エドガーで原本を確認する
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Israel |
||
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
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124 Dvora HaNevi’a St., Tel Aviv,
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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 |
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
|
Non-accelerated filer |
☐ | Smaller reporting company | ☐ | |||
| Emerging growth company | ☐ | |||||
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
INDEX
| PART I. |
Financial Statements (unaudited) | |||||
| Item 1. |
Financial Statements (unaudited) | 5 | ||||
| Consolidated Balance Sheets | 5 | |||||
| Consolidated Statements of Income (loss) | 6 | |||||
| Consolidated Statements of Comprehensive Income (loss) | 7 | |||||
| Consolidated statements of changes in equity | 8 | |||||
| Consolidated Statements of Cash Flows | 9 | |||||
| Notes to Consolidated Financial Statements | 10 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 46 | ||||
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 66 | ||||
| Item 4. |
Controls and Procedures | 66 | ||||
| PART II. |
OTHER INFORMATION | |||||
| Item 1. |
Legal Proceedings | 68 | ||||
| Item 1A. |
Risk Factors | 68 | ||||
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 68 | ||||
| Item 3. |
Defaults Upon Senior Securities | 68 | ||||
| Item 4. |
Mine Safety Disclosures | 68 | ||||
| Item 5. |
Other Information | 68 | ||||
| Item 6. |
Exhibits | 70 | ||||
| Signatures | 71 | |||||
2
| • | our ability to successfully compete in the marketplace, including: that we are substantially dependent on our generic products; concentration of our customer base and commercial alliances among our customers; delays in launches of new generic products; our ability to develop and commercialize biopharmaceutical products; competition for our innovative medicines; our ability to achieve expected results from investments in our product pipeline; our ability to develop and commercialize additional pharmaceutical products; our ability to successfully execute our Pivot to Growth strategy, including to expand our innovative and biosimilar medicines pipeline and profitably commercialize the innovative medicines and biosimilar portfolio, whether organically or through business development, and to sustain and focus our portfolio of generics medicines; and the effectiveness of our patents and other measures to protect our intellectual property rights, including any potential challenges to our Orange Book patent listings in the U.S.; |
| • | our substantial indebtedness, which may limit our ability to incur additional indebtedness, engage in additional transactions or make new investments, may result in a future downgrade of our credit ratings; and our inability to raise debt or borrow funds in amounts or on terms that are favorable to us; |
| • | our business and operations in general, including: the impact of global economic conditions and other macroeconomic developments and the governmental and societal responses thereto; the widespread outbreak of an illness or any other communicable disease, or any other public health crisis; effectiveness of our optimization efforts; our ability to attract, hire, integrate and retain highly skilled personnel; interruptions in our supply chain or problems with internal or third party manufacturing; disruptions of information technology systems; breaches of our data security challenges associated with conducting business globally, including political or economic instability, major hostilities or terrorism, such as the ongoing conflict between Russia and Ukraine and the state of war declared in Israel; costs and delays resulting from the extensive pharmaceutical regulation to which we are subject; our ability to successfully bid for suitable acquisition targets or licensing opportunities, or to consummate and integrate acquisitions; and our prospects and opportunities for growth if we sell assets or business units and close or divest plants and facilities, as well as our ability to successfully and cost-effectively consummate such sales and divestitures, including our planned divestiture of our API business; |
| • | compliance, regulatory and litigation matters, including: failure to comply with complex legal and regulatory environments; the effects of governmental and civil proceedings and litigation which we are, or in the future become, party to; the effects of reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage; increased legal and regulatory action in connection with public concern over the abuse of opioid medications; our ability to timely make payments required under our nationwide opioids settlement agreement and provide our generic version of Narcan ® (naloxone hydrochloride nasal spray) in the amounts and at the times required under the terms of such agreement; scrutiny from competition and pricing authorities around the world, including our ability to comply with and operate under our deferred prosecution agreement (“DPA”) with the U.S. Department of Justice (“DOJ”); potential liability for intellectual property right infringement; product liability claims; failure to comply with complex Medicare, Medicaid and other governmental programs reporting and payment obligations; compliance with anti-corruption, sanctions and trade control laws; environmental risks; and the impact of sustainability issues; |
| • | the impact of the state of war declared in Israel and the military activity in the region, including the risk of disruptions to our operations and facilities, such as our manufacturing and R&D facilities, located in Israel, the impact of our employees who are military reservists being called to active military duty, and the impact of the war on the economic, social and political stability of Israel; |
| • | other financial and economic risks, including: our exposure to currency fluctuations and restrictions as well as credit risks; potential impairments of our long-lived assets; the impact of geopolitical conflicts including the state of war declared in Israel and the conflict between Russia and Ukraine; potential significant increases in tax liabilities; the effect on our overall effective tax rate of the termination or expiration of governmental programs or tax benefits, or of a change in our business; and our ability to remediate an existing material weakness in our internal control over financial reporting; |
ITEM 1. |
FINANCIAL STATEMENTS |
March 31, |
December 31, |
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2024 |
2023 |
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| ASSETS |
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| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 2,991 | $ | 3,226 | ||||
| Accounts receivables, net of allowance for credit losses of $98 million and $95 million as of March 31, 2024 and December 31, 2023, respectively |
3,456 | 3,408 | ||||||
| Inventories |
3,949 | 4,021 | ||||||
| Prepaid expenses |
1,336 | 1,255 | ||||||
| Other current assets |
495 | 504 | ||||||
| Assets held for sale |
70 | 70 | ||||||
| |
|
|
|
|||||
| Total current assets |
12,297 | 12,485 | ||||||
| Deferred income taxes |
1,960 | 1,812 | ||||||
| Other non-current assets |
470 | 470 | ||||||
| Property, plant and equipment, net |
5,618 | 5,750 | ||||||
| Operating lease right-of-use |
364 | 397 | ||||||
| Identifiable intangible assets, net |
5,056 | 5,387 | ||||||
| Goodwill |
17,007 | 17,177 | ||||||
| |
|
|
|
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| Total assets |
$ | 42,773 | $ | 43,479 | ||||
| |
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| LIABILITIES AND EQUITY |
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| Current liabilities: |
||||||||
| Short-term debt |
$ | 3,060 | $ | 1,672 | ||||
| Sales reserves and allowances |
3,594 | 3,535 | ||||||
| Accounts payables |
2,439 | 2,602 | ||||||
| Employee-related obligations |
492 | 611 | ||||||
| Accrued expenses |
2,784 | 2,771 | ||||||
| Other current liabilities |
1,161 | 1,044 | ||||||
| Liabilities held for sale |
262 | 13 | ||||||
| |
|
|
|
|||||
| Total current liabilities |
13,792 | 12,247 | ||||||
| Long-term liabilities: |
||||||||
| Deferred income taxes |
569 | 606 | ||||||
| Other taxes and long-term liabilities |
3,991 | 4,019 | ||||||
| Senior notes and loans |
16,584 | 18,161 | ||||||
| Operating lease liabilities |
294 | 320 | ||||||
| |
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| Total long-term liabilities |
21,438 | 23,106 | ||||||
| |
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|
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| Commitments and contingencies |
||||||||
| Total liabilities |
35,230 | 35,353 | ||||||
| |
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| Equity: |
||||||||
| Teva shareholders’ equity: |
||||||||
| Ordinary shares of NIS 0.10 par value per share; March 31, 2024 and December 31, 2023: authorized 2,495 million shares; issued 1,238 million shares and 1,227 million shares, respectively. |
58 | 57 | ||||||
| Additional paid-in capital |
27,796 | 27,807 | ||||||
| Accumulated deficit |
(13,673 | ) | (13,534 | ) | ||||
| Accumulated other comprehensive loss |
(2,775 | ) | (2,697 | ) | ||||
| Treasury shares as of March 31, 2024 and December 31, 2023: 106 million ordinary shares |
(4,128 | ) | (4,128 | ) | ||||
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| 7,278 | 7,506 | |||||||
| |
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| Non-controlling interests |
265 | 620 | ||||||
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|
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| Total equity |
7,543 | 8,126 | ||||||
| |
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|
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| Total liabilities and equity |
$ | 42,773 | $ | 43,479 | ||||
| |
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Three months ended |
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March 31, |
||||||||
2024 |
2023 |
|||||||
| Net revenues |
$ | 3,819 | $ | 3,661 | ||||
| Cost of sales |
2,048 | 2,079 | ||||||
| |
|
|
|
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| Gross profit |
1,771 | 1,582 | ||||||
| Research and development expenses |
242 | 234 | ||||||
| Selling and marketing expenses |
608 | 546 | ||||||
| General and administrative expenses |
278 | 296 | ||||||
| Intangible assets impairments |
80 | 178 | ||||||
| Other assets impairments, restructuring and other items |
673 | 110 | ||||||
| Legal settlements and loss contingencies |
106 | 233 | ||||||
| Other loss (income) |
1 | (2 | ) | |||||
| |
|
|
|
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| Operating income (loss) |
(218 | ) | (13 | ) | ||||
| Financial expenses, net |
250 | 260 | ||||||
| |
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|
|
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| Income (loss) before income taxes |
(467 | ) | (272 | ) | ||||
| Income taxes (benefit) |
(52 | ) | (19 | ) | ||||
| Share in (profits) losses of associated companies, net |
4 | § | ||||||
| |
|
|
|
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| Net income (loss) |
(419 | ) | (253 | ) | ||||
| Net income (loss) attributable to non-controlling interests |
(280 | ) | (33 | ) | ||||
| |
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|
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| Net income (loss) attributable to Teva |
(139 | ) | (220 | ) | ||||
| |
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| Earnings (loss) per share attributable to ordinary shareholders: |
||||||||
| Basic |
$ | (0.12 | ) | $ | (0.20 | ) | ||
| |
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| Diluted |
$ | (0.12 | ) | $ | (0.20 | ) | ||
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| Weighted average number of shares (in millions): |
||||||||
| Basic |
1,123 | 1,115 | ||||||
| |
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| Diluted |
1,123 | 1,115 | ||||||
| |
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| § | Represents an amount less than $0.5 million. |
Three months ended |
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March 31, |
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2024 |
2023 |
|||||||
| Net income (loss) |
$ | (419 | ) | $ | (253 | ) | ||
| Other comprehensive income (loss), net of tax: |
||||||||
| Currency translation adjustment |
(123 | ) | 120 | |||||
| Unrealized gain (loss) from derivative financial instruments, net |
7 | 8 | ||||||
| Unrealized loss on defined benefit plans |
(1 | ) | (1 | ) | ||||
| |
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|
|
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| Total other comprehensive income (loss) |
(117 | ) | 127 | |||||
| |
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|
|
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| Total comprehensive income (loss) |
(536 | ) | (126 | ) | ||||
| Comprehensive income (loss) attributable to non-controlling interests |
(322 | ) | (42 | ) | ||||
| |
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|
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| Comprehensive income (loss) attributable to Teva |
$ | (214 | ) | $ | (84 | ) | ||
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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, 2023 |
1,227 | 57 | 27,807 | (13,534 | ) | (2,697 | ) | (4,128 | ) | 7,506 | 620 | 8,126 | ||||||||||||||||||||||||
| Net Income (loss) |
(139 | ) | (139 | ) | (280 | ) | (419 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
(75 | ) | (75 | ) | (42 | ) | (117 | ) | ||||||||||||||||||||||||||||
| Issuance of Shares |
11 | 1 | * | 1 | 1 | |||||||||||||||||||||||||||||||
| Stock-based compensation expense |
28 | 28 | — | 28 | ||||||||||||||||||||||||||||||||
| Proceeds from exercise of options |
6 | 6 | 6 | |||||||||||||||||||||||||||||||||
| Dividend to non-controlling interests** |
(18 | ) | (18 | ) | ||||||||||||||||||||||||||||||||
| Purchase of shares from non-controlling interests*** |
(45 | ) | (3 | ) | (48 | ) | (16 | ) | (64 | ) | ||||||||||||||||||||||||||
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| Balance at March 31, 2024 |
1,238 | $ | 58 | $ | 27,796 | $ | (13,673 | ) | $ | (2,775 | ) | $ | (4,128 | ) | $ | 7,278 | $ | 265 | $ | 7,543 | ||||||||||||||||
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| * | Represents an amount less than $0.5 million. |
| ** | In connection with dividends to non-controlling interests in Teva’s joint venture in Japan. |
*** |
Purchase of shares from non-controlling interests in Teva’s subsidiary in Switzerland. |
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, 2022** |
1,217 | 57 | 27,688 | (12,975 | ) | (2,838 | ) | (4,128 | ) | 7,804 | 794 | 8,598 | ||||||||||||||||||||||||
| Net Income (loss)** |
(220 | ) | (220 | ) | (33 | ) | (253 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
136 | 136 | (9 | ) | 127 | |||||||||||||||||||||||||||||||
| Issuance of shares |
9 | * | * | * | * | |||||||||||||||||||||||||||||||
| Stock-based compensation expense |
32 | 32 | 32 | |||||||||||||||||||||||||||||||||
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| Balance at March 31, 2023** |
1,226 | $ | 57 | $ | 27,719 | $ | (13,194 | ) | $ | (2,701 | ) | $ | (4,128 | ) | $ | 7,752 | $ | 751 | $ | 8,504 | ||||||||||||||||
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| * | Represents an amount less than $0.5 million. |
** |
The data presented for prior periods have been revised to reflect a revision to a contingent consideration liability and related expenses in the consolidated financial statements. For additional information, see note 1c. |
Three months ended |
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March 31, |
||||||||
2024 |
2023 |
|||||||
| Operating activities: |
||||||||
| Net income (loss) |
$ | (419 | ) | (253 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operations: |
||||||||
| Depreciation and amortization |
272 | 304 | ||||||
| Impairment of goodwill, long-lived assets and assets held for sale |
679 | 189 | ||||||
| Net change in operating assets and liabilities |
(497 | ) | (349 | ) | ||||
