TEVA PHARMACEUTICAL INDUSTRIES LIMITED Business Overview
We are a global pharmaceutical company, committed to helping patients around the world to access affordable medicines and benefit from innovations to improve their health. Our mission is to be a global leader in generics, specialty medicines and biopharmaceuticals, improving the lives of patients. We operate worldwide, with headquarters inIsrael and a significant presence inthe United States ,Europe and many other markets around the world. Our key strengths include our world-leading generic medicines expertise and portfolio, focused specialty medicines portfolio and global infrastructure and scale.
Teva was incorporated in
Our Business Segments
We operate our business through three segments:
In addition to these three segments, we have other activities, primarily the sale of API to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliateMedis .
The
COVID-19
Pandemic
As a leading global pharmaceutical company, Teva provides essential medicines to millions of patients around the world every day. Our priorities remain focused on the health and well-being of our employees and on our responsibility to continue to provide our medicines to the nearly 200 million patients who depend on us every day. During the second quarter of 2022, we have not experienced material delays in the production and distribution of medicines. The COVID-19 pandemic has had an effect on our suppliers, which led to minimal delays or disruptions in our materials supply. However, the supply chain supporting our key products - specialty, generics and API - remains largely uninterrupted, with adequate product inventory across our network and redundancy plans in place to address potential shortfalls, if any. Our facilities that research, manufacture, order, pack, distribute and provide critical customer and patient services remain largely uninterrupted as well, and are currently functioning to meet demand for essential medicines for patients throughout the world. During the second quarter of 2022, we have experienced delays in some clinical trials due to slow-downs of recruitment for studies and suspended regulatory inspections, delays in regulatory approvals of new products due to reduced capacity or re-prioritization of regulatory agencies and delays in pre-commercial launch activities. We may experience further delays if the pandemic continues for an extended period of time, including as a result of the emergence of new COVID-19 variants. The long-term effects of the pandemic cannot be predicted at this time and would depend on the duration and severity of the pandemic and the restrictive measures put in place to control its impact. Although no one can predict future demand for pharmaceutical products, market dynamics or the scope or duration of the financial and other challenges arising from the pandemic, it is possible that we will continue to see variable demand in future periods. We do not currently anticipate that the ongoing COVID-19 pandemic will have a material impact on our 2022 financial results.
Highlights
Significant highlights in the second quarter of 2022 included:
• Revenues in the second quarter of 2022 were
3% compared to the second quarter of 2021, or an increase of 1% in local
currency terms. This increase in local currency terms was mainly due to
higher revenues from generic products in our
segments, partially offset by lower revenues from COPAXONE and
BENDEKA/TREANDA in our North America segment.
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• Our
of
compared to the second quarter of 2021. Profit decreased by 8% compared
to the second quarter of 2021.
• Our Europe segment generated revenues of
second quarter of 2021. Profit increased by 13% compared to the second
quarter of 2021.
• Our International Markets segment generated revenues of
profit of
by 6% in
compared to the second quarter of 2021. Profit decreased by 23% compared
to the second quarter of 2021.
• Our revenues from other activities in the second quarter of 2022 were
In local currency terms, revenues decreased by 10% compared to the second
quarter of 2021.
• Exchange rate movements during the second quarter of 2022, net of hedging
effects, negatively impacted revenues by $162 million , compared to the
second quarter of 2021. See note 8d to our consolidated financial
statements.
• Impairments of identifiable intangible assets were $51 million in the
second quarter of 2022, compared to
2021. See note 5 to our consolidated financial statements.
• We recorded a goodwill impairment charge of $745 million in the second
quarter of 2022, of which
Markets reporting unit and
reporting unit. See note 6 to our consolidated financial statements.
• We recorded expenses of
restructuring and other items in the second quarter of 2022, compared to
expenses of
consolidated financial statements.
• Legal settlements and loss contingencies expenses were
the second quarter of 2022, compared to $6 million in the second quarter
of 2021. See note 9 to our consolidated financial statements.
• Operating loss was $949 million in the second quarter of 2022, compared
to an operating income of $582 million in the second quarter of 2021.
• Financial expenses were $211 million in the second quarter of 2022,
compared to $274 million in the second quarter of 2021.
• In the second quarter of 2022, we recognized a tax benefit of
$900 million , on
pre-tax
loss of
tax expense of $98 million , on
pre-tax
income of $308 million . See note 11 to our consolidated financial
statements.
• As of June 30, 2022 , our debt was $22,082 million , compared to
$23,043 million as of December 31, 2021 . This decrease was mainly due to
$680 million from exchange rate fluctuations and $296 million of senior
notes repaid at maturity.
• Cash flow generated from operating activities during the second quarter
of 2022 was $123 million , compared to $218 million in the second quarter
of 2021. This decrease was mainly due to payments related to legal
settlements in the second quarter of 2022, partially offset by an
increase in accounts payables.
• During the second quarter of 2022, we generated free cash flow of
$301 million , which we define as comprising: $123 million in cash flow
generated from operating activities, $287 million in beneficial interest
collected in exchange for securitized accounts receivables and
$18 million in proceeds from divestitures of businesses and other assets,
partially offset by
During the second quarter of 2021, we generated free cash flow of
$625 million . The decrease in the second quarter of 2022 resulted mainly
from lower cash flow from operating activities as well as lower proceeds
from sales of assets.
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Results of Operations
Comparison of Three Months Ended
Segment Information North America Segment
The following table presents revenues, expenses and profit for our
Three months ended June 30,
2022 2021
(U.S. $ in millions / % of Segment
Revenues)
Revenues $ 1,904 100 % $ 1,943 100 %
Gross profit 1,010 53.0 % 1,040 53.5 %
R&D expenses 147 7.7 % 162 8.4 %
S&M expenses 256 13.4 % 255 13.1 %
G&A expenses 127 6.7 % 106 5.5 %
Other income (1 ) § (5 ) §
Segment profit* $ 481 25.3 % $ 521 26.8 %
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than 0.5%.
North America Revenues
OurNorth America segment includesthe United States andCanada . Revenues from ourNorth America segment in the second quarter of 2022 were$1,904 million , a decrease of$39 million , or 2%, compared to the second quarter of 2021, mainly due to a decrease in revenues from COPAXONE and BENDEKA/TREANDA, partially offset by higher revenues from generic products.
Revenues by Major Products and Activities
The following table presents revenues for our
Three months ended Percentage
June 30, Change
2022 2021 2022-2021
(U.S. $ in millions)
Generic products $ 1,026 $ 951 8 %
AJOVY 49 46 9 %
AUSTEDO 204 174 17 %
BENDEKA/TREANDA 83 106 (22 %)
COPAXONE 94 152 (38 %)
Anda 308 316 (2 %)
Other 139 199 (30 %)
Total $ 1,904 $ 1,943 (2 %)
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-------------------------------------------------------------------------------- Generic products revenues in ourNorth America segment (including biosimilars) in the second quarter of 2022 were$1,026 million , an increase of 8% compared to the second quarter of 2021, mainly due to revenues from lenalidomide capsules (the generic version of Revlimid ® ), partially offset by increased competition and loss of revenues due to the closure of theIrvine, CA site. Among the most significant generic products we sold inNorth America in the second quarter of 2022 were lenalidomide capsules (the generic version of Revlimid ® ), Truxima ® (the biosimilar to Rituxan ® ), epinephrine injectable solution (the generic equivalent of EpiPen ® and EpiPen Jr. ® ) and albuterol sulfate inhalation aerosol (our ProAir ® authorized generic).
In the second quarter of 2022, our total prescriptions were approximately
302 million (based on trailing twelve months), representing 8.2% of total
On
(lenalidomide capsules), in 5mg, 10mg, 15mg, and 25mg strengths, inthe United States . These lenalidomide capsules are a prescription medicine used in adults for the treatment of (i) multiple myeloma in combination with the medicine dexamethasone, (ii) certain myelodysplastic syndromes, and (iii) mantle cell lymphoma following specific prior treatment.
AJOVY
revenues in ourNorth America segment in the second quarter of 2022 increased by 9% to$49 million , compared to the second quarter of 2021, mainly due to growth in volume. In the second quarter of 2022, AJOVY's exit market share inthe United States in terms of total number of prescriptions was 24.4% compared to 20.7% in the second quarter of 2021. AJOVY is indicated for the preventive treatment of migraine in adults. AJOVY was launched in theU.S. in 2018, and was approved inCanada inApril 2020 . Our auto-injector device for AJOVY became commercially available in theU.S. inApril 2020 and inCanada inApril 2021 . AJOVY is the only anti-CGRP product indicated for quarterly treatment and inJanuary 2021 , we launched a new product offering, providing a quarterly dose. AJOVY is protected by patents expiring in 2026 inEurope and in 2027 inthe United States . Applications for patent term extensions have been submitted in various markets around the world, and certain extensions inEurope and other countries have already been granted until 2031. Additional patents relating to the use of AJOVY in the treatment of migraine have also been issued inthe United States and will expire between 2035 and 2039. Such patents are also pending in other countries. AJOVY will also be protected by regulatory exclusivity for 12 years from marketing approval inthe United States and 10 years from marketing approval inEurope . We filed a lawsuit in theU.S. District Court for the District of Massachusetts alleging that Eli Lilly & Co.'s ("Lilly") marketing and sale of its galcanezumab product for the treatment of migraine infringes nine Teva patents. Lilly then submitted inter partes review ("IPR") petitions to the Patent Trial and Appeal Board ("PTAB"), challenging the validity of the nine patents asserted against it in the litigation. The litigation in the district court was stayed pending resolution of the IPR petitions. OnFebruary 18, 2020 , the PTAB issued decisions on the first six IPRs, finding the six composition of matter patents invalid as being obvious. OnMarch 31, 2020 , the PTAB issued a decision upholding the three method of treatment patents. OnAugust 16, 2021 theCourt of Appeals for the Federal Circuit affirmed all of the PTAB's decisions. The litigation is proceeding as to the three method of treatment patents and trial is expected inOctober 2022 . We also filed another suit against Lilly onJune 8, 2021 , asserting two patents recently granted to Teva, related to the treatment of refractory migraine. Lilly responded to the complaint with a motion to dismiss, which Teva opposed. OnMarch 15, 2022 , theU.S. District Court for the District of Massachusetts denied Lilly's motion to dismiss and onMarch 23, 2022 , Lilly submitted IPR petitions challenging the patentability of the two refractory migraine patents. OnApril 11, 2022 , Lilly submitted another IPR petition challenging the patentability of a patent related to the two refractory migraine patents. In addition, in 2018 we entered into separate agreements withAlder Biopharmaceuticals, Inc. and Lilly, resolving theEuropean Patent Office oppositions that they filed against our AJOVY patents. The settlement agreement with Lilly also resolved Lilly's action to revoke the patent protecting AJOVY in theUnited Kingdom .
