☒ | QUARTERLY 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
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation (§and post such files). ☒ Non-accelerated filer ☐ (Do not check if a smaller reporting company)
PART I. | ||||||||||
Item 1. | ||||||||||
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Item 2. | ||||||||||
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Item 3. | ||||||||||
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PART II. | ||||||||||
Item 1. | 78 | |||||||||
Item 1A. | 78 | |||||||||
Item 2. | ||||||||||
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Item 3. | 78 | |||||||||
Item 4. | 78 | |||||||||
Item 5. | 78 | |||||||||
Item 6. | 79 | |||||||||
80 |
Some amounts in this report may not add up due to rounding. All percentages have been calculated using unrounded amounts.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
ITEM 1. | FINANCIAL STATEMENTS |
millions, except for share data)
March 31, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,418 | $ | 963 | ||||
Trade receivables | 6,289 | 7,128 | ||||||
Inventories | 5,113 | 4,924 | ||||||
Prepaid expenses | 1,138 | 1,100 | ||||||
Other current assets | 712 | 701 | ||||||
Assets held for sale | 17 | 566 | ||||||
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Total current assets | 14,687 | 15,382 | ||||||
Deferred income taxes | 463 | 574 | ||||||
Othernon-current assets | 832 | 932 | ||||||
Property, plant and equipment, net | 7,420 | 7,673 | ||||||
Identifiable intangible assets, net | 17,314 | 17,640 | ||||||
Goodwill | 28,465 | 28,414 | ||||||
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Total assets | $ | 69,181 | $ | 70,615 | ||||
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LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 1,302 | $ | 3,646 | ||||
Sales reserves and allowances | 7,410 | 7,881 | ||||||
Trade payables | 1,929 | 2,069 | ||||||
Employee-related obligations | 607 | 549 | ||||||
Accrued expenses | 2,632 | 3,014 | ||||||
Other current liabilities | 876 | 724 | ||||||
Liabilities held for sale | — | 38 | ||||||
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|
|
| |||||
Total current liabilities | 14,756 | 17,921 | ||||||
Long-term liabilities: | ||||||||
Deferred income taxes | 2,998 | 3,277 | ||||||
Other taxes and long-term liabilities | 1,875 | 1,843 | ||||||
Senior notes and loans | 29,450 | 28,829 | ||||||
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| |||||
Total long-term liabilities | 34,323 | 33,949 | ||||||
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Commitments and contingencies, see note 16 | ||||||||
Total liabilities | 49,079 | 51,870 | ||||||
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Equity: | ||||||||
Teva shareholders’ equity: | ||||||||
Preferred shares of NIS 0.10 par value per mandatory convertible preferred share; March 31, 2018 and December 31, 2017: authorized 5.0 million shares; issued 3.7 million shares | 3,696 | 3,631 | ||||||
Ordinary shares of NIS 0.10 par value per share; March 31, 2018 and December 31, 2017: authorized 2,495 million shares; issued 1,124 million shares | 54 | 54 | ||||||
Additionalpaid-in capital | 23,443 | 23,479 | ||||||
Retained earnings | (2,688 | ) | (3,808 | ) | ||||
Accumulated other comprehensive loss | (1,735 | ) | (1,848 | ) | ||||
Treasury shares as of March 31, 2018 and December 31, 2017 —106 million ordinary shares and 107 million ordinary shares, respectively | (4,149 | ) | (4,149 | ) | ||||
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18,621 | 17,359 | |||||||
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| |||||
Non-controlling interests | 1,481 | 1,386 | ||||||
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|
| |||||
Total equity | 20,102 | 18,745 | ||||||
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| |||||
Total liabilities and equity | $ | 69,181 | $ | 70,615 | ||||
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June 30, | December 31, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,165 | $ | 1,782 | ||||
Trade receivables | 5,260 | 5,822 | ||||||
Inventories | 4,850 | 4,731 | ||||||
Prepaid expenses | 1,069 | 899 | ||||||
Other current assets | 437 | 468 | ||||||
Assets held for sale | 24 | 92 | ||||||
Total current assets | 13,805 | 13,794 | ||||||
Deferred income taxes | 317 | 368 | ||||||
Other non-current assets | 721 | 731 | ||||||
Property, plant and equipment, net | 6,732 | 6,868 | ||||||
Operating lease right-of-use assets | 500 | — | ||||||
Identifiable intangible assets, net | 12,435 | 14,005 | ||||||
Goodwill | 24,913 | 24,917 | ||||||
Total assets | $ | 59,424 | $ | 60,683 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 2,771 | $ | 2,216 | ||||
Sales reserves and allowances | 6,054 | 6,711 | ||||||
Trade payables | 1,806 | 1,853 | ||||||
Employee-related obligations | 587 | 870 | ||||||
Accrued expenses | 2,335 | 1,868 | ||||||
Other current liabilities | 899 | 804 | ||||||
Total current liabilities | 14,452 | 14,322 | ||||||
Long-term liabilities: | ||||||||
Deferred income taxes | 1,698 | 2,140 | ||||||
Other taxes and long-term liabilities | 1,642 | 1,727 | ||||||
Senior notes and loans | 25,955 | 26,700 | ||||||
Operating lease liabilities | 426 | — | ||||||
Total long-term liabilities | 29,721 | 30,567 | ||||||
Commitments and contingencies 16 | ||||||||
Total liabilities | 44,173 | 44,889 | ||||||
Equity: | ||||||||
Teva shareholders’ equity: | ||||||||
Ordinary shares of NIS 0.10 2,495 1,198 1,196 | 56 | 56 | ||||||
Additional paid-in capital | 27,258 | 27,210 | ||||||
Accumulated deficit | (6,752 | ) | (5,958 | ) | ||||
Accumulated other comprehensive loss | (2,312 | ) | (2,459 | ) | ||||
Treasury shares as of June 30, 2019 and December 31, 2018 — 107 million ordinary shares and106 million ordinary shares, respectively | (4,128 | ) | (4,142 | ) | ||||
14,122 | 14,707 | |||||||
Non-controlling interests | 1,128 | 1,087 | ||||||
Total equity | 15,251 | 15,794 | ||||||
Total liabilities and equity | $ | 59,424 | $ | 60,683 |
(LOSS)
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
Net revenues | $ | 5,065 | $ | 5,650 | ||||
Cost of sales | 2,717 | 2,811 | ||||||
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Gross profit | 2,348 | 2,839 | ||||||
Research and development expenses | 317 | 432 | ||||||
Selling and marketing expenses | 771 | 958 | ||||||
General and administrative expenses | 329 | 366 | ||||||
Other asset Impairments, restructuring and other items | 707 | 240 | ||||||
Goodwill impairment | 180 | — | ||||||
Legal settlements and loss contingencies | (1,278 | ) | 20 | |||||
Other income | (203 | ) | (72 | ) | ||||
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|
|
| |||||
Operating income | 1,525 | 895 | ||||||
Financial expenses, net | 271 | 207 | ||||||
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Income before income taxes | 1,254 | 688 | ||||||
Income taxes | 46 | 54 | ||||||
Share in (profits) losses of associated companies, net | 74 | (7 | ) | |||||
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|
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| |||||
Net income | 1,134 | 641 | ||||||
Net Income (loss) attributable tonon-controlling interests | 14 | (4 | ) | |||||
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| |||||
Net income attributable to Teva | 1,120 | 645 | ||||||
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Dividends on preferred shares | 65 | 65 | ||||||
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Net income attributable to ordinary shareholders | $ | 1,055 | $ | 580 | ||||
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| |||||
Earnings per share attributable to ordinary shareholders: | ||||||||
Basic | $ | 1.04 | $ | 0.57 | ||||
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Diluted | $ | 1.03 | $ | 0.57 | ||||
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Weighted average number of shares (in millions): | ||||||||
Basic | 1,017 | 1,016 | ||||||
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| |||||
Diluted | 1,020 | 1,017 | ||||||
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net revenues | $ | 4,337 | $ | 4,701 | $ | 8,632 | $ | 9,766 | ||||||||
Cost of sales | 2,443 | 2,668 | 4,883 | 5,418 | ||||||||||||
Gross profit | 1,893 | 2,033 | 3,749 | 4,348 | ||||||||||||
Research and development expenses | 276 | 290 | 537 | 607 | ||||||||||||
Selling and marketing expenses | 666 | 682 | 1,313 | 1,420 | ||||||||||||
General and administrative expenses | 296 | 316 | 589 | 645 | ||||||||||||
Intangible assets impairment | 561 | 521 | 1,030 | 727 | ||||||||||||
Goodwill impairment | — | 120 | — | 300 | ||||||||||||
Other assets impairments, restructuring and other items | 101 | 194 | 103 | 695 | ||||||||||||
Legal settlements and loss contingencies | 646 | 20 | 703 | (1,258 | ) | |||||||||||
Other income | (9 | ) | (96 | ) | (15 | ) | (299 | ) | ||||||||
Operating income (loss) | (644 | ) | (14 | ) | (510 | ) | 1,511 | |||||||||
Financial expenses, net | 206 | 236 | 425 | 507 | ||||||||||||
Income (loss) before income taxes | (850 | ) | (250 | ) | (934 | ) | 1,004 | |||||||||
Income taxes | (179 | ) | (76 | ) | (170 | ) | (30 | ) | ||||||||
Share in losses (income) of associated companies, net | — | (8 | ) | 4 | 66 | |||||||||||
Net income (loss) | (671 | ) | (166 | ) | (768 | ) | 968 | |||||||||
Net income attributable to non-controlling interests | 18 | 10 | 26 | 24 | ||||||||||||
Net income (loss) attributable to Teva | (689 | ) | (176 | ) | (794 | ) | 944 | |||||||||
Dividends on preferred shares | — | 65 | — | 130 | ||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | (689 | ) | $ | (241 | ) | $ | (794 | ) | $ | 814 | |||||
Earnings (loss) per share attributable to ordinary shareholders: | ||||||||||||||||
Basic | $ | (0.63 | ) | $ | (0.24 | ) | $ | (0.73 | ) | $ | 0.80 | |||||
Diluted | $ | (0.63 | ) | $ | (0.24 | ) | $ | (0.73 | ) | $ | 0.80 | |||||
Weighted average number of shares (in millions): | ||||||||||||||||
Basic | 1,092 | 1,018 | 1,091 | 1,018 | ||||||||||||
Diluted | 1,092 | 1,018 | 1,091 | 1,020 | ||||||||||||
(LOSS)
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
Net income | $ | 1,134 | $ | 641 | ||||
Other comprehensive income, net of tax: | ||||||||
Currency translation adjustment | 239 | 466 | ||||||
Unrealized gain (loss) from derivative financial instruments, net | (44 | ) | 8 | |||||
Unrealized gain fromavailable-for-sale securities, net | 1 | 54 | ||||||
Unrealized loss on defined benefit plans | — | (13 | ) | |||||
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Total other comprehensive income | 196 | 515 | ||||||
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Total comprehensive income | 1,330 | 1,156 | ||||||
Comprehensive income attributable tonon-controlling interests | 97 | 66 | ||||||
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Comprehensive income attributable to Teva | $ | 1,233 | $ | 1,090 | ||||
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Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income (loss) | $ | (671 | ) | $ | (166 | ) | $ | (768 | ) | $ | 968 | |||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Currency translation adjustment | 86 | (711 | ) | 133 | (472 | ) | ||||||||||
Unrealized gain (loss) from derivative financial instruments | (10 | ) | 100 | 37 | 56 | |||||||||||
Unrealized gain (loss) from available-for-sale securities | 1 | (1 | ) | 1 | (1 | ) | ||||||||||
Unrealized loss on defined benefit plans | (1 | ) | (2 | ) | (1 | ) | (1 | ) | ||||||||
Total other comprehensive income (loss) | 76 | (614 | ) | 170 | (418 | ) | ||||||||||
Total comprehensive income (loss) | (595 | ) | (780 | ) | (598 | ) | 550 | |||||||||
Comprehensive income (loss) attributable to non-controlling interests | 47 | (51 | ) | 49 | 46 | |||||||||||
Comprehensive income (loss) attributable to Teva | $ | (642 | ) | $ | (729 | ) | $ | (647 | ) | $ | 504 | |||||
(U.S. dollars in millions)
(Unaudited)
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
Operating activities: | ||||||||
Net income | $ | 1,134 | $ | 641 | ||||
Adjustments to reconcile net income to net cash provided by operations: | ||||||||
Net change in operating assets and liabilities | (592 | ) | (797 | ) | ||||
Impairment of long-lived assets | 432 | 11 | ||||||
Depreciation and amortization | 507 | 480 | ||||||
Goodwill impairment | 180 | — | ||||||
Deferred income taxes – net and uncertain tax positions | (221 | ) | (217 | ) | ||||
Net gain from sale of long-lived assets and investments | (106 | ) | (39 | ) | ||||
Impairment of equity investment | 94 | — | ||||||
Research and development in process | 54 | — | ||||||
Stock-based compensation | 30 | 40 | ||||||
Other items | (16 | ) | 17 | |||||
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Net cash provided by operating activities | 1,496 | 136 | ||||||
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Investing activities: | ||||||||
Proceeds from sales of business, investments and long-lived assets | 824 | 1,412 | ||||||
Beneficial interest collected in exchanged for securitized trade receivables | 444 | 334 | ||||||
Purchases of property, plant and equipment | (163 | ) | (202 | ) | ||||
Purchases of investments and other assets | (56 | ) | (6 | ) | ||||
Other investing activities | (10 | ) | (22 | ) | ||||
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Net cash provided by investing activities | 1,039 | 1,516 | ||||||
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Financing activities: | ||||||||
Repayment of long-term loans and other long-term liabilities | (6,243 | ) | — | |||||
Proceeds from long-term loans, net of issuance costs | 4,440 | — | ||||||
Net change in short-term debt | (261 | ) | (1,350 | ) | ||||
Dividends paid on ordinary shares | (12 | ) | (346 | ) | ||||
Dividends paid on preferred shares | (10 | ) | (65 | ) | ||||
Other financing activities | (5 | ) | (7 | ) | ||||
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Net cash used in financing activities | (2,091 | ) | (1,768 | ) | ||||
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Translation adjustment on cash and cash equivalents | 11 | 28 | ||||||
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Net change in cash and cash equivalents | 455 | (88 | ) | |||||
Balance of cash and cash equivalents at beginning of period | 963 | 988 | ||||||
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Balance of cash and cash equivalents at end of period | $ | 1,418 | $ | 900 | ||||
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Supplemental cash flow information: | ||||||||
Non-cash financing and investing activities: | ||||||||
Beneficial interest obtained in exchange for securitized trade receivables | $ | 551 | $ | 285 |
CHANGES IN EQUITY
Teva shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||
Ordinary shares | ||||||||||||||||||||||||||||||||||||||||
Number of shares (in millions) | Stated value | MCPS* | Additional paid-in capital | Retained earnings (accumulated deficit) | Accumulated other compre- hensive (loss) | Treasury shares | Total Teva shareholders ’ equity | Non- controlling interests | Total equity | |||||||||||||||||||||||||||||||
(U.S. dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2018** | 1,124 | 54 | 3,696 | 23,443 | (2,688 | ) | (1,735 | ) | (4,149 | ) | 18,621 | 1,481 | 20,102 | |||||||||||||||||||||||||||
Comprehensive income (loss) | (176 | ) | (554 | ) | (730 | ) | (51 | ) | (780 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation expense | 47 | 47 | 47 | |||||||||||||||||||||||||||||||||||||
Dividends to preferred shareholders | 65 | (65 | ) | — | — | — | ||||||||||||||||||||||||||||||||||
Balance at June 30, 2018 | 1,124 | $ | 54 | $ | 3,760 | $ | 23,426 | $ | (2,864 | ) | $ | (2,289 | ) | $ | (4,149 | ) | $ | 17,938 | $ | 1,430 | $ | 19,368 | ||||||||||||||||||
* | Mandatory convertible preferred shares. |
** | Following the adoption of ASU 2016-01, the Company recorded a $5 million opening balance reclassification from accumulated other comprehensive income to retained earnings. |
Teva shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||
Ordinary shares | ||||||||||||||||||||||||||||||||||||||||
Number of shares (in millions) | Stated value | MCPS* | Additional paid-in capital | Retained earnings (accumulated deficit) | Accumulated other compre- hensive (loss) | Treasury shares | Total Teva shareholders’ equity | Non- controlling interests | Total equity | |||||||||||||||||||||||||||||||
(U.S. dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | 1,198 | 56 | — | 27,234 | (6,063 | ) | (2,359 | ) | (4,137 | ) | 14,732 | 1,089 | 15,821 | |||||||||||||||||||||||||||
Comprehensive income (loss) | (689 | ) | 47 | (642 | ) | 47 | (595 | ) | ||||||||||||||||||||||||||||||||
Issuance of Shares | ** | |||||||||||||||||||||||||||||||||||||||
Issuance of Treasury Shares | (6 | ) | 9 | 3 | 3 | |||||||||||||||||||||||||||||||||||
Stock-based compensation expense | 32 | 32 | 32 | |||||||||||||||||||||||||||||||||||||
Other | (2 | ) | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||||||||
Transactions with non-controlling interests | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | 1,198 | $ | 56 | — | $ | 27,258 | $ | (6,752 | ) | $ | (2,312 | ) | $ | (4,128 | ) | $ | 14,122 | $ | 1,128 | $ | 15,251 | |||||||||||||||||||
* | Mandatory convertible preferred shares. |
** | Represents an amount less than 0.5 million. |
Teva shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||
Ordinary shares | ||||||||||||||||||||||||||||||||||||||||
Number of shares (in millions) | Stated value | MCPS* | Additional paid- in capital | Retained earnings (accumulated deficit) | Accumulated other compre- hensive (loss) | Treasury shares | Total Teva shareholders’ equity | Non- controlling interests | Total equity | |||||||||||||||||||||||||||||||
(U.S. dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2017 | 1,124 | 54 | 3,631 | 23,479 | (3,803 | ) | (1,853 | ) | (4,149 | ) | 17,359 | 1,386 | 18,745 | |||||||||||||||||||||||||||
Cumulative effect of new accounting standard | (5 | ) | 5 | |||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | 944 | (441 | ) | 503 | 46 | 550 | ||||||||||||||||||||||||||||||||||
Dividends to preferred shareholders | 129 | (129 | ) | |||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | 77 | 77 | 77 | |||||||||||||||||||||||||||||||||||||
Transactions with non-controlling interests | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2018 | 1,124 | $ | 54 | $ | 3,760 | $ | 23,426 | $ | (2,864 | ) | $ | (2,289 | ) | $ | (4,149 | ) | $ | 17,938 | $ | 1,430 | $ | 19,368 | ||||||||||||||||||
* | Mandatory convertible preferred shares. |
Teva shareholders’ equity | |||||||||||||||||||||||||||||||||||||||||
Ordinary shares | |||||||||||||||||||||||||||||||||||||||||
Number of shares (in millions) | Stated value | MCPS* | Additional paid- in capital | Retained earnings (accumulated deficit) | Accumulated other compre- hensive (loss) | Treasury shares | Total Teva shareholders’ equity | Non- controlling interests | Total equity | ||||||||||||||||||||||||||||||||
(U.S. dollars in millions) | |||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2018 | 1,196 | 56 | — | 27,210 | (5,958 | ) | (2,459 | ) | (4,142 | ) | 14,707 | 1,087 | 15,794 | ||||||||||||||||||||||||||||
Comprehensive income (loss) | (794 | ) | 147 | (647 | ) | 49 | (598 | ) | |||||||||||||||||||||||||||||||||
Issuance of Shares | 2 | ** | |||||||||||||||||||||||||||||||||||||||
Issuance of Treasury Shares | (8 | ) | 14 | 6 | 6 | ||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | 64 | 64 | 64 | ||||||||||||||||||||||||||||||||||||||
Transactions with non-controlling interests | (8 | ) | (8 | ) | |||||||||||||||||||||||||||||||||||||
Other | (8 | ) | (8 | ) | (8 | ) | |||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | 1,198 | $ | 56 | — | $ | 27,258 | $ | (6,752 | ) | $ | (2,312 | ) | $ | (4,128 | ) | $ | 14,122 | $ | 1,128 | $ | 15,251 | ||||||||||||||||||||
* | Mandatory convertible preferred shares. |
** | Represents an amount less than 0.5 million. |
Six months ended June 30, | ||||||||
2019 | 2018 | |||||||
Operating activities: | ||||||||
Net income (loss) | $ | (768 | ) | $ | 968 | |||
Adjustments to reconcile net income (loss) to net cash provided by operations: | ||||||||
Net change in operating assets and liabilities | (1,056 | ) | (1,268 | ) | ||||
Impairment of long-lived assets | 1,097 | 980 | ||||||
Depreciation and amortization | 893 | 986 | ||||||
Deferred income taxes – net and uncertain tax positions | (362 | ) | (489 | ) | ||||
Stock-based compensation | 64 | 77 | ||||||
Other items | 11 | 44 | ||||||
Net gain from sale of long-lived assets and investments | 6 | (88 | ) | |||||
Goodwill impairment | — | 300 | ||||||
Impairment of equity investment | — | 94 | ||||||
In process Research and development | — | 54 | ||||||
Net cash provided by (used in) operating activities | (115 | ) | 1,658 | |||||
Investing activities: | ||||||||
Beneficial interest collected in exchange for securitized trade receivables | 746 | 970 | ||||||
Purchases of property, plant and equipment | (237 | ) | (299 | ) | ||||
Proceeds from sales of business, investments and long-lived assets | 134 | 841 | ||||||
Other investing activities | 59 | (11 | ) | |||||
Purchases of investments and other assets | (1 | ) | (56 | ) | ||||
Net cash provided by investing activities | 701 | 1,445 | ||||||
Financing activities: | ||||||||
Repayment of senior notes and loans and other long-term liabilities | (157 | ) | (6,289 | ) | ||||
Tax withholding payments made on shares and dividends | (52 | ) | (22 | ) | ||||
Other financing activities | (13 | ) | (10 | ) | ||||
Net change in short-term debt | (2 | ) | (261 | ) | ||||
Proceeds from senior notes and loans, net of issuance costs | — | 4,435 | ||||||
Net cash used in financing activities | (224 | ) | (2,147 | ) | ||||
Translation adjustment on cash and cash equivalents | 21 | (58 | ) | |||||
Net change in cash and cash equivalents | 383 | 898 | ||||||
Balance of cash and cash equivalents at beginning of period | 1,782 | 963 | ||||||
Balance of cash and cash equivalents at end of period | $ | 2,165 | $ | 1,861 | ||||
Non-cash financing and investing activities: | ||||||||
Beneficial interest obtained in exchange for securitized trade receivables | $ | 770 | $ | 968 |
Certain amounts in the consolidated financial statements and associated notes may not add up due to rounding. All percentages have been calculated using unrounded amounts.
