TEVA PHARMACEUTICAL INDUSTRIES LTD
For the period ended May 28, 2026. Filed Mar 31, 2026.
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May 28, 2026 · Filed Mar 31, 2026
Contents
4. Components of Our Compensation Program
- Components of Our Compensation Program
2025 Components in General
The HR and Compensation Committee, Board and shareholders each participated in the selection of the components of compensation set forth in the chart below to achieve our stated executive compensation program objectives. The majority of the compensation of each executive officer is variable andat-risk and a significant portion is subject to the achievement of performance goals in order to be earned. The HR and Compensation Committee and the Board review all components of the compensation of executive officers in order to verify that each executive officer’s total compensation is consistent with our compensation philosophy and objectives and within the parameters set by our shareholder-approved Compensation Policy.
| Element | Description | Additional Detail |
|---|---|---|
| Base Salary | Fixed cash compensation Determined based on each executive officer’s role, individual skills, experience, performance, external market value and internal equity | Base salaries are intended to provide stable compensation to executive officers, allow Teva to attract and retain qualified global executive talent and maintain a stable leadership team |
| Short-Term Incentives: Annual Cash Incentive Opportunities | Variable cash compensation Determined based on the level of achievement relative to Company and individual performance objectives that are pre-determined annually The weighted average of the results for the three Company-wide metrics must be at least 85% of target in order for any payout to occur Cash incentive payouts are capped at a maximum of 200% of the target cash award Per the shareholder-approved Compensation Policy, a target cash award as a percentage of annual base salary is capped at 100% (150% for the CEO) | Annual cash incentive opportunities are designed to ensure that our executive officers are incentivized to reach Teva’s annual goals; payout levels are determined based on actual financial and operational results, as well as individual performance |
| Long-Term Incentives: Annual Equity-Based Compensation | Variable equity-based compensation Per the shareholder-approved Compensation Policy, the maximum monetary grant value of the annual long-term equity award is $16.0 million at target for the CEO and $6.0 million at target for other executive officers Performance Share Units (“PSUs”): • Restricted share units that are earned only upon the attainment of performance goals generally over a 3-year period • Awards are capped at 250% of the target number of shares Restricted Share Units (“RSUs”): Restricted share units that are time-based, with a 4-year vesting period | Equity-based compensation is used to foster a long-term link between executive officers’ interests and the interests of Teva and its shareholders, as well as to attract, motivate and retain executive officers for the long term In 2025, the CEO received: • 70% of the long-term incentive value granted in the form of PSUs • 30% in the form of RSUs; All other executive officers received 67% of the value granted in the form of PSUs and 33% in the form of RSUs |
2025 Target Pay Mix
The target pay mix supports the core principles of our executive officer compensation philosophy of compensating for performance and aligning executive officers’ interests with those of Teva and its shareholders, by emphasizing short- and long-term incentives.
51 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
The following charts outline the HR and Compensation Committee and the Board’s allocation of annual target total direct compensation payable to the CEO and to other NEOs. The HR and Compensation Committee and the Board allocated compensation among (i) base salary, (ii) short-term annual cash incentive opportunity and (iii) long-term annual equity incentives.
A sizeable majority of target total direct compensation is variable, at-risk and performance-based pay, consistent with ourpay-for-performance philosophy. Specifically, in 2025:
| • | 90% of our CEO’s target total direct compensation was at-risk compensation |
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| • | 83%, on average, of the target total direct compensation of our other NEOs was at-risk compensation |
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We consider compensation to be “at risk” if it is subject to performance-based payment or vesting conditions or if its value depends on stock price appreciation. In addition, in 2025, 68% of our CEO’s target total direct compensation was performance-based, and 61%, on average, of the target total direct compensation of our other NEOs was performance-based. We consider compensation to be “performance-based” if it is subject to performance-based payment or vesting conditions. An additional 22% of our CEO’s target total direct compensation, and 22%, on average for our other NEOs, incentivizes performance through its dependence on stock price appreciation while promoting retention over a 4-year vesting period.
Target Pay Mix
The percentages of target total direct compensation as calculated above are based on the annualized 2025 base salary, the 2025 annual cash incentive compensation opportunity (assuming achievement at the target level), and the grant date fair value of the annual long term equity incentive grant and, for the CEO, the additional grant pursuant to the amendment to his employment agreement as approved by shareholder in June 2025, as further described on page 73. Each compensation element is outlined in more detail in the 2025 Summary Compensation Table and 2025 Grants of Plan-Based Awards table.
Base Salary
Base salaries provide stable compensation to executive officers, allow Teva to attract and retain qualified global executive talent and maintain a stable management team. Base salaries vary among executive officers and are individually determined according to each executive officer’s areas of responsibility, role and experience based on a variety of considerations, which may include, among other things, professional background (education, skills, expertise, professional experience and achievements and previous compensation arrangements, as relevant), external competitiveness, job criticality and internal fairness.
52 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
In 2025, the HR and Compensation Committee adjusted the base salary of the CEO pursuant to the amendment to his employment agreement as approved by shareholder in June 2025, and adjusted the base salaries of certain NEOs to maintain market competitive pay, as determined by reference to comparable positions at the Peer Group companies.
| Annualized 2024 Base Salary ($) | Annualized 2025 Base Salary ($)(1) | 2024-2025 % Change | |
|---|---|---|---|
| Richard Francis | $1,600,000 | $1,700,000 | 6.25% |
| Eli Kalif | $876,631 | $1,035,142 | 10%(2) |
| Dr. Eric A. Hughes | $770,000 | $847,000 | 10% |
| Christine Fox | $800,000 | $864,000 | 8% |
| Evan Lippman | — | $680,000 | — |
| (1) | Annualized base salary as of December 31, 2025 converted from local currency, where relevant, using a 2025 annual average exchange rate. |
| (2) | Mr. Kalif is paid in Israeli shekels. Mr. Kalif received a 10% salary increase. The difference in values reflects this increase and fluctuations in exchange rates. |
Annual Cash Incentives
The annual cash incentive component aims to incentivize our executives to reach our annual goals. Annual cash incentives are designed to provide a significantpay-for-performance element of our executive compensation package, as payout eligibility and levels are determined based on actual financial and operational performance, as well as individual performance.
