INDEX

~~INDEX~~

PART I.

	Financial Statements (unaudited)

~~PART I.~~Item 1.	Financial Statements (unaudited)

~~Item 1.~~	~~Financial Statements (unaudited)~~Consolidated Balance Sheets	5

	~~Consolidated Balance Sheets~~	5

	Consolidated Statements of Income (loss)	6

	Consolidated Statements of Comprehensive Income (loss)	7

	Consolidated statements of changes in equity	8

	Consolidated Statements of Cash Flows	9

	Notes to Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
		39
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	61
61 Item 4.	Controls and Procedures	61

PART II.	OTHER INFORMATION
~~Item 4.~~	~~Controls and Procedures~~	61

~~PART II.~~Item 1.	~~OTHER INFORMATION~~Legal Proceedings
		62
Item 1.1A.	~~Legal Proceedings~~Risk Factors	62

Item ~~1A.~~2.	~~Risk Factors~~	62

~~Item 2.~~	Unregistered Sales of Equity Securities and Use of Proceeds	62
62 Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	63

~~Item 3.~~	~~Defaults Upon Senior Securities~~Signatures	63

~~Item 4.~~	~~Mine Safety Disclosures~~	63

~~Item 5.~~	~~Other Information~~	63

~~Item 6.~~	~~Exhibits~~	64

	~~Signatures~~	65

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

INTRODUCTION AND USE OF CERTAIN TERMS

Unless otherwise indicated, all references to the “Company,” “we,” “our” and “Teva” refer to Teva Pharmaceutical Industries Limited and its subsidiaries, and references to “revenues” refer to net revenues. References to “U.S. dollars,” “dollars,” “U.S. $” and “$” are to the lawful currency of the United States of America, and references to “NIS” are to new Israeli shekels. References to “ADS(s)” are to Teva’s American Depositary Share(s). References to “MS” are to multiple sclerosis. Market data, including both sales and share data, is based on information provided by IQVIA, ~~(formerly IMS Health Inc.),~~ a provider of market research to the pharmaceutical industry (“IQVIA”), unless otherwise stated. ~~References to “Actavis Generics” are to the generic pharmaceuticals business we purchased from Allergan plc (“Allergan”) on August 2, 2016.~~ References to “R&D” are to Research and Development, references to “IPR&D” are to

in-process

R&D, references to “S&M” are to Selling and Marketing and references to “G&A” are to General and Administrative. Some amounts in this report may not add up due to rounding. All percentages have been calculated using unrounded amounts. This report on Form

10-Q

contains many of the trademarks and trade names used by Teva in the United States and internationally to distinguish its products and services. Any third-party trademarks mentioned in this report are the property of their respective owners.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form

10-Q,

and the reports and documents incorporated by reference in this Quarterly Report on Form

10-Q,

may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management’s current beliefs and expectations and are subject to substantial risks and uncertainties, both known and unknown, that could cause our future results, performance or achievements to differ significantly from that expressed or implied by such forward-looking statements. You can identify these forward-looking statements by the use of words such as “should,” “expect,” “anticipate,” “estimate,” “target,” “may,” “project,” “guidance,” “intend,” “plan,” “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. Important factors that could cause or contribute to such differences include risks relating to:

our ability to successfully compete in the marketplace, including: that we are substantially dependent on our generic products; consolidation of our customer base and commercial alliances among our customers; delays in launches of new generic products; the increase in the number of competitors targeting generic opportunities and seeking U.S. market exclusivity for generic versions of significant products; our ability to develop and commercialize biopharmaceutical products; competition for our specialty products, ~~especially~~including AUSTEDO

, AJOVY

and COPAXONE

, our leading medicine, which faces competition from existing and potential additional generic versions, competing glatiramer acetate products and orally-administered alternatives; the uncertainty of commercial success of AJOVY

~~or AUSTEDO~~

; ~~competition from companies with greater resources and capabilities; delays in launches of new products and~~ our ability to achieve expected results from investments in our product pipeline; our ability to develop and commercialize ~~biopharmaceutical~~additional pharmaceutical products; ~~efforts of pharmaceutical companies to limit the use of generics, including through legislation and regulations~~ and the effectiveness of our patents and other measures to protect our intellectual property rights;

our substantial indebtedness, which may limit our ability to incur additional indebtedness, engage in additional transactions or make new investments, may result in a further downgrade of our credit ratings; and our inability to raise debt or borrow funds in amounts or on terms that are favorable to us;

our business and operations in general, ~~including~~including: uncertainty regarding ~~the magnitude, duration, and geographic reach of~~ the

COVID-19

pandemic and its impact on our business, financial condition, operations, cash flows, and liquidity and on the economy in general; ~~manufacturing or quality control protocols; interruptions in our supply chain, including due to potential effects of the~~

~~COVID-19~~

~~pandemic on our operations and business in geographic locations impacted by the pandemic and on the business operations of our customers and suppliers;~~ our ability to successfully execute and maintain the activities and efforts related to the measures we have taken or may take in response to the

COVID-19

pandemic and associated costs therewith; ~~challenges associated with conducting business globally, including adverse effects of the~~

~~COVID-19~~

~~pandemic; costs resulting from the extensive governmental regulation to which we are subject or delays in governmental processing time due to modified government operations due to the~~

~~COVID-19~~

~~pandemic, including effects on product and patent approvals due to the~~

~~COVID-19~~

~~pandemic; disruptions of information technology systems; and our ability to successfully compete in the marketplace;~~

~~our business and operations in general, including:~~ effectiveness of our ~~restructuring plan announced in December 2017;~~optimization efforts; our ability to attract, hire and retain highly skilled personnel; ~~our ability to develop and commercialize additional pharmaceutical products; compliance with anti-corruption sanctions and trade control laws;~~ manufacturing or quality control problems; interruptions in our supply chain; disruptions of information technology systems; breaches of our data security; variations in intellectual property laws; challenges associated with conducting business globally, including ~~adverse effects of~~ political or economic instability, major hostilities or terrorism; costs and delays resulting from the extensive pharmaceutical regulation to which we are subject or delays in governmental processing time due to travel and work restrictions caused by the

COVID-19

pandemic; the effects of reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage; significant sales to a limited number of customers; our ability to successfully bid for suitable acquisition targets or licensing opportunities, or to consummate and integrate acquisitions; and our prospects and opportunities for growth if we sell ~~assets and potential difficulties related to the operation of our new global enterprise resource planning (ERP) system;~~assets;

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

compliance, regulatory and litigation matters, including: failure to comply with complex legal and regulatory environments; increased legal and regulatory action in connection with public concern over the abuse of opioid medications ~~in the U.S.~~ and our ability to reach a final resolution of the remaining opioid-related litigation; ~~costs~~scrutiny from competition and ~~delays resulting from~~pricing authorities around the ~~extensive governmental regulation~~world, including our ability to ~~which we are subject;~~successfully defend against the ~~effects~~U.S. Department of ~~reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage; governmental investigations into S&M practices;~~Justice (“DOJ”) criminal charges of Sherman Act violations; potential liability for patent infringement; product liability claims; ~~increased government scrutiny of our patent settlement agreements;~~ failure to comply with complex Medicare and Medicaid reporting and payment obligations; compliance with anti-corruption sanctions and trade control laws; and environmental risks;

other financial and economic risks, including: our exposure to currency fluctuations and restrictions as well as credit risks; potential impairments of our intangible assets; potential significant increases in tax ~~liabilities;~~liabilities (including as a result of potential tax reform in the United States); and the effect on our overall effective tax rate of the termination or expiration of governmental programs or tax benefits, or of a change in our business;

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

and other factors discussed in this Quarterly Report on Form

10-Q

and in our Annual Report on Form

10-K

for the year ended December 31, ~~2019,~~2020, including in the sections captioned “Risk Factors.” Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statements or other information contained herein, whether as a result of new information, future events or otherwise. You are cautioned not to put undue reliance on these forward-looking statements.

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in millions, except for share data)

(Unaudited)

March 31,

December 31,

2020

2019

ASSETS

Current assets:

Cash and cash equivalents

$
1,804

$
1,975

Accounts receivables, net of allowance for credit losses of $127 million and $135 million as of March 31, 2020 and December 31, 2019

5,189

5,676

Inventories

4,290

4,422

Prepaid expenses

977

870

Other current assets

538

434

Assets held for sale

86

87

Total current assets

12,884

13,464

Deferred income taxes

440

386

Other
non-current
assets

550

591

Property, plant and equipment, net

6,221

6,436

Operating lease
right-of-use
assets

489

514

Identifiable intangible assets, net

10,256

11,232

Goodwill

24,490

24,846

Total assets

$
55,330

$
57,470

LIABILITIES AND EQUITY

Current liabilities:

Short-term debt

$
1,630

$
2,345

Sales reserves and allowances

5,662

6,159

Accounts payables

1,710

1,718

Employee-related obligations

540

693

Accrued expenses

1,718

1,869

Other current liabilities

1,061

889

Total current liabilities

12,322

13,674

Long-term liabilities:

Deferred income taxes

912

1,096

Other taxes and long-term liabilities

2,624

2,640

Senior notes and loans

24,473

24,562

Operating lease liabilities

411

435

Total long-term liabilities

28,420

28,733

Commitments and contingencies
, see note
10

Total liabilities

40,742

42,407

Equity:

Teva shareholders’ equity:

Ordinary shares of NIS 0.10 par value per share; March 31, 2020 and December 31, 2019: authorized 2,495 million shares; issued 1,201 million shares and 1,198 million shares, respectively

56

56

Additional
paid-in
capital

27,342

27,312

Accumulated deficit

(6,887
)
(6,956
)
Accumulated other comprehensive loss

(2,852
)
(2,312
)
Treasury shares as of March 31, 2020 and December 31, 2019 — 106 million ordinary shares

(4,128
)
(4,128
)

13,531

13,972

Non-controlling
interests

1,057

1,091

Total equity

14,588

15,063

Total liabilities and equity

$
55,330

$
57,470


	March 31,			December 31,
	2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,743		$	2,177
Accounts receivables, net of allowance for credit losses of $119 million and $126 million as of March 31, 2021 and December 31, 2020		4,572			4,581
Inventories		4,406			4,403
Prepaid expenses		942			945
Other current assets		652			710
Assets held for sale		87			189

Total current assets		12,401			13,005
Deferred income taxes		691			695
Other non-current assets		524			538
Property, plant and equipment, net		6,112			6,296
Operating lease right-of-use assets		529			559
Identifiable intangible assets, net		8,445			8,923
Goodwill		20,302			20,624

Total assets	$	49,004		$	50,640

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	2,697		$	3,188
Sales reserves and allowances		4,584			4,824
Accounts payables		1,692			1,756
Employee-related obligations		526			685
Accrued expenses		1,851			1,780
Other current liabilities		739			933	��

Total current liabilities		12,089			13,164
Long-term liabilities:
Deferred income taxes		991			964
Other taxes and long-term liabilities		2,220			2,240
Senior notes and loans		22,288			22,731
Operating lease liabilities		441			479

Total long-term liabilities		25,940			26,414

Commitments and contingencies , see note 10		0			0
Total liabilities		38,029			39,579

Equity:
Teva shareholders’ equity:
Ordinary shares of NIS 0.10 par value per share; March 31, 2021 and December 31, 2020: authorized 2,495 million shares; issued 1,208 million shares and 1,202 million shares, respectively		57			57
Additional paid-in capital		27,474			27,443
Accumulated deficit		(10,869	)		(10,946	)
Accumulated other comprehensive los s		(2,534	)		(2,399	)
Treasury shares as of March 31 , 2021 and December 31, 2020 — 106 million ordinary shares		(4,128	)		(4,128	)

		10,000			10,026

Non-controlling interests		975			1,035

Total equity		10,975			11,061

Total liabilities and equity	$	49,004		$	50,640

Amounts may not add up due to rounding.

The accompanying notes are an integral part of the financial statements.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(U.S. dollars in millions, except share and per share data)

(Unaudited)

Three months ended

March 31,

2020

2019

Net revenues

$
4,357

$
4,149

Cost of sales

2,294

2,293

Gross profit

2,063

1,856

Research and development expenses

221

261

Selling and marketing expenses

613

648

General and administrative expenses

304

292

Intangible assets impairments

649

469

Other assets impairments, restructuring and other items

121

1

Legal settlements and loss contingencies

(25
)
57

Other income

(13
)
(6
)

Operating (loss) income

191

134

Financial expenses, net

224

218

Income (loss) before income taxes

(33
)
(84
)
Income taxes (benefit)

(59
)
9

Share in (profits) losses of associated companies, net

1

4

Net income (loss)

25

(97
)
Net income
(
loss)
attributable to
non-controlling
interests

(44
)
8

Net income (loss) attributable to Teva

69

(105
)

Net income (loss) attributable to ordinary shareholders
$
69
$
(105
)

Earnings (loss) per share attributable to ordinary shareholders:

Basic
$
0.06
$
(0.10
)

Diluted
$
0.06
$
(0.10
)

Weighted average number of shares (in millions):

Basic

1,093

1,090

Diluted

1,096

1,090


	Three months ended
	March 31,
	2021			2020
Net revenues	$	3,982		$	4,357
Cost of sales		2,104			2,294

Gross profit		1,878			2,063
Research and development expenses		254			221
Selling and marketing expenses		585			613
General and administrative expenses		290			304
Intangible assets impairments		79			649
Other assets impairments, restructuring and other items		137			121
Legal settlements and loss contingencies		104			(25	)
Other income		(5	)		(13	)

Operating (loss) income		434			191
Financial expenses, net		290			224

Income (loss) before income taxes		144			(33	)
Income taxes (benefit)		62			(59	)
Share in (profits) losses of associated companies, net		(3	)		1

Net income (loss)		84			25
Net income (loss) attributable to non-controlling interests		7			(44	)

Net income (loss) attributable to Teva		77			69

Earnings (loss) per share attributable to ordinary shareholders:
Basic	$	0.07		$	0.06

Diluted	$	0.07		$	0.06

Weighted average number of shares (in millions):
Basic		1,099			1,093

Diluted		1,107			1,096

Amounts may not add up due to rounding.

The accompanying notes are an integral part of the financial statements.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(U.S. dollars in millions)

(Unaudited)

Three months ended

March 31,

2020

2019

Net income (loss)

$
25

$
(97
)
Other comprehensive income (loss), net of tax:

Currency translation adjustment

(560
)
47

Unrealized gain from derivative financial instruments

30

47

Total other comprehensive income (loss)

(530
)
94

Total comprehensive income (loss)

(505
)
(3
)
Comprehensive income (loss) attributable to
non-controlling
interests

(34
)
2

Comprehensive income (loss) attributable to Teva

$
(471
)

$
(5
)


	Three months ended
	March 31,
	2021			2020
Net income (loss)	$	84		$	25
Other comprehensive income (loss), net of tax:
Currency translation adjustment		(208	)		(560	)
Unrealized gain (loss) from derivative financial instruments, net		7			30

Total other comprehensive income (loss)		(201	)		(530	)

Total comprehensive income (loss)		(117	)		(505	)
Comprehensive income (loss) attributable to non-controlling interests		(60	)		(34	)

Comprehensive income (loss) attributable to Teva	$	(57	)	$	(471	)

Amounts may not add up due to rounding.

The accompanying notes are an integral part of the financial statements.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

~~(Unaudited)~~

Teva shareholders’ equity

Ordinary shares

Number of
shares (in
millions)

Stated
value

Additional
paid-in
capital

Retained
earnings
(accumulated
deficit)

Accumulated other
comprehensive
(loss)

Treasury
shares

Total Teva
shareholders’
equity

Non-
controlling
interests

Total
equity

(U.S. dollars in millions)

Balance at December 31, 2019

1,198

56

27,312

(6,956
)
(2,312
)
(4,128
)
13,972

1,091

15,063

Comprehensive income (loss)

69

(540
)
(471
)
(34
)
(505
)
Issuance of Shares

3

*

*

Stock-based compensation expense

30

30

30

Balance at March 31, 2020

1,201
$
56
$
27,342
$
(6,887
) $
(2,852
) $
(4,128
) $
13,531
$
1,057
$
14,588


	Teva shareholders’ equity
	Ordinary shares
	Number of shares (in millions)		Stated value		Additional paid-in capital		Retained earnings (accumulated deficit)			Accumulated other comprehensive (loss)			Treasury shares			Total Teva shareholders’ equity			Non-controlling interests			Total equity
	(U.S. dollars in millions)
Balance at December 31, 2020		1,202		57		27,443		(10,946	)		(2,399	)		(4,128	)		10,026			1,035			11,061
Net Income (loss)								77									77			7			84
Other comprehensive income (loss)											(134	)					(134	)		(67	)		(201	)
Issuance of Shares		6		0*																			0*
Stock-based compensation expense						31											31			0			31

Balance at March 31, 2021		1,208	$	57	$	27,474	$	(10,869	)	$	(2,534	)	$	(4,128	)	$	10,000		$	975		$	10,975

*	Represents an amount less than $0.5 million.

Amounts may not add up due to rounding.

The accompanying notes are an integral part of the financial statements.


	Teva shareholders’ equity
	Ordinary shares
	Number of shares (in millions)		Stated value		Additional paid-in capital		Retained earnings (accumulated deficit)			Accumulated other comprehensive (loss)			Treasury shares			Total Teva shareholders’ equity			Non-controlling interests			Total equity
	(U.S. dollars in millions)
Balance at December 31, 2019		1,198		56		27,312		(6,956	)		(2,312	)		(4,128	)		13,972			1,091			15,063
Net Income (loss)								69									69			(44	)		25
Other comprehensive income (loss)											(540	)					(540	)		10			(530	)
Issuance of shares		3		0*																			0*
Stock-based compensation expense						30											30						30

Balance at March 31, 2020		1,201	$	56	$	27,342	$	(6,887	)	$	(2,852	)	$	(4,128	)	$	13,531		$	1,057		$	14,588

Teva shareholders’ equity

Ordinary shares

Number of
shares (in
millions)

Stated
value

Additional
paid-in
capital

Retained
earnings
(accumulated
deficit)

Accumulated other
comprehensive
(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)

(105
)
100

(5
)
2

(3
)
Issuance of shares

2

*

*

Issuance of Treasury Shares

(3
)
5

2

2

Stock-based compensation expense

34

34

34

Other

(6
)
(6
)
(6
)

Balance at March 31, 2019

1,198
$
56
$
27,234
$
(6,063
) $
(2,359
) $
(4,137
) $
14,732
$
1,089
$
15,821

*	Represents an amount less than $0.5 million $. ~~0.5 million.~~

Amounts may not add up due to rounding.

The accompanying notes are an integral part of the financial statements.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in millions)

(Unaudited)

Three months ended

March 31,

2020

2019

Operating activities:

Net income (loss)

$
25

$
(97
)
Adjustments to reconcile net income (loss) to net cash provided by operations:

Depreciation and amortization

399

443

Impairment of long-lived assets

724

489

Net change in operating assets and liabilities

(666
)
(805
)
Deferred income taxes – net and uncertain tax positions

(233
)
(33
)
Stock-based compensation

30

34

Net loss (gain) from sale of long-lived assets and investments

24

(2
)
Other items

2

83

Net cash provided by operating activities

305

112

Investing activities:

Beneficial interest collected in exchange for securitized accounts receivables

368

362

Purchases of property, plant and equipment

(128
)
(125
)
Proceeds from sale of long lived assets

6

11

Other investing activities

6

24

Net cash provided by investing activities

252

272

Financing activities:

Repayment of senior notes and loans and other long-term liabilities

(700
)
(126
)
Tax withholding payments made on shares and dividends

—

(52
)
Other financing activities

—

(11
)

Net cash used in financing activities

(700
)
(189
)

Translation adjustment on cash and cash equivalents

(28
)
(4
)

Net change in cash and cash equivalents

(171
)
191

Balance of cash and cash equivalents at beginning of period

1,975

1,782

Balance of cash and cash equivalents at end of period

$
1,804

$
1,973

Non-cash
financing and investing activities:

Beneficial interest obtained in exchange for securitized accounts receivables

$
375

$
396


	Three months ended
	March 31,
	2021			2020
Operating activities:
Net income (loss)	$	84		$	25
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization		376			399
Impairment of long-lived assets and assets held for sale		127			724
Net change in operating assets and liabilities		(1,076	)		(666	)
Deferred income taxes – net and uncertain tax positions		(11	)		(233	)
Stock-based compensation		31			30
Net loss (gain) from investments and from sale of long lived assets		74			24
Other items		(10	)		2

Net cash provided by (used in) operating activities		(405	)		305

Investing activities:
Beneficial interest collected in exchange for securitized accounts receivables		476			368
Purchases of property, plant and equipment		(150	)		(128	)
Proceeds from sale of business and long lived assets		138			6
Proceeds from sale of investments and other investing activities		44			6

Net cash provided by investing activities		508			252

Financing activities:
Repayment of senior notes and loans and other long-term liabilities		0			(700	)
Redemption of convertible senior notes		(491	)		0
Other financing activities		(2	)		0

Net cash used in financing activities		(493	)		(700	)

Translation adjustment on cash and cash equivalents		(44	)		(28	)

Net change in cash and cash equivalents		(434	)		(171	)
Balance of cash and cash equivalents at beginning of period		2,177			1,975

Balance of cash and cash equivalents at end of period	$	1,743		$	1,804

Non-cash financing and investing activities:
Beneficial interest obtained in exchange for securitized accounts receivables	$	488		$	375

Amounts may not add up due to ~~rounding~~roundin

The accompanying notes are an integral part of the financial statements.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – Basis of presentation:

~~a. Basis of presentation~~

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, the financial statements reflect all normal and recurring adjustments necessary to fairly state the financial position and results of operations of Teva. The information included in this Quarterly Report on Form

10-Q

should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form

10-K

for the year ended December 31, ~~2019,~~2020, as filed with the Securities and Exchange Commission (“SEC”). ~~Amounts~~The

year-end

balance sheet data was derived from the audited consolidated financial statements as of December 31, ~~2019 were derived from the audited balance sheet at that date,~~2020, but not all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) are ~~included.~~included

In the process of preparing the consolidated financial statements, management makes estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. The inputs into Teva’s judgments and estimates also consider the economic implications of the

COVID-19

pandemic on its critical and significant accounting estimates, most significantly in relation to sales, reserves and allowances, IPR&D assets, marketed product rights and goodwill, all of which will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning the

COVID-19

pandemic and the actions taken to contain or treat it, as well as the economic impact on Teva’s employees, third-party manufacturers and suppliers, customers and markets. All estimates made by Teva related to the impact of the

COVID-19

pandemic within its financial statements may change in future periods. Actual results could differ from those estimates.

~~Certain comparative figures have been reclassified to conform to current presentation.~~ The results of operations for the three months ended March 31, ~~2020~~2021 are not necessarily indicative of results that could be expected for the entire fiscal year. 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.

b. Significant accounting policies

Recently adopted accounting pronouncements

In March 2020, the FASB issued ASU

2020-04

“Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial ~~Reporting”.~~Reporting.” This guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This guidance is effective for all entities as of March 12, 2020 through December 31, 2022. There was no impact to the Company’s consolidated financial statements for the ~~quarter~~period ended March 31, ~~2020~~2021 as a result of adopting this standard update. The Company ~~will continue~~is continuing to evaluate ~~this guidance to determine~~ the potential impact ~~it may have in~~of the ~~future~~replacement of the LIBOR benchmark on its ~~consolidated financial statements.~~

~~In April 2019,~~interest rate risk management activities and has started initial negotiations to transform the ~~FASB issued ASU~~

~~2019-04~~

~~“Codification Improvements~~facility base rate of its securitization program. However, it is not expected to Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Financial Instruments (Topic 825).” This ASU provides clarifications of three topics related to financial instruments accounting. Teva adopted the provisions of this update as of January 1, 2020 with nohave a material impact on ~~its~~the consolidated financial ~~statements.~~

~~In November 2018, the FASB issued ASU~~

~~2018-18~~

“Collaborative Arrangements (Topic 808)—Clarifying the interaction between Topic 808 and Topic 606.” The amendments provide guidance on whether certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606. It also specifically (i) addresses when the participant should be considered a customer in the context of a unit of account, (ii) adds

~~unit-of-account~~

guidance in ASC 808 to align with guidance in ASC 606 and (iii) precludes presenting revenue from a collaborative arrangement together with revenue recognized under ASC 606 if the collaborative arrangement participant is not a customer. Teva adopted the provisions of this update as of January 1, 2020 with no material impact on its consolidated financial statements.

~~In August 2018, the FASB issued ASU~~

~~2018-15~~

~~“Intangibles—Goodwill and~~

~~other—Internal-use~~

~~software (Subtopic~~

~~350-40):~~

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain

~~internal-use~~

software. Teva applied the guidance prospectively to all implementation costs incurred after the date of adoption. Teva adopted the provisions of this update as of January 1, 2020 with no material impact on its consolidated financial statements.

~~In August 2018, the FASB issued ASU~~

~~2018-13~~

“Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” This guidance removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. The new disclosure requirements include disclosing the changes in unrealized gains and losses for the

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Certain disclosures required by this guidance must be applied on a retrospective basis and others on a prospective basis. Teva adopted the provisions of this update as of January 1, 2020 with no material impact on its consolidated financial statements.

~~In June 2016, the FASB issued ASU~~

~~2016-13~~

“Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Teva adopted the provisions of this update as of January 1, 2020 with no impact on its consolidated financial statements.

~~Recently issued accounting pronouncement, not yet adopted~~

results.

In December 2019, the FASB issued ASU

2019-12

“Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes” ~~(“the Update”~~(the “update”). The amendments in this ~~Update~~update simplify the accounting for income taxes by removing the following exceptions in ASC 740: (1) exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items; (2) exception to ~~the requirement to recognize a deferred tax liability~~accounting for basis differences for equity method investments when a foreign subsidiary becomes an equity method investment; and (3) exception to ~~the ability not to recognize a deferred tax liability~~accounting for basis differences for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) exception to the general methodology for calculating income taxes in an interim period when a

year-to-date

loss exceeds the anticipated loss for the year.

In addition, the ~~Update~~update also simplifies the accounting for income taxes in certain topics as follows: (1) requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a

non-income-based

tax; (2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction; (3) specifying that an entity can elect (rather than be required to) allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; and (4) requiring that an entity reflect the effect of an enacted change in tax laws or

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

rates in the annual effective tax rate computation in the interim period that includes the enactment date. Teva adopted the provisions of this update as of January 1, 2021. Based on the Company’s evaluation of the above provisions, the Company notes that items (1) and (4) of this paragraph are not material. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Recently issued accounting pronouncements, not yet adopted

In August 2020, the FASB issued ASU

2020-06

“Debt – Debt with Conversion and Other Options

(Subtopic 470-20)

and Derivatives and

Hedging—Contracts

in Entity’s Own Equity (Subtopic 815 – 40).” This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The amendments into this ~~Update~~guidance are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal ~~years, beginning after December 15, 2020.~~years. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated

financial statements.

~~c. Revision of Previously Reported Consolidated Financial Statements~~

In connection with the preparation of Teva’s consolidated financial statements for the fiscal year ended December 31, 2019, Teva determined that in the full years and interim periods of fiscal years 2017 and 2018, and the first three quarters of fiscal year 2019, it had an immaterial error in the presentation of distribution revenues from its Israeli distribution business. This business is part of the International Markets reporting segment and facilitates distribution of Teva and third party products to pharmacies, hospitals and other organizations in Israel.

Specifically, the Company concluded that it presented revenues from its Israeli distribution business on a gross basis, although it should have reported such revenues on a net basis. Because Teva has no discretion in establishing prices for any specified goods or services, limited inventory risk and is not primarily responsible for contract fulfillment, Teva does not meet the criteria for reporting revenues from such business as a principal (on a gross basis), as opposed to as an agent (on a net basis).

The Company evaluated the cumulative impact of this item on its previously issued annual financial statements for 2017 and 2018, and the interim financial statements for 2017, 2018 and the first three quarters of 2019, and concluded that, for the reasons mentioned below, the revisions were not material, individually or in the aggregate, to any of its previously-issued interim or annual financial statements. Teva has revised its presentation of net revenue and cost of sales in the historical consolidated financial statements to reflect the change in this item, as described in more detail below.

The impact of this revision is a decrease in net revenues with an offsetting decrease in cost of sales. There is no impact on gross profit, operating income or earnings per share. In addition, there is no impact on Teva’s balance sheet or statement of cash flows for the related periods.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~The following table summarizes the impact of the revision on net revenues and cost of sales in the consolidated statement of income for the relevant period:~~

Net revenues

Cost of sales

As reported

Adjustment

As revised

As reported

Adjustment

As revised

(U.S. $ in millions)

2019

Q1

4,295

(146
)
4,149

2,440

(146
)
2,293

NOTE 2 – Certain transactions:

The Company has entered into alliances and other arrangements with third parties to acquire rights to products it does not have, to access markets it does not operate in and to otherwise share development costs or business risks. The Company’s most significant agreements of this nature are summarized below.

Alvotech Partnership

In August 2020, Teva entered into a partnership agreement with biopharmaceutical company Alvotech for the exclusive commercialization in the U.S. of five biosimilar product candidates. The initial pipeline for this partnership contains biosimilar candidates addressing multiple therapeutic areas, including a proposed biosimilar to Humira

450

million,

as well as royalty payments, may be payable by Teva over the next few years. Teva and Alvotech will share profit from the commercialization of these biosimilars. Abbvie recently sued Alvotech for allegedly misappropriating confidential information relating to Humira

. Alvotech has disputed these claims.

Eli Lilly and Alder BioPharmaceuticals

In December 2018, Teva entered into an agreement with Eli Lilly resolving the European Patent Office opposition they had filed against Teva’s AJOVY

patents. The settlement agreement with Lilly also resolved Lilly’s action to revoke the patent protecting AJOVY in the United Kingdom.

On January 8, 2018, Teva signed a global license agreement with Alder BioPharmaceuticals (“Alder”). The agreement validates Teva’s IPintellectual property and resolves Alder’s opposition to Teva’s European patent with respect to anti-calcitonin gene-related peptide (CGRP) antibodies, including the withdrawal of Alder’s appeal before the European Patent Office. Under the terms of the agreement, Alder ~~will receive~~

received a

non-exclusive

license to Teva’s anti-CGRP antibodies patent portfolio to develop, manufacture and commercialize eptinezumab in the United States and worldwide, excluding Japan and Korea. Teva received a ~~$25~~ $

million upfront payment that was recognized as revenue during the first quarter of

2018

, and a $

~~$25~~

million milestone payment in March

2020

that was recognized as revenue in the first quarter of ~~2020.~~

2020

. The agreement stipulates additional development and commercial milestone payments to Teva of up to ~~$150~~$

150

million, as well as future royalties.

~~PGT Healthcare Partnership~~

In July 2018, Teva terminated its joint venture with the Procter & Gamble Company (“P&G”), PGT Healthcare partnership (“PGT”), which the two companies established in 2011 to market OTC medicines. Teva will continue to maintain its OTC business on an independent basis.

As part of the separation, Teva transferred to P&G the shares it held in New Chapter Inc. and ownership rights in an OTC plant located in India. Teva provides certain services to P&G after the separation for a transition period.

