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 June 30, 2021
1,209 57 27,503 (10,662 ) (2,446 ) (4,128 ) 10,324 987 11,311
Net Income (loss)
292 292 11 302
Other comprehensive income
(loss)
(174 ) (174 ) (13 ) (187 )
Issuance of Shares
* * * *
Stock-based compensation
expense
26 26 26

Balance at September 30, 2021
1,209 $ 57 $ 27,529 $ (10,370 ) $ (2,620 ) $ (4,128 ) $ 10,467 $ 984 $ 11,451


	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, 2021		1,209		57		27,561		(10,529	)		(2,683	)		(4,128	)		10,278			966			11,244
Net Income (loss)								(955	)								(955	)		3			(952	)
Other comprehensive income (loss)											(4	)					(4	)		(53	)		(57	)
Issuance of Shares		7		*		1											1						1
Stock-based compensation expense						24											24						24

Balance at March 31, 2022		1,216	$	57	$	27,587	$	(11,484	)	$	(2,687	)	$	(4,128	)	$	9,344		$	916		$	10,260

*	Represents an amount less than $0.5 million.


	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		*																			*
Stock-based compensation expense						31											31						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.

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 June 30, 2020
1,202 57 27,374 (6,747 ) (2,703 ) (4,128 ) 13,852 972 14,824
Net Income (loss)
(4,349 ) (4,349 ) 10 (4,340 )
Other comprehensive income
(loss)
61 61 18 79
Issuance of Shares
* * * *
Stock-based compensation
expense
29 29 29

Balance at September 30, 2020
1,202 $ 57 $ 27,403 $ (11,096 ) $ (2,643 ) $ (4,128 ) $ 9,593 $ 999 $ 10,592

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

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)
576 576 32 608
Other comprehensive income
(loss)
(221 ) (221 ) (81 ) (302 )
Issuance of Shares
7 * * *
Stock-based compensation
expense
86 86 86

Balance at September 30, 2021
1,209 $ 57 $ 27,529 $ (10,370 ) $ (2,620 ) $ (4,128 ) $ 10,467 $ 984 $ 11,451

*	~~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.

~~Table of Contents~~

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)
(4,140 ) (4,140 ) (121 ) (4,261 )
Other comprehensive i
n
come
(loss)
(331 ) (331 ) 29 (302 )
Issuance of shares
4 * * *
Stock-based compensation
expense
91 91 91

Balance at September 30, 2020
1,202 $ 57 $ 27,403 $ (11,096 ) $ (2,643 ) $ (4,128 ) $ 9,593 $ 999 $ 10,592

*	~~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.~~

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in millions)

(Unaudited)

Nine months ended


September 30,


2021

2020

Operating activities:

Net income (loss)
   $ 608 $ (4,261 )
Adjustments to reconcile net income (loss) to net cash provided by o
p
erations:

Depreciation and amortization
   1,010 1,162
Impairment of long-lived assets and assets held for sale
   401 6,314
Net change in operating assets and liabilities
   (1,881 ) (1,627 )
Deferred income taxes – net and uncertain tax positions
   13 (656 )
Stock-based compensation
   86 91
Net loss (gain) from investments and from sale of long lived assets
   109 (232 )
Research and development in process
   0   40
Other items
   (4 ) 54


Net cash provided by (used in) operating activities
   342 885


Investing activities:

Beneficial interest collected in exchange for securitized accounts receivables
   1,278 1,102
Purchases of property, plant and equipment
   (409 ) (402 )
Proceeds from sale of business and long lived assets
   269 54
Proceeds from sale of investments
   172 12
Other investing activities
   (33 ) (44 )


Net cash provided by investing activities
   1,277 722


Financing activities:

Repayment of senior notes and loans and other long-term liabilities
   (1,475 ) (1,871 )
Proceeds from short term debt
   500 231
Repayment of short term debt
   (200 ) (116 )
Redemption of convertible senior notes
   (491 ) 0
Other financing activities
   (5 ) (4 )


Net cash used in financing activities
   (1,671 ) (1,760 )


Translation adjustment on cash and cash equivalents
   (80 ) 5


Net change in cash and cash equivalents
   (132 ) (148 )
Balance of cash and cash equivalents at beginning of period
   2,177 1,975


Balance of cash and cash equivalents at end of period
   $ 2,045 $ 1,827


Non-cash
financing and investing activities:

Beneficial interest obtained in exchange for securitized accounts receivables
   $ 1,310 $ 1,055


	Three months ended
	March 31,
	2022			2021
Operating activities:
Net income (loss)	$	(952	)	$	84
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization		323			376
Impairment of long-lived assets and assets held for sale		165			127
Net change in operating assets and liabilities		559			(1,076	)
Deferred income taxes – net and uncertain tax positions		(175	)		(11	)
Stock-based compensation		24			31
Other items		30			(10	)
Net loss (gain) from investments and from sale of long lived assets		(23	)		74

Net cash provided by (used in) operating activities		(49	)		(405	)

Investing activities:

Beneficial interest collected in exchange for securitized trade receivables		305			476
Proceeds from sale of business and long lived assets		25			138
Acquisition of businesses, net of cash acquired		(7	)		0

Purchases of property, plant and equipment		(157	)		(150	)
Purchases of investments and other assets .		(4	)		(2	)
Proceeds from sale of investments		0			46
Other investing activities		(1	)		0

Net cash provided by (used in) investing activities		161			508

Financing activities:
Redemption of convertible senior notes		0			(491	)
Other financing activities		2			(2	)

Net cash provided by (used in) financing activities		2			(493	)

Translation adjustment on cash and cash equivalents		(62	)		(44	)

Net change in cash, cash equivalents and restricted cash		52			(434	)
Balance of cash, cash equivalents and restricted cash at beginning of period		2,198			2,177

Balance of cash, cash equivalents and restricted cash at en d of period	$	2,250		$	1,743

Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets:
Cash and cash equivalents		2,175			1,743
Restricted cash included in other current assets		75			0

Total cash, cash equivalents and restricted cash shown in the statement of cash flows		2,250			1,743

Non-cash financing and investing activities:
Beneficial interest obtained in exchange for securitized accounts receivables	$	299		$	488

Amounts may not add up due to rounding

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

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – 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, ~~2020,~~2021, as filed with the Securities and Exchange Commission (“SEC”). The

year-end

balance sheet data was derived from the audited consolidated financial statements as of December 31, ~~2020,~~2021, 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.

In February 2022, Russia launched an invasion of Ukraine. As of the date of this Quarterly Report on Form

10-Q,

sustained conflict and disruption in the region is ongoing. Russia and Ukraine markets are included in Teva’s International Markets segment results. Teva has no manufacturing or R&D facilities in these markets. During the first quarter of 2022, the impact of this conflict on Teva’s results of operations and financial condition was immaterial.

The results of operations for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 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.

Significant accounting policies

Recently adopted accounting pronouncements

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 to this guidance are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements.

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.” 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 material impact to the Company’s consolidated financial statements for the period ended ~~September 30, 2021~~March 31, 2022 as a result of adopting this standard update. The Company has completed negotiations to transform the facility base rate of its securitization program and is continuing to evaluate the potential impact of the replacement of the LIBOR benchmark on its interest rate risk management activities. However, it is not expected to have a material impact on the consolidated financial results of operations, financial position or cash flows.

~~In December 2019, the FASB issued ASU~~

~~2019-12~~

“Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes” (the “update”). The amendments in this 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 accounting for basis differences for equity method investments when a foreign subsidiary becomes an equity method investment; and (3) exception to 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 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

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

in its separate financial statements; and (4) requiring that an entity reflect the effect of an enacted change in tax laws or 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 results of operations, financial position or cash flows.

Recently issued accounting pronouncements, not yet adopted

In ~~August 2020,~~November 2021, the FASB issued ASU

~~2020-06~~2021-10

“~~Debt – Debt with Conversion and Other Options (Subtopic~~Government Assistance (Topic 832)”, which requires annual disclosures that increase the transparency of transactions involving government grants, including (1) the types of

~~470-20)~~

~~and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This guidance simplifies~~

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

transactions, (2) the accounting for ~~certain financial instruments with characteristics~~those transactions, and (3) the effect of ~~liabilities and equity, including convertible instruments and contracts~~those transactions on an entity’s ~~own equity.~~financial statements. The amendments toin this update are effective for financial statements issued for annual periods beginning after December 15, 2021. The Company is currently evaluating this guidance ~~are~~to determine the impact it may have on its consolidated financial statements.

In October 2021, the FASB issued ASU

2021-08

“Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. The guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The guidance should be applied prospectively to acquisitions occurring on or after the effective date. The guidance is effective for fiscal years beginning after December 15, ~~2021, and~~2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The ~~adoption of~~Company is currently evaluating this guidance ~~will not~~to determine the impact it may have ~~a significant impact~~ on ~~the Company’s~~its consolidated financial statements.

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.

MODAG

In October 2021, Teva

announced a license agreement with MODAG GmbH (“Modag”), that will provide Teva an exclusive global license to develop, manufacture and commercialize Modag’s lead compound ~~anle138b~~

(TEV-56286)

and a related compound ~~(sery433)~~

(TEV-56287). ~~The agreement is subject to regulatory approval. Anle138b~~

TEV-56286

was initially developed for the treatment of Multiple System Atrophy (MSA) and Parkinson’s disease, and has the potential to be applied to other treatments for neurodegenerative disorders, such as Alzheimer’s disease. A phase 1b clinical trial is currently being ~~completed.~~completed for

TEV-56286.

In the fourth quarter of 2021, Teva ~~will~~

~~make~~

made an upfront payment ~~subject~~

of $10

million to ~~regulatory approval and~~Modag that was recorded as R&D expense. Modag may be eligible for future development milestone payments, totaling

aggregate amount of

$70

~~$80~~ million, as well as future commercial milestones and ~~royalties~~

royalties.

Alvotech

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

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. In March 2021,

Abbvie sued Alvotech for allegedly misappropriating confidential information relating to Humira

. In October 2021, the ~~federal court~~claim was dismissed ~~the lawsuit~~ for lack of jurisdiction. Abbvie has appealed this decision to the U.S. Court of Appeals. In addition, there is pending patent litigation between Abbvie and

Alvotech related to Alvotech’s proposed biosimilar to Humira

. In December 2021, Abbvie also filed a complaint with the U.S. International Trade Commission (“ITC”) against both Alvotech and Teva seeking to prevent Teva and Alvotech from importing Alvotech’s proposed biosimilar to Humira

into the United States. On January 26, 2022, the ITC issued a decision to initiate an investigation into Alvotech’s proposed biosimilar product. On March 8, 2022, Abbvie and Alvotech settled all the above pending IP matters relating to Alvotech’s proposed biosimilar to Humira

. Pursuant to that settlement, Alvotech and Teva may sell Alvotech’s proposed biosimilar to Humira

in the United States beginning on July 1, 2023, provided that U.S. regulatory approval is obtained by that date. On March 28, 2022, the ITC officially terminated the investigation requested by Abbvie.

Eli Lilly and Alder BioPharmaceuticals

In December 2018, Teva entered into an agreement with Eli Lilly & Co. (“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~~

.Kingdom.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

On January 8, 2018, Teva signed a global license agreement with Alder BioPharmaceuticals (“Alder”). The agreement validates Teva’s intellectual 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 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. Teva received a

~~$25~~ $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. The agreement stipulates additional development and commercial milestone payments to Teva of up to $150 million, as well as future royalties.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~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.

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~~develop and ~~3 clinical trials for~~commercialize AJOVY ~~in Japan and, if approved, to commercialize the product~~ in Japan. Otsuka paid Teva an upfront payment of $50 million in consideration for the transaction. ~~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. AJOVY was approved in Japan in June 2021 and launched on August 30, 2021. As a result of the launch, Otsuka paid Teva a milestone payment of $35

million, which was recognized as revenue in the third quarter of 2021. Teva may receive additional milestone payments upon achievement of certain revenue targets. Otsuka ~~will~~ also ~~pay~~pays Teva royalties on AJOVY sales in Japan.

~~Celltrion~~

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

~~and Herzuma~~

, two biosimilar products for the U.S. and Canadian markets. Teva paid Celltrion $160 million, of which Teva received an aggregate credit of $60 million as of March 31, 2021. Teva and Celltrion share the profit from the commercialization of these products. These two products, Truxima and 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. No additional milestone payments are expected.

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 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 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 $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.

MedinCell

In November 2013, Teva entered into an agreement with MedinCell for the development and commercialization of multiple ~~long acting~~long-acting injectable products. The lead product candidate selected was risperidone LAI

(TV-46000)

suspension for subcutaneous use for the treatment of schizophrenia. In August 2021, the FDA accepted the new drug application (“NDA”) for risperidone LAI, based on phase 3 data from two pivotal studies. Teva leads the clinical development and regulatory process and is responsible for commercialization of this product candidate. MedinCell may be eligible for development milestones, and future commercial milestones of up to $112 million in respect of risperidone LAI. Teva will also pay MedinCell royalties

on net ~~sales~~sales. In April 2022, the FDA issued a Complete Response Letter (“CRL”) regarding the NDA for risperidone LAI. Teva is reviewing its next steps based on the CRL and will work closely with

the

FDA to address their recommendations.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Assets and Liabilities Held For Sale:

~~Certain assets of Teva’s business venture in Japan~~

Teva operates 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 own

~~a 51% stake and Takeda owns the remaining 49%.~~

~~In July 2020, Teva and Takeda entered into a purchase agreement with~~

~~Nichi-Iko~~

to sell the majority of the business venture’s generic and operational assets. This transaction was completed on February 1, 2021. The business venture retains its specialty portfolio and other selected generic molecules, pipeline assets authorized generics and long listed products (LLPs).

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 of $247 million in other assets impairments, restructuring and other items recognized in 2020 and in the first quarter of 2021.

General

Assets and liabilities held for sale as of ~~September 30, 2021 include~~March 31, 2022 included certain manufacturing assets that are expected to be sold within the next year. Assets and liabilities held for sale as of December 31, ~~2020~~2021 included ~~the Teva-Takeda business venture~~certain manufacturing assets sold during the first quarter of ~~2021,~~2022, and certain ~~OTC~~ assets that are expected to be sold during ~~the second quarter of 2021 and other manufacturing assets.~~

2022. The table below summarizes all Teva assets and liabilities included as held for sale as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:

September 30,

December 31,


2021

2020



(U.S. $ in millions)

Inventories
   7    146
Property, plant and equipment, net and others
   32    312
Goodwill
   13    27
Adjustments of assets held for sale to fair value
   (27 )    (296 )




Total assets of the disposal group classified as held for sale in the consolidated balance sheets
   $ 25    $ 189

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)


	March 31,			December 31,
	2022			2021
	(U.S. $ in millions)
Inventories	$	0		$	2
Property, plant and equipment, net and others		64			86
Goodwill		0			7
Adjustments of assets held for sale to fair value		(51	)		(76	)

Total assets of the disposal group classified as held for sale in the consolidated balance sheets	$	13		$	19

Total liabilities of the disposal group classified as held for sale in the consolidated balance sheets, recorded under accrued expenses and other long-term liabilities	$	(60	)	$	(43	)

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 September 30, 2021
	North America		Europe		International Markets		Other activities		Total		Three months ended March 31, 2022
											North America			Europe		International Markets		Other activities		Total
	(U.S. $ in millions)										(U.S. $ in millions)
Sale of goods		1,487		1,197		495		160		3,340		1,377			1,134		445		180		3,136
Licensing arrangements		22		11		4		1		38		21			12		4		1		38
Distribution		363		§		15		0		378		342			§		16		0		358
Other		2		11		15		102		130		(2	)		9		27		95		129

	$	1,875	$	1,220	$	530	$	262	$	3,887	$	1,737		$	1,156	$	492	$	275	$	3,661

§ Represents an amount less than $1$0.5 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		§		19		0		308
Other		§		22		28		111		162

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

Three months ended September 30, 2020


North
America

Europe

International
Markets

Other
activities

Total



(U.S. $ in millions)

Sale of goods
   1,660 1,116 478    173    3,427
Licensing arrangements
   17 7 2    1    27
Distribution
   341 § 9    0      350
Other
   (1) (8 ) 41    142    174






   $ 2,017 $ 1,116 $ 529    $ 316    $ 3,978

Nine months ended September 30, 2021


North
America

Europe

International
Markets

Other
activities

Total



(U.S. $ in millions)

Sale of goods
   4,776    3,560    1,397    534    10,268
Licensing arrangements
   62    32    9    3    106
Distribution
   968    §    49    0      1,018
Other
   §    25    50    312    387










   $ 5,807    $ 3,618    $ 1,505    $ 849    11,778

§ Represents an amount less than $1$0.5 million.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Nine months ended September 30, 2020


North
America

Europe

International
Markets

Other
activities

Total



(U.S. $ in millions)

Sale of goods
   4,943    3,487    1,417    561    10,408
Licensing arrangements
   59    22    6    3    90
Distribution
   1,141    3    21    0      1,165
Other
   3    9    138    394    543










   $ 6,146    $ 3,520    $ 1,582    $ 957    $ 12,206

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.

SR&A to U.S. customers comprised approximately ~~76%~~73% of the Company’s total SR&A as of ~~September 30, 2021,~~March 31, 2022, with the remaining balance primarily in Canada and Germany. The changes in SR&A for third-party sales for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 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, 2020
   $ 80    $ 2,054    $ 828    $ 1,108    $ 686    $ 148    $ 4,824    $ 4,904
Provisions related to sales made in current year
   285    3,060    617    5,949    207    246    10,079    10,364
Provisions related to sales made in prior periods
   (5 )    (94 )    (46 )    (31 )    (53 )    (25 )    (249
)

   (254
)

Credits and payments
   (293 )    (3,286 )    (595 )    (5,983 )    (265 )    (247 )    (10,376
)

   (10,669
)
Translation differences
   0      (22 )    (5 )    (4 )    (4 )    (2 )    (37
)

   (37
)
















Balance at September 30, 2021
   $ 67    1,712    $ 799    $ 1,039    $ 571    $ 120    $ 4,241    $ 4,308


	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, 2021	$	68		$	1,655		$	854		$	1,085		$	535		$	112		$	4,241		$	4,309
Provisions related to sales made in current year		82			928			198			1,814			58			90			3,088			3,170
Provisions related to sales made in prior periods		—			(90	)		26			(8	)		(14	)		(1	)		(87	)		(87	)
Credits and payments		(88	)		(1,037	)		(270	)		(1,940	)		(110	)		(73	)		(3,430	)		(3,518	)
Translation differences		—			(3	)		(1	)		—			—			(1	)		(5	)		(5	)

Balance at March 31, 2022	$	62			1,453		$	807		$	951		$	469		$	127		$	3,807		$	3,869


	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

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

~~Note~~

Notes to Consolidated Financial Statements

(Unaudited)

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
   285 3,649 566 6,268 299 55 10,837 11,122
Provisions related to sales made in prior periods
   —   (192 ) (116 ) (33 ) (11 ) 2 (350 ) (350 )
Credits and payments
   (298 ) (4,224 ) (650 ) (6,418 ) (289 ) (79 ) (11,660 ) (11,958 )
Translation differences
   —   10 4 2 0   (4 ) 12 12


Balance at September 30, 2020
   $ 74 $ 2,138 $ 913 $ 1,161 $ 636 $ 150 $ 4,998 $ 5,072

NOTE 4 – Inventories:

Inventories, net of reserves, consisted of the following:

September 30,
2021

December 31,
2020



(U.S. $ in millions)

Finished products
   $ 2,089    $ 2,378
Raw and packaging materials
   1,285    1,231
Products in process
   631    605
Materials in transit and payments on account
   161    189




Total
   $ 4,167    $ 4,403


	March 31,		December 31,
	2022		2021
	(U.S. $ in millions)
Finished products	$	1,985	$	1,932
Raw and packaging materials		1,256		1,136
Products in process		593		587
Materials in transit and payments on account		178		163

Total	$	4,012	$	3,818

NOTE 5 – Identifiable intangible assets:

Identifiable intangible assets consisted of the following:

Gross carrying amount net

of impairment

Accumulated

amortization

Net carrying amount


September 30,

December 31,

September 30,

December 31,

September 30,

December 31,


2021

2020

2021

2020

2021

2020



(U.S. $ in millions)

Product rights
   $ 19,034    $ 19,650    $ 12,234    $ 12,094    $ 6,800    $ 7,556
Trade names
   635    621    226    165    409    456
In process research and development
   623    911    0      —      623    911












Total
   $ 20,292    $ 21,182    $ 12,460    $ 12,259    $ 7,832    $ 8,923


	Gross carrying amount net of impairment				Accumulated amortization				Net carrying amount
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2022		2021		2022		2021		2022		2021
	(U.S. $ in millions)
Product rights	$	18,544	$	18,815	$	12,383	$	12,318	$	6,161	$	6,497
Trade names		588		590		206		198		382		392
In process research and development		573		577		—		—		573		577

Total	$	19,705	$	19,982	$	12,589	$	12,516	$	7,116	$	7,466

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.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Amortization of intangible assets was ~~$199~~$200 million and ~~$251~~$242 million in the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively.~~

~~Amortization of intangible assets was $613 million and $758 million in the nine months ended September 30, 2021 and 2020,~~ 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 of ~~$589~~$542 million. IPR&D carries intrinsic risks that the asset might not succeed in advanced phases and may be impaired in future periods.

In the first nine months of 2021, Teva reclassified $162 million of products from IPR&D to product rights, of which $123 million were reclassified in connection with lenalidomide (generic equivalent of Revlimid

Intangible assets impairments

Impairments of long-lived intangible assets for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ were ~~$21~~$149 million and ~~$509~~$79 million, respectively.

Impairments in the first quarter of 2022 consisted primarily of identifiable product rights of $129 million related to updated market assumptions regarding price and volume of products acquired from Actavis Generics.

Impairments in the ~~third~~first quarter of ~~2020~~2021 consisted of:

(a)

IPR&D assets of ~~$360 million, mainly due to: (i) $262 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) $96~~$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

(b)

Identifiable product rights of ~~$149~~$28 million ~~due to: (i) $110 million related to a change in the assumptions regarding competition for the expected relaunch of metformin tablets; and (ii) $39 million mainly~~ related to updated market assumptions regarding price and volume of products acquired from Actavis Generics that are primarily marketed in the United States.

~~Impairments of long-lived intangible assets for the nine months ended September 30, 2021 and 2020, were $295 million and $1,278 million, respectively.~~

~~Impairments in the first nine months of 2021 consisted of:~~

~~(a)~~

~~Identifiable product rights and trade names of~~

~~209 million due to: (i) $30 million related to lenalidomide (generic equivalent of Revlimid~~

~~), resulting from modified competition assumptions as a result of settlements between the innovator and other generic filers, and (ii) $~~

~~179 million, mainly related to updated market assumptions regarding price and volume of products acquired from Actavis Generics that are primarily marketed in the United States; and~~

~~(b)~~

~~IPR&D assets of $86 million, mainly due to~~

generic pipeline products acquired from Actavis Generics resulting from development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape, launch date) in the United States.

~~Impairments in the first nine months of 2020 consisted of:~~

~~(a)~~

~~IPR&D assets of $708 million, mainly due to: (i) $262 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; (ii) $211 million related to AUSTEDO for the treatment of Tourette syndrome in pediatric patients in the United States following clinical trial results, received in February 2020,which failed to meet their primary endpoints; and (iii) $213 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

~~(b)~~

Identifiable product rights of $570 million, mainly due to: (i) $271 million related to updated market assumptions regarding price and volume of products acquired from Actavis Generics that are primarily marketed in the United States; (ii) $165 million in Japan in connection with ongoing regulatory pricing reductions and generic competition; and (iii) $110 million related to a change in the assumptions regarding competition for the expected relaunch of metformin tablets.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

The fair

value measurement of the impaired ~~intangible~~i

ntan

gible assets in the first ~~nine~~

three

months of ~~2021~~

2022

is based on significant unobservable inputs in the market and thus represents a Level

measurement within the fair value hierarchy. The discount rate applied ranged from ~~7.25%~~

7.25

% to ~~10%~~

%. A probability of success factor ranging from ~~20%~~

% to ~~90%~~

100

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

NOTE 6 – Goodwill:

The changes in the carrying amount of goodwill for the period ended ~~September 30, 2021~~March 31, 2022 were as follows:

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:

Goodwill reclassified as assets held for sale
      (7 ) (6 ) (13 )
Translation differences
   0      (388 ) (44 )    (432 )






Balance as of September 30, 2021 (1)
   $ 6,473    $ 8,707 $ 2,318 $ 2,681    $ 20,179


	North America		Europe			International Markets		Other			Total
	(U.S. $ in millions)
Balance as of December 31, 2021 (1)	$	6,474	$	8,544		$	2,328	$	2,694		$	20,040
Changes during the period:
Goodwill acquired									12			12
Translation differences		9		(85	)		34		(24	)		(66	)

Balance as of March 31, 2022 (1)	$	6,483	$	8,459		$	2,362	$	2,682		$	19,986

(1)	Accumulated goodwill impairment as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 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”)~~(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 an impairment of goodwill allocated to these reporting units in the future. The current projections related to AUSTEDO and the resolution of the opioid and price fixing litigation in North America are a significant ~~assumption~~assumptions in Teva’s future projections. Additionally, certain parts of its business volumes, particularly in Europe, were impacted by the

COVID-19

pandemic. Management continues to analyze the expected pace of recovery of volumes and the related impact of the

COVID-19

pandemic on Teva’s business.

~~First Quarter Developments~~

During the first quarter of ~~2021,~~2022, 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.

Based on this assessment, management concluded that it was not more likely than not that the fair value of any of the reporting units was below its carrying value as of March 31, ~~2021~~2022 and, therefore, no quantitative assessment was performed.

