PART I. Financial Statements (unaudited) This section presents Teva's unaudited consolidated financial statements and related notes for the reported period Item 1. Financial Statements (unaudited) This section presents Teva's unaudited consolidated financial statements, including balance sheets, income statements, comprehensive income statements, changes in equity, and cash flow statements, along with detailed notes explaining the basis of presentation, significant transactions, revenue disaggregation, inventory, intangible assets, goodwill, debt, derivatives, legal matters, income taxes, and fair value measurements Consolidated Balance Sheets This section presents Teva's consolidated financial position, detailing assets, liabilities, and equity at specific reporting dates | Metric | Sep 30, 2023 (Millions USD) | Dec 31, 2022 (Millions USD) | Change (Millions USD) | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Assets | 42,088 | 44,006 | (1,918) | | Total Liabilities | 34,576 | 35,315 | (739) | | Total Equity | 7,512 | 8,691 | (1,179) | | Cash and cash equivalents | 2,249 | 2,801 | (552) | | Accounts receivables, net | 3,385 | 3,696 | (311) | | Inventories | 4,051 | 3,833 | 218 | | Short-term debt | 1,479 | 2,109 | (630) | | Sales reserves and allowances| 3,351 | 3,750 | (399) | | Accrued expenses | 2,741 | 2,151 | 590 | Consolidated Statements of Income (loss) This section outlines Teva's financial performance, including revenues, expenses, and net income or loss over specified periods | Metric (Millions USD) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net revenues | 3,850 | 3,595 | 11,389 | 11,041 | | Cost of sales | 1,999 | 1,926 | 6,159 | 5,839 | | Gross profit | 1,851 | 1,669 | 5,230 | 5,203 | | Research and development expenses | 253 | 175 | 726 | 628 | | Selling and marketing expenses | 576 | 539 | 1,726 | 1,716 | | General and administrative expenses | 268 | 283 | 870 | 892 | | Intangible assets impairments | 47 | 24 | 289 | 223 | | Goodwill impairment | — | — | 700 | 745 | | Other assets impairments, restructuring and other items | 46 | 36 | 241 | 282 | | Legal settlements and loss contingencies | 314 | 195 | 1,009 | 2,048 | | Operating income (loss)| 355 | 419 | (289) | (1,244) | | Financial expenses, net| 280 | 252 | 808 | 721 | | Income (loss) before income taxes | 75 | 166 | (1,097) | (1,964) | | Income taxes (benefit)| (12) | 107 | (48) | (792) | | Net income (loss) attributable to Teva | 80 | 56 | (988) | (1,132) | | Basic EPS | 0.07 | 0.05 | (0.88) | (1.02) | | Diluted EPS | 0.07 | 0.05 | (0.88) | (1.02) | Consolidated Statements of Comprehensive Income (loss) This section details Teva's comprehensive income or loss, encompassing net income and other comprehensive income items | Metric (Millions USD) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | 88 | 58 | (1,048) | (1,152) | | Currency translation adjustment | (255) | (402) | (173) | (684) | | Unrealized gain (loss) from derivative financial instruments, net | 7 | 7 | 19 | 21 |\ | Unrealized loss on defined benefit plans | (1) | — | (2) | — | | Total other comprehensive income (loss) | (249) | (395) | (156) | (663) | | Total comprehensive income (loss) | (161) | (337) | (1,204) | (1,815) | | Comprehensive income (loss) attributable to Teva | (153) | (297) | (1,060) | (1,601) | Consolidated statements of changes in equity This section tracks the changes in Teva's total equity, reflecting net income, other comprehensive income, and other equity transactions | Metric (Millions USD) | Dec 31, 2022 | Sep 30, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total equity | 8,691 | 7,512 | (1,179)| | Net Income (loss) | (1,048) | (988) | 60 | | Other comprehensive income (loss) | (156) | (72) | 84 | Consolidated Statements of Cash Flows This section reports Teva's cash inflows and outflows from operating, investing, and financing activities | Metric (Millions USD) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by (used in) operating activities | 5 | 543 | 184 | 617 | | Net cash provided by (used in) investing activities | 184 | 147 | 667 | 488 | | Net cash provided by (used in) financing activities | (576) | (439) | (1,337) | (776) | | Net change in cash, cash equivalents and restricted cash | (420) | 167 | (584) | 60 | | Balance of cash, cash equivalents and restricted cash at end of period | 2,250 | 2,258 | 2,250 | 2,258 | - Free cash flow decreased to $229 million in Q3 2023 from $685 million in Q3 2022, primarily due to lower cash flow generated from operating activities310 Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements Note 1 – Basis of presentation This note describes