☒ |
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
|
Israel
|
Not Applicable
|
|
(State or other jurisdiction of
incorporation or organization)
|
(IRS Employer
Identification Number)
|
|
5 Basel Street, Petach Tikva, ISRAEL
|
4951033
|
|
(Address of principal executive offices)
|
(Zip code)
|
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
|
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
PART I.
|
||||||
Item 1. | ||||||
5 | ||||||
6 | ||||||
7 | ||||||
8 | ||||||
10 | ||||||
11 | ||||||
Item 2. | 48 | |||||
Item 3. | 78 | |||||
Item 4. | 78 | |||||
PART II.
|
||||||
Item 1. | 79 | |||||
Item 1A. | 79 | |||||
Item 2. | 80 | |||||
Item 3. | 80 | |||||
Item 4. | 80 | |||||
Item 5. | 80 | |||||
Item 6. | 81 | |||||
82 |
• |
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; the increase in the number of competitors targeting generic opportunities and seeking U.S. market exclusivity for generic versions of significant products; competition for our specialty products, especially COPAXONE
®
, our leading medicine, which faces competition from existing and potential additional generic versions, competing glatiramer acetate products and orally-administered alternatives; the uncertainty of commercial success of AJOVY
®
or AUSTEDO
®
; competition from companies with greater resources and capabilities; delays in launches of new products and our ability to achieve expected results from investments in our product pipeline; ability to develop and commercialize biopharmaceutical products; efforts of pharmaceutical companies to limit the use of generics, including through legislation and regulations 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 magnitude, duration, and geographic reach of the
COVID-19
pandemic and its impact on our business, financial condition, operations, cash flows, and liquidity and on the economy in general; our ability to successfully execute and maintain the activities and efforts related to the measures we have taken or may take in response to the
COVID-19
pandemic and associated costs therewith; effectiveness of our restructuring plan announced in December 2017; our ability to attract, hire and retain highly skilled personnel; our ability to develop and commercialize additional pharmaceutical products; compliance with anti-corruption sanctions and trade control laws; manufacturing or quality control problems; interruptions in our supply chain, including due to potential effects of the
COVID-19
pandemic on our operations and business in geographic locations impacted by the pandemic and on the business operations of our suppliers; disruptions of information technology systems; breaches of our data security; variations in intellectual property laws; challenges associated with conducting business globally, including adverse effects of the
COVID-19
pandemic, political or economic instability, major hostilities or terrorism; 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; our prospects and opportunities for growth if we sell assets; and potential difficulties related to the operation of our new global enterprise resource planning (ERP) system;
|
• |
compliance, regulatory and litigation matters, including: our ability to successfully defend against the U.S. Department of Justice (“DOJ”) criminal charges of Sherman Act violations; increased legal and regulatory action in connection with public concern over the abuse of opioid medications in the U.S. and our ability to reach a final resolution of the remaining opioid-related litigation; costs and delays resulting from the extensive governmental regulation to which we are subject or delays in
|
governmental processing time due to modified government operations due to the
COVID-19
pandemic, including effects on product and patent approvals due to the
COVID-19
pandemic; the effects of reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage; governmental investigations into S&M practices; potential liability for patent infringement; product liability claims; increased government scrutiny of our patent settlement agreements; failure to comply with complex Medicare and Medicaid reporting and payment obligations; and environmental risks;
|
• |
other financial and economic risks, including: our exposure to currency fluctuations and restrictions as well as credit risks; potential impairments of our intangible assets; potential significant increases in tax liabilities; 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;
|
September 30,
|
December 31,
|
|||||||
2020
|
2019
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
|
$
|
1,827
|
|
|
$
|
1,975
|
|
Accounts receivables, net of allowance for credit losses of $117 million and $135 million as of September 30, 2020 and December 31, 2019
|
4,385 | 5,676 | ||||||
Inventories
|
4,516 | 4,422 | ||||||
Prepaid expenses
|
895 | 870 | ||||||
Other current assets
|
423 | 434 | ||||||
Assets held for sale
|
113 | 87 | ||||||
Total current assets
|
12,160 | 13,464 | ||||||
Deferred income taxes
|
509 | 386 | ||||||
Other
non-current
assets
|
822 | 591 | ||||||
Property, plant and equipment, net
|
6,152 | 6,436 | ||||||
Operating lease
right-of-use
|
557 | 514 | ||||||
Identifiable intangible assets, net
|
9,308 | 11,232 | ||||||
Goodwill
|
20,228 | 24,846 | ||||||
|
|
|
|
|||||
Total assets
|
|
$
|
49,737
|
|
|
$
|
57,470
|
|
LIABILITIES AND EQUITY
|
|
|||||||
Current liabilities:
|
|
|||||||
Short-term debt
|
|
$
|
2,106
|
|
|
$
|
2,345
|
|
Sales reserves and allowances
|
4,998 | 6,159 | ||||||
Accounts payables
|
1,716 | 1,718 | ||||||
Employee-related obligations
|
601 | 693 | ||||||
Accrued expenses
|
1,735 | 1,869 | ||||||
Other current liabilities
|
946 | 889 | ||||||
|
|
|
|
|||||
Total current liabilities
|
12,103 | 13,674 | ||||||
Long-term liabilities:
|
||||||||
Deferred income taxes
|
874 | 1,096 | ||||||
Other taxes and long-term liabilities
|
2,181 | 2,640 | ||||||
Senior notes and loans
|
23,515 | 24,562 | ||||||
Operating lease liabilities
|
472 | 435 | ||||||
|
|
|
|
|||||
Total long-term liabilities
|
27,042 | 28,733 | ||||||
|
|
|
|
|||||
Commitments and contingencies
|
||||||||
Total liabilities
|
39,145 | 42,407 | ||||||
|
|
|
|
|||||
Equity:
|
||||||||
Teva shareholders’ equity:
|
||||||||
Ordinary shares of NIS 0.10 par value per share; September 30, 2020 and December 31, 2019: authorized 2,495 million shares; issued 1,202 million shares and 1,198 million shares, respectively
|
57 | 56 | ||||||
Additional
paid-in
capital
|
27,403 | 27,312 | ||||||
Accumulated deficit
|
(11,096 | ) | (6,956 | ) | ||||
Accumulated other comprehensive loss
|
(2,643 | ) | (2,312 | ) | ||||
Treasury shares as of September 30, 2020 and December 31, 2019 — 106 million ordinary
s
hares
|
(4,128 | ) | (4,128 | ) | ||||
|
|
|
|
|||||
9,593 | 13,972 | |||||||
|
|
|
|
|||||
Non-controlling
interests
|
999 | 1,091 | ||||||
|
|
|
|
|||||
Total equity
|
10,592 | 15,063 | ||||||
|
|
|
|
|||||
Total liabilities and equity
|
|
$
|
49,737
|
|
|
$
|
57,470
|
|
|
|
|
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Net revenues
|
$ | 3,978 | $ | 4,093 | $ | 12,206 | $ | 12,420 | ||||||||
Cost of sales
|
2,126 | 2,264 | 6,528 | 6,841 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
1,852 | 1,830 | 5,678 | 5,579 | ||||||||||||
Research and development expenses
|
258 | 240 | 704 | 778 | ||||||||||||
Selling and marketing expenses
|
605 | 595 | 1,815 | 1,908 | ||||||||||||
General and administrative expenses
|
279 | 285 | 846 | 873 | ||||||||||||
Intangible assets impairments
|
509 | 177 | 1,278 | 1,206 | ||||||||||||
Goodwill impairment
|
|
|
4,628
|
|
|
|
—
|
|
|
|
4,628
|
|
|
|
—
|
|
Other assets impairments, restructuring and other items
|
(98 | ) | 160 | 404 | 263 | |||||||||||
Legal settlements and loss contingencies
|
21 | 468 | 10 | 1,171 | ||||||||||||
Other income
|
(8 | ) | (14 | ) | (30 | ) | (29 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating (loss) income
|
(4,342 | ) | (81 | ) | (3,978 | ) | (591 | ) | ||||||||
Financial expenses, net
|
117 | 211 | 565 | 635 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
(4,459 | ) | (292 | ) | (4,543 | ) | (1,226 | ) | ||||||||
Income taxes (benefit)
|
16 | 11 | (147 | ) | (159 | ) | ||||||||||
Share in (profits) losses of associated companies, net
|
(136 | ) | 4 | (135 | ) | 8 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss)
|
(4,340 | ) | (307 | ) | (4,261 | ) | (1,076 | ) | ||||||||
Net income (loss) attributable to
non-controlling
interests
|
10 | 7 | (121 | ) | 33 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to Teva
|
(4,349 | ) | (314 | ) | (4,140 | ) | (1,108 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings (loss) per share attributable to ordinary shareholders:
|
||||||||||||||||
Basic
|
$ | (3.97 | ) | $ | (0.29 | ) | $ | (3.78 | ) | $ | (1.02 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Diluted
|
$ | (3.97 | ) | $ | (0.29 | ) | $ | (3.78 | ) | $ | (1.02 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average number of shares (in millions):
|
||||||||||||||||
Basic
|
1,096 | 1,092 | 1,095 | 1,091 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted
|
1,096 | 1,092 | 1,095 | 1,091 | ||||||||||||
|
|
|
|
|
|
|
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Net income (loss)
|
$
|
(4,340
|
)
|
|
$
|
(307
|
)
|
|
$
|
(4,261
|
)
|
|
$
|
(1,076
|
)
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|||||||||||||
Currency translation adjustment
|
|
70
|
|
|
|
(138
|
)
|
|
|
(348
|
)
|
|
|
(5
|
)
|
|
Unrealized gain (loss) from derivative financial instruments
|
|
9
|
|
|
|
87
|
|
|
|
46
|
|
|
|
124
|
|
|
Unrealized gain from
available-for-sale
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
Unrealized loss on defined benefit plans
|
|
—
|
|
|
|
— |
|
|
|
—
|
|
|
|
(1
|
)
|
|
Total other comprehensive income (loss)
|
|
79
|
|
|
|
(53
|
)
|
|
|
(302
|
)
|
|
|
117
|
|
|
Total comprehensive income (loss)
|
|
(4,261
|
)
|
|
|
(360
|
)
|
|
|
(4,563
|
)
|
|
|
(959
|
)
|
|
Comprehensive income (loss) attributable to
non-controlling
interests
|
|
27
|
|
|
|
7
|
|
|
|
(92
|
)
|
|
|
56
|
|
|
Comprehensive income (loss) attributable to Teva
|
$
|
(4,288
|
)
|
|
$
|
(367
|
)
|
|
$
|
(4,471
|
)
|
|
$
|
(1,015
|
)
|
|
|
|
|
|
|
|
|
|
Teva shareholders’ equity
|
||||||||||||||||||||||||||||||||||||
Ordinary shares
|
||||||||||||||||||||||||||||||||||||
Number of
shares (in millions) |
Stated
value |
Additional
paid-in
capital |
Retained
earnings (accumulated deficit) |
Accumulated other
comprehensive (loss) |
Treasury
shares |
Total Teva
shareholders’ equity |
Non-controlling
interests |
Total
equity |
||||||||||||||||||||||||||||
(U.S. dollars in millions)
|
||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020
|
1,202 | 57 | 27,374 | (6,747 | ) | (2,703 | ) | (4,128 | ) | 13,852 | 972 | 14,824 | ||||||||||||||||||||||||
Net Income (loss)
|
(4,349 | ) | (4,349 | ) | 10 | (4,340 | ) | |||||||||||||||||||||||||||||
Other comprehensive income
|
61 | 61 | 18 | 79 | ||||||||||||||||||||||||||||||||
Issuance of Shares
|
* | * | * | * | ||||||||||||||||||||||||||||||||
Stock-based compensation expense
|
29 | 29 | 29 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance at September 30, 2020
|
1,202 | $ | 57 | $ | 27,403 | $ | (11,096 | ) | $ | (2,643 | ) | $ | (4,128 | ) | $ | 9,593 | $ | 999 | $ | 10,592 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Represents an amount less than $0.5 million.
|
Teva shareholders’ equity
|
||||||||||||||||||||||||||||||||||||
Ordinary shares
|
||||||||||||||||||||||||||||||||||||
Number of
shares (in millions) |
Stated
value |
Additional
paid-in
capital |
Retained
earnings (accumulated deficit) |
Accumulated other
comprehensive (loss) |
Treasury
shares |
Total Teva
shareholders’ equity |
Non-controlling
interests |
Total
equity |
||||||||||||||||||||||||||||
(U.S. dollars in millions)
|
||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019
|
1,198 | 56 | 27,258 | (6,752 | ) | (2,312 | ) | (4,128 | ) | 14,122 | 1,128 | 15,251 | ||||||||||||||||||||||||
Net Income (loss)
|
(314 | ) | (314 | ) | 7 | (307 | ) | |||||||||||||||||||||||||||||
Other comprehensive income (loss)
|
(53 | ) | (53 | ) | (53 | ) | ||||||||||||||||||||||||||||||
Issuance of Shares
|
* | * | * | |||||||||||||||||||||||||||||||||
Stock-based compensation expense
|
35 | 35 | 35 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance at September 30, 2019
|
1,198 | $ | 56 | $ | 27,293 | $ | (7,066 | ) | $ | (2,365 | ) | $ | (4,128 | ) | $ | 13,790 | $ | 1,134 | $ | 14,925 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Represents an amount less than $0.5 million.
|
Teva shareholders’ equity
|
||||||||||||||||||||||||||||||||||||
Ordinary shares
|
||||||||||||||||||||||||||||||||||||
Number of
shares (in millions) |
Stated
value |
Additional
paid-in
capital |
Retained
earnings (accumulated deficit) |
Accumulated other
comprehensive (loss) |
Treasury
shares |
Total Teva
shareholders’ equity |
Non-controlling
interests |
Total
equity |
||||||||||||||||||||||||||||
(U.S. dollars in millions)
|
||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019
|
1,198 | 56 | 27,312 | (6,956 | ) | (2,312 | ) | (4,128 | ) | 13,972 | 1,091 | 15,063 | ||||||||||||||||||||||||
Net Income (loss)
|
(4,140 | ) | (4,140 | ) | (121 | ) | (4,261 | ) | ||||||||||||||||||||||||||||
Other comprehensive income (loss)
|
(331 | ) | (331 | ) | 29 | (302 | ) | |||||||||||||||||||||||||||||
Issuance of Shares
|
4 | * | * | * | ||||||||||||||||||||||||||||||||
Stock-based compensation expense
|
91 | 91 | 91 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance at September 30, 2020
|
1,202 | $ | 57 | $ | 27,403 | $ | (11,096 | ) | $ | (2,643 | ) | $ | (4,128 | ) | $ | 9,593 | $ | 999 | $ | 10,592 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Represents an amount less than $0.5 million.
