TEVA PHARMACEUTICAL INDUSTRIES LTD

Comparison of Three Months Ended September 30, 2024 to Three Months Ended September 30, 2023

Segment Information

United States Segment

The following table presents revenues, expenses and profit for our United States segment for the three months ended September 30, 2024 and 2023:

United States Revenues

As part of a recent shift in executive management responsibilities and in line with our Pivot to Growth strategy, commencing January 1, 2024, Canada is reported as part of our International Markets segment. Prior period amounts were recast to reflect this change. See note 15 to our consolidated financial statements.

Revenues from our United States segment in the third quarter of 2024 were $2,225 million, an increase of $329 million, or 17%, compared to the third quarter of 2023. This increase was mainly due to higher revenues from generic products, AUSTEDO and UZEDY, partially offset by lower revenues from certain innovative products, primarily COPAXONE and BENDEKA and TREANDA.

The following table presents revenues for our United States segment by major products and activities for the three months ended September 30, 2024 and 2023:

Generic products revenues in our United States segment (including biosimilars) in the third quarter of 2024 were $1,094 million, an increase of 30% compared to the third quarter of 2023, the majority of which is driven by higher revenues from lenalidomide capsules (the generic version of Revlimid®), and the remaining, primarily by the launch of liraglutide injection 1.8mg (an authorized generic of Victoza®) and higher revenues from epinephrine injectable solution (the generic equivalent of EpiPen® and EpiPen Jr®).

Among the most significant generic products we sold in the United States in the third quarter of 2024 were lenalidomide capsules (the generic version of Revlimid®), epinephrine injectable solution (the generic equivalent of EpiPen® and EpiPen Jr®), Truxima® (the biosimilar to Rituxan®) and liraglutide 1.8 mg injection (an authorized generic of Victoza®). In the third quarter of 2024, our total prescriptions were approximately 292 million (based on trailing twelve months), representing 7.6% of total U.S. generic prescriptions, compared to approximately 320 million (based on trailing twelve months), representing 8.4% of total U.S. generic prescriptions in the third quarter of 2023, all according to IQVIA data.

On October 1, 2024, Teva launched octreotide acetate for injectable suspension, the first generic version of Sandostatin® LAR Depot. Octreotide acetate for injectable suspension is indicated for the treatment of acromegaly and severe diarrhea associated with carcinoid syndrome, and is available to patients in the U.S.

AJOVY revenues in our United States segment in the third quarter of 2024 were $58 million, an increase of 4% compared to the third quarter of 2023, mainly due to growth in volume. In the third quarter of 2024, AJOVY’s exit market share in the United States in terms of total number of prescriptions was 29.1% compared to 24.9% in the third quarter of 2023.

AJOVY is indicated for the preventive treatment of migraine in adults, and was launched in the U.S. in 2018. AJOVY is the only anti-CGRP subcutaneous product indicated for quarterly treatment.

AJOVY is protected worldwide by patents expiring in 2026 at the earliest; extensions have been granted in several countries, including the United States and in Europe, until 2031. Additional patents relating to the use of AJOVY in the treatment of migraine have also been issued in the 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 in the United States (obtained in September 2018) and 10 years from marketing approval in Europe (obtained in April 2019).

In October 2017, we filed a lawsuit in the U.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, including three method of treatment patents and six composition of matter patents. Lilly then submitted inter partes review (“IPR”) petitions to the Patent Trial and Appeal Board (“PTAB”), challenging the validity of the nine Teva patents. The PTAB issued decisions upholding the three method of treatment patents but finding the six composition of matter patents invalid, which decisions were affirmed by the Court of Appeals for the Federal Circuit on August 16, 2021. A jury trial regarding the three method of treatment patents resulted in a verdict in Teva’s favor on November 9, 2022, in which the three method of treatment patents were determined to be valid and infringed by Lilly, and Teva was awarded $176.5 million in damages. On September 26, 2023, the U.S. District Court for the District of Massachusetts issued a decision that reversed the jury’s verdict and damages award, finding Teva’s method of treatment patents to be invalid. Teva appealed this ruling on October 24, 2023. On February 2, 2024, Teva filed its opening appeal brief, to which Lilly filed its responding brief on April 19, 2024, which Teva responded to on May 29, 2024. Lilly’s final brief was filed on July 19, 2024. No date has been set for the appeal hearing.

In addition, in 2018 we entered into separate agreements with Alder Biopharmaceuticals, Inc. and Lilly, resolving the European 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 the United Kingdom.

AUSTEDO revenues in our United States segment in the third quarter of 2024 increased by 28%, to $435 million, compared to $339 million in the third quarter of 2023, mainly due to growth in volume and expanded access for patients.

AUSTEDO was launched in the U.S. in 2017. It is indicated for the treatment of chorea associated with Huntington disease and for the treatment of tardive dyskinesia in adults.

AUSTEDO is protected in the United States by 14 Orange Book patents expiring between 2031 and 2038. 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. On July 1, 2021, we filed claims against two generic ANDA filers, Aurobindo and Lupin, in the U.S. District Court for the District of New Jersey. In addition, Apotex filed a petition for IPR by the PTAB of the patent covering the deutetrabenazine compound that expires in 2031. On March 9, 2022, the U.S. Patent and Trademark Office denied Apotex’s petition and declined to institute a review of the deutetrabenazine patent. On April 29, 2022 and June 8, 2022, we reached agreements with Lupin and Aurobindo, respectively, to sell their generic products beginning in April 2033, or earlier under certain circumstances. There are no further patent litigations pending regarding AUSTEDO.

AUSTEDO XR (deutetrabenazine) extended-release tablets was approved by the FDA on February 17, 2023, in three doses of 6, 12 and 24 mg, and became commercially available in the U.S. in May 2023. In May 2024, the FDA approved AUSTEDO XR as a one pill, once-daily treatment option in doses of 30, 36, 42, and 48 mg. In July 2024, the FDA approved the 18 mg dosage for AUSTEDO XR making it a one pill, once-daily option for all available doses. AUSTEDO XR is a once-daily formulation indicated in adults for tardive dyskinesia and chorea associated with Huntington’s disease, which is additional to the currently marketed twice-daily AUSTEDO. AUSTEDO XR is protected by 11 Orange Book patents expiring between 2031 and 2041.

