybersecurity incident response, and tactical governance risk compliance.
Our CISO and CIO are also members of our information and security governance group, led by our CIO, which is comprised of executive and senior leadership from a variety of functions, including information security, corporate security, legal, finance, human resources, internal audit and compliance, as well as members of Teva’s global situation room (“GSR”). Additionally, our CISO, CIO and other members of our information security office may, from time to time, consult and coordinate with other Teva departments and members of management to manage cybersecurity risks and implement cybersecurity incident responses.
In addition, management has worked, and expects to continue to work, with third-party service providers, as appropriate, to assess, identify and manage cybersecurity risks. Management also conducts periodic and on-demand assessments of our cybersecurity risk management program with expert service providers to ensure it complies with and meets current ISO 27001 standards. In early 2024, our management team performed an exercise tabletop relating to potential cybersecurity risks.
As part of its overall risk oversight function, our Audit Committee, which is comprised entirely of independent directors, considers cybersecurity risks in connection with overseeing our overall enterprise risk management system. Management, including our CISO and CIO, provide updates on our cybersecurity risk management program and cybersecurity matters to the Audit Committee, and also reports to the Board of Directors as necessary. During 2023, the Board received dedicated cybersecurity training and performed an exercise tabletop relating to potential cybersecurity risks. As part of our cybersecurity risk management program, we maintain industry standard procedures and policies, which are reviewed and revised frequently, and certified to comply with ISO 27001 standards, to both proactively assess, identify and manage potential cybersecurity risks and respond to any actual cybersecurity threats and incidents. Such procedures and policies include: actively monitoring our information technology systems to ensure compliance with applicable legal and regulatory requirements; engaging third-party consultants and other service providers to monitor and, as appropriate, respond to cybersecurity risks; requiring our service providers and our business partners who connect directly to our information technology systems, to comply with our cybersecurity standards, due diligence processes and be subject to our non-disclosure and other confidentiality agreements that include cybersecurity-related terms; providing and analyzing specialized industry sector intelligence on cybersecurity threats; regularly testing our cybersecurity systems and disaster preparedness, including our back-up information technology systems; developing and updating incident response plans to address potential cybersecurity threats; and maintaining and training our personnel on cybersecurity incident reporting procedures.
Cyber Threats and Incident Response
In the ordinary course of our business, we collect and store confidential data, including intellectual property, proprietary business information and personally identifiable information (including of our employees, customers, suppliers and business partners). We rely extensively on information technology systems, including some systems that are managed by third-party service providers, to securely process, store and transmit such confidential data in order to conduct our business. These systems include programs and processes relating to internal and external communications, ordering and managing materials from suppliers, collecting, processing and storing data produced by our clinical trials and other research and development initiatives, converting materials to finished products, shipping products to customers, processing transactions, processing payments to employees and vendors, calculating sales receivables, generating our financial results for each reporting period, summarizing and reporting results of operations, and complying with information technology security compliance and other regulatory, legal or tax requirements.
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In the event that we experience a cybersecurity incident, we have a cybersecurity incident response playbook that sets forth the applicable processes, roles, engagements, escalations and notifications to be executed in order to promptly respond to such threats. Depending on its nature and scale, a cybersecurity threat may be managed within our information security office, escalated to our CISO and CIO, or escalated to our management, and Board of Directors and Audit Committee, as appropriate. In certain instances, our GSR may be initiated and will collectively manage Teva’s response to a crisis on a corporate level. The GSR is comprised of members from our various business units and regions, including senior leadership from a variety of functions, such as information security, legal, finance, human resources, communications and compliance.
We carry insurance that provides protection against the potential losses arising from a cybersecurity incident. However, there is no assurance that our insurance coverage will cover or be sufficient to cover all losses or claims that may result from a cybersecurity incident.
ITEM 2. | PROPERTIES |
We own or lease 7959 manufacturing and R&D facilities, occupying approximately 22.217 million square feet. As of December 31, 2021,2023, our manufacturing and R&D facilities are used by our business segments as follows:
Business Segment | Number of Facilities | Square Feet (in thousands) | ||||||
North America | 19 | 4,000 | ||||||
Europe | 30 | 11,200 | ||||||
International Markets | 30 | 7,000 | ||||||
Worldwide Total Manufacturing and R&D Facilities | 79 | 22,200 |
Business Segment | Number of Facilities | Square Feet (in thousands) | ||||||
North America | 18 | 3,350 | ||||||
Europe | 25 | 9,000 | ||||||
International Markets | 16 | 4,850 | ||||||
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Worldwide Total Manufacturing and R&D Facilities | 59 | 17,200 |
In addition to the manufacturing and R&D facilities discussed above, we maintain numerous office, distribution and warehouse facilities around the world.
We generally seek to own our manufacturing facilities. Office, R&D, distribution and warehouse facilities are often leased.
We are committed to maintaining all of our properties in good operating condition and repair, and the facilities are well utilized.
In Israel, our principal executive offices and corporate headquarters are located in Tel Aviv-Jaffa. We have an operating lease for our office space in Tel Aviv-Jaffa for an initial term of twelve and a half years, with an option for three extensions.
In North America, our principal executive offices are our U.S. headquarters in Parsippany, New Jersey. In Europe, our principal executive offices are in Amsterdam, the Netherlands. Our principal executive offices in North America and in Europe are leased by us.
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We are continuing the ongoing review and optimization of our manufacturing and supply network, which may include closures and/or divestment of manufacturing plants around the world.
ITEM 3.LEGAL PROCEEDINGS
Information pertaining to legal proceedings can be found in “Item 8 Financial Statements—Note 12b Contingencies” and is incorporated by reference herein.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
American Depositary Shares (“ADSs”)
Our ADSs, which have been traded in the United States since 1982, were admitted to trade on the Nasdaq National Market in October 1987 and were subsequently traded on the Nasdaq Global Select Market. On May 30, 2012, we transferred the listing of our ADSs to the New York Stock Exchange (the “NYSE”). The ADSs are
Various other stock exchanges quote derivatives and options on our ADSs under the symbol “TEVA.”
Ordinary Shares
Our ordinary shares have been listed on the Tel Aviv Stock Exchange (“TASE”) since 1951.
Holders
The number of record holders of ADSs at December 31, 20212023 was 2,497.
The number of record holders of ordinary shares at December 31, 20212023 was 177.
The number of record holders is based upon the actual number of holders registered on our books at such date and does not include holders of shares in “street names” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depository trust companies.
Dividends
We have not paid dividends on our ordinary shares or ADSs since December 2017.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
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Performance Graph
Set forth below is a performance graph comparing the cumulative total return (assuming reinvestment of dividends), in U.S. dollars, for the calendar years ended December 31, 2017, 2018, 2019, 2020, 2021, 2022 and 2021,2023, of $100 invested on December 31, 20162018 in the Company’s ADSs, the Standard & Poor’s 500 Index and the Dow Jones U.S. Pharmaceuticals Index.
* | $100 invested on December 31, |
ITEM 6. SELECTED FINANCIAL DATA[RESERVED]
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Overview
We are a global pharmaceutical company, committed to helping patients around the world to access affordable medicines and benefit from innovations to improve their health. Our mission is to be a global leader in generics, specialtyinnovative medicines and biopharmaceuticals, improving the lives of patients.
We operate worldwide, with headquarters in Israel and a significant presence in the United States, Europe and many other markets around the world. Our key strengths include our world-leading generic medicines expertise and portfolio, focused specialtyinnovative medicines portfolio and global infrastructure and scale.
Teva was incorporated in Israel on February 13, 1944 and is the successor to a number of Israeli corporations, the oldest of which was established in 1901.
Our Business Segments
We operate our business through three segments: North America, Europe and International Markets. Each business segment manages our entire product portfolio in its region, including generics, specialtywhich includes biosimilars and OTC products.products, as well as innovative medicines. This structure enables strong alignment and integration between operations, commercial regions, R&D and our global marketing and portfolio function, optimizing our product lifecycle across therapeutic areas.
In addition to these three segments, we have other activities, primarily the sale of API to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis.
Pivot to Growth Strategy
In May 2023, we introduced our new “Pivot to Growth” strategy, which is based on four key pillars: (i) delivering on our growth engines, mainly AUSTEDO, AJOVY, UZEDY and our late-stage pipeline of biosimilars; (ii) stepping up innovation through delivering on our late-stage innovative pipeline assets as well as building up our early-stage pipeline organically and potentially through business development activities; (iii) sustaining our generics medicines powerhouse with a leading global pharmaceutical company, Teva provides essential medicinescommercial footprint, focused portfolio, pipeline and manufacturing footprint; and (iv) focusing our business by optimizing our portfolio and global manufacturing footprint to millions of patients around the world every day. Our priorities remain focused on the healthenable strategic capital deployment to accelerate our near and well-beinglong-term growth engines and reorganizing certain of our employeesbusiness units to a more optimal structure, while also reorganizing key business units to enhance operational efficiency.
Macroeconomic and Geopolitical Environment
In recent years, the global economy has been impacted by fluctuating foreign exchange rates. Approximately 47% of our revenues are denominated in currencies other than the U.S. dollar and we manufacture our products largely outside of the United States. Fluctuations in the U.S. dollar versus other currencies in which we operate may materially impact our revenues, results of operations, profits and cash flows. Additionally, high levels of inflation have recently resulted in significant economic volatility and monetary tightening by central banks through increasing interest rates. In addition to rising inflation, heightened interest rates and fluctuating foreign exchange rates, the global economy has also been impacted by geopolitical tensions which have resulted in disruptions to global supply chains, including to our internal supply chain. In October 2023, Israel was attacked by a terrorist organization and entered a state of war. Our global headquarters as well as several of our manufacturing and R&D facilities are located in Israel and, while operations there currently remain largely unaffected, the impact of this war on our responsibility tooperations may increase, which could be material, as a result of
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the continuation, escalation or expansion of this war. In light of the above, supply chain disruptions could continue to provide our medicines to the nearly 200 million patients who depend on us every day.
Highlights
Significant highlights of 20212023 included:
Our revenues in 20212023 were $15,878$15,846 million, a decreasean increase of 5%6% in U.S. dollars, or 6%7% in local currency terms, compared to 2020,2022. This increase was mainly due to an upfront payment received in connection with the collaboration on our anti-TL1A asset, higher revenues from generic products in our International Markets and Europe segments and our innovative products AUSTEDO and AJOVY, the sale of certain product rights in our Europe segment, as well as higher revenues from Anda, partially offset by lower revenues from COPAXONE, API sales to third parties, and from BENDEKA and TREANDA, and generic products in the U.S., generic products in Japan resulting from the divestment of a majority of the generic and operational assets of our Japanese business venture, and Anda, partially offset by higher revenues from AUSTEDO and AJOVY. Revenues continued to be affected by the ongoing impact of the COVID-19 pandemic on markets and on customer stocking and purchasing patterns.North America segment.
Our North America segment generated revenues of $7,809$8,124 million and profit of $2,224$2,396 million in 2021.2023. Revenues decreasedincreased by 7.5%9% compared to 2020.2022. Profit decreasedincreased by 8%20% compared to 2020.2022.
Our Europe segment generated revenues of $4,886$4,837 million and profit of $1,494$1,478 million in 2021.2023. Revenues increased by 3%7% in U.S. dollars. Indollars or 5% in local currency terms, revenuescompared to 2022. Profit decreased by 2%1% compared to 2020. Profit increased by 12% compared to 2020.2022.
Our International Markets segment generated revenues of $2,032$1,958 million and profit of $529$464 million in 2021.2023. Revenues decreasedincreased by 6%3% in U.S. dollars or 4%16% in local currency terms, compared to 2020.2022. Profit increaseddecreased by 12%3% compared to 2020.2022.
Our revenues from other activities in 20212023 were $1,151$926 million, a decrease of 11% in U.S. dollars, or 12% compared to 2020. Inin local currency terms, revenues decreased by 13%.compared to 2022.
R&D expenses, net in 2023 were $953 million, an increase of 14% compared to $838 million in 2022.
Impairments of identifiable intangible assets were $424$350 million and $1,502$355 million in the years ended December 31, 20212023 and 2020,2022, respectively. See note 6
We recorded goodwill impairment charges of $700 million in 2023, related to our consolidated financial statements.International Markets reporting unit, compared to goodwill impairment charges of $2,045 million in 2022, of which $979 million is related to our International Markets reporting unit and $1,066 million is related to Teva’s API reporting unit.
We recorded expenses of $341$718 million for other asset impairments, restructuring and other items in 2021,2023, compared to expenses of $479$512 million in 2020. See2022. The data presented for the prior period have been revised to reflect a revision in relation to a contingent consideration liability and related expenses in the consolidated financial statements. For additional information, see note 151b to our consolidated financial statements.
We recorded an expenseexpenses of $717$1,043 million in legal settlements and loss contingencies in 2023, compared to an expenseexpenses of $60$2,082 million in 2020. See note 11 to our consolidated financial statements.2022.
Operating income was $1,716$433 million in 2021,2023, compared to an operating loss of $3,572$2,197 million in 2020.
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Financial expenses, net were $1,057 million or 32%, on a pre-tax income of $658 million. In 2020, we recognized a tax benefit of $168in 2023, compared to $966 million or 4%, on a pre-tax loss of $4,406 million. See note 13 to our consolidated financial statements.in 2022.
• | In 2023, we recognized a tax benefit of $7 million, or 1%, on a pre-tax loss of $624 million. In 2022, we recognized a tax benefit of $643 million, or 20%, on a pre-tax loss of $3,163 million. The data presented for the prior period have been revised to reflect a revision in relation to a contingent consideration liability and related expenses in the consolidated financial statements. For additional information see note 1b to our consolidated financial statements. |
Our debt was $23,043 million, compared to $25,919$19,833 million as of December 31, 2020. This decrease was mainly due2023, compared to $4,008$21,212 million repurchased upon consummationas of a cash tender offer, $3,167 million senior notes repaid at maturity and $710 million exchange rate fluctuations, partially offset by $4,973 million of issued sustainability-linked senior notes net of issuance costs.December 31, 2022.
Cash flow generated from operating activities in 2023 was $798$1,368 million, compared to $1,590 million in 2021, compared to $1,216 million2022. The decrease in 2020. This decrease was2023 resulted mainly due to lower profitfrom the sale of accounts receivables under our U.S. securitization facility during 2022, and higher payments of legal settlements in our North America segment during 2021.connection with the opioids litigation in 2023, partially offset by changes in working capital items, including a positive impact of accounts payables and accounts receivables in 2023, as well as higher tax payments in 2022.
During 2021,2023, we generated free cash flow of $2,196$2,387 million, which we define as comprising: $798comprising $1,368 million in cash flow generated from operating activities, $1,648$1,477 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program) and $311$68 million in proceeds from divestituressale of businesses and otherlong-lived assets, partially offset by $562$526 million in cash used for capital investments. During 2020,2022, we generated free cash flow of $2,110$2,243 million. The increase in 2023 resulted mainly from higher beneficial interest collected in exchange for securitized accounts receivables under our EU securitization, partially offset by lower cash flow generated from operating activities.
Results of Operations
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for fiscal years 20212023 and 2020.2022. For a comparison of our results of operations and financial condition for fiscal years 20202022 and 2019,2021, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20202022 Annual Report on Form 10-K, filed with the SEC on February 10, 2021.
Segment Information
North America Segment
The following table presents revenues, expenses and profit for our North America segment for the past two years:
Year ended December 31, | ||||||||||||||||
2021 | 2020 | |||||||||||||||
(U.S. $ in millions /% of Segment Revenues) | ||||||||||||||||
Revenues | $ | 7,809 | 100 | % | $ | 8,447 | 100 | % | ||||||||
Gross profit | 4,226 | 54.1 | % | 4,489 | 53.1 | % | ||||||||||
R&D expenses | 618 | 7.9 | % | 622 | 7.4 | % | ||||||||||
S&M expenses | 988 | 12.7 | % | 1,013 | 12.0 | % | ||||||||||
G&A expenses | 427 | 5.5 | % | 443 | 5.2 | % | ||||||||||
Other income | (31 | ) | § | (10 | ) | § | ||||||||||
Segment profit* | $ | 2,224 | 28.5 | % | $ | 2,421 | 28.7 | % | ||||||||
Year ended December 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
(U.S. in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 8,124 | 100% | $ | 7,452 | 100% | ||||||||||
Gross profit | 4,421 | 54.4% | 3,926 | 52.7% | ||||||||||||
R&D expenses | 625 | 7.7% | 532 | 7.1% | ||||||||||||
S&M expenses | 1,005 | 12.4% | 941 | 12.6% | ||||||||||||
G&A expenses | 403 | 5.0% | 474 | 6.4% | ||||||||||||
Other income | (8 | ) | § | (15 | ) | § | ||||||||||
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Segment profit* | $ | 2,396 | 29.5% | $ | 1,993 | 26.7% | ||||||||||
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* | Segment profit does not include amortization and certain other items. |
§ | Represents an amount less than 0.5%. |
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North America Revenues
Our North America segment includes the United States and Canada. As part of a recent shift in executive management responsibilities, commencing January 1, 2024, Canada will be reported as part of our International Markets segment.
Revenues from our North America segment in 20212023 were $7,809$8,124 million, a decreasean increase of $637$672 million, or 7.5%9%, compared to 2020,2022, mainly due to a declinean upfront payment received in connection with the collaboration on our anti-TL1A asset, higher revenues from COPAXONE, genericour innovative products AUSTEDO and ANDA,AJOVY, as well as higher revenues from Anda, partially offset by higherlower revenues from AUSTEDOBENDEKA and AJOVY. Our North America segment has experienced some reductions in volume due to less physicianTREANDA, COPAXONE and hospital activity during the COVID-19 pandemic, but has also experienced increase in demand for certain products related to the treatment of COVID-19 and its symptoms. In addition, the ability to promote our new specialty products, primarily AJOVY and AUSTEDO, has been impacted by less physician visits by patients and less physician interactions by our sales personnel.
Revenues by Major Products and Activities
The following table presents revenues for our North America segment by major products and activities for the past two years:
Year ended December 31, | Percentage Change 2020-2021 | |||||||||||
2021 | 2020 | |||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 3,769 | $ | 4,010 | (6 | %) | ||||||
AJOVY | 176 | 134 | 31 | % | ||||||||
AUSTEDO | 802 | 637 | 26 | % | ||||||||
BENDEKA/TREANDA | 385 | 415 | (7 | %) | ||||||||
COPAXONE | 577 | 884 | (35 | %) | ||||||||
ProAir* | 180 | 241 | (25 | %) | ||||||||
Anda | 1,323 | 1,462 | (9 | %) | ||||||||
Other | 597 | 664 | (10 | %) | ||||||||
Total | $ | 7,809 | $ | 8,447 | (8 | %) | ||||||
Year ended December 31, | Percentage Change 2023-2022 | |||||||||||
2023 | 2022 | |||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 3,475 | $ | 3,549 | (2 | %) | ||||||
AJOVY | 230 | 218 | 6 | % | ||||||||
AUSTEDO | 1,225 | 963 | 27 | % | ||||||||
BENDEKA and TREANDA | 241 | 316 | (24 | %) | ||||||||
COPAXONE | 320 | 387 | (17 | %) | ||||||||
Anda | 1,577 | 1,471 | 7 | % | ||||||||
Other* | 1,056 | 549 | 92 | % | ||||||||
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Total | $ | 8,124 | $ | 7,452 | 9 | % | ||||||
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financial statements.
Generic products
Among the most significant generic products we sold in North America in 20212023 were Truximalenalidomide capsules (the biosimilar to Rituxan
On March 9, 2023, Teva and tenofovir disoproxil fumarate tabletsNatco Pharma Ltd. announced the launch of additional strengths for lenalidomide capsules (the generic equivalent of Truvada
During the fourth quarter of Lidoderm Patch
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For more information on our generic products, including biosimilars, see “Item 1—Business—Our Product Portfolio and Business Offering—Generic Medicines.”
In 2021,2023, our total prescriptions were approximately 301318 million (based on trailing twelve months), representing 8.3%8.4% of total U.S. generic prescriptions according to IQVIA data.
AJOVY
For more information on AJOVY, see “Item 1—Business—Our Product Portfolio and Business Offering—SpecialtyInnovative Medicines—AJOVY.”
AUSTEDO
For more information on AUSTEDO, see “Item 1—Business—Our Product Portfolio and Business Offering—SpecialtyInnovative Medicines—AUSTEDO.”
BENDEKA
For more information on BENDEKA and TREANDA, see “Item 1—Business—Our Product Portfolio and Business Offering—SpecialtyInnovative Medicines—Oncology.”
COPAXONE
For more information on COPAXONE, see “Item 1—Business—Our Product Portfolio and Business Offering—SpecialtyInnovative Medicines—COPAXONE.”
Anda
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Product Launches and Pipeline
In 2021,2023, we launched the generic version of the following branded products in the United States:
Product Name | Brand Name | Launch Date | Total Annual U.S. Branded Sales at Time of Launch (U.S. $ in millions (IQVIA))* | |||||
Mesalamine Extended-Release Capsules, 0.375g | Apriso ® | January | $ | 344 | ||||
Etonogestrel and Ethinyl Estradiol Vaginal Ring | NuvaRing ® | January | $ | 812 | ||||
Testosterone Gel, 1.62%, 20.25mg/1.25g & 40.5mg/2.5g | AndroGel ® | February | $ | 40 | ||||
Liothyronine Sodium Tablets USP, 5mcg, 25mcg, 50mcg | Cytomel ® | February | $ | 107 | ||||
Brinzolamide Ophthalmic Suspension, USP, 1% | Azopt ® | March | $ | 184 | ||||
Mesalamine Suppositories | Canasa ® | April | $ | 66 | ||||
Isotretinoin Capsules, USP | Absorica ® | April | $ | 156 | ||||
Erythromycin Tablets, USP | N/A | May | $ | 45 | ||||
Tiopronin Tablets | Thiola ® | May | $ | 0.2 | ||||
Ivermectin Cream, 1% | Soolantra ® | June | $ | 111 | ||||
Formoterol Fumarate Inhalation Solution | Perforomist ® | June | $ | 300 | ||||
Bexarotene Capsules 75 mg | Targretin ® | November | $ | 48 | ||||
Adapalene and Benzoyl Peroxide Gel | Epiduo ® | December | $ | 281 | ||||
Arformoterol Tartrate Inhalation, Eq. 0.015 mg base/2 mL | Brovana ® | December | $ | 333 | ||||
Erlotinib Hydrochloride Tablets, 2 mg | Tarceva ® | December | $ | 3 | ||||
Pyrimethamine Tablets USP, 25 mg | Daraprim ® | December | $ | 42 | ||||
Ibuprofen & Famotidine Tablets, 800 mg/26.6 mg | Duexis ® | December | $ | 690 | ||||
Naloxone HCl Nasal Spray, 4 mg/spray | Narcan ® | December | $ | 281 | ||||
Sunitinib Malate Capsules, 12.5 mg, 25 mg, 37.5 mg and 50 mg | Sutent ® | December | $ | 193 | ||||
Buprenorphine Transdermal System, 7.5 mcg | Butrans ® | December | $ | 13 |
Product Name | Brand Name | Launch Date | Total Annual U.S. Branded Sales at Time of Launch (U.S. $ in millions (IQVIA))* | |||||||
Lubiprostone Capsules | Amitiza® capsules | January | $ | 204 | ||||||
Sorafenib Tablets, USP | Nexavar® tablets | January | $ | 64 | ||||||
Theophylline Extended-Release Tablets | Theo-Dur® | January | $ | 22 | ||||||
Doxepin Hydrochloride Cream | Zonalon® Cream | February | $ | 6 | ||||||
Teriflunomide Tablets | Aubagio® Tablets | March | $ | 1,970 | ||||||
Topiramate Extended-release Capsules | Trokendi XR® ER capsules | March | $ | 188 | ||||||
Lenalidomide Capsules 2.5mg & 20mg | Revlimid® capsules | March | $ | 185 | ||||||
Topiramate Extended-release Capsules | Trokendi XR® | May | $ | 244 | ||||||
Amlodipine Besylate Tablets, USP | Norvasc® tablets | May | $ | 88 | ||||||
Darunavir Tablets | Prezista® tablets | June | $ | 308 | ||||||
Gefitinib Tablets | Norvasc® tablets | June | $ | 5 | ||||||
Plerixafor Injection | Mozobil® | July | $ | 211 | ||||||
Everolimus Tablets | Afinitor® Tablets | October | $ | 251 | ||||||
Pazopanib Tablets | Votrient® Tablets | October | $ | 172 | ||||||
Dextroamphetamine Saccharate, Amphetamine Aspartate Monohydrate, Dextroamphetamine Sulfate, and Amphetamine Sulfate | Mydayis® | October | $ | 113 | ||||||
Pitavastatin Tablets | Livalo® tablets | November | $ | 299 | ||||||
Deferasirox Oral Granules | Jadenu® | November | $ | 21 | ||||||
Teriparatide Injection | Forteo® | December | $ | 720 | ||||||
Risperidone for Extended-Release Injectable Suspension | Risperdal Consta® | December | $ | 255 | ||||||
Cetrorelix Acetate for Injection | Cetrotide® | December | $ | 126 |
* | The figures presented are for the twelve months ended in the calendar quarter immediately prior to our launch or re-launch. |
As of December 31, 2021,2023, our generic products pipeline in the United States includes 200137 product applications awaiting FDA approval, including 6963 tentative approvals. This total reflects all pending ANDAs, supplements for product line extensions and tentatively approved applications and includes some instances where more than one application was submitted for the same reference product. Excluding overlaps, the branded products underlying these pending applications had U.S. sales for the twelve months ended September 30, 2021 exceeding $1102023 of approximately $107 billion, according to IQVIA. Approximately 72%78% of pending applications include a paragraph IV patent challenge and we believe we are first to file with respect to 7562 of these products, or 10288 products including
IQVIA reported brand sales are one of the many indicators of future potential value of a launch, but equally important are the mix and timing of competition, as well as cost effectiveness. The potential advantages of being the first filer with respect to some of these products may be subject to forfeiture, shared exclusivity or competition from so-called “authorized generics,” which may ultimately affect the value derived.
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In 2021,2023, we received tentative approvals for generic equivalents of the products listed in the table below, excluding overlapping applications. A “tentative approval” indicates that the FDA has substantially completed its review of an application and final approval is expected once the relevant patent expires, a court decision is reached, a 30-month regulatory stay lapses or a 180-day exclusivity period awarded to another manufacturer either expires or is forfeited.
Generic Name | Brand Name | Total U.S. Annual Branded Market (U.S. $ in millions (IQVIA))* | ||||
Ibrutinib Caps | Imbruvica ® | $ | 781 | |||
Lubiprostone Caps | Amitiza ® | $ | 306 | |||
Lenalidomide Capsules, 2.5 mg and 20 mg | Revlimid ® | $ | 162 | |||
Pimavanserin Capsules, 34 mg | Nuplazid ® | $ | 165 | |||
Methylnaltrexone Bromide Subcutaneous Injection | Relistor ® | $ | 19 | |||
Tasimelteon Caps | Hetlioz ® | $ | 2 |
Generic Name | Brand Name | Total U.S. Annual Branded Market (U.S. $ in millions (IQVIA))* | ||||
Tofacitinib Tablets, 5 mg and 10 mg | Xeljanz PF® | $ | 879 | |||
Fidaxomicin Tablets, 200 mg | Dificid® | $ | 320 | |||
Encorafenib Capsules, 75 mg | Braftovi® | $ | 197 | |||
Ponatinib Tablets, 15 mg and 45 mg | Iclusig® | $ | 175 | |||
Pazopanib Tablets, 200 mg | Votrient® | $ | 172 | |||
Thalidomide Capsules USP, 50 mg, 100 mg, and 200 mg | Thalomid® | $ | 12 | |||
Aspirin Delayed-Release and Omeprazole Tablets, 81 mg/40 mg and 325 mg and 40 mg** | Yosprala® | No Data | ||||
Treprostinil ER Tabs, 0.25 mg, 1 mg and 2.5 mg*** | Orenitram | No Data |
* | The figures presented are for the twelve months ended in the calendar quarter immediately prior to our launch or re-launch. |
** | Branded product discontinued on FDA website. |
*** | Marketed through Specialty Pharmacy that does not report to IQVIA. |
For a description of our specialty productinnovative medicines pipeline, see “Item 1—Business—Our Product Portfolio and Business Offering—SpecialtyInnovative Medicines” above.
North America Gross Profit
Gross profit from our North America segment in 20212023 was $4,226$4,421 million, a decreasean increase of 6%13% compared to $4,489$3,926 million in 2020, mainly due to lower revenues from COPAXONE and generic products.
