10-Q 1 d776015d10q.htm 10-Q 10-Q
Table of Contents
falseQ10000818686--12-3100-0000000ILContingent consideration represents liabilities recorded at fair value in connection with acquisitions.In March 2023, Teva consummated a cash tender offer and extinguished $631 million aggregate principal amount of its 1,000 million euro 6% senior notes due in 2025; $432 million aggregate principal amount of its 900 million euro 4.5% senior notes due in 2025; $574 million aggregate principal amount of its $1,000 million 7.13% senior notes due in 2025; $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.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.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.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.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% per annum, from and including September 15, 2026.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% per annum, from and including September 15, 2026.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% per annum, from and including September 15, 2026.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% per annum, from and including September 15, 2026.In April 2024, Teva repaid $956 million of its 6% senior notes at maturity.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.The fair value was estimated based on quoted market prices.Cumulative goodwill impairment as of March 31, 2024 and December 31, 2023 was approximately $28.3 billion.Debt issuance costs as of March 31, 2024 include $26 million in connection with the issuance of the sustainability-linked senior notes in March 2023, partially offset by $6 million acceleration of issuance costs related to the cash tender offer.Amounts do not include a $42 million loss from foreign currency translation adjustments attributable to non-controlling interests.Amounts do not include a $9 million loss from foreign currency translation adjustments attributable to non-controlling interests.Including expenses related to exit and disposal activities.The contingent consideration presented in the table above for the three months ended March 31, 2023 has been revised as discussed in note 1c.Includes adjustments for foreign currency translation.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.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. 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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 March 31, 2024
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 March 31, 2024, the registrant had 1,132,640,597 ordinary shares outstanding.
 
 
 
For an accessible version of this Quarterly Report on
Form 10-Q,
please visit www.tevapharm.com


Table of Contents

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


Table of Contents
http://fasb.org/us-gaap/2023#IncomeLossFromContinuingOperationsBeforeIncomeTaxesMinorityInterestAndIncomeLossFromEquityMethodInvestments2026-04-30http://fasb.org/us-gaap/2023#Liabilitieshttp://www.tevapharm.com/20240331#ImpairmentsRestructuringAndOthershttp://fasb.org/us-gaap/2023#OtherAssetsCurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesCurrent
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; 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;
 
3

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
 
 
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;
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, 2023, 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)
 
    
March 31,
   
December 31,
 
    
2024
   
2023
 
ASSETS
    
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
assets, net
     364       397  
Identifiable intangible assets, net
     5,056       5,387  
Goodwill
     17,007       17,177  
  
 
 
   
 
 
 
Total assets
   $ 42,773     $ 43,479  
  
 
 
   
 
 
 
LIABILITIES AND EQUITY
    
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  
  
 
 
   
 
 
 
Total long-term liabilities
     21,438       23,106  
  
 
 
   
 
 
 
Commitments and contingencies
, see note 10
    
Total liabilities
     35,230       35,353  
  
 
 
   
 
 
 
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
  
 
 
   
 
 
 
     7,278       7,506  
  
 
 
   
 
 
 
Non-controlling
interests
     265       620  
  
 
 
   
 
 
 
Total equity
     7,543       8,126  
  
 
 
   
 
 
 
Total liabilities and equity
   $ 42,773     $ 43,479  
  
 
 
   
 
 
 
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
 
    
March 31,
 
    
2024
   
2023
 
Net revenues
   $ 3,819     $ 3,661  
Cost of sales
     2,048       2,079  
  
 
 
   
 
 
 
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
  
 
 
   
 
 
 
Operating income (loss)
     (218     (13
Financial expenses, net
     250       260  
  
 
 
   
 
 
 
Income (loss) before income taxes
     (467     (272
Income taxes (benefit)
     (52     (19
Share in (profits) losses of associated companies, net
     4       §  
  
 
 
   
 
 
 
Net income (loss)
     (419     (253
Net income (loss) attributable to
non-controlling
interests
     (280     (33
  
 
 
   
 
 
 
Net income (loss) attributable to Teva
     (139     (220
  
 
 
   
 
 
 
Earnings (loss) per share attributable to ordinary shareholders:
    
Basic
   $ (0.12   $ (0.20
  
 
 
   
 
 
 
Diluted
   $ (0.12   $ (0.20
  
 
 
   
 
 
 
Weighted average number of shares (in millions):
    
Basic
     1,123       1,115  
  
 
 
   
 
 
 
Diluted
     1,123       1,115  
  
 
 
   
 
 
 
 
§
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.
 