UZEDY (risperidone) extended-release injectable suspension revenues in our United States segment in the third quarter of 2024 were $35 million. UZEDY was approved by the FDA on April 28, 2023 for the treatment of schizophrenia in adults, and was launched in the U.S. in May 2023. UZEDY is a subcutaneous, long-acting formulation of risperidone that controls the steady release of risperidone. UZEDY is protected by nine Orange Book patents expiring between 2025 and 2033. We are moving forward with plans to launch UZEDY in other countries around the world. UZEDY faces competition from multiple other products.

BENDEKAand TREANDA combined revenues in our United States segment in the third quarter of 2024 were $40 million, a decrease of 28% compared to the third quarter of 2023, mainly due to competition from alternative therapies, as well as the entry of generic bendamustine products into the market. The orphan drug exclusivity that had attached to bendamustine products expired in December 2022.

In April 2019, we signed an amendment to the license agreement with Eagle extending the royalty term applicable to the 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 18 patents listed in the U.S. Orange Book for BENDEKA with expiration dates in 2026 and 2031. In April 2020, the U.S. District Court for the District of Delaware issued a trial decision upholding the validity of all of the asserted patents and finding that four ANDA filers for generic versions of BENDEKA infringe at least one of the patents. Teva settled with one of the three ANDA filers that appealed the district court’s decision, and on August 13, 2021, the Federal Circuit issued a Rule 36 affirmance of such decision. Litigation against the fifth ANDA filer was dismissed after withdrawal of its patent challenge, and on October 18, 2021, the case against a sixth ANDA filer was also settled.

Teva also settled litigations against three 505(b)(2) applicants, Hospira, Inc. (“Hospira”), Dr. Reddy’s Laboratories (“DRL”) and Accord Healthcare (“Accord”). Based on these settlement agreements, the three 505(b)(2) filers, Hospira, Accord and DRL can launch their products on November 17, 2027 or earlier under certain circumstances. On May 4, 2023, and June 9, 2023, Teva and Eagle also filed suit against BendaRx Corp. in the U.S. District Court for the District of Delaware, following its filing of a 505(b)(2) NDA for a bendamustine product. In addition, on June 16, 2023, Teva filed suit against BendaRx USA Corp. in the U.S. District Court for the District of Eastern Virginia, which was then stayed and has now been transferred to the U.S. District Court for the District of Delaware where it has been consolidated with the suits filed there.

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. Currently, there are multiple generic TREANDA products on the market.

COPAXONE revenues in our United States segment in the third quarter of 2024 were $69 million, a decrease of 30% compared to the third quarter of 2023, mainly due to market share erosion and competition.

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 from third-party products in our United States segment in the third quarter of 2024 increased by 3% to $380 million, compared to $367 million in the third quarter of 2023, mainly due to higher volumes. Anda, our distribution business in the United States, distributes generic and innovative medicines and OTC pharmaceutical products from Teva and various third-party manufacturers to independent retail pharmacies, pharmacy retail chains, hospitals and physician offices in the United States. Anda is able to compete in the distribution market by maintaining a broad portfolio of products, competitive pricing and delivery throughout the United States.

Product Launches and Pipeline

In the third quarter of 2024, we launched the generic version of the following branded products in the United States:

As of September 30, 2024, our generic products pipeline in the United States includes 125 product applications awaiting FDA approval, including 62 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 had U.S. sales for the twelve months ended June 30, 2024 of approximately $119 billion, according to IQVIA. Approximately 79% of pending applications include a paragraph IV patent challenge, and we believe we arefirst-to-file with respect to 55 of these products, or 85 products including final approvals where launch is pending a settlement agreement or court decision. Collectively, these first-to-file opportunities represent over $79 billion in U.S. brand sales for the twelve months ended June 30, 2024, 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 fromso-called “authorized generics,” which may ultimately affect the value derived.

In the third quarter of 2024, 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.

For information regarding our innovative and biosimilar products pipeline, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.

United States Gross Profit

Gross profit from our United States segment in the third quarter of 2024 was $1,265 million, an increase of 19%, compared to $1,060 million in the third quarter of 2023.

Gross profit margin for our United States segment in the third quarter of 2024 increased to 56.9%, compared to 55.9% in the third quarter of 2023. This increase was mainly due to a favorable mix of products primarily driven by higher revenues from lenalidomide capsules (the generic version of Revlimid®) and AUSTEDO.

United States R&D Expenses

R&D expenses relating to our United States segment in the third quarter of 2024 were $151 million, a decrease of 3%, compared to $156 million in the third quarter of 2023.

United States S&M Expenses

S&M expenses relating to our United States segment in the third quarter of 2024 were $259 million, an increase of 6%, compared to $243 million in the third quarter of 2023. This increase was mainly due to promotional activities related to AUSTEDO, primarily thedirect-to-consumer advertising campaign and our patient support programs.

United States G&A Expenses

G&A expenses relating to our United States segment in the third quarter of 2024 were $107 million, an increase of 16% compared to $93 million in the third quarter of 2023.

United States Profit

Profit from our United States 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 our United States segment in the third quarter of 2024 was $748 million, an increase of 31% compared to $571 million in the third quarter of 2023. This increase was mainly due to higher gross profit, partially offset by higher S&M and G&A expenses, as discussed above.

Europe Segment

The following table presents revenues, expenses and profit for our Europe segment for the three months ended September 30, 2024 and 2023:

Europe Revenues

Our Europe segment includes the European Union, the United Kingdom and certain other European countries.

Revenues from our Europe segment in the third quarter of 2024 were $1,265 million, an increase of 10%, or $119 million, compared to the third quarter of 2023. In local currency terms, revenues increased by 11% compared to the third quarter of 2023, mainly due to higher revenues from generic and OTC products as well as AJOVY. Our higher revenues in the third quarter of 2024 were also partly driven by the sale of certain product rights.

In the third quarter of 2024, revenues were negatively impacted by exchange rate fluctuations of $6 million, net of hedging effects, compared to the third quarter of 2023. Revenues in the third quarter of 2024, included $10 million from a negative hedging impact, which is included in “Other” in the table below. Revenues in the third quarter of 2023 included $15 million from a positive hedging impact, which is included in “Other” in the table below. See note 8d to our consolidated financial statements.

The following table presents revenues for our Europe segment by major products and activities for the three months ended September 30, 2024 and 2023:

Generic products revenues (including OTC and biosimilar products) in our Europe segment in the third quarter of 2024, were $973 million, an increase of 10% compared to the third quarter of 2023. In local currency terms, revenues increased by 8%, mainly due to price increases as a result of market conditions such as inflationary pressures in certain markets, as well as higher revenues from recently launched products.