|
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, 2018
|
1,196 | 56 | 27,210 | (5,958 | ) | (2,459 | ) | (4,142 | ) | 14,707 | 1,087 | 15,794 | ||||||||||||||||||||||||
Net Income (loss)
|
(1,108 | ) | (1,108 | ) | 33 | (1,076 | ) | |||||||||||||||||||||||||||||
Other comprehensive income (loss)
|
94 | 94 | 23 | 117 | ||||||||||||||||||||||||||||||||
Issuance of shares
|
2 | * | * | * | ||||||||||||||||||||||||||||||||
Issuance of Treasury
shares
|
(8 | ) | 14 | 6 | 6 | |||||||||||||||||||||||||||||||
Stock-based compensation expense
|
99 | 99 | 99 | |||||||||||||||||||||||||||||||||
Transactions with non-controlling interest
|
(8 | ) | (8 | ) | ||||||||||||||||||||||||||||||||
Other
|
(8 | ) | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance at September 30, 2019
|
1,198 | $ | 56 | $ | 27,293 | $ | (7,066 | ) | $ | (2,365 | ) | $ | (4,128 | ) | $ | 13,790 | $ | 1,134 | $ | 14,925 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Represents an amount less than $0.5 million.
|
Nine months ended
|
||||||||
September 30,
|
||||||||
2020
|
2019
|
|||||||
Operating activities:
|
||||||||
Net income (loss)
|
|
$
|
(4,261
|
)
|
|
$
|
(1,076
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operations:
|
|
|
||||||
Depreciation and amortization
|
|
|
1,162
|
|
|
|
1,306
|
|
Impairment of long-lived assets and assets held for sale
|
|
|
6,314
|
|
|
|
1,302
|
|
Net change in operating assets and liabilities
|
|
|
(1,627
|
)
|
|
|
(784
|
)
|
Deferred income taxes – net and uncertain tax positions
|
|
|
(656
|
)
|
|
|
(652
|
)
|
Stock-based compensation
|
|
|
91
|
|
|
|
99
|
|
Net loss (gain) from investments and from sale of long lived assets
|
|
|
(232
|
)
|
|
|
10
|
|
Research and development in process
|
|
|
40
|
|
|
|
— |
|
Other items
|
|
|
54
|
|
|
|
5
|
|
|
|
|
|
|||||
Net cash provided by operating activities
|
|
|
885
|
|
|
|
210
|
|
|
|
|
|
|||||
Investing activities:
|
|
|
||||||
Beneficial interest collected in exchange for securitized accounts receivables
|
|
|
1,102
|
|
|
|
1,108
|
|
Purchases of property, plant and equipment
|
|
|
(402
|
)
|
|
|
(406
|
)
|
Proceeds from sale of long lived assets
|
|
|
54
|
|
|
|
167
|
|
Other investing activities
|
|
|
(32
|
)
|
|
|
56
|
|
|
|
|
|
|||||
Net cash provided by investing activities
|
|
|
722
|
|
|
|
925
|
|
|
|
|
|
|||||
Financing activities:
|
|
|
||||||
Repayment of senior notes and loans and other long-term liabilities
|
|
|
(1,871
|
)
|
|
|
(1,715
|
)
|
Net change in short-term debt
|
|
|
115
|
|
|
|
96
|
|
Tax withholding payments made on shares and dividends
|
|
|
— |
|
|
|
(52
|
)
|
Other financing activities
|
|
|
(4
|
)
|
|
|
(14
|
)
|
|
|
|
|
|||||
Net cash used in financing activities
|
|
|
(1,760
|
)
|
|
|
(1,685
|
)
|
|
|
|
|
|||||
Translation adjustment on cash and cash equivalents
|
|
|
5
|
|
|
|
9
|
|
|
|
|
|
|||||
Net change in cash and cash equivalents
|
|
|
(148
|
)
|
|
|
(541
|
)
|
Balance of cash and cash equivalents at beginning of period
|
|
|
1,975
|
|
|
|
1,782
|
|
|
|
|
|
|||||
Balance of cash and cash equivalents at end of period
|
|
$
|
1,827
|
|
|
$
|
1,241
|
|
|
|
|
|
|||||
Non-cash
financing and investing activities:
|
|
|
||||||
Beneficial interest obtained in exchange for securitized accounts receivables
|
|
$
|
1,055
|
|
|
$
|
1,123
|
|
a.
|
Basis of presentation
|
b.
|
Significant accounting policies
|
c.
|
Revision of Previously Reported Consolidated Financial Statements
|
Net revenues
|
Cost of sales
|
|||||||||||||||||||||||||||
As reported
|
Adjustment
|
As revised
|
As reported
|
Adjustment
|
As revised
|
|||||||||||||||||||||||
(U.S. $ in millions)
|
||||||||||||||||||||||||||||
2019
|
Q1 | 4,295 | (146 | ) | 4,149 | 2,440 | (146 | ) | 2,293 | |||||||||||||||||||
Q2 | 4,337 | (159 | ) | 4,177 | 2,443 | (159 | ) | 2,284 | ||||||||||||||||||||
Q3 | 4,264 | (171 | ) | 4,093 | 2,435 | (171 | ) | 2,264 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
12,896
|
|
|
|
(477
|
)
|
|
|
12,420
|
|
|
|
7,318
|
|
|
|
(477
|
)
|
|
|
6,841
|
|
September 30,
|
December 31,
|
|||||||
2020
|
2019
|
|||||||
(U.S. $ in millions)
|
||||||||
Inventories
|
160 | — | ||||||
Property, plant and equipment, net and others
|
239 | 98 | ||||||
Goodwill
|
27 | — | ||||||
Adjustments of assets held for sale to fair value
|
(313 | ) | (11 | ) | ||||
|
|
|
|
|||||
Total assets of the disposal group classified as held for sale in the consolidated balance sheets
|
$ | 113 | $ | 87 | ||||
|
|
|
|
Three months ended September 30, 2020
|
||||||||||||||||||||
North
America |
Europe
|
International
Markets |
Other
activities |
Total
|
||||||||||||||||
(U.S. $ in millions)
|
||||||||||||||||||||
Sale of goods
|
1,660
|
|
|
1,116
|
|
|
478
|
|
|
173
|
|
|
3,427
|
|
||||||
Licensing arrangements
|
|
17
|
|
|
7
|
|
|
2
|
|
|
1
|
|
|
27
|
|
|||||
Distribution
|
|
341
|
|
|
§
|
|
|
9
|
|
|
— |
|
|
350
|
|
|||||
Other
|
|
(1
|
)
|
|
(8
|
)
|
|
41
|
|
|
142
|
|
|
174
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ |
2,017
|
|
$
|
1,116
|
|
$
|
529
|
|
$
|
316
|
|
$
|
3,978
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2019
|
|
|||||||||||||||||
|
|
North
America |
|
|
Europe
|
|
|
International
Markets |
|
|
Other
activities |
|
|
Total
|
|
|||||
|
|
(U.S. $ in millions)
|
|
|||||||||||||||||
Sale of goods
|
|
1,674
|
|
|
1,153
|
|
|
511
|
|
|
176
|
|
|
3,514
|
|
|||||
Licensing arrangements
|
|
26
|
|
|
7
|
|
|
1
|
|
|
1
|
|
|
36
|
|
|||||
Distribution
|
|
|
351
|
|
|
|
1
|
|
|
|
5
|
|
|
|
— |
|
|
|
357
|
|
Other
|
|
§
|
|
|
2
|
|
|
48
|
|
|
136
|
|
|
186
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$
|
2,051
|
|
$
|
1,163
|
|
$
|
565
|
|
$
|
314
|
|
$
|
4,093
|
|
||||||
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2020
|
||||||||||||||||||||
North
America |
Europe
|
International
Markets |
Other
activities |
Total
|
||||||||||||||||
(U.S. $ in millions)
|
||||||||||||||||||||
Sale of goods
|
|
4,943
|
|
|
3,487
|
|
|
1,417
|
|
|
561
|
|
|
10,408
|
|
|||||
Licensing arrangements
|
|
59
|
|
|
22
|
|
|
6
|
|
|
3
|
|
|
90
|
|
|||||
Distribution
|
|
1,141
|
|
|
3
|
|
|
21
|
|
|
—
|
|
|
1,165
|
|
|||||
Other
|
|
3
|
|
|
9
|
|
|
138
|
|
|
394
|
|
|
543
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$
|
6,146
|
|
$
|
3,520
|
|
$
|
1,582
|
|
$
|
957
|
|
$
|
12,206
|
|
||||||
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2019
|
||||||||||||||||||||
North
America |
Europe
|
International
Markets |
Other
activities |
Total
|
||||||||||||||||
(U.S. $ in millions)
|
||||||||||||||||||||
Sale of goods
|
4,997 | 3,586 | 1,505 | 566 | 10,653 | |||||||||||||||
Licensing arrangements
|
92 | 22 | 3 | 4 | 121 | |||||||||||||||
Distribution
|
|
|
1,080
|
|
|
|
1
|
|
|
|
14
|
|
|
|
—
|
|
|
|
1,095
|
|
Other
|
§
|
2 | 146 | 402 | 549 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 6,169 | $ | 3,611 | $ | 1,668 | $ | 972 | $ | 12,420 | |||||||||||
|
|
|
|
|
|
|
|
|
|
Sales Reserves and Allowances
|
||||||||||||||||||||||||||||||||
Reserves
included in Accounts Receivable, net |
Rebates
|
Medicaid
other governmental allowances |
Chargebacks
|
Returns
|
Other
|
Total reserves
included in SR&A |
Total
|
|||||||||||||||||||||||||
(U.S. $ in millions)
|
||||||||||||||||||||||||||||||||
Balance at December 31, 2019
|
$ | 87 | $ | 2,895 | $ | 1,109 | $ | 1,342 | $ | 637 | $ | 176 | $ | 6,159 | $ | 6,246 | ||||||||||||||||
Provisions related to sales made in current year
|
285 | 3,649 | 566 | 6,268 | 299 | 55 | 10,837 | 11,122 | ||||||||||||||||||||||||
Provisions related to sales made in prior
period
s
|
— | (192 | ) | (116 | ) | (33 | ) | (11 | ) | 2 | (350 | ) | (350 | ) | ||||||||||||||||||
Credits and payments
|
(298 | ) | (4,224 | ) | (650 | ) | (6,418 | ) | (289 | ) | (79 | ) | (11,660 | ) | (11,958 | ) | ||||||||||||||||
Translation differences
|
— | 10 | 4 | 2 | — | (4 | ) | 12 | 12 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at September 30, 2020
|
$ | 74 | 2,138 | $ | 913 | $ | 1,161 | $ | 636 | $ | 150 | $ | 4,998 | $ | 5,072 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2018
|
$ | 175 | $ | 3,006 | $ | 1,361 | $ | 1,530 | $ | 638 | $ | 176 | $ | 6,711 | $ | 6,886 | ||||||||||||||||
Provisions related to sales made in
current |
334 | 4,004 | 760 | 7,196 | 195 | 308 | 12,463 | 12,797 | ||||||||||||||||||||||||
Provisions related to sales made in
prior periods |
3 | (28 | ) | (2 | ) | (1 | ) | 23 | (7 | ) | (15 | ) | (12 | ) | ||||||||||||||||||
Credits and payments
|
(356 | ) | (4,276 | ) | (882 | ) | (7,299 | ) | (251 | ) | (295 | ) | (13,003 | ) | (13,359 | ) | ||||||||||||||||
Translation differences
|
— | (14 | ) | (4 | ) | (1 | ) | (1 | ) | 1 | (19 | ) | (19 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at September 30, 201
9
|
$ | 156 | 2,692 | $ | 1,233 | $ | 1,425 | $ | 604 | $ | 183 | $ | 6,137 | $ | 6,293 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020 |
December 31,
2019 |
|||||||
(U.S. $ in millions)
|
||||||||
Finished products
|
$ | 2,384 | $ | 2,504 | ||||
Raw and packaging materials
|
1,334 | 1,183 | ||||||
Products in process
|
635 | 583 | ||||||
Materials in transit and payments on account
|
163 | 151 | ||||||
|
|
|
|
|||||
Total
|
$ | 4,516 | $ | 4,422 | ||||
|
|
|
|
Gross carrying amount net of
impairment |
Accumulated
amortization
|
Net carrying amount
|
||||||||||||||||||||||
September 30,
|
December 31,
|
September 30,
|
December 31,
|
September 30,
|
December 31,
|
|||||||||||||||||||
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||||||||
(U.S. $ in millions)
|
||||||||||||||||||||||||
Product rights
|
$ | 19,520 | $ | 19,663 | $ | 11,665 | $ | 10,640 | $ | 7,856 | $ | 9,023 | ||||||||||||
Trade names
|
609 | 600 | 154 | 126 | 455 | 474 | ||||||||||||||||||
In process research and development
|
998 | 1,735 | — | — | 998 | 1,735 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total
|
$ | 21,128 | $ | 21,998 | $ | 11,819 | $ | 10,766 | $ | 9,308 | $ | 11,232 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
IPR&D assets
of $360
million,
ma
due to: (i) $262 million related to lenalidomide (generic equivalent of
inly
Revlimid
®
)
due to modified competition assumptions as a result of settlements between the innovator and other generic filers; and (ii) $96 million related to generic pipeline products acquired from Actavis Generics resulting from development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape, launch date) in the United States; and
|
(b) |
Identifiable product rights
of $149
million, due to: (i) $110 million related to a change in the assumptions regarding competition for the
expected relaunch of
metformin tablets; and (ii) $39 million mainly related to updated market assumptions regarding price and volume of products acquired from Actavis Generics that are primarily marketed in the United States.
