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 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) | |
(Address of principal executive offices) |
(Zip code) | |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| ☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
| Emerging growth company | ||||||
For an accessible version of this Quarterly Report on Form 10-Q, please visit www.tevapharm.com
INDEX
| PART I. |
Financial Statements (unaudited) | |||||
| Item 1. |
Financial Statements (unaudited) | |||||
| Consolidated Balance Sheets | 5 | |||||
| Consolidated Statements of Income (loss) | 6 | |||||
| Consolidated Statements of Comprehensive Income (loss) | 7 | |||||
| Consolidated statements of changes in equity | 8 | |||||
| Consolidated Statements of Cash Flows | 10 | |||||
| Notes to Consolidated Financial Statements | 11 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 54 | ||||
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 82 | ||||
| Item 4. |
Controls and Procedures | 82 | ||||
| PART II. |
OTHER INFORMATION | |||||
| Item 1. |
Legal Proceedings | 84 | ||||
| Item 1A. |
Risk Factors | 84 | ||||
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 84 | ||||
| Item 3. |
Defaults Upon Senior Securities | 84 | ||||
| Item 4. |
Mine Safety Disclosures | 84 | ||||
| Item 5. |
Other Information | 84 | ||||
| Item 6. |
Exhibits | 85 | ||||
| Signatures | 86 | |||||
| • | our ability to successfully compete in the marketplace, including: that we are substantially dependent on our generic products; concentration of our customer base and commercial alliances among our customers; delays in launches of new generic products; our ability to develop and commercialize biopharmaceutical products; competition for our innovative medicines; our ability to achieve expected results from investments in our product pipeline; our ability to develop and commercialize additional pharmaceutical products; our ability to successfully execute our Pivot to Growth strategy, including to expand our innovative and biosimilar medicines pipeline and profitably commercialize the innovative medicines and biosimilar portfolio, whether organically or through business development, and to sustain and focus our portfolio of generics medicines; and the effectiveness of our patents and other measures to protect our intellectual property rights, including any potential challenges to our Orange Book patent listings in the U.S.; |
| • | our substantial indebtedness, which may limit our ability to incur additional indebtedness, engage in additional transactions or make new investments, may result in a future downgrade of our credit ratings; and our inability to raise debt or borrow funds in amounts or on terms that are favorable to us; |
| • | our business and operations in general, including: the impact of global economic conditions and other macroeconomic developments and the governmental and societal responses thereto; the widespread outbreak of an illness or any other communicable disease, or any other public health crisis; effectiveness of our optimization efforts; our ability to attract, hire, integrate and retain highly skilled personnel; interruptions in our supply chain or problems with internal or third party manufacturing; disruptions of information technology systems; breaches of our data security challenges associated with conducting business globally, including political or economic instability, major hostilities or terrorism, such as the ongoing conflict between Russia and Ukraine and the state of war declared in Israel; costs and delays resulting from the extensive pharmaceutical regulation to which we are subject; our ability to successfully bid for suitable acquisition targets or licensing opportunities, or to consummate and integrate acquisitions; and our prospects and opportunities for growth if we sell assets or business units and close or divest plants and facilities, as well as our ability to successfully and cost-effectively consummate such sales and divestitures, including our planned divestiture of our API business; |
| • | compliance, regulatory and litigation matters, including: failure to comply with complex legal and regulatory environments; the effects of governmental and civil proceedings and litigation which we are, or in the future become, party to; the effects of reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage; increased legal and regulatory action in connection with public concern over the abuse of opioid medications; our ability to timely make payments required under our nationwide opioids settlement agreement and provide our generic version of Narcan ® (naloxone hydrochloride nasal spray) in the amounts and at the times required under the terms of such agreement; scrutiny from competition and pricing authorities around the world, including our ability to comply with and operate under our deferred prosecution agreement (“DPA”) with the U.S. Department of Justice (“DOJ”); potential liability for intellectual property right infringement; product liability claims; failure to comply with complex Medicare, Medicaid and other governmental programs reporting and payment obligations; compliance with anti-corruption, sanctions and trade control laws; environmental risks; and the impact of sustainability issues; |
| • | the impact of the state of war declared in Israel and the military activity in the region, including the risk of disruptions to our operations and facilities, such as our manufacturing and R&D facilities, located in Israel, the impact of our employees who are military reservists being called to active military duty, and the impact of the war on the economic, social and political stability of Israel; |