On January 1,
In May 2017, the FASB issued ASU
In February 2017, the FASB issued guidance onde-recognition of nonfinancial assets. The amendments address the recognition of gains and losses on the transfer (i.e., sale) of nonfinancial assets to counterparties other than customers. The guidance conformsde-recognition on nonfinancial assets with the model for transactions in the new revenue standard. Teva adopted the provisions of this update in the first quarter of 2018January 1, 2019 with no material impact on its consolidated financial statements.
In August 2016, the FASB issued guidance on statements of cash flows. The guidance addresses eight specific issues: debt prepayment or debt extinguishment costs; settlement of certain debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interest in securitization transactions; and separately identifiable cash flows and application of predominance principle. The amendments should be applied retrospectively. Teva adopted the provisions of this update in the first quarter of 2018. This resulted in a reclassification of $444 million and $334 million from operating activities to investing activities in the first quarter of 2018 and 2017, respectively.
In January 2016, the FASB issued guidance which updates certain aspects of recognition, measurement, presentation and disclosure of equity investments. The guidance requires entities to recognize changes in fair value in net income rather than in accumulated other comprehensive income. Teva adopted the provisions of this update in the first quarter of 2018. Following the adoption, the Company recorded a $5 million opening balance reclassification from accumulated other comprehensive loss to retained earnings. See note 10.
Recently issued accounting pronouncements, not yet adopted
In February 2018, the FASB issued guidance on the recognition and measurement of financial assets and financial liabilities. The guidance provides updates which address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The guidance is effective for fiscal years beginning after December 15, 2017; however, public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018 are not required to adopt these amendments until the interim period beginning after June 15, 2018. Teva is currently evaluating the potential effect of the guidance on its consolidated financial statements.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
In February 2018, the FASB issued guidance on the reclassification of certain tax effects from accumulated other comprehensive income. The guidance allows reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. This guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. Teva is currently evaluating the potential effect of the guidance on its consolidated financial statements.
In February 2016,
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
corresponding decrease in S&M expenses.
contingencies in the first quarter of 2018.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
2018.
Certain Women’s Health and Other Specialty Products
On September 17, 2017, Teva entered into a definitive agreement under which CVC Capital Partners Fund VI will acquire a portfolio of products for $703 million in cash. The portfolio of products, which is marketed and sold outside of the United States, includes the women’s health products OVALEAP®, ZOELY®, SEASONIQUE®, COLPOTROPHINE® and other specialty products such as ACTONEL®.
As of December 31, 2017, the Company accounted for this transaction as assets and liabilities held for sale and determined that the fair value less cost to sell exceeded the carrying value of the business. The Company disposed of $329 million of goodwill associated with the divested business.
On January 31, 2018, Teva completed the sale of the portfolio of products to CVC Capital Partners Fund VI. As a result of these transactions, the Company recognized a net gain on sale of approximately $93 million in the first quarter of 2018 within other income in the consolidated statement of income. The transaction expenses for these divestitures of approximately $2 million were recognized concurrently and included as a reduction to the net gain on sale.
The Company determined that the sale of its global women’s health business did not constitute a strategic shift and that it did not, and will not, have a major effect on its operations and financial results. Accordingly, the operations associated with the transactions are not reported as discontinued operations.
March 31, 2018 | December 31, 2017 | |||||||
(U.S. $ in millions) | ||||||||
Inventories | — | 39 | ||||||
Property, plant and equipment, net | 17 | 16 | ||||||
Identifiable intangible assets, net | — | 236 | ||||||
Goodwill | — | 275 | ||||||
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Total assets of the disposal group classified as held for sale in the consolidated balance sheets | $ | 17 | $ | 566 | ||||
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Other taxes and long-term liabilities | — | 38 | ||||||
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Total liabilities of the disposal group classified as held for sale in the consolidated balance sheets | $ | — | $ | 38 | ||||
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2018:
June 30, 2019 | December 31, 2018 | |||||||
(U.S. $ in millions) | ||||||||
Property, plant and equipment, net | $ | 30 | $ | 92 | ||||
Goodwill | — | 51 | ||||||
Adjustments of assets held for sale to fair value | (6 | ) | (51 | ) | ||||
Total assets of the disposal group classified as held for sale in the consolidated balance sheets | $ | 24 | $ | 92 | ||||
PGT Healthcare Partnership
The separation is planned to become effective July 1, 2018, subject to receipt of applicable regulatory approvals. As part of the separation, Teva will transfer shares it holds in New Chapter Inc. and ownership rights in an OTC plant located in India to P&G. Teva will continue to provide certain services to P&G after the separation for a transition period.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
During the first quarter of 2018, Teva recorded an impairment of $56 million related to the plant in India and an impairment of $94 million related to the investment in New Chapter Inc. which was recorded within share in loss (profits) of associated companies.
Alder BioPharmaceuticals®
United Kingdom.
Ninlaro®
In November 2016, Teva entered into an agreement to sell its royalties and other rights in Ninlaro® (ixazomib) to a subsidiary of Takeda, for a $150 million upfront payment to Teva and an additional $150 million payment based on sales during 2017. Teva was entitled to these royalties pursuant to an agreement from 2014 assigning the Ninlaro® patents to an affiliate of Takeda in consideration of milestone payments and sales royalties. In the first six months of 2017, Teva received payments in the amount of $150 million, which were recognized as revenue for the period.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
and the fourth quarter of 2018, respectively.
March 31, 2018 | December 31, 2017 | |||||||
(U.S. $ in millions) | ||||||||
Finished products | $ | 2,772 | $ | 2,689 | ||||
Raw and packaging materials | 1,483 | 1,454 | ||||||
Products in process | 646 | 597 | ||||||
Materials in transit and payments on account | 212 | 184 | ||||||
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| |||||
$ | 5,113 | $ | 4,924 | |||||
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|
June 30, | December 31, | |||||||
2019 | 2018 | |||||||
(U.S. $ in millions) | ||||||||
Finished products | $ | 2,643 | $ | 2,665 | ||||
Raw and packaging materials | 1,393 | 1,328 | ||||||
Products in process | 638 | 590 | ||||||
Materials in transit and payments on account | 176 | 148 | ||||||
Total | $ | 4,850 | $ | 4,731 | ||||
equipment:
March 31, | December 31, | |||||||
2018 | 2017 | |||||||
(U.S. $ in millions) | ||||||||
Machinery and equipment | $ | 5,759 | $ | 5,809 | ||||
Buildings | 3,307 | 3,329 | ||||||
Computer equipment and other assets | 2,055 | 2,016 | ||||||
Payments on account | 615 | 634 | ||||||
Land(1) | 358 | 390 | ||||||
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12,094 | 12,178 | |||||||
Less—accumulated depreciation | 4,674 | 4,505 | ||||||
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| |||||
$ | 7,420 | $ | 7,673 | |||||
|
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|
June 30, | December 31, | |||||||
2019 | 2018 | |||||||
(U.S. $ in millions) | ||||||||
Machinery and equipment | $ | 5,713 | $ | 5,691 | ||||
Buildings | 3,092 | 3,143 | ||||||
Computer equipment and other assets | 2,129 | 2,097 | ||||||
Payments on account | 526 | 514 | ||||||
Land | 370 | 351 | ||||||
11,830 | 11,796 | |||||||
Less—accumulated depreciation | (5,099 | ) | (4,928 | ) | ||||
Total | $ | 6,732 | $ | 6,868 | ||||
Gross carrying amount net of impairment | Accumulated amortization | Net carrying amount | ||||||||||||||||||||||
March 31, | December 31, | March 31, | December 31, | March 31, | December 31, | |||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||||||
Product rights | $ | 21,395 | $ | 21,011 | $ | 8,728 | $ | 8,276 | $ | 12,667 | $ | 12,735 | ||||||||||||
Trade names | 618 | 617 | 64 | 55 | 554 | 562 | ||||||||||||||||||
Research and development in process | 4,093 | 4,343 | — | — | 4,093 | 4,343 | ||||||||||||||||||
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Total | $ | 26,106 | $ | 25,971 | $ | 8,792 | $ | 8,331 | $ | 17,314 | $ | 17,640 | ||||||||||||
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TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
Gross carrying amount net of impairment | Accumulated amortization | Net carrying amount | ||||||||||||||||||||||
June 30, | December 31, | June 30, | December 31, | June 30, | December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||||||
Product rights | $ | 19,995 | $ | 20,361 | $ | 10,043 | $ | 9,565 | $ | 9,952 | $ | 10,796 | ||||||||||||
Trade names | 604 | 606 | 109 | 91 | 496 | 515 | ||||||||||||||||||
In process research and development | 1,988 | 2,694 | — | — | 1,988 | 2,694 | ||||||||||||||||||
Total | $ | 22,587 | $ | 23,661 | $ | 10,152 | $ | 9,656 | $ | 12,435 | $ | 14,005 | ||||||||||||
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 by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams and 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 book value over fair value based on the discounted cash flows.
The more significant estimates and assumptions inherent in the estimate of the fair value of identifiable intangible assets include all assumptions associated with forecasting product profitability, including sales and cost to sell projections, R&D expenditure for ongoing support of product rights or continued development of IPR&D, 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.
Impairment of identifiable intangible assets was $206$302 million in the three months ended March 31,June 30, 2019 and 2018, respectively.
Additional reductions to Rmay be impaired in future periods.
approval.
the three months ended on June
a) | Identifiable product rights of $365 million, mainly due to updated market assumptions regarding price and volume of products acquired from Actavis Generics and primarily marketed in the United States. |
b) | IPR&D assets of $196 million, mainly due to: (i) $137 million of generic pipeline products acquired from Actavis Generics due to development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape, launch date or discount rate) in the United States and (ii) million related to a change in the assumption of the future market share of few products within Teva’s Actavis Generics related pipeline in Europe.$59 |
a) | Identifiable product rights of $569 million, mainly due to updated market assumptions regarding price and volume of products acquired from Actavis Generics and primarily marketed in the United States. |
b) | IPR&D assets of $461 million, due to: (i) $277 million of generic pipeline products acquired from Actavis Generics due to development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape, launch date or discount rate) in the United States and (ii) $125 million related to lenalidomide (generic equivalent of Revlimid ® ) due to modified competition assumptions as a result of settlements between the innovator and other generic filers (iii) $59 million related to a change inthe assumption of the future market share of few products within Teva’s Actavis |
Generics | Specialty | Other | Total | North America | Europe | Growth Market | Other | Total | ||||||||||||||||||||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2017(3) | $ | 18,864 | $ | 8,464 | $ | 1,086 | $ | 28,414 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Relative fair value allocation | (18,864 | ) | (8,464 | ) | (1,086 | ) | (28,414 | ) | 11,144 | 9,001 | 5,404 | 2,865 | 28,414 | |||||||||||||||||||||||
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Balance as of January 1, 2018 | — | — | — | — | 11,144 | 9,001 | 5,404 | 2,865 | 28,414 | |||||||||||||||||||||||||||
Changes during the period: | ||||||||||||||||||||||||||||||||||||
Goodwill impairment(1) | (180 | ) | (180 | ) | ||||||||||||||||||||||||||||||||
Goodwill disposal(2) | (54 | ) | (54 | ) | ||||||||||||||||||||||||||||||||
Translation differences | (13 | ) | 269 | 28 | 1 | 285 | ||||||||||||||||||||||||||||||
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Balance as of March 31, 2018(3) | $ | — | $ | — | $ | — | $ | — | $ | 11,131 | $ | 9,216 | $ | 5,252 | $ | 2,866 | $ | 28,465 | ||||||||||||||||||
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North America | Europe | International Markets | Other | Total | |||||||||||||||||
(U.S. $ in millions) | |||||||||||||||||||||
Balance as of January 1, 2019 (1) | $ | 11,098 | $ | 8,653 | $ | 2,479 | $ | 2,687 | $ | 24,917 | |||||||||||
Changes during the period: | |||||||||||||||||||||
Goodwill disposal | (23 | ) | (5 | ) | — | — | (28 | ) | |||||||||||||
Goodwill adjustments | (13 | ) | — | — | — | (13 | ) | ||||||||||||||
Translation differences | 16 | (32 | ) | 53 | — | 37 | |||||||||||||||
Balance as of June 30, 2019 (1) | $ | 11,078 | $ | 8,616 | $ | 2,532 | $ | 2,687 | $ | 24,913 | |||||||||||
(1) |
Accumulated goodwill impairment as of |
In November 2017,
Following the announcement of its new organizational structure and leadership changes in November 2017, Teva conducted an analysis of its business segments, which led to changes in Teva’s identified reporting units, operating and reporting segments. As a result, on January 1, 2018, Teva reallocated its goodwill to the adjusted reporting units using a relative fair value allocation. In conjunction with the goodwill reallocation, Teva performed a goodwill impairment test for the balances in its adjusted reporting units, utilizing the same annual operating plan (“AOP”) and long range plan model that were used in its 2017 annual impairment test; The Company concluded that the fair value of each reporting unit was in excess of its carrying value.
During the first quarter of 2018, Teva identified an increase in certain components of the weighted average cost of capital (“WACC”), such as an increase in the risk free interest and the unlevered beta. The Company addressed these changes in rates as an indication for impairment and performed an additional impairment test as of March 31, 2018.
Based on its revised analysis, Teva recorded a goodwill impairment of $180 million related to its Rimsa reporting unit in the first quarter of 2018. The remaining goodwill allocated to this reporting unit is $706 million as of March 31, 2018. This impairment was driven by the change in fair value, including the discount rate updated for the WACC change noted above, and the change in allocated net assets to the reporting unit. See note 3.
Based on current macro-economic developments and capital markets anticipation, a possible increase in the risk free interest rate of 0.5% may result in an increase to Teva’s WACC by approximately the same amount and consequently in an additional impairment of $70 million and $100 million with respect to Rimsa and the Growth Markets reporting units, respectively.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
For Teva’s remaining reporting units, the percentage difference between estimated fair value and estimated carrying value in the first quarter of 2018 was 6%, 10%, 21% and 49% for Teva’s Growth Markets, Europe, North America and other reporting units, respectively.
Additionally,three months ended June 30, 2018, no account was taken of the potential dilution by the mandatory convertible preferred shares, amounting to 6463 million shares (including shares that may bewere issued due to unpaid dividends tountil that date) for the three months ended March 31, 2018 and 59 million for the three months ended March 31, 2017, as well as for the convertible senior debentures for the respective periods,, since boththey had an anti-dilutive effect on loss per share.
On January 1, 2018, Teva adopted the new accounting standard ASC 606, Revenue from Contracts with Customers, and all the related amendments (“new revenue standard”) to all contracts using the modified retrospective method. The cumulative effect of initially applying the new revenue standard was immaterial.
Revenue recognition prior to the adoption of the new revenue standard
Please refer to note 1 to the consolidated financial statements and critical accounting policies included in our Annual Report on Form10-K for the year ended December 31, 2017 for a summary of our significant accounting policies
Revenue recognition following the adoption of the new revenue standard
A contract with a customer exists only when: the parties to the contract have approved it and are committed to perform their respective obligations, the Company can identify each party’s rights regarding the distinct goods or services to be transferred (“performance obligations”), the Company can determine the transaction price for the goods or services to be transferred, the contract has commercial substance and it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.
Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations upon transfer of control to the customer, excluding amounts collected on behalf of other third parties and sales taxes.
The amount of consideration to which Teva expects to be entitled varies as a result of rebates, chargebacks, returns and other sales reserve and allowances (“SR&A”) the Company offers its customers and their customers, as well as the occurrence or nonoccurrence of future events, including milestone events. A minimum amount of variable consideration is recorded concurrently with the satisfaction of performance obligations to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimates of variable consideration are based on historical experience and the specific terms in the individual agreements (which the Company believes approximates expected value). Rebates and chargebacks are the largest components of SR&A. For further description of SR&A components and how they are estimated, see “Variable consideration” below.
Shipping and handling costs after control over a product has transferred to a customer are accounted for as a fulfillment cost and are recorded under S&M expenses.
Teva does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between the time of transfer of the promised goods or services to the customer and the time the customer pays for these goods or services to be generally one year or less. The Company’s credit terms to customers are in average between thirty and ninety days.