Gross profit margin for our North America segment in 20212023 increased to 54.1%54.4%, compared to 53.1%52.7% in 2020.2022. This increase was mainly due to higheran upfront payment received in connection with the collaboration on our anti-TL1A asset, as discussed above, as well as a favorable mix of products primarily driven by an increase in revenues from AUSTEDO and a favorable mixlenalidomide capsules (the generic version of generic products.
North America R&D Expenses
R&D expenses relating to our North America segment in 20212023 were $618$625 million, a decreasean increase of 1%18% compared to $622$532 million in 2020.
For a description of our R&D expenses in 2021,2023, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.
North America S&M Expenses
S&M expenses relating to our North America segment in 20212023 were $988$1,005 million, a decreasean increase of 2%7% compared to $1,013$941 million in 2020,2022. This increase was mainly due to lower volumes as well as sales force efficiencies.promotional and commercial activities related to AUSTEDO and UZEDY.
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North America G&A Expenses
G&A expenses relating to our North America segment in 20212023 were $427$403 million, a decrease of 4%15% compared to $443$474 million in 2020.
North America Profit
Profit from our North America segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.
Profit from our North America segment in 20212023 was $2,224$2,396 million, a decreasean increase of 8%20% compared to $2,421$1,993 million in 2020.2022. This decreaseincrease was mainly due to lowerhigher revenues, partially offset by lower operatinghigher R&D and S&M expenses, as discussed above, as well as higher other income, as discussed in note 16 to our consolidated financial statements.
Europe Segment
The following table presents revenues, expenses and profit for our Europe segment for the past two years:
Year ended December 31, | ||||||||||||||||
2021 | 2020 | |||||||||||||||
(U.S. $ in millions /% of Segment Revenues) | ||||||||||||||||
Revenues | $ | 4,886 | 100 | % | $ | 4,757 | 100 | % | ||||||||
Gross profit | 2,823 | 57.8 | % | 2,666 | 56.0 | % | ||||||||||
R&D expenses | 244 | 5.0 | % | 247 | 5.2 | % | ||||||||||
S&M expenses | 846 | 17.3 | % | 830 | 17.4 | % | ||||||||||
G&A expenses | 244 | 5.0 | % | 261 | 5.5 | % | ||||||||||
Other (income) expense | (5 | ) | § | (3 | ) | § | ||||||||||
Segment profit* | $ | 1,494 | 30.6 | % | $ | 1,331 | 28.0 | % | ||||||||
Year ended December 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
(U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 4,837 | 100% | $ | 4,525 | 100% | ||||||||||
Gross profit | 2,726 | 56.4% | 2,700 | 59.7% | ||||||||||||
R&D expenses | 220 | 4.6% | 213 | 4.7% | ||||||||||||
S&M expenses | 767 | 15.9% | 748 | 16.5% | ||||||||||||
G&A expenses | 263 | 5.4% | 246 | 5.4% | ||||||||||||
Other (income) expense | (2 | ) | § | (3 | ) | § | ||||||||||
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Segment profit* | $ | 1,478 | 30.6% | $ | 1,496 | 33.1% | ||||||||||
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* | Segment profit does not include amortization and certain other items. |
§ | Represents an amount less than 0.5%. |
Europe Revenues
Our Europe segment includes the European Union, the United Kingdom and certain other European countries. Revenues from our Europe segment in 20212023 were $4,886$4,837 million, an increase of $129$312 million, or 3%7%, compared to 2020.2022. In local currency terms, revenues decreasedincreased by 2%5%, mainly due to lower demand ofhigher revenues from generic OTC and respiratory products due to the impact the COVID-19 pandemic had on purchasing patterns, price declines in oncologyOTC products as a result of generic competition and a decline in COPAXONEwell as higher revenues due to competing glatiramer acetate products,from AJOVY, partially offset by increasinglower revenues from AJOVY.COPAXONE and certain other respiratory products. Higher revenues from our Europe segment in 2023 were also driven by the sale of certain product rights.
In 2023, revenues were positively impacted by exchange rate fluctuations of $88 million, net of hedging effects, compared to 2022. Revenues in 2023 were affected by a $12 million negative hedging impact, compared to a $17 million positive hedging impact in 2022, which are included in “Other” in the table below. See note 10d to our consolidated financial statements.
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Revenues by Major Products and Activities
The following table presents revenues for our Europe segment by major products and activities for the past two years:
Year ended December 31, | Percentage Change 2020-2021 | |||||||||||
2021 | 2020 | |||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 3,569 | $ | 3,513 | 2 | % | ||||||
AJOVY | 87 | 31 | 184 | % | ||||||||
COPAXONE | 391 | 400 | (2 | %) | ||||||||
Respiratory products | 356 | 353 | 1 | % | ||||||||
Other | 483 | 459 | 5 | % | ||||||||
Total | $ | 4,886 | $ | 4,757 | 3 | % | ||||||
Year ended December 31, | Percentage Change 2023-2022 | |||||||||||
2023 | 2022 | |||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 3,664 | $ | 3,466 | 6 | % | ||||||
AJOVY | 160 | 124 | 29 | % | ||||||||
COPAXONE | 231 | 268 | (14 | %) | ||||||||
Respiratory products | 265 | 273 | (3 | %) | ||||||||
Other* | 516 | 393 | 31 | % | ||||||||
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Total | $ | 4,837 | $ | 4,525 | 7 | % | ||||||
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Generic products
AJOVYrevenues in our Europe segment in 2021, including OTC products,2023 increased by 2%29% to $3,569$160 million, compared to 2020.2022. In local currency terms, revenues decreasedincreased by 3%, mainly27% due to lower demand of generic, OTC and respiratory products due to the impact the COVID-19 pandemic had on purchasing patterns.
For more information on AJOVY, see “Item 1—Business—Our Product Portfolio and Business Offering—SpecialtyInnovative Medicines—AJOVY.”
COPAXONE
For more information on COPAXONE, see “Item 1—Business—Our Product Portfolio and Business Offering—SpecialtyInnovative Medicines—COPAXONE.”
Respiratory products
Product Launches and Pipeline
As of December 31, 2021,2023, our generic products pipeline in Europe included 588442 generic approvals relating to 7767 compounds in 163124 formulations, no EMA approvals received.received during 2023. In addition, approximately 1,3511,318 marketing authorization applications pending approval in 37 European countries, relating to 13799 compounds in 278214 formulations. One application isTwo applications are pending with the EMA.
For a description of our specialty productinnovative medicines pipeline, see “Item 1—Business—Our Product PortfolioResearch and Business Offering—Specialty Medicines”Development” above.
Europe Gross Profit
Gross profit from our Europe segment in 20212023 was $2,823$2,726 million, an increase of 6%1% compared to $2,666$2,700 million in 2020. This increase was mainly due to a positive exchange rate impact and lower cost of goods sold, mainly driven by our network consolidation activities.2022.
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Gross profit margin for our Europe segment in 2021 increased2023 decreased to 57.8%56.4%, compared to 56.0%59.7% in 2020,2022, mainly due to our network consolidation activities.
Europe R&D Expenses
R&D expenses relating to our Europe segment in 20212023 were $244$220 million, a decreasean increase of 1%3% compared to $247$213 million in 2020.
For a description of our R&D expenses in 2021,2023, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.
Europe S&M Expenses
S&M expenses relating to our Europe segment in 20212023 were $846$767 million, an increase of 2%3% compared to $830$748 million in 2020.2022. This increase was mainly to support revenue growth as well as due to exchange rate impacts.
Europe G&A Expenses
G&A expenses relating to our Europe segment in 20212023 were $244$263 million, a decreasean increase of 7% compared to $261$246 million in 2020.
Europe Profit
Profit of our Europe segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.
Profit from our Europe segment in 20212023 was $1,494$1,478 million, an increasea decrease of 12%1% compared to $1,331$1,496 million in 2020. This increase was mainly due to higher gross profit, as described above.
International Markets Segment
The following table presents revenues, expenses and profit for our International Markets segment for the past two years:
2021 | 2020 | |||||||||||||||
(U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 2,032 | 100 | % | $ | 2,154 | 100 | % | ||||||||
Gross profit | 1,118 | 55.0 | % | 1,096 | 50.9 | % | ||||||||||
R&D expenses | 68 | 3.3 | % | 70 | 3.3 | % | ||||||||||
S&M expenses | 417 | 20.5 | % | 427 | 19.8 | % | ||||||||||
G&A expenses | 109 | 5.4 | % | 136 | 6.3 | % | ||||||||||
Other (income) expense | (5 | ) | § | (11 | ) | (0.5 | %) | |||||||||
Segment profit* | $ | 529 | 26.0 | % | $ | 474 | 22.0 | % | ||||||||
Year ended December 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
(U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 1,958 | 100% | $ | 1,903 | 100% | ||||||||||
Gross profit | 1,050 | 53.6% | 1,033 | 54.3% | ||||||||||||
R&D expenses | 83 | 4.3% | 72 | 3.8% | ||||||||||||
S&M expenses | 420 | 21.4% | 405 | 21.3% | ||||||||||||
G&A expenses | 118 | 6.0% | 119 | 6.3% | ||||||||||||
Other (income) expense | (35 | ) | (1.8% | ) | (43 | ) | (2.2% | ) | ||||||||
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Segment profit* | $ | 464 | 23.7% | $ | 479 | 25.2% | ||||||||||
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* | Segment profit does not include amortization and certain other items. |
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International Markets Revenues
Our International Markets segment includes all countries in which we operate other than those in our North America and Europe segments. The International Markets segment includes more than 35 countries,
As part of a recent shift in executive management responsibilities, commencing January 1, 2024, Canada will be reported under our International Markets segment and will no longer be included as part of our North America segment. See note 19 to our consolidated financial statements.
In February 1, 2021, we completed the sale2022, Russia launched an invasion of Ukraine. As of the majoritydate of this Annual Report on Form 10-K, sustained conflict and disruption in the region is ongoing. Russia and Ukraine markets are included in our International Markets segment results. We have no manufacturing or R&D facilities in these markets. During the year ended December 31, 2023, the impact of this conflict on our International Markets segment’s results of operations and financial condition was immaterial. Consistent with our foreign exchange risk management hedging programs, we entered into hedges to hedge our exposure to currency exchange rate fluctuations with respect to our balance sheet assets, revenues and expenses. However, as of the generic and operational assetsend of 2023, we were unable to renew certain of our expiring hedging positions due to the liquidity situation in the market for Russian rubles. Prior to and since the escalation of the conflict, we have been taking measures to reduce our operational cash balances in Russia and Ukraine. We have been monitoring the solvency of our customers in Russia and Ukraine and have taken measures, where practicable, to mitigate our exposure to risks related to the conflict in the region. However, the duration, severity and global implications (including potential inflation and devaluation consequences) of the conflict cannot be predicted at this time and could have an effect on our business, ventureincluding on our exchange rate exposure, supply chain, operational costs and commercial presence in Japan.
In October 2023, Israel was attacked by a terrorist organization and entered a state of war. For additional information see “—Macroeconomic and Geopolitical Environment” above and note 1 to our consolidated financial statements.
Revenues from our International Markets segment in 20212023 were $2,032$1,958 million, a decreasean increase of $122$55 million, or 6%,3% compared to 2020.2022. In local currency terms, revenues decreasedincreased by 4%16% compared to 2020,2022, mainly due to lower saleshigher revenues from generic products in Japan resulting from the divestment mentioned above,most markets, partially offset by higherregulatory price reductions and generic competition to off-patented products in Japan.
In 2023, revenues were negatively impacted by exchange rate fluctuations of $246 million, net of hedging effects, compared to 2022. Revenues in most markets. Revenues continued to be2023 were affected by the ongoing impact of the COVID-19 pandemic on markets and on customer stocking and purchasing patterns. Revenues in 2021, included $6an $11 million from a positive hedging impact, compared to $16an $11 million from a positivenegative hedging impact in 2020,2022, which are included in “Other” in the table below. See note 10d to our consolidated financial statements.
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Revenues by Major Products and Activities
The following table presents revenues for our International Markets segment by major products and activities for the past two years:
Year ended December 31, | Percentage Change 2020-2021 | |||||||||||
2021 | 2020 | |||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 1,649 | $ | 1,792 | (8 | %) | ||||||
AJOVY | 50 | 18 | 179 | % | ||||||||
COPAXONE | 37 | 53 | (29 | %) | ||||||||
Other | 295 | 291 | 1 | % | ||||||||
Total | $ | 2,032 | $ | 2,154 | (6 | %) | ||||||
Year ended December 31, | Percentage Change 2023-2022 | |||||||||||
2023 | 2022 | |||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 1,594 | $ | 1,586 | 1% | |||||||
AJOVY | 44 | 35 | 25% | |||||||||
COPAXONE | 39 | 36 | 9% | |||||||||
Other | 281 | 246 | 14% | |||||||||
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Total | $ | 1,958 | $ | 1,903 | 3% | |||||||
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Generic products
AJOVY
For more information on AJOVY, in Japan. Revenues in 2020 included a milestone payment of $15 million received from Otsuka.
COPAXONE
For more information on COPAXONE, see “Item 1—Business—Our Product Portfolio and Business Offering—SpecialtyInnovative Medicines—COPAXONE.”
AUSTEDO was launched in China and Israel in 2021 and in Brazil in 2022 for the treatment of chorea associated with Huntington’s disease and for the treatment of tardive dyskinesia.
For more information on AUSTEDO, see “Item 1—Business—Our Product Portfolio and Business Offering—Innovative Medicines—AUSTEDO.”
International Markets Gross Profit
Gross profit from our International Markets segment in 20212023 was $1,118$1,050 million, an increase of 2% compared to $1,096$1,033 million in 2020.
Gross profit margin for our International Markets segment in 2021 increased2023 decreased to 55.0%53.6%, compared to 50.9%54.3% in 2020.2022. This increasedecrease was mainly due to higher profitability resulting from the divestment in Japan mentioned above, partially offset by regulatory price reductions and generic competition to off-patented products in Japan.
International Markets R&D Expenses
R&D expenses relating to our International Markets segment in 20212023 were $68$83 million, a decreasean increase of 3%16% compared to $70$72 million in 2020.2022.
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For a description of our R&D expenses in 2021,2023, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.
International Markets S&M Expenses
S&M expenses relating to our International Markets segment in 20212023 were $417$420 million, a decreasean increase of 2%4% compared to $427$405 million in 2020,2022, mainly due to lower marketing and travel costs attributed to restrictions related to the COVID-19 pandemic.
International Markets G&A Expenses
G&A expenses relating to our International Markets segment in 20212023 were $109$118 million, a decrease of 19%1% compared to $136$119 million in 2020.
International Markets Other Income
Other income relating to our International Markets segment in 2023 was $35 million, compared to $43 million in 2022. Other income in 2023 was mainly the result of a capital gain from the sale of assets. Other income in 2022 was mainly the result of settlement proceeds.
International Markets Profit
Profit of our International Markets segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.
Profit from our International Markets segment in 20212023 was $529$464 million an increasea decrease of 12%3% compared to $474$479 million in 2020.2022. This increasedecrease was mainly due to higher revenues in most marketsS&M and R&D expenses and lower S&M and G&A expenses, partially offset by lower sales in Japan, as discussed above.
Other Activities
We have other sources of revenues, primarily the sale of APIs to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis. Our other activities are not included in our North America, Europe or International Markets segments described above.
Our revenues from other activities in 20212023 were $1,151$926 million, a decrease of 11% in U.S. dollars, or 12% compared to 2020. Inin local currency terms, revenues decreased by 13%, mainly duecompared to a decrease in volumes from API and Medis resulting from the COVID-19 pandemic, as well as lower revenues from contract manufacturing services.
API sales to third parties in 20212023 were $742$568 million, a decrease of 4%16% in both U.S. dollars and local currency terms.
On January 31, 2024, we announced that we intend to divest our API business (including its R&D, manufacturing and commercial activities) through a sale, which divestment is expected to be completed in the first half of 2025. The intention to divest is in alignment with our Pivot to Growth strategy. However, there can be no assurance regarding the ultimate timing or structure of a potential divestiture or that a divestiture will be agreed or completed at all.
Teva Consolidated Results
The data presented with respect to other asset impairments, restructuring and other items, operating income (loss), income taxes, net income (loss) attributable to Teva and earnings (loss) per share for the prior period have been revised to reflect a revision in relation to a contingent consideration and related expenses in the consolidated financial statements. For additional information, see note 1b to our consolidated financial statements.
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Revenues
Revenues in 20212023 were $15,878$15,846 million, a decreasean increase of 5%6%, in U.S. dollars or 6%7% in local currency terms, compared to 2020,2022. This increase was mainly due to an upfront payment received in connection with the collaboration on our anti-TL1A asset, higher revenues from generic products in our International Markets and Europe segments, from our innovative products AUSTEDO and AJOVY, the sale of certain product rights in our Europe segment, as well as higher revenues from Anda, partially offset by lower revenues from COPAXONE, API sales to third parties, BENDEKA and TREANDA, and generic products in the U.S., generic
Exchange rate movements during 2021,2023, including hedging effects, positivelynegatively impacted revenues by $232$172 million, compared to 2020.2022. See note 10d to our consolidated financial statements.
Gross Profit
Gross profit in 20212023 was $7,594$7,645 million, a decreasean increase of 2%10% compared to 2020. This decrease was mainly a result of the factors discussed above under “—North America Gross Profit,” “—Europe Gross Profit” and “—International Markets Gross Profit.”
Gross profit as a percentage of revenuesmargin was 47.8%48.2% in 2021,2023, compared to 46.4%46.7% in 2020.
This increase in gross profit as a percentage of revenuesmargin was mainly due to higher profitabilityan upfront payment received in North America, resulting fromconnection with the collaboration on our anti-TL1A asset and higher revenues from AUSTEDO and AJOVY, and a favorable mix of generic products,in our North America segment, as well as higher profitabilitythe sale of certain product rights in our Europe and International Markets,segment, partially offset by higher cost of goods sold, mainly driven by higher costs due to inflationary and other macroeconomic pressures, and lower revenues from COPAXONE due to generic competition.
Research and Development (R&D) Expenses,
Our R&D activities for generic products in each of our segments include both (i) direct expenses relating to product formulation, analytical method development, stability testing, management of bioequivalence and other clinical studies and regulatory filings; and (ii) indirect expenses, such as costs of internal administration, infrastructure and personnel.
Our R&D activities for generic products in each of our segments include both (i) direct expenses relating to product formulation, analytical method development, stability testing, management of bioequivalence and other clinical studies and regulatory filings; and (ii) indirect expenses, such as costs of internal administration, infrastructure and personnel.
Our R&D expenses, for 2021net in 2023 were $967$953 million, a decreasean increase of 3%14% compared to 2020.
Our higher R&D expenses, net in 2023 compared to 2022, were mainly due to an increase related to our late-stage innovative pipeline in neuroscience (mainly neuropsychiatry), in immunology and in immuno-oncology, partially offset by a decline in various generics projects, as well as lower R&D expenses related to our biosimilar products pipeline. Additionally, in 2022 our R&D expenses were primarily relatedlower due to specialty product candidatesan adjustment in neuroscience (such as migraine, movement disorders/ neurodegeneration and neuropsychiatry, including post-approval commitments), immunology (such as respiratory medicines) and selected other areas, as well as generic products including biosimilars.
Our lower R&D expenses, net in 2021, compared2023 were also impacted by reimbursements from our strategic partnerships entered into in 2023. See note 2 to 2020, were mainly due to an upfront payment paid in connection with the collaboration with Alvotech and a decrease in the pain and neuropsychiatry therapeutic areas, partially offset by higher R&D expenses related to generic products including biosimilars.
R&D expenses as a percentage of revenues were 6.1%6.0% in 2021,2023, compared to 6.0%5.6% in 2020.2022.
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Selling and Marketing (S&M) Expenses
S&M expenses in 20212023 were $2,429$2,336 million, a decreasean increase of 3% compared to 2020.2022. Our S&M expenses were primarily the result of the factors discussed above under “—North America Segment— S&M Expenses,” “—Europe Segment— S&M Expenses” and “—International Markets Segment— S&M Expenses.”
S&M expenses as a percentage of revenues were 15.3%14.7% in 2021,2023, compared to 15.0%15.2% in 2020.
General and Administrative (G&A) Expenses
G&A expenses in 20212023 were $1,099$1,162 million, a decrease of 6%2% compared to 2020.
Our G&A expenses were primarily the result of the factors discussed above under “—North America Segment—G&A Expenses” and “—Europe Segment— G&A Expenses.”
G&A expenses as a percentage of revenues were 6.9%7.3% in 2021, flat2023, compared to 2020.
Identifiable Intangible Asset Impairments
We recorded expenses of $424$350 million for identifiable intangible asset impairments in 2021,2023, compared to expenses of $1,502$355 million in 2020.2022. See note 6 to our consolidated financial statements.
Goodwill Impairment
We recorded goodwill impairment charge was recordedcharges of $700 million in 2021. We recorded a goodwill impairment charge of $4,628 millionthe year ended December 31, 2023 related to our North AmericaInternational Markets reporting unit. We recorded goodwill impairment charges of $2,045 million in the year ended December 31, 2022, of which $979 million is related to our International Markets reporting unit in 2020.and $1,066 million is related to Teva’s API reporting unit. See note 7 to our consolidated financial statements.
Other Asset Impairments, Restructuring and Other Items
We recorded expenses of $341$718 million for other asset impairments, restructuring and other items in 2021,2023, compared to expenses of $479$512 million in 2020. For further details, as well as a description of significant regulatory and other events, see2022. See note 15 to our consolidated financial statements.
Legal Settlements and Loss Contingencies
In 2021,2023, we recorded an expenseexpenses of $717$1,043 million in legal settlements and loss contingencies, compared to an expenseexpenses of $60$2,082 million in 2020.2022. See note 11 to our consolidated financial statements.
Other Income
Other income in 20212023 was $98$49 million, compared to $40$107 million in 2020.2022. See note 16 to our consolidated financial statements.
Operating Income (Loss)
Operating income was $1,716$433 million in 2021,2023, compared to operating loss of $3,572$2,197 million in 2020.
Operating income as a percentage of revenues was 10.8%2.7% in 2021,2023, compared to operating loss as a percentage of revenues of 21.4%14.7% in 2020. Operating loss in 20202022. This increase was mainly affected bydue to higher goodwill impairment charges and intangible asset impairments.legal settlements and loss contingencies in 2022.
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Financial Expenses, Net
Financial expenses, net were $1,058$1,057 million in 2021,2023, compared to $834$966 million in 2020.
Reconciliation Table to Consolidated Income (Loss) Before Income Taxes
The following table presents a reconciliation of our segment profits to Teva’s consolidated operating income (loss) and to consolidated income (loss) before income taxes for the past two years:
Year ended December 31, | ||||||||
2021 | 2020 | |||||||
(U.S. $ in millions) | ||||||||
North America profit | $ | 2,224 | $ | 2,421 | ||||
Europe profit | 1,494 | 1,331 | ||||||
International Markets profit | 529 | 474 | ||||||
Total reportable segments profit | 4,246 | 4,225 | ||||||
Profit of other activities | 154 | 163 | ||||||
Total segments profit | 4,401 | 4,388 | ||||||
Amounts not allocated to segments: | ||||||||
Amortization | 802 | 1,020 | ||||||
Other assets impairments, restructuring and other items | 341 | 479 | ||||||
Goodwill impairment | — | 4,628 | ||||||
Intangible asset impairments | 424 | 1,502 | ||||||
Legal settlements and loss contingencies | 717 | 60 | ||||||
Other unallocated amounts | 402 | 271 | ||||||
Consolidated operating income (loss) | 1,716 | (3,572 | ) | |||||
Financial expenses, net | 1,058 | 834 | ||||||
Consolidated income (loss) before income taxes | $ | 658 | $ | (4,406 | ) | |||
Year ended December 31, | ||||||||
2023 | 2022 | |||||||
(U.S. $ in millions) | ||||||||
North America profit | $ | 2,396 | $ | 1,993 | ||||
Europe profit | 1,478 | 1,496 | ||||||
International Markets profit | 464 | 479 | ||||||
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Total reportable segments profit | 4,338 | 3,968 | ||||||
Profit of other activities | 24 | 172 | ||||||
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Total segments profit | 4,361 | 4,139 | ||||||
Amounts not allocated to segments: | ||||||||
Amortization | 616 | 732 | ||||||
Other asset impairments, restructuring and other items (1) | 718 | 512 | ||||||
Goodwill impairment | 700 | 2,045 | ||||||
Intangible assets impairments | 350 | 355 | ||||||
Legal settlements and loss contingencies | 1,043 | 2,082 | ||||||
Other unallocated amounts | 502 | 610 | ||||||
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Consolidated operating income (loss) (1) | 433 | (2,197 | ) | |||||
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Financial expenses, net | 1,057 | 966 | ||||||
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Consolidated income (loss) before income taxes (1) | $ | (624 | ) | $ | (3,163 | ) | ||
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(1) | The data presented for 2022 have been revised to reflect a revision in relation to a contingent consideration liability and related expenses in the consolidated financial statements. For additional information see note 1b to our consolidated financial statements. |
Income Taxes
In 2021, we recognized a tax expense of $211 million, or 32%, on a pre-tax income of $658 million.
In 2022, we recognized a tax rate for 2020 was lower than in 2021 mainly duebenefit of $643 million, or 20%, on a pre-tax loss of $3,163 million. See note 13 to a goodwill impairment charge that did not have a corresponding tax effect.
Share In (Profits) Losses of Associated Companies, – Net
Share in profits of associated companies, net was $9$2 million in 2021,2023, compared to $138$21 million in 2020. Our share2022. Share in profits of associated companies, net in 20202022 was mainly duerelated to a gain of $134 million reflecting the difference between the book value of our investment in American Well CorporationNovetide and its fair value as of the date itwe completed its initial public offeringacquisition in September 2020.
Net Income (Loss) Attributable to Teva
Net incomeloss was $417$559 million in 2021,2023, compared to a net loss of $3,990$2,446 million in 2020.2022. This increase was mainly due to higher goodwill impairment charges and legal settlements and loss contingencies in 2022, partially offset by higher tax benefits in 2022.
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Diluted Shares Outstanding and Earnings (Loss) Per Share
The weighted average diluted shares outstanding used for the fully diluted share calculation for 20212023 and 20202022 was 1,1071,119 million and 1,0951,110 million shares, respectively.
In computing diluted loss per share for the year ended December 31, 2020,2023 and 2022, no account was taken of the potential dilution that could occur upon the exercise of options and non-vested RSUs restricted share units (“RSUs”) and performance share units (“PSUs”) granted under employee stock compensation plans, and convertible senior debentures, since they had an anti-dilutive effect on loss per share.
Diluted earningsloss per share were $0.38was $0.50 for the year ended December 31, 2021,2023, compared to diluted loss per share of $3.64$2.20 for the year ended December 31, 2020.
Share Count for Market Capitalization
We calculate share amounts using the outstanding number of shares (i.e., excluding treasury shares) plus shares that would be outstanding upon the exercise of options and vesting of RSUs and performance share units (“PSUs”)PSUs and the conversion of our convertible senior debentures, in each case, at period end.
As of December 31, 20212023 and 2020,2022, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,1281,157 million and 1,1171,143 million, respectively.
Impact of Currency Fluctuations on Results of Operations
In 2021,2023, approximately 48%47% of our revenues were denominated in currencies other than the U.S. dollar. Since our results are reported in U.S. dollars, we are subject to significant foreign currency risks. Accordingly, changes in the rate of exchange between the U.S. dollar and local currencies in the markets in which we operate (primarily the euro, Israeli shekel,British pound, Canadian dollar, Russian ruble, Japanese yen, British pound, Russian ruble, Canadian dollar, Swiss franc, Indian rupeeIsraeli shekel and Polish zloty) impact our results.
During 2021,2023, the following main currencies relevant to our operations decreased in value against the U.S. dollar (each on an annual average compared to annual average basis): the Argentinian peso by 26%52%, the Turkish lira by 19%29%, the Brazilian realRussian ruble by 5%20%, the Ukraine hryvna by 13%, the Israeli shekel by 9% and the Japanese yen by 3% and the Russian ruble by 2%7%. The following main currencies relevant to our operations increased in value against the U.S. dollar: the Australian dollarMexican peso by 9%13%, the British poundSwiss franc by 7%6%, the Canadian dollarPolish zloty by 7%6%, the Swedish kronaHungarian forint by 7%5%, the Israeli shekelChilean peso by 6%4% and the euro by 4%3%.
As a result, exchange rate movements during 2021,2023, including hedging effects, positivelynegatively impacted overall revenues by $232$172 million and operating income by $49$111 million in comparison with 2020.
In 2021,2023, a positivenegative hedging impact of $31$2 million was recognized under revenues, and a negative impact of $1 million was recognized under cost of sales. In 2020,2022, a positive impact of $1$11 million was recognized under revenues offset byand a positivenegative impact of $1$7 million was recognized under cost of sales.