| Deferred income taxes – net and uncertain tax positions |
(189 | ) | (106 | ) | ||||
| Stock-based compensation |
28 | 32 | ||||||
| Other items |
2 | 34 | ||||||
| Net loss (gain) from investments and from sale of long-lived assets |
— | 4 | ||||||
| |
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| Net cash provided by (used in) operating activities |
(124 | ) | (145 | ) | ||||
| |
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| Investing activities: |
||||||||
| Beneficial interest collected in exchange for securitized trade receivables |
295 | 323 | ||||||
| Purchases of property, plant and equipment and intangible assets |
(124 | ) | (139 | ) | ||||
| Proceeds from sale of business and long-lived assets |
— | 2 | ||||||
| Acquisition of businesses, net of cash acquired |
(15 | ) | — | |||||
| Purchases of investments and other assets |
(12 | ) | (4 | ) | ||||
| Other investing activities |
— | (1 | ) | |||||
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| Net cash provided by (used in) investing activities |
144 | 181 | ||||||
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| Financing activities: |
||||||||
| Purchase of shares from non-controlling interests |
(64 | ) | — | |||||
| Dividends paid to non-controlling interests |
(78 | ) | — | |||||
| Repayment of senior notes and loans and other long-term liabilities |
— | (3,152 | ) | |||||
| Proceeds from senior notes, net of issuance costs |
— | 2,451 | ||||||
| Other financing activities |
(9 | ) | (5 | ) | ||||
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| Net cash provided by (used in) financing activities |
(151 | ) | (706 | ) | ||||
| |
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| Translation adjustment on cash and cash equivalents |
(104 | ) | 12 | |||||
| |
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| Net change in cash, cash equivalents and restricted cash |
(236 | ) | (658 | ) | ||||
| Balance of cash, cash equivalents and restricted cash at beginning of period |
3,227 | 2,834 | ||||||
| |
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| Balance of cash, cash equivalents and restricted cash at end of period |
$ | 2,991 | 2,176 | |||||
| |
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| Cash and cash equivalents |
2,991 | 2,143 | ||||||
| Restricted cash included in other current assets |
— | 33 | ||||||
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| Total cash, cash equivalents and restricted cash shown in the statement of cash flows |
2,991 | 2,176 | ||||||
| |
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| Non-cash financing and investing activities: |
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| Beneficial interest obtained in exchange for securitized accounts receivables |
$ | 312 | 334 | |||||
a. |
Basis of presentation |
b. |
Significant accounting policies |
c. |
Revision of Previously Reported Consolidated Financial Statements |
| Three months ended | ||||||||||||
| March 31, 2023 | ||||||||||||
| U.S $ in millions (except per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
| As previously reported | Adjustment | As revised | ||||||||||
Other asset impairments, restructuring and other items |
$ | 96 | 15 | 110 | ||||||||
Operating income (loss) |
2 | (15 | ) | (13 | ) | |||||||
Income (loss) before income taxes |
(258 | ) | (15 | ) | (272 | ) | ||||||
Income taxes (benefit) |
(19 | ) | § | (19 | ) | |||||||
Net income (loss) |
(238 | ) | (15 | ) | (253 | ) | ||||||
Net income (loss) attributable to Teva |
(205 | ) | (15 | ) | (220 | ) | ||||||
| Earnings (loss) per share attributable to ordinary shareholders: | ||||||||||||
Basic |
$ | (0.18 | ) | (0.02 | ) | (0.20 | ) | |||||
Diluted |
$ | (0.18 | ) | (0.02 | ) | (0.20 | ) | |||||
| § | Represents an amount less than $0.5 million. |
March 31, |
December 31, |
|||||||
2024 |
2023 |
|||||||
(U.S. $ in millions) |
||||||||
| Inventories |
169 | 12 | ||||||
| Accounts receivables |
146 | — | ||||||
| Goodwill |
78 | 30 | ||||||
| Identifiable intangible assets, net |
63 | — | ||||||
| Property, plant and equipment, net |
13 | 5 | ||||||
| Other current and non-current assets |
65 | 23 | ||||||
| Expected loss on sale* |
(464 | ) | — | |||||
| |
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| Total assets of the disposal group classified as held for sale in the consolidated balance sheets |
$ | 70 | $ | 70 | ||||
| |
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| Accounts payables |
(92 | ) | — | |||||
| Other liabilities |
(57 | ) | (13 | ) | ||||
| Expected loss on sale* |
(113 | ) | — | |||||
| |
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| Total liabilities of the disposal group classified as held for sale in the consolidated balance sheets |
$ | (262 | ) | $ | (13 | ) | ||
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| * | Includes an expected loss from reclassification of currency translation adjustments to the consolidated statements of income (loss) upon sale . |
Three months ended March 31, 2024 |
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United States |
Europe |
International Markets |
Other activities |
Total |
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(U.S.$ in millions) |
||||||||||||||||||||
| Sale of goods |
1,321 | 1,252 | 566 | 128 | 3,267 | |||||||||||||||
| Licensing arrangements |
23 | 11 | 5 | § | 40 | |||||||||||||||
| Distribution |
381 | § | 9 | — | 391 | |||||||||||||||
| Other |
§ | 9 | 16 | 97 | 121 | |||||||||||||||
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| $ | 1,725 | $ | 1,272 | $ | 597 | $ | 225 | $ | 3,819 | |||||||||||
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| § | Represents an amount less than $ 0.5 million. |
Three months ended March 31, 2023 |
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United States |
Europe |
International Markets |
Other activities |
Total |
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(U.S.$ in millions) |
||||||||||||||||||||
| Sale of goods |
1,230 | 1,176 | 553 | 131 | 3,090 | |||||||||||||||
| Licensing arrangements |
22 | 14 | 6 | 1 | 43 | |||||||||||||||
| Distribution |
424 | § | 10 | — | 434 | |||||||||||||||
| Other |
§ | (6 | ) | 13 | 87 | 95 | ||||||||||||||
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| $ | 1,677 | $ | 1,184 | $ | 581 | $ | 219 | $ | 3,661 | |||||||||||
| |
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| § | Represents an amount less than $ 0.5 million. |
Sales Reserves and Allowances |
||||||||||||||||||||||||||||||||
Reserves included in Accounts Receivable, net |
Rebates |
Medicaid and other governmental allowances |
Chargebacks |
Returns |
Other |
Total reserves included in Sales Reserves and Allowances |
Total |
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(U.S.$ in millions) |
||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 |
$ | 61 | $ | 1,603 | $ | 540 | $ | 859 | $ | 436 | $ | 97 | $ | 3,535 | $ | 3,596 | ||||||||||||||||
| Provisions related to sales made in current year period |
93 | 1,118 | 181 | 1,942 | 73 | 40 | 3,354 | 3,447 | ||||||||||||||||||||||||
| Provisions related to sales made in prior periods |
— | 10 | 20 | (11 | ) | (6 | ) | (1 | ) | 12 | 12 | |||||||||||||||||||||
| Credits and payments |
(87 | ) | (1,086 | ) | (171 | ) | (1,935 | ) | (67 | ) | (18 | ) | (3,277 | ) | (3,364 | ) | ||||||||||||||||
| Translation differences |
— | (17 | ) | (3 | ) | (5 | ) | (3 | ) | (2 | ) | (30 | ) | (30 | ) | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at March 31, 2024 |
$ | 67 | $ | 1,628 | $ | 567 | $ | 850 | $ | 433 | $ | 116 | $ | 3,594 | $ | 3,661 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Sales Reserves and Allowances |
||||||||||||||||||||||||||||||||
Reserves included in Accounts Receivable, net |
Rebates |
Medicaid and other governmental allowances |
Chargebacks |
Returns |
Other |
Total reserves included in Sales Reserves and Allowances |
Total |
|||||||||||||||||||||||||
(U.S.$ in millions) |
||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 |
$ | 67 | $ | 1,575 | $ | 663 | $ | 991 | $ | 455 | $ | 66 | $ | 3,750 | $ | 3,817 | ||||||||||||||||
| Provisions related to sales made in current year period |
80 | 1,003 | 142 | 1,855 | 73 | 25 | 3,098 | 3,178 | ||||||||||||||||||||||||
| Provisions related to sales made in prior periods |
— | (7 | ) | (36 | ) | (9 | ) | 6 | (1 | ) | (47 | ) | (47 | ) | ||||||||||||||||||
| Credits and payments |
(84 | ) | (1,127 | ) | (289 | ) | (1,973 | ) | (95 | ) | (21 | ) | (3,505 | ) | (3,589 | ) | ||||||||||||||||
| Translation differences |
— | 8 | 2 | 2 | 1 | § | 13 | 13 | ||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at March 31, 2023 |
$ | 63 | $ | 1,452 | $ | 482 | $ | 866 | $ | 440 | $ | 69 | $ | 3,309 | $ | 3,372 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
March 31, |
December 31, |
|||||||
2024 |
2023 |
|||||||
(U.S. $ in millions) |
||||||||
| Finished products |
$ | 2,238 | $ | 2,346 | ||||
| Raw and packaging materials |
1,014 | 993 | ||||||
| Products in process |
508 | 500 | ||||||
| Materials in transit and payments on account |
189 | 183 | ||||||
| |
|
|
|
|||||
| $ | 3,949 | $ | 4,021 | |||||
| |
|
|
|
|||||
Gross carrying amount net of impairment |
Accumulated amortization |
Net carrying amount |
||||||||||||||||||||||
March 31, |
December 31, |
March 31, |
December 31, |
March 31, |
December 31, |
|||||||||||||||||||
2024 |
2023 |
2024 |
2023 |
2024 |
2023 |
|||||||||||||||||||
(U.S. $ in millions) |
||||||||||||||||||||||||
| Product rights |
$ | 16,261 | $ | 17,981 | $ | 11,846 | $ | 13,274 | $ | 4,415 | $ | 4,707 | ||||||||||||
| Trade names |
576 | 583 | 276 | 269 | 300 | 314 | ||||||||||||||||||
| In process research and development |
341 | 366 | — | — | 341 | 366 | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 17,178 | $ | 18,930 | $ | 12,122 | $ | 13,543 | $ | 5,056 | $ | 5,387 | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (a) | Identifiable product rights of $57 million , mainly due to updated market assumptions regarding price and volume of products mainly in the U.S.; and |
| (b) | IPR&D assets of $23 million, mainly related to generic pipeline products resulting from development progress and changes in other key valuation indications mainly in the U.S. (e.g., market size, competition assumptions, legal landscape and launch date). |
| (a) | Identifiable product rights of $159 million due to: (i) $112 million in Japan, mainly related to regulatory pricing reductions; and (ii) $47 million related to updated market assumptions regarding price and volume of products; and |
| (b) | IPR&D assets of $19 million, related to generic pipeline products resulting from development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape and launch date). |
North America |
United States |
Europe |
International Markets |
Other |
Total |
|||||||||||||||||||||||
Teva’s API |
Medis |
|||||||||||||||||||||||||||
(U.S. $ in millions) |
||||||||||||||||||||||||||||
| Balance as of December 31, 2023 (1) |
$ | 6,459 | $ | — | $ | 8,466 | $ | 675 | $ | 1,313 | $ | 265 | $ | 17,177 | ||||||||||||||
| Goodwill allocation related to the shift of Canada to International Markets |
(6,459 | ) | 5,813 | — | 646 | — | — | — | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance as of January 1, 2024 |
$ | — | $ | 5,813 | $ | 8,466 | $ | 1,321 | $ | 1,313 | $ | 265 | $ | 17,177 | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Other changes during the period: |
||||||||||||||||||||||||||||
| Goodwill reclassified as assets held for sale |
— | — | — | (48 | ) | — | — | (48 | ) | |||||||||||||||||||
| Translation differences |
— | — | (104 | ) | 6 | (14 | ) | (10 | ) | (122 | ) | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance as of March 31, 2024 (1) |
$ | — | $ | 5,813 | $ | 8,362 | $ | 1,279 | $ | 1,299 | $ | 255 | $ | 17,007 | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (1) | Cumulative goodwill impairment as of March 31, 2024 and December 31, 2023 was approximately $28.3 billion. |
a. |
Short-term debt: |
March 31, |
December 31, |
|||||||||||||||
Interest rate as of March 31, 2024 |
Maturity |
2024 |
2023 |
|||||||||||||
(U.S. $ in millions) |
||||||||||||||||
| Convertible senior debentures |
0.25 | % | 2026 | 23 | 23 | |||||||||||
| Current maturities of long-term liabilities |
|
3,037 | 1,649 | |||||||||||||
| |
|
|
|
|||||||||||||
| Total short-term debt |
|
$ | 3,060 | $ | 1,672 | |||||||||||
| |
|
|
|
|||||||||||||
b. |
Long-term debt: |
Interest rate as of March 31, 2024 |
Maturity |
March 31, 2024 |
December 31, 2023 |
|||||||||||||
(U.S. $ in millions) |
||||||||||||||||
| Senior notes EUR 1,500 million |
1.13 | % | 2024 | 676 | 693 | |||||||||||
| Sustainability-linked senior notes EUR 1,500 million (6)(*) |
4.38 | % | 2030 | 1,620 | 1,656 | |||||||||||
| Sustainability-linked senior notes EUR 1,100 million (7)(*) |
3.75 | % | 2027 | 1,188 | 1,215 | |||||||||||
| Senior notes EUR 1,000 million (5) |
6.00 | % | 2025 | 443 | 453 | |||||||||||
| Senior notes EUR 900 million (5) |
4.50 | % | 2025 | 535 | 547 | |||||||||||
| Sustainability-linked senior notes EUR 800 million (1)(*) |
7.38 | % | 2029 | 864 | 884 | |||||||||||
| Senior notes EUR 750 million |
1.63 | % | 2028 | 806 | 826 | |||||||||||
| Senior notes EUR 700 million |
1.88 | % | 2027 | 757 | 771 | |||||||||||
| Sustainability-linked senior notes EUR 500 million (2)(*) |
7.88 | % | 2031 | 540 | 552 | |||||||||||
| Senior notes USD 3,500 million (5) |
3.15 | % | 2026 | 3,374 | 3,374 | |||||||||||
| Senior notes USD 2,000 million |
4.10 | % | 2046 | 1,986 | 1,986 | |||||||||||
| Senior notes USD 1,250 million (5)(8) |
6.00 | % | 2024 | 956 | 956 | |||||||||||
| Senior notes USD 1,250 million |
6.75 | % | 2028 | 1,250 | 1,250 | |||||||||||
| Senior notes USD 1,000 million (5) |
7.13 | % | 2025 | 427 | 427 | |||||||||||
| Sustainability-linked senior notes USD 1,000 million (7)(*) |
4.75 | % | 2027 | 1,000 | 1,000 | |||||||||||
| Sustainability-linked senior notes USD 1,000 million (6)(*) |
5.13 | % | 2029 | 1,000 | 1,000 | |||||||||||
| Senior notes USD 789 million |
6.15 | % | 2036 | 783 | 783 | |||||||||||
| Sustainability-linked senior notes USD 600 million (3)(*) |
7.88 | % | 2029 | 600 | 600 | |||||||||||
| Sustainability-linked senior notes USD 500 million (4)(*) |
8.13 | % | 2031 | 500 | 500 | |||||||||||
| Senior notes CHF 350 million |
1.00 | % | 2025 | 390 | 416 | |||||||||||
| |
|
|
|
|||||||||||||
| Total senior notes |
|
19,695 | 19,889 | |||||||||||||
| Other long-term debt |
— | 1 | ||||||||||||||
| Less current maturities |
|
(3,037 | ) | (1,649 | ) | |||||||||||
| Less debt issuance costs |
|
(74 | ) | (80 | ) | |||||||||||
| |
|
|
|
|||||||||||||
| Total senior notes and loans |
|
$ | 16,584 | $ | 18,161 | |||||||||||
| |
|
|
|
|||||||||||||
| (1) | In March 2023, Teva issued sustainability-linked senior notes in an aggregate principal amount of 800 million euro bearing 7.38 % annual interest and due September 2029. If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by 0.100 %-0.300 % |
| (2) | In March 2023, Teva issued sustainability-linked senior notes in an aggregate principal amount of 500 million euro bearing 7.88 % annual interest and due September 2031. If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by 0.100 %-0.300 % |
| (3) | In March 2023, Teva issued sustainability-linked senior notes in an aggregate principal amount of $ 600 million bearing 7.88 % annual interest and due September 2029. If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by 0.100 %-0.300 % |
| (4) | In March 2023, Teva issued sustainability-linked senior notes in an aggregate principal amount of $ 500 million bearing 8.13 % annual interest and due September 2031. If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by 0.100 %-0.300 % |
| (5) | In March 2023, Teva consummated a cash tender offer and extinguished $ 631 1,000 6 432 900 4.5 2025 ; $574 454 million aggregate principal amount of its $3,000 million 2.8% senior notes due in 2023; $293 million aggregate principal amount of its $1,250 million 6% senior notes due in 2024 and $122 million aggregate principal amount of its $3,500 million 3.15% senior notes due in 2026. |
