TEVA PHARMACEUTICAL INDUSTRIES LTD
For the period ended Jun 6, 2024. Filed Apr 16, 2024.
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Jun 6, 2024 · Filed Apr 16, 2024
Contents
Appendix A
Reconciliations of GAAP Reported to Non-GAAP Financial Information
This Proxy Statement contains certain financial information that differs from what is reported under accounting principles generally accepted in the United States (“GAAP”). Thesenon-GAAP financial measures includenon-GAAP net income, non-GAAP earnings per share (“EPS”), non-GAAP operating income, non-GAAP operating margin and free cash flow. We present thesenon-GAAP financial measures as management believes that such data provide useful information to investors because they are used by management and our Board of Directors, in conjunction with other performance metrics, to evaluate our operational performance, to prepare and evaluate our work plans and annual budgets and ultimately to evaluate the performance of management, including annual compensation. While other qualitative factors and judgment also affect annual compensation, the principal quantitative element in the determination of such compensation are performance targets tied to the work plan, which are based onthese non-GAAP measures.
Non-GAAP financial measures have no standardized meaning and accordingly have limitations in their usefulness to investors. Investors are cautioned that, unlike financial measures prepared in accordance with U.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 ofusing 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 ournon-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP.
Non-GAAP Net Income and Non-GAAP EPS
The following table presents ournon-GAAP net income andnon-GAAP EPS for the years ended December 31, 2023 and 2022, as well as reconciliations of each measure to their nearest GAAP equivalents:
| Year endedDecember 31, | ||||
|---|---|---|---|---|
| ($ in millions except per share amounts) · 2023 · 2022 | ||||
| Net income (loss) attributable to Teva (1) | ($ | ) | (559) | (2,446) |
| Increase (decrease) for excluded items: | ||||
| Amortization of purchased intangible assets | 616 | 732 | ||
| Legal settlements and loss contingencies (2) | 1,043 | 2,082 | ||
| Goodwill impairment | 700 | 2,045 | ||
| Impairment of long-lived assets | 378 | 402 | ||
| Restructuring costs | 111 | 146 | ||
| Costs related to regulatory actions taken in facilities | 4 | 7 | ||
| Equity compensation | 121 | 124 | ||
| Contingent consideration (1)(3) | 548 | 261 | ||
| Gain on sale of business | (3) | (47) | ||
| Accelerated depreciation | 80 | 117 | ||
| Financial expenses | 66 | 61 | ||
| Share in profits (losses) of associated companies - net | — | (22) | ||
| Items attributable to non-controlling interests | (92) | (96) | ||
| Other non-GAAP items (4) | 330 | 465 | ||
| Corresponding tax effects and unusual tax items (1)(5) | (446) | (1,021) | ||
| Non-GAAP net income attributable to Teva | ($ | ) | 2,898 | 2,812 |
| Non-GAAP tax rate (6) | 13.0% | 11.7% | ||
| GAAP diluted earnings (loss) per share attributable to Teva | ($ | ) | (0.50) | (2.20) |
| EPS difference (7) | 3.06 | 4.73 | ||
| Non-GAAP diluted EPS attributable to Teva (7) | ($ | ) | 2.56 | 2.52 |
| Non-GAAP average number of shares (in millions) (7) | 1,131 | 1,115 | ||
| 116 | Teva Pharmaceutical Industries Ltd. 2024 Proxy Statement |
| (1) | The data presented for the prior period have been revised to reflect a revision in the presentation of these items in the consolidated financial statements. For additional information see note 1b to our consolidated financial statements included in our 2023 Annual Report on Form 10-K. |
| (2) | Expenses in 2023 were mainly related to an estimated provision for the U.S. DOJ patient assistance program litigation, an update to the estimated settlement provision for the opioid cases, the provision for the settlement of the U.S. DOJ criminal antitrust charges on the marketing and pricing of certain Teva USA generic products, and the provision for the settlement of the reverse-payment antitrust litigation over certain HIV medicines. |
| (3) | For the year ended December 31, 2023, contingent consideration expenses primarily related to $422 million in changes in the estimated future royalty payments to be paid by Teva to Allergan PLC and $132 million in changes in the estimated future royalty payments to be paid by Teva to Eagle Pharmaceuticals, Inc. For the year ended December 31, 2022, contingent consideration expenses primary related to $240 million in changes in the estimated future royalty payments to be paid by Teva to Allergan PLC and $21 million in changes in the estimated future royalty payments to be paid by Teva to Eagle Pharmaceuticals, Inc. |
