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Other assets impairments, restructuring and other items | 9 Months Ended
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Sep. 30, 2021
Other assets impairments, restructuring and other items | NOTE 12 – Other assets impairments, restructuring and other items:
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
|  | (U.S. $ in millions) |  |  | (U.S. $ in millions) |
Impairments of long-lived tangible assets (1) |  | $ | 26 |  |  | $ | 56 |  |  | $ | 106 |  |  | $ | 408 |
Contingent consideration |  |  | 9 |  |  |  | (179 | ) |  |  | (7 | ) |  |  | (96 | )
Restructuring |  |  | 28 |  |  |  | 9 |  |  |  | 96 |  |  |  | 82 |
Other |  |  | (1 | ) |  |  | 15 |  |  |  | 32 |  |  |  | 10 |
Total |  | $ | 62 |  |  | $ | (98 | ) |  | $ | 227 |  |  | $ | 404 |
(1) | Including impairments related to exit and disposal activities
Impairments Impairments of tangible assets for the three months ended September 30, 2021 and 2020 were $26 million and $56 million, respectively. The impairment for the three months ended September 30, 2021 was mainly related to certain assets in North America. The impairment for the three months ended September 30, 2020 was mainly related to the intention to sell certain assets in Teva’s International Markets and Europe segments. Impairments of tangible assets for the nine months ended September 30, 2021 and 2020 were $106 million and $408 million, respectively. The impairment for the nine months ended September 30, 2021 was mainly related to certain assets in the Europe and North America segments. The impairment for the nine months ended September 30, 2020 was mainly related to the intention to sell certain assets from Teva’s business venture in Japan and plant rationalization. See note 2. 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. Contingent consideration In the three months ended September 30, 2021, Teva recorded an expense of $9 million for contingent consideration, compared to an income of $179 million in the three months ended September 30, 2020. The expense in the third quarter of 2021 was mainly related to a change in the estimated future royalty payments to Eagle Pharmaceuticals, Inc. (“Eagle”) in connection with expected future bendamustine sales. The income in the third quarter of 2020 was mainly related to a change in the future royalty payments to Allergan in connection with lenalidomide (generic equivalent of Revlimid ® ), which was part of the Actavis Generics acquisition. In the nine months ended September 30, 2021, Teva recorded income of $7 million for contingent consideration, compared to income of $96 million in the nine months ended September 30, 2020. The income in the first nine months of 2021 was mainly related to a change in the estimated future royalty payments to Allergan in connection with lenalidomide (generic equivalent of Revlimid ® ), which was part of the Actavis Generics acquisition, partially offset by the change in the estimated future royalty payments to Eagle in connection with expected future bendamustine sales. The income in the first nine months of 2020 was mainly related to a change in the future royalty payments to Allergan in connection with lenalidomide (generic equivalent of Revlimid ® ), which was part of the A c tavis Generics acquisition, partially offset by the change in the estimated future royalty payments to Eagle in connection with expected future bendamustine sales. Restructuring In the three m o nths ended September 30, 2021, Teva recorded $ 28 million of restructuring expenses, compared to $ 9 million of restructuring expenses in the three months ended September 30, 2020. The expenses for the three months ended September 30, 2021 were primarily related to network consolidation activities and residual expenses of the restructuring plan announced in 2017. In the nine months ended September 30, 2021, Teva recorded $96 million of restructuring expenses, compared to $82 million in the nine months ended September 30, 2020. The expenses for the nine months ended September 30, 2021 and September 30, 2020 were primarily related to network consolidation activities and residual expenses of the restructuring plan announced in 2017. The following tables provide the components of costs associated with T e va’s restructuring plan, including other costs associated with Teva’s restructuring plan and recorded under different items:
|  | Three months ended September 30, |
|  | 2021 |  |  | 2020 |
|  | (U.S. $ in millions) |
Restructuring |  |  |  |  |  |  |  |
Employee termination |  | $ | 24 |  |  | $ | 3 |