AUSTEDO
revenues in ourNorth America segment in the second quarter of 2022 increased by 17%, to$204 million , compared to$174 million in the second quarter of 2021, mainly due to growth in volume.
AUSTEDO was launched in the
AUSTEDO is protected inthe United States by eight Orange Book patents expiring between 2031 and 2038 and inEurope by two patents expiring in 2029. We received notice letters from two ANDA filers regarding the filing of their ANDAs with paragraph (IV) certifications for certain of the patents listed in the Orange Book for AUSTEDO. OnJuly 1 , 53 -------------------------------------------------------------------------------- 2021, we filed a complaint against Aurobindo, asserting six of the Orange Book patents, and a separate complaint against Lupin, asserting four of the Orange Book patents. The suits were filed in theU.S. District Court for the District of New Jersey . The seventh patent was issued inNovember 2021 , and listed in the Orange Book inDecember 2021 . In addition, Apotex filed a petition for IPR by the PTAB of the patent covering the deutetrabenazine compound that expires in 2031. OnMarch 9, 2022 , theU.S. Patent and Trademark Office denied Apotex's petition and declined to institute a review of the deutetrabenazine patent. OnApril 29, 2022 , we reached an agreement with Lupin to resolve the abovementioned dispute over Lupin's ANDA for a generic deutetrabenazine product. OnJune 8, 2022 we reached an agreement with Aurobindo regarding the dispute over Aurobindo's ANDA for a generic deutetrabenazine product. Under the terms of the settlement agreements, the litigation between the parties in theU.S. District Court for the District of New Jersey have been ended, and Lupin and Aurobindo will have a license to sell its generic product beginningApril 2033 , or earlier under certain circumstances. There are no further patent litigations pending regarding AUSTEDO. BENDEKA and TREANDA combined revenues in ourNorth America segment in the second quarter of 2022 decreased by 22% to$83 million , compared to the second quarter of 2021, mainly due to the availability of alternative therapies and continued competition from Belrapzo ® (a ready-to-dilute bendamustine hydrochloride product from Eagle). InJuly 2018 , Eagle prevailed in its suit against the FDA to obtain seven years of orphan drug exclusivity inthe United States for BENDEKA. OnMarch 13, 2020 , this decision was upheld in the appellate court. As things currently stand, drug applications referencing BENDEKA, TREANDA or any other bendamustine product will not be approved by the FDA until the orphan drug exclusivity expires inDecember 2022 . InApril 2019 , we signed an amendment to the license agreement with Eagle extending the royalty term applicable tothe United States to the full period for which we sell BENDEKA and increased the royalty rate. In consideration, Eagle agreed to assume a portion of BENDEKA-related patent litigation expenses. There are 16 patents listed in theU.S. Orange Book for BENDEKA with expiry dates in 2026 and 2031. InSeptember 2019 , a patent infringement action against four of six ANDA filers for generic versions of BENDEKA was tried in theU.S. District Court for the District of Delaware . OnApril 27, 2020 , the district court upheld the validity of all of the asserted patents and found that all four ANDA filers infringe at least one of the patents. Three of the four ANDA filers appealed the district court decision. Teva settled with one of the three ANDA filers, and onAugust 13, 2021 , the Federal Circuit issued a Rule 36 affirmance of the district court decision with respect to the other two filers. OnDecember 14, 2021 , Apotex filed a Petition for a Writ of Certiorari with theU.S. Supreme Court , which was denied. Litigation against the fifth ANDA filer was dismissed after the withdrawal of its patent challenge, and the case against a sixth ANDA filer was also settled. Suits against two filers of 505(b)(2) NDAs referencing BENDEKA are pending. Additionally, inJuly 2018 , Teva and Eagle filed suit againstHospira, Inc. ("Hospira") related to its 505(b)(2) NDA referencing BENDEKA in theU.S. District Court for the District of Delaware . OnDecember 16, 2019 , the district court dismissed the case against Hospira on all but one of the asserted patents, which expires in 2031. OnApril 18, 2022 , Teva and Eagle settled this matter, allowing Hospira to launch its product onJanuary 17, 2028 or earlier under certain circumstances. In addition to the settlement with Eagle regarding its bendamustine 505(b)(2) NDA, between 2015 and 2020, we reached final settlements with 22 ANDA filers for generic versions of the lyophilized form of TREANDA and one 505(b)(2) NDA filer for a generic version of the liquid form of TREANDA, providing for the launch of generic versions of TREANDA prior to patent expiration.
COPAXONE
revenues in ourNorth America segment in the second quarter of 2022 decreased by 38% to$94 million , compared to the second quarter of 2021, mainly due to generic competition inthe United States and a decrease in glatiramer acetate market share due to availability of alternative therapies. The market for MS treatments continues to develop, particularly with the approval of generic versions of COPAXONE. Oral treatments for MS, such as Tecfidera ® , Gilenya ® and Aubagio ® , continue to present significant and increasing competition. COPAXONE also continues to face competition from existing injectable products, as well as from monoclonal antibodies, such as Ocrevus ® and Kesimpta ® . Anda revenues in ourNorth America segment in the second quarter of 2022 decreased by 2% to$308 million , compared to$316 million in the second quarter of 2021, mainly due to lower market demand. Anda, our distribution business inthe United States , distributes generic, specialty and OTC pharmaceutical products from various third party manufacturers to independent retail pharmacies, pharmacy retail chains, hospitals and physician offices inthe United States . Anda is able to compete in the secondary distribution market by maintaining high inventory levels for a broad offering of products, competitive pricing and offering next day delivery throughoutthe United States . 54
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Product Launches and Pipeline
In the second quarter of 2022, we launched the generic version of the following
branded products in
Total Annual U.S.
Branded Sales at Time
of Launch
(U.S. $ in millions
Launch (IQVIA))
Product Name Brand Name Date *
Pirfenidone Tablets Esbriet
267mg & 801mg ®
tablets May $ 569.8
Vilazodone Hydrochloride Viibryd
Tablets 10mg, 20mg, 40mg ®
tablets June $ 569.1
Scopolamine Transdermal Transderm Scop
System 1mg/3 days ®
Transdermal System May $ 87.9
Dalfampridine Ampyra
Extended-release Tablets ®
10mg Extended
Release Tablets May $ 81.3
Mycophenolate Mofetil for CellCept
Oral Suspension, USP, ®
200mg/mL Oral
Suspension June $ 55.2
Lanthanum Carbonate Fosrenol
Chewable Tablets 500mg, ®
750mg, 1000mg chewable
tablets May $ 35.4
Pemetrexed Injection
100mg/4mL, 500mg/20mL,
1g/40mL** N/A May N/A
* The figures presented are for the twelve months ended in the calendar quarter
immediately prior to our launch or
re-launch.
** Teva's Pemetrexed is a 505(b)(2) product, was filed as an NDA and is not
bioequivalent to a brand product.
Our generic products pipeline inthe United States includes, as ofJune 30, 2022 , 178 product applications awaiting FDA approval, including 68 tentative approvals. This total reflects all pending ANDAs, supplements for product line extensions and tentatively approved applications and includes some instances where more than one application was submitted for the same reference product. Excluding overlaps, the branded products underlying these pending applications hadU.S. sales for the twelve months endedMarch 31, 2022 of approximately$109 billion , according to IQVIA. Approximately 73% of pending applications include a paragraph IV patent challenge, and we believe we are first to file with respect to 69 of these products, or 97 products including final approvals where launch is pending a settlement agreement or court decision. Collectively, these first to file opportunities represent over$82 billion inU.S. brand sales for the twelve months endedMarch 31, 2022 , according to IQVIA. IQVIA reported brand sales are one of the many indicators of future potential value of a launch, but equally important are the mix and timing of competition, as well as cost effectiveness. The potential advantages of being the first filer with respect to some of these products may be subject to forfeiture, shared exclusivity or competition from so-called "authorized generics," which may ultimately affect the value derived. In the second quarter of 2022, we received tentative approvals for generic equivalents of the products listed in the table below, excluding overlapping applications. A "tentative approval" indicates that the FDA has substantially completed its review of an application and final approval is expected once the relevant patent expires, a court decision is reached, a 30-month regulatory stay lapses or a 180-day exclusivity period awarded to another manufacturer either expires or is forfeited. 55 --------------------------------------------------------------------------------
Total Annual U.S.
Branded Sales at Time
of Launch
(U.S. $ in millions
(IQVIA))
Generic Name Brand Name *
Canagliflozin Tabs Invokana
® $ 900
Linaclotide Capsules, 72 mcg Linzess
® $ 457Plerixafor Injection, 24 mg/1.2 mL (20 Mozobil mg/mL)
® $ 192
Methylnaltrexone Bromide Tablets, 150 Relistor mg
® $ 131
Methylphenidate Hydrochloride Extended-Release Chewable Tablets, 20 Quillichew ER mg, 30 mg and 40 mg
® $ 118
* The figures presented are for the twelve months ended in the calendar quarter
immediately prior to our launch or
re-launch.