|
|
(a)
|
Identifiable product rights of $99 million, mainly due to supply challenges in connection with products primarily marketed in Hong Kong; and
|
|
(b)
|
IPR&D assets of $78 million, mainly
du
to generic pipeline products acquired from Actavis Generics due to development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape, launch date or discount rate) in the United States.
e
|
(a) |
IPR&D assets of $708 million,
mainly
due to: (i) $262 million related to lenalidomide (generic equivalent of Revlimid
$211 million related to AUSTEDO for the treatment of Tourette syndrome in pediatric patients in the United States following clinical trial results
®
) due to modified competition assumptions as a result of settlements between the innovator and other generic filers; (ii)
,
received in February 2020, which failed to meet their primary endpoints; and
(iii) $213
million related to generic pipeline products acquired from Actavis Generics resulting from development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape, launch date) in the United States; and
|
(b) |
Identifiable product rights of $570 million, mainly due to: (i) $271 million
related
to updated market assumptions regarding price and volume of products acquired from Actavis
Generics
(ii) $165 million in Japan in connection with ongoing regulatory pricing reductions and generic
that are
primarily marketed in the United States;
competition; and (iii) $110 million related to a change in the assumptions regarding competition for the
expected relaunch of
metformin
tablets
.
|
|
(a)
|
Identifiable product rights of $667 million, mainly due to updated market assumptions regarding price and volume of products acquired from Actavis Generics and primarily marketed in the United States; and
|
|
(b)
|
IPR&D assets of $539 million: (i) $355 million of various generic pipeline products acquired from Actavis Generics due to development progress and changes in other key valuation indications (e.g., market size, competition assumptions, legal landscape, launch date or discount rate) in the United States, (ii) $125 million related to lenalidomide (generic equivalent of Revlimid
®
) due to modified competition assumptions as a result of settlements between the innovator and other generic filers; and (iii) $59 million related to a change in assumptions concerning the future market share of a number of products within Teva’s Actavis Generics pipeline in Europe.
|
North America
|
Europe
|
International
Markets |
Other
|
Total
|
||||||||||||||||
|
|
(U.S. $ in millions)
|
|
|
|
|
|
|||||||||||||
Balance as of December 31, 2019 (1)
|
$ | 11,091 | $ | 8,536 | $ | 2,532 | $ | 2,687 | $ | 24,846 | ||||||||||
Changes during the period:
|
||||||||||||||||||||
Goodwill reclassified as assets held for sale
|
— | (8 | ) | (19 | ) | — | (27 | ) | ||||||||||||
Goodwill impairment
|
|
|
(4,628
|
) |
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,628
|
) |
Translation differences
|
(10 | ) | 253 | (206 | ) |
—
|
37 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of
S
30, 2020 (1)
eptember
|
$ | 6,453 | $ | 8,781 | $ | 2,307 | $ | 2,687 | $ | 20,228 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(1) |
Accumulated goodwill impairment as of September 30, 2020 and December 31, 2019 was approximately $25.6
billion and $21.0
billion
|
|
•
|
|
Management noted a portion of the difference can be attributed to sales projections of AJOVY and AUSTEDO in the International Markets reporting unit. Management continues to believe that the majority of analysts do not focus on these brands in preparing their financial models and, as a result, have not attributed value to the launch potential in this reporting unit
|
|
•
|
|
Management noted an additional difference can be attributed to sales projections of AUSTEDO in the North America reporting unit, resulting in higher fair value as analyzed by management compared to Teva’s market capitalization. Management continues to believe that it has more accurate information based on its knowledge of the market and its growth and therefore no adjustment was incorporated to the fair value.
|
|
•
|
|
Management noted that market concerns regarding the uncertainty related to the opioid and price fixing litigation risks are impacting its market capitalization. Management believes that these concerns led to an acute reaction, which resulted in a decline in Teva’s share price. Management believed developments in the opioids case would clarify the outlook with regards to the opioid litigation, when the proposed settlement framework is finalized, which was expected in the near term.
|
|
•
|
|
The Company noted a 25% reduction in its market capitalization from the second quarter of 2020 to the third quarter of 2020.
|
|
•
|
|
With respect to the opioids litigation, as discussions continue with the group of Attorneys General regarding the nationwide framework and trial dates are postponed largely due to the
COVID-19
pandemic, a resolution of this matter is taking longer than anticipated. Accordingly, the Company is currently unable to predict the timing of any final settlement or whether the settlement will be finalized based upon the current settlement framework.
|
|
•
|
|
On August 25, 2020, the Company was indicted by the U.S. Department of Justice for alleged violations of the Sherman Act.
|
|
•
|
|
On August 18, 2020, the Company was sued by the U.S. Department of Justice alleging violations of the federal Anti-Kickback Statute, and asserting causes of action under the federal False Claims Act and state law.
|
September 30,
2020
|
December 31,
2019
|
|||||||||||||||
Weighted average interest
|
Maturity
|
|||||||||||||||
(U.S. $ in millions)
|
||||||||||||||||
Revolving Credit Facility
|
|
|
LIBOR+1.75
|
%
|
|
|
|
|
|
$
|
117
|
|
|
$
|
—
|
|
Convertible
senior
debentures
|
0.25
|
% | 2026 | 514 | 514 | |||||||||||
Current maturities of long-term liabilities
|
|
1,474 | 1,831 | |||||||||||||
|
|
|
|
|||||||||||||
Total short-term debt
|
|
$ | 2,106 | $ | 2,345 | |||||||||||
|
|
|
|
Weighted average interest
rate as of September 30, 2020 |
Maturity
|
September 30,
2020 |
December 31,
2019 |
|||||||||||||
(U.S. $ in millions)
|
||||||||||||||||
Senior notes EUR 1,010 million (1)
|
0.38 | % | 2020 | — | 1,131 | |||||||||||
Senior notes EUR 1,500 million
|
1.13 | % | 2024 | 1,755 | 1,673 | |||||||||||
Senior notes EUR 1,300 million
|
1.25 | % | 2023 | 1,522 | 1,451 | |||||||||||
Senior notes EUR 1,000 million
|
6.00 | % | 2025 | 1,174 | 1,120 | |||||||||||
Senior notes EUR 900 million
|
4.50 | % | 2025 | 1,057 | 1,008 | |||||||||||
Senior notes EUR 750 million
|
1.63 | % | 2028 | 874 | 833 | |||||||||||
Senior notes EUR 700 million
|
3.25 | % | 2022 | 822 | 784 | |||||||||||
Senior notes EUR 700 million
|
1.88 | % | 2027 | 821 | 782 | |||||||||||
Senior notes USD 3,500 million
|
3.15 | % | 2026 | 3,495 | 3,494 | |||||||||||
Senior notes USD 1,475 million
|
2.20 | % | 2021 | 1,474 | 1,474 | |||||||||||
Senior notes USD 3,000 million
|
2.80 | % | 2023 | 2,996 | 2,995 | |||||||||||
Senior notes USD 2,000 million
|
4.10 | % | 2046 | 1,986 | 1,985 | |||||||||||
Senior notes USD 1,250 million
|
6.00 | % | 2024 | 1,250 | 1,250 | |||||||||||
Senior notes USD 1,250 million
|
6.75 | % | 2028 | 1,250 | 1,250 | |||||||||||
Senior notes USD 1,000 million
|
7.13 | % | 2025 | 1,000 | 1,000 | |||||||||||
Senior notes USD 844 million
|
2.95 | % | 2022 | 855 | 856 | |||||||||||
Senior notes USD 789 million
|
6.15 | % | 2036 | 783 | 782 | |||||||||||
Senior notes USD 700 million (2)
|
2.25 | % | 2020 | — | 700 | |||||||||||
Senior notes USD 613 million
|
3.65 | % | 2021 | 616 | 618 | |||||||||||
Senior notes USD 588 million
|
3.65 | % | 2021 | 587 | 587 | |||||||||||
Senior notes CHF 350 million
|
0.50 | % | 2022 | 381 | 361 | |||||||||||
Senior notes CHF 350 million
|
1.00 | % | 2025 | 381 | 362 | |||||||||||
|
|
|
|
|||||||||||||
Total senior notes
|
|
25,078 | 26,496 | |||||||||||||
Other long-term debt
|
1.13 | % | 2026 | 1 | 1 | |||||||||||
Less current maturities
|
|
(1,474 | ) | (1,831 | ) | |||||||||||
Less debt issuance costs
|
|
(89 | ) | (103 | ) | |||||||||||
|
|
|
|
|||||||||||||
Total senior notes and loans
|
|
$ | 23,515 | $ | 24,562 | |||||||||||
|
|
|
|
(1) |
In July 2020, Teva repaid at maturity
€
1,010 million of its 0.375% senior notes.
|
(2) |
In March 2020, Teva repaid at maturity $700 million of its 2.25% senior notes.
|
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
Notes to Consolidated Financial Statements
(Unaudited)
|
September 30,
|
December 31,
|
|||||||
2020
|
2019
|
|||||||
(U.S. $ in millions)
|
||||||||
Cross-currency swap
—
net investment hedge
|
$ | — | $ | 1,000 | ||||
|
|
|
|
Fair value
|
||||||||||||||||
Designated as hedging
instruments
|
Not designated as hedging
instruments
|
|||||||||||||||
September 30,
2020
|
December 31,
2019
|
September 30,
2020
|
December 31,
2019
|
|||||||||||||
Reported under
|
(U.S. $ in millions)
|
|||||||||||||||
Asset derivatives:
|
||||||||||||||||
Other current assets:
|
||||||||||||||||
Option and forward contracts
|
$ | — | $ | — | $ | 36 | $ | 32 | ||||||||
Liability derivatives:
|
||||||||||||||||
Other current liabilities:
|
||||||||||||||||
Cross-currency swaps—net investment hedge
|
— | (22 | ) | — | — | |||||||||||
Option and forward contracts
|
— | — | (67 | ) | (41 | ) |
|
|
Financial expenses, net
|
|
|
Other comprehensive income
(loss) |
|
||||||||||
|
|
Three months ended,
|
|
|
Three months ended,
|
|
||||||||||
|
|
September 30,
2020
|
|
|
September 30,
2019 |
|
|
September 30,
2020
|
|
|
September 30,
2019 |
|
||||
Reported under
|
|
(U.S. $ in millions)
|
|
|||||||||||||
Line items in which effects of hedges are recorded
|
|
$
|
117
|
|
|
$
|
211
|
|
|
$
|
79
|
|
|
$
|
(53
|
)
|
Cross-currency swaps—cash flow hedge (1)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(33
|
)
|
Cross-currency swaps—net investment hedge (2)
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
(39
|
)
|
Interest rate swaps—fair value hedge (3)
|
|
|
—
|
|
|
|
*
|
|
|
|
—
|
|
|
|
—
|
|
*
|
Represents an amount less than $0.5 million.
|
|
Financial expenses, net
|
Other comprehensive income (loss)
|
|||||||||||||||
Nine months ended,
|
Nine months ended,
|
|||||||||||||||
September 30,
2020
|
September 30,
2019 |
September 30,
2020
|
September 30,
2019 |
|||||||||||||
Reported under
|
(U.S. $ in millions)
|
|||||||||||||||
Line items in which effects of hedges are recorded
|
$ | 565 | $ | 635 | $ | (302 | ) | $ | 117 | |||||||
Cross-currency swaps
—
cash flow hedge (1)
|
— | (2 | ) | — | (49 | ) | ||||||||||
Cross-currency swaps
—
net investment hedge (2)
|
(2 | ) | (22 | ) | (21 | ) | (46 | ) | ||||||||
Interest rate swaps—fair value hedge (3)
|
— | 2 | — | — |
|
|
Financial expenses, net
|
|
|
Net revenues
|
|
||||||||||
|
|
Three months ended,
|
|
|
Three months ended,
|
|
||||||||||
|
|
September 30,
2020
|
|
|
September 30,
2019 |
|
|
September 30,
2020
|
|
|
September 30,
2019 |
|
||||
Reported under
|
|
(U.S. $ in millions)
|
|
|||||||||||||
Line items in which effects of hedges are recorded
|
|
$
|
117
|
|
|
$
|
211
|
|
|
$
|
(3,978
|
)
|
|
$
|
(4,093
|
)
|
Option and forward contracts (4)
|
|
|
40
|
|
|
|
(35
|
)
|
|
|
—
|
|
|
|
—
|
|
Option and forward contracts economic hedge (5)
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
(4
|
)
|
|
|
Financial expenses, net
|
|
|
Net revenues
|
|
||||||||||
|
|
Nine months ended,
|
|
|
Nine months ended,
|
|
||||||||||
|
|
September 30,
2020
|
|
|
September 30,
2019 |
|
|
September 30,
2020
|
|
|
September 30,
2019 |
|
||||
Reported under
|
|
(U.S. $ in millions)
|
|
|||||||||||||
Line items in which effects of hedges are recorded
|
|
$
|
565
|
|
|
$
|
635
|
|
|
$
|
(12,206
|
)
|
|
$
|
(12,420
|
)
|
Option and forward contracts (4)
|
|
|
78
|
|
|
|
(42
|
)
|
|
|
—
|
|
|
|
—
|
|
Option and forward contracts Economic hedge (5)
|
|
|
—
|
|
|
|
—
|
|
|
|
(37
|
)
|
|
|
—
|
|
(1) |
With respect to cross-currency swap agreements, Teva recognized gains which mainly reflect the differences between the fixed interest rate and the floating interest rate. In the fourth quarter of 2019, Teva terminated $588 million in cross-currency swap agreements against its outstanding 3.65% senior notes maturing in November 2021. The settlement of these transactions resulted in cash proceeds of $95 million. The cash flow hedge accounting adjustments of these instruments, which are recorded under senior notes and loans, are amortized under financial expenses, net over the life of the debt as additional interest expense.