Hedging transactions against future projected revenues and expenses are recognized on the balance sheet at their fair value on a quarterly basis, while the foreign exchange impact on the underlying revenues and expenses may occur in subsequent quarters. See note 1010d to our consolidated financial statements.
Commencing in the third quarter of 2018, the cumulative inflation in Argentina exceeded 100% or more over a 3-year period. Although this triggered highly inflationary accounting treatment, it did not have a material impact on our results of operations.
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Commencing the second quarter of 2022, the cumulative inflation in Turkey exceeded 100% or more over a three-year period. Although this triggered highly inflationary accounting treatment, it did not have a material impact on our results of operations.
Liquidity and Capital Resources
Total balance sheet assets were $47,666$43,479 million as of December 31, 2021,2023, compared to $50,640$44,011 million as of December 31, 2020.
Our working capital balance, which includes accounts receivables net of SR&A, inventories, prepaid expenses and other current assets, accounts payables, employee-related obligations, accrued expenses and other current liabilities, was $787negative $1,374 million as of December 31, 2021,2023, compared to $662negative $119 million as of December 31, 2020.
Cash investment in property, plant and equipment and intangible assets in 20212023 was $562$526 million, compared to $578$548 million in 2020.2022. Depreciation was $528 million in 2021, compared to $537 million in 2020.
Cash and cash equivalents and short-term and long-term investments, as of December 31, 2021,2023 were $2,191$3,226 million compared to $2,478$2,801 million as of December 31, 2020. This decrease was mainly due to debt repayments as discussed below, partially offset by cash flow generated during the year.
Our cash on hand that is not used for ongoing operations is generally invested in bank deposits, as well as liquid securities that bear fixed and floating rates.
Teva’s principal sources of short-term liquidity are ourits cash on hand, existing cash investments, liquid securities and available credit facilities, primarily our $2.3$1.8 billion unsecured syndicated sustainability-linked revolving credit facility, entered into in April 2019, which will be reduced to $2.2 billion2022, as amended in April 2022February 2023 (“RCF”).
2023 Debt Balance and Movements
As of December 31, 2023, our debt was $19,833 million, compared to $21,212 million as of December 31, 2022.This decrease was mainly due to $1,646 million senior notes repaid at maturity, partially offset by $302 million of exchange rate fluctuations. Additionally, during the first quarter of 2023, we repurchased $2,506 million aggregate principal amount of notes upon consummation of a maturity datecash tender offer and issued $2,445 million of April 8, 2022,sustainability-linked senior notes, net of issuance costs. For further information, see note 9 to our consolidated financial statements.
In March 2023, we repaid $646 million of our 1.25% senior notes at maturity.
In July 2023, we repaid $1,000 million of our 2.8% senior notes at maturity.
In July 2023, a total amount of $700 million was withdrawn under the RCF, of which an$200 million was repaid in September 2023 and the remaining amount of $1.065 billion$500 million was extended twice, initially to April 8, 2023 and then to April 8, 2024. Tranche B has a maturity date of April 8, 2024. Loans and letters of credit will be available from time to time under each tranche for Teva’s general corporate purposes.
Our debt as of December 31, 20212023 was effectively denominated in the following currencies: 60% in U.S. dollars, 37%38% in euros and 3%2% in Swiss francs.
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The portion of total debt classified as short-term as of December 31, 20212023 was 6%8%, compared to 12%10% as of December 31, 2020, mainly due to repayment of debt, partially offset by a reclassification of upcoming maturities in 2022.
Our financial leverage, which is the ratio between our debt and the sum of our debt and equity, was 67%71% as of December 31, 2021, compared to 70% as of2023 and December 31, 2020.
Our average debt maturity was approximately 6.46.0 years as of December 31, 2021,2023, compared to 5.8 years as of December 31, 2020.
For further information, see note 9 to our consolidated financial statements.
2022 Debt Balance and Movements
In March 2020, weApril 2022, Teva repaid our $700$296 million 2.25%of its 3.25% senior notes at maturity.
In July 2020, we2022, Teva repaid our €1,010$365 million 0.375%of its 0.50% senior notes at maturity.
In December 2022, Teva repaid $713 million from our RCF, which was fully repaid before 2020 year end.
Total Equity
Total equity was $11,244$8,126 million as of December 31, 2021,2023, compared to $11,061$8,598 million as of December 31, 2020.2022. This increasedecrease was mainly due to a net incomeloss of $456$615 million $119and a dividend declaration to non-controlling interests in Teva’s joint venture in Japan of $67 million, stock-based compensation expenses and $39 millionwhich is expected to be paid in unrealized profit associated with hedging activities,the first quarter of 2024, partially offset by a negativepositive impact of $462$80 million from exchange rate fluctuations.
Exchange rate fluctuations affected our balance sheet, as approximately 50%81% of our net assets (including both non-monetary and monetary assets) were in currencies other than the U.S. dollar. When compared to December 31, 2020,2022, changes in currency rates had a negativepositive impact of $462$80 million on our equity as of December 31, 2021, mainly due to the change2023. The following main currencies decreased in value against the U.S. dollar of: thedollar: Russian ruble by 21%, Japanese yen by 8% and Chilean peso by 4%. The following main currencies increased in value against the U.S. dollar: Mexican peso by 13%, Polish zloty by 10%, Swiss franc by 9%, British pound by 5%, euro by 3%, Bulgarian lev by 3% and the Peruvian nuevo sol by 3%, the Bulgarian lev by 3%, the Japanese yen by 3%, the Polish zloty by 2%, the Russian ruble by 2% and the euro by 2%. All comparisons are on a year-end to year-end basis.
Cash Flow
We continually seek to continually improve the efficiency of our working capital management. From time to time,Periodically, as part of our cash and commercial relationship management activities, we may make decisions in our commercial and supply chain activities which may drive an acceleration of receivable payments from customers, or deceleration of payments to vendors, havingvendors. This has the effect of increasing or decreasing cash from operations during any given period. Increased cash from operations has the effect of reducing our leverage ratio, which is measured net of cash and cash equivalents, as of the end of such period. In connection with strategic continual improvement, we obtained more favorable payment terms from many of our vendors which are expected to continue in an individual period.future periods. In addition, in periods in which receivable payments from customers are delayed, we have and expect we may in the future extend the time to pay certain vendors, in order to balance our liquidity position. Such decisions had nomay have a material impact on our 2021annual operating cash flow measurement, but may impact quarter-to-quarteras well as on our quarterly results.
Cash flow generated from operating activities in 20212023 was $798$1,368 million, compared to $1,216$1,590 million in 2020. This2022. The decrease wasin 2023 resulted mainly due to lower profitfrom the sale of accounts receivables under our U.S. securitization
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facility during 2022 and higher payments of legal settlements in our North America segment during 2021.
During 2021,2023, we generated free cash flow of $2,196$2,387 million, which we define as comprising: $798comprising $1,368 million in cash flow generated from operating activities, $1,648$1,477 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program) and $68 million proceeds from sale of businesses and long-lived assets, partially offset by $526 million in cash used for capital investments. During 2022, we generated free cash flow of $2,243 million, which we define as comprising $1,590 million in cash flow generated from operating activities, $1,140 million in beneficial interest collected in exchange for securitized accounts receivables and $311$68 million in proceeds from divestituressale of businesses and otherlong-lived assets, partially offset by $562$548 million in cash used for capital investments. During 2020, we generated free cash flow of $2,110 million, comprised of $1,216investments and $7 million in cash flow generatedused for acquisition of businesses, net of cash acquired. The increase in 2023 resulted mainly from operating activities $1,405 million inhigher beneficial interest collected in exchange for securitized accounts receivables and $67 million in proceeds from sale of property, plant and equipment and intangible assets, partially offset by $578 million in cash used for capital investments. The increase in 2021 resulted mainly from higher cash generated from divestitures of businesses and other assets,under our EU securitization, partially offset by lower cash flow generated from operating activities.
Dividends
We have not paid dividends on our ordinary shares or ADSs since December 2017.
Commitments
In addition to financing obligations under short-term debt and long-term senior notes and loans, debentures and convertible debentures, our major contractual obligations and commercial commitments include leases, royalty payments, contingent payments pursuant to acquisition agreements, collaboration agreements and participation in joint ventures associated with R&D activities.
We are committed to pay royalties to owners of know-how, partners in alliances and certain other arrangements, and to parties that financed R&D at a wide range of rates as a percentage of sales of certain
In connection with certain development, supply and marketing, and research and collaboration or services agreements, we are required to indemnify, in unspecified amounts, the parties to such agreements against third-party claims relating to (i) infringement or violation of intellectual property or other rights of such third party; or (ii) damages to users of the related products. Except as described in our financial statements, we are not aware of any material pending action that may result in the counterparties to these agreements claiming such indemnification.
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Aggregated Contractual Obligations
The following table summarizes our material contractual obligations and commitments as of December 31, 2021:
Payments Due by Period | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||
Long-term debt obligations, including estimated interest* | $ | 29,778 | $ | 2,340 | $ | 5,805 | $ | 8,301 | $ | 13,332 | ||||||||||
Purchase obligations (including purchase orders) | 1,382 | 1,135 | 163 | 69 | 15 | |||||||||||||||
Total | $ | 31,160 | $ | 3,475 | $ | 5,968 | $ | 8,370 | $ | 13,347 | ||||||||||
Payments Due by Period | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||
Long-term debt obligations, including estimated interest* | $ | 25,847 | $ | 2,534 | $ | 6,814 | $ | 6,180 | $ | 10,319 | ||||||||||
Purchase obligations (including purchase orders) | 1,523 | 1,189 | 207 | 108 | 19 | |||||||||||||||
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Total | $ | 27,370 | $ | 3,723 | $ | 7,021 | $ | 6,288 | $ | 10,338 | ||||||||||
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* | Long-term debt obligations mainly include senior notes, sustainability-linked senior notes and convertible senior debentures, as disclosed in note 9 to our consolidated financial statements. |
The total gross amount of unrecognized tax benefits for uncertain tax positions was $672$651 million at December 31, 2021.2023. Payment of these obligations would result from settlements with tax authorities. Due to the difficulty in determining the timing and magnitude of settlements, these obligations are not included in the table above. Correspondingly, it is difficult to ascertain whether we will pay any significant amount related to these obligations within the next year.
We have committed to make potential future milestone payments to third parties under various agreements. These payments are contingent upon the occurrence of certain future events and, given the nature of these events, it is unclear when, if ever, we may be required to pay such amounts. As of December 31, 2021,2023, if all development milestones and targets, for compounds in phase 2 and in more advanced stages of development, are achieved, the total contingent payments could reach an aggregate amount of up to $121$20 million. Additional contingent payments are owed upon achievement of product approval or launch milestones.
We have committed to pay royalties to owners of know-how, partners in alliances and pursuant to certain other certain arrangements and to parties that financed research and development, at a wide range of rates as a percentage of sales or of the gross margin of certain products, as defined in the underlying agreements.
Due to the uncertainty of the timing of these payments, these amounts, and the amounts described in the previous paragraph, are not included in the table above.
Off-Balance Sheet Arrangements
Except for securitization transactions, which are disclosed in note 10 f10f to our consolidated financial statements, we do not have any material off-balance sheet arrangements.
Non-GAAP financial measures have no standardized meaning and accordingly have limitations in their usefulness to investors. We provide such non-GAAP data because management believes that such data provide useful information to investors. However, investorsInvestors are cautioned that, unlike financial measures prepared in accordance with U.S.
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GAAP, non-GAAP measures may not be comparable with the calculation of similar measures for other companies. These non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses our performance. The limitations of using non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all events during a period and may not provide a comparable view of our performance to other companies in the pharmaceutical industry.
In arriving atpreparing our non-GAAP presentation, net income and non-GAAP EPS data, we exclude items that either have a non-recurring impact on the income statementour financial performance or which, in the judgment of our management, are items that, either as a result of their nature or size, could, were they not singled out,excluded, potentially cause investors to extrapolate future performance from an improper base. In addition, we also exclude equity compensation expenses to facilitate a better understandingbase that is not reflective of our financial results, since we believe that such exclusion is important for understanding the trends in our financial results and that these expenses do not affect ourunderlying business operations. While not all inclusive, examplesperformance. Certain of these items are also excluded because of the difficulty in predicting their timing and scope. The items excluded from our non-GAAP net income and non-GAAP EPS include:
amortization of purchased intangible assets;
legal settlements and material litigation fees and/or loss contingencies, due to the difficulty in predicting their timing and scope;
impairments of long-lived assets, including intangibles, property, plant and equipment and goodwill;
restructuring expenses, including severance, retention costs, contract cancellation costs and certain accelerated depreciation expenses primarily related to the rationalization of our plants or to certain other strategic activities, such as the realignment of R&D focus or other similar activities;
• | acquisition- or divestment- related items, including changes in contingent consideration, integration costs, banker and other professional fees and inventory step-up; |
expenses related to our equity compensation;
• | significant one-time financing costs, amortization of issuance costs and terminated derivative instruments, and marketable securities investment valuation gains/losses; |
unusual tax items;
other awards or settlement amounts, either paid or received;
other exceptional items that we believe are sufficiently large that their exclusion is important to facilitate an understanding of trends in our financial results, such as impacts due to changes in accounting, significant costs for remediation of plants, such as inventory write-offs or related consulting costs, or other unusual events; and
corresponding tax effects of the foregoing items.
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The following tables present supplemental non-GAAP data, in U.S. dollars, which we believe facilitates an understanding of the factors affectingtable presents our business. In these tables, we exclude the following amounts:
Year Ended December 31, 2021 (U.S. $ and shares in millions, except per share amounts) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP | Excluded for non-GAAP measurement | Non- GAAP | ||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of purchased intangible assets | Legal settlements and loss contingencies | Impairment of long- lived assets | Other R&D expenses | Restructuring costs | Costs related to regulatory actions taken in facilities | Equity compensation | Contingent consideration | Gain on sale of business | Other non- GAAP items | Other items | ||||||||||||||||||||||||||||||||||||||||||
Net revenue | 15,878 | 15,878 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of sales | 8,284 | 702 | 23 | 23 | 270 | 7,266 | ||||||||||||||||||||||||||||||||||||||||||||||
Gross profit | 7,594 | 702 | — | — | — | — | 23 | 23 | — | — | 270 | — | 8,612 | |||||||||||||||||||||||||||||||||||||||
Gross profit margin | 48 | % | 54 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
R&D expenses | 967 | 15 | 19 | — | 933 | |||||||||||||||||||||||||||||||||||||||||||||||
S&M expenses | 2,429 | 99 | 33 | — | 2,297 | |||||||||||||||||||||||||||||||||||||||||||||||
G&A expenses | 1,099 | 43 | 27 | 1,029 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expense | (98 | ) | (51 | ) | (48 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies | 717 | 717 | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Other asset impairments, restructuring and other items | 341 | 160 | 133 | 7 | 40 | — | ||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets impairment | 424 | 424 | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Operating income (loss) | 1,716 | 802 | 717 | 584 | 15 | 133 | 23 | 118 | 7 | (51 | ) | 337 | — | 4,401 | ||||||||||||||||||||||||||||||||||||||
Financial expenses | 1,058 | 128 | 930 | |||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes | 658 | 802 | 717 | 584 | 15 | 133 | 23 | 118 | 7 | (51 | ) | 337 | 128 | 3,471 | ||||||||||||||||||||||||||||||||||||||
Income taxes | 211 | (360 | ) | 570 | ||||||||||||||||||||||||||||||||||||||||||||||||
Share in profits (losses) of associated companies – net | (9 | ) | (1 | ) | (8 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | 456 | 802 | 717 | 584 | 15 | 133 | 23 | 118 | 7 | (51 | ) | 337 | (232 | ) | 2,909 | |||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to non-controlling interests | 39 | (15 | ) | 54 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to Teva | 417 | 802 | 717 | 584 | 15 | 133 | 23 | 118 | 7 | (51 | ) | 337 | (247 | ) | 2,855 | |||||||||||||||||||||||||||||||||||||
EPS—Basic | 0.38 | 2.21 | 2.59 | |||||||||||||||||||||||||||||||||||||||||||||||||
EPS—Diluted | 0.38 | 2.20 | 2.58 |
Year ended December 31, | ||||||||||
($ in millions except per share amounts) | 2023 | 2022 | ||||||||
Net income (loss) attributable to Teva(5) | ($) | (559 | ) | (2,446 | ) | |||||
Increase (decrease) for excluded items: | ||||||||||
Amortization of purchased intangible assets | 616 | 732 | ||||||||
Legal settlements and loss contingencies | 1,043 | 2,082 | ||||||||
Goodwill impairment | 700 | 2,045 | ||||||||
Impairment of long-lived assets | 378 | 402 | ||||||||
Restructuring costs | 111 | 146 | ||||||||
Costs related to regulatory actions taken in facilities | 4 | 7 | ||||||||
Equity compensation | 121 | 124 | ||||||||
Contingent consideration(5) | 548 | 261 | ||||||||
Gain on sale of business | (3 | ) | (47 | ) | ||||||
Accelerated depreciation | 80 | 117 | ||||||||
Financial expenses | 66 | 61 | ||||||||
Share in profits (losses) of associated companies – net | — | (22 | ) | |||||||
Items attributable to non-controlling interests | (92 | ) | (96 | ) | ||||||
Other non-GAAP items(1) | 330 | 465 | ||||||||
Corresponding tax effects and unusual tax items(5) | (446 | ) | (1,021 | )(4) | ||||||
Non-GAAP net income attributable to Teva | ($) | 2,898 | 2,812 | |||||||
Non-GAAP tax rate(2) | 13.0 | % | 11.7 | % | ||||||
GAAP diluted earnings (loss) per share attributable to Teva | ($) | (0.50 | ) | (2.20 | ) | |||||
EPS difference(3) | 3.06 | 4.73 | ||||||||
Non-GAAP diluted EPS attributable to Teva(3) | ($) | 2.56 | 2.52 | |||||||
Non-GAAP average number of shares (in millions)(3) | 1,131 | 1,115 |
Other non-GAAP items include other exceptional items that we believe are sufficiently large that their exclusion is important to facilitate an understanding of trends in our financial results, |
Year ended December 31, 2020 (U.S. $ and shares in millions, except per share amounts) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP | Excluded for non-GAAP measurement | Non-GAAP | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of purchased intangible assets | Legal settlements and loss contingencies | Goodwill impairment | Impairment of long- lived assets | Other R&D expenses | Restructuring costs | Costs related to regulatory actions taken in facilities | Equity compensation | Contingent consideration | Gain on sale of business | Other non- GAAP items | Other items | |||||||||||||||||||||||||||||||||||||||||||||
Net revenue | 16,659 | 16,659 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of sales | 8,933 | 894 | 23 | 27 | 63 | 7,925 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Gross profit | 7,726 | 894 | 23 | 27 | 63 | 8,734 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Gross profit margin | 46.4 | % | 52.4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
R&D expenses | 997 | 37 | 20 | — | 941 | |||||||||||||||||||||||||||||||||||||||||||||||||||
S&M expenses | 2,498 | 126 | 36 | 14 | 2,322 | |||||||||||||||||||||||||||||||||||||||||||||||||||
G&A expenses | 1,173 | 46 | 12 | 1,115 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expense | (40 | ) | (8 | ) | (31 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies | 60 | 60 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other asset impairments, restructuring and other items | 479 | 416 | 120 | (81 | ) | 24 | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets impairment | 1,502 | 1,502 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill impairment | 4,628 | 4,628 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating income (loss) | (3,572 | ) | 1,020 | 60 | 4,628 | 1,918 | 37 | 120 | 23 | 129 | (81 | ) | (8 | ) | 114 | — | 4,388 | |||||||||||||||||||||||||||||||||||||||
Financial expenses, net | 834 | (85 | ) | 918 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes | (4,406 | ) | 1,020 | 60 | 4,628 | 1,918 | 37 | 120 | 23 | 129 | (81 | ) | (8 | ) | 114 | (85 | ) | 3,470 | ||||||||||||||||||||||||||||||||||||||
Income taxes | (168 | ) | (745 | ) | 577 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Share in profits (losses) of associated companies – net | (138 | ) | (134 | ) | (4 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | (4,099 | ) | 1,020 | 60 | 4,628 | 1,918 | 37 | 120 | 23 | 129 | (81 | ) | (8 | ) | 114 | (964 | ) | 2,897 | ||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to non-controlling interests | (109 | ) | (177 | ) | 68 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to Teva | (3,990 | ) | 1,020 | 60 | 4,628 | 1,918 | 37 | 120 | 23 | 129 | (81 | ) | (8 | ) | 114 | (1,140 | ) | 2,830 | ||||||||||||||||||||||||||||||||||||||
EPS—Basic | (3.64 | ) | 6.23 | 2.58 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
EPS—Diluted | (3.64 | ) | 6.22 | 2.57 |
Non-GAAP tax rate is tax expenses (benefit) excluding the impact of non-GAAP |
(3) | EPS difference and diluted non-GAAP EPS are |
(4) | Includes a portion of the realization of a loss related to |
(5) | The data presented for the prior period have been revised to reflect a revision in the presentation of these items in the consolidated financial statements. For additional information see note 1b to our consolidated financial statements. |
Trend Information
The following factors are expected to have a significant effect on our 20222024 results:
continued success of our specialty productsinnovative medicines AUSTEDO, AJOVY and AJOVY;UZEDY;
continued execution on the key pillars of our specialty product risperidone LAI;Pivot to Growth strategy;
expanding our existing innovative medicines and biosimilar pipeline, including by pursuing business development and other partnership opportunities;
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ability to successfully execute key generic launches in a timely manner;
ability to successfully develop and launch new biosimiliarbiosimilar products;
continued decline in sales of COPAXONE and other specialty productsinnovative medicines due to potential loss of exclusivity, generic competition and/or availability of alternative therapies;
continued competition for our generic products where multiple similar generic products have been launched, resulting in pricing pressure in the generics markets. We do, however, also see certain generic segments in which opportunities exist to grow our business, including our portfolio of new drug applications and our portfolio of approved complex products;
our disciplined cash management and debt repayment schedule;
• | our non-investment grade credit rating may increase the cost of any new borrowing; |
ongoing impact of currency fluctuations on revenuesmacroeconomic headwinds and operating income,geopolitical tensions, including global supply chain disruptions, increases in prices of raw materials, labor and transportation as well as on various balance sheetexchange rate fluctuations. For further details, see “—Macroeconomic and statements of income line items;Geopolitical Environment” above;
ongoing evaluation to further network consolidation activities to achieve additional operational efficiencies, including potential divestitures, which may affect our business and operations; and
continued efforts towards achieving our long-term financial goals.
For additional information, please see “Item 1—Business” above and elsewhere in this Item 7.
Critical Accounting Policies
For a description of our significant accounting policies, see note 1 to our consolidated financial statements.
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in certain circumstances that affect the amounts reported in the accompanying consolidated financial statements and related footnotes. Actual results may differ from these estimates. We base our judgments on our experience and on various assumptions that we believe to be reasonable under the circumstances.
Of our policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and complex judgment, involving critical accounting estimates and assumptions impacting our consolidated financial statements. We have applied our policies and critical accounting estimates consistently across our businesses.
The critical accounting estimates relate to the following:
Revenue Recognition and SR&A in the United States
Income Taxes
Contingencies
Goodwill
Identifiable Intangible Assets
Revenue Recognition and SR&A in the United States
Our gross product revenues are subject to a variety of deductions which are generally estimated and recorded in the same period that the revenues are recognized, and primarily represent chargebacks, rebates and
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sales allowances to wholesalers, retailers and government agencies with respect to our pharmaceutical products. Those deductions represent estimates of rebates and discounts related to gross sales for the reporting period and, as such, knowledge and judgment of market conditions and practice are required when estimating the impact of these revenue deductions on gross sales for a reporting period.
Historically, our changes of estimates reflecting actual results or updated expectations, have not been material to our overall business. Product-specific rebates, however, may have a significant impact on year-over-year individual product growth trends. If any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate predictors of our future experience, our results could be materially affected. The sensitivity of our estimates can vary by program, type of customer and geographic location. However, estimates associated with governmental allowances, U.S. Medicaid and other performance-based contract rebates are most at risk for material adjustment because of the extensive time delay between the recording of the accrual and its ultimate settlement, an interval that can generally range up to one year. Because of this time lag, in any given quarter, our adjustments to actual can incorporate revisions of several prior quarters. See also “Revenue recognition” in note 1 to ourthe consolidated financial statements.
Income Taxes
The provision for income tax is calculated based on our assumptions as to our entitlement to various benefits under the applicable tax laws in the jurisdictions in which we operate. The entitlement to such benefits depends upon our compliance with the terms and conditions set out in these laws.
Accounting for uncertainty in income taxes requires that it be more likely than not that the tax benefits recognized in the financial statements be sustained based on technical merits. The amount of benefits recorded for these positions is measured as the largest benefit more likely than not to be sustained. Significant judgment is required in making these determinations.
Deferred taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and tax bases of assets and liabilities under the applicable tax laws. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the determination of the appropriate valuation allowances, we have considered the most recent projections of future business results and prudent tax planning alternatives that may allow us to realize the deferred tax assets. Taxes which would apply in the event of disposal of investments in subsidiaries have not been taken into account in computing deferred taxes, as it is our intention to hold these investments rather than realize them.
Taxes have not been provided for tax-exempt income, as the Company intends to permanently reinvest these earnings and does not currently foresee a need to distribute dividends out of these earnings. In addition, the
For a discussion of the valuation allowance, deferred tax and valuation allowance estimates see notes 1 and 13 to our consolidated financial statements.
Contingencies
From time to time, Teva and/or its subsidiaries are subject to claims for damages and/or equitable relief arising in the ordinary course of business. In addition, in large part as a result of the nature of its business, Teva
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is frequently subject to litigation, governmental investigations and other legal proceedings. Except for income tax contingencies or contingent consideration acquired in a business combination, Teva records a provision in its consolidated financial statements to the extent that it concludes that a contingent liability is probable and the amount thereof is reasonably estimable. When accruing these costs, Teva will recognize an accrual in the amount within a range of loss that is the best estimate within the range. When no amount within the range is a better estimate than any other amount, Teva accrues for the minimum amount within the range. Teva records anticipated recoveries under existing insurance contracts at the gross amount that is expected to be collected when they are considered probable to occur.
Teva reviews the adequacy of the accruals on a periodic basis and, may determine to alteralthough it believes that its provisions at any timepresent reserves are adequate, changes in facts and circumstances in the future if it believes it would be appropriatemay lead to do so.adjustments to reserve estimates and could have a material impact on Teva’s results of operations, cash flows and financial condition in the period that reserve estimates are adjusted or paid. As such accruals are based on management’s judgment as to the probability of losses and, where applicable, actuarially determined estimates, accruals may materially differ from actual verdicts, settlements or other agreements made with regards to such contingencies. Litigation outcomes and contingencies are unpredictable and excessive verdicts can occur. Accordingly, management’s assessments involve complex judgments concerning future events and often rely heavily on estimates and assumptions.
Goodwill
Goodwill reflects the excess of the consideration transferred, including the fair value of any contingent consideration and any non-controlling interest in the acquiree, over the assigned fair values of the identifiable net assets acquired. Goodwill is not amortized, and is assigned to reporting units and tested for impairment at least annually, in the second quarter of the fiscal year.
We perform an impairment test annually and whenever events or changes in circumstances indicate the carrying value of an asseta reporting unit may not be recoverable. The provisions of the accounting standard for goodwill allow us to first assess qualitative factors to determine whether it is necessary to perform the next goodwill impairment quantitative test.
Examples of events or circumstances that may be indicative of impairment include, but are not limited to: macroeconomic and industry conditions, overall financial performance and adverse changes in legal, regulatory, market share and other relevant entity specific events.
The Company estimates the fair values of all reporting units using a discounted cash flow model which utilizes Level 3 unobservable inputs. Key estimates include the revenue growth rates taking into consideration industry and market conditions, terminal growth rate and the discount rate. The discount rate used is based on the WACC, adjusted for the relevant risk associated with country-specific and business-specific characteristics.
The carrying value of each reporting unit is determined by assigning the assets and liabilities, including the existing goodwill, to those reporting units.
When necessary, we record charges for impairments of goodwill for the amount by which the carrying amount exceeds the fair value of these assets.
See note 7 and note 19 to our consolidated financial statements for further details on the goodwill impairmentimpairments recognized in 2020,2023 and 2022, and Teva’s operating and reporting segments.
Identifiable Intangible Assets
Identifiable intangible assets are comprised of definite life intangible assets and indefinite life intangible assets.
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Definite life intangible assets consist mainly of acquired product rights and other rights relating to products for which marketing approval was received from the FDA or the equivalent agencies in other countries. These assets are amortized using mainly the straight-line method over their estimated period of useful life, or based on economic benefit models, if more appropriate, which is determined by identifying the period and manner in which substantially all of the cash flows are expected to be generated. Amortization of acquired developed products is recorded under cost of sales. Amortization of marketing and distribution rights is recorded under selling and marketing expenses when separable.