During the first quarter of 2018, Teva classified the plant in India as an asset held for sale and recorded an impairment of $64 million under other assets impairments, restructuring and other items. In addition, Teva recorded a write-down of $94 million of its investment in New Chapter Inc. under share in losses of associated companies.

During September 2018, Teva and P&G completed the final net asset distribution as part of the dissolution and Teva recorded a gain of $50 million to reflect the cash payment received from P&G under the dissolution agreement.

AUSTEDO

On September 19, 2017, Teva entered into a partnership agreement with Nuvelution Pharma, Inc. (“Nuvelution”) for development of AUSTEDO for the treatment of Tourette syndrome in pediatric patients in the United States. There are no further plans in this indication following clinical trial results received in February 2020, which failed to meet their primary endpoints. The partnership agreement was terminated on

February 5, 2021.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Otsuka

On May 12, 2017, Teva entered into a license and collaboration agreement with Otsuka Pharmaceutical Co. Ltd. (“Otsuka”), providing Otsuka with an exclusive license to conduct phase 2 and 3 clinical trials for AJOVY in Japan and,

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

approved, to commercialize the product in Japan. Otsuka paid Teva an upfront payment of $50 million in consideration for the transaction. Teva may receive additional milestone payments upon filing with Japanese regulatory authorities, receipt of regulatory approval and achievement of certain revenue targets. Otsuka will also pay Teva royalties on AJOVY sales in Japan. Results for these trials were received in January 2020 indicating that primary and secondary endpoints were achieved and that no clinically significant adverse events were observed in subjects. In the third quarter of 2020, Otsuka submitted an application to obtain manufacturing and marketing approval for AJOVY in Japan and, as a result, paid Teva a milestone payment of $15 million, which was recognized as revenue in the third quarter of 2020. Teva may receive additional milestone payments upon achievement of

certain development and revenue targets. Otsuka will also pay Teva royalties on AJOVY sales in Japan.

Celltrion

In October 2016, Teva and Celltrion, Inc. (“Celltrion”) entered into a collaborative agreement to commercialize ~~TRUXIMA~~Truxima

and ~~HERZUMA~~Herzuma

, two biosimilar products for the U.S. and Canadian markets. Teva paid Celltrion $160 million, of which ~~up to~~Teva received an aggregate credit of $60 million as

~~million is refundable or creditable.~~

of March 31, 2021.

Teva and Celltrion ~~will~~ share the profit from

the commercialization of these products. These two products, ~~TRUXIMA~~Truxima and ~~HERZUMA,~~Herzuma, were approved by the FDA in November and December

2018

, respectively and were launched in the United States in November

2019

and March

2020

, respectively.

Regeneron

In September 2016, Teva and Regeneron Pharmaceuticals, Inc. (“Regeneron”) entered into a collaborative agreement to develop and commercialize Regeneron’s pain medication product, fasinumab. Teva and Regeneron share ~~equally~~ in the global commercial rights to this product (excluding Japan, Korea and nine other Asian countries), as well as ongoing associated R&D costs of approximately

$1 billion. Teva made an upfront payment of

~~$250~~

$250 million to Regeneron in the third quarter of 2016 ~~as part~~and additional payments for achievement of ~~the agreement.~~development milestones in an aggregate amount of $120 million were paid during 2017 and 2018. The agreement stipulates additional development and commercial milestone payments of up to ~~Regeneron,~~$2,230

million, as well as future royalties. Currently, all non-essential activities and related expenditures for fasinumab have been put on hold. Next steps will be assessed together with Regeneron, with the intention of discussing data with the FDA.

Assets and Liabilities Held For Sale:

Certain assets of Teva’s business venture in Japan

Teva operated its business in Japan, which was part of Teva’s International Market segment, through a business venture with The Takeda Pharmaceutical Company Limited (“Takeda”), in which Teva owned a 51% stake and Takeda owned the remaining 49%.

In July 2020

, Teva and Takeda entered into a purchase agreement to sell the majority of the business venture’s generic and operational assets. This transaction was completed on February 1

, 2021

Until the closing date Teva accounted for the business venture assets and liabilities that were sold, as held for sale and determined that the fair value less cost of sale did not exceed the carrying value, resulting in an impairment charge

247

million in other assets impairments, restructuring and other items recognized in 2020 and in the first quarter of 2021.

Assets held for sale as of March 31, 2021, include the sale of certain OTC assets and manufacturing assets that are expected to be sold within the next year. The OTC assets were sold in April 2021. Assets held for sale as of December 31, 2020, included the Teva-Takeda business venture assets sold during the first quarter of 2021 and the sale of certain OTC assets and other manufacturing assets.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

The table below summarizes all Teva assets included as held for sale as of March 31, 2021 and December 31, 2020:


	March 31,			December 31,
	2021			2020
	(U.S. $ in millions)
Inventories		0			146
Property, plant and equipment, net and others		99			312
Goodwill		2			27
Adjustments of assets held for sale to fair value		(14	)		(296	)

Total assets of the disposal group classified as held for sale in the consolidated balance sheets	$	87		$	189

NOTE 3 – Revenue from contracts with customers:

Disaggregation of revenue

The following table disaggregates Teva’s revenues by major revenue streams. For additional information on disaggregation of revenues, see note 15.

Three months ended March 31, 2020

North
America

Europe

International
Markets

Other

activities

Total

(U.S. $ in millions)

Sale of goods

1,625

1,370

482

177

3,655

Licensing arrangements

25

12

3

1

41

Distribution

426

2

6

—

434

Other
6
19

74

129

227

$
2,082
$
1,402
$
565
$
307
$
4,357

Three months ended March 31, 2019

North
America

Europe

International
Markets

Other

activities

Total

(U.S. $ in millions)

Sale of g
oods

1,637

1,259

468

187

3,551

Licensing arrangements

31

5
§
1

37

Distribution

379
§
5

—

383

Other

—
§
48

128

176

$
2,047
$
1,264
$
521
$
317
$
4,149

§	~~Represents an amount less than $1 million.~~


	Three months ended March 31, 2021
	North America		Europe		International Markets		Other activities		Total
	(U.S. $ in millions)
Sale of goods		1,668		1,178		440		177		3,463
Licensing arrangements		32		14		3		1		49
Distribution		289		0§		19		0		308
Other		0§		22		28		111		162

	$	1,989	$	1,214	$	490	$	289	$	3,982

The financial data presented in the tables above with respect to prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c.

§ Represents an amount less than $1 million.


	Three months ended March 31, 2020
	North America		Europe		International Markets		Other activities		Total
	(U.S. $ in millions)
Sale of goods		1,625		1,370		482		177		3,655
Licensing arrangements		25		12		3		1		41
Distribution		426		2		6		—		434
Other		6		19		74		129		227

	$	2,082	$	1,402	$	565	$	307	$	4,357

Variable consideration

Variable consideration mainly includes sales reserves and allowances (“SR&A”), comprised of rebates (including Medicaid and other governmental program discounts), chargebacks, returns and other promotional (including shelf stock adjustments) items. Provisions for prompt payment discounts are netted against accounts receivables.

The Company recognizes these provisions at the time of sale and adjusts them if the actual amounts differ from the estimated provisions.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

SR&A to U.S. customers comprised approximately ~~82%~~79% of the Company’s total SR&A as of March 31, ~~2020,~~

2021, with the remaining balance primarily in Canada and Germany. The changes in SR&A for third-party sales for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:

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, 2019
$
87
$
2,895
$
1,109
$
1,342
$
637
$
176
$
6,159
$
6,246

Provisions related to sales made in current year period

102

1,370

233

2,223

139

33

3,998

4,100

Provisions related to sales made in prior periods

—
(106 ) (29 ) (16 ) (1 )
4
(148 ) (148 )
Credits and payments
(106 ) (1,513 ) (248 ) (2,396 ) (112 ) (35 ) (4,304 ) (4,410 )
Translation differences

—
(21 ) (2 ) (6 ) (4 ) (10 ) (43 ) (43 )

Balance at March 31, 2020
$
83

2,625
$
1,063
$
1,147
$
659
$
168
$
5,662
$
5,745

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

112

1,350

324

2,320

72

114

4,180

4,292

Provisions related to sales made in prior periods

—

—

1

(5
)
3

(1
)
(2
)
(2
)
Credits and payments

(125
)
(1,613
)
(438
)
(2,413
)
(117
)
(101
)
(4,682
)
(4,807
)
Translation differences

—

(6
)
(1
)
—

—

—

(7
)
(7
)

Balance at March 31, 2019
$
162

2,737
$
1,247
$
1,432
$
596
$
188
$
6,200
$
6,362

~~Allowance for credit losses~~

Accounts receivable are recognized net of allowance for credit losses. Allowances for credit losses were $127 million and $135 million as of March 31, 2020 and December 31, 2019, respectively. The decrease is mainly due to currency fluctuations.


	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, 2020	$	80		$	2,054		$	828		$	1,108		$	686		$	148		$	4,824		$	4,904
Provisions related to sales made in current year		100			1,126			164			2,043			76			23			3,432			3,532
Provisions related to sales made in prior periods		—			(55	)		(11	)		6			(40	)		(17	)		(117	)		(117	)
Credits and payments		(102	)		(1,210	)		(188	)		(1,987	)		(101	)		(40	)		(3,526	)		(3,628	)
Translation differences		—			(17	)		(4	)		(3	)		(3	)		(2	)		(29	)		(29	)

Balance at March 31, 2021	$	78			1,898		$	789		$	1,167		$	618		$	112		$	4,584		$	4,662


	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, 2019	$	87		$	2,895		$	1,109		$	1,342		$	637		$	176		$	6,159		$	6,246
Provisions related to sales made in current year		102			1,370			233			2,223			139			33			3,998			4,100
Provisions related to sales made in prior periods		—			(106	)		(29	)		(16	)		(1	)		4			(148	)		(148	)
Credits and payments		(106	)		(1,513	)		(248	)		(2,396	)		(112	)		(35	)		(4,304	)		(4,410	)
Translation differences		—			(21	)		(2	)		(6	)		(4	)		(10	)		(43	)		(43	)

Balance at March 31, 2020	$	83			2,625		$	1,063		$	1,147		$	659		$	168		$	5,662		$	5,745

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 4 – Inventories:

Inventories, net of reserves, consisted of the following:

March 31,

December 31,

2020

2019

(U.S. $ in millions)

Finished products
$
2,193
$
2,504

Raw and packaging materials

1,306

1,183

Products in process

650

583

Materials in transit and payments on account

141

151

Total
$
4,290
$
4,422


	March 31, 2021		December 31, 2020
	(U.S. $ in millions)
Finished products	$	2,253	$	2,378
Raw and packaging materials		1,297		1,231
Products in process		663		605
Materials in transit and payments on account		193		189

Total	$	4,406	$	4,403

NOTE 5 – Identifiable intangible assets:

Identifiable intangible assets consisted of the following:

Gross carrying amount net of
impairment

Accumulated amortization

Net carrying amount

March 31,

December 31,

March 31,

December 31,

March 31,

December 31,

2020

2019

2020

2019

2020

2019

(U.S. $ in millions)

Product rights
$
19,371
$
19,663
$
10,969
$
10,640
$
8,402
$
9,023

Trade names

595

600

135

126

460

474

In process research and development

1,394

1,735

—

—

1,394

1,735

Total
$
21,361
$
21,998
$
11,104
$
10,766
$
10,256
$
11,232


	Gross carrying amount net of impairment				Accumulated amortization				Net carrying amount
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2021		2020		2021		2020		2021		2020
	(U.S. $ in millions)
Product rights	$	19,213	$	19,650	$	12,019	$	12,094	$	7,194	$	7,556
Trade names		610		621		173		165		437		456
In process research and development		814		911		—		—		814		911

Total	$	20,637	$	21,182	$	12,192	$	12,259	$	8,445	$	8,923

Product rights and trade names

Product rights and trade names are assets presented at amortized cost. Product rights and trade names represent a portfolio of pharmaceutical products from various therapeutic categories from various acquisitions with a weighted average life of approximately 10 years.

~~years.~~ Amortization of intangible assets ~~amounted to~~

~~$258~~was $242 million and ~~$283~~

$258 million in the three months ended March 31, 2021 and 2020, ~~and 2019,~~ respectively.

IPR&D

Teva’s IPR&D are assets that have not yet been approved in major markets. Teva’s IPR&D is comprised mainly of various generic products from the Actavis Generics acquisition ~~for~~

~~$1,333~~

of $780 million. IPR&D carries intrinsic risks that the asset might not succeed in advanced phases and may be impaired in future periods.

Intangible assets impairments

Impairments of long-lived intangible assets for the three months ended March 31, 2021 and 2020, were $79 million and $649 million, respectively.

Impairments in the first ~~three months~~quarter of

~~2020 and 2019 were~~

~~$649 million and $469~~

~~million, respectively.~~ 2021 consisted of:

(a)

IPR&D assets of $51 million related to generic pipeline products acquired from Actavis Generics resulting from development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape, launch date) in the United States; and

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

(b)

Identifiable product rights of $28 million related to updated market assumptions regarding price and volume of products acquired from Actavis Generics that are primarily marketed in the United States.

Impairments in the first quarter of 2020 consisted of:

(a)

IPR&D assets of $331 million, primarily due to: (i) $211 million related to AUSTEDO for the treatment of Tourette syndrome in pediatric patients in the United States; and (ii) $106 million related to 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) in the United States; ~~and~~and;

(b)

Identifiable product rights of $318 million, mainly due to: (i) $165 million in Japan in connection with ongoing regulatory pricing reductions and generic competition; and (ii) $138 million due to updated market assumptions regarding price and volume of certain generic products primarily marketed in the United States.

~~Impairments~~The fair value measurement of the impaired intangible assets in the first ~~quarter~~three months of ~~2019 consisted of:~~2021 is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. The discount rate applied ranged from 7.5% to 9%. A probability of success factor

ranging from

~~(a)~~

~~IPR&D assets of $265 million, mainly due to: (i) $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 and (ii) $140 million of other generic 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); and

~~Table~~40% to 90% was used in the fair value calculation to reflect inherent regulatory and commercial risk of ~~Contents~~IPR&D.

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(b)~~

Identifiable product rights of $204 million, mainly due to updated market assumptions regarding price and volume of products acquired from Actavis Generics and primarily marketed in the United States.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

NOTE 6 – Goodwill:

The changes in the carrying amount of goodwill for the period ended March 31, ~~2020~~2021 were as follows:

North

America

Europe

International
Markets

Other

Total

(U.S. $ in millions)

Balance as of
December

3
1,
2019
$
11,091
$
8,536
$
2,532
$
2,687
$
24,846

Changes during the period:

Translation differences

(31
)
(143
)
(182
)
—

(357
)

Balance as of March 31, 2020
$
11,060
$
8,393
$
2,350
$
2,687
$
24,490


	North America		Europe			International Markets			Other		Total
	(U.S. $ in millions)
Balance as of December 31, 2020 (1)	$	6,473	$	9,102		$	2,362		$	2,687	$	20,624
Changes during the period:
Translation differences		4		(312	)		(14	)				(322	)

Balance as of March 31, 2021 (1)	$	6,477	$	8,790		$	2,348		$	2,687	$	20,302

(1)	Accumulated goodwill impairment as of March 31, 2021 and December 31, 2020 was approximately $25.6 billion.

Teva operates its business through three

reporting

segments: North America, Europe and International Markets. Each of these business segments is a reporting unit. Additional reporting units include Teva’s production and sale of APIs to third parties (“Teva API”) and an

out-licensing

platform offering a portfolio of products to other pharmaceutical companies through its affiliate Medis. The Teva API and Medis reporting units are included under “Other” in the above table. See note 15 for additional segment information.

Teva determines the fair value of its reporting units using the income approach. The income approach is a forward-looking approach for estimating fair value. Within the income approach, the method used is the discounted cash flow method. Teva starts with a forecast of all the expected net cash flows associated with the reporting unit, which includes the application of a terminal value, and then applies a discount rate to arrive at a net present value amount. Cash flow projections are based on Teva’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on the weighted average cost of capital (“WACC”), adjusted for the relevant risk associated with country-specific and business-specific characteristics. If any of these expectations were to vary materially from Teva’s assumptions, Teva may ~~record~~recognize an impairment of goodwill allocated to these reporting units in the future.

~~First Quarter Developments~~

During the first quarter of ~~2020,~~2021, management assessed developments that occurred during the quarter to determine if it was more likely than not that the fair value of any of its reporting units was below its carrying amount. As part of this assessment, management also considered the sensitivity of its conclusions as they relate to changes in the estimates and assumptions used in the latest forecast available for each period.

~~Teva evaluated qualitative factors, including expected effects of~~

~~COVID-19~~

~~on its business. The impact of the~~

~~COVID-19~~

~~pandemic on Teva’s business has been evaluated and it is not expected to significantly alter the Company’s business model at this time.~~ Based on this assessment, management ~~has~~ concluded that it iswas not more likely than not that the fair value of any of the reporting units iswas below its carrying value as of March 31, ~~2020~~2021 and, therefore, no quantitative assessment was performed. ~~If circumstances were to change from Teva’s expectations about the duration or impact of~~

~~COVID-19,~~

~~one or more business units could be impacted, which may result in an impairment.~~

~~Market Capitalization~~16

~~Teva analyzed the aggregate fair value of its reporting units, calculated as part of the annual goodwill impairment test performed in the fourth quarter of 2019, compared to its market capitalization.~~

At December 31, 2019, Teva’s market capitalization was below management’s assessment of the aggregate fair value of the Company’s reporting units. Management viewed this as a temporary situation mainly attributed to an acute reaction by the market primarily related to opioid and price fixing litigation risks. Management continues to believe market concerns regarding the uncertainty of these matters are impacting its market capitalization. However, developments in the case are expected to clarify the outlook with regards to the opioid litigation, assuming the proposed settlement framework is finalized in 2020.

~~During 2020, Teva experienced additional volatility in its share price resulting from the impact of the~~

~~COVID-19~~

pandemic on equity markets and the global economy. Management believes the current market reaction is based upon the lack of information regarding the impact the pandemic might have on Teva’s business and the entire economy. The economic uncertainties in the market related to the

~~COVID-19~~

pandemic, along with the uncertainties related to Teva’s litigations, result in a similar gap between book value and market value at the date of this filing as compared to the gap that existed at December 31, 2019. Further, as of the date of this filing, the Company’s market capitalization plus a reasonable control premium exceeds its book value. Based on management’s assessment of the developments in the first quarter of 2020 and considering the Company’s current market capitalization as comparable to that of December 31, 2019, management concluded that the estimated fair value of its reporting units more likely than not exceeds its carrying amount.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Following the goodwill impairment charge recorded in the third quarter of 2020 in the North America reporting unit, the carrying value of the North America reporting unit equaled its fair value as of September 30, 2020. Therefore, if business conditions or expectations were to change materially, it may be necessary to record further impairment charges to the North America reporting unit in the future.

The other reporting units all have fair value in excess of

~~Management will continue to monitor business conditions, including the impact~~

over their book values as of

~~COVID-19,~~ March 31, 2021.

~~and will consider future developments in Teva’s market capitalization when assessing whether additional goodwill impairment is required in future periods.~~

NOTE 7 – Debt obligations:

Short-term debt:

March 31,
2020

December 31,
2019

Weighted average interest
rate as of March 31, 2020

Maturity

(U.S. $ in millions)

Convertible debentures

0.25
%
2026
$
514
$
514

Current maturities of long-term liabilities

1,116

1,831

Total short-term debt
$
1,630
$
2,345


						March 31, 2021		December 31, 2020
	Weighted average interest rate as of March 31, 2021			Maturity		March 31, 2021		December 31, 2020
						(U.S. $ in millions)
Convertible senior debentures		0.25	%		2026		23		514
Current maturities of long-term liabilities							2,674		2,674

Total short-term debt						$	2,697	$	3,188

Convertible senior debentures

The principal amount of Teva’s 0.25% convertible senior debentures due 2026, ~~with $514~~was $23 million ~~principal amount outstanding~~ as of March 31, ~~2020~~2021 and $514 million as of December ~~31,2019,~~31, 2020. These convertible senior debentures include a “net share settlement” feature according to which the principal amount will be paid in cash and in case of conversion, only the residual conversion value above the principal amount will be paid in Teva shares. Due to the “net share settlement” feature, exercisable at any time, these convertible senior debentures are classified in the Balance Sheet under short-term debt. Holders of the convertible senior debentures ~~will be able to cause Teva to redeem~~exercised their optional repurchase right and redeemed $491 million of the convertible senior debentures on February 1, ~~2021.~~2021,

which was the date to exercise this right.

191

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

b. Long-term debt:

Weighted average interest
rate as of March 31, 2020

Maturity

March 31,

2020

December 31,
2019

(U.S. $ in millions)

Senior notes EUR 1,010 million

0.38
%
2020
$
1,116
$
1,131

Senior notes EUR 1,500 million

1.13
%
2024

1,651

1,673

Senior notes EUR 1,300 million

1.25
%
2023

1,432

1,451

Senior notes EUR 1,000 million

6.00
%
2025

1,105

1,120

Senior notes EUR 900 million

4.50
%
2025

994

1,008

Senior notes EUR 750 million

1.63
%
2028

822

833

Senior notes EUR 700 million

3.25
%
2022

773

784

Senior notes EUR
700 million

1.88
%
2027

771

782

Senior notes USD 3,500 million

3.15
%
2026

3,494

3,494

Senior notes USD 1,475 million

2.20
%
2021

1,474

1,474

Senior notes USD 3,000 million

2.80
%
2023

2,995

2,995

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 1,000 million 7.13
%
2025 1,000 1,000
Senior notes USD 844 million

2.95
%
2022

855

856

Senior notes USD 789 million

6.15
%
2036

783

782

Senior notes USD 700 million
(1)

2.25
%
2020

—

700

Senior notes USD 613 million

3.65
%
2021

618

618

Senior notes USD 588 million

3.65
%
2021

587

587

Senior notes CHF 350 million

0.50
%
2022

366

361

Senior notes CHF 350 million

1.00
%
2025

366

362

Total senior notes

25,687

26,496

Other long-term debt

1.14
%
2026

1

1

Less current maturities

(1,116
)
(1,831
)
Less debt issuance costs

(98
)
(103
)

Total senior notes and loans
$
24,473

$
24,562

~~(1)~~

~~During the first quarter of 2020, Teva repaid at maturity~~

~~$700 million of its 2.25% senior notes.~~


	Weighted average interest rate as of March 31, 2021			Maturity		March 31, 2021			December 31, 2020
						(U.S. $ in millions)
Senior notes EUR 1,500 million		1.13	%		2024		1,752			1,839
Senior notes EUR 1,300 million		1.25	%		2023		1,520			1,595
Senior notes EUR 1,000 million		6.00	%		2025		1,172			1,230
Senior notes EUR 900 million		4.50	%		2025		1,054			1,107
Senior notes EUR 750 million		1.63	%		2028		873			916
Senior notes EUR 700 million		3.25	%		2022		820			861
Senior notes EUR 700 million		1.88	%		2027		818			860
Senior notes USD 3,500 million		3.15	%		2026		3,495			3,495
Senior notes USD 1,475 million		2.20	%		2021		1,474			1,472
Senior notes USD 3,000 million		2.80	%		2023		2,997			2,996
Senior notes USD 2,000 million		4.10	%		2046		1,986			1,986
Senior notes USD 1,250 million		6.00	%		2024		1,250			1,250
Senior notes USD 1,250 million		6.75	%		2028		1,250			1,250
Senior notes USD 1,000 million		7.13	%		2025		1,000			1,000
Senior notes USD 844 million		2.95	%		2022		851			853
Senior notes USD 789 million		6.15	%		2036		783			783
Senior notes USD 613 million		3.65	%		2021		615			616
Senior notes USD 588 million		3.65	%		2021		587			586
Senior notes CHF 350 million		0.50	%		2022		372			397
Senior notes CHF 350 million		1.00	%		2025		372			398

Total senior notes							25,041			25,490
Other long-term debt		0.90	%		2026		1			1
Less current maturities							(2,674	)		(2,674	)
Less debt issuance costs							(80	)		(86	)

Total senior notes and loans						$	22,288		$	22,731

Long-term debt was issued by several indirect wholly-owned subsidiaries of the Company and is fully and unconditionally guaranteed by the Company as to payment of all principal, interest, discount and additional amounts, if any.

Long-term debt as of March 31, ~~2020~~2021 is effectively denominated in the following currencies:

~~66%~~

61% in U.S. dollar,

~~31%~~

36% in euro and

in Swiss franc.

Teva’s principal sources of short-term liquidity are its cash on hand, existing cash investments, liquid securities and available credit facilities, primarily its

~~$2.3~~ $2.3 billion unsecured syndicated revolving credit facility entered into in April 2019 (“RCF”).

~~In April 2019, the Company entered into a $2.3~~

~~billion unsecured syndicated RCF.~~ The RCF agreement provides for two separate tranches, a

~~$1.15~~ $1.15 billion

~~ranche~~ tranche A and a $1.15 billion

~~ranche~~ tranche B. Tranche A had a maturity date of April 8, 2022, of which an amount of $1.065 billion was extended twice, initially to April 8, 2023 and then to April 8, 2024. Tranche B has a maturity date of April 8, 2024. Loans and letters of credit will be available from time to time under each tranche for Teva’s general corporate purposes. ~~Tranche A has a maturity date of April 8, 2022, with two~~

~~one-year~~

~~extension options, of which $1.0 billion~~

~~was~~

~~extended to April 8, 2023. Tranche B has a maturity date of April 8, 2024.~~

The RCF contains certain covenants, including certain limitations on incurring liens and indebtedness and maintenance of certain financial ratios, including the requirement to maintain compliance with a net debt to EBITDA ratio, which becomes more restrictive over time. The net debt to EBITDA ratio limit ~~is 6.0x in the first and second quarters of 2020 and~~was 5.50x through March 31, 2021, gradually declines to ~~5.75x~~5.00x in the third and fourth quarters of ~~2020,~~2021, 4.50x in the first quarter of 2022, and continues to gradually decline over the remaining term of the ~~RCF.~~RCF to 3.50x in the first quarter of 2023.

The RCF can be used for general corporate purposes, including repaying existing debt. As of March 31, ~~2020,~~ 2021, and as of the date of this Quarterly Report on Form

10-Q,

0 amounts were outstanding under the RCF. Based on current and forecasted results, the Company expects that it will not exceed the financial covenant thresholds set forth in the RCF within one year from the date these financial statements are ~~issued.~~

20issued.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Under specified circumstances, including

non-compliance

with any of the covenants described above and the unavailability of any waiver, amendment or other modification thereto, the Company will not be able to borrow under the RCF. Additionally, violations of the covenants, under the above-mentioned circumstances, would result in an event of default in all borrowings under the RCF and, when greater than a specified threshold amount as set forth in each series of senior notes is outstanding, could lead to an event of default under the Company’s senior notes due to cross acceleration provisions.

Teva expects that it will continue to have sufficient cash resources to support its debt service payments and all other financial obligations within one year from the date that these financial statements are issued.

NOTE 8 – Derivative instruments and hedging activities:

a. Foreign exchange risk management:

In the first three months of ~~2020,~~2021, approximately ~~50%~~48% of Teva’s revenues were denominated in currencies other than the U.S. dollar. As a result, Teva is subject to significant foreign currency risks.

The Company enters into forward exchange contracts, purchases and writes options in order to hedge the currency exposure on balance sheet items, revenues and expenses. In addition, the Company takes measures to reduce exposure by using natural hedging. The Company also acts to offset risks in opposite directions among the ~~companies~~subsidiaries within Teva. The currency hedged items are usually denominated in the following main currencies: the ~~Russian ruble, the~~ euro, the Swiss franc, the Japanese yen, the British pound, the Russian ruble, the Canadian dollar, the Polish zloty, the Indian rupee and other European and Latin American currencies.

Depending on market conditions, foreign currency risk is also managed through the use of foreign currency debt.

The Company ~~hedged~~may choose to hedge against possible fluctuations in foreign ~~subsidiaries’~~subsidiaries net assets (“net investment hedge”) and ~~from time to time enters~~entered into ~~cross-currency~~cross currency swaps and forward contracts in the past in order to hedge such an exposure.

Most of the counterparties to the derivatives are major banks and the Company is monitoring the associated inherent credit risks. The Company does not enter into derivative transactions for trading purposes.

b. Interest risk management:

The Company raises capital through various debt instruments, including straight notes that bear a fixed or variable interest rate, bank loans ~~securitizations~~ and convertible debentures. In some cases, the Company has swapped from a fixed to a floating interest rate (“fair value hedge”) and from a fixed to a fixed interest rate with an exchange from a currency other than the functional currency (“cash flow hedge”), thereby reducing overall interest expenses or hedging risks associated with interest rate fluctuations.

Derivative instruments ~~notional amounts:~~outstanding:

~~The following table summarizes the notional amounts for hedged items, when transactions are designated as hedge accounting:~~

March 31,

December 31,

2020

2019

(U.S. $ in millions)

Cross-currency swap—net investment hedge
$
—
$
1,000

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~Derivative instrument outstanding:~~

The following table summarizes the classification and fair values of derivative instruments:

Fair value

Designated as hedging
instruments

Not designated as hedging
instruments

March 31,
2020

December 31,
2019

March 31,
2020

December 31,
2019

Reported under (U.S. $ in millions)
Asset derivatives:

Other current assets:

Option and forward contracts
$
—
$
—
$
104
$
32

Liability derivatives:

Other current liabilities:

Cross-currency swaps—net investment hedge

—

(22
)
—
—
Option and forward contracts

—

—

(94
)
(41
)


	Fair value
	Not designated as hedging instruments
	March 31, 2021			December 31, 2020
Reported under	(U.S. $ in millions)
Asset derivatives:
Other current assets:
Option and forward contracts	$	63		$	24
Liability derivatives:
Other current liabilities:
Option and forward contracts		(23	)		(79	)

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

The table below provides information regarding the location and amount of

pre-tax

(gains) losses from derivatives designated in fair value or cash flow hedging relationships:

Financial expenses, net Other comprehensive
income (loss)
Three months ended, Three months ended,

March 31,
2020
March 31,
2019
March 31,
2020
March 31,
2019
Reported under (U.S. $ in millions)
Line items in which effects of hedges are recorded
$
224
$
218
$
(530
) $
94

Cross-currency swaps—cash flow hedge (1)
— (1 ) — (20 )
Cross-currency swaps—net investment hedge (2)

(2
)
(7
)
(21
)
$
(20
)
Interest rate swaps—fair value hedge (3)

—

1

—

—


	Financial expenses, net					Other comprehensive income (loss)
	Three months ended,					Three months ended,
	March 31, 2021		March 31, 2020			March 31, 2021			March 31, 2020
Reported under	(U.S. $ in millions)
Line items in which effects of hedges are recorded	$	290	$	224		$	(201	)	$	(530	)
Cross-currency swaps—net investment hedge (1)		0		(2	)		0			(21	)

The table below provides information regarding the location and amount of

pre-tax

(gains) losses from derivatives not designated as hedging instruments:

Financial expenses, net

Net revenues

Three months ended,

Three months ended,

March 31,
2020

March 31,
2019

March 31,
2020

March 31,
2019

Reported under

(U.S. $ in millions)

Line items in which effects of hedges are recorded
$
224
$
218
$
(4,357
) $
(4,149
)
Option and forward contracts (4)

24

(42
)
—

—

Option and forward contracts economic hedge (5)

—
—
(60
)
—


	Financial expenses, net					Net revenues
	Three months ended,					Three months ended,
	March 31, 2021			March 31, 2020		March 31, 2021			March 31, 2020
Reported under	(U.S. $ in millions)
Line items in which effects of hedges are recorded	$	290		$	224	$	(3,982	)	$	(4,357	)
Option and forward contracts (2)		(70	)		24		0—			—
Option and forward contracts economic hedge (3)		0—			—		(28	)		(60	)

(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. In the fourth quarter of 2019, Teva terminated cross-currency swap agreements against its outstanding 3.65% senior notes maturing in November 2021. The settlement of these transactions resulted in cash proceeds of $95 million. The cash flow hedge accounting adjustments of these instruments, which are recorded under senior notes and loans, are amortized under financial

~~expenses-net~~

~~over the life of the debt as additional interest expense.~~

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(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. In the first quarter of 2020, these cross-currency swap agreements

~~expired~~

. expired. The settlement of these transactions resulted in cash proceeds of $3 million.

