Overview

Teva Pharmaceutical Industries (TEVA) is global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic medicines and a focused portfolio of specialty medicines. The company operate worldwide, with a significant presence in the United States, Europe and many other markets around the world. Its key strengths include itsworld-leading generics expertise and portfolio, focused specialty portfolio, robust R&D capabilities, global infrastructure and scale and dedicated leadership and employees.

Teva Pharmaceutical believe company is strategically positioned to benefit from market, economic and regulatory trends in global healthcare. These trends include aging populations, the increasing prevalence of chronic diseases, economic pressure on governments and private payors to provide affordable healthcare solutions, legislative and regulatory reforms, scientific and technological advances, increased patient awareness and involvement, the impact of the digital revolution on consumer healthcare, increased spending on pharmaceuticals in emerging markets and the growing importance of over-the-counter (OTC) medicines.¹

Teva Pharmaceutical operate its business in two segments:

• Generic medicines, which includes chemical and therapeutic equivalents of originator medicines in a variety of dosage forms, such as tablets, capsules, injectables, inhalants, liquids, ointments and creams. Teva Pharmaceutical is the leading generic drug company in the United States and Europe, and company has a significant presence in certain ROW markets. This segment includes its OTC business, conducted primarily through PGT, its consumer healthcare joint venture with P&G, as well as its world-leading active pharmaceutical ingredient (API) manufacturing business.
• Specialty medicines, which includes its core therapeutic areas of central nervous system (CNS) medicines such as Copaxone® and Azilect® and respiratory medicines such as ProAir® and QVAR®. Its specialty medicines segment also includes products in other therapeutic areas, such as Bendeka®/ Treanda® in oncology and ParaGard® in womens' health.

In addition to these two segments, company has other activities, primarily sales of third-party products for which the company act as distributor in the United States, Israel and Hungary. In 2016, 55% of its revenues were generated from its generic medicines segment and 40% of its revenues were generated from specialty medicines segment. In 2016, the company generated 38% of its generic revenues in the United States, 30% in Europe and 32% in its ROW markets.

Teva was incorporated in Israel on February 13, 1944, and is the successor to a number of Israeli corporations, the oldest of which was established in 1901. its executive offices are located at 5 Basel Street, P.O. Box 3190, Petach Tikva 4951033, Israel, and its telephone number is +972-3-926-7267. its website is www.tevapharm.com.

Strategy

Teva Pharmaceutical's strategy aims to capitalize on its strengths including the largest generic medicines business in the world, a focused specialty medicines business, a global OTC business, its robust R&D and API capabilities and global infrastructure and scale to better address patient needs. Fundamental to its strategy are its efforts to enhance its financial profile with diversified revenue sitsces and profit streams, backed by strong product development engines in both generics and specialty.

Underlying its strategy is its focus on cash generation and debt repayment. As Teva Pharmaceutical execute its disciplined strategy, Teva Pharmaceutical seek to continue generating significant cash flow, which the company plan to use to pay down debt and maintain its current credit ratings.

The key elements of its strategy are:

• Driving continuous growth and improving profitability in its generics business. Teva Pharmaceutical is the leading generics company worldwide, delivering high quality generic medicines at competitive prices. Its strong legacy generics business, combined with the Actavis Generics business, has a world-leading product portfolio, comprehensive R&D capabilities, a robust product pipeline and an efficient global operational network. Its generics business includes:
• a wide-reaching commercial presence, as the market leader in the United States and a top-three leadership position in over 40 other countries;
• a global portfolio of more than 1,800 molecules, treating millions of patients every day around the world; and
• a world-leading generic pipeline that includes, as of December 31, 2016, 330 product applications awaiting FDA approval in the U.S., including 71 tentative approvals. This total reflects all pending ANDAs, supplements for product line extensions and tentatively approved applications and includes some instances where more than one application was submitted for the same reference product. Nearly 70% of pending applications include a paragraph IV patent challenge, and the company believe it is first to file with respect to 95 of these products, or 119 products including final approvals where launch is pending a settlement agreement or citst decision. During 2016, Teva Pharmaceutical received 1,655 generic approvals in Europe, including two EMA approvals valid in 30 EU member states, and approximately 2,435 marketing authorization applications pending approval in 37 European countries, including one application pending with the EMA for fits strengths in 30 countries. Its global pipeline of generic products positions it for an increasing number of first-to-file opportunities and other key generic launches, as well as further expanding its product portfolio.

This world-leading product pipeline, which includes a large number of smaller opportunities, will lessen its dependence on any single product and be critical to its growth while improving profitability in the face of the continuing price erosion expected in the generics market.

• Achieving synergies from the Actavis Generics acquisition and driving efficiency and effectiveness throughout its organization. Teva Pharmaceutical seek to manage its business to extract the greatest benefit from synergies from the Actavis Generics acquisition. At the same time, the company is expanding its cost reduction activities to continue improving the profitability of its business.
• Delivering on the promise of its specialty pipeline. The company seek leadership positions in its core therapeutic areas of CNS (including multiple sclerosis (MS), neurodegenerative diseases, movement disorders, pain care and migraine) and respiratory (including asthma and chronic obstructive pulmonary disease (“COPD”)). the company has taken significant steps to leverage the existing platforms in its core therapeutic areas to develop promising pipeline assets, addressing illnesses such as MS, Huntington disease, chronic pain, migraine and severe respiratory conditions.
• Maintaining Copaxone® and other key specialty products. the company enhanced its MS franchise through the introduction of its three-times-a-week Copaxone® 40 mg/mL product in the United States in 2014 and in additional countries since 2015. the company also enhanced its oncology portfolio with the launch of Bendeka® in January 2016, which extended its bendamustine franchise. the company will continue to support Copaxone® and its other key products by vigorously defending its intellectual property and through patient support programs and product enhancements.

Actavis Generics and Anda Acquisitions

In August 2016, the company completed its acquisition of Allergan plc’s worldwide generic pharmaceuticals business (Actavis Generics). At closing, the companypaid Allergan consideration of approximately $33.4 billion in cash and approximately 100.3 million Teva shares. The acquisition significantly expanded its generics product portfolio and pipeline, R&D capabilities and global operational network.

In October 2016, the company completed the acquisition of Anda Inc., the fitsth largest distributor of generic pharmaceuticals in the United States, from Allergan plc, for $500 million in cash.

As part of the Actavis Generics acquisition, the company divested certain products in the U.S. and Europe, to meet antitrust regulatory requirements. In January 2017, the company completed the divestiture of certain assets and operations of Actavis Generics in the U.K. and Ireland for GBP 603 million, as required by its undertaking to the European Commission in connection with the Actavis Generics acquisition.

Other Recent Transactions

• AttenukineTM out-license: In December 2016, Teva Pharmaceutical entered into a license agreement for research, development, manufacture and commercializing of AttenukineTM with a subsidiary of Takeda, for a $30 million upfront payment to it, with additional milestone payments of up to $280 million and royalties.
• Ninlaro® out-license: In November 2016, the company entered into an agreement to sell its royalties and other rights in Ninlaro® (ixazomib) to a subsidiary of Takeda, for a $150 million upfront payment to it, with additional consideration of up to $150 million dependent on future sales. the company were entitled to these royalties pursuant to an agreement from 2014 assigning the Ninlaro® patents to an affiliate of Takeda in consideration of milestone payments and sales royalties.
• Celltrion partnership: In October 2016, the company entered into a collaborative agreement with Celltrion, Inc. to commercialize two of Celltrion’s biosimilar products in development for the U.S. and Canadian markets. Teva Pharmaceutical paid Celltrion $160 million, of which up to $60 million is refundable or creditable under certain circumstances. the company will share the profit from the commercialization of these products with Celltrion.
• Regeneron partnership: In September 2016, the company entered into a collaborative agreement with Regeneron Pharmaceuticals, Inc. to develop and commercialize Regeneron’s pain medication product, fasinumab. Teva Pharmaceutical paid Regeneron $250 million upfront and will share the global commercial benefits of this product, as well as ongoing associated research and development costs of approximately $1 billion, equally with Regeneron. Following the termination of the phase 2 clinical study for chronic low back pain in October 2016, the company and Regeneron plan to design a phase 3 study in chronic low back pain that excludes patients with advanced osteoarthritis. See “—Specialty Medicines—Central Nervous System—Pipeline” below.
• Japanese business venture: In April 2016, the company established a business venture with Takeda in Japan in which the company own a 51% stake and Takeda owns the remaining 49%. The business venture combined its Japanese generics business with Takeda’s portfolio of off-patent products, leveraging Takeda’s leading brand reputation and strong distribution presence in Japan with its expertise in supply chain, operational network, infrastructure and R&D, to meet the wide-ranging needs of patients and growing importance of generic medicines in Japan through the provision of off-patent medicines.
• Rimsa acquisition: In March 2016, the company completed the acquisition of Representaciones e Investigaciones Médicas, S.A. de C.V. (Rimsa), a pharmaceutical manufacturing and distribution company in Mexico, for $2.3 billion. Following the closing, the company identified issues concerning Rimsa’s pre-acquisition quality, manufacturing and other practices. In September 2016, two lawsuits were filed: a pre-emptive suit by the Rimsa sellers against Teva, and its lawsuit alleging fraud and breach of contract against the Rimsa sellers. The Rimsa sellers subsequently dismissed their lawsuit, and the dismissal was approved by citst order on December 20, 2016. the company have conducted an assessment and recognized an impairment of $900 million and are currently executing a remediation plan in order to resume operations at the Rimsa facility. See note 2 to its consolidated financial statements.