Indefinite life intangible assets are mainly comprised of IPR&D assets. Teva monitors these assets for items such as research and development milestones and progress to identify any triggering events.
The fair value of acquired identifiable intangible assets is determined using an income approach. This method starts with a forecast of all expected future net cash flows associated with the asset and then adjusts the forecast to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams.
Whenever impairment indicators are identified for definite life intangible assets, Teva reconsiders the asset’s estimated life, calculates the undiscounted value of the asset’s or asset group’s cash flows and then calculates, if required, the discounted value of cash flow by applying an appropriate discount rate to the undiscounted cash flow streams. Teva then compares such value against the asset’s or asset group’s carrying amount. If the carrying amount is greater, Teva records an impairment loss for the excess of carrying value over fair value based on the discounted cash flows.
For indefinite life intangible assets Teva performs an impairment test annually in the second quarter and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Teva determines the fair value of the asset annually or when triggering events are present, based on discounted cash flows and records an impairment loss if book value exceeds fair value.
Examples of events or circumstances that may be indicative of impairment include:
A projection or forecast that indicates losses or reduced profits associated with an asset. This could result, for example, from a change in the competitive landscape modifying our assumptions about market share or pricing prospectively, a government reimbursement program that results in an inability to sustain projected product revenues and profitability, or lack of acceptance of a product by patients, physicians or payers limiting our projected growth.
A significant adverse change in legal factors or in the business climate that could affect the value of the asset. For example, a successful challenge of our patent rights by a competitor would likely result in generic competition earlier than expected. And conversely, a lost challenge of patent rights in connection with our generic file would likely result in delayed entry.
A significant adverse change in the extent or manner in which an asset is used. For example, restrictions imposed by the FDA or other regulatory authorities could affect our ability to manufacture or sell a product.
For IPR&D projects, this could result from, among other things, a change in outlook affecting assumptions around competition or timing of entry such as approval success or the related timing of approval, clinical trial data results, other delays in the projected launch dates or additional expenditures required to commercialize the product.
The more significant estimates and assumptions inherent in the estimate of the fair value of identifiable intangible assets include (i) assumptions associated with forecasting product profitability, including sales and cost to sell projections, (ii) tax rates which seek to incorporate the geographic diversity of the projected cash flows, (iii) expected impact of competitive, legal and/or regulatory forces on the projections and the impact of
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technological risk, R&D expenditure for ongoing support of product rights or continued development of IPR&D, and (iv) estimated useful lives and IPR&D expected launch dates. Additionally, for IPR&D assets the risk of failure has been factored into the fair value measure.
While all intangible assets other than goodwill can face events and circumstances that can lead to impairment, in general, intangible assets other than goodwill that are most at risk of impairment include IPR&D assets and newly acquired or recently impaired indefinite-lived brand assets. IPR&D assets are high-risk assets, as R&D is an inherently risky activity. Consequently, IPR&D assets could be determined to be no longer commercially viable. Newly acquired and recently impaired indefinite-lived assets are more vulnerable to impairment as the assets are recorded at fair value and are then subsequently measured at the lower of fair value or carrying value annually or when triggering events are present. As such, immediately after acquisition or impairment, even small declines in the outlook for these assets can negatively impact our ability to recover the carrying value and can result in an impairment charge.
Recently Issued Accounting Pronouncements
See note 1 to our consolidated financial statements.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General
The objective of our financial risk management measures is to minimize the impact of risks arising from foreign exchange and interest rate fluctuations. To reduce these risks, we take various operational measures in order to achieve a natural hedge and may enter, from time to time, into financial derivative instruments. Our derivative transactions are executed through global banks. We believe that due to our diversified derivatives portfolio, the credit risk associated with any of these banks is minimal. No derivative instruments are entered into for trading purposes.
Exchange Rate Risk Management
We operate our business worldwide and, as such, we are subject to foreign exchange risks on our results of operations, our monetary assets and liabilities and our foreign subsidiaries’ net assets. For further information on currencies in which we operate, see “Item 7— Management’s Discussion and Analysis of Financial Condition and Results of Operations —Impact of Currency Fluctuations on Results of Operations.”
We generally prefer to borrow in U.S. dollars;dollars or euros; however, from time to time we borrow funds in other currencies, such as the euro, Swiss franc, and new Israeli shekel, in order to benefit from same currency revenues in relation to same currency costs and same currency assets in relation to same currency liabilities.
Cash Flow Exposure
Our total revenues were $15,878$15,846 million in 2021.2023. Of these revenues, approximately 48%47% were denominated in currencies other than the U.S. dollar, of which 21% in euros 4% in British pound and the rest in other currencies, none of which accounted for more than 4%3% of total revenues in 2021.2023. In most currencies, we record corresponding expenses.
In certain currencies, primarily the euro, our revenues generally exceed our expenses. Conversely, in other currencies, primarily the new Israeli shekel and the Indian rupee, our expenses generally exceed our revenues.
We enter into financial derivatives to hedge part of those currencies which do not have a sufficient natural hedge, in order to reduce the impact of foreign exchange fluctuations on our operating results.
As of December 31, 2021,2023, we hedged part of our expected operating results for 20222024 in currencies other than the U.S. dollar, primarily the euro, British pound, Canadian dollar, Swiss franc, Swedish krona, Polish zloty, Japanese yen, Russian rubleChilean peso, Indian rupee and Latin American currencies.
In certain cases, we may hedge exposure arising from a specific transaction, executed in a currency other than the functional currency, by entering into forward contracts and/or by using plain-vanilla and exotic option strategies. We generally limit the term of hedging transactions to a maximum of eighteen months.
Balance Sheet Exposure
With respect to our monetary assets and liabilities, the exposure arises when the monetary assets and/or liabilities are denominated in currencies other than the functional currency of our subsidiaries. We strive to limit our exposure through natural hedging. The remaining exposure is hedged almost in full by entering into financial derivative instruments. To the extent possible, the hedging activity is carried out on a consolidated level.
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The table below presents exposures exceeding $50 million in absolute values:
Net exposure as of December 31, | |||||||
Liability/Asset | (U.S. $ in millions) | ||||||
CHF/EUR | |||||||
GBP/EUR | |||||||
USD/ | |||||||
BGN/EUR | |||||||
USD/JPY | |||||||
PLN/EUR | |||||||
GBP/USD | |||||||
EUR/RUB | |||||||
INR/USD | |||||||
USD/PLN | 65 | ||||||
USD/MXN | 58 |
Outstanding Foreign Exchange Hedging Transactions
As of December 31, 2021,2023, we had outstanding derivatives, primarily forwards and currency option contracts, with a corresponding notional amount of approximately $1.7$2.5 billion and $0.4$0.2 billion, respectively. As of December 31, 2020,2022, we had outstanding derivatives, primarily forwards and currency option contracts, with a corresponding notional amountsamount of approximately $2.4$1.9 billion and $0.5$0.3 billion, respectively.
The table below presents the net notional and fair values of the financial derivatives entered into as of December 31, 20212023 in order to reduce currency exposure arising from our cash flow and balance sheet exposures. The table below presents only currency paired with hedged net notional values exceeding $50 million.
Currency (sold) | Cross Currency (bought) | Net Notional Value | Fair Value | 2021 Weighted Average Cross Currency Prices or Strike Prices | ||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||||||
Forward: | ||||||||||||||||||||||||
CHF | USD | 509 | 464 | (4 | ) | (12 | ) | 0.92 | ||||||||||||||||
JPY | USD | 313 | 326 | 4 | (5 | ) | 113.51 | |||||||||||||||||
USD | GBP | 133 | * | (1 | ) | — | 1.36 | |||||||||||||||||
EUR | USD | 98 | 400 | 4 | (16 | ) | 1.18 | |||||||||||||||||
MXN | USD | 96 | 91 | (4 | ) | (2 | ) | 21.38 | ||||||||||||||||
USD | INR | 95 | 145 | 1 | 2 | 75.35 | ||||||||||||||||||
RUB | USD | 79 | * | (1 | ) | — | 76.92 | |||||||||||||||||
CAD | USD | 76 | 70 | 1 | (2 | ) | 1.25 | |||||||||||||||||
EUR | PLN | 68 | 103 | 1 | — | 4.66 | ||||||||||||||||||
CZK | EUR | 50 | * | (1 | ) | — | 25.63 | |||||||||||||||||
GBP | USD | * | 133 | — | (3 | ) | — | |||||||||||||||||
EUR | CAD | * | 101 | — | (1 | ) | — | |||||||||||||||||
Options: | ||||||||||||||||||||||||
EUR | USD | 73 | 167 | 1 | (3 | ) | 1.15 | |||||||||||||||||
CAD | USD | 53 | * | — | (1 | ) | 1.30 | |||||||||||||||||
CHF | USD | 51 | 84 | — | (2 | ) | 0.94 | |||||||||||||||||
JPY | USD | * | 89 | — | — | — | ||||||||||||||||||
GBP | USD | * | 53 | — | (1 | ) | — |
Currency (sold) | Cross Currency (bought) | Net Notional Value | Fair Value | 2023 Weighted Average Cross Currency Prices or Strike Prices | ||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||||||
Forward: | ||||||||||||||||||||||||
EUR | CHF | 409 | 354 | 10 | (3 | ) | 0.95 | |||||||||||||||||
EUR | USD | 367 | 252 | (5 | ) | (8 | ) | 0.92 | ||||||||||||||||
EUR | GBP | 293 | 246 | 1 | (17 | ) | 0.87 | |||||||||||||||||
JPY | USD | 239 | 179 | (6 | ) | (4 | ) | 145.00 | ||||||||||||||||
EUR | PLN | 187 | 151 | 2 | (1 | ) | 4.40 | |||||||||||||||||
USD | INR | 162 | 122 | 1 | (8 | ) | 83.80 | |||||||||||||||||
USD | ILS | 144 | 79 | 5 | 2 | 3.73 | ||||||||||||||||||
GBP | USD | 105 | 58 | 4 | (18 | ) | 1.23 | |||||||||||||||||
USD | PLN | 97 | 58 | (1 | ) | 1 | 4.03 | |||||||||||||||||
CAD | USD | 61 | 52 | (1 | ) | (5 | ) | 1.38 | ||||||||||||||||
CHF | USD | 56 | 50 | (2 | ) | (2 | ) | 1 | ||||||||||||||||
MXN | USD | 56 | * | (2 | ) | — | 18 | |||||||||||||||||
Options: | ||||||||||||||||||||||||
EUR | USD | * | 132 | — | (3 | ) | — | |||||||||||||||||
GBP | USD | * | 86 | — | (2 | ) | 1.23 | |||||||||||||||||
USD | ILS | * | 68 | 1 | (2 | ) | 3.66 | |||||||||||||||||
CAD | USD | * | * | — | — | 1.38 | ||||||||||||||||||
CHF | USD | * | * | — | (1 | ) | 1 |
* | Represents net notional value of less than $50 million. |
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Foreign Subsidiaries Net Assets
Under certain market conditions, we may hedge against possible fluctuations in foreign subsidiaries’ net assets (“net investment hedge”). In these cases, we may use cross currency swaps and forward contracts.
Interest Rate Risk Management
We are subject to interest rate risk on our investments and on our borrowings. We manage interest rate risk in the aggregate, while focusing on our immediate and intermediate liquidity needs.
We raise capital through various debt instruments including senior notes, and sustainability-linked senior notes, that bear a fixed or variable interest rate, syndicated revolving credit facility that bears a fixed or variable interest rate and convertible debentures that bear fixed or variable interest rates, as well as a fixedsyndicated sustainability-linked revolving credit facility and securitization programs that bear a variable interest rate. In some cases, as described below, we have swapped from a fixed to a variable interest rate (“fair value hedge”), from a variable to a fixed interest rate and from a fixed to a fixed interest rate with an exchange from a currency other than the functional currency (“cash flow hedge”), reducing overall interest expenses or hedging risks associated with interest rate fluctuations.
In certain cases, we may hedge, in whole or in part, against exposure arising from a specific transaction, such as debt issuances related to an acquisition or debt refinancing, by entering into forward and interest rate swap contracts and/or by using options.
The table below presents the aggregate outstanding debt by currencies and maturities as of December 31, 2021:
Currency | Total Amount | Interest Rate Ranges | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 & thereafter | ||||||||||||||||||||||||||||
(U.S. dollars in millions) | ||||||||||||||||||||||||||||||||||||
Fixed Rate: | ||||||||||||||||||||||||||||||||||||
USD | 13,934 | 2.80 | % | 7.13 | % | 1,453 | 1,250 | 1,000 | 3,496 | 1,000 | 5,019 | |||||||||||||||||||||||||
Euro | 8,417 | 1.13 | % | 6.00 | % | 670 | 708 | 2,152 | — | 2,037 | 2,543 | |||||||||||||||||||||||||
CHF | 767 | 0.50 | % | 1.00 | % | — | — | 383 | — | — | — | |||||||||||||||||||||||||
USD convertible debentures* | 23 | 0.25 | % | 0.25 | % | — | — | — | — | — | — | |||||||||||||||||||||||||
Variable Rate: | ||||||||||||||||||||||||||||||||||||
Others | 2 | 1.00 | % | 2.00 | % | — | — | — | — | — | — | |||||||||||||||||||||||||
Total: | 23,143 | $ | 2,122 | $ | 1,958 | $ | 3,535 | $ | 3,496 | $ | 3,037 | $ | 7,562 | |||||||||||||||||||||||
Less debt issuance costs | (100 | ) | ||||||||||||||||||||||||||||||||||
Total: | $ | 23,043 | ||||||||||||||||||||||||||||||||||
Currency | Total Amount | Interest Rate Ranges | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 & thereafter | ||||||||||||||||||||||||||||
(U.S. dollars in millions) | ||||||||||||||||||||||||||||||||||||
Fixed Rate: | ||||||||||||||||||||||||||||||||||||
USD | 11,880 | 3.15 | % | 8.13 | % | 957 | 427 | 3,375 | 1,000 | 1,250 | 4,891 | |||||||||||||||||||||||||
Euro | 7,592 | 1.13 | % | 7.88 | % | 691 | 1,001 | — | 1,986 | 824 | 3,090 | |||||||||||||||||||||||||
CHF | 416 | 1.00 | % | 1.00 | % | | — | | 416 | — | — | — | — | |||||||||||||||||||||||
USD convertible debentures* | 23 | 0.25 | % | 0.25 | % | — | — | — | — | — | — | |||||||||||||||||||||||||
Variable Rate: | ||||||||||||||||||||||||||||||||||||
Others | 1 | 1.00 | % | 2.00 | % | — | — | — | — | — | — | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total: | 19,912 | $ | 1,648 | $ | 1,843 | $ | 3,375 | $ | 2,986 | $ | 2,074 | $ | 7,961 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Less debt issuance costs | (80 | ) | ||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Total: | $ | 19,833 | ||||||||||||||||||||||||||||||||||
|
|
* | Classified under short-term debt. |
86
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Page | ||||
Consolidated Financial Statements: | ||||
Statements of income | ||||
December 31, | December 31, | |||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,165 | $ | 2,177 | ||||
Accounts receivables, net of allowance for credit losses of $90 million and $126 million as of December 31, 2021 and December 31, 2020, respectively | 4,529 | 4,581 | ||||||
Inventories | 3,818 | 4,403 | ||||||
Prepaid expenses | 1,075 | 945 | ||||||
Other current assets | 965 | 710 | ||||||
Assets held for sale | 19 | 189 | ||||||
Total current assets | 12,573 | 13,005 | ||||||
Deferred income taxes | 596 | 695 | ||||||
Other non-current assets | 515 | 538 | ||||||
Property, plant and equipment, net | 5,982 | 6,296 | ||||||
Operating lease right-of-use assets | 495 | 559 | ||||||
Identifiable intangible assets, net | 7,466 | 8,923 | ||||||
Goodwill | 20,040 | 20,624 | ||||||
Total assets | $ | 47,666 | $ | 50,640 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 1,426 | $ | 3,188 | ||||
Sales reserves and allowances | 4,241 | 4,824 | ||||||
Accounts payables | 1,686 | 1,756 | ||||||
Employee-related obligations | 563 | 685 | ||||||
Accrued expenses | 2,208 | 1,780 | ||||||
Other current liabilities | 903 | 933 | ||||||
Total current liabilities | 11,027 | 13,164 | ||||||
Long-term liabilities: | ||||||||
Deferred income taxes | 784 | 964 | ||||||
Other taxes and long-term liabilities | 2,578 | 2,240 | ||||||
Senior notes and loans | 21,617 | 22,731 | ||||||
Operating lease liabilities | 416 | 479 | ||||||
Total long-term liabilities | 25,395 | 26,414 | ||||||
Commitments and contingencies | 0 | 0 | ||||||
Total liabilities | 36,422 | 39,579 | ||||||
Equity: | ||||||||
Teva shareholders’ equity: | ||||||||
Ordinary shares of NIS 0.10 par value per share; December 31, 2021 and December 31, 2020: authorized 2,495 million shares; issued 1,209 million shares and 1,202 million shares, respectively | 57 | 57 | ||||||
Additional paid-in capital | 27,561 | 27,443 | ||||||
Accumulated deficit | (10,529 | ) | (10,946 | ) | ||||
Accumulated other comprehensive loss | (2,683 | ) | (2,399 | ) | ||||
Treasury shares as of December 31, 2021 and December 31, 2020: 106 million ordinary shares | (4,128 | ) | (4,128 | ) | ||||
10,278 | 10,026 | |||||||
Non-controlling interests | 966 | 1,035 | ||||||
Total equity | 11,244 | 11,061 | ||||||
Total liabilities and equity | $ | 47,666 | $ | 50,640 | ||||
December 31, 2023 | December 31, 2022 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,226 | $ | 2,801 | ||||
Accounts receivables, net of allowance for credit losses of $95 million and $91 million as of December 31, 2023 and December 31, 2022, respectively | 3,408 | 3,696 | ||||||
Inventories | 4,021 | 3,833 | ||||||
Prepaid expenses | 1,255 | 1,162 | ||||||
Other current assets | 504 | 549 | ||||||
Assets held for sale | 70 | 10 | ||||||
Total current assets | 12,485 | 12,051 | ||||||
Deferred income taxes | 1,812 | 1,458 | ||||||
Other non-current assets | 470 | 441 | ||||||
Property, plant and equipment, net | 5,750 | 5,739 | ||||||
Operating lease right-of-use | 397 | 419 | ||||||
Identifiable intangible assets, net | 5,387 | 6,270 | ||||||
Goodwill | 17,177 | 17,633 | ||||||
Total assets | $ | 43,479 | $ | 44,011 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 1,672 | $ | 2,109 | ||||
Sales reserves and allowances | 3,535 | 3,750 | ||||||
Accounts payables | 2,602 | 1,887 | ||||||
Employee-related obligations | 611 | 566 | ||||||
Accrued expenses | 2,771 | 2,151 | ||||||
Other current liabilities | 1,056 | 1,005 | ||||||
Total current liabilities | 12,247 | 11,469 | ||||||
Long-term liabilities: | ||||||||
Deferred income taxes | 606 | 548 | ||||||
Other taxes and long-term liabilities | 4,019 | 3,945 | ||||||
Senior notes and loans | 18,161 | 19,103 | ||||||
Operating lease liabilities | 320 | 349 | ||||||
Total long-term liabilities | 23,106 | 23,944 | ||||||
Commitments and contingencies | ||||||||
Total liabilities | 35,353 | 35,413 | ||||||
Equity: | ||||||||
Teva shareholders’ equity: | ||||||||
Ordinary shares of NIS 0.10 par value per share; December 31, 2023 and December 31, 2022: authorized 2,495 million shares; issued 1,227 million shares and 1,217 million shares, respectively | 57 | 57 | ||||||
Additional paid-in capital | 27,807 | 27,688 | ||||||
Accumulated deficit | (13,534 | ) | (12,975 | ) | ||||
Accumulated other comprehensive loss | (2,697 | ) | (2,838 | ) | ||||
Treasury shares as of December 31, 2023 and December 31, 2022: 106 million ordinary shares | (4,128 | ) | (4,128 | ) | ||||
7,506 | 7,804 | |||||||
Non-controlling interests | 620 | 794 | ||||||
Total equity | 8,126 | 8,598 | ||||||
Total liabilities and equity | $ | 43,479 | $ | 44,011 | ||||
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Net revenues | $ | 15,878 | $ | 16,659 | $ | 16,887 | ||||||
Cost of sales | 8,284 | 8,933 | 9,351 | |||||||||
Gross profit | 7,594 | 7,726 | 7,537 | |||||||||
Research and development expenses , net | 967 | 997 | 1,010 | |||||||||
Selling and marketing expenses | 2,429 | 2,498 | 2,614 | |||||||||
General and administrative expenses | 1,099 | 1,173 | 1,192 | |||||||||
Intangible assets impairments | 424 | 1,502 | 1,639 | |||||||||
Goodwill impairment | 0 | 4,628 | 0 | |||||||||
Other asset impairments, restructuring and other items | 341 | 479 | 423 | |||||||||
Legal settlements and loss contingencies | 717 | 60 | 1,178 | |||||||||
Other income | (98 | ) | (40 | ) | (76 | ) | ||||||
Operating (loss) income | 1,716 | (3,572 | ) | (443 | ) | |||||||
Financial expenses—net | 1,058 | 834 | 822 | |||||||||
Income (loss) before income taxes | 658 | (4,406 | ) | (1,265 | ) | |||||||
Income taxes (benefit) | 211 | (168 | ) | (278 | ) | |||||||
Share in (profits) losses of associated companies—net | (9 | ) | (138 | ) | 13 | |||||||
Net income (loss) | 456 | (4,099 | ) | (1,000 | ) | |||||||
Net income (loss) attributable to non-controlling interests | 39 | (109 | ) | (2 | ) | |||||||
Net income (loss) attributable to Teva | 417 | (3,990 | ) | (999 | ) | |||||||
Earnings (loss) per share attributable to ordinary shareholders: | ||||||||||||
Basic | $ | 0.38 | $ | (3.64 | ) | $ | (0.91 | ) | ||||
Diluted | $ | 0.38 | $ | (3.64 | ) | $ | (0.91 | ) | ||||
Weighted average number of shares (in millions): | ||||||||||||
Basic | 1,102 | 1,095 | 1,091 | |||||||||
Diluted | 1,107 | 1,095 | 1,091 | |||||||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Net revenues | $ | 15,846 | $ | 14,925 | $ | 15,878 | ||||||
Cost of sales | 8,200 | 7,952 | 8,284 | |||||||||
Gross profit | 7,645 | 6,973 | 7,594 | |||||||||
Research and development expenses, net | 953 | 838 | 967 | |||||||||
Selling and marketing expenses | 2,336 | 2,265 | 2,429 | |||||||||
General and administrative expenses | 1,162 | 1,180 | 1,099 | |||||||||
Intangible assets impairments | 350 | 355 | 424 | |||||||||
Goodwill impairment | 700 | 2,045 | — | |||||||||
Other asset impairments, restructuring and other items | 718 | 512 | 341 | |||||||||
Legal settlements and loss contingencies | 1,043 | 2,082 | 717 | |||||||||
Other income | (49 | ) | (107 | ) | (98 | ) | ||||||
Operating (loss) income | 433 | (2,197 | ) | 1,716 | ||||||||
Financial expenses – net | 1,057 | 966 | 1,058 | |||||||||
Income (loss) before income taxes | (624 | ) | (3,163 | ) | 658 | |||||||
Income taxes (benefit) | (7 | ) | (643 | ) | 211 | |||||||
Share in (profits) losses of associated companies – net | (2 | ) | (21 | ) | (9 | ) | ||||||
Net income (loss) | (615 | ) | (2,499 | ) | 456 | |||||||
Net income (loss) attributable to non-controlling interests | (56 | ) | (53 | ) | 39 | |||||||
Net income (loss) attributable to Teva | (559 | ) | (2,446 | ) | 417 | |||||||
Earnings (loss) per share attributable to ordinary shareholders: | ||||||||||||
Basic | $ | (0.50 | ) | $ | (2.20 | ) | $ | 0.38 | ||||
Diluted | $ | (0.50 | ) | $ | (2.20 | ) | $ | 0.38 | ||||
Weighted average number of shares (in millions): | ||||||||||||
Basic | 1,119 | 1,110 | 1,102 | |||||||||
Diluted | 1,119 | 1,110 | 1,107 | |||||||||
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Net income (loss) | $ | 456 | $ | (4,099 | ) | $ | (1,000 | ) | ||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Currency translation adjustment | (462 | ) | (69 | ) | 97 | |||||||
Unrealized gain (loss) on derivative financial instruments, net | 39 | 57 | 84 | |||||||||
Unrealized gain (loss) on available-for-sale securities, net | 0 | 0 | (1 | ) | ||||||||
Unrealized gain (loss) on defined benefit plans, net | 32 | (18 | ) | (20 | ) | |||||||
Total other comprehensive income (loss) | (391 | ) | (30 | ) | 160 | |||||||
Total comprehensive income (loss) | 65 | (4,129 | ) | (840 | ) | |||||||
Comprehensive income (loss) attributable to non-controlling interests | (68 | ) | (53 | ) | 12 | |||||||
Comprehensive income (loss) attributable to Teva | $ | 133 | $ | (4,076 | ) | $ | (852 | ) | ||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Net income (loss) | $ | (615 | ) | $ | (2,499 | ) | $ | 456 | ||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Currency translation adjustment | 80 | (356 | ) | (462 | ) | |||||||
Unrealized gain (loss) on derivative financial instruments, net | 29 | 29 | 39 | |||||||||
Unrealized gain (loss) on defined benefit plans, net | (18 | ) | 57 | 32 | ||||||||
Total other comprehensive income (loss) | 91 | (270 | ) | (391 | ) | |||||||
Total comprehensive income (loss) | (524 | ) | (2,769 | ) | 65 | |||||||
Comprehensive income (loss) attributable to non-controlling interests | (106 | ) | (169 | ) | (68 | ) | ||||||
Comprehensive income (loss) attributable to Teva | $ | (418 | ) | $ | (2,600 | ) | $ | 133 | ||||
Teva shareholders’ equity | ||||||||||||||||||||||||||||||||||||
Ordinary shares | ||||||||||||||||||||||||||||||||||||
Number of shares (in millions) | Stated value | Additional paid-in capital | Retained earnings (accumulated deficit) | Accumulated other comprehensive income (loss) | Treasury shares | Total Teva share-holders’ equity | Non- controlling interests | Total equity | ||||||||||||||||||||||||||||
(U.S. dollars in millions) | ||||||||||||||||||||||||||||||||||||
Balance at January 1, 2019 | 1,196 | 56 | 27,210 | (5,958 | ) | (2,459 | ) | (4,142 | ) | 14,707 | 1,087 | 15,794 | ||||||||||||||||||||||||
Changes during 2019: | ||||||||||||||||||||||||||||||||||||
Net income (loss) | (999 | ) | (999 | ) | (2 | ) | (1,000 | ) | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | 147 | 147 | 14 | 160 | ||||||||||||||||||||||||||||||||
Issuance of Treasury Shares | * | (8 | ) | 14 | 6 | 6 | ||||||||||||||||||||||||||||||