Pursuant to our Compensation Policy, which serves as a shareholder-approved framework, executive officer target annual cash incentive opportunity is capped at 100% of annual base salary, and for the CEO, target annual cash incentive opportunity is capped at 150% of annual base salary. In addition, the maximum annual cash incentive payout cannot exceed 200% of target annual cash incentive. The 2025 annual cash incentive plan offers incentives to the executive officers to accomplish annual financial results that the HR and Compensation Committee and Board view as key steps in the execution of our overall business strategy, with the intent ultimately of increasing shareholder value.
The amount of the payout, if any, under the annual cash incentive plan is determined as follows:
Target Opportunities
The HR and Compensation Committee and the Board determine the target annual cash incentive opportunity available to each NEO by taking the individual’s base salary and multiplying it by the individual’s target incentive percentage. The HR and Compensation Committee and the Board did not change the target incentive percentages for our recurring NEOs from 2024 levels.
| Executive | 2025 Target Annual Cash Incentive (% of Base Salary) |
|---|---|
| Richard Francis | 150% |
| Eli Kalif | 100% |
| Dr. Eric A. Hughes | 100% |
| Christine Fox | 100% |
| Evan Lippman | 100% |
53 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
Performance Measures
The HR and Compensation Committee and the Board used the same performance measure categories in 2025 as used in 2024: Company Financial and Individual.
| Category | Weighting | Metric Weighting |
|---|---|---|
| Company Financial | 75% | 25% Net Revenues |
| 25% Non-GAAP EPS | ||
| 25% Free Cash Flow | ||
| Individual | 25% | See Below |
Company Financial Measures
The HR and Compensation Committee and the Board believe that certain financial measures are key performance indicators of the present and future prospects of our business and key drivers of shareholder value, and as such, selected the following financial measures for use in the annual cash incentive plan:
| • | Net Revenues: This measure is determined using Net Revenues as reported in our audited financial statements, subject to adjustment for currency fluctuations. It represents top line growth, in alignment with the Pivot to Growth strategy, and is a leading indicator of corporate performance and value creation. |
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| • | Non-GAAP Earnings Per Share: This measure of income is calculated as net income attributable to ordinary shareholders divided by the weighted average number of shares outstanding (fully diluted), and represents profitability. It focuses managers on expense control in addition to revenue generation and is viewed as a strong indicator of sustained performance over the short- and long-term. |
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| • | Free Cash Flow: This measure, for purposes of the annual cash incentive, is calculated as the cash flow generated from operating activities, cash received for beneficial interest collected in exchange for securitized trade receivables (under our EU securitization program) and proceeds from divestitures of businesses and other assets, net of capital investments. It serves to focus employees on generating cash in the short- and long-term, to make investments (including in innovative products), fund operations and pay debt. It focuses managers on expense control in addition to revenue generation and on improvement in working capital. |
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These performance measures were selected because they focus management on metrics that align with our most critical strategic priorities of generating revenue, controlling expenses and improving profitability, and generating cash to make investments and service debt, and give a clear line of sight into how achieving operating goals drives Teva performance and generates rewards. For 2025, we excluded the contribution and performance of TAPI, our active pharmaceutical ingredient business which is classified as held for sale, and of the Company’s business venture in Japan divested early in the year, from both target and actual performance of all financial performance metrics.
We usenon-GAAP measures as our compensation performance metrics, as do many other companies, because they are used by management and our Board (in conjunction with other performance metrics) to evaluate our operational performance, and to prepare and evaluate our work plans and annual budgets. While other qualitative factors and judgment also affect the establishment of performance metrics and goals and compensation levels, the principal quantitative elements are tied to the work plan/annual budget, which are based on thesenon-GAAP measures. Thenon-GAAP measures exclude items that management believes arenon-recurring or not reflective of the Company’s underlying business performance. As such, performance achievement and compensation outcomes are not disproportionately affected by factors unrelated to the ongoing operation of our business by management. Using thenon-GAAP measures aligns with the intent of the HR and Compensation Committee and the Board in setting business performance-related goals for our executive officers that are not affected by items that are not indicative of performance.
For a reconciliation of thesenon-GAAP measures to their most directly comparable financial measures calculated and presented in accordance with GAAP, please see Appendix A hereto.
54 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
Threshold, Target, and Maximum Company Performance Levels
The HR and Compensation Committee and the Board set the 2025 threshold, target and maximum performance levels at levels that were considered rigorous, aggressive and challenging, attainable only with strong performance, and that took into account the relevant risks and opportunities.
The HR and Compensation Committee developed performance metric targets based on the business plan that were aligned to the middle of the range of our outlook as communicated to investors in January 2025, excluding TAPI and the business venture in Japan. In setting these goals, the HR and Compensation Committee and the Board took into account various factors, including forecasted growth levels for the global economy, for the geographic areas where the Company operates and for the market for generic products, and with recognition that goals were established in conjunction with the execution of our Pivot to Growth strategy. In addition, the goals were based on key assumptions communicated to investors in January 2025, including:
| • | Anticipated continued decline in COPAXONE® revenue from $503 million in 2024 to approximately $370 million in 2025, due to an expected increase in generic competition; |
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| • | Anticipated continued increase of AUSTEDO revenue from $1.7 billion in 2024 to a range of $1.9 billion to $2.0 billion in 2025; and |
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| • | Anticipated continued increase of global AJOVY revenue from $507 million in 2024 to approximately $600 million in 2025. |
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In light of all of these factors, these goals were considered rigorous, aggressive and challenging, attainable only with strong performance, and took into account the relevant opportunities and risks we were facing.
After setting the targets, the HR and Compensation Committee and the Board also set the threshold and maximum performance levels. To achieve threshold performance, the weighted average of the achievement percentages for the three Company-wide metrics must be at least 85%, which is a rigorous and challenging level of achievement that must be met. A weighted average achievement percentage of less than 85% would result in no annual cash incentive payment for executive officers. The HR and Compensation Committee and the Board set the maximum level of performance at 120% of target for each Company performance metric, a level that presented a significant challenge requiring exceptionally strong performance.
