TEVA PHARMACEUTICAL INDUSTRIES LTD

S-K

promulgated by the SEC requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions, unless the Company reasonably believes that the matter will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, of less than $300,000. The following matter is disclosed in accordance with that requirement. On July 8, 2021, the National Green Tribunal Principal Bench, New Delhi, issued an order against Teva’s subsidiary in India, Teva API India Private Limited, finding

non-compliance

with environmental laws and assessing a penalty of $1.4 million. Teva filed an appeal before the Hon’ble Supreme Court of India, disputing certain of the findings and the amount of the penalty. On August 5, 2021, the Supreme Court of India granted a stay of the judgment by the National Green Tribunal Principal Bench. On April 8, 2025, the Supreme Court of India accepted the appeal filed by Teva’s subsidiary and a hearing will be scheduled in due course. The Company does not believe that the eventual outcome of such matter will have a material effect on its business.

Gain Contingencies

From time to time, Teva may directly or indirectly pursue claims against certain parties, including but not limited to patent infringement lawsuits against other pharmaceutical companies to protect its patent rights, as well as derivative actions brought on behalf of Teva. Teva recognizes gain contingencies from the defendants in such lawsuits when they are realized or when all related contingencies have been resolved. No gain has been recognized regarding any matter disclosed below, unless mentioned otherwise.

In October 2017, Teva 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 on 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. The jury’s verdict found that the three method of treatment patents were valid and infringed by Lilly and awarded Teva

$

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 and a hearing was held on September 5, 2025. A decision remains pending.

In March 2024, Teva filed a lawsuit in the U.S. District Court for the District of New Jersey alleging that Amarin Pharma, Inc., Amarin Pharmaceuticals Ireland Limited, and Amarin Corporation plc (collectively “Amarin”) engaged in a decade-long scheme to lock up the supply of icosapent ethyl to prevent and delay generic competition to its branded Vascepa

®

drug product. Teva’s lawsuit coincides with four other lawsuits brought by generic drug manufacturers and purchasers of branded Vascepa

®

alleging the same or similar conduct by Amarin. Teva’s requested relief includes compensatory damages for lost sales and lost profits from generic icosapent ethyl drug sales that Teva could have made absent Amarin’s alleged interference. On May 24, 2024, Amarin filed a motion in the U.S. District Court for the District of Nevada, seeking to enforce the terms of an earlier

Teva-Amarin

agreement to settle patent litigation regarding Vascepa

®

, which Amarin asserts precludes Teva from filing the present antitrust action. Teva opposed this motion on June 7, 2024, and on December 4, 2024, the Nevada court denied Amarin’s motion. On March 25, 2025, Amarin filed a

“pre-motion

letter” with the District of New Jersey, where the case is pending, asking for permission to file a motion for judgment on the pleadings on the same grounds as its motion in Nevada. On October 8, 2025, the Court granted Amarin’s request to file its motion. Amarin served its motion on October 29, 2025. Briefing on Amarin’s motion is expected to be completed on November 19, 2025. As the lawsuit is still in its initial stages, it is not possible to predict its outcome and there is no guarantee that Teva will be granted its requested relief.

In June 2024, Teva filed a lawsuit in the U.S. District Court for the Northern District of California alleging that Corcept Therapeutics, Inc. (“Corcept”), and Optime Care Inc. (“Optime”) have engaged in a multifaceted, years-long scheme to stifle generic competition to Corcept’s branded Korlym

®

(mifepristone) drug product, which is indicated to treat endogenous Cushing’s syndrome. Teva alleges that Corcept and Optime have suppressed competition by abusing the patent and judicial systems, entering a long-term, blanket exclusive-dealing agreement that has locked up a key pharmaceutical distribution channel, and making illicit payments to physicians as compensation for prescribing Korlym

®

. Teva’s requested relief includes compensatory damages for lost sales and lost profits from generic mifepristone drug sales that Teva could have made absent Corcept and Optime’s alleged interference, as well as injunctive relief to remove the unlawful barriers to generic competition created by Corcept and Optime. Teva filed an amended complaint in September 2024. Defendants filed a joint motion to dismiss in October 2024, which the court denied in substantial part on September 12, 2025. On September 26, 2025, Teva filed an amended complaint amending certain claims that were dismissed. Discovery is ongoing. As the lawsuit is still in its initial stages, it is not possible to predict its outcome and there is no guarantee that Teva will be granted its requested relief.