Stock-based compensation expense | 119 | 119 | 119 | |||||||||||||||||||||||||||||||||
Issuance of shares | 2 | * | * | |||||||||||||||||||||||||||||||||
Transactions with non-controlling interests | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||||||
Other | (8 | ) | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||||
Balance at December 31, 2019 | 1,198 | 56 | 27,312 | (6,956 | ) | (2,312 | ) | (4,128 | ) | 13,972 | 1,091 | 15,063 | ||||||||||||||||||||||||
Changes during 2020: | ||||||||||||||||||||||||||||||||||||
Net income (loss) | (3,990 | ) | (3,990 | ) | (109 | ) | (4,099 | ) | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | (86 | ) | (86 | ) | 56 | (30 | ) | |||||||||||||||||||||||||||||
Issuance of Shares | 4 | * | * | 1 | 1 | |||||||||||||||||||||||||||||||
Stock-based compensation expense | 129 | 129 | 129 | |||||||||||||||||||||||||||||||||
Transactions with non-controlling interests | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | 1,202 | 57 | 27,443 | (10,946 | ) | (2,399 | ) | (4,128 | ) | 10,026 | 1,035 | 11,061 | ||||||||||||||||||||||||
Changes during 2021: | ||||||||||||||||||||||||||||||||||||
Net income (loss) | 417 | 417 | 39 | 456 | ||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (283 | ) | (283 | ) | (107 | ) | (391 | ) | ||||||||||||||||||||||||||||
Issuance of Shares | 7 | * | * | * | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 119 | 119 | 119 | |||||||||||||||||||||||||||||||||
Transactions with non-controlling interests | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | 1,209 | $ | 57 | $ | 27,561 | $ | (10,529 | ) | $ | (2,683 | ) | $ | (4,128 | ) | $ | 10,278 | $ | 966 | $ | 11,244 | ||||||||||||||||
Teva shareholders’ equity | ||||||||||||||||||||||||||||||||||||
Ordinary shares | ||||||||||||||||||||||||||||||||||||
Number of shares (in millions) | Stated value | Additional paid-in capital | Retained earnings (accumulated deficit) | Accumulated other comprehensive income (loss) | Treasury shares | Total Teva share- holders’ equity | Non-controlling interests | Total equity | ||||||||||||||||||||||||||||
(U.S. dollars in millions) | ||||||||||||||||||||||||||||||||||||
Balance at January 1, 2021 | 1,202 | 57 | 27,443 | (10,946 | ) | (2,399 | ) | (4,128 | ) | 10,026 | 1,035 | 11,061 | ||||||||||||||||||||||||
Changes during 2021: | ||||||||||||||||||||||||||||||||||||
Net income (loss) | 417 | 417 | 39 | 456 | ||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (283 | ) | (283 | ) | (107 | ) | (391 | ) | ||||||||||||||||||||||||||||
Issuance of shares | 7 | * | * | * | * | |||||||||||||||||||||||||||||||
Stock-based compensation expense | 119 | 119 | 119 | |||||||||||||||||||||||||||||||||
Transactions with non-controlling interests | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | 1,209 | 57 | 27,561 | (10,529 | ) | (2,683 | ) | (4,128 | ) | 10,278 | 966 | 11,244 | ||||||||||||||||||||||||
Changes during 2022: | ||||||||||||||||||||||||||||||||||||
Net income (loss) | (2,446 | ) | (2,446 | ) | (53 | ) | (2,499 | ) | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | (154 | ) | (154 | ) | (116 | ) | (270 | ) | ||||||||||||||||||||||||||||
Issuance of Shares | 8 | * | 1 | 1 | 1 | |||||||||||||||||||||||||||||||
Stock-based compensation expense | 124 | 124 | 124 | |||||||||||||||||||||||||||||||||
Transactions with non-controlling interests | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2022 | 1,217 | 57 | 27,688 | (12,975 | ) | (2,838 | ) | (4,128 | ) | 7,804 | 794 | 8,598 | ||||||||||||||||||||||||
Changes during 2023: | ||||||||||||||||||||||||||||||||||||
Net income (loss) | (559 | ) | (559 | ) | (56 | ) | (615 | ) | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | 141 | 141 | (50 | ) | 91 | |||||||||||||||||||||||||||||||
Issuance of Shares | 10 | * | * | * | * | |||||||||||||||||||||||||||||||
Stock-based compensation expense | 121 | 121 | 121 | |||||||||||||||||||||||||||||||||
Dividend to non-controlling interests ** | (68 | ) | (68 | ) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2023 | 1,227 | $ | 57 | $ | 27,807 | $ | (13,534 | ) | $ | (2,697 | ) | $ | (4,128 | ) | $ | 7,506 | $ | 620 | $ | 8,126 | ||||||||||||||||
* | Represents an amount less than |
** | Mainly in connection with a declaration of dividends to non-controlling interests in Teva’s joint venture in Japan. |
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Operating activities: | ||||||||||||
Net income (loss) | $ | 456 | $ | (4,099 | ) | $ | (1,000 | ) | ||||
Adjustments to reconcile net loss to net cash provided by operations: | ||||||||||||
Impairment of goodwill, long-lived assets and assets held for sale | 584 | 6,546 | 1,778 | |||||||||
Depreciation and amortization | 1,330 | 1,557 | 1,722 | |||||||||
Net change in operating assets and liabilities | (1,701 | ) | (2,188 | ) | (896 | ) | ||||||
Deferred income taxes—net and uncertain tax positions | (120 | ) | (696 | ) | (985 | ) | ||||||
Stock-based compensation | 119 | 129 | 119 | |||||||||
Other items | 16 | 100 | 28 | |||||||||
Research and development in process | 10 | 80 | 0 | |||||||||
Net loss (gain) from investments and from sale of business and long lived assets | 104 | (213 | ) | (18 | ) | |||||||
Net cash provided by operating activities | 798 | 1,216 | 748 | |||||||||
Investing activities: | ||||||||||||
Beneficial interest collected in exchange for securitized trade receivables | 1,648 | 1,405 | 1,487 | |||||||||
Proceeds from sale of business and long lived assets | 311 | 67 | 343 | |||||||||
Purchases of property, plant and equipment | (562 | ) | (578 | ) | (525 | ) | ||||||
Purchases of investments and other assets | (47 | ) | (55 | ) | (8 | ) | ||||||
Proceeds from sale of investments | 172 | 12 | 2 | |||||||||
Other investing activities | 1 | 12 | 56 | |||||||||
Net cash provided by investing activities | 1,523 | 863 | 1,355 | |||||||||
Financing activities: | ||||||||||||
Repayment of senior notes and loans and other long term liabilities | (6,649 | ) | (1,871 | ) | (3,944 | ) | ||||||
Proceeds from senior notes, net of issuance costs | 4,974 | 0 | 2,083 | |||||||||
Proceeds from short term debt | 700 | 550 | 500 | |||||||||
Repayment of short term debt | (700 | ) | (559 | ) | (502 | ) | ||||||
Redemption of convertible debentures | (491 | ) | 0 | 0 | ||||||||
Other financing activities | (6 | ) | (5 | ) | (11 | ) | ||||||
Tax withholding payments made on shares and dividends | 0 | 0 | (52 | ) | ||||||||
Net cash used in financing activities | (2,172 | ) | (1,885 | ) | (1,926 | ) | ||||||
Translation adjustment on cash and cash equivalents | (128 | ) | 8 | 16 | ||||||||
Net change in cash, cash equivalents and restricted cash | 21 | 202 | 193 | |||||||||
Balance of cash, cash equivalents and restricted cash at beginning of year | 2,177 | 1,975 | 1,782 | |||||||||
Balance of cash, cash equivalents and restricted cash at end of year | $ | 2,198 | $ | 2,177 | $ | 1,975 | ||||||
Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets: | ||||||||||||
Cash and cash equivalents | 2,165 | 2,177 | 1,975 | |||||||||
Restricted cash included in other current assets | 33 | 0 | 0 | |||||||||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | 2,198 | 2,177 | 1,975 | |||||||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Operating activities: | ||||||||||||
Net income (loss) | $ | (615 | ) | $ | (2,499 | ) | $ | 456 | ||||
Adjustments to reconcile net income (loss) to net cash provided by operations: | ||||||||||||
Impairment of goodwill, long-lived assets and assets held for sale | 1,078 | 2,447 | 584 | |||||||||
Depreciation and amortization | 1,153 | 1,308 | 1,330 | |||||||||
Net change in operating assets and liabilities | (72 | ) | 1,355 | (1,701 | ) | |||||||
Deferred income taxes — net and uncertain tax positions | (317 | ) | (1,064 | ) | (120 | ) | ||||||
Stock-based compensation | 121 | 124 | 119 | |||||||||
Research and development in process | — | — | 10 | |||||||||
Net loss (gain) from investments and from sale of business and long-lived assets | (41 | ) | 10 | 104 | ||||||||
Other items | 61 | (91 | ) | 16 | ||||||||
Net cash provided by (used in) operating activities | 1,368 | 1,590 | 798 | |||||||||
Investing activities: | ||||||||||||
Beneficial interest collected in exchange for securitized trade receivables | 1,477 | 1,140 | 1,648 | |||||||||
Purchases of property, plant and equipment and intangible assets | (526 | ) | (548 | ) | (562 | ) | ||||||
Proceeds from sale of business and long-lived assets | 68 | 68 | 311 | |||||||||
Purchases of investments and other assets | (46 | ) | (1 | ) | (47 | ) | ||||||
Proceeds from sale of investments | — | 4 | 172 | |||||||||
Acquisitions of businesses, net of cash acquired | — | (7 | ) | — | ||||||||
Other investing activities | (5 | ) | — | 1 | ||||||||
Net cash provided by (used in) investing activities | 968 | 656 | 1,523 | |||||||||
Financing activities: | ||||||||||||
Repayment of senior notes and loans and other long term liabilities | (4,152 | ) | (1,369 | ) | (6,649 | ) | ||||||
Proceeds from senior notes, net of issuance costs | 2,451 | — | 4,974 | |||||||||
Proceeds from short term debt | 700 | — | 700 | |||||||||
Repayment of short term debt | (700 | ) | — | (700 | ) | |||||||
Redemption of convertible debentures | — | — | (491 | ) | ||||||||
Other financing activities | (212 | ) | (118 | ) | (6 | ) | ||||||
Net cash provided by (used in) financing activities | (1,913 | ) | (1,487 | ) | (2,172 | ) | ||||||
Translation adjustment on cash and cash equivalents | (30 | ) | (123 | ) | (128 | ) | ||||||
Net change in cash, cash equivalents and restricted cash | 393 | 636 | 21 | |||||||||
Balance of cash, cash equivalents and restricted cash at beginning of year | 2,834 | 2,198 | 2,177 | |||||||||
Balance of cash, cash equivalents and restricted cash at end of year | $ | 3,227 | $ | 2,834 | $ | 2,198 | ||||||
Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets: | ||||||||||||
Cash and cash equivalents | 3,226 | 2,801 | 2,165 | |||||||||
Restricted cash included in other current assets | 1 | 33 | 33 | |||||||||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | 3,227 | 2,834 | 2,198 | |||||||||
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Supplemental cash flow information: | ||||||||||||
Non-cash financing and investing activities: | ||||||||||||
Beneficial interest obtained in exchange for securitized trade receivables | $ | 1,635 | $ | 1,397 | $ | 1,511 | ||||||
Cash paid during the year for: | ||||||||||||
Interest | $ | 913 | $ | 846 | $ | 840 | ||||||
Income taxes, net of refunds | $ | 495 | $ | 709 | $ | 552 |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Non-cash financing and investing activities: | ||||||||||||
Beneficial interest obtained in exchange for securitized trade receivables | $ | 1,446 | $ | 1,189 | $ | 1,635 | ||||||
Dividend declared to non-controlling interests | 67 | $ | — | $ | — | |||||||
Cash paid during the year for: | ||||||||||||
Interest | $ | 1,078 | $ | 948 | $ | 913 | ||||||
Income taxes, net of refunds | $ | 298 | $ | 543 | $ | 495 |
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Other current assets | $ | (2,271 | ) | $ | (1,473 | ) | $ | (1,416 | ) | |||
Trade payables, accrued expenses, employee-related obligations and other liabilities | 764 | (463 | ) | 643 | ||||||||
Trade receivables net of sales reserves and allowances | (574 | ) | (293 | ) | (394 | ) | ||||||
Inventories | 380 | 41 | 271 | |||||||||
$ | (1,701 | ) | $ | (2,188 | ) | $ | (896 | ) | ||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Other current assets | $ | (1,525 | ) | $ | (828 | ) | $ | (2,271 | ) | |||
Trade payables, accrued expenses, employee-related obligations and other liabilities | 1,588 | 2,012 | 764 | |||||||||
Trade receivables net of sales reserves and allowances | 12 | 334 | (574 | ) | ||||||||
Inventories | (147 | ) | (163 | ) | 380 | |||||||
$ | (72 | ) | $ | 1,355 | $ | (1,701 | ) | |||||
b. |
Consolidated Statements of Income (loss) | Year ended December 31, 2022 | Consolidated Balance Sheets | December 31, 2022 | |||||||||||||||||||||||
As previously reported | Adjustment | As revised | As previously reported | Adjustment | As revised | |||||||||||||||||||||
U.S $ in millions (except per share amounts) | U.S $ in millions (except per share amounts) | |||||||||||||||||||||||||
Other asset impairments, restructuring and other items | $ | 414 | 98 | 512 | Deferred income taxes | $ | 1,453 | 5 | 1,458 | |||||||||||||||||
Operating income (loss) | (2,099 | ) | (98 | ) | (2,197 | ) | Total assets | 44,006 | 5 | 44,011 | ||||||||||||||||
Income (loss) before income taxes | (3,065 | ) | (98 | ) | (3,163 | ) | Other taxes and long-term liabilities | 3,847 | 98 | 3,945 | ||||||||||||||||
Income taxes (benefit) | (638 | ) | (5 | ) | (643 | ) | Total long-term liabilities | 23,846 | 98 | 23,944 | ||||||||||||||||
Net income (loss) | (2,406 | ) | (93 | ) | (2,499 | ) | Total liabilities | 35,315 | 98 | 35,413 | ||||||||||||||||
Net income (loss) attributable to Teva | (2,353 | ) | (93 | ) | (2,446 | ) | Teva shareholders’ equity: | |||||||||||||||||||
Earnings (loss) per share attributable to ordinary shareholders: | Accumulated deficit | (12,882 | ) | (93 | ) | (12,975 | ) | |||||||||||||||||||
Basic | $ | (2.12 | ) | (0.08 | ) | (2.20 | ) | Total equity | 8,691 | (93 | ) | 8,598 | ||||||||||||||
Diluted | $ | (2.12 | ) | (0.08 | ) | (2.20 | ) | Total liabilities and equity | $ | 44,006 | 5 | 44,011 |
c. | New accounting pronouncements |
Acquisitions: |
e. | Collaborative arrangements: |
Equity investments: |
Fair value measurement: |
h. | Investment in debt securities: |
Cash and cash equivalents: |
Restricted cash: |
Accounts Receivables: |
Concentration of credit risks: |
m. | Inventories: |
Long-lived assets: |
1. | An initial qualitative assessment may be performed to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. |
2. | If the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying mount, a quantitative fair value test is performed. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized. |
o. | Contingencies: |
Treasury shares: |
Stock-based compensation: |
Deferred income taxes: |
1. | Taxes that would apply in the event of disposal of investments in subsidiaries, as it is generally the Company’s intention to hold these investments, not to realize them. The determination of the amount of related unrecognized deferred tax liability is not practicable. |
2. | Amounts of tax-exempt income generated from the Company’s current Approved Enterprises and unremitted earnings from foreign subsidiaries retained for reinvestment in the Group. See note 13f. |
Uncertain tax positions: |
Derivatives and hedging: |
Revenue recognition: |
Research and development: |
Shipping and handling costs: |
Advertising costs: |
Restructuring: |
Segment reporting: |
(a) | North America segment, which includes the United States and Canada. |
(b) | Europe segment, which includes the European Union, the United Kingdom and certain other European countries. |
(c) | International Markets segment, which includes all countries in which Teva operates other than those in the North America and Europe segments. |
Earnings per share: |
Securitization and factoring |
Divestitures |
Debt instruments |
Leases |
December 31, 2023 | December 31, 2022 | |||||||
(U.S. $ in millions) | ||||||||
Inventories | $ | 12 | $ | 2 | ||||
Property, plant and equipment, net and others | 28 | 18 | ||||||
Goodwill | 30 | — | ||||||
Adjustments of assets held for sale to fair value | — | (10 | ) | |||||
Total assets of the disposal group classified as held for sale in the consolidated balance sheets | $ | 70 | $ | 10 | ||||
Total liabilities of the disposal group classified as held for sale in the consolidated balance sheets, recorded under other current liabilities | $ | (13 | ) | $ | — | |||
December 31, 2021 | December 31, 2020 | |||||||
(U.S. $ in millions) | ||||||||
Inventories | 2 | 146 | ||||||
Property, plant and equipment, net and others | 86 | 312 | ||||||
Goodwill | 7 | 27 | ||||||
Adjustments of assets held for sale to fair value | (76 | ) | (296 | ) | ||||
Total assets of the disposal group classified as held for sale in the consolidated balance sheets | $ | 19 | $ | 189 | ||||
Total liabilities of the disposal group classified as held for sale in the consolidated balance sheets under accrued expenses ($23 million) and other long-term liabilities ($20 million) | $ | (43 | ) | $ | 0 | |||
Year ended December 31, 2023 | ||||||||||||||||||||
North America | Europe | International Markets | Other activities | Total | ||||||||||||||||
(U.S.$ in millions) | ||||||||||||||||||||
Sale of goods | 5,944 | 4,631 | 1,840 | 565 | 12,979 | |||||||||||||||
Licensing arrangements * | 601 | 51 | 24 | 5 | 681 | |||||||||||||||
Distribution | 1,577 | § | 38 | — | 1,615 | |||||||||||||||
Other** | 2 | 155 | 56 | 357 | 570 | |||||||||||||||
$ | 8,124 | $ | 4,837 | $ | 1,958 | $ | 926 | $ | 15,846 | |||||||||||
Year ended December 31, 2021 | ||||||||||||||||||||
North America | Europe | International Markets | Other activities | Total | ||||||||||||||||
(U.S.$ in millions) | ||||||||||||||||||||
Sale of goods | 6,394 | 4,807 | 1,889 | 739 | 13,829 | |||||||||||||||
Licensing arrangements | 92 | 50 | 13 | 4 | 160 | |||||||||||||||
Distribution | 1,323 | 1 | 65 | 0 | 1,390 | |||||||||||||||
Other | (1 | ) | 27 | 65 | 408 | 500 | ||||||||||||||
$ | 7,809 | $ | 4,886 | $ | 2,032 | $ | 1,151 | $ | 15,878 | |||||||||||
Year ended December 31, 2020 | ||||||||||||||||||||
North America | Europe | International Markets | Other activities | Total | ||||||||||||||||
(U.S.$ in millions) | ||||||||||||||||||||
Sale of goods | 6,902 | 4,736 | 1,946 | 772 | 14,354 | |||||||||||||||
Licensing arrangements | 84 | 32 | 9 | 4 | 129 | |||||||||||||||
Distribution | 1,462 | 3 | 30 | 0 | 1,495 | |||||||||||||||
Other | § | (14 | ) | 169 | 527 | 680 | ||||||||||||||
$ | 8,447 | $ | 4,757 | $ | 2,154 | $ | 1,302 | $ | 16,659 | |||||||||||
Year ended December 31, 2019 | ||||||||||||||||||||
North America | Europe | International Markets | Other activities | Total | ||||||||||||||||
(U.S.$ in millions) | ||||||||||||||||||||
Sale of goods | 6,941 | 4,770 | 2,045 | 754 | 14,510 | |||||||||||||||
Licensing arrangements | 109 | 29 | 4 | 5 | 147 | |||||||||||||||
Distribution | 1,492 | 2 | 20 | 0 | 1,514 | |||||||||||||||
Other | § | (6 | ) | 177 | 545 | 716 | ||||||||||||||
$ | 8,542 | $ | 4,795 | $ | 2,246 | $ | 1,304 | $ | 16,887 | |||||||||||
* | Revenues from licensing arrangements in North America segment were mainly comprised of $500 million upfront payment received in connection with the collaboration on Teva’s anti-TL1A asset. See note 2. |
** | “Other” revenues in Europe segment mainly related to the sale of certain product rights. |
§ | Represents an amount less than 0.5 million. |
Year ended December 31, 2022 | ||||||||||||||||||||
North America | Europe | International Markets | Other activities | Total | ||||||||||||||||
(U.S.$ in millions) | ||||||||||||||||||||
Sale of goods | 5,834 | 4,455 | 1,806 | 671 | 12,766 | |||||||||||||||
Licensing arrangements | 139 | 51 | 19 | 4 | 212 | |||||||||||||||
Distribution | 1,471 | 1 | 46 | — | 1,519 | |||||||||||||||
Other | 8 | 18 | 33 | 370 | 428 | |||||||||||||||
$ | 7,452 | $ | 4,525 | $ | 1,903 | $ | 1,045 | $ | 14,925 | |||||||||||
Year ended December 31, 2021 | ||||||||||||||||||||
North America | Europe | International Markets | Other activities | Total | ||||||||||||||||
(U.S.$ in millions) | ||||||||||||||||||||
Sale of goods | 6,394 | 4,807 | 1,889 | 739 | 13,829 | |||||||||||||||
Licensing arrangements | 92 | 50 | 13 | 4 | 160 | |||||||||||||||
Distribution | 1,323 | 1 | 65 | — | 1,390 | |||||||||||||||
Other | (1) | 27 | 65 | 408 | 500 | |||||||||||||||
$ | 7,809 | $ | 4,886 | $ | 2,032 | $ | 1,151 | $ | 15,878 | |||||||||||
Sales Reserves and Allowances | Sales Reserves and Allowances | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserves included in Accounts Receivable, net | Rebates | Medicaid and other governmental allowances | Chargebacks | Returns | Other | Total reserves included in Sales Reserves and Allowances | Total | Reserves included in Accounts Receivable, net | Rebates | Medicaid and other governmental allowances | Chargebacks | Returns | Other | Total reserves included in Sales Reserves and Allowances | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
(U.S.$ in millions) | (U.S.$ in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2020 | $ | 87 | 2,895 | $ | 1,109 | $ | 1,342 | $ | 637 | $ | 176 | $ | 6,159 | $ | 6,246 | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2023 | $ | 67 | $ | 1,575 | $ | 663 | $ | 991 | $ | 455 | $ | 66 | $ | 3,750 | $ | 3,817 | ||||||||||||||||||||||||||||||||||||||||||||||||
Provisions related to sales made in current year period | 391 | 4,703 | 744 | 8,438 | 459 | 71 | 14,415 | $ | 14,806 | 354 | 4,015 | 654 | 7,579 | 264 | 109 | 12,621 | 12,975 | |||||||||||||||||||||||||||||||||||||||||||||||
Provisions related to sales made in prior periods | 0 | (219 | ) | (184 | ) | (65 | ) | (28 | ) | (1 | ) | (497 | ) | $ | (497 | ) | — | (31 | ) | (33 | ) | (54 | ) | 17 | — | (101 | ) | (101 | ) | |||||||||||||||||||||||||||||||||||
Credits and payments | (398 | ) | (5,360 | ) | (849 | ) | (8,614 | ) | (386 | ) | (100 | ) | (15,309 | ) | $ | (15,707 | ) | (360 | ) | (3,974 | ) | (748 | ) | (7,662 | ) | (304 | ) | (77 | ) | (12,765 | ) | (13,125 | ) | |||||||||||||||||||||||||||||||
Translation differences | 0 | 35 | 8 | 7 | 4 | 2 | 56 | $ | 56 | — | 18 | 4 | 5 | 4 | (1 | ) | 30 | 30 | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | 80 | 2,054 | $ | 828 | $ | 1,108 | $ | 686 | $ | 148 | $ | 4,824 | $ | 4,904 | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2023 | $ | 61 | $ | 1,603 | $ | 540 | $ | 859 | $ | 436 | $ | 97 | $ | 3,535 | $ | 3,596 | ||||||||||||||||||||||||||||||||||||||||||||||||
Provisions related to sales made in current year period | 382 | 4,030 | 852 | 7,967 | 263 | 314 | 13,426 | $ | 13,808 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provisions related to sales made in prior periods | (9 | ) | (125 | ) | (51 | ) | (47 | ) | (60 | ) | (26 | ) | (309 | ) | $ | (318 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Credits and payments | (385 | ) | (4,275 | ) | (768 | ) | (7,937 | ) | (350 | ) | (321 | ) | (13,651 | ) | $ | (14,036 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Translation differences | 0 | (29 | ) | (7 | ) | (6 | ) | (4 | ) | (3 | ) | (49 | ) | $ | (49 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | 68 | 1,655 | 854 | 1,085 | 535 | 112 | 4,241 | $ | 4,309 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales Reserves and Allowances | ||||||||||||||||||||||||||||||||
Reserves included in Accounts Receivable, net | Rebates | Medicaid and other governmental allowances | Chargebacks | Returns | Other | Total reserves included in Sales Reserves and Allowances | Total | |||||||||||||||||||||||||
(U.S.$ in millions) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2022 | $ | 68 | $ | 1,655 | $ | 854 | $ | 1,085 | $ | 535 | $ | 112 | $ | 4,241 | $ | 4,309 | ||||||||||||||||
Provisions related to sales made in current year period | 363 | 3,823 | 871 | 7,819 | 317 | 85 | 12,915 | 13,278 | ||||||||||||||||||||||||
Provisions related to sales made in prior periods | — | (69 | ) | (35 | ) | (44 | ) | (3 | ) | (51 | ) | (202 | ) | (202 | ) | |||||||||||||||||
Credits and payments | (364 | ) | (3,798 | ) | (1,023 | ) | (7,861 | ) | (390 | ) | (77 | ) | (13,149 | ) | (13,513 | ) | ||||||||||||||||
Translation differences | — | (36 | ) | (4 | ) | (8 | ) | (4 | ) | (3 | ) | (55 | ) | (55 | ) | |||||||||||||||||
Balance at December 31, 2022 | $ | 67 | $ | 1,575 | $ | 663 | $ | 991 | $ | 455 | $ | 66 | $ | 3,750 | $ | 3,817 | ||||||||||||||||
December 31, | ||||||||
2023 | 2022 | |||||||
(U.S. $ in millions) | ||||||||
Finished products | $ | 2,346 | $ | 1,987 | ||||
Raw and packaging materials | 993 | 1,059 | ||||||
Products in process | 500 | 555 | ||||||
Materials in transit and payments on account | 183 | 232 | ||||||
$ | 4,021 | $ | 3,833 | |||||
December 31, | ||||||||
2021 | 2020 | |||||||
(U.S. $ in millions) | ||||||||
Finished products | $ | 1,932 | $ | 2,378 | ||||
Raw and packaging materials | 1,136 | 1,231 | ||||||
Products in process | 587 | 605 | ||||||
Materials in transit and payments on account | 163 | 189 | ||||||
$ | 3,818 | $ | 4,403 | |||||
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | |||||||||||||||
Machinery and equipment | $ | 5,098 | $ | 5,245 | $ | 4,807 | $ | 5,026 | ||||||||
Buildings | 2,568 | 2,720 | 2,488 | 2,463 | ||||||||||||
Computer equipment and other assets | 2,261 | 2,197 | 2,419 | 2,323 | ||||||||||||
Assets under construction and payments on account | 1,034 | 933 | 1,427 | 1,199 | ||||||||||||
Land | 262 | 292 | 246 | 246 | ||||||||||||
11,223 | 11,388 | 11,387 | 11,257 | |||||||||||||
Less—accumulated depreciation | (5,241 | ) | (5,092 | ) | ||||||||||||
Less- accumulated depreciation | (5,637 | ) | (5,518 | ) | ||||||||||||
$5,982 | $6,296 | $ | 5,750 | $ | 5,739 | |||||||||||
Gross carrying amount net of impairment | Accumulated amortization | Net carrying amount | Gross carrying amount net of impairment | Accumulated amortization | Net carrying amount | |||||||||||||||||||||||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
Product rights | $ | 18,815 | $ | 19,650 | $ | 12,318 | $ | 12,094 | $ | 6,497 | $ | 7,556 | $ | 17,981 | $ | 18,067 | $ | 13,274 | $ | 12,630 | $ | 4,707 | $ | 5,437 | ||||||||||||||||||||||||
Trade names | 590 | 621 | 198 | 165 | 392 | 456 | 583 | 577 | 269 | 231 | 314 | 346 | ||||||||||||||||||||||||||||||||||||
In-process research and development (IPR&D) | 577 | 911 | — | — | 577 | 911 | 366 | 487 | — | — | 366 | 487 | ||||||||||||||||||||||||||||||||||||
Total | $ | 19,982 | $ | 21,182 | $ | 12,516 | $ | 12,259 | $ | 7,466 | $ | 8,923 | $ | 18,930 | $ | 19,131 | $ | 13,543 | $ | 12,861 | $ | 5,387 | $ | 6,270 | ||||||||||||||||||||||||
(a) | Identifiable product rights of $260 million due to: (i) $148 million related to updated market assumptions regarding price and volume of products; and (ii) $112 million in Japan, mainly related to regulatory pricing reductions; and |
