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 |
Applicable | ||
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) | |
(Address of principal executive offices) |
(Zip code) | |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| ☒ | Accelerated filer | ☐ | ||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||
| Emerging growth company | ||||||
PART I. |
||||||
Item 1. |
Financial Statements (unaudited) | |||||
| 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 | 10 | |||||
| Notes to Consolidated Financial Statements | 11 | |||||
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 47 | ||||
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 74 | ||||
Item 4. |
Controls and Procedures | 74 | ||||
PART II. |
||||||
Item 1. |
Legal Proceedings | 75 | ||||
Item 1A. |
Risk Factors | 75 | ||||
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 75 | ||||
Item 3. |
Defaults Upon Senior Securities | 75 | ||||
Item 4. |
Mine Safety Disclosures | 75 | ||||
Item 5. |
Other Information | 75 | ||||
Item 6. |
Exhibits | 76 | ||||
| Signatures | 77 | |||||
| • | our ability to successfully compete in the marketplace, including: that we are substantially dependent on our generic products; consolidation of our customer base and commercial alliances among our customers; delays in launches of new generic products; the increase in the number of competitors targeting generic opportunities and seeking U.S. market exclusivity for generic versions of significant products; our ability to develop and commercialize biopharmaceutical products; competition for our specialty products, including AUSTEDO ® , AJOVY® and COPAXONE® ; our ability to achieve expected results from investments in our product pipeline; our ability to develop and commercialize additional pharmaceutical products; and the effectiveness of our patents and other measures to protect our intellectual property rights; |
| • | our substantial indebtedness, which may limit our ability to incur additional indebtedness, engage in additional transactions or make new investments, may result in a further downgrade of our credit ratings; and our inability to raise debt or borrow funds in amounts or on terms that are favorable to us; |
| • | our business and operations in general, including: uncertainty regarding the COVID-19 pandemic and the governmental and societal responses thereto; our ability to successfully execute and maintain the activities and efforts related to the measures we have taken or may take in response to the COVID-19 pandemic and associated costs therewith; effectiveness of our optimization efforts; our ability to attract, hire and retain highly skilled personnel; manufacturing or quality control problems; interruptions in our supply chain; disruptions of information technology systems; breaches of our data security; variations in intellectual property laws; challenges associated with conducting business globally, including political or economic instability, major hostilities or terrorism; costs and delays resulting from the extensive pharmaceutical regulation to which we are subject or delays in governmental processing time due to travel and work restrictions caused by the COVID-19 pandemic; the effects of reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage; significant sales to a limited number of customers; our ability to successfully bid for suitable acquisition targets or licensing opportunities, or to consummate and integrate acquisitions; and our prospects and opportunities for growth if we sell assets; |
| • | compliance, regulatory and litigation matters, including: failure to comply with complex legal and regulatory environments; increased legal and regulatory action in connection with public concern over the abuse of opioid medications and our ability to reach a final resolution of the remaining opioid-related litigation, including to finalize settlement documentation and obtain sufficient participation of plaintiffs for the proposed nationwide settlement to take effect; scrutiny from competition and pricing authorities around the world, including our ability to successfully defend against the U.S. Department of Justice (“DOJ”) criminal charges of Sherman Act violations; potential liability for patent infringement; product liability claims; failure to comply with complex Medicare and Medicaid reporting and payment obligations; compliance with anti-corruption sanctions and trade control laws; environmental risks; and the impact of Environmental, Social and Governance (“ESG”) issues; |
| • | other financial and economic risks, including: our exposure to currency fluctuations and restrictions as well as credit risks; potential impairments of our intangible assets; the impact of other macroeconomic developments such as rising inflation and geopolitical conflicts including the ongoing conflict between Russia and Ukraine; potential significant increases in tax liabilities (including as a result of potential tax reform in the United States); and the effect on our overall effective tax rate of the termination or expiration of governmental programs or tax benefits, or of a change in our business; |