~~(3)~~(2)

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. In the third quarter of 2019, Teva terminated this interest rate swap agreement. The settlement of these transactions resulted in a gain position of $10 million. The fair value hedge accounting adjustments of these instruments, which are recorded under senior notes and loans, are amortized under financial

~~expenses-net~~

~~over the life of the debt as additional interest expense.~~

~~(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.

~~net.~~

~~(5)~~(3)

Teva entered into option and forward contracts designed to limit the exposure of foreign exchange fluctuations on projected revenues and expenses recorded in euro, the Swiss franc, the Japanese yen, the British pound, the Russian ruble, the Canadian dollar and some other currencies ~~during the quarter~~to protect its projected operating results for ~~which such instruments are transacted.~~2021. These derivative instruments do not meet the criteria for hedge accounting, however, they are accounted for as an economic hedge. These derivative instruments, which may include hedging transactions against future projected revenues and expenses, are recognized on the balance sheet at their fair value on a quarterly basis, while the foreign exchange impact on the underlying revenues and expenses may occur in subsequent quarters. In 2020, Teva recognized a loss of $27 million in relation with the 2021 hedging program Teva entered into in the second half of 2020. In the first three months of 2021, the positive impact from these derivatives recognized under revenues was $28 million. Changes in the fair value of the derivative instruments are recognized in the same line item in the statements of income as the underlying exposure being hedged. ~~In the first quarter of 2020, the positive impact from these derivatives recognized under revenues was $60 million, partially offset by a $5 million negative impact recognized under cost of sales.~~ The cash flows associated with these derivatives are reflected as cash flows from operating activities in the consolidated statements of cash flows.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

d. Amortizations due to terminated derivative instruments:

~~Matured~~

Forward starting interest rate swaps and treasury lock agreements

In 2015, Teva entered into forward starting interest rate swaps and treasury lock ~~agreements:~~

~~Certain~~agreements to protect the Company from interest rate fluctuations in connection with a future debt issuance the Company was planning. These forward starting interest rate swaps and treasury lock agreements were terminated in July 2016 ~~in connection with Teva’s~~upon the debt ~~issuances.~~issuance. The termination of these transactions resulted in a loss position of $493 million, which was recorded in other comprehensive income (loss) and is amortized under financial

~~expenses-net~~

expenses, net over the life of the ~~debt.~~debt

With respect to these forward starting interest rate swaps and treasury lock agreements,

losses of $8 ~~million and $7~~ million were recognized under financial expenses, net for

each of

the three months ended March 31, ~~2020~~2021 and ~~2019, respectively.~~2020.

Fair value hedge

In the third quarter of 2016, Teva terminated interest rate swap agreements designated as a fair value hedge relating to its 2.95% senior notes due 2022 with respect to $844 million notional amount and its 3.65% senior notes due 2021 with respect to $450 million notional amount. Settlement of these transactions resulted in a gain position of $41 million. The fair value hedge accounting adjustments of these instruments, which are recorded under senior notes and loans, are amortized under financial expenses, net over the life of the debt as additional interest expense.

In the third quarter of 2019, Teva terminated $500 million interest rate swap agreements designated as a fair value hedge relating to its 2.8% senior notes due 2023 with respect to $3,000 million notional amount. Settlement of these transactions resulted in cash proceeds of $10 million. The fair value hedge accounting adjustments of these instruments, which are recorded under senior notes and loans, are amortized under financial

~~expenses-net~~

expenses, net over the life of the debt.

Cash flow hedge

In the fourth quarter of 2019, Teva terminated $588 million cross-currency swap agreements against its outstanding 3.65% senior notes maturing in November 2021. Settlement of these transactions resulted in cash proceeds of $95 million. The cash flow hedge accounting adjustments of these instruments, which are recorded under senior notes and loans, are amortized under financial

~~expenses-net~~

expenses, net over the life of the debt.

In the first quarter of 2020, a $1,000 million cross currency swap agreement designated as a net investment hedge of Teva’s foreign subsidiaries euro denominated net assets expired. Settlement of these transactions resulted in cash proceeds of $3 million.

With respect to the interest rate

swap and cross-currency

swap agreements, 0 gains were recognized for the three months ended March 31, 2021, compared to gains of $1 million ~~and $2 million were~~ recognized under financial expenses, net for the three months ended March 31, ~~2020 and 2019, respectively.~~2020.

NOTE 9 – Legal settlements and loss contingencies:

InLegal settlements and loss contingencies for the first quarter of ~~2020, Teva recorded~~2021

were

$104 million, compared to an income of $25 million in ~~legal settlements and loss contingencies, compared to an~~the first quarter of 2020. The expense ~~of $57 million~~ in the first quarter of ~~2019.~~2021 was mainly due to the provision for the carvedilol patent litigation (see note 10). The income in the first quarter of 2020 was mainly due to proceeds received following a settlement of an action brought against the sellers of Auden McKenzie (an acquisition made by Actavis Generics).

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~~TEVA~~

~~PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, Teva’s provision for legal settlements and loss contingencies recorded under accrued expenses and other taxes and long-term liabilities was ~~$1,539~~$1,730 million and ~~$1,580~~1,625 million, respectively.

NOTE 10 –

Commitments and contingencies:

General

From time to time, Teva and/or its subsidiaries are subject to claims for damages and/or equitable relief arising in the ordinary course of business. In addition, as described below, in large part as a result of the nature of its business, Teva is frequently subject to litigation. Teva generally believes that it has meritorious defenses to the actions brought against it and vigorously pursues the defense or settlement of each such action.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Teva records a provision in its financial statements to the extent that it concludes that a contingent liability is probable and the amount thereof is estimable. Based upon the status of the cases described below, management’s assessments of the likelihood of damages, and the advice of counsel, no provisions have been made regarding the matters disclosed in this note, except as noted below. Litigation outcomes and contingencies are unpredictable, and excessive verdicts can occur. Accordingly, management’s assessments involve complex judgments about future events and often rely heavily on estimates and assumptions. Teva continuously reviews the matters described below and may, from time to time, remove previously disclosed matters ~~that~~where the ~~Company has~~exposures were fully resolved in the prior year, or determined to no longer meet the materiality threshold for ~~disclosure.~~disclosure, or were substantially resolved. In the first quarter of 2021, Teva has removed the bortezomib intellectual property litigation as it was fully resolved during 2020. In addition, Teva has removed PROVIGIL

, lidocaine patch and the memantine hydrochloride antitrust matters exposures, which are no longer considered material risks to the results of operations and cash flows of the Company as they were substantially resolved in prior periods.

If one or more of such proceedings described below were to result in final judgments against Teva, such judgments could be material to its results of operations and cash flows in a given period. In addition, Teva incurs significant legal fees and related expenses in the course of defending its positions even if the facts and circumstances of a particular litigation do not give rise to a provision in the financial statements.

In connection with third-party agreements, Teva may under certain circumstances be required to indemnify, and may be indemnified by, in unspecified amounts, the parties to such agreements against third-party claims. Among other things, Teva’s agreements with third parties may require Teva to indemnify them, or require them to indemnify Teva, for the costs and damages incurred in connection with product liability claims, in specified or unspecified amounts.

Except as otherwise noted, all of the litigation matters disclosed below involve claims arising in the United States. Except as otherwise noted, all third party sales figures given below are based on IQVIA (formerly IMS Health Inc.) data.

Intellectual Property Litigation

From time to time, Teva seeks to develop generic versions of patent-protected pharmaceuticals for sale prior to patent expiration in various markets. In the United States, to obtain approval for most generics prior to the expiration of the originator’s patents, Teva must challenge the patents under the procedures set forth in the Hatch-Waxman Act of 1984, as amended. To the extent that Teva seeks to utilize such patent challenge procedures, Teva is and expects to be involved in patent litigation regarding the validity, enforceability or infringement of the originator’s patents. Teva may also be involved in patent litigation involving the extent to which its product or manufacturing process techniques may infringe other originator or third-party patents.

Additionally, depending upon a complex analysis of a variety of legal and commercial factors, Teva may, in certain circumstances, elect to market a generic version even though litigation is still pending. To the extent Teva elects to proceed in this manner, it could face substantial liability for patent infringement if the final court decision is adverse to Teva, which could be material to its results of operations and cash flows in a given period.

Teva could also be sued for patent infringement outside of the context of the Hatch-Waxman Act. For example, Teva could be sued for patent infringement after commencing sales of a product. In addition, for biosimilar products, Teva could be sued according to the “patent dance” procedures of the Biologics Price Competition and Innovation Act (BPCIA).

The general rule for damages in patent infringement cases in the United States is that the patentee should be compensated by no less than a reasonable royalty and it may also be able, in certain circumstances, to be compensated for its lost profits. The amount of a reasonable royalty award would generally be calculated based on the sales of Teva’s product. The amount of lost profits would generally be based on the lost sales of the patentee’s product. In addition, the patentee may seek consequential damages as well as enhanced damages of up to three times the profits lost by the patent holder for willful infringement, although courts have typically awarded much lower multiples.

Teva is also involved in litigation regarding patents in other countries where it does business, particularly in Europe. The laws concerning generic pharmaceuticals and patents differ from country to country. Damages for patent infringement in Europe may include lost profits or a reasonable royalty, but enhanced damages for willful infringement are generally not available.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

In July 2014, GlaxoSmithKline (“GSK”) sued Teva in Delaware federal court for infringement of a patent ~~expiring in June 2015~~ directed to using carvedilol in a

specified manner to decrease the risk of mortality in patients with congestive heart failure. Teva and eight other generic producers began selling their carvedilol tablets (the generic version of

GSK’s ~~Coreg~~

Coreg®) in

n September 2007. A jury trial was held and the jury returned a verdict in GSK’s favor finding Teva liable for induced infringement, including willful infringement, and assessing damages of ~~$235.5~~

235.5

million, not including

pre-

or post-judgment interest

or a multiplier for willfulness. ~~Following post-trial motions filed by~~Thereafter, the ~~parties, on March 28, 2018, the district court issued an opinion overturning~~judge overturned the jury verdict, ~~and instead found~~finding no induced infringement by Teva ~~thereby finding~~and that Teva did not owe any ~~damages;~~damages. On October 2, 2020, in a two-to-one decision, the ~~district court also denied Teva’s motion seeking to overturn~~Court of Appeals for the Federal Circuit, overturned the judge’s ruling and reinstated the jury ~~verdict with respect to invalidity. The provision that~~verdict. Teva’s request for rehearing was ~~originally included in~~granted, and the ~~financial statements following~~October 2020 decision was vacated. On February 23, 2021, the damages verdict in this matter was reversed following the opinion overturning the verdict as the exposure was no longer considered probable. A hearing on an appeal filed by both parties was held on September 4, 2019 and Teva awaits the Court’s decision. If the appealsame three-judge panel of the ~~district court’s decision~~Federal Circuit heard additional oral argument on the issue of whether there is enough evidence to support the jury’s verdict of induced infringement during the period from January 8, 2008 through April 30, 2011 (the “skinny label” period). If further appeals are decided against Teva, the case would be remanded to the district court for it to consider Teva’s other legal and equitable defenses that have not yet been considered by the district court. In the first quarter of 2021, Teva recognized a provision based on its offer to settle such matter.

~~In 2014, Teva Canada succeeded in its challenge of the bortezomib (the generic equivalent of Velcade~~

~~) product and mannitol ester patents under the Patented Medicines (Notice Of Compliance) Regulations (“PM~~

~~(NOC)”). At the time of Teva’s launch in 2015, annual sales of Velcade were approximately 94 million Canadian dollars. Additionally, Teva commenced an action under Section 8 of PM~~

~~(NOC) to recover damages for being kept off of the market during the PM~~

(NOC) proceedings. Janssen and Millennium filed a counterclaim for infringement of the same two patents as well as a patent covering a process to prepare bortezomib. The product patent expired in October 2015; the other patents expire in January 2022 and March 2025. In 2017, Teva entered into an agreement with Janssen and Millennium which limits the damages payable by either party depending on the outcome of the infringement/impeachment action. As a result, the most Janssen and Millennium could recover is 200 million

Canadian dollars plus post-judgment interest. In June 2018, the court ruled that Janssen and Millennium pay Teva 5 million Canadian dollars in Section 8 damages. Janssen and Millennium filed an appeal, which was denied by the appellate court on November 4, 2019. On January 3, 2020, Janssen and Millennium applied for leave to appeal to the Canadian Supreme Court. If the decision is ultimately overturned, Teva could owe the capped damages set forth above. In addition to the potential damages that could be awarded, Teva could be ordered to cease sales of its bortezomib product.

Product Liability Litigation

Teva’s business inherently exposes it to potential product liability claims. Teva maintains a program of insurance, which may include commercial insurance, self-insurance (including direct risk retention), or a combination of both approaches, in amounts and on terms that it believes are reasonable and prudent in light of its business and related risks. However, Teva sells, and will continue to sell, pharmaceuticals that are not covered by its product liability insurance; in addition, it may be subject to claims for which insurance coverage is denied as well as claims that exceed its policy limits. Product liability coverage for pharmaceutical companies is becoming more expensive and increasingly difficult to obtain. As a result, Teva may not be able to obtain the type and amount of insurance it desires, or any insurance on reasonable terms, in all of its markets.

Teva and its subsidiaries are parties to litigation relating to previously unknown nitrosamine impurities discovered in certain products. The discovery led to a global recall of single and combination valsartan medicines around the world starting in July 2018 and to subsequent recalls on other products. The nitrosamine impurities in valsartan are allegedly found in the active pharmaceutical ingredient (API) supplied by multiple API manufacturers. Teva’s products allegedly at issue in the various nitrosamine-related litigations pending in the United States include valsartan, losartan, metformin and ranitidine. There are currently two Multi-District Litigations (“MDL”) pending in the United States District Courts against Teva and numerous other manufacturers. One MDL is pending in the United States District Court for the District of New Jersey for valsartan, losartan and irbesartan. Teva is not named in complaints with respect to irbesartan. The second MDL is pending in the United States District Court for the Southern District of Florida for ranitidine. The lawsuits against Teva in the MDLs consist of individual personal injury and/or product liability claims and economic damages claims brought by consumers and end payors on behalf of purported classes of other consumers and end payors as well as medical monitoring class claims. Defendants’ motions to dismiss in the valsartan, losartan and irbesartan MDL were denied in part and granted in part, allowing plaintiffs to file amended complaints. On December 31, 2020, the court in the ranitidine MDL granted the generic defendants’ motion to dismiss on the grounds of preemption and deficient pleading, allowing plaintiffs to re-plead certain claims. Certain plaintiffs appealed the decision. Plaintiffs in the ranitidine MDL filed amended complaints, and on March 24, 2021, defendants moved to dismiss those amended complaints on largely the same grounds as the first round of motions to dismiss. In addition to these MDLs, Teva has also been named in a consolidated proceeding pending in the United States District Court for the District of New Jersey brought by individuals and end payors seeking economic damages on behalf of purported classes of consumers and end payors who purchased Teva’s, as well as other generic manufacturers’ metformin products. A motion to dismiss in that consolidated action is pending. Similar lawsuits are pending in Canada and Germany.

Competition Matters

As part of its generic pharmaceuticals business, Teva has challenged a number of patents covering branded pharmaceuticals, some of which are among the most widely-prescribed and well-known drugs on the market. Many of Teva’s patent challenges have resulted in litigation relating to Teva’s attempts to market generic versions of such pharmaceuticals under the federal Hatch-Waxman Act. Some of this litigation has been resolved through settlement agreements in which Teva obtained a license to market a generic version of the drug, often years before the patents expire.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Teva and its subsidiaries have increasingly been named as defendants in cases that allege antitrust violations arising from such settlement agreements. The plaintiffs in these cases, which are usually direct and indirect purchasers of pharmaceutical products, and often assert claims on behalf of classes of all direct and indirect purchasers, typically allege that (1) Teva received something of value from the innovator in exchange for an agreement to delay generic entry, and (2) significant savings could have been realized if there had been no settlement agreement and generic competition had commenced earlier. These class action cases seek various forms of injunctive and monetary relief, including damages based on the difference between the brand price and what the generic price allegedly would have been and disgorgement of profits, which are automatically tripled under the relevant statutes, plus attorneys’ fees and costs. The alleged damages generally depend on the size of the branded market and the length of the alleged delay, and can be substantial—potentially measured in multiples of the annual brand sales—particularly where the alleged delays are lengthy or branded drugs with annual sales in the billions of dollars are involved.

Teva believes that its settlement agreements are lawful and serve to increase competition, and has defended them vigorously. In Teva’s experience to date, these cases have typically settled for a fraction of the high end of the damages sought, although there can be no assurance that such outcomes will continue.

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~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

In June 2013, the U.S. Supreme Court held, in Federal Trade Commission (“FTC”) v. Actavis, Inc. (the “AndroGel case”), that a rule of reason test should be applied in analyzing whether such settlements potentially violate the federal antitrust laws. The Supreme Court held that a trial court must analyze each agreement in its entirety in order to determine whether it violates the antitrust laws. This new test has resulted in increased scrutiny of Teva’s patent settlements, additional action by the FTC and state and local authorities, and an increased risk of liability in Teva’s currently pending antitrust litigations.

Beginning in April 2006, certain subsidiaries of Teva were named in a class action lawsuit filed in the U.S. District Court for the Eastern District of Pennsylvania with allegations that the settlement agreements entered into betweenIn May 2015, Cephalon Inc., ~~now~~ a Teva subsidiary (“Cephalon”), ~~and various generic pharmaceutical companies in late 2005 and early 2006 to resolve patent litigation involving certain finished modafinil products (marketed as PROVIGIL~~

) were unlawful because they had the effect of excluding generic competition. The cases also allege that Cephalon improperly asserted its PROVIGIL patent against the generic pharmaceutical companies. Separately, Apotex challenged Cephalon’s PROVIGIL patent and, in October 2011, the court found the patent to be invalid and unenforceable based on inequitable conduct. Teva has either settled or reached agreements in principle to settle with all plaintiffs in such cases, except for an action brought by the State of Louisiana. The settlement with the State of California that was reached in 2019 is still pending final court approval. All settlements entered into in connection with the above proceeding are covered by the settlement fund explained below.

~~In May 2015, Cephalon~~ entered into a consent decree with the FTC (the “Modafinil Consent Decree”) under which the FTC dismissed ~~its~~antitrust claims against Cephalon ~~in the FTC Modafinil Action~~related to certain finished modafinil products (marketed as PROVIGIL

) in exchange for ~~payment of $1.2 billion (less~~

~~set-offs~~

~~for prior settlements) by~~ Cephalon and Teva ~~into~~agreeing to, among other things, abide by certain restrictions and limitations, for a settlement fund. The settlement fund does not cover any judgments or settlements outside the United States. Under the Modafinil Consent Decree, Teva also agreed to certain injunctive relief with respect to the typesperiod of ten years, when entering into settlement agreements ~~Teva may enter into~~ to resolve patent litigation in the United States for a period of ten years. The remaining balance of the settlement fund after consideration of the settlement with the State of California noted above is approximately $19 million. In February 2019,States. Those restrictions and limitations were further refined in connection with the settlement of other unrelated FTC antitrust lawsuits, as described below, ~~Teva~~ and the ~~FTC agreed to amend certain~~

~~non-financial~~

~~provisions~~term of the Modafinil Consent Decree ~~and to restart its~~

~~ten-year~~was extended until 2029.

~~term.~~

~~Additionally, following an investigation initiated by the European Commission in April 2011 regarding a modafinil patent settlement in Europe,~~

In November 2020, the European Commission issued a ~~Statement of Objections~~final decision in ~~July 2017~~its proceedings against both Cephalon and Teva, ~~alleging~~finding that the 2005 settlement agreement between the parties had the object and effect of hindering the entry of generic ~~modafinil. No final~~modafinil, and imposed fines totaling

€

60.5

million

on Teva and Cephalon. Teva and Cephalon filed an appeal against the decision ~~regarding liability has yet been taken by the European Commission. The sales of modafinil~~in February 2021. A provision for this matter was included in the ~~European Economic Area during the last full year of the alleged breach amounted to~~

€financial statements.

~~46.5 million.~~

InTeva and its affiliates have been named as defendants in lawsuits alleging that multiple patent litigation settlement agreements relating to AndroGel

1% (testosterone gel)

violate the antitrust laws. The first of these lawsuits (the “Georgia AndroGel Litigation”) was filed in January 2009 in California federal court, and later transferred to Georgia federal court, with the FTC and the State of California, ~~filed a complaint for injunctive relief in California federal court alleging that~~and later private plaintiffs challenging a September 2006 patent ~~lawsuit~~litigation settlement between Watson Pharmaceuticals, Inc. (“Watson”), from which Teva later acquired certain assets and liabilities, and Solvay Pharmaceuticals, Inc. (“Solvay”) ~~relating to~~. The second lawsuit (the “Philadelphia AndroGel

~~1% (testosterone gel) violated the antitrust laws. Additional lawsuits alleging similar claims were later~~ Litigation”) was filed by ~~private plaintiffs (including plaintiffs purporting to represent classes of similarly situated claimants as well as retailer plaintiffs filing separately) and~~ the ~~various actions were consolidated~~FTC in ~~a multidistrict~~

September 2014 in federal court in Philadelphia, challenging Teva’s December 2011 patent litigation ~~in Georgia federal court. On February 22, 2019, the~~settlement with AbbVie. The FTC stipulated to ~~the dismissal of its claims against Watson,~~

dismiss Teva from both litigations, in exchange for Teva’s agreement to amend the Modafinil Consent Decree, as described above. ~~Teva also settled with most of the retailer plaintiffs in April 2019.~~ On July 16, 2018,

the direct purchaser plaintiffs’ motion for class certification in the Georgia AndroGel Litigation was denied and Teva later settled with most of the

retailer plaintiffs in ~~December 2019, Teva reached a settlement agreement with~~the Georgia AndroGel Litigation as well as the three direct purchasers that had sought class ~~certification. Settlement amounts were paid~~certification and on January 7, 2021,

Teva settled all claims with the remaining retailer plaintiff in ~~full.~~the Georgia AndroGel Litigation, thus leaving no remaining claims in the Georgia

AndroGel Litigation. In ~~addition, in~~ August 2019, certain other direct-purchaser plaintiffs (who would have been members of the direct purchaser class in the

Georgia AndroGel Litigation, had it been certified) filed their own claims in the federal court in Philadelphia (where the Philadelphia AndroGel

Litigation has been pending), challenging (in one complaint) both the September 2006 settlement between Watson and Solvay, ~~referenced above, as well as Teva’s~~and the December 2011

settlement ~~with AbbVie involving AndroGel~~

between Teva and ~~TriCor~~

~~, referenced below.~~AbbVie. Those claims remain pending. Annual sales of AndroGel

1% were approximately ~~$350~~

350

million at the time of the

earlier Watson/Solvay settlement and approximately ~~$140~~

140

million at the time Actavis launched its generic version of AndroGel

1% in November 2015. A provision for ~~this case~~these matters was included in the financial statements.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

In December 2011, three groups of plaintiffs sued Wyeth and Teva for alleged violations of the antitrust laws in connection with their settlement of patent litigation involving extended release venlafaxine (generic Effexor XR

) entered into in November 2005. The cases were filed by a purported class of direct purchasers, by a purported class of indirect purchasers and by certain chain pharmacies in the U.S. District Court for the District of New Jersey. The plaintiffs claim that the settlement agreement between Wyeth and Teva unlawfully delayed generic entry. In October 2014, the court granted Teva’s motion to dismiss in the direct purchaser cases, after which the parties agreed that the court’s reasoning applied equally to the indirect purchaser cases. Plaintiffs appealed and, in August 2017, the Third Circuit reversed the district court’s decision and remanded for further proceedings. In March 2020, the district court temporarily stayed discovery and referred the case to ~~mediation.~~mediation, and discovery remains stayed. Annual sales of Effexor XR

were approximately $2.6 billion at the time of settlement and at the time Teva launched its generic version of Effexor XR

in July 2010.

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~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

In February 2012, two purported classes of direct-purchaser plaintiffs sued GSK and Teva in New Jersey federal court for alleged violations of the antitrust laws in connection with their settlement of patent litigation involving lamotrigine ~~(generic Lamictal~~

(generic Lamicta

) ~~entered~~

ntered into in February 2005. The plaintiffs claim that the settlement agreement unlawfully delayed generic entry and seek unspecified damages. In December 2012, the court dismissed the case, but in June 2015, the U.S. Court of Appeals for the Third Circuit reversed and remanded for further proceedings. In December 2018, the district court granted the direct-purchaser plaintiffs’ motion for class certification, but on April 22, 2020, the Third Circuit reversed that ruling and remanded for further class certification proceedings. On April 9, 2021, the district court denied the direct purchaser plaintiffs’ renewed motion for class certification. Annual sales of

Lamictal

were approximately ~~$950~~

950

million at the time of the settlement and approximately ~~$2.3~~ $

2.3

billion at the time Teva launched its generic version of Lamictal

in July 2008.

In April 2013, purported classes of direct purchasers of, and end payers for, Niaspan

(extended release niacin) sued Teva and Abbott for violating the antitrust laws by entering into a settlement agreement in April 2005, to resolve patent

litigation over the product. A multidistrict litigation has been established in the U.S. District Court for the Eastern District of Pennsylvania. Throughout 2015 and in January 2016, several individual direct-purchaser

opt-out

plaintiffs filed complaints with allegations nearly identical to those of the direct purchasers’ ~~class and, in~~class. In August 2019, the district court certified the direct-purchaser class, ~~although~~but in June 2020, the court ~~has yet to rule on~~denied the indirect purchasers’ ~~pending~~ motion for class ~~certification.~~certification without prejudice. On September 4, 2020, the indirect purchasers filed a renewed motion for class certification, which remains pending. In October 2016, the District Attorney for Orange County, California, filed a similar complaint in California state court, which has since been amended, alleging violations of state law. Defendants moved to strike the District Attorney’s claims for restitution and civil penalties to the extent not limited to alleged activity occurring in Orange County. The Superior Court denied that motion. The Court of Appeals subsequently reversed the decision and ~~review of the Appellate Court decision is now pending before~~in June 2020, the California Supreme ~~Court.~~Court reversed the Court of Appeals’ decision, allowing the District Attorney’s claims to proceed. Annual sales of Niaspan

were approximately

~~approximately $416~~

416

million at the time of the settlement and approximately ~~$1.1~~ $

1.1

billion at the time Teva launched its generic version of Niaspan

in September ~~2013.~~2013

Beginning in 2013, several putative class actions were filed against Actavis, Inc. and certain of its affiliates, alleging that Watson’s 2012 patent lawsuit settlement with Endo Pharmaceuticals Inc. relating to Lidoderm

(lidocaine transdermal patches) violated the antitrust laws. The cases were consolidated as a multidistrict litigation in federal court in California and were settled in 2018. The FTC also filed suit to challenge the Lidoderm

settlement, although in February 2019, the FTC dismissed its claims against Actavis and Allergan, in exchange for Teva’s agreement to amend the Modafinil Consent Decree, as described above. In July 2019, Teva also settled a complaint brought by the State of California. On September 16, 2019,

~~end-payers~~

Blue Cross Blue Shield of Michigan and Blue Care Network of Michigan filed their own lawsuit against Watson, and other defendants, in Michigan state court and that lawsuit remains pending. On January 24, 2020, the State of Mississippi filed a lawsuit against Teva and Watson in Mississippi state court, which the defendants have moved to dismiss, which motion remains pending.

Since January 2014, numerous lawsuits have been filed in the U.S. District Court for the Southern District of New York by purported classes of

end-payers

for, and direct-purchasers of, Actos

and Actoplus Met (pioglitazone and pioglitazone plus metformin) against Takeda, the innovator, and several generic manufacturers, including Teva, Actavis and Watson. The lawsuits allege, among other things, that the settlement agreements between Takeda and the generic manufacturers violated the antitrust laws. The court dismissed the

end-payers’

lawsuits against all defendants in September 2015. 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 following the Second Circuit’s decision, but on October 8, 2019, the district court dismissed, with prejudice, the direct purchasers’ claims against the generic manufacturers (including Teva, Actavis, and Watson). At the time of ~~the~~Teva’s settlement, annual sales of Actos

and Actoplus Met were

approximately $3.7 billion and approximately $500 million, respectively. At the time Teva launched its authorized generic version of Actos

and Actoplus Met in August 2012, annual sales of Actos

and Actoplus Met were approximately $2.8 billion and approximately $430 million,

respectively.