Segments

Generic Medicines

Overview

Generic medicines are the chemical and therapeutic equivalents of originator medicines and are typically more affordable in comparison to the originator’s products. Generics are required to meet similar governmental regulations as their brand-name equivalents offered or sold by the originator, such as those relating to manufacturing processes and health authorities’ inspections, and must receive regulatory approval prior to their sale in any given country. Generic medicines may be manufactured and marketed if relevant patents on their brand-name equivalents (and any additional government-mandated market exclusivity periods) have expired or have been challenged or otherwise circumvented.

Teva Pharmaceutical develop, manufacture and sell generic medicines in a variety of dosage forms, including tablets, capsules, injectables, inhalants, liquids, ointments and creams. the company offer a broad range of basic chemical entities, as well as specialized product families such as sterile products, hormones, narcotics, high-potency drugs and cytotoxic substances, in both parenteral and solid dosage forms.

In August 2016, Teva Pharmaceutical completed the Actavis Generics acquisition. Its strong legacy generics business, combined with the Actavis Generics business, has a world-leading product portfolio, comprehensive R&D capabilities, robust product pipeline and an efficient global operational network. The combined generic business has a wide-reaching commercial presence, as the market leader in the United States and a top three leadership position in over 40 countries, including some of its key European markets. The combined business benefits from a leading and diverse pipeline of products, which will help it continue executing key generic launches and further expand its product pipeline, focusing on both large and small opportunities. Teva Pharmaceutical expect that a larger number of smaller but more durable launches will help offset expected price erosion while diversifying its revenue stream.

Through coordination between its global portfolio, business development and global R&D teams, Teva Pharmaceutical seek to achieve and maintain market leadership in all markets where the company strategically choose to operate. In particular, the company seek to establish a leadership position in high-barrier, complex products, while continuing to pursue patent challenge opportunities and early launches globally.

When considering whether to develop a generic medicine, the company take into account a number of factors, including its overall strategy, regional and local patient and customer needs, R&D recommendations, manufacturing capabilities, regulatory considerations, commercial factors and the intellectual property landscape. Teva Pharmaceutical will challenge patents if the company believe they are either invalid or would not be infringed by a generic version. The company may seek alliances to acquire rights to products the company do not have in its portfolio or to otherwise share development costs or litigation risks, or to resolve patent and regulatory barriers to entry.

One of its top priorities is to increase the profitability of its generics business, by placing a strong emphasis on the cost of goods sold, product mix and overall cost structure. The company have also prioritized the most important markets for it to do business. Teva Pharmaceutical expect these efforts to continue and improve as the company integrate the Actavis Generics business.

Sales of generic medicines have benefitted from increasing awareness and acceptance on the part of healthcare insurers and institutions, consumers, physicians and pharmacists globally. Factors contributing to this increased awareness are the passage of legislation permitting or encitsaging generic substitution and the publication by regulatory authorities of lists of equivalent pharmaceuticals, which provide physicians and pharmacists with generic alternatives. In addition, various government agencies and many private managed care or insurance programs encitsage the substitution of brand-name pharmaceuticals with generic products as a cost-savings measure in the purchase of, or reimbursement for, prescription pharmaceuticals. Further, in countries as diverse as France and Japan, governments have issued regulations designed to increase generic penetration. These conditions also result in intense competition in the generic market, with generic companies competing for advantage based on pricing, time to market, reputation, customer service and breadth of product line. The company believe that these factors, together with an aging population, an increase in global spending on healthcare, economic pressure on governments to provide less expensive healthcare solutions, legislative and regulatory reforms and a shift of decision-making power to payors, will lead to its continued expansion in the global generic market, as well as increased competition. The company believe that its robust product pipeline, which has been enhanced with the Actavis Generics business, and ability to continuously launch new products are critical to its growth in the face of continuing price erosion expected in the generics market.

In markets such as the United States, the United Kingdom, Canada, the Netherlands and Israel, generic medicines may be substituted by the pharmacist for their brand name equivalent or prescribed by International Nonproprietary Name (“INN”). In these so-called “pure generic” markets, physicians or patients have little control over the choice of generic manufacturer, and consequently generic medicines are not actively marketed or promoted to physicians. Instead, the relationship between the manufacturer and pharmacy chains and distributors, health funds, and other health insurers is critical. Many of these markets have automatic substitution models when generics are available as alternatives to brands. In contrast, in Russia, Ukraine, Kazakhstan, some Asian and Latin American countries as well as certain European markets, generic medicines are generally sold under brand names alongside the originator brand. In many of these “branded generic” markets, pharmacists dispense the specific medicine prescribed by the physician, and substitution between originator brand, branded generic and/or generic manufacturers is often limited without the physician’s consent. In some of these markets, branded generic products are actively promoted and a sales force is necessary. Other markets, such as Germany, Japan, France, Italy and Spain, are hybrid markets with elements of both approaches.

Its position in the generics market is supported by its global R&D function, as well as its API R&D and manufacturing activities, which provide significant vertical integration for its own products.

In most markets in which the company operate, it use an integrated and comprehensive marketing model, offering a portfolio of generic, specialty and OTC products.

OTC

Teva Pharmaceutical has a global OTC business, primarily through PGT, its consumer healthcare joint venture with P&G, formed in 2011. PGT manufactures and markets more than 200 consumer healthcare brands, including OTC medicines and vitamins, minerals and food supplements, in more than 70 countries around the world. Its portfolio includes the leading cough and cold brand Vicks®, Germany’s leading OTC brand, ratiopharm, and other leading brands.

Teva Pharmaceutical own 49% and P&G owns 51% of the joint venture, which incorporates the two companies’ OTC businesses outside of North America and benefits from both companies’ core strengths and capabilities. The joint venture combines the consumer brand-building capabilities of P&G with Teva’s pharmaceutical supply, regulatory and development capabilities. The two companies combined efforts through PGT facilitate expansion into new countries and categories, enabling PGT to quickly reach a significant number of consumers.

PGT's growth strategy includes the following:

• Building on the Vicks® franchise and other leading multi-country respiratory brands where it has a strong presence, to increase its presence in the areas of cough, cold and nasal decongestion;
• Leveraging its generic capabilities under brands like ratiopharm, which offers quality, affordable OTC healthcare in Germany, to broaden its portfolio and expand to new markets;
• Expanding its vitamin, mineral and supplement product portfolio globally, in collaboration with Swisse Wellness, Australia's market-leading wellness brand; and
• Developing existing local brands that have market leading potential in individual or groups of countries.

APIs

Teva Pharmaceutical produce approximately 300 APIs for its own use and for sale to third parties in many therapeutic areas. APIs used in pharmaceutical products are subject to regulatory oversight by national health authorities. The company utilize a variety of production technologies, including chemical synthesis, semi-synthetic fermentation, enzymatic synthesis, high potency manufacturing, plant extract technology and peptides synthesis. Its advanced technology and expertise in the field of solid state particle technology enable it to meet specifications for particle size distribution, bulk density, specific surface area and polymorphism, as well as other characteristics.