The Company generally recognizes the incremental costs of obtaining contracts as an expense since the amortization period of the assets that the Company otherwise would have recognized is one year or less. The costs are recorded under S&M expenses. Similarly, Teva does not disclose the value of unsatisfied performance obligations for contracts with original expected duration of one year or less.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 2018 | ||||||||||||||||||||
North America | Europe | Growth Markets | Other activities | Total | ||||||||||||||||
(U.S. dollars in millions) | ||||||||||||||||||||
Sale of goods | 2,168 | 1,429 | 519 | 177 | 4,293 | |||||||||||||||
Licensing arrangements | 32 | 10 | 20 | 2 | 64 | |||||||||||||||
Distribution | 331 | 3 | 153 | — | 487 | |||||||||||||||
Other | — | — | 58 | 163 | 221 | |||||||||||||||
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$ | 2,531 | $ | 1,442 | $ | 750 | $ | 342 | $ | 5,065 | |||||||||||
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March 31, 2017 | ||||||||||||||||||||
North America | Europe | Growth Markets | Other activities | Total | ||||||||||||||||
(U.S. dollars in millions) | ||||||||||||||||||||
Sale of goods | 2,824 | 1,287 | 529 | 196 | 4,836 | |||||||||||||||
Licensing arrangements | 121 | 1 | 1 | 1 | 124 | |||||||||||||||
Distribution | 295 | 53 | 125 | — | 473 | |||||||||||||||
Other | — | — | 63 | 154 | 217 | |||||||||||||||
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$ | 3,240 | $ | 1,341 | $ | 718 | $ | 351 | $ | 5,650 | |||||||||||
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Nature
Three months ended June 30, 2019 | ||||||||||||||||||||
North America | Europe | International Markets | Other activities | Total | ||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||
Sale of goods | 1,686 | 1,173 | 526 | 204 | 3,588 | |||||||||||||||
Licensing arrangements | 35 | 10 | 2 | 1 | 48 | |||||||||||||||
Distribution | 351 | § | 164 | — | 515 | |||||||||||||||
Other | — | § | 49 | 137 | 186 | |||||||||||||||
$ | 2,071 | $ | 1,183 | $ | 741 | $ | 342 | 4,337 | ||||||||||||
§ Represents an amount less than $1 million. |
Three months ended June 30, 2018 | ||||||||||||||||||||
North America | Europe | International Markets | Other activities | Total | ||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||
Sale of goods | 1,913 | 1,317 | 573 | 186 | 3,989 | |||||||||||||||
Licensing arrangements | 30 | 8 | 1 | 2 | 41 | |||||||||||||||
Distribution | 320 | 3 | 154 | — | 477 | |||||||||||||||
Other | — | — | 61 | 133 | 194 | |||||||||||||||
$ | 2,263 | $ | 1,328 | $ | 789 | $ | 321 | $ | 4,701 |
Six months ended June 30, 2019 | ||||||||||||||||||||
North America | Europe | International Markets | Other activities | Total | ||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||
Sale of goods | 3,324 | 2,433 | 994 | 390 | 7,141 | |||||||||||||||
Licensing arrangements | 65 | 15 | 2 | 3 | 85 | |||||||||||||||
Distribution | 729 | § | 315 | — | 1,044 | |||||||||||||||
Other | — | § | 97 | 264 | 362 | |||||||||||||||
$ | 4,118 | $ | 2,448 | $ | 1,409 | $ | 657 | $ | 8,632 | |||||||||||
§ Represents an amount less than $1 million. |
Six months ended June 30, 2018 | ||||||||||||||||||||
North America | Europe | International Markets | Other activities | Total | ||||||||||||||||
(U.S. $ in millions) | ||||||||||||||||||||
Sale of goods | 4,081 | 2,746 | 1,092 | 365 | 8,284 | |||||||||||||||
Licensing arrangements | 62 | 18 | 21 | 4 | 105 | |||||||||||||||
Distribution | 651 | 6 | 307 | — | 964 | |||||||||||||||
Other | — | — | 119 | 294 | 413 | |||||||||||||||
$ | 4,794 | $ | 2,770 | $ | 1,539 | $ | 663 | $ | 9,766 | |||||||||||
Other revenues are primarily comprised of contract manufacturing services, sales of medical devices, and other miscellaneous items. The Company is generally the principal in these arrangements and therefore records revenue on a gross basis as it controls the promised goods before transferring these goods to the customer. Revenue is recognized when the customer obtains control of the products. This generally occurs when products are shipped once the Company has a present right to payment, legal title, and risk and rewards of ownership are obtained by the customer.
Contract assets and liabilities
Contract assets are mainly comprised of trade receivables net of allowance for doubtful debts, which includes amounts billed and currently due from customers.
Contract liabilities are mainly comprised of deferred revenues, which were immaterial as of March 31, 2018 and December 31, 2017, respectively.
Rebates
Rebates are primarily related to volume incentives and are offered to key customers to promote loyalty. These rebate programs provide that, upon the attainment ofpre-established volumes or the attainment of revenue milestones for a specified period, the customer receives a rebate. Since rebates are contractually agreed upon, they are estimated based on the specific terms in each agreement based on historical trends and expected sales. Externally obtained inventory levels are evaluated in relation to estimates made for rebates payable to indirect customers.
Medicaid and Other Governmental Rebates
Pharmaceutical manufacturers whose products are covered by the Medicaid program are required to rebate to each state a percentage of their average manufacturer’s price for the products dispensed. Many states have also implemented supplemental rebate programs that obligate manufacturers to pay rebates in excess of those required under federal law. The Company estimates these rebates based on historical trends of rebates paid, as well as on changes in wholesaler inventory levels and increases or decreases in sales.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
Chargebacks
The Company has arrangements with various third parties, such as managed care organizations and drug store chains, establishing prices for certain of Teva’s products. While these arrangements are made between the Company and the customers, the customers independently select a wholesaler from which they purchase the products. Alternatively, certain wholesalers may enter into agreements with the customers, with Teva’s concurrence, which establish the pricing for certain products which the wholesalers provide. Under either arrangement, Teva will issue a credit (referred to as a “chargeback”) to the wholesaler for the difference between the invoice price to the wholesaler and the customer’s contract price. Provisions for chargebacks involve estimates of contract prices of over 2,000 products and multiple contracts with multiple wholesalers. The provision for chargebacks varies in relation to changes in product mix, pricing and the level of inventory at the wholesalers and therefore will not necessarily fluctuate in proportion to an increase or decrease in sales. Provisions for estimating chargebacks are calculated using historical chargeback experience and/or expected chargeback levels for new products and anticipated pricing changes. Teva considers current and expected price competition when evaluating the provision for chargebacks. Chargeback provisions are compared to externally obtained distribution channel reports for reasonableness. The Company regularly monitors the provision for chargebacks and makes adjustments when the Company believes that actual chargebacks may differ from estimated provisions.
Other Promotional Arrangements
Other promotional or incentive arrangements are periodically offered to customers, specifically related to the launch of products or other targeted promotions. Provisions are made in the period for which the Company can estimate the incentive earned by the customer, in accordance with the contractual terms. The Company regularly monitors the provision for other promotional arrangements and makes adjustments when Teva believes that the actual provision may differ from the estimated provisions.
Shelf Stock Adjustments
The custom in the pharmaceutical industry is generally to grant customers a shelf stock adjustment based on the customers’ existing inventory contemporaneously with decreases in the market price of the related product. The most significant of these relate to products for which an exclusive or semi-exclusive period exists. Provisions for price reductions depend on future events, including price competition, new competitive launches and the level of customer inventories at the time of the price decline. Teva regularly monitors the competitive factors that influence the pricing of its products and customer inventory levels and adjust these estimates where appropriate.
Returns
Returns primarily relate to customer returns of expired products which, the customer has the right to return up to one year following the expiration date. Such returned products are destroyed and credits and/or refunds are issued to the customer for the value of the returns. Accordingly, no returned assets are recoded in connection with those products. The returns provision is estimated by applying a historical return rate to the amounts of revenue estimated to be subject to returns. Revenue subject to returns is estimated based on the lag time from time of sale to date of return. The estimated lag time is developed by analyzing historical experience. Additionally, The Company considers specific factors, such as levels of inventory in the distribution channel, product dating and expiration, size and maturity of launch, entrance of new competitors, changes in formularies or packaging and any changes to customer terms, for determining the overall expected levels of returns.
Prompt Pay Discounts
Prompt pay discounts are offered to most customers to encourage timely payment. Discounts are estimated at the time of invoice based on historical discounts in relation to sales. Prompt pay discounts are almost always utilized by customers. As a result, the actual discounts do not vary significantly from the estimated amount.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
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. dollars in millions) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2017 | $ | 196 | $ | 3,077 | $ | 1,908 | $ | 1,849 | $ | 780 | $ | 267 | $ | 7,881 | $ | 8,077 | ||||||||||||||||
Provisions related to sales made in current year period | 136 | 1,865 | 357 | 2,711 | 70 | 103 | 5,106 | 5,242 | ||||||||||||||||||||||||
Provisions related to sales made in prior periods | 2 | (19 | ) | 3 | (1 | ) | 21 | (8 | ) | (4 | ) | (2 | ) | |||||||||||||||||||
Credits and payments | (157 | ) | (2,051 | ) | (349 | ) | (2,927 | ) | (119 | ) | (139 | ) | (5,585 | ) | (5,742 | ) | ||||||||||||||||
Translation differences | 1 | 9 | 2 | 1 | 1 | (1 | ) | 12 | 13 | |||||||||||||||||||||||
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| |||||||||||||||||
Balance at March 31, 2018 | $ | 178 | 2,881 | $ | 1,921 | $ | 1,633 | $ | 753 | $ | 222 | $ | 7,410 | $ | 7,588 | |||||||||||||||||
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Sales Reserves and Allowances | ||||||||||||||||||||||||||||||||
Reserves included in Accounts Receivable, net | Rebates | Medicaid and other governmental allowances | Chargebacks | Returns | Other | Total reserves included in SR&A | Total | |||||||||||||||||||||||||
(U.S.$ in millions) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2018 | $ | 175 | $ | 3,006 | $ | 1,361 | $ | 1,530 | $ | 638 | $ | 176 | $ | 6,711 | $ | 6,886 | ||||||||||||||||
Provisions related to sales made in current year period | 229 | 2,651 | 548 | 4,822 | 148 | 213 | 8,427 | 8,656 | ||||||||||||||||||||||||
Provisions related to sales made in prior periods | — | 7 | — | (5 | ) | 3 | (4 | ) | 1 | 1 | ||||||||||||||||||||||
Credits and payments | (242 | ) | (2,975 | ) | (739 | ) | (4,936 | ) | (196 | ) | (206 | ) | (9,052 | ) | (9,294 | ) | ||||||||||||||||
Translation differences | — | 4 | — | 2 | 2 | 4 | 12 | 12 | ||||||||||||||||||||||||
Balance at June 30, 2019 | $ | 162 | $ | 2,693 | $ | 1,170 | $ | 1,413 | $ | 595 | $ | 183 | $ | 6,054 | $ | 6,261 | ||||||||||||||||
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 | ||||||||||||||||
Balance as of December 31, 2017* | $ | (1,316 | ) | $ | 1 | $ | (442 | ) | $ | (91 | ) | $ | (1,848 | ) | ||||||
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| |||||||||||
Other comprehensive income (loss) before reclassifications | 156 | 1 | (51 | ) | — | 106 | ||||||||||||||
Amounts reclassified to the statements of income | — | — | 7 | — | 7 | |||||||||||||||
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Net other comprehensive income (loss) before tax | 156 | 1 | (44 | ) | — | 113 | ||||||||||||||
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| |||||||||||
Net other comprehensive income (loss) after tax** | 156 | 1 | (44 | ) | — | 113 | ||||||||||||||
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| |||||||||||
Balance as of March 31, 2018 | $ | (1,160 | ) | $ | 2 | $ | (486 | ) | $ | (91 | ) | $ | (1,735 | ) | ||||||
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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 December 31, 2017* | $ | (1,316 | ) | $ | 1 | $ | (442 | ) | $ | (91 | ) | $ | (1,848 | ) | |||||||
Other comprehensive income (loss) before reclassifications | (495 | ) | — | 42 | — | (453 | ) | ||||||||||||||
Amounts reclassified to the statements of income | — | (1 | ) | 14 | 1 | 14 | |||||||||||||||
Net other comprehensive income (loss) before tax | (495 | ) | (1 | ) | 56 | 1 | (439 | ) | |||||||||||||
Corresponding income tax | — | — | — | (2 | ) | (2 | ) | ||||||||||||||
Net other comprehensive income (loss) after tax** | (495 | ) | (1 | ) | 56 | (1 | ) | (441 | ) | ||||||||||||
Balance as of June 30, 2018 | $ | (1,811 | ) | $ | — | $ | (386 | ) | $ | (92 | ) | $ | (2,289 | ) | |||||||
* | Following the adoption of ASU 2016-01, the Company recorded a 5 |
** | Amounts do not include a $ 23 million gain from foreign currency translation adjustments attributable tonon-controlling interests. |
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 | ||||||||||||||||
Balance, December 31, 2016 | $ | (2,769 | ) | $ | (7 | ) | $ | (302 | ) | $ | (81 | ) | $ | (3,159 | ) | |||||
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| |||||||||||
Other comprehensive income/(loss) before reclassifications | 448 | 90 | 2 | (9 | ) | 531 | ||||||||||||||
Amounts reclassified to the statements of income | (52 | ) | (35 | ) | 6 | 1 | (80 | ) | ||||||||||||
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| |||||||||||
Net other comprehensive income/(loss) before tax | 396 | 55 | 8 | (8 | ) | 451 | ||||||||||||||
Corresponding income tax | — | (1 | ) | — | (5 | ) | (6 | ) | ||||||||||||
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| |||||||||||
Net other comprehensive income/(loss) after tax* | 396 | 54 | 8 | (13 | ) | 445 | ||||||||||||||
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| |||||||||||
Balance, March 31, 2017 | $ | (2,373 | ) | $ | 47 | $ | (294 | ) | $ | (94 | ) | $ | (2,714 | ) | ||||||
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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 December 31, 2018 | $ | (2,055 | ) | $ | 1 | $ | (327 | ) | $ | (78 | ) | $ | (2,459 | ) | |||||||
Other comprehensive income (loss) before reclassifications | 111 | — | 22 | — | 133 | ||||||||||||||||
Amounts reclassified to the statements of income | — | — | 15 | — | 15 | ||||||||||||||||
Net other comprehensive income (loss) before tax | 111 | — | 37 | — | 148 | ||||||||||||||||
Corresponding income tax | — | — | — | (1 | ) | (1 | ) | ||||||||||||||
Net other comprehensive income (loss) after tax* | 111 | — | 37 | (1 | ) | 147 | |||||||||||||||
Balance as of June 30, 2019 | $ | (1,944 | ) | $ | 1 | $ | (290 | ) | $ | (79 | ) | $ | (2,312 | ) | |||||||
* | Amounts do not include a $ 24 million gain from foreign currency translation adjustments attributable tonon-controlling interests. |
Weighted average interest rate as of March 31, 2018 | Maturity | March 31, 2018 | December 31, 2017 | |||||||||||
(U.S. $ in millions) | ||||||||||||||
Term loan JPY 28.3 billion(5) | JPY LIBOR+0.25% | 2018 | $ | — | $ | 251 | ||||||||
Convertible debentures | 0.25% | 2026 | * | 514 | 514 | |||||||||
Other | 11.68% | 2018 | 2 | 1 | ||||||||||
Current maturities of long-term liabilities |
| 786 | 2,880 | |||||||||||
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| |||||||||||
Total short term debt |
| $ | 1,302 | $ | 3,646 | |||||||||
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|
|
Weighted average interest rate as of June 30, 2019 | Maturity | June 30, 2019 | December 31, 2018 | ||||||||||||||
(U.S. $ in millions) | |||||||||||||||||
Bank and financial institutions | 4.25 | % | — | $ | 1 | $ | 2 | ||||||||||
Convertible debentures | 0.25 | % | 2026 | 514 | 514 | ||||||||||||
Current maturities of long-term liabilities | 2,256 | 1,700 | |||||||||||||||
Total short-term debt | $ | 2,771 | $ | 2,216 | |||||||||||||
Weighted average interest rate as of March 31, 2018 | Maturity | March 31, 2018 | December 31, 2017 | |||||||||
% | (U.S. $ in millions) | |||||||||||
Senior notes EUR 1,750 million | 0.38% | 2020 | $ | 2,152 | $ | 2,095 | ||||||
Senior notes EUR 1,500 million | 1.13% | 2024 | 1,837 | 1,788 | ||||||||
Senior notes EUR 1,300 million | 1.25% | 2023 | 1,593 | 1,550 | ||||||||
Senior notes EUR 1,000 million(3) | 2.88% | 2019 | — | 1,199 | ||||||||
Senior notes EUR 900 million(1) | 4.50% | 2025 | 1,109 | — | ||||||||
Senior notes EUR 750 million | 1.63% | 2028 | 915 | 891 | ||||||||
Senior notes EUR 700 million(1) | 3.25% | 2022 | 863 | — | ||||||||
Senior notes EUR 700 million | 1.88% | 2027 | 859 | 837 | ||||||||
Senior notes USD 3,500 million | 3.15% | 2026 | 3,492 | 3,492 | ||||||||
Senior notes USD 3,000 million | 2.20% | 2021 | 2,997 | 2,996 | ||||||||
Senior notes USD 3,000 million | 2.80% | 2023 | 2,992 | 2,992 | ||||||||
Senior notes USD 2,000 million | 1.70% | 2019 | 2,000 | 2,000 | ||||||||
Senior notes USD 2,000 million | 4.10% | 2046 | 1,984 | 1,984 | ||||||||
Senior notes USD 1,500 million(3) | 1.40% | 2018 | — | 1,500 | ||||||||
Senior notes USD 1250 million(2) | 6.00% | 2024 | 1,250 | — | ||||||||
Senior notes USD 1250 million(2) | 6.75% | 2028 | 1,250 | — | ||||||||
Senior notes USD 844 million | 2.95% | 2022 | 863 | 864 | ||||||||
Senior notes USD 789 million | 6.15% | 2036 | 781 | 781 | ||||||||
Senior notes USD 700 million | 2.25% | 2020 | 700 | 700 | ||||||||
Senior notes USD 613 million | 3.65% | 2021 | 623 | 624 | ||||||||
Senior notes USD 588 million | 3.65% | 2021 | 587 | 587 | ||||||||
Senior notes CHF 450 million | 1.50% | 2018 | 472 | 461 | ||||||||
Senior notes CHF 350 million | 0.50% | 2022 | 367 | 360 | ||||||||
Senior notes CHF 350 million | 1.00% | 2025 | 368 | 360 | ||||||||
Senior notes CHF 300 million | 0.13% | 2018 | 314 | 308 | ||||||||
Fair value hedge accounting adjustments | (16 | ) | (2 | ) | ||||||||
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|
|
| |||||||||
Total senior notes | 30,352 | 28,367 | ||||||||||
Term loan USD 2.5 billion(4) | LIBOR +1.1375% | 2018 | — | 285 | ||||||||
Term loan USD 2.5 billion(4) | LIBOR +1.50% | 2017-2020 | — | 2,000 | ||||||||
Term loan JPY 58.5 billion(5) | JPY LIBOR +0.55% | 2022 | — | 519 | ||||||||
Term loan JPY 35 billion(6) | 1.42% | 2019 | — | 311 | ||||||||
Term loan JPY 35 billion(6) | JPY LIBOR +0.3% | 2018 | — | 311 | ||||||||
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| |||||||||
Total loans | — | 3,426 | ||||||||||
Debentures USD 15 million(7) | 7.20% | 2018 | — | 15 | ||||||||
Other | 7.31% | 2026 | 5 | 5 | ||||||||
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| |||||||||
Total debentures and others | 5 | 20 | ||||||||||
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|
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| |||||||||
Less current maturities | (786 | ) | (2,880 | ) | ||||||||
Derivative instruments | 16 | 2 | ||||||||||
Less debt issuance costs | (137 | ) | (106 | ) | ||||||||
|
|
|
| |||||||||
Total long-term debt | $ | 29,450 | $ | 28,829 | ||||||||
|
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|
|
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
Debt development
Weighted average interest rate as of June 30, 2019 | Maturity | June 30, 2019 | December 31, 2018 | ||||||||||||||
(U.S. $ in millions) | |||||||||||||||||
Senior notes EUR 1,660 million | 0.38% | 2020 | $ | 1,886 | $ | 1,897 | |||||||||||
Senior notes EUR 1,500 million | 1.13% | 2024 | 1,697 | 1,707 | |||||||||||||
Senior notes EUR 1,300 million | 1.25% | 2023 | 1,472 | 1,480 | |||||||||||||
Senior notes EUR 900 million | 4.50% | 2025 | 1,023 | 1,029 | |||||||||||||
Senior notes EUR 750 million | 1.63% | 2028 | 846 | 850 | |||||||||||||
Senior notes EUR 700 million | 3.25% | 2022 | 796 | 801 | |||||||||||||
Senior notes EUR 700 million | 1.88% | 2027 | 794 | 798 | |||||||||||||
Senior notes USD 3,500 million | 3.15% | 2026 | 3,493 | 3,493 | |||||||||||||
Senior notes USD 3,000 million | 2.20% | 2021 | 2,998 | 2,997 | |||||||||||||
Senior notes USD 3,000 million | 2.80% | 2023 | 2,994 | 2,993 | |||||||||||||
Senior notes USD 1,556 million (1) | 1.70% | 2019 | 1,556 | 1,700 | |||||||||||||
Senior notes USD 2,000 million | 4.10% | 2046 | 1,985 | 1,985 | |||||||||||||
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 844 million | 2.95% | 2022 | 858 | 860 | |||||||||||||
Senior notes USD 789 million | 6.15% | 2036 | 782 | 782 | |||||||||||||
Senior notes USD 700 million | 2.25% | 2020 | 700 | 700 | |||||||||||||
Senior notes USD 613 million | 3.65% | 2021 | 619 | 621 | |||||||||||||
Senior notes USD 588 million | 3.65% | 2021 | 587 | 587 | |||||||||||||
Senior notes CHF 350 million | 0.50% | 2022 | 359 | 356 | |||||||||||||
Senior notes CHF 350 million | 1.00% | 2025 | 359 | 356 | |||||||||||||
Fair value hedge accounting adjustments | 9 | (9 | ) | ||||||||||||||
Total senior notes | 28,313 | 28,483 | |||||||||||||||
Other long-term debt | 1.15% | 2026 | 1 | 12 | |||||||||||||
Less current maturities | (2,256 | ) | (1,700 | ) | |||||||||||||
Derivative instruments | (9 | ) | 9 | ||||||||||||||
Less debt issuance costs | (94 | ) | (104 | ) | |||||||||||||
Total senior notes and loans | $ | 25,955 | $ | 26,700 | |||||||||||||
(1) |
Long term
Long term
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
that these financial statements are issued.