For information regarding our specialty and biosimilar products pipeline, see
"-
North America Gross Profit
Gross profit from our
Gross profit margin for our
North America R&D Expenses
R&D expenses relating to ourNorth America segment in the second quarter of 2022 were$147 million , a decrease of 10%, compared to$162 million in the second quarter of 2021.
For a description of our R&D expenses in the second quarter of 2022, see "-
North America S&M Expenses
S&M expenses relating to our
North America G&A Expenses
G&A expenses relating to our
North America Profit
Profit from our
Profit from our
Europe Segment
The following table presents revenues, expenses and profit for our
56
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Three months ended June 30,
2022 2021
(U.S. $ in millions / % of Segment
Revenues)
Revenues $ 1,171 100 % $ 1,184 100 %
Gross profit 703 60.0 % 661 55.8 %
R&D expenses 56 4.7 % 63 5.3 %
S&M expenses 196 16.8 % 209 17.7 %
G&A expenses 63 5.4 % 47 4.0 %
Other income (1 ) § § §
Segment profit* $ 389 33.2 % $ 343 28.9 %
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than
Europe Revenues
OurEurope segment includes theEuropean Union , theUnited Kingdom and certain other European countries. Revenues from ourEurope segment in the second quarter of 2022 were$1,171 million , a decrease of 1%, or$13 million , compared to the second quarter of 2021. In local currency terms, revenues increased by 8%. In the second quarter of 2021, our revenues were impacted by the implications of the COVID-19 pandemic. In the second quarter of 2022, the increase in our revenues in local currency terms was attributed to higher demand for generic and OTC products resulting mainly from the removal of restrictions related to doctor and hospital visits by patients that were previously implemented in response to the COVID-19 pandemic, together with higher revenues from generic product launches. In the second quarter of 2022, revenues were negatively impacted by exchange rate fluctuations of$106 million , net of hedging effects, compared to the second quarter of 2021. Revenues in the second quarter of 2022 included$31 million from a positive hedging impact, which is included in "Other" in the table below. See note 8d to our consolidated financial statements.
Revenues by Major Products and Activities
The following table presents revenues for our
Three months ended
Percentage
June 30, Change
2022 2021 2022-2021
(U.S. $ in millions)
Generic products $ 873 $ 878 (1 %)
AJOVY 29 19 52 %
COPAXONE 72 100 (28 %)
Respiratory products 65 85 (23 %)
Other 131 102 29 %
Total $ 1,171 $ 1,184 (1 %)
Generic products
revenues in our Europe segment in the second quarter of 2022, including OTC
products, decreased by 1% to $873 million , compared to the second quarter of
2021. In local currency terms, revenues increased by 12%, mainly due to higher
demand for generic and OTC products, resulting mainly from the removal of
restrictions related to doctor and hospital visits by patients that were
previously implemented in response to the
COVID-19
pandemic, together with higher revenues from generic product launches.
AJOVY
revenues in ourEurope segment in the second quarter of 2022 increased to$29 million , compared to$19 million in the second quarter of 2021, mainly due to growth in European countries in which AJOVY had previously been launched, as well as launches and reimbursements in additional European countries. 57
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For information about AJOVY patent protection, see "-North America Revenues-Revenues by Major Product" above.
COPAXONE
revenues in ourEurope segment in the second quarter of 2022 decreased by 28% to$72 million , compared to the second quarter of 2021. In local currency terms, revenues decreased by 18%, due to price reductions and a decline in volume resulting from competing glatiramer acetate products. One European patent protecting COPAXONE 40 mg/mL was found invalid by theBoard of Appeal of theEuropean Patent Office inSeptember 2020 . Two additional patents expiring in 2030 were found invalid at theEuropean Patent Office inDecember 2021 . In certain countries, Teva remains in litigation against generic companies on an additional COPAXONE 40 mg/mL patent that expires in 2030. Respiratory products revenues in ourEurope segment in the second quarter of 2022 decreased by 23% to$65 million compared to the second quarter of 2021. In local currency terms, revenues decreased by 14%, mainly due to net price reductions and lower volumes.
Product Launches and Pipeline
As ofJune 30, 2022 , our generic products pipeline inEurope included 434 generic approvals relating to 54 compounds in 118 formulations, with noEuropean Medicines Agency ("EMA") approvals received. In addition, approximately 1,144 marketing authorization applications are pending approval in 37 European countries, relating to 125 compounds in 252 formulations. Two applications are pending with the EMA with one application relating to two strengths in 30 markets and one application relating to three strengths in 30 markets.
For information regarding our specialty and biosimilar products pipeline, see
"-
Europe Gross Profit
Gross profit from our
Gross profit margin for ourEurope segment in the second quarter of 2022 increased to 60.0%, compared to 55.8% in the second quarter of 2021. This increase was mainly due to higher revenues from the positive impact of hedging activities discussed above as well as lower cost of goods sold, mainly due to better mix of products and decrease in write-offs.
Europe R&D Expenses
R&D expenses relating to ourEurope segment in the second quarter of 2022 were$56 million , a decrease of 11% compared to$63 million in the second quarter of 2021.
For a description of our R&D expenses in the second quarter of 2022, see "-
Europe S&M Expenses
S&M expenses relating to ourEurope segment in the second quarter of 2022 were$196 million , a decrease of 6% compared to$209 million in the second quarter of 2021. This decrease was mainly due to exchange rate fluctuations in the second quarter of 2022. Europe G&A Expenses G&A expenses relating to ourEurope segment in the second quarter of 2022 were$63 million , an increase of 34% compared to$47 million in the second quarter of 2021. Europe Profit Profit from ourEurope segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items. Profit from ourEurope segment in the second quarter of 2022 was$389 million , an increase of 13%, compared to$343 million in the second quarter of 2021. This increase was mainly due to higher gross profit as discussed above. 58
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International Markets Segment
The following table presents revenues, expenses and profit for our International
Markets segment for the three months ended
Three months ended June 30,
2022 2021
(U.S. $ in millions /% of Segment Revenues)
Revenues $ 454 100 % $ 485 100 %
Gross profit 242 53.3 % 270 55.7 %
R&D expenses 19 4.2 % 18 3.6 %
S&M expenses 99 21.7 % 105 21.7 %
G&A expenses 30 6.7 % 25 5.1 %
Other income (1 ) § (1 ) §
Segment profit* $ 95 20.9 % $ 123 25.5 %
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than 0.5%.
International Markets Revenues
Our International Markets segment includes all countries in which we operate other than those in ourNorth America andEurope segments. The International Markets segment includes more than 35 countries, covering a substantial portion of the global pharmaceutical market. Our key international markets areJapan ,Russia andIsrael . The countries in our International Markets segment include highly regulated, pure generic markets, such asIsrael , branded generics oriented markets, such asRussia and certainLatin America markets and hybrid markets, such asJapan . InFebruary 2022 ,Russia launched an invasion ofUkraine . As of the date of this Quarterly Report on Form 10-Q, sustained conflict and disruption in the region is ongoing.Russia andUkraine markets are included in our International Markets segment results. We have no manufacturing or R&D facilities in these markets. During the three and six months endedJune 30, 2022 , the impact of this conflict on our International Markets segment's results of operations and financial condition was immaterial. Consistent with our foreign exchange risk management hedging programs, we entered into hedges to hedge our exposure to currency exchange rate fluctuations with respect to our balance sheet assets, revenues and expenses. However, as of the end of the second quarter of 2022, we were unable to renew certain of our expiring hedging positions due to the liquidity situation in the market for Rubles. Prior to and since the escalation of the conflict, we have been taking measures to reduce our operational cash balances inRussia andUkraine . We have been monitoring the solvency of our customers inRussia andUkraine and have taken measures, where practicable, to mitigate our exposure to risks related to the conflict in the region. However, the duration, severity and global implications (including potential inflation and devaluation consequences) of the conflict cannot be predicted at this time and could have an effect on our business, including on our exchange rate exposure, supply chain, operational costs and commercial presence in these markets. Revenues from our International Markets segment in the second quarter of 2022 were$454 million , a decrease of 6% compared to the second quarter of 2021. In local currency terms, revenues increased by 3% compared to the second quarter of 2021, mainly due to higher revenues in certain markets, partially offset by lower revenues inJapan due to regulatory price reductions and generic competition to off-patented products. In the second quarter of 2022, revenues were negatively impacted by exchange rate fluctuations of$45 million , including hedging effects, compared to the second quarter of 2021. Revenues in the second quarter of 2022 included$17 million from a negative hedging impact, which is included in "Other" in the table below. See note 8d to our consolidated financial statements. 59
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Revenues by Major Products and Activities
The following table presents revenues for our International Markets segment by major products and activities for the three months endedJune 30, 2022 and 2021: Three months ended Percentage June 30, Change 2022 2021 2022-2021 (U.S. $ in millions) Generic products$ 394 $ 407 (3 %) AJOVY 10 5 96 % COPAXONE 9 7 27 % Other 40 65 (39 %) Total$ 454 $ 485 (6 %) Generic products revenues in our International Markets segment in the second quarter of 2022, which include OTC products, decreased by 3% inU.S. dollars. In local currency terms, revenues increased by 4% to$394 million , compared to the second quarter of 2021. This increase was mainly due to higher revenues in certain markets, partially offset by lower sales inJapan due to regulatory price reductions and generic competition to off-patented products in Japan. AJOVY was launched in certain markets in our International Markets segment, including inJapan inAugust 2021 . We are moving forward with plans to launch AJOVY in other markets. AJOVY revenues in our International Markets segment in the second quarter of 2022 were$10 million , compared to$5 million in the second quarter of 2021.