| (6) | If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by 0.125%-0.375% per annum, from and including May 9, 2026. |
| (7) | If Teva fails to achieve certain sustainability performance targets, a one-time premium payment 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. |
(8) |
In April 2024, Teva repaid $956 million of its 6% 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 8c. |
a. |
Foreign exchange risk management: |
b. |
Interest risk management: |
c. |
Bifurcated embedded derivatives: |
d. |
Derivative instruments outstanding: |
March 31, |
December 31, |
|||||||
2024 |
2023 |
|||||||
(U.S. $ in millions) |
||||||||
| Cross-currency swap - cash flow hedge (1) |
$ | — | $ | 169 | ||||
| |
|
|
|
|||||
Fair value |
||||||||||||||||
|
Designated as hedging instruments |
Not designated as hedging instruments |
|||||||||||||||
|
March 31, 2024 |
December 31, 2023 |
March 31, 2024 |
December 31, 2023 |
|||||||||||||
| Reported under |
(U.S. $ in millions) |
(U.S. $ in millions) |
||||||||||||||
| Asset derivatives: |
||||||||||||||||
| Other current assets: |
||||||||||||||||
| Option and forward contracts |
$ |
— |
$ |
— |
$ |
36 |
$ |
38 |
||||||||
| Other non-current assets: |
||||||||||||||||
| Cross-currency swap-cash flow hedge (1) |
— |
8 |
— |
— |
||||||||||||
| Liability derivatives: |
||||||||||||||||
| Other current liabilities: |
||||||||||||||||
| Option and forward contracts |
— |
— |
(35 |
) |
(39 |
) | ||||||||||
Financial expenses, net |
Other comprehensive income (loss) |
|||||||||||||||
Three months ended, |
Three months ended, |
|||||||||||||||
|
March 31, 2024 |
March 31, 2023 |
March 31, 2024 |
March 31, 2023 |
|||||||||||||
| Reported under |
(U.S. $ in millions) |
|||||||||||||||
| Line items in which effects of hedges are recorded |
$ |
250 |
$ |
260 |
$ |
(117 |
) |
$ |
127 |
|||||||
| Cross-currency swaps - cash flow hedge (1) |
(8 |
) |
1 |
1 |
(2 |
) | ||||||||||
Financial expenses, net |
Net revenues |
|||||||||||||||
Three months ended, |
Three months ended, |
|||||||||||||||
|
March 31, 2024 |
March 31, 2023 |
March 31, 2024 |
March 31, 2023 |
|||||||||||||
| Reported under |
(U.S. $ in millions) |
|||||||||||||||
| Line items in which effects of hedges are recorded |
$ |
250 |
$ |
260 |
$ |
(3,819 |
) |
$ |
(3,661 |
) | ||||||
| Option and forward contracts (2) |
(10 |
) |
(13 |
) |
— |
— |
||||||||||
| Option and forward contracts economic hedge (3) |
— |
— |
(13 |
) |
6 |
|||||||||||
| (1) | On March 31, 2023, Teva entered into a cross-currency interest rate swap agreement, designated as cash flow hedge for accounting purposes with respect to an intercompany loan due October 2026, denominated in Japanese yen. The agreement was terminated in the first quarter of 2024 and resulted in cash proceeds of $16 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) | Teva entered into option and forward contracts designed to limit the exposure of foreign exchange fluctuations on projected revenues and expenses recorded in euro, Swiss franc, Japanese yen, British pound, Russian ruble, Canadian dollar, Polish zloty and some other currencies to protect its projected operating results for 2024. 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 the first quarter of 2024, the positive impact from these derivatives recognized under revenues was $13 million. In the first quarter of 2023, the negative impact from these derivatives recognized under was $6 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. Cash flows associated with these derivatives are reflected as cash flows from operating activities in the consolidated statements of cash flows. |
e. |
Amortizations due to terminated derivative instruments: |
f. |
Securitization: |
g. |
Supplier Finance Program Obligation |
Three months ended |
||||||||
March 31, |
||||||||
2024 |
2023 |
|||||||
(U.S. $ in millions) |
||||||||
ments of long-lived tangible assets (1) |
$ |
599 |
$ |
10 |
||||
Contingent consideration (2) |
79 |
35 |
||||||
Restructuring |
13 |
56 |
||||||
Other |
(18 |
) |
9 |
|||||
Total |
$ |
673 |
$ |
110 |
||||
| (1) | Including expenses related to exit and disposal activities. |
(2) |
The contingent consideration presented in the table above for the three months ended March 31, 2023 has been revised as discussed in note 1c. |
Three months ended March 31, |
||||||||
2024 |
2023 |
|||||||
(U.S. $ in millions) |
||||||||
Restructuring |
||||||||
Employee termination |
$ |
7 |
$ |
23 |
||||
Other |
6 |
33 |
||||||
Total |
$ |
13 |
$ |
56 |
||||
Employee termination costs |
Other |
Total |
||||||||||
(U.S. $ in millions) |
||||||||||||
Balance as of January 1, 2024 |
$ |
(75 |
) |
$ |
(7 |
) |
$ |
(82 |
) |
|||
Provision |
(7 |
) |
(6 |
) |
(13 |
) |
||||||
Utilization and other* |
32 |
7 |
39 |
|||||||||
Balance as of March 31, 2024 |
$ |
(50 |
) |
$ |
(6 |
) |
$ |
(57 |
) |
|||
Employee termination costs |
Other |
Total |
||||||||||
(U.S. $ in millions) |
||||||||||||
Balance as of January 1, 2023 |
$ |
(112 |
) |
$ |
(7 |
) |
$ |
(119 |
) |
|||
Provision |
(23 |
) |
(33 |
) |
(56 |
) |
||||||
Utilization and other* |
25 |
27 |
52 |
|||||||||
Balance as of March 31, 2023 |
$ |
(110 |
) |
$ |
(13 |
) |
$ |
(123 |
) |
|||
| * | Includes adjustments for foreign currency translation. |
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, 2023, net of taxes |
$ | (2,384 | ) | $ | (266 | ) | $ | (46 | ) | $ | (2,697 | ) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| Other comprehensive income (loss) before reclassifications |
(89 | ) | — | — | (89 | ) | ||||||||||
| Amounts reclassified to the statements of income |
— | 7 | (1 | ) | 6 | |||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net other comprehensive income (loss) before tax |
(89 | ) | 7 | (1 | ) | (83 | ) | |||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Corresponding income tax |
5 | — | — | 5 | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net other comprehensive income (loss) after tax* |
(84 | ) | 7 | (1 | ) | (78 | ) | |||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance as of March 31, 2024, net of taxes |
$ | (2,468 | ) | $ | (259 | ) | $ | (47 | ) | $ | (2,775 | ) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| * | Amounts do not include a $42 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, 2022, net of taxes |
$ | (2,514 | ) | $ | (295 | ) | $ | (28 | ) | $ | (2,838 | ) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| Other comprehensive income (loss) before reclassifications |
122 | — | 122 | |||||||||||||
| Amounts reclassified to the statements of income |
— | 8 | (1 | ) | 7 | |||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net other comprehensive income (loss) before tax |
122 | 8 | (1 | ) | 129 | |||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Corresponding income tax |
7 | — | — | 7 | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net other comprehensive income (loss) after tax* |
129 | 8 | (1 | ) | 136 | |||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance as of March 31, 2023, net of taxes |
$ | (2,385 | ) | $ | (287 | ) | $ | (29 | ) | $ | (2,701 | ) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| * | Amounts do not include a $9 million loss from foreign currency translation adjustments attributable to non-controlling interests. |
| (a) | United States segment. |
| (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 the United States and countries included in the Europe segment. |
a. |
Segment information: |
Three months ended March 31, |
||||||||||||
2024 |
||||||||||||
United States |
Europe |
International Markets |
||||||||||
(U.S. $ in millions) |
||||||||||||
| Revenues |
$ | 1,725 | $ | 1,272 | $ | 597 | ||||||
| Gross profit |
858 | 738 | 297 | |||||||||
| R&D expenses |
154 | 56 | 28 | |||||||||
| S&M expenses |
261 | 194 | 118 | |||||||||
| G&A expenses |
93 | 65 | 35 | |||||||||
| Other income |
1 | 1 | § | |||||||||
| |
|
|
|
|
|
|||||||
| Segment profit |
$ | 350 | $ | 423 | $ | 117 | ||||||
| |
|
|
|
|
|
|||||||
| § | Represents an amount less than $0.5 million. |
Three months ended March 31, |
||||||||||||
2023 |
||||||||||||
United States |
Europe |
International Markets |
||||||||||
(U.S. $ in millions) |
||||||||||||
| Revenues |
$ |
1,677 |
$ |
1,184 |
$ |
581 |
||||||
| Gross profit |
789 |
655 |
285 |
|||||||||
| R&D expenses |
149 |
53 |
27 |
|||||||||
| S&M expenses |
207 |
187 |
113 |
|||||||||
| G&A expenses |
95 |
70 |
38 |
|||||||||
| Other income |
§ |
§ |
(1 |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Segment profit |
$ |
338 |
$ |
345 |
$ |
108 |
||||||
| |
|
|
|
|
|
|||||||
| § | Represents an amount less than $0.5 million. |
Three months ended March 31, |
||||||||
2024 |
2023 |
|||||||
(U.S. $ in millions) |
||||||||
| United States profit |
$ |
350 |
$ |
338 |
||||
| Europe profit |
423 |
345 |
||||||
| International Markets profit |
117 |
108 |
||||||
| |
|
|
|
|||||
| Total reportable segments profit |
890 |
791 |
||||||
| Profit (loss) of other activities |
2 |
(6 |
) | |||||
| |
|
|
|
|||||
| Total segments profit |
892 |
785 |
||||||
| Amounts not allocated to segments: |
||||||||
| Amortization |
152 |
165 |
||||||
| Other assets impairments, restructuring and other items * |
673 |
110 |
||||||
| Intangible assets impairments |
80 |
178 |
||||||
| Legal settlements and loss contingencies |
106 |
233 |
||||||
| Other unallocated amounts |
99 |
112 |
||||||
| |
|
|
|
|||||
| Consolidated operating income (loss) * |
(218 |
) |
(13 |
) | ||||
| |
|
|
|
|||||
| Financial expenses, net |
250 |
260 |
||||||
| |
|
|
|
|||||
| Consolidated income (loss) before income taxes * |
$ |
(467 |
) |
$ |
(272 |
) | ||
| |
|
|
|
|||||
| * | The data presented for the prior period have been revised to reflect a revision in the presentation of these items in the consolidated financial statements. For additional information see note 1c. |
b. |
Segment revenues by major products and activities: |
| United States |
Three months ended March 31, |
|||||||
2024 |
2023 |
|||||||
(U.S. $ in millions) |
||||||||
| Generic products |
$ | 808 | $ | 747 | ||||
| AJOVY ®
|
45 | 46 | ||||||
| AUSTEDO |
282 | 170 | ||||||
| BENDEKA ® and TREANDA®
|
46 | 62 | ||||||
| COPAXONE |
30 | 71 | ||||||
| Anda |
381 | 424 | ||||||
| Other |
133 | 158 | ||||||
| |
|
|
|
|||||
| Total |
$ | 1,725 | $ | 1,677 | ||||
| |
|
|
|
|||||
| Europe |
Three months ended March 31, |
|||||||
2024 |
2023 |
|||||||
(U.S. $ in millions) |
||||||||
| Generic products |
$ | 1,004 | $ | 932 | ||||
| AJOVY |
51 | 36 | ||||||
| COPAXONE |
57 | 59 | ||||||
| Respiratory products |
66 | 68 | ||||||
| Other |
94 | 89 | ||||||
| |
|
|
|
|||||
| Total |
$ | 1,272 | $ | 1,184 | ||||
| |
|
|
|
|||||
| International markets |
Three months ended March 31, |
|||||||
2024 |
2023 |
|||||||
(U.S. $ in millions) |
||||||||
| Generic products |
$ | 477 | $ | 477 | ||||
| AJOVY |
17 | 13 | ||||||
| COPAXONE |
12 | 17 | ||||||
| Other |
91 | 74 | ||||||
| |
|
|
|
|||||
| Total |
$ | 597 | $ | 581 | ||||
| |
|
|
|
|||||
March 31, 2024 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
(U.S. $ in millions) |
||||||||||||||||
Cash and cash equivalents: |
||||||||||||||||
Money markets |
$ | 1,574 | $ | — | $ | — | $ | 1,574 | ||||||||
Cash, deposits and other |
1,417 | — | — | 1,417 | ||||||||||||
Investment in securities: |
||||||||||||||||
Investment in convertible bond |
— | — | 40 | 40 | ||||||||||||
Equity securities |
8 | — | — | 8 | ||||||||||||
Other |
3 | — | — | 3 | ||||||||||||
Derivatives: |
||||||||||||||||
: |
||||||||||||||||
Options and forward contracts |
— | 36 | — | 36 | ||||||||||||
: |
||||||||||||||||
Options and forward contracts |
— | (35 | ) | — | (35 | ) | ||||||||||
Bifurcated embedded derivatives |
— | — | § | — | ||||||||||||
Contingent consideration* |
— | — | (567 | ) | (567 | ) | ||||||||||
Total |
$ | 3,002 | $ | 1 | $ | (527 | ) | $ | 2,476 | |||||||
December 31, 2023 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
(U.S. $ in millions) |
||||||||||||||||
Cash and cash equivalents: |
||||||||||||||||
Money markets |
$ | 1,704 | $ | — | $ | — | $ | 1,704 | ||||||||
Cash, deposits and other |
1,522 | — | — | 1,522 | ||||||||||||
Investment in securities: |
||||||||||||||||
Investment in convertible bond security |
40 | 40 | ||||||||||||||
Equity securities |
7 | — | — | 7 | ||||||||||||
Other |
1 | — | — | 1 | ||||||||||||
Restricted cash |
1 | — | — | 1 | ||||||||||||
Derivatives: |
||||||||||||||||
Asset derivatives: |
||||||||||||||||
Options and forward contracts |
— | 38 | — | 38 | ||||||||||||
Cross-currency interest rate swap |
8 | 8 | ||||||||||||||
Liability derivatives: |
||||||||||||||||
Options and forward contracts |
— | (39 | ) | — | (39 | ) | ||||||||||
Bifurcated embedded derivatives |
— | — | § | — | ||||||||||||
Contingent consideration* |
$ | — | — | (517 | ) | (517 | ) | |||||||||
Total |
3,235 | $ | 7 | $ | (477 | ) | $ | 2,765 | ||||||||
| § | Represents an amount less than $0.5 million. |
| * | Contingent consideration represents liabilities recorded at fair value in connection with acquisitions. |
|
Three months ended March 31, 2024 |
Three months ended March 31, 2023 |
|||||||
(U.S. $ in millions) |
||||||||
Fair value at the beginning of the period |
$ |
(477 |
) |
(250 |
) |
|||
Bifurcated embedded derivatives |
§ |
§ |
||||||
Adjustments to provisions for contingent consideration: |
||||||||
Allergan transaction* |
(64 |
) |
(24 |
) |
||||
Eagle transaction |
(14 |
) |
(11 |
) |
||||
Novetide transaction |
(1 |
) |
(1 |
) |
||||
Settlement of contingent consideration: |
||||||||
Allergan transaction |
13 |
2 |
||||||
Eagle transaction |
15 |
21 |
||||||
Novetide transaction |
1 |
2 |
||||||
Fair value at the end of the period |
$ |
(527 |
) |
$ |
(261 |
) |
||
| § | Represents an amount less than $0.5 million. |
| * | The financial data presented in the tables above with respect to adjustments to provisions for contingent consideration related to Allergan for the three months ended March 31, 2023 have been revised as discussed in note 1c. |
Estimated fair value* |
||||||||
March 31, |
December 31, |
|||||||
2024 |
2023 |
|||||||
(U.S. $ in millions) |
||||||||
Senior notes and sustainability-linked senior notes included under senior notes and loans |
$ |
15,786 |
$ |
17,214 |
||||
Senior notes and convertible senior debentures included under short-term debt |
3,051 |
1,651 |
||||||
Total |
$ |
18,837 |
$ |
18,865 |
||||
| * | The fair value was estimated based on quoted market prices. |
| 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, innovative 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 innovative 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: United States (previously referred to as North America segment, see below “—United States Segment”), Europe and International Markets. Each business segment manages our entire product portfolio in its region, including generics, which includes biosimilars and OTC products, as well as innovative medicines. This structure enables strong alignment and integration between operations, commercial regions, R&D and our global marketing and portfolio function, optimizing our product lifecycle across therapeutic areas.
In addition to these three segments, we have other activities, primarily the sale of API to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis.
Pivot to Growth Strategy
In May 2023, we introduced our Pivot to Growth strategy, which is based on four key pillars: (i) delivering on our growth engines, mainly AUSTEDO®, AJOVY®, UZEDY® and our late-stage pipeline of biosimilars; (ii) stepping up innovation through delivering on our late-stage innovative pipeline assets as well as building up our early-stage pipeline organically and potentially through business development activities; (iii) sustaining our generics medicines powerhouse with a global commercial footprint, focused portfolio, pipeline and manufacturing footprint; and (iv) focusing our business by optimizing our portfolio and global manufacturing footprint to enable strategic capital deployment to accelerate our near and long-term growth engines and reorganizing certain of our business units to a more optimal structure, while also reorganizing key business units to enhance operational efficiency.