In October 2023, the Company had announced a collaboration with Sanofi toco-develop a Teva product candidate for the treatment of ulcerative colitis and Crohn’s disease. In 2025, under the terms of the collaboration agreement, in connection with Teva’s considerable work to achieve the initiation of Phase 3 studies for duvakitug, Teva received a $500 million development milestone payment. Because the collaboration agreement was already in place, the planned payment amount was included in the target figures, and the actual payment, having been received for the achievement, was included in actual performance for the metrics in the annual cash incentive.
| Weighting · PerformanceMetric · Threshold (85%)(1) · Target (100%)(1) · Maximum (120%)(1) · ActualResults(1) · %Achievement | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 25% | Net Revenues | $13.7B | $ | 16.1B | $19.3B | $ | 16.3B | (2) | 101% |
| 25% | Non-GAAP EPS | $ 2.00 | $2.35 | $ 2.82 | $2.89 | 120%(3) | |||
| 25% | Free Cash Flow | $1.49B | $ | 1.75B | $2.10B | $ | 2.40B | 120%(3) | |
| (1) | We excluded the contributions and performance of TAPI and the business venture in Japan from targets and actuals. |
| (2) | We utilized foreign exchange rates used for setting our business plan for 2025 when determining performance achievement. |
| (3) | Cap of 120% performance was applied. |
Individual Measures
The remaining 25% of the measures under the 2025 annual cash incentive plan were individual performance measures established by the HR and Compensation Committee and the Board early in the year. These measures included components specific to the nature of each executive officer’s position and area of responsibility. The HR and Compensation Committee and the Board established measures that it viewed as rigorous and challenging, requiring significant effort to achieve. The HR and Compensation Committee and the Board evaluated performance with respect to the individual measures by determining an individual performance rating and individual performance achievement percentage, which was then used as a component for determining the overall performance factor.
55 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
| Richard Francis President and Chief Executive Officer | ACHIEVEMENT |
| Individual Goals • Leading the Accelerate Growth phase of the Pivot to Growth strategy • Achieving global sales targets • Building a high-performance organization by achieving transformation goals and focusing on executive leadership • Driving the implementation of Teva’s Healthy Future strategy by achieving our public targets and external commitments, including such goals as are included in our Sustainability-Linked Bonds and Revolving Credit Facility, by achieving 2% reduction in absolute Scope 1 and 2 Greenhouse Gas emissions (vs. 2024), and meeting compliance and ethics training targets (>99% of targeted active employees trained) | Key Performance Accomplishments • Launched Accelerate Growth phase of our Pivot to Growth strategy • Increased global revenues by 4% in U.S. dollars, or 3% in local currency terms, compared to 2024 • Grew AUSTEDO globally by 34%, AJOVY globally by 30%, and UZEDY by 63% in the U.S. compared to 2024 • Filed an NDA for olanzapine LAI in December 2025; initiated Phase 3 programs for duvakitug (anti-TL1A) in October 2025; achieved the targeted initial enrollment levels in the adult and pediatric populations for DARI’s (Dual-action Asthma Rescue Inhaler) Phase 3 trial • Made strong progress on our late-stage pipeline of proposed biosimilars • In May 2025, announced Teva Transformation programs expected to generate ~$700 million of net savings through 2027; achieved targeted savings for 2025 • Surpassed Sustainability-Linked Bonds and Revolving Credit Facility access to medicine targets: 83 SLB-eligible cumulative regulatory submissions (2022-2025) and in 2025, 6.7 million SLB eligible doses of medicines were donated, surpassed 2% scope 1 and 2 greenhouse gas emissions reduction target, and achieved >99% compliance and ethics training completion target |
| Eli Kalif Executive Vice President, Chief Financial Officer | ACHIEVEMENT |
| Individual Goals • Supporting the Accelerate Growth phase of the Pivot to Growth strategy • Achieving financial and operational excellence targets • Building a high-performance organization by achieving transformation goals and focusing on leadership development • Achieving Sustainability targets, including enabling renewable electricity agreements to be signed, enhancing data collection and reporting, and meeting compliance and ethics training targets (>99% of targeted active employees trained) | Key Performance Accomplishments • Credit rating upgrades by Moody’s, Fitch, and S&P • Raised the guidance for key financial metrics three times during the year • Exceeded most recent financial outlook ranges for key metrics • Reduced net debt by an additional $1.2 billion to $13.3 billion at the end of 2025 • Announced Teva Transformation programs expected to generate ~$700 million of net savings through 2027; achieved targeted savings for 2025 • Met leadership and sustainability targets, including: signed a new renewable electricity Virtual Power Purchase Agreement (VPPA), implemented enhanced sustainability IT data controls, and achieved >99% compliance and ethics training completion target |
56 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
| Dr. Eric A. Hughes Executive Vice President, Global R&D and Chief Medical Officer | ACHIEVEMENT |
| Individual Goals • Supporting the Accelerate Growth phase of the Pivot to Growth strategy • Meeting key innovative milestones • Building a high-performance organization by achieving transformation goals and focusing on leadership development • Achieving Sustainability targets, including 100% completion of sustainability evaluation and meeting compliance and ethics training targets (>99% of targeted active employees trained) | Key Performance Accomplishments • Filed an NDA for olanzapine LAI in December 2025 • Initiated Phase 3 programs for duvakitug (anti-TL1A) in October 2025 • Achieved the targeted initial enrollment levels in the adult and pediatric populations for DARI’s (Dual-action Asthma Rescue Inhaler) Phase 3 trial • Received U.S. FDA Fast Track designation for our investigational therapy emrusolmin (TEV-56286) in Immuno-Oncology • Made strong progress on our late-stage pipeline of proposed biosimilars • Met transformation and leadership targets • Met sustainability targets including: completed 100% sustainability evaluation and achieved >99% compliance and ethics training completion target |
| Christine Fox Executive Vice President, U.S. Commercial | ACHIEVEMENT |
| Individual Goals • Supporting the Accelerate Growth phase of the Pivot to Growth strategy • Achieving regional sales and operational targets • Building a high-performance organization by achieving transformation goals and focusing on leadership development • Achieving Sustainability targets, including meeting compliance and ethics training targets (>99% of targeted active employees trained) | Key Performance Accomplishments • Increased U.S. revenues by 14% compared to 2024 • Increased U.S. profit by 46% and U.S. gross profit by 28% compared to 2024 • Grew AUSTEDO by 35%, AJOVY by 42%, and UZEDY by 63% in the U.S. compared to 2024 • Increased generic products revenues in the U.S. by 2% compared to 2024 • Met transformation and leadership targets • Met sustainability targets, including: achieved >99% compliance and ethics training completion target |
57 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
| Evan Lippman Executive Vice President, Business Development | ACHIEVEMENT |
| Individual Goals • Supporting the Accelerate Growth phase of the Pivot to Growth strategy • Meeting annual plan goals • Building a high-performance organization by achieving transformation goals and focusing on leadership development • Achieving Sustainability targets, including meeting compliance and ethics training targets | Key Performance Accomplishments • Entered license agreement with Prestige Biopharma for Tuznue® commercialization in Europe • Entered into strategic partnership with Fosun Pharma to develop Novel Anti-PD1-IL2 Therapy (TEV-56278) in Immuno-Oncology • Met transformation and leadership targets • Met sustainability targets, including: achieved >99% compliance and ethics training completion target |
Compliance Modifier
Strong performance by the CEO and NEOs, as measured by the various components, is fully rewarded only if there are no substantial compliance events. The annual incentive payout may be decreased by up to 100% if there is a substantial compliance event.