ITEM 1. |
FINANCIAL STATEMENTS |
September 30, |
December 31, |
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2022 |
2021 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
$ |
||||||
| Accounts receivables, net of allowance for credit losses of $ |
||||||||
| Inventories |
||||||||
| Prepaid expenses |
||||||||
| Other current assets |
||||||||
| Assets held for sale |
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| |
|
|
|
|||||
| Total current assets |
||||||||
| Deferred income taxes |
||||||||
| Other non-current assets |
||||||||
| Property, plant and equipment, net |
||||||||
| Operating lease right-of-use |
||||||||
| Identifiable intangible assets, net |
||||||||
| Goodwill |
||||||||
| |
|
|
|
|||||
| Total assets |
$ |
$ |
||||||
| |
|
|
|
|||||
| LIABILITIES AND EQUITY |
||||||||
| Current liabilities: |
||||||||
| Short-term debt |
$ |
$ |
||||||
| Sales reserves and allowances |
||||||||
| Accounts payables |
||||||||
| Employee-related obligations |
||||||||
| Accrued expenses |
||||||||
| Other current liabilities |
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| |
|
|
|
|||||
| Total current liabilities |
||||||||
| Long-term liabilities: |
||||||||
| Deferred income taxes |
||||||||
| Other taxes and long-term liabilities |
||||||||
| Senior notes and loans |
||||||||
| Operating lease liabilities |
||||||||
| |
|
|
|
|||||
| Total long-term liabilities |
||||||||
| |
|
|
|
|||||
| Commitments and contingencies |
||||||||
| Total liabilities |
||||||||
| |
|
|
|
|||||
| Equity: |
||||||||
| Teva shareholders’ equity: |
||||||||
| Ordinary shares of NIS |
||||||||
| Additional paid-in capital |
||||||||
| Accumulated deficit |
( |
) |
( |
) | ||||
| Accumulated other comprehensive loss |
( |
) |
( |
) | ||||
| Treasury shares as of September 30, 2022 and December 31, 2021: |
( |
) |
( |
) | ||||
| |
|
|
|
|||||
| |
|
|
|
|||||
| Non-controlling interests |
||||||||
| |
|
|
|
|||||
| Total equity |
||||||||
| |
|
|
|
|||||
| Total liabilities and equity |
$ |
$ |
||||||
| |
|
|
|
|||||
Three months ended |
Nine months ended |
|||||||||||||||
September 30, |
September 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Net revenues |
$ |
$ |
$ |
$ |
||||||||||||
| Cost of sales |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Gross profit |
||||||||||||||||
| Research and development expenses |
||||||||||||||||
| Selling and marketing expenses |
||||||||||||||||
| General and administrative expenses |
||||||||||||||||
| Intangible assets impairments |
||||||||||||||||
| Goodwill impairment |
||||||||||||||||
| Other assets impairments, restructuring and other items |
||||||||||||||||
| Legal settlements and loss contingencies |
||||||||||||||||
| Other income |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) |
( |
) | ||||||||||||||
| Financial expenses, net |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Income (loss) before income taxes |
( |
) | ||||||||||||||
| Income taxes (benefit) |
( |
) | ||||||||||||||
| Share in (profits) losses of associated companies, net |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
( |
) | ||||||||||||||
| Net income (loss) attributable to non-controlling interests |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net income (loss) attributable to Teva |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Earnings (loss) per share attributable to ordinary shareholders: |
||||||||||||||||
| Basic |
$ | $ | $ | ( |
) | $ | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | $ | $ | ( |
) | $ | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Weighted average number of shares (in millions): |
||||||||||||||||
| Basic |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Diluted |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Three months ended |
Nine |
|||||||||||||||
September 30, |
September 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Net income (loss) |
$ |
$ |
$ |
( |
) |
$ |
||||||||||
| Other comprehensive income (loss), net of tax: |
||||||||||||||||
| Currency translation adjustment |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Unrealized gain (loss) from derivative financial instruments, net |
||||||||||||||||
| Unrealized loss on defined benefit plans |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total other comprehensive income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total comprehensive income (loss) |
( |
) | ( |
) | ||||||||||||
| Comprehensive income (loss) attributable to non-controlling interests |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Comprehensive income (loss) attributable to Teva |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
||||||||
| |
|
|
|
|
|
|
|
|||||||||
Teva shareholders’ equity |
||||||||||||||||||||||||||||||||||||
Ordinary shares |
||||||||||||||||||||||||||||||||||||
Number of shares (in millions) |
Stated value |
Additional paid-in capital |
Retained earnings (accumulated deficit) |
Accumulated other comprehensive (loss) |
Treasury shares |
Total Teva shareholders’ equity |
Non- controlling interests |
Total equity |
||||||||||||||||||||||||||||
(U.S. dollars in millions) |