2019.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 2018 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money markets | $ | 6 | $ | — | $ | — | $ | 6 | ||||||||
Cash, deposits and other | 1,412 | — | — | 1,412 | ||||||||||||
Investment in securities: | ||||||||||||||||
Equity securities | 58 | — | — | 58 | ||||||||||||
Other, mainly debt securities | 13 | — | 19 | 32 | ||||||||||||
Derivatives: | ||||||||||||||||
Asset derivatives - options and forward contracts | — | 15 | — | 15 | ||||||||||||
Asset derivatives - cross currency swaps | — | 4 | — | 4 | ||||||||||||
Liabilities derivatives - options and forward contracts | — | (18 | ) | — | (18 | ) | ||||||||||
Liabilities derivatives - interest rate and cross-currency swaps | — | (141 | ) | — | (141 | ) | ||||||||||
Contingent consideration* | — | — | (708 | ) | (708 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,489 | $ | (140 | ) | $ | (689 | ) | $ | 660 | ||||||
|
|
|
|
|
|
|
| |||||||||
December 31, 2017 | ||||||||||||||||
Level 1 | �� | Level 2 | Level 3 | Total | ||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money markets | $ | 5 | $ | — | $ | — | $ | 5 | ||||||||
Cash, deposits and other | 958 | — | — | 958 | ||||||||||||
Investment in securities: | ||||||||||||||||
Equity securities | 65 | — | — | 65 | ||||||||||||
Structured investment vehicles | — | — | — | — | ||||||||||||
Other, mainly debt securities | 14 | — | 18 | 32 | ||||||||||||
Derivatives: | ||||||||||||||||
Asset derivatives - options and forward contracts | — | 17 | — | 17 | ||||||||||||
Asset derivatives - cross-currency swaps | — | 25 | — | 25 | ||||||||||||
Liability derivatives - options and forward contracts | — | (15 | ) | — | (15 | ) | ||||||||||
Liabilities derivatives - interest rate and cross-currency swaps | — | (98 | ) | — | (98 | ) | ||||||||||
Contingent consideration* | — | — | (735 | ) | (735 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,042 | $ | (71 | ) | $ | (717 | ) | $ | 254 | ||||||
|
|
|
|
|
|
|
|
June 30, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money markets | $ | 401 | $ | — | $ | — | $ | 401 | ||||||||
Cash, deposits and other | 1,764 | — | — | 1,764 | ||||||||||||
Investment in securities: | ||||||||||||||||
Equity securities | 48 | — | — | 48 | ||||||||||||
Other, mainly debt securities | 5 | — | 13 | 18 | ||||||||||||
Derivatives: | ||||||||||||||||
Asset derivatives—options and forward contracts | — | 14 | — | 14 | ||||||||||||
Asset derivatives —interest rate and cross-currency swaps | 85 | — | 85 | |||||||||||||
Liability derivatives—options and forward contracts | — | (55 | ) | — | (55 | ) | ||||||||||
Liability derivatives—interest rate and cross-currency swaps | — | (37 | ) | — | (37 | ) | ||||||||||
Contingent consideration* | — | — | (403 | ) | (403 | ) | ||||||||||
Total | $ | 2,218 | $ | 7 | $ | (390 | ) | $ | 1,835 | |||||||
December 31, 2018 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money markets | $ | 203 | $ | — | $ | — | $ | 203 | ||||||||
Cash, deposits and other | 1,579 | — | — | 1,579 | ||||||||||||
Investment in securities: | ||||||||||||||||
Equity securities | 51 | — | — | 51 | ||||||||||||
Other, mainly debt securities | 2 | — | 10 | 12 | ||||||||||||
Derivatives: | ||||||||||||||||
Asset derivatives —options and forward contracts | — | 18 | — | 18 | ||||||||||||
Asset derivatives—interest rate and cross-currency swaps | — | 58 | — | 58 | ||||||||||||
Liability derivatives—options and forward contracts | — | (26 | ) | — | (26 | ) | ||||||||||
Liability derivatives—interest rate and cross-currency swaps | — | (50 | ) | — | (50 | ) | ||||||||||
Contingent consideration* | — | — | (507 | ) | (507 | ) | ||||||||||
Total | $ | 1,835 | $ | — | $ | (497 | ) | $ | 1,338 | |||||||
* | Contingent consideration represents liabilities recorded at fair value in connection with acquisitions. |
Three months ended March 31, 2018 | ||||
(U.S. $ in millions) | ||||
Fair value at the beginning of the period | $ | (717 | ) | |
Revaluation of debt securities | 1 | |||
Adjustments to provisions for contingent consideration: | ||||
Actavis Generics transaction | (6 | ) | ||
Labrys transaction | (1 | ) | ||
Eagle transaction | (1 | ) | ||
Settlement of contingent consideration: | ||||
Eagle transaction | 35 | |||
|
| |||
Fair value at the end of the period | $ | (689 | ) | |
|
|
Six months ended June 30, 2019 | ||||
(U.S. $ in millions) | ||||
Fair value at the beginning of the period | $ | (497 | ) | |
Revaluation of debt securities | 3 | |||
Adjustments to provisions for contingent consideration: | ||||
Actavis Generics transaction | 101 | |||
Eagle transaction | (54 | ) | ||
Settlement of contingent consideration: | ||||
Eagle transaction | 57 | |||
Fair value at the end of the period | $ | (390 | ) | |
Estimated fair value* | ||||||||
March 31, 2018 | December 31, 2017 | |||||||
(U.S. $ in millions) | ||||||||
Senior notes included under senior notes and loans | $ | 26,365 | $ | 23,459 | ||||
Senior notes and convertible debentures included under short-term debt | 1,242 | 2,713 | ||||||
|
|
|
| |||||
Total | $ | 27,607 | $ | 26,172 | ||||
|
|
|
|
Fair value* | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
(U.S. $ in millions) | ||||||||
Senior notes included under senior notes and loans | $ | 22,770 | $ | 23,560 | ||||
Senior notes and convertible senior debentures included under short-term debt | 2,719 | 2,140 | ||||||
Total | $ | 25,489 | $ | 25,700 | ||||
* | The fair value was |
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
a. | Foreign exchange risk management: |
b. | Interest risk management: |
c. | Derivative instruments notional amounts |
March 31, 2018 | December 31, 2017 | |||||||
(U.S. $ in millions) | ||||||||
Cross-currency swap – cash flow hedge | $ | 588 | $ | 588 | ||||
Cross-currency swap – net investment hedge | 1,000 | 1,000 | ||||||
Interest rate swap – fair value hedge | 500 | 500 |
June 30, 2019 | December 31, 2018 | |||||||
(U.S. $ in millions) | ||||||||
Cross-currency swap—cash flow hedge | $ | 588 | $ | 588 | ||||
Cross-currency swap—net investment hedge | 1,000 | 1,000 | ||||||
Interest rate swap—fair value hedge | 500 | 500 | ||||||
$ | 2,088 | $ | 2,088 | |||||
d. | Derivative instrument outstanding: |
Fair value | ||||||||||||||||
Designated as hedging instruments | Not designated as hedging instruments | |||||||||||||||
March 31, 2018 | December 31, 2017 | March 31, 2018 | December 31, 2017 | |||||||||||||
Reported under | (U.S. $ in millions) | |||||||||||||||
Asset derivatives: | ||||||||||||||||
Other current assets: | ||||||||||||||||
Option and forward contracts | $ | — | $ | — | $ | 15 | $ | 17 | ||||||||
Othernon-current assets: | ||||||||||||||||
Cross-currency swaps – cash flow hedge | 4 | 25 | — | — | ||||||||||||
Liability derivatives: | ||||||||||||||||
Other current liabilities: | ||||||||||||||||
Option and forward contracts | — | — | (18 | ) | (15 | ) | ||||||||||
Other taxes and long-term liabilities: | ||||||||||||||||
Cross-currency swaps – net investment hedge | (125 | ) | (96 | ) | — | — | ||||||||||
Senior notes and loans: | ||||||||||||||||
Interest rate swaps – fair value hedge | (16 | ) | (2 | ) | — | — |
Derivatives on foreign exchange contracts mainly hedge Teva’s balance sheet items
Fair value | ||||||||||||||||
Designated as hedging instruments | Not designated as hedging instruments | |||||||||||||||
June 30, 2019 | December 31, 2018 | June 30, 2019 | December 31, 2018 | |||||||||||||
Reported under | (U.S. $ in millions) | |||||||||||||||
Asset derivatives: | ||||||||||||||||
Other current assets: | ||||||||||||||||
Option and forward contracts | $ | — | $ | — | $ | 14 | $ | 18 | ||||||||
Other non-current assets: | ||||||||||||||||
Cross-currency swaps—cash flow hedge | 76 | 58 | — | — | ||||||||||||
Senior notes and loans: | ||||||||||||||||
Interest rate swaps—fair value hedge | 9 | — | — | — | ||||||||||||
Liability derivatives: | ||||||||||||||||
Other current liabilities: | ||||||||||||||||
Option and forward contracts | — | — | (55 | ) | (26 | ) | ||||||||||
Cross-currency swaps—net investment hedge | (37 | ) | — | — | — | |||||||||||
Other taxes and long-term liabilities: | ||||||||||||||||
Cross-currency swaps—net investment hedge | — | (41 | ) | — | — | |||||||||||
Senior notes and loans: | ||||||||||||||||
Interest rate swaps—fair value hedge | — | (9 | ) | — | — |
Financial expenses, net | Other comprehensive income | |||||||||||||||
Three month ended, | Three month ended, | |||||||||||||||
June 30, 2019 | June 30, 2018** | June 30, 2019 | June 30, 2018** | |||||||||||||
Reported under | (U.S. $ in millions) | |||||||||||||||
Line items in which effects of hedges are recorded | $ | 206 | $ | 236 | $ | (76 | ) | $ | 614 | |||||||
Cross-currency swaps—cash flow hedge (1) | (1 | ) | * | 4 | (28 | ) | ||||||||||
Cross-currency swaps—net investment hedge (2) | (7 | ) | (9 | ) | 14 | (59 | ) | |||||||||
Interest rate swaps—fair value hedge (3) | 1 | * | — | — |
* | Represents an amount less than $0.5 million. |
** | Comparative figures are based on prior hedge accounting standard. |
Financial expenses, net | Other comprehensive income | |||||||||||||||
Six month ended, | Six month ended, | |||||||||||||||
June 30, 2019 | June 30, 2018** | June 30, 2019 | June 30, 2018** | |||||||||||||
Reported under | (U.S. $ in millions) | |||||||||||||||
Line items in which effects of hedges are recorded | $ | 425 | $ | 507 | $ | (170 | ) | $ | 418 | |||||||
Cross-currency swaps—cash flow hedge (1) | (1 | ) | (1 | ) | (15 | ) | (11 | ) | ||||||||
Cross-currency swaps—net investment hedge (2) | (15 | ) | (16 | ) | (6 | ) | (29 | ) | ||||||||
Interest rate swaps—fair value hedge (3) | 1 | * | — | — |
* | Represents an amount less than $0.5 million. |
** | Comparative figures are based on prior hedge accounting standard. |
With respect to the interest rate and cross-currency swap agreements, gains of $0.5 million and $1 million were recognized under financial expenses, net for the three months ended March 31, 2018 and 2017, respectively. Such gains mainly reflect the differences between the fixed interest rate and the floating interest rate.
instruments:
Financial expenses, net | Net revenues | |||||||||||||||
Three month ended, | Three month ended, | |||||||||||||||
June 30, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | |||||||||||||
Reported under | (U.S. $ in millions) | |||||||||||||||
Line items in which effects of hedges are recorded | $ | 206 | $ | 236 | $ | (4,337 | ) | $ | (4,701 | ) | ||||||
Option and forward contracts (4) | 34 | (24 | ) | — | — | |||||||||||
Option and forward contracts Economic hedge | — | — | 4 | (1 | ) | |||||||||||
Financial expenses, net | Net revenues | |||||||||||||||
Six month ended, | Six month ended, | |||||||||||||||
June 30, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | |||||||||||||
Reported under | (U.S. $ in millions) | |||||||||||||||
Line items in which effects of hedges are recorded | $ | 425 | $ | 507 | $ | (8,632 | ) | $ | (9,766 | ) | ||||||
Option and forward contracts (4) | (7 | ) | (5 | ) | — | — | ||||||||||
Option and forward contracts Economic hedge | — | — | 4 | (1 | ) |
(1) | With respect to cross-currency swap agreements, Teva recognized gains which mainly reflect the differences between the fixed interest rate and the floating interest rate. |
(2) | In each of the first and second quarters of 2017, Teva entered into a cross currency swap agreement with a notional amount of $500 million maturing in 2020. These cross currency swaps were designated as a net investment hedge of Teva’s foreign subsidiaries euro denominated net assets, in order to reduce the risk of adverse exchange rate fluctuations. With respect to these cross currency swap agreements, Teva recognized gains which mainly reflect the differences between the float-for-float interest rates paid and received. No amounts were reclassified from accumulated other comprehensive income into income related to the sale of a subsidiary. |
(3) | In the fourth quarter of 2016, Teva entered into an interest rate swap agreement designated as fair value hedge relating to its 2.8% senior notes due 2023 with respect to $500 million notional amount of outstanding debt. With respect to this interest rate swap agreement, Teva recognized a loss which mainly reflects the differences between the fixed interest rate and the floating interest rate. |
(4) | 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. |
e. | Matured forward starting interest rate swaps and treasury lock agreements: |
losses of $15 million and $14 million were recognized under financial expenses, net for the six months ended June 30, 2019 and 2018.
In the fourth quarter of 2016, Teva entered into an interest rate swap agreement designated as fair value hedge relating to its 2.8% senior notes due 2023, with respect to $500 million notional amount of outstanding debt.
In each of the first and second quarters of 2017, Teva entered into a cross currency swap agreement maturing in 2020 with a notional amount of $500 million. These cross currency swaps were designated as a net investment hedge of Teva’s euro denominated net assets, in order to reduce the risk of adverse exchange rate fluctuations. The effective portion of the hedge will be determined by looking into changes in spot exchange rate. The change in fair value of the cross currency swap attributable to changes other than those due to fluctuations in the spot exchange rates are excluded from the assessment of hedge effectiveness and are reported directly in the statement of income.
With respect to these cross currency swap agreements, gains of $7$3 million were recognized under financial expenses, net for the threesix months ended March 31,June 30, 2019 and 2018. The amount recorded in the statement of income in the first quarter of 2017 was not material.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
Other impairments, restructuring
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Impairments of long-lived tangible assets (1) | $ | 48 | $ | 27 | $ | 68 | $ | 253 | ||||||||
Contingent consideration | 24 | 47 | (47 | ) | 55 | |||||||||||
Restructuring | 47 | 107 | 79 | 354 | ||||||||||||
Other | (18 | ) | 13 | 3 | 33 | |||||||||||
Total | $ | 101 | $ | 194 | $ | 103 | $ | 695 |
(1) | Including impairments related to exit and disposal activities |
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
(U.S. $ in millions) | ||||||||
Restructuring expenses | $ | 247 | $ | 130 | ||||
Integration expenses | — | 23 | ||||||
Contingent consideration | 8 | 21 | ||||||
Impairments of long-lived assets | 432 | 11 | ||||||
Other | 20 | 55 | ||||||
|
|
|
| |||||
Total | $ | 707 | $ | 240 | ||||
|
|
|
|
In determining the estimated fair value of long-lived assets, Teva utilized a discounted cash flow model. The key assumptions within the model related to forecasting future revenue and operating income, an appropriate WACC and an appropriate terminal value based on the nature of the long-lived asset. The Company’s updated forecasts of net cash flowsequipment for the impaired assets reflect, among others,three months ended on June 30, 2019 and 2018 were
$253 million, respectively.
Impairments
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
six months ended June 30, 2018.
of $21 million and $8 million, respectively.
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
(U.S. $ in millions) | ||||||||
Restructuring | ||||||||
Employee termination | $ | 228 | $ | 95 | ||||
Other | 19 | 35 | ||||||
|
|
|
| |||||
Total | $ | 247 | $ | 130 | ||||
|
|
|
|
recorded under different items:
Three months ended June 30, | ||||||||
2019 | 2018 | |||||||
(U.S. $ in millions) | ||||||||
Restructuring | ||||||||
Employee termination | $ | 36 | $ | 90 | ||||
Other | 11 | 17 | ||||||
Total | $ | 47 | $ | 107 | ||||
Six months ended June 30, | ||||||||
2019 | 2018 | |||||||
(U.S. $ in millions) | ||||||||
Restructuring | ||||||||
Employee termination | $ | 56 | $ | 318 | ||||
Other | 23 | 36 | ||||||
Total | $ | 79 | $ | 354 | ||||
Employee termination costs | Other | Total | ||||||||||
(U.S. $ in millions ) | ||||||||||||
Balance as of January 1, 2018 | $ | (294 | ) | $ | (17 | ) | $ | (311 | ) | |||
Provision | (228 | ) | (19 | ) | (247 | ) | ||||||
Utilization and other* | 129 | 7 | 136 | |||||||||
|
|
|
|
|
| |||||||
Balance as of March 31, 2018 | $ | (393 | ) | $ | (29 | ) | $ | (422 | ) | |||
|
|
|
|
|
|
Employee termination costs | Other | Total | ||||||||||
(U.S. $ in millions ) | ||||||||||||
Balance as of January 1, 2019 | $ | (204 | ) | $ | (29 | ) | $ | (233 | ) | |||
Provision | (56 | ) | (23 | ) | (79 | ) | ||||||
Utilization and other* | 67 | 45 | 112 | |||||||||
Balance as of June 30, 2019 | $ | (193 | ) | $ | (7 | ) | $ | (200 | ) | |||
* | Includes adjustments for foreign currency translation. |
Legal
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
$562 million, respectively.
contingencies:
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
Additionally, Cephalon and Teva have reached a settlement with 48 state attorneys general, which was approved by the court on November 7, 2016. Certain other claimants, including2016, and on July 23, 2019, reached a settlement with the State of California, have given noticeswhich is pending court approval.