|
(2) |
In each of the first and second quarters of 2017, Teva entered into a cross currency swap agreement with a notional amount of $500 million maturing in 2020. These cross currency swaps were designated as a net investment hedge of Teva’s foreign subsidiaries euro denominated net assets, in order to reduce the risk of adverse exchange rate fluctuations. With respect to these cross currency swap agreements, Teva recognized gains which mainly reflect the differences between the
float-for-float
|
(3) |
In the fourth quarter of 2016, Teva entered into an interest rate swap agreement designated as fair value hedge relating to its 2.8% senior notes due 2023 with respect to $500 million notional amount of outstanding debt. With respect to this interest rate swap agreement, Teva recognized a loss which mainly reflects the differences between the fixed interest rate and the floating
|
interest rate. In the third quarter of 2019, Teva terminated this interest rate swap agreement. The settlement of these transactions resulted in a gain position of $10 million. The fair value hedge accounting adjustments of these instruments, which are recorded under senior notes and loans, are amortized under financial expenses, net over the life of the debt as additional interest expense. |
(4) |
Teva uses foreign exchange contracts (mainly option and forward contracts) to hedge balance sheet items from currency exposure. These foreign exchange contracts are not designated as hedging instruments for accounting purposes. In connection with these foreign exchange contracts, Teva recognizes gains or losses that offset the revaluation of the balance sheet items also recorded under financial expenses, net.
|
(5) |
Teva entered into option and forward contracts designed to limit the exposure of foreign exchange fluctuations on projected revenues and expenses recorded in euro, the British pound, the Russian ruble and some other currencies during the period for which such instruments are transacted. These derivative instruments do not meet the criteria for hedge accounting, however, they are accounted for as an economic hedge. These derivative instruments, which may include hedging transactions against future projected revenues and expenses, are recognized on the balance sheet at their fair value on a quarterly basis, while the foreign exchange impact on the underlying revenues and expenses may occur in subsequent quarters. Changes in the fair value of the derivative instruments are recognized in the same line item in the statements of income as the underlying exposure being hedged. In the first nine months of 2020, the positive impact from these derivatives recognized under revenues was $37 million, partially offset by a $3 million negative impact recognized under cost of sales. The cash flows associated with these derivatives are reflected as cash flows from operating activities in the consolidated statements of cash flows.
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
(U.S. $ in millions)
|
(U.S. $ in millions)
|
|||||||||||||||
Impairments of long-lived tangible assets (1)
|
|
$
|
56
|
|
|
$
|
28
|
|
|
$
|
408
|
|
|
$
|
96
|
|
Contingent consideration
|
|
|
(179
|
)
|
|
|
51
|
|
|
|
(96
|
)
|
|
|
4
|
|
Restructuring
|
|
|
9
|
|
|
|
61
|
|
|
|
82
|
|
|
|
140
|
|
Other
|
|
|
15
|
|
|
|
21
|
|
|
|
10
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|||||||||
Total
|
|
$
|
(98
|
)
|
|
$
|
160
|
|
|
$
|
404
|
|
|
$
|
263
|
|
|
|
|
|
|
|
|
|
(1) |
Including impairments related to exit and disposal activities
|
Three months ended September 30,
|
||||||||
2020
|
2019
|
|||||||
(U.S. $ in millions)
|
||||||||
Restructuring
|
||||||||
Employee termination
|
$ | 3 | $ | 49 | ||||
|
|
|
|
|||||
Other
|
7 | 11 | ||||||
|
|
|
|
|||||
Total
|
$ | 9 | $ | 61 | ||||
|
|
|
|
Nine months ended September 30,
|
||||||||
2020
|
2019
|
|||||||
(U.S. $ in millions)
|
||||||||
Restructuring
|
||||||||
Employee termination
|
$ | 39 | $ | 105 | ||||
|
|
|
|
|||||
Other
|
43 | 34 | ||||||
|
|
|
|
|||||
Total
|
$ | 82 | $ | 140 | ||||
|
|
|
|
Employee termination
costs |
Other
|
Total
|
||||||||||
(U.S. $ in millions )
|
||||||||||||
Balance as of January 1, 2020
|
$ | (208 | ) | $ | (7 | ) | $ | (215 | ) | |||
Provision
|
(39 | ) | (43 | ) | (82 | ) | ||||||
Utilization and other*
|
145 | 43 | 188 | |||||||||
|
|
|
|
|
|
|||||||
Balance as of September 30, 2020
|
$ | (102 | ) | $ | (7 | ) | $ | (109 | ) | |||
|
|
|
|
|
|
* |
Includes adjustments for foreign currency translation.
|
Net Unrealized Gains (Losses)
|
Benefit Plans
|
|||||||||||||||||||
Foreign
currency translation adjustments |
Available-for-
sale
securities |
Derivative
financial instruments |
Actuarial gains
(losses) and prior service (costs) credits |
Total
|
||||||||||||||||
(U.S. $ in millions)
|
||||||||||||||||||||
Balance as of December 31, 2019
|
$ | (1,794 | ) | $ | — | $ | (420 | ) | $ | (98 | ) | $ | (2,312 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income (loss) before reclassifications
|
(377 | ) | — | 20 | — | (357 | ) | |||||||||||||
Amounts reclassified to the statements of income
|
— | — | 26 | — | 26 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net other comprehensive income (loss) before tax
|
(377 | ) | — | 46 | — | (331 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net other comprehensive income (loss) after tax*
|
(377 | ) | — | 46 | — | (331 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of September 30, 2020
|
$ | (2,171 | ) | $ | — | $ | (374 | ) | $ | (98 | ) | $ | (2,643 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
* |
Amounts do not include a $29 million gain from foreign currency translation adjustments attributable to
non-controlling
interests.
|
Net Unrealized Gains (Losses)
|
Benefit Plans
|
|||||||||||||||||||
Foreign
currency translation adjustments |
Available-for-
sale
securities |
Derivative
financial instruments |
Actuarial gains
(losses) and prior service (costs) credits |
Total
|
||||||||||||||||
(U.S. $ in millions)
|
||||||||||||||||||||
Balance as of December 31, 2018
|
$ | (1,878 | ) | $ | 1 | $ | (504 | ) | $ | (78 | ) | $ | (2,459 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income (loss) before reclassifications
|
(28 | ) | (1 | ) | 103 | * |
*
|
74 | ||||||||||||
Amounts reclassified to the statements of income
|
— | — | 21 | — | 21 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net other comprehensive income (loss) before tax
|
(28 | ) | (1 | ) | 124 | * |
*
|
95 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net other comprehensive income (loss) after tax*
|
(28 | ) | (1 | ) | 124 | (1 | ) | 94 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of September 30, 2019
|
$ | (1,906 | ) | $ | — | $ | (380 | ) | $ | (79 | ) | $ | (2,365 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
* |
Amounts do not include a $23 million gain from foreign currency translation adjustments attributable to
non-controlling
interests.
|
** |
Represents an amount less than $0.5 million.
|
|
Teva
|
operates its business and reports its financial results in three segments:
|
|
(a)
|
North America segment, which includes the United States and Canada.
|
|
(b)
|
Europe segment, which includes the European Union and certain other European countries.
|
|
(c)
|
International Markets segment, which includes all countries other than those in the North America and Europe segments.
|
a.
|
Segment information:
|
|
|
Three months ended September 30,
|
|
|||||||||
|
|
2020
|
|
|||||||||
|
|
North America
|
|
|
Europe
|
|
|
International Markets
|
|
|||
|
|
(U.S. $ in millions)
|
|
|||||||||
Revenues
|
|
$
|
2,017
|
|
|
$
|
1,116
|
|
|
$
|
529
|
|
Gross profit
|
|
|
1,056
|
|
|
|
637
|
|
|
|
275
|
|
R&D expenses
|
|
|
155
|
|
|
|
60
|
|
|
|
17
|
|
S&M expenses
|
|
|
250
|
|
|
|
200
|
|
|
|
101
|
|
G&A expenses
|
|
|
97
|
|
|
|
66
|
|
|
|
33
|
|
Other income
|
|
|
(5
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit
|
|
$
|
560
|
|
|
$
|
312
|
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|||||||||
|
|
2019
|
|
|||||||||
|
|
North America
|
|
|
Europe
|
|
|
International Markets*
|
|
|||
|
|
(U.S. $ in millions)
|
|
|||||||||
Revenues
|
|
$
|
2,051
|
|
|
$
|
1,163
|
|
|
$
|
565
|
|
Gross profit
|
|
|
1,048
|
|
|
|
662
|
|
|
|
295
|
|
R&D expenses
|
|
|
156
|
|
|
|
63
|
|
|
|
21
|
|
S&M expenses
|
|
|
219
|
|
|
|
206
|
|
|
|
114
|
|
G&A expenses
|
|
|
112
|
|
|
|
56
|
|
|
|
32
|
|
Other (income) expense
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit
|
|
$
|
565
|
|
|
$
|
341
|
|
|
$
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
||||||||||||
2020
|
||||||||||||
North America
|
Europe
|
International Markets
|
||||||||||
(U.S. $ in millions)
|
||||||||||||
Revenues
|
$ | 6,146 | $ | 3,520 | $ | 1,582 | ||||||
Gross profit
|
3,208 | 2,009 | 828 | |||||||||
R&D expenses
|
455 | 180 | 51 | |||||||||
S&M expenses
|
755 | 590 | 312 | |||||||||
G&A expenses
|
325 | 184 | 96 | |||||||||
Other income
|
(9 | ) | (3 | ) | (10 | ) | ||||||
|
|
|
|
|
|
|||||||
Segment profit
|
$ | 1,682 | $ | 1,058 | $ | 378 | ||||||
|
|
|
|
|
|
Nine months ended September 30,
|
||||||||||||
2019
|
||||||||||||
North America
|
Europe
|
International Markets*
|
||||||||||
(U.S. $ in millions)
|
||||||||||||
Revenues
|
$ | 6,169 | $ | 3,611 | $ | 1,668 | ||||||
Gross profit
|
3,155 | 2,066 | 877 | |||||||||
R&D expenses
|
497 | 199 | 66 | |||||||||
S&M expenses
|
756 | 637 | 348 | |||||||||
G&A expenses
|
342 | 175 | 102 | |||||||||
Other income
|
(6 | ) | (5 | ) | (2 | ) | ||||||
|
|
|
|
|
|
|||||||
Segment profit
|
$ | 1,566 | $ | 1,060 | $ | 363 | ||||||
|
|
|
|
|
|
*
|
The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c.
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
(U.S.
|
(U.S. $ in millions)
|
|||||||||||||||
North America profit
|
$ | 560 | $ | 565 | $ | 1,682 | $ | 1,566 | ||||||||
Europe profit
|
312 | 341 | 1,058 | 1,060 | ||||||||||||
International Markets profit
|
125 | 130 | 378 | 363 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total reportable segments profit
|
997 | 1,036 | 3,118 | 2,989 | ||||||||||||
Profit of other activities
|
28 | 16 | 130 | 92 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total segments profit
|
1,025 | 1,051 | 3,248 | 3,081 | ||||||||||||
Amounts not allocated to segments:
|
||||||||||||||||
Amortization
|
251 | 255 | 758 | 823 | ||||||||||||
Other assets impairments, restructuring and other items
|
(98 | ) | 160 | 404 | 263 | |||||||||||
Intangible asset impairments
|
509 | 177 | 1,278 | 1,206 | ||||||||||||
Goodwill impairment
|
|
|
4,628
|
|
|
|
—
|
|
|
|
4,628
|
|
|
|
—
|
|
Legal settlements and loss contingencies
|
21 | 468 | 10 | 1,171 | ||||||||||||
Other unallocated amounts
|
55 | 73 | 148 | 209 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Consolidated operating income (loss)
|
(4,342 | ) | (81 | ) | (3,978 | ) | (591 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial expenses, net
|
117 | 211 | 565 | 635 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Consolidated income (loss) before income taxe
s
|
$ | (4,459 | ) | $ | (292 | ) | $ | (4,543 | ) | $ | (1,226 | ) | ||||
|
|
|
|
|
|
|
|
North America
|
|
Three months ended
September 30,
|
||||||
|
|
2020
|
|
|
2019
|
|||
|
|
(U.S. $ in millions)
|
||||||
Generic products
|
|
$
|
928
|
|
|
$
|
914
|
|
AJOVY
|
|
|
35
|
|
|
|
25
|
|
AUSTEDO
|
|
|
168
|
|
|
|
105
|
|
BENDEKA
®
/TREANDA
®
|
|
|
105
|
|
|
|
124
|
|
COPAXONE
|
|
|
236
|
|
|
|
271
|
|
ProAir
®
*
|
|
|
50
|
|
|
|
71
|
|
QVAR
®
|
|
|
42
|
|
|
|
60
|
|
Anda
|
|
|
341
|
|
|
|
351
|
|
Other
|
|
|
113
|
|
|
|
131
|
|
Total
|
|
$
|
2,017
|
|
|
$
|
2,051
|
* |
Does not include revenues from the ProAir authorized generic, which are included under generic products.
|
|
|
North America
|
|
Nine months ended
September 30, |
|
|||||
|
|
2020
|
|
|
2019
|
|
||
|
|
(U.S. $ in millions)
|
|
|||||
Generic products
|
|
$
|
2,804
|
|
|
$
|
2,826
|
|
AJOVY
|
|
|
98
|
|
|
|
68
|
|
AUSTEDO
|
|
|
451
|
|
|
|
276
|
|
BENDEKA/TREANDA
|
|
|
313
|
|
|
|
371
|
|
COPAXONE
|
|
|
671
|
|
|
|
753
|
|
ProAir*
|
|
|
175
|
|
|
|
194
|
|
QVAR
|
|
|
139
|
|
|
|
183
|
|
Anda
|
|
|
1,141
|
|
|
|
1,080
|
|
Other
|
|
|
354
|
|
|
|
417
|
|
Total
|
|
$
|
6,146
|
|
|
$
|
6,169
|
|
* |
Does not include revenues from the ProAir authorized generic, which are included under generic products.