In September 2014, the FTC sued AbbVie Inc. and certain of its affiliates (“AbbVie”) as well as Teva in federal court in Philadelphia alleging that they violated the antitrust laws by entering into a December 2011 settlement agreement to resolve the patent litigation on AndroGel

~~and a supply agreement under which AbbVie agreed to supply Teva with an authorized generic version of TriCor~~

. In May 2015, the court dismissed the FTC’s claim concerning the settlement and supply agreements, and thus dismissed Teva from the case entirely. The FTC proceeded with a separate claim against AbbVie alone and, in June 2018, secured a $448 million judgement against AbbVie. The FTC then filed a notice of appeal, including as to the claims against Teva that had been dismissed by the district court, but in February 2019, the FTC stipulated to dismiss Teva from its appeal, in exchange for Teva’s agreement to amend the Modafinil Consent Decree, as described above. In August 2019, two groups of direct-purchaser plaintiffs filed similar claims against AbbVie and Teva, in the same federal court in Philadelphia where the FTC’s claims had been pending. In December 2019, Teva reached a settlement agreement with one group of plaintiffs. The second group’s claims challenge both Teva’s December 2011 settlement with AbbVie and the September 2006 AndroGel

~~settlement between Watson and Solvay, referenced above. Those claims remain pending.~~

~~In May 2015, a purported class of end payers for Namenda IR~~

®25

(memantine hydrochloride) filed a lawsuit against Forest Laboratories, LLC (“Forest”), the innovator, and several generic manufacturers, including Teva. In November 2019, two additional plaintiffs filed a similar lawsuit – purportedly as

~~opt-outs~~

from the end payers’ class – against the same defendants. These lawsuits allege, among other things, that settlement agreements between Forest and the generic manufacturers to resolve patent litigation over Namenda IR

~~violated the antitrust laws. Annual sales of Namenda IR~~

~~at the time of the settlement were approximately $1.1 billion and approximately $550 million at the time other manufacturers first launched generic versions of Namenda IR~~

~~in July 2015.~~

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

In January 2019, generic manufacturer Cipla Limited filed a lawsuit against Amgen, which was later amended to include Teva as a defendant, in Delaware federal court, alleging, among other things, that a January 2, 2019 settlement agreement between Amgen and Teva, resolving patent litigation over cinacalcet (generic Sensipar

), violated the antitrust laws. ~~In March 2019,~~On August 14, 2020, Cipla Limited ~~amended~~agreed to dismiss its ~~complaint to name~~claims against Teva, ~~as an additional defendant,~~with prejudice, and ~~putative~~those claims have since been dismissed. Putative classes of direct-purchaser and

end-payer

plaintiffs have also filed antitrust lawsuits (which have since been ~~consolidated~~coordinated in federal court in Delaware) against Amgen and Teva related to the January 2, 2019 settlement. ~~Both Cipla Limited~~On July 22, 2020, a magistrate judge recommended that plaintiffs’ claims be dismissed and on November 30, 2020, the ~~putative class~~district court overruled the magistrate judge’s recommendation, denied Teva’s motion to dismiss in part, and instructed plaintiffs ~~seek damages and injunctive relief and the defendants~~to file amended complaints, which plaintiffs filed on February 16, 2021. Teva again moved to dismiss ~~their claims~~those complaints on ~~October 15, 2019. Those~~March 30, 2021, based on plaintiffs’ failure to allege both (a) that the settlement violated the antitrust laws and (b) that the settlement caused any actual injury to plaintiffs, and Teva’s motions remain pending. Annual sales of Sensipar

in the United States were approximately ~~$1.4~~

$1.4

billion at the time Teva launched its generic version of Sensipar

in December 2018, and at the time of the January 2, 2019 settlement.

On December 16, 2016, the U.K. Competition and Markets Authority (“CMA”) issued a statement of objections (a provisional finding of breach of the Competition Act) in respect of certain allegations against Allergan, Actavis UK and certain Auden Mckenzie entities alleging competition law breaches in connection with the supply of 10mg and 20mg hydrocortisone tablets in the U.K. On ~~December 18, 2017, the CMA issued a Statement of Draft Penalty Calculation. On~~ March 3, 2017 and February 28, 2019, the CMA issued second and third statements of objections in respect of certain additional allegations relating to the same products and covering part of the same time periods as in the first statement of objections. On February 12, 2020, the CMA issued a ~~supplementary statement~~Supplementary Statement of ~~objections~~Objections effectively combining the three previously issued statements referenced ~~above.~~above and a Statement of Draft Penalty Calculation was issued on October 28, 2020. On January 9, 2017, Teva completed the sale of Actavis UK to Accord Healthcare Limited, in connection with which Teva will indemnify Accord Healthcare for potential fines imposed by the CMA and/or damages awarded by a court against Actavis UK in relation to the December 16, 2016 and March 3, 2017 statements of objections, and resulting from conduct prior to the closing date of the sale. In addition, Teva agreed to indemnify Allergan against losses arising from this matter in the event of any such fines or damages. A liability for this matter has been recorded in the financial statements.

In March 2021, following the 2019 European Commission’s inspection of Teva and subsequent request for information, the European Commission opened a formal antitrust investigation to assess whether Teva may have abused a dominant position by delaying the market entry and uptake of medicines that compete with COPAXONE

. Annual sales of COPAXONE in the European Economic Area for the past year were

approximately $380 million.

Between September 1, 2020 and December 20, 2020, separate plaintiffs purporting to represent putative classes of direct and indirect purchasers and

opt-out

retailer purchasers of Bystolic

(nebivolol hydrochloride) filed separate complaints in the U.S. District Court for the Southern District of New York against several generic manufacturers, including Teva, Actavis, and Watson, alleging, among other things, that the settlement agreements these generic manufacturers entered into with Forest Laboratories, Inc., the innovator, to resolve patent litigation over Bystolic

violated the antitrust laws. The cases were coordinated and on March 15, 2021, plaintiffs filed amended complaints. Annual sales of Bystolic

in the United States were

approximately $700 million at the time of Watson’s 2013 settlement with Forest.

Government Investigations and Litigation Relating to Pricing and Marketing

Teva is involved in government investigations and litigation arising from the marketing and promotion of its pharmaceutical products in the United States.

In 2015 and 2016, Actavis and Teva USA each respectively received subpoenas from the U.S. Department of Justice (“DOJ”) Antitrust Division seeking documents and other information relating to the marketing and pricing of certain Teva USA generic products and communications with competitors about such products. On August 25, 2020, a federal grand jury in the Eastern District of Pennsylvania returned a three count indictment charging Teva USA with criminal felony Sherman Act violations. See No.

20-cr-200

(E.D. Pa.). The indictment alleges Teva USA participated in a conspiracy with certain other generic drug manufacturers to maintain and fix prices, allocate customers, and other alleged antitrust offenses concerning the sale of generic drugs, including Pravastatin, Carbamazepine, Clotrimazole, Etodolac (IR and ER), Fluocinonide (Cream

E-Cream,

Gel, and Ointment), Warfarin, Etodolac (IR), Nadolol, Temozolomide, and Tobramycin. On September 8, 2020, Teva USA pled not guilty to all counts. A tentative trial date is yet to be scheduled. While the Company is unable to estimate a range of loss at this time, a conviction on these criminal charges could have a material adverse impact on the Company’s business, including monetary penalties and debarment from federally funded health care programs.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

In May 2018, Teva received a civil investigative demand from the DOJ Civil Division, pursuant to the federal False Claims Act, seeking documents and information produced since January 1, 2009 relevant to the Civil Division’s investigation concerning allegations that generic pharmaceutical manufacturers, including Teva, engaged in market allocation and price-fixing agreements, paid illegal remuneration, and caused false claims to be submitted in violation of the False Claims Act. ~~Teva is cooperating with these subpoena requests.~~

An adverse resolution of this matter may include fines, penalties, financial forfeiture and compliance conditions.

In 2015 and 2016, Actavis and Teva USA each respectively received a subpoena from the Connecticut Attorney General seeking documents and other information relating to potential state antitrust law violations. Subsequently, on December 15, 2016, a civil action was brought by the attorneys general of twenty states against Teva USA and several other companies asserting claims under federal antitrust law alleging price fixing of generic products in the United States. That complaint was later amended to add new states as named plaintiffs, as well as new allegations and new state law claims, and on June 18, 2018, the attorneys general of 49 states plus Puerto Rico and the District of Columbia filed a consolidated amended complaint against Actavis and Teva, as well as other companies and individuals. On May 10, 2019, most (though not all) of these attorneys general filed yet another antitrust complaint against Actavis, Teva and other companies and individuals, alleging price-fixing and market allocation with respect to additional generic products. On November 1, 2019, the state attorneys general filed an amended complaint, bringing the total number of plaintiff states and territories to 54. The amended complaint alleges that Teva was at the center of a conspiracy in the generic pharmaceutical industry, and asserts that Teva and others fixed prices, rigged bids, and allocated customers and market share with respect to certain additional ~~products, many~~products. On June 10, 2020, most, but not all, of ~~which were not previously at issue~~the same states, with the addition of the U.S. Virgin Islands, filed a third complaint in the ~~Pennsylvania MDL.~~District of Connecticut naming, among other defendants, Actavis, but not Teva USA in a similar complaint relating to dermatological generics products. 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. All such complaints have been transferred to the generic drug multidistrict litigation in the Eastern District of Pennsylvania (“Pennsylvania MDL”). On July 13, 2020, the court overseeing the Pennsylvania MDL chose the attorneys’ general November 1, 2019 amended complaint, referenced above, along with three complaints filed by private plaintiffs, to proceed first in the litigation as bellwether complaints. Teva moved the court to reconsider that ruling, and the motion was granted on February 9, 2021. As a result, the attorneys’ general November 1, 2019 amended complaint is not expected to be among the bellwether complaints in the Pennsylvania MDL.

Beginning on March 2, 2016, and continuing through December 2020, numerous complaints have been filed in the United States on behalf of putative classes of direct and indirect purchasers of several generic drug products, as well as several individual direct and indirect purchaser

opt-out

plaintiffs. These complaints, which allege that the defendants engaged in conspiracies to fix prices and/or allocate market share of generic products have been brought against various manufacturer defendants, including Teva and Actavis. The plaintiffs generally seek injunctive relief and damages under federal antitrust law, and damages under various state laws. On ~~April 6, 2017, these cases were transferred to the Pennsylvania MDL. Additional cases were transferred to that court and the~~

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~plaintiffs filed consolidated amended complaints on August 15, 2017. On~~ October 16, 2018, the court denied certain of the defendants’ motions to dismiss as to certain federal claims, pending as of that date, and on February 15, 2019, the court granted in part and denied in part defendants’ motions to dismiss as to certain state law claims. On July 18, 2019, and again on May 6, 2020, certain individual plaintiffs commenced a civil action in the Pennsylvania Court of Common Pleas of Philadelphia County against many of the defendants in the Pennsylvania MDL, including Teva and Actavis, but no complaint has been filed in either action and, ~~the case has~~both cases have been placed in deferred status. On November 13, 2019, ~~several~~and again on August 24, 2020, certain counties in New York commenced a civil ~~action~~actions against many of the defendants in the Pennsylvania MDL, including Teva and Actavis, and the ~~complaint has~~complaints have been transferred to the Pennsylvania MDL. On December 15, 2020, several additional New York counties filed suit in New York state court raising similar allegations, and the case was removed to federal court on March 26, 2021. On March 1, 2020, Harris County in Texas filed a complaint against several generic manufacturers including Teva and Actavis in the District Court for the Southern District of ~~Texas. This complaint largely mirrors certain allegations in the complaints in the Pennsylvania MDL. This case~~Texas, which has ~~not~~ been transferred to the Pennsylvania MDL.

There is also one similar complaint brought in Canada, which alleges that the defendants engaged in conspiracies to fix prices and/or allocate market share of generic drug products to the detriment of a class of private payors. The action is in its early stages.

OnIn March ~~21,~~ 2017, Teva received a subpoena from the U.S. Attorney’s office in Boston, Massachusetts requesting documents related to Teva’s donations to patient assistance programs. ~~Teva is cooperating~~Subsequently, in ~~responding to~~August 2020, the ~~subpoena.~~ U.S. Attorney’s

~~In December 2016, Teva resolved certain claims~~

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

office in Boston, Massachusetts brought a civil action in the U.S. District Court for the District of Massachusetts alleging violations of the federal Anti-Kickback Statute, and asserting causes of action under the ~~U.S. Foreign Corrupt Practices~~federal False Claims Act ~~(“FCPA”) with the SEC~~ and the DOJ. The settlement included a fine, disgorgement and prejudgment interest, a three-year deferred prosecution agreement (“DPA”) for Teva and the retention of an independent compliance monitor for a period of three years. In February 2020 the term of the monitorship provided for by the DPA and Teva’s consent judgement with the SEC expired and on March 4, 2020, following Teva’s certification to the SEC and the DOJ confirmingstate law. It is alleged that Teva ~~had complied with its disclosure obligations under~~caused the ~~DPA, the DOJ~~submission of false claims to Medicare through Teva’s donations to bona fide independent charities that provide financial assistance to patients. An adverse judgment may involve damages, civil penalties and injunctive remedies. On October 19, 2020, Teva filed a motion to dismiss the ~~information~~complaint on the grounds that it fails to state a claim, and that motion remains pending. Additionally, on January 8, 2021, Humana, Inc. filed an action against Teva atin the ~~time~~United States District Court for the ~~DPA was entered into.~~Middle District of Florida based on the allegations raised in the August 2020 complaint filed by the U.S. Attorney’s Office in Boston. On April 2, 2021 Teva filed a motion to dismiss the claims on the grounds that the claims are time-barred and/or insufficiently pled, and that action remains pending.

Opioids Litigation

Since May 2014, more than ~~2,900~~3,000 complaints have been filed with respect to opioid sales and distribution against various Teva affiliates, along with several other pharmaceutical companies, by a number of cities, counties, states, other governmental agencies, tribes and private plaintiffs (including various putative class actions of individuals) in both state and federal courts. Most of the federal cases have been consolidated into a multidistrict litigation in the Northern District of Ohio (“MDL Opioid Proceeding”) and many of the cases filed in state court have been removed to federal court and consolidated into the MDL Opioid Proceeding. Two cases that were included in the MDL Opioid Proceeding were recently transferred back to federal district court for additional discovery,

pre-trial

proceedings and trial. Those cases are: City of Chicago v. Purdue Pharma L.P. et al., No.

14-cv-04361

(N.D. Ill.) and City and County of San Francisco v. Purdue Pharma L.P. et al., No.

18-cv-07591-CRB

(N.D. Cal.). Other cases remain pending in various states. In some jurisdictions, such as Illinois, New York, Pennsylvania, South Carolina, Texas, Utah and West Virginia, certain state court cases have been transferred to a single court within their respective state court systems for coordinated pretrial proceedings. Complaints asserting claims under similar provisions of different state law, generally contend that the defendants allegedly engaged in improper marketing and distribution of opioids, including ACTIQ

and FENTORA

. The complaints also assert claims related to Teva’s generic opioid products. In addition, over 950 personal injury plaintiffs, including various putative class actions of individuals, have asserted personal injury and wrongful death ~~claims.~~claims in over 600 complaints, nearly all of which are consolidated in the MDL Opioid Proceeding. Furthermore, approximately ~~600~~700 complaints have named Anda, Inc. (and other distributors and manufacturers) alleging that Anda failed to develop and implement systems sufficient to identify suspicious orders of opioid products and prevent the abuse and diversion of such products to individuals who used them for other than legitimate medical purposes. Plaintiffs seek a variety of remedies, including restitution, civil penalties, disgorgement of profits, treble damages, attorneys’ fees and injunctive relief. Certain plaintiffs assert that the measure of damages is the entirety of the costs associated with addressing the abuse of opioids and opioid addiction and certain plaintiffs specify multiple billions of dollars in the aggregate as alleged damages. The individual personal injury plaintiffs further seek

non-economic

damages. In many of these cases, plaintiffs are seeking joint and several damages among all defendants. ~~An adverse resolution~~

On April 19, 2021, a bench trial in California (The People of ~~any~~the State of ~~these lawsuits or investigations may involve large monetary penalties, damages, and/or~~California, acting by and through Santa Clara County Counsel James R. Williams, et. al. v. Purdue Pharma L.P., et. al.) commenced with Teva and other ~~forms~~defendants focused on the marketing of ~~monetary and~~

~~non-monetary~~

~~relief and could have a material and adverse effect on Teva’s reputation, business, results of operations and cash flows.~~

branded opioids. Absent resolutions, additional trials are expected to proceed in several states in ~~2020 and~~ 2021. ~~A court in New York had set a date, for a liability trial only, to start in March 2020. However, that trial has been postponed due to the impact of~~

~~COVID-19.~~

A new trial date has not been set. It is also anticipated that a court in California may reset a trial date, most recently scheduled for June 2020, to the second half of 2020. It is difficult to predict when or if trials will occur in 2020 given the current impact of

~~COVID-19~~

~~on the United States and the U.S. judicial system.~~

In May 2019, Teva settled the Oklahoma litigation brought by the Oklahoma Attorney General (State of Oklahoma, ex. rel. Mike Hunter, Attorney General of Oklahoma vs. Purdue Pharma L.P., et. al.) for ~~$85~~

$85 million. The settlement did not include any admission of violation of law for any of the claims or allegations made. As the Company demonstrated a willingness to settle part of the litigation, for accounting purposes, management considered a portion of opioid-related cases as probable and, as such, recorded an estimated provision in the second quarter of 2019. Given the relatively early stage of the cases, management viewed no amount within the range to be the most likely outcome. Therefore, management recorded a provision for the reasonably estimable minimum amount in the assessed range for such opioid-related cases in accordance with Accounting Standards Codification 450 “Accounting for Contingencies.”

On October 21, 2019, Teva reached a settlement with the two plaintiffs in the MDL Opioid Proceeding that was scheduled for trial for the Track One case, Cuyahoga and Summit Counties of Ohio. Under the terms of the settlement, Teva will provide the two counties with opioid treatment medication, buprenorphine naloxone (sublingual tablets), known by the brand name Suboxone

, with a value of $25 million at wholesale acquisition cost and distributed over three years to help in the care and treatment of people suffering from addiction, and a cash payment in the amount of $20 million, to be paid in 4

payments over three years.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Also on October 21, 2019, Teva and certain other defendants reached an agreement in principle with a group of Attorneys General from North Carolina, Pennsylvania, Tennessee and Texas for a nationwide settlement. This nationwide settlement ~~framework. The framework is~~was designed to provide a mechanism by which the Company attempts to seek resolution of remaining potential and

pending opioid claims by both the U.S. states and political subdivisions (i.e., counties, tribes and other plaintiffs) thereof. Under this ~~agreement,~~nationwide settlement, Teva would provide buprenorphine naloxone (sublingual tablets) with an estimated value of up to approximately ~~$23~~

$23 billion at wholesale acquisition cost over

ten year period. In addition, Teva would also provide cash payments of up to $250 million over a ten year

period. ~~The~~

During the passage of time since then, the Company has continued to negotiate the terms and conditions of a nationwide settlement. There are many complex financial and legal issues still outstanding, including indemnification claims by Allergan against the Company, arising from the acquisition of the Actavis Generics business. Since negotiations are ongoing, the Company cannot predict if ~~the nationwide~~a settlement ~~framework~~ will be ~~finalized~~

finalized.

~~Following these developments, the~~The Company considered a range of potential settlement outcomes. ~~No single outcome in~~The current provision remains a reasonable estimate of the ~~range was considered~~ultimate costs if a settlement is finalized based on the Company’s most recent offer to ~~be more likely than any other outcome; accordingly, in~~settle. However, if not finalized for the ~~third quarter~~entirety of ~~2019, Teva accrued to~~ the ~~new low~~cases, a reasonable upper end of ~~the~~a range ~~resulting in an increase in~~of loss cannot be determined. An adverse resolution of any of these lawsuits or investigations may involve large monetary penalties, damages, and/or other forms of monetary and

non-monetary

relief and could have a material and adverse effect on Teva’s ~~previously recorded estimated liability. There was no change in this estimate in the first quarter~~reputation, business, results of ~~2020.~~

operations and cash flows.

Separately, on April 27, 2018, Teva received subpoena requests from the United States Attorney’s office in the Western District of Virginia and the Civil Division seeking documents relating to the manufacture, marketing and sale of branded opioids. In August 2019, Teva received a grand jury subpoena from the United States Attorney’s Office for the Eastern District of New York for documents related to the Company’s anti-diversion policies and procedures and distribution of its opioid medications, in what the Company understands to be part of a broader investigation into manufacturers’ and distributors’ monitoring programs and reporting under the Controlled Substances Act. In September 2019, Teva received subpoenas from the New York State Department of Financial Services (NYDFS) as part of an industry-wide inquiry into the effect of opioid prescriptions on New York health insurance premiums. ~~The Company~~Following a Statement of Charges and Notice of Hearing filed by the NYDFS, a hearing is ~~cooperating with NYDFS’s inquiry and producing documents~~currently scheduled to take place in ~~response to the various subpoenas and requests for information.~~June 2021. Currently, Teva cannot predict how ~~the~~a nationwide settlement ~~framework agreement~~ (if finalized) will affect these ~~investigations.~~investigations and administrative actions. In addition, a number of state attorneys general, including a coordinated multistate effort, have initiated investigations into sales and marketing practices of Teva and its affiliates with respect to opioids. Other states are conducting their own investigations outside of the multistate group. Teva is cooperating with these ongoing investigations and cannot predict their outcome at this time.

In addition, several jurisdictions and consumers in Canada have initiated litigation regarding opioids alleging similar claims as those in the United States. The cases in Canada ~~are likely to~~may be consolidated and are in their early stages.

Shareholder Litigation

On November 6, 2016 and December 27, 2016, two putative securities class actions were filed in the U.S. District Court for the Central District of California against Teva and certain of its current and former officers and directors. Those lawsuits were consolidated and transferred to the U.S. District Court for the District of Connecticut (the “Ontario Teachers Securities Litigation”). On December 13, 2019, the lead plaintiff in that action filed an amended complaint, purportedly on behalf of purchasers of Teva’s securities between February 6, 2014 and May 10, 2019. The amended complaint asserts that Teva and certain of its current and former officers and directors violated federal securities and common laws in connection with Teva’s alleged failure to disclose pricing strategies for various drugs in its generic drug portfolio and by making allegedly false or misleading statements in certain offering materials. The amended complaint seeks unspecified damages, legal fees, interest, and costs. In July 2017, August 2017, and June 2019, other putative securities class actions were filed in other federal courts based on similar allegations, and those cases have been transferred to the U.S. District Court for the District of Connecticut. Between August 2017 and ~~January~~October 2020, ~~eighteen~~twenty complaints were filed against Teva and certain of its current and former officers and directors seeking unspecified compensatory damages, legal fees, costs and expenses. The similar claims in these complaints have been brought on behalf of plaintiffs, in various forums across the country, who have indicated that they intend to

“opt-out”

of the ~~plaintiffs’ class if one is certified in the~~ Ontario Teachers Securities Litigation. On March 10, 2020, the Court consolidated the Ontario Teachers Securities Litigation with all of the above-referenced putative class actions for all purposes and the

“opt-out”

cases for pretrial purposes. The case is now in discovery. Pursuant to that

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

consolidation order, plaintiffs in several of the

“opt-out”

cases filed amended complaints on May 28, 2020. On January 22, 2021, the Court dismissed the

“opt-out”

plaintiffs’ claims arising from statements made prior to the five year statute of repose, but denied Teva’s motion to dismiss their claims under Israeli laws. Those

“opt-out”

plaintiffs moved for reconsideration, which was denied on March 30, 2021. The Ontario Teachers Securities Litigation plaintiffs’ Motion for Class Certification and Appointment of Class Representatives and Class Counsel was granted on March 9, 2021, to which Teva has sought an appeal. That motion is pending. Motions to approve securities class actions were also filed in the Tel Aviv District Court in Israel with similar allegations to those made in the Ontario Teachers Securities Litigation

On September 23, 2020, a putative securities class action was filed in the U.S. District Court for the Eastern District of Pennsylvania against Teva and certain of its former officers alleging, among other things, violations of Section 10(b) of the Securities and Exchange Act of 1934 and SEC Rule

10b-5.

The complaint, purportedly filed on behalf of persons who purchased or otherwise acquired Teva securities between October 29, 2015 and August 18, 2020, alleges that Teva and certain of its former officers violated federal securities laws by allegedly making false and misleading statements regarding the commercial performance of COPAXONE, namely, by failing to disclose that Teva had caused the submission of false claims to Medicare through Teva’s donations to bona fide independent charities that provide financial assistance to patients, which allegedly impacted COPAXONE’s commercial success and the sustainability of its revenues and resulted in the above referenced August 2020 False Claims Act complaint filed by the DOJ. The securities class action complaint seeks unspecified damages, legal fees, interest, and costs. The case is in its preliminary stages, and on March 15, 2021, plaintiffs filed amended complaints. On March 26, 2021, the Court appointed lead plaintiff and lead counsel, and instructed that the lead plaintiff can file an amended complaint by May 25, 2021. A motion to approve a securities class action was also filed in the Central District Court in Israel, which has been stayed pending the U.S. litigation, with similar allegations to those made in the above complaint filed in the U.S. District Court for the Eastern District of Pennsylvania.

Motions to approve derivative actions against certain past and present directors and officers have been filed in ~~Israel~~Israeli Courts alleging negligence and recklessness with respect to the acquisition of the Rimsa business, ~~and~~ the acquisition of Actavis ~~Generics.~~Generics and the patent settlement relating to Lidoderm

. Motions for document disclosure prior to initiating derivative actions were filed with respect to several U.S. and EU settlement agreements, opioids, ~~and~~ the U.S. price-fixing ~~investigations. Motions~~investigations and allegations related to ~~approve securities class actions against Teva and certain of its current and former directors and officers were filed in Israel based on allegations of improper disclosure of~~ the ~~above-mentioned pricing investigation, as well as lack of disclosure of negative developments~~DOJ’s complaint regarding Copaxone patient assistance program in the ~~generic sector, including price erosion~~U.S. In October 2020, Teva filed a notice with respect to Teva’s products. Various motions were filed in Israel to approve a derivative action, discovery and a class action related to claims regarding Teva’s above-mentioned FCPA resolution with the SEC and DOJ. The parties have reached an agreement in principle to settle these proceedings and the settlement was approved by the Tel Aviv District Court ~~on April 6, 2020.~~

~~Table~~to settle the derivative proceeding with regard to the acquisition of ~~Contents~~Actavis Generics and two related actions, including the derivative proceedings related to allegations in connection with the Lidoderm

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~patent settlement agreement.

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Environmental Matters

Teva or its subsidiaries are party to a number of environmental proceedings, or have received claims, including under the federal Superfund law or other federal, provincial or state and local laws, imposing liability for alleged noncompliance, or for the investigation and remediation of releases of hazardous substances and for natural resource damages. Many of these proceedings and claims seek to require the generators of hazardous wastes disposed of at a third party-owned site, or the party responsible for a release of hazardous substances that impacted a site, to investigate and clean the site or to pay or reimburse others for such activities, including for oversight by governmental authorities and any related damages to natural resources. Teva or its subsidiaries have received claims, or been made a party to these proceedings, along with others, as an alleged generator of wastes that were disposed of or treated at third-party waste disposal sites, or as a result of an alleged release from one of Teva’s facilities or former facilities.

Although liability among the responsible parties, under certain circumstances, may be joint and several, these proceedings are frequently resolved so that the allocation of

clean-up

and other costs among the parties reflects the relative contributions of the parties to the site conditions and takes into account other pertinent factors. Teva’s potential liability varies greatly at each of the sites; for some sites the costs of the investigation,

clean-up

and natural resource damages have not yet been determined, and for others Teva’s allocable share of liability has not been determined. At other sites, Teva has taken an active role in identifying those costs, to the extent they are identifiable and estimable, which do not include reductions for potential recoveries of

clean-up

costs from insurers, indemnitors, former site owners or operators or other potentially responsible parties. In addition, enforcement proceedings relating to alleged violations of federal, state, commonwealth or local requirements at some of Teva’s facilities may result in the imposition of significant penalties (in amounts not expected to materially adversely affect Teva’s results of operations) and the recovery of certain costs and natural resource damages, and may require that corrective actions and enhanced compliance measures be

implemented.

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Other Matters

On February 1, 2018, former shareholders of Ception Therapeutics, Inc., a company that was acquired by and merged into Cephalon in 2010, prior to Cephalon’s acquisition by Teva, filed breach of contract and other related claims against the Company, Teva USA and Cephalon in the Delaware Court of Chancery. Among other things, the plaintiffs allege that Cephalon breached the terms of the 2010 Ception-Cephalon merger agreement by failing to exercise commercially reasonable efforts to develop and commercialize CINQAIR

(reslizumab) for the treatment of eosinophilic esophagitis (“EE”). The plaintiffs claim damages of at least $200 million, an amount they allege is equivalent to the

milestones payable to the former shareholders of Ception in the event Cephalon were to obtain regulatory approval for EE in the United States ($150 million) and Europe ($50 million). Defendants moved to dismiss the complaint and on December 28, 2018, the court granted the motion in part and dismissed all of plaintiffs’ claims, except for their claim against Cephalon for breach of contract. Trial in this matter is currently scheduled for

June 2022.

NOTE 11 – Income taxes:

In the first quarter of 2021, Teva recognized a tax expense

$62 million, on

pre-tax

income of $144 million. In the first quarter of 2020, Teva recognized a tax benefit of $59

million, on

pre-tax

loss of ~~$33~~

$33 million. ~~In the first quarter of 2019, Teva recognized a tax expense of $9 million, on~~

~~pre-tax~~

~~loss of $84 million.~~

Teva’s tax rate for the first quarter of ~~2020~~2021 was mainly affected by legal settlements, impairments and amortization in jurisdictions in which tax rates are ~~higher~~lower than Teva’s average tax rate

on its ongoing business operations.

The statutory Israeli corporate tax rate is 23% in ~~2020.~~ 2021.

Teva’s tax rate differs from the Israeli statutory tax rate, mainly due to generation of profits in various jurisdictions in which tax rates are different than the Israeli tax rate, tax benefits in Israel and other countries, as well as infrequent or ~~nonrecurring~~

non-recurring

items.

Teva filed a claim seeking the refund of withholding taxes paid to the Indian tax authorities in 2012. Trial in this case is scheduled to begin in

~~July 2020~~

. May 2021. A final and binding decision against Teva in this case may lead to an ~~impairment in the amount~~asset write off of ~~$136~~

$140 million.

The Israeli tax authorities issued tax assessment decrees for 2008-2012 and 2013-2016, challenging the Company’s positions on several issues. Teva has protested the 2008-2012 and 2013-2016 decrees before the Central District Court in Israel. The Company believes it has adequately provided for these items, however, adverse results could be material.

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~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

NOTE 12 – Other assets impairments, restructuring and other items:

Three months ended

March 31,

2020

2019

(U.S. $ in millions)

Impairments of long-lived tangible assets (1)
$
75
$
20

Contingent consideration

6

(71
)
Restructuring

39

32

Other

—

20

Total
$
121
$
1


	Three months ended
	March 31,
	2021		2020
	(U.S. $ in millions)
Impairments of long-lived tangible assets (1)	$	48	$	75
Contingent consideration		3		6
Restructuring		81		39
Other		4		—

Total	$	137	$	121

(1)	Including impairments related to exit and disposal ~~activities.~~activities

~~Impairme~~

~~nts~~Impairments

Impairments of tangible assets for the ~~first~~ three months ofended March 31, 2021 and 2020 were $48 million and $75

~~and 2019~~

million, respectively. The impairment for the three months ended March 31, 2021 was mainly related to certain assets in Europe.

~~were~~

~~$75 million and $20 million, respectively.~~

~~The impairments in the first three months of 2020~~

~~are mainly related to plant rationalization.~~31

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Teva may record additional impairments in the future, to the extent it changes its plans on any given asset and/or the assumptions underlying such plans, as a result of its ~~plant rationalization plan.~~network consolidation activities.

Contingent consideration

In the three months ended March 31, ~~2020,~~2021, Teva recorded an expense

$3 million for contingent consideration, compared to an ~~income~~expense of

~~$71~~

$6 million

in the three months ended March 31, ~~2019. The income in the first quarter of 2019 was mainly related to a decrease in royalty payments expected in connection with lenalidomide (generic equivalent of Revlimid~~

~~) which was part of the Actavis Generics acquisition.~~2020.

Restructuring

In the three months ended March 31, ~~2020,~~2021, Teva

recorded $

$81 million of restructuring expenses, compared

to $

$39 million

in the three months ended March 31, ~~2019.~~ 2020.

The expenses infor the ~~first quarter of 2020~~three months ended March 31, 2021 were primarily related to network consolidation activities and residual expenses of the restructuring plan announced in 2017.