Macroeconomic and Geopolitical Environment
In recent years, the global economy has been impacted by fluctuating foreign exchange rates. In the first quarter of 2024, approximately 50% of our revenues were denominated in currencies other than the U.S. dollar and we manufacture our products largely outside of the United States. Fluctuations in the U.S. dollar versus other currencies in which we operate may materially impact our revenues, results of operations, profits and cash flows. Additionally, high levels of inflation have recently resulted in significant economic volatility and monetary tightening by central banks through higher interest rates. In addition to inflation, higher interest rates and fluctuating foreign exchange rates, the global economy has also been impacted by geopolitical tensions which have resulted in disruptions to global supply chains, including to our internal supply chain. In October 2023, Israel was attacked by a terrorist organization and entered a state of war, which as of the date of this Quarterly Report on Form 10-Q is ongoing. Our global headquarters as well as several of our manufacturing and R&D facilities are located in Israel and, while operations there currently remain largely unaffected, the impact of this war on our operations may increase, which could be material, as a result of the continuation, escalation or expansion of this war. In light of the above, supply chain disruptions could continue to result in delays in our production and distribution processes, R&D initiatives and our ability to timely respond to consumer demand. We have implemented certain measures in response to such events and are continually considering various initiatives, including price adjustments where we are not restricted contractually or regulatorily, enhanced inventory management, alternative sourcing strategies for our raw material supply and backup production plans for key products, to allow us to partially mitigate and offset the impact of these macroeconomic and geopolitical factors. However, although inflationary and other macroeconomic pressures may ease, the higher costs we have experienced during the recent periods have already impacted our operations and will likely continue to have an effect on our financial results.
46
Highlights
Significant highlights in the first quarter of 2024 included:
| • | Revenues in the first quarter of 2024 were $3,819 million, an increase of 4% in U.S. dollars or 5% in local currency terms, compared to the first quarter of 2023. This increase was mainly due to higher revenues from generic products in all our segments, from AUSTEDO, as well as from AJOVY in our Europe and International Markets segments, partially offset by lower revenues from COPAXONE, and from Anda, our distribution business in the U.S. |
| • | Our United States segment generated revenues of $1,725 million and segment profit of $350 million in the first quarter of 2024. Revenues increased by 3% and segment profit increased by 4% compared to the first quarter of 2023. |
| • | Our Europe segment generated revenues of $1,272 million and segment profit of $423 million in the first quarter of 2024. Revenues increased by 7% in U.S. dollars, or 4% in local currency terms, compared to the first quarter of 2023. Segment profit increased by 22% compared to the first quarter of 2023. |
| • | Our International Markets segment generated revenues of $597 million and segment profit of $117 million in the first quarter of 2024. Revenues increased by 3% in U.S. dollars, or 17% in local currency terms, compared to the first quarter of 2023. Segment profit increased by 8% compared to the first quarter of 2023. |
| • | Our revenues from other activities in the first quarter of 2024 were $225 million, an increase of 3% in U.S. dollars or 2% in local currency terms, compared to the first quarter of 2023. |
| • | Exchange rate movements during the first quarter of 2024, net of hedging effects, negatively impacted overall revenues by $39 million and operating income by $11 million, compared to the first quarter of 2023. |
| • | Gross profit in the first quarter of 2024 was $1,771 million, an increase of 12% compared to the first quarter of 2023. |
| • | Gross profit margin was 46.4% in the first quarter of 2024, compared to 43.2% in the first quarter of 2023. This increase was mainly due to a favorable mix of products as well as a decrease in our operational costs. |
| • | R&D expenses, net in the first quarter of 2024 were $242 million, an increase of 4% compared to $234 million in the first quarter of 2023, as we continue to execute on our Pivot to Growth strategy. |
| • | Impairments of identifiable intangible assets were $80 million in the first quarter of 2024, compared to $178 million in the first quarter of 2023. See note 5 to our consolidated financial statements. |
| • | We recorded expenses of $673 million for other asset impairments, restructuring and other items in the first quarter of 2024, compared to expenses of $110 million in the first quarter of 2023. The data presented for the prior period have been revised to reflect a revision in relation to a contingent consideration liability and related expenses in the consolidated financial statements. For additional information, see note 1c to our consolidated financial statements. |
| • | Legal settlements and loss contingencies expenses were $106 million in the first quarter of 2024, compared to $233 million in the first quarter of 2023. See note 9 to our consolidated financial statements. |
| • | Operating loss was $218 million in the first quarter of 2024, compared to an operating loss of $13 million in the first quarter of 2023. The data presented for the prior period have been revised to reflect a revision in relation to a contingent consideration liability and related expenses in the consolidated financial statements. For additional information, see note 1c to our consolidated financial statements. |
| • | Financial expenses, net were $250 million in the first quarter of 2024, compared to $260 million in the first quarter of 2023. |
47
| • | In the first quarter of 2024, we recognized a tax benefit of $52 million, on a pre-tax loss of $467 million. In the first quarter of 2023, we recognized a tax benefit of $19 million, on a pre-tax loss of $272 million. The data presented for the prior period have been revised to reflect a revision in relation to a contingent consideration liability and related expenses in the consolidated financial statements. For additional information, see note 1c to our consolidated financial statements. |
| • | As of March 31, 2024, our debt was $19,643 million, compared to $19,833 million as of December 31, 2023. In April 2024, we repaid $956 million of our 6% senior notes at maturity. See note 7 to our consolidated financial statements. |
| • | Cash flow used in operating activities during the first quarter of 2024 was $124 million, compared to $145 million of cash flow used in operating activities in the first quarter of 2023. The lower cash flow used in operating activities in the first quarter of 2024 resulted mainly from higher profit in our Europe segment, partially offset by changes in certain working capital items, including a negative impact from accounts payables. |
| • | During the first quarter of 2024, we generated free cash flow of $32 million, which we define as comprising: $124 million in cash flow used in operating activities, $295 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program), partially offset by $124 million in cash used for capital investment and $15 million in cash used for acquisition of businesses, net of cash acquired. During the first quarter of 2023, we generated free cash flow of $41 million. |
Results of Operations
Comparison of Three Months Ended March 31, 2024 to Three Months Ended March 31, 2023
Segment Information
United States Segment
The following table presents revenues, expenses and profit for our United States segment for the three months ended March 31, 2024 and 2023:
| Three months ended March 31, | ||||||||||||||||
| 2024 | 2023 | |||||||||||||||
| (U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
| Revenues |
$ | 1,725 | 100 | % | $ | 1,677 | 100 | % | ||||||||
| Gross profit |
858 | 49.8 | % | 789 | 47.0 | % | ||||||||||
| R&D expenses |
154 | 8.9 | % | 149 | 8.9 | % | ||||||||||
| S&M expenses |
261 | 15.1 | % | 207 | 12.4 | % | ||||||||||
| G&A expenses |
93 | 5.4 | % | 95 | 5.7 | % | ||||||||||
| Other income |
1 | § | § | § | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Segment profit* |
$ | 350 | 20.3 | % | $ | 338 | 20.2 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| * | Segment profit does not include amortization and certain other items. |
| § | Represents an amount less than $0.5 million or 0.5%, as applicable. |
United States Revenues
As part of a recent shift in executive management responsibilities and in line with our Pivot to Growth strategy, commencing January 1, 2024, Canada is reported as part of our International Markets segment. Prior period amounts were recast to reflect this change. See note 15 to our consolidated financial statements.
Revenues from our United States segment in the first quarter of 2024 were $1,725 million, an increase of $48 million, or 3%, compared to the first quarter of 2023. This increase was mainly due to higher revenues from AUSTEDO, as well as higher revenues from generic products, partially offset by lower revenues from certain innovative products, primarily COPAXONE and BENDEKA and TREANDA, as well as from Anda, our distribution business.
48
Revenues by Major Products and Activities
The following table presents revenues for our United States segment by major products and activities for the three months ended March 31, 2024 and 2023:
| Three months ended March 31, |
Percentage Change |
|||||||||||
| 2024 | 2023 | 2024-2023 | ||||||||||
| Generic products |
$ | 808 | $ | 747 | 8 | % | ||||||
| AJOVY |
45 | 46 | (3 | %) | ||||||||
| AUSTEDO |
282 | 170 | 67 | % | ||||||||
| BENDEKA and TREANDA |
46 | 62 | (26 | %) | ||||||||
| COPAXONE |
30 | 71 | (58 | %) | ||||||||
| Anda |
381 | 424 | (10 | %) | ||||||||
| Other* |
133 | 158 | (16 | %) | ||||||||
|
|
|
|
|
|||||||||
| Total |
$ | 1,725 | $ | 1,677 | 3 | % | ||||||
|
|
|
|
|
|||||||||
| * | Other revenues in the first quarter of 2023 were higher compared to the first quarter of 2024, mainly due to a reduction in estimated liabilities in connection with ProAir® HFA during the first quarter of 2023 following its discontinuation. |
Generic products revenues in our United States segment (including biosimilars) in the first quarter of 2024 were $808 million, an increase of 8% compared to the first quarter of 2023, mainly due to revenues from lenalidomide capsules (the generic version of Revlimid®), partially offset by increased competition to other generic products.
Among the most significant generic products we sold in the United States in the first quarter of 2024 were lenalidomide capsules (the generic version of Revlimid®), Truxima® (the biosimilar to Rituxan®), epinephrine injectable solution (the generic equivalent of EpiPen® and EpiPen Jr®), and albuterol sulfate inhalation aerosol (our ProAir® authorized generic).
In the first quarter of 2024, our total prescriptions were approximately 314 million (based on trailing twelve months), representing 8.2% of total U.S. generic prescriptions, compared to approximately 312 million (based on trailing twelve months), representing 8.3% of total U.S. generic prescriptions in the first quarter of 2023, all according to IQVIA data.
On February 24, 2024, Alvotech and Teva announced that the FDA approved SIMLANDI (adalimumab-ryvk) injection, as an interchangeable biosimilar to Humira®, for the treatment of adult rheumatoid arthritis, juvenile idiopathic arthritis, adult psoriatic arthritis, adult ankylosing spondylitis, Crohn’s disease, adult ulcerative colitis, adult plaque psoriasis, adult hidradenitis suppurativa and adult uveitis. Teva plans to launch SIMLANDI during the second quarter of 2024.
On April 16, 2024, Alvotech and Teva announced that the FDA has approved SELARSDITM (ustekinumab-aekn) injection for subcutaneous use, as a biosimilar to Stelara®, for the treatment of moderate to severe plaque psoriasis and for active psoriatic arthritis in adults and pediatric patients 6 years and older.
AJOVY revenues in our United States segment in the first quarter of 2024 were $45 million, flat compared to the first quarter of 2023. In the first quarter of 2024, AJOVY’s exit market share in the United States in terms of total number of prescriptions was 27.4% compared to 24.5% in the first quarter of 2023.
AJOVY is indicated for the preventive treatment of migraine in adults. AJOVY was launched in the U.S. in 2018. AJOVY is the only anti-CGRP subcutaneous product indicated for quarterly treatment.
49
AJOVY is protected worldwide by patents expiring in 2026 at the earliest; extensions have been granted in several countries, including the United States and in Europe, until 2031. Additional patents relating to the use of AJOVY in the treatment of migraine have also been issued in the United States and will expire between 2035 and 2039. Such patents are also pending in other countries. AJOVY will also be protected by regulatory exclusivity for 12 years from marketing approval in the United States (obtained in September 2018) and 10 years from marketing approval in Europe (obtained in April 2019).
In October 2017, we filed a lawsuit in the U.S. District Court for the District of Massachusetts alleging that Eli Lilly & Co.’s (“Lilly”) marketing and sale of its galcanezumab product for the treatment of migraine infringes nine Teva patents, including three method of treatment patents and six composition of matter patents. Lilly then submitted inter partes review (“IPR”) petitions to the Patent Trial and Appeal Board (“PTAB”), challenging the validity of the nine Teva patents. The PTAB issued decisions upholding the three method of treatment patents but finding the six composition of matter patents invalid, which decisions were affirmed by the Court of Appeals for the Federal Circuit on August 16, 2021. A jury trial regarding the three method of treatment patents resulted in a verdict in Teva’s favor on November 9, 2022, in which the three method of treatment patents were determined to be valid and infringed by Lilly, and Teva was awarded $176.5 million in damages. On September 26, 2023, the U.S. District Court for the District of Massachusetts issued a decision that reversed the jury’s verdict and damages award, finding Teva’s method of treatment patents to be invalid. Teva appealed this ruling on October 24, 2023. On February 2, 2024, Teva filed its opening appeal brief and Lilly filed its responding brief on April 19, 2024. Teva’s responsive brief is due on May 29, 2024, and Lilly’s final brief is due on June 19, 2024. No date has been set for the appeal hearing.
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 United States segment in the first quarter of 2024 increased by 67%, to $282 million, compared to $170 million in the first quarter of 2023, mainly due to growth in volume including the launch of AUSTEDO XR in May 2023, as well as expanded access for patients and increased investment to support higher demand.
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 13 Orange Book patents expiring between 2031 and 2038. We received notice letters from two ANDA filers regarding the filing of their ANDAs with paragraph (IV) certifications for certain of the patents listed in the Orange Book for AUSTEDO. On July 1, 2021, we filed claims against two generic ANDA filers, Aurobindo and Lupin, in the U.S. District Court for the District of New Jersey. In addition, Apotex filed a petition for 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 and June 8, 2022, we reached agreements with Lupin and Aurobindo, respectively, to sell their generic products beginning in April 2033, or earlier under certain circumstances. There are no further patent litigations pending regarding AUSTEDO.
AUSTEDO XR (deutetrabenazine) extended-release tablets was approved by the FDA on February 17, 2023, and became commercially available in the U.S. in May 2023. AUSTEDO XR is a new once-daily formulation indicated in adults for tardive dyskinesia and chorea associated with Huntington’s disease, additional to the currently marketed twice-daily AUSTEDO. AUSTEDO XR is protected by ten Orange Book patents expiring between 2031 and 2041.
UZEDY (risperidone) extended-release injectable suspension was approved by the FDA on April 28, 2023 for the treatment of schizophrenia in adults, and was launched in the U.S. in May 2023. UZEDY is a subcutaneous, long-acting formulation of risperidone that controls the steady release of risperidone. UZEDY is protected by nine Orange Book patents expiring between 2025 and 2033. We are moving forward with plans to launch UZEDY in other countries around the world. UZEDY faces competition from four other products.
BENDEKA and TREANDA combined revenues in our United States segment in the first quarter of 2024 decreased by 26% to $46 million, compared to the first quarter of 2023, mainly due to generic bendamustine products entry into the market. The orphan drug exclusivity that had attached to bendamustine products expired in December 2022.
50
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 18 patents listed in the U.S. Orange Book for BENDEKA with expiration dates in 2026 and 2031. In April 2020, the U.S. District Court for the District of Delaware issued a trial decision upholding the validity of all of the asserted patents and finding that four ANDA filers for generic versions of BENDEKA infringe at least one of the patents. Teva settled with one of the three ANDA filers that appealed the district court’s decision, and on August 13, 2021, the Federal Circuit issued a Rule 36 affirmance of such decision. Litigation against the fifth ANDA filer was dismissed after withdrawal of its patent challenge, and on October 18, 2021, the case against a sixth ANDA filer was also settled.
Teva also settled litigations against three 505(b)(2) applicants, Hospira, Inc. (“Hospira”), Dr. Reddy’s Laboratories (“DRL”) and Accord Healthcare (“Accord”). Based on these settlement agreements, the three 505(b)(2) filers, Hospira, Accord and DRL can launch their products on November 17, 2027 or earlier under certain circumstances. On May 4, 2023, and June 9, 2023, Teva and Eagle also filed suit against BendaRx Corp. in the U.S. District Court for the District of Delaware, following its filing of a 505(b)(2) NDA for a bendamustine product. In addition, on June 16, 2023, Teva filed suit against BendaRx USA Corp. in the U.S. District Court for the District of Eastern Virginia, which was then stayed and has now been transferred to the U.S. District Court for the District of Delaware where it has been consolidated with the suits filed there.
In addition to the settlement with Eagle regarding its bendamustine 505(b)(2) NDA, between 2015 and 2020, we reached final settlements with 22 ANDA filers for generic versions of the lyophilized form of TREANDA and one 505(b)(2) NDA filer for a generic version of the liquid form of TREANDA, providing for the launch of generic versions of TREANDA prior to patent expiration. Currently, there are multiple generic TREANDA products on the market.