the accounting policies, estimates, and significant judgments used in preparing Teva's financial statements - Management's financial statements rely on estimates and assumptions, particularly for IPR&D assets, marketed product rights, goodwill, sales reserves, tax positions, and contingencies, which could be impacted by macroeconomic factors like inflation4142 - The Russia-Ukraine conflict led to a goodwill impairment charge in the International Markets segment due to an increased discount rate, but its overall impact on Teva's results remains immaterial43 - The state of war in Israel, where Teva's global headquarters and several manufacturing/R&D facilities are located, has had an immaterial impact on operations and financial condition as of the report date, with contingency plans in place44 - Teva adopted ASU 2022-04 (Supplier Finance Programs) and ASU 2021-08 (Business Combinations - Contract Assets and Liabilities) effective January 1, 2023, with ASU 2021-08 having no material impact on consolidated financial statements4649 Note 2 – Certain transactions This note details significant business collaborations, licensing agreements, and product approvals impacting Teva's operations - Teva entered an exclusive collaboration with Sanofi to co-develop and co-commercialize anti-TL1A (TEV-'574) for inflammatory bowel disease, receiving an upfront payment of $500 million and up to $1 billion in milestones52 - Teva holds an exclusive global license with MODAG for emrusolmin (TEV-'286) for neurodegenerative disorders, with a Phase 2 trial expected soon53 - The partnership with Alvotech for biosimilars was amended to add two new candidates and line extensions. Alvotech issued $40 million in convertible bonds to Teva5458 - UZEDY (risperidone) extended-release injectable suspension was approved by the FDA on April 28, 2023, and launched in the U.S. in May 2023 for schizophrenia treatment62 Note 3 – Revenue from contracts with customers This note disaggregates Teva's net revenues by geographic segment and product type, along with sales reserves and allowances | Revenue Stream (Millions USD) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Net Revenues | 3,850 | 3,595 | 11,389 | 11,041 | | North America | 2,002 | 1,809 | 5,759 | 5,450 | | Europe | 1,146 | 1,069 | 3,493 | 3,396 | | International Markets | 485 | 475 | 1,456 | 1,422 | | Other activities | 217 | 241 | 681 | 773 | | Sales of goods (Total) | 3,303 | 3,021 | 9,724 | 9,447 | | Sales Reserves and Allowances (SR&A) (Millions USD) | Jan 1, 2023 | Sep 30, 2023 | Change | | :-------------------------------------------------- | :---------- | :----------- | :----- | | Total SR&A | 3,750 | 3,351 | (399) | Note 4 – Inventories This note provides a breakdown of Teva's inventory components, including finished products, raw materials, and work in process | Inventory Component (Millions USD) | Sep 30, 2023 | Dec 31, 2022 | Change | | :--------------------------------- | :----------- | :----------- | :----- | | Finished products | 2,171 | 1,987 | 184 | | Raw and packaging materials | 1,106 | 1,059 | 47 | | Products in process | 590 | 555 | 35 | | Materials in transit and payments on account | 184 | 232 | (48) | | Total Inventories | 4,051 | 3,833 | 218 | Note 5 – Identifiable intangible assets This note details Teva's identifiable intangible assets, including product rights, trade names, and in-process R&D, along with related amortization and impairments | Intangible Asset (Millions USD) | Sep 30, 2023 | Dec 31, 2022 | Change | | :------------------------------ | :----------- | :----------- | :----- | | Product rights, net | 4,814 | 5,437 | (623) | | Trade names, net | 317 | 346 | (29) | | In process research and development, net | 394 | 487 | (93) | | Total Identifiable Intangible Assets, net | 5,525 | 6,270 | (745) | - Amortization of intangible assets was $471 million for the nine months ended September 30, 2023, down from $576 million in the prior year83 - Impairments of long-lived intangible assets totaled $289 million for the nine months ended September 30, 2023, mainly impacting identifiable product rights ($206 million) in Japan due to regulatory pricing and other market assumptions, and IPR&D assets ($83 million) due to development progress and market changes8890 Note 6 – Goodwill This note discusses Teva's goodwill, including impairment charges and the fair value assessment of reporting units | Goodwill (Millions USD) | Dec 31, 2022 | Sep 30, 2023 | Change | | :---------------------- | :----------- | :----------- | :----- | | Total Goodwill | 17,633 | 16,885 | (748) | | International Markets | 1,339 | 647 | (692) | - A $700 