Below is a description of its generic medicines business by the main geographic areas in which the company operate:

United States

Teva Pharmaceutical is the leading generic drug company in the United States. The company market over 500 generic products in more than 2,000 dosage strengths and packaging sizes, including oral, injectable and inhaled products. The company believe that the breadth of its product portfolio provides it with a strategic advantage, particularly as the market is impacted by consolidation that continues among purchasers, including large drugstore chains, wholesaling organizations and buying groups. Its growth strategy focuses on a broad portfolio of products and a large and diverse pipeline that will provide added value to its patients, payors and customers, utilizing new and advanced technologies.

Teva Pharmaceutical seek to continue its U.S. market leadership based on its ability to introduce new generic equivalents for brand-name products on a timely basis, with a focus on complex generics and other high-barrier products that the company believe will create more value for patients and customers, its strong emphasis on customer service, the breadth of its product line, its commitment to quality and regulatory compliance and its cost-effective production, including through its recent acquisition of Actavis Generics, which has substantially expanded its generics operations and pipeline.

In the United States, Teva Pharmaceutical is subject to intense competition in the generic drug market from domestic and international generic drug manufacturers, brand-name pharmaceutical companies through lifecycle management initiatives, authorized generics, existing brand equivalents and manufacturers of therapeutically similar drugs. Price competition from additional generic versions of the same product typically results in margin pressures. Teva Pharmaceutical believe that its primary competitive advantages are its ability to continually introduce new and complex generic equivalents for brand-name drug products on a timely basis, its quality, its customer service and the breadth of its product portfolio.

Almost all of its U.S. generic sales are made to retail drug chains and wholesalers, which continue to undergo significant consolidation and globalization. Its portfolio selection, breadth of product offerings and its global network capabilities have provided mutually beneficial strategic advantages to both its customers and it . Teva Pharmaceutical believe that, with its global landscape and presence, the company is best suited to match its customers' needs for scale. The company is committed to the success of its customers and work closely with them as important business partners.

In the United States, its wholesale and retail selling efforts are supported by participating in key medical and pharmaceutical conferences as well as focused advertising in professional jitsnals and on leading pharmacy websites. The company continue to strengthen consumer awareness of the benefits of generics through partnerships and digital marketing programs.

Europe

Teva Pharmaceutical define its European region as the European Union and certain other European countries.

Teva Pharmaceutical is the leading generic pharmaceutical company in Europe. The company is among the top three companies in more than 25 markets across Europe. No single market in Europe represents more than 25% of its total European generic revenues, and as a result the company is not dependent on any single market that could be affected by pricing reforms or changes in public policy. In Europe, the company also out-license certain generic pharmaceutical products.

Despite their diversity and highly fragmented nature, the European markets share many characteristics that allow it to leverage its pan-European presence and broad portfolio. Global customers are crucial partners in its generic business and are expanding across Europe, although customer consolidation is lower than it is in the U.S. market. the company is one of a few companies with a pan-European footprint. Most competitors focus on a select few markets or business lines.

its strategy for generic medicines in Europe is to seek sustainable and profitable growth by differentiated investment levels in different countries. While building on its global knowledge and resitsces and strong market position, the company is able to understand and adapt to the local needs of its patients, payors and customers. In parallel, the company seek to enhance the efficiency of its operations by selectively investing in markets, optimizing its existing portfolio and pricing, and rigorously controlling cost. The company closely monitor the disciplined execution of its strategy to further increase the value realized by its European generic business while maintaining its market leadership position in key countries.

The European market continues to be ever more competitive, especially in terms of pricing, higher quality standards, customer service and portfolio relevance. its leadership position provides it a solid base to be reliable partners to fulfill the needs of patients, physicians, pharmacies, customers and payors.

Key market highlights

Germany is the largest European pharmaceutical market. Teva Pharmaceutical is the second largest provider in the overall generics market, and its ratiopharm brand continues to be a leader in the retail generics segment. Germany has a hybrid market, partially driven by prescriptions of physicians and partially by tenders with increasing price pressure. the company participate in both segments; however, the company compete on tenders only if they can generate sustainable value to the business.

Teva Pharmaceutical believe that its balanced presence and strong track record with new launches are competitive advantages for it over most companies in Germany.

In the United Kingdom, the company is one of the largest suppliers by volume to the National Health Service, supplying one in every five generic prescriptions dispensed, focusing on major retail chains as well as independent pharmacies.

The United Kingdom is a pure generic market with low barriers to entry and very high generic penetration. In general, retail pricing of generics to pharmacies is unregulated (thus prices can increase or decrease), leading to very strong price competition. Pricing is heavily influenced by government regulations, such as ‘Scheme M’ that limits pharmacies’ reimbursement profit.

Customers and wholesalers are highly vertically integrated, which further drives competition in terms of pricing. Pharmaceutical companies seek differentiation strategies to maximize value in a market where prices are already among the lowest in Europe, while quality and reliability of medicine has become the driver of competitive advantage.

In January 2017, Teva Pharmaceutical completed the divestiture of certain assets and operations of Actavis Generics in the U.K. and Ireland, as part of its undertaking to the European Commission in connection with the Actavis Generics acquisition.

In Italy, Teva Pharmaceutical continue to be a generic market leader, supplying about 20% of the country’s generic medicines. The market is concentrated, with the top five players holding approximately 86% of market share. Generic penetration is low compared to most other European countries and is currently growing at a slow pace, although pharmacists have increasing influence to substitute with generics.

Teva Pharmaceutical aim to benefit from any increases in the total value of the generic market in Italy as the company seek to further strengthen its leadership position and its presence in pharmacies. The Teva brand is increasingly recognized among patients, pharmacists and physicians alike.

In Switzerland the company is the largest supplier in the generics market. The company offer a comprehensive portfolio and own the leading brand in the generic retail segment. Generic penetration is relatively low in Switzerland, and the generic market is concentrated with the top two suppliers holding about 70% of the market share. Pricing measures of the government for originator products are increasing the pressure on prices also for generic pharmaceuticals. The company aim to further strengthen its leadership in the generic market as well as to maintain its position as the second largest supplier in the overall retail pharmaceutical market, by leveraging its brand power, using quality and service as competitive advantages, being the preferred partner in the generic market and promoting generic substitution in pharmacies.

In Poland Teva Pharmaceutical is the second largest supplier in the generics market. its portfolio covers both branded generic products as well as OTC products. While generic penetration in Poland is high, the rate of untreated population remains higher than average compared to other Western European markets.

In France, the company continue to see strong pricing pressures and increased generic penetration due to government measures. Teva Pharmaceutical is focused on a selective approach to generate sustainable and profitable business that is customer centered.

The market in Spain was characterized in 2016 by further government pricing and reimbursement reforms which increased generic penetration. its strategy in Spain is to compete for sustainable and profitable business in this market.

Rest of the World Markets

its ROW markets include all countries other than the United States and those included under Europe. its key ROW markets are Venezuela, Japan, Canada and Russia. The countries in this category range from highly regulated, pure generic markets such as Canada and Israel, to hybrid markets such as Japan and Brazil, to branded generics oriented markets such as Russia and certain Commonwealth of Independent States (CIS), Latin American markets and Asia Pacific markets.

its ROW strategy is to be selective as to where the company do business, focusing on the countries and segments where the company can a significant position. Over time and with the right opportunities, the company intend to expand its presence in markets such as China and Brazil and enhance its existing presence in other high growth markets such as Russia, Mexico, South Korea, Australia and Turkey. In other markets, the company will optimize its existing assets and may minimize or divest its operations.

As part of this strategy, the company acquired Rimsa, a pharmaceutical manufacturing and distribution company in Mexico, in March 2016. Following the closing, the company identified issues concerning Rimsa’s pre-acquisition quality, manufacturing and other practices. The company has conducted an assessment and recognized an impairment of $900 million, and are currently executing a remediation plan in order to resume operations at the Rimsa facility.

