Other assets impairments, restructuring and other items

12 Months Ended

Dec. 31, 2021

Other assets impairments, restructuring and other items

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


	Year ended December 31,
	2021		2020			2019
	(U.S. $ in millions)
Impairment of long-lived tangible assets (1)	$	160	$	416		$	139
Contingent consideration (see note 20)		7		(81	)		59
Restructuring		133		120			199
Other		41		24			26

Total	$	341	$	479		$	423

(1)	Including impairments related to exit and disposal activities.

Impairments

Impairments of tangible assets for the years ended December 31, 2021, 2020 and 2019 were $160 million, $416 million and $139 million, respectively. The impairment for the year ended December 31, 2021 was mainly related to certain assets in the Europe and North America segments. The impairment for the year ended December 31, 2020 was mainly related to the sale of certain assets from Teva’s business venture in Japan, which was completed on February 1, 2021, as well as 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 2021, Teva recorded an expense of $7 million for contingent consideration, compared to income of $81 million in 2020 and an expense of $59 million in 2019, respectively. The income in 2020 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.

Restructuring

In 2021, Teva recorded $133 million of restructuring expenses, compared to $120 million in 2020 and $199 million in 2019. The expenses in 2021 were primarily related to network consolidation activities and residual expenses of the restructuring plan announced in 2017.

The following tables provide the components of restructuring costs:


	Year ended December 31,
	2021		2020		2019
	(U.S. $ in millions)
Restructuring
Employee termination	$	117	$	71	$	159
Other		16		49		40

Total	$	133	$	120	$	199

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, 2019	$	(204	)	$	(29	)	$	(233	)

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

Balance as of January 1, 2020	$	(208	)	$	(7	)	$	(215	)

Provision		(71	)		(49	)		(120	)
Utilization and other*		164			49			213

Balance as of December 31, 2020	$	(115	)	$	(7	)	$	(122	)

Provision		(117	)		(16	)		(133	)
Utilization and other*		101			16			117

Balance as of December 31, 2021	$	(131	)	$	(7	)	$	(138	)

*	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 water

supply remediation is expected to be completed during the second quarter of 2022, and in the meantime the site is operating under an interim water solution without any material impact expected on compliance and supply capacity. The impact to Teva’s financial results for the twelve months ended December 31, 2021 was immaterial.

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. On August 18, 2021, the Company issued field alert reports to the FDA for products manufactured at the Irvine facility and put Irvine-manufactured products 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 and, on December 17, 2021, the FDA notified the Company that the inspection classification of this site is OAI. Teva is working diligently to address the FDA’s concerns in a manner consistent with current good manufacturing practice (CGMP) requirements. In addition, Teva has been in discussions with the FDA Drug Shortage Staff (DSS) and FDA Office of Manufacturing Quality (OMQ) to recommence the distribution, release and manufacture of certain medically necessary products from the site under defined controls and protocols to minimize the impact on public health. If Teva is unable to address such inspection issues satisfactorily, it could be subject to additional regulatory actions. 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 loss of revenues, impairments, inventory write offs, customer penalties, idle capacity charges, costs of additional remediation and/or FDA enforcement actions.