Overall Performance Factor and Payout Calculation
Overall Performance Factor
The HR and Compensation Committee and the Board calculated an overall performance factor for each executive officer by taking the weighted average of the achievement percentages for Net Revenue, non-GAAP EPS, Free Cash Flow and individual performance for each NEO. As a last step, that overall weighted average achievement percentage is then converted to an overall payout performance factor based on the payout curve set forth in the table below.
| Weighted Average Level of Achievement of Objectives | Overall Performance Achievement %(1) | Overall Payout Performance Factor: Potential Annual Cash Incentive as a % of Target |
|---|---|---|
| Below Threshold | Below 85% weighted averageCompany Financial measuresperformance | 0% (no annual cash incentive payment) |
| Threshold | 85% weighted average CompanyFinancial measures performance, with90% for minimum individualperformance | 66% |
| Target | 100% weighted average CompanyFinancial measures performance, with100% individual performance | 100% |
| Maximum Cash Incentive | 120% weighted average CompanyFinancial measures performance, withup to 130% for maximum individualperformance | 200% |
| (1) | Payouts are determined linearly based on a straight-line interpolation of the applicable payout range (i.e., 2.5% for each percentile change in weighted average performance between threshold and target and 5% for each percentile change in performance between target and maximum). No additional payout is made for weighted average performance achievement in excess of 120% (or 130% in the case of maximum individual performance). |
58 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
The HR and Compensation Committee and the Board reviewed Company financial and individual performance against objectives in order to make determinations regarding whether any payouts were due under our annual incentive plan. The table below sets forth the calculation of the overall performance achievement percentage and payout performance factor for our CEO and other NEOs:
| Executive | Net Revenues % Achievement (25% weighting) | Non-GAAP EPS % Achievement (25% weighting) | Free Cash Flow% Achievement (25% weighting) | IndividualPerformance % Achievement (25% weighting) | Overall Weighted AvgPerformanceAchievement % | OverallPayoutPerformance Factor % |
|---|---|---|---|---|---|---|
| Richard Francis | 101% | 120% | 120% | 130% | 118% | 189% |
| Eli Kalif | 101% | 120% | 120% | 120% | 115% | 177% |
| Dr. Eric A. Hughes | 101% | 120% | 120% | 130% | 118% | 189% |
| Christine Fox | 101% | 120% | 120% | 130% | 118% | 189% |
| Evan Lippman | 101% | 120% | 120% | 105% | 112% | 158% |
The HR and Compensation Committee and the Board then took the target award opportunity and applied the overall payout performance factor to determine the total 2025 annual incentive plan payout for the CEO and each other NEO.
This amount reflected in the“Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table is presented below under the “Additional Compensation Information” section.
| Executive | Eligible BaseSalary ($)(1) | Target Annual CashIncentive (% ofBase Salary) | TargetAward ($) | Overall PayoutPerformanceFactor(2) | Payout ($)(3) |
|---|---|---|---|---|---|
| Richard Francis | $1,700,000 | 150% | $2,550,000 | 189% | $4,827,405 |
| Eli Kalif | $1,012,687 | 100% | $1,012,687 | 177% | $1,788,633 |
| Dr. Eric A. Hughes | $829,231 | 100% | $829,231 | 189% | $1,569,817 |
| Christine Fox | $849,231 | 100% | $849,231 | 189% | $1,607,679 |
| Evan Lippman | $680,000 | 100% | $680,000 | 158% | $1,074,808 |
| (1) | Eligible base salary is generally defined as actual base salary earned during the year. Mr. Lippman’s eligible base salary was $680,000, his annualized salary when he was hired into the position. |
| (2) | Percentages have been rounded to the nearest whole percentage. |
| (3) | Annual cash incentive payout amount is calculated in the currency in which the amount is paid and converted to U.S. dollars. |
Long-Term Incentive Equity-Based Compensation
The third and largest main component of the executive compensation program is long-term equity incentives.
Equity-based compensation is intended to incentivize and reward for future long-term performance, as reflected by the market price of our shares and/or other performance criteria, and is used to foster a long-term link between executive officers’ interests and the interests of Teva and its shareholders. Equity-based compensation is also intended to attract, motivate and retain executive officers for the long term by (i) providing them with a meaningful interest in Teva’s share performance; (ii) linking equity-based compensation to potential and sustained performance; and (iii) spreading benefits over a longer performance cycle through the vesting period mechanism.
Pursuant to our current Compensation Policy, which serves as a shareholder-approved framework, the minimum full vesting period of all equity-based awards is three years from the date of grant (partial vesting can occur before), the maximum monetary grant date fair value of annual equity-based awards granted to the CEO cannot exceed $16 million at target and to any other executive officer $6 million at target, and the maximum number of shares settled for a performance-based equity award shall not exceed 250% of the target number of shares granted.