AJOVY revenues in our Europe segment in the third quarter of 2024 increased by 37% to $56 million, compared to $41 million in the third quarter of 2023. In local currency terms revenues increased by 36% due to growth in volume.

For information about AJOVY patent protection, see “—United States Revenues—Revenues by Major Products and Activities” above.

COPAXONE revenues in our Europe segment in the third quarter of 2024 were $53 million, a decrease of 5% in both U.S. dollars and local currency terms, compared to the third quarter of 2023, due to price reductions and a decline in volume resulting from availability of alternative therapies and competing glatiramer acetate products.

In certain countries, Teva remains in litigation against generic companies regarding COPAXONE.

Respiratory products revenues in our Europe segment in the third quarter of 2024 were $60 million, a decrease of 1% compared to the third quarter of 2023. In local currency terms, revenues decreased by 3% compared to the third quarter of 2023, mainly due to net price reductions and lower volumes.

Product Launches and Pipeline

As of September 30, 2024, our generic products pipeline in Europe included 412 generic approvals relating to 53 compounds in 108 formulations, with no European Medicines Agency (“EMA”) approvals received. In addition, approximately 1,508 marketing authorization applications are pending approval in 37 European countries, relating to 94 compounds in 215 formulations. Two applications are pending with the EMA relating to seven strengths in 30 markets.

For information regarding our innovative medicines and biosimilar products pipeline, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.

Europe Gross Profit

Gross profit from our Europe segment in the third quarter of 2024 was $698 million, an increase of 8% compared to $648 million in the third quarter of 2023.

Gross profit margin for our Europe segment in the third quarter of 2024 decreased to 55.2%, compared to 56.6% in the third quarter of 2023. This decrease was mainly due to a negative exchange rate impact from hedging activities.

Europe R&D Expenses

R&D expenses relating to our Europe segment in the third quarter of 2024 were $55 million, a decrease of 11% compared to $62 million in the third quarter of 2023.

Europe S&M Expenses

S&M expenses relating to our Europe segment in the third quarter of 2024 were $203 million, an increase of 10% compared to $184 million in the third quarter of 2023. This increase was mainly to support revenue growth in generic products and AJOVY.

Europe G&A Expenses

G&A expenses relating to our Europe segment in the third quarter of 2024 were $67 million, an increase of 2% compared to $66 million in the third quarter of 2023.

Europe Profit

Profit from our Europe 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 our Europe segment in the third quarter of 2024 was $373 million, an increase of 10%, compared to $338 million in the third quarter of 2023. This increase was mainly due to higher gross profit resulting mainly from proceeds from the sale of certain product rights, partially offset by S&M expenses.

International Markets Segment

The following table presents revenues, expenses and profit for our International Markets segment for the three months ended September 30, 2024 and 2023:

International Markets Revenues

Our International Markets segment includes all countries in which we operate other than the United States and the countries included in our Europe segment. The International Markets segment includes more than 35 countries, covering a substantial portion of the global pharmaceutical industry. As part of a recent shift in executive management responsibilities, commencing January 1, 2024, Canada is reported under our International Markets segment and is no longer included as part of our United States segment. Prior period amounts were recast to reflect this change. See note 15 to our consolidated financial statements.

The countries in our International Markets segment include highly regulated, mainly generic markets, such as Canada and Israel, branded generics-oriented markets, such as Russia and certain Latin America markets and hybrid markets, such as Japan.

In February 2022, Russia launched an invasion of Ukraine. As of the date of this Quarterly Report on Form 10-Q, sustained conflict and disruption in the region is ongoing. Russia and Ukraine markets are included in our International Markets segment results and we have no manufacturing or R&D facilities in these markets. During the three months ended September 30, 2024, 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, in the nine months ended September 30, 2024 we partially hedged our exposure to currency exchange rate fluctuations with respect to our balance sheet assets, revenues and expenses. However, as of the end of the third quarter of 2024, we hedge a small part of our projected net revenues in Russian ruble for 2024. Prior to and since the escalation of the conflict, we have been taking measures to reduce our operational cash balances in Russia and Ukraine. We have been monitoring the solvency of our customers in Russia and Ukraine 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 third quarter of 2024 were $613 million, an increase of 4% compared to the third quarter of 2023. In local currency terms, revenues increased by 18% compared to the third quarter of 2023, mainly due to higher revenues from generic products in most markets, partially offset by regulatory price reductions and generic competition tooff-patented products in Japan. Our higher revenues in the third quarter of 2024 were also partly driven by the sale of certain product rights.

In the third quarter of 2024, revenues were negatively impacted by exchange rate fluctuations of $84 million, including hedging effects, compared to the third quarter of 2023. Revenues in the third quarter of 2024 included $1 million from a positive hedging impact, compared to a positive hedging impact of $7 million in the third quarter of 2023, which are included in “Other” in the table below. See note 8d to our consolidated financial statements.

The following table presents revenues for our International Markets segment by major products and activities for the three months ended September 30, 2024 and 2023:

Generic products revenues (including OTC and biosimilar products) in our International Markets segment were $477 million in the third quarter of 2024, an increase of 1% compared to the third quarter of 2023. In local currency terms, revenues increased by 13% compared to the third quarter of 2023, mainly due to higher revenues in most markets, largely driven by price increases as a result of higher costs due to inflationary pressure in certain markets and higher volumes, partially offset by regulatory price reductions and generic competition tooff-patented products in Japan.

AJOVY was launched in certain markets in our International Markets segment, including in Canada, Japan, Australia, Israel, South Korea, Brazil and others. AJOVY revenues in our International Markets segment in the third quarter of 2024 were $24 million, compared to $18 million in the third quarter of 2023, due to growth in existing markets in which AJOVY was launched.

COPAXONE revenues in our International Markets segment in the third quarter of 2024 were $13 million compared to $16 million in the third quarter of 2023.

AUSTEDO was launched in China and Israel in 2021 and in Brazil in 2022, for the treatment of chorea associated with Huntington’s disease and for the treatment of tardive dyskinesia. In February 2024, we announced a strategic partnership for the marketing and distribution of AUSTEDO in China. We continue with additional submissions in various other markets.

International Markets Gross Profit

Gross profit from our International Markets segment in the third quarter of 2024 was $306 million, an increase of 4% compared to $293 million in the third quarter of 2023.