Consolidated Financial Statements
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
NotesFTC agreed to Consolidated Financial Statements
(Unaudited)
Followingamend certain provisions of the Modafinil Consent Decree and to restart its ten-year term.
A provision for this case was included in the financial statements.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
agreement.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
The lawsuits allege, among other things, that the settlement agreements between Takeda and the generic manufacturers (including Takeda’s December 2010 settlement agreement with Teva) violated the antitrust laws. The Courtcourt dismissed the end payer lawsuits against all defendants in September 2015. In October 2015, the end payers appealed that ruling, and on March 22, 2016, a stipulation was filed dismissing Teva and the other generic defendants from the appeal. On February 8, 2017, the Court of Appeals for the Second Circuit affirmed the dismissal in part and vacated and remanded the dismissal in part with respect to the claims against Takeda. The direct purchasers’ case had been stayed pending resolution of the appeal in the end payer matter and the direct purchasers amended their complaint for a second time afterfollowing the Second Circuit’s decision. Defendants had moved to dismiss the direct purchasers’ original complaint, and supplemental briefing on that motion based on the new allegations in the amended complaint was completed on June 29, 2017. The court has not yet issued its decision.remains pending. At the time of the settlement, annual sales of Actos
In June 2014, two groups of end payers sued AstraZeneca and Teva, as well as Ranbaxy and Dr. Reddy’s, in the Philadelphia Court of Common Pleas for violating the antitrust laws by entering into settlement agreements to resolve the esomeprazole (generic Nexium®) patent litigation (the “Philadelphia Esomeprazole Actions”). These end payers had opted out of a class action that was filed in the Massachusetts federal court in September 2012 and resulted in a jury verdict in December 2014 in favor of AstraZeneca and Ranbaxy (the “Massachusetts Action”). Prior to the jury verdict, Teva settled with all plaintiffs in the Massachusetts Action for $24 million. The allegations in the Philadelphia Esomeprazole Actions are nearly identical to those in the Massachusetts Action. The Philadelphia Esomeprazole Actions were stayed pending resolution of the Massachusetts Action, which was on appeal to the First Circuit with respect to the claims against thenon-settling defendants AstraZeneca and Ranbaxy. On November 21, 2016, the First Circuit affirmed the district court’s judgment in favor of AstraZeneca and Ranbaxy, and the plaintiffs’ petitions for rehearing and rehearing en banc were denied on January 10, 2017.
million, respectively.
SinceModafinil Consent Decree, as described above.
$550 million at the time other manufacturers first launched generic versions of Namenda IR
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
A response was submittedentities alleging competition law breaches in connection with the supply of 10mg and an oral hearing was held.20mg hydrocortisone tablets in the U.K. On December 18, 2017, the CMA issued a Statement of Draft Penalty Calculation. A response was submitted and an oral hearing was held. No final decision regarding infringement of competition law has yet been issued by the CMA.issued. On March 3, 2017, the CMA issued a second statement of objectionobjections in respect of certain additional allegations (relating to the same products and covering part of the same time period as forin the first statement of objections) against Actavis UK, Allergan and a number of other companies, which was later reissued to include certain Auden Mckenzie entities. A response was submittedOn February 28, 2019, the CMA issued a third statement of objections with allegations of additional infringements relating to the supply of 10mg and an oral hearing was held.20mg hydrocortisone tablets in the U.K against certain Auden Mckenzie entities and others. On January 9, 2017
In
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
On February 9, 2018, the judgment was fully satisfied and on February 16, 2018, the trial court discharged the appeal bond fully concluding this matter. In Utah, claims against Watson that were dismissed in their entirety by the trial court are now on appeal.
Beginningthe case alleges that Teva violated the False Claims Act by devising and engaging in promotional schemes that violate the Anti-Kickback Statute (“AKS”), resulting in false certifications of compliance with the AKS. Specifically, the relator alleges that Teva paid in-kind remuneration to physicians through reimbursement support and nursing services in order to increase the number of COPAXONE prescriptions. An amended complaint was filed on October 15, 2018. Teva and the DOJ moved to dismiss the case. These motions are pending.
United States. The cases in Canada are likely to be consolidated and are in their early stages.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
ThePennsylvania MDL. In the various complaints described above, the states seek a finding that the defendants’ actions violated federal antitrust law and state antitrust and consumer protection laws, as well as injunctive relief, disgorgement, damages on behalf of various state and governmental entities and consumers, civil penalties and costs. On August 3, 2017, the Judicial Panel on Multidistrict Litigation (“JPML”) transferred this action to the generic drug multidistrict litigation pending in federal court in Pennsylvania, which is discussed in greater detail below. On July 17, 2017, a new complaint was filed in the District Court of Connecticut on behalf of four additional states – Arkansas, Missouri, New Mexico and West Virginia, as well as the District of Columbia. These plaintiffs were not previously party to the State Attorney General action that commenced in December 2016. This complaint, which the JPML has alsoAll such complaints have been transferred to the generic drug multidistrict litigation discussed below, makes the same factual allegations and claims that are at issue in the earlier State Attorneys General complaint. On October 31, 2017 the attorneys general of 45 states plus Puerto Rico and theEastern District of Columbia filed a motion for leave to file an amended complaint in this action. The proposed amended complaint names Actavis as a defendant as well as Teva, and adds new allegations and claims to those appearing in the prior complaints. Defendants have opposed the motion.
Pennsylvania (“Pennsylvania MDL”).
information produced since January
For several years,
charges. Following the above resolution with the SEC and DOJ, Teva has had requests for documents and information from various Russian government entities. In December 2016, Teva was informed by Israeli authorities that they had initiated an investigation into the conduct that was the subject of the FCPA investigation and which resulted in the above-mentioned resolution with the SEC and DOJ. Onaddition, on January 14, 2018, Teva and the Government of Israel entered into an arrangement for the Contingent Cessation of Proceedings pursuant to the Israeli Securities Law with the Government of Israel that endsended the investigation of the Israeli government into suchthe conduct againstthat was subject to the CompanyFCPA investigation, and provides forprovided a payment of 75 million New Israeli Shekels (approximatelyapproximately $22 million).
million.
court.
On August 21, 2017, a putative class action securities lawsuit was filed by Elliot Grodkoactions in the U.S. District Court for the Eastern District of Pennsylvania purportedly on behalf of purchasers of Teva’s securities between November
Securities Litigation described above.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
the U.S. price-fixing investigations. Motions to approve securities class actions against Teva and certain of its current and former directors and officers were filed in Israel withbased on allegations regarding properof improper disclosure of the above-mentioned pricing investigation, as well as lack of disclosure of negative developments in the generic sector, andincluding price erosion of the prices ofwith respect to Teva’s products as were presented in the second quarter financial reporting of Teva.products. Other motions were filed in Israel to approve a derivative action, discovery and a class action related to alleged claims regarding Teva’s above-mentioned FCPA resolution with the SEC and DOJ.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
claim against Cephalon for breach of contract.
In November 2017,
In addition to these three segments, Teva has other activities, primarily the API manufacturing business and certain contract manufacturing services.
All the above changes were reflected through retroactive revision of prior period segment information.
Since 2013 and until December 31, 2017, Teva had two reportable segments: generic and specialty medicines. The generic medicines segment included Teva’s OTC and API businesses. Teva’s other activities included distribution activities, sales of medical devices and certain contract manufacturing operation (“CMO”) services.
Teva now operates its business and reports its financial results in three segments:
a) North America segment, which includes the United States and Canada.
b) Europe segment, which includes the European Union and certain other European countries.
c) Growth
(a) | North America segment, which includes the United States and Canada. |
(b) | Europe segment, which includes the European Union and certain other European countries. |
(c) | International Markets segment, which includes all countries other than those in the North America and Europe segments. |
an out-licensing platform offering a portfolio of products to other pharmaceutical companies through its affiliate Medis.
Three months ended June 30, 2019 | ||||||||||||
North America | Europe | International Markets | ||||||||||
(U.S. $ in millions) | ||||||||||||
Revenues | $ | 2,071 | $ | 1,183 | $ | 741 | ||||||
Gross profit | 1,067 | 674 | 312 | |||||||||
R&D expenses | 175 | 70 | 24 | |||||||||
S&M expenses | 269 | 216 | 119 | |||||||||
G&A expenses | 117 | 70 | 34 | |||||||||
Other (income) expense | 2 | 1 | (1 | ) | ||||||||
Segment profit | $ | 504 | $ | 316 | $ | 136 | ||||||
Three months ended June 30, 2018 | ||||||||||||
North America | Europe | International Markets | ||||||||||
(U.S. $ in millions) | ||||||||||||
Revenues | $ | 2,263 | $ | 1,328 | $ | 789 | ||||||
Gross profit | 1,179 | 727 | 328 | |||||||||
R&D expenses | 182 | 73 | 25 | |||||||||
S&M expenses | 272 | 233 | 130 | |||||||||
G&A expenses | 103 | 78 | 37 | |||||||||
Other (income) expense | (100 | ) | (3 | ) | (3 | ) | ||||||
Segment profit | $ | 722 | $ | 346 | $ | 139 | ||||||
Six months ended June 30, 2 019 | ||||||||||||
North America | Europe | International Markets | ||||||||||
(U.S. $ in millions) | ||||||||||||
Revenues | $ | 4,118 | $ | 2,448 | $ | 1,409 | ||||||
Gross profit | 2,107 | 1,404 | 582 | |||||||||
R&D expenses | 340 | 136 | 46 | |||||||||
S&M expenses | 537 | 431 | 234 | |||||||||
G&A expenses | 230 | 119 | 70 | |||||||||
Other (income) expense | (2 | ) | (1 | ) | (1 | ) | ||||||
Segment profit | $ | 1,001 | $ | 719 | $ | 233 | ||||||
Six months ended June 30, 2018 | ||||||||||||
North America | Europe | International Markets | ||||||||||
(U.S. $ in millions) | ||||||||||||
Revenues | $ | 4,794 | $ | 2,770 | $ | 1,539 | ||||||
Gross profit | 2,582 | 1,519 | 641 | |||||||||
R&D expenses | 370 | 146 | 49 | |||||||||
S&M expenses | 548 | 483 | 264 | |||||||||
G&A expenses | 229 | 169 | 78 | |||||||||
Other (income) expense | (202 | ) | (2 | ) | (11 | ) | ||||||
Segment profit | $ | 1,637 | $ | 723 | $ | 261 | ||||||
a. Segment information:
North America | Europe | Growth Markets | ||||||||||||||||||||||
Three months ended March 31, | Three months ended March 31, | Three months ended March 31, | ||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | (U.S. $ in millions) | ||||||||||||||||||||||
Revenues | $ | 2,531 | $ | 3,240 | $ | 1,442 | $ | 1,341 | $ | 750 | $ | 718 | ||||||||||||
Gross profit | 1,432 | 2,080 | 797 | 734 | 313 | 292 | ||||||||||||||||||
R&D expenses | 188 | 267 | 73 | 106 | 24 | 47 | ||||||||||||||||||
S&M expenses | 305 | 441 | 255 | 279 | 134 | 158 | ||||||||||||||||||
G&A expenses | 126 | 139 | 91 | 79 | 41 | 48 | ||||||||||||||||||
Other income | (102 | ) | (73 | ) | 1 | 2 | (8 | ) | (1 | ) | ||||||||||||||
|
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|
|
| |||||||||||||
Segment profit | $ | 915 | $ | 1,306 | $ | 377 | $ | 268 | $ | 122 | $ | 40 | ||||||||||||
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|
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
(U.S.$ in millions) | ||||||||
North America profit | $ | 915 | $ | 1,306 | ||||
Europe profit | 377 | 268 | ||||||
Growth Markets profit | 122 | 40 | ||||||
|
|
|
| |||||
Total segment profit | 1,414 | 1,614 | ||||||
Profit of other activities | 21 | 7 | ||||||
|
|
|
| |||||
1,435 | 1,621 | |||||||
Amounts not allocated to segments: | ||||||||
Amortization | 310 | 320 | ||||||
Other asset impairments, restructuring and other items | 707 | 240 | ||||||
Goodwill impairment | 180 | — | ||||||
Gain on divestitures, net of divestitures related costs | (93 | ) | — | |||||
Inventorystep-up | — | 64 | ||||||
Other R&D expenses | 22 | — | ||||||
Costs related to regulatory actions taken in facilities | 1 | 34 | ||||||
Legal settlements and loss contingencies | (1,278 | ) | 20 | |||||
Other unallocated amounts | 61 | 48 | ||||||
|
|
|
| |||||
Consolidated operating income | 1,525 | 895 | ||||||
|
|
|
| |||||
Financial expenses, net | 271 | 207 | ||||||
|
|
|
| |||||
Consolidated income before income taxes | $ | 1,254 | $ | 688 | ||||
|
|
|
|
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | |||||||||||||||
North America profit | $ | 504 | $ | 722 | $ | 1,001 | $ | 1,637 | ||||||||
Europe profit | 316 | 346 | 719 | 723 | ||||||||||||
International Markets profit | 136 | 139 | 233 | 261 | ||||||||||||
Total segment profit | 956 | 1,207 | 1,954 | 2,621 | ||||||||||||
Profit of other activities | 55 | 31 | 76 | 52 | ||||||||||||
1,011 | 1,238 | 2,029 | 2,673 | |||||||||||||
Amounts not allocated to segments: | ||||||||||||||||
Amortization | 285 | 302 | 568 | 612 | ||||||||||||
Other assets impairments, restructuring and other items | 101 | 194 | 103 | 695 | ||||||||||||
Goodwill impairment | — | 120 | — | 300 | ||||||||||||
Intangible asset impairments | 561 | 521 | 1,030 | 727 | ||||||||||||
(Gain) loss on divestitures, net of divestitures related costs | (9 | ) | 10 | (9 | ) | (83 | ) | |||||||||
Other R&D expenses | § | — | § | 22 | ||||||||||||
Costs related to regulatory actions taken in facilities | 12 | 4 | 16 | 5 | ||||||||||||
Legal settlements and loss contingencies | 646 | 20 | 703 | (1,258 | ) | |||||||||||
Other unallocated amounts | 59 | 81 | 129 | 142 | ||||||||||||
Consolidated operating income (loss) | (644 | ) | (14 | ) | (510 | ) | 1,511 | |||||||||
Financial expenses, net | 206 | 236 | 425 | 507 | ||||||||||||
Consolidated income (loss) before income taxes | $ | (850 | ) | $ | (250 | ) | $ | (934 | ) | $ | 1,004 | |||||
§ | Represents an amount less than $1 million. |
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
(U.S.$ in millions) | ||||||||
North America segment | ||||||||
Generic products | $ | 1,088 | $ | 1,415 | ||||
COPAXONE | 476 | 797 | ||||||
BENDEKA / TREANDA | 181 | 156 | ||||||
ProAir | 130 | 121 | ||||||
QVAR | 107 | 84 | ||||||
AUSTEDO | 30 | — | ||||||
Distribution | 331 | 295 | ||||||
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
(U.S.$ in millions) | ||||||||
Europe segment | ||||||||
Generic products | $ | 997 | $ | 850 | ||||
COPAXONE | 153 | 152 | ||||||
Respiratory products | 113 | 84 | ||||||
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
(U.S.$ in millions) | ||||||||
Growth Markets segment |
| |||||||
Generic products | $ | 488 | $ | 486 | ||||
COPAXONE | 16 | 21 | ||||||
Distribution | 153 | 125 |
2018:
Three months ended June 30, | |||||||||
2019 | 2018 | ||||||||
(U.S. $ in millions) | |||||||||
North America | |||||||||
Generic products | $ | 946 | $ | 947 | |||||
COPAXONE | 274 | 464 | |||||||
TREANDA/BENDEKA | 115 | 160 | |||||||
ProAir* | 65 | 115 | |||||||
QVAR | 60 | 30 | |||||||
AJOVY | 23 | — | |||||||
AUSTEDO | 96 | 44 | |||||||
Anda | 351 | 320 | |||||||
Other | 141 | 183 | |||||||
Total | $ | 2,071 | $ | 2,263 |
* | Does not include sales of ProAir authorized generic, which are included under generics. |
Six months ended | ||||||||
June 30, | ||||||||
2019 | 2018 | |||||||
(U.S. $ in millions) | ||||||||
North America | ||||||||
Generic prod uct s | $ | 1,913 | $ | 2,035 | ||||
COPAXONE | 482 | 940 | ||||||
TREANDA/BENDEKA | 229 | 341 | ||||||
ProAir* | 123 | 245 | ||||||
QVAR | 124 | 137 | ||||||
AJOVY | 43 | — | ||||||
AUSTEDO | 171 | 74 | ||||||
Anda | 729 | 651 | ||||||
Other | 305 | 372 | ||||||
Total | $ | 4,118 | $ | 4,794 |
* | Does not include sales of ProAir authorized generic, which are included under generics. |
Three months ended June 30, | ||||||||
2019 | 2018 | |||||||
(U.S. $ in millions) | ||||||||
Europe | ||||||||
Generic products | $ | 844 | $ | 907 | ||||
COPAXONE | 107 | 140 | ||||||
Respiratory products | 89 | 106 | ||||||
Other | 143 | 175 | ||||||
Total | $ | 1,183 | $ | 1,328 |
Six months ended June 30, | |||||||||
2019 | 2018 | ||||||||
(U.S. $ in millions) | |||||||||
Europe | |||||||||
Generic products | $ | 1,763 | $ | 1,904 | |||||
COPAXONE | 221 | 293 | |||||||
Respiratory products | 181 | 219 | |||||||
Other | 283 | 354 | |||||||
Total | $ | 2,448 | $ | 2,770 |
Three months ended June 30, | ||||||||
2019 | 2018 | |||||||
(U.S. $ in millions) | ||||||||
International markets | ||||||||
Generic products | $ | 489 | $ | 537 | ||||
COPAXONE | 13 | 22 | ||||||
Distribution | 164 | 154 | ||||||
Other | 75 | 76 | ||||||
Total | $ | 741 | $ | 789 |
Six months ended June 30, | |||||||||
2019 | 2018 | ||||||||
(U.S. $ in millions) | |||||||||
International markets | |||||||||
Generic products | $ | 930 | $ | 1,025 | |||||
COPAXONE | 27 | 38 | |||||||
Distribution | 315 | 307 | |||||||
Other | 137 | 168 | |||||||
Total | $ | 1,409 | $ | 1,539 |
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
(U.S. $ in millions) | ||||||||
Gain on divestitures, net of divestitures related costs(1) | $ | 93 | — | |||||
Section 8 and similar payments(2) | 99 | 75 | ||||||
Gain on sale of assets | 8 | — | ||||||
Other, net | 3 | (3 | ) | |||||
|
|
|
| |||||
Total other income | $ | 203 | $ | 72 | ||||
|
|
|
|
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(U.S. $ in millions) | (U.S. $ in millions) | |||||||||||||||
Gain (loss) on divestitures, net of divestitures related costs (1) | $ | 9 | (10 | ) | $ | 9 | 83 | |||||||||
Section 8 and similar payments (2) | — | 95 | — | 194 | ||||||||||||
Gain (loss) on sale of assets | (5 | ) | 1 | (4 | ) | 9 | ||||||||||
Other, net | 5 | 10 | 11 | 13 | ||||||||||||
Total other income | $ | 9 | $ | 96 | $ | 15 | $ | 299 |
(1) |
(2) | Section 8 of the Patented Medicines (Notice of Compliance) |
taxes:
The Company recognizedresult of the income tax effects of theU.S. Tax Cuts and Jobs Act (“TCJA”) in its audited consolidated financial statements included in the Company’s Annual Report on Form10-K for the year ended December 31, 2017, in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the TCJA was enacted into law. The guidance also provides for a measurement period of up to one year from the enactment date for the Company to complete the accounting for the U.S. tax law changes. As such, the Company’s financial results for the year ended December 31, 2017, reflected a $112 million provisional estimate for itsone-time deemed repatriation tax liability. No subsequent adjustments have been made to the amounts recorded as of December 31, 2017, which continue to represent a provisional estimate of the impact of the TCJA. The estimated impact of the TCJA is based on certain assumptions and the Company’s current interpretation, and may change as the Company receives additional clarification and implementation guidance and as the interpretation of the TCJA evolves over time.