59 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
Equity Vehicles and Mix
The HR and Compensation Committee and the Board used the equity vehicles and mix set forth in the following table:
| Type of Long-Term Incentive Vehicle | Proportionof Long-TermIncentive Grant | Vesting Schedule | PerformanceMetrics(Weighting) | Rationale for Use |
|---|---|---|---|---|
| Performance Share Units (PSUs) | 70% for CEO; 67% for other executive officers | Three-year cliff vesting | 2025-2027 Cumulative Free Cash Flow (60%) | Focuses employees on generating cash in the short- and long-term to deploy capital and repay debt, and reflects cash management practices, including working capital and capital expenditures, enabling the Company to pursue opportunities that contribute to long-term shareholder value |
| 2025-2027 Net Revenue Growth (annual and cumulative) (40%) | Demonstrates top line expansion, in alignment with the Pivot to Growth strategy, and is a leading indicator of corporate performance and value creation | |||
| 2025-2027 Absolute Stock Price (Modifier) | Strong performance, as measured by the other two metrics, is fully rewarded only if it also results in meaningful stock price growth. Absolute stock price performance ties executive officer compensation to shareholder value creation and aligns the interests and experience of executive officers with those of Teva and its shareholders. The absolute stock price modifier for the 2025 grants caps payouts at target if stock price performance measured at the end of the performance period has decreased compared to a set stock price, and can increase payouts up to 150% for increases in the third year of the performance period, subject to a maximum cap of 250% for the overall PSU payout. | |||
| Restricted Share Units (RSUs) | 30% for CEO; 33% for other executive officers | Four equal tranches vesting on the first, second, third and fourth anniversaries of the date of grant | N/A | N/A |
The HR and Compensation Committee and the Board have structured the mix of equity vehicles and the relative weight assigned to each type to motivate performance against long-term targets and stock price appreciation over the long term and to encourage ownership and retention while aligning executive officers’ interests and experience with those of our shareholders. The PSUs granted represent the opportunity to have shares vest at the end of the three-year performance cycle based on the achievement of designated performance metrics and the change in absolute stock price, in each case, during the performance period of 2025-2027. The RSUs are complementary to the PSUs because they have upside potential but deliver some value even during periods of market or stock price underperformance, providing a retention incentive and reinforcing an ownership culture and commitment to Teva.
60 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
PSU Performance Metrics
All metrics give recipients a clear line of sight into how achieving operating goals drives Teva performance and generates rewards.
For purposes of the PSU performance measures:
| 1) | Net Revenue Growth is defined as the percentage increase or decrease in GAAP Net Revenue as reported in the financial statements included in the Company’s Annual Report on Form 10-K for a particular year, adjusted as described in the following sentence, in comparison to GAAP Net Revenue as reported in the financial statements included in the Company’s Annual Report on Form 10-K for the prior year. For purposes of determining Net Revenue Growth, the effects of unique transactions or divestitures and foreign exchange fluctuations are disregarded, and only the exchange rates used in the Company’s annual operating plan are used. |
| 2) | Free Cash Flow is defined as cash flow from operating activities, beneficial interest collected in exchange for securitized accounts receivables, proceeds from divestitures of businesses and other assets, net of cash used for capital investment. For purposes of determining Free Cash Flow, the effects of unique transactions or divestitures and foreign exchange fluctuations are disregarded, and only the exchange rates used in the Company’s annual operating plan are used. For a reconciliation of Free Cash Flow to Cash Flow from Operating Activities, please see Appendix A hereto. |
Before the conclusion of the three-year performance period, we do not publicly disclose our specific performance measure targets and the corresponding minimums and maximums because of the potential for competitive harm from such disclosure. These measures are competitively sensitive and would reveal information about our view of our anticipated trajectory, which is not otherwise public. The HR and Compensation Committee and the Board believe that they have set performance goals at rigorous and challenging levels so as to require significant effort and achievement by our executive officers to be attained, and that such goals have been established in light of our internal forecast as well as the macroeconomic and industry environments. After the end of the performance period, the targets and achievement relative to such targets will be disclosed.
Target, Threshold and Maximum Performance Levels
Similar to the annual cash incentive plan, for the PSUs, the HR and Compensation Committee and the Board defined payout levels representing the number of PSUs to be earned by executive officers based on the weighted average earning percentages for each of the two performance metrics.
Net Revenue Growth. For Net Revenue Growth, performance is calculated as four equally-weighted point-to-point measurements from 2025 to 2027—for each of the three calendar years, as well as for the three-year period as a whole. The HR and Compensation Committee determines the Company’s performance achievement percentage for each individual period within the overall performance period. If performance achievement for a particular year exceeds the maximum, the target for the following year will be set based on the maximum level of performance for the prior year.
The performance achievement percentage for each of these four measurement periods is then converted to an earning percentage for the Net Revenue Growth metric as set forth below.
| Level of Achievement of Net Revenue Growth(*) | EarningPercentage |
|---|---|
| Below Threshold | 0% |
| Threshold | 25% |
| Target | 100% |
| Maximum | 200% |
| (*) | Linear interpolation will be used to determine the applicable earning percentage between levels. |
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61 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
The HR and Compensation Committee then determines the average earning percentage for the Net Revenue Growth metric. Each of the four measurement periods carries a weight of 25% in calculating the average earning percentage.
Free Cash Flow. For Free Cash Flow, the HR and Compensation Committee determines the Company’s performance achievement percentage for the three-year period (three-year cumulative Free Cash Flow). The performance achievement percentage is then converted to an earning percentage as set forth below.
| Level of Achievement of Free Cash Flow(*) | PerformanceAchievement % | EarningPercentage |
|---|---|---|
| Below Threshold | Below 85% | 0% |
| Threshold | 85% | 25% |
| Target | 100% | 100% |
| Maximum | 110% | 200% |
| (*) | Linear interpolation will be used to determine the applicable earning percentage between levels. |
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The HR and Compensation Committee then calculates the weighted average of the earning percentages for the two performance measures.
Absolute Stock Price Modifier
The HR and Compensation Committee and the Board view the inclusion of Absolute Stock Price as critical because it ties executive officer compensation to the shareholder experience and the creation of shareholder value, and it aligns the interests of executive officers with those of Teva and its shareholders.