|
|
|
Europe
|
|
Three months ended
September 30,
|
|
|||||
|
|
2020
|
|
|
2019
|
|
||
|
|
(U.S. $ in millions)
|
|
|||||
Generic products
|
|
$
|
824
|
|
|
$
|
836
|
|
COPAXONE
|
|
|
101
|
|
|
|
106
|
|
Respiratory products
|
|
|
77
|
|
|
|
87
|
|
AJOVY
|
|
|
8
|
|
|
|
1
|
|
Other
|
|
|
106
|
|
|
|
134
|
|
Total
|
|
$
|
1,116
|
|
|
$
|
1,163
|
|
Europe
|
Nine
months ended
September 30,
|
|||||||
2020
|
2019
|
|||||||
(U.S. $ in millions)
|
||||||||
Generic products
|
$ | 2,593 | $ | 2,599 | ||||
COPAXONE
|
294 | 327 | ||||||
Respiratory products
|
263 | 267 | ||||||
AJOVY
|
17 | 1 | ||||||
Other
|
352 | 416 | ||||||
|
|
|
|
|||||
Total
|
$ | 3,520 | $ | 3,611 | ||||
|
|
|
|
International Markets
|
|
Three months ended
September 30,
|
|
|||||
|
|
2020
|
|
|
2019
|
|
||
|
|
(U.S. $ in millions)
|
|
|||||
Generic products
|
|
$
|
429
|
|
|
$
|
474
|
|
COPAXONE
|
|
|
14
|
|
|
|
20
|
|
Other
|
|
|
86
|
|
|
|
71
|
|
Total
|
|
$
|
529
|
|
|
$
|
565
|
|
* |
The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c.
|
|
|
International Markets
|
|
Nine months ended
September 30, |
|
|||||
|
|
2020
|
|
|
2019
|
|
||
|
|
(U.S. $ in millions)
|
|
|||||
Generic products
|
|
$
|
1,304
|
|
|
$
|
1,404
|
|
COPAXONE
|
|
|
38
|
|
|
|
46
|
|
Other
|
|
|
241
|
|
|
|
218
|
|
Total
|
|
$
|
1,582
|
|
|
$
|
1,668
|
|
* |
The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c.
|
December 31, 2019
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
(U.S. $ in millions)
|
||||||||||||||||
Cash and cash equivalents:
|
||||||||||||||||
Money markets
|
$ | 577 | $ | — | $ | — | $ | 577 | ||||||||
Cash, deposits and other
|
1,398 | — | — | 1,398 | ||||||||||||
Investment in securities:
|
||||||||||||||||
Equity securities
|
42 | — | — | 42 | ||||||||||||
Other, mainly debt securities
|
2 | — | 12 | 14 | ||||||||||||
Derivatives:
|
||||||||||||||||
Asset derivatives—options and forward contracts
|
— | 32 | — | 32 | ||||||||||||
Liability derivatives—options and forward contracts
|
— | (41 | ) | — | (41 | ) | ||||||||||
Liability derivatives—interest rate and cross-currency swaps
|
— | (22 | ) | — | (22 | ) | ||||||||||
Contingent consideration**
|
— | — | (460 | ) | (460 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
|
$ | 2,019 | $ | (31 | ) | $ | (448 | ) | $ | 1,540 | ||||||
|
|
|
|
|
|
|
|
* |
During the third quarter of 2020, Teva recorded a gain of $134 million under share in profits of associated companies, net, reflecting the difference between the book value of Teva’s investment in American Well Corporation (“American Well”) and its fair value as of the date it completed its initial public offering in September 2020. The investment was reclassified from “investment in associated companies” to “investment in marketable securities,” since Teva no longer has significant influence in American Well. On
September
30, 2020, Teva recorded an additional gain of $118 million under financial expenses, net, reflecting the revaluation gain of this security as of September 30, 2020.
|
** |
Contingent consideration represents liabilities recorded at fair value in connection with acquisitions.
|
Nine months ended
September 30, 2020 |
||||
(U.S. $ in millions)
|
||||
Fair value at the beginning of the period
|
$ | (448 | ) | |
Transfer into Level 3- equity securities
|
|
|
179
|
|
Revaluation of equity securities
|
|
|
118
|
|
Revaluation of debt securities
|
(3 | ) | ||
Adjustments to provisions for contingent consideration:
|
||||
Actavis Generics transaction
|
161 | |||
Eagle transaction
|
(65 | ) | ||
Settlement of contingent consideration:
|
||||
Eagle transaction
|
85 | |||
|
|
|||
Fair value at the end of the period
|
$ |
27
|
||
|
|
Fair value*
|
||||||||
September 30,
|
December 31,
|
|||||||
2020
|
2019
|
|||||||
(U.S. $ in millions)
|
||||||||
Senior notes included under senior notes and loans
|
$ | 22,194 | $ | 22,686 | ||||
Senior notes and convertible senior debentures included under short-term debt
|
1,968 | 2,318 | ||||||
|
|
|
|
|||||
Total
|
$ | 24,162 | $ | 25,004 | ||||
|
|
|
|
* |
Based on quoted market price. See note 7 for carrying value.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
• |
Revenues in the third quarter of 2020 were $3,978 million, a decrease of 3% in both U.S. dollar and local currency terms, compared to the third quarter of 2019, mainly due to lower revenues from generics, OTC and COPAXONE in all regions and lower revenues from QVAR and BENDEKA/TREANDA in our North America segment, as well as reduced demand for certain products resulting from the impact of the
COVID-19
pandemic, partially offset by higher revenues from AUSTEDO and AJOVY.
|
• |
Our North America segment generated revenues of $2,017 million and profit of $560 million in the third quarter of 2020. Revenues decreased by 2% compared to the third quarter of 2019, mainly due to a decrease in revenues of COPAXONE and BENDEKA/TREANDA, partially offset by higher revenues from AUSTEDO, generic products and AJOVY. Our North America segment has experienced some reductions in volume due to less physician and hospital activity during the
COVID-19
pandemic, but has also experienced increase in demand for certain products related to the treatment of
COVID-19
and its symptoms. In addition, the ability to promote our new specialty products, primarily AJOVY and AUSTEDO, has been impacted by less physician visits by patients and less physician interactions by our sales personnel. Profit was flat compared to the third quarter of 2019, mainly due to lower revenues, offset by a change in mix of products.
|
• |
Our Europe segment generated revenues of $1,116 million and profit of $312 million in the third quarter of 2020. Revenues decreased by 4%, or 7% in local currency terms, compared to the third quarter of 2019. This decrease was mainly due to reduced demand for certain products resulting from the
COVID-19
pandemic. The
COVID-19
pandemic has led to a decline in doctor and hospital visits by patients resulting in fewer prescriptions during the third quarter of 2020. This decrease is also attributed to price declines for oncology products as a result of generic competition and a decline in COPAXONE revenues due to competing glatiramer acetate products. Profit decreased by 8%, mainly due to lower revenues.
|
• |
Our International Markets segment generated revenues of $529 million and profit of $125 million in the third quarter of 2020. Revenues decreased by 6%, or 1% in local currency terms, compared to the third quarter of 2019, mainly due to lower sales in Japan resulting from regulatory price reductions and generic competition to
off-patented
products, as well as loss of revenues from the sale of certain assets in the Israeli market, partially offset by higher revenues in other markets. Revenues in the third quarter of 2020 were also impacted by reduced demand for certain products resulting from the impact of the
COVID-19
pandemic. The
COVID-19
pandemic has led to a decline in doctor and hospital visits by patients resulting in fewer prescriptions during the third quarter of 2020. Profit decreased by 4%, mainly due to lower sales in Japan, partially offset by lower S&M expenses.
|
• |
Impairments of identifiable intangible assets were $509 million in the third quarter of 2020, compared to $177 million in the third quarter of 2019. Impairment expenses in the third quarter of 2020 comprised of $360 million of IPR&D assets and $149 million of identifiable product rights.
|
• |
We recorded a goodwill impairment charge of $4,628 million related to our North America reporting unit in the third quarter of 2020. See note 6 to our consolidated financial statements.
|
• |
We recorded other asset impairments, restructuring and other items income of $98 million in the third quarter of 2020, compared to expenses of $160 million in the third quarter of 2019. See note 12 to our consolidated financial statements.
|
• |
Legal settlements and loss contingencies were $21 million in the third quarter of 2020, compared to $468 million in the third quarter of 2019.
|
• |
Operating loss was $4,342 million in the third quarter of 2020, compared to operating loss of $81 million in the third quarter of 2019. The decrease in the third quarter of 2020 was mainly due to the goodwill impairment charge and higher intangible asset impairment charges in the third quarter of 2020, partially offset by lower legal settlements and loss contingencies in the third quarter of 2020.
|
• |
Financial expenses were $117 million in the third quarter of 2020, compared to $211 million in the third quarter of 2019. Financial expenses in the third quarter of 2020 were mainly comprised of interest expenses of $241 million, partially offset by gains on revaluations of marketable securities of $124 million (see note 16 to our consolidated financial statements). Financial expenses in the third quarter of 2019 were mainly comprised of interest expenses of $219 million.
|
• |
In the third quarter of 2020, we recognized a tax expense of $16 million, on
pre-tax
loss of $4,459 million. In the third quarter of 2019, we recognized a tax expense of $11 million, on
pre-tax
loss of $292 million. Our tax rate for the third quarter of 2020 was mainly affected by the goodwill impairment charge that does not have a corresponding tax effect and other changes to tax positions and deductions.
|
• |
Exchange rate movements during the third quarter of 2020, including hedging effects, positively impacted revenues by $14 million and negatively impacted operating loss by $18 million, compared to the third quarter of 2019.
|
• |
As of September 30, 2020, our debt was $25,621 million, compared to $26,266 million as of June 30, 2020. This decrease was mainly due to the repayment at maturity of our €1,010 million 0.375% senior notes in July 2020, partially offset by exchange rate fluctuations. As of September 30, 2020, €100 million were outstanding under the RCF. As of the date of this Quarterly Report on Form
10-Q,
€270 million were outstanding under the RCF.
|
• |
Cash flow generated from operating activities during the third quarter of 2020 was $307 million, compared to $325 million in the third quarter of 2019. The decrease in the third quarter of 2020 was mainly due to an increase in inventory during the third quarter of 2020, compared to a decrease in inventory in the third quarter of 2019.
|
• |
During the third quarter of 2020, we generated free cash flow of $506 million, which we define as comprising $307 million in cash flow generated from operating activities, $333 million in beneficial interest collected in exchange for securitized accounts receivables and $9 million in proceeds from sale of property, plant and equipment, partially offset by $143 million in cash used for capital investment. During the third quarter of 2019, we generated free cash flow of $551 million, comprising $325 million in cash flow used in operating activities, $362 million in beneficial interest collected in exchange for securitized accounts receivables and $33 million in proceeds from sale of property, plant and equipment and intangible assets, partially offset by $169 million in cash used for capital investment. The decrease in the third quarter of 2020 resulted mainly from lower cash flow generated from operating activities.
|
Three months ended September 30,
|
||||||||||||||||
2020
|
2019
|
|||||||||||||||
(U.S. $ in millions / % of Segment
Revenues)
|
||||||||||||||||
Revenues
|
$ | 2,017 | 100 | % | $ | 2,051 | 100 | % | ||||||||
Gross profit
|
1,056 | 52.4 | % | 1,048 | 51.1 | % | ||||||||||
R&D expenses
|
155 | 7.7 | % | 156 | 7.6 | % | ||||||||||
S&M expenses
|
250 | 12.4 | % | 219 | 10.7 | % | ||||||||||
G&A expenses
|
97 | 4.8 | % | 112 | 5.5 | % | ||||||||||
Other (income) expense
|
(5 | ) | § | (5 | ) | § | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment profit*
|
$ | 560 | 27.7 | % | $ | 565 | 27.5 | % | ||||||||
|
|
|
|
|
|
|
|
* |
Segment profit does not include amortization and certain other items.
|
§ |
Represents an amount less than 0.5%.
|
Three months
ended
September 30,
|
Percentage
Change
|
|||||||||||
2020
|
2019
|
2019-2020
|
||||||||||
(U.S. $ in millions)
|
||||||||||||
Generic products
|
$ | 928 | $ | 914 | 2 | % | ||||||
AJOVY
|
35 | 25 | 42 | % | ||||||||
AUSTEDO
|
168 | 105 | 60 | % | ||||||||
BENDEKA/TREANDA
|
105 | 124 | (15 | %) | ||||||||
COPAXONE
|
236 | 271 | (13 | %) | ||||||||
ProAir*
|
50 | 71 | (30 | %) | ||||||||
QVAR
|
42 | 60 | (29 | %) | ||||||||
Anda
|
341 | 351 | (3 | %) | ||||||||
Other
|
113 | 131 | (14 | %) | ||||||||
|
|
|
|
|||||||||
Total
|
$ | 2,017 | $ | 2,051 | (2 | %) | ||||||
|
|
|
|
* |
Does not include revenues from the ProAir authorized generic, which are included under generic products.
|
Product Name
|
Brand
Name |
Launch
Date
|
Total Annual U.S.
Branded Sales at Time
of Launch
(U.S. $ in millions
(IQVIA))
*
|
|||||
Imiquimod Cream 3.75%
|
Zyclara
®
|
July | $ | 24 | ||||
Sildenafil for Oral Suspension
|
Revatio
®
|
August | $ | 121 | ||||
PEG-3350,
Sodium Sulfate, Sodium Chloride, Potassium Chloride, Sodium Ascorbate, and Ascorbic Acid for Oral Solution
|
MoviPrep
®
|
August | $ | 10 | ||||
Tobramycin Inhalation Solution, USP
|
Bethkis
®
|
September | $ | 42 | ||||
Dimethyl Fumarate Delayed-Release Capsules
|
Tecfidera
®
|
September | $ | 3,788 | ||||
Emtricitabine and Tenofovir Disoproxil Fumarate Tablets, 200mg/300mg
|
Truvada
®
|
September | $ | 2,872 | ||||
Efavirenz, Emtricitabine and Tenofovir Disoproxil Fumarate Tablets
|
Atripla
®
|
September | $ | 578 |
* |
The figures presented are for the twelve months ended in the calendar quarter immediately prior to our launch or
re-launch.
|
Generic Name
|
Brand Name
|
Total Annual U.S.