| (4) | 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, primarily related to the rationalization of our plants, certain inventory write-offs, material litigation fees and other unusual events. For the year ended December 31, 2023, other non-GAAP items primarily consisted of $107 million of litigation fees mainly attributed to fees related to the settlement of Teva’s opioids litigation, the settlement of the U.S. DOJ’s antitrust charges against Teva on the marketing and pricing of certain Teva USA generic products; and $154 million of costs relating to our plant rationalization efforts, a portion of which consists of costs related to plants used in our API business that we intend to divest. For the year ended December 31, 2022, other non-GAAP items primarily consisted of $114 million of litigation fees related to the settlement of Teva’s opioids litigation and the settlement of the U.S. DOJ’s antitrust charges against Teva on the marketing and pricing of certain Teva USA generic products; $179 million of costs relating to Teva’s plant rationalization efforts; and $122 million of expenses related to a specific product that Teva decided to divest, consisting primarily of a write-off of raw materials purchased to produce the product and penalties related to Teva’s exit from a contract related to the product. |
| (5) | Amount for the year ended December 31, 2022 included $436 million representing a portion of the realization of a loss related to an investment in one of our U.S. subsidiaries as well as $585 million corresponding tax effects on non-GAAP items. |
| (6) | Non-GAAP tax rate is tax expenses (benefit) excluding the impact of non-GAAP tax adjustments presented above as a percentage of income (loss) before income taxes excluding the impact of non-GAAP adjustments presented above. |
| (7) | EPS difference and diluted non-GAAP EPS are calculated by dividing our non-GAAP net income attributable to Teva by our non-GAAP diluted weighted average number of shares. |
Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin
The following table presents ournon-GAAP operating income (loss) andnon-GAAP operating margin for the years ended December 31, 2023 and 2022, as well as reconciliations of each measure to its nearest GAAP equivalent:
| Year endedDecember 31, | ||
|---|---|---|
| ($ in millions) | 2023 | 2022 |
| GAAP operating income (loss) (1) | $433 | (2,197) |
| GAAP operating margin (1) | 2.7% | (14.7%) |
| Increase (decrease) for excluded items: | ||
| Amortization of purchased intangible assets | 616 | 732 |
| Legal settlements and loss contingencies (2) | 1,043 | 2,082 |
| Goodwill impairment | 700 | 2,045 |
| Impairment of long-lived assets | 378 | 402 |
| Restructuring costs | 111 | 146 |
| Costs related to regulatory actions taken in facilities | 4 | 7 |
| Equity compensation | 121 | 124 |
| Contingent consideration (1)(3) | 548 | 261 |
| Gain on sale of business | (3) | (47) |
| Accelerated depreciation | 80 | 117 |
| Other non-GAAP items (4) | 330 | 465 |
| Non-GAAP operating income (loss) | 4,361 | 4,139 |
| Non-GAAP operating margin (5) | 27.5% | 27.7% |
| Teva Pharmaceutical Industries Ltd. 2024 Proxy Statement | 117 |
|---|
| (1) | The data presented for prior periods have been revised to reflect a revision in the presentation of these items in the consolidated financial statements included in our 2023 Annual Report on Form 10-K. See note 1b to the consolidated financial statements included in our 2023 Annual Report on Form 10-K for additional information. |
| (2) | Expenses in 2023 were mainly related to an estimated provision for the U.S. DOJ patient assistance program litigation, an update to the estimated settlement provision for the opioid cases, the provision for the settlement of the U.S. DOJ criminal antitrust charges on the marketing and pricing of certain Teva USA generic products, and the provision for the settlement of the reverse-payment antitrust litigation over certain HIV medicines. |
| (3) | In the year ended December 31, 2023, contingent consideration expenses primarily related to $422 million in changes in the estimated future royalty payments to be paid by Teva to Allergan PLC and $132 million in changes in the estimated future royalty payments to be paid by Teva to Eagle Pharmaceuticals, Inc. For the year ended December 31, 2022, contingent consideration expenses primary related to $240 million in changes in the estimated future royalty payments to be paid by Teva to Allergan PLC and $21 million in changes in the estimated future royalty payments to be paid by Teva to Eagle Pharmaceuticals, Inc. |
| (4) | 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, primarily related to the rationalization of our plants, certain inventory write-offs, material litigation fees and other unusual events. For the year ended December 31, 2023, other non-GAAP items primarily consisted of $107 million of litigation fees mainly attributed to fees related to the settlement of Teva’s opioids litigation, the settlement of the U.S. DOJ’s antitrust charges against Teva on the marketing and pricing of certain Teva USA generic products; and $154 million of costs relating to our plant rationalization efforts, a portion of which consists of costs related to plants used in our API business that we intend to divest. For the year ended December 31, 2022, other non-GAAP items primarily consisted of $114 million of litigation fees related to the settlement of Teva’s opioids litigation and the settlement of the U.S. DOJ’s antitrust charges against Teva on the marketing and pricing of certain Teva USA generic products; $179 million of costs relating to Teva’s plant rationalization efforts; and $122 million of expenses related to a specific product that Teva decided to divest, consisting primarily of a write-off of raw materials purchased to produce the product and penalties related to Teva’s exit from a contract related to the product. |