Motions to approve derivative actions seeking monetary damages against certain past and present directors and officers have been filed in Israeli Courts alleging negligence and recklessness, as well as motions for document disclosure prior to initiating derivative actions. Motions were filed with respect to several U.S. and EU settlement agreements, allegations related to the DOJ PAP Complaint, an

d

with respect to the European Commission’s proceedings relating to COPAXONE.

NOTE 11 – Income taxes:

In the third quarter of 2025, Teva recognized a tax expense of $214 million, on a

pre-tax

income of $646 million. In the third quarter of 2024, Teva recognized a tax expense of $69 million, on a

pre-tax

loss of $324 million.

Teva’s tax rate for the third quarter of 2025 was mainly impacted by changes in deferred tax balances due to statutory tax rate changes and interest and inflation adjustments related to the agreement with the Israeli Tax Authorities (“ITA”) mentioned below.

Teva’s tax rate for the third quarter of 2024 was mainly impacted by impairment charges with no corresponding tax effects, an adjustment to the Company’s corporate tax rate in Israel on losses related to

non-qualified

tax incentive activities in Israel, legal expenses with no corresponding tax effect related to the fine issued by the European Commission in connection with its antitrust investigation into COPAXONE, and recording of valuation allowance with respect to certain carry over credits outside of Israel.

In the first nine months of 2025, Teva recognized a tax expense of $210 million, on a

pre-tax

income of $1,143 million. In the first nine months of 2024, Teva recognized a tax expense of $648 million, on a

pre-tax

loss of $1,037 million.

Teva’s tax rate for the first nine months of 2025 was mainly impacted by releases of uncertain tax positions, interest and inflation adjustments related to the agreement with the ITA mentioned below, foreign exchange impact on deferred tax positions and changes in deferred tax balances due to statutory tax rate changes.

Teva’s tax rate for the first nine months of 2024 was mainly impacted by a settlement agreement with the ITA as discussed below, impairment charges with no corresponding tax effects, deferred tax benefits resulting from intellectual property related integration plans, an adjustment to the Company’s corporate tax rate in Israel on losses related to

non-qualified

tax incentives activities in Israel, legal expenses with no corresponding tax effect related to the fine issued by the European Commission in connection with its antitrust investigation into COPAXONE, and recording of valuation allowance with respect to certain carry over credits outside of Israel.

The statutory Israeli corporate tax rate is 23% in 2025. Teva’s global tax rate differs from the Israeli statutory tax rate, mainly due to generation of profits in various jurisdictions in which tax rates are different than the Israeli tax rate, tax benefits, as well as infrequent or

non-recurring

items.

Teva filed a claim seeking the refund of withholding taxes paid to the Indian tax authorities in 2012. A trial for this case is currently ongoing. A final and binding decision against Teva in this case may lead to a charge of $118 million.

On June 23, 2024, Teva entered into an agreement with the ITA to settle certain litigation with respect to taxes payable for the Company’s taxable years 2008 through 2020 (the “Agreement”). Pursuant to the terms of the Agreement, the Company will pay a total amount of approximately $750 million (based on exchange rates at the date of the Agreement) to the ITA spread over a

six-year

period beginning in 2024. Additionally, under the terms of the Agreement, it was further agreed that in the future event the Company pays dividends on, or repurchases, its equity interests, the Company will pay an additional

5%-7%

of the amount of such dividends or repurchases in corporate taxes, up to a maximum tax payment amount of approximately $500 million. Any amounts due under this provision of the Agreement will be recorded in the future as incurred.

Teva periodically assesses the need for valuation allowances against its deferred tax assets, and considers available evidence including but not limited to, the Company’s recent earnings history, forecasted future taxable income to the extent it is objectively verifiable, and significant nonrecurring items impacting those amounts. To the extent Teva’s operating results improve or deteriorate, or to the extent changes in tax laws and other factors affect Teva’s ability to utilize deferred tax assets, Teva may need to adjust its valuation allowance.