COPAXONE
revenues in our International Markets segment in the second quarter of 2022 were
AUSTEDO
was launched in early 2021 inChina for the treatment of chorea associated withHuntington's disease and for the treatment of tardive dyskinesia, and was also launched inIsrael during 2021. InOctober 2021 , we received marketing approval for both indications inBrazil . We continue with additional submissions in various other markets.
International Markets Gross Profit
Gross profit from our International Markets segment in the second quarter of 2022 was$242 million , a decrease of 10% compared to$270 million in the second quarter of 2021. Gross profit margin for our International Markets segment in the second quarter of 2022 decreased to 53.3%, compared to 55.7% in the second quarter of 2021. This decrease was mainly due to regulatory price reductions and generic competition to off-patented products inJapan , as well as a negative impact from hedging activity.
International Markets R&D Expenses
R&D expenses relating to our International Markets segment in the second quarter
of 2022 were
For a description of our R&D expenses in the second quarter of 2022, see "-
International Markets S&M Expenses
S&M expenses relating to our International Markets segment in the second quarter of 2022 were$99 million , a decrease of 6% compared to$105 million the second quarter of 2021.
International Markets G&A Expenses
G&A expenses relating to our International Markets segment in the second quarter
of 2022 were
International Markets Profit
Profit from our International Markets segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.
60
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Profit from our International Markets segment in the second quarter of 2022 was
$95 million , a decrease of 23%, compared to $123 million in the second quarter
of 2021. This decrease was mainly due to lower gross profit, as discussed above.
Other Activities
We have other sources of revenues, primarily the sale of APIs to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliateMedis . Our other activities are not included in ourNorth America ,Europe or International Markets segments described above.
Our revenues from other activities in the second quarter of 2022 were
API sales to third parties in the second quarter of 2022 were$177 million , a decrease of 11% in bothU.S. dollars and local currency terms compared to the second quarter of 2021. Teva Consolidated Results Revenues Revenues in the second quarter of 2022 were$3,786 million , a decrease of 3% compared to the second quarter of 2021. In local currency terms, revenues increased by 1%, mainly due to higher revenues from generic products in ourEurope andNorth America segments, partially offset by lower revenues from COPAXONE and BENDEKA/TREANDA in ourNorth America segment. See "-North America Revenues," "-Europe Revenues," "-International Markets Revenues" and "-Other Activities" above.
Exchange rate movements during the second quarter of 2022, net of hedging
effects, negatively impacted revenues by
Gross Profit
Gross profit in the second quarter of 2022 was
Gross profit margin was 47.4% in the second quarter of 2022, compared to 47.9% in the second quarter of 2021. This decrease was mainly driven by lower revenues from COPAXONE and a change in the mix of products in ourNorth America segment, partially offset by a favorable mix of products in ourEurope segment.
Research and Development (R&D) Expenses
Our R&D activities for generic products in each of our segments include both (i) direct expenses relating to product formulation, analytical method development, stability testing, management of bioequivalence and other clinical studies and regulatory filings; and (ii) indirect expenses, such as costs of internal administration, infrastructure and personnel. Our R&D activities for specialty and biosimilar products in each of our segments include costs of discovery research, preclinical development, early- and late-clinical development and drug formulation, clinical trials and product registration costs. These expenditures are reported net of contributions received from collaboration partners. Our spending takes place throughout the development process, including (i) early-stage projects in both discovery and preclinical phases; (ii) middle-stage projects in clinical programs up to phase 3; (iii) late-stage projects in phase 3 programs, including where a new drug application is currently pending approval; (iv) post-approval studies for marketed products; and (v) indirect expenses, such as costs of internal administration, infrastructure and personnel.
R&D expenses in the second quarter of 2022 were
In the second quarter of 2022, our R&D expenses related primarily to specialty product candidates in neuroscience (such as migraine, movement disorders/ neurodegeneration and neuropsychiatry, including post-approval commitments), immunology (such as respiratory medicines) and selected other areas, as well as generic products and biosimilars.
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Our lower R&D expenses in the second quarter of 2022, compared to the second
quarter of 2021, were mainly due to a decrease in neuroscience (in the pain and
migraine and headache therapeutic areas) and immunology (in the respiratory
therapeutic area) as well as various generics projects, partially offset by
higher R&D expenses related to our biosimilar products pipeline.
R&D expenses as a percentage of revenues were 6.0% in the second quarter of 2022, compared to 6.3% in the second quarter of 2021.
Specialty Products Pipeline
Below is a description of key products in our specialty pipeline as ofJuly 15, 2022 : Phase 2 Phase 3 Pre-Submission Under Regulatory Review Novel Biologics TEV-48574 Fasinumab Inflammatory Osteoarthritic Pain Bowel Disease (March 2016) (1) Small Molecules Deutetrabenazine Risperidone LAI Dyskinesia Schizophrenia in Cerebral Palsy (2) (September 2019) Digital Respiratory Digihaler ® (budesonide and formoterol fumarate dihydrate) (EU) QVAR ® Digihaler ® (beclomethasone dipropionate HFA)(U.S.)
(1) Developed in collaboration with Regeneron Pharmaceuticals, Inc.
("Regeneron"). Results for two phase 3 clinical trials, FACT OA1 and FACT
OA2, were released on
co-primary
endpoints for fasinumab 1 mg monthly were achieved. Fasinumab 1 mg monthly
demonstrated significant improvements in pain and physical function over
placebo at week 16 and week 24, respectively. Fasinumab 1 mg monthly also
showed nominally significant benefits in physical function in two trials and
pain in one trial, when compared to the maximum
FDA-approved
prescription doses of
non-steroidal
anti-inflammatory drugs for osteoarthritis. The FACT OA1 trial included an
additional treatment arm, fasinumab 1 mg every two months, which showednumerical benefit over placebo, but did not reach statistical significance.
In initial safety analyses from the phase 3 trials, there was an increase in
arthropathies reported with fasinumab. In a
sub-group
of patients from one phase 3 long-term safety trial, there was an increase in
joint replacement with fasinumab 1 mg monthly treatment during the
off-drug
follow-up
period, although this increase was not seen in the other trials to date.
Active treatment of patients with fasinumab, which only involved dosing in an optional second-year extension phase of one trial, has been discontinued following a recommendation from the fasinumab program's Independent Data Monitoring Committee that the program should be terminated, based on available evidence obtained to date. The core efficacy data has already been obtained to support potential fasinumab regulatory filings. Long-term safety data is expected to be discussed with the FDA in 2022. Currently, all non-essential activities and related expenditures for fasinumab have been put on hold. Next steps will be assessed together with Regeneron, with the intention of discussing data with the FDA.
(2) Developed under a license agreement with MedinCell. In
accepted the NDA for risperidone LAI, based on phase 3 data from two pivotal
studies. In
regarding the NDA for risperidone LAI. We are working to address the issues
raised in the CRL with a view to resubmission.
Biosimilar Products Pipeline
We have additional biosimilar products in development internally and with our partners that are in various stages of clinical trials and regulatory review worldwide, including phase 3 clinical trials for biosimilars to Prolia ® (denosumab), Stelara ® (ustekinumab), Xolair ® (omalizumab) and Eylea ® (afilbercept), a biosimilar to Lucentis ® (ranibizumab) that is currently under regulatory review inEurope and is in pre-submission inCanada , as well as a biosimilar to Humira ® (adalimumab) that is currently underU.S. regulatory review. 62
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Selling and Marketing (S&M) Expenses
S&M expenses in the second quarter of 2022 were$594 million , a decrease of 3% compared to the second quarter of 2021. This decrease was mainly a result of the factors discussed above under "-Europe Segment-S&M Expenses."
S&M expenses as a percentage of revenues were 15.7% in the second quarter of both 2022 and 2021.
General and Administrative (G&A) Expenses
G&A expenses in the second quarter of 2022 were$313 million , an increase of 29% compared to the second quarter of 2021. The increase in G&A expenses in the second quarter of 2022 was related to proceeds received from Teva's insurance carriers pursuant to a settlement reached on a derivative proceeding related to the acquisition of Actavis Generics in the second quarter of 2021, as well as higher litigation fees in the second quarter of 2022.
G&A expenses as a percentage of revenues were 8.3% in the second quarter of 2022, compared to 6.2% in the second quarter of 2021.
Intangible Asset Impairments
We recorded expenses of
Goodwill Impairment
We recorded a goodwill impairment charge of$745 million in the second quarter of 2022, of which$479 million is related to our International Markets reporting unit and$266 million is related to Teva's API reporting unit. See note 6 to our consolidated financial statements.
Other Asset Impairments, Restructuring and Other Items
We recorded expenses of$118 million for other asset impairments, restructuring and other items in the second quarter of 2022, compared to expenses of$28 million in the second quarter of 2021. For further details, as well as a description of significant regulatory and other events, see note 12 to our consolidated financial statements.
Legal Settlements and Loss Contingencies
In the second quarter of 2022, we recorded expenses of$729 million in legal settlements and loss contingencies, compared to an expense of$6 million in the second quarter of 2021. See note 9 to our consolidated financial statements.
Other Income
Other income in the second quarter of 2022 was$34 million , compared to$43 million in the second quarter of 2021. Other income in the second quarter of 2022 was mainly related to a capital gain related to the sale of an R&D site. Other income in the second quarter of 2021 was mainly due to capital gains related to the sale of certain OTC assets.
Operating Income (Loss)
Operating loss was
Operating loss as a percentage of revenues was 25.1% in the second quarter of 2022, compared to operating income as a percentage of revenues of 14.9% in the second quarter of 2021. Operating loss in the second quarter of 2022 was mainly affected by goodwill impairment charges and legal settlements and loss contingencies, as discussed above.
