Other assets impairments, restructuring and other items

12 Months Ended

Dec. 31, 2019

Other assets impairments, restructuring and other items

NOTE 15—Other assets impairments, restructuring and other items:


	Year ended December 31,
	2019		2018			2017
	(U.S. $ in millions)
Impairment of long-lived tangible assets (1)	$	139	$	500		$	544
Contingent consideration (see note 2 0 )		59		57			154
Acquisition, integration and related costs		—		13			105
Restructuring		199		488			535
Venezuela deconsolidation charge (see note 1)		—		—			396
Other		26		(71	)		102

Total	$	423	$	987		$	1,836

(1)	Including impairments related to exit and disposal activities

Following Teva’s

two-year

restructuring plan announced in December 2017 and its ongoing plant rationalization efforts, the Company may change its current plans with respect to any given asset and/or the assumptions underlying such plans. Consequently, additional impairments may be recorded in the future.

Impairments

Impairments of tangible assets for the years ended on December 31, 2019, 2018 and 2017 were $139 million $500 million, and $544 million, respectively

Contingent consideration

In 2019, Teva recorded $59 million of contingent consideration expenses, compared to $57 million

and $154 million

in 2018

and 2017

espectively.

The expenses in 2019

were

mainly related

to a change in the estimated future royalty payments from Eagle in connection with bendamustine sales and an increase in the expected future royalty payments to Eagle due to the orphan drug status granted to BENDEKA

, offset by the change in future royalty payments in connection with lenalidomide (generic equivalent of Revlimid

), which was part of the Actavis Generics acquisition.

Restructuring

In 2019, Teva recorded $199 million of restructuring expenses, compared to $488 million in 2018

and

$535 million in 2017.

The expenses in 2019 were primarily related to headcount reductions across all functions, as part of the restructuring plan announced in 2017.

In December 2017, Teva announced a comprehensive

two-year

restructuring plan intended to reduce its cost base by $3 billion, unify and simplify its organization and improve business performance, profitability, cash flow generation and productivity. This plan achieved its goals by the end of 2019. Teva is continuing to evaluate opportunities to further optimize its manufacturing and supply network to achieve additional operational efficiencies.

Since the announcement of its restructuring plan, Teva reduced its global headcount by approximately

13,000

full-time-equivalent employees.

The following tables provide the components of costs associated with Teva’s restructuring plan, including other costs associated with Teva’s restructuring plan and recorded under different items:


	Year ended December 31,
	201 9		201 8		201 7
	(U.S. $ in millions)
Restructuring
Employee termination	$	159	$	410	$	443
Other		40		78		92

Total	$	199	$	488	$	535

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


	Employee termination costs			Other			Total
	(U.S. $ in millions)
Balance as of January 1, 201 8	$	(294	)	$	(17	)	$	(311	)
Provision		(410	)		(78	)		(488	)
Utilization and other*		500			66			566

Balance as of December 31, 201 8	$	(204	)	$	(29	)	$	(233	)

Provision		(159	)		(40	)		(199	)
Utilization and other*		155			62			217

Balance as of December 31, 201 9	$	(208	)	$	(7	)	$	(215	)

*	Includes adjustments for foreign currency translation.

Significant regulatory events

In July 2018, the FDA completed an inspection of Teva’s manufacturing plant in Davie, Florida in the United States, and issued a Form

FDA-483

to the site. In October 2018, the FDA notified Teva that the inspection of the site is classified as “official action indicated” (OAI). On February 5, 2019, Teva received a warning letter from the FDA that contained four additional enumerated concerns related to production, quality control and investigations at this site. Teva has been working diligently to address the FDA’s concerns in a manner consistent with current good manufacturing practice (cGMP) requirements as quickly and as thoroughly as possible. An FDA follow up inspection occurred in January 2020, resulting in some follow up findings. If Teva

unable to remediate the findings to the FDA’s satisfaction, it may face additional consequences. These would potentially include delays in FDA approval for future products from the site, financial implications due to loss of revenues, impairments, inventory write offs, customer penalties, idle capacity charges, costs of additional remediation and possible FDA enforcement action. Teva expects to generate approximately $230 million in revenues from this site in 2020, assuming remediation or enforcement does not cause any unscheduled slowdown or stoppage at the facility or prevent approvals of new products from the site.

In July 2018, Teva announced the voluntary recall of valsartan and certain combination valsartan medicines in various countries due to the detection of trace amounts of a previously unknown nitrosamine impurity called NDMA found in valsartan API supplied to it by Zhejiang Huahai Pharmaceutical Co., Ltd. (“Huahai”). Since July 2018, Teva has been actively engaged with regulatory agencies around the world in reviewing its sartan and other products to determine whether NDMA and/or other related nitrosamine impurities are present in specific products. Where necessary, Teva has initiated additional voluntary recalls. The aggregate direct impact of this

recall on Teva’s 2018 and 2019 financial statements was $54 million, primarily related to inventory write-downs and returns. As a result of this loss, Teva initiated negotiations with Huahai and in December 2019, Teva reached a settlement with Huahai resolving its claims related to certain sartan API Huahai supplied to Teva. Under the settlement agreement, Huahai agreed to compensate Teva for some of the direct losses suffered by Teva and provide Teva prospective cost reductions for API. The settlement does not release Huahai from liability for any losses Teva may incur as a result of third party personal injury or product liability claims relating to the sartan API at issue. In addition, multiple lawsuits have been filed in connection with this matter, which may lead to additional customer penalties, impairments and litigation costs. Teva expects additional expenses and loss of revenues and profits in connection with this matter going forward.