6
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(U.S. dollars in millions)
(Unaudited)
 
    
Three months ended
 
    
March 31,
 
    
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
  
 
 
   
 
 
 
Total other comprehensive income (loss)
     (117     127  
  
 
 
   
 
 
 
Total comprehensive income (loss)
     (536     (126
Comprehensive income (loss) attributable to
non-controlling
interests
     (322     (42
  
 
 
   
 
 
 
Comprehensive income (loss) attributable to Teva
   $ (214   $ (84
  
 
 
   
 
 
 
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
 
    
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
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at March 31, 2024
     1,238      $ 58      $ 27,796     $ (13,673   $ (2,775   $ (4,128   $ 7,278     $ 265     $ 7,543  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
*
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  
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at March 31, 2023**
     1,226      $ 57      $ 27,719      $ (13,194   $ (2,701   $ (4,128   $ 7,752     $ 751     $ 8,504  
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
*
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.
Amounts may not add up due to rounding.
The accompanying notes are an integral part of the financial statements.
 
8

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in millions)
(Unaudited)
 
    
Three months ended
 
    
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  
  
 
 
   
 
 
 
Net cash provided by (used in) operating activities
     (124     (145
  
 
 
   
 
 
 
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
  
 
 
   
 
 
 
Net cash provided by (used in) investing activities
     144       181  
  
 
 
   
 
 
 
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
  
 
 
   
 
 
 
Net cash provided by (used in) financing activities
     (151 )     (706
  
 
 
   
 
 
 
Translation adjustment on cash and cash equivalents
     (104     12  
  
 
 
   
 
 
 
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  
  
 
 
   
 
 
 
Balance of cash, cash equivalents and restricted cash at end of period
   $ 2,991       2,176  
  
 
 
   
 
 
 
Cash and cash equivalents
     2,991       2,143  
Restricted cash included in other current assets
           33  
  
 
 
   
 
 
 
Total cash, cash equivalents and restricted cash shown in the statement of cash flows
     2,991       2,176  
  
 
 
   
 
 
 
Non-cash
financing and investing activities:
    
Beneficial interest obtained in exchange for securitized accounts receivables
   $ 312       334  
Amounts may not add up due to rounding
The accompanying notes are an integral part of the financial statements.
 
9
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, 2023, 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, 2023, but not all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) are included.
In preparing the Company’s consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity and disclosure of contingent liabilities and assets at the dates of the financial statements and the reported amounts of revenues and expenses during the reported years. Actual results could differ from those estimates.
In preparing the Company’s consolidated financial statements, management also considered the economic implications of inflation expectations on its critical and significant accounting estimates. As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to determining the valuation and recoverability of IPR&D assets, marketed product rights and goodwill, assessing sales reserves and allowances in the United States, uncertain tax positions, valuation allowances and contingencies. These estimates could be impacted by higher costs and the ability to pass on such higher costs to customers, which is highly uncertain. Government actions taken to address macroeconomic developments, as well as their economic impact on Teva’s third-party manufacturers and suppliers, customers and markets, could also impact such estimates and may change in future periods.
In February 2022, Russia launched an invasion of Ukraine. As of the date of these consolidated financial statements, sustained conflict and disruption in the region is ongoing. Russia and Ukraine markets are included in Teva’s International Markets segment results. Teva has no manufacturing or R&D facilities in these markets. During the three months ended March 31, 2024, the impact of this conflict on Teva’s results of operation and financial condition continues to be immaterial.
In October 2023, Israel was attacked by a terrorist organization and entered a state of war. As of the date of these consolidated financial statements, the war in Israel is ongoing and continues to evolve. Israel is included in Teva’s International Markets segment results. Teva’s global headquarters and several manufacturing and R&D facilities are located in Israel. Currently, such activities in Israel remain largely unaffected. Teva continues to maintain contingency plans with backup production locations for key products. During the three months ended March 31, 2024, the impact of this war on Teva’s results of operations and financial condition is immaterial, but such impact may increase, which could be material, as a result of the continuation, escalation or expansion of such war.
Teva’s results of operations for the three months ended March 31, 2024 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
None.
Recently issued accounting pronouncements, not yet adopted
In December 2023, the FASB issued ASU
2023-09
“Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This guidance is intended to enhance the transparency and decision-usefulness of income tax disclosures. The amendments in ASU
2023-09
address investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU
2023-09
is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures.
 