Branded Sales at Time
of Launch
(U.S. $ in millions
(IQVIA))
*
|
||||
Apixaban Tablets, 2.5 mg and 5 mg
|
Eliquis
®
|
$ | 11,445 | |||
Pirfenidone Tabs
|
Esbriet
®
|
$ | 540 |
* |
The figures presented are for the twelve months ended in the calendar quarter immediately prior to our launch or
re-launch.
|
Product
|
Potential
Indication(s)
|
Route of
Administration
|
Development Phase
(date entered phase 3)
|
Comments
|
||||
CNS, Neurology and
Neuropsychiatry
|
||||||||
AUSTEDO (deutetrabenazine) | Dyskinesia in cerebral palsy | Oral | 3 (September 2019) | |||||
TV-46000
(risperidone LAI)
|
Schizophrenia | Subcutaneous | 3 (April 2018) | |||||
Migraine and Pain
|
||||||||
fremanezumab (anti CGRP) |
Post traumatic
headache
|
Subcutaneous | 2 | The clinical trial did not meet its primary endpoint for efficacy and the development for this indication has been discontinued. | ||||
fibromyalgia | Subcutaneous | 2 | ||||||
fasinumab | Osteoarthritis pain | Subcutaneous | 3 (March 2016) | Developed in collaboration with Regeneron Pharmaceuticals, Inc. (“Regeneron”). See below table regarding phase 3 clinical trial results. | ||||
Respiratory
|
||||||||
GoResp
®
DigiHaler
®
/ DuoResp
®
DigiHaler
®
|
Treatment of asthma in patients aged 12 years and older and COPD | Oral inhalation | Under regulatory review |
Three months ended September 30,
|
||||||||||||
2020
|
2019
|
|||||||||||
(U.S. $ in millions / % of Segment Revenues)
|
||||||||||||
Revenues
|
$ | 1,116 | 100% | $ | 1,163 | 100% | ||||||
Gross profit
|
637 | 57.1% | 662 | 56.9% | ||||||||
R&D expenses
|
60 | 5.4% | 63 | 5.4% | ||||||||
S&M expenses
|
200 | 17.9% | 206 | 17.7% | ||||||||
G&A expenses
|
66 | 5.9% | 56 | 4.9% | ||||||||
Other (income) expense
|
(1 | ) | § | (4 | ) | § | ||||||
|
|
|
|
|
|
|||||||
Segment profit*
|
$ | 312 | 28.0% | $ | 341 | 29.3% | ||||||
|
|
|
|
|
|
* |
Segment profit does not include amortization and certain other items.
|
§ |
Represents an amount less than 0.5%.
|
Three months ended
September 30,
|
Percentage
Change
|
|||||||||||
2020
|
2019
|
2019-2020
|
||||||||||
(U.S. $ in millions)
|
||||||||||||
Generic products
|
$ | 824 | $ | 836 | (1 | %) | ||||||
COPAXONE
|
101 | 106 | (5 | %) | ||||||||
Respiratory products
|
77 | 87 | (12 | %) | ||||||||
AJOVY
|
8 | 1 | NA | |||||||||
Other
|
106 | 134 | (21 | %) | ||||||||
|
|
|
|
|||||||||
Total
|
$ | 1,116 | $ | 1,163 | (4 | %) | ||||||
|
|
|
|
Three months ended September 30,
|
||||||||||||||||
2020
|
2019**
|
|||||||||||||||
(U.S. $ in millions / % of Segment Revenues)
|
||||||||||||||||
Revenues
|
$ | 529 | 100 | % | $ | 565 | 100 | % | ||||||||
Gross profit
|
275 | 52.0 | % | 295 | 52.2 | % | ||||||||||
R&D expenses
|
17 | 3.2 | % | 21 | 3.7 | % | ||||||||||
S&M expenses
|
101 | 19.1 | % | 114 | 20.1 | % | ||||||||||
G&A expenses
|
33 | 6.3 | % | 32 | 5.6 | % | ||||||||||
Other (income) expense
|
(1 | ) | § | (1 | ) | § | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment profit*
|
$ | 125 | 23.6 | % | $ | 130 | 23.0 | % | ||||||||
|
|
|
|
|
|
|
|
§ |
Represents an amount less than 0.5%.
|
* |
Segment profit does not include amortization and certain other items.
|
** |
The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.
|
Three months ended
September 30,
|
Percentage
Change
|
|||||||||||
2020
|
2019*
|
2019-2020
|
||||||||||
(U.S. $ in millions)
|
||||||||||||
Generic products
|
$ | 429 | $ | 474 | (10 | %) | ||||||
COPAXONE
|
14 | 20 | (27 | %) | ||||||||
Other
|
86 | 71 | 21 | % | ||||||||
|
|
|
|
|||||||||
Total
|
$ | 529 | $ | 565 | (6 | %) | ||||||
|
|
|
|
* |
The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.
|
Three months ended
September 30,
|
||||||||
2020
|
2019
|
|||||||
(U.S. $ in millions)
|
||||||||
North America profit
|
$ | 560 | $ | 565 | ||||
Europe profit
|
312 | 341 | ||||||
International Markets profit
|
125 | 130 | ||||||
|
|
|
|
|||||
Total reportable segments profit
|
997 | 1,036 | ||||||
Profit of other activities
|
28 | 16 | ||||||
|
|
|
|
|||||
Total segments profit
|
1,025 | 1,051 | ||||||
Amounts not allocated to segments:
|
||||||||
Amortization
|
251 | 255 | ||||||
Other assets impairments, restructuring and other items
|
(98 | ) | 160 | |||||
Intangible asset impairments
|
509 | 177 | ||||||
Goodwill impairment
|
4,628 | — | ||||||
Legal settlements and loss contingencies
|
21 | 468 | ||||||
Other unallocated amounts
|
55 | 73 | ||||||
|
|
|
|
|||||
Consolidated operating income (loss)
|
(4,342 | ) | (81 | ) | ||||
|
|
|
|
|||||
Financial expenses, net
|
117 | 211 | ||||||
|
|
|
|
|||||
Consolidated income (loss) before income taxes
|
$ | (4,459 | ) | $ | (292 | ) | ||
|
|
|
|
Nine months ended September 30,
|
||||||||||||||||
2020
|
2019
|
|||||||||||||||
(U.S. $ in millions / % of Segment Revenues)
|
||||||||||||||||
Revenues
|
$ | 6,146 | 100 | % | $ | 6,169 | 100.0 | % | ||||||||
Gross profit
|
3,208 | 52.2 | % | 3,155 | 51.1 | % | ||||||||||
R&D expenses
|
455 | 7.4 | % | 497 | 8.0 | % | ||||||||||
S&M expenses
|
755 | 12.3 | % | 756 | 12.3 | % | ||||||||||
G&A expenses
|
325 | 5.3 | % | 342 | 5.5 | % | ||||||||||
Other (income) expense
|
(9 | ) | § | (6 | ) | § | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment profit*
|
$ | 1,682 | 27.4 | % | $ | 1,566 | 25.4 | % | ||||||||
|
|
|
|
|
|
|
|
* |
Segment profit does not include amortization and certain other items.
|
§ |
Represents an amount less than 0.5%.
|
Nine months ended September 30,
|
Percentage
Change
|
|||||||||||
2020
|
2019
|
2019-2020
|
||||||||||
(U.S. $ in millions)
|
||||||||||||
Generic products
|
$ | 2,804 | $ | 2,826 | (1 | %) | ||||||
AJOVY
|
98 | 68 | 45 | % | ||||||||
AUSTEDO
|
451 | 276 | 64 | % | ||||||||
BENDEKA/TREANDA
|
313 | 371 | (16 | %) | ||||||||
COPAXONE
|
671 | 753 | (11 | %) | ||||||||
ProAir*
|
175 | 194 | (10 | %) | ||||||||
QVAR
|
139 | 183 | (24 | %) | ||||||||
Anda
|
1,141 | 1,080 | 6 | % | ||||||||
Other
|
354 | 417 | (15 | %) | ||||||||
|
|
|
|
|||||||||
Total
|
$ | 6,146 | $ | 6,169 | § | |||||||
|
|
|
|
* |
Does not include revenues from the ProAir authorized generic, which are included under generic products.
|
§ |
Represents an amount less than 0.5%.
|
Nine months ended September 30,
|
||||||||||||||||
2020
|
2019
|
|||||||||||||||
(U.S. $ in millions / % of Segment Revenues)
|
||||||||||||||||
Revenues
|
$ | 3,520 | 100 | % | $ | 3,611 | 100 | % | ||||||||
Gross profit
|
2,009 | 57.1 | % | 2,066 | 57.2 | % | ||||||||||
R&D expenses
|
180 | 5.1 | % | 199 | 5.5 | % | ||||||||||
S&M expenses
|
590 | 16.8 | % | 637 | 17.6 | % | ||||||||||
G&A expenses
|
184 | 5.2 | % | 175 | 4.8 | % | ||||||||||
Other (income) expense
|
(3 | ) | § | (5 | ) | § | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment profit*
|
$ | 1,058 | 30.1 | % | $ | 1,060 | 29.4 | % | ||||||||
|
|
|
|
|
|
|
|
* |
Segment profit does not include amortization and certain other items.
|
§ |
Represents an amount less than 0.5%.
|
Nine months ended
September 30,
|
||||||||
2020
|
2019
|
|||||||
(U.S. $ in millions)
|
||||||||
Generic products
|
$ | 2,593 | $ | 2,599 | ||||
COPAXONE
|
294 | 327 | ||||||
Respiratory products
|
263 | 267 | ||||||
AJOVY
|
17 | 1 | ||||||
Other
|
352 | 416 | ||||||
|
|
|
|
|||||
Total
|
$ | 3,520 | $ | 3,611 | ||||
|
|
|
|
Nine months ended
September 30,
|
||||||||||||||||
2020
|
2019**
|
|||||||||||||||
(U.S. $ in millions / % of Segment
Revenues)
|
||||||||||||||||
Revenues
|
$ | 1,582 | 100 | % | $ | 1,668 | 100 | % | ||||||||
Gross profit
|
828 | 52.3 | % | 877 | 52.6 | % | ||||||||||
R&D expenses
|
51 | 3.3 | % | 66 | 4.0 | % | ||||||||||
S&M expenses
|
312 | 19.7 | % | 348 | 20.9 | % | ||||||||||
G&A expenses
|
96 | 6.1 | % | 102 | 6.1 | % | ||||||||||
Other (income) expense
|
(10 | ) | (0.6 | %) | (2 | ) | § | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment profit*
|
$ | 378 | 23.9 | % | $ | 363 | 21.7 | % | ||||||||
|
|
|
|
|
|
|
|
§ |
Represents an amount less than 0.5%.
|
* |
Segment profit does not include amortization and certain other items.
|
** |
The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements.
|
2020
|
2019
|
|||||||
(U.S. $ in millions)
|
||||||||
Generic products
|
$ | 1,304 | $ | 1,404 | ||||
COPAXONE
|
38 | 46 | ||||||
Other
|
241 | 218 | ||||||
|
|
|
|
|||||
Total
|
$ | 1,582 | $ | 1,668 | ||||
|
|
|
|
* |
The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.
|
Nine months ended September 30,
|
||||||||
2020
|
2019
|
|||||||
(U.S. $ in millions)
|
||||||||
North America profit
|
$ | 1,682 | $ | 1,566 | ||||
Europe profit
|
1,058 | 1,060 | ||||||
International Markets profit
|
378 | 363 | ||||||
|
|
|
|
|||||
Total reportable segments profit
|
3,118 | 2,989 | ||||||
Profit (loss) of other activities
|
130 | 92 | ||||||
|
|
|
|
|||||
Total segments profit
|
3,248 | 3,081 | ||||||
Amounts not allocated to segments:
|
||||||||
Amortization
|
758 | 823 | ||||||
Other asset impairments, restructuring and other items
|
404 | 263 | ||||||
Intangible asset impairments
|
1,278 | 1,206 | ||||||
Goodwill impairment
|
4,628 | — | ||||||
Legal settlements and loss contingencies
|
10 | 1,171 | ||||||
Other unallocated amounts
|
148 | 209 | ||||||
|
|
|
|
|||||
Consolidated operating income (loss)
|
(3,978 | ) | (591 | ) | ||||
|
|
|
|
|||||
Financial expenses, net
|
565 | 635 | ||||||
|
|
|
|
|||||
Consolidated income (loss) before income taxes
|
$ | (4,543 | ) | $ | (1,226 | ) | ||
|
|
|
|
• |
our management and Board of Directors use the
non-GAAP
measures to evaluate our operational performance, to compare against work plans and budgets, and ultimately to evaluate the performance of management;
|
• |
our annual budgets are prepared on a
non-GAAP
basis; and
|
• |
senior management’s annual compensation is derived, in part, using these
non-GAAP
measures. While qualitative factors and judgment also affect annual bonuses, the principal quantitative element in the determination of such bonuses is performance targets tied to the work plan, which is based on the
non-GAAP
presentation set forth below.
|
• |
amortization of purchased intangible assets;
|
• |
legal settlements and/or loss contingencies, due to the difficulty in predicting their timing and scope;
|
• |
impairments of long-lived assets, including intangibles, property, plant and equipment and goodwill;
|
• |
restructuring expenses, including severance, retention costs, contract cancellation costs and certain accelerated depreciation expenses primarily related to the rationalization of our plants or to certain other strategic activities, such as the realignment of R&D focus or other similar activities;
|
• |
acquisition- or divestment- related items, including changes in contingent consideration, integration costs, banker and other professional fees, inventory
step-up
and
in-process
R&D acquired in development arrangements;
|
• |
expenses related to our equity compensation;
|
• |
significant
one-time
financing costs and devaluation losses;
|
• |
unusual tax items;
|
• |
other awards or settlement amounts, either paid or received;
|
• |
other exceptional items that we believe are sufficiently large that their exclusion is important to facilitate an understanding of trends in our financial results, such as impacts due to changes in accounting, significant costs for remediation of plants, such as inventory write-offs or related consulting costs, or other unusual events; and
|
• |
corresponding tax effects of the foregoing items.