~~Second Quarter Developments~~

~~During~~ Changes to Teva’s current assessment regarding the ~~second quarter~~impact of ~~2021, Teva completed~~the COVID-19 pandemic on its ~~long-range planning (“LRP”) process. The LRP is part of Teva’s internal financial planning and budgeting processes and is discussed and reviewed by Teva’s management~~projections and its ~~board of directors.~~long-term forecast related to AUSTEDO could result in future impairments.

19NOTE 7 – Debt obligations:

a. Short-term debt:


						March 31,		December 31,
	Weighted average interest rate as of March 31, 2022			Maturity		2022		2021
						(U.S. $ in millions)
Convertible senior debentures		0.25	%		2026		23		23
Current maturities of long-term liabilities (1)							2,054		1,403

Total short-term debt						$	2,077	$	1,426

(1)	In April 2022, Teva repaid $302 million of its 3.25% senior notes at maturity.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Additionally, Teva conducted a quantitative analysis of all reporting units as part of its annual goodwill impairment test with the assistance of an independent valuation expert. Based on this analysis, no goodwill impairment charge was recorded during the second quarter of 2021. Changes to Teva’s current assessment regarding the impact of the

~~COVID-19~~

~~pandemic on its projections and its long-term forecast related to AUSTEDO could result in future impairments.~~

~~Third Quarter Developments~~

During the third quarter of 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.

Based on this assessment, management concluded that it was not more likely than not that the fair value of any of the reporting units was below its carrying value as of September 30, 2021 and, therefore, no quantitative assessment was performed. Changes to Teva’s current assessment regarding the impact of the

~~COVID-19~~

~~pandemic on its projections and its long~~

~~term forecast related to AUSTEDO could result in future impairments.~~

~~NOTE 7 – Debt obligations:~~

~~a. Short-term debt:~~

September 30
,

December 31,


Weighted average interest
rate as of September 30, 2021

Maturity

2021

2020



(U.S. $ in millions)

Convertible senior debentures
   0.25 % 2026    23    514
Revolving Credit Facility(1)    LIBOR+1.75 %    300    0
Current maturities of long-term liabilities
      2,386    2,674




Total short-term debt
      $ 2,709    $ 3,188

~~(1)~~

~~As of the date of this Quarterly Report on Form 10-Q, no amounts were outstanding under the RCF.~~

Convertible senior debentures

The principal amount of T

~~va’s~~Teva’s 0.25% convertible senior debentures due 2026 was $23 million as of ~~September 30, 2021~~March 31, 2022 and ~~$514 million as of~~ December 31, ~~2020.~~2021. 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 exercised their optional repurchase right and redeemed $491 million of the convertible senior debentures on February 1, 2021, which was the date to exercise this right.

b. Long-term debt:

Weighted average interest
rate as of September 30, 2021

Maturity

September 30,
2021

December 31,
2020



(U.S. $ in millions)

Senior notes EUR 1,500 million
   1.13 % 2024 1,735 1,839
Senior notes EUR 1,300 million
   1.25 % 2023 1,505 1,595
Senior notes EUR 1,000 million
   6.00 % 2025 1,160 1,230
Senior notes EUR 900 million
   4.50 % 2025 1,044 1,107
Senior notes EUR 750 million
   1.63 % 2028 864 916
Senior notes EUR 700 million
   3.25 % 2022 812 861
Senior notes EUR 700 million
   1.88 % 2027 810 860
Senior notes USD 3,500 million
   3.15 % 2026 3,495 3,495
Senior notes USD 1,475 million (1)
   2.20 % 2021 0   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


	Weighted average interest rate as of March 31, 2022			Maturity		March 31, 2022			December 31, 2021
						(U.S. $ in millions)
Senior notes EUR 1,500 million		1.13	%		2024		698			708
Sustainability-linked senior notes EUR 1,500 million (1)(*)		4.38	%		2030		1,674			1,699
Senior notes EUR 1,300 million		1.25	%		2023		660			670
Sustainability-linked senior notes EUR 1,100 million (2)(*)		3.75	%		2027		1,228			1,246
Senior notes EUR 1,000 million		6.00	%		2025		1,117			1,134
Senior notes EUR 900 million		4.50	%		2025		1,004			1,020
Senior notes EUR 750 million		1.63	%		2028		833			844
Senior notes EUR 700 million (3)		3.25	%		2022		302			307
Senior notes EUR 700 million		1.88	%		2027		780			792
Senior notes USD 3,500 million		3.15	%		2026		3,496			3,496
Senior notes USD 3,000 million		2.80	%		2023		1,453			1,453
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
Sustainability-linked senior notes USD 1,000 million (2)(*)		4.75	%		2027		1,000			1,000
Sustainability-linked senior notes USD 1,000 million (1)(*)		5.13	%		2029		1,000			1,000
Senior notes USD 844 million		2.95	%		2022		714			715
Senior notes USD 789 million		6.15	%		2036		783			783
Senior notes CHF 350 million		0.50	%		2022		378			382
Senior notes CHF 350 million		1.00	%		2025		380			383

Total senior notes							22,985			23,118
Other long-term debt							2			2
Less current maturities							(2,054	)		(1,403	)
Less debt issuance costs							(93	)		(100	)

Total senior notes and loans						$	20,840		$	21,617

(1)	If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by 0.125%-0.375% per annum, from and including May 9, 2026.

(2)	If Teva fails to achieve certain sustainability performance targets, a one-time premium payment of 0.15%-0.45% out of the principal amount will be paid at maturity or upon earlier redemption, if such redemption is on or after May 9, 2026.

(3)	In April 2022, Teva repaid $302 million of its 3.25% senior notes at maturity.

2017

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

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    614    616
Senior notes USD 588 million
   3.65 % 2021    586    586
Senior notes CHF 350 million
   0.50 % 2022    374    397
Senior notes CHF 350 million
   1.00 % 2025    375    398




Total senior notes
      23,491    25,490
Other long-term debt
   1.23 % 2026    2    1
Less current maturities
      (2,386 )    (2,674 )
Less debt issuance costs
      (69 )    (86 )




Total senior notes and loans
      $ 21,037    $ 22,731

~~(1)~~*

~~In July 2021, Teva repaid $1,475 million of its 2.2% senior notes at maturity.~~Interest rate adjustments and a potential

one-time

premium payment related to the sustainability-linked bonds are treated as bifurcated embedded derivatives. See note 8d.

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 p

~~yment~~payment of all principal, interest, discount and additional amounts, if any.

The long-term debt outlined in the above table is generally redeemable at any time at varying redemption prices plus accrued and unpaid interest.

Long-term debt as of ~~September 30, 2021~~March 31, 2022 is effectively denominated in the following currencies: ~~64%~~63% in U.S. dollar, ~~34%~~35% in euro and 2% 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

, as of March 31, 2022,

its $2.3

billion unsecured syndicated revolving credit facility entered into in April 2019, which was replaced in April 2022 (“RCF”).

~~The RCF agreement provides for two separate tranches, a $1.15~~

In April 2022, Teva entered into an unsecured syndicated sustainability-linked revolving credit facility of $1.8 billion ~~tranche A and a $1.15 billion tranche B. Tranche A h~~

dwith 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.

2026, with two one-year extension options. 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~~maximum leverage ratio, which becomes more restrictive over time. In addition, the RCF is linked to two sustainability performance targets, (i) the company’s S&P ESG Score and (ii) number of new regulatory submissions in low and middle-income countries. The ~~net debt to EBITDA~~RCF margin may increase or decrease depending on the Company’s sustainability performance.

Under the terms of the RCF, the leverage ratio ~~limit is 5.00x in the third and fourth quarters of 2021, gradually declines to~~shall not exceed 4.50x in the ~~first~~second and ~~second~~third quarters of 2022, ~~and continues to gradually decline over~~4.25x in the ~~remaining term~~fourth quarter of ~~the RCF to 3.50x~~2022, 4.00x in the first, second and third quarters of 2023, 3.75x in the fourth quarter of ~~2023.~~2023 and 3.50x in 2024 and onwards.

The RCF can be used for general corporate purposes, including repaying existing debt. As of ~~September 30, 2021~~

~~, $300 million was outstanding under the RCF. As~~

March 31, 2022 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, the Company expects that it will not exceed the financial covenant thresholds set forth in the RCF within one year from the date ~~these~~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, 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 and sustainability-linked senior notes is outstanding, could lead to an event of default under the Company’s senior notes and sustainability-linked 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~~the financial statements are issued.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

NOTE 8 – Derivative instruments and hedging activities:

a. Foreign exchange risk management:

In the first ~~nine~~three months of ~~2021,~~2022, approximately 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 subsidiaries within Teva. The currency hedged items are usually denominated in the following main currencies: 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.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

The Company may choose to hedge against possible fluctuations in foreign subsidiaries net assets (“net investment hedge”) and entered into 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~~senior notes, sustainability-linked senior notes, bank loans, convertible debentures and syndicated revolving credit facility that bear a fixed or variable interest ~~rate, bank loans and convertible debentures.~~rate. In some cases, the Company has swapped from a fixed to a ~~floating~~variable 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.

c. Bifurcated embedded derivatives:

Upon issuance of sustainability-linked senior notes, Teva recognized embedded derivatives related to interest rate adjustments and a potential

one-time

premium payment upon failure to achieve certain sustainability performance targets, such as access to medicines in

low-to-middle-income

countries and absolute greenhouse gas emissions reduction, which were bifurcated and are accounted for separately as derivative financial instruments. As of March 31, 2022 the fair value of these derivative instruments is negligible.

d. Derivative instruments outstanding:

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

Fair value


Not designated as hedging

instruments


September 30,

2021

December 31,

2020


Reported under

(U.S. $ in millions)

Asset derivatives:

Other current assets:

Option and forward contracts
   $ 45    $ 24
Liability derivatives:

Other current liabilities:

Option and forward contracts
   (23 )    (79 )


	Fair value
	Not designated as hedging instruments
	March 31, 2022			December 31, 2021
Reported under	(U.S. $ in millions)
Asset derivatives:
Other current assets:
Option and forward contracts	$	56		$	30
Liability derivatives:
Other current liabilities:
Option and forward contracts		(31	)		(23	)

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, 2022			March 31, 2021			March 31, 2022			March 31, 2021

Reported under	(U.S. $ in millions)
Line items in which effects of hedges are recorded	$	258		$	290		$	(3,661	)	$	(3,982	)
Option and forward contracts (1)		(5	)		(70	)		0			0
Option and forward contracts economic hedge (2)		0			0			(19	)		(28	)

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,


September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020









Reported under


(U.S. $ in millions)



Line items in which effects of hedges are recorded
   $ 241    $ 117    $ (187 )    $ 79
Cross-currency swaps—net investment hedge (1)
   0      0      0      0

Financial expenses, net

Other comprehensive income (loss)



Nine months ended,



Nine months ended,






September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020









Reported under

(U.S. $ in millions)

Line items in which effects of hedges are
recorded
   $ 805    $ 565    $ (302 )    $ (302 )
Cross-currency swaps—net investment
hedge (1)
   0      (2 )    0      (21 )

~~The table below provides information regarding the loc~~

~~tion 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,






September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020









Reported under

(U.S. $ in millions)

Line items in which effects of hedges are recorded
   $ 241    $ 117    $ (3,887 )    $ (3,978 )
Option and forward contracts (2)
   (9 )    40    0—      0—
Option and forward contracts economic hedge (3)
   0—      0—      (16 )    3

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Financial expenses, net

Net revenues


Nine months ended,

Nine months ended,


September 30,

2021

September 30,
2020

September 30,

2021

September 30,
2020

Reported under

(U.S. $ in millions)

Line items in which effects of hedges are recorded
   $ 805    $ 565    $ (11,778 )    $ (12,206 )
Option and forward contracts (2)
   (51 )    78    0—      0—
Option and forward contracts economic hedge (3)
   0—      0—      (29 )    (37 )

(1)

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

~~(2)~~

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.

~~(3)~~(2)

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 to protect its projected operating results for 2021 and 2022. 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~~the first quarter of 2022, the positive impact from these derivatives recognized ~~a loss of $27 million in relation with the 2021 hedging program Teva entered into in the second half of 2020.~~under revenues was $19 million. In the first ~~nine months~~quarter of 2021, the positive impact from these derivatives recognized under revenues was ~~$29 million, of which $6 million relate to 2022 operating results.~~$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. The cash flows associated with these derivatives are reflected as cash flows from operating activities in the consolidated statements of cash flows.

d.e. Amortizations d

edue to terminated derivative instruments:

Forward starting interest rate swaps and treasury lock agreements

In 2015, Teva entered into forward starting interest rate swaps and treasury lock 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 upon the debt 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 over the life of the debt.

With respect to these forward starting interest rate swaps and treasury lock agreements, losses of $7 million and $8 million were recognized under financial expenses, net for each of the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and losses of $24~~

~~million and $23 million~~

~~were recognized under financial expenses, net for~~

~~the nine months ended September 30, 2021 and 2020,~~ respectively.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

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 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 over the life of the debt.

With respect to the interest rate swap and cross-currency swap agreements, ~~gains of $1~~

$1 million ~~were recognized under financial expenses, net for each of the three months ended September 30, 2021 and 2020, respectively, and gains of $2 million and $3 million were~~loss was recognized under financial expenses, net for the ~~nine~~three months ended ~~September 30, 2021 and 2020, respectively.~~March 31, 2022. NaN gains or losses were recognized for the three months ended March 31, 2021.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 9 – Legal settlements and loss contingencies:

In the ~~third~~first quarter of ~~2021,~~2022, Teva recorded ~~an expense~~expenses of $3$1,124 million in legal settlements and loss contingencies, compared to ~~$21 million in the third quarter of 2020.~~

The expense in the third quarter of 2020 was mainly due to settling, in part, antitrust claims challenging a patent settlement agreement, partially offset by proceeds received following a settlement of an action brought against the sellers of Auden McKenzie (an acquisition made by Actavis Generics).

~~In the third quarter of 2021, Teva~~

~~also recorded a liability and an offsetting insurance receivable related to mediation discussed in note 10, for which there was no net impact to litigation expenses.~~

~~In the first nine months of 2021, Teva recorded an expense of $113 million in legal settlements and loss contingencies, compared to~~

~~$10~~$104 million in the first ~~nine months~~quarter of ~~2020.~~2021. The ~~expense~~expenses in the first ~~nine months~~quarter of 2022 were mainly related to an update of the estimated settlement provision recorded in connection with the remaining opioid cases. The expenses in the first quarter of 2021 ~~was~~were mainly due to the provision for the carvedilol patent litigation (see note 10). The expense in the first nine months of 2020 was mainly related to an increase of a reserve for certain legal expenses and settlement contributions related to product liability claims in the United States and partially settling antitrust claims challenging a patent settlement agreement, partially offset by proceeds received following a settlement of the FCPA derivative proceedings in Israel and settlement of an action brought against the sellers of Auden McKenzie (an acquisition made by Actavis Generics).litigation.

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, Teva’s provision for legal settlements and loss contingencies recorded under accrued expenses and other taxes and long-term liabilities was ~~$2,009~~$3,762 million and ~~$1,625~~$2,710 million, respectively. In connection with Teva’s provision for legal settlements and loss contingencies as of March 31, 2022 and December 31, 2021, related to the Ontario Teachers Securities Litigation, Teva also recognized an insurance receivable.

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~~

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

action.

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 where the exposures were fully resolved in the prior year, or determined to no longer meet the materiality threshold for disclosure, or were substantially resolved.

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 and biosimilar versions of patent-protected pharmaceuticals and biopharmaceuticals 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. For many biosimilar products that are covered by patents, Teva participates in the “patent dance” procedures of the Biologics Price Competition and Innovation Act (BPCIA), which allow for the challenge to originator patents prior to biosimilar product approval. 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 or biosimilar 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.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Teva could also be sued for patent infringement outside of the context of the Hatch-Waxman ~~Act.~~Act or BPCIA. For example, Teva could be sued for patent infringement after commencing sales of a product. ~~In addition, for~~This type of litigation can involve any of Teva’s pharmaceutical products, not just its generic and biosimilar ~~products, Teva could be sued according to the “patent dance” procedures of the Biologics Price Competition and Innovation Act (BPCIA).~~products.

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.

In July 2014, GlaxoSmithKline (“GSK”) sued Teva in the District Court for the District of Delaware ~~federal court~~ for infringement of a patent 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

) in 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 million, not including

pre-

or post-judgment interest or a multiplier for willfulness. Thereafter, the judge overturned the jury verdict, finding no induced infringement by Teva and that Teva did not owe any damages. On August 5, 2021, the Court of Appeals for the

Federal

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Circuit issued a

two-to-one

decision reinstating the $235.5 million verdict and finding Teva liable for patent infringement.

On ~~October 7, 2021, Teva filed a petition for~~

~~en banc~~

~~review with~~February 11, 2022, the Court of Appeals for the Federal ~~Circuit. If further appeals are decided against~~Circuit denied rehearing. Teva plans to appeal this decision to the U.S. Supreme Court. While that appeal is pending, the case ~~would be~~is remanded to the district court for ~~it to consider~~proceedings on 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 October 2016, Adapt and Emergent Biosciences Inc. (“EBSI”) sued Teva in the District Court for the District of New Jersey, asserting infringement of its patents expiring in 2035, as a result of Teva’s filing of its Abbreviated New Drug Application (“ANDA”) seeking to market a generic version of Narcan

nasal spray. In June 2020, the court issued a decision finding all of EBSI’s patents expiring in 2035, to be invalid. On February 10, 2022, the Court of Appeals for the Federal Circuit affirmed the lower court decision finding that EBSI’s patents are invalid. EBSI filed a request for rehearing by the Federal Circuit. On December 22, 2021, Teva launched its generic version of Narcan

nasal spray. If Teva ultimately loses the case, Teva may be ordered to cease commercial sales or donations of its generic product and/or pay damages to EBSI. Annual sales of Narcan

in the U.S. were approximately $434 million at the time Teva launched its generic version in December 2021.

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)~~(“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

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

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. Plaintiffs~~part and plaintiffs have ~~moved to file~~filed amended ~~complaints, which defendants have opposed.~~complaints. In the ranitidine MDL, the generics manufacturers’ motions to dismiss have been granted, although certain plaintiffs have appeals pending. Teva, as well as other generic manufacturers, ~~was~~is also ~~recently~~ named in several state court actions asserting allegations similar to those in the ranitidine MDL and the valsartan and losartan MDL. The state court valsartan and losartan actions are pending in New Jersey and Delaware and are currently stayed. The state court ranitidine cases naming Teva are pending in California, Illinois and Pennsylvania. One ranitidine case pending in Madison County, Illinois currently has a trial date scheduled for August 2022. 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. ~~The defendants’ motion to dismiss the metformin complaint was granted, and on June 21, 2021, plaintiffs filed an amended complaint.~~ Defendants’ motion to dismiss the plaintiffs’ amended metformin complaint ~~is pending.~~from June 2021, was granted without prejudice with respect to the consumer economic loss plaintiffs and granted in part and denied in part with respect to the end payor plaintiffs. Plaintiffs were granted leave to file a second amended complaint. In June 2021, Teva ~~has also been~~was named in one personal injury metformin case ~~filed in Florida state court,~~seeking monetary damages, which has been removed to federal ~~court.~~court in Florida. Teva’s motion to dismiss the Florida plaintiff’s amended complaint was granted and the Florida plaintiff was granted leave to file a second amended complaint. 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.

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~~some of whom assert claims on behalf of classes of all direct and indirect purchasers, and they typically allege that ~~(1)~~(i) Teva received something of value from the innovator in exchange for an agreement to delay generic entry, and ~~(2)~~(ii) significant savings could have been realized if there had been no settlement agreement and generic competition had commenced earlier. These ~~class action cases~~plaintiffs 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 often 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.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

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.

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.

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

) in exchange for Cephalon and Teva agreeing to, among other things, abide

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

by certain restrictions and limitations, for a period of ten years, when entering into settlement agreements to resolve patent litigation in the United States. Those restrictions and limitations were further refined in connection with the settlement of other unrelated FTC antitrust lawsuits ~~as described below,~~ and the term of the Modafinil Consent Decree was extended until 2029.

In November 2020, the European Commission issued a final decision in its proceedings against both Cephalon and Teva, finding that the 2005 settlement agreement between the parties had the object and effect of hindering the entry of generic modafinil, and imposed fines totaling ~~€60.5~~euro 60.5 million on Teva and Cephalon. Teva and Cephalon filed an appeal against the decision in February 2021. A provision for this matter was included in the financial statements. Teva has provided the European Commission with a bank guarantee in the amount of the imposed fines.

In August 2019, certain direct-purchaser plaintiffs filed claims in federal court in Philadelphia naming Teva and its affiliates ~~have been named~~ as defendants ~~in lawsuits~~ alleging that ~~multiple~~certain 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~~laws, specifically the ~~FTC and the State of California, and later private plaintiffs, challenging a~~ September 2006 patent litigation settlement between Watson Pharmaceuticals, Inc. (“Watson”), from which Teva later acquired certain assets and liabilities, and Solvay Pharmaceuticals, Inc. (“~~Solvay”~~Salvoy”). The second lawsuit (the “Philadelphia AndroGel Litigation”) was filed by the FTC in September 2014 in federal court in Philadelphia, challenging Teva’s December 2011 patent litigation settlement with AbbVie. The FTC stipulated to dismiss Teva from both litigations, in exchange for Teva’s agreement to amend the Modafinil Consent Decree, as described above. On July 16, 2018, the direct purchaser plaintiffs’ motion for class certification in the Georgia AndroGel Litigation was denied, and Teva later settled with the retailer plaintiffs in the Georgia AndroGel Litigation as well as the three direct purchasers that had sought class certification, thus leaving no remaining claims in the Georgia AndroGel Litigation. 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, and thea December 2011 settlement between Teva and 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 million at the time Actavis launched its generic version of AndroGel

% in November 2015. A provision for these matters and related litigations in Georgia that have since been settled was included in the financial statements.

In December 2011, three groups of plaintiffs sued Wyeth and Teva for alleged violations of the antitrust laws in connection with their November 2005 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, and discovery remains stayed. Annual sales of Effexor XR

were approximately ~~$2.6~~

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

in July 2010.

~~Table of Contents~~

~~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

) entered into in February 2005. The plaintiffs claim that the settlement agreement unlawfully delayed generic entry and seek unspecified damages. 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, which had previously granted an initial motion for class certification by the direct purchaser plaintiffs but was reversed on that ruling by the Third Circuit in April 2020, denied the direct purchaser plaintiffs’ renewed motion for class ~~certification, but allowed additional briefing on whether plaintiffs can~~certification. Plaintiffs thereafter sought leave to file a supplemental expert report in an effort to show that they could still meet the class certification standard on certain of their ~~claims.~~claims, but on January 21, 2022, the district court denied that request in full, and on April 21, 2022, the court entered a schedule for additional briefing on the remaining class certification issues. Annual sales of Lamictal

were

approximately $950 million at the time of the settlement and approximately $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. In August 2019, the district court certified the direct-purchaser class, but in June 2020, the court denied the indirect purchasers’ motion for class certification without prejudice. On September 4, 2020, the indirect purchasers filed a renewed motion for class certification, which was subsequently denied with prejudice by the district court and is now on appeal before the Court of Appeals for the Third Circuit. 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~~law and seeking 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 in June 2020, the Califo

~~nia Supreme Court reversed the Court of Appeals’ decision, allowing the District Attorney’s claims to proceed.~~penalties. Annual sales of Niaspan

were approximately $416 million at the time of the settlement and approximately $1.1 billion at the time Teva launched its generic version of Niaspan

in September 2013.

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

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

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 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 January 2019, generic manufacturer Cipla Limited~~Putative classes of direct-purchaser and

end-payer

plaintiffs have filed ~~a lawsuit~~antitrust lawsuits (which have since been coordinated in federal court in Delaware) against Amgen ~~which was later amended to include~~and Teva ~~as a defendant, in Delaware federal court,~~ alleging ~~among other things,~~ that athe January 2, 2019 settlement agreement between Amgen and Teva, resolving patent litigation over cinacalcet (generic Sensipar

), violated the antitrust laws. On ~~August 14, 2020, Cipla Limited agreed to dismiss its claims against Teva, with prejudice, and those claims have since been dismissed. Putative classes of direct-purchaser and~~

~~end-payer~~

plaintiffs have also filed antitrust lawsuits (which have since been coordinated in federal court in Delaware) against Amgen and Teva related to the January 2, 2019 settlement. On July 22, 2020, a magistrate judge recommended that plaintiffs’ claims be dismissed and on November 30, 2020, the district court ~~overruled the magistrate judge’s recommendation,~~ denied Teva’s motion to dismiss in part, and ~~instructed plaintiffs to file amended complaints, which plaintiffs filed~~ on February 16, ~~2021.~~2021, plaintiffs filed amended complaints. On March 30, 2021, Teva again moved to dismiss those ~~complaints on March 30, 2021,~~claims 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~~plaintiffs. On March 11, 2022, the district court denied Teva’s ~~motions remain pending.~~motion to dismiss in part. Teva intends to request that the district court certify its rulings for review by the United States Court of Appeals for the Third Circuit. Annual sales of Sensipar

in the United States were approximately $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.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

On July 15, 2021, the U.K. Competition and Markets Authority (“CMA”) issued a decision imposing fines for breaches of U.K. competition law by Allergan, Actavis UK and Auden Mckenzie and a number of other companies in connection with the supply of 10mg and 20mg hydrocortisone tablets in the U.K. The decision combines the CMA’s three prior investigations into the supply of hydrocortisone tablets in the U.K. and encompasses those allegations which were subject to prior statements of objections (a provisional finding of breach of the Competition Act), in particular those under case

50277-1

(unfair pricing, originally subject to a statement of objections on December 16, 2016), case

50277-2

(anti-competitive agreement with AMCo, originally subject to a statement of objections on March 3, 2017) as well as the CMA’s subsequent investigation relating to an anti-competitive agreement with Waymade. 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. On October 6, 2021, Accord UK and Auden Mckenzie appealed the CMA’s decision. A provision for the estimated exposure for Teva related to the fines and/or damages 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 calendar year~~2021 were approximately ~~$380~~$373 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, which Teva, Actavis, and Watson ~~have~~moved to dismiss. On January 24, 2022, the court dismissed plaintiffs’ amended complaints without prejudice. Plaintiffs filed amended complaints on February 22, 2022, which defendants moved to dismiss on ~~the grounds (among others) that the allegations do not plausibly demonstrate any improper payment from Forest to Watson that could create antitrust liability. Those~~April 19, 2022 and those motions remain pending. Annual sales of Bystolic

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

In February 2021, the State of New Mexico filed a lawsuit against Teva and certain other defendants related to various medicines used to treat HIV. InBetween September and ~~October~~December 2021, several private plaintiffs including retailers and a health insurance ~~provider~~providers filed similar claims in federal court in the Northern District of California and in the District of Minnesota. As

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

they relate to Teva, the lawsuits challenge settlement agreements Teva entered into with Gilead in 2013 and 2014 to resolve patent litigation relating to Teva’s generic versions of Viread

, Truvada

, and Atripla

. Plaintiffs allege that the settlements contain improper reverse payments that delayed the availability of Teva’s generic products, in violation of the federal antitrust laws and state law. ~~The claims against Teva in these matters~~Several recently filed cases are in ~~preliminary stages.~~the process of being coordinated with the existing litigation in the Northern District of California, and any effect those cases may have on the overall case schedule remains unclear. On February 16, 2022, Teva moved to dismiss the claims by certain private plaintiffs but that motion was denied. However, Teva has successfully moved to limit the potential damages period as to certain private plaintiffs. On August 5, 2021, Teva moved to dismiss the complaint brought by the State of New Mexico, and on December 20, 2021, the trial court denied Teva’s motion. The trial court certified the decision as appropriate for interlocutory appeal, but on April 8, 2022, the appellate court in New Mexico declined to accept the appeal and remanded back to the trial court. Annual sales in the United States at the time of the settlement of Viread

, Truvada

and

~~and~~ Atripla

were approximately

$582 million, $2.4 billion, and $2.9 billion, respectively. Annual sales in the United States at the time Teva launched its generic version of Viread

in 2017, Truvada

in 2020 and Atripla

in 2020 were approximately $728 million, $2.1 billion and $444 million, respectively.