million goodwill impairment charge was recorded in Q2 2023 for the International Markets reporting unit, mainly due to an increased discount rate reflecting higher country-specific risks100 - The carrying value of the International Markets reporting unit now equals its fair value, indicating potential for future impairments if conditions change. The API reporting unit also has a negligible excess of fair value over carrying amount101102 - Teva's Europe reporting unit's fair value exceeds its estimated carrying amount by 3%, while North America and Medis reporting units have fair values in excess of 10% over their respective book values as of June 30, 2023103104 Note 7 – Debt obligations This note outlines Teva's short-term and long-term debt, including recent issuances, repayments, and credit facility details | Debt Type (Millions USD) | Sep 30, 2023 | Dec 31, 2022 | Change | | :----------------------- | :----------- | :----------- | :----- | | Short-term debt | 1,479 | 2,109 | (630) | | Senior notes and loans | 18,495 | 19,103 | (608) | | Total Debt | 19,974 | 21,212 | (1,238)| - In March 2023, Teva issued $2,445 million (net of issuance costs) in sustainability-linked senior notes and repurchased $2,506 million of notes through a cash tender offer491 - In July 2023, Teva repaid $1,000 million of its 2.8% senior notes at maturity120492 - Teva's debt is effectively denominated 62% in U.S. dollars, 36% in euro, and 2% in Swiss franc. The average debt maturity is approximately 6.3 years114493495 - The $1.8 billion revolving credit facility (RCF) was amended in February 2023 to update the maximum leverage ratio. As of September 30, 2023, $500 million is outstanding under the RCF116117492 Note 8 – Derivative instruments and hedging activities This note describes Teva's use of derivative instruments to manage foreign currency and interest rate risks, and their financial impact - Approximately 47% of Teva's revenues are non-U.S. dollar denominated, exposing the company to significant foreign currency risks, which are managed through forward exchange contracts, options, and natural hedging122123414479 - Teva uses interest rate swaps to manage interest rate fluctuations on its debt instruments125 - Embedded derivatives related to interest rate adjustments and potential premium payments on sustainability-linked senior notes are bifurcated and accounted for separately, with a negligible fair value as of September 30, 2023126 - Exchange rate movements, net of hedging effects, negatively impacted Q3 2023 revenues by $9 million and operating income by $53 million compared to Q3 2022. For the first nine months of 2023, the negative impact was $189 million on revenues and $122 million on operating income416482 - Teva maintains supply chain finance agreements, with $85 million in accounts payables outstanding to participating suppliers as of September 30, 2023139 Note 9 – Legal settlements and loss contingencies This note details the provisions for legal settlements and loss contingencies, including significant litigation updates and their financial impact | Metric (Millions USD) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Legal settlements and loss contingencies | 314 | 195 | 1,009 | 2,048 | - Q3 2023 expenses were mainly due to updates for the DOJ patient assistance program litigation and the estimated settlement provision of opioid cases140 - The total provision for legal settlements and loss contingencies was $4,905 million as of September 30, 2023, an increase from $4,186 million at December 31, 2022142 Note 10 – Commitments and contingencies This note provides an overview of Teva's significant commitments and contingencies, including opioid settlements, litigation, and other legal matters - Teva finalized nationwide opioid settlement agreements with all 50 U.S. states and Tribes, totaling up to $4.25 billion over 13 years, including up to $1.2 billion in generic Narcan213214 - An agreement in principle was reached with acute care hospitals for a national settlement of up to $126 million in cash and $49 million in generic Narcan over 7 years215 - In the DOJ patient assistance program litigation, the court granted the DOJ's summary judgment motion, adopting its positions on materiality, causation, and damages, with potential damages exceeding $1 billion (trebled) plus statutory penalties. Teva is appealing this decision201 - Teva entered into a 3-year deferred prosecution agreement (DPA) with the DOJ for antitrust violations, agreeing to divest pravastatin, donate clotrimazole and tobramycin, and pay a $225 million fine over 5 years191 - In intellectual property litigation, a jury