|
Three Months Ended September 30, 2020
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. $ and shares in millions (except per share amounts)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP |
Excluded for
non-GAAP
measurement
|
Non-GAAP
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization
of purchased intangible assets |
Legal
settlements
and loss
contingencies |
Goodwill
impairment |
Impairment
of long
lived
assets
|
Other
R&D expenses |
Restructuring
costs |
Costs
related to
regulatory
actions
taken in
facilities |
Equity
compensation |
Contingent
consideration |
Other
non-GAAP
items |
Other
items |
Corresponding
tax effect |
|||||||||||||||||||||||||||||||||||||||||||||
Cost of sales
|
2,126 | 221 | 6 | 7 | (2 | ) | 1,894 | |||||||||||||||||||||||||||||||||||||||||||||||||
R&D expenses
|
258 | 21 | 5 | 233 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
S&M expenses
|
605 | 31 | 8 | 566 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
G&A expenses
|
279 | 10 | 269 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expense
|
(8 | ) | (8 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies
|
21 | 21 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other assets impairments, restructuring and other items
|
(98 | ) | 56 | 9 | (179 | ) | 15 | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets impairments
|
509 | 509 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill impairment
|
4,628 | 4,628 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial expenses, net
|
117 | (124 | ) | 241 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes
|
16 | (117 | ) | 133 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Share in losses of associated companies – net
|
(136 | ) | (134 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to
non-controlling
interests
|
10 | (6 | ) | 15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Total reconciled items
|
251 | 21 | 4,628 | 565 | 21 | 9 | 6 | 30 | (179 | ) | 14 | (264 | ) | (117 | ) | |||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
EPS - Basic
|
(3.97 | ) | 4.55 | 0.58 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
EPS - Diluted
|
(3.97 | ) | 4.55 | 0.58 |
Three Months Ended September 30, 2019
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. $ and shares in millions (except per share amounts)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP |
Excluded for
non-GAAP
measurement
|
Non-GAAP
|
||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization
of purchased intangible assets |
Legal
settlements
and loss
contingencies |
Impairment
of long
lived assets
|
Restructuring
costs |
Costs
related to
regulatory
actions
taken in facilities |
Equity
compensation |
Contingent
consideration |
Gain
on sale
of business |
Other
non-
GAAP
items |
Other
items |
Corresponding
tax effect |
||||||||||||||||||||||||||||||||||||||||||
Cost of sales*
|
2,264 | 220 | 11 | 7 | 35 | 1,990 | ||||||||||||||||||||||||||||||||||||||||||||||
R&D expenses
|
240 | 5 | (7 | ) | 242 | |||||||||||||||||||||||||||||||||||||||||||||||
S&M expenses
|
595 | 35 | 9 | 551 | ||||||||||||||||||||||||||||||||||||||||||||||||
G&A expenses
|
285 | 14 | 1 | 270 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expense
|
(14 | ) | (3 | ) | (11 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies
|
468 | 468 | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Other assets impairments, restructuring and other items
|
160 | 28 | 61 | 51 | 21 | — | ||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets impairments
|
177 | 177 | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Financial expenses, net
|
211 | 3 | 208 | |||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes
|
11 | (172 | ) | 183 | ||||||||||||||||||||||||||||||||||||||||||||||||
Share in losses of associated
companies – net
|
4 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to
non-controlling
interests
|
7 | (12 | ) | 19 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total reconciled items
|
255 | 468 | 204 | 61 | 11 | 35 | 51 | (3 | ) | 51 | (9 | ) | (172 | ) | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
EPS - Basic
|
(0.29 | ) | 0.87 | 0.58 | ||||||||||||||||||||||||||||||||||||||||||||||||
EPS - Diluted
|
(0.29 | ) | 0.87 | 0.58 |
* |
The data presented for prior periods has been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.
|
Nine Months Ended September 30, 2020
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. $ and shares in millions (except per share amounts)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP |
Excluded for
non-GAAP
measurement
|
Non-GAAP
|
||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization
of purchased intangible assets |
Legal
settlements
and loss
contingencies |
Goodwill
impairment |
Impairment
of long-
lived assets
|
Restructuring
costs |
Costs
related to
regulatory actions
taken in
facilities |
Equity
compensation |
Contingent
consideration |
Other non
GAAP items |
Other
items |
Corresponding
tax effect
|
||||||||||||||||||||||||||||||||||||||||||
Cost of sales
|
6,528 | 663 | 17 | 19 | 30 | 5,799 | ||||||||||||||||||||||||||||||||||||||||||||||
R&D expenses
|
704 | 14 | 3 | 687 | ||||||||||||||||||||||||||||||||||||||||||||||||
S&M expenses
|
1,815 | 95 | 25 | 1,695 | ||||||||||||||||||||||||||||||||||||||||||||||||
G&A expenses
|
846 | 31 | 12 | 803 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expense
|
(30 | ) | (3 | ) | (27 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies
|
10 | 10 | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Other assets impairments, restructuring and other items
|
404 | 408 | 82 | (96 | ) | 10 | — | |||||||||||||||||||||||||||||||||||||||||||||
Intangible assets impairment
|
1,278 | 1,278 | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill impairment
|
4,628 | 4,628 | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Financial expenses, net
|
565 | (118 | ) | 683 | ||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes
|
(147 | ) | (583 | ) | 436 | |||||||||||||||||||||||||||||||||||||||||||||||
Share in losses of associated companies – net
|
(135 | ) | (134 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to
non-controlling
interests
|
(121 | ) | (174 | ) | 53 | |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total reconciled items
|
758 | 10 | 4,628 | 1,686 | 82 | 17 | 90 | (96 | ) | 52 | (427 | ) | (583 | ) | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
EPS - Basic
|
(3.78 | ) | 5.68 | 1.90 | ||||||||||||||||||||||||||||||||||||||||||||||||
EPS - Diluted
|
(3.78 | ) | 5.67 | 1.89 |
Nine months ended September 30, 2019
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. $ and shares in millions (except per share amounts)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP |
Excluded for
non-GAAP
measurement
|
Non-
GAAP |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization
of purchased intangible assets |
Legal
settlements and loss contingencies |
Impairment
of long- lived assets |
Acquisition,
integration and related expenses |
Restructuring
costs |
Costs
related to regulatory actions taken in facilities |
Equity
compensation |
Contingent
consideration |
Gain
on
sale of
business |
Other
non GAAP items |
Other
items |
Corresponding
tax effect |
Unusual
tax item* |
||||||||||||||||||||||||||||||||||||||||||||||||
Cost of sales**
|
6,841 | 717 | 28 | 21 | 96 | 5,978 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
R&D expenses
|
778 | 17 | (7 | ) | 768 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
S&M expenses
|
1,908 | 105 | 29 | 1,774 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
G&A expenses
|
873 | 37 | 836 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expense
|
(29 | ) | (12 | ) | (17 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal settlements and loss contingencies
|
1,171 | 1,171 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other assets impairments, restructuring and other items
|
263 | 96 | 2 | 140 | 4 | 22 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets impairment
|
1,206 | 1,206 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial expenses, net
|
635 | 9 | 626 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes
|
(159 | ) | (662 | ) | 61 | 442 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share in losses of associated companies – net
|
8 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to
non-controlling
interests
|
33 | (28 | ) | 61 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Total reconciled items
|
823 | 1,171 | 1,302 | 2 | 140 | 28 | 104 | 4 | (12 | ) | 111 | (19 | ) | (662 | ) | 61 | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
EPS - Basic
|
(1.02 | ) | 2.80 | 1.78 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EPS - Diluted
|
(1.02 | ) | 2.80 | 1.78 |
* |
Interest disallowance as a result of the U.S Tax Cuts and Jobs Act.
|
** |
The data presented for prior periods has been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
* |
Filed herewith.
|
(1) |
Incorporated by reference to Appendix A to our Definitive Proxy Statement filed on April 22, 2020.
|
TEVA PHARMACEUTICAL INDUSTRIES LIMITED | ||||||
Date: November 5, 2020 | By: |
/s/ Eli Kalif
|
||||
Name: |
Eli Kalif
|
|||||
Title: |
Executive Vice President,
Chief Financial Officer
(Duly Authorized Officer)
|
Exhibit 10.2
AWARD AGREEMENT
This Award Agreement (this Agreement), is made effective as of [], between Teva Pharmaceutical Industries Limited (the Company) and [] (the Participant). Capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the Companys 2020 Long-Term Equity-Based Incentive Plan (the Plan).
Pursuant to Sections 6, 7 and 8 of the Plan, the Company hereby grants to the Participant as of the Grant Date (as defined below) the number of Options, Restricted Share Units (RSUs) and Performance Share Units (PSUs) (Options, RSUs and PSUs are collectively and individually referred to herein as Awards) set forth below, subject to the terms and conditions contained herein and in the appendices attached hereto, as well as the terms and conditions of the Plan and the compensation policy for executive officers and directors, as may be amended from time to time, as may be amended from time to time at the Companys sole discretion, which are incorporated herein in their entirety. All dollar amounts in this Agreement are in U.S. dollars.
Total Fair Value of the Award: | $[] | |
Fair Value of each RSU: | $[] | |
Fair Value of each PSU: | $[] | |
Fair Value of each Option: | $[] | |
RSUs Granted: | [], which represents approximately [] of the Total Fair Value of the Award divided by the Fair Value of each RSU, rounded down to the nearest whole number. | |
Target Number of PSUs Granted: |
[], which represents approximately [] of the Total Fair Value of the Award divided by the Fair Value of each PSU, rounded down to the nearest whole number.
The Target Number of PSUs Granted represents the number of PSUs that would be earned, subject to vesting, if the Company were to achieve the target level of the PSU Performance Objectives and the target Relative TSR Modifier during the PSU Performance Period. The number of PSUs earned, if any, is subject to an increase or decrease based on the Companys actual achievement of the PSU Performance Objectives during the PSU Performance Period, as modified by the Relative TSR Modifier, and may range from [] to [] of the Target Number of PSUs Granted. |
Options Granted: | [], which represents approximately [] of the Total Fair Value of Award divided by the Fair Value of each Option. | |
Grant Date: | [] | |
Vesting of [] of Options and RSUs Granted: |
[] anniversary of the Grant Date, subject to the Participants continued employment through such date. |
|
Vesting of [] of Options and RSUs Granted: |
[] anniversary of the Grant Date, subject to the Participants continued employment through such date. |
|
Vesting of the Balance of Options and RSUs Granted: |
[] anniversary of the Grant Date, subject to the Participants continued employment through such date. |
|
Option Exercise Price: | $[], the Fair Market Value per Share on the Grant Date. | |
Option Expiration Date: | Tenth Anniversary of the Grant Date. | |
Settlement of Vested RSUs: | Upon vesting, RSUs shall be settled by delivering one Share for each RSU (or the cash value of one Share, if so determined by the Committee) that vested as soon as practicable, but in any event no later than thirty (30) days, following the vesting date. | |
PSU Performance Period: | [] | |
PSU Performance Objectives: |
[] Performance Objective [] Performance Objective |
|
Relative TSR Modifier: | The Relative TSR Modifier will be determined based on the Companys Relative TSR Percentile Rank for the PSU Performance Period, in accordance with the following table: |
Achievement Level |
Relative TSR
|
Relative
|
||
Minimum |
Up to [] Percentile | [] % | ||
Target |
[] Percentile | [] % | ||
Maximum |
[]Percentile or above | [] % |
- 2 -
Linear interpolation shall be used to determine the Relative TSR Modifier between Achievement Levels.
For purposes hereof, the following terms have the following meanings:
Beginning Stock Price with respect to any company means the average of the closing prices of such companys stock for each of the sixty (60) trading days ending on (and including) the day immediately prior to the first day of the PSU Performance Period.
Ending Stock Price with respect to any company means the average of the closing prices of such companys stock for each of the sixty (60) trading days ending on (and including) the last day of the PSU Performance Period.
Peer Group means the following group of companies: []
Relative TSR Percentile Rank means the percentile rank of the TSR of the Company relative to the TSR of the companies in the Peer Group, in each case, for the PSU Performance Period, equal to the product of (i) the quotient of (a) the numeric rank of Companys TSR relative to the Peer Group, where the lowest TSR in the Peer Group is ranked number 1, and (b) the total number of companies in the Peer Group plus 1, rounded to the nearest hundredth, and (ii) 100.
TSR as of a given date means the percentage change in the value of companys stock from the Beginning Stock Price to the Ending Stock Price calculated as the quotient of (i) (a) the applicable Ending Stock Price minus the applicable Beginning Stock Price, plus (b) dividends paid with respect to a record date occurring during the PSU Performance Period, divided by (ii) the applicable Beginning Stock Price. |
||
Earned PSUs: | The number of PSUs earned, if any, subject to vesting (Earned PSUs), will be based on the achievement of the PSU Performance Objectives for the PSU Performance Period, as determined in accordance with the following table and as adjusted by the Relative TSR Modifier. Performance will be measured for each PSU Performance Objective, and the arithmetic mean of the Applicable Earning Percentage of the [] Performance Objective and the Applicable Earning Percentage of the [] Objective shall equal the Applicable Earning Percentage of the PSU Performance Objectives: |
- 3 -
Achievement Level |
Percentage Achievement of PSU Performance Objectives |
Applicable Earning Percentage |
||
Below Threshold |
[] | [] | ||
Threshold |
[] | [] | ||
Target |
[] | [] | ||
Maximum |
[] | [] | ||
Above Maximum |
[] | [] |
- 4 -
1. Restricted Share Units.
(A) Grant of RSUs. As set forth above, the Company hereby grants to the Participant, as of the Grant Date, the number of RSUs as set forth in the table above.
(B) No Share Issuance at Grant. No Shares shall be issued or delivered to the Participant at the time the RSUs are granted.
2. Performance Share Units.
(A) Grant of PSUs. As set forth above, the Company hereby grants to the Participant, as of the Grant Date, the Target Number of PSUs Granted as set forth in the table above.
