10-Q 1 d223700d10q.htm 10-Q 10-Q
falseQ3TEVA PHARMACEUTICAL INDUSTRIES LTD0000818686--12-3100-0000000ILDuring the first quarter of 2021, Teva’s shares in American Well Corporation (“American Well”) moved from a Level 2 measurement to a Level 1 measurement within the fair value hierarchy, since they were no longer subject to a sale restriction. As of September 30, 2021, Teva sold all of its holdings in American Well.Accumulated goodwill impairment as of September 30, 2021 and December 31, 2020 was approximately $25.6 billion.In July 2021, Teva repaid $1,475 million of its 2.2% senior notes at maturity. As of the date of this Quarterly Report on Form 10-Q, no amounts were outstanding under the RCF. Including impairments related to exit and disposal activities.Amounts do not include a $81 million loss from foreign currency translation adjustments attributable to non-controlling interests.Amounts do not include a $29 million gain from foreign currency translation adjustments attributable to non-controlling interests.In each of the first and second quarters of 2017, Teva entered into a cross currency swap agreement with a notional amount of $500 million maturing in 2020. These cross currency swaps were designated as a net investment hedge of Teva’s foreign subsidiaries euro denominated net assets, in order to reduce the risk of adverse exchange rate fluctuations. With respect to these cross currency swap agreements, Teva recognized gains which mainly reflect the differences between the float-for-float interest rates paid and received. In the first quarter of 2020, these cross-currency swap agreements expired. The settlement of these transactions resulted in cash proceeds of $3 million.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.Teva entered into option and forward contracts designed to limit the exposure of foreign exchange fluctuations on projected revenues and expenses recorded in euro, the Swiss franc, the Japanese yen, the British pound, the Russian ruble, the Canadian dollar and some other currencies to protect its projected operating results for 2021. These derivative instruments do not meet the criteria for hedge accounting, however, they are accounted for as an economic hedge. These derivative instruments, which may include hedging transactions against future projected revenues and expenses, are recognized on the balance sheet at their fair value on a quarterly basis, while the foreign exchange impact on the underlying revenues and expenses may occur in subsequent quarters. In 2020, Teva recognized a loss of $27 million in relation with the 2021 hedging program Teva entered into in the second half of 2020. In the first nine months of 2021, the positive impact from these derivatives recognized under revenues was $29 million. Changes in the fair value of the derivative instruments are recognized in the same line item in the statements of income as the underlying exposure being hedged. The cash flows associated with these derivatives are reflected as cash flows from operating activities in the consolidated statements of cash flows. 0000818686 2021-01-01 2021-09-30 0000818686 2021-07-01 2021-09-30 0000818686 2020-07-01 2020-09-30 0000818686 2020-01-01 2020-09-30 0000818686 2021-09-30 0000818686 2020-12-31 0000818686 2009-01-31 0000818686 2020-09-01 0000818686 2020-01-01 2020-12-31 0000818686 2017-08-21 2017-08-21 0000818686 2005-02-28 0000818686 2008-07-31 0000818686 2008-08-01 2008-08-31 0000818686 2015-07-15 2015-07-15 0000818686 2010-12-01 2010-12-31 0000818686 2012-08-01 2012-08-31 0000818686 2020-09-30 0000818686 2019-01-01 2019-12-31 0000818686 2020-11-01 2020-11-30 0000818686 2021-01-01 2021-03-31 0000818686 2014-01-01 2014-12-31 0000818686 2020-11-20 2020-11-20 0000818686 2021-07-08 0000818686 2021-08-05 2021-08-05 0000818686 2021-06-30 0000818686 2020-06-30 0000818686 2019-12-31 0000818686 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number
001-16174
 
 
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
(Exact name of registrant as specified in its charter)
 
 
 
Israel
 
Not Applicable
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification Number)
   
124 Dvora HaNevi’a St., Tel Aviv, ISRAEL
 
6944020
(Address of principal executive offices)
 
(Zip code)
+972
(3)
 914-8213
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
 
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
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes
  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes
  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated filer
     Smaller reporting company  
       
Emerging growth company           
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Act).    Yes  ☐    No  
As of
September 30
, 2021, the registrant had 1,103,007,168
 
ordinary shares outstanding.
 