COPAXONE revenues in our United States segment in the first quarter of 2024 decreased by 58% to $30 million, compared to the first quarter of 2023, mainly due to generic competition and a decrease in glatiramer acetate market share due to availability of alternative therapies. COPAXONE revenues in the first quarter of 2024 were also negatively impacted by an increase in sales allowance due to a non-recurring item.
The market for MS treatments continues to develop, particularly with the approval of generic versions of COPAXONE. Oral treatments for MS, such as Tecfidera®, Gilenya® and Aubagio®, continue to present significant and increasing competition. COPAXONE also continues to face competition from existing injectable products, as well as from monoclonal antibodies, such as Ocrevus® and Kesimpta®.
Anda revenues from third-party products in our United States segment in the first quarter of 2024 decreased by 10% to $381 million, compared to $424 million in the first quarter of 2023, mainly due to lower demand from seasonal and other market conditions. Anda, our distribution business in the United States, distributes generic and innovative medicines and OTC pharmaceutical products from Teva and 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 distribution market by maintaining a broad portfolio of products, competitive pricing and delivery throughout the United States.
Product Launches and Pipeline
In the first quarter of 2024, we launched the generic version of the following branded products in the United States:
| Product Name |
Brand Name |
Launch Date |
Total Annual U.S. Branded Sales at Time of Launch (U.S. $ in millions (IQVIA))* |
|||||
| ALVAIZ™ (eltrombopag choline tablets) 505(b)(2) |
Promacta® Tablets | February | $ | 1,145 | ||||
| Fingolimod Capsules |
Gilenya® capsules | February | $ | 483 | ||||
| Mifepristone Tablets |
Korlym® Tablets | January | No Data | |||||
| * | The figures presented are for the twelve months ended in the calendar quarter immediately prior to our launch or re-launch. |
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Our generic products pipeline in the United States includes, as of March 31, 2024, 130 product applications awaiting FDA approval, including 61 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 December 31, 2023 of approximately $111 billion, according to IQVIA. Approximately 78% of pending applications include a paragraph IV patent challenge, and we believe we are first-to-file with respect to 59 of these products, or 86 products including final approvals where launch is pending a settlement agreement or court decision. Collectively, these first-to-file opportunities represent over $75 billion in U.S. brand sales for the twelve months ended December 31, 2023, 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 first quarter of 2024, 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 Sales at Time of Launch (U.S. $ in millions (IQVIA))* |
||||
| Tofacitinib ER Tabs, 11 and 22 mg |
Xeljanz XR® | $ | 1,787 | |||
| Sugammadex Sodium Injection, Eq. 200 mg base/2 mL (Eq. 100 mg base/mL) |
Bridion® | $ | 1,055 | |||
| Metoclopramide Nasal Spray, 15 mg/spray** |
GIMOTI® | No Data | ||||
| * | The figures presented are for the twelve months ended in the calendar quarter immediately prior to our launch or re-launch. |
| ** | Marketed through Specialty Pharmacy that does not report to IQVIA. |
For information regarding our innovative and biosimilar products pipeline, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.
United States Gross Profit
Gross profit from our United States segment in the first quarter of 2024 was $858 million, an increase of 9%, compared to $789 million in the first quarter of 2023.
Gross profit margin for our United States segment in the first quarter of 2024 increased to 49.8%, compared to 47.0% in the first quarter of 2023. This increase was mainly due to a favorable mix of products primarily driven by an increase in revenues from AUSTEDO and lenalidomide capsules (the generic version of Revlimid®), as well as a decrease in our operational costs.
United States R&D Expenses
R&D expenses relating to our United States segment in the first quarter of 2024 were $154 million, an increase of 3%, compared to $149 million in the first quarter of 2023.
For a description of our R&D expenses in the first quarter of 2024, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.
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United States S&M Expenses
S&M expenses relating to our United States segment in the first quarter of 2024 were $261 million, an increase of 26%, compared to $207 million in the first quarter of 2023. This increase was mainly due to promotional activities related to AUSTEDO, primarily the direct-to-consumer advertising campaign, and promotional activities related to the launch of UZEDY.
United States G&A Expenses
G&A expenses relating to our United States segment in the first quarter of 2024 were $93 million, a decrease of 2% compared to $95 million in the first quarter of 2023.
United States Profit
Profit from our United States 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 United States segment in the first quarter of 2024 was $350 million, an increase of 4% compared to $338 million in the first quarter of 2023. This increase was mainly due to higher gross profit, partially offset by higher S&M expenses, as discussed above.
Europe Segment
The following table presents revenues, expenses and profit for our Europe segment for the three months ended March 31, 2024 and 2023:
| Three months ended March 31, | ||||||||||||||||
| 2024 | 2023 | |||||||||||||||
| (U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
| Revenues |
$ | 1,272 | 100 | % | $ | 1,184 | 100 | % | ||||||||
| Gross profit |
738 | 58.0 | % | 655 | 55.3 | % | ||||||||||
| R&D expenses |
56 | 4.4 | % | 53 | 4.5 | % | ||||||||||
| S&M expenses |
194 | 15.2 | % | 187 | 15.8 | % | ||||||||||
| G&A expenses |
65 | 5.1 | % | 70 | 5.9 | % | ||||||||||
| Other income |
1 | § | § | § | ||||||||||||
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|
|
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| Segment profit* |
$ | 423 | 33.2 | % | $ | 345 | 29.1 | % | ||||||||
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| * | Segment profit does not include amortization and certain other items. |
| § | Represents an amount less than $0.5 million or 0.5%, as applicable. |
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 2024 were $1,272 million, an increase of 7%, or $88 million, compared to the first quarter of 2023. In local currency terms, revenues increased by 4% compared to the first quarter of 2023, mainly due to higher revenues from generic products and AJOVY.
In the first quarter of 2024, revenues were positively impacted by exchange rate fluctuations of $43 million, including hedging effects, compared to the first quarter of 2023. Revenues in the first quarter of 2024 included $8 million from a positive hedging impact, which is included in “Other” in the table below. Revenues in the first quarter of 2023 included $6 million from a negative hedging impact, which is included in “Other” in the table below. See note 8d to our consolidated financial statements.
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Revenues by Major Products and Activities
The following table presents revenues for our Europe segment by major products and activities for the three months ended March 31, 2024 and 2023:
| Three months ended March 31, |
Percentage Change |
|||||||||||
| 2024 | 2023 | 2024-2023 | ||||||||||
| (U.S. $ in millions) | ||||||||||||
| Generic products |
$ | 1,004 | $ | 932 | 8 | % | ||||||
| AJOVY |
51 | 36 | 42 | % | ||||||||
| COPAXONE |
57 | 59 | (4 | %) | ||||||||
| Respiratory products |
66 | 68 | (3 | %) | ||||||||
| Other |
94 | 89 | 6 | % | ||||||||
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| Total |
$ | 1,272 | $ | 1,184 | 7 | % | ||||||
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Generic products revenues (including OTC and biosimilar products) in our Europe segment in the first quarter of 2024, increased by 8% to $1,004 million, compared to the first quarter of 2023. In local currency terms, revenues increased by 5%, mainly due to higher volumes.
AJOVY revenues in our Europe segment in the first quarter of 2024 increased by 42% to $51 million, compared to $36 million in the first quarter of 2023. In local currency terms revenues increased by 40%, mainly due to growth in European countries in which AJOVY had previously been launched.
For information about AJOVY patent protection, see “—United States Revenues—Revenues by Major Products and Activities” above.
COPAXONE revenues in our Europe segment in the first quarter of 2024 decreased by 4% to $57 million, compared to the first quarter of 2023. In local currency terms, revenues decreased by 5%, due to price reductions and a decline in volume resulting from competing glatiramer acetate products and availability of alternative therapies.
In certain countries, Teva remains in litigation against generic companies regarding COPAXONE.
Respiratory products revenues in our Europe segment in the first quarter of 2024 decreased by 3% to $66 million compared to the first quarter of 2023. In local currency terms, revenues decreased by 5% compared to the first quarter of 2023, mainly due to net price reductions and lower volumes.
Product Launches and Pipeline
As of March 31, 2024, our generic products pipeline in Europe included 132 generic approvals relating to 25 compounds in 47 formulations, with no European Medicines Agency (“EMA”) approvals received. In addition, approximately 1,470 marketing authorization applications are pending approval in 37 European countries, relating to 101 compounds in 223 formulations. Two applications are pending with the EMA relating to seven strengths in 30 markets.
For information regarding our innovative medicines 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 2024 was $738 million, an increase of 13% compared to $655 million in the first quarter of 2023.
Gross profit margin for our Europe segment in the first quarter of 2024 increased to 58.0%, compared to 55.3% in the first quarter of 2023. This increase was mainly due to a favorable mix of products as well as a decrease in our operational costs.
Europe R&D Expenses
R&D expenses relating to our Europe segment in the first quarter of 2024 were $56 million, an increase of 5% compared to $53 million in the first quarter of 2023.
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For a description of our R&D expenses in the first quarter of 2024, 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 2024 were $194 million, an increase of 4% compared to $187 million in the first quarter of 2023, this increase was mainly to support revenue growth including AJOVY, as well as due to exchange rate fluctuations.
Europe G&A Expenses
G&A expenses relating to our Europe segment in the first quarter of 2024 were $65 million, a decrease of 6% compared to $70 million in the first quarter of 2023.
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 2024 was $423 million, an increase of 22%, compared to $345 million in the first quarter of 2023. This increase was mainly due to higher gross profit, as described above.
International Markets Segment
The following table presents revenues, expenses and profit for our International Markets segment for the three months ended March 31, 2024 and 2023:
| Three months ended March 31, | ||||||||||||||||
| 2024 | 2023 | |||||||||||||||
| (U.S. $ in millions / % of Segment Revenues) | ||||||||||||||||
| Revenues |
$ | 597 | 100 | % | $ | 581 | 100 | % | ||||||||
| Gross profit |
297 | 49.7 | % | 285 | 49.0 | % | ||||||||||
| R&D expenses |
28 | 4.6 | % | 27 | 4.7 | % | ||||||||||
| S&M expenses |
118 | 19.8 | % | 113 | 19.4 | % | ||||||||||
| G&A expenses |
35 | 5.8 | % | 38 | 6.6 | % | ||||||||||
| Other income |
§ | § | (1 | ) | § | |||||||||||
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| Segment profit* |
$ | 117 | 19.6 | % | $ | 108 | 18.5 | % | ||||||||
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| * | Segment profit does not include amortization and certain other items. |
| § | Represents an amount less than $0.5 million or 0.5%, as applicable. |
International Markets Revenues
Our International Markets segment includes all countries in which we operate other than the United States and the countries included in our Europe segment. The International Markets segment includes more than 35 countries, covering a substantial portion of the global pharmaceutical industry. As part of a recent shift in executive management responsibilities, commencing January 1, 2024, Canada is reported under our International Markets segment and is no longer included as part of our United States segment. Prior period amounts were recast to reflect this change. See note 15 to our consolidated financial statements.
The countries in our International Markets segment include highly regulated, mainly generic markets, such as Canada and Israel, branded generics-oriented markets, such as Russia and certain Latin America markets and hybrid markets, such as Japan.
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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 three months ended March 31, 2024, the impact of this conflict on our International Markets segment’s results of operations and financial condition was immaterial. Consistent with our foreign exchange risk management hedging programs, we hedged our exposure to currency exchange rate fluctuations with respect to our balance sheet assets, revenues and expenses. However, as of the end of the first quarter of 2024, we hedge a small part of our projected net revenues in Russian ruble for 2024. Prior to and since the escalation of the conflict, we have been taking measures to reduce our operational cash balances in Russia and Ukraine. We have been monitoring the solvency of our customers in Russia and Ukraine and have taken measures, where practicable, to mitigate our exposure to risks related to the conflict in the region. However, the duration, severity and global implications (including potential inflation and devaluation consequences) of the conflict cannot be predicted at this time and could have an effect on our business, including on our exchange rate exposure, supply chain, operational costs and commercial presence in these markets.
Revenues from our International Markets segment in the first quarter of 2024 were $597 million, an increase of 3% compared to the first quarter of 2023. In local currency terms, revenues increased by 17% compared to the first quarter of 2023, mainly due to higher revenues from generic products in most markets, partially offset by regulatory price reductions and generic competition to off-patented products in Japan.
In the first quarter of 2024, revenues were negatively impacted by exchange rate fluctuations of $82 million, net of hedging effects, compared to the first quarter of 2023. Revenues in the first quarter of 2024 included $4 million from a positive hedging impact, compared to a minimal hedging impact in the first quarter of 2023, which are included in “Other” in the table below. See note 8d 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 three months ended March 31, 2024 and 2023:
| Three months ended March 31, |
Percentage Change |
|||||||||||
| 2024 | 2023 | 2024-2023 | ||||||||||
| (U.S. $ in millions) | ||||||||||||
| Generic products |
$ | 477 | $ | 477 | § | |||||||
| AJOVY |
17 | 13 | 26 | % | ||||||||
| COPAXONE |
12 | 17 | (32 | %) | ||||||||
| Other |
91 | 74 | 24 | % | ||||||||
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| Total |
$ | 597 | $ | 581 | 3 | % | ||||||
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Generic products revenues (including OTC products) in our International Markets segment were $477 million in the first quarter of 2024, flat compared to the first quarter of 2023. In local currency terms, revenues increased by 16% compared to the first quarter of 2023, mainly due to higher revenues in most markets, largely driven by price increases as a result of higher costs due to inflationary pressure and higher volumes, partially offset by regulatory price reductions and generic competition to off-patented products in Japan.
AJOVY was launched in certain markets in our International Markets segment, including in Canada, Japan, Australia, Israel, South Korea, Brazil and others. We are moving forward with plans to launch AJOVY in other markets. AJOVY revenues in our International Markets segment in the first quarter of 2024 were $17 million, compared to $13 million in the first quarter of 2023.
COPAXONE revenues in our International Markets segment in the first quarter of 2024 were $12 million compared to $17 million in the first quarter of 2023.
AUSTEDO was launched in China and Israel in 2021 and in Brazil in 2022, for the treatment of chorea associated with Huntington’s disease and for the treatment of tardive dyskinesia. In February 2024, we announced a strategic partnership for the marketing and distribution of AUSTEDO in China. We continue with additional submissions in various other markets.
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International Markets Gross Profit
Gross profit from our International Markets segment in the first quarter of 2024 was $297 million, an increase of 4% compared to $285 million in the first quarter of 2023.
Gross profit margin for our International Markets segment in the first quarter of 2024 increased to 49.7%, compared to 49.0% in the first quarter of 2023. This increase was mainly due to price increases largely as a result of inflationary pressures and a favorable mix of products, partially offset by regulatory price reductions and generic competition to off-patented products in Japan, as well as higher costs due to inflationary and other macroeconomic pressures.
International Markets R&D Expenses
R&D expenses relating to our International Markets segment in the first quarter of 2024 were $28 million, an increase of 1% compared to the first quarter of 2023.
For a description of our R&D expenses in the first quarter of 2024, 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 2024 were $118 million, an increase of 5% compared to the first quarter of 2023, mainly to support revenue growth.
International Markets G&A Expenses
G&A expenses relating to our International Markets segment in the first quarter of 2024 were $35 million, a decrease of 9% compared to the first quarter of 2023.
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 2024 was $117 million, an increase of 8%, compared to $108 million in the first quarter of 2023.
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 United States, Europe or International Markets segments described above.
On January 31, 2024, we announced that we intend to divest our API business (including its R&D, manufacturing and commercial activities) through a sale, which divestment is expected to be completed in the first half of 2025. The intention to divest is in alignment with our Pivot to Growth strategy. However, there can be no assurance regarding the ultimate timing or structure of a potential divestiture or that a divestiture will be agreed or completed at all.
Our revenues from other activities in the first quarter of 2024 were $225 million, an increase of 3% in U.S. dollars or 2% in local currency terms, compared to the first quarter of 2023.
API sales to third parties in the first quarter of 2024 were $128 million, reflecting an increase of 2% in both U.S. dollars and local currency terms, compared to the first quarter of 2023, following a reallocation of an immaterial business within our other activities, in line with our intention to divest our API business.