Other |  |  | 4 |  |  |  | 7 |
Total |  | $ | 28 |  |  | $ | 9 |
|  | Nine months ended September 30, |
|  | 2021 |  |  | 2020 |
|  | (U.S. $ in millions) |
Restructuring |  |  |  |  |  |  |  |
Employee termination |  | $ | 84 |  |  | $ | 39 |
Other |  |  | 12 |  |  |  | 43 |
Total |  | $ | 96 |  |  | $ | 82 |
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, 2021 |  | $ | (115 | ) |  | $ | (7 | ) |  | $ | (122 | )
Provision |  |  | (84 | ) |  |  | (12 | ) |  |  | (96 | )
Utilization and other* |  |  | 78 |  |  |  | 12 |  |  |  | 90 |
Balance as of September 30, 2021 |  | $ | (121 | ) |  | $ | (7 | ) |  | $ | (128 | )
|  | Employee termination costs |  |  | Other |  |  | Total |
|  | (U.S. $ in millions ) |
Balance as of January 1, 2020 |  | $ | (208 | ) |  | $ | (7 | ) |  | $ | (215 | )
Provision |  |  | (39 | ) |  |  | (43 | ) |  |  | (82 | )
Utilization and other* |  |  | 145 |  |  |  | 43 |  |  |  | 188 |
Balance as of September 30, 2020 |  | $ | (102 | ) |  | $ | (7 | ) |  | $ | (109 | )
* | Includes adjustments for foreign currency translation.
Significant regulatory and other 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 had been classified as “official action indicated” (“OAI”), and 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. Since the inspection, 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. FDA follow up inspections occurred in January 2020 and in May 2021. In an official “Warning Letter Closeout Letter” dated September 1, 2021, FDA notified Teva that FDA had completed its evaluation of Teva’s corrective actions, and it appeared that Teva had adequately addressed the warning letter. 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 by Zhejiang Huahai Pharmaceuticals Co. Ltd. (“Huahai”). Since July 2018, Teva has been actively engaged with global regulatory authorities 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. In December 2019, Teva reached a settlement with Huahai resolving Teva’s claims related to certain sartan API supplied by Huahai. Under the settlement agreement, Huahai agreed to compensate Teva for some of its direct losses and provide it with 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. In the second quarter of 2020, Teva’s operations in its manufacturing facilities in Goa, India were temporarily suspended due to a water supply issue. During the second half of 2020, Teva completed partial remediation of this issue and restarted limited supply from its Goa facilities. The site experienced some additional delays in the first quarter of 2021 due to labor related issues, but the situation stabilized during the second quarter of 2021. The impact to Teva’s financial results for the nine months ended September 30, 2021 was immaterial, however, if the full remediation takes longer than expected there may be further loss of sales, customer penalties or impairments to related assets. In June 2021, the Company temporarily paused manufacturing at its Irvine, California facility in the United States, and suspended release of product from the facility pending completion of an open manufacturing investigation. In July 2021, the FDA initiated an establishment inspection at the facility. During the period from February 2021 through July 2021, the Company voluntarily initiated recalls of specific lots of multiple products from the facility. On August 18, 2021, the Company issued field alert reports to FDA for products manufactured at the Irvine facility and put Irvine manufactured product in Teva’s distribution center on hold. On August 20, 2021, the FDA completed its inspection and issued a Form FDA-483 to the Irvine facility with ten observations. 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. In addition, Teva is in discussions with the FDA Drug Shortage Staff (DSS) and FDA Office of Manufacturing Quality (OMQ) in an effort to allow for the distribution and re-start of manufacturing of certain medically necessary products to minimize the impact on patients. Suspension of manufacturing and distribution for an extended period or if Teva is unable to address additional inspection issues satisfactorily, could subject Teva to additional consequences. Teva has considered these developments and has recorded immaterial costs in its financial statements related to this matter. Teva will continue to assess potential financial implications, including due to loss of revenues, impairments, inventory write offs, customer pe n alties, idle capacity charges, costs of additional remediation and/or FDA enforcement actions.

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