 
 

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
INDEX
 
PART I.
 
  
Item 1.
 
  
 
5
 
 
  
 
5
 
 
  
 
6
 
 
  
 
7
 
 
  
 
8
 
 
  
 
10
 
 
  
 
11
 
Item 2.
 
  
 
48
 
Item 3.
 
  
 
79
 
Item 4.
 
  
 
79
 
PART II.
 
  
Item 1.
 
  
 
80
 
Item 1A.
 
  
 
80
 
Item 2.
 
  
 
80
 
Item 3.
 
  
 
80
 
Item 4.
 
  
 
80
 
Item 5.
 
  
 
80
 
Item 6.
 
  
 
81
 
 
  
 
82
 
 
2

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
INTRODUCTION AND USE OF CERTAIN TERMS
Unless otherwise indicated, all references to the “Company,” “we,” “our” and “Teva” refer to Teva Pharmaceutical Industries Limited and its subsidiaries, and references to “revenues” refer to net revenues. References to “U.S. dollars,” “dollars,” “U.S. $” and “$” are to the lawful currency of the United States of America, and references to “NIS” are to new Israeli shekels. References to “ADS(s)” are to Teva’s American Depositary Share(s). References to “MS” are to multiple sclerosis. Market data, including both sales and share data, is based on information provided by IQVIA, a provider of market research to the pharmaceutical industry (“IQVIA”), unless otherwise stated. References to “R&D” are to Research and Development, references to “IPR&D” are to
in-process
R&D, references to “S&M” are to Selling and Marketing and references to “G&A” are to General and Administrative. Some amounts in this report may not add up due to rounding. All percentages have been calculated using unrounded amounts. This report on Form
10-Q
contains many of the trademarks and trade names used by Teva in the United States and internationally to distinguish its products and services. Any third-party trademarks mentioned in this report are the property of their respective owners.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report on Form
10-Q,
and the reports and documents incorporated by reference in this Quarterly Report on Form
10-Q,
may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management’s current beliefs and expectations and are subject to substantial risks and uncertainties, both known and unknown, that could cause our future results, performance or achievements to differ significantly from that expressed or implied by such forward-looking statements. You can identify these forward-looking statements by the use of words such as “should,” “expect,” “anticipate,” “estimate,” “target,” “may,” “project,” “guidance,” “intend,” “plan,” “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. Important factors that could cause or contribute to such differences include risks relating to:
 
 
 
our ability to successfully compete in the marketplace, including: that we are substantially dependent on our generic products; consolidation of our customer base and commercial alliances among our customers; delays in launches of new generic products; the increase in the number of competitors targeting generic opportunities and seeking U.S. market exclusivity for generic versions of significant products; our ability to develop and commercialize biopharmaceutical products; competition for our specialty products, 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 its impact on our business, financial condition, operations, cash flows, and liquidity and on the economy in general; 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; 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; and environmental risks;
 
 
 
other financial and economic risks, including: our exposure to currency fluctuations and restrictions as well as credit risks; potential impairments of our intangible assets; potential significant increases in tax liabilities (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;
 
3

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
and other factors discussed in this Quarterly Report on Form
10-Q
and in our Annual Report on Form
10-K
for the year ended December 31, 2020, including in the sections captioned “Risk Factors.” Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statements or other information contained herein, whether as a result of new information, future events or otherwise. You are cautioned not to put undue reliance on these forward-looking statements.
 
4

PART I — FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in millions, except for share data)
(Unaudited)
 
    
September 30,
   
December 31,
 
    
2021
   
2020
 
ASSETS
                
Current assets:
                
Cash and cash equivalents
  
$
2,045    
$
2,177  
Accounts receivables, net of allowance for credit losses of $119 million and $126 million as of September 30, 2021 and December 31, 2020
     4,046       4,581  
Inventories
     4,167       4,403  
Prepaid expenses
     1,066       945  
Other current assets
     805       710  
Assets held for sale
     25       189  
    
 
 
   
 
 
 
Total current assets
     12,154       13,005  
Deferred income taxes
     622       695  
Other
non-current
assets
     518       538  
Property, plant and equipment, net
     6,040       6,296  
Operating lease
right-of-use
assets
     507       559  
Identifiable intangible assets, net
     7,832       8,923  
Goodwill
     20,179       20,624  
    