Key market highlights

Teva Pharmaceutical operate in Venezuela with a product portfolio consisting mainly of branded generic medicines and OTC products. Venezuela is a hyperinflationary economy, and the financial outlook there remains challenging and uncertain. In November 2016, the unofficial exchange rate increased at an accelerated rate, indicating further economic distress. This development, together with a decrease in scope of transactions involving the importation, manufacture and distribution of pharmaceutical products that were settled using the DIPRO rate of 10 bolivars per dollar, led it to replace the official DIPRO rate Teva Pharmaceutical had used to report its Venezuelan financial position, results of operations and cash flows with a blended exchange rate of 273 bolivar per dollar. See “Item 5— Operating and Financial Review and Prospects.

In April 2016, Teva Pharmaceutical established a business venture with Takeda in Japan. Teva Pharmaceutical own a 51% stake and Takeda owns 49% in the business venture. The business venture combined its Japanese generics business with Takeda’s portfolio of off-patent products, leveraging Takeda’s leading brand reputation and strong distribution presence in Japan with its expertise in supply chain, operational network, infrastructure and R&D. This business venture meets the wide-ranging needs of patients and growing importance of generics in Japan through the provision of off-patent medicines. The company is one of the top three generics companies in Japan.

Japan is one of the largest and fastest growing generic pharmaceutical markets in the world. The generics market is expected to continue growing over the next several years due to government incentive programs targeted at both physicians and dispensing channels and due to patent expirations of major drugs.

Following the Actavis Generics acquisition, the company is the leading generic pharmaceutical company in Canada in terms of prescriptions and sales, offering a broad portfolio of medicines. The company aim to maintain its leading market position, grow its portfolio strategically and continue to drive first-to-market opportunities.

Teva Pharmaceutical market generic products to retail chains, retail buying groups and independent pharmacies, reaching approximately 8,800 outlets. The company also market solid dose and injectable medications to hospitals and hospital buying groups across the country. The company continue to see consolidation of independent retail pharmacies and increased expansion of retail chains and buying groups, with the top fits retail chains in Canada now representing approximately 65% of the market (in terms of value). These larger corporate retailers work closely with selected suppliers, listing products as part of a chain-wide formulary. The company continue to experience increased government pressure on pricing. Customers look to generic suppliers to timely launch cost effective generic products, maintain high levels of product availability and provide increased levels of overall customer value and service.

In Canada, the competitive landscape continues to intensify with the increasing presence of multinational companies. The top five manufacturers satisfy over 80% of the Canadian demand for generic pharmaceuticals. In addition, the major branded pharmaceutical companies have intensified their efforts to compete with the generic players, and are now offering incentives to patients and customers to offset generic cost savings.

In Russia, which is primarily a branded generic market, the company market a diverse portfolio of products. the company are currently one of the top five pharmaceutical companies and the largest generics company in Russia, operating in the commercial retail (branded generics and OTC), hospital and state funded segments.

The Russian government seeks to increase the share of domestically produced pharmaceutical products by implementing a policy to encitsage local production to meet state and local needs. In order to take advantage of this policy, the company established a manufacturing facility in Yaroslavl, Russia, which became operational in 2016.

Specialty Medicines

its specialty medicines business, which is focused on delivering innovative solutions to patients and providers via medicines, devices and services in key regions and markets around the world, includes its core therapeutic areas of CNS (with a strong emphasis on MS, neurodegenerative disorders, movement disorders and pain care including migraine) and respiratory medicines (with a focus on asthma and chronic obstructive pulmonary disease). Teva Pharmaceutical also have specialty products in oncology, women's health and selected other areas.

its specialty medicines business faces intense competition from both specialty and generic pharmaceutical companies. The specialty business may continue to be affected by price reforms and changes in the political landscape, following recent public debate in the U.S. Teva Pharmaceutical believe that its primary competitive advantages include its commercial marketing teams, global R&D capabilities, the body of scientific evidence substantiating the safety and efficacy of its various medicines, its patient-centric solutions, physician and patient experience with its medicines, and its medical capabilities, which are tailored to its product offerings and to its market and stakeholders needs.

its specialty medicines organization focuses on its key therapeutic areas and selected local opportunities, with medical and sales and marketing professionals within each area who seek to address the needs of patients and healthcare professionals. the company tailor its patient support, payor relations and medical affairs activities to the distinct characteristics of each therapeutic area and medicine.

its U.S. specialty medicines revenues were $6.7 billion in 2016, comprising the most significant part of its specialty business. In 2016, its European specialty medicines revenues were $1.6 billion and its ROW specialty medicines revenues were $352 million. In Europe and its ROW markets, the company leverage existing synergies with its generics and OTC businesses through integrated in-market structures. its specialty presence in ROW markets is mainly built on its CNS franchise, with gradual development in other therapeutic areas closely related to its branded generics portfolios in those countries.

Teva Pharmaceutical has built a specialized capability to help patients adhere to their treatments, improve patient outcomes, and in certain markets, to ensure timely delivery of medicines and assist in securing reimbursement. These programs, known as Patient Support Programs, reflect the importance Teva Pharmaceutical place on supporting patients and are a critical part of its success. While originally focused on supporting MS patients in the United States, the company has expanded this capability to other regions and therapeutic areas. the company currently operate Patient Support Programs in 35 countries around the world in multiple therapeutic areas. the company believe that it can provide a range of services and solutions appropriately tailored to meet the needs of patients according to their specific condition and local market requirements. the company believe this capability provides it with an important competitive advantage in the specialty medicines market.

Below is a description of its key therapeutic areas, products and pipeline:

Central Nervous System Medicines

its CNS portfolio, one of its two core therapeutic areas, includes Copaxone® for the treatment of relapsing forms of multiple sclerosis and Azilect® for the treatment of the symptoms of Parkinson’s disease, as well as several other medicines.

Copaxone® (glatiramer acetate injection) is the leading multiple sclerosis therapy in the United States and worldwide. Copaxone® is indicated for the treatment of patients with relapsing forms of multiple sclerosis (RMS), including the reduction of the frequency of relapses in relapsing-remitting multiple sclerosis (RRMS), including in patients who have experienced a first clinical episode and have MRI features consistent with multiple sclerosis.

Multiple sclerosis is the most common cause of neurological disability in young adults and affects more than 2.5 million people worldwide. In the majority of patients, the disease is of the relapsing-remitting form, which is manifested by relapses and slow progression of the disease that can affect the functioning of multiple systems. its MS portfolio consists of Copaxone® as well as laquinimod, a phase 3 investigational compound currently under development.

Copaxone®, the first non-interferon immunomodulator approved for the treatment of RRMS, is believed to have a unique mechanism of action that works with the immune system, unlike many therapies that are believed to rely on general immune suppression or cell sequestration to exert their effect. Copaxone® provides a proven mix of efficacy, safety and tolerability.

its U.S. Orange Book patents covering Copaxone® 20 mg/mL expired in May 2014. its patents on Copaxone® 20 mg/mL expired in May 2015 in most of the rest of the world.

Accordingly, a key part of its strategy has been the introduction of Copaxone® 40 mg/mL, a higher dose of Copaxone® with a three times a week dosing regimen for patients with RRMS, which was launched in the United States in January 2014. This formulation allows for a less-frequent dosing regimen administered subcutaneously for patients with relapsing forms of MS. In December 2014, the company received European Medicines Agency (EMA) approval in a decentralized procedure for Copaxone® 40 mg/mL in Europe. In December 2016, the company received approval to remove the pregnancy contraindication from the European label for Copaxone®. To date, the company has launched Copaxone® 40mg/mL in most of its European markets. Copaxone® 40 mg/mL has also launched in Australia, Argentina, Canada, Chile, Colombia, Hong Kong, Israel, Russia, South Korea and Ukraine. the company expect to receive marketing approvals in other ROW markets during 2017.

Copaxone® 40 mg/mL was protected by five U.S. Orange Book patents that expire in 2030. All of the claims of three of those patents were declared to be unpatentable by the U.S. Patent Office in inter parties review (“IPR”) proceedings, and the company has appealed those decisions. In addition, a petition for an IPR has been filed against a fitsth Orange Book patent; a decision on whether the Patent Office will move forward with this proceeding is expected by May 2017. These fits patents have also been challenged in paragraph IV litigation in the United States. A trial was held in the United States District Citst for the District of Delaware, and in January 2017 the citst held that the asserted claims of these fits patents were invalid. the company has appealed this decision; however, it is possible that certain competitors may receive FDA approval and launch before either appeal is decided. The fifth Orange Book patent, which was issued in August 2016, is being challenged in a separate paragraph IV litigation in the United States. the company has also filed suit against multiple ANDA filers to assert a non-Orange Book process patent in various jurisdictions. Copaxone® 40 mg/mL is also protected by one European patent expiring in 2030.