The following tables provide the components of costs associated with Teva’s restructuring plan, including other costs associated with Teva’s restructuring plan and recorded under different items:

Three months ended

March 31,

2020

2019

(U.S. $ in millions)

Restructuring

Employee termination
$
33
$
20

Other

6

12

Total
$
39
$
32


	Three months ended March 31,
	2021		2020
	(U.S. $ in millions)
Restructuring
Employee termination	$	79	$	33
Other		2		6

Total	$	81	$	39

The following table provides the components of and changes in the Company’s restructuring accruals:


	Employee termination costs			Other			Total
	(U.S. $ in millions )
Balance as of January 1, 2021	$	(115	)	$	(7	)	$	(122	)
Provision		(79	)		(2	)		(81	)
Utilization and other*		33			2			35

Balance as of March 31, 2021	$	(161	)	$	(7	)	$	(168	)


	Employee termination costs			Other			Total
	(U.S. $ in millions )
Balance as of January 1, 2020	$	(208	)	$	(7	)	$	(215	)
Provision		(33	)		(6	)		(39	)
Utilization and other*		69			6			75

Balance as of March 31, 2020	$	(172	)	$	(7	)	$	(179	)

*	Includes adjustments for foreign currency translation.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Significant regulatory and other events

In July 2018, the FDA completed an inspection of Teva’s manufacturing plant in Davie, Florida in the United States, and issued a Form

~~FDA-483~~FDA-

483

to the site. In October 2018, the FDA notified Teva that the inspection of the site is classified as “official action indicated” (OAI). On February 5, 2019, Teva received a warning letter from the FDA that contained four additional enumerated concerns related to production, quality control and investigations at this site. Teva has been working diligently to address the FDA’s concerns in a manner consistent with current good manufacturing practice (cGMP) requirements ~~and to address those concerns~~ as quickly and as thoroughly as possible.

An FDA follow up inspection occurred in January 2020, resulting in some follow up findings and Teva received a letter from the FDA dated April 24, 2020 notifying it that the site continues to be classified as ~~OAI~~

.OAI. If Teva is unable to remediate the findings to the FDA’s satisfaction, itTeva may face additional consequences. These would potentially include continued delays in FDA approval for future products from the site, financial implications due to loss of revenues, impairments, inventory ~~write offs,~~write-offs, customer penalties, idle capacity charges, costs of additional remediation and possible FDA enforcement action. Teva expects to generate

approximately $125

~~approximately~~

~~$230~~

million in revenues

from this site ~~in 2020,~~during the remainder of 2021, assuming remediation or enforcement does not cause any unscheduled slowdown or stoppage at the facility, however, delays in FDA approvals of future products from the site may ~~occur.~~occur

In July 2018, Teva announced the voluntary recall of valsartan and certain combination valsartan medicines in various countries due to the detection of trace amounts of a previously unknown nitrosamine impurity called NDMA

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

found in valsartan API supplied ~~to Teva~~ by Zhejiang Huahai Pharmaceuticals Co. Ltd. (“Huahai”). Since July 2018, Teva has been actively engaged with global regulatory ~~agency requests around the world~~authorities in reviewing its sartan and other products to determine whether NDMA and/or other related nitrosamine impurities are present in specific products. Where necessary, Teva has initiated additional voluntary recalls. ~~The aggregate direct impact of the sartan recalls on Teva’s 2018 and 2019 financial statements was~~

~~$54 million,~~

~~primarily related to inventory write-downs and returns. As a result of this loss, Teva initiated negotiations with Huahai and in~~In December 2019, Teva reached a settlement with Huahai resolving ~~its~~Teva’s claims related to certain sartan API supplied by ~~Huahai to Teva.~~Huahai. Under the settlement agreement, Huahai agreed to compensate Teva for some of ~~the~~its direct losses ~~suffered by Teva~~ and provide ~~Teva~~it with prospective cost reductions for API. The settlement does not release Huahai from liability for any losses Teva may incur as a result of third party personal injury or product liability claims relating to the sartan API at issue. In addition, multiple lawsuits have been filed in connection with this matter, which may lead to additional customer penalties, impairments and litigation costs.

In the second quarter of 2020, Teva’s operations in its manufacturing facilities in Goa, India were temporarily suspended due to a water supply issue. During the second half of 2020, Teva ~~expects~~has completed partial remediation of this issue and has restarted limited supply from its Goa facilities. The site experienced some additional ~~expenses and~~delays in first quarter of 2021 due to labor related issues. The impact to Teva’s financial results for the three months ended March 31, 2021 was immaterial, however, if the full remediation takes longer than expected there may be further loss of ~~revenues and profits in connection with this matter going forward.~~sales, customer penalties or impairments to related assets.

NOTE 13 – Earnings (Loss) per share:

Basic earnings and loss per share are computed by dividing net results attributable to Teva’s ordinary shareholders by the weighted average number of ordinary shares outstanding (including fully vested restricted share units (“RSUs”)) during the period, net of treasury shares.

In computing diluted earnings per share for the three months ended March 31, 2021 and March 31, 2020, basic earnings per share were adjusted to take into account the potential dilution that could occur upon the exercise of options and

non-vested

RSUs granted under employee stock compensation ~~plans, using the treasury stock method. No~~plans. NaN account was taken of the potential dilution by the convertible senior debentures, since they had an anti-dilutive effect on earnings per share.

~~In computing diluted loss per share for the three months ended March 31, 2019, no account was taken of the potential dilution by the assumed exercise of employee stock options and~~

~~non-vested~~

~~RSUs granted under employee stock compensation plans, and convertible senior debentures, since they had an anti-dilutive effect on loss per share.~~

Basic and diluted earnings per share were ~~$0.06 in~~$0.07 for the ~~first quarter of 2020,~~three months ended March 31, 2021, compared to basic and diluted ~~loss~~earnings per share of ~~$0.10~~$0.06 for the three months ended March 31, 2020.

NOTE 14 – Accumulated other comprehensive income (loss):

The components of, and changes within, accumulated other comprehensive income (loss) attributable to Teva are presented in the ~~first quarter of 2019.~~table below:


	Net Unrealized Gains (Losses)						Benefit Plans
	Foreign currency translation adjustments			Derivative financial instruments			Actuarial gains (losses) and prior service (costs) credits			Total
	(U.S. $ in millions)
Balance as of December 31, 2020, net of taxes	$	(1,919	)	$	(363	)	$	(117	)	$	(2,399	)

Other comprehensive income (loss) before reclassifications		(174	)		—			—			(174	)
Amounts reclassified to the statements of income		—			9						9

Net other comprehensive income (loss) before tax		(174	)		9			—			(165	)

Corresponding income tax		33			(2	)		—			31

Net other comprehensive income (loss) after tax*		(141	)		7			—			(134	)

Balance as of March 31, 2021, net of taxes	$	(2,060	)	$	(356	)	$	(117	)	$	(2,534	)

*	Amounts do not include a $67 million loss from foreign currency translation adjustments attributable to non-controlling interests .

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)


	Net Unrealized Gains (Losses)						Benefit Plans
	Foreign currency translation adjustments			Derivative financial instruments			Actuarial gains (losses) and prior service (costs) credits			Total
	(U.S. $ in millions)
Balance as of December 31, 2019, net of taxes	$	(1,794	)	$	(420	)	$	(98	)	$	(2,312	)

Other comprehensive income (loss) before reclassifications		(573	)		22			—			(551	)
Amounts reclassified to the statements of income		—			8			—			8

Net other comprehensive income (loss) before tax		(573	)		30			—			(543	)

Corresponding income tax		3			—			—			3

Net other comprehensive income (loss) after tax*		(570	)		30			—			(540	)

Balance as of March 31, 2020, net of taxes	$	(2,364	)	$	(390	)	$	(98	)	$	(2,852	)

~~NOTE 14 – Accumulated other comprehensive loss:~~

~~The components of, and changes within, accumulated other comprehensive losses attributable to Teva are presented in the table below:~~

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, 2019
$
(1,794
) $
—
$
(420
) $
(98
) $
(2,312
)

Other comprehensive income (loss) before reclassifications

(570
)
—

22

—

(548
)
Amounts reclassified to the statements of income

—

—

8

—

8

Net other comprehensive income (loss) before tax

(570
)
—

30

—

(540
)

Net other comprehensive income (loss) after tax*

(570
)
—

30

—

(540
)

Balance as of March 31, 2020
$
(2,364
) $
—
$
(390
) $
(98
) $
(2,852
)

*	Amounts do not include a $10 million loss from foreign currency translation adjustments attributable to non-controlling ~~interests.~~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

(U.S. $ in millions)

Balance as of December 31, 2018
$
(1,878
) $
1
$
(504
) $
(78
) $
(2,459
)

Other comprehensive income (loss) before reclassifications

53

40

—

93

Amounts reclassified to the statements of income

—

—

7

—


7

Net other comprehensive income (loss) before tax

53

—

47

—


100

Net other comprehensive income (loss) after tax*

53

—

47

100

Balance as of March 31, 2019
$
(1,825
) $
1
$
(457
) $
(78
) $
(2,359
)

*	~~Amounts do not include a $6 million loss from foreign currency translation adjustments attributable to~~ ~~non-controlling~~ ~~interests.~~

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

NOTE 15 – Segments:

Teva operates its business and reports its financial results in ~~three~~3 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)

International Markets segment, which includes all countries other than those in the North America and Europe segments.

In addition to these three segments, Teva has other sources of revenues, primarily the sale of APIs to third parties, certain contract manufacturing services and an

out-licensing

platform offering a portfolio of products to other pharmaceutical companies through its affiliate Medis.

Teva’s Chief Executive Officer (“CEO”), who is the chief operating decision maker (“CODM”), reviews financial information prepared on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the three identified reportable segments, namely North America, Europe and International Markets, to make decisions about resources to be allocated to the segments and assess their performance.

Segment profit is comprised of gross profit for the segment less R&D expenses, S&M expenses, G&A expenses and other income related to the segment. Segment profit does not include amortization and certain other items.

Teva manages its assets on a company basis, not by segments, as many of its assets are shared or commingled. Teva’s CODM does not regularly review asset information by reportable segment and, therefore, Teva does not report asset information by reportable segment.

Teva’s CEO may review its strategy and organizational structure from time to time. Any changes in strategy may lead to a reevaluation of the Company’s segments and goodwill allocation to reporting units, as well as fair value attributable to its reporting units. See note

3 and

~~Segment information:~~note 6.

Three months ended March 31,

2020

North

America

Europe

International Markets

(U.S. $ in millions)

Revenues
$
2,082
$
1,402
$
565

Gross profit

1,062

823

305

R&D expenses

146

55

15

S&M expenses

251

202

106

G&A expenses

118

66

34

Other income

(2
)
(1
)
(6
)

Segment profit
$
550
$
502
$
156

Three months ended March 31,

2019

North

America

Europe

International Markets
*

(U.S. $ in millions)

Revenues
$
2,047
$

1,264
$ 521
Gross profit

1,039

730

269

R&D expenses

165

66

22

S&M expenses

268

215

115

G&A expenses

112

48

36

Other (income) expense

(4
)
(1
)
—

Segment profit
$
498
$
403
$
97

*	The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c for additional information.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

a.	Segment information:


	Three months ended March 31,
	2021
	North America			Europe		International Markets
	(U.S. $ in millions)
Revenues	$	1,989		$	1,214	$	490
Gross profit		1,074			688		260
R&D expenses		160			66		18
S&M expenses		229			214		96
G&A expenses		111			70		26
Other income		(3	)		§		(2	)

Segment profit	$	577		$	338	$	122

§ Represents an amount less than $1 million.


		Three months ended March 31,
		2020
	��	North America			Europe			International Markets
		(U.S. $ in millions)
Revenues		$	2,082		$	1,402		$	565
Gross profit			1,062			823			305
R&D expenses			146			55			15
S&M expenses			251			202			106
G&A expenses			118			66			34
Other income			(2	)		(1	)		(6	)

Segment profit		$	550		$	502		$	156

The following table presents a reconciliation of ~~our~~Teva’s segment profits to ~~our~~its consolidated operating income (loss) and to consolidated income (loss) before income taxes for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:


	Three months ended
	March 31,
	2021		2020
	(U.S. $ in millions)
North America profit	$	577	$	550
Europe profit		338		502
International Markets profit		122		156

Total reportable segments profit		1,036		1,208
Profit of other activities		41		36

Total segments profit		1,077		1,244
Amounts not allocated to segments:
Amortization		242		258
Other assets impairments, restructuring and other items		137		121
Intangible asset impairments		79		649
Legal settlements and loss contingencies		104		(25	)
Other unallocated amounts		82		49

Consolidated operating income (loss)		434		191

Financial expenses, net		290		224

Consolidated income (loss) before income taxes	$	144	$	(33	)

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Three months

ended
March 31,

2020

2019

(U.S. $ in millions)

North America profit
$
550
$
498

Europe profit

502

403

International Markets profit

156

97

Total reportable segments profit

1,208

998

Profit of other activities

36

21

Total segments profit

1,244

1,019

Amounts not allocated to segments:

Amortization

258

283

Other assets impairments, restructuring and other items

121

1

Intangible asset impairments

649

469

Legal settlements and loss contingencies

(25
)
57

Other unallocated amounts

49

75

Consolidated operating income (loss)

191

134

Financial expenses, net

224

218

Consolidated income (loss) before income taxes
$
(33
) $
(84
)

Notes to Consolidated Financial Statements

(Unaudited)

b. Segment revenues by major products and activities:

The following tables present revenues by major products and activities for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

North America

Three months ended
March 31,

2020

2019

(U.S. $ in millions)

Generic products
$
952
$
966

AJOVY

29

20

AUSTEDO

122

74

BENDEKA/TREANDA

105

122

COPAXONE

198

208

ProAir*

59

59

QVAR

45

64

Anda

426

379

Other

146

155

Total
$
2,082
$ 2,047


North America	Three months ended March 31,
	2021		2020
	(U.S. $ in millions)
Generic products	$	1,053	$	952
AJOVY		31		29
AUSTEDO		146		122
BENDEKA/TREANDA		91		105
COPAXONE		164		198
ProAir*		54		59
Anda		289		426
Other		161		191

Total	$	1,989	$	2,082

*	Does not include revenues from ~~the~~ ProAir authorized generic, which are included under generic products.


Europe	Three months ended March 31,
	2021		2020
	(U.S. $ in millions)
Generic products	$	865	$	1,032
AJOVY		16		4
COPAXONE		100		109
Respiratory products		93		106
Other		140		151

Total	$	1,214	$	1,402


International markets	Three months ended March 31,
	2021		2020
	(U.S. $ in millions)
Generic products	$	392	$	449
COPAXONE		12		12
Other		86		104

Total	$	490	$	565

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Europe

Three months

ended
March 31,

2020

2019

(U.S. $ in millions)

Generic products
$ 1,032 $ 919
COPAXONE

109

114

Respiratory products

106

91

AJOVY

4

—

Other

151

140

Total
$
1,402
$
1,264

International markets
*

Three months

ended
March
31,

2020

2019

(U.S. $ in millions)

Generic products
$
449
$
441

COPAXONE

12

13

Other

104

67

Total
$

565
$

521

*	The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c for additional information.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

NOTE 16 – Fair value measurement:

Financial items carried at fair value on a recurring basis as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 are classified in the tables below in one of the three categories of fair value ~~levels:~~level

March 31, 2020

Level 1

Level 2

Level 3

Total

(U.S. $ in millions)

Cash and cash equivalents:

Money markets
$
260
$
—
$
—
$
260

Cash, deposits and other

1,544

—

—

1,544

Investment in securities:

Equity securities

31

—

—

31

Other, mainly debt securities

2

—

12

14

Derivatives:

Asset derivatives—options and forward contracts

—

104

—

104

Liability derivatives—options and forward contracts

—

(94
)
—

(94
)
Contingent consideration*

—

—

(435
)
(435
)

Total
$
1,837
$
10
$
(423
) $
1,424

December 31, 2019

Level 1

Level 2

Level 3

Total

(U.S. $ in millions)

Cash and cash equivalents:

Money markets
$
577
$
—
$
—
$
577

Cash, deposits and other

1,398

—

—

1,398

Investment in securities:

Equity securities

42

—

—

42

Other, mainly debt securities

2

—

12

14

Derivatives:

Asset derivatives—options and forward contracts

—

32

—

32

Liability derivatives—options and forward contracts

—

(41
)
—

(41
)
Liability derivatives—interest rate and cross-currency swaps

—

(22
)
—

(22
)
Contingent consideration*

—

—

(460
)
(460
)

Total
$
2,019
$
(31
) $
(448
) $
1,540


	March 31, 2021
	Level 1		Level 2			Level 3			Total
	(U.S. $ in millions)
Cash and cash equivalents:
Money markets	$	120	$	—		$	—		$	120
Cash, deposits and other		1,623		—			—			1,623
Investment in securities:
Equity securities*		182		—			—			182
Other, mainly debt securities		5		—			1			6
Derivatives:
Asset derivatives—options and forward contracts		—		63			—			63
Liability derivatives—options and forward contracts		—		(23	)		—			(23	)
Contingent consideration**		—		—			(246	)		(246	)

Total	$	1,930	$	40		$	(245	)	$	1,725


	December 31, 2020
	Level 1		Level 2			Level 3			Total
	(U.S. $ in millions)
Cash and cash equivalents:
Money markets	$	367	$	—		$	—		$	367
Cash, deposits and other		1,810		—			—			1,810
Investment in securities:
Equity securities*		25		259			—			284
Other, mainly debt securities		5		—			10			15
Derivatives:
Asset derivatives—options and forward contracts		—		24			—			24
Liability derivatives—options and forward contracts		—		(79	)		—			(79	)
Contingent consideration**		—		—			(268	)		(268	)

Total	$	2,207	$	204		$	(258	)	$	2,153

*	As of March 31, 2021, Teva’s shares in American Well Corporation (“American Well”) moved from a Level 2 measurement to Level 1 measurement within the fair value hierarchy, since they are no longer subject to a sale restriction.

**	Contingent consideration represents liabilities recorded at fair value in connection with acquisitions.

Teva determined the fair value of the ~~liability~~liabilities for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration is based on several factors, such as: the cash flows projected from the success of unapproved product candidates; the probability of success of product candidates, including risks associated with uncertainty regarding achievement and payment of milestone events; the time and resources needed to complete the development and approval of product candidates; the life of the potential commercialized products and associated risks of obtaining regulatory approvals in the United States and Europe, and the risk adjusted discount rate for fair value measurement.

A probability of success factor ranging from 80% to 100% was used in the fair value calculation to reflect inherent regulatory and commercial risk of the contingent payments and IPR&D. The discount rate applied ranged from 8%7.5% to 9

%8.0%. The weighted average discount rate, calculated based on the relative fair value of ~~our~~Teva’s contingent consideration ~~obligations,~~liabilities, was ~~8.6%~~7.8%.

The contingent consideration is evaluated quarterly, or more frequently, if circumstances dictate. Changes in the fair value of contingent consideration are recorded in ~~earnings.~~

consolidated statements of income.

Significant changes in unobservable inputs, mainly the probability of success and cash flows projected, could result in material changes to the contingent consideration ~~liability.~~liabilities.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

The following table summarizes the activity for those financial assets and liabilities where fair value measurements are estimated utilizing Level 3 inputs:

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Three months ended
March 31, 2020

(U.S. $ in millions)

Fair value at the beginning of the period
$
(448
)
Adjustments to provisions for contingent consideration:

Actavis Generics transaction

(5
)
Eagle transaction

(1
)
Settlement of contingent consideration:

Eagle transaction

31

Fair value at the end of the period
$
(423
)


	Three months ended March 31, 2021			Three months ended March 31, 2020
	(U.S. $ in millions)
Fair value at the beginning of the period	$	(258	)		(448	)
Redemption of debt securities		(9	)
Adjustments to provisions for contingent consideration:
Actavis Generics transaction		(3	)		(5	)
Eagle transaction		—			(1	)
Settlement of contingent consideration:
Eagle transaction		25			31

Fair value at the end of the period	$	(245	)	$	(423	)

Financial instruments not measured at fair value

Financial instruments measured on a basis other than fair value mostly consist of senior notes and convertible senior debentures (see note 7) and are presented in the table below in terms of fair value (level 1 inputs):

Fair value*

March 31,

December 31,

2020

2019

(U.S. $ in millions)

Senior notes included under senior notes and loans
$
21,960
$
22,686

Senior notes and convertible senior debentures included under short-term debt

1,583

2,318

Total
$
23,543
$
25,004


	Estimated fair value*
	March 31,		December 31,
	2021		2020
	(U.S. $ in millions)
Senior notes included under senior notes and loans	$	22,316	$	22,684
Senior notes and convertible senior debentures included under short-term debt		2,711		3,207

Total	$	25,027	$	25,891

*	~~Based~~ The fair value was estimated based on quoted market ~~price. See note 7 for carrying value.~~prices.

3938

Table of Contents

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Overview

We are a global pharmaceutical company, committed to helping patients around the world to access affordable medicines and benefit from innovations to improve their health. Our mission is to be a global leader in generics, specialty medicines and biopharmaceuticals, improving the lives of patients.

We operate worldwide, with headquarters in Israel and a significant presence in the United States, Europe and many other markets around the world. Our key strengths include our world-leading generic medicines expertise and portfolio, focused specialty medicines portfolio and global infrastructure and scale.

Teva was incorporated in Israel on February 13, 1944 and is the successor to a number of Israeli corporations, the oldest of which was established in 1901.

Our Business Segments

We operate our business through three segments: North America, Europe and International Markets. Each business segment manages our entire product portfolio in its region, including generics, specialty and OTC products. This structure enables strong alignment and integration between operations, commercial regions, R&D and our global marketing and portfolio function, optimizing our product lifecycle across therapeutic areas.

In addition to these three segments, we have other activities, primarily the sale of API to third parties, certain contract manufacturing services and an

out-licensing

platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis.

The

COVID-19

Pandemic

As a leading global pharmaceutical company, Teva provides essential medicines to millions of patients around the world every day. Our priorities remain focused on the health and well-being of our employees and on our responsibility to continue to provide our medicines to the nearly 200 million patients who depend on us every day.

~~Our industry plays a critical role, particularly during such challenging times. We are working with governments to do all they can,~~

During the first quarter of 2021, we have not experienced material delays in ~~partnership with our industry, to maintain the~~ development, production ~~supply~~ and distribution of ~~high quality~~ medicines ~~for patients worldwide during this unprecedented global health crisis.~~

~~Business Continuity~~

or disruptions in our supply chains. The supply chain supporting our key ~~products –~~ products—specialty, generics and API – remains largely uninterrupted, ~~and~~ with adequate product inventory across our ~~network. Additionally, based on analysis of potential scenarios, we currently have inventory~~network and redundancy plans in place to address potential shortfalls, if any. ~~We are closely monitoring the evolving situation in our key manufacturing locations and commercial markets, and are accordingly adapting our business continuity plans.~~ All our facilities that research, manufacture, order, pack, distribute and provide critical customer and patient services are currently functioning to meet demand for essential medicines for patients throughout the world.

~~Teva has worked since the early days of the~~

~~COVID-19~~

pandemic to support efforts of governments and health services to curb the impact of the virus. Our global manufacturing network has been tirelessly focused on securing and scaling production of both API and finished doses for potential treatments that may prove essential in treating the condition nearly everywhere Teva does business. Teva will continue to work with governments and international organizations throughout the world to support emerging needs related to this crisis, while doing everything possible to also continue to supply our vast portfolio of medicines to patients.

~~R&D~~We did not have and ~~New Launches~~

We do not expect to have a material impact on our ongoing clinical research programs and product launches as a result of the

COVID-19

pandemic; however, ifduring the ~~pandemic continues for an extended period~~first quarter of ~~time,~~2021, we ~~may experience~~have experienced minimal delays in clinical trials due to cessation or slow-downs of recruitment for patient studies and suspended regulatory inspections, raw material supply issues, delays in regulatory approvals of new products due to reduced capacity or

re-prioritization

of regulatory agencies and delays in

pre-commercial

launch activities. We may experience further delays if the pandemic continues for an extended period of time. All of our new product launches have been risk-assessed based on upcoming manufacturing and regulatory inspections.

~~Workforce Policy and Measures~~

Our employees across all aspects of our business are safeguarding the continuity of our activities and we are committed to supporting their efforts and caring for their personal health and safety. We are enacting appropriate measures to ensure the safe supply and transport of our medicines and APIs, and have established measures intended to ensure our sites remain open, allowing us to maintain our business, R&D and manufacturing operations. We have reduced the number of people in our facilities to only those who are essential and may not work remotely. By doing our part to reduce proximity to one another, we hope to better protect our overall workforce, and ultimately, the communities in which we live.

~~Table of Contents~~

As we work through this health crisis, we are starting to plan our strategy for returning to usual operations at all organizational levels, under guiding principles to protect our business, maximize organizational productivity and efficiency while simultaneously ensuring a safe workplace.

~~Trends~~

~~We have limited insight into the extent to which our business may be impacted by the~~

~~COVID-19~~

~~pandemic and there are many unknowns facing our industry and society at large. At this stage~~The long-term effects of the pandemic ~~we are not experiencing material delays in development, production and distribution of medicines or disruptions in our supply chains; however, longer term affects~~ cannot be predicted at this time and would depend on the duration and severity of the pandemic and the restrictive measures put in place to control its impact. ~~We are experiencing~~In the first quarter of 2020, we experienced increasing demand for certain medicines, as would be expected during a global crisis of this ~~nature,~~nature. We saw a compensating effect with lower demand for certain medicines during the second quarter of 2020 and ~~cannot assess whether such increased~~continuing slightly lower demand isdue to less physician and hospital activity in certain regions and for certain medicines in the ~~result~~second half of ~~stocking by wholesalers or patients.~~2020. Although no one can predict future demand for pharmaceutical products, market dynamics or the scope or duration of the financial and other challenges arising from the pandemic, it is possible that we will continue to see ~~a compensating effect during the remainder of the year,~~variable demand in 2021, but we do not currently anticipate a material negative impact on our ~~2020~~2021 financial results due to the ~~evolving~~ongoing global pandemic.

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Highlights

Significant highlights in the first quarter of ~~2020~~2021 included:

Revenues in the first quarter of ~~2020~~2021 were ~~$4,357~~$3,982 million, ~~an increase~~a decrease of 5%9%, or 10% in ~~both U.S. dollar and~~ local currency terms, compared to the first quarter of ~~2019,~~2020, mainly due to lower revenues from generic, OTC and respiratory products and from COPAXONE in our Europe segment, lower revenues from Anda, COPAXONE and BENDEKA/TREANDA in our North America segment, lower revenues from Japan resulting from the divestment of a majority of the generic and operational assets of our Japanese business venture, as well as regulatory price reductions and generic competition to

off-patented

products in Japan, partially offset by higher revenues from ~~generics~~generic products and ~~OTC sales~~AUSTEDO in ~~Europe, higher revenues from AUSTEDO~~

~~and Anda in~~our North America ~~and higher revenues from our International Markets segment, partially offset~~segment. Revenues were also affected by ~~lower revenues from generics in the U.S. and lower revenues from QVAR~~

~~and BENDEKA~~

~~/TREANDA~~

~~in North America.~~

Our North America segment generated revenues of $2,082 million and profit of $550 million in the first quarter of 2020. Revenues increased by 2% compared to the first quarter of 2019, mainly due to an increase in revenues of AUSTEDO and Anda as well as a milestone payment related to our anti-CGRP intellectual property, partially offset by lower revenues from QVAR, BENDEKA/TREANDA, COPAXONE

~~and generic products. Profit increased by 10%, mainly due to the~~ changes in ~~revenues described above.~~

Our Europe segment generated revenues of $1,402 million and profit of $502 million in the first quarter of 2020. Revenues increased by 11%. In local currency terms, revenues increased by 13% compared to the first quarter of 2019, mainly due to higher demand for certain products resulting from the impact of the

COVID-19

pandemic.

Our North America segment generated revenues of $1,989 million and profit of $577 million in the first quarter of 2021. Revenues decreased by 5% compared to the first quarter of 2020, mainly due to a decrease in revenues of Anda, COPAXONE and BENDEKA/TREANDA, partially offset by higher revenues from generic products and AUSTEDO. Our North America segment has experienced some reductions in volume due to less physician and hospital activity during the

COVID-19

pandemic, ~~on purchasing patterns~~but has also experienced increase in demand for certain products related to the treatment of

COVID-19

and its symptoms. In addition, the ability to promote certain specialty products, primarily AJOVY and AUSTEDO, has been impacted by less physician visits by patients and less physician interactions by our sales personnel. Profit increased by 5% compared to the first quarter of 2020, mainly due to higher gross profit, as well as ~~continuing growth~~lower S&M expenses.

Our Europe segment generated revenues of $1,214 million and profit of $338 million in ~~generics and new generic product launches, partially offset~~the first quarter of 2021. Revenues decreased by ~~price declines for oncology products~~13%, or 20% in local currency terms, compared to the first quarter of 2020. This decrease was mainly due to higher revenues in the first quarter of 2020, as a result of significant customer stocking due to the

COVID-19

pandemic. In addition, revenues were impacted by lower demand of generic, ~~competition~~OTC and respiratory products resulting from a decline in doctor and hospital visits by patients, which resulted in fewer prescriptions, as well as lower sales of cough and cold products, both due to the

COVID-19

pandemic. The decrease in revenues is also attributed to a decline in COPAXONE revenues due to competing glatiramer acetate ~~products.~~products and price declines in oncology products as a result of generic competition. Profit ~~increased~~decreased by ~~25%~~33%, mainly due to ~~higher revenues and~~ lower ~~expenses.~~revenues.

Our International Markets segment generated revenues of ~~$565~~$490 million and profit of ~~$156~~$122 million in the first quarter of ~~2020.~~2021. Revenues ~~increased~~

decreased by ~~8% in U.S. dollars~~13%, or 5% 7%

in local currency terms, compared to the first quarter of ~~2019. The increase in revenues was~~2020, mainly due to ~~higher~~lower revenues in Japan resulting from the divestment of the majority of the generic and operational assets of our Japanese business venture, as well as regulatory price reductions and generic competition to

off-patented

products in Japan and lower positive impact from hedging activity. Profit decreased by 22%, mainly due to lower positive impact from hedging activity as well as lower sales in ~~Latin America, Asia-Pacific, Ukraine~~Japan resulting from regulatory price reductions and ~~Russia,~~generic competition to

off-patented

products, partially offset by lower ~~sales in Japan. The revenues~~S&M expenses.

Impairments of identifiable intangible assets were $79 million in the first quarter of ~~2020 included $35 million from a positive hedging impact. Profit increased by 61%, mainly due~~2021, compared to ~~higher sales and the positive impact from hedging activity.~~

~~Impairment of identifiable intangible assets were~~ $649 million in the first quarter of ~~2020, compared~~2020. See note 5 to ~~$469 million in the first quarter of 2019. Impairment expenses in the first quarter of 2020 related to IPR&D assets were $331 million and identifiable product rights were $318 million.~~our consolidated financial statements.

No goodwill impairments were recorded in the first quarters of both ~~2020~~2021 and ~~2019.~~2020.