 
 
   
 
 
 
Total assets
  
$
47,851
 
 
$
50,640  
    
 
 
   
 
 
 
LIABILITIES AND EQUITY
                
Current liabilities:
                
Short-term debt
  
$
2,709    
$
3,188  
Sales reserves and allowances
     4,241       4,824  
Accounts payables
     1,514       1,756  
Employee-related obligations
     555       685  
Accrued expenses
     2,035       1,780  
Other current liabilities
     770       933  
    
 
 
   
 
 
 
Total current liabilities
     11,825       13,164  
Long-term liabilities:
                
Deferred income taxes
     910       964  
Other taxes and long-term liabilities
     2,203       2,240  
Senior notes and loans
     21,037       22,731  
Operating lease liabilities
     425       479  
    
 
 
   
 
 
 
Total long-term liabilities
     24,575       26,414  
    
 
 
   
 
 
 
Commitments and contingencies
, see note 10
                
Total liabilities
     36,400       39,579  
    
 
 
   
 
 
 
Equity:
                
Teva shareholders’ equity:
                
Ordinary shares of NIS 0.10 par value per share; September 30, 2021 and December 31, 2020: authorized 2,495 million shares; issued 1,209 million shares and 1,202 million shares, respectively
     57       57  
Additional
paid-in
capital
     27,529       27,443  
Accumulated deficit
     (10,370     (10,946
Accumulated other comprehensive loss
     (2,620     (2,399
Treasury shares as of September 30, 2021 and December 31, 2020 — 106 million ordinary shares
     (4,128     (4,128
    
 
 
   
 
 
 
       10,467       10,026  
    
 
 
   
 
 
 
Non-controlling
interests
     984       1,035  
    
 
 
   
 
 
 
Total equity
     11,451       11,061  
    
 
 
   
 
 
 
Total liabilities and equity
  
$
47,851    
$
50,640  
    
 
 
   
 
 
 
Amounts may not add up due to rounding.
The accompanying notes are an integral part of the financial statements.
 
5

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(U.S. dollars in millions, except share and per share data)
(Unaudited)
 
    
Three months ended
   
Nine months ended
 
    
September 30,
   
September 30,
 
    
2021
   
2020
   
2021
   
2020
 
Net revenues
  
$
3,887
 
 
$
3,978
 
 
$
11,778
 
 
$
12,206  
Cost of sales
     2,093       2,126       6,234       6,528  
    
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
     1,794       1,852       5,544       5,678  
Research and development expenses
     222       258       723       704  
Selling and marketing expenses
     597       605       1,798       1,815  
General and administrative expenses
     291       279       822       846  
Intangible assets impairments
     21       509       295       1,278  
Goodwill impairment
              4,628                4,628  
Other assets impairments, restructuring and other items
     62       (98     227       404  
Legal settlements and loss contingen
c
ies
     3       21       113       10  
Other income
     (25     (8     (73     (30
    
 
 
   
 
 
   
 
 
   
 
 
 
Operating income (loss)
     623       (4,342     1,638       (3,978
Financial expenses, net
     241       117       805       565  
    
 
 
   
 
 
   
 
 
   
 
 
 
Income (loss) before income taxes
     382       (4,459     833       (4,543
Income taxes (benefit)
     76       16       235       (147
Share in (profits) losses of associated companies, net
     5       (136     (9     (135
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss)
     302       (4,340     608       (4,261
Net income (loss) attributable to
non-controlling
interests
     11       10       32       (121
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) attributable to Teva
     292       (4,349     576       (4,140
    
 
 
   
 
 
   
 
 
   
 
 
 
Earnings (loss) per share attributable to ordinary shareholders:
                                
Basic
   $ 0.26     $ (3.97   $ 0.52     $ (3.78
    
 
 
   
 
 
   
 
 
   
 
 
 
Diluted
   $ 0.26     $ (3.97   $ 0.52     $ (3.78
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average number of shares (in millions):
                                
Basic
     1,103       1,096       1,102       1,095  
    
 
 
   
 
 
   
 
 
   
 
 
 
Diluted
     1,109       1,096       1,109       1,095  
    
 
 
   
 
 
   
 
 
   
 
 
 
Amounts may not add up due to rounding.
The accompanying notes are an integral part of the financial statements.
 
6

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(U.S. dollars in millions)
(Unaudited)
 
    
Three months ended
   
Nine months ended
 
    
September 30,
   
September 30,
 
    
2021
   
2020
   
2021
   
2020
 
Net income (loss)
  
$
302     $ (4,340
 
$
608
 
 
$
(4,261
Other comprehensive income (loss), net of tax:
                                
Currency translation adjustment
     (195     70       (325     (348
Unrealized gain (loss) from derivative financial instrum
e
nts, net
     7       9       21       46  
Unrealized loss on defined benefit plans
     1                2           
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other comprehensive income (loss)
     (187     79       (302     (302
    
 
 
   
 
 
   
 
 
   
 
 
 
Total comprehensive income (loss)
     115       (4,261     306       (4,563
Comprehensive income (loss) attributable to
non-controlling
interests
     (3     27       (49     (92
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive income (loss) attributable to Teva
  
$
118
 
 
$
(4,288
 
$
355
 
 
$
(4,471
    
 
 
   
 
 
   
 
 
   
 
 
 
Amounts may not add up due to rounding.
The accompanying notes are an integral part of the financial statements.
 
7

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
 
   
Teva shareholders’ equity
             
   
Ordinary shares
                                           
   
Number of
shares (in
millions)
   
Stated
value
   
Additional
paid-in

capital
   
Retained
earnings
(accumulated
deficit)
   
Accumulated other
comprehensive
(loss)
   
Treasury
shares
   
Total Teva
shareholders’
equity
   
Non-controlling

interests
   
Total
equity
 
                                                       
   
(U.S. dollars in millions)
 
Balance at June 30, 2021
    1,209       57       27,503       (10,662     (2,446     (4,128     10,324       987       11,311  
Net Income (loss)
                            292                       292       11       302  
Other comprehensive income
(loss)
                                    (174             (174     (13     (187
Issuance of Shares
    *       *                                       *               *  
Stock-based compensation 
expense
                    26                               26               26  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2021
    1,209     $ 57     $ 27,529     $ (10,370   $ (2,620   $ (4,128   $ 10,467     $ 984     $ 11,451  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
*
Represents an amount less than $0.5 million.
 
   
Teva shareholders’ equity
             
   
Ordinary shares
                                           
   
Number of
shares (in
millions)
   
Stated
value
   
Additional
paid-in

capital
   
Retained
earnings
(accumulated
deficit)
   
Accumulated other
comprehensive
(loss)
   
Treasury
shares
   
Total Teva
shareholders’
equity
   
Non-controlling

interests
   
Total
equity
 
                                                       
   
(U.S. dollars in millions)
 
Balance at June 30, 2020
    1,202       57       27,374       (6,747     (2,703     (4,128     13,852       972       14,824  
Net Income (loss)
                            (4,349                     (4,349     10       (4,340
Other comprehensive income
(loss)
                                    61               61       18       79  
Issuance of Shares
    *       *                                        
*
              *  
Stock-based compensation 
expense
                    29                               29               29  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2020
    1,202     $ 57     $ 27,403     $ (11,096   $ (2,643   $ (4,128   $ 9,593     $ 999     $ 10,592  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
*
Represents an amount less than $0.5 million.
 
   
Teva shareholders’ equity
             
   
Ordinary shares
                                           
   
Number of
shares (in
millions)
   
Stated
value
   
Additional
paid-in

capital
   
Retained
earnings
(accumulated
deficit)
   
Accumulated other
comprehensive
(loss)
   
Treasury
shares
   
Total Teva
shareholders’
equity
   
Non-controlling

interests
   
Total
equity
 
                                                       
   
(U.S. dollars in millions)
 
Balance at December 31, 2020
    1,202       57       27,443       (10,946     (2,399     (4,128     10,026       1,035       11,061  
Net Income (loss)
                            576                       576       32       608  
Other comprehensive income
(loss)
                                    (221             (221     (81     (302
Issuance of Shares
    7       *                                       *               *  
Stock-based compensation 
expense
                    86                               86               86  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2021
    1,209     $ 57     $ 27,529     $ (10,370   $ (2,620   $ (4,128   $ 10,467     $ 984     $ 11,451  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
*
Represents an amount less than $0.5 million.
Amounts may not add up due to rounding.
The accompanying notes are an integral part of the financial statements.
 
8

   
Teva shareholders’ equity
             
   
Ordinary shares
                                           
   
Number of
shares (in
millions)
   
Stated
value
   
Additional
paid-in

capital
   
Retained
earnings
(accumulated
deficit)
   
Accumulated other
comprehensive
(loss)
   
Treasury
shares
   
Total Teva
shareholders’
equity
   
Non-controlling

interests
   
Total
equity
 
                                                       
   
(U.S. dollars in millions)
 
Balance at December 31, 2019
    1,198       56       27,312       (6,956     (2,312     (4,128     13,972       1,091       15,063  
Net Income (loss)
                            (4,140                     (4,140     (121     (4,261
Other comprehensive i
n
come
(loss)
                                    (331             (331     29       (302
Issuance of shares
    4       *                                       *               *  
Stock-based compensation 
expense
                    91                               91               91  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2020
    1,202     $ 57     $ 27,403     $ (11,096   $ (2,643   $ (4,128   $ 9,593     $ 999     $ 10,592  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
*
Represents an amount less than $0.5 million.
Amounts may not add up due to rounding.
The accompanying notes are an integral part of the financial statements.
 
9

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in millions)
(Unaudited)
 
    
Nine months ended
 
    
September 30,
 
    
2021
   
2020
 
Operating activities:
                
Net income (loss)
  
$
608    
$
(4,261
Adjustments to reconcile net income (loss) to net cash provided by o
p
erations:
                
Depreciation and amortization
     1,010       1,162  
Impairment of long-lived assets and assets held for sale
     401       6,314  
Net change in operating assets and liabilities
     (1,881     (1,627
Deferred income taxes – net and uncertain tax positions
     13       (656
Stock-based compensation
     86       91  
Net loss (gain) from investments and from sale of long lived assets
     109       (232
Research and development in process
              40  
Other items
     (4     54  
    
 
 
   
 
 
 
Net cash provided by (used in) operating activities
     342       885  
    
 
 
   
 
 
 
Investing activities:
                
Beneficial interest collected in exchange for securitized accounts receivables
     1,278       1,102  
Purchases of property, plant and equipment
     (409     (402
Proceeds from sale of business and long lived assets
     269       54  
Proceeds from sale of investments
     172       12  
Other investing activities
     (33     (44
    
 
 
   
 
 
 
Net cash provided by investing activities
     1,277       722  
    
 
 
   
 
 
 
Financing activities:
                
Repayment of senior notes and loans and other long-term liabilities
     (1,475     (1,871
Proceeds from short term debt
     500       231  
Repayment of short term debt
     (200     (116
Redemption of convertible senior notes
     (491         
Other financing activities
     (5     (4
    
 
 
   
 
 
 
Net cash used in financing activities
     (1,671     (1,760
    
 
 
   
 
 
 
Translation adjustment on cash and cash equivalents
     (80     5  
    
 
 
   
 
 
 
Net change in cash and cash equivalents
     (132     (148
Balance of cash and cash equivalents at beginning of period
     2,177       1,975  
    
 
 
   
 
 
 
Balance of cash and cash equivalents at end of period
  
$
2,045
 
 
$
1,827  
    
 
 
   
 
 
 
Non-cash
financing and investing activities:
                
Beneficial interest obtained in exchange for securitized accounts receivables
  
$
1,310
 
 
$
1,055  
Amounts may not add up due to rounding
The accompanying notes are an integral part of the financial statements.
 
10

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 – Basis of presentation:
 
 
a.
Basis of presentation
The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, the financial statements reflect all normal and recurring adjustments necessary to fairly state the financial position and results of operations of Teva. The information included in this Quarterly Report on Form
10-Q
should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”). The
year-end
balance sheet data was derived from the audited consolidated financial statements as of December 31, 2020, but not all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) are included
.
In the process of preparing the consolidated financial statements, management makes estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. The inputs into Teva’s judgments and estimates also consider the economic implications of the
COVID-19
pandemic on its critical and significant accounting estimates, most significantly in relation to sales, reserves and allowances, IPR&D assets, marketed product rights and goodwill, all of which will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning the
COVID-19
pandemic and the actions taken to contain or treat it, as well as the economic impact on Teva’s employees, third-party manufacturers and suppliers, customers and markets. All estimates made by Teva related to the impact of the
COVID-19
pandemic within its financial statements may change in future periods. Actual results could differ from those estimates.
The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of results that could be expected for the entire fiscal year. Certain amounts in the consolidated financial statements and associated notes may not add up due to rounding. All percentages have been calculated using unrounded amounts.
 
 
b.
Significant accounting policies
Recently adopted accounting pronouncements
In March 2020, the FASB issued ASU
2020-04
“Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This guidance is effective for all entities as of March 12, 2020 through December 31, 2022. There was no material impact to the Company’s consolidated financial statements for the period ended September 30, 2021 as a result of adopting this standard update. The Company has completed negotiations to transform the facility base rate of its securitization program and is continuing to evaluate the potential impact of the replacement of the LIBOR benchmark on its interest rate risk management activities. However, it is not expected to have a material impact on the consolidated financial results of operations, financial position or cash flows.
In December 2019, the FASB issued ASU
2019-12
“Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes” (the “update”). The amendments in this update simplify the accounting for income taxes by removing the following exceptions in ASC 740: (1) exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items; (2) exception to accounting for basis differences for equity method investments when a foreign subsidiary becomes an equity method investment; and (3) exception to accounting for basis differences for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) exception to the general methodology for calculating income taxes in an interim period when a
year-to-date
loss exceeds the anticipated loss for the year.
In addition, the update also simplifies the accounting for income taxes in certain topics as follows: (1) requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a
non-income-based
tax; (2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction; (3) specifying that an entity can elect (rather than be required to) allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax
 
11

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
in its separate financial statements; and (4) requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. Teva adopted the provisions of this update as of January 1, 2021. Based on the Company’s evaluation of the above provisions, the Company notes that items (1) and (4) of this paragraph are not material. The adoption of this guidance did not have a material impact on the Company’s consolidated financial results of operations, financial position or cash flows.
Recently issued accounting pronouncements, not yet adopted
In August 2020, the FASB issued ASU
2020-06
“Debt – Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The amendments to this guidance are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The adoption of this guidance will not have a significant impact on the Company’s consolidated financial statements.
NOTE 2 – Certain transactions:
The Company has entered into alliances and other arrangements with third parties to acquire rights to products it does not have, to access markets it does not operate in and to otherwise share development costs or business risks. The Company’s most significant agreements of this nature are summarized below.
MODAG
In October 2021, Teva
 
announced a license agreement with MODAG GmbH (“Modag”), that will provide Teva an exclusive global license to develop, manufacture and commercialize Modag’s lead compound anle138b and a related compound (sery433). The agreement is subject to regulatory approval. Anle138b was initially developed for the treatment of Multiple System Atrophy (MSA) and Parkinson’s disease, and has the potential to be applied to other treatments for neurodegenerative disorders, such as Alzheimer’s disease. A phase 1b clinical trial is currently being completed. Teva will
make
an upfront payment subject to regulatory approval and Modag may be eligible for future development milestone payments, totaling
an
aggregate amount of
 up
 
to
$80 million, as well as future commercial milestones and royalties
.
Alvotech
In August 2020, Teva entered into an agreement with biopharmaceutical company Alvotech for the exclusive commercialization in the U.S. of five biosimilar product candidates. The initial pipeline for this collaboration contains biosimilar candidates addressing multiple therapeutic areas, including a proposed biosimilar to Humira
®
. Under this agreement, Alvotech is responsible for the development, registration and supply of the biosimilar product candidates and Teva will exclusively commercialize the products in the United States. Teva paid an upfront payment in the third quarter of 2020 and additional upfront and milestone payments in the second quarter of 2021 that were recorded as R&D expenses. Additional development and commercial milestone payments of up to $450 million, as well as royalty payments, may be payable by Teva over the next few years. Teva and Alvotech will share profit from the commercialization of these biosimilars. In March 2021, Abbvie sued Alvotech for allegedly misappropriating confidential information relating to Humira
®
. In October 2021, the federal court dismissed the lawsuit for lack of jurisdiction. In addition, there is pending patent litigation between Abbvie and
Alvotech related to Alvotech’s proposed biosimilar to Humira
®
Eli Lilly and Alder BioPharmaceuticals
In December 2018, Teva entered into an agreement with Eli Lilly resolving the European Patent Office opposition they had filed against Teva’s AJOVY
®
patents. The settlement agreement with Lilly also resolved Lilly’s action to revoke the patent protecting AJOVY in the United Kingdom
.
On January 8, 2018, Teva signed a global license agreement with Alder BioPharmaceuticals (“Alder”). The agreement validates Teva’s intellectual property and resolves Alder’s opposition to Teva’s European patent with respect to anti-calcitonin gene-related peptide (CGRP) antibodies, including the withdrawal of Alder’s appeal before the European Patent Office. Under the terms of the agreement, Alder received a
non-exclusive
license to Teva’s anti-CGRP antibodies patent portfolio to develop, manufacture and commercialize eptinezumab in the United States and worldwide, excluding Japan. Teva received a
$25 million upfront payment that was recognized as revenue during the first quarter of 2018, and a $25 million milestone payment in March 2020 that was recognized as revenue in the first quarter of 2020. The agreement stipulates additional development and commercial milestone payments to Teva of up to $150 million, as well as future royalties.
 
12

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
AUSTEDO
®
On September 19, 2017, Teva entered into a partnership agreement with Nuvelution Pharma, Inc. (“Nuvelution”) for development of AUSTEDO for the treatment of Tourette syndrome in pediatric patients in the United States. There are no further plans in this indication following clinical trial results received in February 2020, which failed to meet their primary endpoints. The partnership agreement was terminated on February 5, 2021.
 
Otsuka
On May 12, 2017, Teva entered into a license and collaboration agreement with Otsuka Pharmaceutical Co. Ltd. (“Otsuka”), providing Otsuka with an exclusive license to conduct phase 2 and 3 clinical trials for AJOVY in Japan and, if approved, to commercialize the product in Japan. Otsuka paid Teva an upfront payment of $50 million in consideration for the transaction. Results for these trials were received in January 2020 indicating that primary and secondary endpoints were achieved and that no clinically significant adverse events were observed in subjects. In the third quarter of 2020, Otsuka submitted an application to obtain manufacturing and marketing approval for AJOVY in Japan and, as a result, paid Teva a milestone payment of $15 million, which was recognized as revenue in the third quarter of 2020. AJOVY was approved in Japan in June 2021 and launched on August 30, 2021. As a result of the launch, Otsuka paid Teva a milestone payment of $35 million, which was recognized as revenue in the third quarter of 2021. Teva may receive additional milestone payments upon achievement of certain revenue targets. Otsuka will also pay Teva royalties on AJOVY sales in Japan.
Celltrion
In October 2016, Teva and Celltrion, Inc. (“Celltrion”) entered into a collaborative agreement to commercialize Truxima
®
and Herzuma
®
, two biosimilar products for the U.S. and Canadian markets. Teva paid Celltrion $160 million, of which Teva received an aggregate credit of $60 million as of March 31, 2021. Teva and Celltrion share the profit from the commercialization of these products. These two products, Truxima and Herzuma, were approved by the FDA in November and December 2018, respectively and were launched in the United States in November 2019 and March 2020, respectively. No additional milestone payments are expected.
Regeneron
In September 2016, Teva and Regeneron Pharmaceuticals, Inc. (“Regeneron”) entered into a collaborative agreement to develop and commercialize Regeneron’s pain medication product, fasinumab. Teva and Regeneron share in the global commercial rights to this product (excluding Japan, Korea and nine other Asian countries), as well as ongoing associated R&D costs of approximately $1 billion. Teva made an upfront payment of $250 million to Regeneron in the third quarter of 2016 and additional payments for achievement of development milestones in an aggregate amount of $120 million were paid during 2017 and 2018. The agreement stipulates additional development and commercial milestone payments of up to $2,230 million, as well as future royalties. Currently, all
non-essential
activities and related expenditures for fasinumab have been put on hold. Next steps will be assessed together with Regeneron, with the intention of discussing data with the FDA.
MedinCell
In November 2013, Teva entered into an agreement with MedinCell for the development and commercialization of multiple long acting injectable products. The lead product candidate selected was risperidone LAI
(TV-46000)
suspension for subcutaneous use for the treatment of schizophrenia. In August 2021, the FDA accepted the new drug application (“NDA”) for risperidone LAI, based on phase 3 data from two pivotal studies. Teva leads the clinical development and regulatory process and is responsible for commercialization of this product candidate. MedinCell may be eligible for development milestones, and future commercial milestones of up to $112 million in respect of risperidone LAI. Teva will also pay MedinCell royalties
on net sales
.
 
13

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
Assets and Liabilities Held For Sale:
Certain assets of Teva’s business venture in Japan
Teva operates its business in Japan, which was part of Teva’s International Market segment, through a business venture with The Takeda Pharmaceutical Company Limited (“Takeda”), in which Teva own
s
 a 51% stake and Takeda owns the remaining 49%.
In July 2020, Teva and Takeda entered into a purchase agreement with
Nichi-Iko
to sell the majority of the business venture’s generic and operational assets. This transaction was completed on February 1, 2021. The business venture retains its specialty portfolio and other selected generic molecules, pipeline assets authorized generics and long listed products (LLPs).
Until the closing date Teva accounted for the business venture assets and liabilities that were sold, as held for sale and determined that the fair value less cost of sale did not exceed the carrying value, resulting in an impairment charge of $247 million in other assets impairments, restructuring and other items recognized in 2020 and in the first quarter of 2021.
General
Assets held for sale as of September 30, 2021 include certain manufacturing assets that are expected to be sold within the next year. Assets held for sale as of December 31, 2020 included the Teva-Takeda business venture assets sold during the first quarter of 2021, certain OTC assets sold during the second quarter of 2021 and other manufacturing assets.
The table below summarizes all Teva assets included as held for sale as of September 30, 2021 and December 31, 2020:
 
    
September 30,
    
December 31,
 
    
2021
    
2020
 
               
    
(U.S. $ in millions)
 
Inventories
     7        146  
Property, plant and equipment, net and others
     32        312  
Goodwill
     13        27  
Adjustments of assets held for sale to fair value
     (27      (296
    
 
 
    
 
 
 
Total assets of the disposal group classified as held for sale in the consolidated balance sheets
   $ 25      $ 189  
    
 
 
    
 
 
 
 
1
4

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
NOTE 3 – Revenue from contracts with customers:
Disaggregation of revenue
The following table disaggregates Teva’s revenues by major revenue streams. For additional information on disaggregation of revenues, see note 15.
 
    
Three months ended September 30, 2021
 
    
North
America
    
Europe
    
International
Markets
    
Other
activities
    
Total
 
                                    
    
(U.S. $ in millions)
 
Sale of goods
     1,487        1,197        495        160        3,340  
Licensing arrangements
     22        11        4        1        38  
Distribution
     363        §        15                  378  
Other
     2        11        15        102        130  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 1,875      $ 1,220      $ 530      $ 262      $ 3,887  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
 
§ Represents an amount less than $1 million.    
 
    
Three months ended September 30, 2020
 
    
North
America
   
Europe
   
International
Markets
    
Other
activities
    
Total
 
                                  
    
(U.S. $ in millions)
 
Sale of goods
     1,660       1,116       478        173        3,427  
Licensing arrangements
     17       7       2        1        27  
Distribution
     341       §       9                  350  
Other
     (1)     (8     41        142        174  
    
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
     $ 2,017     $ 1,116     $ 529      $ 316      $ 3,978  
    
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
 
    
Nine months ended September 30, 2021
 
    
North
America
    
Europe
    
International
Markets
    
Other
activities
    
Total
 
                                    
    
(U.S. $ in millions)
 
Sale of goods
     4,776        3,560        1,397        534        10,268  
Licensing arrangements
     62        32        9        3        106  
Distribution
     968        §        49                  1,018  
Other
     §        25        50        312        387