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Teva Consolidated Results
The data presented with respect to other asset impairments, restructuring and other items, operating income (loss), income taxes, net income (loss) attributable to Teva and earnings (loss) per share for the prior period have been revised to reflect a revision in relation to a contingent consideration and related expenses in the consolidated financial statements. For additional information, see note 1c to our consolidated financial statements.
Revenues
Revenues in the first quarter of 2024 were $3,819 million, an increase of 4% in U.S. dollars or 5% in local currency terms compared to the first quarter of 2023. This increase was mainly due to higher revenues from generic products in all our segments, from AUSTEDO, as well as from AJOVY in our Europe and International Markets segments, partially offset by lower revenues from COPAXONE, and from Anda, our distribution business in the U.S. See “—United States Revenues,” “—Europe Revenues,” “—International Markets Revenues” and “—Other Activities” above.
Exchange rate movements during the first quarter of 2024, net of hedging effects, negatively impacted revenues by $39 million, compared to the first quarter of 2023. See note 8d to our consolidated financial statements.
Gross Profit
Gross profit in the first quarter of 2024 was $1,771 million, an increase of 12% compared to $1,582 million in the first quarter of 2023.
Gross profit margin was 46.4% in the first quarter of 2024, compared to 43.2% in the first quarter of 2023. This increase was mainly due to a favorable mix of products as well as a decrease in our operational costs.
Research and Development (R&D) Expenses, net
Our R&D activities for innovative medicines and biosimilar products in each of our segments include costs of discovery research, preclinical work, drug formulation, early- and late-stage clinical development 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.
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.
In the first quarter of 2024, our R&D expenses related primarily to innovative product candidates and marketed products in neuroscience (such as neuropsychiatry, including post-approval commitments), immunology and immuno-oncology and selected other areas, as well as generic products and biosimilars.
R&D expenses, net in the first quarter of 2024 were $242 million, an increase of 4% compared to $234 million in the first quarter of 2023, as we continue to execute on our Pivot to Growth strategy.
Our higher R&D expenses, net in the first quarter of 2024, compared to the first quarter of 2023, were mainly due to an increase related to our late-stage innovative pipeline in neuroscience (mainly neuropsychiatry) and in immunology and immuno-oncology.
Our R&D expenses, net in the first quarter of 2024 were also impacted by reimbursements from our strategic partnerships. See note 2 to our consolidated financial statements.
R&D expenses as a percentage of revenues were 6.3% in the first quarter of 2024, compared to 6.4% in the first quarter of 2023.
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Innovative Medicines Pipeline
Below is a description of key products in our innovative medicines pipeline as of May 1, 2024:
| Phase 2 |
Phase 3 |
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| Neuroscience | Olanzapine LAI (TEV-‘749) Schizophrenia (September 2022) |
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| Immunology | Anti- TL1A(1) (TEV-’574) Inflammatory Bowel Disease |
ICS/SABA(3) (TEV-’248) Respiratory (February 2023) |
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| Emrusolmin(2) (TEV-‘286) Multiple System Atropy |
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| (1) | In collaboration with Sanofi. |
| (2) | In collaboration with Modag. |
| (3) | In collaboration with Launch Therapeutics. |
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® and Xgeva® (denosumab), Xolair® (omalizumab), as well as Eylea® (afilbercept) and Simponi® and Simponi Aria® (golimumab), which are in collaboration with Alvotech for the U.S. market.
Selling and Marketing (S&M) Expenses
S&M expenses in the first quarter of 2024 were $608 million, an increase of 11.4% compared to the first quarter of 2023. This increase was mainly a result of the factors discussed above under “—United States segment—S&M Expenses.”
S&M expenses as a percentage of revenues were 15.9% in the first quarter of 2024, compared to 14.9% in the first quarter of 2023.
General and Administrative (G&A) Expenses
G&A expenses in the first quarter of 2024 were $278 million, a decrease of 6% compared to the first quarter of 2023, mainly due to lower litigation fees in the first quarter of 2024.
G&A expenses as a percentage of revenues were 7.3% in the first quarter of 2024 compared to 8.1% in the first quarter of 2023.
Intangible Asset Impairments
We recorded expenses of $80 million for identifiable intangible asset impairments in the first quarter of 2024, compared to expenses of $178 million in the first quarter of 2023. See note 5 to our consolidated financial statements.
Goodwill Impairment
No goodwill impairments were recorded in the first quarters of 2024 and 2023.
Other Asset Impairments, Restructuring and Other Items
We recorded expenses of $674 million for other asset impairments, restructuring and other items in the first quarter of 2024, compared to expenses of $110 million in the first quarter of 2023. See note 12 to our consolidated financial statements.
Legal Settlements and Loss Contingencies
We recorded expenses of $106 million in legal settlements and loss contingencies in the first quarter of 2024, compared to expenses of $233 million in the first quarter of 2023. See note 9 to our consolidated financial statements.
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Operating Income (Loss)
Operating loss was $218 million in the first quarter of 2024, compared to an operating loss of $13 million in the first quarter of 2023. The higher operating loss in the first quarter of 2024 was mainly due to higher other assets impairments, restructuring and other items, as well as higher S&M expenses in the first quarter of 2024, partially offset by higher gross profit, lower legal settlements and loss contingencies and lower intangible asset impairments in the first quarter of 2024.
Operating loss as a percentage of revenues was 5.7% in the first quarter of 2024, compared to an operating loss as a percentage of revenues of 0.4% in the first quarter of 2023.
Financial Expenses, Net
In the first quarter of 2024, financial expenses, net were $250 million, mainly comprised of net-interest expenses of $233 million. In the first quarter of 2023, financial expenses, net were $260 million, mainly comprised of net-interest expenses of $236 million.
Reconciliation Table to Consolidated Income (Loss) Before Income Taxes
The following table presents a reconciliation of our segment profits to our consolidated operating income (loss) and to consolidated income (loss) before income taxes for the three months ended March 31, 2024 and 2023:
| Three months ended March 31, |
||||||||
| 2024 | 2023 | |||||||
| (U.S. $ in millions) | ||||||||
| United States profit |
$ | 350 | $ | 338 | ||||
| Europe profit |
423 | 345 | ||||||
| International Markets profit |
117 | 108 | ||||||
|
|
|
|
|
|||||
| Total reportable segments profit |
890 | 791 | ||||||
| Profit (loss) of other activities |
2 | (6 | ) | |||||
|
|
|
|
|
|||||
| Total segments profit |
892 | 785 | ||||||
| Amounts not allocated to segments: |
||||||||
| Amortization |
152 | 165 | ||||||
| Other assets impairments, restructuring and other items * |
673 | 110 | ||||||
| Intangible assets impairments |
80 | 178 | ||||||
| Legal settlements and loss contingencies |
106 | 233 | ||||||
| Other unallocated amounts |
99 | 112 | ||||||
|
|
|
|
|
|||||
| Consolidated operating income (loss) * |
(218 | ) | (13 | ) | ||||
|
|
|
|
|
|||||
| Financial expenses, net |
250 | 260 | ||||||
|
|
|
|
|
|||||
| Consolidated income (loss) before income taxes * |
$ | (467 | ) | $ | (272 | ) | ||
|
|
|
|
|
|||||
| * | The data presented for the prior period have been revised to reflect a revision in the presentation of these items in the consolidated financial statements. For additional information see note 1c to our consolidated financial statements. |
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Income Taxes
In the first quarter of 2024, Teva recognized a tax benefit of $52 million, on a pre-tax loss of $467 million. In the first quarter of 2023, Teva recognized a tax benefit of $19 million, on a pre-tax loss of $272 million. See note 11 to our consolidated financial statements.
Share in (Profits) Losses of Associated Companies, Net
Share in losses of associated companies, net in the first quarter of 2024 was $4 million. Share in profits of associated companies, net in the first quarter of 2023 was immaterial.
Net Income (Loss) Attributable to non-controlling interests
Net loss attributable to non-controlling interests was $280 million in the first quarter of 2024, compared to a net loss attributable to non-controlling interests of $33 million in the first quarter of 2023. The higher net loss in the first quarter of 2024 was mainly due to higher impairments of tangible assets largely related to the classification of a business in our International Markets segment as held for sale. See note 12 to our consolidated financial statements.
Net Income (Loss) Attributable to Teva
Net loss was $139 million in the first quarter of 2024, compared to a net loss of $220 million in the first quarter of 2023. The lower net loss in the first quarter of 2024 was mainly due to higher net loss attributable to non-controlling interests, higher gross profit and lower legal settlements and loss contingencies, partially offset by higher other asset impairments, restructuring and other items, as discussed above.
Diluted Shares Outstanding and Earnings (Loss) per Share
The weighted average diluted shares outstanding used for the fully diluted share calculations for the three months ended March 31, 2024 and 2023 was 1,123 million and 1,115 million shares, respectively.
Diluted loss per share was $0.12 in the first quarter of 2024, compared to diluted loss per share of $0.20 in the first quarter of 2023. See note 13 to 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 PSUs, and the conversion of our convertible senior debentures, in each case, at period end.
As of March 31, 2024 and 2023, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,167 million and 1,158 million shares, respectively.
Impact of Currency Fluctuations on Results of Operations
In the first quarter of 2024, approximately 50% 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 local currencies in the markets in which we operate (primarily the euro, British pound, Japanese yen, Russian ruble, Swiss franc, Canadian dollar, and the new Israeli shekel) impact our results.
During the first quarter of 2024, the following main currencies relevant to our operations decreased in value against the U.S. dollar (each compared on a quarterly average basis): Argentinian peso by 77%, Turkish lira by 39%, Russian ruble by 20%, Chilean peso by 14%, Japanese yen by 11%, Ukrainian hryvna by 4%, Australian dollar by 4% and the new Israeli shekel by 3%. The following main currencies increased in value against the U.S. dollar: Polish zloty by 10%, Mexican peso by 10%, Swiss franc by 6%, Brazilian real by 5%, British pound by 4% and the euro by 1%.
As a result, exchange rate movements during the first quarter of 2024, net of hedging effects, negatively impacted overall revenues by $39 million and operating income by $11 million, compared to the first quarter of 2023.
In the first quarter of 2024, a positive hedging impact of $13 million was recognized under revenues, and a negative hedging impact of $3 million was recognized under cost of sales. In the first quarter of 2023, a negative hedging impact of $6 million was recognized under revenues and a minimal hedging impact was recognized under cost of sales.
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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 8d 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.
Commencing in the second quarter of 2022, the cumulative inflation in Turkey exceeded 100% or more over a three-year period. Although this triggered highly inflationary accounting treatment, it did not have a material impact on our results of operations.
2024 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, 2023.
Liquidity and Capital Resources
Total balance sheet assets were $42,773 million as of March 31, 2024, compared to $43,479 million as of December 31, 2023.
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 negative $1,235 million as of March 31, 2024, compared to negative $1,374 million as of December 31, 2023. This increase was mainly due to an increase in accounts receivables net of SR&A and in inventory levels, a decrease in employee-related obligations mainly due to performance incentive payments to employees for 2023, and a decrease in accounts payables, partially offset by a classification to held for sale of working capital balance related to a business in our International Markets segment, as well as an increase in other current liabilities.
Employee-related obligations, as of March 31, 2024 were $492 million, compared to $611 million as of December 31, 2023. The decrease in the first quarter of 2024 was mainly due to performance incentive payments to employees for 2023, partially offset by an accrual for performance incentive payments to employees for 2024.
Cash investment in property, plant and equipment in the first quarter of 2024 was $124 million, compared to $139 million in the first quarter of 2023. Depreciation in the first quarter of 2024 was $120 million, compared to $139 million in the first quarter of 2023.
Cash and cash equivalents as of March 31, 2024 were $2,991 million compared to $3,226 million as of December 31, 2023.
Our cash on hand that is not used for ongoing operations is generally invested in bank deposits as well as liquid securities that bear fixed and floating rates.
Teva’s principal sources of short-term liquidity are its cash on hand, existing cash investments, liquid securities and available credit facilities, primarily our $1.8 billion unsecured syndicated sustainability-linked revolving credit facility, entered into in April 2022, as amended in February 2023 and on May 3, 2024 (“RCF”). See note 7 to our consolidated financial statements.
Debt Balance and Movements
As of March 31, 2024, our debt was $19,643 million, compared to $19,833 million as of December 31, 2023. This decrease was mainly due to $193 million of exchange rate fluctuations.
In April 2024, we repaid $956 million of our 6% senior notes at maturity.
As of March 31, 2024, our debt was effectively denominated in the following currencies: 60% in U.S. dollars, 38% in euros and 2% in Swiss francs.
The portion of total debt classified as short-term as of March 31, 2024 was 16% compared to 8% as of December 31, 2023.
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Our financial leverage, which is the ratio between our debt and the sum of our debt and equity, was 72% as of March 31, 2024, compared to 71% as of December 31, 2023.
Our average debt maturity was approximately 5.7 years as of March 31, 2024, compared to 6.0 years as of December 31, 2023.
Total Equity
Total equity was $7,543 million as of March 31, 2024, compared to $8,126 million as of December 31, 2023. This decrease was mainly due to a net loss of $419 million, a negative impact of $123 million from exchange rate fluctuations, and purchase of shares from non-controlling interests in a subsidiary of Teva in Switzerland of $64 million.
Exchange rate fluctuations affected our balance sheet, as approximately 80% of our net assets as of March 31, 2024 (including both monetary and non-monetary assets) were in currencies other than the U.S. dollar. When compared to December 31, 2023, changes in currency rates as of March 31, 2024 had a negative impact of $123 million on our equity. The following main currency increased in value against the U.S. dollar: Mexican peso by 2%. The following main currencies decreased in value against the U.S. dollar: Chilean peso by 11%, Japanese yen by 7%, Swiss franc by 7%, Russian ruble by 4%, and the euro by 2%. All comparisons are on a year-to-date basis.
Cash Flow
We continually seek to improve the efficiency of our working capital management. Periodically, as part of our cash and commercial relationship management activities, we make decisions in our commercial and supply chain activities which may drive an acceleration of receivable payments from customers, or deceleration of payments to third parties. This has the effect of increasing or decreasing cash from operations during any given period. In connection with strategic continual improvement, we obtained more favorable payment terms from many of our vendors which are expected to continue in future periods. In addition, in periods in which receivable payments from customers are delayed, we have and expect we may in the future extend the time to pay certain vendors, so as to balance our liquidity position. Such decisions may have a material impact on our annual operating cash flow measurement, as well as on our quarterly results.
Cash flow used in operating activities during the first quarter of 2024 was $124 million, compared to $145 million of cash flow used in operating activities in the first quarter of 2023. The lower cash flow used in operating activities in the first quarter of 2024 resulted mainly from higher profit in our Europe segment, partially offset by changes in certain working capital items, including a negative impact from accounts payables.
During the first quarter of 2024, we generated free cash flow of $32 million, which we define as comprising $124 million in cash flow used in operating activities, $295 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program), partially offset by $124 million in cash used for capital investment and $15 million in cash used for acquisition of businesses, net of cash acquired. During the first quarter of 2023, we generated free cash flow of $41 million, which we define as comprising $145 million in cash flow used in operating activities, $323 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program) and $2 million in proceeds from divestitures of businesses and other assets, partially offset by $139 million in cash used for capital investment.
Dividends
We have not paid dividends on our ordinary shares or ADSs since December 2017.
Commitments
In addition to financing obligations under short-term debt and long-term senior notes and loans, debentures and convertible debentures, our major contractual obligations and commercial commitments include leases, royalty payments, contingent payments pursuant to acquisition agreements, collaboration agreements, development funding agreements and participation in joint ventures associated with R&D activities. For further information on our agreements with mAbxience, Launch Therapeutics and Abingworth, Biolojic Design, Royalty Pharma, Sanofi, Modag, Alvotech, Takeda and MedinCell, see note 2 to our consolidated financial statements.
We are committed to 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.
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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.
Non-GAAP Net Income and Non-GAAP EPS Data
We present non-GAAP net income and non-GAAP earnings per share (“EPS”) as management believes that such data provide useful information to investors because they are used by management and our Board of Directors, in conjunction with other performance metrics, to evaluate our operational performance, to prepare and evaluate our work plans and annual budgets and ultimately to evaluate the performance of management, including annual compensation. While other qualitative factors and judgment also affect annual compensation, the principal quantitative element in the determination of such compensation are performance targets tied to the work plan, which are based on these non-GAAP measures.