 
10

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
In November 2023, the FASB issued ASU
2023-07
“Segment Reporting: Improvements to Reportable Segment Disclosures”. This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements related disclosures.
In October 2023, the FASB issued ASU
2023-06
“Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” which incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification (“Codification”). The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification topics, allow investors to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation
S-X
or Regulation
S-K
becomes effective, with early adoption prohibited. The amendments in this ASU should be applied prospectively. The Company does not expect ASU
2023-06
will have a material impact to its consolidated financial statements.
 
 
c.
Revision of Previously Reported Consolidated Financial Statements
In connection with the preparation of the consolidated financial statements as of and for the year ended December 31, 2023, the Company identified errors in a single contingent consideration liability and related expenses in connection with estimated future royalty payments, along with corresponding deferred tax adjustments, that aggregated into an understatement of the contingent consideration liability of approximately $132 million, of which $98 million related to 2022 and $34 million related to 2023. These errors resulted from the exclusion of royalty payments that should have been included in the fair value
re-measurement
calculation of the contingent consideration liability as of and for the year ended December 31, 2022, and the quarterly and
year-to-date
periods ended June 30, September 30 and December 31, 2022, and March 31, June 30 and September 30, 2023. These errors did not impact the Company’s actual royalty payments, as well as total cash flows from operating activities, financing activities and investing activities in the periods stated above.
The Company evaluated the errors, individually and in the aggregate, considering both qualitative and quantitative factors, and concluded that these errors did not have a material impact on any of the prior periods stated above. However, the aggregate amount of the prior period errors in 2022, would have been material to the consolidated financial statements for fiscal year 2023. Therefore, the Company has revised the prior periods impacted for these errors.
The tables below present the impact of the revision on the line items within the Company’s consolidated financial statements for the relevant period:
 
     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.
 
11

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
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.
mAbxience
In April 2024, Teva announced it entered into a strategic licensing agreement with mAbxience for a biosimilar candidate currently in development for the treatment of multiple oncology indications. Under the terms of the licensing agreement, mAbxience will develop and produce the biosimilar product and Teva will lead the regulatory processes and commercialization in multiple global markets, including Europe and the U.S. In April 2024, Teva paid mAbxience an upfront payment of $10 million, which will be recorded as R&D expenses in the second quarter of 2024. mAbxience may be eligible for future development, regulatory and commercial milestone payments, in an aggregate total amount of up to $142 million.
Launch Therapeutics and Abingworth
On March 28, 2024, Teva and Launch Therapeutics, Inc. (“Launch Therapeutics”) entered into a clinical collaboration agreement to further accelerate the clinical research program of Teva’s
ICS-SABA
(TEV-‘248).
As part of this clinical collaboration agreement Teva also entered into a development funding agreement with funds affiliated with Abingworth LLP (“Abingworth”). Under the clinical collaboration agreement, Launch Therapeutics, a clinical development company backed by Abingworth and Carlyle, the global investment firm, will have the lead role in the operational execution and management of the planned clinical trials. Teva will retain primary responsibility for manufacturing, regulatory interactions in the U.S., and commercialization.
ICS-SABA
(TEV-’248)
is currently in Phase 3 for the treatment of asthma symptoms addressing both immediate symptoms and long-term inflammation.
Under the development funding agreement, Abingworth will provide Teva up to
 $150 
million to fund ongoing development costs for
ICS-SABA
(TEV-‘248).
In exchange and subject to regulatory approval, Teva will pay Abingworth a milestone payment in the amount actually funded by Abingworth up to $150 million, as well as success payments based on
ICS-SABA
(TEV-‘248)
sales. Teva will recognize the funding as reimbursement for R&D expenses. The development funding agreement with Abingworth did not have any impact on Teva’s consolidated financial statements for the three months ended March 31, 2024.
Biolojic Design
On November 26, 2023, Teva entered into a license agreement with Biolojic Design Ltd. (“Biolojic”), pursuant to which Teva received exclusive rights to develop, manufacture and commercialize worldwide a BD9 multibody for the potential treatment of Atopic Dermatitis and Asthma. In exchange, Teva agreed to pay an upfront payment in an amount of
 