In August 2021, a plaintiff filed a putative class action suit in the United States District Court for the Eastern District of Pennsylvania against Takeda and several generic

manufacturers,

, including Watson and Teva, alleging violations of the antitrust laws in connection with their settlement of patent litigation involving colchicine tablets (generic Colcrys

), entered into in January 2016. Plaintiff claims that the settlement was part of a horizontal conspiracy among Takeda and the generic manufacturers to unlawfully restrict output of colchicine by delaying generic entry. Defendants ~~intend to move~~moved to dismiss the complaint for failure to state a claim. On December 28, 2021, the Court granted the defendants’ motion to dismiss, finding that plaintiff’s allegations were implausible, but granted plaintiff leave to amend, and on January 18, 2022, plaintiff filed its amended complaint, making substantively the same antitrust allegations as before, but with certain new allegations regarding the nature of the alleged conspiracy. On March 30, 2022, the Court granted in part and denied in part defendants’ motion to dismiss, dismissing the newly pled bilateral conspiracy claims but allowing the revised overarching conspiracy claim to proceed against all defendants. On April 8, 2022, Teva and Watson, along with their codefendant Amneal, moved the court to reconsider its partial

motion-to-dismiss

denial or, in the alternative, to certify that denial for immediate appellate review. However, that motion was denied on April 25, 2022. Annual sales of Colcrys

in the United States were approximately ~~$187~~$

187 million at the time of the settlement.

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.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

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.~~

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. The indictment identified the following generic drugs: Pravastatin, Carbamazepine, Clotrimazole, Etodolac (IR and ER), Fluocinonide (Cream

E-Cream,

Gel, and Ointment), Warfarin, 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.

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

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

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 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. On June 10, 2020, most, but not all, of the same states, with the addition of the U.S. Virgin Islands, filed a third complaint in the District of Connecticut naming, among other defendants, Actavis, but not Teva USA, in a similar complaint relating to dermatological generics products. On September 9, 2021, the states’ attorneys general amended their third complaint to, among other things, add California as a plaintiff. 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 certain complaints filed by private plaintiffs, to proceed first in the litigation as bellwether complaints. Teva moved the court to reconsider that ruling. On February 9, 2021, Teva’s motion to reconsider that ruling was granted, and on May 7, 2021, the Court chose the attorneys’ general third complaint filed on June 10, 2020 and subsequently amended to serve as a bellwether complaint in the Pennsylvania MDL, along with certain complaints filed by private plaintiffs. ~~In June 2021,~~ Teva settled with the State of Mississippi for $925,000 in June 2021 and with the State of Louisiana for $1,450,000 in March 2022. Pursuant to these settlements, both states have dismissed ~~its~~their claims against Actavis and Teva USA, as well as certain former employees of Actavis and Teva ~~USA, pursuant~~USA. On December 9, 2021, the Court entered an order setting the schedule for the proceedings in the bellwether cases. The order did not include trial dates, but provides for the parties to ~~that settlement.~~complete briefing on motions for summary judgement in early 2024.

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 USA and Actavis. The plaintiffs generally seek injunctive relief and damages under federal antitrust law, and damages under various state laws. 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

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

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 and October 8, 2021, certain individual plaintiffs commenced a civil ~~action~~actions 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~~complaints have been filed in ~~either action~~the actions and ~~both~~each of the three of the cases have been placed in deferred status. Certain counties in New York and Texas have also commenced civil actions against many of the defendants in the Pennsylvania MDL, including Teva and Actavis, and the complaints have been ~~or are in the process of being~~ 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.

In March 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. Subsequently, in August 2020, the U.S. Attorney’s 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 federal False Claims Act and state law. It is alleged that Teva caused the 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 complaint on the grounds that

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

it fails to state a claim. On September 10, 2021, the Court granted Teva’s motion to dismiss the unjust enrichment claim and denied the remainder of the motion. On October 15, 2021, Teva filed an answer to the complaint. The proceeding is in early stages. Additionally, on January 8, 2021, Humana, Inc. filed an action against Teva in the United States District Court for the 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 motion remains pending.

In April 2021, a city and county in Washington sued Teva in the United States District Court for the Western District of Washington for alleged violations of the Racketeer Influenced and Corrupt Organizations Act, Washington’s Consumer Protection Act, and unjust enrichment concerning Teva’s sale of COPAXONE. Plaintiffs purport to represent a nationwide class of health plans and a subclass of Washington-based health plans that purchased and/or reimbursed health plan members for COPAXONE. Plaintiffs allege that Teva engaged in several fraudulent schemes that resulted in plaintiffs and the putative class members purchasing and/or reimbursing plan members for additional prescriptions of COPAXONE and/or at inflated COPAXONE prices. Plaintiffs seek treble damages for the excess reimbursements and inflated costs, as well as injunctive relief. On September 28, 2021, plaintiffs filed an amended ~~complaint, which~~complaint. On November 17, 2021, Teva ~~plans~~moved to ~~move~~dismiss the suit, on the grounds that plaintiffs’ claims are barred by the applicable statutes of limitations and the direct purchaser rule, suffer from jurisdictional defects, and fail to ~~dismiss.~~plausibly allege fraud or other elements of their claims. That motion remains pending.

On June 29, 2021, Mylan Pharmaceuticals (“Mylan”) sued Teva in the District Court for the District of New Jersey. On March 11, 2022 and March 15, 2022, FWK Holdings, LLC, KPH Healthcare Servs., Inc. d/b/a Kinney Drugs, Inc., Meijer Inc., Meijer Distribution, Inc., Labor-Management Healthcare Fund, the Mayor and City Council of Baltimore, and the New York State Teamsters Council Health and Hospital Fund sued Teva in the District Court for the District of New Jersey on behalf of themselves and others similarly situated direct and indirect purchasers of COPAXONE. The complaints assert claims for alleged violations of the Lanham Act, state and federal unfair competition and monopolization laws, tortious interference, trade libel, and ~~trade libel.~~a violation of the Racketeer Influenced and Corrupt Organizations Act. Plaintiffs claim Teva was involved in an unlawful scheme to delay and hinder generic competition concerning COPAXONE sales. Plaintiffs seek damages for lost profits and expenses, disgorgement, restitution, treble damages, attorneys’ fees and costs, and injunctive relief. ~~The proceeding~~Teva has moved to dismiss the complaint filed by Mylan on the grounds, among others, that none of its challenged conduct violates the law. That motion remains pending, and Teva’s deadline to answer or move to dismiss the remaining complaints is ~~in preliminary stages.~~June 15, 2022.

Opioids Litigation

Since May 2014, more than 3,500 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 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.~~

No. 14-cv-04361

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

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,

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

including various putative class actions of individuals, have asserted personal injury and wrongful death claims in over 600 complaints, nearly all of which are consolidated in the MDL Opioid Proceeding. Furthermore, approximately 700

non-personal

injury complaints and approximately 100 personal injury 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.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

On April 19, 2021, a bench trial in California (The People of the State of California, acting by and through Santa Clara County Counsel James R. Williams, et. al. v. Purdue Pharma L.P., et. al.) commenced ~~with~~against Teva and other defendants focused on the marketing of branded opioids. On December 14, 2021, the court issued its final judgment in favor of the defendants on all claims. Teva expects that the plaintiffs will appeal this judgment. On June 29, 2021, a jury trial in New York (

In re Opioid Litigation

, Index No. 400000/2017)) commenced ~~with~~against Teva and other defendants, focused on the marketing and distribution of opioids. The case was bifurcated between liability and damages. On December 30, 2021, the jury returned a liability verdict in favor of plaintiffs (the County of Suffolk, the County of Nassau and the State of New York), on the plaintiffs’ public nuisance claim. It is anticipated that discovery with respect to the damages portion of the case will begin in 2022 followed by a damages trial. Teva intends to appeal and expects that both Teva and the plaintiffs will file post-trial motions with respect to the liability portion of the case. Absent resolutions, additional trials are expected to proceed in several states in 2022.

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 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.”

Additionally, 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 agreed to 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, which has been paid.

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 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 nationwide settlement, Teva would provide buprenorphine naloxone (sublingual tablets) with an estimated value of up to approximately $23 billion at wholesale acquisition cost over a ten year period. In addition, Teva would also provide cash payments of up to $250 million over a ten year period.

~~During the passage of time since then, the Company has continued to negotiate the terms and conditions of a nationwide settlement.~~ On July 21, 2021, it was announced that four other defendants (not including Teva) have reached a nationwide settlement, subject to certain conditions, which includes payment of up to approximately $26 billion spread over up to 18 years. ~~The achievement~~During the passage of ~~this settlement may similarly present an opportunity for Teva~~time since then, the Company has continued to ~~arrive at~~negotiate the terms and conditions of a ~~settlement, although there do~~nationwide settlement. There remain 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. The Company cannot predict if~~business, which makes the timing of any outcome uncertain. In that regard, Allergan is also in settlement negotiations over various opioid matters and has asked Teva, pursuant to indemnification provisions in agreements between Teva and Allergan arising from Teva’s acquisition of the Actavis generics business, to contribute to those settlements. On December 8, 2021, Allergan reached a settlement ~~will be finalized.~~in the New York opioids litigation. Allergan has indicated that it may seek indemnification from Teva for a significant portion of that New York settlement, and that it could initiate arbitration proceedings to resolve the dispute. Teva disputes that, under the circumstances, Teva is obligated to provide indemnification in connection with Allergan’s New York settlement.

On September 28, 2021, Teva reached an agreement with the Attorney General of Louisiana that settles the state’s opioid-related claims. The agreement iswas contingent ~~on confirmation from the state by November 2, 2021~~ that all political subdivisions of Louisiana will formally release Teva as part of the ~~settlement.~~settlement, which Teva was advised has occurred by the Attorney General of Louisiana. Under the terms of the settlement, Teva will pay Louisiana $15 million over an

18-year

period and will provide ~~an additional donation of~~ buprenorphine naloxone (sublingual tablets) valued at $3 million (wholesale acquisition cost).

3329

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

~~The~~On February 4, 2022, the Company ~~considered~~reached an agreement with the Attorney General of the State of Texas that settles Texas’ and its subdivisions opioid-related claims. On March 10, 2022, Texas confirmed that at least 96% of the population of subdivisions will formally release Teva as part of the settlement. Under the terms of the settlement, Teva will pay Texas $150 million over a ~~range~~

15-year

time period and will provide its recently launched, lifesaving medicine generic Narcan

(naloxone hydrochloride nasal spray), valued at $75 million (wholesale acquisition cost) over

years.

On March 21, 2022, Teva reached an agreement with the Attorney General of Rhode Island that settles Rhode Island’s and its subdivisions’ opioid-related claims. Under the terms of the settlement, Teva will pay Rhode Island $21 million over 13 years, in addition to attorneys’ fees and costs, and will provide generic Narcan

(naloxone hydrochloride nasal spray) and a significant amount of buprenorphine naloxone sublingual tablets known by the brand name Suboxone

, together valued at $78.5 million (wholesale acquisition cost) over

years.

On March 30, 2022, Teva reached an agreement with the Attorney General of Florida that settles Florida’s and its subdivisions’ opioid-related claims. Under the terms of the settlement, Teva will pay Florida $177 million over

15-years

in addition to attorneys’ fees

and costs

, and will provide generic Narcan

(naloxone hydrochloride nasal spray) valued at $84 million (wholesale acquisition cost) over

years.

As a result of the settlements with Texas, Florida, Louisiana and Rhode Island, recent decisions in California, Oklahoma and New York, as well as continued nationwide settlement negotiation with state Attorneys General and plaintiffs, the Company has reconsidered the potential settlement ~~outcomes.~~outcome and revised its provision. The ~~current~~revised provision ~~remains~~is a reasonable estimate of the ultimate costs if a nationwide settlement is finalized, ~~based on the Company’s most recent offer~~after discounting payments to ~~settle.~~states to their net present value. However, if not finalized for the entirety of the remaining cases, a reasonable upper end of a range 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 reputation, business, results of 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. This was followed by a Statement of Charges and Notice of Hearing filed by the NYDFS, although no merits hearing date is currently set. Currently, Teva cannot predict how a nationwide settlement (if finalized) will affect these 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 ~~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 ~~September 2021,~~

~~twenty-two~~

January 2022, twenty-three 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 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. Pursuant to that consolidation order,

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

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. On May 24, 2021, Teva moved to dismiss a majority of the

“opt-out”

complaints on various other grounds. Those motions are still pending. 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’s appeal was denied. ~~Summary judgment and~~

~~Daubert~~

~~motions are currently scheduled to be filed~~On January 18, 2022, Teva entered into a settlement in the Ontario Teachers Securities Litigation ~~in November 2021. The~~for $420 million, which was preliminarily approved by the court on January 27, 2022. Pursuant to an agreement between the Company ~~is in mediation related to this matter~~ and ~~has recorded a liability in the third quarter of 2021 based upon an offer to settle the class litigation. Accordingly, an~~its insurance ~~receivable in the same amount was recorded. A settlement is subject to alignment with~~carriers, the insurance ~~carriers. There was~~carriers provided the vast majority of the total settlement amount, with a small portion contributed by Teva. Additionally, as part of the settlement, Teva admitted no ~~net impact to litigation expenses. Motions~~liability and denied all allegations of wrongdoing. A number of

“opt-out”

complaints still remain outstanding, and 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.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

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, as amended 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. On March 26, 2021, the Court appointed lead plaintiff and lead counsel. On May 25, 2021, lead plaintiff filed an amended class action complaint, which named four additional former and current officers as defendants. On August 10, 2021, lead plaintiff moved to strike certain allegations from its amended complaint and to file a corrected amended complaint, which the court granted that same day. The corrected amended complaint seeks unspecified damages and legal fees. On August 23, 2021, Teva and the individual defendants moved to dismiss the corrected amended complaint. On March 25, 2022, the court (i) held that the corrected amended complaint failed to plead that certain public statements regarding Teva’s compliance with law were misleading, (ii) held that two alleged partial corrective disclosures did not establish loss causation and ~~that~~cannot serve as the basis for plaintiff’s claimed loss, and (iii) dismissed all claims against one of the individual defendants. The court otherwise denied the motion ~~remains pending.~~to dismiss with respect to Teva and the remaining individual defendants. 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 seeking monetary damages against certain past and present directors and officers have been filed in Israeli Courts alleging negligence and ~~recklessness with respect to the acquisition of the Rimsa business, the acquisition of Actavis Generics and the patent settlement relating to Lidoderm~~

.recklessness. Motions for document disclosure prior to initiating derivative actions were filed with respect to several U.S. and EU settlement agreements, opioids, the U.S. price-fixing investigations and allegations related to the DOJ’s complaint regarding Copaxone patient assistance program in the U.S. In June 2021, the Tel Aviv District Court approved the settlement reached with respect to the derivative proceeding with regard to the acquisition of Actavis Generics and two related actions, including the derivative proceedings related to allegations in connection with the Lidoderm

~~patent settlement agreement.~~

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.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

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.

Item 103 of Regulation

S-K

promulgated by the SEC requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions, unless the Company reasonably believes that the matter will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, of less than $300,000. The following matter is disclosed in accordance with that requirement. On July 8, 2021, the National Green Tribunal Principal Bench, New Delhi, issued an order against Teva’s subsidiary in India, Teva API India Private Limited, finding

non-compliance

with environmental laws and assessed a penalty of $1.4 million.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

The Company disputed certain of the findings and the amount of the penalty and filed an appeal before the Supreme Court of India. On August 5, 2021, the Supreme Court of India admitted the appeal for hearing and granted an interim unconditional stay on the National Green Tribunal’s order. The Company does not believe that the eventual outcome of such matter will have a material effect on its business.

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. In November 2021, plaintiffs moved to amend their complaint to, among other things, reassert claims against the Company and Teva USA, which motion remains pending. Trial in this matter is currently scheduled for ~~June~~September 2022.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

NOTE 11 – Income taxes:

In the ~~third~~first quarter of 2022, Teva recognized a tax

expense

of $2 million, on

pre-tax

loss

of $971 million. In the first quarter of 2021, Teva recognized a tax expense of ~~$76 million, on~~

~~pre-tax~~

~~income of $382 million. In the third quarter of 2020, Teva recognized a tax expense of $16 million, on~~

~~pre-tax~~

~~loss of $4,459~~

~~million. Teva’s tax rate for the third quarter of 2021 was mainly affected by amortization and interest expense disallowance.~~

~~In the first nine months of 2021, Teva recognized a tax expense of $235~~$62 million, on

pre-tax

income of ~~$833~~$144 million. ~~In the first nine months of 2020, Teva recognized a tax benefit of $147 million, on~~

~~pre-tax~~

~~loss of $4,543 million.~~

Teva’s tax rate for the first ~~nine months~~quarter of ~~2021~~2022 was mainly affected by ~~amortization,~~

legal settlement charges

~~impairments,~~

, adjustments to valuation allowances on deferred tax assets

~~legal settlements~~

and interest expense ~~disallowance.~~disallowances.

The statutory Israeli corporate tax rate is 23% in ~~2021.~~ 2022.

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, interest expense disallowances, tax be

~~efits~~benefits in Israel and other countries, as well as infrequent or

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 ~~on October 29, 2021.~~in July 2022. A final and binding decision against Teva in this case may lead to an ~~asset write off~~impairment of

~~$141~~ $138 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.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

In October 2021, the Central District Court in Israel held in favor of the Israeli tax authorities with respect to 2008-2011 decrees. The case with respect to 2012-2016 remains pending with similar legal claims. The October 2021 Central District Court decision found that Teva has a tax liability to the Israeli government for 2008-2011 of approximately $350 million, of which a portion will be paid in cash during 2022 and 2023, and the remaining portion will be offset by carried forward losses that Teva would otherwise be entitled to. Teva appealed the decision to the Israeli Supreme Court and expects the appeal hearings to start in the second half of 2022.

The Company believes it has adequately provided for ~~these~~all of its uncertain tax positions, including those items currently under dispute, however, adverse results could b

be material.

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

Three months ended
September 30,

Nine months ended
September 30,


2021

2020

2021

2020



(U.S. $ in millions)

(U.S. $ in millions)

Impairments of long-lived tangible assets (1)
   $ 26    $ 56    $ 106    $ 408
Contingent consideration
   9    (179 )    (7 )    (96 )
Restructuring
   28    9    96    82
Other
   (1 )    15    32    10








Total
   $ 62    $ (98 )    $ 227    $ 404


	Three months ended
	March 31,
	2022		2021
	(U.S. $ in millions)
Impairments of long-lived tangible assets (1)	$	16	$	48
Contingent consideration		33		3
Restructuring		57		81
Other		21		4

Total	$	128	$	137

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

Impairments

Impairments of tangible assets for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$26~~$16 million and ~~$56~~$48 million, respectively. The impairment for the three months ended ~~September 30, 2021~~March 31, 2022 was mainly related to certain assets in North America. The impairment for the three months ended ~~September 30, 2020 was mainly related to the intention to sell certain assets in Teva’s International Markets and Europe segments.~~

~~Impairments of tangible assets for the nine months ended September 30, 2021 and 2020 were $106 million and $408 million, respectively. The impairment for the nine months ended September 30,~~March 31, 2021 was mainly related to certain assets in the Europe and North America segments. The impairment for the nine months ended September 30, 2020 was mainly related to the intention to sell certain assets from Teva’s business venture in Japan and plant rationalization. See note 2.Europe.

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 network consolidation activities.

Contingent consideration

In the three months ended March 31, 2022, Teva recorded an expense of $33 million for contingent consideration, compared to an expense of $3 million in the three months ended March 31, 2021. The expense in the first three months of 2022 was mainly related to a change in the estimated future royalty payments in connection with lenalidomide (generic equivalent of Revlimid

), which was part of the Actavis Generics acquisition.

37Restructuring

In the three months ended March 31, 2022, Teva recorded $57 million of restructuring expenses, compared to $81

million of restructuring expenses in the three months ended March 31, 2021. The expenses for the three months ended March 31, 2022 and 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 restructuring costs:


	Three months ended March 31,
	2022		2021
	(U.S. $ in millions)
Restructuring
Employee termination	$	52	$	79
Other		5		2

Total	$	57	$	81

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

~~Contingent consideration~~

~~In the three months ended September 30, 2021, Teva recorded an expense of $9 million for contingent consideration, compared to an income of $179~~

million in the three months ended September 30, 2020. The expense in the third quarter of 2021 was mainly related to a change in the estimated future royalty payments to Eagle Pharmaceuticals, Inc. (“Eagle”) in connection with expected future bendamustine sales. The income in the third quarter of 2020 was mainly related to a change in the future royalty payments to Allergan in connection with lenalidomide (generic equivalent of Revlimid

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

~~In the nine months ended September 30, 2021, Teva recorded income of $7 million for contingent consideration, compared to~~

~~income of $96~~

million in the nine months ended September 30, 2020. The income in the first nine months of 2021 was mainly related to a change in the estimated future royalty payments to Allergan in connection with lenalidomide (generic equivalent of Revlimid

), which was part of the Actavis Generics acquisition, partially offset by the change in the estimated future royalty payments to Eagle in connection with expected future bendamustine sales. The income in the first nine months of 2020 was mainly related to a change in the future royalty payments to Allergan in connection with lenalidomide (generic equivalent of Revlimid

~~), which was part of the A~~

~~tavis Generics acquisition, partially offset by the change in the estimated future royalty payments to Eagle in connection with expected future bendamustine sales.~~

~~Restructuring~~

~~In the three m~~

~~nths ended September 30, 2021, Teva recorded $~~

~~million of restructuring expenses, compared to $~~

million of restructuring expenses in the three months ended September 30, 2020. The expenses for the three months ended September 30, 2021 were primarily related to network consolidation activities and residual expenses of the restructuring plan announced in 2017.

In the nine months ended September 30, 2021, Teva recorded $96 million of restructuring expenses, compared to $82 million in the nine months ended September 30, 2020. The expenses for the nine months ended September 30, 2021

~~and September 30, 2020~~

~~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 T~~

~~va’s restructuring plan, including other costs associated with Teva’s restructuring plan and recorded under different items:~~

Three months ended September 30,


2021

2020



(U.S. $ in millions)

Restructuring

Employee termination
   $ 24    $ 3
Other
   4    7




Total
   $ 28    $ 9

Nine months ended September 30,


2021

2020



(U.S. $ in millions)

Restructuring

Employee termination
   $ 84    $ 39
Other
   12    43




Total
   $ 96    $ 82

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

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


	Employee termination costs			Other			Total			Employee termination costs			Other			Total
										(U.S. $ in millions )
	(U.S. $ in millions )
Balance as of January 1, 2021	$	(115	)	$	(7	)	$	(122	)
Balance as of January 1, 2022										$	(131	)	$	(7	)	$	(138	)
Provision		(84	)		(12	)		(96	)		(52	)		(5	)		(57	)
Utilization and other*		78			12			90			59			6			65

Balance as of September 30, 2021	$	(121	)	$	(7	)	$	(128	)
Balance as of March 31, 2022										$	(124	)	$	(6	)	$	(130	)

Employee termination
costs

Other

Total



(U.S. $ in millions )

Balance as of January 1, 2020
   $ (208 )    $ (7 )    $ (215 )
Provision
   (39 )    (43 )    (82 )
Utilization and other*
   145    43    188






Balance as of September 30, 2020
   $ (102 )    $ (7 )    $ (109 )


	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	)

*	Includes adjustments for foreign currency translation.

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~~

to the site. In October 2018, the FDA notified Teva that the inspection of the site had been classified as “official action indicated” (“OAI”), and 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. Since the inspection, Teva has 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. FDA follow up inspections occurred in January 2020 and in May 2021. In an official “Warning Letter Closeout Letter” dated September 1, 2021, FDA notified Teva that FDA had completed its evaluation of Teva’s corrective actions, and it appeared that Teva had adequately addressed the warning letter.

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 found in valsartan API supplied by Zhejiang Huahai Pharmaceuticals Co. Ltd. (“Huahai”). Since July 2018, Teva has been actively engaged with global regulatory 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. In December 2019, Teva reached a settlement with Huahai resolving Teva’s claims related to certain sartan API supplied by Huahai. Under the settlement agreement, Huahai agreed to compensate Teva for some of its direct losses and provide 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 completed partial remediation of this issue and restarted limited supply from its Goa facilities. The site experienced some additional delays in the first quarter of 2021 due to labor related issues, but the situation stabilized during the second quarter of 2021. The water supply remediation is expected to be completed during the second quarter of 2022, and in the meantime the site is operating under an interim water solution without any material impact expected on compliance and supply capacity. The impact to Teva’s financial results for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~immaterial, however, if the full remediation takes longer than expected there may be further loss of sales, customer penalties or impairments to related assets.~~immaterial.

~~Table of Contents~~

~~TEVA PHARMACEUTICAL INDUSTRIES LIMITED~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

In June 2021, the Company temporarily paused manufacturing at its Irvine, California facility in the United States, and suspended release of product from the facility pending completion of an open manufacturing investigation. In July 2021, the FDA initiated an establishment inspection at the facility. ~~During the period from February 2021 through July 2021, the Company voluntarily initiated recalls of specific lots of multiple products from the facility.~~ On August 18, 2021, the Company issued field alert reports to the FDA for products manufactured at the Irvine facility and put Irvine manufactured ~~product~~products in Teva’s distribution center on hold. On August 20, 2021, the FDA completed its inspection and issued a Form

FDA-483

to the Irvine facility with ten ~~observations.~~observations and, on December 17, 2021, the FDA notified the Company that the inspection classification of this site is “official action indicated” (“OAI”). Teva ~~has been~~began working diligently to address the FDA’s

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

concerns in a manner consistent with current good manufacturing practice ~~(CGMP)~~(“CGMP”) requirements, ~~as quickly~~ and ~~as thoroughly as possible. In addition, Teva is~~was in discussions with the FDA Drug Shortage Staff (DSS) and FDA Office of Manufacturing Quality (OMQ) ~~in an effort~~ to ~~allow for the~~recommence distribution, release and

~~re-start~~

~~of manufacturing~~ manufacture of certain medically necessary products from the site under defined controls and protocols.

On March 22, 2022, the Company announced its decision to ~~minimize~~permanently cease all manufacturing activities and to close the ~~impact on patients. Suspension~~site, and to transfer certain products to other facilities. Teva will remain in contact with the FDA regarding the status of ~~manufacturing and distribution for an extended period or if~~the Irvine, California site to ensure that the Company continues to comply with all relevant CGMP requirements, particularly those involved with product transfers to other sites within the Teva network.

If Teva is unable to address ~~additional~~FDA inspection issues satisfactorily, it could be subject ~~Teva~~ to additional ~~consequences.~~regulatory actions. Teva has considered these developments and, ~~has~~as of March 31, 2022, recorded ~~immaterial~~$54 million costs in its financial statements related to this matter. Teva will continue to assess potential financial implications, including ~~due to~~ loss of revenues, impairments, inventory write offs, customer pe

~~alties, idle capacity charges,~~penalties, costs of additional remediation and/or FDA enforcement actions.

NOTE 13 – Earnings (Loss) per share:

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

In computing diluted loss per share for the three months ended March 31, 2022, 0 account was taken of the potential dilution that could occur upon the exercise of options and

non-vested

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

In computing diluted earnings per share for the three months ended ~~September 30,~~March 31, 2021, 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 and PSUs granted under employee stock compensation ~~plans.~~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~~

The weighted average diluted ~~loss~~ shares outstanding used for the fully diluted share

calculations

for

both

the

three months ended March 31, 2022 and 2021 were 1,107 million shares.

Basic and diluted

los

per share

was

$0.86 for the three months ended ~~September 30, 2020, 0 account was taken of the potential dilution that could occur upon the exercise of 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.~~

~~In computing diluted earnings per share for the nine months ended September 30, 2021,~~March 31, 2022, compared to 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. 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 nine months ended September 30, 2020, 0 account was taken of the potential dilution that could occur upon the exercise of 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 $0.26~~of $0.07 for the three months ended ~~September 30, 2021, compared to basic and diluted loss per share of $3.97 for the three months ended September 30, 2020.~~March 31, 2021.

~~Basic and diluted earnings per share were $0.52 for the nine months ended September 30, 2021, compared to basic and diluted loss per share of $3.78 for the nine months ended September 30, 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 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, 2021, net of taxes	$	(2,274	)	$	(324	)	$	(85	)	$	(2,683	)

Other comprehensive income (loss) before reclassifications		(4	)		—			—			(4	)
Amounts reclassified to the statements of income		—			7						7

Net other comprehensive income (loss) before tax		(4	)		7			0			3

Corresponding income tax		(7	)		—			—			(7	)

Net other comprehensive income (loss) after tax*		(11	)		7			0			(4	)

Balance as of March 31, 2022, net of taxes	$	(2,285	)	$	(317	)	$	(85	)	$	(2,687	)

*	Amounts do not include a $53 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 14 – Accumulated other comprehensive income (loss):~~

~~The components of, and changes within, accumulated other comprehensive in~~

~~ome (loss) attributable to Teva are presented in the table below:~~


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

Other comprehensive income (loss) before reclassifications		(270	)		—			—			(270	)		(174	)					—			(174	)
Amounts reclassified to the statements of income		—			27			2			29			—			9			—			9

Net other comprehensive income (loss) before tax		(270	)		27			2			(241	)		(174	)		9			—			(165	)

Corresponding income tax		26			(6	)		—			20			33			(2	)		—			31

Net other comprehensive income (loss) after tax*		(244	)		21			2			(221	)		(141	)		7			—			(134	)

Balance as of September 30, 2021, net of taxes	$	(2,163	)	$	(342	)	$	(115	)	$	(2,620	)
Balance as of March 31, 2021, net of taxes													$	(2,060	)	$	(356	)	$	(117	)	$	(2,534	)

*	Amounts do not include a ~~$81~~$67 million loss from foreign currency translation adjustments attributable to non-controlling interests.

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
   (418 ) 20 —   (398 )
Amounts reclassified to the statements of income
   —   26 —   26


Net other comprehensive income (loss) before tax
   (418 ) 46 —   (372 )


Corresponding income tax
   41 —   —   41


Net other comprehensive income (loss) after tax*
   (377 ) 46 —   (331 )


Balance as of September 30, 2020, net of taxes
   $ (2,171 ) $ (374 ) $ (98 ) $ (2,643 )

*	~~Amounts do not include a $29 million gain 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 segments:

(a)

North America segment, which includes the United States and Canada.

(b)

Europe segment, which includes the European Union, the United Kingdom and certain other European countries.

(c)

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

In addition to these 3 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 note 6.

~~a. Segment information:~~

Three months ended September 30,


2021


North America

Europe

International Markets



(U.S. $ in millions)

Revenues
   $ 1,875    $ 1,220    $ 530
Gross profit
   967    714    296
R&D expenses
   146    55    16
S&M expenses
   250    204    102
G&A expenses
   121    64    29
Other income
   (7 )    (2 )    (2 )






Segment profit
   $ 458    $ 394    $ 152

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

Three months ended September 30,


2020


North America

Europe

International Markets



(U.S. $ in millions)

Revenues
   $ 2,017    $ 1,116    $ 529
Gross profit
   1,056    637    275
R&D expenses
   155    60    17
S&M expenses
   250    200    101
G&A expenses
   97    66    33
Other income
   (5 )    (1 )    (1 )






Segment profit
   $ 560    $ 312    $ 125

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

a. Segment information:


	Three months ended March 31,
	2022
	North America			Europe		International Markets
	(U.S. $ in millions)
Revenues	$	1,737		$	1,156	$	492
Gross profit		890			694		286
R&D expenses		143			58		20
S&M expenses		245			196		97
G&A expenses		112			59		29
Other income		(11	)		§		(40	)

Segment profit	$	402		$	381	$	179

§ Represents an amount less than $0.5 million.

Nine months ended September 30,


2021


North America

Europe

International Markets



(U.S. $ in millions)

Revenues
   $ 5,807    $ 3,618    $ 1,505
Gross profit
   3,081    2,063    826
R&D expenses
   467    184    51
S&M expenses
   734    628    303
G&A expenses
   338    180    79
Other income
   (14 )    (3 )    (5 )






Segment profit
   $ 1,556    $ 1,074    $ 398

Nine months ended September 30,


2020


North America

Europe

International Markets



(U.S. $ in millions)

Revenues
   $ 6,146    $ 3,520    $ 1,582
Gross profit
   3,208    2,009    828
R&D expenses
   455    180    51
S&M expenses
   755    590    312
G&A expenses
   325    184    96
Other income
   (9 )    (3 )    (10 )






Segment profit
   $ 1,682    $ 1,058    $ 378


	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 $0.5 million.

The following table presents a reconciliation of Teva’s segment profits to its consolidated operating income (loss) and to consolidated income (loss) before income taxes for the three months ended March 31, 2022 and ~~nine mo~~

n2021:

~~ths ended September 30, 2021 and 2020:~~

.

Three months ended

Nine months ended


September 30,

September 30,


2021

2020

2021

2020



(U.S. $ in millions)

(U.S. $ in millions)

North America profit
   $ 458    $ 560    $ 1,556    $ 1,682
Europe profit
   394    312    1,074    1,058
International Markets prof
i
t
   152    125    398    378








Total reportable segments profit
   1,004    997    3,028    3,118
Profit of other activities
   38    28    125    130








Total segments profit
   1,042    1,025    3,153    3,248
Amounts not allocated to segments:

Amortization
   199    251    613    758
Other assets impairments, restructuring and other items
   62    (98 )    227    404
Goodwill impairment
   0      4,628    0      4,628
Intangible asset impairments
   21    509    295    1,278
Legal settlements and loss contingencies
   3    21    113    10
Other unallocated amounts
   134    55    266    148








Consolidated operating income (loss)
   623    (4,342 )    1,638    (3,978 )








Financial expenses, net
   241    117    805    565








Consolidated income (loss) before income taxes
   $ 382    $ (4,459 )    $ 833    $ (4,543 )


	Three months ended
	March 31,
	2022		2021
	(U.S. $ in millions)
North America profit	$	402	$	577
Europe profit		381		338
International Markets profit		179		122

Total reportable segments profit		962		1,036
Profit of other activities		52		41

Total segments profit		1,013		1,077
Amounts not allocated to segments:
Amortization		200		242

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)


Other assets impairments, restructuring and other items		128			137
Intangible asset s impairments		149			79
Legal settlements and loss contingencies		1,124			104
Other unallocated amounts		127			82

Consolidated operating income (loss)		(713	)		434

Financial expenses, net		258			290

Consolidated income (loss) before income taxes	$	(971	)	$	144

b. Segment revenues by major products and activities:

The following tables present revenues by major products and activities for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

North America

Three months ended

September 30,


2021

2020


(U.S. $ in millions)

Generic products
   $ 859    $ 928
AJOVY
   46    35
AUSTEDO
   201    168
BENDEKA
®
/TREANDA
®
   95    105
COPAXONE
   133    236
ProAir
®
*
   31    50
Anda
   363    341
Other
   146    155




Total
   $ 1,875    $ 2,017


North America	Three months ended March 31,
	2022		2021
	(U.S. $ in millions)
Generic products	$	899	$	1,053
AJOVY		36		31
AUSTEDO		154		146
BENDEKA ® /TREANDA ®		82		91
COPAXONE		86		164
Anda		342		289
Other		139		215

Total	$	1,737	$	1,989

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


Europe	Three months ended March 31,
	2022		2021
	(U.S. $ in millions)
Generic products	$	876	$	865
AJOVY		30		16
COPAXONE		72		100
Respiratory products		71		93
Other		107		140

Total	$	1,156	$	1,214

North America

Nine months ended
September 30,


2021

2020


(U.S. $ in millions)

Generic products
   $ 2,864    $ 2,804
AJOVY
   123    98
AUSTEDO
   520    451
BENDEKA/TREANDA
   292    313
COPAXONE
   448    671
ProAir*
   140    175
Anda
   968    1,141
Other
   451    493




Total
   $ 5,807    $ 6,146

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

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Europe

Three months ended

September 30,


2021

2020



(U.S. $ in millions)

Generic products
   $ 895    $ 824
AJOVY
   23    8
COPAXONE
   95    101
Respiratory products
   85    77
Other
   122    106




Total
   $ 1,220    $ 1,116


International markets	Three months ended March 31,
	2022		2021
	(U.S. $ in millions)
Generic products	$	388	$	392
AJOVY		6		1
COPAXONE		10		12
Other		88		85

Total	$	492	$	490

Europe

Nine months ended
September 30,


2021

2020



(U.S. $ in millions)

Generic products
   $ 2,637    $ 2,593
AJOVY
   58    17
COPAXONE
   296    294
Respiratory products
   263    263
Other
   364    352




Total
   $ 3,618    $ 3,520

International markets

Three months ended

September 30,


2021

2020



(U.S. $ in millions)

Generic products
   $ 412    $ 429
AJOV
Y

39

16

COPAXONE
   10    14
Other
   69    71




Total
   $ 530    $ 529

International markets

Nine months ended
September 30,


2021

2020



(U.S. $ in millions)

Generic products
   $ 1,211    $ 1,304
AJOV
Y

46

17

COPAXONE
   29    38
Other
   219    224




Total
   $ 1,505    $ 1,582

~~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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 are classified in the tables below in one of the three categories of fair value levels:

September 30, 2021


Level 1

Level 2

Level 3

Total



(U.S. $ in millions)

Cash and cash equivalents:

Money markets
   $ 325    $ —      $ —      $ 325
Cash, deposits and other
   1,720    —      —      1,720
Investment in securities:

Equity securities
   18    —      —      18
Other, mainly debt securities
   5    —      1    6
Derivatives:

Asset derivatives—options and forward contracts
   —      45    —      45
Liability derivatives—options and forward contracts
   —      (23 )    —      (23 )
Contingent consideration**
   —      —      (187 )    (187 )








Total
   $ 2,068    $ 22    $ (186 )    $ 1,904


	March 31, 2022
	Level 1		Level 2			Level 3			Total
	(U.S. $ in millions)
Cash and cash equivalents:
Money markets	$	276	$	—		$	—		$	276
Cash, deposits and other		1,899		—			—			1,899
Investment in securities:
Equity securities		16		—			—			16
Other		6		—			1			7
Restricted cash		75		—			—			75
Derivatives:
Asset derivatives—options and forward contracts		—		56			—			56
Liability derivatives:
Options and forward contracts		—		(31	)		—			(31	)
Bifurcated embedded derivatives		—		—			§			0
Contingent consideration*		—		—			(197	)		(197	)

Total	$	2,272	$	25		$	(196	)	$	2,101

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


	December 31, 2021
	Level 1		Level 2			Level 3			Total
	(U.S. $ in millions)
Cash and cash equivalents:

Money markets	$	220	$	—		$	—		$	220
Cash, deposits and other		1,945		—			—			1,945
Investment in securities:
Equity securities		18		—			—			18
Other		6		—			1			7
Restricted cash		33		—			—			33
Derivatives:
Asset derivatives—options and forward contracts		—		30			—			30
Liability derivatives:
Options and forward contracts		—		(23	)		—			(23	)
Bifurcated embedded derivatives		—		—			§			0
Contingent consideration*		—		—			(176	)		(176	)

Total	$	2,222	$	7		$	(175	)	$	2,054

*§

During the first quarter of 2021, Teva’s shares in American Well Corporation (“American Well”) moved from a Level 2 measurement to a Level 1 measurement within the fair value hierarchy, since they

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

~~no longer subject to a sale restriction. As of September 30, 2021, Teva sold all of its holdings in American Well.~~

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

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Teva determined the fair value of the 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 90% to~~of 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 7.3% to ~~7.8%~~10.7%. The weighted average discount rate, calculated based on the relative fair value of Teva’s contingent consideration liabilities, was ~~7.5%~~7.7%. The contingent consideration is evaluated quarterly, or more frequently, if circumstances dictate. Changes in the fair value of contingent consideration are recorded in 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 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:

Nine months
ended September
30, 2021

Nine months
ended
September 30,
2020



(U.S. $ in millions)

Fair value at the beginning of the period
   $ (258 )    (448 )
Transfer into
Level 3-
equity securities

—

179

Revaluation of equity securities

—

118

Redemption of debt securities
   (9 )    —
Revaluation of debt securities
   —      (3 )
Adjustments to provisions for contingent consideration:

Actavis Generics transaction
   21    161
Eagle transaction
   (14 )    (65 )
Settlement of contingent consideration:

Eagle transaction
   74    85




Fair value at the end of the period
   $ (186 )    $ 27


	Three months ended March 31, 2022			Three months ended March 31, 2021
	(U.S. $ in millions)
Fair value at the beginning of the period	$	(175	)		(258	)
Redemption of debt securities		0			(9	)
Bifurcated embedded derivatives		§			0
Adjustments to provisions for contingent consideration:
Actavis Generics transaction		(31	)		(3	)
Eagle transaction		(2	)		0
Settlement of contingent consideration:
Eagle transaction		23			25
Additional contingent consideration resulting from Novetide acquisition*		(11	)		0

Fair value at the end of the period	$	(196	)	$	(245	)

§	Represents an amount less than $0.5 million.

In January 2022, Teva acquired 100% ownership of Novetide Ltd. (“Novetide”), which was previously accounted for as “investment in associated companies”. This transaction was accounted for as a business combination. Total consideration for the transaction included cash and certain contingent royalty payments through 2034. As part of the transaction, Teva recognized a gain under “Share in (profits) losses of associated companies, net”, reflecting the difference between the book value of its investment in Novetide and its fair value as of the date Teva completed its acquisition.

Table of Contents

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

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):

Estimated fair value*


September 30,

December 31,


2021

2020



(U.S. $ in millions)

Senior notes included under senior notes and loans
   $ 21,018    $ 22,684
Senior notes and convertible senior debentures included under short-term debt
   2,413    3,207




Total
   $ 23,431    $ 25,891


	Estimated fair value*
	March 31,		December 31,
	2022		2021
	(U.S. $ in millions)
Senior notes and sustainability-linked senior notes included under senior notes and loans	$	19,858	$	21,477
Senior notes and convertible senior debentures included under short-term debt		2,067		1,426

Total	$	21,925	$	22,903

*	The fair value was estimated based on quoted market prices.

4741

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.

During the ~~third~~first quarter of ~~2021,~~2022, we have not experienced material delays in ~~development,~~the production and distribution of ~~medicines or disruptions~~medicines. The

COVID-19

pandemic has had an effect on our suppliers, which led to minimal delays in our ~~supply chains. The~~materials supply. However, the supply chain supporting our key products – specialty, generics and API – remains largely uninterrupted, with adequate product inventory across our network and redundancy plans in place to address potential shortfalls, if any. ~~All our~~Our facilities that research, manufacture, order, pack, distribute and provide critical customer and patient services remain largely uninterrupted as well, and are currently functioning to meet demand for essential medicines for patients throughout the world.

~~We did not have and 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, during~~During the ~~third~~first quarter of ~~2021,~~2022, we 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.~~

The long-term effects of the pandemic 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. In the first quarter of 2020, we experienced increasing demand for certain medicines, as would be expected during a global crisis of this nature. We saw a compensating effect with lower demand for certain medicines during the second quarter of 2020 and continuing slightly lower demand due to less physician and hospital activity in certain regions and for certain medicines in the second half of 2020. During the first nine months of 2021, the

~~COVID-19~~

~~pandemic has continued to have an impact on markets and on customer stocking and purchasing patterns.~~ 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 variable demand in future periods. While

COVID-19

continues to impact sales in certain markets and for certain products, we do not currently anticipate a material ~~negative~~ impact on our ~~2021~~2022 financial results due to the ongoing global pandemic.

~~Table of Contents~~

Highlights

Significant highlights in the ~~third~~first quarter of ~~2021~~2022 included:

Revenues in the ~~third~~first quarter of ~~2021~~2022 were ~~$3,887~~$3,661 million, a decrease of 2%8%, or 3%5% in local currency terms, compared to the ~~third~~first quarter of ~~2020.~~2021. This decrease was mainly due to lower revenues in our North America segment ~~mainly due~~primarily related to ~~COPAXONE~~generic products and ~~generic products,~~COPAXONE, partially offset by higher revenues from ~~generic~~Anda and ~~OTC~~generic products in our Europe ~~segment, AJOVY and AUSTEDO. Revenues continued to be affected by the ongoing impact of the~~

~~COVID-19~~segment.

~~pandemic on markets and on customer stocking and purchasing patterns.~~

Table of Contents

Our North America segment generated revenues of ~~$1,875~~$1,737 million and profit of ~~$458~~$402 million in the ~~third~~first quarter of 2022. Revenues decreased by 13% compared to the first quarter of 2021. ~~Revenues~~Profit decreased by 7%30% compared to the ~~third~~first quarter of 2020, mainly due to a decrease in revenues from COPAXONE and generic products. Our North America segment has experienced some reductions in volume due to less physician and hospital activity during the

~~COVID-19~~2021.

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

~~COVID-19~~

and its symptoms. In addition, the ability to promote certain specialty products has been impacted by less physician visits by patients and less physician interactions by our sales personnel. Profit decreased by 18% compared to the third quarter of 2020, mainly due to lower gross profit.

Our Europe segment generated revenues of ~~$1,220~~$1,156 million and profit of ~~$394~~$381 million in the ~~third~~first quarter of 2022. Revenues decreased by 5% compared to the first quarter of 2021. ~~Revenues increased by 9%, or 6% in~~In local currency terms, revenues increased by 3%. Profit increased by 13% compared to the ~~third~~first quarter of ~~2020. This increase was mainly due to the impact the~~

~~COVID-19~~2021.

~~pandemic had on markets and on customer stocking and purchasing patterns. Profit increased by 26%, mainly due to higher revenues.~~

Our International Markets segment generated revenues of ~~$530~~$492 million and profit of ~~$152~~$179 million in the ~~third~~first quarter of ~~2021.~~2022. Revenues were flat in U.S. ~~dollar terms,~~dollars, but increased by 1%8% in local currency terms, compared to the ~~third~~first quarter of 2020, mainly due to higher revenues in most markets and a milestone payment of $35 million from Otsuka related to the launch of AJOVY in Japan, partially offset by lower revenues in Japan resulting from the divestment of the majority of the generic and operational assets of our business venture in Japan, as well as regulatory price reductions and generic competition to

~~off-patented~~

~~products. Revenues continued to be affected by the ongoing impact of the~~

~~COVID-19~~

~~pandemic on markets and on customer stocking and purchasing patterns.~~2021. Profit increased by ~~22%, mainly due~~47% compared to ~~higher gross profit.~~the first quarter of 2021.

Our revenues from other activities in the first quarter of 2022 were $275 million, a decrease of 5% compared to the first quarter of 2021. In local currency terms, revenues were flat compared to the first quarter of 2021.

Impairments of identifiable intangible assets were ~~$21~~$149 million in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~$509~~$79 million in the ~~third~~first quarter of ~~2020.~~2021. See note 5 to our consolidated financial statements.

~~No goodwill impairment charges were~~We recorded ~~in the third quarter~~expenses of ~~2021, compared to a goodwill impairment charge of $4,628~~$128 million ~~in the third quarter of 2020.~~

~~We recorded~~for other asset impairments, restructuring and other items in the first quarter of 2022, compared to expenses of ~~$62~~$137 million in the ~~third~~first quarter of ~~2021, compared to income of $98 million in the third quarter of 2020.~~2021. See note 12 to our consolidated financial statements.

Legal settlements and loss contingencies expenses were $3$1,124 million in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~$21~~$104 million in the ~~third~~first quarter of ~~2020.~~2021. See note 9 to our consolidated financial statements.

Operating ~~income~~loss was ~~$623~~$713 million in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~a loss~~an operating income of ~~$4,342~~$434 million in the ~~third~~first quarter of ~~2020. The operating loss in the third quarter of 2020 was mainly due to a goodwill impairment charge and higher intangible asset impairment charges.~~2021.

Financial expenses were ~~$241~~$258 million in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~$117~~$290 million in the ~~third~~first quarter of 2020. Financial expenses in the third quarter of 2021 were mainly comprised of interest expenses of $232 million. Financial expenses in the third quarter of 2020 were mainly comprised of interest expenses of $241 million, partially offset by gains on revaluations of marketable securities of $124 million.2021.

In the ~~third~~first quarter of 2022, we recognized a tax expense of $2 million, on

pre-tax

loss of $971 million. In the first quarter of 2021, we recognized a tax expense of ~~$76~~$62 million, on

pre-tax

income of ~~$382~~$144 million. ~~In the third quarter of 2020, we recognized a tax expense of $16 million, on~~

~~pre-tax~~

~~loss of $4,459 million. Our tax rate for the third quarter of 2021 was mainly affected by amortization and interest expense disallowance.~~See note 11 to our consolidated financial statements.

~~Exchange rate movements during the third quarter~~As of ~~2021, including hedging effects, positively impacted revenues by $42 million and operating income by $22~~March 31, 2022, our debt was $22,917 million, compared to ~~the third quarter of 2020.~~

~~Table of Contents~~

~~As of September 30, 2021, our debt was $23,746 million, compared to $25,132~~$23,043 million as of ~~June 30,~~December 31, 2021. This decrease was mainly due to ~~repayment of our $1,475 million 2.2% senior notes at maturity and~~ exchange rate ~~fluctuations, partially offset by $300 million borrowed under our revolving credit facility.~~fluctuations.

Cash flow ~~generated from~~used in operating activities during the ~~third~~first quarter of ~~2021~~2022 was ~~$529~~$49 million, compared to ~~$307~~$405 million in the ~~third~~first quarter of ~~2020.~~2021. The ~~increase~~lower cash flow used in operating activities in the ~~third~~first quarter of ~~2021~~2022 was mainly due to ~~favorable collection~~changes in working capital items resulting from a decrease in accounts receivables net of ~~payments from customers~~SR&A in ~~North America.~~connection with the decrease in revenues.

During the ~~third~~first quarter of ~~2021,~~2022, we generated free cash flow of ~~$795~~$117 million, which we define as ~~comprising $529~~comprising: $49 million in cash flow ~~generated from~~used in operating activities, ~~$397~~$305 million in beneficial interest collected in exchange for securitized accounts receivables and ~~$15~~$25 million in proceeds from divestitures of businesses and other assets, partially offset by ~~$146~~$157 million in cash used for capital ~~investment.~~investment and $7 million in cash used for acquisition of businesses, net of cash acquired. During the ~~third~~first quarter of ~~2020,~~2021, we generated free cash flow of $506 million, comprising $307 million in cash flow generated from operating activities, $333 million in beneficial interest collected in exchange for securitized accounts receivables and $9 million in proceeds from sale of property, plant and equipment and intangible assets, partially offset by $143 million in cash used for capital investment. The increase in the third quarter of 2021 resulted mainly from higher cash flow from operating activities.$59 million.

Table of Contents

Results of Operations

Comparison of Three Months Ended ~~September 30, 2021~~March 31, 2022 to Three Months Ended ~~September 30, 2020~~March 31, 2021

Segment Information

North America Segment

The following table presents revenues, expenses and profit for our North America segment for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three months ended September 30,										Three months ended March 31,
	2021					2020					2022					2021
	(U.S. $ in millions / % of Segment Revenues)										(U.S. $ in millions / % of Segment Revenues)
Revenues	$	1,875		100	%	$	2,017		100	%	$	1,737		100	%	$	1,989		100	%
Gross profit		967		51.6	%		1,056		52.4	%		890		51.2	%		1,074		54.0	%
R&D expenses		146		7.8	%		155		7.7	%		143		8.2	%		160		8.0	%
S&M expenses		250		13.3	%		250		12.4	%		245		14.1	%		229		11.5	%
G&A expenses		121		6.4	%		97		4.8	%		112		6.4	%		111		5.6	%
Other income		(7	)	§			(5	)	§			(11	)	(0.7	%)		(3	)	§

Segment profit*	$	458		24.4	%	$	560		27.7	%	$	402		23.1	%	$	577		29.0	%

*	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 ~~third~~first quarter of ~~2021~~2022 were ~~$1,875~~$1,737 million, a decrease of ~~$142~~$251 million, or 7%13%, compared to the ~~third~~first quarter of ~~2020,~~2021, mainly due to a decrease in revenues from generic products and COPAXONE, ~~and generic products. Our North America segment has~~partially offset by higher revenues from Anda.

~~Table of Contents~~

~~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~~

~~and its symptoms. In addition, the ability to promote certain specialty products has been impacted by less physician visits by patients and less physician interactions by our sales personnel.~~

Revenues by Major Products and Activities

The following table presents revenues for our North America segment by major products and activities for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three months ended September 30,				Percentage Change			Three months ended March 31,				Percentage Change
	2021		2020		2020-2021			2022		2021		2022-2021
	(U.S. $ in millions)							(U.S. $ in millions)
Generic products	$	859	$	928		(7	%)	$	899	$	1,053		(15	%)
AJOVY		46		35		31	%		36		31		16	%
AUSTEDO		201		168		19	%		154		146		6	%
BENDEKA/TREANDA		95		105		(9	%)		82		91		(10	%)
COPAXONE		133		236		(44	%)		86		164		(48	%)
ProAir*		31		50		(37	%)
Anda		363		341		7	%		342		289		18	%
Other		146		155		(5	%)		139		215		(35	%)

Total	$	1,875	$	2,017		(7	%)	$	1,737	$	1,989		(13	%)

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

Generic products

revenues in our North America segment (including biosimilars) in the ~~third~~first quarter of ~~2021~~2022 were ~~$859~~$899 million, a decrease of 7%15% compared to the ~~third~~first quarter of ~~2020,~~2021, mainly due to increased competition on key products and lower ~~volumes.~~volumes, partially offset by higher revenues from lenalidomide capsules (the generic version of Revlimid

) and Truxima

Among the most significant generic products we sold in North America in the ~~third~~first quarter of ~~2021~~2022 were Truxima

(the biosimilar to Rituxan

), lenalidomide capsules (the generic version of Revlimid

), epinephrine injectable solution (the generic equivalent of EpiPen

and EpiPen Jr.

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

), and albuterol sulfate inhalation aerosol (our ProAir

authorized generic) ~~and lidocaine transdermal patch (the generic equivalent~~.

Table of ~~Lidoderm Patch~~Contents

In the ~~third~~first quarter of ~~2021,~~2022, our total prescriptions were approximately ~~305~~302 million (based on trailing twelve months), representing 8.2% of total U.S. generic prescriptions according to IQVIA data.

On March 7, 2022 we announced the launch of the first generic version of Revlimid

(lenalidomide capsules), in 5mg, 10mg, 15mg, and 25mg strengths, in the United States. These lenalidomide capsules are a prescription medicine used in adults for the treatment of (i) multiple myeloma in combination with the medicine dexamethasone, (ii) certain myelodysplastic syndromes, and (iii) mantle cell lymphoma following specific prior treatment.

AJOVY

revenues in our North America segment in the ~~third~~first quarter of ~~2021~~2022 increased by ~~31%~~16% to ~~$46~~$36 million, compared to the ~~third~~first quarter of ~~2020,~~2021, mainly due to growth in volume. In the ~~third~~first quarter of ~~2021,~~2022, AJOVY’s exit market share in the United Stated in terms of total number of prescriptions was ~~21.4%~~23.9% compared to ~~18.5%~~20.7% in the ~~third~~first quarter of ~~2020.~~2021.

AJOVY is indicated for the preventive treatment of migraine in adults. AJOVY was launched in the U.S. in 2018, and was approved in Canada in April 2020. Our auto-injector device for AJOVY became commercially available in the U.S. in April 2020 and in Canada in April 2021. AJOVY is the only anti-CGRP product indicated for quarterly treatment and in January 2021 we launched a new product offering, providing a quarterly dose.

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, 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 have also been issued in the United States and will expire between 2035 and 2039. Such patents are also pending in other countries. AJOVY will also be protected by regulatory exclusivity for 12 years from marketing approval in the United States and 10 years from marketing approval in Europe. We ~~have~~ filed a lawsuit in the U.S. District Court for the

~~Table of Contents~~

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 then submitted ~~IPR (inter~~inter partes ~~review)~~review (“IPR”) petitions to the Patent Trial and Appeal Board (“PTAB”), 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~~PTAB issued decisions on the first six IPRs, finding the six composition of matter patents invalid as being ~~obvious and we have appealed these decisions.~~obvious. On March 31, 2020, the ~~Patent Trial and Appeal Board (“PTAB”)~~PTAB issued a decision upholding the three method of treatment ~~patents and Lilly appealed~~patents. On August 16, 2021, the ~~decisions on these three patents. The~~ Court of Appeals for the Federal Circuit ~~heard oral argument for the IPR appeals on June 7, 2021 and on August 16, 2021~~ affirmed all of the PTAB’s decisions. The litigation is proceeding ~~with~~as to the three method of treatment patents and trial is expected in ~~front of a jury will take place in the second quarter of~~October 2022. We also filed another suit against Lilly on June 8, 2021, asserting two patents ~~which issued that same day and relate~~recently granted to Teva, related to the treatment of refractory migraine. ~~The case has been assigned to the same judge in the U.S. District Court for the District of Massachusetts.~~ Lilly responded to the complaint with a motion to dismiss, which ~~we are opposing.~~Teva opposed. On March 15, 2022, the U.S. District Court for the District of Massachusetts denied Lilly’s motion to dismiss and on March 23, 2022, Lilly submitted IPR petitions challenging the patentability of the two refractory migraine patents. On April 11, 2022, Lilly submitted another IPR petition challenging the patentability of a patent related to the two refractory migraine patents. In addition, in 2018 we entered into separate agreements with Alder Biopharmaceuticals, Inc. and Lilly, resolving the European Patent Office oppositions that they filed against our AJOVY patents. The settlement agreement with Lilly also resolved Lilly’s action to revoke the patent protecting AJOVY in the United Kingdom.

AUSTEDO

revenues in our North America segment in the ~~third~~first quarter of ~~2021~~2022 increased by ~~19%~~6%, to ~~$201~~$154 million, compared to ~~$168~~$146 million in the ~~third~~first quarter of ~~2020,~~2021, mainly due to growth in volume.

AUSTEDO was launched in the U.S. in 2017. It is indicated for the treatment of chorea associated with Huntington disease and for the treatment of tardive dyskinesia in adults.

AUSTEDO is protected in the United States by ~~six~~seven Orange Book patents expiring between 2031 and ~~2036~~2038 and in Europe by two patents expiring in 2029. We received notice letters from two ANDA filers regarding the filing of their ANDAs with paragraph (IV) certifications for certain of the patents listed in the Orange Book for AUSTEDO. On July 1, 2021, we filed a complaint against Aurobindo, asserting ~~all~~ six of the Orange Book patents, and a separate complaint against Lupin, asserting four of the Orange Book patents. The suits were filed in the U.S. District Court for the District of New Jersey. The seventh patent was issued in November 2021, and listed in the Orange Book in December 2021. In addition, Apotex ~~has~~ filed a petition for ~~inter partes review~~IPR by the PTAB of the patent covering the deutetrabenazine compound that expires in 2031. On March 9, 2022, the U.S. Patent and Trademark Office denied Apotex’s petition and declined to institute a review of the deutetrabenazine patent. On April 29, 2022, we reached an agreement with Lupin to resolve the abovementioned dispute over Lupin’s ANDA for a generic deutetrabenazine product. Under the terms of the settlement agreement, the litigation between the parties in the U.S. District Court for the District of New Jersey will be ended, and Lupin will have a license to sell its generic product beginning April 2033, or earlier under certain circumstances. The litigation against Aurobindo remains pending.

BENDEKA

and

TREANDA

combined revenues in our North America segment in the ~~third~~first quarter of ~~2021~~2022 decreased by 9%10% to ~~$95~~$82 million, compared to the ~~third~~first quarter of ~~2020,~~2021, mainly due to the availability of alternative therapies and continued competition from Belrapzo

ready-to-dilute

bendamustine hydrochloride product from 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 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. In April 2019, we signed an amendment to the license agreement with Eagle extending the royalty term applicable to the United States to the full period for which we sell BENDEKA and increased the royalty rate. In consideration, Eagle agreed to assume a portion of BENDEKA-related patent litigation expenses.

There are 16 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 six ANDA filers for generic versions of BENDEKA was tried in the ~~United States~~U.S. District Court for the District of Delaware. On April 27, 2020, the ~~District Court~~district court upheld the validity of all of the asserted patents and found that all four ANDA filers infringe at least one of the patents. Three of the four ANDA filers appealed the district court decision. Teva settled with one of the three ANDA filers, ~~prior to oral argument in front of the Federal Circuit,~~ and on August 13, 2021, the Federal Circuit issued a Rule 36 affirmance of the district court ~~decision. A litigation~~decision with respect to the other two filers. On December 14, 2021, Apotex filed a Petition for a Writ of Certiorari with the U.S. Supreme Court, which was denied. Litigation against the fifth ANDA filer was dismissed after the withdrawal of its patent challenge, and the case against a sixth ANDA filer was also settled. Recent suits against two filers of 505(b)(2) NDAs referencing BENDEKA are also in the initial 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”)~~NDA referencing BENDEKA in the U.S. District Court for the District of Delaware. On December 16, 2019, the ~~Delaware District Court~~district court dismissed the case against Hospira on all but one of the asserted patents, which expires in 2031. ~~Trial against~~On April 18, 2022, Teva and Eagle settled this matter, allowing Hospira to launch its product on ~~that patent has been postponed and is scheduled to begin in April 2022.~~January 17, 2028 or earlier under certain circumstances.

In addition to the settlement with Eagle regarding its bendamustine 505(b)(2) NDA, between 2015 and 2020, we reached final settlements with 22 ANDA filers for generic versions of the lyophilized form of TREANDA and one 505(b)(2) NDA filer for a generic version of the liquid form of TREANDA, providing for the launch of generic versions of TREANDA prior to patent expiration.

~~Table of Contents~~

COPAXONE

revenues in our North America segment in the ~~third~~first quarter of ~~2021~~2022 decreased by ~~44%~~48% to ~~$133~~$86 million, compared to the ~~third~~first quarter of ~~2020,~~2021, mainly due to generic competition in the United ~~States.~~States and a decrease in glatiramer acetate market share due to availability of alternative therapies.

The market for MS treatments continues to develop, particularly with the approval of generic versions of COPAXONE. ~~Additionally, oral~~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 third quarter of 2021 were $31 million, a decrease of 37% compared to the third quarter of 2020, mainly due to generic competition. 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 authorized generic are included in “generic products” above. During the third quarter of 2021, the exit market share of our overall albuterol product, including our ProAir authorized generic was 38%, making it the second largest in the market, compared to 44% in the third quarter of 2020. Other generic versions of ProAir were launched in 2020.

Anda

revenues in our North America segment in the ~~third~~first quarter of ~~2021~~2022 increased by 7%18% to ~~$363~~$342 million, compared to ~~$341~~$289 million in the ~~third~~first quarter of ~~2020,~~2021, mainly due to higher ~~demand.~~demand for COVID-related products. 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 ~~third~~first quarter of ~~2021~~2022, we ~~had no launches~~launched the generic version of ~~generic versions of~~the following branded products in North ~~America.~~America:


Product Name	Brand Name	Launch Date	Total Annual U.S. Branded Sales (U.S. $ in millions (IQVIA)) *
Fluticasone Propionate and Salmeterol Inhalation Powder, USP	Advair Diskus ®	March	$	2,940
Lenalidomide Capsules, 5, 10, 15, & 25 mg	Revlimid ® capsules	March	$	2,143
Diclofenac Potassium Capsules	Zipsor ® Liquid Filled Capsules	March	$	20

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

Our generic products pipeline in the United States includes, as of ~~September 30, 2021, 201~~March 31, 2022, 189 product applications awaiting FDA approval, including 7267 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 ~~June 30,~~December 31, 2021 of approximately ~~$108~~$111 billion, according to IQVIA. Approximately ~~72%~~71% of pending applications include a paragraph IV patent challenge, and we believe we are first to file with respect to 7572 of these products, or ~~102~~100 products including final approvals where launch is pending a settlement agreement or court decision. Collectively, these first to file opportunities represent over ~~$79~~$81 billion in U.S. brand sales for the twelve months ended ~~June 30,~~December 31, 2021, 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.

In the ~~third~~first quarter of ~~2021,~~2022, we received tentative approvals for generic equivalents of the products listed in the table below, excluding overlapping applications. A “tentative approval” indicates that the FDA has substantially completed its review of an application and final approval is expected once the relevant patent expires, a court decision is reached, a

30-month

regulatory stay lapses or a

180-day

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

Generic Name

Brand Name

Total Annual U.S.

Branded Market

(U.S. $ in millions
(IQVIA))
*

Methylnaltrexone Bromide Subcutaneous Injection
   Relistor
®
$ 18
Tasimelteon Caps
   Hetlioz
®
$ 1


Generic Name	Brand Name	Total Annual U.S. Branded Sales (U.S. $ in millions (IQVIA)) *
Midostaurin Capsules, 25 mg	Rydapt ®	$	88
Riociguat Tablets	Adempas ®	$	12
Gefitinib Tablets, 250 mg	Iressa ®	$	6

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

Table of Contents

For information regarding our specialty and biosimilar products pipeline, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.

North America Gross Profit

Gross profit from our North America segment in the first quarter of 2022 was $890 million, a decrease of 17%, compared to $1,074 million in the first quarter of 2021. This decrease was mainly due to lower gross profit from generic products and lower gross profit from COPAXONE.

Gross profit margin for our North America segment in the first quarter of 2022 decreased to 51.2%, compared to 54.0% in the first quarter of 2021. This decrease was mainly due to a change in the mix of generic products and COPAXONE.

North America R&D Expenses

R&D expenses relating to our North America segment in the first quarter of 2022 were $143 million, a decrease of 11%, compared to $160 million in the first quarter of 2021.

For a description of our R&D expenses in the first quarter of 2022, 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 2022 were $245 million, an increase of 7%, compared to $229 million in the first quarter of 2021. This increase was mainly due to direct to consumer promotional expenses related to AUSTEDO.

North America G&A Expenses

G&A expenses relating to our North America segment in the first quarter of 2022 were $112 million, flat compared to the first quarter of 2021.

North America Profit

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

Profit from our North America segment in the first quarter of 2022 was $402 million, a decrease of 30% compared to $577 million in the first quarter of 2021, mainly due to lower revenues, as discussed above.

Europe Segment

The following table presents revenues, expenses and profit for our Europe segment for the three months ended March 31, 2022 and 2021:


	Three months ended March 31,
	2022					2021
	(U.S. $ in millions / % of Segment Revenues)
Revenues	$	1,156		100	%	$	1,214		100	%
Gross profit		694		60.0	%		688		56.6	%
R&D expenses		58		5.0	%		66		5.4	%
S&M expenses		196		17.0	%		214		17.7	%
G&A expenses		59		5.1	%		70		5.8	%
Other income	§		§			§		§

Segment profit*	$	381		32.9	%	$	338		27.8	%

* Segment profit does not include amortization and certain other items. § Represents an amount less than $0.5 million or 0.5%, as applicable.

Table of Contents

Europe Revenues

Our Europe segment includes the European Union, the United Kingdom and certain other European countries. Revenues from our Europe segment in the first quarter of 2022 were $1,156 million, a decrease of 5%, or $58 million, compared to the first quarter of 2021. In local currency terms, revenues increased by 3%.

In the first quarter of 2021, our lower revenues were impacted by the implications of the

COVID-19

pandemic. In the first quarter of 2022, our higher revenues were attributed to higher demand for generic and OTC products resulting mainly from the removal of restrictions related to doctor and hospital visits by patients that were previously implemented in response to the

COVID-19

pandemic, as well as higher sales of cough and cold products.

In the first quarter of 2022, revenues were negatively impacted by exchange rate fluctuations of $67 million, net of hedging effects.

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, 2022 and 2021:


	Three months ended March 31,				Percentage Change
	2022		2021		2022-2021
	(U.S. $ in millions)
Generic products	$	876	$	865		1	%
AJOVY		30		16		94	%
COPAXONE		72		100		(29	%)
Respiratory products		71		93		(24	%)
Other		107		140		(24	%)

Total	$	1,156	$	1,214		(5	%)

Generic products

revenues in our Europe segment in the first quarter of 2022, including OTC products, increased by 1% to $876 million, compared to the first quarter of 2021. In local currency terms, revenues increased by 8%, mainly due to higher demand for generic and OTC products, resulting mainly from the removal of restrictions related to doctor and hospital visits by patients that were previously implemented in response to the

COVID-19

pandemic, as well as higher sales of cough and cold products.

AJOVY

revenues in our Europe segment in the first quarter of 2022 increased to $30 million, compared to $16 million in the first quarter of 2021, mainly due to growth in European countries in which AJOVY had previously been launched, as well as launches and reimbursements in additional European countries.

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 2022 decreased by 29% to $72 million, compared to the first quarter of 2021. In local currency terms, revenues decreased by 24%, 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 were found invalid at the European Patent Office in December 2021. 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 2022 decreased by 24% to $71 million compared to the first quarter of 2021. In local currency terms, revenues decreased by 19%, mainly due to price reductions.

Product Launches and Pipeline

As of March 31, 2022, our generic products pipeline in Europe included 185 generic approvals relating to 33 compounds in 75 formulations, with no European Medicines Agency (“EMA”) approvals received. In addition, approximately 1,241 marketing authorization applications are pending approval in 37 European countries, relating to 132 compounds in 266 formulations. Two applications are pending with the EMA with one application relating to three strengths in 30 markets.

Table of Contents

For information regarding our specialty and biosimilar products pipeline, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.

Europe Gross Profit

Gross profit from our Europe segment in the first quarter of 2022 was $694 million, an increase of 1% compared to $688 million in the first quarter of 2021.

Gross profit margin for our Europe segment in the first quarter of 2022 increased to 60.0%, compared to 56.6% in the first quarter of 2021. This increase was mainly due to lower cost of goods sold, mainly driven by our network consolidation activities, as well as a decrease in write-offs.

Europe R&D Expenses

R&D expenses relating to our Europe segment in the first quarter of 2022 were $58 million, a decrease of 12% compared to $66 million in the first quarter of 2021.

For a description of our R&D expenses in the first quarter of 2022, 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 2022 were $196 million, a decrease of 8% compared to $214 million in the first quarter of 2021. This decrease was mainly due to exchange rate fluctuations, as well as lower marketing costs in the first quarter of 2022.

Europe G&A Expenses

G&A expenses relating to our Europe segment in the first quarter of 2022 were $59 million, a decrease of 15% compared to $70 million in the first quarter of 2021.

Europe Profit

Profit from 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 2022 was $381 million, an increase of 13%, compared to $338 million in the first quarter of 2021. This increase was mainly due to higher gross profit and reduced expenses, as discussed above.

International Markets Segment

The following table presents revenues, expenses and profit for our International Markets segment for the three months ended March 31, 2022 and 2021:


	Three months ended March 31,
	2022					2021
	(U.S. $ in millions / % of Segment Revenues)
Revenues	$	492		100	%	$	490			100	%
Gross profit		286		58.1	%		260			53.0	%
R&D expenses		20		4.0	%		18			3.6	%
S&M expenses		97		19.8	%		96			19.6	%
G&A expenses		29		5.9	%		26			5.3	%
Other income		(40	)	(8.1	%)		(2	)	§

Segment profit*	$	179		36.4	%	$	122			24.9	%

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

§	Represents an amount less than 0.5%.

Table of Contents

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.

In February 2022, Russia launched an invasion of Ukraine. As of the date of this Quarterly Report on Form

10-Q,

sustained conflict and disruption in the region is ongoing. Russia and Ukraine markets are included in our International Markets segment results. We have no manufacturing or R&D facilities in these markets. During the first quarter of 2022, the impact of this conflict on our International Markets segment results of operations and financial condition was immaterial. Consistent with our foreign exchange risk management hedging programs, we enter into hedges to hedge our exposure to currency exchange rate fluctuations with respect to our balance sheet assets, revenues and expenses. In the first quarter of 2022, prior to escalation of the conflict, we took measures to reduce our operational cash balances in Russia and Ukraine and we are monitoring the solvency of our customers in Russia and Ukraine and taking measures, where practicable, to mitigate our exposure to risks related to the conflict in the region. However, the duration, severity and global implications (including potential inflation and devaluation consequences) of the conflict cannot be predicted at this time and could have an effect on our business, including on our exchange rate exposure, supply chain, operational costs and commercial presence in these markets.

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 2022 were $492 million, flat compared to the first quarter of 2021. In local currency terms, revenues increased by 8% compared to the first quarter of 2021, mainly due to higher revenues in certain markets, partially offset by lower revenues in Japan resulting from the divestment mentioned above, as well as regulatory price reductions and generic competition to

off-patented

products. Revenues continued to be affected by the ongoing impact of the

COVID-19

pandemic on markets and on customer stocking and purchasing patterns.

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, 2022 and 2021:


	Three months ended March 31,				Percentage Change
	2022		2021		2022-2021
	(U.S. $ in millions)
Generic products	$	388	$	392		(1	%)
AJOVY		6		1		315	%
COPAXONE		10		12		(11	%)
Other		88		85		4	%

Total	$	492	$	490		§

§	Represents an amount less than 0.5%.

Generic products

revenues in our International Markets segment in the first quarter of 2022, which include OTC products, decreased by 1% in U.S. dollars. In local currency terms, revenues increased by 9% to $388 million, compared to the first quarter of 2021. This increase was mainly due to higher revenues in certain markets, 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 in Japan.

Table of Contents

AJOVY

was launched in certain markets in our International Markets segment, including in Japan in August 2021. We are moving forward with plans to launch AJOVY in other markets. AJOVY revenues in our International Markets segment in the first quarter of 2022 were $6 million, compared to $1 million in the first quarter of 2021.

COPAXONE

revenues in our International Markets segment in the first quarter of 2022 were $10 million compared to $12 million in the first quarter of 2021.

AUSTEDO

was launched in early 2021 in China for the treatment of chorea associated with Huntington’s disease and for the treatment of tardive dyskinesia, and was also launched in Israel during 2021. In October 2021, we received marketing approval for both indications in Brazil. We continue with additional submissions in various other markets.

International Markets Gross Profit

Gross profit from our International Markets segment in the first quarter of 2022 was $286 million, an increase of 10% compared to $260 million in the first quarter of 2021.

Gross profit margin for our International Markets segment in the first quarter of 2022 increased to 58.1%, compared to 53.0% in the first quarter of 2021. This increase was mainly due to a change in product portfolio mix, price increases largely as a result of rising costs due to inflationary pressure and a positive impact from hedging activity, partially offset by regulatory price reductions and generic competition to

off-patented

products in Japan.

International Markets R&D Expenses

R&D expenses relating to our International Markets segment in the first quarter of 2022 were $20 million, an increase of 12% compared to $18 million in the first quarter of 2021.

For a description of our R&D expenses in the first quarter of 2022, 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 2022 were $97 million, an increase of 1% compared to $96 million the first quarter of 2021.

International Markets G&A Expenses

G&A expenses relating to our International Markets segment in the first quarter of 2022 were $29 million, an increase of 13% compared to $26 million in the first quarter of 2021.

International Markets Other Income

Other income relating to our International Markets segment in the first quarter of 2022 was $40 million, compared to $2 million in the first quarter of 2021. Other income in the first quarter of 2022 was mainly the result of settlement proceeds.

International Markets Profit

Profit from 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 2022 was $179 million, an increase of 47%, compared to $122 million in the first quarter of 2021. This increase was mainly due to higher gross profit as well as other income, as mentioned 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 2022 were $275 million, a decrease of 5% compared to the first quarter of 2021. In local currency terms, revenues were flat.

Table of Contents

API sales to third parties in the first quarter of 2022 were $181 million, an increase of 2% in both U.S. dollars and local currency terms compared to the first quarter of 2021.

Teva Consolidated Results

Revenues

Revenues in the first quarter of 2022 were $3,661 million, a decrease of 8%, or 5% in local currency terms, compared to the first quarter of 2021. This decrease was mainly due to lower revenues in our North America segment primarily related to generic products and COPAXONE, partially offset by higher revenues from Anda and generic products in our Europe segment. See “—North America Revenues,” “—Europe Revenues,” “—International Markets Revenues” and “—Other Activities” above.

Exchange rate movements during the first quarter of 2022, including hedging effects, negatively impacted revenues by $133 million, compared to the first quarter of 2021. See note 8d to our consolidated financial statements.

Gross Profit

Gross profit in the first quarter of 2022 was $1,740 million, a decrease of 7% compared to the first quarter of 2021. This decrease was mainly a result of the factors discussed above under “—North America Segment—Gross Profit,” “—Europe Segment—Gross Profit” and “—International Markets Segment—Gross Profit.”

Gross profit margin was 47.5% in the first quarter of 2022, compared to 47.2% in the first quarter of 2021. The increase in gross profit margin was mainly driven by our network consolidation activities, as well as a change in product portfolio mix in our International Markets segment, partially offset by the unfavorable mix of generic products in our North America segment and lower revenues from COPAXONE.

Research and Development (R&D) Expenses

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

Our R&D activities for 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) post-approval studies for marketed products; and (v) indirect expenses, such as costs of internal administration, infrastructure and personnel.

R&D expenses in the first quarter of 2022 were $225 million, a decrease of 11% compared to the first quarter of 2021.

In the first quarter of 2022, our R&D expenses related primarily to specialty product candidates in neuroscience (such as migraine, movement disorders/ neurodegeneration and neuropsychiatry, including post-approval commitments), immunology (such as respiratory medicines) and selected other areas, as well as generic products including biosimilars.

Our lower R&D expenses in the first quarter of 2022, compared to the first quarter of 2021, were mainly due to a decrease in neuroscience (in the pain and migraine and headache therapeutic areas), as well as various generics projects.

R&D expenses as a percentage of revenues were 6.2% in the first quarter of 2022, compared to 6.4% in the first quarter of 2021.

Table of Contents

~~We have additional biosimilar products in development in various stages of clinical trials and regulatory review worldwide, including phase 3 clinical trials for biosimilars to Prolia~~

®Specialty Products Pipeline

~~(denosumab), Stelara~~

~~(ustekinumab) and Xolair~~

~~(omalizumab) and regulatory review for biosimilars to Humira~~

~~(adalimumab) and Lucentis~~

~~(ranibizumab).~~

Below is a description of key products in our specialty pipeline as of ~~September 30, 2021:~~April 20, 2022:


	Phase 2	Phase 3	Pre-Submission	Under Regulatory Review

Novel Biologics	~~Fremanezumab~~ ~~Fibromyalgia~~

	TEV-48574 ~~Respiratory~~Inflammatory Bowel Disease	Fasinumab Osteoarthritic Pain (March 2016) (1)

	~~TEV-53275~~ ~~Respiratory~~

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

Digital Respiratory			Digihaler ® ® (budesonide and formoterol fumarate dihydrate) (EU)

			QVAR ® ~~Digihaler~~ ® ~~(beclomethasone dipropionate HFA)~~ Digihaler ® (beclomethasone dipropionate HFA)(U.S.)

(1)

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.

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~~discussed with the FDA in ~~2021.~~2022.

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)

Developed under a license agreement with MedinCell. In August 2021, the FDA accepted the NDA for risperidone LAI, based on phase 3 data from two pivotal studies. In April 2022, the FDA issued a Complete Response Letter (“CRL”) regarding the NDA for risperidone LAI. We are reviewing our next steps based on the CRL and will work closely with the FDA to address their recommendations.

Discontinued Project

During the first quarter of 2022, development of

54TEV-53275

was discontinued.

Biosimilar Products Pipeline

We have additional biosimilar products in development internally and with our partners that are in various stages of clinical trials and regulatory review worldwide, including phase 3 clinical trials for biosimilars to Prolia

(denosumab), Stelara

(ustekinumab), Xolair

(omalizumab) and Eylea

(afilbercept), a biosimilar to Lucentis

~~Table of Contents~~®

~~North America Gross Profit~~

~~Gross profit from our North America segment~~(ranibizumab) that is currently under regulatory review in ~~the third quarter of 2021 was $967 million,~~Europe and is in

pre-submission

in Canada, as well as a ~~decrease of 8%, compared~~biosimilar to ~~$1,056 million in the third quarter of 2020. This decrease was mainly due to lower gross profit from COPAXONE.~~Humira

Gross profit margin for our North America segment in the third quarter of 2021 decreased to 51.6%, compared to 52.4% in the third quarter of 2020. This decrease was mainly due to a change in the mix of products.

~~North America R&D Expenses~~

~~R&D expenses relating to our North America segment in the third quarter of 2021 were $146 million, a decrease of 6%, compared to $155 million in the third quarter of 2020.~~

~~For a description of our R&D expenses in the third quarter of 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 third quarter of 2021 were $250 million, flat compared to the third quarter of 2020.~~

~~North America G&A Expenses~~

~~G&A expenses relating to our North America segment in the third quarter of 2021 were $121 million, an increase of 25%, compared to $97 million in the third quarter of 2020.~~

~~North America Profit~~

~~Profit from our North America segment in the third quarter of 2021 was $458 million, a decrease of 18% compared to $560 million in the third quarter of 2020, mainly due to lower gross profit.~~

~~Europe Segment~~

~~The following table presents revenues, expenses and profit for our Europe segment for the three months ended September 30, 2021 and 2020:~~

Three months ended September 30,


2021

2020


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

Revenues
   $ 1,220    100 % $ 1,116    100 %
Gross profit
   714    58.6 % 637    57.1 %
R&D expenses
   55    4.5 % 60    5.4 %
S&M expenses
   204    16.7 % 200    17.9 %
G&A expenses
   64    5.2 % 66    5.9 %
Other income
   (2 )    § (1 )    §






Segment profit*
   $ 394    32.3 % $ 312    28.0 %

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

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

(adalimumab) that is currently under U.S. regulatory review.

5554

Table of Contents

~~Europe Revenues~~

Our Europe segment includes the European Union and certain other European countries. Revenues from our Europe segment in the third quarter of 2021 were $1,220 million, an increase of 9% or $104 million, compared to the third quarter of 2020. In local currency terms, revenues increased by 6%, mainly due to the impact the

~~COVID-19~~

~~pandemic had on markets and on customer stocking and purchasing patterns.~~

~~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 September 30, 2021 and 2020:~~

Three months ended

September 30,

Percentage
Change


2021

2020

2020-2021


(U.S. $ in millions)

Generic products
   $ 895    $ 824    9 %
AJOVY
   23    8    180 %
COPAXONE
   95    101    (6 %)
Respiratory products
   85    77    10 %
Other
   122    106    15 %





Total
   $ 1,220    $ 1,116    9 %

~~Generic products~~

revenues in our Europe segment in the third quarter of 2021, including OTC products, increased by 9% to $895 million, compared to the third quarter of 2020. In local currency terms, revenues increased by 7%, mainly due to the impact the

~~COVID-19~~

~~pandemic had on markets and on customer stocking and purchasing patterns.~~

~~AJOVY~~

revenues in our Europe segment in the third quarter of 2021 increased to $23 million, compared to $8 million in the third quarter of 2020, mainly due to launches and reimbursements in additional European countries as well as growth in existing countries.

By the end of the third quarter of 2021, we launched AJOVY in most European countries and we are moving forward with plans to launch in other European countries. For information about AJOVY patent protection, see “—North America Revenues—Revenues by Major Product” above.

~~COPAXONE~~

revenues in our Europe segment in the third quarter of 2021 decreased by 6% to $95 million, compared to the third quarter of 2020. In local currency terms, revenues decreased by 7%, 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 third quarter of 2021 increased by 10% to $85 million compared to the third quarter of 2020. In local currency terms, revenues increased by 7%, mainly due to the impact the

~~COVID-19~~

~~pandemic had on markets and on customer stocking and purchasing patterns.~~

~~Product Launches and Pipeline~~

As of September 30, 2021, our generic products pipeline in Europe included 436 generic approvals relating to 63 compounds in 132 formulations, with no European Medicines Agency (“EMA”) approvals received. In addition, approximately 1,295 marketing authorization applications are pending approval in 37 European countries, relating to 130 compounds in 266 formulations. One application is pending with the EMA (for two strengths in 30 countries).

~~For information regarding our specialty pipeline, see “—North America Segment —Product Launches and Pipeline” above.~~

~~Europe Gross Profit~~

~~Gross profit from our Europe segment in the third quarter of 2021 was $714 million, an increase of 12% compared to $637 million in the third quarter of 2020, mainly due to the impact the~~

~~COVID-19~~

~~pandemic had on markets and on customer stocking and purchasing patterns.~~

~~Table of Contents~~

~~Gross profit margin for our Europe segment in the third quarter of 2021 increased to 58.6%, compared to 57.1% in the third quarter of 2020.~~

~~Europe R&D Expenses~~

~~R&D expenses relating to our Europe segment in the third quarter of 2021 were $55 million, a decrease of 8% compared to $60 million in the third quarter of 2020.~~

~~For a description of our R&D expenses in the third quarter of 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 third quarter of 2021 were $204 million, an increase of 2% compared to $200 million in the third quarter of 2020. This increase was mainly due to exchange rate fluctuations, as well as lower expenses in the third quarter of 2020 attributed to restrictions related to the

~~COVID-19~~

~~pandemic.~~

~~Europe G&A Expenses~~

~~G&A expenses relating to our Europe segment in the third quarter of 2021 were $64 million, a decrease of 4% compared to $66 million in the third quarter of 2020.~~

~~Europe Profit~~

Profit from our Europe segment in the third quarter of 2021 was $394 million, an increase of 26%, compared to $312 million in the third quarter of 2020. This increase was mainly due to higher revenues, as discussed above.

~~International Markets Segment~~

~~The following table presents revenues, expenses and profit for our International Markets segment for the three months ended September 30, 2021 and 2020:~~

Three months ended September 30,


2021

2020


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

Revenues
   $ 530    100%    $ 529    100%
Gross profit
   296    55.9%    275    52.0%
R&D expenses
   16    3.0%    17    3.2%
S&M expenses
   102    19.2%    101    19.1%
G&A expenses
   29    5.4%    33    6.3%
Other income
   (2 )    §    (1 )    §








Segment profit*
   $ 152    28.8%    $ 125    23.6%

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

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

~~International Markets Revenues~~

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

~~Table of Contents~~

Revenues from our International Markets segment in the third quarter of 2021 were $530 million, flat compared to the third quarter of 2020. In local currency terms, revenues increased by 1% compared to the third quarter of 2020, mainly due to higher revenues in most markets and a milestone payment of $35 million from Otsuka related to the launch of AJOVY in Japan, partially offset by lower revenues in Japan resulting from the divestment mentioned above, as well as regulatory price reductions and generic competition to

~~off-patented~~

~~products. Revenues continued to be affected by the ongoing impact of the~~

~~COVID-19~~

~~pandemic on markets and on customer stocking and purchasing patterns.~~

~~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 September 30, 2021 and 2020:~~

Three months ended

September 30,

Percentage
Change


2021

2020

2020-2021


(U.S. $ in millions)

Generic products
   $ 412    $ 429    (4 %)
AJOVY
   39    16    145 %
COPAXONE
   10    14    (30 %)
Other
   69    71    (3%)
Total
   $ 530    $ 529    §

~~Generic products~~

revenues in our International Markets segment in the third quarter of 2021, which include OTC products, decreased by 4% in U.S. dollar or 3% in local currency terms, to $412 million, compared to the third quarter of 2020. This decrease was mainly due to lower sales in Japan resulting from the divestment mentioned above, as well as regulatory price reductions and generic competition to

~~off-patented~~

~~products in Japan, partially offset by higher revenues in most other markets.~~

~~AJOVY~~

was launched in certain markets in our International Markets segment, including in Japan during the third quarter of 2021. We are moving forward with plans to launch AJOVY in other markets. AJOVY revenues in our International Markets segment in the third quarter of 2021 were $39 million, compared to $16 million in the third quarter of 2020. Revenues in the third quarter of 2021 included a milestone payment of $35 million received from Otsuka related to the launch of AJOVY in Japan. Revenues in the third quarter of 2020 included a milestone payment of $15 million received from Otsuka.

~~COPAXONE~~

~~revenues in our International Markets segment in the third quarter of 2021 were $10 million compared to $14 million in the third quarter of 2020.~~

~~AUSTEDO~~

was 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 markets.

~~International Markets Gross Profit~~

~~Gross profit from our International Markets segment in the third quarter of 2021 was $296 million, an increase of 8% compared to $275 million in the third quarter of 2020.~~

Gross profit margin for our International Markets segment in the third quarter of 2021 increased to 55.9%, compared to 52.0% in the third quarter of 2020. This increase was mainly due to the divestment in Japan mentioned above, the Otsuka milestone payment for AJOVY and a change in product portfolio mix, partially offset by regulatory price reductions and generic competition to

~~off-patented~~

~~products in Japan.~~

~~International Markets R&D Expenses~~

~~R&D expenses relating to our International Markets segment in the third quarter of 2021 were $16 million, a decrease of 8% compared to $17 million in the third quarter of 2020.~~

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

~~Table of Contents~~

~~International Markets S&M Expenses~~

~~S&M expenses relating to our International Markets segment in the third quarter of 2021 were $102 million, flat compared to the third quarter of 2020.~~

~~International Markets G&A Expenses~~

~~G&A expenses relating to our International Markets segment in the third quarter of 2021 were $29 million, a decrease of 14% compared to $33 million in the third quarter of 2020.~~

~~International Markets Profit~~

Profit from our International Markets segment in the third quarter of 2021 was $152 million, an increase of 22%, compared to $125 million in the third quarter of 2020. This increase was mainly due to higher gross profit.

~~Other Activities~~

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

~~out-licensing~~

Our revenues from other activities in the third quarter of 2021 were $262 million, a decrease of 17% compared to the third quarter of 2020 in both U.S. dollar and local currency terms, mainly due to a decrease in volumes from API and Medis resulting from the

~~COVID-19~~

~~pandemic, as well as lower revenues from contract manufacturing services.~~

~~API sales to third parties in the third quarter of 2021 were $161 million, a decrease of 8% in both U.S. dollar and local currency terms compared to the third quarter of 2020.~~

~~Teva Consolidated Results~~

~~Revenues~~

Revenues in the third quarter of 2021 were $3,887 million, a decrease of 2%, or 3% in local currency terms, compared to the third quarter of 2020. This decrease was mainly due to lower revenues in our North America segment, mainly due to COPAXONE and generic products, partially offset by higher revenues from generic and OTC products in our Europe segment, AJOVY and AUSTEDO. Revenues continued to be affected by the ongoing impact of the

~~COVID-19~~

pandemic on markets and on customer stocking and purchasing patterns. See “—North America Revenues,” “—Europe Revenues,” “—International Markets Revenues” and “—Other Activities” above.

Exchange rate movements during the third quarter of 2021, including hedging effects, positively impacted revenues by $42 million, compared to the third quarter of 2020. See note 8c to our consolidated financial statements.

~~Gross Profit~~

Gross profit in the third quarter of 2021 was $1,794 million, a decrease of 3% compared to the third quarter of 2020. This decrease was mainly a result of the factors discussed above under “—North America Gross Profit,” “—Europe Gross Profit” and “—International Markets Gross Profit.”

~~Gross profit margin was 46.2% in the third quarter of 2021, compared to 46.6% in the third quarter of 2020.~~

The decrease in gross profit margin was mainly driven by a change in the mix of products sold, resulting from lower sales of specialty products that have higher profitability, mainly COPAXONE, and lower profitability from Anda, partially offset by improved profitability from generic products, mainly in our North America segment.

~~Table of Contents~~

~~Research and Development (R&D) Expenses~~

~~R&D expenses in the third quarter of 2021 were $222 million, a decrease of 14% compared to the third quarter of 2020.~~

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

Our lower R&D expenses in the third quarter of 2021, compared to the third quarter of 2020, were mainly due to a decrease in the pain and neuropsychiatry therapeutic areas as well as various generics projects.

~~R&D expenses as a percentage of revenues were 5.7% in the third quarter of 2021, compared to 6.5% in the third quarter of 2020.~~

Selling and Marketing (S&M) Expenses

S&M expenses in the ~~third~~first quarter of ~~2021~~2022 were ~~$597~~$584 million, ~~a decrease of 1%~~flat compared to the ~~third~~first quarter of ~~2020.~~2021. This was mainly a result of the factors discussed above under “—North America Segment—S&M Expenses” and “—Europe Segment—S&M Expenses”.

S&M expenses as a percentage of revenues were ~~15.4%~~15.9% in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~15.2%~~14.7% in the ~~third~~first quarter of ~~2020.~~2021.

General and Administrative (G&A) Expenses

G&A expenses in the ~~third~~first quarter of ~~2021~~2022 were ~~$291~~$296 million, an increase of 4%2% compared to the ~~third~~first quarter of ~~2020.~~2021.

G&A expenses as a percentage of revenues were ~~7.5%~~8.1% in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~7.0%~~7.3% in the ~~third~~first quarter of ~~2020.~~2021.

Intangible Asset Impairments

We recorded expenses of ~~$21~~$149 million for identifiable intangible asset impairments in the ~~third~~first quarter of ~~2021,~~2022, compared to expenses of ~~$509~~$79 million in the ~~third~~first quarter of ~~2020.~~2021. See note 5 to our consolidated financial statements.

Goodwill Impairment

~~In the third quarter of 2021, there~~No goodwill impairments were ~~no goodwill impairment charges~~ recorded ~~compared to a goodwill impairment charge of $4,628 million~~ in the ~~third quarter~~first quarters of ~~2020, which was related to our North America reporting unit.~~2022 and 2021.

Other Asset Impairments, Restructuring and Other Items

We recorded expenses of ~~$62~~$128 million for other asset impairments, restructuring and other items in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~income~~expenses of ~~$98~~$137 million in the ~~third~~first quarter of ~~2020.~~2021. For further details, as well as a description of significant regulatory and other events, see note 12 to our consolidated financial statements.

Legal Settlements and Loss Contingencies

In the ~~third~~first quarter of ~~2021,~~2022, we recorded ~~an expense~~expenses of $3$1,124 million in legal settlements and loss contingencies, compared to an expense of ~~$21~~$104 million in the ~~third~~first quarter of ~~2020.~~2021. See note 9 to our consolidated financial statements.

~~Table of Contents~~

Other Income

Other income in the ~~third~~first quarter of ~~2021~~2022 was ~~$25~~$52 million, compared to $8$5 million in the ~~third~~first quarter of ~~2020.~~2021. Other income in the first quarter of 2022 was mainly the result of settlement proceeds in our International Markets segment.

Operating Income (Loss)

Operating loss as a percentage of revenues was 19.5% in the first quarter of 2022, compared to operating income as a percentage of revenues ~~was 16.0%~~of 10.9% in the ~~third~~first quarter of ~~2021, compared to operating loss as a percentage of revenues of 109.1% in the third quarter of 2020. The operating~~2021. Operating loss in the ~~third~~first quarter of ~~2020~~2022 was mainly ~~due to a goodwill impairment charge~~affected by legal settlements and ~~higher intangible asset impairment charges.~~loss contingencies.

Financial Expenses, Net

Financial expenses were ~~$241~~$258 million in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~$117~~$290 million in the ~~third~~first quarter of ~~2020.~~2021. Financial expenses in the ~~third~~first quarter of 2022 were mainly comprised of interest expenses of $238 million. Financial expenses in the first quarter of 2021 were mainly comprised of interest expenses of ~~$232 million. Financial expenses in the third quarter of 2020 were mainly comprised of interest expenses of $241~~$239 million ~~partially offset by gains~~and loss on revaluations of marketable securities of ~~$124~~$64 million.

Table of Contents

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 ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


.	Three months ended
						Three months ended
	September 30,					March 31,
	2021		2020			2022			2021
	(U.S. $ in millions)					(U.S. $ in millions)
North America profit	$	458	$	560		$	402		$	577
Europe profit		394		312			381			338
International Markets profit		152		125			179			122

Total reportable segments profit		1,004		997			962			1,036
Profit of other activities		38		28			52			41

Total segments profit		1,042		1,025			1,013			1,077
Amounts not allocated to segments:
Amortization		199		251			200			242
Other assets impairments, restructuring and other items		62		(98	)		128			137
Goodwill impairment		—		4,628
Intangible asset impairments		21		509
Intangible assets impairments							149			79
Legal settlements and loss contingencies		3		21			1,124			104
Other unallocated amounts		134		55			127			82

Consolidated operating income (loss)		623		(4,342	)		(713	)		434

Financial expenses, net		241		117			258			290

Consolidated income (loss) before income taxes	$	382	$	(4,459	)	$	(971	)	$	144

Tax Rate

In the ~~third~~first quarter of 2022, we recognized a tax expense of $2 million, on

pre-tax

loss of $971 million. In the first quarter of 2021, we recognized a tax expense of ~~$76~~$62 million, on

pre-tax

income of ~~$382 million. In the third quarter of 2020, we recognized a tax expense of $16 million, on~~

~~pre-tax~~

~~loss of $4,459~~$144 million. Our tax rate for the ~~third~~first quarter of ~~2021~~2022 was mainly affected by ~~amortization~~legal settlement charges, adjustments to valuation allowances on deferred tax assets and interest expense ~~disallowance.~~

~~Table of Contents~~

~~The statutory Israeli corporate tax rate is 23% in 2021. Our tax rate differs from the Israeli statutory tax rate, mainly due~~disallowances. See note 11 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~~

~~non-recurring~~

~~items.~~our consolidated financial statements.

Share In (Profits) Losses of Associated Companies, Net

Share in ~~losses~~profits of associated companies, net in the ~~third~~first quarter of ~~2021~~2022 was $5$21 million, compared to share in profits of $3 million in the first quarter of 2021. The share in profits of associated companies, net ~~of $136 million~~ in the ~~third~~first quarter of ~~2020. The profit in the third quarter of 2020~~2022 was mainly ~~due~~related to ~~a gain of $134 million reflecting~~ the difference between the book value of our investment in ~~American Well Corporation~~Novetide and its fair value as of the date itwe completed its ~~initial public offering~~acquisition in ~~September 2020 (see note 16 to our consolidated financial statements).~~January 2022.

Net Income (Loss) Attributable to Teva

Net ~~income~~loss was ~~$292~~$955 million in the ~~third~~first quarter of ~~2021,~~2022, compared to net ~~loss~~income of ~~$4,349~~$77 million in the ~~third~~first quarter of ~~2020. The loss in the third quarter of 2020 was mainly due to a goodwill impairment charge and intangible asset impairment charges.~~2021.

Diluted Shares Outstanding and Earnings (Loss) per Share

The weighted average diluted shares outstanding used for the fully diluted share ~~calculation~~calculations for both the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~1,109~~1,107 million ~~and 1,096 million shares, respectively.~~shares.

~~In computing~~

Diluted loss per share was $0.86 in the first quarter of 2022, compared to diluted earnings per share ~~for the three months ended September 30, 2021 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. 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 per share for the three months ended September 30, 2020, no account was taken of the potential dilution that could occur upon the exercise of 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.~~

~~Diluted earnings per share were $0.26~~$0.07 in the ~~third~~first quarter of ~~2021, compared~~2021. See note 13 to ~~diluted loss per share of $3.97 in the third quarter of 2020.~~our consolidated financial statements.

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 ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the fully diluted share count for purposes of calculating our market capitalization was approximately ~~1,128~~1,145 million and ~~1,118~~1,130 million, respectively.

Table of Contents

Impact of Currency Fluctuations on Results of Operations

In the ~~third~~first quarter of ~~2021,~~2022, approximately 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,~~Canadian dollar, Russian ruble, new Israeli shekel ~~Canadian dollar~~ and ~~Russian ruble)~~Japanese yen) impact our results.

During the ~~third~~first quarter of ~~2021,~~2022, 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): Turkish lira by 47%, Argentinian peso by ~~25%~~17%, ~~Turkish lira~~Russian ruble by ~~16%~~14%, Chilean peso by 11%, Swedish krona by 10% and Japanese yen by ~~4% and Polish zloty by 2%~~9%. The following main currencies relevant to our operations increased in value against the U.S. dollar: ~~Mexican peso~~Brazilian real by ~~10%, British pound by 7%, Canadian dollar by 6%~~4% and Israeli shekel by 6%2%.

As a result, exchange rate movements during the ~~third~~first quarter of ~~2021,~~2022, including hedging effects, ~~positively~~negatively impacted overall revenues by ~~$42~~$133 million and operating income by ~~$22~~$56 million, compared to the ~~third~~first quarter of ~~2020.~~2021.

In the ~~third~~first quarter of 2022, a positive hedging impact of $19 million was recognized under revenues, and a minimal positive impact was recognized under cost of sales. In the first quarter of 2021, a positive hedging impact of ~~$16~~$28 million was recognized under revenues and a minimal negative impact was recognized under cost of sales. ~~In the third quarter of 2020, a negative hedging impact of $4 million was recognized under revenues and a negative impact of $2 million was recognized under cost of sales.~~

~~Table of Contents~~

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 8c8d 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.

~~Comparison of Nine Months Ended September 30, 2021 to Nine Months Ended September 30, 2020~~

Unless specified otherwise, the factors used to explain quarterly changes on a year-over-year basis are also relevant for the comparison of the results for the nine months ended September 30, 2021 and 2020. Where there are different factors affecting the nine months comparison, we have described them below.

~~Segment Information~~

~~North America Segment~~

~~The following table presents revenues, expenses and profit for our North America segment for the nine months ended September 30, 2021 and 2020:~~

Nine months ended September 30,


2021

2020


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

Revenues
   $ 5,807    100 % $ 6,146    100 %
Gross profit
   3,081    53.1 % 3,208    52.2 %
R&D expenses
   467    8.1 % 455    7.4 %
S&M expenses
   734    12.6 % 755    12.3 %
G&A expenses
   338    5.8 % 325    5.3 %
Other income
   (14 )    § (9 )    §






Segment profit*
   $ 1,556    26.8 % $ 1,682    27.4 %

*	~~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 nine months of 2021 were $5,807 million, a decrease of 5.5% compared to $6,146 million in the first nine months of 2020.

~~Revenues by Major Products and Activities~~

~~The following table presents revenues for our North America segment by major products and activities for the nine months ended September 30, 2021 and 2020:~~

Nine months

ended

September 30,

Percentage

Change


2021

2020

2020-2021


(U.S. $ in millions)

Generic products
   $ 2,864    $ 2,804    2 %
AJOVY
   123    98    25 %
AUSTEDO
   520    451    15 %
BENDEKA/TREANDA
   292    313    (7 %)
COPAXONE
   448    671    (33 %)
ProAir*
   140    175    (20 %)
Anda
   968    1,141    (15 %)
Other
   451    493    (8 %)





Total
   $ 5,807    $ 6,146    (6 %)

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

~~Table of Contents~~

~~North America Gross Profit~~

~~Gross profit from our North America segment in the first nine months of 2021 was $3,081 million, a decrease of 4%, compared to $3,208 million in the first nine months of 2020.~~

Gross profit margin for our North America segment in the first nine months of 2021 increased to 53.1% compared to 52.2% in the first nine months of 2020. This increase was mainly due to a change in the mix of products.

~~North America R&D Expenses~~

~~R&D expenses relating to our North America segment in the first nine months of 2021 were $467 million, an increase of 3%, compared to $455 million in the first nine months of 2020.~~

~~North America S&M Expenses~~

S&M expenses relating to our North America segment in the first nine months of 2021 were $734 million, a decrease of 2.8% compared to $755 million in the first nine months of 2020. This decrease was mainly due to 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 nine months of 2021 were $338 million, an increase of 4%, compared to $325 million in the first nine months of 2020.~~

~~North America Profit~~

~~Profit from our North America segment in the first nine months of 2021 was $1,556 million, a decrease of 8%, compared to $1,682 million in the first nine months of 2020.~~

~~Europe Segment~~

~~The following table presents revenues, expenses and profit for our Europe segment for the nine months ended September 30, 2021 and 2020:~~

Nine months ended September 30,


2021

2020


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

Revenues
   $ 3,618    100%    $3,520    100%
Gross profit
   2,063    57.0%    2,009    57.1%
R&D expenses
   184    5.1%    180    5.1%
S&M expenses
   628    17.3%    590    16.8%
G&A expenses
   180    5.0%    184    5.2%
Other (income) expense
   (3)    §    (3)    §








Segment profit*
   $ 1,074    29.7%    $1,058    30.1%

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

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

~~Table of Contents~~

~~Europe Revenues~~

Our Europe segment includes the European Union and certain other European countries. Revenues from our Europe segment in the first nine months of 2021 were $3,618 million, an increase of 3% or $98 million, compared to the first nine months of 2020. In local currency terms, revenues decreased by 3%, compared to the first nine months of 2020, mainly due to the impact the

~~COVID-19~~

~~pandemic had on markets and on customer stocking and purchasing patterns, as well as lower revenues from COPAXONE, partially offset by higher revenues from AJOVY.~~

~~Revenues by Major Products and Activities~~

~~The following table presents revenues for our Europe segment by major products and activities for the nine months ended September 30, 2021 and 2020:~~

Nine months ended
September 30,

Percentage
Change


2021

2020

2020-2021


(U.S. $ in millions)

Generic products
   $ 2,637    $ 2,593    2 %
AJOVY
   58    17    232 %
COPAXONE
   296    294    1 %
Respiratory products
   263    263    §
Other
   364    352    3 %





Total
   $ 3,618    $ 3,520    3 %

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

~~Europe Gross Profit~~

~~Gross profit from our Europe segment in the first nine months of 2021 was $2,063 million, an increase of 3% compared to $2,009 million in the first nine months of 2020.~~

~~Gross profit margin for our Europe segment in the first nine months of 2021 decreased to 57.0% compared to 57.1% in the first nine months of 2020, mainly due to a change in the mix of products.~~

~~Europe R&D Expenses~~

~~R&D expenses relating to our Europe segment in the first nine months of 2021 were $184 million, an increase of 2% compared to $180 million in the first nine months of 2020.~~

~~Europe S&M Expenses~~

~~S&M expenses relating to our Europe segment in the first nine months of 2021 were $628 million, an increase of 6% compared to $590 million in the first nine months of 2020.~~

~~Europe G&A Expenses~~

~~G&A expenses relating to our Europe segment in the first nine months of 2021 were $180 million, a decrease of 2% compared to $184 million in the first nine months of 2020.~~

~~Europe Profit~~

~~Profit from our Europe segment in the first nine months of 2021 was $1,074 million, an increase of 2% compared to the first nine months of 2020.~~

~~International Markets Segment~~

~~The following table presents revenues, expenses and profit for our International Markets segment for the nine months ended September 30, 2021 and 2020:~~

2021

2020


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

Revenues
   $ 1,505    100 % $ 1,582    100 %
Gross profit
   826    54.9 % 828    52.3 %
R&D expenses
   51    3.4 % 51    3.3 %
S&M expenses
   303    20.1 % 312    19.7 %
G&A expenses
   79    5.3 % 96    6.1 %
Other (income) expense
   (5 )    § (10 )    (0.6 %)






Segment profit*
   $ 398    26.4% $ 378    23.9%

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

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

~~Table of Contents~~

~~International Markets Revenues~~

Our International Markets segment includes all countries other than those in our North America and Europe segments. Revenues from our International Markets segment in the first nine months of 2021 were $1,505 million, a decrease of $77 million, or 5%, compared to the first nine months of 2020. In local currency terms, revenues decreased by 3%. Revenues in the first nine months of 2021, included $4 million from a positive hedging impact, compared to $25 million from a positive hedging impact in the first nine months of 2020, which are included in “Other” in the table below. See note 8c to our consolidated financial statements.

~~Revenues by Major Products and Activities~~

~~The following table presents revenues for our International Markets segment by major products and activities for the nine months ended September 30, 2021 and 2020:~~

Nine months ended
September 30,

Percentage

Change


2021

2020

2020-2021


(U.S. $ in millions)

Generic products
   $ 1,211    $ 1,304    (7 %)
AJOVY
   46    17    170 %
COPAXONE
   29    38    (23 %)
Other
   219    224    (2 %)






Total
   $ 1,505    $ 1,582    (5 %)

~~International Markets Gross Profit~~

~~Gross profit from our International Markets segment in the first nine months of 2021 was $826 million, compared to $828 million in the first nine months of 2020.~~

~~Gross profit margin for our International Markets segment in the first nine months of 2021 increased to 54.9%, compared to 52.3% in the first nine months of 2020.~~

~~International Markets R&D Expenses~~

~~R&D expenses relating to our International Markets segment in the first nine months of 2021 were $51 million, flat compared to the first nine months of 2020.~~

~~International Markets S&M Expenses~~

~~S&M expenses relating to our International Markets segment in the first nine months of 2021 were $303 million, a decrease of 3% compared to $312 million in the first nine months of 2020.~~

~~International Markets G&A Expenses~~

~~G&A expenses relating to our International Markets segment in the first nine months of 2021 were $79 million, a decrease of 17% compared to $96 million in the first nine months of 2020.~~

~~International Markets Profit~~

~~Profit from our International Markets segment in the first nine months of 2021 was $398 million, an increase of 5%, compared to $378 million in the first nine months of 2020.~~

~~Table of Contents~~

~~Other Activities~~

~~Our revenues from other activities in the first nine months of 2021 decreased by 11% to $849 million, compared to the first nine months of 2020. In local currency terms, revenues decreased by 13%.~~

~~API sales to third parties in the first nine months of 2021 were $537 million, a decrease of 5% in both U.S. dollar and local currency terms, compared to the first nine months of 2020.~~

~~Teva Consolidated Results~~

~~Revenues~~

~~Revenues in the first nine months of 2021 were $11,778 million, a decrease of 4%, or 6% in local currency terms, compared to the first nine months of 2020.~~

Exchange rate movements during the first nine months of 2021, including hedging effects, positively impacted revenues by $251 million, compared to the first nine months of 2020. See note 8c to our consolidated financial statements.

~~Gross Profit~~

~~Gross profit in the first nine months of 2021 was $5,544 million, a decrease of 2% compared to the first nine months of 2020.~~

Gross profit margin was 47.1% in the first nine months of 2021, compared to 46.5% in the first nine months of 2020. This increase was mainly driven by a change in the mix of products sold, resulting from improved profitability from generic products, mainly in our North America segment, partially offset by lower sales of COPAXONE and lower profitability from Anda.

~~Research and Development (R&D) Expenses~~

R&D expenses in the first nine months of 2021 were $723 million, an increase of 3% compared to the first nine months of 2020. Our higher R&D expenses in the first nine months of 2021, compared to the first nine months of 2020, were mainly due to an increase in respiratory and biosimilar projects as well as various generics projects, partially offset by lower expenses in the pain and neuropsychiatry therapeutic areas.

~~R&D expenses as a percentage of revenues were 6.1% in the first nine months of 2021, compared to 5.8% in the first nine months of 2020.~~

~~Selling and Marketing (S&M) Expenses~~

~~S&M expenses in the first nine months of 2021 were $1,798 million, a decrease of 1% compared to the first nine months of 2020.~~

~~S&M expenses as a percentage of revenues were 15.3% in the first nine months of 2021, compared to 14.9% in the first nine months of 2020.~~

~~General and Administrative (G&A) Expenses~~

~~G&A expenses in the first nine months of 2021 were $822 million, a decrease of 3% compared to the first nine months of 2020.~~

~~G&A expenses as a percentage of revenues were 7.0% in the first nine months of 2021, compared to 6.9% in the first nine months of 2020.~~

~~Intangible Asset Impairments~~

We recorded expenses of $295 million for identifiable intangible asset impairments, in the first nine months of 2021, compared to expenses of $1,278 million in the first nine months of 2020. See note 5 to our consolidated financial statements.

~~Table of Contents~~

~~Goodwill Impairment~~

No goodwill impairment charges were recorded in the first nine months of 2021, compared to a goodwill impairment charge of $4,628 million in the first nine months of 2020, which was related to our North America reporting unit.

~~Other Asset Impairments, Restructuring and Other Items~~

We recorded expenses of $227 million for other asset impairments, restructuring and other items in the first nine months of 2021, compared to expenses of $404 million in the first nine months of 2020. See note 12 to our consolidated financial statements.

~~Legal Settlements and Loss Contingencies~~

In the first nine months of 2021, we recorded expenses of $113 million in legal settlements and loss contingencies, compared to an expense of $10 million in the first nine months of 2020. See note 9 to our consolidated financial statements.

~~Other Income~~

Other income in the first nine months of 2021 was $73 million, compared to $30 million in the first nine months of 2020. The other income in the first nine months of 2021 was mainly due to capital gains related to the sale of certain OTC assets.

~~Operating Income (Loss)~~

~~Operating income was $1,638 million in the first nine months of 2021, compared to operating loss of $3,978 million in the first nine months of 2020.~~

~~Operating income as a percentage of revenues was 13.9% in the first nine months of 2021, compared to operating loss as a percentage of revenues of 32.6% in the first nine months of 2020.~~

~~Financial Expenses, Net~~

Financial expenses were $805 million in the first nine months of 2021, compared to $565 million in the first nine months of 2020. Financial expenses in the first nine months of 2021 were mainly comprised of interest expenses of $711 million and loss on revaluations of marketable securities of $104 million. Financial expenses in the first nine months of 2020 were mainly comprised of interest expenses of $722 million, partially offset by gains on revaluations of marketable securities of $118 million as well as a gain of $27 million resulting from our hedging and derivatives activities.

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 nine months ended September 30, 2021 and 2020:

Nine months

ended


September 30,


2021

2020


(U.S. $ in millions)

North America profit
   $ 1,556    $ 1,682
Europe profit
   1,074    1,058
International Markets profit
   398    378




Total reportable segments profit
   3,028    3,118
Profit of other activities
   125    130




Total segments profit
   3,153    3,248
Amounts not allocated to segments:

Amortization
   613    758
Other assets impairments, restructuring and other items
   227    404
Goodwill impairment
   —      4,628

~~Table of Contents~~

Intangible asset impairments
   295    1,278
Legal settlements and loss contingencies
   113    10
Other unallocated amounts
   266    148




Consolidated operating income (loss)
   1,638    (3,978 )




Financial expenses, net
   805    565




Consolidated income (loss) before income taxes
   $ 833    $ (4,543 )

~~Tax Rate~~

~~In the first nine months of 2021, we recognized a tax expense of $235 million, on~~

~~pre-tax~~

~~income of $833 million. In the first nine months of 2020, we recognized a tax benefit of $147 million, on~~

~~pre-tax~~

~~loss of $4,543 million. Our tax rate in the first nine months of 2021 was mainly affected by amortization, impairments, legal settlements and interest expense disallowance.~~

~~Share in (Profits) Losses of Associated Companies, Net~~

Share in profits of associated companies, net in the first nine months of 2021 was $9 million, compared to $135 million in the first nine months of 2020. The profit in the first nine months of 2020 was mainly due to a gain of $134 million reflecting the difference between the book value of our investment in American Well Corporation and its fair value as of the date it completed its initial public offering in September 2020 (see note 16 to our consolidated financial statements).

~~Net Income (Loss) Attributable to Teva~~

~~Net income was $576 million in the first nine months of 2021, compared to net loss of $4,140 million in the first nine months of 2020.~~

~~Diluted Shares Outstanding and Earnings (Loss) per Share~~

The weighted average diluted shares outstanding used for the fully diluted share calculation for the nine months ended September 30, 2021 and 2020 was 1,109 million shares and 1,095 million shares, respectively.

In computing diluted earnings per share for the nine months ended September 30, 2021, basic earnings per share were adjusted to take into account the potential dilution that could occur upon the exercise of options and

~~non-vested~~

~~In computing diluted loss per share for the nine months ended September 30, 2020, no account was taken of the potential dilution that could occur upon the exercise of 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.~~

~~Diluted earnings per share were $0.52 in the first nine months of 2021, compared to diluted loss per share of $3.78 in the first nine months of 2020.~~

~~Impact of Currency Fluctuations on Results of Operations~~

In the first nine months of 2021, approximately 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 and, accordingly, changes in the exchange rate between the U.S. dollar and local currencies in markets in which we operate (primarily the euro, British pound, Japanese yen, Israeli shekel, Canadian dollar and Russian ruble) impact our results.

During the first nine months of 2021, the following main currencies relevant to our operations decreased in value against the U.S. dollar: Argentinian peso by 28%, Turkish lira by 17%, Brazilian real by 6%, Russian ruble by 5% and Ukrainian hryvnia by 4% (all compared on a nine-month average basis). The following main currencies relevant to our operations increased in value against the U.S. dollar: Australian dollar by 12%, Swedish krona by 11%, Chilean peso by 9%, British pound by 9%, Canadian dollar by 8%, new Israeli shekel by 7%, Mexican peso by 7% and euro by 6%.

As a result, exchange rate movements during the first nine months of 2021 positively impacted overall revenues by $251 million and our operating income by $35 million, in comparison to the first nine months of 2020.

~~Table of Contents~~

In the first nine months of 2021, a positive hedging impact of $28 million was recognized under revenues, and a negative impact of $1 million was recognized under cost of sales. In the first nine months of 2020, a positive hedging impact of $37 million was recognized under revenues and a positive impact of $3 million was recognized under cost of sales.

Liquidity and Capital Resources

Total balance sheet assets were ~~$47,851~~$47,059 million as of ~~September 30, 2021,~~March 31, 2022, compared to ~~$49,195~~$47,666 million as of ~~June 30,~~December 31, 2021.

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 ~~$968~~$727 million as of ~~September 30, 2021,~~March 31, 2022, compared to ~~$1,196~~$787 million as of ~~June 30,~~December 31, 2021. This decrease was mainly due to aan update to the estimated settlement provision recorded in connection with the remaining opioid cases, offset by an increase in inventory levels and accounts receivables net of SR&A.

Employee-related obligations, as of March 31, 2022 were $481 million, compared to $563 million as of December 31, 2021. The decrease in ~~our accounts receivables (net~~the first quarter of ~~SR&A) balances as a result of favorable collection of~~2022 was mainly due to performance incentive payments ~~in North America.~~to employees for 2021.

Cash investment in property, plant and equipment in the ~~third~~first quarter of ~~2021~~2022 was ~~$146~~$157 million, compared to ~~$113~~$150 million in the ~~second~~first quarter of 2021. Depreciation in ~~both~~ the ~~third and second quarters~~first quarter of ~~2021~~2022 was ~~$132 million.~~$123 million, compared to $134 million in the first quarter of 2021.

Cash and cash equivalents and short-term and long-term investments as of ~~September 30, 2021~~March 31, 2022 were ~~$2,072~~$2,199 million, compared to ~~$2,479~~$2,191 million as of ~~June 30,~~December 31, 2021. The decrease in the third quarter of 2021 was mainly due to repayment of our $1,475 million 2.2% senior notes at maturity, partially offset by cash flow generated during the quarter and $300 million borrowed under our unsecured syndicated revolving credit facility.

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.

Table of Contents

Our principal sources of short-term liquidity are our cash on hand, existing cash investments, liquid securities and available credit facilities, primarily, as of March 31, 2022, our $2.3 billion unsecured syndicated revolving credit facility entered into in April 2019, which was replaced in April 2022 (“RCF”).

~~The RCF agreement provides for two separate tranches, a $1.15~~In April 2022, we entered into an unsecured syndicated sustainability-linked revolving credit facility of $1.8 billion ~~tranche A and a $1.15 billion tranche B. Tranche A has~~with 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.

The RCF can be used for general corporate purposes, including repaying existing debt. As of ~~September 30, 2021, $300 million was outstanding under the RCF. As~~March 31, 2022 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~~abovementioned circumstances, would result in an event of default in all borrowings under the RCF and, when greater than a specified threshold amount as set forth in each series of senior notes and sustainability-linked senior notes is outstanding, could lead to an event of default under our senior notes and sustainability-linked senior notes, due to cross acceleration provisions.

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.

~~Table of Contents~~

Debt Balance and Movements

As of ~~September 30, 2021,~~March 31, 2022, our debt was ~~$23,746~~$22,917 million, compared to ~~$25,132~~$23,043 million as of ~~June 30,~~December 31, 2021. This decrease was mainly due to ~~repayment of our $1,475 million 2.2% senior notes at maturity and~~ exchange rate ~~fluctuations, partially offset by $300 million borrowed under the RCF.~~

~~In July 2021, we repaid $1,475 million of our 2.2% senior notes at maturity.~~

During the third quarter of 2021, we borrowed $500 million under our RCF and repaid $200 million of such borrowings. As of September 30, 2021, $300 million was outstanding under the RCF. As of the date of this Quarterly Report on Form 10-Q, no amounts were outstanding under the RCF.fluctuations.

Our debt as of ~~September 30, 2021~~March 31, 2022 was effectively denominated in the following currencies: ~~63%~~61% in U.S. dollars, ~~34%~~36% in euros and 3% in Swiss francs.

The portion of total debt classified as short-term as of ~~September 30, 2021~~March 31, 2022 was ~~11%~~9%, compared to ~~14%~~6% as of ~~June 30,~~December 31, 2021.

Our financial leverage was 69% as of March 31, 2022, compared to 67% as of ~~September 30, 2021, compared to 69% as of June 30,~~December 31, 2021.

Our average debt maturity was approximately ~~5.4~~6.2 years as of ~~September 30, 2021,~~March 31, 2022, compared to ~~5.3~~6.4 years as of ~~June 30,~~December 31, 2021.

Total Equity

Total equity was ~~$11,451~~$10,260 million as of ~~September 30, 2021,~~March 31, 2022, compared to ~~$11,311~~$11,244 million as of ~~June 30,~~December 31, 2021. This ~~increase~~decrease was mainly due to a net ~~income~~loss of ~~$302~~$952 million ~~partially offset by~~and a negative impact of ~~$195~~$64 million from exchange rate fluctuations.

Exchange rate fluctuations affected our balance sheet, as approximately ~~56%~~55% of our net assets in the ~~third~~first quarter of ~~2021~~2022 (including both

non-monetary

and monetary assets) were in currencies other than the U.S. dollar. When compared to ~~June 30,~~December 31, 2021, changes in currency rates had a negative impact of ~~$195~~$64 million on our equity as of ~~September 30, 2021,~~March 31, 2022, mainly due to the changes in value against the U.S. dollar of: the Russian ruble by 12%, the Turkish lira by 11%, the Chilean peso by ~~11%~~7%, the Peruvian sol by 6%7%, the ~~Polish zloty~~Japanese yen by 5%6%, the Mexican peso by 3%, the ~~Canadian dollar~~British pound by 3%, the ~~euro~~Polish zloty by 3%, the ~~British pound by 3% and the~~ Croatian kuna by 3%2% and the euro by 1%. 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 and commercial relationship management activities, we may make decisions in our commercial and supply chain activities which may drive an acceleration of receivable payments from customers or deceleration of payments to vendors, having the effect of increasing or decreasing cash from operations in an individual period. Such decisions ~~had no material~~may have an impact on our

~~year-to-date~~

annual operating cash flow measurement, ~~but may impact~~as well as on our quarterly results.

~~quarter-to-quarter~~

~~results.~~

Table of Contents

During the ~~third~~first quarter of ~~2021,~~2022, we generated free cash flow of ~~$795~~$117 million, which we define as comprising ~~$529~~$49 million in cash flow ~~generated from~~used in operating activities, ~~$397~~$305 million in beneficial interest collected in exchange for securitized accounts receivables and ~~$15~~$25 million in proceeds from divestitures of businesses and other assets, partially offset by ~~$146~~$157 million in cash used for capital ~~investment.~~investment and $7 million in cash used for acquisition of businesses, net of cash acquired. During the ~~third~~first quarter of ~~2020,~~2021, we generated free cash flow of ~~$506~~$59 million, comprising ~~$307~~$405 million in cash flow generated from operating activities, ~~$333~~$476 million in beneficial interest collected in exchange for securitized accounts receivables and $9$138 million in proceeds from sale of property, plant and equipment and intangible assets, partially offset by ~~$143~~$150 million in cash used for capital investment. The increase in the ~~third~~first quarter of ~~2021~~2022 resulted mainly from ~~higher~~lower cash flow ~~from~~used in operating ~~activities.~~activities, partially offset by lower sales of assets.

Dividends

We have not paid dividends on our ordinary shares or ADSs since December 2017.

Commitments

In addition to financing obligations under short-term debt and long-term senior notes and loans, debentures and convertible debentures, our major contractual obligations and commercial commitments include leases, royalty payments, contingent payments pursuant to acquisition agreements and participation in joint ventures associated with R&D activities.

~~Table of Contents~~

In October 2021, weTeva announced a license agreement with ~~MODAG GmbH (“Modag”),~~Modag that will provide Teva an exclusive global license to develop, manufacture and commercialize Modag’s lead compound ~~anle138b~~

(TEV-56286)

and a related compound ~~(sery433)~~

(TEV-56287). ~~The agreement is subject to regulatory approval. Anle138b~~

TEV-56286

TEV-56286.

In the fourth quarter of 2021, Teva ~~will make~~made an upfront payment ~~subject~~of $10 million to ~~regulatory approval and~~Modag that was recorded as R&D expense. Modag may be eligible for future development milestone payments, totaling an aggregate amount of up to ~~$80~~$70 million, as well as future commercial milestones and ~~royalties~~

royalties.

In August 2020, weTeva entered into an agreement with biopharmaceutical company Alvotech for the exclusive commercialization in the U.S. of five biosimilar product candidates. The initial pipeline for this collaboration 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. WeTeva paid an upfront payment in the third quarter of 2020 and additional upfront and milestone payments in the second quarter of 2021 that were recorded as R&D expenses. Additional development and commercial milestone payments of up to ~~$450~~$455 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. In March 2021, Abbvie sued Alvotech for allegedly misappropriating confidential information relating to Humira

. In December 2021, Abbvie also filed a complaint with the ITC against both Alvotech and Teva seeking to prevent Teva and Alvotech from importing Alvotech’s proposed biosimilar to Humira

. Pursuant to that settlement, Alvotech and Teva may sell Alvotech’s proposed biosimilar to Humira

In September 2016, weTeva and Regeneron entered into a collaborative agreement ~~with Regeneron~~ to develop and commercialize Regeneron’s pain medication product, fasinumab. WeTeva and Regeneron share in the global commercial 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 billion. WeTeva 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

Table of Contents

payments of up to $2,230 million, as well as future royalties. ~~For information regarding~~Currently, all

non-essential

activities and related expenditures for fasinumab ~~see “—North America Segment —Product Launches and Pipeline” above.~~

~~In October 2016, we entered into a collaborative agreement~~have been put on hold. Next steps will be assessed together with ~~Celltrion to commercialize Truxima and Herzuma, two biosimilar products for~~Regeneron, with the ~~U.S. and Canadian markets. We paid Celltrion $160 million,~~intention of ~~which we received an aggregate credit of $60 million as of March 31, 2021. We share~~discussing data with the profit from the commercialization of these products with Celltrion. These two products, Truxima and 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. No additional milestone payments are expected.