With respect to certain U.S. tax attributes, depending on Teva’s future operating results, the Company may have sufficient positive evidence to release valuation allowances within the next twelve months. If realized, the release would result in recognition of certain deferred tax assets, with a corresponding income tax benefit in the period in which it is recorded.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the United States. The Act contains certain provisions related to the extent of deductibility of interest expense for U.S. federal tax purposes, R&D costs and other depreciable property, as well as changes to U.S. taxation of foreign subsidiaries’ earnings, and other U.S. corporate tax law changes. Pursuant to ASC 740, changes in tax rates and tax law are required to be recognized in the period in which the legislation is enacted. Teva evaluated the potential impact of this Act on its annual consolidated financial statements and related disclosures, and does not expect the Act to have a material impact on its 2025 consolidated financial statements.

Teva believes it has adequately provided for all of its uncertain tax positions, including items currently under dispute, however, adverse outcomes to any of these positions or disputes could be material.

The OECD introduced Base Erosion and Profit Shifting (“BEPS”) Pillar Two rules that impose a global minimum tax rate of 15% for large multinational corporations. On December 12, 2022, the EU Council announced that EU member states had reached an agreement to implement the minimum taxation component of 15% of the OECD’s reform of international taxation. Teva has evaluated the potential impact on its 2025 consolidated financial statements and related disclosures and does not expect Pillar Two to have a material impact on its effective tax rate or consolidated financial statements in the foreseeable future.

NOTE 12 – Other assets impairments, restructuring and other items:

Impairments

In the three months ended September 30, 2025, Teva recorded an expense of $15 million under impairments of tangible assets, compared to an income of $80

million in the three months ended September 30, 2024. The income for the three months ended September 30, 2024 was mainly related to a favorable adjustment to the changes of the expected loss from reclassification of currency translation adjustments, partially offset by an additional impairment due to the fair value update in connection with the classification of the business venture in Japan as held for sale.

Impairments of tangible assets for the nine months ended September 30, 2025 and 2024 were $28 million and $589

million, respectively. The impairments for the nine months ended September 30, 2024 were mainly related to the classification of the business venture in Japan as held for sale (see note 2).

In addition, as part of the Company’s efforts to further focus its business by optimizing its portfolio and global manufacturing footprint to achieve additional operational efficiencies, the Company, from time to time, evaluates strategic alternatives for certain individual assets or asset groups. These strategic alternatives may include partnerships, joint ventures, redeployment of assets or divestitures. These actions may involve substantial impairment charges in the future depending on the ultimate course of action for these long-lived assets. Any such impairment charges are recorded in the period in which there is a triggering event or commitment to a probable transaction.

Teva may record additional impairments in the future, to the extent it changes its plans on any given asset and/or the assumptions underlying such plans, as a result of its network consolidation activities and its Pivot to Growth strategy.

Contingent consideration

In the three months ended September 30, 2025, Teva recorded an expense of $16 million for contingent consideration, compared to an expense of $34 million in the three months ended September 30, 2024. The expenses in the three months ended September 30, 2025 were mainly related to a change in the estimated future royalty payments to Eagle in connection with expected future bendamustine sales. The expenses in the three months ended September 30, 2024 were mainly due to the effect of the passage of time on the net present value of the discounted payments.

In the nine months ended September 30, 2025, Teva recorded an expense of $46 million for contingent consideration, compared to an expense of $305 million in the nine months ended September 30, 2024. The expense in the first nine months of 2025 was mainly related to lenalidomide capsules (the generic version of Revlimid

®

) (mainly the effect of the passage of time on the net present value of the discounted payments) and to a change in the estimated future royalty payments to Eagle in connection with expected future bendamustine sales. The expenses in the first nine months of 2024 were mainly related to a change in the estimated future royalty payments to Allergan in connection with lenalidomide capsules (the generic version of Revlimid

®

) and a change in the estimated future royalty payments to Eagle in connection with expected future bendamustine sales.

Restructuring

In the three months ended September 30, 2025, Teva recorded $29 million of restructuring expenses, compared to $21 million in the three months ended September 30, 2024. Expenses in the three months ended September 30, 2025 were primarily related to optimization activities in connection with Teva’s Transformation programs related to Teva’s global organization and operations, mainly through headcount reductions. Expenses in the three months ended September 30, 2024 primarily related to network consolidation activities.