As of December 31, 2016, over 84% of the total U.S. Copaxone® prescriptions and over 67% of the total European Copaxone® prescriptions were filled with the 40 mg/mL version, driven by patient and physician choice of the 40 mg/mL version supported by payor access and patient support activities.

Copaxone® accounted for $4.2 billion (including $3.5 billion in the U.S.), or 19% of its revenues in 2016, and contributed a significantly higher percentage to its profits and cash flow from operations during such period.

The market for MS treatments continues to change as a result of new and emerging therapies as well as a generic version of Copaxone® 20 mg/mL in the U.S. and follow-on products in some European countries and potential competing purported generic versions of Copaxone® 40 mg/mL following the citst ruling invalidating fits Copaxone® 40 mg/mL patents in January 2017. In particular, the increasing number of oral treatments, such as Tecfidera® by Biogen, Gilenya® by Novartis, and Aubagio® by Genzyme, continue to present significant and increasing competition. Copaxone® also continues to face competition from existing injectable products, such as five beta-interferons Avonex®, Plegridy®, Betaseron®, Extavia® and Rebif®, as well as from monoclonal antibodies such as Tysabri®, Lemtrada® and Zinbryta®.

Azilect® (rasagiline tablets) is indicated as initial monotherapy and as an adjunct to levodopa for the treatment of the signs and symptoms of Parkinsons disease, the second most common neurodegenerative disorder.

Azilect® is a second-generation, irreversible monoamine oxidase type B (MAO-B) inhibitor. Although other symptom-reducing therapies are available, many of them have efficacy, safety and tolerability concerns.

Teva Pharmaceutical exclusively market Azilect® in the United States, but generic competition commenced in January 2017. In Europe, the companyshared marketing rights with Lundbeck until the end of 2015, when the initial period of its agreement with Lundbeck ended and all marketing rights reverted to it. Teva Pharmaceutical continue to share marketing rights with Lundbeck in certain of its ROW markets. Data exclusivity protection for Azilect® in the EU expired in 2015.

Azilect®’s competitors include both specialty and generic versions of the newer non-ergot dopamine agonists class, including Mirapex® /Sifrol® (pramipexole), Requip® (ropinirole) and Neupro® (rotigotine), which are indicated for all stages of Parkinson’s disease, as well as Comtan®, a COMT inhibitor, indicated only for adjunct therapy in moderate to advanced stages of the disease.

Nuvigil® (armodafinil), the R-isomer of modafinil, is indicated for the treatment of excessive sleepiness associated with narcolepsy and certain other disorders. Generic competition from several manufacturers began in mid-2016.

its CNS portfolio also includes: Actiq® (fentanyl oral transmucosal lozenge) for the treatment of breakthrough pain in opioid-tolerant adult patients with cancer; and Amrix® (cyclobenzaprine hydrochloride extended-release capsules) in the United States, for relief of muscle spasm in acute, painful, musculoskeletal conditions.

Central Nervous System Pipeline

its clinical pipeline of neurology and neuropsychiatry products includes:

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SD-809 (deutetrabenazine) is a deuterated form of a small molecule inhibitor of vesicular monoamine 2 transporter, or VMAT2, that is designed to regulate the levels of a specific neurotransmitter, dopamine, in the brain. SD-809 was granted Orphan Drug Designation by the FDA for the treatment of chorea associated with Huntington disease in November 2014 and the company expect to be granted seven years of orphan drug exclusivity. The SD-809 NDA submission for the treatment of chorea associated with Huntington disease was accepted for filing by the FDA in August 2015 based on positive results from two phase 3 studies (FIRST-HD and ARC-HD). the companyre-submitted the NDA in October 2016 following the receipt of a complete response letter from the FDA in May 2016.

SD-809 is also currently in clinical development for the treatment of tardive dyskinesia. Results from the pivotal phase 3 clinical study “AIM-TD (Addressing Involuntary Movements in Tardive Dyskinesia) demonstrated all doses improved AIMS scores compared to placebo.

A phase 3 clinical study of SD-809 for the treatment of Titsette syndrome is planned to commence in 2017.

SD-809 is protected by patents expiring in 2029 in Europe and in 2031 in the United States.

Laquinimod is a once-daily, orally administered immunomodulatory compound being developed for treatment of relapsing-remitting and progressive forms of multiple sclerosis. the company has the exclusive rights to develop, register, manufacture and commercialize laquinimod worldwide, in return for an upfront payment and possible future milestone payments and royalties.

In 2012, Teva Pharmaceutical submitted a Marketing Authorization Application to the EMA and a New Drug Submission to Health Canada following completion of two phase 3 studies in 2011. In 2014, the EMA confirmed that the risk-benefit profile of laquinimod is not favorable. The ongoing phase 3 CONCERTO trial (laquinimod versus placebo using confirmed disability progression as the primary endpoint) is intended to further address the risk-benefit profile of laquinimod. In addition, the company is conducting studies to address nonclinical findings noted by the Committee for Medicinal Products for Human Use (CHMP) and clarify the molecular mechanism of action.

In January 2016, the company discontinued the highest dose of laquinimod in all studies after the occurrence of cardiovascular events (none of which were fatal) in eight patients receiving the highest doses in the CONCERTO trial and in the other ongoing study for progressive forms of multiple sclerosis. The studies are continuing with the lower- and mid-dosages. On January 31, 2017, laquinimod was granted orphan-drug designation for the treatment of Huntington Disease by the FDA’s Office of Orphan Products Development.

Laquinimod is protected by patents expiring in 2019 worldwide, with potential for extensions in various markets.

Pridopidine is an oral small molecule dopamine stabilizer being developed for the symptomatic treatment of motor disorders (including Huntington disease). Results from the phase 2 “Pride-HD” clinical study demonstrated an unusually high placebo effect, which limited the ability to determine the effect of treatment on Huntington disease motor scores. However, evidence of symptomatic impact was seen in the early stage Huntington patient sub-population, with improvement in total motor score and dystonia observed at 26 and 52 weeks in this patient sub-set (stage 1 Huntington disease) at specific doses. A phase 3 clinical study of pridopidine is planned to commence in 2017. the company expect to be granted seven years of orphan drug exclusivity in the U.S. for this product.

Pridopidine is protected by patents worldwide that expire in 2020, with potential for extension in various markets.

its clinical pipeline of migraine and other pain products includes:

Vantrela ER is its formulation of hydrocodone, an opioid analgesic, utilizing OraGuard®, its proprietary abuse deterrence technology platform that has been evaluated for resistance to physical manipulations, chemical extractions and multi-step chemical extraction methods.

Vantrela ER was approved by the FDA in January 2017 with abuse-deterrent properties that are expected to reduce, but not totally prevent, oral, intranasal and intravenous abuse of the drug when the tablets are manipulated.

Vantrela ER is protected by patents in Europe that expire in 2027 and in the United States that expire in 2029.

TEV-48125 (anti CGRP) (fremanezumab) is a fully humanized monoclonal antibody that binds to calcitonin gene-related peptide (CGRP). Fremanezumab is being developed for the prevention of chronic and high frequency episodic migraine. In the phase 2b trial, Fremanezumab met both primary and secondary endpoints in episodic migraine, achieving highly significant reductions in mean monthly migraine days and monthly headache days relative to baseline. Phase 3 clinical development for chronic and episodic migraine was initiated in February 2016.

Fremanezumab is also in phase 3 clinical development to evaluate its safety and efficacy in the treatment of chronic and episodic cluster headache. The clinical study was initiated in February 2016. Fremanezumab is protected by patents expiring in 2026 in Europe and in 2027 in the United States. TV-46763 and TV-46139 are two pain products with potential abuse-deterrent properties, developed using its OraGuard® technology platform. Phase 3 clinical development is in progress for TV-46763 while TV-46139 remains in early clinical development.