If the weighted average of the earning percentages for Net Revenue Growth and Free Cash Flow is less than 100%, then the modifier will not apply.
If the weighted average of the earning percentages for Net Revenue Growth and Free Cash Flow is greater than 100%, then the weighted average is multiplied by an Absolute Stock Price modifier.
As noted above, strong performance, as measured by the other two metrics, is fully rewarded only if it also results in meaningful stock price growth. The HR and Compensation Committee will calculate the December trading day average ending on the last trading day of the last month of the performance period at the end of December 2027. If the average for the end of 2027 is less than a set stock price as approved by the HR and Compensation Committee and the Board for December 2024, then any weighted average earning percentage of the two financial metrics above 100% will be reduced to 100%. If the average for the end of 2027 is greater than the set stock price, then any weighted average earning percentage above 100% will be multiplied by a modifier based on the Absolute Stock Price. The HR and Compensation Committee will calculate the Absolute Stock Price to use based on the highest price within a 30 consecutive trading day period within 2027, where each day’s price is the 15-trading day average price.
There is a cap on the final earning percentage, as modified by any potential modifier, of 250%. The product of (1) the weighted average of the earning percentages for the two metrics and (2) the Absolute Stock Price modifier is multiplied by the target number of PSUs granted to each of the executive officers to determine the final number of PSUs earned by each individual.
62 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
Ultimately, the HR and Compensation Committee approves and presents the performance achievement percentages, the calculation of the average earning percentage and the Absolute Stock Price modifier (if applicable), and the determination of the number of PSUs earned by each executive officer to the Board for its review and approval.
2025 Grants of PSUs and RSUs
In making determinations about 2025 long-term equity incentive grants to executive officers, the HR and Compensation Committee and the Board considered, among other things: sustained performance; criticality of contributions to Teva; comparison against our Peer Group; the executive officer’s role, skills, experience and development; internal fairness among executive officers; current value of prior granted equity and pay mix. The portion of executive officer compensation that is composed of these equity vehicles is “at risk” and directly aligned with shareholder value creation.
The following table sets forth the 2025 annual grant date fair values at target approved by the HR and Compensation Committee and the Board for the CEO and the other NEOs. As described above, the amounts for the CEO reflect an additional grant of PSUs and RSUs to bring the total value into alignment with the updated CEO Terms of Office and Employment approved by shareholders at the 2025 annual meeting.
| Executive | PSUs ($)(*) | RSUs ($)(*) | Total ($)(*) |
|---|---|---|---|
| Richard Francis | $8,400,000 | $3,600,000 | $12,000,000 |
| Eli Kalif | $2,533,333 | $1,266,667 | $3,800,000 |
| Dr. Eric A. Hughes | $2,500,000 | $1,250,000 | $3,750,000 |
| Christine Fox | $2,266,667 | $1,133,333 | $3,400,000 |
| Evan Lippman | $1,600,000 | $800,000 | $2,400,000 |
| (*) | Equity values have been rounded to the nearest $10,000. |
|---|
Consistent with historical practice, the dollar value allocated to PSUs was converted to a number of units, based on the grant date fair value as determined in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718. The dollar amount allocated to RSUs was converted to a number of shares using the fair market value on the grant date.
2023-2025 PSU Payout
In 2023, the HR and Compensation Committee and the Board selected Net Revenue from Innovative Products, Net Revenue from All Other Products andnon-GAAP Operating Profit as metrics for the PSUs and granted PSUs with performance-based vesting requirements for the three-year performance period of 2023-2025.
In addition, strong performance, as measured by the other three operating metrics, was only to be fully rewarded if it also resulted in above-median shareholder returns. The HR and Compensation Committee and the Board viewed the inclusion of Total Shareholder Return as critical because it tied executive officer compensation to the shareholder experience and the creation of shareholder value, and it aligned the interests of executive officers with those of Teva and its shareholders. The relative TSR modifier for the 2023 award could decrease or increase the average earning percentage by up to 10%. By measuring our stock performance relative to peers, it mitigated the impact of macroeconomic factors, both positive and negative, that affect the industry and/or stock price performance and are beyond the control of management, and it provided rewards that are more directly aligned with performance through different economic cycles.
In connection with the 2023 PSU grants, the number of PSUs earned by the NEOs who were executive officers at the time the grants were made has been determined in two steps as follows.
In step one, there were three Company financial performance measures, 2023-2025 Net Revenue from Innovative Products (25% weighting), 2023-2025 Net Revenue from All Other Products (25% weighting) and 2023-2025 non-GAAP Operating Profit (50% weighting). For each of these measures, the HR and Compensation Committee and the Board determined the Company’s performance achievement percentage for each year in the three-year period relative to the target set according to the annual business plan for each year. In 2023, at the beginning of the performance period, Mr. Francis had just taken over as CEO and began formulating the Pivot to Growth strategy, which he launched in May of that year. Because the strategy had not yet been set when the goals were adopted, the metrics utilized threeone-year periods. The
63 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
HR and Compensation Committee and the Board then calculated the average annual performance achievement percentage for the three-year period. The average three-year performance achievement percentage was then converted to an earning percentage based on the following:
| Level of Achievement of Objectives(*) | % Achievement of Target | Earning Percentage |
|---|---|---|
| Below Threshold | Below 85% | 0% |
| Threshold | 85% | 62.5% |
| Target | 100% | 100% |
| Maximum | 120% | 150% |
| (*) | Linear interpolation was used to determine the applicable earning percentage between levels. |
|---|
The HR and Compensation Committee and the Board then calculated the average of the earning percentages for the three performance measures.
In step two, this average of the earning percentages was multiplied by a modifier that was determined based on our TSR performance relative to the companies included in the peer group used as a reference point for 2023 compensation decisions for the three-year period, as set forth below.
| Level of Achievement of Relative TSR(*) | Relative TSR Ranking | Modifier |
|---|---|---|
| Threshold | Up to 25th percentile | 90% |
| (i.e., 10% less than unmodified average of the earning percentages) | ||
| Target | 50th percentile | 100% |
| Maximum | 75th percentile | 110% |
| (*) | Linear interpolation was used to determine the applicable modifier. |
|---|
The product of (1) the average of the earning percentages and (2) the relative TSR modifier was multiplied by the target number of PSUs granted to the NEOs, to determine the final number of PSUs earned by each individual, except that the number of PSUs to be issued could not exceed 165% of the target number of PSUs.