||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Net Income (loss) |
||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of Shares |
* |
* |
* |
* |
||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance at September 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| * | Represents an amount less than $ |
Teva shareholders’ equity |
||||||||||||||||||||||||||||||||||||
Ordinary shares |
||||||||||||||||||||||||||||||||||||
Number of shares (in millions) |
Stated value |
Additional paid-in capital |
Retained earnings (accumulated deficit) |
Accumulated other comprehensive (loss) |
Treasury shares |
Total Teva shareholders’ equity |
Non- controlling interests |
Total equity |
||||||||||||||||||||||||||||
(U.S. dollars in millions) |
||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Net Income (loss) |
||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of Shares |
* |
* |
* |
* |
||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance at September 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| * | Represents an amount less than $ |
Teva shareholders’ equity |
||||||||||||||||||||||||||||||||||||
Ordinary shares |
||||||||||||||||||||||||||||||||||||
Number of shares (in millions) |
Stated value |
Additional paid-in capital |
Retained earnings (accumulated deficit) |
Accumulated other comprehensive (loss) |
Treasury shares |
Total Teva shareholders’ equity |
Non- controlling interests |
Total equity |
||||||||||||||||||||||||||||
(U.S. dollars in millions) |
||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Net Income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of Shares |
* |
|||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance at September 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| * | Represents an amount less than $ |
Teva shareholders’ equity |
||||||||||||||||||||||||||||||||||||
Ordinary shares |
||||||||||||||||||||||||||||||||||||
Number of shares (in millions) |
Stated value |
Additional paid-in capital |
Retained earnings (accumulated deficit) |
Accumulated other comprehensive (loss) |
Treasury shares |
Total Teva shareholders’ equity |
Non- controlling interests |
Total equity |
||||||||||||||||||||||||||||
(U.S. dollars in millions) |
||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Net Income (loss) |
||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of shares |
* |
* |
* |
|||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance at September 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| * | Represents an amount less than $ |
Nine months ended |
||||||||
September 30, |
||||||||
2022 |
2021 |
|||||||
| Operating activities: |
||||||||
| Net income (loss) |
$ |
( |
) |
$ |
||||
| Adjustments to reconcile net income (loss) to net cash provided by operations: |
||||||||
| Depreciation and amortization |
||||||||
| Impairment of goodwill, long-lived assets and assets held for sale |
||||||||
| Net change in operating assets and liabilities |
( |
) | ||||||
| Deferred income taxes – net and uncertain tax positions |
( |
) | ||||||
| Stock-based compensation |
||||||||
| Other items |
( |
) | ( |
) | ||||
| Net loss (gain) from investments and from sale of long lived assets |
||||||||
| |
|
|
|
|||||
| Net cash provided by (used in) operating activities |
||||||||
| |
|
|
|
|||||
| Investing activities: |
||||||||
| Beneficial interest collected in exchange for securitized trade receivables |
||||||||
| Purchases of property, plant and equipment |
( |
) | ( |
) | ||||
| Proceeds from sale of business and long lived assets |
||||||||
| Acquisition of businesses, net of cash acquired |
( |
) | ||||||
| Proceeds from sale of investments |
||||||||
| Purchases of investments and other assets |
|
|
( |
) |
|
|
( |
) |
| Other investing activities |
||||||||
| |
|
|
|
|||||
| Net cash provided by (used in) investing activities |
||||||||
| |
|
|
|
|||||
| Financing activities: |
||||||||
| Redemption of convertible senior notes |
( |
) | ||||||
| Proceeds from short term debt |
||||||||
| Repayment of short term debt |
( |
) | ||||||
| Repayment of senior notes and loans |
( |
) | ( |
) | ||||
| Other financing activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net cash provided by (used in) financing activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Translation adjustment on cash and cash equivalents |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net change in cash, cash equivalents and restricted cash |
( |
) | ||||||
| Balance of cash, cash equivalents and restricted cash at beginning of period |
||||||||
| |
|
|
|
|||||
| Balance of cash, cash equivalents and restricted cash at end of period |
$ |
$ |
||||||
| |
|
|
|
|||||
| Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets: |
||||||||
| Cash and cash equivalents |
||||||||
| Restricted cash included in other current assets . . |
||||||||
| |
|
|
|
|||||
| Total cash, cash equivalents and restricted cash shown in the statement of cash flows |
||||||||
| |
|
|
|
|||||
| Non-cash financing and investing activities: |
||||||||
| Beneficial interest obtained in exchange for securitized accounts receivables |
$ |
$ |
||||||