Fasinumab is a fully human monoclonal antibody that targets NGF, a protein that plays a central role in the regulation of pain signaling. There is evidence that NGF levels are elevated in patients with chronic pain conditions. In September 2016, Teva Pharmaceutical entered into collaboration with Regeneron to develop and commercialize fasinumab. Fasinumab is currently in phase 3 clinical development for osteoarthritis pain. The phase 2 clinical study for chronic low back pain was discontinued in October 2016 after observing a case of adjudicated arthropathy in a patient receiving high dose fasinumab who had advanced osteoarthritis at study entry. Regeneron completed an unplanned interim review of results, which demonstrated efficacy with improvement in pain scores in all fasinumab groups compared to placebo at the 8- and 12-week time points. Regeneron and Teva plan to design a pivotal phase 3 study in chronic low back pain that excludes patients with advanced osteoarthritis.

Fasinumab is protected by patents expiring in 2028, and will also be protected by regulatory exclusivity of 12 years from marketing approval in the U.S. and 10 years from marketing approval in Europe.

TV-45070 Topical is a small molecule intended to treat pain locally at its sitsce through blocking of Nav1.7 and Nav1.8 sodium channels, which are found in sensory nerve endings that can increase in chronic painful conditions. TV-45070 was licensed from Xenon Pharmaceuticals Inc. in December 2012.

TV-45070 has been studied in human subjects in both oral and topical forms in neuropathic and inflammatory diseases. In an early study, oral TV-45070 was shown to be effective at relieving the pain associated with the rare neuropathic pain condition, erythromelalgia. In a phase 2 trial to evaluate effectiveness in alleviating the pain of post-herpetic neuralgia, topical TV-45070 led to significantly more meaningful reductions in pain as compared to placebo. TV-45070 is currently in phase 2 clinical development for neuropathic pain.

TV-45070 is protected by patents in Europe that expire in 2026 and in the United States that expire in 2028.

Respiratory Medicines

its respiratory portfolio, one of its two core therapeutic areas, includes ProAir®, QVAR®, DuoResp Spiromax®, Qnasl®, Braltus® and Cinqair®/Cinqaero®.

Teva Pharmaceutical is committed to maintaining a leading presence in the respiratory market, its second core therapeutic area, by delivering a range of medicines for the treatment of asthma and chronic obstructive pulmonary disease (COPD). its portfolio is centered on optimizing respiratory treatment for patients and healthcare providers through the development of novel delivery systems and therapies that help address unmet needs.

its respiratory pipeline is based on drug molecules delivered in its proprietary dry powder formulations and breath-actuated device technologies and targeted biologics, including a novel product for add-on maintenance treatment of patients with severe asthma. With this portfolio, the company is targeting high value markets in the respiratory area such as inhaled short-acting beta agonists, inhaled corticosteroids, fixed-dose corticosteroid and beta2 agonist combinations, long-acting muscarinic antagonist products and biologics. its proprietary inhalation technology “tidal inhaler” allows a person suffering from asthma or COPD to inhale their medication by breathing normally into the tidal inhaler device. the company is developing a range of inhaled medicines for use in the tidal inhaler. Below is a description of its main respiratory medicines:

ProAir® includes ProAir® hydrofluoroalkane (HFA) and ProAir® RespiClick®, both sold only in the United States.

ProAir® (albuterol sulfate) HFA is an inhalation aerosol with dose counter and is indicated for patients fits years of age and older for the treatment or prevention of bronchospasm with reversible obstructive airway disease and for the prevention of exercise-induced bronchospasm. In March 2012, the FDA approved the addition of a dose counter, an innovation designed to help patients, as well as their caregivers, keep track of the number of doses remaining in the inhaler. The efficacy and safety profile of albuterol, which is used by millions of patients every day around the world, is well established, while HFA is an environmentally friendly propellant. ProAir® HFA is the leading quick relief inhaler in the United States. It is protected by various patents expiring between 2017 and 2028. In June 2014, the company settled a patent challenge to ProAir® HFA with Perrigo Pharmaceuticals permitting Perrigo to launch its generic product in limited quantities once it receives FDA approval and without quantity limitations after June 2018.

ProAir® RespiClick® (albuterol sulfate) inhalation powder is a breath-actuated, multi-dose, dry-powder, short-acting beta-agonist inhaler for the treatment or prevention of bronchospasm with reversible obstructive airway disease and for the prevention of exercise-induced bronchospasm in patients fits years of age and older.

ProAir® Respiclick® was approved by the FDA for use in adults and adolescents aged 12 years and older in March 2015 and its label was expanded for use by children 4 to 11 years of age in April 2016. ProAir® Respiclick® remains the only breath-activated, multi-dose, dry powder, short-acting beta-agonist inhaler available in the U.S. ProAir® Respiclick® is protected by various U.S. Orange Book patents expiring between 2017 and 2031.

Three major brands compete with ProAir® HFA and ProAir® Respiclick® in the United States in the short-acting beta agonist market: Ventolin® HFA (albuterol) by GlaxoSmithKline, Proventil® HFA (albuterol) by Merck and Xopenex® HFA (levalbuterol) by Sunovion.

QVAR® (beclomethasone dipropionate HFA) is indicated as a maintenance treatment for asthma as a prophylactic therapy in patients five years of age or older. QVAR® is also indicated for asthma patients who require systemic corticosteroid administration, where adding QVAR® may reduce or eliminate the need for systemic corticosteroids. QVAR® has the highest preferred and total formulary coverage in the inhaled corticosteroid class in the U.S. the company market QVAR®, which is manufactured by 3M, in the United States and in major European markets. QVAR® is protected by various U.S. Orange Book patents in the United States expiring between 2017 and 2031.

Fits major brands compete with QVAR® in the mono inhaled corticosteroid segment: Flixotide/Flovent® (fluticasone) by GlaxoSmithKline, Pulmicort Flexhaler® (budesonide) by AstraZeneca, Asmanex® (mometasone) by Merck and Alvesco® (ciclesonide) by Sunovion.

The actuator with dose counter used in connection with ProAir® HFA and QVAR® is protected by patents and applications expiring between December 2017 and May 2031.

DuoResp Spiromax® (budesonide/formoterol) is a combination of an inhaled corticosteroid and a long acting beta-agonist bronchodilator, and was approved for treatment of adults with asthma and COPD in Europe by the EMA in a centralized procedure. DuoResp Spiromax® is protected in Europe by patents expiring between 2017 and 2031. First launched in the EU in June 2014, DuoResp Spiromax® has been successfully introduced in 18 European markets.

The main competitors for DuoResp Spiromax® are Symbicort® Turbuhaler® (budesonide/formoterol) by AstraZeneca, Seretide® (fluticasone propionate/salmeterol) by GlaxoSmithKline and Foster® (beclomathasone/formoterol) by Chiesi.

its respiratory portfolio also includes Qnasl® Nasal Aerosol (beclomethasone dipropionate HFA in a nasal actuator), for the treatment of seasonal and year-round nasal allergy symptoms in the United States.

In August 2016, the company launched Braltus® (tiotropium bromide), a long-acting muscarinic antagonist, indicated for adult patients with COPD, delivered via the Zonda® inhaler.

Aerivio Spiromax® (fluticasone/salmeterol 500/50) was developed pursuant to EU guidance to achieve the same clinical outcomes as Seretide® Accuhaler®. Bioequivalence was demonstrated for the high strength product, which was approved in Europe in August 2016 and launched in January 2017.

Aerivio Spiromax® is protected by patents and applications expiring between June 2021 and October 2034.

Cinqair®/Cinqaero® (reslizumab) injection, a humanized interleukin 5 antagonist monoclonal antibody for add-on maintenance treatment of adult patients with severe asthma and with an eosinophilic phenotype, received FDA, EMA and Health Canada approval in 2016 for add-on maintenance treatment of patients with severe eosinophilic asthma aged 18 years and older. This biologic treatment became commercially available to patients in the U.S. in April 2016, began launching in individual European countries in November 2016 and is expected to launch in Canada in 2017. Additional regulatory filings have been submitted in other global markets.

Cinqair® is protected by patents in the United States that expire in 2017. the company has requested extension of one of the patents until 2021. Cinqair® has biological exclusivity in the United States until 2028. the company also expect the product to be entitled to 10 years regulatory exclusivity in Europe beginning on the date of approval. A subcutaneous version is in development (see below).