| • | other financial and economic risks, including: our exposure to currency fluctuations and restrictions as well as credit risks; potential impairments of our long-lived assets; the impact of geopolitical conflicts including the state of war declared in Israel and the conflict between Russia and Ukraine; potential significant increases in tax liabilities; the effect on our overall effective tax rate of the termination or expiration of governmental programs or tax benefits, or of a change in our business; and our ability to remediate an existing material weakness in our internal control over financial reporting; |
June 30, |
December 31, |
|||||||
2024 |
2023 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
$ |
||||||
| Accounts receivables, net of allowance for credit losses of $ |
||||||||
| Inventories |
||||||||
| Prepaid expenses |
||||||||
| Other current assets |
||||||||
| Assets held for sale |
||||||||
| |
|
|
|
|||||
| Total current assets |
||||||||
| Deferred income taxes |
||||||||
| Other non-current assets |
||||||||
| Property, plant and equipment, net |
||||||||
| Operating lease right-of-use |
||||||||
| Identifiable intangible assets, net |
||||||||
| Goodwill |
||||||||
| |
|
|
|
|||||
| Total assets |
$ |
$ |
||||||
| |
|
|
|
|||||
| LIABILITIES AND EQUITY |
||||||||
| Current liabilities: |
||||||||
| Short-term debt |
$ |
$ |
||||||
| Sales reserves and allowances |
||||||||
| Accounts payables |
||||||||
| Employee-related obligations |
||||||||
| Accrued expenses |
||||||||
| Other current liabilities |
||||||||
| Liabilities held for sale |
||||||||
| |
|
|
|
|||||
| Total current liabilities |
||||||||
| Long-term liabilities: |
||||||||
| Deferred income taxes |
||||||||
| Other taxes and long-term liabilities |
||||||||
| Senior notes and loans |
||||||||
| Operating lease liabilities |
||||||||
| |
|
|
|
|||||
| Total long-term liabilities |
||||||||
| |
|
|
|
|||||
| Commitments and contingencies |
||||||||
| Total liabilities |
||||||||
| |
|
|
|
|||||
| Equity: |
||||||||
| Teva shareholders’ equity: |
||||||||
| Ordinary shares of NIS |
||||||||
| Additional paid-in capital |
||||||||
| Accumulated deficit |
( |
) | ( |
) | ||||
| Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
| Treasury shares as of June 30, 2024 and December 31, 2023: |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| |
|
|
|
|||||
| Non-controlling interests |
||||||||
| |
|
|
|
|||||
| Total equity |
||||||||
| |
|
|
|
|||||
| Total liabilities and equity |
$ |
$ |
||||||
| |
|
|
|
|||||
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Net revenues |
$ |
$ |
$ |
$ |
||||||||||||
| Cost of sales |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Gross profit |
||||||||||||||||
| Research and development expenses |
||||||||||||||||
| Selling and marketing expenses |
||||||||||||||||
| General and administrative expenses |
||||||||||||||||
| Intangible assets impairments |
||||||||||||||||
| Goodwill impairment |
||||||||||||||||
| Other assets impairments, restructuring and other items |
||||||||||||||||
| Legal settlements and loss contingencies |
||||||||||||||||
| Other income |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Financial expenses, net |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Income (loss) before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income taxes (benefit) |
( |
) | ( |
) | ||||||||||||
| Share in (profits) losses of associated companies, net |
( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net income (loss) attributable to non-controlling interests |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net income (loss) attributable to Teva |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Earnings (loss) per share attributable to ordinary shareholders: |
||||||||||||||||
| Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| Weighted average number of shares (in millions): |
||||||||||||||||
| Basic |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Diluted |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Net income (loss) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
| Other comprehensive income (loss), net of tax: |
||||||||||||||||
| Currency translation adjustment |
( |
) |
( |
) |
( |
) |
||||||||||
| Unrealized gain (loss) from derivative financial instruments, net |
||||||||||||||||
| Unrealized loss on defined benefit plans |
( |
) |
( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total other comprehensive income (loss) |
( |
) |
( |
) |
( |
) |
||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total comprehensive income (loss) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
| Comprehensive income (loss) attributable to non-controlling interests |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Comprehensive income (loss) attributable to Teva |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
Teva shareholders’ equity |
||||||||||||||||||||||||||||||||||||
Ordinary shares |
||||||||||||||||||||||||||||||||||||
Number of shares (in millions) |
Stated value |
Additional paid-in capital |
Retained earnings (accumulated deficit) |
Accumulated other comprehensive (loss) |
Treasury shares |
Total Teva shareholders’ equity |
Non-controlling interests |
Total equity |
||||||||||||||||||||||||||||
(U.S. dollars in millions) |
||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Net Income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of Shares |
* | * | * | * | ||||||||||||||||||||||||||||||||
| Stock-based compensa tio n expense |
||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance at June 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| * | Represents an amount less than |
Teva shareholders’ equity |
||||||||||||||||||||||||||||||||||||
Ordinary shares |
||||||||||||||||||||||||||||||||||||
Number of shares (in millions) |
Stated value |