We recorded ~~expenses of $121 million for~~ other asset impairments, restructuring and other items ~~in the first quarter of 2020, compared to~~ expenses of $1$137 million in the first quarter of ~~2019.~~

~~In the first quarter of 2020, we recorded an income of $25 million in legal settlements and loss contingencies,~~2021, compared to ~~an expense~~expenses of ~~$57~~$121 million in the first quarter of ~~2019. The income~~2020. See note 12 to our consolidated financial statements.

Legal settlements and loss contingencies expenses were $104 million in the first quarter of ~~2020 was mainly related~~2021, compared to ~~a settlement~~income of ~~an action brought against~~$25 million in the ~~sellers~~first quarter of ~~Auden McKenzie (an acquisition made by Actavis Generics).~~2020. See note 9 to our consolidated financial statements.

Operating income was $434 million in the first quarter of 2021, compared to operating income of $191 million in the first quarter of ~~2020, compared~~2020. The increase was mainly due to ~~$134~~lower intangible asset impairment charges, partially offset by lower profit in our Europe segment along with higher legal settlements and loss contingencies.

Financial expenses were $290 million in the first quarter of ~~2019. The increase in the first quarter of 2020 was mainly due~~2021, compared to higher profit in our Europe, International Markets and North America segments and income from legal settlements (compared to an expense in the first quarter of 2019), partially offset by higher intangible asset impairments and higher other assets impairments, restructuring and other items in the first quarter of 2020.

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~~Financial expenses were~~ $224 million in the first quarter of ~~2020, compared to $218 million~~2020. Financial expenses in the first quarter of ~~2019.~~2021 were mainly comprised of interest expenses of $239 million and loss on revaluations of marketable securities of $64 million. Financial expenses in the first quarter of 2020 were mainly comprised of interest expenses of $241 million. ~~Financial expenses in~~

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In the first quarter of ~~2019 were mainly comprised~~2021, we recognized a tax expense of ~~interest expenses~~$62 million, on

pre-tax

income of ~~$227~~$144 million.

In the first quarter of 2020, we recognized a tax benefit of $59 million, on

pre-tax

loss of $33 million. ~~In the first quarter of 2019, we recognized a tax expense of $9 million, on~~

~~pre-tax~~

~~loss of $84 million.~~ Our tax rate for the first quarter of ~~2020~~2021 was mainly affected by legal settlements, impairments and amortization in jurisdictions in which tax rates are ~~higher~~lower than Teva’s average tax rate

its ongoing business ~~operations~~operations.

Exchange rate movements ~~between~~during the first quarter of ~~2020~~2021, net of hedging effects, positively impacted revenues by $74 million and negatively impacted operating income by $14 million, compared to the first quarter of ~~2019, net of hedging, negatively impacted overall revenues by $3 million and positively impacted operating income by $27 million.~~2020.

As of March 31, ~~2020,~~2021, our debt was ~~$26,103~~$24,986 million, compared to ~~$26,908~~$25,919 million as of December 31, ~~2019.~~2020. This decrease was mainly due to ~~repayment at maturity~~the redemption of $491 million of our ~~$700 million 2.25%~~convertible senior ~~notes, as well as~~debentures and exchange rate fluctuations.

Cash flow ~~generated from~~used in operating activities during the first quarter of ~~2020~~2021 was ~~$305~~$405 million, compared to ~~$112~~cash flow generated from operating activities of $305 million in the first quarter of ~~2019. This increase in cash flow~~2020. The decrease in the first quarter of ~~2020~~2021 was mainly due to ~~higher operating profit~~changes in ~~each of our three segments,~~working capital items resulting from a decrease in SR&A and an increase in inventory, as well as lower ~~performance incentive payments to employees paid~~profit in our Europe segment.

During the first quarter of ~~2020, compared to the amounts paid~~2021, we generated free cash flow of $59 million, which we define as comprising $405 million in ~~the first quarter~~cash flow used in operating activities, $476 million in beneficial interest collected in exchange for securitized accounts receivables and $138 million in proceeds from divestitures of ~~2019.~~

Results of Operations

Comparison of Three Months Ended March 31, ~~2020~~2021 to Three Months Ended March 31, ~~2019~~2020

The following table sets forth, for the periods indicated, certain financial data derived from our financial statements, presented according to generally accepted accounting principles in the United States (“U.S. GAAP”), presented as percentages of net revenues, and the percentage change for each item as compared to the previous year:

Percentage of Net Revenues
Three Months Ended
March 31,

Percentage
Change

2020

2019

2020 - 2019

%

%

%

Net revenues

100

100

5

Gross profit

47

45

11

Research and development expenses

5

6

(15
)
Selling and marketing expenses

14

16

(5
)
General and administrative expenses

7

7.0

4

Intangible assets impairments

15

11

38

Other assets impairments, restructuring and other items

3

§

NA

Legal settlements and loss contingencies

(1
)
1

NA

Other income (loss)

§

§

115

Operating income

4

3

43

Financial expenses, net

5

5

3

Income (loss) before income taxes

(1
)
(2
)
(61
)
Income taxes (benefit)

(1
)
§

—

Share in losses (profits) of associated companies, net

§

§

NA

Net income attributable to
non-controlling
interests

(1
)
§

NA

Net income (loss) attributable to Teva

2

(3
)
—

Net income (loss) attributable to ordinary shareholders

2

(3
)
—

§	~~Represents an amount less than 0.5%.~~

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Segment Information

North America Segment

The following table presents revenues, expenses and profit for our North America segment for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

Three months ended March 31,

2020

2019

(U.S. $ in millions / % of Segment Revenues)

Revenues
$
2,082

100
% $
2,047

100.0
%
Gross profit

1,062

51.0
%
1,039

50.8
%
R&D expenses

146

7.0
%
165

8.1
%
S&M expenses

251

12.1
%
268

13.1
%
G&A expenses

118

5.6
%
112

5.5
%
Other (income) expense

(2
)
§

(4
)
§

Segment profit*
$
550

26.4
% $
498

24.3
%


	Three months ended March 31,
	2021					2020
	(U.S. $ in millions / % of Segment Revenues)
Revenues	$	1,989		100	%	$	2,082		100	%
Gross profit		1,074		54.0	%		1,062		51.0	%
R&D expenses		160		8.0	%		146		7.0	%
S&M expenses		229		11.5	%		251		12.1	%
G&A expenses		111		5.6	%		118		5.6	%
Other (income) expense		(3	)		§		(2	)		§

Segment profit*	$	577		29.0	%	$	550		26.4	%

*	Segment profit does not include amortization and certain other items.

§	Represents an amount less than 0.5%.

North America Revenues

Our North America segment includes the United States and Canada. Revenues from our North America segment in the first quarter of ~~2020~~2021 were ~~$2,082~~$1,989 million, ~~an increase~~a decrease of ~~$36~~$94 million, or 2%5%, compared to the first quarter of ~~2019,~~2020, mainly due to ~~an increase~~a decrease in revenues ~~of AUSTEDO~~from Anda, COPAXONE and ~~Anda as well as a milestone payment related to our anti-CGRP intellectual property (see note 2 to our consolidated financial statements),~~BENDEKA/TREANDA, partially offset by ~~lower~~ higher

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revenues from ~~QVAR, BENDEKA/TREANDA, COPAXONE~~generic products and ~~generic products.~~AUSTEDO. Our North America segment has experienced some reductions in volume due to less physician and hospital activity during the

COVID-19

pandemic, but has also experienced increase in demand for certain products related to the treatment of

COVID-19

Revenues by Major Products and Activities

The following table presents revenues for our North America segment by major products and activities for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

Three months ended
March 31,

Percentage
Change

2020

2019

2019-2020

(U.S. $ in millions)

Generic products
$
952
$
966

(1
%)
AJOVY

29

20

44
%
AUSTEDO

122

74

64
%
BENDEKA/TREANDA

105

122

(14
%)
COPAXONE

198

208

(5
%)
ProAir*

59

59

1
%
QVAR

45

64

(29
%)
Anda

426

379

13
%
Other

146

155

(6
%)

Total
$
2,082
$
2,047

2
%


	Three months ended March 31,				Percentage Change
	2021		2020		2020-2021
	(U.S. $ in millions)
Generic products	$	1,053	$	952		11	%
AJOVY		31		29		8	%
AUSTEDO		146		122		20	%
BENDEKA/TREANDA		91		105		(14	%)
COPAXONE		164		198		(17	%)
ProAir*		54		59		(9	%)
Anda		289		426		(32	%)
Other		161		191		(16	%)

Total	$	1,989	$	2,082		(5	%)

*	Does not include revenues from ~~the~~ ProAir authorized generic, which are included under generic products.

Generic products

revenues in our North America segment (including biosimilars) in the first quarter of ~~2020~~2021 were ~~$952~~$1,053 million, ~~a decrease~~an increase of 1%11% compared to the first quarter of ~~2019. This decrease was~~2020, mainly due to ~~price erosion in our product portfolio and lower royalty income, offset by an increase in~~higher revenues from ~~launches~~emtricitabine and tenofovir disoproxil fumarate tablets (the generic equivalent of ~~new products, including TRUXIMA~~Truvada

), Truxima (the biosimilar to Rituxan

) and ~~from our~~ ProAir

authorized generic, ~~due to higher demand related to the~~

~~COVID-19~~

~~pandemic.~~

~~Table~~partially offset by lower volume and pricing of ~~Contents~~other generic products.

Among the most significant generic products we sold in North America in the first quarter of ~~2020~~2021 were ~~albuterol sulfate inhalation aerosol (ProAir HFA authorized~~emtricitabine and tenofovir disoproxil fumarate tablets (the generic equivalent of ~~our specialty product)~~Truvada

), Truxima (the biosimilar to Rituxan

), epinephrine injectable solution (the generic equivalent of EpiPen

and EpiPen Jr.

), ~~TRUXIMA (the biosimilar to Rituxan~~

),albuterol sulfate inhalation aerosol (our ProAir authorized generic) and lidocaine transdermal patch (the generic equivalent of Lidoderm Patch

In January 2021, we launched etonogestrel and ~~amphetamine salt tablets~~ethinyl estradiol vaginal ring, 0.120 mg/0.015 mg per day (the generic equivalent of ~~Adderall IR~~

~~We launched HERZUMA for Injection (the biosomilar to Herceptin~~NuvaRing

) in the ~~United States in March 2020. HERZUMA and TRUXIMA were also launched in Canada in January 2020 and February 2020, respectively. On May 4, 2020, TRUXIMA became available in the~~ U.S., which is an estrogen/progestin combination hormonal contraceptive (CHC) indicated for ~~the treatment of rheumatoid arthritis, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis.~~use by women to prevent pregnancy.

In the first quarter of ~~2020, we led the U.S. generics market in~~2021, our total prescriptions ~~and new prescriptions, with~~were approximately ~~389~~322 million ~~total prescriptions~~ (based on trailing twelve months), representing ~~10.4%~~9.2% of total U.S. generic prescriptions, according to IQVIA data.

AJOVY

revenues in our North America segment in the first quarter of ~~2020 were $29~~2021 increased by 8% to $31 million, ~~an increase of $9 million, or 44%~~ compared to the first quarter of ~~2019,~~2020, mainly due to growth in ~~volume~~volume. In the first quarter of 2021, AJOVY’s exit market share in the United Stated in terms of total number of prescriptions was 20.7%, compared to 14.2% in the first quarter of 2020.

AJOVY ~~was approved by the FDA and launched in the United States in September 2018~~is indicated for the preventive treatment of migraine in adults. ~~On January 27, 2020,~~AJOVY was launched in the ~~FDA~~U.S. in 2018, and was approved anin Canada in April 2020. Our auto-injector device for AJOVY ~~in the U.S., which~~ became commercially available in the U.S. in April ~~2020. In addition, AJOVY was approved~~2020 and in Canada onin April ~~14, 2020.~~

~~On May 12, 2017, we entered into a license~~2021. AJOVY is the only anti-CGRP product indicated for quarterly treatment and collaboration agreement with Otsuka Pharmaceutical Co., Ltd. (“Otsuka”) providing Otsuka with an exclusive license to conduct phase 2 and 3 clinical trials for AJOVY in Japan and, once approved, to commercialize the product in Japan. Results for these trials were received in January ~~2020 indicating that primary and secondary endpoints were achieved and that no clinically significant adverse events were observed in subjects.~~2021 we launched a new product offering, providing a quarterly dose.

~~AJOVY is also in clinical development to evaluate safety and efficacy in the treatment~~

Table of ~~post traumatic headache and fibromyalgia.~~Contents

AJOVY is protected by patents expiring in 2026 in Europe and in 2027 in the United States. Applications for patent term extensions have been submitted in various markets around the ~~world. An additional patent~~world, and certain extensions in Europe and other countries have already been granted until 2031. Additional patents relating to the use of AJOVY in the treatment of migraine ishave also been issued in the United States and will expire in ~~2035. This patent is~~2035 and 2037. Such patents are also pending in other countries. AJOVY will also be protected by regulatory exclusivity for 12 years from marketing approval in the United States and 10 years from marketing approval in Europe.

We have filed a lawsuit in the U.S. District Court for the District of Massachusetts alleging that Eli Lilly & Co.’s (“Lilly”) marketing and sale of its galcanezumab product for the treatment of migraine infringes nine Teva patents. Lilly ~~has also~~then submitted IPR (inter partes review) petitions to the Patent Trial and Appeal Board, challenging the validity of the nine patents asserted against it in the litigation. The litigation in the district court was stayed pending resolution of the IPR petitions. On February 18, 2020, the Patent Trial and Appeal Board issued decisions on the first six IPRs, finding the six composition of matter patents invalid as being obvious. On April 21, 2020, we filed notices of appeal in connection with these decisions. On March 31, 2020 the Patent Trial and Appeal Board issued a decision upholding the 3three method of treatment patents and on June 1, 2020, Lilly filed notices of appeal in connection with the decisions on these three patents. The litigation stay ended following the issuance of the most recent IPR decisions, and the parties are proceeding with the litigation. Also, the Court of Appeals for the Federal Circuit has scheduled oral argument for the IPR appeals for June 7, 2021. In addition, in 2018 we ~~have~~ entered into separate agreements with Alder Biopharmaceuticals, Inc. and Lilly, resolving the European Patent Office oppositions that they filed against our AJOVY patents. The settlement agreement with Lilly also resolved Lilly’s action to revoke the patent protecting AJOVY in the United Kingdom.

AUSTEDO

revenues in our North America segment in the first quarter of ~~2020~~2021 increased by ~~64%~~20%, to ~~$122~~$146 million, compared to ~~$74~~$122 million in the first quarter of ~~2019.~~2020. This increase was mainly due to growth in ~~volume in the first quarter of 2020.~~volume.

~~In April 2017,~~ AUSTEDO was ~~approved by the FDA and~~ launched in the ~~United States~~U.S. in 2017. It is indicated for the treatment of chorea associated with Huntington ~~disease. In August 2017, the FDA approved AUSTEDO~~disease and for the treatment of tardive ~~dyskinesia.~~

~~We do not have further plans for the development of AUSTEDO for the treatment of Tourette syndrome~~dyskinesia in pediatric patients in the United States, which was being developed under a partnership agreement with Nuvelution Pharma, Inc. (“Nuvelution”), following clinical trial results received in February 2020, which failed to meet their primary endpoints.adults.

AUSTEDO is protected in the United States by ~~five~~six Orange Book patents expiring between 2031 and ~~2033~~2036 and in Europe by two patents expiring in 2029. Generic ANDA filings on AUSTEDO are expected as early as the second quarter of 2021.

BENDEKA

and

TREANDA

combined revenues in our North America segment in the first quarter of ~~2020~~2021 decreased by 14% to ~~$105~~$91 million, compared to the first quarter of ~~2019,~~2020, mainly due to the ~~emergence~~availability of alternative ~~novel~~ therapies and continued competition from Belrapzo

ready-to-dilute

bendamustine hydrochloride product from Eagle Pharmaceuticals, Inc. (“Eagle”)).

~~Table of Contents~~

In July 2018, Eagle prevailed in its suit against the FDA to obtain seven years of orphan drug exclusivity in the United States for BENDEKA. On March 13, 2020, this decision was upheld in the appellate court. As ~~a result,~~things currently stand, 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. ~~It is unclear whether the FDA or the intervening generic defendants will further appeal this ruling.~~ 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~~increased the royalty rate. In consideration, Eagle agreed to assume a portion of BENDEKA-related patent litigation expenses.

There are 15 patents listed in the U.S. Orange Book for BENDEKA with expiry dates in 2026 and 2031. In September 2019, a patent infringement action against four of ~~the five~~six ANDA filers for generic versions of BENDEKA was tried in the United States District Court for the District of Delaware. On April 27, 2020, the District Court upheld the validity of all of the asserted patents and found that all four ANDA filers infringe ~~these~~at least one of the patents. ~~As a result,~~Three of the four ANDA filers have appealed the district court decision, but barring an adverse appellate decision, these ANDA filers should be enjoined until ~~these~~the patents expire in 2031. The litigation against the fifth ANDA filer was dismissed after the withdrawal of its patent challenge, and the case against the sixth ANDA filer is in the early stages of litigation.

Additionally, in July 2018, Teva and Eagle filed suit against Hospira, Inc. (“Hospira”) related to its 505(b)(2) new drug application (“NDA”) referencing BENDEKA in the U.S. District Court for the District of Delaware. ~~Hospira’s~~

~~30-month~~

~~stay expires in December 2020.~~ On December 16, 2019, the Delaware District Court dismissed the case against Hospira on all but one of the asserted patents, which expires in 2031. Trial against Hospira on that patent is scheduled to begin on November 15, 2021.

~~We have U.S. Orange Book patents for TREANDA expiring between 2026 and 2031. One~~In addition to the settlement with Eagle regarding its bendamustine 505(b)(2) NDA, ~~was filed for a liquid version of bendamustine~~between 2015 and ~~21 ANDAs were filed~~2020, we reached final settlements with 22 ANDA filers for generic versions of the lyophilized form of ~~TREANDA. We have reached final settlements with all 22 filers,~~TREANDA and one 505(b)(2) NDA filer for a generic version of the liquid form of TREANDA, providing for the launch of generic versions of TREANDA prior to patent expiration.

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COPAXONE

revenues in our North America segment in the first quarter of ~~2020~~2021 decreased by 5%17% to ~~$198~~$164 million, compared to the first quarter of ~~2019,~~2020, mainly due to generic competition in the United States.

The market for MS treatments continues to develop, particularly with the ~~approvals~~approval of generic versions of ~~COPAXONE discussed above, as well as additional generic versions expected to be approved in the future. Oral~~COPAXONE. Additionally, oral treatments for MS, such as Tecfidera

, Gilenya

and Aubagio

, continue to present significant and increasing competition. COPAXONE also continues to face competition from existing injectable products, as well as from monoclonal antibodies, such as Ocrevus

ProAir

(HFA and RespiClick)

revenues in our North America segment in the first quarter of ~~2020~~2021 were ~~$59~~$54 million, ~~flat~~a decrease of 9% compared to the first quarter of ~~2019.~~2020. In January 2019, we launched our own ProAir authorized generic in the United States, following the launch of a generic version of Ventolin

HFA, another albuterol inhaler. Revenues from our ProAir ~~HFA~~ authorized generic are included in “generic products” above. During the first quarter of 2021, ProAir iswas the ~~fourth-largest~~fifth-largest short-acting beta-agonist in the market, with an exit market share of ~~15.5% (37.5% including our ProAir HFA authorized generic, making our overall albuterol product the largest in the market)~~10.3% in terms of total number of prescriptions for albuterol inhalers, ~~during the first quarter of 2020,~~ compared to ~~27.6%~~15.8% in the first quarter of ~~2019. In June 2014, we settled a patent challenge~~2020. The exit market share including our ProAir authorized generic is 43.9%, making our overall albuterol product the second largest in the market, compared to ProAir HFA with Perrigo Company plc (“Perrigo”), under which Perrigo is now permitted to launch its generic product. In February 2020, Perrigo obtained FDA approval of its generic product and announced initial release of limited supplies. 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.

~~QVAR~~

~~revenues in our North America segment~~38.6% in the first quarter of ~~2020 decreased by 29% to $45 million, compared to the first quarter~~2020. Other generic versions of ~~2019, mainly due to increased price competition and lower volumes. QVAR maintained its second-place position~~ProAir were launched in the inhaled corticosteroids category in the United States, with an exit market share of 20.8% in terms of total number of prescriptions during the first quarter of 2020, compared to 21.7% in the first quarter of 2019.2020.

Anda

revenues in our North America segment in the first quarter of ~~2020 increased~~2021 decreased by ~~13%~~32% to ~~$426~~$289 million, compared to ~~$379~~$426 million in the first quarter of ~~2019,~~2020, mainly due to lower demand. In addition, revenues were higher ~~volume increases primarily related~~in the first quarter of 2020 as a result of significant customer stocking due to the

COVID-19

pandemic. Anda, our distribution business in the United States, distributes generic, specialty and OTC pharmaceutical products from various third party manufacturers to independent retail pharmacies, pharmacy retail chains, hospitals and physician offices in the United States. Anda is able to compete in the secondary distribution market by maintaining high inventory levels for a broad offering of products, competitive pricing and offering next day delivery throughout the United States.

~~Table of Contents~~

Product Launches and Pipeline

In the first quarter of ~~2020,~~2021, we launched the generic version of the following branded products in North America:

Product Name

Brand Name

Launch
Date

Total Annual U.S.
Branded Sales at Time
of Launch
(U.S. $ in millions
(IQVIA))
*

Doxepin tablets, 3 mg & 6 mg

Silenor
®
January
$
50

HERZUMA
®
(trastuzumab-pkrb) for injection, 150 mg/vial & 420 mg/vial

Herceptin
®**
March
$
3,042


Product Name	Brand Name	Launch Date	Total Annual U.S. Branded Sales at Time of Launch (U.S. $ in millions (IQVIA)) *
Mesalamine Extended-Release Capsules, 0.375g	Apriso ®	January	$	344
Etonogestrel and Ethinyl Estradiol Vaginal Ring	NuvaRing ®	January	$	812
Testosterone Gel, 1.62%, 20.25mg/1.25g & 40.5mg/2.5g	AndroGel ®	February	$	40
Liothyronine Sodium Tablets USP, 5mcg, 25mcg, 50mcg	Cytomel ®	February	$	107
Brinzolamide Ophthalmic Suspension, USP, 1%	Azopt ®	March	$	184

*	The figures presented are for the twelve months ended in the calendar quarter immediately prior to our launch or ~~re-launch~~re-launch.

**	~~Biosimilar.~~

Our generic products pipeline in the United States includes, as of March 31, ~~2020, 242~~2021, 206 product applications awaiting FDA approval, including 7972 tentative approvals. This total reflects all pending ANDAs, supplements for product line extensions and tentatively approved applications and includes some instances where more than one application was submitted for the same reference product. Excluding overlaps, the branded products underlying these pending applications had U.S. sales for the twelve months ended ~~March~~December 31, 2020 exceeding ~~$119~~$109 billion, according to IQVIA. Approximately ~~70%~~71% of pending applications include a paragraph IV patent challenge, and we believe we are first to file with respect to 9076 of these products, or ~~112~~101 products including final approvals where launch is pending a settlement agreement or court decision. Collectively, these first to file opportunities represent over ~~$77~~$74 billion in U.S. brand sales for the twelve months ended ~~March~~December 31, 2020, according to IQVIA.

IQVIA reported brand sales are one of the many indicators of future potential value of a launch, but equally important are the mix and timing of competition, as well as cost effectiveness. The potential advantages of being the first filer with respect to some of these products may be subject to forfeiture, shared exclusivity or competition from

so-called

“authorized generics,” which may ultimately affect the value derived.

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In the first quarter of ~~2020,~~2021, we ~~did not receive any~~received tentative approvals for generic ~~equivalents.~~equivalents of the products listed in the table below, excluding overlapping applications. A “tentative approval” indicates that the FDA has substantially completed its review of an application and final approval is expected once the relevant patent expires, a court decision is reached, a

30-month

regulatory stay lapses or a

180-day

exclusivity period awarded to another manufacturer either expires or is forfeited.


Generic Name	Brand Name	Total Annual U.S. Branded Market (U.S. $ in millions (IQVIA)) *
Ibrutinib Caps	Imbruvica ®	$	782
Lubiprostone Caps	Amitza ®	$	410

*	The figures presented are for the twelve months ended in the calendar quarter immediately prior to our launch or re-launch.

We have additional biosimilar products in development in various stages of clinical trials and regulatory review.

Below is a description of key products in our specialty pipeline as of March 31, ~~2020:~~2021:



~~Product~~Phase 2	~~Potential~~ ~~Indication(s)~~Phase 3	~~Route of~~Pre-Submission
~~Administration~~ Novel Biologics	~~Development Phase~~ Fremanezumab ~~(date entered phase 3)~~ Fibromyalgia	~~Comments~~ Fremanezumab Additional indication

	TEV-48574 Respiratory	Fasinumab Osteoarthritic Pain (March 2016) (1)

	TEV-53275 Respiratory

Small Molecules		Deutetrabenazine Dyskinesia in Cerebral Palsy (September 2019)	Risperidone LAI Schizophrenia (2)

~~CNS, Neurology and~~ ~~Neuropsychiatry~~ Digital Respiratory

~~AUSTEDO (deutetrabenazine)~~ Digihaler ®	~~Tourette syndrome~~(budesonide and formoterol fumarate dihydrate)	~~Oral~~		~~No further plans in this indication.~~(EU)

		~~Dyskinesia in cerebral palsy~~	~~Oral~~	~~3 (September 2019)~~

~~TV-46000~~ ~~(risperidone LAI)~~	~~Schizophrenia~~	~~Subcutaneous~~	~~3 (April 2018)~~

~~Table of Contents~~


~~Product~~	~~Potential~~ ~~Indication(s)~~	Route of Administration	Development Phase (date entered phase 3)	~~Comments~~
~~Migraine and Pain~~

~~fremanezumab (anti CGRP)~~ QVAR ® Digihaler ®	~~Post traumatic~~ ~~headache~~(beclomethasone dipropionate HFA) (U.S.)

(1)	~~Subcutaneous~~		2

		~~fibromyalgia~~		~~Subcutaneous~~	2

~~fasinumab~~		~~Osteoarthritis pain~~		~~Subcutaneous~~	~~3 (March 2016)~~	Developed in collaboration with Regeneron Pharmaceuticals, Inc. (“Regeneron”). Results for two phase 3 clinical trials, FACT OA1 and FACT OA2, were released on August 5, 2020, indicating that the co-primary endpoints for fasinumab 1 mg monthly were achieved. Fasinumab 1 mg monthly demonstrated significant improvements in pain and physical function over placebo at week 16 and week 24, respectively. Fasinumab 1 mg monthly also showed nominally significant benefits in physical function in two trials and pain in one trial, when compared to the maximum FDA-approved prescription doses of non-steroidal anti-inflammatory drugs for osteoarthritis. The FACT OA1 trial included an additional treatment arm, fasinumab 1 mg every two months, which showed numerical benefit over placebo, but did not reach statistical significance. In initial safety analyses from the phase 3 trials, there was an increase in arthropathies reported with fasinumab. In a sub-group of patients from one phase 3 long-term safety trial, there was an increase in joint replacement with fasinumab 1 mg monthly treatment during the off-drug follow-up period, although this increase was not seen in the other trials to date.

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Active treatment of patients with fasinumab, which only involved dosing in an optional second-year extension phase of one trial, has been discontinued following a recommendation from the fasinumab program’s Independent Data Monitoring Committee that the program should be terminated, based on available evidence obtained to date. The core efficacy data has already been obtained to support potential fasinumab regulatory filings. Long-term safety data continues to be gathered, and is expected to be reported in 2021. Currently, all non-essential activities and related expenditures for fasinumab have been put on hold. Next steps will be assessed together with Regeneron, with the intention of discussing data with the FDA.

(2)	In January 2021, we announced positive results for a phase 3 clinical trial designed to evaluate the efficacy of risperidone LAI. No new safety signals were identified that are inconsistent with the known safety profile of other risperidone formulations. The second phase 3 study evaluating long-term safety and tolerability is ongoing.

~~Respiratory~~

~~ProAir~~ ~~e-RespiClick~~ ™		~~Bronchospasm and exercise induced bronchitis~~	~~Oral inhalation~~	~~Approved by FDA~~ ~~(December 2018)~~

~~AirDuo~~ ® ~~Digihaler~~ ®		~~Treatment of asthma in patients aged 12 years and older~~	~~Oral inhalation~~	~~Approved by FDA (July 2019)~~

~~ArmonAir~~ ® ~~DigiHaler~~ ®		~~Treatment of asthma in patients aged 12 years and older~~	~~Oral inhalation~~	~~Approved by FDA (February 2020)~~

~~GoResp~~ ® ~~DigiHaler~~ ® ~~/ DuoResp~~ ® ~~DigiHaler~~ ®		~~Treatment of asthma in patients aged 12 years and older and COPD~~	~~Oral inhalation~~	~~Under regulatory review~~

North America Gross Profit

Gross profit from our North America segment in the first quarter of ~~2020~~2021 was ~~$1,062~~$1,074 million, an increase of 2%1%, compared to ~~$1,039~~$1,062 million in the first quarter of ~~2019. This increase was mainly due to the change in mix of revenues, as discussed above.~~2020.

Gross profit margin for our North America segment in the first quarter of ~~2020~~2021 increased to ~~51.0%~~54.0%, compared to ~~50.8%~~51.0% in the first quarter of ~~2019.~~2020. This increase was mainly due to the change in mix of products.

North America R&D Expenses

R&D expenses relating to our North America segment in the first quarter of ~~2020~~2021 were ~~$146~~$160 million, ~~a decrease~~an increase of ~~12%~~10%, compared to ~~$165~~$146 million in the first quarter of ~~2019.~~2020.

For a description of our R&D expenses in the first quarter of ~~2020,~~2021, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.

North America S&M Expenses

S&M expenses relating to our North America segment in the first quarter of ~~2020~~2021 were ~~$251~~$229 million, a decrease of 6%9%, compared to ~~$268~~$251 million in the first quarter of ~~2019.~~2020. This decrease was mainly due to ~~cost reductions~~lower S&M expenses related to Anda and additional efficiency measures.

North America G&A Expenses

G&A expenses relating to our North America segment in the first quarter of ~~2020~~2021 were ~~$118~~$111 million, ~~an increase~~a decrease of 5%, compared to ~~$112~~$118 million in the first quarter of ~~2019.~~2020.

~~North America Other Income (Expense)~~

~~Other income from our North America segment in the first quarter of 2020 was $2 million, compared to other income of $4 million in the first quarter of 2019.~~

North America Profit

Profit from our North America segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.

~~Table of Contents~~

Profit from our North America segment in the first quarter of ~~2020~~2021 was ~~$550~~$577 million, an increase of ~~10%,~~5% compared to ~~$498~~$550 million in the first quarter of ~~2019. This increase was~~2020, mainly due to higher ~~revenues and lower expenses~~gross profit, as discussed ~~above.~~above, as well as lower S&M expenses.