(b) | IPR&D assets of $90 million, mainly related to generic pipeline products resulting from development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape and launch date). |
(a) | Identifiable product rights of $310 million due to: (i) $256 million related to updated market assumptions regarding price and volume of products, and (ii) $54 million related to a change in Teva’s commercial plans regarding a certain program, as part of portfolio optimization efforts, which also included an inventory write-off of $108 million; and |
(b) | IPR&D assets of $45 million, due to generic pipeline products resulting from development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape and launch date). |
(a) | Identifiable product rights and trade names of $297 million due to: (i) $267 million, mainly related to updated market assumptions regarding price and volume of products acquired from Actavis |
Generics that are primarily marketed in the United States, and, (ii) $30 million related to lenalidomide (generic equivalent of Revlimid ® ), resulting from modified competition assumptions as a result of settlements between the innovator and other generic filers; and |
(b) | IPR&D assets of $127 million, mainly due to generic pipeline products acquired from Actavis Generics resulting from development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape, launch date) in the United States. |
North America | Europe | International Markets | Other | Total | ||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||
Balance as of December 31, 2019 (1) | $ | 11,091 | $ | 8,536 | $ | 2,532 | $ | 2,687 | $ | 24,846 | ||||||||||
Changes during the period: | ||||||||||||||||||||
Goodwill reclassified as assets held for sale | — | (8 | ) | (19 | ) | — | (27 | ) | ||||||||||||
Goodwill impairment | (4,628 | ) | — | — | — | (4,628 | ) | |||||||||||||
Translation differences | 10 | 574 | (151 | ) | — | 433 | ||||||||||||||
Balance as of December 31, 2020 (1) | $ | 6,473 | $ | 9,102 | $ | 2,362 | $ | 2,687 | $ | 20,624 | ||||||||||
Changes during the period: | ||||||||||||||||||||
Goodwill reclassified as assets held for sale | — | (7 | ) | — | (11 | ) | (18 | ) | ||||||||||||
Translation differences | 1 | (551 | ) | (34 | ) | 18 | (566 | ) | ||||||||||||
Balance as of December 31, 2021 (1) | $ | 6,474 | $ | 8,544 | $ | 2,328 | $ | 2,694 | $ | 20,040 | ||||||||||
Other | ||||||||||||||||||||||||
North America | Europe | International Markets | Teva’s API | Medis | Total | |||||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||||||
Balance as of December 31, 2021 (1) | $ | 6,474 | $ | 8,544 | $ | 2,328 | $ | 2,417 | $ | 277 | $ | 20,040 | ||||||||||||
Changes during the period: | ||||||||||||||||||||||||
Goodwill impairment | — | — | (979 | ) | (1,066 | ) | — | (2,045 | ) | |||||||||||||||
Goodwill acquired | — | — | — | 12 | — | 12 | ||||||||||||||||||
Translation differences | (24 | ) | (242 | ) | (10 | ) | (70 | ) | (28 | ) | (374 | ) | ||||||||||||
Balance as of December 31, 2022 (1) | $ | 6,450 | $ | 8,302 | $ | 1,339 | $ | 1,293 | $ | 249 | $ | 17,633 | ||||||||||||
Changes during the period: | ||||||||||||||||||||||||
Goodwill impairment | — | — | (700 | ) | — | — | (700 | ) | ||||||||||||||||
Goodwill reclassified as assets held for sale | — | — | (30 | ) | — | — | (30 | ) | ||||||||||||||||
Translation differences | 9 | 164 | 66 | 20 | 16 | 275 | ||||||||||||||||||
Balance as of December 31, 2023 (1) | $ | 6,459 | $ | 8,466 | $ | 675 | $ | 1,313 | $ | 265 | $ | 17,177 | ||||||||||||
(1) |
Year ended December 31, | Year ended December 31, | Year ended December 31, | Year ended December 31, | Year ended December 31, | Year ended December 31, | |||||||||||||||||||
2021 | 2020 | 2019 | 2023 | 2022 | 2021 | |||||||||||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | (U.S. $ in millions) | (U.S. $ in millions) | (U.S. $ in millions) | (U.S. $ in millions) | |||||||||||||||||||
Operating lease cost: | ||||||||||||||||||||||||
Fixed payments and variable payments that depend on an index or rate | $ | 135 | $ | 148 | $ | 166 | $ | 132 | $ | 142 | $ | 135 | ||||||||||||
Variable lease payments not included in the lease liability | 4 | 4 | 6 | 5 | 4 | 4 | ||||||||||||||||||
Short-term lease cost | 2 | 3 | 6 | 3 | 2 | 2 | ||||||||||||||||||
$ | 141 | $ | 155 | $ | 178 | $ | 139 | $ | 148 | $ | 141 | |||||||||||||
Year ended December 31, | Year ended December 31, | Year ended December 31, | ||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | (U.S. $ in millions) | ||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||
Operating cash flows from operating leases | $ | 143 | $ | 151 | $ | 169 | ||||||
Right-of-use assets obtained in exchange for lease obligations (non-cash): | ||||||||||||
Operating leases | $ | 81 | $ | 211 | $ | 142 |
Year ended December 31, | Year ended December 31, | Year ended December 31, | ||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | (U.S. $ in millions) | ||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||
Operating cash flows from operating leases | $ | 141 | $ | 140 | $ | 143 | ||||||
Right-of-use (non-cash): | ||||||||||||
Operating leases | $ | 121 | $ | 81 | $ | 81 |
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
(U.S. $ in millions) | (U.S. $ in millions) | |||||||
Operating leases: | ||||||||
Operating lease ROU assets | $ | 397 | $ | 419 | ||||
Other current liabilities | 97 | 93 | ||||||
Operating lease liabilities | 320 | 349 | ||||||
Total operating lease liabilities | $ | 417 | $ | 442 | ||||
December 31, | December 31, | |||||||
2021 | 2020 | |||||||
(U.S. $ in millions) | (U.S. $ in millions) | |||||||
Operating leases: | ||||||||
Operating lease ROU assets | $ | 495 | $ | 559 | ||||
Other current liabilities | 109 | 116 | ||||||
Operating lease liabilities | 416 | 479 | ||||||
Total operating lease liabilities | $ | 525 | $ | 595 | ||||
December 31, | December 31, | |||||||
2021 | 2020 | |||||||
Weighted average remaining lease term | ||||||||
Operating leases | 7.3 years | 7.5 years | ||||||
Weighted average discount rate | ||||||||
Operating leases | 5.4 | % | 5.2 | % |
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
Weighted average remaining lease term | ||||||||
Operating leases | 6.1 years | 6.8 years | ||||||
Weighted average discount rate | ||||||||
Operating leases | 6.0 | % | 5.6 | % |
December 31, | ||||
2021 | ||||
(U.S. $ in millions) | ||||
2022 | $ | 133 | ||
2023 | 106 | |||
2024 | 81 | |||
2025 | 71 | |||
2026 and thereafter | 255 | |||
Total operating lease payments | $ | 646 | ||
Less: imputed interest | 121 | |||
Present value of lease liabilities | $ | 525 | ||
December 31, | ||||
2023 | ||||
(U.S. $ in millions) | ||||
2024 | $ | 116 | ||
2025 | 98 | |||
2026 | 80 | |||
2027 | 62 | |||
2028 and thereafter | 140 | |||
Total operating lease payments | $ | 496 | ||
Less: imputed interest | 79 | |||
Present value of lease liabilities | $ | 417 | ||
a. | Short-term debt: |
December 31, | December 31, | |||||||||||||||||||||||||||||||
Weighted average interest rate as of December 31, 2021 | Maturity | 2021 | 2020 | Weighted average interest rate as of December 31, 2023 | Maturity | 2023 | 2022 | |||||||||||||||||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | |||||||||||||||||||||||||||||||
Convertible debentures | 0.25 | % | 2026 | 23 | 514 | 0.25 | % | 2026 | $ | 23 | $ | 23 | ||||||||||||||||||||
Current maturities of long-term liabilities | Current maturities of long-term liabilities | 1,403 | 2,674 | Current maturities of long-term liabilities | 1,649 | 2,086 | ||||||||||||||||||||||||||
Total short term debt | Total short term debt | $ | 1,426 | $ | 3,188 | Total short term debt | $ | 1,672 | $ | 2,109 | ||||||||||||||||||||||
Weighted average interest rate as of December 31, 2021 | Maturity | December 31, 2021 | December 31, 2020 | |||||||||||||
% | (U.S. $ in millions) | |||||||||||||||
Senior notes EUR 1,500 million (6) | 1.13 | % | 2024 | 708 | 1,839 | |||||||||||
Sustainability-linked senior notes EUR 1,500 million (2)(*) | 4.38 | % | 2030 | 1,699 | — | |||||||||||
Senior notes EUR 1,300 million (6) | 1.25 | % | 2023 | 670 | 1,595 | |||||||||||
Sustainability-linked senior notes EUR 1,100 million (3)(*) | 3.75 | % | 2027 | 1,246 | — | |||||||||||
Senior notes EUR 1,000 million | 6.00 | % | 2025 | 1,134 | 1,230 | |||||||||||
Senior notes EUR 900 million | 4.50 | % | 2025 | 1,020 | 1,107 | |||||||||||
Senior notes EUR 750 million | 1.63 | % | 2028 | 844 | 916 | |||||||||||
Senior notes EUR 700 million (6) | 3.25 | % | 2022 | 307 | 861 | |||||||||||
Senior notes EUR 700 million | 1.88 | % | 2027 | 792 | 860 | |||||||||||
Senior notes USD 3,500 million | 3.15 | % | 2026 | 3,496 | 3,495 | |||||||||||
Senior notes USD 3,000 million (6) | 2.80 | % | 2023 | 1,453 | 2,996 | |||||||||||
Senior notes USD 2,000 million | 4.10 | % | 2046 | 1,986 | 1,986 | |||||||||||
Senior notes USD 1,475 million (1) | 2.20 | % | 2021 | — | 1,472 | |||||||||||
Senior notes USD 1,250 million | 6.00 | % | 2024 | 1,250 | 1,250 | |||||||||||
Senior notes USD 1,250 million | 6.75 | % | 2028 | 1,250 | 1,250 | |||||||||||
Senior notes USD 1,000 million | 7.13 | % | 2025 | 1,000 | 1,000 | |||||||||||
Sustainability-linked senior notes USD 1,000 million (4)(*) | 4.75 | % | 2027 | 1,000 | — | |||||||||||
Sustainability-linked senior notes USD 1,000 million (5)(*) | 5.13 | % | 2029 | 1,000 | — | |||||||||||
Senior notes USD 844 million (6) | 2.95 | % | 2022 | 715 | 853 | |||||||||||
Senior notes USD 789 million | 6.15 | % | 2036 | 783 | 783 |
Weighted average interest rate as of December 31, 2021 | Maturity | December 31, 2021 | December 31, 2020 | |||||||||||||
% | (U.S. $ in millions) | |||||||||||||||
Senior notes USD 613 million (7) | 3.65 | % | 2021 | — | 616 | |||||||||||
Senior notes USD 588 million (7) | 3.65 | % | 2021 | — | 586 | |||||||||||
Senior notes CHF 350 million | 0.50 | % | 2022 | 382 | 397 | |||||||||||
Senior notes CHF 350 million | 1.00 | % | 2025 | 383 | 398 | |||||||||||
Total senior notes | 23,118 | 25,490 | ||||||||||||||
Other long-term debt | 2 | 1 | ||||||||||||||
Less current maturities | (1,403 | ) | (2,674 | ) | ||||||||||||
Less debt issuance costs | (100 | ) | (86 | ) | ||||||||||||
Total senior notes and loans | $ | 21,617 | $ | 22,731 | ||||||||||||
b. | Long-term debt: |
Interest rate as of December 31, 2023 | Maturity | December 31, 2023 | December 31, 2022 | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Senior notes EUR 1,500 million | 1.13 | % | 2024 | 693 | 670 | |||||||||||
Sustainability-linked senior notes EUR 1,500 million (6)(*) | 4.38 | % | 2030 | 1,656 | 1,606 | |||||||||||
Senior notes EUR 1,300 million (9) | 1.25 | % | 2023 | — | 633 | |||||||||||
Sustainability-linked senior notes EUR 1,100 million (7)(*) | 3.75 | % | 2027 | 1,215 | 1,177 | |||||||||||
Senior notes EUR 1,000 million (5) | 6.00 | % | 2025 | 453 | 1,070 | |||||||||||
Senior notes EUR 900 million (5) | 4.50 | % | 2025 | 547 | 963 | |||||||||||
Sustainability-linked senior notes EUR 800 million (1)(*) | 7.38 | % | 2029 | 884 | — | |||||||||||
Senior notes EUR 750 million | 1.63 | % | 2028 | 826 | 800 | |||||||||||
Senior notes EUR 700 million | 1.88 | % | 2027 | 771 | 748 | |||||||||||
Sustainability-linked senior notes EUR 500 million (2)(*) | 7.88 | % | 2031 | 552 | — | |||||||||||
Senior notes USD 3,500 million (5) | 3.15 | % | 2026 | 3,374 | 3,496 | |||||||||||
Senior notes USD 3,000 million (5)(10) | 2.80 | % | 2023 | — | 1,453 | |||||||||||
Senior notes USD 2,000 million | 4.10 | % | 2046 | 1,986 | 1,986 | |||||||||||
Senior notes USD 1,250 million (5) | 6.00 | % | 2024 | 956 | 1,250 | |||||||||||
Senior notes USD 1,250 million | 6.75 | % | 2028 | 1,250 | 1,250 | |||||||||||
Senior notes USD 1,000 million (5) | 7.13 | % | 2025 | 427 | 1,000 | |||||||||||
Sustainability-linked senior notes USD 1,000 million (7)(*) | 4.75 | % | 2027 | 1,000 | 1,000 | |||||||||||
Sustainability-linked senior notes USD 1,000 million (6)(*) | 5.13 | % | 2029 | 1,000 | 1,000 | |||||||||||
Senior notes USD 789 million | 6.15 | % | 2036 | 783 | 783 | |||||||||||
Sustainability-linked senior notes USD 600 million (3)(*) | 7.88 | % | 2029 | 600 | — | |||||||||||
Sustainability-linked senior notes USD 500 million (4)(*) | 8.13 | % | 2031 | 500 | — | |||||||||||
Senior notes CHF 350 million | 1.00 | % | 2025 | 416 | 382 | |||||||||||
Total senior notes | 19,889 | 21,266 | ||||||||||||||
Other long-term debt | 1 | 1 | ||||||||||||||
Less current maturities | (1,649 | ) | (2,086 | ) | ||||||||||||
Less debt issuance costs (8) | (80 | ) | (78 | ) | ||||||||||||
Total senior notes and loans | $ | 18,161 | $ | 19,103 | ||||||||||||
(1) | In |
0.100%-0.300% per annum, from and including |
In 0.100%-0.300% per annum, from and including September 15, 2026. |
(3) | In March 2023, Teva issued sustainability-linked senior notes in an aggregate principal amount of $600 million bearing 7.88% annual interest and due September 2029. If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by 0.100%-0.300% per annum, from and including September 15, 2026. |
(4) | In March 2023, Teva issued sustainability-linked senior notes in an aggregate principal amount of $500 million bearing 8.13% annual interest and due September 2031. If Teva fails to achieve certain |
sustainability performance targets, the interest rate shall increase by 0.100%-0.300% per annum, from and including September 15, 2026. |
(5) | In March 2023, Teva consummated a cash tender offer and extinguished $631 million aggregate principal amount of its 1,000 million euro 6% senior notes due in 2025; $432 million aggregate principal amount of its 900 million euro 4.5% senior notes due in 2025; $574 million aggregate principal amount of its $1,000 million 7.13% senior notes due in 2025; $454 million aggregate principal amount of its $3,000 million 2.8% senior notes due in 2023; $293 million aggregate principal amount of its $1,250 million 6% senior notes due in 2024 and $122 million aggregate principal amount of its $3,500 million 3.15% senior notes due in 2026. |
(6) | If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by 0.125%-0.375% per annum, from and including May 9, 2026. |
(7) | If Teva fails to achieve certain sustainability performance targets, a one-time premium payment of0.15%-0.45% out of the principal amount will be paid at maturity or upon earlier redemption, if such redemption is on or after May 9, 2026. |
(8) | Debt issuance costs as of December 31, $26 million in connection with the issuance of the sustainability-linked senior notes in |
(9) | In March 2023, Teva repaid $646 million of its 1.25% senior notes at maturity. |
(10) | In July 2023, Teva repaid $1,000 million of its 2.8% senior notes at maturity. |
* | Interest rate adjustments and a potential one-time premium payment related to the sustainability-linked bonds are treated as bifurcated embedded derivatives. See note 10c. |
December 31, 2023 | ||||
(U.S. $ in millions) | ||||
2025 | $ | 1,843 | ||
2026* | 3,397 | |||
2027 | 2,986 | |||
2028 | 2,076 | |||
2029 and thereafter | 7,961 | |||
$ | 18,263 | |||
December 31, 2021 | ||||
(U.S. $ in millions) | ||||
2023 | $ | 2,124 | ||
2024 | 1,960 | |||
2025 | 3,535 | |||
2026 * | 3,523 | |||
2027 and thereafter | 10,626 | |||
$ | 21,768 | |||
* |
a. | Foreign exchange risk management: |
b. | Interest risk management: |
c. | Bifurcated embedded derivatives: |
d. | Derivative instrument outstanding: |
December 31, 2023 | December 31, 2022 | |||||||
(U.S. $ in millions) | ||||||||
Cross-currency swap-cash flow hedge (1) | $ | 169 | $ | — | ||||
Fair value | ||||||||||||||||
Designated as hedging instruments | Not designated as hedging instruments | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Reported under | (U.S. $ in millions) | (U.S. $ in millions) | ||||||||||||||
Asset derivatives: | ||||||||||||||||
Other current assets: | ||||||||||||||||
Option and forward contracts | $ | — | $ | — | $ | 38 | $ | 29 | ||||||||
Other non-current assets: | ||||||||||||||||
Cross-currency swaps - cash flow hedge (1) | 8 | — | — | — | ||||||||||||
Liability derivatives: | ||||||||||||||||
Other current liabilities: | ||||||||||||||||
Option and forward contracts | $ | — | $ | — | $ | (39 | ) | $ | (101 | ) |
Fair value | ||||||||
Not designated as hedging instruments | ||||||||
December 31, 2021 | December 31, 2020 | |||||||
Reported under | (U.S. $ in millions) | |||||||
Asset derivatives: | ||||||||
Other current assets: | ||||||||
Option and forward contracts | $ | 30 | $ | 24 | ||||
Liability derivatives: | ||||||||
Other current liabilities: | ||||||||
Option and forward contracts | (23 | ) | (79 | ) |
Financial expenses, net | Other comprehensive income (loss) | |||||||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |||||||||||||||||||
Reported under | (U.S. $ in millions) | |||||||||||||||||||||||
Line items in which effects of hedges are recorded | $ | 1,058 | $ | 834 | $ | 822 | $ | (391 | ) | $ | (30 | ) | $ | 160 | ||||||||||
Cross-currency swaps—cash flow hedge (1) | 0 | 0 | (2 | ) | 0 | 0 | (33 | ) | ||||||||||||||||
Cross-currency swaps—net investment hedge (2) | 0 | (2 | ) | (29 | ) | 0 | (21 | ) | (22 | ) | ||||||||||||||
Interest rate swaps—fair value hedge (3) . | 0 | 0 | 2 | 0 | 0 | 0 |
Reported under | Financial expenses, net | Other comprehensive income (loss) | ||||||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |||||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||||||
Line items in which effects of hedges are recorded | $ | 1,057 | $ | 966 | $ | 1,058 | $ | 91 | $ | (270 | ) | $ | (391 | ) | ||||||||||
Cross-currency swaps - cash flow hedge (1) | (11 | ) | — | — | 1 | — | — |
Financial expenses, net | Net revenues | |||||||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |||||||||||||||||||
Reported under | (U.S. $ in millions) | |||||||||||||||||||||||
Line items in which effects of hedges are recorded | $ | 1,058 | $ | 834 | $ | 822 | $ | 15,878 | $ | 16,659 | $ | 16,887 | ||||||||||||
Option and forward contracts (4) | (45 | ) | 130 | (51 | ) | — | — | — | ||||||||||||||||
Option and forward contracts (5) | — | 0 | — | 31 | * | 14 |
Reported under | Financial expenses, net | Net revenues | ||||||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |||||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||||||
Line items in which effects of hedges are recorded | $ | 1,057 | $ | 966 | $ | 1,058 | $ | (15,846 | ) | $ | (14,925 | ) | $ | (15,878 | ) | |||||||||
Option and forward contracts (2) | (54 | ) | (12 | ) | (45 | ) | — | — | — | |||||||||||||||
Option and forward contracts economic hedge (3) | — | — | — | 2 | (11 | ) | (31 | ) |
(1) |
Teva uses foreign exchange contracts (mainly option and forward contracts) to hedge balance sheet items from currency exposure. These foreign exchange contracts are not designated as hedging instruments for accounting purposes. In connection with these foreign exchange contracts, Teva recognizes gains or losses that offset the revaluation of the balance sheet items also recorded under financial expenses, net. |
Teva entered into option and forward contracts designed to limit the exposure of foreign exchange fluctuations on projected revenues and expenses recorded in euro, revenues was |
e. | Amortizations due to terminated derivative instruments: |
f. | Securitization: |
As of and for the year ended December 31, | ||||||||
2023 | 2022 | |||||||
(U.S. $ in millions) | ||||||||
Sold receivables at the beginning of the year | $ | 636 | $ | 685 | ||||
Proceeds from sale of receivables | 4,391 | 4,653 | ||||||
Cash collections (remitted to the owner of the receivables) | (4,365 | ) | (4,665 | ) | ||||
Effect of currency exchange rate changes | 24 | (37 | ) | |||||
Sold receivables at the end of the year | $ | 686 | $ | 636 | ||||
As of and for the year ended December 31, | ||||||||
2021 | 2020 | |||||||
(U.S. $ in millions) | ||||||||
Sold receivables at the beginning of the year | $ | 734 | $ | 690 | ||||
Proceeds from sale of receivables | 5,139 | 4,606 | ||||||
Cash collections (remitted to the owner of the receivables) | (5,152 | ) | (4,607 | ) | ||||
Effect of currency exchange rate changes | (36 | ) | 45 | |||||
Sold receivables at the end of the year | $ | 685 | $ | 734 | ||||
g. | Supplier Finance Program Obligation |
a. | Commitments: |
b. | Contingencies: |
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Parent Company and its Israeli subsidiaries | $ | 126 | $ | 947 | $ | 542 | ||||||
Non-Israeli subsidiaries | 532 | (5,353 | ) | (1,807 | ) | |||||||
$ | 658 | $ | (4,406 | ) | $ | (1,265 | ) | |||||
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
In Israel | $ | 124 | $ | 60 | $ | 107 | ||||||
Outside Israel | 87 | (228 | ) | (385 | ) | |||||||
$ | 211 | $ | (168 | ) | $ | (278 | ) | |||||
Current | $ | 270 | $ | 182 | $ | 885 | ||||||
Deferred | (59 | ) | (350 | ) | (1,163 | ) | ||||||
$ | 211 | $ | (168 | ) | $ | (278 | ) | |||||
a. | Income (loss) before income taxes: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Parent Company and its Israeli subsidiaries | $ | (767 | ) | $ | (119 | ) | $ | 126 | ||||
Non-Israeli subsidiaries | 143 | (3,044 | ) | 532 | ||||||||
$ | (624 | ) | $ | (3,163 | ) | $ | 658 | |||||
b. | Income taxes: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
In Israel | $ | (402 | ) | $ | 33 | $ | 124 | |||||
Outside Israel | 395 | (676 | ) | 87 | ||||||||
$ | (7 | ) | $ | (643 | ) | $ | 211 | |||||
Current | $ | 333 | $ | 430 | $ | 270 | ||||||
Deferred | (340 | ) | (1,073 | ) | (59 | ) | ||||||
$ | (7 | ) | $ | (643 | ) | $ | 211 | |||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Income (loss) before income taxes (***) | $ | (624 | ) | $ | (3,163 | ) | $ | 658 | ||||
Statutory tax rate in Israel | 23 | % | 23 | % | 23 | % | ||||||
Theoretical provision for income taxes (***) | $ | (144 | ) | $ | (727 | ) | $ | 151 | ||||
Increase (decrease) in the provision for income taxes due to: | ||||||||||||
The Parent Company and its Israeli subsidiaries - Tax benefits arising from net deferred taxes, resulting from intellectual property related integration plans, including carryforward losses | (272) | — | — | |||||||||
Tax benefits arising from reduced tax rates under benefit programs | 14 | 15 | (12) | |||||||||
Mainly nondeductible items and prior year tax | — | 35 | 20 | |||||||||
Non-Israeli subsidiaries, including impairments (*) | 372 | 941 | 117 | |||||||||
Worthless stock deduction (**) | — | (909) | — | |||||||||
Increase (decrease) in other uncertain tax positions - net | 23 | 2 | (65) | |||||||||
Effective consolidated income taxes (***) | $ | (7) | $ | (643) | $ | 211 | ||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Income (loss) before income taxes | $ | 658 | $ | (4,406 | ) | $ | (1,265 | ) | ||||
Statutory tax rate in Israel | 23 | % | 23 | % | 23 | % | ||||||
Theoretical provision for income taxes | $ | 151 | $ | (1,013 | ) | $ | (291 | ) | ||||
Increase (decrease) in the provision for income taxes due to: | ||||||||||||
The Parent Company and its Israeli subsidiaries - Tax benefits arising from reduced tax rates under benefit programs | (12 | ) | (153 | ) | (77 | ) | ||||||
Mainly nondeductible items and prior year tax | 20 | (30 | ) | 33 | ||||||||
Non-Israeli subsidiaries, including impairments (*) | 117 | 1,369 | (115 | ) | ||||||||
Increase (decrease) in other uncertain tax positions—net | (65 | ) | (341 | ) | 172 | |||||||
Effective consolidated income taxes | $ | 211 | $ | (168 | ) | $ | (278 | ) | ||||
In non-Israeli subsidiaries that did not have a corresponding tax effect. |
** | In 2022, one of Teva’s U.S. subsidiaries was determined to be insolvent for tax purposes (i.e., its liabilities exceeded the fair market value of its assets), mainly in light of its accumulated operational losses. Consequently, Teva recognized on its 2022 tax return, a worthless stock deduction of approximately $4.2 billion, with related tax benefit of approximately $909 million. |
*** | The financial data presented in the tables above for the year ended December 31, 2022 have been revised as discussed in note 1b. |
c. | Deferred income taxes: |
December 31, | ||||||||
2023 | 2022 | |||||||
(U.S. $ in millions) | ||||||||
Deferred tax assets (liabilities), net: | ||||||||
Inventory related | $ | 76 | $ | 125 | ||||
Sales reserves and allowances | 81 | 89 | ||||||
Provision for legal settlements | 702 | 703 | ||||||
Intangible assets (*) | (118 | ) | (567 | ) | ||||
Carryforward losses and deductions and credits (**) | 2,463 | 2,850 | ||||||
Property, plant and equipment | (225 | ) | (238 | ) | ||||
Deferred interest | 799 | 800 | ||||||
Provisions for employee related obligations | 80 | 82 | ||||||
Other (***) | 357 | 138 | ||||||
4,215 | 3,982 | |||||||
Valuation allowance—in respect of carryforward losses and deductions that may not be utilized | (3,009 | ) | (3,072 | ) | ||||
$ | 1,206 | $ | 910 | |||||
December 31, | ||||||||
2021 | 2020 | |||||||
(U.S. $ in millions) | ||||||||
Deferred tax assets (liabilities), net: | ||||||||
Inventory related | $ | 104 | $ | 212 | ||||
Sales reserves and allowances | 136 | 173 | ||||||
Provision for legal settlements | 360 | 235 | ||||||
Intangible assets (*) | (814 | ) | (1,064 | ) | ||||
Carryforward losses and deductions and credits (**) | 2,093 | 2,176 | ||||||
Property, plant and equipment | (215 | ) | (142 | ) | ||||
Deferred interest | 617 | 527 | ||||||
Provisions for employee related obligations | 95 | 107 | ||||||
Other | 159 | 54 | ||||||
2,535 | 2,278 | |||||||
Valuation allowance—in respect of carryforward losses and deductions that may not be utilized | (2,723 | ) | (2,547 | ) | ||||
$ | (188 | ) | $ | (269 | ) | |||
(*) | The |
(**) | The amounts are shown following a reduction for unrecognized tax benefits of |
(***) | The |
December 31, | ||||||||
2023 | 2022 | |||||||
(U.S. $ in millions) | ||||||||
Long-term assets—deferred income taxes (*) | 1,812 | 1,458 | ||||||
Long-term liabilities—deferred income taxes | (606 | ) | (548 | ) | ||||
$ | 1,206 | $ | 910 | |||||
(*) | Long-term assets—deferred income taxes presented in the tables above as of December 31, 2022, have been revised as discussed in note 1b. |
December 31, | ||||||||
2021 | 2020 | |||||||
(U.S. $ in millions) | ||||||||
Long-term assets—deferred income taxes | 596 | 695 | ||||||