Act.
more of the remaining economic life of the underlying asset is a major part of the remaining economic life of that underlying asset; and (ii) generally 90% or more of the fair value of the underlying asset comprises substantially all of the fair value of the underlying asset.
Three months ended June 30, | Six months ended June 30, | |||||||
2019 | ||||||||
(U.S. $ in millions) | ||||||||
Operating lease cost: | ||||||||
Fixed payments and variable payments that depend on an index or rate | $ | 36 | $ | 78 | ||||
Variable lease payments not included in the lease liability | 2 | 4 | ||||||
Short-term lease cost | 1 | 3 | ||||||
Total operating lease cost | $ | 39 | $ | 85 | ||||
Six months ended | ||||
June 30, 2019 | ||||
(U.S. $ in millions) | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows from operating leases | $ | 79 | ||
Right-of-use assets obtained in exchange for lease obligations(non- cash): | ||||
Operating leases | $ | 46 |
June 30, 2019 | ||||
(U.S. $ in millions) | ||||
Operating leases: | ||||
Operating lease ROU assets | $ | 500 | ||
Other current liabilities | 120 | |||
Operating lease liabilities | 426 | |||
Total operating lease liabilities | $ | 546 | ||
June 30, 2019 | ||||
Weighted average remaining lease term | ||||
Operating leases | 7.7 years | |||
Weighted average discount rate | ||||
Operating leases | 5.9 | % |
June 30, 2019 | ||||
(U.S. $ in millions) | ||||
2019 (excluding the six months ended June 30, 2019) | $ | 87 | ||
2020 | 124 | |||
2021 | 100 | |||
2022 | 78 | |||
2023 | 58 | |||
2024 and thereafter | 266 | |||
Total operating lease payments | $ | 713 | ||
Less: imputed interest | 167 | |||
Present value of lease liabilities | $ | 546 | ||
December 31, 2018 | ||||
(U.S. $ in millions) | ||||
2019 | $ | 193 | ||
2020 | 154 | |||
2021 | 118 | |||
2022 | 91 | |||
2023 | 66 | |||
2024 and thereafter | 283 | |||
Total lease payments | $ | 905 | ||
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
In November 2017, we announced a new organizational structure and leadership changes to enable strategic alignment across our portfolios, regions and functions.
The data presented in this report for prior periods have been conformed
Highlights
Significant highlights of the first quarter of 20182019 included:
, as well as declines in revenues from TREANDA ® /BENDEKA® , certain other specialty products in the United States, our Europe segment and Japan, partially offset by higher revenues from AUSTEDO® , AJOVY® and QVAR® in the United States.Our North America |
Transactions
On January 31, 2018, we completed the sale of a portfolio of products to CVC Capital Partners Fund VI for $703 million in cash. The portfolio of products, which is marketed and sold outside of the United States, includes the women’s health products OVALEAP®, ZOELY®, SEASONIQUE®, COLPOTROPHINE® and other specialty products such as ACTONEL®.
In April 2018, we signed a separation agreement with P&G to terminate the PGT Healthcare partnership that the two companies established in 2011 to market OTC medicines. We will continue to maintain our OTC business on an independent basis. The separation is planned to become effective July 1, 2018, subject to receipt of applicable regulatory approvals. As part of the separation, we will transfer shares we hold in New Chapter Inc. and ownership rights in an OTC plant located in India to P&G. We will continue to provide certain services to P&G after the separation for a transition period.
June 30, 2018
Percentage of Net Revenues | Percentage Change 2018 - 2017 | |||||||||||
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | |||||||||||
% | % | % | ||||||||||
Net revenues | 100.0 | 100.0 | (10 | ) | ||||||||
Gross profit | 46.4 | 50.2 | (17 | ) | ||||||||
Research and development expenses | 6.3 | 7.6 | (27 | ) | ||||||||
Selling and marketing expenses | 15.2 | 17.0 | (20 | ) | ||||||||
General and administrative expenses | 6.5 | 6.5 | (10 | ) | ||||||||
Other asset impairments, restructuring and other items | 14.0 | 4.2 | 195 | |||||||||
Goodwill impairment | 3.6 | — | § | |||||||||
Legal settlements and loss contingencies | (25.2 | ) | 0.4 | — | ||||||||
Other income | (4.0 | ) | (1.3 | ) | 182 | |||||||
Operating income | 30.0 | 15.8 | 70 | |||||||||
Financial expenses, net | 5.4 | 3.7 | 31 | |||||||||
Income before income taxes | 24.6 | 12.1 | 82 | |||||||||
Income taxes (benefit) | 0.9 | 1.0 | (15 | ) | ||||||||
Share in (profits) losses of associated companies, net | 1.4 | (0.1 | ) | — | ||||||||
Net income attributable tonon-controlling interests | 0.3 | (0.1 | ) | — | ||||||||
Net income attributable to Teva | 22.0 | 11.3 | 74 | |||||||||
Dividends on preferred shares | 1.3 | 1.2 | § | |||||||||
Net income attributable to ordinary shareholders | 20.7 | 10.1 | 82 |
Percentage of Net Revenues Three Months Ended June 30, | Percentage Change | |||||||||||
2019 | 2018 | 2019 - 2018 | ||||||||||
% | % | % | ||||||||||
Net revenues | 100 | 100 | (8 | ) | ||||||||
Gross profit | 44 | 43 | (7 | ) | ||||||||
Research and development expenses | 6 | 6 | (5 | ) | ||||||||
Selling and marketing expenses | 15 | 15 | (2 | ) | ||||||||
General and administrative expenses | 7 | 7 | (6 | ) | ||||||||
Intangible assets impairment | 13 | 11 | 8 | |||||||||
Goodwill impairment | — | 3 | (100 | ) | ||||||||
Other assets impairments, restructuring and other items | 2 | 4 | (48 | ) | ||||||||
Legal settlements and loss contingencies | 15 | § | — | |||||||||
Other income | § | (2 | ) | — | ||||||||
Operating income | (15 | ) | § | — | ||||||||
Financial expenses, net | 5 | 5 | (13 | ) | ||||||||
Income (loss) before income taxes | (20 | ) | (5 | ) | 240 | |||||||
Income taxes | (4 | ) | (2 | ) | 135 | |||||||
Share in losses (income) of associated companies, net | § | § | — | |||||||||
Net income attributable to non-controlling interests | § | § | — | |||||||||
Net income (loss) attributable to Teva | (16 | ) | (4 | ) | 292 | |||||||
Dividends on preferred shares | — | 1 | (100 | ) | ||||||||
Net income (loss) attributable to ordinary shareholders | (16 | ) | (5 | ) | 186 |
§ | Represents an amount less than 0.5%. |
Three months ended March 31, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
(U.S.$ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 2,531 | 100 | % | $ | 3,240 | 100 | % | ||||||||
Gross profit | 1,432 | 57 | % | 2,080 | 64 | % | ||||||||||
R&D expenses | 188 | 8 | % | 267 | 8 | % | ||||||||||
S&M expenses | 305 | 12 | % | 441 | 14 | % | ||||||||||
G&A expenses | 126 | 5 | % | 139 | 4 | % | ||||||||||
Other income | (102 | ) | (4 | %) | (73 | ) | (2 | %) | ||||||||
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| |||||||
Segment profit* | $ | 915 | 36 | % | $ | 1,306 | 40 | % | ||||||||
|
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Three months ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 2,071 | 100.0 | % | $ | 2,263 | 100.0 | % | ||||||||
Gross profit | 1,067 | 51.5 | % | 1,179 | 52.1 | % | ||||||||||
R&D expenses | 175 | 8.5 | % | 182 | 8.0 | % | ||||||||||
S&M expenses | 269 | 13.0 | % | 272 | 12.0 | % | ||||||||||
G&A expenses | 117 | 5.6 | % | 103 | 4.6 | % | ||||||||||
Other (income) expense | 2 | § | (100 | ) | (4.4 | %) | ||||||||||
Segment profit* | $ | 504 | 24.3 | % | $ | 722 | 31.9 | % | ||||||||
* | Segment profit does not include amortization and certain other items. |
§ Represents an amount less than 0.5%.
Revenues in the United States, our largest market, were $2.4 billion in the first quarter of 2018, a decrease of $719 million, or 23%, compared to the first quarter of 2017.
AJOVY.
Three months ended March 31, | Percentage Change | |||||||||||
2018 | 2017 | 2017-2018 | ||||||||||
(U.S.$ in millions) | ||||||||||||
Generic products | $ | 1,088 | $ | 1,415 | (23 | %) | ||||||
COPAXONE | 476 | 797 | (40 | %) | ||||||||
BENDEKA / TREANDA | 181 | 156 | 16 | % | ||||||||
ProAir | 130 | 121 | 7 | % | ||||||||
QVAR | 107 | 84 | 27 | % | ||||||||
AUSTEDO | 30 | — | N/A | |||||||||
Distribution | 331 | 295 | 12 | % |
2018:
Three months ended June 30, | Percentage Change | |||||||||||
2019 | 2018 | 2019-2018 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 946 | $ | 947 | § | |||||||
COPAXONE | 274 | 464 | (41 | %) | ||||||||
TREANDA/BENDEKA | 115 | 160 | (28 | %) | ||||||||
ProAir* | 65 | 115 | (44 | %) | ||||||||
QVAR | 60 | 30 | 103 | % | ||||||||
AJOVY | 23 | — | NA | |||||||||
AUSTEDO | 96 | 44 | 117 | % | ||||||||
Anda | 351 | 320 | 10 | % | ||||||||
Other | 141 | 183 | (23 | %) | ||||||||
Total | $ | 2,071 | $ | 2,263 | (8 | %) | ||||||
* | Does not include sales of ProAir authorized generic, which are included under generics. |
§ | Represents an amount less than 0.5%. |
erosion in our U.S. generics business.
2019.
2018.
The patent was upheld by the Opposition Division of the European Patent Office in April 2019.
the June 2018 launch of a ready-to-dilute bendamustine hydrochloride by Eagle Pharmaceuticals, Inc. (“Eagle”). In July 2018, Eagle, prevailed in its suit in the U.S. district court against the FDA to obtain seven years of orphan drug exclusivity in the United States for BENDEKA. The FDA has appealed the district court’s decision, but barring a reversal by the appellate court, drug applications referencing BENDEKA, TREANDA or any other bendamustine product will not be approved by the FDA until the orphan drug exclusivity expires 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 increasing the royalty rate. In addition, Eagle agreed to assume a portion of BENDEKA-related patent litigation expenses.
2018. In June 2014, we settled a patent challenge to ProAir HFA with Perrigo Pharmaceuticals (“Perrigo”), under which Perrigo is now permitted to launch its generic product. In November 2017, we settled another patent challenge to ProAir HFA with Lupin Pharmaceuticals, Inc. (“Lupin”), et al. permitting Lupin to launch its generic product on September 23, 2019, or earlier under certain circumstances. To date, no generic competition has been launched.
AUSTEDO2018.
Distribution
States.
Product Name | Brand Name | Launch | Total Annual U.S. Branded Sales at Time of Launch (U.S.$ in millions (IQVIA))* | |||||
Estradiol Vaginal Cream, USP, 0.01% | Estrace® | January | $ | 304 | ||||
Methylphenidate Hydrochloride Extended-Release Capsules (LA), CII 20 mg, 30 mg & 40 mg | Ritalin LA® ER | January | $ | 97 | ||||
Busulfan Injection 6 mg/mL, 60 mg | Busulfex® | January | $ | 86 | ||||
Trientine Hydrochloride Capsules, USP 250 mg | Syprine® | February | $ | 147 | ||||
Hydrocortisone Butyrate Cream USP, 0.1% (Lipophilic) | Locoid Lipocream® | February | $ | 6 | ||||
Minocycline Hydrochloride Extended-Release Tablets, USP 65 mg & 115 mg | Solodyn® ER | February | $ | 148 | ||||
Lansoprazole Delayed-Release Orally Disintegrating Tablets 15 mg & 30 mg | Prevacid® SoluTab™ DR ODT | March | $ | 184 | ||||
Tiagabine Hydrochloride Tablets 12 mg & 16 mg ** | Gabitril® | March | $ | 9 | ||||
Palonosetron Hydrochloride Injection 0.05 mg/mL, 0.25 mg | Aloxi® | March | $ | 452 | ||||
Mesalamine Delayed-Release Tablets, USP 1.2 g | Lialda® DR | March | $ | 1,128 |
Product Name | Brand Name | Launch Date | Total Annual U.S. Branded Sales at Time of Launch (U.S. $ in millions (IQVIA)) * | |||||||||
Fluoxetine tablets, USP 20 mg | — | April | $ | 56 | ||||||||
Testosterone gel, metered 1.62% CIII | AndroGel | ® | April | $ | 755 | |||||||
1.62 [CIII] | % | |||||||||||
Solifenacin succinate tablets, 5 mg & 10 mg | Vesicare | ® | April | $ | 946 | |||||||
Ambrisentan tablets, 5 mg & 10 mg | Letairis | ® | May | $ | 254 | |||||||
Erlotinib tablets, 100 mg & 150 mg | Tarceva | ® | May | $ | 188 | |||||||
Mesalamine delayed-release capsules, 400 mg | Delzicol | ® | May | $ | 130 | |||||||
Ranolazine extended-release tablets, 500 mg & 1000 mg | Ranexa | ® | May | $ | 950 | |||||||
Aspirin and extended-release dipyridamole capsules, 25 mg/200 mg ** | Aggrenox | ® | June | $ | 168 | |||||||
Desmopressin acetate injection, USP, 4 mcg/mL** | DDAVP | ® | June | $ | 58 | |||||||
Albendazole tablets, USP, 200 mg | Albenza | ® | June | $ | 85 | |||||||
Bosentan tablets, 62.5 mg & 125 mg | Tracleer | ® | June | $ | 84 | |||||||
Doxylamine succinate and pyridoxine hydrochloride delayed-release tablets, 10 mg/10 mg | Diclegis | ® | June | $ | 151 | |||||||
Penicillamine capsules, USP, 250 mg | Cuprimine | ® | June | $ | 130 | |||||||
1% Sodium hyaluronate injection | *** | June | $ | — |
* | The figures presented are for the twelve months ended in the calendar quarter immediately prior to our launch orre-launch. |
** |
*** | Approved via 515(d)(1)(B)(ii) regulatory pathway for medical devices; not equivalent to a |
Generic Name Eltrombopag tablets, 12.5 mg, 25 mg & 75 mg Esomeprazole magnesium delayed-release capsules, 20 mg Ingenol mebutate gel, 0.05% Nicotine polacrilex mini mint lozenges, 2 mg & 4 mg Perampanel tablets, 2 mg, 4 mg, 6 mg, 8 mg & 10 mg Rotigotine transdermal system, 1 mg/24 hr, 2 mg/24 hr, 3 mg/24 hr, 4 mg/24 hr, 6 mg/24 hr & 8 mg/24 hr Ticagrelor tablets, 60 mg & 90 mg Brand Name Total U.S. Annual Branded
Market (U.S. $ in millions (IQVIA))* Promacta® $ 200 Nexium® DR $ 85 Picato® $ 17 Nicorette® $ 68 Fycompa® $ 68 Neupro® $ 143 Brilinta® $ 712
Generic Name | Brand Name | Total U.S. Annual Branded Market (U.S. $ in millions (IQVIA))* | ||||||
Icatibant injection, 30 mg/3 mL | Firazyr | ® | $ | 318 | ||||
Sorafenib tablets, 200 mg | Nexavar | ® | $ | 55 |
* | For the twelve months ended in the calendar quarter immediately prior to the receipt of tentative approval. |
In the first quarter
| ||||||||||
Product | Potential Indication(s) | Route of Administration | Development Phase (date entered phase 3) | |||||||
Comments | ||||||||||
CNS, Neurology and | ||||||||||
| ||||||||||
Neuropsychiatry | ||||||||||
AUSTEDO (deutetrabenazine) | Tourette syndrome | Oral | 3 (December 2017) | Teva and Nuvelution entered into a partnership agreement on September 19, 2017 to |
Dyskinesia in cerebral palsy | Oral | 3 (January 2019) | ||||||||
TV-46000 (risperidone LAI) | Schizophrenia | LAI | 3 (April 2018) | |||||||
Migraine and Pain | ||||||||||
fremanezumab (anti CGRP) | Post traumatic headache | Subcutaneous | 2 | |||||||
Fasinumab | Osteoarthritis pain | Subcutaneous | 3 (March 2016) | Developed in collaboration with Regeneron Pharmaceuticals, Inc. (“Regeneron”). In August 2018, Regeneron Fasinumab is protected by patents expiring in 2028 and will also be protected by regulatory exclusivity of 12 years from marketing approval in the United States and 10 years from marketing approval in Europe. | ||||||
Chronic lower back pain | Subcutaneous | 3 (December 2017) | ||||||||
Respiratory | ||||||||||
CINQAIR/CINQAERO | Severe asthma with eosinophilia | Subcutaneous | 3 (August 2015) | In January 2018, we announced that the | ||||||
ProAir e-RespiClick™ | Bronchospasm and | Oral inhalation | Approved by FDA (December 2018) | |||||||
AirDuo ® DigihalerTM | Treatment of | Oral inhalation | Approved by FDA (July 2019) | |||||||
Oncology | ||||||||||
Truxima (formerly CT-P10) | (biosimilar to Rituxan ® US) | Approved by FDA (November 2018) Approved in Canada (April 2019) | ||||||||
Herzuma (formerly CT-P06) | (biosimilar to Herceptin ® US) | Approved by FDA (December 2018) |
AJOVY.
products.
2018.
plan, partially offset by increased expenses related to AJOVY.
(Expense)
litigation had previously prevented a product’s sales.
financial processes. ERP implementation is a complex and time-consuming project. As with any new information system we implement, this application, along with the internal controls over financial reporting included in this process, has required testing for effectiveness and management has made appropriate efforts in this regard. In connection with this ERP implementation, we are updating our internal controls over financial reporting, as necessary, to accommodate modifications to our business processes and accounting procedures. We do not expect that the ERP implementation will have an adverse effect on our business. However, if the design or implementation of our new ERP system is deficient, it could adversely affect our operations, such as manufacturing or distribution, and/or the effectiveness of our internal controls.