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Europe Segment

The following table presents revenues, expenses and profit for our Europe segment for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

Three months ended March 31,

2020

2019

(U.S. $ in millions / % of Segment Revenues)

Revenues
$
1,402

100
% $
1,264

100
%
Gross profit

823

58.7
%
730

57.8
%
R&D expenses

55

3.9
%
66

5.2
%
S&M expenses

202

14.4
%
215

17.0
%
G&A expenses

66

4.7
%
48

3.8
%
Other (income) expense

(1
)
§

(1
)
§

Segment profit*
$
502

35.8
% $
403

31.9
%


	Three months ended March 31,
	2021			2020
	(U.S. $ in millions / % of Segment Revenues)
Revenues	$	1,214	100%		$1,402	100%
Gross profit		688	56.6%		823	58.7%
R&D expenses		66	5.4%		55	3.9%
S&M expenses		214	17.7%		202	14.4%
G&A expenses		70	5.8%		66	4.7%
Other (income) expense		§	§		(1)	§

Segment profit*	$	338	27.8%		$502	35.8%

*	Segment profit does not include amortization and certain other items.

§	Represents an amount less than $1 million or 0.5%., as applicable.

Europe Revenues

Our Europe segment includes the European Union and certain other European countries. Revenues from our Europe segment in the first quarter of ~~2020~~2021 were ~~$1,402~~$1,214 million, ~~an increase~~a decrease of ~~11%~~13% or ~~$138~~$188 million, compared to the first quarter of ~~2019.~~2020. In local currency terms, revenues ~~increased~~decreased by ~~13%~~20%, mainly due to higher ~~demand for certain products resulting from~~revenues in the ~~impact~~first quarter of ~~the~~

~~COVID-19~~

~~pandemic on purchasing patterns as well as continuing growth in generics and new generic product launches, partially offset by price declines for oncology products~~2020, as a result of significant customer stocking due to the

COVID-19

pandemic. In addition, revenues were impacted by lower demand of generic, ~~competition~~OTC and respiratory products resulting from a decline in doctor and hospital visits by patients resulting in fewer prescriptions, as well as lower sales of cough and cold products, both due to the

COVID-19

Revenues by Major Products and Activities

The following table presents revenues for our Europe segment by major products and activities for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

Three months ended
March 31,

Percentage
Change

2020

2019

2019-2020

(U.S. $ in millions)

Generic products
$
1,032
$
919

12
%
COPAXONE

109

114

(4
%)
Respiratory products

106

91

16
%
AJOVY

4

—

NA

Other

151

140

7
%

Total
$
1,402
$
1,264

11
%


	Three months ended March 31,				Percentage Change
	2021		2020		2020-2021
	(U.S. $ in millions)
Generic products	$	865	$	1,032		(16	%)
AJOVY		16		4		251	%
COPAXONE		100		109		(8	%)
Respiratory products		93		106		(12	%)
Other		140		151		(7	%)

Total	$	1,214	$	1,402		(13	%)

Generic products

revenues in our Europe segment in the first quarter of ~~2020,~~2021, including OTC products, ~~increased~~decreased by ~~12%~~16% to ~~$1,032~~$865 million, compared to the first quarter of ~~2019. In local currency terms, revenues increased by 16% compared to the first quarter of 2019, mainly due to higher demand for certain products resulting from the impact of the~~

~~COVID-19~~

~~pandemic on purchasing patterns as well as continuing growth in generics and new generic product launches. We estimate that the impact of the~~

~~COVID-19~~

~~pandemic on advanced purchasing patterns was approximately $100 million.~~

~~COPAXONE~~

~~revenues in our Europe segment in the first quarter of 2020 decreased by 4% to $109 million, compared to the first quarter of 2019.~~2020. In local currency terms, revenues decreased by ~~1%,~~23% compared to the first quarter of 2020, mainly due to ~~price reductions and a decline in volume resulting from competing glatiramer acetate products, partially offset by~~ higher ~~demand due to the impact of the~~

~~COVID-19~~

~~pandemic on purchasing patterns.~~

COPAXONE 40 mg/mL is protected by one European patent expiring in 2030. This patent is being challenged in various European jurisdictions. In October 2017, the U.K. High Court found this patent invalid and our application for permission to appeal this decision was rejected. The patent was upheld by the Opposition Division of the European Patent Office in April 2019. A hearing for an appeal in this case has been set for June 2020.

~~Table of Contents~~

~~Respiratory products~~

revenues ~~in our Europe segment~~ in the first quarter of 2020, ~~increased by 16% to $106 million, compared to the first quarter~~as a result of ~~2019. In local currency terms, revenues increased by 20%, mainly~~significant customer stocking due to ~~higher~~the

COVID-19

pandemic. In addition, revenues were impacted by lower demand ~~attributed~~of generic and OTC products resulting from a decline in doctor and hospital visits by patients resulting in fewer prescriptions, as well as lower sales of cough and cold products, both due to ~~the impact of~~ the

COVID-19

pandemic.

AJOVY

revenues in our Europe segment in the first quarter of ~~2020~~2021 were $16 million, compared to $4 ~~million.~~

~~AJOVY was granted a Marketing Authorization~~million in the first quarter of 2020, mainly due to launches and reimbursements in additional European ~~Union by~~countries.

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By the ~~European Medicines Agency (“EMA”) in a centralized process in April 2019. We commenced launching~~end of 2020, we launched AJOVY in ~~certain~~most European ~~markets in May 2019 and~~countries. We are moving forward with plans to launch in other ~~European countries. In October 2019, we received approval from~~countries around the ~~EMA for AJOVY’s auto-injector submission in the European Union and we commenced launch in March 2020.~~world. For information about AJOVY patent protection, see “—North America Revenues—Revenues by Major Product” above.

COPAXONE

revenues in our Europe segment in the first quarter of 2021 decreased by 8% to $100 million, compared to the first quarter of 2020. In local currency terms, revenues decreased by 15%, due to price reductions and a decline in volume resulting from competing glatiramer acetate products.

One European patent protecting COPAXONE 40 mg/mL was found invalid by the Board of Appeal of the European Patent Office in September 2020. Two additional patents expiring in 2030 are currently under opposition at the European Patent Office. In certain countries, Teva remains in litigation against generic companies on an additional COPAXONE 40 mg/mL patent that expires in 2030.

Respiratory products

revenues in our Europe segment in the first quarter of 2021 decreased by 12% to $93 million compared to the first quarter of 2020. In local currency terms, revenues decreased by 19%, mainly due to significant customer stocking due to the

COVID-19

pandemic in the first quarter of 2020, as well as reduced demand resulting from

COVID-19

restrictions in the first quarter of 2021.

Product Launches and Pipeline

As of March 31, ~~2020,~~2021, our generic products pipeline in Europe included 88143 generic approvals relating to 2728 compounds in 4961 formulations, with no ~~EMA~~European Medicines Agency (“EMA”) approvals received. In addition, approximately ~~1,115~~1,247 marketing authorization applications are pending approval in 37 European countries, relating to ~~119~~139 compounds in ~~236~~268 formulations. No applications are pending with the EMA.

For information regarding our specialty pipeline, ~~and launches in the first quarter of 2020,~~ see “—North America Segment —Product Launches and Pipeline” above.

Europe Gross Profit

Gross profit from our Europe segment in the first quarter of ~~2020~~2021 was ~~$823~~$688 million, an increase of ~~13%~~17% compared to ~~$730~~$823 million in the first quarter of ~~2019. This increase was mainly due to higher revenues, as discussed above.~~2020.

Gross profit margin for our Europe segment in the first quarter of ~~2020 increased~~2021 decreased to ~~58.7%~~56.6%, compared to ~~57.8%~~58.7% in the first quarter of ~~2019.~~2020. This ~~increase~~decrease was mainly due to lower revenues, as discussed above and increased write-offs and obsolescence provisions as a ~~favorable mix~~result of ~~generic products and lower~~increased inventory ~~write-offs.~~levels.

Europe R&D Expenses

R&D expenses relating to our Europe segment in the first quarter of ~~2020~~2021 were ~~$55~~$66 million, ~~a decrease~~an increase of ~~17%~~21% compared to ~~$66~~$55 million in the first quarter of ~~2019.~~2020.

For a description of our R&D expenses in the first quarter of ~~2020,~~2021, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.

Europe S&M Expenses

S&M expenses relating to our Europe segment in the first quarter of ~~2020~~2021 were ~~$202~~$214 million, ~~a decrease~~an increase of 6% compared to ~~$215~~$202 million in the first quarter of ~~2019.~~2020. This ~~decrease~~increase was mainly due to ~~lower marketing and travel costs attributed to travel restrictions related to the~~

~~COVID-19~~exchange rate fluctuations.

~~pandemic.~~

Europe G&A Expenses

G&A expenses relating to our Europe segment in the first quarter of ~~2020~~2021 were ~~$66~~$70 million, an increase of ~~37%~~6% compared to ~~$48~~$66 million in the first quarter of ~~2019.~~2020.

Europe Profit

Profit offrom our Europe segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.

Profit from our Europe segment in the first quarter of ~~2020~~2021 was ~~$502~~$338 million, ~~an increase~~a decrease of ~~25%~~33%, compared to ~~$403~~$502 million in the first quarter of ~~2019.~~2020. This ~~increase~~decrease was mainly due to ~~higher~~lower revenues, ~~and lower expenses~~ as discussed above.

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International Markets Segment

The following table presents revenues, expenses and profit for our International Markets segment for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

Three months ended March 31,

2020

2019

(U.S. $ in millions / % of Segment Revenues)

Revenues
$
565

100
% $
521

100
%
Gross profit

305

54.0
%
269

51.7
%
R&D expenses

15

2.7
%
22

4.2
%
S&M expenses

106

18.8
%
115

22.0
%
G&A expenses

34

6.0
%
36

6.8
%
Other (income) expense

(6
)
(1.1
%)
—

§

Segment profit*
$
156

27.6
% $
97

18.6
%


	Three months ended March 31,
	2021				2020
	(U.S. $ in millions / % of Segment Revenues)
Revenues	$	490		100%	$	565		100%
Gross profit		260		53.0%		305		54.0%
R&D expenses		18		3.6%		15		2.7%
S&M expenses		96		19.6%		106		18.8%
G&A expenses		26		5.3%		34		6.0%
Other (income) expense		(2	)	§		(6	)	(1.1%)

Segment profit*	$	122		24.9%	$	156		27.6%

*	Segment profit does not include amortization and certain other items.

§	Represents an amount less than 0.5%.

**	The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.

International Markets Revenues

Our International Markets segment includes all countries in which we operate other than those in our North America and Europe segments. The International Markets segment includes more than 35 countries, covering a substantial portion of the global pharmaceutical market. Our key international markets are Japan, Russia and Israel. The countries in our International Markets segment include highly regulated, pure generic markets, such as Israel, branded generics oriented markets, such as Russia and certain Latin America markets and hybrid markets, such as Japan.

On February 1, 2021, we completed the sale of the majority of the generic and operational assets of our business venture in Japan.

Revenues from our International Markets segment in the first quarter of ~~2020~~2021 were ~~$565~~$490 million, ~~an increase~~a decrease of ~~$44~~$75 million, or 8%13%, compared to the first quarter of ~~2019.~~2020. In local currency terms, revenues ~~increased~~decreased by 5%7% compared to the first quarter of ~~2019,~~2020, mainly due to ~~higher sales in Latin America, Asia-Pacific, Ukraine and Russia, partially offset by~~ lower ~~sales in Japan. The~~ revenues in Japan resulting from the ~~first quarter of 2020 included $35 million~~divestment mentioned above, as well as regulatory price reductions and generic competition to

off-patented

products in Japan and lower positive impact from ~~a positive~~ hedging ~~impact, which are included in “Other” in the table below. See note 8d to our consolidated financial statements.~~

The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.

activity.

Revenues by Major Products and Activities

The following table presents revenues for our International Markets segment by major products and activities for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

Three months ended
March 31,

Percentage
Change

2020

2019

2019-2020

(U.S. $ in millions)

Generic products
$
449
$
441

2
%
COPAXONE

12

13

(11
%)
Other

104

67

57
%

Total
$
565
$
521

8
%

*	The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.


	Three months ended March 31,				Percentage Change
	2021		2020		2020-2021
	(U.S. $ in millions)
Generic products	$	392	$	449		(13	%)
COPAXONE		12		12		(1	%)
Other		86		104		(17	%)

Total	$	490	$	565		(13	%)

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Generic products

revenues in our International Markets segment in the first quarter of ~~2020,~~2021, which include OTC products, ~~increased~~decreased by 2%13% to ~~$449~~$392 million, compared to the first quarter of ~~2019.~~2020. In local currency terms, revenues ~~increased~~decreased by 6%11%, mainly due to ~~higher sales in Latin America, Asia-Pacific, Ukraine and Russia, partially offset by~~ lower sales in Japan resulting from the divestment mentioned above, as well as regulatory price reductions and generic competition to

off-patented

~~products.~~products in Japan.

COPAXONE

revenues in our International Markets segment in the first quarter of ~~2020 decreased by 11% to~~2021 were $12 million, flat compared to ~~$13 million in~~ the first quarter of ~~2019.~~2020. In local currency terms, revenues ~~decreased~~increased by 1%4%.

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AJOVY

was launched in certain International Markets countries and we are moving forward with plans to launch in other countries.

AUSTEDO

launched in China for the treatment of chorea associated with Huntington disease and for the treatment of tardive dyskinesia in early 2021. We continue with additional submissions in various other countries.

International Markets Gross Profit

Gross profit from our International Markets segment in the first quarter of ~~2020~~2021 was ~~$305~~$260 million, ~~an increase~~a decrease of ~~13%~~15% compared to ~~$269~~$305 million in the first quarter of ~~2019.~~2020.

Gross profit margin for our International Markets segment in the first quarter of ~~2020 increased~~2021 decreased to ~~54.0%~~53.0%, compared to ~~51.7%~~54.0% in the first quarter of ~~2019.~~2020. This ~~increase~~decrease was mainly due to ~~higher sales and the~~lower positive impact from ~~the~~ hedging activity ~~discussed above.~~and a change in mix of products.

International Markets R&D Expenses

R&D expenses relating to our International Markets segment in the first quarter of ~~2020~~2021 were ~~$15~~$18 million, ~~a decrease~~an increase of ~~31%~~16% compared to ~~$22~~$15 million in the first quarter of ~~2019.~~2020.

For a description of our R&D expenses in the first quarter of ~~2020,~~2021, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.

International Markets S&M Expenses

S&M expenses relating to our International Markets segment in the first quarter of ~~2020~~2021 were ~~$106~~$96 million, a decrease of 8%9% compared to ~~$115~~$106 million in the first quarter of ~~2019.~~2020. This decrease was mainly due to ~~a decline in distribution fees paid in Japan.~~lower marketing and travel costs attributed to restrictions related to the

COVID-19

pandemic.

International Markets G&A Expenses

G&A expenses relating to our International Markets segment in the first quarter of ~~2020~~2021 were ~~$34~~$26 million, a decrease of 5%23% compared to ~~$36~~$34 million in the first quarter of ~~2019.~~2020.

International Markets Profit

Profit offrom our International Markets segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.

Profit from our International Markets segment in the first quarter of ~~2020~~2021 was ~~$156~~$122 million, ~~an increase~~a decrease of ~~61%~~22%, compared to ~~$97~~$156 million in the first quarter of ~~2019.~~2020. This ~~increase~~decrease was mainly due to ~~higher sales and the~~lower positive impact from ~~the~~ hedging activity as well as lower sales in Japan resulting from regulatory price reductions and generic competition to

off-patented

products, partially offset by lower S&M expenses, as discussed above.

Other Activities

We have other sources of revenues, primarily the sale of APIs to third parties, certain contract manufacturing services and an

out-licensing

platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis. Our other activities are not included in our North America, Europe or International Markets segments described above.

Our revenues from other activities in the first quarter of ~~2020~~2021 were ~~$307~~$289 million, a decrease of 3%6% compared to the first quarter of ~~2019.~~2020. In local currency terms, revenues decreased by ~~2%.~~9% compared to the first quarter of 2020.

API sales to third parties in the first quarter of ~~2020~~2021 were ~~$177~~$178 million, ~~a decrease of 5%,~~flat in both U.S. dollar and local currency terms compared to the first quarter of ~~2019. This decrease was mainly due to timing~~2020.

Table of ~~certain orders and divestment of certain activities.~~Contents

Teva Consolidated Results

~~The~~

data presented with respect to revenues, gross profit, R&D expenses, S&M expenses, G&A expenses and operating income (loss) for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.

Revenues

Revenues in the first quarter of ~~2020~~2021 were ~~$4,357~~$3,982 million, ~~an increase~~a decrease of 5%9%, or 10% in ~~both U.S. dollar and~~ local currency terms, compared to the first quarter of ~~2019.~~2020. This ~~increase~~decrease was mainly due to ~~higher revenues from generics and OTC sales in Europe, higher revenues from AUSTEDO and Anda in North America and higher revenues from our International Markets segment, partially offset by~~ lower revenues from ~~generics~~generic, OTC and respiratory products and from COPAXONE in ~~the U.S. and~~our Europe segment, lower revenues from ~~QVAR~~Anda, COPAXONE and BENDEKA/TREANDA in our North ~~America.~~America segment, lower revenues from Japan resulting from the divestment of a majority of the generic and operational assets of our Japanese business venture, as well as regulatory price reductions and generic competition to

off-patented

products in Japan, partially offset by higher revenues from generic products and AUSTEDO in our North America segment. Revenues were also affected by changes in demand for certain products resulting from the impact of the

COVID-19

pandemic. See “—North America Revenues,” “—Europe Revenues,” “—International Markets Revenues” and “—Other Activities” above.

Exchange rate movements during the first quarter of ~~2020,~~2021, net of hedging ~~negatively~~effects, positively impacted revenues by $3$74 million, compared to the first quarter of ~~2019.~~2020. See note 8d8c to our consolidated financial statements.

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Gross Profit

Gross profit in the first quarter of ~~2020~~2021 was ~~$2,063~~$1,878 million, ~~an increase~~a decrease of ~~11%~~9% compared to the first quarter of ~~2019.~~2020. This ~~increase~~decrease was mainly a result of the factors discussed above under “—North America Gross Profit,” “—Europe Gross Profit” and “—International Markets Gross Profit.”

Gross profit ~~as a percentage~~margin was 47.2% in the first quarter of ~~revenues was~~2021, compared to 47.3% in the first quarter of ~~2020, compared to 44.7% in the first quarter of 2019.~~2020.

The ~~increase~~decrease in gross profit ~~as a percentage of revenues~~margin was mainly due to ~~higher profitability in each of our three segments, primarily higher~~lower revenues from ~~AUSTEDO, a favorable mix of generic products in North America, a favorable mix of generic products in~~our Europe ~~and International Markets and a positive impact from our hedging activity,~~segment, partially offset by higher ~~revenues~~profitability in North America resulting from ~~Anda, which has lower profitability.~~the change in mix of products.

Research and Development (R&D) Expenses

~~Net R&D expenses in the first quarter of 2020 were $221 million, a decrease of 15% compared to the first quarter of 2019.~~

Our R&D activities for generic products in each of our segments include both (i) direct expenses relating to product formulation, analytical method development, stability testing, management of bioequivalence and other clinical studies and regulatory filings; and (ii) indirect expenses, such as costs of internal administration, infrastructure and personnel.

Our R&D activities for specialty and biosimilar products in each of our segments include costs of discovery research, preclinical development, early- and late-clinical development and drug formulation, clinical trials and product registration costs. These expenditures are reported net of contributions received from collaboration partners. Our spending takes place throughout the development process, including (i) early-stage projects in both discovery and preclinical phases; (ii) middle-stage projects in clinical programs up to phase 3; (iii) late-stage projects in phase 3 programs, including where a new drug application is currently pending approval; (iv) ~~life cycle management and~~ post-approval studies for marketed products; and (v) indirect expenses, ~~that support our overall specialty R&D efforts but are not allocated by product or to specific R&D projects,~~ such as ~~the~~ costs of internal administration, infrastructure and personnel.

R&D expenses in the first quarter of 2021 were $254 million, an increase of 15% compared to the first quarter of 2020.

In the first quarter of ~~2020,~~2021, our R&D expenses related primarily to specialty product candidates in the ~~pain, migraine, headache~~respiratory and ~~respiratory~~pain therapeutic areas, with additional activities in selected other areas and generic ~~products.~~products including biosimilars.

Our ~~lower~~higher R&D expenses in the first quarter of ~~2020,~~2021, compared to the first quarter of ~~2019, resulted primarily from the life cycle~~2020, were mainly due to an increase in respiratory and ~~stage of various~~biosimilar projects.

R&D expenses as a percentage of revenues were 6.4% in the first quarter of 2021, compared to 5.1% in the first quarter of ~~2020, compared to 6.3% in the first quarter of 2019.~~2020.

Selling and Marketing (S&M) Expenses

S&M expenses in the first quarter of ~~2020~~2021 were ~~$613~~$585 million, a decrease of 5% compared to the first quarter of ~~2019.~~2020. Our S&M expenses were primarily the result of the factors discussed above under “—North America Segment— S&M Expenses,” “—Europe Segment— S&M Expenses” and “—International Markets Segment— S&M Expenses.”

S&M expenses as a percentage of revenues were 14.7% in the first quarter of 2021, compared to 14.1% in the first quarter of ~~2020, compared to 15.6% in the first quarter of 2019.~~2020.

General and Administrative (G&A) Expenses

G&A expenses in the first quarter of ~~2020~~2021 were ~~$304~~$290 million, ~~an increase~~a decrease of 4%5% compared to the first quarter of ~~2019.~~2020.

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G&A expenses as a percentage of revenues were 7.3% in the first quarter of 2021, compared to 7.0% in the first quarter of ~~2020, flat compared to the first quarter of 2019.~~2020.

Intangible Asset Impairments

We recorded expenses of ~~$649~~$79 million for identifiable intangible asset impairments in the first quarter of ~~2020,~~2021, compared to expenses of ~~$469~~$649 million in the first quarter of ~~2019.~~2020. See note 5 to our consolidated financial statements.

Goodwill Impairment

No goodwill impairments were recorded in the first quarters of both ~~2020~~2021 and ~~2019. See note 6 to our consolidated financial statements.~~2020.

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Other Asset Impairments, Restructuring and Other Items

We recorded expenses of ~~$121~~$137 million for other asset impairments, restructuring and other items in the first quarter of ~~2020,~~2021, compared to expenses of $1$121 million in the first quarter of ~~2019. See~~2020. For further details, as well as a description of significant regulatory and other events, see note 12 to our consolidated financial statements.

~~Significant regulatory events~~

In July 2018, the FDA completed an inspection of our manufacturing plant in Davie, Florida in the United States, and issued a Form FDA-483 to the site. In October 2018, the FDA notified us that the inspection of the site is classified as “official action indicated” (OAI). On February 5, 2019, we received a warning letter from the FDA that contained four additional enumerated concerns related to production, quality control and investigations at this site. We have been working diligently to address the FDA’s concerns in a manner consistent with current good manufacturing practice (cGMP) requirements as quickly and as thoroughly as possible. An FDA follow up inspection occurred in January 2020, resulting in some follow up findings, and we received a letter from the FDA dated April 24, 2020 notifying us that the site continues to be classified as OAI. If we are unable to remediate the findings to the FDA’s satisfaction, we may face additional consequences. These would potentially include delays in FDA approval for future products from the site, financial implications due to loss of revenues, impairments, inventory write offs, customer penalties, idle capacity charges, costs of additional remediation and possible FDA enforcement action. We expect to generate approximately $230 million in revenues from this site in 2020, assuming remediation or enforcement does not cause any unscheduled slowdown or stoppage at the facility, however delays in FDA approvals of future products from the site may occur.

In July 2018, we announced the voluntary recall of valsartan and certain combination valsartan medicines in various countries due to the detection of trace amounts of a previously unknown nitrosamine impurity called NDMA found in valsartan API supplied to us by Zhejiang Huahai Pharmaceuticals Co. Ltd. (“Huahai”). Since July 2018, we have been actively engaged with regulatory agency requests around the world in reviewing our sartan and other products to determine whether NDMA and/or other related nitrosamine impurities are present in specific products. Where necessary, we have initiated additional voluntary recalls. The aggregate direct impact of the sartan recalls on our 2018 and 2019 financial statements was $54 million, primarily related to inventory write-downs and returns. As a result of this loss, we initiated negotiations with Huahai and in December 2019, we reached a settlement with Huahai resolving our claims related to certain sartan API supplied by Huahai to Teva. Under the settlement agreement, Huahai agreed to compensate Teva for some of the direct losses suffered by Teva and provide Teva prospective cost reductions for API. The settlement does not release Huahai from liability for any losses we may incur as a result of third party personal injury or product liability claims relating to the sartan API at issue. In addition, multiple lawsuits have been filed in connection with this matter, which may lead to additional customer penalties, impairments and litigation costs. We expect additional expenses and loss of revenues and profits in connection with this matter going forward.

~~Restructuring~~

In the first quarter of 2020, we recorded $39 million of restructuring expenses, compared to $32 million in the first quarter of 2019. The expenses in the first quarter of 2020 were primarily related to residual expenses of the restructuring plan announced in 2017.

Legal Settlements and Loss Contingencies

In the first quarter of ~~2020,~~2021, we recorded an ~~income~~expense of ~~$25~~$104 million in legal settlements and loss contingencies, compared to an ~~expense~~income of ~~$57~~$25 million in the first quarter of ~~2019. The income in the first quarter of 2020 was mainly due~~2020. See note 9 to ~~a settlement of an action brought against the sellers of Auden McKenzie (an acquisition made by Actavis Generics).~~our consolidated financial statements.

Other Income

Other income in the first quarter of ~~2020~~2021 was ~~$13~~$5 million, compared to $6$13 million in the first quarter of ~~2019.~~2020.

Operating Income (Loss)

Operating income was $434 million in the first quarter of 2021, compared to operating income of $191 million in the first quarter of ~~2020, compared to operating income of $134 million in the first quarter of 2019.~~2020.

Operating income as a percentage of revenues was 10.9% in the first quarter of 2021, compared to 4.4% in the first quarter of ~~2020, compared to 3.2% in the first quarter of 2019.~~2020. This increase was mainly due to ~~higher~~the lower intangible asset impairment charges, partially offset by lower profit in our Europe ~~International Markets and North America segments and income from~~segment along with higher legal settlements ~~(compared to an expense in the first quarter of 2019), partially offset by higher intangible asset impairments~~ and ~~higher other assets impairments, restructuring and other items in the first quarter of 2020.~~loss contingencies.

Financial Expenses, Net

Financial expenses were $290 million in the first quarter of 2021, compared to $224 million in the first quarter of ~~2020, compared to $218 million~~2020. Financial expenses in the first quarter of ~~2019.~~2021 were mainly comprised of interest expenses of $239 million and loss on revaluations of marketable securities of $64 million. Financial expenses in the first quarter of 2020 ~~and 2019~~ were mainly comprised of interest expenses of $241 ~~million and $227 million, respectively.~~

million.

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The following table presents a reconciliation of our segment profits to our consolidated operating income (loss) and to consolidated income (loss) before income taxes for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

Three months ended
March 31,

2020

2019

(U.S. $ in millions)

North America profit
$
550
$
498

Europe profit

502

403

International Markets profit

156

97

Total reportable segments profit

1,208

998

Profit of other activities

36

21

Total segments profit

1,244

1,019

Amounts not allocated to segments:

Amortization

258

283

Other assets impairments, restructuring and other items

121

1

Intangible asset impairments

649

469

Legal settlements and loss contingencies

(25
)
57

Other unallocated amounts

49

75

Consolidated operating income (loss)

191

134

Financial expenses, net

224

218

Consolidated income (loss) before income taxes
$
(33
) $
(84
)


	Three months ended
	March 31,
	2021		2020
	(U.S. $ in millions)
North America profit	$	577	$	550
Europe profit		338		502
International Markets profit		122		156

Total reportable segments profit		1,036		1,208
Profit of other activities		41		36

Total segments profit		1,077		1,244
Amounts not allocated to segments:
Amortization		242		258
Other assets impairments, restructuring and other items		137		121
Intangible asset impairments		79		649
Legal settlements and loss contingencies		104		(25	)
Other unallocated amounts		82		49

Consolidated operating income (loss)		434		191

Financial expenses, net		290		224

Consolidated income (loss) before income taxes	$	144	$	(33	)

Tax Rate

In the first quarter of 2021, we recognized a tax expense of $62 million, on

pre-tax

income of $144 million. In the first quarter of 2020, we recognized a tax benefit of $59 million, on

pre-tax

loss of $33 million. ~~In the first quarter of 2019, we recognized a tax expense of $9 million, on~~

~~pre-tax~~

The statutory Israeli corporate tax rate is 23% in ~~2020.~~2021. Our tax rate differs from the Israeli statutory tax rate, mainly due to generation of profits in various jurisdictions in which tax rates are different than the Israeli tax rate, tax benefits in Israel and other countries, as well as infrequent or nonrecurring items.

Share In (Profits) Losses ~~(Income)~~ of Associated Companies, Net

Share in losses of associated companies, net in the first quarter of ~~2020~~2021 was $1$3 million, compared to $4share in profits of $1 million in the first quarter of ~~2019.~~2020.

Net Income (Loss) Attributable to Teva

Net income ~~attributable~~was $77 million in the first quarter of 2021, compared to ~~Teva and net income attributable to ordinary shareholders were~~ $69 million in the first quarter of ~~2020, compared~~2020. This increase was mainly due to ~~net loss of $105 million~~the increase in ~~the first quarter of 2019.~~operating income, as discussed above.

Diluted Shares Outstanding and Earnings (Loss) per Share

The weighted average diluted shares outstanding used for the fully diluted share calculation for the three months ended March 31, 2021 and 2020 ~~and 2019~~ were ~~1,096~~1,107 million and ~~1,090~~1,096 million shares, respectively.

non-vested

RSUs granted under employee stock compensation ~~plans, using the treasury stock method.~~plans. No account was taken of the potential dilution by the convertible senior debentures, since they had an anti-dilutive effect on earnings per share.

~~In computing diluted loss~~

Diluted earnings per share ~~for~~were $0.07 in the ~~three months ended March 31, 2019, no account was taken~~first quarter of 2021, compared to diluted earnings per share of $0.06 in the ~~potential dilution by the assumed exercise~~first quarter of ~~employee stock options and~~

~~non-vested~~

~~RSUs granted under employee stock compensation plans, and convertible senior debentures, since they had an anti-dilutive effect on loss per share.~~

2020.

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~~Diluted earnings per share were $0.06 in the first quarter of 2020, compared to diluted loss per share of $0.10 in the first quarter of 2019.~~

Share Count for Market Capitalization

We calculate share amounts using the outstanding number of shares (i.e., excluding treasury shares) plus shares that would be outstanding upon the exercise of options and vesting of RSUs and performance share units ~~(“PSUs”)~~ and the conversion of our convertible senior debentures, in each case, at period end.

As of March 31, ~~2020~~2021 and ~~2019,~~2020, the fully diluted share count for purposes of calculating our market capitalization was approximately ~~1,118~~1,130 million and ~~1,107~~1,118 million, respectively.