Gross profit margin for our International Markets segment in the third quarter of 2024 increased to 49.9%, compared to 49.6% in the third quarter of 2023. This increase was mainly due to price increases largely as a result of inflationary pressures in certain markets, the sale of certain product rights and a favorable mix of products, partially offset by regulatory price reductions and generic competition tooff-patented products in Japan, as well as higher costs due to inflationary and other macroeconomic pressures.

International Markets R&D Expenses

R&D expenses relating to our International Markets segment in the third quarter of 2024 were $27 million, a decrease of 11% compared to the third quarter of 2023.

International Markets S&M Expenses

S&M expenses relating to our International Markets segment in the third quarter of 2024 were $134 million, an increase of 16% compared to the third quarter of 2023, mainly to support revenue growth including through our strategic partnership in China for AUSTEDO.

International Markets G&A Expenses

G&A expenses relating to our International Markets segment in the third quarter of 2024 were $36 million, an increase of 10% compared to the third quarter of 2023.

International Markets Other Income

Other income in the third quarter of 2024 was minimal, compared to $2 million in the third quarter 2023. Other income in the third quarter of 2023 included a capital gain from the sale of assets.

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.

Profit from our International Markets segment in the third quarter of 2024 was $109 million, a decrease of 7%, compared to $117 million in the third quarter of 2023. This decrease was mainly due to higher S&M expenses in the third quarter of 2024.

Other Activities

We have other sources of revenues, primarily the sale of APIs to third parties, certain contract manufacturing services and anout-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis. Our other activities are not included in our United States, Europe or International Markets segments described above.

On January 31, 2024, we announced that we intend to divest our API business (including its R&D, manufacturing and commercial activities) through a sale, which divestment is expected to be completed in the first half of 2025. The intention to divest is in alignment with our Pivot to Growth strategy. However, there can be no assurance regarding the ultimate timing or structure of a potential divestiture or that a divestiture will be agreed or completed at all.

Our revenues from other activities in the third quarter of 2024 were $229 million, an increase of 6% in U.S. dollars, or 5% in local currency terms, compared to the third quarter of 2023.

API sales to third parties in the third quarter of 2024 were $130 million, reflecting an increase of 4% in both U.S. dollars and local currency terms, compared to the third quarter of 2023, following a reallocation of an immaterial business within our other activities, in line with our intention to divest our API business.

Teva Consolidated Results

The data presented with respect to other asset impairments, restructuring and other items, operating income (loss), income taxes, net income (loss) attributable to Teva and earnings (loss) per share for the prior period have been revised to reflect a revision in relation to a contingent consideration and related expenses in our consolidated financial statements. For additional information, see note 1c to our consolidated financial statements.

Revenues

Revenues in the third quarter of 2024 were $4,332 million, an increase of 13% in U.S. dollars, or 15% in local currency terms, compared to the third quarter of 2023. This increase was mainly due to higher revenues from generic products in all our segments, from AUSTEDO in our United States segment, as well as from the sale of product rights in our Europe and International Markets segments. See “—United States Revenues,” “—Europe Revenues,” “—International Markets Revenues” and “—Other Activities” above.

Exchange rate movements during the third quarter of 2024, including hedging effects, negatively impacted revenues by $88 million, compared to the third quarter of 2023. See note 8d to our consolidated financial statements.

Gross Profit

Gross profit in the third quarter of 2024 was $2,148 million, an increase of 16% compared to $1,851 million in the third quarter of 2023.

Gross profit margin was 49.6% in the third quarter of 2024, compared to 48.1% in the third quarter of 2023. This increase was mainly due to a favorable mix of products, primarily AUSTEDO, partially offset by a negative impact from foreign exchange rate movements including hedging effects.

Research and Development (R&D) Expenses, net

Our R&D activities for innovative medicines and biosimilar products in each of our segments include costs of discovery research, preclinical work, drug formulation, early- and late-stage clinical development 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.

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.

In the third quarter of 2024, our R&D expenses related primarily to innovative product candidates and marketed products in immunology and immuno-oncology, neuroscience (such as neuropsychiatry, including post-approval commitments) and selected other areas, as well as generic products and biosimilars.

R&D expenses, net in the third quarter of 2024 were $240 million, a decrease of 5% compared to $253 million in the third quarter of 2023.

Our lower R&D expenses, net in the third quarter of 2024 were largely driven by reimbursements from our strategic partnerships (see note 2 to our consolidated financial statements), reflecting a decrease related to our late-stage innovative pipeline, partially offset by an increase in R&D expenses relating to immunology projects. As we continue to execute on our Pivot to Growth strategy, we see higher R&D spend in some of our late-stage innovative pipeline assets.

R&D expenses as a percentage of revenues were 5.5% in the third quarter of 2024, compared to 6.6% in the third quarter of 2023.

Innovative Medicines Pipeline

Below is a description of key products in our innovative medicines pipeline as of November 1, 2024:

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 Xgeva® (denosumab) and Xolair® (omalizumab), biosimilars to Eylea® (afilbercept), Simponi®, Simponi Aria® (golimumab) and Entyvio® (vedolizymab), which are in collaboration with Alvotech for the U.S. market, as well as our proposed biosimilar to Prolia® (denosumab), which was submitted for regulatory review in the U.S. and Europe.

Selling and Marketing (S&M) Expenses

S&M expenses in the third quarter of 2024 were $626 million, an increase of 9% compared to the third quarter of 2023. This increase was mainly a result of the factors discussed above under “—United States segment—S&M Expenses,” “—Europe segment— S&M Expenses” and “—International Markets Segment—S&M Expenses.”

S&M expenses as a percentage of revenues were 14.5% in the third quarter of 2024, compared to 15.0% in the third quarter of 2023.

General and Administrative (G&A) Expenses

G&A expenses in the third quarter of 2024 were $298 million, an increase of 11% compared to the third quarter of 2023.

G&A expenses as a percentage of revenues were 6.9% in the third quarter of 2024 compared to 7.0% in the third quarter of 2023.

Intangible Asset Impairments

We recorded expenses of $28 million for identifiable intangible asset impairments in the third quarter of 2024, compared to expenses of $47 million in the third quarter of 2023. See note 5 to our consolidated financial statements.

Goodwill Impairment

We recorded a goodwill impairment charge of $600 million related to Teva’s API reporting unit in the third quarter of 2024. No goodwill impairment charge was recorded in the third quarter of 2023. See note 6 to our consolidated financial statements.