Financial Expenses, Net
Financial expenses were$211 million in the second quarter of 2022, compared to$274 million in the second quarter of 2021. Financial expenses in the second quarter of 2022 were mainly comprised of interest expenses of$225 million , partially offset by a positive exchange rate impact driven mainly from currencies which we were unable to hedge, such as the Russian ruble. Financial expenses in the second quarter of 2021 were mainly comprised of interest expenses of$240 million and loss on revaluations of marketable securities of$34 million . 63
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The following table presents a reconciliation of our segment profits to our
consolidated operating income (loss) and to consolidated income (loss) before
income taxes for the three months ended
Three months ended June 30,
2022 2021
(U.S. $ in millions)
North America profit $ 481 $ 521
Europe profit 389 343
International Markets profit 95 123
Total reportable segments profit 964 987
Profit of other activities 55 47
Total segments profit 1,019 1,034
Amounts not allocated to segments:
Amortization 212 173
Other assets impairments, restructuring and other items 118 28
Goodwill impairment 745 -
Intangible assets impairments 51 195
Legal settlements and loss contingencies 729 6
Other unallocated amounts 113 50
Consolidated operating income (loss) (949 ) 582
Financial expenses, net 211 274
Consolidated income (loss) before income taxes $ (1,160 ) $ 308
Tax Rate
In the second quarter of 2022, we recognized a tax benefit of $900 million , on
pre-tax
loss of $1,160 million . In the second quarter of 2021, we recognized a tax
expense of $98 million , on
pre-tax
income of $308 million . See note 11 to our consolidated financial statements.
Share In (Profits) Losses of Associated Companies, Net
We did not have any share in (profits) losses of associated companies, net in the second quarter of 2022. Share in profits of associated companies, net in the second quarter of 2021 was$11 million .
Net Income (Loss) Attributable to Teva
Net loss was$232 million in the second quarter of 2022, compared to net income of$207 million in the second quarter of 2021. Net loss in the second quarter of 2022 was mainly affected by goodwill impairment charges and legal settlements and loss contingencies, partially offset by a tax benefit, all as discussed above.
Diluted Shares Outstanding and Earnings (Loss) per Share
The weighted average diluted shares outstanding used for the fully diluted share
calculations for the three months ended
Diluted loss per share was
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Share Count for Market Capitalization
We calculate share amounts using the outstanding number of shares (i.e., excluding treasury shares) plus shares that would be outstanding upon the exercise of options and vesting of RSUs and PSUs and the conversion of our convertible senior debentures, in each case, at period end.
As of
Impact of Currency Fluctuations on Results of Operations
In the second quarter of 2022, approximately 47% of our revenues were denominated in currencies other than theU.S. dollar. Because our results are reported inU.S. dollars, we are subject to significant foreign currency risks. Accordingly, changes in the rate of exchange between theU.S. dollar and the local currencies in the markets in which we operate (primarily the euro, British pound, Canadian dollar, Russian ruble, Japanese yen, Swiss franc and new Israeli shekel) impact our results. During the second quarter of 2022, the following main currencies relevant to our operations decreased in value against theU.S. dollar (each on a quarterly average compared to quarterly average basis): Turkish lira by 46%, Argentinian peso by 20%, Hungarian forint by 18%, Japanese yen by 15%, Chilean peso by 15%, Swedish krona by 14%, Polish zloty by 14% and euro by 12%. The following main currencies relevant to our operations increased in value against theU.S. dollar: Russian ruble by 11% and Brazilian real by 8%.
As a result, exchange rate movements during the second quarter of 2022, net of
hedging effects, negatively impacted overall revenues by
In the second quarter of 2022, a positive hedging impact of$17 million was recognized under revenues, and a positive impact of$3 million was recognized under cost of sales. In the second quarter of 2021, a negative hedging impact of$15 million was recognized under revenues and a minimal negative impact was recognized under cost of sales. 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. See note 8d to our consolidated financial statements. Commencing in the third quarter of 2018, the cumulative inflation inArgentina exceeded 100% or more over a three-year period. Although this triggered highly inflationary accounting treatment, it did not have a material impact on our results of operations. Commencing in the second quarter of 2022, the cumulative inflation inTurkey exceeded 100% or more over a three-year period. Although this triggered highly inflationary accounting treatment, it did not have a material impact on our results of operations.
Comparison of Six Months Ended
Unless specified otherwise, the factors used to explain quarterly changes on a year-over-year basis are also relevant for the comparison of the results for the six months endedJune 30, 2022 and 2021. Where there are different factors affecting the six months comparison, we have described them below.
Segment Information
North America Segment
The following table presents revenues, expenses and profit for our
Six months ended June 30,
2022 2021
(U.S. $ in millions / % of Segment
Revenues)
Revenues $ 3,641 100 % $ 3,932 100 %
Gross profit 1,899 52.2 % 2,114 53.8 %
R&D expenses 289 7.9 % 322 8.2 %
S&M expenses 501 13.7 % 483 12.3 %
G&A expenses 239 6.6 % 218 5.5 %
Other income (12 ) § (7 ) §
Segment profit* $ 883 24.2 % $ 1,098 27.9 %
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than 0.5%.
65--------------------------------------------------------------------------------
North America Revenues
OurNorth America segment includesthe United States andCanada . Revenues from ourNorth America segment in the first six months of 2022 were$3,641 million , a decrease of 7% compared to$3,932 million in the first six months of 2021.
Revenues by Major Products and Activities
The following table presents revenues for our
Percentage
Six months ended
June 30, Change
2022 2021 2022-2021
(U.S. $ in millions)
Generic products $ 1,925 $ 2,004 (4 %)
AJOVY 86 77 12 %
AUSTEDO 358 320 12 %
BENDEKA/TREANDA 165 197 (16 %)
COPAXONE 180 315 (43 %)
Anda 650 605 7 %
Other 278 414 (33 %)
Total $ 3,641 $ 3,932 (7 %)
Generic products
revenues in our North America segment (including biosimilars) in the first six
months of 2022 were $1,925 million , a decrease of 4% compared to the first six
months of 2021, mainly due to increased competition and loss of revenues due to
the closure of the Irvine, CA site, partially offset by revenues from
lenalidomide capsules (the generic version of Revlimid
®
).
Anda
revenues in ourNorth America segment in the first six months of 2022 increased by 7% to$650 million , compared to$605 million in the first six months of 2021, mainly due to higher demand for COVID-related products.
North America Gross Profit
Gross profit from ourNorth America segment in the first six months of 2022 was$1,899 million , a decrease of 10%, compared to$2,114 million in the first six months of 2021.
Gross profit margin for our
North America R&D Expenses
R&D expenses relating to ourNorth America segment in the first six months of 2022 were$289 million , a decrease of 10%, compared to$322 million in the first six months of 2021. 66
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North America S&M Expenses
S&M expenses relating to ourNorth America segment in the first six months of 2022 were$501 million , an increase of 3.5% compared to$483 million in the first six months of 2021. This increase was mainly due to promotional activities related to AUSTEDO. North America G&A Expenses
G&A expenses relating to our
North America Profit
Profit from our
Europe Segment
The following table presents revenues, expenses and profit for our
Six months ended June 30,
2022 2021
(U.S. $ in millions / % of Segment
Revenues)
Revenues $ 2,327 100 % $ 2,398 100 %
Gross profit 1,397 60.0 % 1,349 56.2 %
R&D expenses 114 4.9 % 129 5.4 %
S&M expenses 393 16.9 % 424 17.7 %
G&A expenses 122 5.2 % 117 4.9 %
Other (income) expense (1 ) § (1 ) §
Segment profit* $ 769 33.1 % $ 680 28.4 %
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than 0.5%.
Europe Revenues
OurEurope segment includes theEuropean Union and certain other European countries. Revenues from ourEurope segment in the first six months of 2022 were$2,327 million , a decrease of 3% or$71 million , compared to the first six months of 2021. In local currency terms, revenues increased by 3%, compared to the first six months of 2021, which increase was attributed to higher demand for generic and OTC products resulting mainly from the removal of restrictions related to doctor and hospital visits by patients that were previously implemented in response to the COVID-19 pandemic, together with higher revenues from generic product launches. In the first six months of 2022, revenues were negatively impacted by exchange rate fluctuations of$196 million , net of hedging effects, compared to the first six months of 2021. Revenues in the first six months of 2022 included$39 million from a positive hedging impact, which are included in "Other" in the table below. See note 8d to our consolidated financial statements. 67
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Revenues by Major Products and Activities
The following table presents revenues for our
Percentage
Six months ended
June 30, Change
2022 2021 2022-2021
(U.S. $ in millions)
Generic products $ 1,749 $ 1,742 §
AJOVY 60 35 71 %
COPAXONE 144 201 (28 %)
Respiratory products 137 179 (24 %)
Other 238 242 (2 %)
Total $ 2,327 $ 2,398 (3 %)
§ Represents an amount less than 0.5%.
Europe Gross Profit
Gross profit from our
Gross profit margin for our
Europe R&D Expenses
R&D expenses relating to ourEurope segment in the first six months of 2022 were$114 million , a decrease of 12% compared to$129 million in the first six months of 2021. Europe S&M Expenses S&M expenses relating to ourEurope segment in the first six months of 2022 were$393 million , a decrease of 7% compared to$424 million in the first six months of 2021. Europe G&A Expenses G&A expenses relating to ourEurope segment in the first six months of 2022 were$122 million , an increase of 4% compared to$117 million in the first six months of 2021. Europe Profit
Profit from our
International Markets Segment
The following table presents revenues, expenses and profit for our International
Markets segment for the six months ended
2022 2021
(U.S. $ in millions /% of Segment Revenues)
Revenues $ 946 100 % $ 975 100 %
Gross profit 528 55.8 % 530 54.4 %
R&D expenses 39 4.1 % 35 3.6 %
S&M expenses 196 20.7 % 201 20.7 %
G&A expenses 60 6.3 % 51 5.2 %
Other (income) expense (41 ) (4.3 %) (3 ) §
Segment profit* $ 274 29.0 % $ 245 25.2 %
* Segment profit does not include amortization and certain other items.
§ Represents an amount less than 0.5%.
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International Markets Revenues
Our International Markets segment includes all countries other than those in ourNorth America andEurope segments. Revenues from our International Markets segment in the first six months of 2022 were$946 million , a decrease of$29 million , or 3%, compared to the first six months of 2021. In local currency terms, revenues increased by 5%. In the first six months of 2022, revenues were negatively impacted by exchange rate fluctuations of$81 million , including hedging effects, compared to the first six months of 2021. Revenues in the first six months of 2022 included$5 million from a negative hedging impact, which is included in "Other" in the table below. See note 8d to our consolidated financial statements.
On
Revenues by Major Products and Activities
The following table presents revenues for our International Markets segment by major products and activities for the six months endedJune 30, 2022 and 2021: Six months ended Percentage June 30, Change 2022 2021 2022-2021 (U.S. $ in millions) Generic products$ 782 $ 799 (2 %) AJOVY 16 7 143 % COPAXONE 20 19 4 % Other 128 150 (15 %) Total$ 946 $ 975 (3 %)
International Markets Gross Profit
Gross profit from our International Markets segment in the first six months of
2022 was
Gross profit margin for our International Markets segment in the first six months of 2022 increased to 55.8%, compared to 54.4% in the first six months of 2021. This increase was mainly due to price increases largely as a result of rising costs due to inflationary pressure.
International Markets R&D Expenses
R&D expenses relating to our International Markets segment in the first six
months of 2022 were
International Markets S&M Expenses
S&M expenses relating to our International Markets segment in the first six
months of 2022 were
International Markets G&A Expenses
G&A expenses relating to our International Markets segment in the first six
months of 2022 were
International Markets Other Income
Other income in the first six months of 2022 was
International Markets Profit
Profit from our International Markets segment in the first six months of 2022 was$274 million , an increase of 12%, compared to$245 million in the first six months of 2021. This increase was mainly due to the higher other income discussed above. 69
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Other Activities
Our revenues from other activities in the first six months of 2022 decreased by 9% to$532 million , compared to the first six months of 2021. In local currency terms, revenues decreased by 7%. API sales to third parties in the first six months of 2022 were$357 million , a decrease of 5% in bothU.S. dollars and local currency terms, compared to the first six months of 2021. Teva Consolidated Results Revenues Revenues in the first six months of 2022 were$7,447 million , a decrease of 6%, or 2% in local currency terms, compared to the first six months of 2021. The decrease in the first six months of 2022 was mainly due to lower revenues from COPAXONE in ourNorth America andEurope segments, and from generic products and BENDEKA/TREANDA in ourNorth America segment, partially offset by higher revenues from generic products in ourEurope segment.
Exchange rate movements during the first six months of 2022, net of hedging
effects, negatively impacted revenues by
Gross Profit
Gross profit in the first six months of 2022 was
Gross profit margin was 47.5% in the first six months of 2022, flat compared to the first six months of 2021.
Research and Development (R&D) Expenses
R&D expenses in the first six months of 2022 were
R&D expenses as a percentage of revenues were 6.1% in the first six months of 2022, compared to 6.4% in the first six months of 2021.
Selling and Marketing (S&M) Expenses
S&M expenses in the first six months of 2022 were
S&M expenses as a percentage of revenues were 15.8% in the first six months of 2022, compared to 15.2% in the first six months of 2021.
General and Administrative (G&A) Expenses
G&A expenses in the first six months of 2022 were
G&A expenses as a percentage of revenues were 8.2% in the first six months of 2022, compared to 6.7% in the first six months of 2021.
Intangible Asset Impairments
We recorded expenses of
Goodwill Impairment We recorded a goodwill impairment charge of$745 million in the first six months of 2022, of which$479 million is related to our International Markets reporting unit and$266 million is related to Teva's API reporting unit. See note 6 to our consolidated financial statements. 70
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Other Asset Impairments, Restructuring and Other Items
We recorded expenses of$246 million for other asset impairments, restructuring and other items in the first six months of 2022, compared to expenses of$165 million in the first six months of 2021. See note 12 to our consolidated financial statements.
Legal Settlements and Loss Contingencies
In the first six months of 2022, we recorded expenses of$1,854 million in legal settlements and loss contingencies, compared to an expense of$110 million in the first six months of 2021. See note 9 to our consolidated financial statements.
Other Income
Other income in the first six months of 2022 was$87 million , compared to$48 million in the first six months of 2021. Other income in the first six months of 2022 was mainly the result of settlement proceeds in our International Markets segment as well as a capital gain related to the sale of an R&D site. Other income in the first six months of 2021 was mainly due to capital gains related to the sale of certain OTC assets.
Operating Income (Loss)
Operating loss was
Operating loss as a percentage of revenues was 22.3% in the first six months of 2022, compared to operating income as a percentage of revenues of 12.9% in the first six months of 2021. Financial Expenses, Net Financial expenses were$468 million in the first six months of 2022, compared to$564 million in the first six months of 2021. Financial expenses in the first six months of 2022 were mainly comprised of interest expenses of$463 million . Financial expenses in the first six months of 2021 were mainly comprised of interest expenses of$479 million and loss on revaluations of marketable securities of$98 million .
The following table presents a reconciliation of our segment profits to our
consolidated operating income (loss) and to consolidated income (loss) before
income taxes for the six months ended
Six months ended
June 30,
2022 2021
(U.S. $ in millions)
North America profit $ 883 $ 1,098
Europe profit 769 680
International Markets profit 274 245
Total reportable segments profit 1,926 2,023
Profit of other activities 107 87
Total segments profit 2,033 2,111
Amounts not allocated to segments:
Amortization 412 414
Other assets impairments, restructuring and other items 246 165 Goodwill impairment 745 - Intangible asset impairments 199 274 Legal settlements and loss contingencies 1,854
110
Other unallocated amounts 240
132
Consolidated operating income (loss) (1,662 ) 1,015 Financial expenses, net 468 564 Consolidated income (loss) before income taxes$ (2,131 ) $ 451 71
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Tax Rate
In the first six months of 2022, we recognized a tax benefit of$899 million , on pre-tax loss of$2,131 million . In the first six months of 2021, we recognized a tax expense of$159 million , on pre-tax income of$451 million . See note 11 to our consolidated financial statements.
Share in (Profits) Losses of Associated Companies, Net
Share in profits of associated companies, net in the first six months of 2022 was$21 million , compared to share in profits of$14 million in the first six months of 2021. The share in profits of associated companies, net in the first six months of 2022 was mainly related to the difference between the book value of our investment in Novetide and its fair value as of the date we completed its acquisition inJanuary 2022 .
Net Income (Loss) Attributable to Teva
Net loss was
Diluted Shares Outstanding and Earnings (Loss) per Share
The weighted average diluted shares outstanding used for the fully diluted share calculation for the six months endedJune 30, 2022 and 2021 were 1,109 million and 1,108 million shares. Diluted loss per share was$1.07 in the first six months of 2022, compared to diluted earnings per share of$0.26 in the first six months of 2021. See note 13 to our consolidated financial statements.
Impact of Currency Fluctuations on Results of Operations
In the first six months of 2022, approximately 48% of our revenues were denominated in currencies other than theU.S. dollar. Because our results are reported inU.S. dollars, we are subject to significant foreign currency risks and, accordingly, changes in the exchange rate between theU.S. dollar and local currencies in markets in which we operate (primarily the euro, British pound, Canadian dollar, Russian ruble, Japanese yen, Swiss franc and new Israeli shekel) impact our results. During the first six months of 2022, the following main currencies relevant to our operations decreased in value against theU.S. dollar: Turkish lira by 47%, Argentinian peso by 18%, Hungarian forint by 13%, Chilean peso by 13%, Japanese yen by 12%, Swedish krona by 12%, Polish zloty by 11% and euro by 9% (all compared on a six-month average basis). The following main currency relevant to our operations increased in value against theU.S. dollar: Brazilian real by 6%.
As a result, exchange rate movements during the first six months of 2022
negatively impacted overall revenues by
In the first six months of 2022, a positive hedging impact of$35 million was recognized under revenues, and a positive hedging impact of$4 million was recognized under cost of sales. In the first six months of 2021, a positive hedging impact of$13 million was recognized under revenues and a minimal impact was recognized under cost of sales. 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. See note 8d to our consolidated financial statements.
Liquidity and Capital Resources
Total balance sheet assets were
72
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Our working capital balance, which includes accounts receivables net of SR&A,
inventories, prepaid expenses and other current assets, accounts payables,
employee-related obligations, accrued expenses and other current liabilities,
was $814 million as of June 30, 2022 , compared to $787 million as of
December 31, 2021 . This increase was mainly due to an increase in inventory
levels and accounts receivables, net of SR&A, partially offset by an update to
the estimated settlement provision recorded in connection with the remaining
opioid cases and an increase in accounts payables.
Employee-related obligations, as of June 30, 2022 were $467 million , compared to
$563 million as of December 31, 2021 . The decrease in the first six months of
2022 was mainly due to performance incentive payments to employees for 2021.
Cash investment in property, plant and equipment in the second quarter of 2022
was
Cash and cash equivalents and short-term and long-term investments as of
Our cash on hand that is not used for ongoing operations is generally invested in bank deposits as well as liquid securities that bear fixed and floating rates.