Three months ended March 31, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
(U.S.$ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 1,442 | 100 | % | $ | 1,341 | 100 | % | ||||||||
Gross profit | 797 | 55 | % | 734 | 55 | % | ||||||||||
R&D expenses | 73 | 5 | % | 106 | 8 | % | ||||||||||
S&M expenses | 255 | 18 | % | 279 | 21 | % | ||||||||||
G&A expenses | 91 | 6 | % | 79 | 6 | % | ||||||||||
Other expenses | 1 | § | 2 | § | ||||||||||||
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|
|
|
|
| |||||||
Segment profit* | $ | 377 | 26 | % | 268 | 20 | % | |||||||||
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Three months ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 1,183 | 100.0 | % | $ | 1,328 | 100.0 | % | ||||||||
Gross profit | 674 | 56.9 | % | 727 | 54.7 | % | ||||||||||
R&D expenses | 70 | 5.9 | % | 73 | 5.5 | % | ||||||||||
S&M expenses | 216 | 18.3 | % | 233 | 17.5 | % | ||||||||||
G&A expenses | 70 | 5.9 | % | 78 | 5.9 | % | ||||||||||
Other (income) expense | 1 | § | (3 | ) | § | |||||||||||
Segment profit* | $ | 316 | 26.7 | % | $ | 346 | 26.1 | % | ||||||||
* | Segment profit does not include amortization and certain other items. |
§ | Represents an amount less than 0.5%. |
Generic products COPAXONE Respiratory products 2018: new generic product launches. competing glatiramer acetate products. 2018. United Kingdom.firstsecond quarter of 20182019 were $1.4 billion, an increase$1,183 million, a decrease of 8%11% or $101$145 million, compared to the firstsecond quarter of 2017.2018. In local currency terms, revenues decreased by 6%5%, mainly due to a decline in COPAXONE revenues due to the lossentry of revenues from the closure of our distribution business in Hungarycompeting glatiramer acetate products and the saletermination of our women’s health business,the PGT joint venture, partially offset by new generic product launches.March 31, 2018June 30, 2019 and 2017: Three months ended Percentage March 31, Change 2018 2017 2017-2018 (U.S.$ in millions) $ 997 $ 850 17 % 153 152 1 % 113 84 35 % $ $ %) %) %) %) $ $ %) firstsecond quarter of 2018,2019, including OTC products, increaseddecreased by 17%7% to $997$844 million, compared to the firstsecond quarter of 2017.2018. In local currency terms, revenues increaseddecreased by 2%,1% compared to the second quarter of 2018, mainly due to new product launchesthe loss of revenues from the termination of the PGT joint venture and volume growthdecline due to specific market conditions in OTC,various European Union countries, partially offset by price reductions.firstsecond quarter of 2018 increased2019 decreased by 1%24% to $153$107 million, compared to the firstsecond quarter of 2017.2018. In local currency terms, revenues decreased by 13%19%, mainly due to price reductions resulting from the entry of generic competition.24%27% of global COPAXONE revenues in the firstsecond quarter of 2018,2019, compared to 16%22% in the firstsecond quarter of 2017.onabout COPAXONE, see “—North America Revenues—Revenues by Major Product” above.firstsecond quarter of 2018 increased2019 decreased by 35%16% to $113$89 million, compared to the firstsecond quarter of 2017.2018. In local currency terms, revenues increaseddecreased by 18%11%, mainly due to lower sales in the launch of BRALTUS® in 2017.March 31, 2018,June 30, 2019, our generic products pipeline in Europe included 234384 generic approvals in Europe relating to 4649 compounds in 95101 formulations, and approximately 1,5031,326 marketing authorization applications pending approval in 37 European countries, relating to 183144 compounds in 364296 formulations including one application pending with the EMA for one strength in 30 countries.
new generic product launches.
the PGT joint venture and network optimization.
2018.
plan.
The profit
Growth
Three months ended March 31, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
(U.S.$ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 750 | 100 | % | $ | 718 | 100 | % | ||||||||
Gross profit | 313 | 42 | % | 292 | 41 | % | ||||||||||
R&D expenses | 24 | 4 | % | 47 | 7 | % | ||||||||||
S&M expenses | 134 | 18 | % | 158 | 22 | % | ||||||||||
G&A expenses | 41 | 5 | % | 48 | 7 | % | ||||||||||
Other income | (8 | ) | (1 | %) | (1 | ) | § | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||
Segment profit* | $ | 122 | 16 | % | $ | 40 | 6 | % | ||||||||
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 741 | 100.0 | % | $ | 789 | 100.0 | % | ||||||||
Gross profit | 312 | 42.1 | % | 328 | 41.5 | % | ||||||||||
R&D expenses | 24 | 3.2 | % | 25 | 3.2 | % | ||||||||||
S&M expenses | 119 | 16.1 | % | 130 | 16.4 | % | ||||||||||
G&A expenses | 34 | 4.7 | % | 37 | 4.7 | % | ||||||||||
Other (income) expense | (1 | ) | § | (3 | ) | § | ||||||||||
Segment profit* | $ | 136 | 18.3 | % | $ | 139 | 17.6 | % | ||||||||
* | Segment profit does not include amortization and certain other items. |
§ | Represents an amount less than 0.5%. |
GrowthGrowthInternational Markets segment includes all countries other than those in our North America and Europe segments. Our key growthinternational markets are Israel, Japan Russia and Israel.Russia. The countries in this category range from highly regulated, pure generic markets, such as Israel, to hybrid markets, such as Japan, to branded generics oriented markets, such as Russia and certain Commonwealth of Independent States (CIS), Latin American and Asia Pacific markets.
Russia.
Three months ended | Percentage | |||||||||||
March 31, | Change | |||||||||||
2018 | 2017 | 2017-2018 | ||||||||||
(U.S.$ in millions) | ||||||||||||
Generic products | $ | 488 | $ | 486 | § | |||||||
COPAXONE | 16 | 21 | (24 | %) | ||||||||
Distribution | 153 | 125 | 22 | % |
2018:
Three months ended June 30, | Percentage Change | |||||||||||
2019 | 2018 | 2018-2019 | ||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 489 | $ | 537 | (9 | %) | ||||||
COPAXONE | 13 | 22 | (40 | %) | ||||||||
Distribution | 164 | 154 | 6 | % | ||||||||
Other | 75 | 76 | (1 | %) | ||||||||
Total | $ | 741 | $ | 789 | (6 | %) | ||||||
Japan resulting from generic competition to off-patented products, partially offset by higher sales in Russia.
Growth
Gross profit margin for our Growth Markets segment in the first quarter of 2018 increased to 41.7%, from 40.7% in the first quarter of 2017. This increase was mainly due to higher gross profit in Japan (3.5 points), partially offset by the deconsolidation of our subsidiaries in Venezuela (1.3 points) and currency fluctuations in Argentina (0.8 points).
GrowthIsrael.
2018.
Growth
Growth
Growth
The profit
During the fourth quarter
$125 million compared to the second quarter of 2018.
Profit.”
2018.
COPAXONE revenues due to generic competition.
2018.
reductions.
2018.
2018.
goodwill associated with our Rimsa reporting unit (now included in our International Markets reporting unit). See note 7 to our consolidated financial statements.
Impairments
Since announcing ourfunctions as part of the restructuring plan announced in 2017.
Goodwill Impairment
In the first quarter of 2018, we recorded a goodwill impairment of $180 million. This impairment was driven by the change in fair value, including the discount rate and the change in allocated net assets to the Rimsa reporting unit. See note 7 to our consolidated financial statements.
statements.
Other income2018.
Operating Income
Operating income was $1.5 billion in the first quarter of 2018, compared to $895 million in the first quarter of 2017.
2018. The increase in operating income was mainly due to income from legal settlements and loss contingencies higher operating incomeexpenses, lower profit in our EuropeNorth America segment and Growth Markets segments and net gain fromhigher intangible asset impairments, partially offset by goodwill impairment in the sale of our women’s health business during the firstsecond quarter of 2018 partially offset by higherwhich did not recur in the second quarter of 2019 and lower other assetassets impairments, restructuring and other items, a goodwill impairment and lower operating incomeitems.
the second quarter of 2019, compared to $236 million in the second quarter of 2018. Financial expenses in the second quarter of 2019 were mainly comprised of interest expenses of $226 million. Financial expenses in the second quarter of 2018 were mainly comprised of interest expenses of $231 million.
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
(U.S.$ in millions) | ||||||||
North America profit | $ | 915 | $ | 1,306 | ||||
Europe profit | 377 | 268 | ||||||
Growth Markets profit | 122 | 40 | ||||||
|
|
|
| |||||
Total segment profit | 1,414 | 1,614 | ||||||
Profit of other activities | 21 | 7 | ||||||
|
|
|
| |||||
1,435 | 1,621 | |||||||
Amounts not allocated to segments: | ||||||||
Amortization | 310 | 320 | ||||||
Other asset impairments, restructuring and other items | 707 | 240 | ||||||
Goodwill impairment | 180 | — | ||||||
Gain on divestitures, net of divestitures related costs | (93 | ) | — | |||||
Inventorystep-up | — | 64 | ||||||
Other R&D expenses | 22 | — | ||||||
Costs related to regulatory actions taken in facilities | 1 | 34 | ||||||
Legal settlements and loss contingencies | (1,278 | ) | 20 | |||||
Other unallocated amounts | 61 | 48 | ||||||
|
|
|
| |||||
Consolidated operating income | 1,525 | 895 | ||||||
|
|
|
| |||||
Financial expenses - net | 271 | 207 | ||||||
|
|
|
| |||||
Consolidated income before income taxes | $ | 1,254 | $ | 688 | ||||
|
|
|
|
The increase in operating margin was 14.2 points, mainly due to legal settlements and loss contingencies (25.6 points), higher profits in our Europe (2.7 points) and Growth Markets (1.7 points) segments and2018:
Three months ended June 30, | ||||||||
2019 | 2018 | |||||||
(U.S. $ in millions) | ||||||||
North America profit | $ | 504 | $ | 722 | ||||
Europe profit | 316 | 346 | ||||||
International Markets profit | 136 | 139 | ||||||
Total segment profit | 956 | 1,207 | ||||||
Profit of other activities | 55 | 31 | ||||||
1,011 | 1,238 | |||||||
Amounts not allocated to segments: | ||||||||
Amortization | 285 | 302 | ||||||
Other assets impairments, restructuring and other items | 101 | 194 | ||||||
Goodwill impairment | — | 120 | ||||||
Intangible asset impairments | 561 | 521 | ||||||
Gain on divestitures, net of divestitures related costs | (9 | ) | 10 | |||||
Other R&D expenses | § | — | ||||||
Costs related to regulatory actions taken in facilities | 12 | 4 | ||||||
Legal settlements and loss contingencies | 646 | 20 | ||||||
Other unallocated amounts | 59 | 81 | ||||||
Consolidated operating income (loss) | (644 | ) | (14 | ) | ||||
Financial expenses, net | 206 | 236 | ||||||
Consolidated income (loss) before income taxes | $ | (850 | ) | $ | (250 | ) | ||
§ | Represents an amount less than $1 million. |
During the fourthsecond quarter of 2017,2019, we deconsolidated our subsidiaries in Venezuela from our financial results. Consequently, resultsrecognized a tax benefit of operations$179 million, or 21%, on pre-tax loss of our subsidiaries in Venezuela are not included in our financial results for$850 million. In the first quarter of 2018.
Financial Expenses, Net
Financial expenses were $271 million in the firstsecond quarter of 2018, compared to $207 million in the first quarterwe recognized a tax benefit of 2017. The increase was mainly due to $60 million of early redemption charges and accelerated amortization of issuance costs related to the repayment of senior notes and term loans, partially offset by a $29 million gain derived from net foreign exchange losses and financial derivatives during the first quarter of 2018, compared to a $36 million gain from the sale of Mylan shares during the first quarter of 2017.
Tax Rate
In the first quarter of 2018, income taxes were $46$76 million, or 4%30%, onpre-tax income loss of $1.3 billion. In the first quarter of 2017, income taxes were $54 million, or 8%, onpre-tax income of $688$250 million. Our tax rate for the firstsecond quarter of 20182019 was mainly affected byone-time legal settlements impairments, amortization and divestments that hadinterest disallowance as a low corresponding tax effect.
result of the U.S. Tax Cuts and Jobs Act.
In future years, our effective tax rate is expected to increase following the enactment of the Tax Cuts and Jobs Act in the United States.
Share
2018.
(Loss)
2018.
second quarter of 2018.
Diluted earnings
and convertible senior debentures, since they had an anti-dilutive effect on loss per share.
2018.
Percentage of Net Revenues | Percentage Change 2019 - 2018 | |||||||||||
Six Months Ended June 30, | ||||||||||||
2019 | 2018 | |||||||||||
% | % | % | ||||||||||
Net revenues | 100.0 | 100.0 | (12 | ) | ||||||||
Gross profit | 43.4 | 44.5 | (14 | ) | ||||||||
Research and development expenses | 6.2 | 6.2 | (12 | ) | ||||||||
Selling and marketing expenses | 15.2 | 14.5 | (7 | ) | ||||||||
General and administrative expenses | 6.8 | 6.6 | (9 | ) | ||||||||
Other asset impairments, restructuring and other items | 1.2 | 7.1 | (85 | ) | ||||||||
Goodwill impairment | — | 3 | — | |||||||||
Legal settlements and loss contingencies | 8.1 | (12.9 | ) | — | ||||||||
Other income | (0.2 | ) | (3.1 | ) | (95 | ) | ||||||
Operating income (loss) | (5.9 | ) | 15.6 | — | ||||||||
Financial expenses, net | 4.9 | 5.2 | (16 | ) | ||||||||
Income (loss) before income taxes | (10.8 | ) | 10.4 | — | ||||||||
Tax benefit | (2.0 | ) | (0.3 | ) | 466 | |||||||
Share in (profits) losses of associated companies, net | § | 0.7 | — | |||||||||
Net income (loss) attributable to non-controlling interests | (0.3 | ) | 0.2 | — | ||||||||
Net income (loss) attributable to Teva | (9.2 | ) | 9.7 | — | ||||||||
Dividends on preferred shares | — | 1.3 | — | |||||||||
Net income (loss) attributable to ordinary shareholders | (9.2 | ) | 8.3 | — |
§ | Represents an amount less than 0.5%. |
Six months ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 4,118 | 100.0 | % | $ | 4,794 | 100.0 | % | ||||||||
Gross profit | 2,107 | 51.2 | % | 2,582 | 53.9 | % | ||||||||||
R&D expenses | 340 | 8.3 | % | 370 | 7.7 | % | ||||||||||
S&M expenses | 537 | 13.0 | % | 548 | 11.4 | % | ||||||||||
G&A expenses | 230 | 5.6 | % | 229 | 4.8 | % | ||||||||||
Other (income) expense | (2 | ) | § | (202 | ) | (4.2 | %) | |||||||||
Segment profit* | $ | 1,001 | 24.3 | % | $ | 1,637 | 34.1 | % | ||||||||
* | Segment profit does not include amortization and certain other items. |
§ | Represents an amount less than 0.5%. |
Six months ended June 30, | Percentage Change 2018-2019 | |||||||||||
2019 | 2018 | |||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 1,913 | $ | 2,035 | (6 | %) | ||||||
COPAXONE | 482 | 940 | (49 | %) | ||||||||
TREANDA/BENDEKA | 229 | 341 | (33 | %) | ||||||||
ProAir* | 123 | 245 | (50 | %) | ||||||||
QVAR | 124 | 137 | (10 | %) | ||||||||
AJOVY | 43 | — | N/A | |||||||||
AUSTEDO | 171 | 74 | 130 | % | ||||||||
Anda | 729 | 651 | 12 | % | ||||||||
Other | 305 | 372 | (18 | %) | ||||||||
Total | $ | 4,118 | $ | 4,794 | (14 | %) | ||||||
* | Does not include sales of ProAir authorized generic, which are included under generics. |
Six months ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 2,448 | 100 | % | $ | 2,770 | 100 | % | ||||||||
Gross profit | 1,404 | 57.4 | % | 1,519 | 54.9 | % | ||||||||||
R&D expenses | 136 | 5.5 | % | 146 | 5.3 | % | ||||||||||
S&M expenses | 431 | 17.6 | % | 483 | 17.5 | % | ||||||||||
G&A expenses | 119 | 4.8 | % | 169 | 6.1 | % | ||||||||||
Other (income) expense | (1 | ) | § | (2 | ) | § | ||||||||||
Segment profit* | $ | 719 | 29.4 | % | $ | 723 | 26.1 | % | ||||||||
* | Segment profit does not include amortization and certain other items. |
§ | Represents an amount less than 0.5%. |
Six months ended June 30, | Percentage Change 2018-2019 | |||||||||||
2019 | 2018 | |||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 1,763 | $ | 1,904 | (7 | %) | ||||||
COPAXONE | 221 | 293 | (25 | %) | ||||||||
Respiratory products | 181 | 219 | (18 | %) | ||||||||
Other | 283 | 354 | (20 | %) | ||||||||
Total | $ | 2,448 | $ | 2,770 | (12 | %) | ||||||
Six months ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
Revenues | $ | 1,409 | 100.0 | % | $ | 1,539 | 100.0 | % | ||||||||
Gross profit | 582 | 41.3 | % | 641 | 41.6 | % | ||||||||||
R&D expenses | 46 | 3.2 | % | 49 | 3.2 | % | ||||||||||
S&M expenses | 234 | 16.6 | % | 264 | 17.2 | % | ||||||||||
G&A expenses | 70 | 5.0 | % | 78 | 5.1 | % | ||||||||||
Other (income) expense | (1 | ) | § | (11 | ) | (0.7 | %) | |||||||||
Segment profit* | $ | 233 | 16.5 | % | $ | 261 | 17.0 | % | ||||||||
* | Segment profit does not include amortization and certain other items. |
§ | Represents an amount less than 0.5%. |
Six months ended June 30, | Percentage Change 2018-2019 | |||||||||||
2019 | 2018 | |||||||||||
(U.S. $ in millions) | ||||||||||||
Generic products | $ | 930 | $ | 1,025 | (9 | %) | ||||||
COPAXONE | 27 | 38 | (31 | %) | ||||||||
Distribution | 315 | 307 | 3 | % | ||||||||
Other | 137 | 168 | (19 | %) | ||||||||
Total | $ | 1,409 | $ | 1,539 | (8 | %) | ||||||
Six months ended June 30, | ||||||||
2019 | 2018 | |||||||
(U.S. $ in millions) | ||||||||
North America profit | $ | 1,001 | $ | 1,637 | ||||
Europe profit | 719 | 723 | ||||||
International Markets profit | 233 | 261 | ||||||
Total segment profit | 1,954 | 2,621 | ||||||
Profit of other activities | 76 | 52 | ||||||
2,029 | 2,673 | |||||||
Amounts not allocated to segments: | ||||||||
Amortization | 568 | 612 | ||||||
Other asset impairments, restructuring and other items | 103 | 695 | ||||||
Goodwill impairment | — | 300 | ||||||
Intangible asset impairments | 1,030 | 727 | ||||||
Gain on divestitures, net of divestitures related costs | (9 | ) | (83 | ) | ||||
Other R&D expenses | § | 22 | ||||||
Costs related to regulatory actions taken in facilities | 16 | 5 | ||||||
Legal settlements and loss contingencies | 703 | (1,258 | ) | |||||
Other unallocated amounts | 129 | 142 | ||||||
Consolidated operating income (loss) | (510 | ) | 1,511 | |||||
Financial expenses, net | 425 | 507 | ||||||
Consolidated income (loss) before income taxes | $ | (934 | ) | $ | 1,004 | |||
§ | Represents an amount less than $1 million. |
$91 million, in comparison to the first six months of 2018.
Trade receivables as of March 31, 2018, net of sales reserves and allowances (“SR&A”), were negative $1.1 billion, compared to negative $0.8 billion as of December 31, 2017, mainly due to the decrease in sales in the first quarter of 2018, compared with the fourth quarter of 2017.
As of March 31, 2018, we do not present any material assets held for sale following the completion of the sale of our woman’s health business. As of December 31, 2017, we presented net assets held for sale in the amount of $0.6 billion.
Accrued expenses as of March 31, 2018 were $2.6 billion, compared to $3.0 billion as of December 31, 2017. The decrease was mainly due to $0.4 billion in connection with legal settlements.
2019.
2019. The increase in the second quarter of 2019 was mainly due to timing of sales within the quarter and timing of issuance of credit memos to customers. SR&A as of June 30, 2019 was $6,054 million, compared to $6,200 million as of March 31, 2019. The reduction in the second quarter of 2019 is attributable to the payout of certain rebates, primarily managed care and Medicaid for prior periods. Payments exceed new provisions for the current period due to a decline in sales resulting in overall reduction to the liability.
2019.
quarter.