verdict awarding Teva $176.5 million against Eli Lilly for AJOVY patent infringement was reversed by the U.S. District Court, which found Teva's patents invalid. Teva plans to appeal318432 Note 11 – Income taxes This note explains Teva's income tax provisions, benefits, and potential liabilities, including the impact of deferred taxes and international tax regulations | Metric (Millions USD) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income (loss) before income taxes | 75 | 166 | (1,097) | (1,964) | | Income taxes (benefit)| (12) | 107 | (48) | (792) | - The tax benefits in 2023 were primarily driven by deferred tax benefits from intellectual property-related integration plans, impairments, legal settlements, and interest expense disallowances, partly in response to the global adoption of OECD Pillar Two minimum effective corporate tax234235 - Teva is appealing an Israeli Central District Court decision regarding tax assessment decrees for 2008-2011, with a potential liability of approximately $350 million240 Note 12 – Other assets impairments, restructuring and other items This note details expenses related to other asset impairments, restructuring activities, and changes in contingent consideration | Expense (Millions USD) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Other assets impairments, restructuring and other items | 46 | 36 | 241 | 282 | | Restructuring | 27 | 25 | 93 | 117 | | Contingent consideration | 16 | 6 | 106 | 100 | - Restructuring expenses are primarily related to network consolidation activities250251 - Contingent consideration expenses for the nine months ended September 30, 2023, were mainly due to changes in estimated future royalty payments to Eagle (bendamustine) and Allergan (lenalidomide)247 Note 13 – Earnings (Loss) per share This note presents Teva's basic and diluted earnings per share calculations, including the weighted average shares outstanding | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.07 | $0.05 | $(0.88) | $(1.02) | | Diluted EPS | $0.07 | $0.05 | $(0.88) | $(1.02) | - The weighted average diluted shares outstanding for Q3 2023 were 1,135 million, and for the nine months were 1,119 million258 Note 14 – Accumulated other comprehensive income (loss) This note provides a breakdown of Teva's accumulated other comprehensive income or loss, primarily driven by foreign currency translation adjustments | Metric (Millions USD) | Dec 31, 2022 | Sep 30, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Accumulated other comprehensive loss, net of taxes | (2,838) | (2,910) | (72) | | Foreign currency translation adjustments | (2,514) | (2,603) | (89) | Note 15 – Segments This note describes Teva's reportable business segments, their profit contributions, and changes in segment reporting structure - Teva's business segments are North America (U.S. and Canada), Europe (EU, UK, other European countries), and International Markets (all other countries)263 - Other activities include API sales to third parties, contract manufacturing, and an out-licensing platform (Medis)265 - Effective January 1, 2024, Canada will be reported under the International Markets segment, no longer part of North America, aligning with the "Pivot to Growth" strategy and executive management changes269 | Segment Profit (Millions USD) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | North America profit | 577 | 477 | 1,429 | 1,359 | | Europe profit | 338 | 360 | 1,017 | 1,130 | | International Markets profit | 111 | 112 | 348 | 386 | | Total reportable segments profit | 1,025 | 949 | 2,794 | 2,875 | Note 16 – Fair value measurement This note details the fair value measurements of Teva's financial instruments and liabilities, categorized by valuation input levels | Fair Value Item (Millions USD) | Sep 30, 2023 | Dec 31, 2022 | | :----------------------------- | :----------- | :----------- | | Cash and cash equivalents | 2,249 | 2,801 | | Investment in securities | 37 | 15 | | Asset derivatives | 58 | 29 | | Liability derivatives | (40) | (101) | | Contingent consideration | (68) | (153) | - Contingent consideration liabilities are valued using Level 3 inputs, based on probability-weighted discounted cash flow analysis, with a weighted average discount rate of 9.2%287 - The fair value of senior notes and convertible senior debentures not measured at fair value was $17,604 million as of September 30, 2023, estimated based on quoted market prices293 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Teva's financial performance, condition, and results of operations for the three and nine months ended September 30, 2023. It covers business