Impact of Currency Fluctuations on Results of Operations

In the first quarter of ~~2020,~~2021, approximately ~~50%~~48% of our revenues were denominated in currencies other than the U.S. dollar. Because our results are reported in U.S. dollars, we are subject to significant foreign currency risks. Accordingly, changes in the rate of exchange between the U.S. dollar and the local currencies in the markets in which we operate (primarily the euro, British pound, Japanese yen, new Israeli shekel, Canadian dollar and Russian ruble) impact our results.

During the first quarter of ~~2020,~~2021, the following main currencies relevant to our operations decreased in value against the U.S. dollar (each on a quarterly average compared to quarterly average basis): Argentinian peso by ~~37%~~31%, ~~euro~~Brazilian real by 3%19%, Turkish lira by 17%, Russian ruble by 11% and ~~British pound~~Ukrainian hryvnia by 2%10%. The following main currencies relevant to our operations increased in value against the U.S. dollar: ~~new Israeli shekel~~Australian dollar by 4%17%, Swedish krona by 15%, Chilean peso by 11%, Euro by 9%, Bulgarian lev by 9% and ~~Japanese yen~~British pound by 1%8%.

As a result, exchange rate movements during the first quarter of ~~2020,~~2021, net of hedging ~~negatively~~effects, positively impacted overall revenues by $3$74 million and ~~positively~~negatively impacted our operating income by ~~$27~~$14 million, in comparison with the first quarter of ~~2019.~~2020.

In the first quarter of 2021, a positive hedging impact of $28 million was recognized under revenues, and a minimal negative impact was recognized under cost of sales. In the first quarter of 2020, ~~the~~a positive hedging impact of $60 million was recognized under revenues ~~was $60 million, partially offset by~~and a positive impact of $5 million ~~negative impact~~was recognized under cost of sales.

Hedging transactions against future projected revenues and expenses are recognized on the balance sheet at their fair value on a quarterly basis, while the foreign exchange impact on the underlying revenues and expenses may occur in subsequent quarters. See note 8d8c to our consolidated financial statements.

Commencing in the third quarter of 2018, the cumulative inflation in Argentina exceeded 100% or more over a three-year period. Although this triggered highly inflationary accounting treatment, it did not have a material impact on our results of operations.

Liquidity and Capital Resources

Total balance sheet assets were ~~$55,330~~$49,004 million as of March 31, ~~2020,~~2021, compared to ~~$57,470~~$50,640 million as of December 31, ~~2019.~~2020.

Our working capital balance, which includes accounts receivables net of SR&A, inventories, prepaid expenses and other current assets, accounts payables, employee-related obligations, accrued expenses and other current liabilities, was ~~$302~~$1,179 million as of March 31, ~~2020,~~2021, compared to ~~$74~~$662 million as of December 31, ~~2019.~~2020. This increase was mainly due to decreases in SR&A, employee-related obligations and other current liabilities.

Employee-related obligations, as of March 31, ~~2020,~~2021, were ~~$540~~$526 million, compared to ~~$693~~$685 million as of December 31, ~~2019.~~2020. The decrease in the first quarter of ~~2020~~2021 was mainly due to performance incentive payments to employees for ~~2019.~~2020.

Cash investment in property, plant and equipment in the first quarter of ~~2020~~2021 was ~~approximately $128~~$150 million, compared to ~~$119~~$128 million in the ~~fourth~~first quarter of ~~2019.~~2020. Depreciation in the first quarter of ~~2020~~2021 was ~~$141~~$134 million, compared to ~~$153~~$141 million in the ~~fourth~~first quarter of ~~2019.~~2020.

Cash and cash equivalents and short-term and long-term investments as of March 31, ~~2020~~2021 were ~~$1,850~~$1,933 million, compared to ~~$2,033~~$2,478 million as of December 31, ~~2019.~~

2020. The decrease in the first quarter of ~~2020~~2021 was mainly due to ~~repayment at maturity~~the redemption of our ~~$700 million 2.25%~~convertible senior ~~note~~debentures, a decrease in ~~March 2020,~~valuation of marketable securities, partially offset by cash flow generated during the quarter.

Our cash on hand that is not used for ongoing operations is generally invested in bank deposits as well as liquid securities that bear fixed and floating rates.

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Our principal sources of short-term liquidity are our cash on hand, existing cash investments, liquid securities and available credit facilities, primarily our $2.3 billion unsecured syndicated revolving credit facility entered into in April 2019 (“~~RCF��~~RCF”).

The RCF agreement provides for two separate tranches, a $1.15 billion tranche A and a $1.15 billion tranche B. Tranche A has a maturity date of April 8, 2022, of which an amount of $1.065 billion was extended twice, initially to April 8, 2023 and then to April 8, 2024. Tranche B has a maturity date of April 8, 2024. Loans and letters of credit will be available from time to time under each tranche for Teva’s general corporate purposes. ~~Tranche A has a maturity date of April 8, 2022, with two~~

~~one-year~~

~~extension options, of which $1.0 billion were extended to April 8, 2023. Tranche B has a maturity date of April 8, 2024.~~

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The RCF can be used for general corporate purposes, including repaying existing debt. As of March 31, ~~2020,~~ 2021, and as of the date of this Quarterly Report on Form

10-Q,

no amounts were outstanding under the RCF. Based on current and forecasted results, we expect that we will not exceed the financial covenant thresholds set forth in the RCF within one year from the date the financial statements are issued.

Under specified circumstances, including

non-compliance

with any of the covenants described above and the unavailability of any waiver, amendment or other modification thereto, we will not be able to borrow under the RCF. Additionally, violations of the covenants, under the above-mentioned circumstances, would result in an event of default in all borrowings under the RCF and, when greater than a specified threshold amount as set forth in each series of senior notes is outstanding, could lead to an event of default under our senior notes due to cross acceleration provisions.

We expect that we will continue to have sufficient cash resources to support our debt service payments and all other financial obligations within one year from the date that the financial statements are issued.

Debt Balance and Movements

As of March 31, ~~2020,~~2021, our debt was ~~$26,103~~$24,986 million, compared to ~~$26,908~~$25,919 million as of December 31, ~~2019.~~2020. This decrease was mainly due to ~~repayment at maturity~~redemption of $491 million of our ~~$700 million 2.25%~~convertible senior ~~notes, as well as~~debentures and exchange rate fluctuations.

~~In March 2020, we repaid at maturity our $700 million 2.25% senior notes.~~

Our debt as of March 31, ~~2020~~2021 was effectively denominated in the following currencies: ~~64%~~65% in U.S. dollars, ~~33%~~32% in euros and 3% in Swiss francs.

The portion of total debt classified as short-term as of March 31, ~~2020~~2021 was 6%11%, compared to 9%12% as of December 31, ~~2019.~~2020.

Our financial leverage was ~~64%~~69% as of March 31, ~~2020, similar~~2021, compared to ~~the financial leverage~~70% as of December 31, ~~2019.~~2020.

Our average debt maturity was approximately ~~6.6~~5.6 years as of March 31, ~~2020,~~2021, compared to ~~6.4~~5.8 years as of December 31, ~~2019.~~2020.

Total Equity

Total equity was ~~$14,588~~$10,975 million as of March 31, ~~2020,~~2021, compared to ~~$15,063~~$11,061 million as of December 31, ~~2019.~~2020. This decrease was mainly due to a negative impact of ~~$560~~$208 million from exchange rate ~~fluctuations.~~fluctuations, partially offset by net income of $84 million.

Exchange rate fluctuations affected our balance sheet, as approximately ~~36%~~58% of our net assets in the first quarter of ~~2020~~2021 (including both

non-monetary

and monetary assets) were in currencies other than the U.S. dollar. When compared to December 31, ~~2019,~~2020, changes in currency rates had a negative impact of ~~$560~~$208 million on our equity as of March 31, ~~2020,~~2021, mainly due to the changes in value against the U.S. dollar of: the ~~Mexican peso~~Japanese yen by ~~26%~~7%, the ~~Russian ruble~~Swiss franc by ~~28%, the Canadian dollar by 8%~~7%, the Polish zloty by 8%7%, the ~~British pound~~euro by 6%5%, ~~Indian rupee~~the Croatian kuna by ~~6%,~~5% and the Chilean peso by ~~4%, Croatian kuna by 4% and the euro by 2%~~3%. All comparisons are on a

quarter-end

basis.

Cash Flow

We seek to continually improve the efficiency of our working capital management. From time to time, as part of our cash management activities, we may make decisions in our commercial and supply chain activities which may drive an acceleration of receivable payments from customers or deceleration of payments to vendors, having the effect of increasing or decreasing cash from operations in an individual period. Such decisions had no material impact on our

year-to-date

operating cash flow measurement, but may impact

quarter-to-quarter

results.

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Cash flow ~~generated from~~used in operating activities during the first quarter of ~~2020~~2021 was ~~$305~~$405 million, compared to ~~$112~~$305 million cash flow generated from operating activities in the first quarter of ~~2019.~~2020. The ~~increase~~decrease in the first quarter of ~~2020~~2021 was mainly due to ~~higher operating profit~~changes in ~~each of our three segments,~~working capital items resulting from a decrease in SR&A and an increase in inventory, as well as lower ~~performance incentive payments to employees paid~~profit in our Europe segment.

During the first quarter of ~~2020 compared to the amounts paid~~2021, we generated free cash flow of $59 million, which we define as comprising $405 million in ~~the first quarter~~cash flow used in operating activities, $476 million in beneficial interest collected in exchange for securitized accounts receivables and $138 million in proceeds from divestitures of ~~2019.~~

businesses and other assets, partially offset by $150 million in cash used for capital investment. During the first quarter of 2020, we generated free cash flow of $551 million, ~~which we define as~~ comprising $305 million in cash flow generated from operating activities, $368 million in beneficial interest collected in exchange for securitized accounts receivables and $6 million in proceeds from sale of property, plant and equipment and intangible assets, partially offset by $128 million in cash used for capital investment. During the first quarter of 2019, we generated free cash flow of $360 million, comprising $112 million in cash flow generated from operating activities, $362 million in beneficial interest collected in exchange for securitized accounts receivables and $11 million in proceeds from sale of property, plant and equipment and intangible assets, partially offset by $125 million in cash used for capital investment. The ~~increase~~decrease in the first quarter of ~~2020~~2021 resulted mainly from ~~higher~~lower cash flow ~~generated~~ from operating activities, ~~including significant consumption~~partially offset by higher sales of ~~inventories.~~assets.

Dividends

We have not paid dividends on our ordinary shares or ADSs since December 2017.

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Commitments

In addition to financing obligations under short-term debt and long-term senior notes and loans, debentures and convertible debentures, our major contractual obligations and commercial commitments include leases, royalty payments, contingent payments pursuant to acquisition agreements and participation in joint ventures associated with R&D activities.

In August 2020, we entered into a partnership agreement with biopharmaceutical company Alvotech for the exclusive commercialization in the U.S. of five biosimilar product candidates. The initial pipeline for this partnership contains biosimilar candidates addressing multiple therapeutic areas, including a proposed biosimilar to Humira

. Under this agreement, Alvotech is responsible for the development, registration and supply of the biosimilar product candidates and Teva will exclusively commercialize the products in the United States. We paid an upfront payment in the third quarter of 2020 that was recorded as R&D expense. Additional development and commercial milestone payments of up to $450 million, as well as royalty payments, may be payable by Teva over the next few years. Teva and Alvotech will share profit from the commercialization of these biosimilars. Abbvie recently sued Alvotech for allegedly misappropriating confidential information relating to Humira

. Alvotech has disputed these claims.

In September 2016, we entered into ana collaborative agreement with Regeneron to develop and commercialize Regeneron’s pain medication product, fasinumab. We ~~paid Regeneron $250 million upfront and will~~ share ~~equally with Regeneron~~ in the global commercial ~~benefits of~~rights to this product with Regeneron (excluding Japan, Korea and nine other Asian countries), as well as ongoing associated R&D costs of approximately ~~$1.0~~$1 billion. We made an upfront payment of $250 million to Regeneron in the third quarter of 2016 and additional payments for achievement of development milestones in an aggregate amount of $120 million were paid during 2017 and 2018. The agreement stipulates additional development and commercial milestone payments of up to ~~Regeneron,~~$2,230 million, as well as future royalties.

For information regarding recent fasinumab developments, see “—North America Segment —Product Launches and Pipeline” above.

In October 2016, we entered into ~~an exclusive partnership~~a collaborative agreement with Celltrion to commercialize Truxima

and Herzuma

, two ~~of Celltrion’s~~ biosimilar products ~~in development~~ for the U.S. and Canadian markets. We paid Celltrion $160 million, of which ~~up to~~we received an aggregate credit of $60 million ~~is refundable or creditable.~~as of March 31, 2021. We ~~will~~ share the profit from the commercialization of these products with Celltrion. These two products, ~~TRUXIMA~~Truxima and ~~HERZUMA,~~Herzuma, were approved by the FDA in November and December 2018, respectively and were launched in the United States in November 2019 and March 2020, respectively.

In September 2017, we entered into a partnership agreement with Nuvelution for development of AUSTEDO for the treatment of Tourette syndrome in pediatric patients in the United States. There are no further plans in this indication following clinical trial results received in February 2020, which failed to meet their primary endpoints.

We are committed to pay royalties to owners of

know-how,

partners in alliances and certain other arrangements, and to parties that financed R&D at a wide range of rates as a percentage of sales of certain products, as defined in the agreements. In some cases, the royalty period is not defined; in other cases, royalties will be paid over various periods not exceeding 20 years.

In connection with certain development, supply and marketing, and research and collaboration or services agreements, we are required to indemnify, in unspecified amounts, the parties to such agreements against third-party

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claims relating to (i) infringement or violation of intellectual property or other rights of such third party; or (ii) damages to users of the related products. Except as described in our financial statements, we are not aware of any material pending action that may result in the counterparties to these agreements claiming such indemnification.

~~2020~~2021 Aggregated Contractual Obligations

There have not been any material changes in our assessment of material contractual obligations and commitments as set forth in Item 7 of our Annual Report on Form

10-K

for the year ended December 31, ~~2019.~~2020.

Supplemental

Non-GAAP

Income Data

We utilize certain

non-GAAP

financial measures to evaluate performance, in conjunction with other performance metrics. The following are examples of how we utilize the

non-GAAP

measures:

our management and Board of Directors use the

non-GAAP

measures to evaluate our operational performance, to compare against work plans and budgets, and ultimately to evaluate the performance of management;

our annual budgets are prepared on a

non-GAAP

basis; and

senior management’s annual compensation is derived, in part, using these

non-GAAP

measures. While qualitative factors and judgment also affect annual bonuses, the principal quantitative element in the determination of such bonuses is performance targets tied to the work plan, which is based on the

non-GAAP

presentation set forth below.

Non-GAAP

financial measures have no standardized meaning and accordingly have limitations in their usefulness to investors. We provide such

non-GAAP

data because management believes that such data provide useful information to investors. However, investors are cautioned that, unlike financial measures prepared in accordance with U.S. GAAP,

non-GAAP

measures may not be comparable with the calculation of similar measures for other companies. These

non-GAAP

financial measures are presented solely to permit investors to more fully understand how management assesses our performance. The limitations of using

non-GAAP

financial measures as performance measures are that they provide a view of our results of operations without including all events during a period and may not provide a comparable view of our performance to other companies in the pharmaceutical industry.

Investors should consider

non-GAAP

financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP.

In arriving at our

non-GAAP

presentation, we exclude items that either have a

non-recurring

impact on the income statement or which, in the judgment of our management, are items that, either as a result of their nature or size, could, were they not singled out, potentially cause investors to extrapolate future performance from an improper base. In addition, we also exclude equity compensation expenses to facilitate a better understanding of our financial results, since we believe that such exclusion is important for understanding the trends in our financial results and that these expenses do not affect our business operations. While not all inclusive, examples of these items include:

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amortization of purchased intangible assets;

legal settlements and/or loss contingencies, due to the difficulty in predicting their timing and scope;

impairments of long-lived assets, including intangibles, property, plant and equipment and goodwill;

restructuring expenses, including severance, retention costs, contract cancellation costs and certain accelerated depreciation expenses primarily related to the rationalization of our plants or to certain other strategic activities, such as the realignment of R&D focus or other similar activities;

acquisition- or divestment- related items, including changes in contingent consideration, integration costs, banker and other professional fees, inventory

step-up

and

in-process

R&D acquired in development arrangements;

expenses related to our equity compensation;

significant

one-time

financing costs and ~~devaluation~~ marketable securities investment valuation gains/losses;

unusual tax items;

other awards or settlement amounts, either paid or received;

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other exceptional items that we believe are sufficiently large that their exclusion is important to facilitate an understanding of trends in our financial results, such as impacts due to changes in accounting, significant costs for remediation of plants, such as inventory write-offs or related consulting costs, or other unusual events; and

corresponding tax effects of the foregoing items.

The following tables present supplemental

non-GAAP

data, in U.S. dollar, which we believe facilitates an understanding of the factors affecting our business. In these tables, we exclude the following amounts:

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The following table presents the GAAP measures, related

non-GAAP

adjustments and the corresponding

non-GAAP

amounts for the applicable periods:

Three Months Ended March 31, 2020

U.S. $ and shares in millions (except per share amounts)

Excluded for
non-GAAP
measurement

GAAP

Amortization of
purchased
intangible
assets

Legal
settlements and
loss
contingencies

Impairment
of long lived
assets

Other
R&D
expenses

Restructuring
costs

Costs related
to regulatory
actions taken
in facilities

Equity
compensation

Contingent
consideration

Other
non-
GAAP items

Other
items

Non-GAAP

Cost of sales

2,294

223

4

6

15

2,046

R&D expenses

221

(4
)
5

—

221

S&M expenses

613

35

9

—

570

G&A expenses

304

10

4

290

Other (income) expense

(13
)
0

(13
)
Legal settlements and loss contingencies

(25
)
(25
)
—

Other assets impairments, restructuring and other items

121

75

39

6

1

—

Intangible assets impairments

649

649

—

Financial expenses, net

224

11

213

Income taxes

(59
)
(234
)
175

Share in losses of associated companies – net

1

—

1

Net income (loss) attributable to
non-controlling
interests

(44
)
(63
)
20

Total reconciled items

258

(25
)
724

(4
)
39

4

30

6

20

(286
)

EPS - Basic

0.06

0.70

0.76

EPS - Diluted

0.06

0.70

0.76


	Three Months Ended March 31, 2021
	U.S. $ and shares in millions (except per share amounts)
	GAAP			Excluded for non-GAAP measurement																					Non-GAAP
				Amortization of purchased intangible assets		Legal settlements and loss contingencies		Impairment of long lived assets		Other R&D expenses		Restructuring costs		Costs related to regulatory actions taken in facilities		Equity compensation		Contingent consideration		Other non-GAAP items*		Other items
Net revenues		3,982																								3,982
Cost of sales		2,104			215										5		6				41					1,838

Gross profit		1,878			215		—		—		—		—		5		6		—		41		—			2,144
Gross profit margin		47.2	%																							53.8	%
R&D expenses		254									5						5				—					244
S&M expenses		585			27												9				—					549
G&A expenses		290															11				—					278
Other income		(5	)																							(5	)
Legal settlements and loss contingencies		104					104																			—
Other assets impairments, restructuring and other items		137							48				81						3		4					—
Intangible assets impairments		79							79																	—

Operating income (loss)		434			242		104		127		5		81		5		31		3		45		—			1,077
Financial expenses, net		290																					64			227

Income (loss) before income taxes		144			242		104		127		5		81		5		31		3		45		64			851
Income taxes		62																					(85	)		146
Share in profits (losses) of associated companies – net		(3	)																				2			(4	)

Net income (loss)		84			242		104		127		5		81		5		31		3		45		(19	)		709
Net income (loss) attributable to non-controlling interests		7																					(3	)		10

Net income (loss) attributable to Teva		77			242		104		127		5		81		5		31		3		45		(22	)		699

Total reconciled items					242		104		127		5		81		5		31		3		45		(22	)

EPS - Basic		0.07																					0.57			0.64
EPS - Diluted		0.07																					0.56			0.63

The non-GAAP diluted weighted average number of shares was 1,107 million for the three months ended March 31, 2021.

Non-GAAP income taxes for the three months ended March 31, 2021 were 17% on pre-tax non-GAAP income.

Other non-GAAP items include other exceptional items that we believe are sufficiently large that their exclusion is important to facilitate an understanding of trends in our financial results, such as certain accelerated depreciation expenses and inventory write offs, primarily related to the rationalization of our plants and other unusual events.

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	Three Months Ended March 31, 2020
	U.S. $ and shares in millions (except per share amounts)
	GAAP			Excluded for non-GAAP measurement																							Non-GAAP
				Amortization of purchased intangible assets		Legal settlements and loss contingencies			Impairment of long lived assets		Other R&D expenses			Restructuring costs		Costs related to regulatory actions taken in facilities		Equity compensation		Contingent consideration		Other non-GAAP items*		Other items
Net revenues		4,357																										4,357
Cost of sales		2,294			223												4		6				15					2,046

Gross profit		2,063			223		—			—		—			—		4		6		—		15		—			2,312
Gross profit margin		47.3	%																									53.1	%
R&D expenses		221										(4	)						5									221
S&M expenses		613			35														9									570
G&A expenses		304																	10				4					290
Other income		(13	)																									(13	)
Legal settlements and loss contingencies		(25	)				(25	)																				—
Other assets impairments, restructuring and other items		121								75					39						6		1					—
Intangible assets impairments		649								649																		—

Operating income (loss)		191			258		(25	)		724		(4	)		39		4		30		6		20		—			1,244
Financial expenses, net		224																							11			213

Income (loss) before income taxes		(33	)		258		(25	)		724		(4	)		39		4		30		6		20		11			1,030
Income taxes		(59	)																						(234	)		175
Share in profit (losses) of associated companies – net		1																										1

Net income (loss)		25			258		(25	)		724		(4	)		39		4		30		6		20		(223	)		854
Net income (loss) attributable to non-controlling interests		(44	)																						(63	)		20

Net income (loss) attributable to Teva		69			258		(25	)		724		(4	)		39		4		30		6		20		(286	)		835

Total reconciled items					258		(25	)		724		(4	)		39		4		30		6		20		(286	)

EPS - Basic		0.06																							0.70			0.76
EPS - Diluted		0.06																							0.70			0.76

The

non-GAAP

diluted weighted average number of shares was 1,096 million for the three months ended March 31, 2020.

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Three Months Ended March 31, 2019

U.S. $ and shares in millions (except per share amounts)

Excluded for
non-GAAP
measurement

GAAP

Amortization
of purchased
intangible
assets

Legal
settlements
and loss
contingencies

Impairment
of long lived
assets

Acquisition,
integration
and related
expenses

Restructuring
costs

Costs related to
regulatory actions
taken in facilities

Equity
compensation

Contingent
consideration

Other
non-
GAAP
items

Other
items

Corresponding
tax effect

Unusual
tax item*

Non-
GAAP

Cost of sales**

2,293

248

4

7

35

1,999

R&D expenses

261

6

—

255

S&M expenses

648

35

10

602

G&A expenses

292

12

—

280

Other (income) expense

(6
)
(6
)
Legal settlements and loss contingencies

57

57

—

Other assets impairments, restructuring and other items

1

20

2

32

(71
)
19

—

Intangible assets impairments

469

469

—

Financial expenses, net

218

(2
)
220

Income taxes

9

(177
)
61

125

Share in losses of associated companies – net

4

—

4

Net income (loss) attributable to
non-controlling
interests

8

(8
)
16

Total reconciled items

283

57

489

2

32

4

34

(71
)
54

(10
)
(177
)
61

EPS - Basic

(0.10
)
0.70

0.60

EPS - Diluted

(0.10
)
0.70

0.60

*	~~Interest disallowance as a result of the U.S. Tax Cuts and Jobs Act.~~

**	The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.

~~The~~

~~non-GAAP~~

~~diluted weighted average number of shares was 1,093 million~~Non-GAAP income taxes for the three months ended March 31, ~~2019.~~2020 were 17% on pre-tax non-GAAP income.

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Non-GAAP

Tax Rate

Non-GAAP

income taxes for the first quarter of 2021 were $146 million, or 17%, on

pre-tax

non-GAAP

income of $851 million.

Non-GAAP

income taxes for the first quarter of 2020 were $175 million, or 17%, on

pre-tax

non-GAAP

income of $1,030 million.

~~Non-GAAP~~

~~income taxes in the first quarter of 2019 were $125 million, or 16%, on~~

~~pre-tax~~

~~non-GAAP~~

~~income of $799 million.~~ Our

non-GAAP

tax rate for the first quarter of ~~2020~~2021 was mainly affected by the mix of products we sold and ~~lower~~ interest expense ~~disallowance compared to the first quarter of 2019.~~disallowance.

We expect our annual

non-GAAP

tax rate for 2021 to be between 17% to 18%, similar to our

non-GAAP

tax rate for 2020, ~~to be 17%-18%, slightly lower than our non-GAAP tax rate for 2019,~~ which was ~~18%~~17%. ~~This is due to lower amounts of interest expense disallowance and other changes to tax positions and deductions.~~

Off-Balance

Sheet Arrangements

Except for securitization transactions, which are disclosed in note 10(f) to our consolidated financial statements included in our Annual Report on Form

10-K

for the year ended December 31, ~~2019,~~2020, we do not have any material

off-balance

sheet arrangements.

Critical Accounting Policies

For a summary of our significant accounting 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, ~~2019.~~2020.

Recently Issued Accounting Pronouncements

See note 1 to our consolidated financial statements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has not been any material change in our assessment of market risk as set forth in Item 7A to our Annual Report on Form

10-K

for the year ended December 31, ~~2019.~~2020.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Teva maintains “disclosure controls and procedures” (as defined in

Rules

13a-15(e) and 15d-15(e) under

~~and~~

~~15d-15(e)~~

~~under~~ the Securities Exchange Act of 1934, as amended) that are designed to provide reasonable assurance that information required to be disclosed in Teva’s reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Teva’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating 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.

After evaluating the effectiveness of our disclosure controls and procedures as of March 31, ~~2020,~~2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, Teva’s disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, ~~2020,~~2021, there were no changes in internal control over financial reporting that materially affected or are reasonably likely to materially affect Teva’s internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are subject to various litigation and other legal proceedings. For a discussion of these matters, see “Commitments and Contingencies” included in note 10 to the consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form

10-Q.

ITEM 1A.

RISK FACTORS

~~Except as set forth below, there~~There are no material changes to the risk factors previously disclosed in our Annual Report on Form

10-K

for the year ended December 31, ~~2019.~~2020.

~~The widespread outbreak of an illness or any other communicable disease, or any other public health crisis, such as the~~

~~COVID-19~~

~~pandemic, could adversely affect our business, results of operations and financial condition.~~

~~The novel coronavirus outbreak, or~~

~~COVID-19,~~

~~has affected segments of the global economy and may materially affect our operations, including potentially interrupting our manufacturing, supply chain, clinical trial and~~

~~pre-commercial~~

~~launch activities.~~

~~COVID-19~~

originated in Wuhan, China, in December 2019 and was declared a pandemic by the World Health Organization in March 2020. The virus has since spread to multiple countries, including to the United States and Israel, where we currently manufacture most of our products and conduct our clinical trials. The

~~COVID-19~~

~~pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets.~~

~~At present, we are not experiencing significant impact or delays from~~

~~COVID-19~~

on our business operations. However, as we expect to be able to continue our operations and to satisfy the higher demand for our products, while protecting the health and safety of our employees and customers, the uncertainty surrounding the severity and continued spread of the coronavirus may result in a period of business disruption.

~~COVID-19~~

~~may impact our operations, including potential delays in supply and manufacturing or material interruptions to supply chains, clinical trials and~~

~~pre-commercial~~

~~launch activities and regulatory reviews and approvals.~~

~~COVID-19~~

~~may also affect our employees and employees and operations at third-party manufacturers or suppliers that may result in delays or disruptions in manufacturing and supply. Any~~

~~COVID-19~~

related disruption could have a material adverse impact on our business and our results of operation and financial condition. Changes in patient behavior resulting in less visits to physicians and medical facilities, or increased layoffs in the U.S. employment market, which may affect healthcare benefits coverage, may cause a decline or slower growth in the number of patients diagnosed with diseases for which we produce treatments, and as a result our revenues could be adversely affected. In addition, a recession or market correction resulting from the spread of

~~COVID-19~~

~~could materially affect our business and the value of our shares.~~

~~Additionally, if the~~

~~COVID-19~~

pandemic has a significant impact on our business and financial results for an extended period of time, our credit losses, liquidity and cash resources could be negatively impacted. We may be required to draw down funds from our RCF or pursue additional sources of financing to fund our operations. Capital and credit markets have been disrupted by the crisis and foreign exchanges have experienced increased volatility. As a result, access to additional financing may be challenging and is largely dependent upon evolving market conditions and other factors.

~~We have taken precautionary measures, and may take additional measures, intended to minimize the risk of~~

~~COVID-19~~

~~to our employees and operations. The extent of the impact of~~

~~COVID-19~~

on our operational and financial performance, including our ability to execute our business strategies in the expected time frame or at all, will depend on future developments, such as the duration and spread of the

~~COVID-19~~

~~pandemic and related restrictions and implications, all of which are uncertain and cannot be predicted.~~

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

There were no sales of unregistered equity securities during the three months ended March 31, ~~2020.~~2021.

Repurchase of Shares

We did not repurchase any of our shares during the three months ended March 31, ~~2020~~2021 and currently cannot conduct share repurchases or pay dividends due to our accumulated deficit.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

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ITEM 3.6.

~~DEFAULTS UPON SENIOR SECURITIES~~

EXHIBITS

~~Not applicable.~~

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURES~~

~~Not applicable.~~

~~ITEM 5.~~

~~OTHER INFORMATION~~

~~None.~~

~~Table of Contents~~

~~ITEM 6.~~

~~EXHIBITS~~

31.1

	~~31.1~~	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

31.2
	~~31.2~~	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

32
	32	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

101.INS
	~~101.INS~~	XBRL Taxonomy Instance Document

101.SCH
	~~101.SCH~~	XBRL Taxonomy Extension Schema Document

101.CAL
	~~101.CAL~~	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF
	~~101.DEF~~	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB
	~~101.LAB~~	XBRL Taxonomy Extension Labels Linkbase Document

101.PRE
	~~101.PRE~~	XBRL Taxonomy Extension Presentation Linkbase Document

104
	~~104~~	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

*	~~Filed herewith.~~

6463

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Date: ~~May 7, 2020~~ April 28, 2021	By:	/s/ Eli Kalif
	Name:	Eli Kalif
	Title:	Executive Vice President, Chief Financial Officer (Duly Authorized Officer)


Israel		Not Applicable
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

5 Basel Street, Petach Tikva, ISRAEL		4951033
(Address of principal executive offices)		(Zip code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
American Depositary Shares, each representing one Ordinary Share	TEVA	New York Stock Exchange


Large accelerated filer	☒	Accelerated filer	☐

~~Large accelerated~~Non-accelerated filer	☒ ☐	~~Accelerated filer~~ Smaller reporting company	☐

Emerging growth company
~~Non-accelerated~~ ~~filer~~	☐	~~Smaller reporting company~~	☐

~~Emerging growth company~~	☐