In the nine months ended September 30, 2025, Teva recorded $196 million of restructuring expenses, compared to $52 million in the nine months ended September 30, 2024. Expenses in the nine months ended September 30, 2025 were primarily related to optimization activities in connection with Teva’s Transformation programs related to Teva’s global organization and operations, mainly through headcount reduction. Expenses in the nine months ended September 30, 2024 primarily related to network consolidation activities.

Under Teva’s Transformation programs announced on May 7, 2025, Teva expects to achieve cost savings through a variety of initiatives including examining practices and efficiencies in methods of working, reduction in headcount and optimizing external spend in the following years. These Transformation programs are expected to result in the reduction of approximately 8% of Teva’s total work force as of December 31, 2024, by the end of 2027.

The following tables provide the components of the Company’s restructuring costs:

The following table provides the components of and changes in the Company’s restructuring accruals:

NOTE 13 – Earnings (Loss) per share:

Basic earnings and loss per share are computed by dividing net income (loss) attributable to Teva’s ordinary shareholders by the weighted average number of ordinary shares outstanding, including fully vested restricted share units (“RSUs”) and performance share units (“PSUs”) during the period, net of treasury shares.

Basic and diluted earnings (loss) per share attributable to Teva’s ordinary shareholders for the three and nine months ended September 30, 2025, are calculated as follows:

In computing diluted earnings per share for the three and nine months ended September 30, 2025, basic earnings per share were adjusted to take into account the potential dilution that could occur upon the exercise of options and

non-vested

RSUs and PSUs granted under employee stock compensation plans. No account was taken of the potential dilution that could occur upon the exercise of convertible senior debentures, since they had an anti-dilutive effect on earnings per share. Additionally, an amount of 27.6 million and 28.6 million dilutive shares of ordinary shares from the conversion of outstanding stock options, RSUs and PSUs were excluded from the computation of diluted earnings per share attributable to Teva’s ordinary shareholders for the three and nine months ended September 30, 2025, respectively.

In computing diluted loss per share for the three and nine months ended September 30, 2024, no account was taken of the potential dilution that could occur upon the exercise of options and

non-vested

RSUs and PSUs granted under employee stock compensation plans, and convertible senior debentures, since they had an anti-dilutive effect on loss per share. Additionally, an amount of 51.7 million dilutive shares of ordinary shares from the conversion of outstanding stock options, RSU’s and PSUs were excluded from the computation of diluted earnings per share attributable to Teva’s ordinary shareholders for the three and nine months ended September 30, 2024.

NOTE 14 – Accumulated other comprehensive income (loss):

The components of, and changes within, accumulated other comprehensive income (loss) attributable to Teva are presented in the table below:

NOTE 15 – Segments:

Teva operates its business and reports its financial results in the following three segments:

In addition to these

three

segments, Teva has other sources of revenues included in other activities, 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 its affiliate Medis.

Teva’s Chief Executive Officer (“CEO”), who is the chief operating decision maker (“CODM”), reviews financial information prepared on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the three identified reportable segments, namely the United States, Europe and International Markets, to make decisions about resources to be allocated to the segments and assess their performance.

The key areas of focus by the CODM for allocation of resources are revenues from each reportable segment, as well as operating expenses (cost of sales, R&D expenses, S&M expenses, G&A expenses, and other expenses (income)). While the CODM analyzes each of these categories, the CODM focuses particularly on period-over-period fluctuations and

budget-to-actual

variances to determine the right allocation of resources to be attributed to each segment to ensure profitability is maximized.

Segment profit is comprised of revenues for the segment less cost of sales, R&D expenses, S&M expenses, G&A expenses and other expenses (income) related to the segment. Segment profit does not include amortization and certain other items.

Teva manages its assets on a company basis, not by segments, as many of its assets are shared or commingled. Teva’s CODM does not regularly review asset information by reportable segment and, therefore, Teva does not report asset information by reportable segment.