Long-term liabilities—deferred income taxes | (784 | ) | (964 | ) | ||||
$ | (188 | ) | $ | (269 | ) | |||
d. | Uncertain tax positions: |
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Balance at the beginning of the year | $ | 888 | $ | 1,223 | $ | 1,072 | ||||||
Increase (decrease) related to prior year tax positions, net | (106 | ) | (238 | ) | 23 | |||||||
Increase related to current year tax positions | 7 | 10 | 246 | |||||||||
Decrease related to settlements with tax authorities and lapse of applicable statutes of limitations | (115 | ) | (105 | ) | (118 | ) | ||||||
Other | (2 | ) | (2 | ) | — | |||||||
Balance at the end of the year | $ | 672 | $ | 888 | $ | 1,223 | ||||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Balance at the beginning of the year | $ | 638 | $ | 672 | $ | 888 | ||||||
Increase (decrease) related to prior year tax positions, net | (1 | ) | (46 | ) | (106 | ) | ||||||
Increase related to current year tax positions | 15 | 42 | 7 | |||||||||
Decrease related to settlements with tax authorities and lapse of applicable statutes of limitations | (15 | ) | (31 | ) | (115 | ) | ||||||
Other | 14 | 1 | (2 | ) | ||||||||
Balance at the end of the year | $ | 651 | $ | 638 | $ | 672 | ||||||
e. | Tax assessments: |
f. | Basis of taxation: |
a. | At least 20% of the workforce (or at least 200 employees) are employed in R&D; |
b. | A venture capital investment approximately equivalent to at least $2 million was previously made in the company; or |
c. | Growth in sales or workforce by an average of 25% over the three years preceding the tax year. |
a. | Ordinary shares and ADSs |
b. | Stock-based compensation plans |
Year ended December 31, | ||||||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||
Number (in thousands) | Weighted average exercise price | Number (in thousands) | Weighted average exercise price | Number (in thousands) | Weighted average exercise price | |||||||||||||||||||
Balance outstanding at beginning of year | 35,234 | $ | 37.27 | 40,064 | $ | 37.90 | 48,393 | $ | 38.62 | |||||||||||||||
Changes during the year: | ||||||||||||||||||||||||
Exercised | — | — | — | — | (11 | ) | 16.99 | |||||||||||||||||
Forfeited | (3,644 | ) | 36.09 | (3,610 | ) | 40.24 | (8,318 | ) | 42.12 | |||||||||||||||
Expired | (2,575 | ) | 42.40 | (1,220 | ) | 49.35 | — | — | ||||||||||||||||
Balance outstanding at end of year | 29,015 | 36.96 | 35,234 | 37.27 | 40,064 | 37.90 | ||||||||||||||||||
Balance exercisable at end of year | 26,989 | 38.30 | 28,556 | 40.56 | 26,601 | 43.41 | ||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||
2023 | 2022 | 2021 | ||||||||||||||||||||||
Number (in thousands) | Weighted average exercise price | Number (in thousands) | Weighted average exercise price | Number (in thousands) | Weighted average exercise price | |||||||||||||||||||
Balance outstanding at beginning of year | 24,119 | $ | 36.83 | 29,015 | $ | 36.96 | 35,234 | $ | 37.27 | |||||||||||||||
Changes during the year: | ||||||||||||||||||||||||
Forfeited | (885 | ) | 34.65 | (2,378 | ) | 33.77 | (3,644 | ) | 36.09 | |||||||||||||||
Expired | (531 | ) | 37.57 | (2,518 | ) | 41.26 | (2,575 | ) | 42.40 | |||||||||||||||
Balance outstanding at end of year | 22,703 | 36.89 | 24,119 | 36.83 | 29,015 | 36.96 | ||||||||||||||||||
Balance exercisable at end of year | 22,703 | 36.89 | 24,119 | 36.83 | 26,989 | 38.30 | ||||||||||||||||||
(1) Number of ordinary shares issuable upon exercise of outstanding options | ||||||||||||
Range of exercise prices | Balance at end of period (in thousands) | Weighted average exercise price | Weighted average remaining life | |||||||||
Number of shares | $ | Years | ||||||||||
Lower than $15.01 | 592 | 11.40 | 5.84 | |||||||||
$15.01 - $25.00 | 8,762 | 18.95 | 6.12 | |||||||||
$25.01 - $35.00 | 6,364 | 34.61 | 5.16 | |||||||||
$35.01 - $45.00 | 2,679 | 39.83 | 0.96 | |||||||||
$45.01 - $55.00 | 6,801 | 51.01 | 3.18 | |||||||||
$55.01 - $65.00 | 3,817 | 59.15 | 3.33 | |||||||||
Total | 29,015 | 36.96 | 4.37 | |||||||||
(2) Number of ordinary shares issuable upon exercise of vested options | ||||||||||||||||||||||||
Number of ordinary shares issuable upon exercise of vested options | Number of ordinary shares issuable upon exercise of vested options | |||||||||||||||||||||||
Range of exercise prices | Balance at end of period (in thousands) | Weighted average exercise price | Weighted average remaining life | Balance at end of period (in thousands) | Weighted average exercise price | Weighted average remaining life | ||||||||||||||||||
Number of shares | $ | Years | Number of shares | $ | Years | |||||||||||||||||||
Lower than $15.01 | 592 | 11.40 | 5.84 | 592 | 11.40 | 3.84 | ||||||||||||||||||
$15.01 - $25.00 | 6,736 | 18.90 | 6.11 | 7,374 | 18.95 | 4.14 | ||||||||||||||||||
$25.01 - $35.00 | 6,364 | 34.61 | 5.16 | 5,470 | 34.66 | 3.17 | ||||||||||||||||||
$35.01 - $45.00 | 2,679 | 39.83 | 0.96 | 61 | 37.97 | 2.78 | ||||||||||||||||||
$45.01 - $55.00 | 6,801 | 51.01 | 3.18 | 5,707 | 51.26 | 1.36 | ||||||||||||||||||
$55.01 - $65.00 | 3,817 | 59.15 | 3.33 | 3,500 | 59.04 | 1.34 | ||||||||||||||||||
Total | 26,989 | 38.30 | 4.24 | 22,703 | 36.89 | 2.76 | ||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||
Number (in thousands) | Weighted average grant date fair value | Number (in thousands) | Weighted average grant date fair value | Number (in thousands) | Weighted average grant date fair value | Number (in thousands) | Weighted average grant date fair value | Number (in thousands) | Weighted average grant date fair value | Number (in thousands) | Weighted average grant date fair value | |||||||||||||||||||||||||||||||||||||
Balance outstanding at beginning of year | 20,720 | $ | 13.81 | 15,977 | $ | 16.49 | 10,403 | $ | 20.93 | 32,302 | $ | 9.11 | 24,412 | $ | 11.58 | 20,720 | $ | 13.81 | ||||||||||||||||||||||||||||||
Granted | 12,748 | 10.42 | 10,848 | 11.42 | 9,303 | 15.36 | 16,608 | 9.77 | 18,755 | 7.42 | 12,748 | 10.42 | ||||||||||||||||||||||||||||||||||||
Vested | (6,818 | ) | 15.60 | (4,324 | ) | 19.49 | (2,435 | ) | 30.24 | (10,195 | ) | 10.28 | (7,571 | ) | 13.02 | (6,818 | ) | 15.60 | ||||||||||||||||||||||||||||||
Forfeited | (2,238 | ) | 12.18 | (1,781 | ) | 18.18 | (1,294 | ) | 18.74 | (3,052 | ) | 9.81 | (3,293 | ) | 9.81 | (2,238 | ) | 12.18 | ||||||||||||||||||||||||||||||
Balance outstanding at end of year | 24,412 | 11.58 | 20,720 | 13.81 | 15,977 | 16.49 | 35,664 | 9.07 | 32,302 | 9.11 | 24,412 | 11.58 | ||||||||||||||||||||||||||||||||||||
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Employee stock options | $ | 16 | $ | 30 | $ | 46 | ||||||
RSUs and PSUs | 103 | 99 | 73 | |||||||||
Total stock-based compensation expense | 119 | 129 | 119 | |||||||||
Tax effect on stock-based compensation expense | 12 | 14 | 14 | |||||||||
Net effect | $ | 107 | $ | 115 | $ | 105 | ||||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Employee stock options | $ | — | $ | 2 | $ | 16 | ||||||
RSUs and PSUs | 121 | 122 | 103 | |||||||||
Total stock-based compensation expense | 121 | 124 | 119 | |||||||||
Tax effect on stock-based compensation expense | 11 | 9 | 12 | |||||||||
Net effect | $ | 110 | $ | 115 | $ | 107 | ||||||
Dividends |
Accumulated other comprehensive loss |
Net Unrealized Gains/(Losses) | Benefit Plans | |||||||||||||||||||
Foreign currency translation adjustments | Available- for-sale securities | Derivative financial instruments | Actuarial gains/(losses) and prior service (costs)/credits | Total | ||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||
Balance as of January 1, 2019 | $ | (1,878 | ) | $ | 1 | $ | (504 | ) | $ | (78 | ) | $ | (2,459 | ) | ||||||
Other comprehensive income/(loss) before reclassifications | 100 | (1 | ) | 54 | (11 | ) | 142 | |||||||||||||
Amounts reclassified to the statements of income | 0 | 0 | 30 | (10 | ) | 20 | ||||||||||||||
Net other comprehensive income/(loss) before tax | 100 | (1 | ) | 84 | (21 | ) | 162 | |||||||||||||
Corresponding income tax | (16 | ) | — | — | 1 | (15 | ) | |||||||||||||
Net other comprehensive income/(loss) after tax* | 84 | (1 | ) | 84 | (20 | ) | 147 | |||||||||||||
Balance as of December 31, 2019 | (1,794 | ) | — | (420 | ) | (98 | ) | (2,312 | ) | |||||||||||
Other comprehensive income/(loss) before reclassifications | (190 | ) | — | 22 | (7 | ) | (175 | ) | ||||||||||||
Amounts reclassified to the statements of income | — | — | 35 | (12 | ) | 23 | ||||||||||||||
Net other comprehensive income/(loss) before tax | (190 | ) | — | 57 | (19 | ) | (152 | ) | ||||||||||||
Corresponding income tax | 65 | — | — | 1 | 66 | |||||||||||||||
Net other comprehensive income/(loss) after tax* | (125 | ) | — | 57 | (18 | ) | (86 | ) | ||||||||||||
Balance as of December 31, 2020 | (1,919 | ) | — | (363 | ) | (117 | ) | (2,399 | ) | |||||||||||
Other comprehensive income/(loss) before reclassifications | (386 | ) | — | 0 | 18 | (368 | ) | |||||||||||||
Amounts reclassified to the statements of income | — | — | 39 | 18 | 57 | |||||||||||||||
Net other comprehensive income/(loss) before tax | (386 | ) | — | 39 | 36 | (311 | ) | |||||||||||||
Corresponding income tax | 31 | — | — | (4 | ) | 27 | ||||||||||||||
Net other comprehensive income/(loss) after tax* | (355 | ) | — | 39 | 32 | (283 | ) | |||||||||||||
Balance as of December 31, 202 1 | $ | (2,274 | ) | — | $ | (324 | ) | $ | (85 | ) | $ | (2,683 | ) | |||||||
Net Unrealized Gains/(Losses) | Benefit Plans | |||||||||||||||
Foreign currency translation adjustments | Derivative financial instruments | Actuarial gains/(losses) and prior service (costs)/ credits | Total | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Balance as of January 1, 2021 | $ | (1,919 | ) | (363 | ) | (117 | ) | (2,399 | ) | |||||||
Other comprehensive income/(loss) before reclassifications | (386 | ) | — | 18 | (368 | ) | ||||||||||
Amounts reclassified to the statements of income | — | 39 | 18 | 57 | ||||||||||||
Net other comprehensive income/(loss) before tax | (386 | ) | 39 | 36 | (311 | ) | ||||||||||
Corresponding income tax | 31 | — | (4 | ) | 27 | |||||||||||
Net other comprehensive income/(loss) after tax* | (355 | ) | 39 | 32 | (284 | ) | ||||||||||
Balance as of December 31, 2021 | (2,274 | ) | (324 | ) | (85 | ) | (2,683 | ) | ||||||||
Other comprehensive income/(loss) before reclassifications | (223 | ) | — | 40 | (183 | ) | ||||||||||
Amounts reclassified to the statements of income | — | 29 | 27 | 56 | ||||||||||||
Net other comprehensive income/(loss) before tax | (223 | ) | 29 | 67 | (127 | ) | ||||||||||
Corresponding income tax | (17 | ) | — | (10 | ) | (27 | ) | |||||||||
Net other comprehensive income/(loss) after tax* | (240 | ) | 29 | 57 | (154 | ) | ||||||||||
Balance as of December 31, 2022 | (2,514 | ) | (295 | ) | (28 | ) | (2,838 | ) | ||||||||
Other comprehensive income/(loss) before reclassifications | 167 | (1 | ) | (17 | ) | 149 | ||||||||||
Amounts reclassified to the statements of income | — | 30 | (4 | ) | 26 | |||||||||||
Net other comprehensive income/(loss) before tax | 167 | 29 | (21 | ) | 175 | |||||||||||
Corresponding income tax | (37 | ) | — | 3 | (34 | ) | ||||||||||
Net other comprehensive income/(loss) after tax* | 130 | 29 | (18 | ) | 141 | |||||||||||
Balance as of December 31, 2023 | $ | (2,384 | ) | $ | (266 | ) | $ | (46 | ) | $ | (2,697 | ) | ||||
* | Amounts do not include foreign currency translation adjustments attributable to 2021.non-controlling interests of $50 million loss in 2023, $116 million loss in 2022 and $107 million loss in |
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2023 | 2022 | 2021 | |||||||||||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | |||||||||||||||||||||||
Impairment of long-lived tangible assets (1) | $ | 160 | $ | 416 | $ | 139 | $ | 28 | $ | 47 | $ | 160 | ||||||||||||
Contingent consideration (see note 20) | 7 | (81 | ) | 59 | ||||||||||||||||||||
Contingent consideration (see note 20) (2) | 548 | 261 | 7 | |||||||||||||||||||||
Restructuring | 133 | 120 | 199 | 111 | 146 | 133 | ||||||||||||||||||
Other | 41 | 24 | 26 | 30 | 57 | 41 | ||||||||||||||||||
Total | $ | 341 | $ | 479 | $ | 423 | $ | 718 | $ | 512 | $ | 341 | ||||||||||||
(1) | Including impairments related to exit and disposal activities. |
(2) | The contingent consideration presented in the tables above for the year ended December 31, 2022 have been revised as discussed in note 1b. |
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Restructuring | ||||||||||||
Employee termination | $ | 117 | $ | 71 | $ | 159 | ||||||
Other | 16 | 49 | 40 | |||||||||
Total | $ | 133 | $ | 120 | $ | 199 | ||||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Restructuring | ||||||||||||
Employee termination | $ | 52 | $ | 117 | $ | 117 | ||||||
Other | 59 | 29 | 16 | |||||||||
Total | $ | 111 | $ | 146 | $ | 133 | ||||||
Employee termination costs | Other | Total | ||||||||||
(U.S. $ in millions ) | ||||||||||||
Balance as of January 1, 2019 | $ | (204 | ) | $ | (29 | ) | $ | (233 | ) | |||
Provision | (159 | ) | (40 | ) | (199 | ) | ||||||
Utilization and other* | 155 | 62 | 217 | |||||||||
Balance as of January 1, 2020 | $ | (208 | ) | $ | (7 | ) | $ | (215 | ) | |||
Provision | (71 | ) | (49 | ) | (120 | ) | ||||||
Utilization and other* | 164 | 49 | 213 | |||||||||
Balance as of December 31, 2020 | $ | (115 | ) | $ | (7 | ) | $ | (122 | ) | |||
Provision | (117 | ) | (16 | ) | (133 | ) | ||||||
Utilization and other* | 101 | 16 | 117 | |||||||||
Balance as of December 31, 2021 | $ | (131 | ) | $ | (7 | ) | $ | (138 | ) | |||
Employee termination costs | Other | Total | ||||||||||
(U.S. $ in millions ) | ||||||||||||
Balance as of January 1, 2021 | $ | (115 | ) | $ | (7 | ) | $ | (122 | ) | |||
Provision | (117 | ) | (16 | ) | (133 | ) | ||||||
Utilization and other* | 101 | 16 | 117 | |||||||||
Balance as of December 31, 2021 | $ | (131 | ) | $ | (7 | ) | $ | (138 | ) | |||
Provision | (117 | ) | (29 | ) | (146 | ) | ||||||
Utilization and other* | 136 | 29 | 165 | |||||||||
Balance as of December 31, 2022 | $ | (112 | ) | $ | (7 | ) | $ | (119 | ) | |||
Provision | (52 | ) | (59 | ) | (111 | ) | ||||||
Utilization and other* | 90 | 59 | 149 | |||||||||
Balance as of December 31, 2023 | $ | (75 | ) | $ | (7 | ) | $ | (82 | ) | |||
* | Includes adjustments for foreign currency translation. |
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Gain on divestitures, net of divestitures related costs (1) | 51 | 8 | 50 | |||||||||
Section 8 and similar payments (2) | 19 | — | 5 | |||||||||
Gain (loss) on sale of assets | 7 | 11 | (1 | ) | ||||||||
Other, net | 22 | 20 | 22 | |||||||||
Total other income | $ | 98 | $ | 40 | $ | 76 | ||||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Gain on divestitures, net of divestitures related costs (1) | $ | 3 | $ | 46 | $ | 51 | ||||||
Section 8 and similar payments | 5 | 13 | 19 | |||||||||
Gain (loss) on sale of assets (2) | 25 | 18 | 7 | |||||||||
Other, net (3) | 16 | 31 | 22 | |||||||||
Total other income | $ | 49 | $ | 107 | $ | 98 | ||||||
(1) | In 2022 mainly related to the divestment of several activities in North America and International Markets. In 2021, mainly due to capital gains related to the sale of certain OTC assets. |
(2) | In |
(3) | In 2022 mainly the result of settlement proceeds related to the International Markets segment. |
Year ended December, 31 | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Interest expenses and other bank charges | 891 | 901 | 822 | |||||||||
(Income) loss from investments (1) | 90 | (104 | ) | (41 | ) | |||||||
Foreign exchange (gains) losses, net | 7 | (26 | ) | (15 | ) | |||||||
Other, net (2) | 71 | 62 | 55 | |||||||||
Total finance expense, net | $ | 1,058 | $ | 834 | $ | 822 | ||||||
Year ended December, 31 | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Interest expenses and other bank charges | $ | 1,029 | $ | 930 | $ | 891 | ||||||
(Income) loss from investments (1) | (68 | ) | (10 | ) | 90 | |||||||
Foreign exchange (gains) losses, net | 30 | (16 | ) | 7 | ||||||||
Other, net (2) | 66 | 61 | 71 | |||||||||
Total finance expense, net | $ | 1,057 | $ | 966 | $ | 1,058 | ||||||
(1) |
(2) | Amortization of issuance costs and terminated derivative instruments. |
Year ended December, 31 | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions, except share data) | ||||||||||||
Net income (loss) used for the computation of basic and diluted earnings (loss) per share* | $ | (559 | ) | $ | (2,446 | ) | $ | 417 | ||||
Weighted average number of shares used in the computation of basic earnings (loss) per share | 1,119 | 1,110 | 1,102 | |||||||||
Weighted average number of shares used in the computation of diluted earnings (loss) per share | 1,119 | 1,110 | 1,107 | |||||||||
Year ended December, 31 | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions, except share data) | ||||||||||||
Net income (loss) used for the computation of basic and diluted earnings (loss) per share | 417 | $ | (3,990 | ) | $ | (999 | ) | |||||
Weighted average number of shares used in the computation of basic earnings (loss) per share | 1,102 | 1,095 | 1,091 | |||||||||
Weighted average number of shares used in the computation of diluted earnings (loss) per share | 1,107 | 1,095 | 1,091 | |||||||||
* | Net income (loss) presented in the table above for the year ended December 31, 2022 has been revised as discussed in note 1b. |
(a) | North America segment, which includes the United States and Canada. |
(b) | Europe segment, which includes the European Union, the United Kingdom and certain other European countries. |
(c) | International Markets segment, which includes all countries other than those in the North America and Europe segments. |
Year ended December 31, | ||||||||||||
2021 | ||||||||||||
North America | Europe | International Markets | ||||||||||
(U.S. $ in millions) | ||||||||||||
Revenues | $ | 7,809 | $ | 4,886 | $ | 2,032 | ||||||
Gross profit | 4,226 | 2,823 | 1,118 | |||||||||
R&D expenses | 618 | 244 | 68 | |||||||||
S&M expenses | 988 | 846 | 417 | |||||||||
G&A expenses | 427 | 244 | 109 | |||||||||
Other income | (31 | ) | (5 | ) | (5 | ) | ||||||
Segment profit | $ | 2,224 | $ | 1,494 | $ | 529 | ||||||
Year ended December 31, | ||||||||||||
2020 | ||||||||||||
North America | Europe | International Markets | ||||||||||
(U.S. $ in millions) | ||||||||||||
Revenues | $ | 8,447 | $ | 4,757 | $ | 2,154 | ||||||
Gross profit | 4,489 | 2,666 | 1,096 | |||||||||
R&D expenses | 622 | 247 | 70 | |||||||||
S&M expenses | 1,013 | 830 | 427 | |||||||||
G&A expenses | 443 | 261 | 136 | |||||||||
Other income | (10 | ) | (3 | ) | (11 | ) | ||||||
Segment profit | $ | 2,421 | $ | 1,331 | $ | 474 | ||||||
Year ended December 31, | ||||||||||||
2019 | ||||||||||||
North America | Europe | International Markets | ||||||||||
(U.S. $ in millions) | ||||||||||||
Revenues | $ | 8,542 | $ | 4,795 | $ | 2,246 | ||||||
Gross profit | 4,350 | 2,704 | 1,167 | |||||||||
R&D expenses | 652 | 262 | 88 | |||||||||
S&M expenses | 1,021 | 890 | 481 | |||||||||
G&A expenses | 439 | 239 | 138 | |||||||||
Other income | (14 | ) | (5 | ) | (3 | ) | ||||||
Segment profit | $ | 2,252 | $ | 1,318 | $ | 464 | ||||||
a. | Segment information: |
Year ended | ||||||||||||
December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
North America profit | $ | 2,224 | $ | 2,421 | $ | 2,252 | ||||||
Europe profit | 1,494 | 1,331 | 1,318 | |||||||||
International Markets profit | 529 | 474 | 464 | |||||||||
Total reportable segments profit | 4,246 | 4,225 | 4,034 | |||||||||
Profit of other activities | 154 | 163 | 108 | |||||||||
Total segments profit | 4,401 | 4,388 | 4,142 | |||||||||
Amounts not allocated to segments: | ||||||||||||
Amortization | 802 | 1,020 | 1,113 | |||||||||
Other assets impairments, restructuring and other items | 341 | 479 | 423 | |||||||||
Goodwill impairment | 0 | 4,628 | 0 | |||||||||
Intangible asset impairments | 424 | 1,502 | 1,639 | |||||||||
Legal settlements and loss contingencies | 717 | 60 | 1,178 | |||||||||
Other unallocated amounts | 402 | 271 | 232 | |||||||||
Consolidated operating income (loss) | 1,716 | (3,572 | ) | (443 | ) | |||||||
Financial expenses, net | 1,058 | 834 | 822 | |||||||||
Consolidated income (loss) before income taxes | $ | 658 | $ | (4,406 | ) | $ | (1,265 | ) | ||||
Year ended December 31, | ||||||||||||
2023 | ||||||||||||
North America | Europe | International Markets | ||||||||||
(U.S. $ in millions) | ||||||||||||
Revenues | $ | 8,124 | $ | 4,837 | $ | 1,958 | ||||||
Gross profit | 4,421 | 2,726 | 1,050 | |||||||||
R&D expenses | 625 | 220 | 83 | |||||||||
S&M expenses | 1,005 | 767 | 420 | |||||||||
G&A expenses | 403 | 263 | 118 | |||||||||
Other income | (8 | ) | (2 | ) | (35 | ) | ||||||
Segment profit | $ | 2,396 | $ | 1,478 | $ | 464 | ||||||
Year ended December 31, | ||||||||||||
2022 | ||||||||||||
North America | Europe | International Markets | ||||||||||
(U.S. $ in millions) | ||||||||||||
Revenues | $ | 7,452 | $ | 4,525 | $ | 1,903 | ||||||
Gross profit | 3,926 | 2,700 | 1,033 | |||||||||
R&D expenses | 532 | 213 | 72 | |||||||||
S&M expenses | 941 | 748 | 405 | |||||||||
G&A expenses | 474 | 246 | 119 | |||||||||
Other income | (15 | ) | (3 | ) | (43 | ) | ||||||
Segment profit | $ | 1,993 | $ | 1,496 | $ | 479 | ||||||
Year ended December 31, | ||||||||||||
2021 | ||||||||||||
North America | Europe | International Markets | ||||||||||
(U.S. $ in millions) | ||||||||||||
Revenues | $ | 7,809 | $ | 4,886 | $ | 2,032 | ||||||
Gross profit | 4,226 | 2,823 | 1,118 | |||||||||
R&D expenses | 618 | 244 | 68 | |||||||||
S&M expenses | 988 | 846 | 417 | |||||||||
G&A expenses | 427 | 244 | 109 | |||||||||
Other income | (31 | ) | (5 | ) | (5 | ) | ||||||
Segment profit | $ | 2,224 | $ | 1,494 | $ | 529 | ||||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
North America profit | $ | 2,396 | $ | 1,993 | $ | 2,224 | ||||||
Europe profit | 1,478 | 1,496 | 1,494 | |||||||||
International Markets profit | 464 | 479 | 529 | |||||||||
Total reportable segments profit | 4,338 | 3,968 | 4,246 | |||||||||
Profit of other activities | 24 | 172 | 154 | |||||||||
Total segments profit | 4,361 | 4,139 | 4,401 | |||||||||
Amounts not allocated to segments: | ||||||||||||
Amortization | 616 | 732 | 802 | |||||||||
Other asset impairments, restructuring and other items (1) | 718 | 512 | 341 | |||||||||
Goodwill impairment | 700 | 2,045 | — | |||||||||
Intangible assets impairments | 350 | 355 | 424 | |||||||||
Legal settlements and loss contingencies | 1,043 | 2,082 | 717 | |||||||||
Other unallocated amounts | 502 | 610 | 402 | |||||||||
Consolidated operating income (loss) (1) | 433 | (2,197 | ) | 1,716 | ||||||||
Financial expenses, net | 1,057 | 966 | 1,058 | |||||||||
Consolidated income (loss) before income taxes (1) | $ | (624 | ) | $ | (3,163 | ) | $ | 658 | ||||
(1) | The data presented for 2022 have been revised to reflect a revision in relation to a contingent consideration liability and related expenses in the consolidated financial statements. See note 1b. |
b. | Segment revenues by major products and activities: |
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 3,769 | $ | 4,010 | $ | 3,963 | ||||||
AJOVY | 176 | 134 | 93 | |||||||||
AUSTEDO | 802 | 637 | 412 | |||||||||
BENDEKA/TREANDA | 385 | 415 | 496 | |||||||||
COPAXONE | 577 | 884 | 1,017 | |||||||||
ProAir* | 180 | 241 | 274 | |||||||||
Anda | 1,323 | 1,462 | 1,492 | |||||||||
Other | 597 | 664 | 796 | |||||||||
Total | $ | 7,809 | $ | 8,447 | $ | 8,542 | ||||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 3,475 | $ | 3,549 | $ | 3,769 | ||||||
AJOVY | 230 | 218 | 176 | |||||||||
AUSTEDO | 1,225 | 963 | 802 | |||||||||
BENDEKA and TREANDA | 241 | 316 | 385 | |||||||||
COPAXONE | 320 | 387 | 577 | |||||||||
Anda | 1,577 | 1,471 | 1,323 | |||||||||
Other* | 1,056 | 549 | 777 | |||||||||
Total | $ | 8,124 | $ | 7,452 | $ | 7,809 | ||||||
* | 500 million upfront payment received in the |
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 3,569 | $ | 3,513 | $ | 3,470 | ||||||
AJOVY | 87 | 31 | 3 | |||||||||
COPAXONE | 391 | 400 | 432 | |||||||||
Respiratory products | 356 | 353 | 354 | |||||||||
Other | 483 | 459 | 536 | |||||||||
Total | $ | 4,886 | $ | 4,757 | $ | 4,795 | ||||||
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 1,649 | $ | 1,792 | $ | 1,893 | ||||||
AJOVY | 50 | 18 | § | |||||||||
COPAXONE | 37 | 53 | 63 | |||||||||
Other | 295 | 291 | 291 | |||||||||
Total | $ | 2,032 | $ | 2,154 | $ | 2,246 | ||||||
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 3,664 | $ | 3,466 | $ | 3,569 | ||||||
AJOVY | 160 | 124 | 87 | |||||||||
COPAXONE | 231 | 268 | 391 | |||||||||
Respiratory products | 265 | 273 | 356 | |||||||||
Other* | 516 | 393 | 483 | |||||||||
Total | $ | 4,837 | $ | 4,525 | $ | 4,886 | ||||||
* | Other revenues in 2023 were mainly related to the sale of certain product rights. |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 1,594 | $ | 1,586 | $ | 1,649 | ||||||
AJOVY | 44 | 35 | 50 | |||||||||
COPAXONE | 39 | 36 | 37 | |||||||||
Other | 281 | 246 | 295 | |||||||||
Total | $ | 1,958 | $ | 1,903 | $ | 2,032 | ||||||
c. | Supplemental data—major customers: |
Percentage of Third Party Net Sales | Percentage of Third Party Net Sales | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2023 | 2022 | 2021 | |||||||||||||||||||
McKesson Corporation | 11 | % | 12 | % | 13 | % | 9 | % | 10 | % | 11 | % | ||||||||||||
AmerisourceBergen Corporation | 11 | % | 12 | % | 12 | % | 9 | % | 10 | % | 11 | % |
d. | Property, plant and equipment—by geographical location were as follows: |
December 31, | ||||||||
2021 | 2020 | |||||||
(U.S. $ in millions) | ||||||||
Israel | $ | 1,543 | $ | 1,611 | ||||
United States | 692 | 790 | ||||||
Croatia | 481 | 539 | ||||||
Germany | 1,045 | 933 | ||||||
Czech republic | 324 | 330 | ||||||
Hungary | 321 | 325 | ||||||
Ireland | 269 | 267 | ||||||
Other | 1,307 | 1,501 | ||||||
Total property, plant and equipment | $ | 5,982 | $ | 6,296 | ||||
December 31, | ||||||||
2023 | 2022 | |||||||
(U.S. $ in millions) | ||||||||
Israel | $ | 1,312 | $ | 1,401 | ||||
Germany | 1,318 | 1,143 | ||||||
United States | 596 | 625 | ||||||
Croatia | 447 | 445 | ||||||
Czech republic | 309 | 318 | ||||||
Hungary | 279 | 294 | ||||||
Ireland | 266 | 268 | ||||||
Other | 1,222 | 1,245 | ||||||
Total property, plant and equipment | $ | 5,750 | $ | 5,739 | ||||
December 31, 2023 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money markets | $ | 1,704 | — | — | $ | 1,704 | ||||||||||
Cash, deposits and other | 1,522 | — | — | 1,522 | ||||||||||||
Investment in securities: | ||||||||||||||||
Investment in convertible bond security | — | — | 40 | 40 | ||||||||||||
Equity securities | 7 | — | — | 7 | ||||||||||||
Other | 1 | — | — | 1 | ||||||||||||
Restricted cash | 1 | — | — | 1 | ||||||||||||
Derivatives: | ||||||||||||||||
Asset derivatives : | ||||||||||||||||
Options and forward contracts | — | 38 | — | 38 | ||||||||||||
Cross-currency interest rate swap | — | 8 | — | 8 | ||||||||||||
Liabilities derivatives : | — | |||||||||||||||
Options and forward contracts | — | (39 | ) | — | (39 | ) | ||||||||||
Bifurcated embedded derivatives | — | — | § | — | ||||||||||||
Contingent consideration* | — | — | (517 | ) | (517 | ) | ||||||||||
Total | $ | 3,235 | $ | 7 | $ | (477 | ) | $ | 2,765 | |||||||
December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money markets | $ | 220 | $ | — | $ | — | $ | 220 | ||||||||
Cash, deposits and other | 1,945 | — | — | 1,945 | ||||||||||||
Investment in securities: | ||||||||||||||||
Equity securities* | 18 | — | — | 18 | ||||||||||||
Other | 6 | — | 1 | 7 | ||||||||||||
Restricted cash | 33 | — | — | 33 | ||||||||||||
Derivatives: | ||||||||||||||||
Asset derivatives—options and forward contracts | — | 30 | — | 30 | ||||||||||||
Liabilities derivatives: | 0 | |||||||||||||||
Options and forward contracts | — | (23 | ) | — | (23 | ) | ||||||||||
Bifurcated embedded derivatives | — | — | § | 0 | ||||||||||||
Contingent consideration** | — | — | (176 | ) | (176 | ) | ||||||||||
Total | $ | 2,222 | $ | 7 | $ | (175 | ) | $ | 2,054 | |||||||
December 31, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money markets | $ | 1,222 | — | — | $ | 1,222 | ||||||||||
Cash, deposits and other | 1,579 | — | — | 1,579 | ||||||||||||
Investment in securities: | ||||||||||||||||
Equity securities | 9 | — | — | 9 | ||||||||||||
Other | 5 | — | 1 | 6 | ||||||||||||
Restricted cash | 33 | — | — | 33 | ||||||||||||
Derivatives: | ||||||||||||||||
Asset derivatives: | ||||||||||||||||
Options and forward contracts | — | 29 | — | 29 | ||||||||||||
Liability derivatives: | ||||||||||||||||
Options and forward contracts | (101 | ) | (101 | ) | ||||||||||||
Bifurcated embedded derivatives | — | — | § | — | ||||||||||||
Contingent consideration* | — | — | (251 | ) | (251 | ) | ||||||||||
Total | $ | 2,848 | $ | (73 | ) | $ | (250 | ) | $ | 2,525 | ||||||
§ | Represents an amount less than |
December 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money markets | $ | 367 | $ | 0 | $ | 0 | $ | 367 | ||||||||
Cash, deposits and other | 1,810 | 0 | 0 | 1,810 | ||||||||||||
Investment in securities: | ||||||||||||||||
Equity securities | 25 | 259 | 0 | 284 | ||||||||||||
Other, mainly debt securities | 5 | 0 | 10 | 15 | ||||||||||||
Derivatives: | ||||||||||||||||
Asset derivatives—options and forward contracts | — | 24 | — | 24 | ||||||||||||
Liability derivatives—options and forward contracts | — | (79 | ) | — | (79 | ) | ||||||||||
Contingent consideration** | 0 | 0 | (268 | ) | (268 | ) | ||||||||||
Total | $ | 2,207 | $ | 204 | $ | (258 | ) | $ | 2,153 | |||||||
* |
Contingent consideration represents liabilities recorded at fair value in connection with acquisitions. |
December 31, 2023 | December 31, 2022 | |||||||
(U.S. $ in millions) | ||||||||
Fair value at the beginning of the period | $ | (250 | ) | $ | (175 | ) | ||
Investment in convertible bond ** | 40 | — | ||||||
Bifurcated embedded derivatives | § | § | ||||||
Additional contingent consideration resulting from Novetide acquisition* | — | (11 | ) | |||||
Adjustments to provisions for contingent consideration: | ||||||||
Allergan transaction*** | (422 | ) | (240 | ) | ||||
Eagle transaction | (132 | ) | (21 | ) | ||||
Novetide transaction | 2 | — | ||||||
Settlement of contingent consideration: | ||||||||
Allergan transaction | 207 | 109 | ||||||
Eagle transaction | 76 | 88 | ||||||
Novetide transaction | 2 | — | ||||||
Fair value at the end of the period | $ | (477 | ) | $ | (250 | ) | ||
December 31, 2021 | December 31, 2020 | |||||||
(U.S. $ in millions) | ||||||||
Fair value at the beginning of the period | $ | (258 | ) | $ | (448 | ) | ||
Transfer into Level 3- equity securities | 0 | 179 | ||||||
Revaluation of equity securities | 0 | 80 | ||||||
Redemption of debt securities | (9 | ) | 0 | |||||
Revaluation of debt securities | 0 | (2 | ) | |||||
Reclassification to Level 2- equity securities | 0 | (259 | ) | |||||
Bifurcated embedded derivatives | § | 0 | ||||||
Adjustments to provisions for contingent consideration: | ||||||||
Actavis Generics transaction | 15 | 156 | ||||||
Eagle transaction | (23 | ) | (75 | ) | ||||
Settlement of contingent consideration: | ||||||||
Eagle transaction | 100 | 111 | ||||||
Fair value at the end of the period | $ | (175 | ) | $ | (258 | ) | ||
§ | Represents an amount less than 0.5 million. |
* | In January 2022, Teva acquired 100% ownership of Novetide Ltd. (“Novetide”), which was previously accounted for as “investment in associated companies.” This transaction was accounted for as a business combination. Total consideration for the transaction included cash and certain contingent royalty payments through 2034. As part of the transaction, Teva recognized a gain under “Share in (profits) losses of associated companies, net,” reflecting the difference between the book value of its investment in Novetide and its fair value as of the date Teva completed its acquisition. |
** | On September 29, 2023, Teva invested $40 million in subordinated convertible bonds, which were issued by Alvotech, pursuant to a convertible bond instrument dated December 20, 2022. (see note 2). |
*** | The financial data presented in the tables above with respect to adjustments to provisions for contingent consideration related to Allergan in 2022 have been revised as discussed in note 1b. |
Estimated fair value* | ||||||||
December 31, | ||||||||
2021 | 2020 | |||||||
(U.S. $ in millions) | ||||||||
Senior notes and sustainability-linked senior notes included under senior notes and loans | $ | 21,477 | $ | 22,684 | ||||
Senior notes and convertible senior debentures included under short-term debt | 1,426 | 3,207 | ||||||
Total | $ | 22,903 | $ | 25,891 | ||||
Estimated fair value* | ||||||||
December 31, | ||||||||
2023 | 2022 | |||||||
(U.S. $ in millions) | ||||||||
Senior notes and sustainability-linked senior notes included under senior notes and loans | $ | 17,214 | $ | 16,694 | ||||
Senior notes and convertible senior debentures included under short-term debt | 1,651 | 2,075 | ||||||
Total | $ | 18,865 | $ | 18,769 | ||||
* | The fair value was estimated based on quoted market prices. |
a. | Long-term employee-related obligations consisted of the following: |
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | |||||||||||||||
Accrued severance obligations | $ | 83 | $ | 82 | $ | 74 | $ | 74 | ||||||||
Defined benefit plans | 142 | 192 | 73 | 58 | ||||||||||||
Total | $ | 225 | $ | 275 | $ | 148 | $ | 132 | ||||||||
b. | Terms of arrangements: |
Three months ended | ||||||||||||||||
December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | |||||||||||||
U.S $ in millions (except per share amounts) | ||||||||||||||||
Net revenues | $ | 4,457 | 3,850 | 3,878 | 3,661 | |||||||||||
Gross profit | 2,416 | 1,851 | 1,796 | 1,582 | ||||||||||||
Net income (loss)* | 465 | 78 | (905 | ) | (253 | ) | ||||||||||
Net income (loss) attributable to Teva* | 461 | 70 | (871 | ) | (220 | ) | ||||||||||
Earnings (loss) per share attributable to ordinary shareholders: | ||||||||||||||||
Basic* | $ | 0.41 | 0.06 | (0.78 | ) | (0.20 | ) | |||||||||
Diluted* | $ | 0.41 | 0.06 | (0.78 | ) | (0.20 | ) |
Three months ended | ||||||||||||||||
December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||
U.S $ in millions (except per share amounts) | ||||||||||||||||
Net revenues | $ | 3,884 | 3,595 | 3,786 | 3,661 | |||||||||||
Gross profit | 1,770 | 1,669 | 1,794 | 1,740 | ||||||||||||
Net income (loss)* | (1,333 | ) | 63 | (278 | ) | (952 | ) | |||||||||
Net income (loss) attributable to Teva* | (1,301 | ) | 61 | (251 | ) | (955 | ) | |||||||||
Earnings (loss) per share attributable to ordinary shareholders: | ||||||||||||||||
Basic* | $ | (1.17 | ) | 0.05 | (0.23 | ) | (0.86 | ) | ||||||||
Diluted* | $ | (1.17 | ) | 0.05 | (0.23 | ) | (0.86 | ) |
* | The data presented for the above quarterly periods (except for the three months ended March 31, 2022 and the three months ended December 31, 2023) have been revised to reflect a revision of the line items in the consolidated financial statements. See tables below and note 1b. |
Three months ended | ||||||||||||||||||||||||||||||||||||
September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||||||||||||||||||||||||
As previously reported | Adjustment | As revised | As previously reported | Adjustment | As revised | As previously reported | Adjustment | As revised | ||||||||||||||||||||||||||||
U.S $ in millions (except per share amounts) | ||||||||||||||||||||||||||||||||||||
Other asset impairments, restructuring and other items | $ | 46 | 11 | 57 | $ | 100 | 8 | 108 | $ | 96 | 15 | 110 | ||||||||||||||||||||||||
Operating income (loss) | 355 | (11 | ) | 344 | (646 | ) | (8 | ) | (654 | ) | 2 | (15 | ) | (13 | ) | |||||||||||||||||||||
Income (loss) before income taxes | 75 | (11 | ) | 64 | (914 | ) | (8 | ) | (923 | ) | (258 | ) | (15 | ) | (272 | ) | ||||||||||||||||||||
Income taxes (benefit) | (12 | ) | § | (12 | ) | (16 | ) | § | (16 | ) | (19 | ) | § | (19 | ) | |||||||||||||||||||||
Net income (loss) | 88 | (11 | ) | 78 | (898 | ) | (8 | ) | (905 | ) | (238 | ) | (15 | ) | (253 | ) | ||||||||||||||||||||
Net income (loss) attributable to Teva | 80 | (11 | ) | 70 | (863 | ) | (8 | ) | (871 | ) | (205 | ) | (15 | ) | (220 | ) | ||||||||||||||||||||
Earnings per share attributable to ordinary shareholders: | ||||||||||||||||||||||||||||||||||||
Basic | $ | 0.07 | (0.01 | ) | 0.06 | $ | (0.77 | ) | (0.01 | ) | (0.78 | ) | $ | (0.18 | ) | (0.02 | ) | (0.20 | ) | |||||||||||||||||
Diluted | $ | 0.07 | (0.01 | ) | 0.06 | $ | (0.77 | ) | (0.01 | ) | (0.78 | ) | $ | (0.18 | ) | (0.02 | ) | (0.20 | ) |
Column A | Column B | Column C | Column D | Column E | ||||||||||||||||
Balance at beginning of period | Charged to costs and expenses | Charged to other accounts | Deductions | Balance at end of period | ||||||||||||||||
Allowance for doubtful accounts: | ||||||||||||||||||||
Year ended December 31, 2021 | $ | 200 | $ | (8 | ) | $ | 0 | $ | (28 | ) | $ | 164 | ||||||||
Year ended December 31, 2020 | $ | 209 | $ | (11 | ) | $ | 2 | $ | 0 | $ | 200 | |||||||||
Year ended December 31, 2019 | $ | 232 | $ | (16 | ) | $ | 0 | $ | (7 | ) | $ | 209 | ||||||||
Allowance in respect of carryforward tax losses and deductions that may not be utilized: | ||||||||||||||||||||
Year ended December 31, 2021 | $ | 2,547 | $ | 336 | $ | — | $ | (160 | ) | $ | 2,723 | |||||||||
Year ended December 31, 2020 | $ | 1,974 | $ | 670 | $ | — | $ | (97 | ) | $ | 2,547 | |||||||||
Year ended December 31, 2019 | $ | 1,633 | $ | 555 | $ | — | $ | (214 | ) | $ | 1,974 | |||||||||
Three months ended | ||||||||||||||||||||||||||||||||||||
December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||||||||||||
As previously reported | Adjustment | As revised | As previously reported | Adjustment | As revised | As previously reported | Adjustment | As revised | ||||||||||||||||||||||||||||
U.S $ in millions (except per share amounts) | ||||||||||||||||||||||||||||||||||||
Other asset impairments, restructuring and other items | $ | 132 | 85 | 217 | $ | 36 | (5 | ) | 31 | $ | 118 | 18 | 137 | |||||||||||||||||||||||
Operating income (loss) | (855 | ) | (85 | ) | (940 | ) | 419 | 5 | 424 | (949 | ) | (18 | ) | (967 | ) | |||||||||||||||||||||
Income (loss) before income taxes | (1,100 | ) | (85 | ) | (1,185 | ) | 166 | 5 | 171 | (1,160 | ) | (18 | ) | (1,178 | ) | |||||||||||||||||||||
Income taxes (benefit) | 154 | (5 | ) | 149 | 107 | § | 107 | (900 | ) | § | (900 | ) | ||||||||||||||||||||||||
Net income (loss) | (1,254 | ) | (80 | ) | (1,333 | ) | 58 | 5 | 63 | (259 | ) | (18 | ) | (278 | ) | |||||||||||||||||||||
Net income (loss) attributable to Teva | (1,221 | ) | (80 | ) | (1,301 | ) | 56 | 5 | 61 | (232 | ) | (18 | ) | (251 | ) | |||||||||||||||||||||
Basic | $ | (1.10 | ) | (0.07 | ) | (1.17 | ) | $ | 0.05 | — | 0.05 | $ | (0.21 | ) | (0.02 | ) | (0.23 | ) | ||||||||||||||||||
Diluted | $ | (1.10 | ) | (0.07 | ) | (1.17 | ) | $ | 0.05 | — | 0.05 | $ | (0.21 | ) | (0.02 | ) | (0.23 | ) |
September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||||||||||||||||||||||||
As previously reported | Adjustment | As revised | As previously reported | Adjustment | As revised | As previously reported | Adjustment | As revised | ||||||||||||||||||||||||||||
U.S $ in millions (except per share amounts) | ||||||||||||||||||||||||||||||||||||
Deferred income taxes | $ | 1,748 | 7 | 1,755 | $ | 1,578 | 5 | 1,583 | $ | 1,572 | 5 | 1,577 | ||||||||||||||||||||||||
Total assets | 42,088 | 7 | 42,095 | 43,095 | 5 | 43,100 | 43,456 | 5 | 43,461 | |||||||||||||||||||||||||||
Other taxes and long-term liabilities | 3,818 | 132 | 3,950 | 3,973 | 121 | 4,094 | 3,869 | 113 | 3,982 | |||||||||||||||||||||||||||
Total long-term liabilities | 23,182 | 132 | 23,314 | 23,543 | 121 | 23,664 | 24,433 | 113 | 24,546 | |||||||||||||||||||||||||||
Total liabilities | 34,576 | 132 | 34,708 | 35,387 | 121 | 35,508 | 34,844 | 113 | 34,957 | |||||||||||||||||||||||||||
Teva shareholders’ equity: | ||||||||||||||||||||||||||||||||||||
Accumulated deficit | (13,870 | ) | (125 | ) | (13,995 | ) | (13,950 | ) | (116 | ) | (14,066 | ) | (13,086 | ) | (108 | ) | (13,194 | ) | ||||||||||||||||||
Total equity | 7,512 | (125 | ) | 7,387 | 7,708 | (116 | ) | 7,592 | 8,612 | (108 | ) | 8,504 | ||||||||||||||||||||||||
Total liabilities and equity | $ | 42,088 | 7 | 42,095 | $ | 43,095 | 5 | 43,100 | $ | 43,456 | 5 | 43,461 |
December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||||||||||||
As previously reported | Adjustment | As revised | As previously reported | Adjustment | As revised | As previously reported | Adjustment | As revised | ||||||||||||||||||||||||||||
U.S $ in millions (except per share amounts) | ||||||||||||||||||||||||||||||||||||
Deferred income taxes | $ | 1,453 | 5 | 1,458 | $ | 1,546 | § | 1,546 | $ | 1,595 | § | 1,595 | ||||||||||||||||||||||||
Total assets | 44,006 | 5 | 44,011 | 44,252 | § | 44,252 | 45,932 | § | 45,932 | |||||||||||||||||||||||||||
Other taxes and long-term liabilities | 3,847 | 98 | 3,945 | 3,846 | 13 | 3,859 | 3,842 | 18 | 3,860 | |||||||||||||||||||||||||||
Total long-term liabilities | 23,846 | 98 | 23,944 | 23,200 | 13 | 23,213 | 25,107 | 18 | 25,125 | |||||||||||||||||||||||||||
Total liabilities | 35,315 | 98 | 35,413 | 34,734 | 13 | 34,747 | 36,103 | 18 | 36,121 | |||||||||||||||||||||||||||
Accumulated deficit | (12,882 | ) | (93 | ) | (12,975 | ) | (11,660 | ) | (13 | ) | (11,673 | ) | (11,716 | ) | (18 | ) | (11,734 | ) | ||||||||||||||||||
Total equity | 8,691 | (93 | ) | 8,598 | 9,519 | (13 | ) | 9,506 | 9,828 | (18 | ) | 9,810 | ||||||||||||||||||||||||
Total liabilities and equity | $ | 44,006 | 5 | 44,011 | $ | 44,252 | — | 44,252 | $ | 45,932 | — | 45,932 |
Column A | Column B | Column C | Column D | Column E | ||||||||||||||||
Balance at beginning of period | Charged to costs and expenses | Charged to other accounts | Deductions | Balance at end of period | ||||||||||||||||
Allowance for doubtful accounts including credit losses: | ||||||||||||||||||||
Year ended December 31, 2023 | $ | 162 | $ | 10 | $ | (6 | ) | $ | (2 | ) | 164 | |||||||||
Year ended December 31, 2022 | $ | 164 | $ | 8 | $ | (2 | ) | $ | (8 | ) | $ | 162 | ||||||||
Year ended December 31, 2021 | $ | 200 | $ | (8 | ) | $ | — | $ | (28 | ) | $ | 164 | ||||||||
Allowance in respect of carryforward tax losses and deductions that may not be utilized: | ||||||||||||||||||||
Year ended December 31, 2023 | $ | 3,072 | $ | 161 | $ | — | $ | (224 | ) | $ | 3,009 | |||||||||
Year ended December 31, 2022 | $ | 2,723 | $ | 443 | $ | — | $ | (93 | ) | $ | 3,072 | |||||||||
Year ended December 31, 2021 | $ | 2,547 | $ | 336 | $ | — | $ | (160 | ) | $ | 2,723 | |||||||||
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Teva maintains “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended)amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in Teva’s reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Teva’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating thethese disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective.
After evaluating the effectiveness of our disclosure controls and procedures as of December 31, 2021,2023, our Chief Executive Officer and Chief Financial Officer concluded that, due to a material weakness in internal control over financial reporting described below, as of such date, Teva’sthe Company’s disclosure controls and procedures were effective atnot effective.
In light of this material weakness, management performed certain substantive procedures of roll-forward calculations and reconciliations, allowing Teva’s Chief Executive Officer and Chief Financial Officer to conclude that, notwithstanding the reasonable assurance level.
Report of Teva Management on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as amended.Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of Teva’s internal control over financial reporting as of December 31, 2021.2023. In making this assessment, itmanagement used the criteria established in
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Registered Public Accounting Firmcompany’s annual or interim financial statements will not be prevented or detected on a timely basis.
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We did not design and maintain effective control over the contingent consideration liability and related expenses in connection with estimated future royalty payments. This material weakness resulted in the misstatement of our “Other asset impairments, restructuring and other items”, “Net income” and “Other taxes and long-term liabilities” and related financial disclosures, and led to the revision of the Company’s consolidated financial statements for the year ended December 31, 2022, and the interim financial information for the quarterly and year-to-date periods ended June 30, 2022, September 30, 2022, December 31, 2022, March 31, 2023, June 30, 2023 and September 30, 2023. Additionally, this material weakness could result in a misstatement of the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Our internal control over financial reporting as of December 31, 20212023, has been audited by Kesselman & Kesselman, an independent registered public accounting firm in Israel and a member of PricewaterhouseCoopers International Limited (“PwC”), as stated in their report which is included under “Item 8—Financial Statements.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.”
Remediation Plan
To remediate this material weakness, we are implementing the following specific controls to address it and to enhance our disclosure controls and procedures over the contingent consideration liability: (i) define responsibilities over the end-to-end process; (ii) enhance the formality and rigor of reconciliation procedures; and (iii) implement additional monitoring controls through management reviews. We may design and implement additional controls that we determine to be necessary during the remediation process.
The identified material weakness will be considered remediated once the additional internal controls discussed above have been designed, implemented and operate effectively for a sufficient period of time to allow management to conclude that the material weakness has been fully remediated.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2021,2023, there were no changes in our internal control over financial reporting that materially affected or are reasonably likely to materially affect Teva’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Director and Officer Rule 10b5-1 Trading Arrangements
During the three months ended December 31, 2023, each of the following officers adopted a Rule 10b5-1 trading arrangement (as such term is defined in Item 408 of Regulation S-K). All trading plans are intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act.
Name and Title | Date | Action | Expiration Date | Maximum Shares Subject to Plan (1) | ||||||||||
Richard D. Francis, President and CEO | November 13, 2023 | Adopted | March 6, 2024 | 228,886 | ||||||||||
Vikki Conway, Acting Head of Global Human Resources | November 21, 2023 | Adopted | March 8, 2024 | 21,544 | ||||||||||
Richard Daniell, EVP, Head of European Commercial | November 13, 2023 | Adopted | March 8, 2024 | 379,746 | ||||||||||
Eric Drapé, EVP, Global Operations | November 13, 2023 | Adopted | March 8, 2024 | 341,312 | ||||||||||
Dr. Eric Hughes, EVP, Global R&D and Chief Medical Officer | November 13, 2023 | Adopted | August 3, 2024 | 77,642 | ||||||||||
Eli Kalif, EVP, Chief Financial Officer | November 27, 2023 | Adopted | March 8, 2024 | 77,550 |
(1) | Certain plans include shares to be sold solely to cover tax withholding obligations. |
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ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Reference is made to Teva’s 20222024 Proxy Statement, which will be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2021,2023, with respect to Teva’s directors, executive officers and corporate governance, which is incorporated herein by reference and made a part hereof in response to the information required by Item 10.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to Teva’s 20222024 Proxy Statement, which will be filed no later than 120 days after the close of Teva’s fiscal year ended December 31, 2021,2023, with respect to Teva’s executive compensation, which is incorporated herein by reference and made a part hereof in response to the information required by Item 11.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Reference is made to Teva’s 20222024 Proxy Statement, which will be filed no later than 120 days after the close of Teva’s fiscal year ended December 31, 2021,2023, with respect to the security ownership of certain beneficial owners and management and related stockholder matters of Teva, which is incorporated herein by reference and made a part hereof in response to the information required by Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Reference is made to Teva’s 20222024 Proxy Statement, which will be filed no later than 120 days after the close of Teva’s fiscal year ended December 31, 2021,2023, with respect to certain relationships and related transactions, and director independence of Teva, which is incorporated herein by reference and made a part hereof in response to the information required by Item 13.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Reference is made to Teva’s 20222024 Proxy Statement, which will be filed no later than 120 days after the close of Teva’s fiscal year ended December 31, 2021,2023, with respect to principal accountant fees and services provided to Teva, which is incorporated herein by reference and made a part hereof in response to the information required by Item 14.
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PART IV
ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
(a) | The following financial statements are filed as part of this Annual Report on Form 10-K: |
page | |||||||
Consolidated Financial Statements: | |||||||
92 | |||||||
93 | |||||||
94 | |||||||
95 | |||||||
96 | |||||||
98 | |||||||
Financial Statement Schedule: | |||||||
Exhibits
(b) The information called for by this Item is incorporated herein by reference to the Exhibit Index in this Form 10-K.
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181
182
183
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed |
English translation or summary from Hebrew original, which is the official |
ITEM 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED | ||
By: | /s/ | |
Name: | ||
Title: | President and Chief Executive Officer | |
Dated: | February |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that each of the undersigned directors and/or officers of Teva Pharmaceutical Industries Limited, a corporation organized under the laws of Israel, hereby constitutes and appoints Kåre Schultz,Richard D. Francis, Eli Kalif, David M. StarkDov Bergwerk and Amir Weiss, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign, execute and deliver with the U.S. Securities and Exchange Commission any and all amendments to this annual reportAnnual Report on Form 10-K, with all exhibits thereto, and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name | Title | Date | ||||
By: | /s/ Dr. Sol J. Barer Dr. Sol J. Barer | Chairman of the Board of Directors | February | |||
By: | /s/ Richard D. Francis | President and Chief Executive Officer and Director | February | |||
By: | /s/ Eli Kalif Eli Kalif | Executive Vice President, Chief Financial Officer (Principal Financial Officer) | February | |||
By: | /s/ Amir Weiss Amir Weiss | Senior Vice President, Chief Accounting Officer (Principal Accounting Officer) | February | |||
By: | /s/ Rosemary A. Crane | Director | February | |||
By: | /s/ Amir Elstein Amir Elstein | Director | February 12, 2024 |
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Name | Title | Date | ||||
By: | /s/ Gerald M. Lieberman Gerald M. Lieberman | Director | February 12, 2024 | |||
By: | /s/ Roberto A. Mignone Roberto A. Mignone | Director | February | |||
By: | /s/ Dr. Perry D. Nisen Dr. Perry D. Nisen | Director | February | |||
By: | ||||||
/s/ Prof. Ronit Satchi-Fainaro Prof. Ronit Satchi-Fainaro | Director | February | ||||
By: | /s/ Prof. Varda Shalev Prof. Varda Shalev | Director | February 12, 2024 | |||
By: | /s/ Janet S. Vergis Janet S. Vergis | Director | February | |||
By: | /s/ Dr. Tal Zaks Dr. Tal Zaks | Director | February |
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