overview, key highlights, detailed segment-wise and consolidated results, liquidity, capital resources, and non-GAAP financial measures Business Overview This section provides an overview of Teva's mission, strategic initiatives, and the impact of macroeconomic and geopolitical factors - Teva's mission is to be a global leader in generics, innovative medicines, and biopharmaceuticals, improving patient lives295 - The "Pivot to Growth" strategy, launched in May 2023, focuses on four pillars: delivering on growth engines (AUSTEDO, AJOVY, UZEDY, biosimilars), stepping up innovation, sustaining generics, and optimizing the business299 - Macroeconomic factors (currency fluctuations, inflation) and geopolitical events (Russia-Ukraine conflict, Israel-Hamas war) impact Teva's revenues, operations, and supply chain, though Israeli operations remain largely unaffected300 Highlights This section summarizes key financial and operational performance metrics for the reported period | Metric (Millions USD) | Q3 2023 | Q3 2022 | Change (%) | | :-------------------- | :------ | :------ | :--------- | | Revenues | 3,850 | 3,595 | 7% | | North America Segment Profit | 577 | 477 | 21% | | Europe Segment Profit | 338 | 360 | (6%) | | International Markets Segment Profit | 111 | 112 | (1%) | | R&D expenses | 253 | 175 | 44% | | Legal settlements and loss contingencies | 314 | 195 | 61% | | Operating income | 355 | 419 | (15%) | | Net income attributable to Teva | 80 | 56 | 43% | | Debt (as of Sep 30) | 19,974 | 21,212 | (6%) | | Free Cash Flow | 229 | 685 | (67%) | Results of Operations This section analyzes Teva's financial results, including segment-wise and consolidated performance for the reported periods Comparison of Three Months Ended September 30, 2023 to Three Months Ended September 30, 2022 This section compares Teva's financial performance for the three months ended September 30, 2023, against the same period in the prior year North America Segment This section analyzes the financial performance of Teva's North America segment, including revenues and segment profit | Metric (Millions USD) | Q3 2023 | Q3 2022 | Change (%) | | :-------------------- | :------ | :------ | :--------- | | Revenues | 2,002 | 1,809 | 11% | | Generic products | 929 | 806 | 15% | | AJOVY | 61 | 57 | 8% | | AUSTEDO | 339 | 260 | 30% | | BENDEKA and TREANDA | 57 | 77 | (26%) | | COPAXONE | 103 | 105 | (2%) | | Anda | 367 | 371 | (1%) | | Segment Profit | 577 | 477 | 21% | | Gross Profit Margin | 54.6% | 52.1% | 2.5 pp | - Generic product sales were boosted by the launch of lenalidomide capsules (generic Revlimid®)312 - AUSTEDO growth was driven by volume increase, including the launch of AUSTEDO XR in May 2023322 - UZEDY (risperidone) extended-release injectable suspension was approved and launched in the U.S. in May 2023325 - R&D expenses increased by 46% to $163 million, and S&M expenses increased by 11% to $257 million, mainly due to promotional activities for AUSTEDO and UZEDY343344 Europe Segment This section analyzes the financial performance of Teva's Europe segment, including revenues and segment profit | Metric (Millions USD) | Q3 2023 | Q3 2022 | Change (%) | | :-------------------- | :------ | :------ | :--------- | | Revenues | 1,146 | 1,069 | 7% | | Generic products | 886 | 803 | 10% | | AJOVY | 41 | 30 | 36% | | COPAXONE | 55 | 63 | (13%) | | Respiratory products | 61 | 62 | (2%) | | Segment Profit | 338 | 360 | (6%) | | Gross Profit Margin | 56.6% | 59.3% | (2.7 pp) | - Generic product revenues increased by 2% in local currency, mainly due to higher volumes and OTC price increases353 - R&D expenses increased by 41% to $62 million, and S&M expenses increased by 9% to $184 million, mainly due to exchange rate fluctuations361362 International Markets Segment This section analyzes the financial performance of Teva's International Markets segment, including revenues and segment profit | Metric (Millions USD) | Q3 2023 | Q3 2022 | Change (%) | | :-------------------- | :------ | :------ | :--------- | | Revenues | 485 | 475 | 2% | | Generic products | 381 | 393 | (3%) | | AJOVY | 12 | 6 | 113% | | COPAXONE | 10 | 9 | 10% | | Segment Profit | 111 | 112 | (1%) | | Gross Profit Margin | 53.8% | 53.0% | 0.8 pp | - Local currency revenues increased by 20%, mainly due to higher generic product revenues driven by price increases from inflationary pressures, partially offset by regulatory price reductions and generic competition in Japan370373 - Revenues were negatively impacted by $83 million from exchange rate fluctuations, net of hedging effects371 - R&D expenses increased by 52% to $23 million, and S&M expenses