Other Asset Impairments, Restructuring and Other Items

We recorded income of $23 million for other asset impairments, restructuring and other items in the third quarter of 2024, compared to expenses of $57 million in the third quarter of 2023. See note 12 to our consolidated financial statements.

Legal Settlements and Loss Contingencies

We recorded expenses of $450 million in legal settlements and loss contingencies in the third quarter of 2024, compared to expenses of $314 million in the third quarter of 2023. See note 9 to our consolidated financial statements.

Other Income (Loss)

Other income in the third quarter of 2024 was $21 million, compared to $9 million in the third quarter of 2023. Other income in the third quarter of 2024 included a capital gain from the sale of a business in our International Markets segment.

Operating Income (Loss)

Operating loss was $51 million in the third quarter of 2024, compared to an operating income of $344 million in the third quarter of 2023. This decrease was mainly due to a goodwill impairment charge and higher legal settlements and loss contingencies, partially offset by higher gross profit in the third quarter of 2024.

Operating loss as a percentage of revenues was 1.2% in the third quarter of 2024, compared to an operating income as a percentage of revenues of 8.9% in the third quarter of 2023.

Financial Expenses, Net

In the third quarter of 2024, financial expenses, net were $272 million, mainly comprised ofnet-interest expenses of $225 million and a negative exchange rate impact driven mainly from currencies which we were unable to hedge. In the third quarter of 2023, financial expenses, net were $280 million, mainly comprised ofnet-interest expenses of $247 million and a negative exchange rate impact driven mainly from currencies which we were unable to hedge.

Reconciliation Table to Consolidated Income (Loss) Before Income Taxes

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 September 30, 2024 and 2023:

Income Taxes

In the third quarter of 2024, we recognized a tax expense of $69 million, on apre-tax loss of $324 million. In the third quarter of 2023, we recognized a tax benefit of $12 million, on apre-tax income of $64 million. See note 11 to our consolidated financial statements.

Net Income (Loss) Attributable to Teva

Net loss was $437 million in the third quarter of 2024, compared to a net income of $69 million in the third quarter of 2023. This decrease was mainly due to changes in operating (income) loss 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 September 30, 2024 and 2023 was 1,133 million shares and 1,135 million shares, respectively.

Diluted loss per share was $0.39 in the third quarter of 2024, compared to diluted earnings per share of $0.06 in the third quarter of 2023. See note 13 to our consolidated financial statements.

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 September 30, 2024 and 2023, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,167 million shares and 1,157 million shares, respectively.

Impact of Currency Fluctuations on Results of Operations

In the third quarter of 2024, approximately 45% of our revenues were denominated in currencies other than the U.S. dollar. Because our results are reported in U.S. dollars, we are subject to significant foreign currency risks. Accordingly, changes in the rate of exchange between the U.S. dollar and local currencies in the markets in which we operate (primarily the euro, British pound, Russian ruble, Canadian dollar, Swiss franc, Japanese yen and the new Israeli shekel) impact our results.

During the third quarter of 2024, the following main currencies relevant to our operations decreased in value against the U.S. dollar (each compared on a quarterly average basis): Argentinian peso by 67%, Turkish lira by 20%, Brazilian real by 12%, Ukraine hryvna by 10% and Mexican peso by 10%. The following main currencies relevant to our operations increased in value against the U.S. dollar: Polish zloty by 6%, Russian ruble by 6%, Swedish krona by 4% and the euro by 1%.

As a result, exchange rate movements during the third quarter of 2024, including hedging effects, negatively impacted overall revenues by $88 million and operating income by $57 million, compared to the third quarter of 2023.

In the third quarter of 2024, a negative hedging impact of $9 million was recognized under revenues, and a positive hedging impact of $1 million was recognized under cost of sales. In the third quarter of 2023, a positive hedging impact of $22 million was recognized under revenues and a negative hedging impact of $7 million 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 in Argentina 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 in Turkey 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 Nine Months Ended September 30, 2024 to Nine Months Ended September 30, 2023

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 nine months ended September 30, 2024 and 2023. Where there are different factors affecting the nine months comparison, we have described them below.

Segment Information

United States Segment

The following table presents revenues, expenses and profit for our United States segment for the nine months ended September 30, 2024 and 2023:

United States Revenues

As part of a recent shift in executive management responsibilities and in line with our Pivot to Growth strategy, commencing January 1, 2024, Canada is reported as part of our International Markets segment. Prior period amounts were recast to reflect this change. See note 15 to our consolidated financial statements.

Revenues from our United States segment in the first nine months of 2024 were $6,060 million, an increase of 11% compared to $5,465 million in the first nine months of 2023.

The following table presents revenues for our United States segment by major products and activities for the nine months ended September 30, 2024 and 2023:

AJOVY revenues in our United States segment in the first nine months of 2024 were $144 million, a decrease of 6% compared to $154 million in the first nine months of 2023, mainly due to an increase in sales allowance due to anon-recurring item, partially offset by growth in volume.

Anda revenues from third-party products in our United States segment in the first nine months of 2024 decreased by 4% to $1,134 million, compared to $1,183 million in the first nine months of 2023, mainly due to lower volume.

United States Gross Profit

Gross profit from our United States segment in the first nine months of 2024 was $3,291 million, an increase of 15%, compared to $2,866 million in the first nine months of 2023.

Gross profit margin for our United States segment in the first nine months of 2024 increased to 54.3% compared to 52.4% in the first nine months of 2023.

United States R&D Expenses

R&D expenses relating to our United States segment in the first nine months of 2024 were $475 million, an increase of 3%, compared to $460 million in the first nine months of 2023.

For a description of our R&D expenses in the first nine months of 2024, see “—Teva Consolidated Results—Research and Development (R&D) Expenses” below.

United States S&M Expenses

S&M expenses relating to our United States segment in the first nine months of 2024 were $789 million, an increase of 13%, compared to $700 million in the first nine months of 2023.

United States G&A Expenses

G&A expenses relating to our United States segment in the first nine months of 2024 were $300 million, an increase of 4%, compared to $289 million in the first nine months of 2023.

United States Profit

Profit from our United States segment in the first nine months of 2024 was $1,727 million, an increase of 22%, compared to $1,421 million in the first nine months of 2023.

Europe Segment

The following table presents revenues, expenses and profit for our Europe segment for the nine months ended September 30, 2024 and 2023:

Europe Revenues

Our Europe segment includes the European Union, the United Kingdom, and certain other European countries.