Teva’s CEO may review its strategy and organizational structure from time to time. Based on such review, in May 2023 Teva launched its new Pivot to Growth strategy. Any additional changes in strategy may lead to a reevaluation of the Company’s segments and goodwill allocation to reporting units, as well as fair value attributable to its reporting units. See note 6.

On January 31, 2024, Teva announced that it intends to divest its API business (including its R&D, manufacturing and commercial activities) through a sale. The intention to divest is in alignment with Teva’s Pivot to Growth strategy. As of the date of this Quarterly Report on Form 10-Q, exclusive discussions with a selected buyer on the sale have terminated. Teva is initiating a renewed sales process, maintaining its strategic intention to divest its API business. 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. See note 2.

The following table presents a reconciliation of Teva’s segment profits to its consolidated operating income (loss) and to consolidated income (loss) before income taxes for the three months ended September 30, 2025 and 2024:

b. Segment revenues by major products and activities:

The following tables present revenues by

major

products and activities for the three months ended September 30, 2025 and 2024:

NOTE 16 – Fair value measurement:

Financial items carried at fair value on a recurring basis as of September 30, 2025 and December 31, 2024 are classified in the tables below in one of the three categories of fair value levels:

Teva determined the fair value of the liabilities for contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of contingent consideration is based on several factors, such as cash flows projected from the success of unapproved product candidates; probability of success of product candidates, including risks associated with uncertainty regarding achievement and payment of milestone events; time and resources required to complete the development and approval of product candidates; life of the potential commercialized products and associated risks with obtaining regulatory approvals in the United States and Europe, and the risk adjusted discount rate for fair value measurement. The discount rate applied ranged from 8.25% to 11%. The weighted average discount rate, calculated based on the relative fair value of Teva’s contingent consideration liabilities, was 8.8%. Contingent consideration is evaluated quarterly, or more frequently, if circumstances dictate. Changes in the fair value of contingent consideration are recorded in the consolidated statements of income. Significant changes in unobservable inputs, mainly the probability of success and cash flows projected, could result in material changes to the contingent consideration liabilities. A change of the discount rate by 1% would not have resulted in material changes to the contingent consideration liabilities.

The following table summarizes the activity for the financial assets and liabilities where fair value measurements are estimated utilizing Level 3 inputs:

Financial instruments not measured at fair value

Financial instruments measured on a basis other than fair value mostly consist of senior notes, sustainability-linked senior notes and convertible senior debentures (see note 7) and are presented in the table below in terms of fair value (level 1 inputs):

NOTE 17 – Redeemable

Non-Controlling

Interests:

In December 2024, Teva entered into an agreement with JKI Co., Ltd. (“JKI”) established by the fund managed and operated by private equity firm

J-Will

Partners Co., Ltd.

(“J-Will”),

through which JKI will acquire Teva-Takeda, Teva’s business venture in Japan (the “BV”), which includes generic products and legacy products. This transaction was completed on March 31, 2025.

Since the establishment of the BV and until the completion of the BV’s sale on March 31, 2025, Teva held 51% of the outstanding common stock of the BV, and as a result, Teva consolidated the BV in its financial statements during that period. On March 31, 2025, after the sale of the BV was completed, Teva deconsolidated the BV from its financial statements.

Pursuant to existing agreements with the minority investors of the BV, a redemption feature exists whereby the interest held by the minority investors is redeemable as a result of a sale of the BV, subject to certain terms listed therein. The redemption value would be determined based on a prescribed formula derived from the consideration received from the sale of the BV.

The balance of the redeemable

interest is reported at the greater of the initial carrying amount adjusted for the redeemable

interest’s share of earnings or losses and other comprehensive income or loss, or its estimated redemption value. The resulting changes in the estimated redemption amount (increases or decreases) are recorded with corresponding adjustments against retained earnings or, in the absence of retained earnings, additional

paid-in-capital.

Since the share redemption feature does not include a share cap, these interests are presented on the consolidated balance sheets outside of permanent equity under the caption “Redeemable

interest”.

Commensurate with the sale of the BV, Teva redeemed the remaining balance of the redeemable

interest with consideration of $38 million, following which, such balance was zero, as of March 31, 2025.

Changes in the carrying amount of the redeemable

interests for the period ended September 30, 2025 were as follows: