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 |
e | ||
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) | |
(Address of principal executive offices) |
(Zip code) |
(3) (Registrant’s telephone number, including area 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. |
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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 | 9 | |||||
Notes to Consolidated Financial Statements | 10 | |||||
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 42 | ||||
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 64 | ||||
Item 4. |
Controls and Procedures | 64 | ||||
PART II. |
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Item 1. |
Legal Proceedings | 65 | ||||
Item 1A. |
Risk Factors | 65 | ||||
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 65 | ||||
Item 3. |
Defaults Upon Senior Securities | 65 | ||||
Item 4. |
Mine Safety Disclosures | 65 | ||||
Item 5. |
Other Information | 65 | ||||
Item 6. |
Exhibits | 66 | ||||
Signatures | 67 |
• | 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; 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; 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 |
March 31, |
December 31, |
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2022 |
2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivables, net of allowance for credit losses of $ |
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Inventories |
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Prepaid expenses |
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Other current assets |
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Assets held for sale |
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Total current assets |
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Deferred income taxes |
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Other non-current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use |
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Identifiable intangible assets, net |
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Goodwill |
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Total assets |
$ |
$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Short-term debt |
$ | $ | ||||||
Sales reserves and allowances |
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Accounts payables |
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Employee-related obligations |
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Accrued expenses |
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Other current liabilities |
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Total current liabilities |
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Long-term liabilities: |
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Deferred income taxes |
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Other taxes and long-term liabilities |
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Senior notes and loans |
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Operating lease liabilities |
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Total long-term liabilities |
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Commitments and contingencies |
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Total liabilities |
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Equity: |
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Teva shareholders’ equity: |
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Ordinary shares of NIS |
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Additional paid-in capital |
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Accumulated deficit |
( |
) | ( |
) | ||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Treasury shares as of March 31, 2022 and December 31, 2021: |
( |
) | ( |
) | ||||
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|
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|
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Non-controlling interests |
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Total equity |
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Total liabilities and equity |
$ |
$ |
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|
|
|
|
Three months ended |
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March 31, |
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2022 |
2021 |
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Net revenues |
$ |
$ |
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Cost of sales |
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|
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Gross profit |
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Research and development expenses |
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Selling and marketing expenses |
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General and administrative expenses |
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Intangible assets impairments |
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Other assets impairments, restructuring and other items |
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Legal settlements and loss contingencies |
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Other income |
( |
) | ( |
) | ||||
|
|
|
|
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Operating income (loss) |
( |
) | ||||||
Financial expenses, net |
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|
|
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|
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Income (loss) before income taxes |
( |
) | ||||||
Income taxes (benefit) |
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Share in (profits) losses of associated companies, net |
( |
) | ( |
) | ||||
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|
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Net income (loss) |
( |
) | ||||||
Net income (loss) attributable to non-controlling interests |
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Net income (loss) attributable to Teva |
( |
) | ||||||
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|
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Earnings (loss) per share attributable to ordinary shareholders: |
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Basic |
$ | ( |
) | $ | ||||
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|
|
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Diluted |
$ | ( |
) | $ | ||||
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Weighted average number of shares (in millions): |
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Basic |
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Diluted |
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Three months ended |
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March 31, |
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2022 |
2021 |
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Net income (loss) |
$ |
( |
) |
$ |
||||
Other comprehensive income (loss), net of tax: |
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Currency translation adjustment |
( |
) | ( |
) | ||||
Unrealized gain (loss) from derivative financial instruments, net |
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|
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Total other comprehensive income (loss) |
( |
) | ( |
) | ||||
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|
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Total comprehensive income (loss) |
( |
) | ( |
) | ||||
Comprehensive income (loss) attributable to non-controlling interests |
( |
) | ( |
) | ||||
|
|
|
|
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Comprehensive income (loss) attributable to Teva |
$ |
( |
) |
$ |
( |
) | ||
|
|
|
|
Teva shareholders’ equity |
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Ordinary shares |
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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 |
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(U.S. dollars in millions) |
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Balance at December 31, 2021 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Net Income (loss) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Other comprehensive (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
Issuance of Shares |
* |
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Stock-based compensation expense |
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Balance at March 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
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* | Represents an amount less than $ |
Teva shareholders’ equity |
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Ordinary shares |
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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 |
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(U.S. dollars in millions) |
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Balance at December 31, 2020 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Net Income (loss) |
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Other comprehensive income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
Issuance of shares |
* | * | ||||||||||||||||||||||||||||||||||
Stock-based compensation expense |
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Balance at March 31, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
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* | Represents an amount less than $ |
Three months ended |
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March 31, |
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2022 |
2021 |
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Operating activities: |
||||||||
Net income (loss) |
$ | ( |
) | $ | ||||
Adjustments to reconcile net income (loss) to net cash provided by operations: |
||||||||
Depreciation and amortization |
||||||||
Impairment of 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 |
( |
) | ||||||
|
|
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|
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Net cash provided by (used in) operating activities |
( |
) | ( |
) | ||||
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|
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Investing activities: |
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Beneficial interest collected in exchange for securitized trade receivables |
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Proceeds from sale of business and long lived assets |
||||||||
Acquisition of businesses, net of cash acquired |
|
|
( |
) |
|
|
|
|
Purchases of property, plant and equipment |
( |
) | ( |
) | ||||
Purchases of investments and other assets . |
( |
) | ( |
) | ||||
Proceeds from sale of investments |
||||||||
Other investing activities |
|
|
( |
) |
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Net cash provided by (used in) investing activities |
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|
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Financing activities: |
||||||||
Redemption of convertible senior notes |
( |
) | ||||||
Other financing activities |
( |
) | ||||||
|
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|
|
|||||
Net cash provided by (used in) financing activities |
( |
) | ||||||
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|
|
|
|||||
Translation adjustment on cash and cash equivalents |
( |
) | ( |
) | ||||
|
|
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|
|||||
Net change in cash, cash equivalents and restricted cash |
( |
) | ||||||
Balance of cash, cash equivalents and restricted cash at beginning of period |
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|
|||||
Balance of cash, cash equivalents and restricted cash at en of periodd |
$ | $ | ||||||
|
|
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|
|||||
Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets: |
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Cash and cash equivalents |
||||||||
Restricted cash included in other current assets |
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|
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Total cash, cash equivalents and restricted cash shown in the statement of cash flows |
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|
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Non-cash financing and investing activities: |
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Beneficial interest obtained in exchange for securitized accounts receivables |
$ | $ |
a. |
Basis of presentation |
b. |
Significant accounting policies |
March 31, |
December 31, |
|||||||
2022 |
2021 |
|||||||
(U.S. $ in millions) |
||||||||
Inventories |
$ |
$ |
||||||
Property, plant and equipment, net and others |
||||||||
Goodwill |
||||||||
Adjustments of assets held for sale to fair value |
( |
) | ( |
) | ||||
Total assets of the disposal group classified as held for sale in the consolidated balance sheets |
$ | $ | ||||||
Total liabilities of the disposal group classified as held for sale in the consolidated balance sheets, recorded under accrued expenses and other long-term liabilities |
$ | ( |
) | $ | ( |
) | ||
Three months ended March 31, 2022 |
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North America |
Europe |
International Markets |
Other activities |
Total |
||||||||||||||||
(U.S. $ in millions) |
||||||||||||||||||||
Sale of goods |
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Licensing arrangements |
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Distribution |
§ |
|||||||||||||||||||
Other |
( |
) | ||||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Three months ended March 31, 2021 |
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North America |
Europe |
International Markets |
Other activities |
Total |
||||||||||||||||
(U.S. $ in millions) |
||||||||||||||||||||
Sale of goods |
||||||||||||||||||||
Licensing arrangements |
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Distribution |
§ |
|||||||||||||||||||
Other |
§ |
|||||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Sales Reserves and Allowances |
||||||||||||||||||||||||||||||||
Reserves included in Accounts Receivable, net |
Rebates |
Medicaid and other governmental allowances |
Chargebacks |
Returns |
Other |
Total reserves included in SR&A |
Total |
|||||||||||||||||||||||||
(U.S. $ in millions) |
||||||||||||||||||||||||||||||||
Balance at December 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
Provisions related to sales made in current year |
||||||||||||||||||||||||||||||||
Provisions related to sales made in prior periods |
— |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | |||||||||||||||||||
Credits and payments |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||
Translation differences |
— |
( |
) |
( |
) |
— |
— |
( |
) |
( |
) |
( |
) | |||||||||||||||||||
Balance at March 31, 2022 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||
Reserves included in Accounts Receivable, net |
Rebates |
Medicaid and other governmental allowances |
Chargebacks |
Returns |
Other |
Total reserves included in SR&A |
Total |
|||||||||||||||||||||||||
(U.S.$ in millions) |
||||||||||||||||||||||||||||||||
Balance at December 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
Provisions related to sales made in current year |
||||||||||||||||||||||||||||||||
Provisions related to sales made in prior periods |
— |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | |||||||||||||||||||
Credits and payments |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||
Translation differences |
— |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | |||||||||||||||||
Balance at March 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
March 31, |
December 31, |
|||||||
2022 |
2021 |
|||||||
(U.S. $ in millions) |
||||||||
Finished products |
$ | $ | ||||||
Raw and packaging materials |
||||||||
Products in process |
||||||||
Materials in transit and payments on account |
||||||||
Total |
$ | $ | ||||||
Gross carrying amount net of impairment |
Accumulated amortization |
Net carrying amount |
||||||||||||||||||||||
March 31, |
December 31, |
March 31, |
December 31, |
March 31, |
December 31, |
|||||||||||||||||||
2022 |
2021 |
2022 |
2021 |
2022 |
2021 |
|||||||||||||||||||
(U.S. $ in millions) |
||||||||||||||||||||||||
Product rights |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Trade names |
||||||||||||||||||||||||
In process research and development |
— | — | ||||||||||||||||||||||
Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
(a) | IPR&D assets of $ |
(b) | Identifiable product rights of $ |
North America |
Europe |
International Markets |
Other |
Total |
||||||||||||||||
(U.S. $ in millions) |
||||||||||||||||||||
Balance as of December 31, 2021 (1) |
$ | $ | $ | $ | $ | |||||||||||||||
Changes during the period: |
||||||||||||||||||||
Goodwill acquired |
||||||||||||||||||||
Translation differences |
( |
) | ( |
) | ( |
) | ||||||||||||||
Balance as of March 31, 2022 (1) |
$ | $ | $ | $ | $ | |||||||||||||||
(1) | Accumulated goodwill impairment as of March 31, 2022 and December 31, 2021 was approximately $ |
March 31, |
December 31, |
|||||||||||||||
Weighted average interest rate as of March 31, 2022 |
Maturity |
2022 |
2021 |
|||||||||||||
(U.S. $ in millions) |
||||||||||||||||
Convertible senior debentures |
% | |||||||||||||||
Current maturities of long-term liabilities (1) |
||||||||||||||||
Total short-term debt |
$ | $ | ||||||||||||||