$10 
million, which was recorded as an R&D expense in the fourth quarter of 2023 and was paid in January 2024. Biolojic may be eligible to receive additional development and commercial milestones payments of up to approximately
$500 
million, over the next several years, based on the achievement of certain
pre-clinical,
clinical and regulatory milestones, with the majority of the payments based on future revenue achievements.
Royalty Pharma
On November 9, 2023, Teva entered into a funding agreement with Royalty Pharma plc. (“Royalty Pharma”) to further accelerate the clinical research program for Teva’s olanzapine LAI
(TEV-’749).
Under the terms of the funding agreement, Royalty Pharma will provide Teva up to $100 million to fund ongoing development costs for olanzapine LAI
(TEV-‘749),
and Royalty Pharma and Teva have a mutual option to increase the total funding amount to $125 million. In exchange and subject to regulatory approval, Teva will pay Royalty Pharma a milestone payment in the amount actually funded by Royalty Pharma, paid over 5 years, in addition to royalties upon commercialization. Teva will continue to lead the development and commercialization of the product globally. During the fourth quarter of 2023 and the first quarter of 2024, Teva recorded $35 million and $27 million, respectively, as reimbursement for R&D expenses in connection with this agreement. Olanzapine LAI
(TEV-’749)
is currently in Phase 3 for the treatment of schizophrenia (see also MedinCell transaction below).
 
12

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
Sanofi
On October 3, 2023, Teva entered into an exclusive collaboration with Sanofi to
co-develop
and
co-
commercialize Teva’s anti-TL1A
(TEV-’574)
asset, a novel anti-TL1A therapy for the treatment of ulcerative colitis and Crohn’s disease, two types of inflammatory bowel disease, which is currently in Phase 2b clinical trials. Under the terms of the collaboration agreement, in partial consideration of the licenses granted to Sanofi, Teva received an upfront payment of $500 million in the fourth quarter of 2023, which was recognized as revenue. Additionally, Teva may receive up to $1 billion in development and launch milestones. Each company will equally share the remaining development costs globally and net profits and losses in major markets, with other markets subject to a royalty arrangement, and Sanofi will lead the development of the Phase 3 program. Teva will lead commercialization of the product in Europe, Israel and specified other countries, and Sanofi will lead commercialization in North America, Japan, other parts of Asia and the rest of the world.
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, emrusolmin
(TEV-’286)
and a related compound
(TEV-’287).
Emrusolmin
(TEV-’286)
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 for emrusolmin
(TEV-’286)
was completed and Teva expects to initiate a Phase 2 clinical trial in the coming months. In the fourth quarter of 2021, Teva made an upfront payment of $10 million to Modag, which was recorded as an R&D expense. Modag may be eligible for future development milestone payments, totaling an aggregate amount of up to $30 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 proposed biosimilars to Humira
®
(adalimumab) and Stelara
®
(ustekinumab). Under the terms of the agreement, Alvotech is responsible for the development, registration and supply of the biosimilar product candidates and Teva will exclusively commercialize the products in the U.S. In July 2023, Alvotech and Teva amended their collaboration agreement, adding two new biosimilar candidates as well as line extensions of two current biosimilar candidates to their partnership.
Teva made upfront and milestone payments in an aggregate amount
 
of $78 
million in 2020, 2021 and 2023. Additionally, Teva recognized
$22 
million of a milestone payment as R&D expenses in the first quarter of 2024, which was paid in April 2024. Additional development and commercial milestone payments of up to approximately
$400 
million, as well as royalty payments, and milestone payments related to the amendment of the collaboration agreement entered into in July 2023, may be payable by Teva over the next few years. Teva and Alvotech will share revenue from the commercialization of these biosimilars.
The amendment of the collaboration agreement entered into in July 2023 includes increased involvement by Teva regarding manufacturing and quality at Alvotech’s manufacturing facility. In connection with Teva’s amendment of its strategic partnership with Alvotech, on September 29, 2023, Alvotech issued $40 million of subordinated convertible bonds to Teva.
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 17, 2024, Alvotech and Teva amended their collaboration agreement to enable the purchase by Quallent of a private label adalimumab-ryvk injection from Alvotech for the U.S. market, with Alvotech sharing profits with Teva on the private label sales.
With respect to the proposed biosimilar to Stelara
®
, on June 12, 2023, Alvotech and Teva reached a settlement and license agreement with Johnson & Johnson, granting a licensed entry date in the U.S. no later than February 21, 2025.
On April 16, 2024, Alvotech and Teva announced that the FDA approved SELARSDI
TM
(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.
 