2018 Debt Balance and Movements
As of March 31, 2018, our debt was $30.8 billion, compared to $32.5 billion as of December 31, 2017.2019. The decreaseincrease was mainly due to $6.5 billion of debt prepayments, partially offset by our March 2018 issuance of an aggregate principal amount of $4.4 billion of senior notes, as well as exchange raterates fluctuations.
In January 2018 we prepaid in full $15 million of our U.S. dollar debentures.
In March 2018, we completed debt issuances for an aggregate canceled approximately $126 million principal amount of $4.4 billion, consisting of senior notes with aggregate principal amounts of $2.5 billion and €1.6 billion with maturities ranging from four to ten years. The effective average interest rate of the notes issued is 5.3% per annum. See note 11 to our consolidated financial statements.
In March 2018, we redeemed in full our $1.5 billion 1.4%$1,700 million 1.7% senior notes due in July 20182019.
2019.
2019.
2019.
fluctuations in the second quarter of 2019.
managed care and Medicaid.
reasons mentioned above.
In December 2017, we announced an immediate suspension of
We have suspended cash dividends on our mandatory convertible preferred shares in the first quarter of 2018 due to our accumulated deficit.
since December 2017.
Milestone payments of $25 million, $35 million and $60 million were paid in the second quarter of 2017, the first quarter of 2018 and the fourth quarter of 2018, respectively.
These two products, Truxima and Herzuma, were approved by the FDA in November and December 2018, respectively.
Dividends on our mandatory convertible preferred shares (aggregate liquidation preference of approximately $3.7 billion) are payable on a cumulative basis when, as and if declared by our Board of Directors at an annual rate of 7% on the liquidation preference of $1,000 per mandatory convertible preferred share. Declared dividends are paid in cash on March 15, June 15, September 15 and December 15 of each year to and including December 15, 2018. We have suspended cash dividend payments on our mandatory convertible preferred shares.
Our principal sources of short-term liquidity are our existing cash investments, liquid securities and available credit facilities, primarily our $3 billion syndicated revolving credit facility (“RCF”), which was not utilized as of March 31, 2018, as well as internally generated funds.
Pursuant to the requirements of the RCF, we have entered into negative pledge agreements with certain banks and institutional investors. Under the agreements, we and certain subsidiaries have undertaken not to register floating charges on assets in favor of any third parties without the prior consent of the banks, to maintain certain financial ratios, including the requirement to maintain compliance with a net debt to EBITDA ratio, which becomes more restrictive over time, and to fulfill other restrictions, as stipulated by the agreements. As of March 31, 2018, we did not have any outstanding debt under the RCF, which is our only debt subject to the net debt to EBITDA covenant. Assuming utilization of the RCF and under specified circumstances, includingnon-compliance with such covenants and the unavailability of any waiver, amendment or other modification thereto and the expiration of any applicable grace period thereto, substantially all of our other debt could be negatively impacted bynon-compliance with such covenants. We have sufficient resources to meet our financial obligations in the ordinary course of business for at least twelve months from the date of the release of this Quarterly Report.
2018
In the first quarter of 2018, we repaid debt in a total amount of approximately $6.5 billion and raised new debt in a total amount of approximately $4.4 billion. As of March 31, 2018, the total debt on the balance sheet is approximately $30.8 billion. See note 11 to our consolidated financial statements.
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
(U.S. $ in millions) | ||||||||
Gain on divestitures, net of divestitures related costs | (93 | ) | — | |||||
Amortization of purchased intangible assets | 310 | 320 | ||||||
Restructuring expenses | 247 | 130 | ||||||
Inventorystep-up | — | 64 | ||||||
Capital loss from currency translation | — | 52 | ||||||
Equity compensation expenses | 30 | 36 | ||||||
Costs related to regulatory actions taken in facilities | 1 | 34 | ||||||
Acquisition, integration and related expenses | 2 | 23 | ||||||
Other R&D expenses | 22 | — | ||||||
Contingent consideration | 8 | 21 | ||||||
Legal settlements and loss contingencies | (1,278 | ) | 20 | |||||
Goodwill impairment | 180 | — | ||||||
Impairment of long-lived assets | 432 | 11 | ||||||
Othernon-GAAP items | 49 | 15 | ||||||
Financial expense (income) | 68 | (28 | ) | |||||
Minority interest | (8 | ) | (13 | ) | ||||
Impairments of equity investments | 94 | — | ||||||
Tax effect | (165 | ) | (186 | ) |
The data so presented — after these exclusions — are the results used by management and our board
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(U.S. $ in millions) | ||||||||||||||||
Gain on divestitures, net of divestitures related costs | (9 | ) | 10 | (9 | ) | (83 | ) | |||||||||
Amortization of purchased intangible assets | 285 | 302 | 568 | 612 | ||||||||||||
Restructuring expenses | 47 | 107 | 79 | 354 | ||||||||||||
Equity compensation expenses | 35 | 47 | 69 | 77 | ||||||||||||
Costs related to regulatory actions taken in facilities | 12 | 4 | 16 | 5 | ||||||||||||
Acquisition, integration and related expenses | — | 3 | 2 | 5 | ||||||||||||
Other R&D expenses | — | — | — | 22 | ||||||||||||
Contingent consideration | 24 | 47 | (47 | ) | 55 | |||||||||||
Legal settlements and loss contingencies | 646 | 20 | 703 | (1,258 | ) | |||||||||||
Goodwill impairment | — | 120 | — | 300 | ||||||||||||
Impairment of long-lived assets | 609 | 548 | 1,097 | 980 | ||||||||||||
Other non-GAAP items | 6 | 44 | 60 | 93 | ||||||||||||
Financial expense (income) | 8 | (2 | ) | 6 | 66 | |||||||||||
Minority interest | (8 | ) | (12 | ) | (16 | ) | (20 | ) | ||||||||
Impairments of equity investments | — | — | — | 94 | ||||||||||||
Corresponding tax effect | (312 | ) | (203 | ) | (429 | ) | (368 | ) |
Three Months Ended March 31, 2018 | Three Months Ended March 31, 2017 | |||||||||||||||||||||||||||||||||||||||||
U.S. dollars and shares in millions (except per share amounts) | ||||||||||||||||||||||||||||||||||||||||||
GAAP | Non-GAAP Adjustments | Dividends on Preferred Shares | Non-GAAP | % of Net Revenues | GAAP | Non-GAAP Adjustments | Dividends on Preferred Shares | Non-GAAP | % of Net Revenues | |||||||||||||||||||||||||||||||||
Gross profit (1) | 2,348 | 303 | 2,651 | 52 | % | 2,839 | 377 | 3,216 | 57 | % | ||||||||||||||||||||||||||||||||
Operating income (loss) (1)(2) | 1,525 | (90 | ) | 1,435 | 28 | % | 895 | 726 | 1,621 | 29 | % | |||||||||||||||||||||||||||||||
Net income attributable to ordinary shareholders (1)(2)(3)(4) | 1,055 | (101 | ) | 954 | 19 | % | 580 | 499 | 1,079 | 19 | % | |||||||||||||||||||||||||||||||
Earnings per share attributable to ordinary shareholders - diluted | 1.03 | (0.09 | ) | 0.94 | 0.57 | 0.49 | 1.06 | |||||||||||||||||||||||||||||||||||
(1) | Amortization of purchased intangible assets | 264 | 267 | |||||||||||||||||||||||||||||||||||||||
Inventorystep-up | — | 64 | ||||||||||||||||||||||||||||||||||||||||
Costs related to regulatory actions taken in facilities | 1 | 34 | ||||||||||||||||||||||||||||||||||||||||
Equity compensation expenses | �� | 6 | 5 | |||||||||||||||||||||||||||||||||||||||
Other COGS related adjustments | 32 | 7 | ||||||||||||||||||||||||||||||||||||||||
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Gross profit adjustments | 303 | 377 | ||||||||||||||||||||||||||||||||||||||||
(2) | Gain on divestitures, net of divestitures related costs | (93 | ) | — | ||||||||||||||||||||||||||||||||||||||
Goodwill impairment | 180 | — | ||||||||||||||||||||||||||||||||||||||||
Restructuring expenses | 247 | 130 | ||||||||||||||||||||||||||||||||||||||||
Amortization of purchased intangible assets | 46 | 53 | ||||||||||||||||||||||||||||||||||||||||
Capital loss on currency translation | — | 52 | ||||||||||||||||||||||||||||||||||||||||
Equity compensation expenses | 24 | 31 | ||||||||||||||||||||||||||||||||||||||||
Acquisition, Integration and related expenses | 2 | 23 | ||||||||||||||||||||||||||||||||||||||||
Other R&D expenses | 22 | — | ||||||||||||||||||||||||||||||||||||||||
Contingent consideration | 8 | 21 | ||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies | (1,278 | ) | 20 | |||||||||||||||||||||||||||||||||||||||
Impairment of long-lived assets | 432 | 11 | ||||||||||||||||||||||||||||||||||||||||
Other operating related adjustments | 17 | 8 | ||||||||||||||||||||||||||||||||||||||||
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(393 | ) | 349 | ||||||||||||||||||||||||||||||||||||||||
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Operating income adjustments | (90 | ) | 726 | |||||||||||||||||||||||||||||||||||||||
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(3) | Financial expense (income) | 68 | (28 | ) | ||||||||||||||||||||||||||||||||||||||
Tax effect | (165 | ) | (186 | ) | ||||||||||||||||||||||||||||||||||||||
Impairment of equity investment | 94 | — | ||||||||||||||||||||||||||||||||||||||||
Minority interest | (8 | ) | (13 | ) | ||||||||||||||||||||||||||||||||||||||
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Net income adjustments | (101 | ) | 499 | |||||||||||||||||||||||||||||||||||||||
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Three months ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. $ and shares in millions (except per share amounts) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Excluded for non-GAAP measurement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP | Amorti- zation of purchased intangible assets | Legal settlements and loss contin- gencies | Impair- ment of long- lived assets | Restruc- turing costs | Costs related to regulatory actions taken in facilities | Equity compen- sation | Contin- gent conside- ration | Gain on sale of business | Other non- GAAP items | Other items | Corres- ponding tax effect | Non- GAAP | ||||||||||||||||||||||||||||||||||||||||||||
Cost of Sales | 2,443 | 249 | 12 | 7 | 26 | 2,149 | ||||||||||||||||||||||||||||||||||||||||||||||||||
R&D expenses | 276 | 6 | — | 271 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
S&M expenses | 666 | 35 | 10 | 621 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
G&A expenses | 296 | 12 | (2 | ) | 286 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expenses | (9 | ) | (9 | ) | (0 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies | 646 | 646 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other assets impairments, restructuring and other items | 101 | 48 | 47 | 24 | (18 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets impairment | 561 | 561 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial expenses, net | 206 | 8 | 198 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes | (179 | ) | (312 | ) | 134 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to non-controlling interests | 18 | (8 | ) | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total reconciled items | 285 | 646 | 609 | 47 | 12 | 35 | 24 | (9 | ) | 6 | (0 | ) | (312 | ) | ||||||||||||||||||||||||||||||||||||||||||
EPS—Basic | (0.63 | ) | 1.23 | 0.60 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
EPS—Diluted | (0.63 | ) | 1.23 | 0.60 |
Three months ended June 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. $ and shares in millions (except per share amounts) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Excluded for non-GAAP measurement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP | Amorti- zation of purchased intangible assets | Legal settlements and loss contin- gencies | Impair- ment of long- lived assets | Acquisition, integration and related expenses | Restruc- turing costs | Costs related to regulatory actions taken in facilities | Equity compens- ation | Contin- gent conside- ration | Other non- GAAP items | Other items | Corres- ponding tax effect | Non- GAAP | ||||||||||||||||||||||||||||||||||||||||||||||
Cost of Sales | 2,668 | 261 | 4 | 9 | 32 | 2,362 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
R&D expenses | 290 | 9 | — | 281 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
S&M expenses | 682 | 41 | 12 | (5 | ) | 634 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
G&A expenses | 316 | 17 | 7 | 292 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expenses | (96 | ) | 10 | (106 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies | 20 | 20 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other assets impairments, restructuring and other items | 194 | 27 | 3 | 107 | 47 | 10 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets impairment | 521 | 521 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill impairment | 120 | 120 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial expenses, net | 236 | (2 | ) | 238 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes | (76 | ) | (203 | ) | 127 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Share in losses (income) of associated companies, net | (8 | ) | — | (8 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to non-controlling interests | 10 | (12 | ) | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total reconciled items | 302 | 20 | 668 | 3 | 107 | 4 | 47 | 47 | 54 | (14 | ) | (203 | ) | |||||||||||||||||||||||||||||||||||||||||||||
EPS—Basic | (0.24 | ) | 1.02 | 0.78 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
EPS—Diluted | (0.24 | ) | 1.02 | 0.78 |
Six months ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. $ and shares in millions (except per share amounts) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Excluded for non-GAAP measurement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP | Amorti- zation of purchased intangible assets | Legal settlements and loss contingencies | Impair- ment of long- lived assets | Acquisition, integration and related expenses | Restruc- turing costs | Costs related to regulatory actions taken in facilities | Equity compen- sation | Contingent conside- ration | Gain on sale of business | Other non- GAAP items | Other items | Corres- ponding tax effect | Unusual tax item* | Non- GAAP | ||||||||||||||||||||||||||||||||||||||||||||||||
Cost of Sales | 4,883 | 497 | 16 | 14 | 61 | 4,294 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
R&D expenses | 537 | 11 | 0 | 525 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
S&M expenses | 1,313 | 71 | 20 | — | 1,223 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
G&A expenses | 589 | 24 | (1 | ) | 566 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expenses | (15 | ) | (9 | ) | (6 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies | 703 | 703 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other assets impairments, restructuring and other items | 103 | 68 | 2 | 79 | (47 | ) | 1 | (0 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets impairment | 1,030 | 1,030 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial expenses, net | 425 | 6 | 419 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corresponding tax effect | (170 | ) | (490 | ) | 61 | 259 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share in losses (income) of associated companies, net | 4 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to non-controlling interests | 26 | (16 | ) | 42 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total reconciled items | 568 | 703 | 1,098 | 2 | 79 | 16 | 69 | (47 | ) | (9 | ) | 60 | (10 | ) | (490 | ) | 61 | |||||||||||||||||||||||||||||||||||||||||||||
EPS—Basic | (0.73 | ) | 1.93 | 1.20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EPS—Diluted | (0.73 | ) | 1.93 | 1.20 |
Six months ended June 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. $ and shares in millions (except per share amounts) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Excluded for non-GAAP measurement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP | Amorti- zation of purchased intangible assets | Legal settlements and loss contingencies | Impair- ment of long- lived assets | Other R&D expenses | Acquisition, integration and related expenses | Restruc- turing costs | Costs related to regulatory actions taken in facilities | Equity compen- sation | Contingent conside- ration | Other non- GAAP items | Other items | Corres- ponding tax effect | Non- GAAP | |||||||||||||||||||||||||||||||||||||||||||||
Cost of Sales | 5,418 | 525 | 5 | 15 | 64 | 4,809 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
R&D expenses | 607 | 22 | 14 | 1 | 570 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
S&M expenses | 1,420 | 87 | 21 | (4 | ) | 1,316 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
G&A expenses | 645 | 27 | 4 | 614 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expenses | (299 | ) | (83 | ) | (216 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies | (1,258 | ) | (1,258 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other assets impairments, restructuring and other items | 695 | 253 | 5 | 354 | 55 | 28 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets impairment | 727 | 727 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill impairment | 300 | 300 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial expenses, net | 507 | 66 | 441 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corresponding tax effect | (30 | ) | (368 | ) | 338 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Share in losses (income) of associated companies, net | 66 | 94 | (28 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to non-controlling interests | 24 | (20 | ) | 44 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total reconciled items | 612 | (1,258 | ) | 1,280 | 22 | 5 | 354 | 5 | 77 | 55 | 10 | 140 | (368 | ) | ||||||||||||||||||||||||||||||||||||||||||||
EPS—Basic | 0.80 | 0.92 | 1.72 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
EPS—Diluted | 0.80 | 0.91 | 1.71 |
We expect our annual$1,000 million. Our non-GAAP tax rate for 2018 to be 17%. Ournon-GAAP tax rate for 2017the second quarter of 2019 was 15%. The expected 2018 non-GAAP tax rate is higher than our 2017non-GAAP tax rate, as we expect less tax benefits associated withmainly affected by the Actavis Generics acquisition as a resultmix of products sold in different geographies and the enactment of the Tax Cuts and Jobs Act in the United States.
Critical Accounting Policies
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.
As applicable to our consolidated financial statements, the most significant estimates and assumptions relate to purchase price allocation on acquisitions, including determination of useful lives and contingent consideration; determining the valuation and recoverability of intangible assets and goodwill; and assessing sales reserves and allowances, uncertain tax positions, valuation allowances, contingencies, restructuring costs and inventory valuation.
Please refer to note 1 in the consolidated financial statements and critical accounting policies included in our Annual Report on Form 10-K for the year ended December 31, 2017 for2018, we do not have any material off-balance sheet arrangements.
policies, see note 1 to our consolidated financial statements and “Critical Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, 2018.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Our outstanding debt obligations, the corresponding interest rates, currency and repayment schedules as of March 31, 2018 are set forth in the table below in U.S. dollar equivalent terms, taking into account recent changes in our debt movement:
Currency | Total Amount | Interest Rate Ranges | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 & thereafter | ||||||||||||||||||||||||||||
(U.S. dollars in millions) | ||||||||||||||||||||||||||||||||||||
Fixed Rate: | ||||||||||||||||||||||||||||||||||||
USD | 18,433 | 1.70 | % | 6.75 | % | — | 2,000 | 700 | 3,620 | 863 | 11,250 | |||||||||||||||||||||||||
Euro | 9,914 | 0.38 | % | 3.85 | % | — | — | 2,152 | 587 | 863 | 6,312 | |||||||||||||||||||||||||
CHF | 1,521 | 0.13 | % | 1.50 | % | 786 | 367 | 368 | ||||||||||||||||||||||||||||
USD convertible debentures* | 514 | 0.25 | % | 0.25 | % | 514 | — | — | — | — | — | |||||||||||||||||||||||||
Floating Rate: | ||||||||||||||||||||||||||||||||||||
USD | 500 | 2.80 | % | 2.80 | % | — | — | — | — | — | 500 | |||||||||||||||||||||||||
JPY | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Others | 7 | 8.00 | % | 13.00 | % | 2 | — | — | — | — | 5 | |||||||||||||||||||||||||
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Total: | 30,889 | $ | 1,302 | $ | 2,000 | $ | 2,852 | $ | 4,207 | $ | 2,093 | $ | 18,435 | |||||||||||||||||||||||
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Less debt issuance costs | (137 | ) | ||||||||||||||||||||||||||||||||||
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Total: | $ | 30,752 | ||||||||||||||||||||||||||||||||||
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ITEM 4. | CONTROLS AND PROCEDURES |
In designing and evaluating the 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.procedures. Our management, including our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and proceduresprocedures” (as defined in RuleRules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934)1934, as of the end of the period covered by this Quarterly Report, has concludedamended) that as of such date, Teva’s disclosure controls and procedures were effectiveare designed to ensureprovide reasonable assurance that the information required to be disclosed in theTeva’s reports that we filefiled or submitsubmitted 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 ourTeva’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.control. Control over Financial Reportingperiod covered by this Quarterly Report,quarter ended June 30, 2019, there were no changes in Teva’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect Teva’s internal control over financial reporting.
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
2019.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
Not applicable.
ITEM 6. | EXHIBITS |
* | Filed herewith. |
Incorporated by reference to Exhibit |
TEVA PHARMACEUTICAL INDUSTRIES LIMITED | ||||||||
Date: August 7, 2019 | By: | /s/ Michael McClellan | ||||||
Name: | Michael McClellan | |||||||
Title: | Executive Vice President, Chief Financial Officer (Duly Authorized Officer) |
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