Non-GAAP financial measures have no standardized meaning and accordingly have limitations in their usefulness to investors. 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 net income and non-GAAP EPS in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP.
In preparing our non-GAAP net income and non-GAAP EPS data, we exclude items that either have a non-recurring impact on our financial performance or which, in the judgment of our management, are items that, either as a result of their nature or size, could, were they not excluded, potentially cause investors to extrapolate future performance from an improper base that is not reflective of our underlying business performance. Certain of these items are also excluded because of the difficulty in predicting their timing and scope. The items excluded from our non-GAAP net income and non-GAAP EPS include:
| • | amortization of purchased intangible assets; |
| • | legal settlements and material litigation fees and/or loss contingencies, due to the difficulty in predicting their timing and scope; |
| • | impairments of long-lived assets, including intangibles, property, plant and equipment and goodwill; |
| • | restructuring expenses, including severance, retention costs, contract cancellation costs and certain accelerated depreciation expenses primarily related to the rationalization of our plants or to certain other strategic activities, such as the realignment of R&D focus or other similar activities; |
| • | acquisition- or divestment- related items, including changes in contingent consideration, integration costs, banker and other professional fees and inventory step-up; |
| • | expenses related to our equity compensation; |
| • | significant one-time financing costs, amortization of issuance costs and terminated derivative instruments, and marketable securities investment valuation gains/losses; |
| • | unusual tax items; |
| • | other awards or settlement amounts, either paid or received; |
| • | other exceptional items that we believe are sufficiently large that their exclusion is important to facilitate an understanding of trends in our financial results, such as impacts due to significant costs for remediation of plants, or other unusual events; and |
| • | corresponding tax effects of the foregoing items. |
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The following tables present our non-GAAP net income and non-GAAP EPS for the three months ended March 31, 2024 and 2023, as well as reconciliations of each measure to their nearest GAAP equivalents:
| Three months ended March 31, |
||||||||
| ($ in millions except per share amounts) | 2024 | 2023 | ||||||
| Net income (Loss) attributable to Teva(1) |
($) | (139 | ) | (220 | ) | |||
| Increase (decrease) for excluded items: |
||||||||
| Amortization of purchased intangible assets |
152 | 165 | ||||||
| Legal settlements and loss contingencies(2) |
106 | 233 | ||||||
| Impairment of long-lived assets(3) |
679 | 188 | ||||||
| Restructuring costs |
13 | 56 | ||||||
| Costs related to regulatory actions taken in facilities |
3 | 1 | ||||||
| Equity compensation |
28 | 32 | ||||||
| Contingent consideration(1)(4) |
79 | 35 | ||||||
| Accelerated depreciation |
7 | 25 | ||||||
| Financial expenses |
12 | 23 | ||||||
| Items attributable to non-controlling interests |
(284 | ) | (40 | ) | ||||
| Other non-GAAP items(5) |
44 | 63 | ||||||
| Corresponding tax effects and unusual tax items(6) |
(150 | ) | (104 | ) | ||||
| Non-GAAP net income attributable to Teva |
($) | 548 | 457 | |||||
| Non-GAAP tax rate(7) |
15.0 | % | 15.5 | % | ||||
| GAAP diluted earnings (loss) per share attributable to Teva |
($) | (0.12 | ) | (0.20 | ) | |||
| EPS difference(8) |
0.60 | 0.60 | ||||||
| Non-GAAP diluted EPS attributable to Teva(8) |
($) | 0.48 | 0.40 | |||||
| Non-GAAP average number of shares (in millions)(8) |
1,143 | 1,128 | ||||||
| (1) | The data presented for the prior period have been revised to reflect a revision in the presentation of these items in the consolidated financial statements. For additional information see note 1c to our consolidated financial statements. |
| (2) | For the three months ended March 31, 2024, adjustments for legal settlements and loss contingencies primarily consisted of $64 million attributable to an update to the estimated settlement provision for the Company’s opioid litigation (mainly the effect of the passage of time on the net present value of the discounted payments). For the three months ended March 31, 2023, adjustments for legal settlements and loss contingencies primarily consisted of $100 million related to an estimated provision recorded in connection with the U.S. DOJ patient assistance program litigation, $50 million related to a provision for the reverse-payment antitrust litigation over certain HIV medicines, as well as $36 million attributable to an update to the estimated settlement provision related to the remaining opioid cases (mainly the effect of the passage of time on the net present value of the discounted payments). See note 9 to our consolidated financial statements. |
| (3) | For the three months ended March 31, 2024, adjustments for impairment of long-lived assets primarily consisted of $577 million related to the classification of a business in Teva’s International Markets segment as held for sale. See note 12 to our consolidated financial statements. For the three months ended March 31, 2023, adjustments for impairment of long-lived assets primarily consisted of $112 million mainly related to regulatory pricing reductions in Japan. See note 5 to our consolidated financial statements. |
| (4) | For the three months ended March 31, 2024, adjustments for contingent consideration primarily consisted of $64 million related to a change in the estimated future royalty payments to Allergan in connection with lenalidomide (generic equivalent of Revlimid®). |
| (5) | 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, primarily related to the rationalization of our plants, certain inventory write-offs, material litigation fees and other unusual events. |
| (6) | For the three months ended March 31, 2024 and March 31, 2023, adjustments for corresponding tax effects and unusual tax items exclusively consisted of the tax impact directly attributable to the pre-tax items that are excluded from non-GAAP net income included in the other adjustments to this table. |
| (7) | Non-GAAP tax rate is tax expenses (benefit) excluding the impact of non-GAAP tax adjustments presented above as a percentage of income (loss) before income taxes excluding the impact of non-GAAP adjustments presented above. GAAP tax rate for the three months ended March 31, 2024 and March 31, 2023 was 11.1% and 7.1%, respectively. |
| (8) | EPS difference and diluted non-GAAP EPS are calculated by dividing our non-GAAP net income attributable to Teva by our non-GAAP diluted weighted average number of shares. |
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Off-Balance Sheet Arrangements
Except for securitization transactions, which are disclosed in note 10f to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, 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, 2023. Additionally, see note 6 to our consolidated financial statements on this Form 10-Q for disclosure regarding reporting units at risk identified during our annual goodwill impairment test.
Recently Issued Accounting Pronouncements
See note 1 to our consolidated financial statements.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
There has not been any material change in our assessment of market risk as set forth in Item 7A to our Annual Report on Form 10-K for the year ended December 31, 2023.
| 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 (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in Teva’s reports filed or submitted under the Exchange Act 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 these disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective.
After evaluating the effectiveness of our disclosure controls and procedures as of March 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, due to a material weakness in internal control over financial reporting described below, as of such date, the Company’s disclosure controls and procedures were not effective.
Previously Identified Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As previously disclosed, in our Annual Report on Form 10-K for the year ended December 31, 2023, during the preparation of our consolidated financial statements for the year ended December 31, 2023, management identified a material weakness in our internal control over financial reporting, which continues to exist as of March 31, 2024.
We did not design and maintain effective control over the contingent consideration liability and related expenses in connection with estimated future royalty payments. This material weakness resulted in the misstatement of our “Other asset impairments, restructuring and other items,” “Net income” and “Other taxes and long-term liabilities” and related financial disclosures, and led to the revision of the Company’s consolidated financial statements for the year ended December 31, 2022, and the interim financial information for the quarterly and year-to-date periods ended June 30, 2022, September 30, 2022, December 31, 2022, March 31, 2023, June 30, 2023 and September 30, 2023. Additionally, this material weakness could result in a misstatement of the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
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Remediation Plan
Management has designed and implemented the following specific controls to address the material weakness and enhance our disclosure controls and procedures over the contingent consideration liability: (i) defined responsibilities over the end-to-end process; (ii) enhanced the formality and rigor of reconciliation procedures; and (iii) implemented additional monitoring controls through management reviews.
Although the new controls have been designed and implemented, the new controls have not operated for a sufficient period of time for management to conclude, through testing, that these controls are operating effectively. Accordingly, the material weakness is not remediated as of March 31, 2024.
Changes in Internal Control over Financial Reporting
The actions described under “Remediation Plan” above are changes in our internal control over financial reporting that occurred during the three months ended March 31, 2024, that materially affected or are reasonably likely to materially affect Teva’s internal control over financial reporting.
Additionally, during the three months ended March 31, 2024, we completed the implementation of a new financial consolidation information technology system. Such implementation was not made in response to any identified deficiency or weakness in our internal control over financial reporting. Management completed testing of this system prior to its launch and utilized a parallel run during the previous year. Furthermore, management will continue to monitor, test, and evaluate the operating effectiveness of internal controls during the post-implementation period to ensure effective controls over financial reporting.
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ITEM 1. |
LEGAL PROCEEDINGS |
ITEM 1A. |
RISK FACTORS |
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. |
MINE SAFETY DISCLOSURES |
ITEM 5. |
OTHER INFORMATION |
| ITEM 6. | EXHIBITS |
| * | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TEVA PHARMACEUTICAL INDUSTRIES LIMITED | ||||||
| Date: May 8, 2024 | By: | /s/ Eli Kalif |
||||
| Name: | Eli Kalif | |||||
| Title: | Executive Vice President, Chief Financial Officer (Duly Authorized Officer) |
|||||
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Exhibit 10.1
SECOND AMENDMENT TO SENIOR UNSECURED SUSTAINABILITY-LINKED
REVOLVING CREDIT AGREEMENT
This AMENDMENT to the Senior Unsecured Sustainability-Linked Revolving Credit Agreement, dated as of May 3, 2024 (this “Amendment”), is made and entered into by and among TEVA PHARMACEUTICAL INDUSTRIES LIMITED, an Israeli company registered under no 52-0013-954, the registered address of which is at Dvora HaNevia St. 124, Tel Aviv, Israel (the “Company” or “Parent”), TEVA PHARMACEUTICALS USA, INC., a Delaware corporation, the principal office of which is at 400 Interpace Parkway, Building A, Parsippany, New Jersey 07054, United States of America (“Teva USA” or the “US Borrower”), TEVA PHARMACEUTICAL FINANCE NETHERLANDS II B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands, with its official seat (statutaire zetel) in Amsterdam, the Netherlands, having its office at Piet Heinkade 107, 1019GM Amsterdam, the Netherlands and registered with the Dutch trade register under number 59012161 (the “Dutch II Borrower”) and TEVA PHARMACEUTICAL FINANCE NETHERLANDS III B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands, with its official seat (statutaire zetel) in Amsterdam, the Netherlands, having its office at Piet Heinkade 107, 1019GM Amsterdam, the Netherlands and registered with the Dutch trade register under number 64156729 (the “Dutch III Borrower” and together with the Dutch II Borrower, “Dutch Borrowers” and each a “Dutch Borrower” and, together with the Parent and Teva USA, the “Borrowers”) and BANK OF AMERICA, N.A., (the “Administrative Agent”).
W I T N E S S E T H:
Reference is made to the Senior Unsecured Sustainability-Linked Revolving Credit Agreement dated as of April 29, 2022 (as amended by that certain Amendment, dated February 6, 2023, and as may be further amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Existing Credit Agreement” and as amended by this Amendment, the “Credit Agreement”), between, amongst others, the Parent, the Borrowers, the Lenders named therein and the Administrative Agent.
WHEREAS, the Loan Parties and the Administrative Agent (on behalf of the Lenders in accordance with the Existing Credit Agreement) have agreed to amend certain provisions of the Existing Credit Agreement as provided for herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Defined Terms
Section 1.1 Defined Terms. Each capitalized term used in this Amendment, unless otherwise defined herein, shall have the meaning ascribed to such term in the Credit Agreement.
ARTICLE II
Amendments
Section 2.1 Amendments. Subject to the occurrence of the Second Amendment Effective Date:
| (a) | Section 1.01 of the Existing Credit Agreement is hereby amended by adding the following definitions in the appropriate alphabetical order: |
““Fitch” means Fitch Ratings, Inc. and any successor thereto.”
““Leverage Spike Election” has the meaning specified in Section 6.04(a)(ii).”
““Leverage Spike Margin Adjustment” has the meaning specified in Section 6.04(a)(ii)(II).”
““Leverage Spike Period” has the meaning specified in Section 6.04(a)(ii)(I)(A).”
““Second Amendment Effective Date” means May 3, 2024.”
““Sustainability Amendment Effective Date” means the date of delivery by the Parent of the Sustainability Pricing Certificate pursuant to Section 2.2(f) for the calendar year ending December 31, 2024.”
““Specified Material Transaction” has the meaning specified in Section 6.04(a)(ii).”
“Target” has the meaning specified in Section 6.04(a)(ii).”
| (b) | Section 1.01 of the Existing Credit Agreement is hereby amended by replacing the following existing definitions therein with the below: |
““Agency” means each of Fitch, Moody’s and/or S&P.”
““Applicable Commitment Fee” means, for any day with respect to the undrawn Commitment, the percentages per annum specified in the Rate Table in Annex I hereto in the “Applicable Commitment Fee” row based on the then applicable Rating; provided, that, any Excess Committee Fee shall be deducted as applicable.”
““Excess Commitment Fee” means an amount equal to $148,750.00, representing the excess Commitment Fee paid by the Parent for the period running from November 15, 2023 (the Sustainability Pricing Adjustment Date in respect of the year ended December 31, 2022), through the Second Amendment Effective Date, had the Second Amendment been effective as of January 1, 2024. The Excess Commitment Fee shall be deducted from the Applicable Commitment Fee payable by the Parent for the next quarterly period following the Second Amendment Effective Date.”
““KPI 1 Applicable Rate Adjustment Amount” means, effective from and after the Sustainability Amendment Effective Date, with respect to any period between Sustainability Pricing Adjustment Dates, (a) a positive 0.025% if the KPI 1 for such period as set forth in the KPI Metrics Report is less than the SPT 1 for such period, and (b) no negative (downward) adjustment if the KPI 1 for such period as set forth in the KPI Metrics Report is greater than or equal to the SPT 1 for such period.”
““KPI Metric” means KPI 1.”
““Rating” refers to the credit rating of the Parent in respect of its senior unsecured long-term indebtedness for borrowed money from one or more of the Agencies.”
““Responsible Officer” means a chief financial officer, treasurer, assistant treasurer, chief accounting officer or any other officer with similar responsibilities with respect to financial matters as the foregoing.”
““Sustainability Rate Adjustment” means, with respect to any KPI Metrics Report for any period between Sustainability Pricing Adjustment Dates, an amount (whether positive, negative or zero), expressed as a percentage, equal to the KPI 1 Applicable Rate Adjustment Amount (whether positive, negative or zero) for such period.”
| (c) | Section 1.01 of the Existing Credit Agreement is hereby amended by deleting the definitions of “KPI 2”, “KPI 2 Applicable Rate Adjustment Amount” and “SPT2” in their entirety. |
| (d) | Section 2.22(b) of the Existing Credit Agreement is hereby amended and restated in its entirety to read as follows: |
“Effective from and after the Sustainability Amendment Effective Date, for the avoidance of doubt, only one Sustainability Pricing Certificate may be delivered in respect of any calendar year. It is further understood and agreed that the Applicable Margin (as described in Section 2.22(a)) will never be increased by more than 0.025% pursuant to the Sustainability Rate Adjustment during any calendar year. For the avoidance of doubt, any adjustment to the Applicable Margin by reason of meeting the KPI Metric in any year shall not be cumulative year-over-year. Each applicable adjustment shall only apply until the date on which the next adjustment is due to take place.