Revenues from our Europe segment in the first nine months of 2024 were $3,749 million, an increase of 7% or $257 million, compared to the first nine months of 2023. In local currency terms, revenues increased by 6% compared to the first nine months of 2023.

The following table presents revenues for our Europe segment by major products and activities for the nine months ended September 30, 2024 and 2023:

Europe Gross Profit

Gross profit from our Europe segment in the first nine months of 2024 was $2,113 million, an increase of 9% compared to $1,943 million in the first nine months of 2023.

Gross profit margin for our Europe segment in the first nine months of 2024 increased to 56.3% compared to 55.6% in the first nine months of 2023. This increase was mainly due to price increases of generic products as a result of market conditions such as inflationary pressures in certain markets.

Europe R&D Expenses

R&D expenses relating to our Europe segment in the first nine months of 2024 were $173 million, an increase of 3% compared to $168 million in the first nine months of 2023.

Europe S&M Expenses

S&M expenses relating to our Europe segment in the first nine months of 2024 were $605 million, an increase of 7% compared to $565 million in the first nine months of 2023.

Europe G&A Expenses

G&A expenses relating to our Europe segment in the first nine months of 2024 were $197 million, an increase of 1% compared to the first nine months of 2023.

Europe Profit

Profit from our Europe segment in the first nine months of 2024 was $1,137 million, an increase of 12% compared to $1,017 million in the first nine months of 2023.

International Markets Segment

The following table presents revenues, expenses and profit for our International Markets segment for the nine months ended September 30, 2024 and 2023:

International Markets Revenues

Our International Markets segment includes all countries in which we operate other than the United States and the countries included in our Europe segment. As part of a recent shift in executive management responsibilities, commencing January 1, 2024, Canada is reported under our International Markets segment and is no longer included as part of our United States segment. Prior period amounts were recast to reflect this change. See note 15 to our consolidated financial statements.

Revenues from our International Markets segment in the first nine months of 2024 were $1,802 million, an increase of $53 million, or 3%, compared to the first nine months of 2023. In local currency terms, revenues increased by 19%, compared to the first nine months of 2023.

In the first nine months of 2024, revenues were negatively impacted by exchange rate fluctuations of $281 million including hedging effects, compared to the first nine months of 2023. Revenues in the first nine months of 2024 included a negligible hedging impact compared to a positive hedging impact of $12 million in the first nine months of 2023, which are included in “Other” in the table below. See note 8d to our consolidated financial statements.

The following table presents revenues for our International Markets segment by major products and activities for the nine months ended September 30, 2024 and 2023:

International Markets Gross Profit

Gross profit from our International Markets segment in the first nine months of 2024 was $889 million, compared to $861 million in the first nine months of 2023.

Gross profit margin for our International Markets segment in the first nine months of 2024 was 49.3%, compared to 49.2% in the first nine months of 2023.

International Markets R&D Expenses

R&D expenses relating to our International Markets segment in the first nine months of 2024 were $85 million, an increase of 5% compared to $81 million in the first nine months of 2023.

International Markets S&M Expenses

S&M expenses relating to our International Markets segment in the first nine months of 2024 were $397 million, an increase of 12% compared to $353 million in the first nine months of 2023.

International Markets G&A Expenses

G&A expenses relating to our International Markets segment in the first nine months of 2024 were $109 million an increase of 3% compared to $105 million in the first nine months of 2023.

International Markets Other Income

Other income in the first nine months of 2024 was $1 million, compared to $34 million in the first nine months of 2023. Other income in the first nine months of 2023 included a capital gain from the sale of assets.

International Markets Profit

Profit from our International Markets segment in the first nine months of 2024 was $299 million, a decrease of 16%, compared to $356 million in the first nine months of 2023.

Other Activities

We have other sources of revenues, primarily the sale of APIs to third parties, certain contract manufacturing services and anout-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis. Our other activities are not included in our United States, Europe or International Markets segments described above.

On January 31, 2024, we announced that we intend to divest our API business (including its R&D, manufacturing and commercial activities) through a sale, which divestment is expected to be completed in the first half of 2025. The intention to divest is in alignment with our Pivot to Growth strategy. However, there can be no assurance regarding the ultimate timing or structure of a potential divestiture or that a divestiture will be agreed or completed at all.

Our revenues from other activities in the first nine months of 2024 were $703 million, an increase of 3% in both U.S. dollars and in local currency terms, compared to the first nine months of 2023.

API sales to third parties in the first nine months of 2024 were $409 million, an increase of 4% in both U.S. dollars and local currency terms, compared to the first nine months of 2023, following a reallocation of an immaterial business within our other activities, in line with our intention to divest our API business.

Teva Consolidated Results

The data presented with respect to other asset impairments, restructuring and other items, operating income (loss), income taxes, net income (loss) attributable to Teva and earnings (loss) per share for the prior period have been revised to reflect a revision in relation to a contingent consideration and related expenses in the consolidated financial statements. For additional information, see note 1c to our consolidated financial statements.

Revenues

Revenues in the first nine months of 2024 were $12,315 million, an increase of 8% compared to the first nine months of 2023. In local currency terms, revenues increased by 10%, compared to the first nine months of 2023.

Exchange rate movements during the first nine months of 2024, including hedging effects, negatively impacted revenues by $249 million, compared to the first nine months of 2023. See note 8d to our consolidated financial statements.

Gross Profit

Gross profit in the first nine months of 2024 was $5,943 million, an increase of 14% compared to the first nine months of 2023.

Gross profit margin was 48.3% in the first nine months of 2024, compared to 45.9% in the first nine months of 2023.

Research and Development (R&D) Expenses

R&D expenses in the first nine months of 2024 were $751 million, an increase of 3% compared to the first nine months of 2023, as we continue to execute on our Pivot to Growth strategy, mainly related to investments in our innovative pipeline.

R&D expenses as a percentage of revenues were 6.1% in the first nine months of 2024, compared to 6.4% in the first nine months of 2023.

Selling and Marketing (S&M) Expenses

S&M expenses in the first nine months of 2024 were $1,891 million, an increase of 10% compared to the first nine months of 2023.

S&M expenses as a percentage of revenues were 15.4% in the first nine months of 2024, compared to 15.2% in the first nine months of 2023.

General and Administrative (G&A) Expenses

G&A expenses in the first nine months of 2024 were $859 million, a decrease of 1% compared to the first nine months of 2023.