(B) No Share Issuance at Grant. No Shares shall be issued or delivered to the Participant at the time the PSUs are granted.
(C) Determination of the Earned PSUs. The Human Resources and Compensation Committee (the Committee) and, as applicable, the Board shall have the sole authority to determine the level of achievement of the PSU Performance Objectives and the Relative TSR Modifier and to calculate the number of Earned PSUs, and shall do so as soon as practicable following the completion of the PSU Performance Period and release of Financial Statements as set forth in the table above. For the avoidance of doubt, nothing herein shall derogate from the Committees and the Boards discretion to reduce variable compensation.
(D) Adjustment of PSU Performance Objectives. The Committee and, as applicable, the Board shall have the discretion to designate additional business criteria on which the Performance Objectives may be based, adjust (increase or decrease) modify or amend any of the Performance Objectives, including, without limitation, adjustments, modifications or amendments for one or more of the following items of gain, loss, profit or expense: (1) determined to be extraordinary, unusual or non-recurring in nature; (2) related to changes in accounting principles under GAAP or tax laws; (3) related to currency fluctuations; (4) related to financing activities (e.g., effect on earnings per share of issuing convertible debt securities); (5) related to restructuring, divestitures, productivity initiatives or new business initiatives; (6) related to discontinued operations that do not qualify as a segment of business under GAAP; (7) attributable to the business operations of any entity acquired by the Company during the fiscal year; (8) non-operating items; and (9) acquisition expenses.
3. Options.
(A) Grant of Options. As set forth above, the Company hereby grants to the Participant, as of the Grant Date, the number of Options as set forth in the table above to purchase an equal number of Shares.
(B) No Obligation to Exercise Options. The grant and acceptance of Options pursuant to this Agreement do not impose any obligation on the Participant to exercise them.
- 5 -
4. Other Provisions.
(A) Vesting. The Awards granted hereunder shall vest and settle as set forth in the table above.
(B) Termination of Employment. In order to vest in the Awards, the Participant must be actively employed by the Company or its Affiliates on the applicable vesting date, except as expressly provided in the Participants employment agreement including any amendment thereof and/or company policy applicable to Participant and/or the Plan.
(C) Withholding. The Company or the Employer, or a third party holding Awards on behalf of the Participant, shall have the right to make all payments or distributions pursuant to this Agreement to the Participant net of any applicable taxes, fees or other required deductions, such as, but not limited to, income taxes, capital gains taxes, social security premiums, and custody fees, trustee charges, fees for transfer of any Award or its underlying Share payable by the Participant or required to be paid or withheld as a result of the exercise of an Option, the settlement of an RSU or a PSU, the delivery of a Share or its transfer, and/or of any dividends or dividend equivalents accrued or paid on any Award and/or on any underlying Shares, and any other event occurring pursuant to the Plan or this Agreement, that necessitates the withholding of income, employment or capital gains taxes or any other required deductions or payments (hereinafter referred to as Taxes). The Company or the Employer, may withhold from wages or other amounts payable to the Participant such Taxes as may be required by law or otherwise payable by the Participant, or to otherwise require the Participant to pay such Taxes.
(D) Other Effective Documents; Other Agreements.
(i) |
The terms and provisions of the Compensation Policy and the Plan are incorporated herein by reference and made a part hereof. In case of contradiction between the terms of this Agreement and/or its appendices and/or the Plan and/or the Compensation Policy, it is agreed that the terms of the Plan and the Compensation Policy shall prevail over the terms of this Agreement and any appendix, and that the terms of any appendix shall prevail over the terms of this Agreement. The Participant agrees (x) that by not declining this Agreement within 30 days following Grant Date, he/she will become a party to the agreements set forth in any appendix attached hereto, (y) to the terms of an Award administration framework agreement and its terms and conditions, as may be set forth in an appendix or as requested by the Company or the Employer in the future, and shall also agree to such agreement in writing and (z) to the extent applicable, to adhere to the terms of the Companys insider trading policy. In addition to any restrictions on resale and transfer noted in the Plan, Shares acquired pursuant to the Plan may be subject to certain restrictions on resale and/or disclosure of such sale imposed by local securities laws. Accordingly, the Participant is encouraged to seek legal advice prior to any resale of such Shares. |
- 6 -
(ii) |
The Participant is advised to exercise caution regarding the Awards. If the Participant is in any doubt about any provisions of the Plan or this Agreement, the Participant should obtain independent professional advice. Receiving Awards may have tax consequences under local tax laws. Neither the Company nor any of its Affiliates is responsible for, and has not provided, any advice to the Participant regarding the Plan or the Awards, including but not limited to legal, investment or tax advice. |
(iii) |
The Participant acknowledges and agrees that, if the Participants employment location changes or the Participants employment transfers to a different Employer, whether the Participant will be able to continue participating in the Plan will depend on the Participants circumstances and will be determined by Teva in its discretion in accordance with the Plan. |
(E) Clawback/Recoupment Policy. By signing this Agreement, the Participant grants the Employer a power of attorney to deduct from any payments due to the Participant by the Employer, any amounts owed by the Participant under Section 21(h) of the Plan, in accordance with applicable law.
(F) Binding Effect. This Agreement shall be binding upon the heirs, executors, administrators, and successors of the parties hereto.
(G) Governing Law. This Agreement (including, for the avoidance of doubt, any appendices attached hereto) shall be construed and interpreted in accordance with the local laws of country where the Participant is or was last employed by the Employer without giving effect to the principles of the conflicts of laws thereof.
(H) Entire Agreement; Modification. This Agreement (together with any appendices attached hereto) and the Plan constitute the entire agreement between the parties relative to the subject matter hereof, and supersede all proposals, written or oral, and all other communications between the parties relating to the subject matter of this Agreement. This Agreement may be modified or amended in accordance with Section 18 of the Plan.
(I) Counterparts; Electronic Signature. The award agreement shall be deemed automatically accepted by the Participant and the Participant shall be subject to all its terms and conditions, unless the Participant clicks the I decline button at the end of the award agreement on Equate+ within 30 days following the Grant Date. The Participant certifies that the Participant (A) has been furnished with all relevant information and materials with respect to the terms and conditions of the Award, (B) has read and understands such information and materials, (C) is fully aware and knowledgeable of the terms and conditions of the Award, and (D) completely and voluntarily agrees to the terms and conditions of the Award, as set forth in the Plan and this Agreement.
- 7 -
Exhibit 10.3
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
ISRAELI SUBPLAN
OF THE 2020 LONG-TERM EQUITY-BASED INCENTIVE PLAN
1. |
PURPOSE |
The purpose of this subplan (the Israeli Subplan) is to supplement the Teva Pharmaceutical Industries Limited 2020 Long-Term Equity-Based Incentive Plan (the Plan) in setting the framework for the grant of Awards to Israeli 102 Participants (as such term is defined below), and to allow for favorable tax treatment under the applicable provisions of Section 102 (as such term is defined below).
2. |
GENERAL |
2.1. |
This Israeli Subplan shall apply only to Israeli 102 Participants. The provisions specified hereunder shall form an integral part of the Plan. |
2.2. |
The Plan and this Israeli Subplan are complementary to each other and shall be deemed as one. Other than subject to requirements of Section 102, in the event of any conflict, whether explicit or implied, between the provisions of this Israeli Subplan and the Plan, the provisions set out in the Plan shall prevail. |
2.3. |
Any capitalized term not specifically defined in this Israeli Subplan shall be construed according to the interpretation given to it in the Plan. |
3. |
DEFINITIONS |
3.1. |
Israeli 102 Participant means an Eligible Person who is an Employee, as such term is defined in Section 102. |
3.2. |
Israeli Award Agreement means the Israeli Award Agreement between the Company and an Israeli 102 Participant that sets out the terms and conditions of an Award. |
3.3. |
ITA means the Israeli Tax Authority. |
3.4. |
Ordinance means the Israeli Income Tax Ordinance [New Version] 1961 as now in effect or as hereafter amended. |
3.5. |
Section 102 means section 102 of the Ordinance and any regulations, rules, orders or procedures promulgated thereunder as now in effect or as hereafter amended. |
3.6. |
Settlement means the settlement of Awards upon exercise and/or vesting and/or being earned (as relevant) into Shares. |
3.7. |
Trustee means any person or entity appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a). |
3.8. |
Trustee 102 Award means an Award granted to an Israeli 102 Participant pursuant to Section 102(b), for the benefit of an Israeli 102 Participant, provided that such Award shall be Settled using only Shares. |
1
4. |
GRANT OF AWARDS |
4.1. |
Awards hereunder to Israeli 102 Participants shall be granted pursuant to Section 102, as Trustee 102 Awards. |
4.2. |
Trustee 102 Awards shall be granted under the capital gain tax route in accordance with the provisions of Section 102(b)(3). Such tax route shall apply to: all Trustee 102 Awards granted under this Israeli Subplan, all rights to purchase Shares derived from the Trustee 102 Awards and all Shares received following any realization of rights derived from the Trustee 102 Awards, including, without limitation, share dividends, under the Plan, unless the Company has elected otherwise in accordance with the provisions of Section 102(g). |
4.3. |
All Trustee 102 Awards shall be held in trust by a Trustee, as described in Section 5 below. |
4.4. |
The grant of Trustee 102 Awards shall be subject to the terms and conditions set forth in Section 102. |
5. |
TRUSTEE |
5.1. |
The Company shall enter into an agreement with a Trustee prior to granting any Trustee 102 Awards under this Israeli Subplan, and the provisions of such agreement (including any amendments thereto) shall be binding upon each Israeli 102 Participant. |
5.2. |
Trustee 102 Awards and/or any Shares allocated or issued upon Settlement of a Trustee 102 Award and/or any rights to purchase Shares derived from the Trustee 102 Awards and/or other Shares received following any realization of rights derived from the Trustee 102 Awards, including, without limitation, share dividends, under the Plan shall be allocated or issued to the Trustee, for the benefit of the Israeli 102 Participants, in accordance with the provisions of Section 102. |
5.3. |
Subject to the provisions of Section 102, an Israeli 102 Participant shall not sell or release from trust any Share received upon the Settlement of a Trustee 102 Award and/or any Shares or rights to purchase Shares derived from the Trustee 102 Awards, including, without limitation, share dividends, under the Plan, until the lapse of the period of time required under Section 102 (the Lockup Period). Notwithstanding the aforesaid, it is agreed that in the event that Israeli 102 Participant seeks to sell or release from trust such Trustee 102 Award and/or any Shares or rights to purchase Shares derived from the Trustee 102 Awards before the end of the Lockup Period, such sell or release will be considered as a violation of the provisions of Section 102 and all consequences arising from such violation, including the resulting tax payments, shall apply to the Participant, and the Trustee shall withhold and deduct all tax and other mandatory payments required in relation thereto, according to the maximum rates under applicable law. |
2
6. |
SETTLEMENT OF TRUSTEE 102 AWARDS |
Settlement of Trustee 102 Awards, and sale and/or transfer of Shares, shall be subject to the terms and conditions and the method, as may be determined by the Company and/or the Trustee, in accordance with the requirements of Section 102.
7. |
NON-TRANSFERABILITY BY THE TRUSTEE |
Notwithstanding any other provision of the Plan, as long as Trustee 102 Awards or Shares allocated or issued hereunder are held by the Trustee on behalf of the Israeli 102 Participant, all rights of the Israeli 102 Participant over the Shares cannot be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution, in each case as determined by a probate court of competent jurisdiction.
8. |
INTEGRATION OF SECTION 102 AND ITAS APPROVALS |
8.1. |
Notwithstanding anything to the contrary herein, Trustee 102 Awards may be granted under a different mechanism than that described herein, such as by the use of a Supervisor Trustee ( ) mechanism, subject to receipt of an approval issued by the ITA that such mechanism complies with Section 102 and provided such grants are made in accordance with said approval and the provisions therein. |
8.2. |
With regard to Trustee 102 Award, the provisions of the Plan and/or the Israeli Subplan and/or the Israeli Award Agreement shall be subject to the provisions of Section 102 and any approval issued by the ITA, including without limitation, any approval regarding Supervisor Trustee ( ), and the said provisions shall be deemed an integral part of the Plan, the Israeli Subplan and the Israeli Award Agreement. |
8.3. |
Any provision of Section 102 and/or said approval issued by the ITA which must be complied with in order to receive and/or to maintain any tax benefit pursuant to Section 102, which is not expressly specified in the Plan, the Israeli Subplan or the Israeli Award Agreement, shall be considered binding upon the Company and the Israeli 102 Participants. |
9. |
GOVERNING LAW AND JURISDICTION |
9.1. |
This Israeli Subplan shall be governed by and construed in accordance with the laws of the State of Israel, without giving effect to the principles of conflict of laws. |
9.2. |
The exclusive jurisdiction in any matter arising in connection with this Israeli Subplan shall be vested in the competent courts of Tel Aviv -Jaffa. |
3
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Kåre Schultz, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Teva Pharmaceutical Industries Limited; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
4. |
The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
a. |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. |
evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. |
disclosed in this report any change in the companys internal control over financial reporting that occurred during the companys most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and |
5. |
The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions): |
a. |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and |
b. |
any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting. |
Date: |
November 5, 2020 |
/s/ Kåre Schultz |
Kåre Schultz |
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Eli Kalif, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Teva Pharmaceutical Industries Limited; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
4. |
The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
a. |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. |
evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. |
disclosed in this report any change in the companys internal control over financial reporting that occurred during the companys most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and |
5. |
The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions): |
a. |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and |
b. |
any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting. |
Date: |
November 5, 2020 |
/s/ Eli Kalif |
Eli Kalif |
Executive Vice President, Chief Financial Officer |
Exhibit 32
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Teva Pharmaceutical Industries Limited (the Company) on Form 10-Q for the period ended September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the Report), we, Kåre Schultz, President and Chief Executive Officer of the Company, and Eli Kalif, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: November 5, 2020
/s/ Kåre Schultz |
Kåre Schultz |
President and Chief Executive Officer |
/s/ Eli Kalif |
Eli Kalif |
Executive Vice President, Chief Financial Officer |