As shown in the table below, the HR and Compensation Committee and the Board approved an average earning percentage of 116% which was then subject to a relative TSR modifier, which adjusted the earning percentage to be 110% of the actual earning percentage, resulting in a modified earning percentage of 128%.
| Weighting · Performance Metric · Target(100%) ($B)() · ActualResults($B)() · Achievement% · Earning % | ||||||||
|---|---|---|---|---|---|---|---|---|
| 25% | Net Revenue from Innovative Products | $ | 12.3B | $ | 13.8B | 112% | 131% | |
| 25% | Net Revenue from All Other Products | $ | 35.0B | $ | 34.9B | 100% | 99% | |
| 50% | Non-GAAP Operating Income | $ | 12.6B | $ | 13.5B | 107% | 118% | |
| Weighted Average: | 116% | |||||||
| Relative TSR Modifier (+10%, reflecting 100th percentile) | 110% | |||||||
| Final Earning % | 128% | |||||||
| (*) | Targets and actuals represent an aggregate of the individual years in the performance period. We utilized foreign exchange rates used for setting our business plan for each relevant year when determining performance achievement and excluded the contributions and performance of TAPI and the business venture in Japan in 2025. |
|---|
64 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
Based on this outcome, the NEOs earned Teva PSUs in respect of their 2023-2025 PSU awards as follows (Ms. Fox and Mr. Lippman had not joined Teva in 2023 when these PSUs were granted):
| Executive | Target Award(# of PSUs) | Final EarningPercentage(*) | Final Award (# of PSUs) |
|---|---|---|---|
| Richard Francis | 697,211 | 128% | 891,315 |
| Eli Kalif | 110,668 | 128% | 141,478 |
| Dr. Eric A. Hughes | 110,668 | 128% | 141,478 |
| (*) | Percentages have been rounded to the nearest whole percentage. |
|---|
CEOSign-on PSU Payout
As previously disclosed, in connection with the appointment of Mr. Francis as CEO effective January 1, 2023, Mr. Francis was granted asign-on PSU award with a target grant date fair value of $5 million. The PSU award was earned based on achievement over the 2023-2025 performance period relative to four performance goals, each weighted equally: 1)Non-GAAP Operating Margin; 2) Net Debt reduction; 3) Objectives related to Teva’s Sustainability-Linked Bonds, including greenhouse gas emissions reductions, regulatory submissions of medicines on the WHO Essential Medicines List in low and middle income countries, and increases in access to medicines program product volume; and 4) Revenue growth of a specified compound annual growth.
The HR and Compensation Committee and the Board determined the Company’s performance achievement percentage as of the end of 2025. For three of these four measures(non-GAAP operating margin, net debt reduction, and revenue growth), the performance achievement percentage was converted to an earning percentage based on the following:
| Level of Achievement of Objectives(*) | Achievement % of Target | Earning Percentage |
|---|---|---|
| Below Threshold | Below 85% | 0% |
| Threshold | 85% | 85% |
| Target | 100% | 100% |
| Maximum | 120% | 120% |
| (*) | Linear interpolation was used to determine the applicable earning percentage between levels. |
|---|
For the objectives related to the Sustainability-Linked Bonds, achievement must have been 100% to earn any payout for that category of goals. Achievement above 100% was converted to an earning percentage based on the table above. The HR and Compensation Committee and the Board then calculated the weighted average of the earning percentages for the four performance measures. The number of PSUs earned was determined by multiplying the target number of PSUs granted by the PSU earning percentage.
The HR and Compensation Committee and the Board approved an average earning percentage of 115% based on the following:
| Weighting | Performance Metric by end of2025 | Target (100%) | ActualResults(1) | Achievement%(2) | Earning % |
|---|---|---|---|---|---|
| 25% | Non-GAAP Operating Margin | 28% | 30% | 106% | 106% |
| 25% | Net Debt Reduction | $13.4B | $12.7B | 115% | 115% |
| 25% | Revenue Growth CAGR | 1% | 10.5% | 120% | 120% |
| 25% | Sustainability Linked-Bond Targets | Goals related to regulatory submissions,access to medicines program productvolume, greenhouse gas emissionsreduction | Exceeded | 119% | 119% |
| Final Earning % | 115% | ||||
| (1) | We utilized foreign exchange rates used for setting our business plan for each relevant year when determining performance achievement and excluded the contributions and performance of TAPI and the business venture in Japan in 2025. |
| (2) | Cap of 120% performance was applied to relevant achievement levels. |
Goals related to regulatory submissions, access to medicines program product volume, greenhouse gas emissions reductions
65 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
Based on this outcome, Mr. Francis earned Teva PSUs in respect of hissign-on PSU award as follows:
| Executive | Target Award(# of PSUs) | Final EarningPercentage(*) | Final Award (# of PSUs) |
|---|---|---|---|
| Richard Francis | 538,851 | 115% | 620,110 |
| (*) | Percentage has been rounded to the nearest whole percentage. |
|---|
Leadership Transitions and Related Compensation; New Shareholder-Approved CEO Compensation and Employment Terms
Appointment of Evan Lippman as Executive Vice President, Business Development
Effective March 31, 2025, the Board appointed Evan Lippman as the Company’s Executive Vice President, Business Development. In connection with his appointment, Mr. Lippman is entitled to receive (i) an annual base salary of $680,000; (ii) a target bonus equal to 100% of his annual base salary; (iii) PSUs with a target value of approximately $1,600,000; and (iv) RSUs with a target value of approximately $800,000. The RSUs and PSUs are subject to the same performance and vesting conditions described above for the grants made in 2025. Mr. Lippman also received the following sign-on compensation in consideration of certain equity grants from Mr. Lippman’s prior employer that were forfeited upon his resignation: (a) cash of $700,000 and (b) RSUs with a target value of $2,500,000. Mr. Lippman agreed to certain restrictive covenants, includingnon-competition, non-solicitation, non-disclosure andnon-disparagement covenants, and assignment of inventions.