G&A expenses as a percentage of revenues were 7.0% in the first nine months of 2024, compared to 7.6% in the first nine months of 2023.

Intangible Asset Impairments

We recorded expenses of $169 million for identifiable intangible asset impairments, in the first nine months of 2024, compared to expenses of $289 million in the first nine months of 2023. See note 5 to our consolidated financial statements.

Goodwill Impairment

We recorded goodwill impairment charges of $1,000 million related to Teva’s API reporting unit in the first nine months of 2024, compared to a goodwill impairment charge of $700 million related to our International Markets reporting unit in the first nine months of 2023. See note 6 to our consolidated financial statements.

Other Asset Impairments, Restructuring and Other Items

We recorded expenses of $931 million for other asset impairments, restructuring and other items in the first nine months of 2024, compared to expenses of $276 million in the first nine months of 2023. See note 12 to our consolidated financial statements.

Legal Settlements and Loss Contingencies

We recorded expenses of $638 million in legal settlements and loss contingencies in the first nine months of 2024, compared to expenses of $1,009 million in the first nine months of 2023. See note 9 to our consolidated financial statements.

Other Income (Loss)

Other income in the first nine months of 2024 was $22 million, compared to $43 million in the first nine months of 2023. Other income in the first nine months of 2023 included a capital gain from the sale of assets in our International Markets segment.

Operating Income (Loss)

Operating loss was $274 million in the first nine months of 2024, compared to an operating loss of $323 million in the first nine months of 2023. The lower operating loss in the first nine months of 2024 was mainly due to higher gross profit and lower legal settlements and loss contingencies, partially offset by higher other asset impairments, restructuring and other items as well as higher goodwill impairment charges in the first nine months of 2024.

Operating loss as a percentage of revenues was 2.2% in the first nine months of 2024, compared to an operating loss as a percentage of revenues of 2.8% in the first nine months of 2023.

Financial Expenses, Net

In the first nine months of 2024, financial expenses, net were $763 million, mainly comprised ofnet-interest expenses of $691 million and a negative exchange rate impact driven mainly from currencies which we were unable to hedge. In the first nine months of 2023, financial expenses, net were $808 million, mainly comprised ofnet-interest expenses of $723 million and a negative exchange rate impact driven mainly from currencies which we were unable to hedge.

Reconciliation Table to Consolidated Income (Loss) Before Income Taxes

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 nine months ended September 30, 2024 and 2023:

Income Taxes

In the first nine months 2024, we recognized a tax expense of $648 million, onpre-tax loss of $1,037 million. In the first nine months of 2023, we recognized a tax benefit of $48 million, onpre-tax loss of $1,131 million. See note 11 to our consolidated financial statements.

Net Income (Loss) Attributable tonon-controlling interests

Net loss attributable tonon-controlling interests was $262 million in the first nine months of 2024, compared to a net loss attributable tonon-controlling interests of $60 million in the first nine months of 2023. The higher net loss in the first nine months of 2024 was mainly due to higher impairments of tangible assets largely related to the classification of our business venture in Japan as held for sale. See note 12 to our consolidated financial statements.

Net Income (Loss) Attributable to Teva

Net loss was $1,422 million in the first nine months of 2024, compared to a net loss of $1,022 million in the first nine months of 2023.

Diluted Shares Outstanding and Earnings (Loss) per Share

The weighted average diluted shares outstanding used for the fully diluted share calculations for the nine months ended September 30, 2024 and 2023 was 1,130 million shares and 1,119 million shares, respectively.

Diluted loss per share was $1.26 for the nine months ended September 30, 2024, compared to diluted loss per share of $0.91 for the nine months ended September 30, 2023. See note 13 to our consolidated financial statements.

Impact of Currency Fluctuations on Results of Operations

In the first nine months of 2024, approximately 47% of our revenues were denominated in currencies other than the U.S. dollar. Because our results are reported in U.S. dollars, we are subject to significant foreign currency risks and, accordingly, changes in the exchange rate between the U.S. dollar and local currencies in markets in which we operate (primarily the euro, British pound, Canadian dollar, Swiss franc, Russian ruble, Japanese yen and new Israeli shekel) impact our results.

During the first nine months of 2024, the following main currencies relevant to our operations decreased in value against the U.S. dollar: Argentinian peso by 72%, Turkish lira by 31%, Chilean peso by 12%, Japanese yen by 9% and Russian ruble by 8% (all compared on a nine-month average basis). The following main currencies relevant to our operations increased in value against the U.S. dollar: Polish zloty by 7%, British pound by 3%, Swiss franc by 2% and Swedish krona by 1%.

As a result, exchange rate movements during the first nine months of 2024, including hedging effects, negatively impacted overall revenues by $249 million and our operating income by $124 million, in comparison to the first nine months of 2023.

In the first nine months of 2024, a positive hedging impact of $1 million was recognized under revenues, and a negative hedging impact of $5 million was recognized under cost of sales. In the first nine months of 2023, a positive hedging impact of $20 million was recognized under revenues and a negative hedging impact of $8 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.

2024 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 ended December 31, 2023.

Liquidity and Capital Resources

Total balance sheet assets were $41,758 million as of September 30, 2024, compared to $43,479 million as of December 31, 2023.

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 negative $2,009 million as of September 30, 2024, compared to negative $1,374 million as of December 31, 2023. This decrease was mainly due to a classification of the working capital balance related to our business venture in Japan as held for sale (see note 2 to our consolidated financial statements), an increase in provisions for legal settlements and loss contingencies, and a negative impact from several tax items, primarily the agreement with the Israeli Tax Authorities entered into in June 2024 (see note 11 to our consolidated financial statements), partially offset by a decrease in accounts payables.

Employee-related obligations, as of September 30, 2024 were $619 million, compared to $611 million as of December 31, 2023. The increase in the first nine months of 2024 was mainly due to an accrual for performance incentive payments to employees for 2024, partially offset by performance incentive payments to employees for 2023.

Cash investment in property, plant and equipment and intangible assets in the third quarter of 2024 was $148 million compared to $149 million in the third quarter of 2023. Depreciation in the third quarter of 2024 was $113 million, compared to $138 million in the third quarter of 2023.

Cash and cash equivalents as of September 30, 2024 were $3,319 million compared to $3,226 million as of December 31, 2023.

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 our $1.8 billion unsecured syndicated sustainability-linked revolving credit facility, entered into in April 2022, as amended in February 2023 and on May 3, 2024 (“RCF”). See note 7 to our consolidated financial statements.