Teva's principal sources of short-term liquidity are its cash on hand, existing cash investments, liquid securities and available credit facilities, primarily, as ofJune 30, 2022 , its$1.8 billion unsecured syndicated sustainability-linked revolving credit facility, entered into inApril 2022 ("RCF"). See note 7 to our consolidated financial statements.
Debt Balance and Movements
As of
Our debt as of
The portion of total debt classified as short-term as of
Our financial leverage was 69% as of
Our average debt maturity was approximately 6.1 years as of
Total Equity
Total equity was
Exchange rate fluctuations affected our balance sheet, as approximately 58% of our net assets as ofJune 30, 2022 (including both non-monetary and monetary assets) were in currencies other than theU.S. dollar. When compared toDecember 31, 2021 , changes in currency rates had a negative impact of$282 million on our equity as ofJune 30, 2022 . The following main currencies decreased in value against theU.S. dollar: the Turkish lira by 27%, the Japanese yen by 19%, the British pound by 11%, the Polish zloty by 10%, the Chilean peso by 9%, the Croatian kuna by 9%, the Bulgarian lev by 8%, the euro by 8% and the Indian rupee by 6 %. The following main currency increased in value against theU.S. dollar: the Russian ruble by 30%. All comparisons are on a year to date basis. Cash Flow We seek to continually improve the efficiency of our working capital management. From time to time, as part of our cash and commercial relationship management activities, we may make decisions in our commercial and supply chain activities which may drive an acceleration of receivable payments from customers or deceleration of payments to vendors, having the effect of increasing or decreasing cash from operations in an individual period. Such decisions may have an impact on our annual operating cash flow measurement, as well as on our quarterly results. 73 -------------------------------------------------------------------------------- Cash flow generated from operating activities during the second quarter of 2022 was$123 million , compared to$218 million in the second quarter of 2021. This decrease was mainly due to payments related to legal settlements in the second quarter of 2022, partially offset by an increase in accounts payables. During the second quarter of 2022, we generated free cash flow of$301 million , which we define as comprising$123 million in cash flow generated from operating activities,$287 million in beneficial interest collected in exchange for securitized accounts receivables and$18 million in proceeds from divestitures of businesses and other assets, partially offset by$127 million in cash used for capital investment. During the second quarter of 2021, we generated free cash flow of$625 million , comprising$218 million in cash flow generated from operating activities,$405 million in beneficial interest collected in exchange for securitized accounts receivables and$115 million in proceeds from divestitures of businesses and other assets, partially offset by$113 million in cash used for capital investment. The decrease in the second quarter of 2022 resulted mainly from lower cash flow from operating activities as well as lower proceeds from sales of assets.
Dividends
We have not paid dividends on our ordinary shares or ADSs since
Commitments
In addition to financing obligations under short-term debt and long-term senior notes and loans, debentures and convertible debentures, our major contractual obligations and commercial commitments include leases, royalty payments, contingent payments pursuant to acquisition agreements and participation in joint ventures associated with R&D activities. InOctober 2021 , Teva announced a license agreement withMODAG GmbH ("Modag") that will provide Teva an exclusive global license to develop, manufacture and commercialize Modag's lead compound (TEV-56286) and a related compound (TEV-56287). TEV-56286 was initially developed for the treatment of Multiple System Atrophy ("MSA") and Parkinson's disease, and has the potential to be applied to other treatments for neurodegenerative disorders, such as Alzheimer's disease. A phase 1b clinical trial is currently being completed for TEV-56286. In the fourth quarter of 2021, Teva made an upfront payment of$10 million to Modag that was recorded as an R&D expense. Modag may be eligible for future development milestone payments, totaling an aggregate amount of up to$70 million , as well as future commercial milestones and royalties. InAugust 2020 , Teva entered into an agreement with biopharmaceutical company Alvotech for the exclusive commercialization in theU.S. of five biosimilar product candidates. The initial pipeline for this collaboration contains biosimilar candidates addressing multiple therapeutic areas, including a proposed biosimilar to Humira ® . Under this agreement, Alvotech is responsible for the development, registration and supply of the biosimilar product candidates and Teva will exclusively commercialize the products inthe United States . Teva paid an upfront payment in the third quarter of 2020 and additional upfront and milestone payments in the second quarter of 2021 that were recorded as R&D expenses. Additional development and commercial milestone payments of up to$455 million , as well as royalty payments, may be payable by Teva over the next few years. Teva and Alvotech will share profit from the commercialization of these biosimilars. Alvotech was previously involved in litigation involving certain IP and trade secrets claims filed by Abbvie in relation to Alvotech's proposed biosimilar to Humira ® , all of which were settled onMarch 8, 2022 . Pursuant to that settlement, Alvotech and Teva may sell Alvotech's proposed biosimilar to Humira ® inthe United States beginning onJuly 1, 2023 , provided thatU.S. regulatory approval is obtained by that date. InSeptember 2016 , Teva and Regeneron entered into a collaborative agreement to develop and commercialize Regeneron's pain medication product, fasinumab. Teva and Regeneron share in the global commercial rights to this product (excludingJapan ,Korea and nine other Asian countries), as well as ongoing associated R&D costs of approximately$1 billion . Teva made an upfront payment of$250 million to Regeneron in the third quarter of 2016 and additional payments for achievement of development milestones in an aggregate amount of$120 million were paid during 2017 and 2018. The agreement stipulates additional development and commercial milestone payments of up to$2,230 million , as well as future royalties. Currently, all non-essential activities and related expenditures for fasinumab have been put on hold. Next steps will be assessed together with Regeneron, with the intention of discussing data with the FDA. 74
-------------------------------------------------------------------------------- InNovember 2013 , Teva entered into an agreement with MedinCell for the development and commercialization of multiple long-acting injectable products. The lead product candidate selected was risperidone LAI (TV-46000) suspension for subcutaneous use for the treatment of schizophrenia. InAugust 2021 , the FDA accepted the new drug application ("NDA") for risperidone LAI, based on phase 3 data from two pivotal studies. Teva leads the clinical development and regulatory process and is responsible for commercialization of this product candidate. MedinCell may be eligible for development milestones, and future commercial milestones of up to$112 million in respect of risperidone LAI. Teva will also pay MedinCell royalties on net sales. InApril 2022 , the FDA issued a Complete Response Letter ("CRL") regarding the NDA for risperidone LAI. Teva is working to address the issues raised in the CRL with a view to resubmission. We are committed to paying royalties to owners of know-how, partners in alliances and certain other arrangements, and to parties that financed R&D at a wide range of rates as a percentage of sales of certain products, as defined in the agreements. In some cases, the royalty period is not defined; in other cases, royalties will be paid over various periods not exceeding 20 years. In connection with certain development, supply and marketing, and research and collaboration or services agreements, we are required to indemnify, in unspecified amounts, the parties to such agreements against third-party claims relating to (i) infringement or violation of intellectual property or other rights of such third party; or (ii) damages to users of the related products. Except as described in our financial statements, we are not aware of any material pending action that may result in the counterparties to these agreements claiming such indemnification.
2022 Aggregated Contractual Obligations
There have not been any material changes in our assessment of material contractual obligations and commitments as set forth in Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Supplemental Non-GAAP Income Data We utilize certain non-GAAP financial measures to evaluate performance, in conjunction with other performance metrics. The following are examples of how we utilize the non-GAAP measures:
• 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.
Non-GAAP
financial measures have no standardized meaning and accordingly have limitations in their usefulness to investors. We provide such non-GAAP data because management believes that such data provide useful information to investors. However, investors are cautioned that, unlike financial measures prepared in accordance withU.S. GAAP, non-GAAP measures may not be comparable with the calculation of similar measures for other companies. These non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses our performance. The limitations of using non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all events during a period and may not provide a comparable view of our performance to other companies in the pharmaceutical industry. Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP. In arriving at our non-GAAP presentation, we exclude items that either have a non-recurring impact on the income statement or which, in the judgment of our management, are items that, either as a result of their nature or size, could, were they not singled out, potentially cause investors to extrapolate future performance from an improper base. In addition, we also exclude equity compensation expenses to facilitate a better understanding of our financial results, since we believe that such exclusion is important for understanding the trends in our financial results and that these expenses do not affect our business operations. While not all inclusive, examples of these items include: • amortization of purchased intangible assets;
• legal settlements and material litigation fees 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;
75
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• 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 and inventory
step-up;
• expenses related to our equity compensation;
• significant
one-timefinancing costs, amortization of issuance costs and terminated derivative
instruments, and marketable securities investment valuation gains/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.
Commencing the first quarter of 2022, we no longer exclude IPR&D acquired in
development arrangements from our
non-GAAP
financial measures. No IPR&D acquired in development arrangements was recorded
in our comparable non-GAAP financial measures for the second quarter of 2021. In
our comparable
non-GAAP
financial measures for the six months ended June 30, 2021 , we excluded
$5 million IPR&D acquired in development. We are not recasting the
non-GAAP
presentation for the six months ended June 30, 2021 since the adjustment is not
significant. We are making this change to our presentation of
non-GAAP
financial measures to improve the comparability of our
non-GAAP
presentation to those of other companies in the pharmaceutical industry that are
making a similar change to their presentations beginning in the first quarter of
2022.
