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Segments

9 Months Ended

Sep. 30, 2019

Segments

NOTE 17 – Segments:

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

(a) North America segment, which includes the United States and Canada.

(b) Europe segment, which includes the European Union and certain other European countries.

(c) International Markets segment, which includes all countries other than those in the North America and Europe segments.

The Company began reporting its financial results under this structure in the first quarter of 2018. This change was reflected through retroactive revision of prior period segment information.

In addition to these three segments, Teva has other sources of revenues, primarily the sale of APIs to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through 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 North America, Europe and International Markets, to make decisions about resources to be allocated to the segments and assess their performance.

Segment profit is comprised of gross profit for the segment less R&D expenses, S&M expenses, G&A expenses and other 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. Any 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 7.

a. Segment information:

		Three months ended September 30, 2019
		North America				Europe				International Markets
		(U.S. $ in millions)
Revenues		$	2,051			$	1,163			$	736
Gross profit			1,048				662				295
R&D expenses			156				63				21
S&M expenses			219				206				114
G&A expenses			112				56				32
Other income			(5	)			(4	)			(1	)
Segment profit		$	565			$	341			$	130

		Three months ended September 30, 2018
		North America				Europe				International Markets
		(U.S. $ in millions)
Revenues		$	2,265			$	1,212			$	726
Gross profit			1,196				676				301
R&D expenses			158				62				21
S&M expenses			265				242				120
G&A expenses			128				74				37
Other (income) expense			(4	)			1				—
Segment profit		$	649			$	297			$	123

		Nine months ended September 30, 2019
		North America				Europe				International Markets
		(U.S. $ in millions)
Revenues		$	6,169			$	3,611			$	2,145
Gross profit			3,155				2,066				877
R&D expenses			497				199				66
S&M expenses			756				637				348
G&A expenses			342				175				102
Other income			(6	)			(5	)			(2	)
Segment profit		$	1,566			$	1,060			$	363
		Nine months ended September 30, 2018
		North America				Europe				International Markets
		(U.S. $ in millions)
Revenues		$	7,059			$	3,982			$	2,265
Gross profit			3,778				2,195				942
R&D expenses			528				208				70
S&M expenses			813				725				384
G&A expenses			357				243				115
Other income			(206	)			(1	)			(11	)
Segment profit		$	2,286			$	1,020			$	384

		Three months ended								Nine months ended
		September 30,								September 30,
		2019				2018				2019				2018
		(U.S. $ in millions)								(U.S. $ in millions)
North America profit		$	565			$	649			$	1,566			$	2,286
Europe profit			341				297				1,060				1,020
International Markets profit			130				123				363				384
Total segments profit			1,036				1,069				2,989				3,690
Profit of other activities			16				35				92				87
			1,051				1,104				3,081				3,777
Amounts not allocated to segments:
Amortization			255				297				823				909
Other assets impairments, restructuring and other items			160				139				263				834
Goodwill impairment			—				—				—				300
Intangible asset impairments			177				519				1,206				1,246
Gain on divestitures, net of divestitures related costs			(3	)			(31	)			(12	)			(114	)
Other R&D expenses (income)			(7	)			60				(7	)			82
Costs related to regulatory actions taken in facilities			11				1				28				6
Legal settlements and loss contingencies			468				19				1,171				(1,239	)
Other unallocated amounts			72				84				201				226
Consolidated operating income (loss)			(81	)			16				(591	)			1,527
Financial expenses, net			211				229				635				736
Consolidated income (loss) before income taxes		$	(292	)		$	(213	)		$	(1,226	)		$	791

b. Segment revenues by major products and activities:

The following tables present revenues by major products and activities for the three months and the nine months ended September 30, 2019 and 2018:

		Three months ended September 30,
		2019				2018
		(U.S. $ in millions)
North America
Generic products		$	914			$	922
COPAXONE			271				463
BENDEKA/TREANDA			124				161
ProAir*			71				107
QVAR			60				36
AJOVY			25				—
AUSTEDO			105				62
Anda			351				333
Other			131				182
Total		$	2,051			$	2,265

* Does not include sales of ProAir authorized generic, which are included under generics products.

		Nine months ended September 30,
		2019				2018
		(U.S. $ in millions)
North America
Generic products		$	2,826			$	2,957
COPAXONE			753				1,403
BENDEKA/TREANDA			353				502
ProAir*			194				352
QVAR			183				173
AJOVY			68				—
AUSTEDO			276				136
Anda			1,080				984
Other			436				554
Total		$	6,169			$	7,059

* Does not include sales of ProAir authorized generic, which are included under generics products.

		Three months ended September 30,
		2019				2018
		(U.S. $ in millions)
Europe
Generic products		$	836			$	845
COPAXONE			106				124
Respiratory products			87				93
Other			134				150
Total		$	1,163			$	1,212

		Nine months ended September 30,
		2019				2018
		(U.S. $ in millions)
Europe
Generic products		$	2,599			$	2,749
COPAXONE			327				417
Respiratory products			267				312
Other			417				504
Total		$	3,611			$	3,982

		Three months ended September 30,
		2019				2018
		(U.S. $ in millions)
International markets
Generic products		$	474			$	498
COPAXONE			20				14
Distribution			176				149
Other			66				65
Total		$	736			$	726

		Nine months ended September 30,
		2019				2018
		(U.S. $ in millions)
International markets
Generic products		$	1,404			$	1,523
COPAXONE			46				52
Distribution			491				456
Other			204				233
Total		$	2,145			$	2,265

A significant portion of Teva’s revenues, and a higher proportion of the profits, come from the manufacture and sale of patent-protected pharmaceuticals. Many of Teva’s specialty medicines are covered by several patents that expire at different times. Nevertheless, once patent protection has expired or has been lost prior to the expiration date as a result of a legal challenge, Teva no longer has patent exclusivity on these products, and subject to regulatory approval, generic pharmaceutical manufacturers are able to produce and market similar (or purportedly similar) products and sell them for a lower price. The launch of generic competition, even in the form of non-equivalent products, can result in a substantial decrease in revenues for a particular specialty medicine in a very short time. Any expiration or loss of such intellectual property rights could therefore significantly adversely affect Teva’s results of operations and financial condition.

X

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-URI http://asc.fasb.org/topic&trid=2134510

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