One major brand competes with Cinqair®/Cinqaero® in the United States, Europe and Canada in the IL-5 market: Nucala® (mepolizumab) by GlaxoSmithKline.

Respiratory Pipeline

The key areas of focus for respiratory R&D include development of differentiated respiratory therapies for patients using novel delivery systems and an emerging portfolio of biologic therapies.

its novel delivery systems include:

An advanced breath-actuated inhaler (BAI); Spiromax® (EU) or RespiClick® (US), a novel inhalation-driven multi-dose powder inhaler (“MDPI”); and Tidal inhaler, a unique nebulization device currently being evaluated for use in early stage development programs.

its device strategy is intended to result in “device consistency,” allowing physicians to choose the device that best matches a patient’s needs both in terms of ease of use and effectiveness of delivery of the prescribed molecule.

its devices and delivery systems are protected by the following patents and applications:

         The BAI device is protected by applications and patents expiring between June 2021 and July 2031. The Spiromax® (EU) or RespiClick® (US) device is protected by patents and applications expiring between June 2021 and October 2034. The tidal inhaler device is protected by patents and applications expiring between February 2025 and April 2036.

its clinical pipeline of respiratory projects includes:

Cinqair®/ Cinqaero® (reslizumab) injection, is a humanized interleukin 5 antagonist monoclonal antibody for add-on maintenance treatment of adult patients with severe asthma and with an eosinophilic phenotype.

The phase 3 clinical program for the subcutaneous reslizumab product was initiated in August 2015 and is ongoing.

QVAR® BAI US (beclomethasone) is an oral aerosol corticosteroid in development for the treatment of asthma for ages fits years and older. The BAI device is the next generation of its QVAR® product. It contains the same small particle aerosol formulation as the existing QVAR® in a breath-actuated device.

The phase 3 clinical program was initiated in December 2013 and completed in mid-2016. The product was submitted to the FDA in October 2016.

The QVAR® BAI US product is protected by device patents and applications expiring between June 2021 and June 2030. The actuator with dose counter is protected by patents and applications expiring between December 2017 and July 2030.

ArmonairTM RespiClick® (Fluticasone Propionate MDPI US) is a new formulation of long acting inhaled corticosteroid (“ICS”) using its multi-dose powder inhaler device, with an enhanced lung delivery designed to allow lower doses to achieve the same clinical outcomes as Flovent® Diskus.

AirduoTM RespiClick® (Fluticasone Salmeterol MDPI US) is a new formulation of ICS/LABA using its multi dose powder inhaler device, designed to achieve comparable efficacy to Advair® Diskus at lower doses.

Phase 3 clinical trial results for Fluticasone Salmeterol MDPI US received in November 2015 demonstrated clinically relevant and greater benefit at all doses compared to placebo and versus respective monotherapy (fluticasone propionate) in the improvement of lung function.

Both ArmonairTM RespiClick® and AirduoTM RespiClick® were approved by the FDA in January 2017 and are protected by the device patents and applications noted above.

TV-44664 (Fluticasone Salmeterol DPI) is a long acting beta2-agonist and an inhaled corticosteroid combined for the treatment of asthma in patients 4 years of age and older. The TV-44664 phase 1 pivotal clinical study to demonstrate therapeutic equivalency to Advair® was initiated in November 2016.

Oncology

its oncology portfolio includes Treanda®/ Bendeka® Granix® and Trisenox® in the United States and Lonquex®, Tevagrastim®/Ratiograstim® and Trisenox® outside the United States.

Treanda® / Bendeka® (bendamustine hydrochloride injection) are approved in the United States for the treatment of patients with chronic lymphocytic leukemia and patients with indolent B-cell non-Hodgkin’s lymphoma that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen. Bendeka® which was launched in the United States in January 2016, is a liquid, low-volume (50 mL) and short-time 10-minute infusion formulation of bendamustine hydrochloride that the companylicensed from Eagle to complement its Treanda® franchise. Bendeka® is now the most-used bendamustine product on the U.S. market. The lyophilized formulation of Treanda® continues to be available, but its use has substantially declined in favor of Bendeka®.

Bendeka®’s competitors include combination therapies such as R-CHOP (a combination of cyclophosphamide, vincristine, doxorubicin and prednisone in combination with rituximab) and CVP-R (a combination of cyclophosphamide, vincristine and prednisolone in combination with rituximab) for the treatment of NHL, as well as a combination of fludarabine, doxorubicin and rituximab for the treatment of CLL and also newer targeted oral therapies, ibrutinib and idelilisib.

Teva Pharmaceutical has U.S. Orange Book patents for Treanda® expiring between 2026 and 2031. To date, one company has filed a 505(b)(2) NDA for a liquid version of bendamustine, and 19 others have filed ANDAs for a generic version of the lyophilized form of Treanda®. All of these filings included patent challenges, which the company is contesting. Trial against five of the 19 ANDA filers began in December 2015. In June 2016, the citst issued a decision affirming the validity of certain claims of the patents. the company has reached final settlements with 17 of the 19 ANDA filers, which provide for launch of generics prior to patent expiration.

Filgrastim (branded as Tevagrastim® (in the EU) and Granix® (in the U.S.)) and Lonquex® (lipegfilgrastim) are Granulocyte Colony Stimulating Factor (“G-CSF”) medicines that stimulate the production of white blood cells and are primarily used to reduce the risk of infections in oncology patients receiving chemotherapy.

Tevagrastim® (short-acting G-CSF) was the first biosimilar G-CSF to be approved by the EU in September 2008. Based on clinical trials, Tevagrastim® has been approved in the EU for multiple indications and is available in most European countries. Tevagrastim® is also marketed as Ratiograstim® and Biograstim® in the EU.

Granix® (short-acting G-CSF) was the first new G-CSF to be approved in the United States in more than ten years and was approved via a Biologics License Application by the FDA in 2012 and launched in November 2013. Granix® is not considered a biosimilar in the United States. The product is also approved and available in Japan and certain other markets. In December 2014, the FDA also approved Granix® injection for self-administration by patients and caregivers.

Lonquex® (long-acting G-CSF) is a G-CSF with the active ingredient lipegfilgrastim, a glycoPEGylated (PEG; polyethylene glycol) filgrastim molecule. This is the first long-acting G-CSF to be approved in Europe in more than ten years and offers a new alternative in G-CSF therapy. Lonquex® was launched in November 2013 in Germany and has since been launched in 22 additional European countries. Lonquex® is protected by patents expiring in 2024 in Europe, with extension to 2028 in several countries.

Competitors to Teva’s filgrastim include short acting G-CSF products such as Neupogen® and Zarxio®, which was launched in September 2015 in the United States, and in Europe, also Zarxio/Zarzio® and Nivestim®. Several additional competing short-acting G-CSF biosimilars are expected to launch in 2017 in the United States, and the first long-acting G-CSF biosimilars are also expected to begin launching in the United States and Europe in 2017.

Oncology Pipeline

its clinical pipeline of oncology products includes CT-P10 (biosimilar to Rituxan ® US) and CT-P6 (biosimilar to Herceptin® US). In October 2016, the company entered into an exclusive biosimilar partnership with Celltrion, to commercialize two proposed monoclonal antibodies (mAb) in the U.S. and Canada. CT-P10 is a biosimilar to Rituxan® (rituximab) and CT-P6 is a biosimilar to Herceptin® (trastuzumab). Pivotal phase 3 clinical development is currently in progress for both products.

Women's Health

its women's health portfolio includes ParaGard® and Plan B One-Step® OTC/Rx (levonorgestrel), along with other products that are marketed in various countries.

ParaGard® (intrauterine copper contraceptive) is a non-hormonal intrauterine contraceptive marketed in the United States. ParaGard® provides women with a highly effective, long-term, reversible, non-hormonal contraceptive option. It is the only intrauterine contraceptive approved for up to ten years of continuous use and is more than 99% effective at preventing pregnancy. ParaGard® faces competition from oral contraceptives, as well as intrauterine devices like Mirena®, Kyleena and Skyla® by Bayer, Liletta® by Allergan and patches and vaginal hormonal contraceptive rings like NuvaRing® by Merck.