The following tables present supplemental
non-GAAP
data, in U.S. dollars, which we believe facilitates an understanding of the
factors affecting our business. In these tables, we exclude the following
amounts:
76
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The following table presents the GAAP measures, related
non-GAAP
adjustments and the corresponding
non-GAAP
amounts for the applicable periods:
Three Months Ended June 30, 2022
U.S. $ and shares inmillions (except per share amounts)
Excluded for
non-GAAP
GAAP measurement Non-GAAP
Costs
related to
Amortization Legal Impairment regulatory Other
of purchased settlements of long actions non-GAAP
intangible and loss Goodwill lived Restructuring taken in Equity Contingent Accelerated Other
assets contingencies impairment assets costs facilities compensation consideration items* Depreciation items
Net revenues 3,786 3,786
Cost of sales 1,992 191 3 6 34 32 1,726
Gross profit 1,794 191 3 6 34 32 2,059
Gross profit margin 47.4 % 54.4 %
R&D expenses 228 5 222
S&M expenses 594 21 9 0 563
G&A expenses 313 18 37 258
Other income (34 ) (31 ) (3 )
Legal settlements and loss
contingencies 729 729 -
Other assets impairments,
restructuring and other items 118 14 35 61 8 -
Intangible assets impairments 51 51 -
Goodwill Impairment 745 745
Operating income (loss) (949 ) 212 729 745 65 35 3 39 61 48 32 1,019
Financial expenses, net 211 23 188
Income (loss) before income
taxes (1,160 ) 212 729 745 65 35 3 39 61 48 32 23 831
Income taxes (900 ) **(965 ) 64
Net income (loss) (259 ) 212 729 745 65 35 3 39 61 48 32 (942 ) 767
Net income (loss)
attributable to
non-controlling
interests (27 ) (39 ) 13
Net income (loss)
attributable to Teva (232 ) 212 729 745 65 35 3 39 61 48 32 (981 ) 754
EPS - Basic (0.21 ) 0.89 0.68
EPS - Diluted (0.21 ) 0.89 0.68
The
non-GAAP
diluted weighted average number of shares was 1,114 million for the three months
ended June 30, 2022 .
Non-GAAP
income taxes for the three months ended June 30, 2022 were 8% on
pre-tax
non-GAAP
income.
* Other
non-GAAPitems include 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 certain accelerated depreciation expenses and
inventory write offs, primarily related to the rationalization of our plants
and other unusual events.
** Includes a portion of the realization of losses related to an investment in
one of our
items.
77
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Three Months Ended June 30, 2021
U.S. $ and shares in millions (except per share amounts)
Excluded for
non-GAAP
GAAP measurement Non-GAAP
Costs
related to
Amortization Legal Impairment regulatory Other
of purchased settlements of long actions non-GAAP
intangible and loss lived Restructuring taken in Equity Contingent Other
assets contingencies assets costs facilities compensation consideration items* items
Net revenues 3,910 3,910
Cost of sales 2,037 148 8 6 50 1,826
Gross profit 1,873 148 8 6 50 2,084
Gross profit margin 47.9 % 53.3 %
R&D expenses 248 5 243
S&M expenses 615 25 8 582
G&A expenses 242 11 - 231
Other income (43 ) (37 ) (6 )
Legal settlements and loss contingencies 6 6 -
Other assets impairments, restructuring and
other items 28 32 (13 ) (19 ) 28 -
Intangible assets impairments 195 195 -
Operating income (loss) 582 173 6 226 (13 ) 8 29 (19 ) 42 1,034
Financial expenses, net 274 34 240
Income (loss) before income taxes 308 173 6 226 (13 ) 8 29 (19 ) 42 34 794
Income taxes 98 (36 ) 133
Share in (profit) losses of associated
companies - net (11 ) (3 ) (8 )
Net income (loss) 221 173 6 226 (13 ) 8 29 (19 ) 42 (5 ) 669
Net income (loss) attributable to
non-controlling
interests 14 (3 ) 18
Net income (loss) attributable to Teva 207 173 6 226 (13 ) 8 29 (19 ) 42 (8 ) 651
EPS - Basic 0.19 0.40 0.59
EPS - Diluted 0.19 0.40 0.59
The
non-GAAP
diluted weighted average number of shares was 1,109 million for the three months
ended
Non-GAAP
income taxes for the three months endedJune 30, 2021 were 17% on pre-tax non-GAAP income. * Other non-GAAP
items include 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 certain accelerated depreciation expenses and
inventory write offs, primarily related to the rationalization of our plants
and other unusual events.
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Six Months Ended June 30, 2022
U.S. $ and sharesin millions (except per share amounts)
Excluded for
non-GAAP
GAAP measurement Non-GAAP
Costs
related to
Amortization Legal Impairment regulatory Other
of purchased settlements of long- actions non-GAAP
intangible and loss Goodwill lived Restructuring taken in Equity Contingent Accelerated Other
assets contingencies impairment assets costs facilities compensation consideration depreciation items* items
Net revenue 7,447 7,447
Cost of sales 3,913 368 4 11 33 95 3,401
Gross profit 3,534 368 4 11 33 95 4,045
Gross profit margin 47.5 % 54.3 %
R&D expenses 453 10 443
S&M expenses 1,178 43 16 3 1,115
G&A expenses 609 26 73 510
Other (income) expense (87 ) (31 ) (55 )
Legal settlements and loss contingencies 1,854 1,854 -
Other assets impairments, restructuring
and other items 246 30 92 94 30 -
Intangible assets impairment 199 199 -
Goodwill impairment 745 745
Operating income (loss) (1,662 ) 412 1,854 745 230 92 4 63 94 33 170 2,033
Financial expenses, net 468 33 435
Income (loss) before income taxes (2,131 ) 412 1,854 745 230 92 4 63 94 33 170 33 1,597
Income taxes (899 ) **(1,105 ) 206
Share in (profits) losses of associated
companies - net (21 ) (22 ) 1
Net income (loss) (1,211 ) 412 1,854 745 230 92 4 63 94 33 170 (1,094 ) 1,390
Net income (loss) attributable to
non-controlling
interests (24 ) (50 ) 26
Net income (loss) attributable to Teva (1,187 ) 412 1,854 745 230 92 4 63 94 33 170 (1,144 ) 1,363
EPS - Basic (1.07 ) 2.30 1.23
EPS - Diluted (1.07 ) 2.29 1.22
The
non-GAAP
diluted weighted average number of shares was 1,116 million for the six months
ended
Non-GAAP
income taxes for the six months endedJune 30, 2022 were 13% on pre-tax non-GAAP income. * Other non-GAAP
items include 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 certain accelerated depreciation expenses and
inventory write offs, primarily related to the rationalization of our plants
and other unusual events.
** Includes a portion of the realization of losses related to an investment in
one of our
items.
79
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Six months ended June 30, 2021
U.S. $ and shares in millions (except per share amounts)
Excluded for
non-GAAP
GAAP measurement Non-GAAP
Costs
related to
Amortization Legal Impairment regulatory Other
of purchased settlements of long- actions non-GAAP
intangible and loss lived Restructuring taken in Equity Contingent Other
assets contingencies assets costs facilities compensation consideration items* items
Net revenue 7,892 7,892
Cost of sales 4,141 363 13 12 91 3,663
Gross profit 3,750 363 13 12 91 4,228
Gross profit margin 47.5 % 53.6 %
R&D expenses 501 10 5 487
S&M expenses 1,200 52 18 1,131
G&A expenses 532 21 - 510
Other (income) expense (48 ) (37 ) (11 )
Legal settlements and loss
contingencies 110 110 -
Other assets impairments,
restructuring and other items 165 80 69 (16 ) 33 -
Intangible assets impairment 274 274 -
Operating income (loss) 1,015 414 110 354 69 13 60 (16 ) 92 - 2,111
Financial expenses, net 564 98 467
Income (loss) before income taxes 451 414 110 354 69 13 60 (16 ) 92 98 1,644
Income taxes 159 (120 ) 280
Share in losses of associated
companies - net (14 ) (1 ) (13 )
Net income (loss) attributable to
Teva 306 414 110 354 69 13 60 (16 ) 92 (24 ) 1,377
Net income (loss) attributable to non-controlling interests 21 (6 ) 28 Net income (loss) 284 414 110 354 69 13 60 (16 ) 92 (30 ) 1,350 EPS - Basic 0.26 0.97 1.23 EPS - Diluted 0.26 0.96 1.22 The non-GAAP
diluted weighted average number of shares was 1,108 million for the six months
ended
Non-GAAP
income taxes for the six months endedJune 30, 2021 were 17% on pre-tax non-GAAP income. * Other non-GAAP
items include 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 certain accelerated depreciation expenses and
inventory write offs, primarily related to the rationalization of our plants
and other unusual events.
80
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Non-GAAP
Tax Rate
Non-GAAP
income taxes in the second quarter of 2022 were$64 million , or 7.7%, on pre-tax non-GAAP income of$831 million . Non-GAAP income taxes in the second quarter of 2021 were$133 million , or 17%, on pre-tax non-GAAP income of$794 million . Our non-GAAP tax rate in the second quarter of 2022 was mainly affected by a portion of the realization of losses related to an investment in one of ourU.S. subsidiaries, as mentioned in note 11 to our consolidated financial statements, as well as the mix of products we sold and interest expense disallowances.
Non-GAAP
income taxes in the first six months of 2022 were$206 million , or 12.9%, on pre-tax non-GAAP income of$1,597 million . Non-GAAP income taxes in the first six months of 2021 were$280 million , or 17%, on pre-tax non-GAAP income of$1,644 million . We expect our annual non-GAAP tax rate for 2022 to be between 13% to 14%, lower than our non-GAAP tax rate for 2021, which was 16.4%, mainly due to the effect of a portion of the realization of losses related to an investment in one of ourU.S. subsidiaries, as mentioned in note 11 to our consolidated financial statements.
Off-Balance
Sheet Arrangements
Except for securitization transactions, which are disclosed in note 10(f) to our consolidated financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , we do not have any material off-balance sheet arrangements. Critical Accounting Policies For a summary of our significant accounting policies, see note 1 to our consolidated financial statements and "Critical Accounting Policies" included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Recently Issued Accounting Pronouncements
See note 1 to our consolidated financial statements.
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