Additional paid-in capital |
Retained earnings (accumulated deficit) |
Accumulated other comprehensive (loss) |
Treasury shares |
Total Teva shareholders’ equity |
Non-controlling interests |
Total equity |
||||||||||||||||||||||||||||
(U.S. dollars in millions) |
||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Net Income (loss) |
( |
) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of Shares |
* | |||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | |||||||||||||||||||||||||||||||||||
| Proceeds from exercise of options |
||||||||||||||||||||||||||||||||||||
| Dividend to non-controlling interests** |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Purchase of shares from non-controlling interests*** |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance at June 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| * | Represents an amount less than $ |
| ** | In connection with dividends to non-controlling interests in Teva’s joint venture in Japan. |
| *** | Purchase of shares from non-controlling interests in a 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 March 31, 2023** |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Net Income (loss)** |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Issuance of shares |
* | * | * | * | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance at June 30, 2023** |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| * | Represents an amount less than $ |
| ** | The data presented for prior periods has been revised to reflect a rev is ion in relation to a contingent consideration liability and related expenses in the consolidated financial statements. For additional information, see note 1c. |
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** |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Net Income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
( |
) | ||||||||||||||||||||||||||||||||||
| Issuance of Shares |
* | * | * | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | |||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance at June 30, 2023** |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| * | Represents an amount less than $ |
** |
The data presented for prior periods has been revised to reflect a revision in relation to a contingent consideration liability and related expenses in the consolidated financial statements. For additional information, see note 1c. |
Three months ended |
Six months ended |
|||||||||||||||
June 30, |
June 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Operating activities: |
||||||||||||||||
Net income (loss) |
$ | ( |
) | ( |
) | $ | ( |
) | ( |
) | ||||||
Adjustments to reconcile net income (loss) to net cash provided by operations: |
||||||||||||||||
Depreciation and amortization |
||||||||||||||||
Impairment of goodwill |
||||||||||||||||
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 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net cash provided by (used in) operating activities |
( |
) | ||||||||||||||
Investing activities: |
||||||||||||||||
Beneficial interest collected in exchange for securitized trade receivables |
||||||||||||||||
Purchases of property, plant and equipment and intangible assets |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Proceeds from sale of business and long-lived assets |
||||||||||||||||
Acquisition of businesses, net of cash acquired |
( |
) | ||||||||||||||
Purchases of investments and other assets |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other investing activities |
( |
) | ( |
) | ||||||||||||
Net cash provided by (used in) investing activities |
||||||||||||||||
Financing activities: |
||||||||||||||||
Purchase of shares from non-controlling interests |
( |
) | ||||||||||||||
Dividends paid to non-controlling interests |
( |
) | ||||||||||||||
Repayment of senior notes and loans and other long term liabilities |
( |
) | ( |
) | ( |
) | ||||||||||
Proceeds from senior notes, net of issuance costs |
||||||||||||||||
Other financing activities |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net cash provided by (used in) financing activities |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Translation adjustment on cash and cash equivalents |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net change in cash, cash equivalents and restricted cash |
( |
) | ( |
) | ( |
) | ||||||||||
Balance of cash, cash equivalents and restricted cash at beginning of period |
||||||||||||||||
Balance of cash, cash equivalents and restricted cash at end of period |
$ | |||||||||||||||
Cash and cash equivalents |
||||||||||||||||
Restricted cash included in other current assets . . |
||||||||||||||||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows |
||||||||||||||||
Non-cash financing and investing activities: |
||||||||||||||||
Beneficial interest obtained in exchange for securitized accounts receivables |
$ | |||||||||||||||
| * | Adjustment in the three months period ended June 30, 2024 was mainly related to an agreement with the Israeli Tax Authorities. See note 11. |
a. |
Basis of presentation |
b. |
Significant accounting policies |
c. |
Revision of Previously Reported Consolidated Financial Statements |
Three months ended |
Six months ended |
|||||||||||||||||||||||
June 30, 2023 |
June 30, 2023 |
|||||||||||||||||||||||
U.S. $ in millions (except per share amounts) |
||||||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||||||
As previously reported |
Adjustment |
As revised |
As previously reported |
Adjustment |
As revised |
|||||||||||||||||||
| Other asset impairments, restructuring and other items |
$ | $ | ||||||||||||||||||||||
| Operating income (loss) |
( |
( |
( |
( |
( |
( |
||||||||||||||||||
| Income (loss) before income taxes |
( |
( |
( |
|||||||||||||||||||||