increased by 5% to $102 million to support revenue growth378379 Other Activities This section details revenues from Teva's other activities, including API sales to third parties and contract manufacturing | Metric (Millions USD) | Q3 2023 | Q3 2022 | Change (%) | | :-------------------- | :------ | :------ | :--------- | | Revenues from other activities | 217 | 241 | (10%) | | API sales to third parties | 131 | 149 | (12%) | Teva Consolidated Results This section provides a consolidated overview of Teva's financial performance, including revenues, expenses, and operating income | Metric (Millions USD) | Q3 2023 | Q3 2022 | Change (%) | | :-------------------- | :------ | :------ | :--------- | | Net Revenues | 3,850 | 3,595 | 7% | | Gross Profit | 1,851 | 1,669 | 11% | | Gross Profit Margin | 48.1% | 46.4% | 1.7 pp | | R&D Expenses | 253 | 175 | 44% | | S&M Expenses | 576 | 539 | 7% | | G&A Expenses | 268 | 283 | (5%) | | Legal Settlements | 314 | 195 | 61% | | Operating Income | 355 | 419 | (15%) | | Financial Expenses, net| 280 | 252 | 11% | - R&D expenses increased due to focus on innovative product candidates in neuroscience, immunology, immuno-oncology, and biosimilars, aligning with the "Pivot to Growth" strategy390391 Comparison of Nine Months Ended September 30, 2023 to Nine Months Ended September 30, 2022 This section compares Teva's financial performance for the nine months ended September 30, 2023, against the same period in the prior year North America Segment This section analyzes the financial performance of Teva's North America segment, including revenues and segment profit | Metric (Millions USD) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | | Revenues | 5,759 | 5,450 | 6% | | Generic products | 2,722 | 2,731 | § | | AJOVY | 168 | 142 | 18% | | AUSTEDO | 817 | 618 | 32% | | BENDEKA and TREANDA | 188 | 241 | (22%) | | COPAXONE | 242 | 285 | (15%) | | Anda | 1,183 | 1,021 | 16% | | Segment Profit | 1,429 | 1,359 | 5% | | Gross Profit Margin | 51.2% | 52.1% | (0.9 pp) | Europe Segment This section analyzes the financial performance of Teva's Europe segment, including revenues and segment profit | Metric (Millions USD) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | | Revenues | 3,493 | 3,396 | 3% | | Generic products | 2,727 | 2,552 | 7% | | AJOVY | 115 | 90 | 28% | | COPAXONE | 174 | 207 | (16%) | | Respiratory products | 195 | 198 | (2%) | | Segment Profit | 1,017 | 1,130 | (10%) | | Gross Profit Margin | 55.6% | 59.8% | (4.2 pp) | International Markets Segment This section analyzes the financial performance of Teva's International Markets segment, including revenues and segment profit | Metric (Millions USD) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | | Revenues | 1,456 | 1,422 | 2% | | Generic products | 1,175 | 1,175 | § | | AJOVY | 31 | 22 | 40% | | COPAXONE | 32 | 29 | 9% | | Segment Profit | 348 | 386 | (10%) | | Gross Profit Margin | 53.4% | 54.9% | (1.5 pp) | - Local currency revenues increased by 14%, but were negatively impacted by $159 million from exchange rate fluctuations, net of hedging effects445446 Other Activities This section details revenues from Teva's other activities, including API sales to third parties and contract manufacturing | Metric (Millions USD) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | | Revenues from other activities | 681 | 773 | (12%) | | API sales to third parties | 415 | 505 | (18%) | Teva Consolidated Results This section provides a consolidated overview of Teva's financial performance, including revenues, expenses, and operating income | Metric (Millions USD) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | | Net Revenues | 11,389 | 11,041 | 3% | | Gross Profit | 5,230 | 5,203 | 1% | | Gross Profit Margin | 45.9% | 47.1% | (1.2 pp) | | R&D Expenses | 726 | 628 | 16% | | S&M Expenses | 1,726 | 1,716 | 1% | | G&A Expenses | 870 | 892 | (2%) | | Intangible Asset Impairments | 289 | 223 | 30% | | Goodwill Impairment | 700 | 745 | (6%) | | Other Asset Impairments, Restructuring & Other | 241 | 282 | (15%) | | Legal Settlements | 1,009 | 2,048 | (51%) | | Operating Income (Loss)| (289) | (1,244) | 77% | | Financial Expenses, net| 808 | 721 | 12% | | Income Taxes (Benefit)| (48) | (792) | 94% | | Net Income (Loss) attributable to Teva | (988) | (1,132) | 13% | | Diluted EPS | (0.88) | (1.02) | 14% | - The significant improvement in operating loss was primarily due to lower legal settlements and loss contingencies in the first nine months of 2023 compared to 2022471 - R&D expenses increased due to focus on innovative product candidates in neuroscience, immunology, immuno-oncology, and