13

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
Takeda
In December 2016, Teva entered into a license agreement with a subsidiary of Takeda Pharmaceutical Company Ltd. (“Takeda”), for the research, development, manufacture and commercialization of ATTENUKINE
TM
technology. Teva received a $30 million upfront payment and a milestone payment of $20 
million in 2017. During the second quarter of 2022, Takeda initiated its Phase 2 study of modakafusp alfa (formerly TAK-573 or TEV ’573) and as a result paid Teva a milestone payment
of $25 million, which was recognized as revenue in the second quarter of 2022. In the fourth quarter of 2023, Takeda discontinued further internal development of modakafusp alfa, and in April 2024, informed Teva of its intent to terminate the agreement with respect to such product candidate. Takeda continues to have rights under the license agreement with respect to other product candidates. Teva is assessing its next steps with respect to modakafusp alfa.
MedinCell
In November 2013, Teva entered into an agreement with MedinCell for the development and commercialization of multiple long-acting injectable (“LAI”) products. Teva leads the clinical development and regulatory process and is responsible for commercialization of these products. The lead product is risperidone LAI (formerly known as
TV-46000).
On April 28, 2023, the FDA approved UZEDY
®
(risperidone) extended-release injectable suspension for the treatment of schizophrenia in adults, which was launched in the U.S. in May 2023. MedinCell may be eligible for future sales-based milestones of up
to $105 million in respect of UZEDY. Teva will also pay MedinCell royalties on net sales.
The second selected product candidate is olanzapine LAI
(TEV-’749)
for the treatment of schizophrenia. In the third quarter of 2022, Teva decided to progress development of the product to Phase 3 and, as a result, paid a $3 million milestone payment to MedinCell, which was recognized as R&D expenses. MedinCell may become eligible for further development and commercial milestones and royalties on sales of olanzapine LAI
(TEV-’749).
Assets and Liabilities Held for Sale:
General
Assets and liabilities held for sale as of March 31, 2024 and December 2023, included certain businesses in Teva’s International Markets segment that are expected to be sold within the next year.
In connection with the held for sale classification, in the first quarter of 2024, Teva recorded expenses of
$577 
million due to an expected loss upon sale, including
 $369 
million of expected loss from reclassification of currency translation adjustments to the statements of income upon sale, in other assets impairments, restructuring and other items. See note 12.
The table below summarizes all of Teva’s assets and liabilities included as held for sale as of March 31, 2024 and December 31, 2023:
 
    
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       
  
 
 
    
 
 
 
Total assets of the disposal group classified as held for sale in the consolidated balance sheets
   $ 70      $ 70  
  
 
 
    
 
 
 
Accounts payables
     (92       
Other liabilities
     (57      (13
Expected loss on sale*
     (113       
  
 
 
    
 
 
 
Total liabilities of the disposal group classified as held for sale in the consolidated balance sheets
   $ (262    $ (13
  
 
 
    
 
 
 
 
*
Includes an expected loss from reclassification of currency translation adjustments to the consolidated statements of income (loss) upon
sale
.
 
14

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 March 31, 2024
 
    
United States
    
Europe
    
International
Markets
    
Other activities
    
Total
 
    
(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  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
   $ 1,725      $ 1,272      $ 597      $ 225      $ 3,819  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
§
Represents an amount less than $
0.5
 million.
 
    
Three months ended March 31, 2023
 
    
United States
    
Europe
   
International
Markets
    
Other activities
    
Total
 
    
(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  
  
 
 
    
 
 
   
 
 
    
 
 
    
 
 
 
   $ 1,677      $ 1,184     $ 581      $ 219      $ 3,661  
  
 
 
    
 
 
   
 
 
    
 
 
    
 
 
 
 
§
Represents an amount less than $
0.5
 million.
Variable consideration
Variable consideration mainly includes sales reserves and allowances (“SR&A”), comprised of rebates (including Medicaid and other governmental program discounts), chargebacks, returns and other promotional (including shelf stock adjustments) items. Provisions for prompt payment discounts are netted against accounts receivables.
The Company recognizes these provisions at the time of sale and adjusts them if the actual amounts differ from the estimated provisions.
 
15

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
SR&A to U.S. customers comprised approximately 66% of the Company’s total SR&A as of March 31, 2024, with the remaining balance primarily related to customers in Canada and Germany. The changes in SR&A for third-party sales for the three months ended March 31, 2024 and 2023 were as follows:
 
    
Sales Reserves and Allowances
 
    
Reserves
included in
Accounts
Receivable, net
   
Rebates
   
Medicaid and
other
governmental
allowances
   
Chargebacks
   
Returns
   
Other
   
Total reserves
included in
Sales Reserves
and Allowances
   
Total
 
    
(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  
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
NOTE 4 – Inventories:
Inventories, net of reserves, consisted of the following:
 
    
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  
  
 
 
    
 
 
 
 
16

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
NOTE 5 – Identifiable intangible assets:
Identifiable intangible assets consisted of the following:
 
    
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  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Product rights and trade names
Product rights and trade names are assets presented at amortized cost. Product rights and trade names represent a portfolio of pharmaceutical products in various therapeutic categories from various acquisitions with a weighted average life period of approximately 9 years.
Amortization of intangible assets was $152 million and $165 million in the three months ended March 31, 2024 and 2023, respectively.
IPR&D
Teva’s IPR&D are assets that have not yet been approved in its major markets. IPR&D carries intrinsic risks that the asset might not succeed in advanced phases and may be impaired in future periods.
Intangible assets impairments
Impairments of long-lived intangible assets for the three months ended March 31, 2024 and 2023 were $80 million and $178 million, respectively.
Impairments in the first quarter of 2024 consisted of:
 
  (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).
Impairments in the first quarter of 2023 consisted of:
 
  (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).
The fair value measurement of the impaired intangible assets in the first quarter of 2024 is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. The discount rate applied ranged from 8.5% to 10%. A probability of success factor ranging from 20% to 90% was used in the fair value calculation to reflect inherent regulatory and commercial risk of IPR&D.
 
17

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
NOTE 6 – Goodwill:
Changes in the carrying amount of goodwill for the period ended March 31, 2024 were as follows:
 
    
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.
Teva operates its business through three reporting segments: United States, Europe and International Markets. Each of these business segments is a reporting unit. Additional reporting units include Teva’s production and sale of APIs to third parties (“Teva API”) and an
out-licensing
platform offering a portfolio of products to other pharmaceutical companies through its affiliate Medis. Teva’s API and Medis reporting units are included under “Other” in the table above. See note 15 for additional segment information.
Teva determines the fair value of its reporting units using the income approach. The income approach is a forward-looking approach for estimating fair value. Within the income approach, the method used is the discounted cash flow method. Teva begins with a forecast of all the expected net cash flows associated with the reporting unit, which includes the application of a terminal value, and then applies a discount rate to arrive at a net present value amount. Cash flow projections are based on Teva’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on the weighted average cost of capital (“WACC”), adjusted for the relevant risk associated with country-specific and business-specific characteristics. If any of these expectations were to vary materially from Teva’s assumptions, Teva may record an impairment of goodwill allocated to these reporting units in the future.
First Quarter Developments
As further discussed in note 15, as of January 1, 2024, Canada is reported as part of Teva’s International Markets segment and not as part of Teva’s North America segment, which has been renamed as Teva’s United States segment. As a result, Teva aligned its segment reporting and its reporting units in accordance with this change, and reallocated its goodwill to the adjusted reporting units using a relative fair value allocation. In conjunction with the goodwill reallocation, Teva performed a goodwill impairment test for the balances in its adjusted United States and International Markets reporting units and concluded that the fair value of each reporting unit was in excess of its carrying value. If business conditions or expectations (such as exchange rates, growth rates or discount rates) were to adversely change, it may be necessary to record impairment charges to Teva’s International Markets reporting unit in the future.
During the first quarter of 2024, management evaluated whether there were any developments that occurred during the quarter to determine if it was more likely than not that the fair value of any of its reporting units was below its carrying amount as of March 31, 2024. Management concluded that no triggering event had occurred and, therefore, no quantitative assessment was performed.
Following the quantitative assessment performed in relation to Teva’s API reporting unit in the fourth quarter of 2023, the excess of its estimated fair value over its estimated carrying amount was negligible. Additionally, as part of the quantitative analysis Teva conducted as part of its annual goodwill impairment test in the second quarter of 2023, it concluded that the estimated fair value of Teva’s Europe reporting unit exceeded its estimated carrying amount by 3%.
 
18

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
NOTE 7 – Debt obligations:
 
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  
  
 
 
    
 
 
 
Convertible senior debentures
The principal amount of Teva’s 0.25% convertible senior debentures due
 in
2026 was $23 
million as of March 31, 2024 and as of December 31, 2023. These convertible senior debentures include a “net share settlement” feature according to which the principal amount will be paid in cash and in case of conversion, only the residual conversion value above the principal amount will be paid in Teva shares. Due to the “net share settlement” feature, exercisable at any time, these convertible senior debentures are classified in the Balance Sheet under ‘short-term debt’.
 
19

TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
 
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)(*)