New Shareholder Approved Compensation and Employment Terms for Richard D. Francis, President and CEO
At our 2025 Annual Meeting of Shareholders, our shareholders approved, by a margin of 90% of votes cast, updated terms for Teva’s President and CEO, Richard Francis, for 2025 and beyond. Specifically, the amendment to Mr. Francis’ employment agreement, which is detailed in our 2025 Proxy Statement, provided for the following: annual base salary – $1.7 million, and the HR and Compensation Committee and the Board may, without the need for further action or approval of the shareholders, increase the annual base salary each subsequent year by up to 7.5%; annual cash bonus – subject to meeting the required level of performance, the maximum payout is now 200% of target; annual equity award – to bring it into alignment with the market, in the range of $10 million to $16 million; severance provisions not in connection with a change in control – for an involuntary termination by the Company without cause or a resignation by the President and CEO for good reason, cash severance with a multiple of 1.5 times the sum of annual base salary and target annual cash incentive opportunity, subject to continued covenant compliance; RSUs will continue to vest and PSUs will continue to vest based on actual performance through the end of the performance period, pro rata for the term of service during the vesting period; severance and change in control provisions in connection with a termination and a change in control – cash severance equal to 2.5 times the sum of annual base salary and target annual cash incentive opportunity; RSUs and PSUs will be accelerated, and in the case of PSUs, the total number that vests would be based on the greater of target or actual performance; retirement – early retirement – RSUs will continue to vest and the PSUs will continue to vest based on actual performance through the end of the performance period, in each case, pro rata for the term of service during the applicable vesting period; retirement – qualified retirement – RSUs and PSUs will have full continued vesting (without proration), with such vesting based on actual performance for the PSUs; perquisites – $200,000 annual cash allowance, with no gross up for tax purposes on such amount in lieu of international assignment, flights, housing, car benefit and tax and financial advisory benefits, and if found to be necessary by the HR and Compensation Committee, security services for Mr. Francis and/or his family when he travels for business or personal purposes, such reimbursements grossed up for tax purposes.
Other Elements of Compensation
We generally provide to our executive officers the same benefits that are provided to all employees, including certain health and welfare benefits and other benefits. In addition, our executive officers are provided with certain additional benefits, intended to be competitive with the practices of companies in our Peer Group.
66 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
Health and Welfare Benefits
We offer health and welfare benefits to all eligible employees, including all executive officers, which are tailored to each location’s competitive market. Health and welfare benefits may include medical, dental, prescription drug, vision, life insurance, accidental death and dismemberment, short- and long-term disability coverage and an employee assistance program.
Retirement and Other Local Benefits
Israel
Israeli law generally requires severance pay equal to one month’s salary for each year of employment upon the termination of an employee’s employment due to retirement, death, termination without cause and other circumstances as defined under Israeli law. We make monthly contributions on behalf of our executive officers on Israel payroll to pension plans. These funds provide a combination of pension allowance and/or insurance and severance pay benefits to the executive officers. We contribute 7.5% of an NEO’s monthly salary to the pension component (including disability insurance) and 8.33% of the NEO’s monthly salary to the severance component, and the employee contributes an amount between 6% and 7% of the monthly salary to the pension component. The contributions to the severance component are on account of Teva’s obligation to pay severance upon termination as referenced above. Our CEO is entitled to similar contributions on behalf of the Company as a pension contribution and on account of severance. Accordingly, a substantial part of our statutory severance obligation is covered by these monthly contributions.
Generally, in addition, our NEOs on Israel payroll (excluding those on relocation), like all of our employees in the country, are entitled to participate in a study fund plan, pursuant to which each employee who participates in the plan contributes an amount equal to 2.5% of his or her monthly salary to the study fund and Teva contributes to this fund or pays 7.5% of his or her monthly salary.
Furthermore, as is very common and accepted market practice in Israel, we provide eligible employees, including our NEOs on Israel payroll, with a car or car allowance. This is the norm in Israel and this benefit is provided to a broad range of our employees. This benefit is similarly provided in other countries where it is typical market practice.
United States
Our U.S. subsidiaries mainly provide various defined contribution retirement plans for the benefit of their employees. Under these plans, contributions are based on specified percentages of pay. In addition, Teva USA offers a supplemental deferred compensation plan to eligible employees. The plan is a nonqualified plan which is intended to work as a complement to the qualified 401(k) Retirement Savings Plan. The plan has been designed to address the “retirement gap” that many senior-level employees face, primarily due to IRS-imposed limits on qualified plans and IRAs.
Expatriate Benefits / International Assignment and Relocation Benefits
Teva provides benefits to our employees who either accept an expatriate assignment or relocate internationally. The benefits are designed to provide ongoing assignment management and physical relocation support services. These benefits can vary depending on the nature of the assignment or relocation, but generally include a housing allowance, transportation support, acost-of-living allowance (where applicable), home leave, global health insurance, and Company-paid education for approved dependents in locations where public education is not suitable. Additionally, we provide tax preparation and tax support services, dependent on the nature of the assignment (e.g., tax equalization for home-based assignments or tax gross up of relocation benefits and ongoing assignment allowances for host-based assignments), as well as immigration services to manage compliance within all global jurisdictions. The purpose of these benefits is to keep our expatriate employees “economically neutral” for the costs associated with living and working outside their home country, with the goal that they are not financially advantaged or disadvantaged as a result of relocating to another country and incurring associated taxes.
Security
The personal safety and security of employees is of utmost importance to the Company. The Company provides security for NEOs and other executives, as appropriate, based on an assessment of risk conducted by an independent third-party security advisory firm, which includes consideration of the executive’s position and work location. Security services include travel related security and additional security measures. The HR and Compensation Committee and the Board believe the costs of our security program are an appropriate and necessary business expense and do not consider such security costs to be a perquisite. Pursuant to SEC guidance, we have reported the aggregate incremental costs of personal security in the “All Other Compensation” column of the Summary Compensation Table.
Details regarding benefits and perquisites specific to each NEO can be found in the footnotes to the 2025 Summary Compensation Table set forth below under “Additional Compensation Information.”
67 |Teva Pharmaceutical Industries Ltd. 2026 Proxy Statement
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.