It is hereby understood and agreed that if no such Sustainability Pricing Certificate is delivered by the Parent within the period set forth in paragraph (f) of this Section 2.22, the Sustainability Rate Adjustment will be a positive 0.025%, commencing on the last day such Sustainability Pricing Certificate could have been delivered pursuant to the terms of paragraph (f) of this Section 2.22 and continuing until the Parent delivers a Sustainability Pricing Certificate to the Administrative Agent for the applicable calendar year.”
| (e) | Section 4.02(b) of the Existing Credit Agreement is hereby amended to read as follows: |
“(b) Each of the representations and warranties made by any Loan Party set forth in Article 3 hereof or in any other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified by materiality shall to that extent so qualified be true and correct in all respects) on and as of the date of such Credit Extension, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects (except that any representation and warranty that is qualified by materiality shall to that extent so qualified be true and correct in all respects) as of such earlier date.”
| (f) | Section 5.11 of the Existing Credit Agreement is hereby amended and restated in its entirety to read as follows: |
“The Parent shall use commercially reasonable efforts to maintain a public rating (but, for the avoidance of doubt, not any particular rating) in respect of its senior unsecured long-term indebtedness for borrowed money from not less than two of the Agencies.”
| (g) | Section 6.04(a) of the Existing Credit Agreement is hereby amended and restated in its entirety to read as follows: |
| “(i) | The Parent shall procure that the Leverage Ratio for the period set forth in Column 1 below (calculated as of the last day of, and for, such period) does not exceed the ratio referred to in Column 2 below, subject to the provisions of Section 6.04(a)(ii) below: |
| Column 1 |
Column 2 |
|
| Four-quarter Test Period ending with such quarter below: | ||
| Q1 2022 | No greater than 4.50x | |
| Q2 2022 | No greater than 4.50x | |
| Q3 2022 | No greater than 4.50x | |
| Q4 2022 | No greater than 4.25x | |
| Q1 2023 | No greater than 4.25x | |
| Q2 2023 | No greater than 4.25x | |
| Q3 2023 | No greater than 4.25x | |
| Q4 2023 | No greater than 4.00x | |
| Q1 2024 | No greater than 4.00x | |
| Q2 2024 | No greater than 4.00x | |
| Q3 2024 | No greater than 4.00x | |
| Q4 2024 | No greater than 4.00x | |
| Q1 2025 | No greater than 4.00x | |
| Q2 2025 | No greater than 4.00x | |
| Q3 2025 | No greater than 4.00x | |
| Q4 2025 | No greater than 4.00x | |
| Q1 2026 | No greater than 4.00x | |
| Q2 2026 | No greater than 3.75x | |
| Q3 2026 | No greater than 3.75x | |
| Q4 2026 | No greater than 3.75x | |
| Q1 2027 and thereafter | No greater than 3.50x |
(ii) Notwithstanding the foregoing, if, at any time the Company and/or one of its Subsidiaries consummates or commences a Specified Material Transaction at a time when no Default is then continuing, the Company may elect, upon written notice to the Administrative Agent, to increase the maximum Leverage Ratio permitted by this Section 6.04(a) above by 0.25x for Test Periods ending on or before Q1 2026 and 0.50x for Test Periods ending Q2 2026 or later (retroactive to the first day of the Test Period in which such Specified Material Transaction is consummated or commenced) (such election, a “Leverage Spike Election”); provided, however;
(I) (A) that the Company may only make such election in respect of three Test Periods (which must be consecutive) (such three Test Periods, the “Leverage Spike Period”); and
(B) that the Company may make only one Leverage Spike Election during the life of the Credit Agreement; and
(II) if the Company does make such Leverage Spike Election, then during the applicable Leverage Spike Period, the Applicable Margin shall increase by 0.15% above what it would otherwise have been but for the Leverage Spike Election (such Applicable Margin increase, a “Leverage Spike Margin Adjustment”).
For purposes hereof, a “Specified Material Transaction” means (a) an acquisition of a business or an asset (or group of related businesses and/or assets and whether directly of assets or of equity or similar ownership interests of the direct or indirect owner thereof) (a “Target”) provided that the Target itself becomes, or is acquired by, a direct or indirect Subsidiary of the Company, (b) a substantial expansion, substantial development, substantial refurbishment or substantial modernization of a business or an asset by the Company or any Subsidiary (in each case, with “substantiality” to be determined by the Company in good faith) and (c) the making of investment, capital expenditures or other cash costs in connection with a research or development initiative, the launch of a new product line or asset, licensing agreements, joint ventures and partnerships related to any of the foregoing business development activities or the launch of any existing product line or asset by the Company or any Subsidiary into a new market or consumer base or through a new distribution method or channel, in each case, for aggregate cash consideration or expenditure of not less than US$250,000,000, or, in the case of clauses (b) and (c), projected to be of at least such amount (as certified by a Responsible Officer of the Company), in any four consecutive fiscal quarters.”
(h) Annex 1 to the Existing Credit Agreement is hereby amended and restated in its entirety as attached hereto as Exhibit A; provided however that amendment of the Applicable Commitment Fee row of Annex 1 shall be deemed to have been effective as of January 1, 2024.
(i) Annex 2 to the Existing Credit Agreement is hereby amended and restated in its entirety as attached hereto as Exhibit B.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties to the Second Amendment Effective Date. Each Loan Party hereby represents and warrants as of the Second Amendment Effective Date as follows:
| (a) | all of the representations and warranties set forth in the Credit Agreement are true and correct in all material respects (except that any representation and warranty that is qualified by materiality shall to that extent so qualified be true and correct in all respects) on and as of such date, as if made on such date, except to the extent that such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects (except that any representation and warranty that is qualified by materiality shall to that extent so qualified be true and correct in all respects) on and as of such earlier date (it being understood that references therein to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended by this Amendment and after giving effect to the amendments set forth herein); |
| (b) | the execution, delivery and performance by each Loan Party of this Amendment have been duly authorized by all necessary corporate or other organizational action, as applicable, of such Loan Party; |
| (c) | this Amendment has been duly executed and delivered by such Loan Party; and |
| (d) | no Default or Event of Default has occurred, is continuing or would exist after giving effect to this Amendment. |
ARTICLE IV
Effectiveness
Section 4.1 Effective Date. This Amendment shall become effective on the date (the “Second Amendment Effective Date”) on which:
| (a) | the Administrative Agent shall have received counterparts to this Amendment duly executed and delivered by facsimile transmission or electronic mail (in “pdf” or similar format) by each Loan Party and the Administrative Agent; |
| (b) | the Administrative Agent has received written legal opinions (and applicable resolutions and authorities) in form and substance satisfactory to it from counsel to each other Loan Parties in respect of this Amendment Agreement; and |
| (c) | the Parent shall have paid to the Administrative Agent (for the account of each Lender consenting to the Leverage Ratio Adjustment amendments a consent fee of 0.09% of its total Commitments (as at the date of this Amendment). |
Section 4.2 Notification. The Administrative Agent shall notify the Loan Parties and the Lenders of the Second Amendment Effective Date, and such notice shall be conclusive and binding.
ARTICLE V
Miscellaneous
Section 5.1 Effect of Amendment. Except as modified pursuant hereto, no other changes or modifications to the Existing Credit Agreement or Loan Documents are intended or implied and in all other respects the Existing Credit Agreement and Loan Documents are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent of conflict between the terms of this Amendment and the Loan Documents, the terms of this Amendment shall control. The Credit Agreement and this Amendment shall be read and construed as one agreement.
Section 5.2 Further Assurances. The parties hereto shall execute and deliver such additional documents and take such additional action as may be reasonably necessary or desirable to effectuate the provisions and purposes of this Amendment.
Section 5.3 Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.
Section 5.4 Severability. Any provisions of this Amendment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 5.5 Reference to the Effect on the Loan Documents. Upon the effectiveness of this Amendment, (a) each reference in the Existing Credit Agreement to this “Agreement,” “hereunder,” “hereof,” “herein” or words of similar import and (b) each reference in any other Loan Document to “the Credit Agreement”, shall mean and be a reference to the Credit Agreement as amended by this Amendment.
Section 5.6 Headings. The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment.
Section 5.7 Counterparts; Electronic Signatures. This Amendment may be in the form of an Electronic Record and may be executed using Electronic Signatures (including, without limitation, facsimile and .pdf) and shall be considered an original, and shall have the same legal effect, validity and enforceability as a paper record. For the avoidance of doubt, the authorization under this Section may include, without limitation, use or acceptance by the Administrative Agent of a manually signed paper communication which has been converted into electronic form (such as scanned into PDF format), or an electronically signed communication converted into another format, for transmission, delivery and/or retention. Notwithstanding anything contained herein to the contrary, the Administrative Agent is under no obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by the Administrative Agent pursuant to procedures approved by it; provided, further, without limiting the foregoing, (a) to the extent the Administrative Agent has agreed to accept such Electronic Signature, the Administrative Agent shall be entitled to rely on any such Electronic Signature without further verification and (b) upon the request of the Administrative Agent any Electronic Signature shall be promptly followed by a manually executed, original counterpart. For purposes hereof, “Electronic Record” and “Electronic Signature” shall have the meanings assigned to them, respectively, by 15 USC §7006, as it may be amended from time to time.
This Amendment may be executed by one or more parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by facsimile transmission or electronic mail (in “.pdf” or similar format) shall be effective as of delivery a manually executed counterpart hereof.
Section 5.8 Governing Law; Jurisdiction; Consent to Service of Process.
| (a) | This Amendment and the rights and obligations of the parties under this Amendment shall be governed by, and construed and interpreted in accordance with, the law of the State of New York without regard to conflict of law principles that would result in the application of any law other than the law of the State of New York. |
| (b) | Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Amendment, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. To the extent that any Loan Party has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such Loan Party hereby irrevocably waives such immunity in respect of its obligations under this Amendment. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Amendment shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Amendment against any Loan Party or any of their respective properties in the courts of any jurisdiction to enforce a judgment obtained in accordance with this Section. |
| (c) | Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Amendment in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. |
| (d) | Each party to this Amendment irrevocably consents to service of process in the manner provided for notices in Section 11.01 of the Credit Agreement. In addition, each Loan Party (other than Teva USA) hereby irrevocably designates, appoints and empowers Teva USA (the “Process Agent”), in the case of any suit, action or proceeding brought in the United States as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any kind and all legal process, summons, notices and documents that may be served in any action or proceeding arising out of or in connection with this Amendment or any other Loan Document. By executing this Amendment, Teva USA hereby irrevocably accepts such designation, appointment and agency, which shall remain in full force and effect until such time as Teva USA ceases to be a Borrower under the Credit Agreement (at which time each Loan Party shall designate a replacement Process Agent satisfactory to the Administrative Agent (and deliver the appropriate documentation in respect thereof as reasonably requested by the Administrative Agent)). Such service may be made by mailing (by registered or certified mail, postage prepaid) or delivering a copy of such process to such Person in care of the Process Agent at |
| the Process Agent’s above address, and such Person hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. As an alternative method of service, each Loan Party irrevocably consents to the service of any and all process in any such action or proceeding by the mailing (by registered or certified mail, postage prepaid) of copies of such process to the Process Agent or such Person at its address specified in Section 11.01 of the Credit Agreement. Nothing in this Amendment will affect the right of any party to this Amendment to serve process in any other manner permitted by law. |
Section 5.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
[Remainder of this page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first above written.
| TEVA PHARMACEUTICAL INDUSTRIES LIMITED | ||
| By: | /s/ Eli Kalif |
|
| Name: | Eli Kalif | |
| Title: | Executive Vice President and Chief Financial Officer | |
| By: | /s/ Stephen D. Harper |
|
| Name: | Stephen D. Harper | |
| Title: | Senior Vice President, Corporate Treasurer, Head of Insurance & Risk Management | |
| TEVA PHARMACEUTICALS USA, INC. | ||
| By: | /s/ Debra Peterson |
|
| Name: | Debra Peterson | |
| Title: | Treasurer | |
| By: | /s/ Brian E. Shanahan |
|
| Name: | Brian E. Shanahan | |
| Title: | VP General Counsel, Transactions | |
| TEVA PHARMACEUTICAL FINANCE NETHERLANDS II B.V. | ||
| By: | /s/ Stephen D. Harper |
|
| Name: | Stephen D. Harper | |
| Title: | Managing Director | |
| By: | /s/ David Vrhovec |
|
| Name: | David Vrhovec | |
| Title: | Managing Director | |
| TEVA PHARMACEUTICAL FINANCE NETHERLANDS III B.V. |
||
[Signature Page to 2024 RCF Amendment]
| By: | /s/ Stephen D. Harper |
|
| Name: | Stephen D. Harper | |
| Title: | Managing Director | |
| By: | /s/ David Vrhovec |
|
| Name: | David Vrhovec | |
| Title: | Managing Director | |
[Signature Page to 2024 RCF Amendment]
| BANK OF AMERICA, N.A., as Administrative Agent | ||
| By: | /s/ Anthony W. Kell |
|
| Name: | Anthony W. Kell | |
| Title: | Vice President | |
[Signature Page to 2024 RCF Amendment]
Annex 1
Rate Table
| Applicable Type |
Applicable Rating (Fitch/Moody’s/S&P)(% per annum) | |||||||||||||||||||
| BBB/Baa2/BBB or better |
BBB- /Baa3/ BBB- |
BB+ / Ba1/ BB+ |
BB/Ba2/ BB |
BB-/Ba3/ BB- or lower |
||||||||||||||||
| Applicable |
Term SOFR / EURIBOR Loans | 0.650% | 0.850 | % | 1.150 | % | 1.450 | % | 1.800 | % | ||||||||||
| Margin |
Alternate Base Rate Loans | 0.000% | 0.000 | % | 0.150 | % | 0.450 | % | 0.800 | % | ||||||||||
| Applicable Commitment Fee |
35% of the Applicable Margin for Term SOFR/EURIBOR Loans set out above. | |||||||||||||||||||
| Applicable Utilization Fees |
Less than or equal to one third drawn | 0.100% | ||||||||||||||||||
| Greater than one third and less than or equal to two thirds drawn | 0.200% | |||||||||||||||||||
| More than two thirds drawn | 0.300% | |||||||||||||||||||
The Applicable Margin shall be adjusted pursuant to the Sustainability Rate Adjustments and the Leverage Spike Margin Adjustment, if applicable. The Applicable Commitment Fee shall be calculated based on the Applicable Margin following any adjustments made pursuant to the Sustainability Rate Adjustments and Leverage Spike Margin Adjustment.
For the avoidance of doubt, the Utilization Fee is separate from and in addition to the Applicable Margin or Commitment Fee.
For purposes of determining the Applicable Margin or Applicable Commitment Fee, (a) if any of the Agencies does or do not have in effect a Rating, then the Rating assigned by the other Agency/ies shall be used, provided that (i) in the event that such Rating is not assigned due to a Default under Section 5.11 or (ii) none of the three Agencies have in effect a Rating, the BB-/Ba3/BB- or lower rate shall apply; and (b) in case of a split Rating, the Company shall take the Applicable Margin associated with the highest of the Ratings assigned by any of the three Agencies and the Applicable Margin associated with the lowest of the Ratings assigned by any of the three Agencies and average the two (rounded upwards to the nearest three decimal places) for determining the Applicable Margin for such period.
If the relevant Rating assigned by an Agency shall be changed (other than as a result of a change in the rating system of such Agency), such change shall be effective as of the date on which it is first announced by the applicable Agency. Each change in the Applicable Margin and Applicable Commitment Fee shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of an Agency shall change or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Parent and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system (including, in such case, an amendment to replace an Agency, as applicable, with another rating agency) or the unavailability of ratings from such Agency, and, pending the effectiveness of any such amendment, the Applicable Margin and Applicable Commitment Fee shall be determined by reference to the rating most recently in effect prior to such change or cessation.
Annex 2
Sustainability Table
| Cumulative SPT 11 | ||||
| 2024 |
45 | |||
| 2025 |
75 | |||
| 2026 |
88 | |||
| 2027 |
96 | |||
| 1 | SPT 1’s are cumulative (prior year submissions aggregate into the total). |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Richard D. Francis, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Teva Pharmaceutical Industries Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: May 8, 2024
| /s/ Richard D. Francis |
| Richard D. Francis |
| President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Eli Kalif, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Teva Pharmaceutical Industries Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: May 8, 2024
| /s/ Eli Kalif |
| Eli Kalif |
| Executive Vice President, Chief Financial Officer |
Exhibit 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
In connection with the Quarterly Report of Teva Pharmaceutical Industries Limited (the “Company”) on Form 10-Q for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Richard D. Francis, President and Chief Executive Officer of the Company, and Eli Kalif, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 8, 2024
| /s/ Richard D. Francis |
| Richard D. Francis |
| President and Chief Executive Officer |
| /s/ Eli Kalif |
| Eli Kalif |
| Executive Vice President, Chief Financial Officer |