Debt Balance and Movements

As of September 30, 2024, our debt was $18,980 million, compared to $19,833 million as of December 31, 2023. This decrease was mainly due to repayment at maturity of $956 million of our 6% senior notes, partially offset by $88 million of exchange rate fluctuations.

In April 2024, we repaid $956 million of our 6% senior notes at maturity.

In October 2024, we repaid at maturity $685 million of our 1.13% senior notes due in 2024.

As of September 30, 2024, our debt was effectively denominated in the following currencies: 58% in U.S. dollars, 40% in euros and 2% in Swiss francs.

The portion of total debt classified as short-term as of September 30, 2024 was 14% compared to 8% as of December 31, 2023.

Our financial leverage, which is the ratio between our debt and the sum of our debt and equity, was 75% as of September 30, 2024, compared to 71% as of December 31, 2023. Our average debt maturity was approximately 5.5 years as of September 30, 2024, compared to 6.0 years as of December 31, 2023.

Total Equity

Total equity was $6,383 million as of September 30, 2024, compared to $8,126 million as of December 31, 2023. This decrease was mainly due to a net loss of $1,684 million, and a negative impact from exchange rate fluctuations of $94 million.

Exchange rate fluctuations affected our balance sheet, as approximately 94% of our net assets as of September 30, 2024 (including both monetary andnon-monetary assets) were in currencies other than the U.S. dollar. When compared to December 31, 2023, changes in currency rates as of September 30, 2024 had a negative impact of $94 million on our equity. The following main currencies increased in value against the U.S. dollar: British pound by 5%, Polish zloty by 3% and the euro by 1%. The following main currencies decreased in value against the U.S. dollar: Mexican peso by 16%, Russian ruble by 6%, Chilean peso by 2%, Canadian dollar by 2% and Japanese yen by 1%. All comparisons are on ayear-to-date basis.

Cash Flow

We continually seek to improve the efficiency of our working capital management. Periodically, as part of our cash and commercial relationship management activities, we make decisions in our commercial and supply chain activities which may drive an acceleration of receivable payments from customers, or deceleration of payments to third parties. This has the effect of increasing or decreasing cash from operations during any given period. In connection with strategic continual improvement, we obtained more favorable payment terms from many of our vendors which are expected to continue in future periods. In addition, in periods in which receivable payments from customers are delayed, we have and expect we may in the future extend the time to pay certain vendors, so as to balance our liquidity position. Such decisions may have a material impact on our annual operating cash flow measurement, as well as on our quarterly results.

Cash flow generated from operating activities during the third quarter of 2024 was $693 million, compared to $5 million of cash flow generated from operating activities in the third quarter of 2023. The higher cash flow generated from operating activities in the third quarter of 2024 resulted mainly from higher profit in our United States segment, as well as from changes in working capital items, including a positive impact from accounts receivables, net of SR&A, and from accounts payables and inventory levels, partially offset by higher legal payments during the third quarter of 2024.

During the third quarter of 2024, we generated free cash flow of $922 million, which we define as comprising $693 million in cash flow generated from operating activities, $339 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program) and $38 million in divestitures of businesses and other assets, partially offset by $148 million in cash used for capital investment. During the third quarter of 2023, we generated free cash flow of $229 million, which we define as comprising $5 million in cash flow generated from operating activities, $362 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program) and $10 million in proceeds from divestitures of businesses and other assets, partially offset by $149 million in cash used for capital investment. The increase in the third quarter of 2024, resulted mainly from higher cash flow generated from operating activities.

Dividends

We have not paid dividends on our ordinary shares or ADSs since December 2017.

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, collaboration agreements, development funding agreements and participation in joint ventures associated with R&D activities. For further information on our agreements with mAbxience, Launch Therapeutics and Abingworth, Biolojic Design, Royalty Pharma, Sanofi, Modag, Alvotech, Takeda and MedinCell, see note 2 to our consolidated financial statements.

We are committed to paying royalties to owners ofknow-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.

Non-GAAP Net Income and Non-GAAP EPS Data

We presentnon-GAAP net income andnon-GAAP earnings per share (“EPS”) 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 on thesenon-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. Thesenon-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses our performance. The limitations of usingnon-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 considernon-GAAP net income andnon-GAAP EPS in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP.

In preparing ournon-GAAP net income andnon-GAAP EPS data, we exclude items that either have anon-recurring impact on our financial performance or which, in the judgment of our management, are items that, either as a result of their nature or size, could, were they not excluded, potentially cause investors to extrapolate future performance from an improper base that is not reflective of our underlying business performance. Certain of these items are also excluded because of the difficulty in predicting their timing and scope. The items excluded from ournon-GAAP net income andnon-GAAP EPS include:

The following tables present ournon-GAAP net income andnon-GAAP EPS for the three and nine months ended September 30, 2024 and 2023, as well as reconciliations of each measure to their nearest GAAP equivalents:

Adjustments for legal settlements and loss contingencies in the nine months ended September 30, 2024 were mainly related to a provision of $350 million recorded in connection with a decision by the European Commission in its antitrust investigation into COPAXONE®, and to an update to the estimated settlement provision of $239 million for the opioid cases (mainly the effect of the passage of time on the net present value of the discounted payments and the settlement agreement with the city of Baltimore). Adjustments for legal settlements and loss contingencies in the nine months ended September 30, 2023 were mainly related to an update to the estimated provision of $370 million related to the DOJ patient assistance program litigation, an update to the estimated settlement provision of $248 million related to the remaining opioid cases, the provision of $204 million relating to the U.S. DOJ criminal antitrust charges on the marketing and pricing of certain Teva USA generic products, and the provision of $100 million related to the settlement of the reverse-payment antitrust litigation over certain HIV medicines. See note 10 to our consolidated financial statements.

lenalidomide capsules (the generic version of Revlimid®), of $28 million and $266 million, respectively for the three and nine months ended September 30, 2024, and of $23 million and $111 million, respectively for the three and nine months ended September 30, 2023.

Off-Balance Sheet Arrangements

Except for securitization transactions, which are disclosed in note 10f to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, we do not have any materialoff-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 ended December 31, 2023. Additionally, see note 6 to our consolidated financial statements on this Form 10-Q for disclosure regarding reporting units at risk identified during our annual goodwill impairment test.

Recently Issued Accounting Pronouncements

See note 1 to our consolidated financial statements.