biosimilars, aligning with the "Pivot to Growth" strategy390391 Liquidity and Capital Resources This section discusses Teva's financial liquidity, capital structure, and cash flow management strategies | Metric (Millions USD) | Sep 30, 2023 | Dec 31, 2022 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total Assets | 42,088 | 44,006 | (1,918)| | Working Capital | (779) | (119) | (660) | | Total Debt | 19,974 | 21,212 | (1,238)| | Total Equity | 7,512 | 8,691 | (1,179)| - The decrease in working capital was mainly due to increased accounts payables (from favorable vendor payment terms and higher inventory purchases) and increased legal settlement provisions, partially offset by higher inventory levels and accounts receivables486 - Cash flow from operating activities in Q3 2023 was $5 million, a significant decrease from $543 million in Q3 2022, primarily due to changes in working capital and higher legal payments499 - Free cash flow in Q3 2023 was $229 million, down from $685 million in Q3 2022, mainly due to lower operating cash flow500 - Teva's financial leverage (debt to debt+equity) was 73% as of September 30, 2023, up from 71% at December 31, 2022494 Non-GAAP Net Income and Non-GAAP EPS Data This section reconciles GAAP to non-GAAP financial measures, providing adjusted insights into Teva's underlying business performance - Non-GAAP measures exclude items like amortization of purchased intangible assets, legal settlements, impairments, restructuring expenses, acquisition/divestment-related items, equity compensation, and unusual tax items to better reflect underlying business performance508509514 | Metric (Millions USD) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Non-GAAP net income attributable to Teva | 677 | 658 | 1,762 | 2,021 | | Non-GAAP diluted EPS attributable to Teva | 0.60 | 0.59 | 1.56 | 1.81 | Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that there have been no material changes to Teva's assessment of market risk since its Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to market risk assessment since the Annual Report on Form 10-K for December 31, 2022518 Item 4. Controls and Procedures This section confirms the effectiveness of Teva's disclosure controls and procedures as of September 30, 2023, and reports no material changes in internal control over financial reporting during the quarter - Teva's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2023520 - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2023521 PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and controls Item 1. Legal Proceedings This section refers to Note 10 of the consolidated financial statements for a detailed discussion of Teva's legal proceedings - For a discussion of legal proceedings, refer to "Commitments and Contingencies" in Note 10 to the consolidated financial statements523 Item 1A. Risk Factors This section states that there are no material changes to the risk factors previously disclosed in Teva's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to risk factors since the Annual Report on Form 10-K for December 31, 2022524 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that Teva did not engage in any unregistered sales of equity securities or share repurchases during the three months ended September 30, 2023, and is currently restricted from share repurchases or dividend payments due to its accumulated deficit - No unregistered sales of equity securities or share repurchases during Q3 2023525526 - Teva cannot conduct share repurchases or pay dividends due to its accumulated deficit526 Item 3. Defaults Upon Senior Securities This item is not applicable to Teva for the reported period - Not applicable527 Item 4. Mine Safety Disclosures This item is not applicable to Teva for the reported period - Not applicable528 Item 5. Other Information This section reports that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2023 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 2023529 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications, the Deferred Prosecution Agreement with the DOJ, and XBRL taxonomy documents - Key exhibits include CEO/CFO certifications (31.1, 31.2, 32), the Teva Deferred Prosecution Agreement with the U.S. Department of Justice (10.1), and Inline XBRL Taxonomy documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)530 Signatures This section contains the signatures for the Quarterly Report on Form 10-Q, confirming its submission by an authorized officer - The report was signed by Eli Kalif, Executive Vice President, Chief Financial Officer, on November 9, 2023535
TEVA(TEVA) - 2023 Q3 - Quarterly Report