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Derivative instruments and hedging activities
 9 Months Ended
Sep. 30, 2025
Derivative Instruments and Hedging Activities
NOTE 8 – Derivative instruments and hedging activities:
 
a.
Foreign exchange risk management:
In the first nine months of 2025, approximately 45% of Teva’s revenues were denominated in currencies other than the U.S. dollar. As a result, Teva is subject to significant foreign currency risks.
The Company enters into forward exchange contracts and purchases and writes options in order to hedge the currency exposure on balance sheet items, revenues and expenses. In addition, the Company takes measures to reduce its exposure by using natural hedging. The Company also acts to offset risks in opposite directions among the subsidiaries within Teva. The currency hedged items are usually denominated in the following main currencies: euro, Swiss franc, British pound, Russian ruble, Canadian dollar, Polish złoty, Japanese yen, new Israeli shekel, Indian rupee and other currencies. Depending on market conditions, foreign currency risk is also managed through the use of foreign currency debt.
The Company may choose to hedge against possible fluctuations in foreign subsidiaries net assets (“net investment hedge”) and has entered into cross-currency swaps and forward-contracts in the past in order to hedge such an exposure.
Most of the counterparties to the derivatives are major banks and the Company is monitoring the associated inherent credit risks. The Company enters into derivative transactions for hedging purposes only.
 
b.
Interest risk management:
The Company raises capital through various debt instruments, including senior notes, sustainability-linked senior notes, bank loans and convertible debentures that bear fixed or variable interest rates, as well as a syndicated sustainability-linked revolving credit facility and securitization programs that bear a variable interest rate. In some cases, the Company has swapped from a fixed to a variable interest rate (“fair value hedge”) and from a fixed to a fixed interest rate with an exchange from a currency other than the functional currency (“cash flow hedge”), thereby reducing overall interest expenses or hedging risks associated with interest rate fluctuations. As of September 30, 2025, all outstanding senior notes, sustainability-linked senior notes and convertible debentures bear a fixed interest rate.
 
c.
Bifurcated embedded derivatives:
Upon the issuance of its sustainability-linked senior notes, Teva recognized embedded derivatives related to interest rate adjustments and a potential
one-time
premium payment upon failure to achieve certain sustainability performance targets, such as access to medicines in
low-to-middle-income
countries and reduction of absolute greenhouse gas emissions, which were bifurcated and are accounted for separately as derivative financial instruments. As of September 30, 2025, the fair value of these derivative instruments is negligible.
 
d.
Derivative instruments outstanding:
The following table summarizes the classification and fair values of derivative instruments:
 
    
Fair value
     
Fair value
  
    
Designated as hedging

instruments
     
Not designated as hedging

instruments
  
    
September 30,

2025
     
December 31,

2024
     
September 30,

2025
     
December 31,

2024
  
Reported under
   
(U.S. $ in millions)
     
(U.S. $ in millions)
  
Asset derivatives:
            
Other current assets:
            
Option and forward contracts
    $ —       $ —       $ 64      $ 71  
Liability derivatives:
            
Other current liabilities:
            
Option and forward contracts
      —         —         (35 )       (24 ) 
Other
non-current
liabilities:
            
Cross-currency interest rate swap-cash flow hedge (1)
      (18 )       —         —         —   
 
 
The table below provides information regarding the location and amount of
pre-tax
(gains) losses from derivatives designated in cash flow hedging relationships:
 
    
Financial expenses, net
     
  Other comprehensive income (loss)  
  
    
Three months ended,
     
Three months ended,
  
    
September 30,

2025
    
September 30,
2024
     
September 30,

2025
    
September 30,
2024
  
Reported under
   
(U.S. $ in millions)
  
Line items in which effects of hedges are recorded
    $ 237     $ 272      $ (44 )    $ 180  
Cross-currency interest rate swap—cash flow hedge (1)
      (4 )      —         (1 )      —   
 
    
Financial expenses, net
     
 Other comprehensive income (loss) 
  
    
Nine months ended,
     
Nine months ended,
  
    
September 30,

2025
     
September 30,

2024
     
September 30,

2025
     
September 30,
2024
  
    
(U.S. $ in millions)
  
Reported under
            
Line items in which effects of hedges are recorded
    $ 714      $ 763      $ 700      $ (75 ) 
Cross-currency interest rate swap—cash flow hedge (1)
      12        (8 )       —         1  
The table below provides information regarding the location and amount of
pre-tax
(gains) losses from derivatives not designated as hedging instruments:
 
    
Financial expenses, net
     
       Net revenues     
  
    
Three months ended,
     
Three months ended,
  
    
September 30,
2025
     
September 30,
2024
     
September 30,
2025
     
September 30,
2024
  
Reported under
   
(U.S. $ in millions)
  
Line items in which effects of hedges are recorded
    $ 237      $ 272      $ (4,480 )     $ (4,332 ) 
Option and forward contracts (2)
      4        4        —         —   
Option and forward contracts economic hedge (3)
      —         —         (9 )       9  
 
 
    
Financial expenses, net
     
Net revenues
  
    
Nine months ended,
     
Nine months ended,
  
    
September 30,
2025
     
September 30,
2024
     
September 30,
2025
     
September 30,
2024
  
Reported under
   
(U.S. $ in millions)
  
Line items in which effects of hedges are recorded
    $ 714      $ 763      $ (12,547 )     $ (12,315 ) 
Option and forward contracts (2)
      8        (33 )       —         —   
Option and forward contracts economic hedge (3)
      —         —         51        (1 ) 
 