FDA.

In November 2013, weTeva entered into an agreement with MedinCell for the development and commercialization of multiple long-acting injectable products. The lead product candidate selected was risperidone LAI

(TV-46000)

suspension for subcutaneous use for the treatment of schizophrenia. In August 2021, the FDA accepted the NDA for risperidone LAI, based on phase 3 data from two pivotal studies. ~~We lead~~Teva leads the clinical development and regulatory process and ~~are~~is responsible for commercialization of this product candidate. MedinCell may be eligible for development milestones, and future commercial milestones of up to $112 million in respect of risperidone LAI. WeTeva will also pay MedinCell royalties on net sales. In April 2022, the FDA issued a CRL regarding the NDA for risperidone LAI. Teva is reviewing its next steps based on the CRL and will work closely with the FDA to address their recommendations.

We are committed to ~~pay~~paying 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 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.

~~Table of Contents~~

~~2021~~2022 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, ~~2020.~~2021.

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

Table of Contents

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:

amortization of purchased intangible assets;

legal settlements and material litigation fees and/or loss contingencies, due to the difficulty in predicting their timing and scope;

impairments of long-lived assets, including intangibles, property, plant and equipment and goodwill;

restructuring expenses, including severance, retention costs, contract cancellation costs and certain accelerated depreciation expenses primarily related to the rationalization of our plants or to certain other strategic activities, such as the realignment of R&D focus or other similar activities;

acquisition- or divestment- related items, including changes in contingent consideration, integration costs, banker and other professional fees and inventory

~~step-up~~step-up;

~~and IPR&D acquired in development arrangements;~~

expenses related to our equity compensation;

significant

one-time

financing costs, amortization of issuance costs and terminated derivative instruments, and marketable securities investment valuation gains/losses;

unusual tax items;

other awards or settlement amounts, either paid or received;

~~Table of Contents~~

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.

Commencing the first quarter of 2022, we no longer exclude IPR&D acquired in development arrangements from our

non-GAAP

financial measures. In our comparable

non-GAAP

financial measures for the first quarter of 2021, we excluded $5 million IPR&D acquired in development arrangements. We are not recasting the non-GAAP presentation for the first quarter of 2021 since the adjustment is not significant. We are making this change to our presentation of non-GAAP financial measures to improve comparability of our non GAAP presentation to those of other companies in the pharmaceutical industry that are making a similar change to their presentations beginning in the first quarter of 2022.

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:

7461

Table of Contents

The following table presents the GAAP measures, related

non-GAAP

adjustments and the corresponding

non-GAAP

amounts for the applicable periods:


	Three Months Ended September 30, 2021																											Three Months Ended March 31, 2022
	U.S. $ and shares in millions (except per share amounts)																											U.S. $ and shares in millions (except per share amounts)
	GAAP			Excluded for non-GAAP measurement																					Non-GAAP			GAAP			Excluded for non-GAAP measurement																			Non-GAAP
				Amortization of purchased intangible assets		Legal settlements and loss contingencies		Impairment of long lived assets		Restructuring costs		Costs related to regulatory actions taken in facilities		Equity compensation		Contingent consideration		Other non-GAAP items*			Other items										Amortization of purchased intangible assets		Legal settlements and loss contingencies		Impairment of long lived assets		Restructuring costs		Costs related to regulatory actions taken in facilities		Equity compensation		Contingent consideration		Other non-GAAP items*		Other items
Net revenues		3,887																								3,887			3,661																						3,661
Cost of sales		2,093			175								5		5				104							1,804			1,921			178								1		5				62					1,675

Gross profit		1,794			175								5		5				104							2,083			1,740			178								1		5				62					1,986
Gross profit margin		46.2	%																							53.6	%		47.5	%																					54.2	%
R&D expenses		222													4											217			225													4									221
S&M expenses		597			24										7											567			584			22										7				3					552
G&A expenses		291													10				6							275			296													8				36					252
Other income		(25	)																(7	)						(18	)		(52	)																—					(52	)
Legal settlements and loss contingencies		3					3																			—			1,124					1,124																	—
Other assets impairments, restructuring and other items		62							26		28						9		(1	)						—			128							16		57						33		21					—
Intangible assets impairments		21							21																	—			149							149															—

Operating income (loss)		623			199		3		47		28		5		26		9		103							1,042			(713	)		200		1,124		165		57		1		24		33		123					1,013
Financial expenses, net		241																				6				235			258																			11			247

Income (loss) before income taxes		382			199		3		47		28		5		26		9		103			6				807			(971	)		200		1,124		165		57		1		24		33		123		11			766
Income taxes		76																				(62	)			137			2																			(140	)		142
Share in (profits) losses of associated companies – net		5																				0				4
Share in (profits) losses of associated companies, net																													(21	)																		(22	)		1

Net income (loss)		302			199		3		47		28		5		26		9		103			(56	)			665			(952	)		200		1,124		165		57		1		24		33		123		(152	)		623
Net income (loss) attributable to non-controlling interests		11																				(4	)			14			3																			(11	)		14
																								��
Net income (loss) attributable to Teva		292			199		3		47		28		5		26		9		103			(60	)			651			(955	)		200		1,124		165		57		1		24		33		123		(163	)		609

EPS - Basic		0.26																				0.33				0.59			(0.86	)																		1.41			0.55
EPS - Diluted		0.26																				0.32				0.59			(0.86	)																		1.41			0.55

The

non-GAAP

diluted weighted average number of shares was ~~1,109~~1,112 million for the three months ended ~~September 30,~~March 31, 2022.

Non-GAAP

income taxes for the three months ended March 31, 2022 were 18.5% 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.

Table of Contents


	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 (profit) 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

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 ~~September 30,~~March 31, 2021 were 17% on

pre-tax

non-GAAP

income.

Other

non-GAAP

7563

Table of Contents

Three Months Ended September 30, 2020

U.S. $ and shares in millions (except per share amounts)

GAAP Excluded for
non-GAAP
measurement Non-GAAP
Amortization
of purchased
intangible
assets Legal
settlements
and loss
contingencies Goodwill
impairment
Impairment
of long
lived
assets
Other
R&D
expenses Restructuring
costs Costs
related to
regulatory
actions
taken in
facilities Equity
compensation Contingent
consideration Other
non-GAAP

items* Other
items
Net revenues
3,978 3,978
Cost of sales
2,126 221 6 7 (2 ) 1,894

Gross profit
1,852 221 6 7 (2 ) 2,084
Gross profit margin
46.6 % 52.4 %
R&D expenses
258 21 5 233
S&M expenses
605 31 8 566
G&A expenses
279 10 —   269
Other income
(8 ) —   (8 )
Legal settlements and loss contingencies
21 21 —
Other assets impairments, restructuring and other items
(98 ) 56 9 (179 ) 15 —
Intangible assets impairments
509 509 —
Goodwill impairment
4,628 4,628 —

Operating income (loss)
(4,342 ) 251 21 4,628 565 21 9 6 30 (179 ) 14 1,025
Financial expenses, net
117 (124 ) 241

Income (loss) before income taxes
(4,459 ) 251 21 4,628 565 21 9 6 30 (179 ) 14 (124 ) 784
Income taxes
16 (117 ) 133
Share in profit (losses)of associated companies – net
(136 ) (134 ) (1 )

Net income (loss)
(4,340 ) 251 21 4,628 565 21 9 6 30 (179 ) 14 (375 ) 652
Net income (loss) attributable to
non-controlling
interests
10 (6 ) 15

Net income (loss) attributable to Teva
(4,349 ) 251 21 4,628 565 21 9 6 30 (179 ) 14 (381 ) 637

EPS - Basic
(3.97 ) 4.55 0.58
EPS - Diluted
(3.97 ) 4.55 0.58

~~The~~

~~non-GAAP~~

~~diluted weighted average number of shares was 1,100 million for the three months ended September 30, 2020.~~

~~Non-GAAP~~

~~income taxes for the three months ended September 30, 2020 were 17% on~~

~~pre-tax~~

~~non-GAAP~~

~~income.~~

~~Other~~

~~non-GAAP~~

~~Table of Contents~~

Nine Months Ended September 30, 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
Restructuring
costs Costs
related to
regulatory
actions
taken in
facilities Equity
compensation Contingent
consideration Other
non-GAAP

items* Other
items
Net revenue
11,778 11,778
Cost of sales
6,234 538 17 17 195 5,467

Gross profit
5,544 538 17 17 195 6,311
Gross profit margin
47.1 % 53.6 %
R&D expenses
723 14 5 704
S&M expenses
1,798 76 24 —   1,698
G&A expenses
822 31 7 785
Other (income) expense
(73 ) (44 ) (29 )
Legal settlements and loss contingencies
113 113 —
Other assets impairments, restructuring and other items
227 106 96 (7 ) 32 —
Intangible assets impairment
295 295 —

Operating income (loss)
1,638 613 113 401 96 17 86 (7 ) 194 3,153
Financial expenses, net
805 104 701

Income (loss) before income taxes
833 613 113 401 96 17 86 (7 ) 194 104 2,452
Income taxes
235 (182 ) 417
Share in (profits) losses of associated companies – net
(9 ) (1 ) (8 )

Net income (loss)
608 613 113 401 96 17 86 (7 ) 194 (79 ) 2,042
Net income (loss) attributable to
non-controlling
interests
32 (10 ) 42

Net income (loss) attributable to Teva
576 613 113 401 96 17 86 (7 ) 194 (90 ) 2,001

EPS - Basic
0.52 1.29 1.82
EPS - Diluted
0.52 1.29 1.81

~~The~~

~~non-GAAP~~

~~diluted weighted average number of shares was 1,109 million for the nine months ended September 30, 2021.~~

~~Non-GAAP~~

~~income taxes for the nine months ended September 30, 2021 were 17% on~~

~~pre-tax~~

~~non-GAAP~~

~~income.~~

~~Other~~

~~non-GAAP~~

~~Table of Contents~~

Nine months ended September 30, 2020

U.S. $ and shares in millions (except per share amounts)

GAAP Excluded for
non-GAAP
measurement Non-GAAP
Amortization
of purchased
intangible
assets Legal
settlements
and loss
contingencies Goodwill
impairment
Impairment
of long-
lived
assets
Restructuring
costs Costs
related to
regulatory
actions
taken in
facilities Equity
compensation Contingent
consideration Other
non-GAAP

items* Other
items
Net revenue
12,206 12,206
Cost of sales
6,528 663 17 19 30 5,799

Gross profit
5,678 663 17 19 30 6,407
Gross profit margin
46.5 % 52.5 %
R&D expenses
704 14 3 687
S&M expenses
1,815 95 25 1,695
G&A expenses
846 31 12 803
Other (income) expense
(30 ) (3 ) (27 )
Legal settlements and loss contingencies
10 10 —
Other assets impairments, restructuring and other items
404 408 82 (96 ) 10 —
Intangible assets impairment
1,278 1,278 —
Goodwill impairment
4,628 4,628

Operating income (loss)
(3,978 ) 758 10 4,628 1,686 82 17 90 (96 ) 52 —   3,248
Financial expenses, net
565 (118 ) 683

Income (loss) before income taxes
(4,543 ) 758 10 4,628 1,686 82 17 90 (96 ) 52 (118 ) 2,565
Income taxes
(147 ) (583 ) 436
Share in losses of associated companies – net
(135 ) (134 ) (1 )

Net income (loss) attributable to Teva
(4,261 ) 758 10 4,628 1,686 82 17 90 (96 ) 52 (835 ) 2,130
Net income (loss) attributable to
non-controlling
interests
(121 ) (174 ) 53

Net income (loss)
(4,140 ) 758 10 4,628 1,686 82 17 90 (96 ) 52 (1,009 ) 2,077

EPS - Basic
(3.78 ) 5.68 1.90
EPS - Diluted
(3.78 ) 5.67 1.89

~~The~~

~~non-GAAP~~

~~diluted weighted average number of shares was 1,099 million for the nine months ended September 30, 2020.~~

~~Non-GAAP~~

~~income taxes for the nine months ended September 30, 2021 were 17% on~~

~~pre-tax~~

~~non-GAAP~~

~~income.~~

~~Other~~

~~non-GAAP~~

~~Table of Contents~~

Non-GAAP

Tax Rate

Non-GAAP

income taxes in the ~~third~~first quarter of 2022 were $142 million, or 18.5%, on

pre-tax

non-GAAP

income of $766 million.

Non-GAAP

income taxes in the first quarter of 2021 were ~~$137~~$146 million, or 17%, on

pre-tax

non-GAAP

income of ~~$807 million.~~

~~Non-GAAP~~

~~income taxes in the third quarter of 2020 were $133 million, or 17%, on~~

~~pre-tax~~

~~non-GAAP~~

~~income of $784~~$851 million. Our

non-GAAP

tax rate in the ~~third~~first quarter of ~~2021~~2022 was mainly affected by the mix of products we sold and interest expense ~~disallowance.~~

~~Non-GAAP~~

~~income taxes in the first nine months of 2021 were $417 million, or 17%, on~~

~~pre-tax~~

~~non-GAAP~~

~~income of $2,452 million.~~

~~Non-GAAP~~

~~income taxes in the first nine months of 2020 were $436 million, or 17%, on~~

~~pre-tax~~

~~non-GAAP~~

~~income of $2,565 million.~~disallowances.

We expect our annual

non-GAAP

tax rate for ~~2021~~2022 to be between ~~17%~~18% to ~~18%~~19%, ~~similar to~~higher than our

non-GAAP

tax rate for ~~2020,~~2021, which was ~~17%.~~16.4%, mainly as a result of the different mix of products we expect to sell this year.

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, ~~2020,~~2021, 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, ~~2020.~~2021.

Recently Issued Accounting Pronouncements

See note 1 to our consolidated financial statements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~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, ~~2020.~~2021.

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

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 ~~September 30, 2021,~~March 31, 2022, 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 ~~September 30, 2021,~~March 31, 2022, 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.

7964

Table of Contents

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

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, ~~2020.~~2021.

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 ~~September 30, 2021.~~March 31, 2022.

Repurchase of Shares

We did not repurchase any of our shares during the three months ended ~~September 30, 2021~~March 31, 2022 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.~~

Revolving Credit Agreement

On April 29, 2022, Teva and certain of its subsidiaries entered into a $1.8 billion senior unsecured sustainability-linked revolving credit agreement (the “Revolving Credit Agreement”) with a syndicate of banks, arranged by Bank of America Europe Designated Activity Company, as Documentation Agent and Sustainability Coordinator, Bank of America Europe DAC, BNP Parisbas, Citibank, N.A., Goldman Sachs Bank USA, HSBC Bank Plc, Inesa San Paolo S.P.A, J.P. Morgan S.E., Mizuho Bank, LTD. and PNC Bank, National Association, as Bookrunners & Mandated Lead Arrangers, and Bank of America, N.A., as Administrative Agent and Bank of America Europe Designated Activity Company, as Sustainability Coordinator.

The Revolving Credit Agreement provides for a $1.8 billion Tranche A-1 commitment, and loans and letters of credit will be available from time to time for Teva’s general corporate purposes. Tranche A-1 has a maturity date of April 29, 2026, with two one-year extension options, and will bear interest at Term SOFR (which is subject to certain SOFR Adjustments, as such term is defined in the Revolving Credit Agreement) plus a margin ranging from 0.650% to 1.650% based on Teva’s credit rating from time to time. The applicable margin may be increased or decreased (or neither increased or decreased) based on a progress of two sustainability performance metrics outlined in the Revolving Credit Agreement, (i) the company’s S&P Environmental, Social and Governance Score and (ii) number of new regulatory submissions in low and middle-income countries. The applicable margin will never be reduced or increased based on sustainability performance metrics by more than 0.05% during any calendar year. The commitment will also be subject to a commitment fee on undrawn amounts ranging from 0.228% to 0.578%, based on Teva’s credit rating from time to time. All outstanding loans and letters of credit will be subject to a utilization fee, ranging from 0.100% to 0.300%, based on the then aggregate loans and letters of credit then currently outstanding. Funding of the loans under the Revolving Credit Agreement is subject to customary drawdown conditions.

The Revolving Credit Agreement contains certain customary affirmative and negative covenants for facilities of this type, including certain reporting obligations and certain limitations on dispositions; mergers or consolidations; restricted payments; and limitations on liens, encumbrances and certain indebtedness. The Revolving Credit Agreement contains two financial maintenance covenants, (i) a maximum leverage ratio stepping down from 4.50x to 3.50x over the life of the facility and (ii) a minimum interest coverage ratio of 3.50x. The Revolving Credit Agreement also contains customary events of default, including non-compliance with one or more of the covenants.

The representations, warranties and covenants contained in the Revolving Credit Agreement were made only for purposes of such agreement and as of the dates specified therein, were solely for the benefit of the parties thereto and may be subject to qualifications agreed by the contracting parties and standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company and its subsidiaries.

Concurrently with entry into the Revolving Credit Agreement, Teva’s existing $2.3 billion senior unsecured revolving credit agreement with a syndicate of banks, arranged by Bank of America Merrill Lynch International Designated Activity Company and HSBC Bank plc, as Coordinating LLC, Goldman Sachs Bank USA, JPMorgan Chase Bank, N.A., Mizuho Bank, Ltd., Morgan Stanley Senior Funding, Inc., MUFG Bank, Ltd., Sumitomo Mitsui Banking Corporation and PNC Bank National Association, as Bookrunners & Mandated Lead Arrangers, Banca IMI, as Lead Arranger, and Bank of America, N.A., as Administrative Agent, was terminated. See note 9 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, for a summary of the terms of the existing revolving credit agreement.

The foregoing description of the Revolving Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the Revolving Credit Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

8065

Table of Contents

ITEM 6.

EXHIBITS


10.1		Senior Unsecured Sustainability-Linked Revolving Credit Agreement, dated as of April 29, 2022, by and among Teva Pharmaceutical Industries Limited, Teva Pharmaceuticals USA, Inc., Teva Pharmaceutical Finance Netherlands II B.V. and Teva Pharmaceutical Finance Netherlands III B.V., as borrowers, Bank of America, N.A., as administrative agent, Bank of America Europe Designated Activity Company, as sustainability coordinator and documentation agent, and the lenders party thereto *

31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

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		XBRL Taxonomy Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

8166

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.


Israel		Not Applicable
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

124 Dvora HaNevi’a St., Tel Aviv, ISRAEL		6944020
(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


PART I.	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
	~~Notes to Consolidated Financial Statements~~	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4842
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7964
Item 4.	Controls and Procedures	7964

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	8065
Item 1A.	Risk Factors	8065
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8065
Item 3.	Defaults Upon Senior Securities	8065
Item 4.	Mine Safety Disclosures	8065
Item 5.	Other Information	8065
Item 6.	Exhibits	8166
	Signatures	8267


	Three months ended						Nine months ended
	September 30,						September 30,
	2021			2020			2021			2020
Net revenues	$	3,887		$	3,978		$	11,778		$	12,206
Cost of sales		2,093			2,126			6,234			6,528

Gross profit		1,794			1,852			5,544			5,678
Research and development expenses		222			258			723			704
Selling and marketing expenses		597			605			1,798			1,815
General and administrative expenses		291			279			822			846
Intangible assets impairments		21			509			295			1,278
Goodwill impairment		0			4,628			0			4,628
Other assets impairments, restructuring and other items		62			(98	)		227			404
Legal settlements and loss contingen c ies		3			21			113			10
Other income		(25	)		(8	)		(73	)		(30	)

Operating income (loss)		623			(4,342	)		1,638			(3,978	)
Financial expenses, net		241			117			805			565

Income (loss) before income taxes		382			(4,459	)		833			(4,543	)
Income taxes (benefit)		76			16			235			(147	)
Share in (profits) losses of associated companies, net		5			(136	)		(9	)		(135	)

Net income (loss)		302			(4,340	)		608			(4,261	)
Net income (loss) attributable to non-controlling interests		11			10			32			(121	)

Net income (loss) attributable to Teva		292			(4,349	)		576			(4,140	)

Earnings (loss) per share attributable to ordinary shareholders:
Basic	$	0.26		$	(3.97	)	$	0.52		$	(3.78	)

Diluted	$	0.26		$	(3.97	)	$	0.52		$	(3.78	)

Weighted average number of shares (in millions):
Basic		1,103			1,096			1,102			1,095

Diluted		1,109			1,096			1,109			1,095


	Three months ended September 30, 2020
	North America		Europe			International Markets		Other activities		Total

	(U.S. $ in millions)
Sale of goods		1,660		1,116			478		173		3,427
Licensing arrangements		17		7			2		1		27
Distribution		341		§			9		0		350
Other		(1)		(8	)		41		142		174

	$	2,017	$	1,116		$	529	$	316	$	3,978


	Nine months ended September 30, 2021
	North America		Europe		International Markets		Other activities		Total

	(U.S. $ in millions)
Sale of goods		4,776		3,560		1,397		534		10,268
Licensing arrangements		62		32		9		3		106
Distribution		968		§		49		0		1,018
Other		§		25		50		312		387

	$	5,807	$	3,618	$	1,505	$	849		11,778


	Nine months ended September 30, 2020
	North America		Europe		International Markets		Other activities		Total

	(U.S. $ in millions)
Sale of goods		4,943		3,487		1,417		561		10,408
Licensing arrangements		59		22		6		3		90
Distribution		1,141		3		21		0		1,165
Other		3		9		138		394		543

	$	6,146	$	3,520	$	1,582	$	957	$	12,206


	September 30, 2021		December 31, 2020

	(U.S. $ in millions)
Finished products	$	2,089	$	2,378
Raw and packaging materials		1,285		1,231
Products in process		631		605
Materials in transit and payments on account		161		189

Total	$	4,167	$	4,403


						September 30 ,		December 31,
	Weighted average interest rate as of September 30, 2021			Maturity		2021		2020

						(U.S. $ in millions)
Convertible senior debentures		0.25	%		2026		23		514
Revolving Credit Facility(1)		LIBOR+1.75	%				300		0
Current maturities of long-term liabilities							2,386		2,674

Total short-term debt						$	2,709	$	3,188


	Fair value
	Not designated as hedging instruments
	September 30, 2021			December 31, 2020

Reported under	(U.S. $ in millions)
Asset derivatives:
Other current assets:
Option and forward contracts	$	45		$	24
Liability derivatives:
Other current liabilities:
Option and forward contracts		(23	)		(79	)


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

	September 30, 2021		September 30, 2020			September 30, 2021			September 30, 2020

Reported under	(U.S. $ in millions)
Line items in which effects of hedges are recorded	$	805	$	565		$	(302	)	$	(302	)
Cross-currency swaps—net investment hedge (1)		0		(2	)		0			(21	)


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020

	(U.S. $ in millions)						(U.S. $ in millions)
Impairments of long-lived tangible assets (1)	$	26		$	56		$	106		$	408
Contingent consideration		9			(179	)		(7	)		(96	)
Restructuring		28			9			96			82
Other		(1	)		15			32			10

Total	$	62		$	(98	)	$	227		$	404


	Nine months ended September 30,
	2021		2020

	(U.S. $ in millions)
Restructuring
Employee termination	$	84	$	39
Other		12		43

Total	$	96	$	82


	September 30, 2021
	Level 1		Level 2			Level 3			Total

	(U.S. $ in millions)
Cash and cash equivalents:
Money markets	$	325	$	—		$	—		$	325
Cash, deposits and other		1,720		—			—			1,720
Investment in securities:
Equity securities		18		—			—			18
Other, mainly debt securities		5		—			1			6
Derivatives:
Asset derivatives—options and forward contracts		—		45			—			45
Liability derivatives—options and forward contracts		—		(23	)		—			(23	)
Contingent consideration**		—		—			(187	)		(187	)

Total	$	2,068	$	22		$	(186	)	$	1,904


	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


	Nine months ended September 30, 2021			Nine months ended September 30, 2020

	(U.S. $ in millions)
Fair value at the beginning of the period	$	(258	)		(448	)
Transfer into Level 3- equity securities		—			179
Revaluation of equity securities		—			118
Redemption of debt securities		(9	)		—
Revaluation of debt securities		—			(3	)
Adjustments to provisions for contingent consideration:
Actavis Generics transaction		21			161
Eagle transaction		(14	)		(65	)
Settlement of contingent consideration:
Eagle transaction		74			85

Fair value at the end of the period	$	(186	)	$	27


Generic Name	Brand Name	Total Annual U.S. Branded Market (U.S. $ in millions (IQVIA)) *
Methylnaltrexone Bromide Subcutaneous Injection	Relistor ®	$	18
Tasimelteon Caps	Hetlioz ®	$	1


	Nine months ended September 30,				Percentage Change
	2021		2020		2020-2021
	(U.S. $ in millions)
Generic products	$	2,864	$	2,804		2	%
AJOVY		123		98		25	%
AUSTEDO		520		451		15	%
BENDEKA/TREANDA		292		313		(7	%)
COPAXONE		448		671		(33	%)
ProAir*		140		175		(20	%)
Anda		968		1,141		(15	%)
Other		451		493		(8	%)

Total	$	5,807	$	6,146		(6	%)


	Nine months ended
	September 30,
	2021		2020
	(U.S. $ in millions)
North America profit	$	1,556	$	1,682
Europe profit		1,074		1,058
International Markets profit		398		378

Total reportable segments profit		3,028		3,118
Profit of other activities		125		130

Total segments profit		3,153		3,248
Amounts not allocated to segments:
Amortization		613		758
Other assets impairments, restructuring and other items		227		404
Goodwill impairment		—		4,628

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Date: ~~October 27, 2021~~May 3, 2022

/s/ Eli Kalif

Executive Vice President,
Chief Financial Officer
(Duly Authorized Officer)