| (5) | Non-GAAP operating margin is Non-GAAP operating income as a percentage of revenues. |
Free Cash Flow
The following table presents our Free Cash Flow for the years ended December 31, 2023 and 2022, as well as reconciliations of Free Cash Flow for such periods to its nearest GAAP equivalent:
| Year ended December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| ($ in millions) | ||
| Net cash provided by operating activities | 1,368 | 1,590 |
| Beneficial interest collected in exchange for securitized trade receivables | 1,477 | 1,140 |
| Purchases of property, plant and equipment and intangible assets | (526) | (548) |
| Proceeds from sale of business and long lived assets | 68 | 68 |
| Acquisition of subsidiary, net of cash acquired | — | (7) |
| Free cash flow | $2,387 | $2,243 |
| 118 | Teva Pharmaceutical Industries Ltd. 2024 Proxy Statement |
Thursday, June 6, 2024 4:00 p.m. Israel time 9:00 a.m. Eastern time The 2024 Annual Meeting will be conducted in a virtual format only. See inside for further details. If you need assistance or have questions regarding the 2024 Annual Meeting, please contact our Investor Relations department: TevaIR@tevapharm.com Teva Pharmaceutical Industries Ltd. 124 Dvora HaNevi’a Street, Tel Aviv, 6944020 Israel
TEVA PHARMACEUTICAL INDUSTRIES LIMITED (“TEVA”)
2024 ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 6, 2024
PROXY CARD
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF TEVA
Teva’s Board of Directors recommends that you vote FOR proposals 1, 2 and 4, and vote 1 Year with respect to Proposal 3. If you execute and return this proxy card without indicating any directions with respect to any matter, this proxy card will be voted FOR proposals 1, 2 and 4, and vote ONE YEAR with respect to Proposal 3.
Information in respect of the undersigned:
Shareholder name:
Number of identity card or passport (country) or corporation number (country):
Number of Teva ordinary shares being voted:
The undersigned hereby constitutes and appoints each of DOV BERGWERK, DIKLA TADMOR, SHIRA ARAN-PORAT and MATAN KIMCHI, acting individually, the true and lawful attorney, agent and proxy of the undersigned, with full power of substitution, to vote with respect to the number of shares set forth above, standing in the name of the undersigned at the close of trading on the Record Date, at the 2024 Annual General Meeting of Shareholders, and at any and all adjournments thereof, with all the power that the undersigned would possess if personally present and especially (but without limiting the general authorization and power hereby given) to vote as instructed on the reverse side.
In order to be counted, a duly executed proxy must be received by Teva by 4:00 p.m., Israel time, on June 3, 2024 (if not revoked prior to such time), unless determined otherwise by the chairman of the meeting, by submitting this proxy card to Teva’s executive offices at 124 Dvora HaNevi’a Street, Tel Aviv, 6944020, Israel to the attention of the Company Secretary or by email to TevaAGM2024@tevapharm.com.
In order to be counted, in addition to this proxy card: (i) shareholders registered in Teva’s shareholder register (Registered Holders) must also provide Teva with a copy of such Registered Holder’s identity card, passport or certificate of incorporation, as the case may be; and (ii) a shareholder registered pursuant to Section 177(1) of the Israeli Companies Law, 5759-1999, through a nominee company(Non-Registered Holders) must also provide Teva with an ownership certificate confirming such Non-Registered Holder’s ownership of Teva’s ordinary shares on the Record Date, which certificate must be approved by a member of the Tel Aviv Stock Exchange, as required by the Israeli Companies Regulations (Proof of Share Ownership for Voting at a General Meeting), 5760-2000. Non-Registered Holders may alternatively submit their votes through the electronic voting system of the Israeli Securities Authority athttps//:votes.isa.gov.il.
This proxy card, when properly executed, will be voted in the manner directed herein by the undersigned. Any and all proxies heretofore given are hereby revoked.
(Continued and to be signed on the reverse side)
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY
| Matter on the Agenda: | Please vote by marking “X” in thecorrect box | |||||||
| For | Against | Abstain | ||||||
| 1. | ELECTION OF DIRECTORS: | |||||||
| (a) Rosemary A. Crane | ||||||||
| (b) Gerald M. Lieberman | ||||||||
| (c) Prof. Ronit Satchi-Fainaro | ||||||||
| (d) Prof. Varda Shalev | ||||||||
| 2. | TO APPROVE, ON A NON-BINDING ADVISORY BASIS, THE COMPENSATION FOR TEVA’S NAMED EXECUTIVE OFFICERS | |||||||
| 3. | TO RECOMMEND, ON A NON-BINDING ADVISORY BASIS, TO HOLD A NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION FOR TEVA’S NAMED EXECUTIVE OFFICERS EVERY ONE, TWO OR THREE YEARS | 1 YEAR | 2 YEARS | 3 YEARS | Abstain | |||
| For | Against | Abstain | ||||||
| 4. | TO APPOINT KESSELMAN & KESSELMAN, A MEMBER OF PRICEWATERHOUSECOOPERS INTERNATIONAL LTD., AS TEVA’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM UNTIL TEVA’S 2025 ANNUAL MEETING OF SHAREHOLDERS | |||||||
| Signature | Date |
|---|
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