(1)
In May 2025, Teva entered into a $500 million notional amount of fixed to fixed cross-currency interest rate swaps relating to its 5.75% senior notes due 2030 to hedge the foreign currency exchange risk of future principal and interest payments associated with the USD denominated notes. The cross-currency swaps synthetically convert part of the USD debt into CHF, aligning debt servicing costs with Teva’s inflows and reducing economic volatility. These swaps have been designated as cash flow hedges and the gain or loss on these swaps will be reported as a component of other comprehensive income and reclassified into earnings in each period during which the swaps affect earnings in the same line item associated with the USD denominated bonds.
(2)
Teva uses foreign exchange contracts (mainly option and forward contracts) to hedge balance sheet items from currency exposure. These foreign exchange contracts are not designated as hedging instruments for accounting purposes. In connection with these foreign exchange contracts, Teva recognizes gains or losses that offset the revaluation of the balance sheet items also recorded under financial expenses, net.
(3)
Teva entered into option and forward contracts designed to limit the exposure of foreign exchange fluctuations on projected revenues and expenses recorded in euro, Swiss franc, British pound, Russian ruble, Canadian dollar, Polish złoty, new Israeli shekel, Indian rupee and some other currencies to protect its projected operating results for 2025 and 2026. These derivative instruments do not meet the criteria for hedge accounting, however, they are accounted for as an economic hedge. These derivative instruments, which may include hedging transactions of future projected revenues and expenses, are recognized on the balance sheet at their fair value on a quarterly basis, while the foreign exchange impact on the underlying revenues and expenses may occur in subsequent quarters. In the three months ended September 30, 2025, the positive impact from these derivatives recognized under revenues was $9 million. In the three months ended September 30, 2024, the negative impact from these derivatives recognized under revenues was $9 million. In the nine months ended September 30, 2025, the negative impact from these derivatives recognized under revenues was $51 million. In the nine months ended September 30, 2024, the positive impact from these derivatives recognized under revenues was $1 million. Changes in the fair value of the derivative instruments are recognized in the same line item in the statements of income as the underlying exposure being hedged. Cash flows associated with these derivatives are reflected as cash flows from operating activities in the consolidated statements of cash flows.
 
 
e.
Amortizations due to terminated derivative instruments:
Forward-starting interest rate swaps and treasury lock agreements
In 2015, Teva entered into forward-starting interest rate swaps and treasury lock agreements to protect the Company from interest rate fluctuations in connection with a future debt issuance the Company was planning. These forward-starting interest rate swaps and treasury lock agreements were terminated in July 2016 upon the debt issuance. Termination of these transactions resulted in a
loss position
of $493 million, which was recorded as other comprehensive income (loss) and is amortized under financial expenses, net over the life of the debt.
With respect to these forward-starting interest rate swaps and treasury lock agreements, losses of $5 million and $7 million were recognized under financial expenses, net, for each of the three months ended September 30, 2025 and 2024, and losses of $30 million and $21 million were recognized under financial expenses, net, for each of the nine months ended September 30, 2025 and 2024, respectively.
 
 
 
f.
Securitization:
U.S. securitization program
On November 7, 2022, Teva and a bankruptcy-remote special purpose vehicle (“SPV”) entered into an accounts receivable securitization facility (“AR Facility”) with PNC Bank, National Association (“PNC”) with a three-year term. The AR Facility provided for purchases of accounts receivable by PNC in an amount of up to $1 billion through November 2023, and up to $500 million from November 2023 through November 2025. On June 30, 2023, the AR Facility agreement was amended to include an additional receivables purchaser under the agreement, in an amount of up to $250 million through November 2025. As a result, the total commitment of PNC was reduced to an amount of up to $750 million, effective June 30, 2023. Under the terms of the AR facility agreement, in November 2023, the total commitment of PNC was further reduced to an amount of up to $500 million through November 2025. On November 7, 2023, the SPV amended the agreement and increased the commitment amount to a maximum of $1 billion by including an additional receivables purchaser in an amount of up to $250 million through March 2024, which was then reduced by $125 million through November 2025. As a result, the commitment amount was reduced to a maximum of $875 million without any additional purchasers participating in the AR facility. On October 29, 2024, the SPV amended the agreement and increased the commitment amount to a maximum amount of $950 million by an existing receivables purchaser increasing its commitment by $75 million.
It is anticipated that the AR Facility will be extended during November 2025 for an additional three-year term. The commitment amount will remain $950 million.
Pledged accounts receivables
In connection with the U.S. securitization program, accounts receivables, net of allowance for credit losses, include $782 million and $558 million as of September 30, 2025 and December 31, 2024, respectively, which are pledged by the SPV to PNC.
 
 
g.
Supplier Finance Program Obligation
Teva maintains supply chain finance agreements with participating financial institutions. Under these agreements, participating suppliers may voluntarily elect to sell their accounts receivable with Teva to these financial institutions. Teva’s suppliers negotiate their financing agreements directly with the respective financial institutions and Teva is not a party to these agreements. Teva has no economic interest in its suppliers’ decisions to participate in the program and Teva pays the financial institutions the stated amount of confirmed invoices on the maturity dates, which is generally within 120 days from the date the invoice was received. The agreements with the financial institutions do not require Teva to provide assets pledged as security or other forms of guarantees for the supplier finance program. All outstanding amounts related to suppliers participating in the supplier finance program are recorded under accounts payables in Teva’s consolidated balance sheets. As of September 30, 2025 and December 31, 2024, the outstanding
accounts payables
to suppliers
participating in these supplier finance programs were $171 million and $158 million, respectively.