Plan B One-Step® OTC (levonorgestrel) is an emergency oral contraceptive which consists of a single tablet dose of levonorgestrel for emergency contraception. Plan B One-Step® is intended to prevent pregnancy when taken within 72 hitss after unprotected intercitsse or contraceptive failure. Plan B One-Step® has several generic competitors. However, in June 2013, it became the first FDA-approved emergency contraceptive to be available without age or point of sales restrictions. the company is the only company that has conducted actual use and label comprehension studies required by the FDA, demonstrating that adolescents can understand how to use Plan B One-Step® just as well as adults. Changes to Other Pipeline Projects During 2016

During 2016, development of the following pipeline projects was either discontinued or transferred:

• Fluticasone Salmeterol (MDI) EU—Development discontinued.
• SD-560—Development discontinued.
• TV-44649 (Budesonide Formoterol HFA MDI)—Product development activities transferred to generic R&D.
• CEP-41750 (Mesenchymal Precursor Cell, Revascor®)—Rights for both cardiovascular products returned by Teva to Mesoblast in June 2016.
• TEV-90110, TEV-90111, TEV-90112 and TEV-90113—Development discontinued.

Other Activities

Teva Pharmaceutical has other sitsces of revenues, primarily sales of third-party products for which the company act as distributor, mostly in the United States, as well as in Israel and Hungary, sales of medical devices, contract manufacturing services related to products divested in connection with the Actavis Generics acquisition and other miscellaneous items. its other activities are not included in its generics and specialty segments described above.

In the United States, the company distribute generic, specialty and OTC pharmaceutical products from more than 300 third party manufacturers, as well as its own products, to independent retail pharmacies, pharmacy retail chains, hospitals and physician offices, through its recently acquired Anda business. Anda’s strategic focus is primarily as a supplier that augments a customer’s primary wholesale supplier, which means that the company can experience high volatility in demand for these distribution services, depending on the performance of the primary suppliers. Anda is able to compete in the secondary distribution market by maintaining high inventory levels for a broad offering of products, next day delivery throughout the United States, competitive pricing and high-level customer service.

Research and Development

its research and development activities span the breadth of its business, including generic medicines (finished goods and API), specialty pharmaceuticals, innovation of existing molecules (new therapeutic entities, or NTEs) and OTC medicines.

Generics

A major area of focus is the development of new generic medicines. The company develop generic products in all therapeutic areas. its emphasis is on developing high-value products, such as those with complex technologies and formulations which thus have higher barriers to entry. Generic R&D activities, which are carried out in development centers located around the world, include product formulation, analytical method development, stability testing, management of bioequivalence, bio-analytical studies, other clinical studies and registration of generic drugs in all of the markets where the company operate. the company also operate several clinics where most of its bioequivalent studies are performed. the company have more than 1,500 generic products in its global pipeline.

In addition, its generic R&D supports its OTC business, including PGT, in developing OTC products, as well as in overseeing the work performed by contract developers.

In recent years, the company has built additional R&D capabilities beyond tablets, capsules, liquids, ointments and creams to other dosage forms and delivery systems, such as matrix systems, special coating systems for sustained release products, orally disintegrating systems, sterile systems such as vials, syringes and blow-fill-seal systems and more recently, capability build-up in long-acting release injectables, transdermal patches, oral thin film, drug device combinations and nasal delivery systems. the company has also started the development of multiple AB-rated respiratory programs.

its API R&D division focuses on the development of processes for the manufacturing of APIs, including intermediates, chemicals and fermentation products, for both its generic drugs and its proprietary drugs. its facilities include fits large development centers: a center in Israel focusing on synthetic products and peptides, a center in Hungary specializing in fermentation and semi-synthetic products and centers in India and Croatia, both focusing on synthetic products. Three additional smaller sites are located in Italy, Mexico and the Czech Republic for development of high-potency APIs. its substantial investment in API R&D generates a steady flow of API products, enabling the timely introduction of generic products to market. The API R&D division also seeks methods to continuously reduce API production costs, enabling it to improve its cost structure.

Specialty

its specialty R&D product pipeline is focused on novel small molecule and biologic products, biosimilar products, innovation of existing molecules as well as discovery of new small molecule and biologic candidates. Specialty development activities include preclinical assessment (including toxicology, pharmacokinetics, pharmacodynamics and pharmacology studies), clinical development (including pharmacology and the design, execution and analysis of global safety and efficacy trials), as well as regulatory strategy to deliver registration of its pipeline products.

its specialty R&D develops novel specialty products in its core therapeutic and disease focus areas. the company has CNS projects in areas such as migraine, pain, movement disorders/neurodegeneration, multiple sclerosis and neuropsychiatry. its respiratory projects are focused on asthma and COPD and include novel compounds and novel delivery systems designed to address unmet patient needs. the company also pursue select pipeline projects (e.g., biosimilars) in other therapeutic and disease areas that leverage its global R&D and commercial areas of expertise.

its commitment to innovate existing molecules in its core therapeutic areas remains a significant channel to build its pipeline. These projects include NTEs as well as deuterated molecules. NTEs are known molecules that are formulated, delivered or used in a novel way to address unmet patient needs (such as adherence, compliance, efficacy and safety). In deuterated molecules, hydrogen atoms are selectively replaced with deuterium atoms to create carbon deuterium bonds that are potentially more resistant to metabolic breakdown than their corresponding carbon hydrogen bond. Deuteration can enable changes in metabolic properties that can potentially lead to improved clinical outcomes.

Teva Pharmaceutical continue to evaluate in-licensing, acquisition and partnership opportunities to supplement and expand its specialty pipeline (e.g., the Regeneron, Celltrion and Eagle transactions) to create and maintain a robust global pipeline. In parallel, the company continue to evaluate and expand the development scope of its existing R&D pipeline products as well as its existing products for submission in additional markets.

Operations

Teva Pharmaceutical operate its business globally and believe that its global infrastructure provides it with the following capabilities and advantages:

global research and development facilities that enable it to have a leading global generic pipeline and a broad generic product line globally, as well as a strong pipeline of specialty products in its key therapeutic areas; pharmaceutical manufacturing facilities approved by the FDA, EMA and other regulatory authorities located around the world, which offer a broad range of production technologies and the ability to concentrate production in order to achieve high quality and economies of scale; API manufacturing capabilities that offer a stable, high-quality supply of key APIs, vertically integrated with its pharmaceutical operations; and high-volume, technologically advanced distribution facilities that allow it to deliver new products to its customers quickly and efficiently, providing a cost-effective, safe and reliable supply.

These capabilities provide it with the means to respond on a global scale to a wide range of therapeutic and commercial requirements of patients, customers and healthcare providers.

Pharmaceutical Production

Teva Pharmaceutical operate 69 finished dosage and packaging pharmaceutical plants in 35 countries, including 22 finished dosage manufacturing sites and two packaging sites acquired as part of the Actavis Generics acquisition. These plants manufacture solid dosage forms, sterile injectables, liquids, semi-solids, inhalers, transdermal patches and medical devices. In 2016, the company produced approximately 88 billion tablets and capsules and 720 million sterile units. The FDA has approved 36 of its finished dosage manufacturing facilities and the company has 30 finished dosage manufacturing facilities approved by EMA authorities.

its two primary manufacturing technologies, solid dosage forms and injectables, are available in North America, Europe, Latin America and Israel. The manufacturing sites located in Israel, Germany, Hungary, Croatia, Bulgaria and the Czech Republic comprise the majority of its production capacity.

Teva Pharmaceutical continue to implement its ongoing Operational Excellence program to optimize its manufacturing efficiency, to maintain its goal of supplying high quality, cost-competitive products on a timely basis to its customers globally. In 2016, the company closed its manufacturing facilities in Pomona, NY (U.S.), Sens and Nevers (France), as well as two API facilities in Guayama (Puerto Rico) and Humacao (Puerto Rico). the company is in the process of closing additional facilities and, in light of the Actavis Generics acquisition, are reviewing other potential sites for restructuring. Additional facilities, specifically Iceland, Malta, Corona (California) and Singapore, are planned for closure throughout 2017 and early 2018. its network restructuring plan aims at further optimizing and consolidating its manufacturing footprint, yielding higher efficiency and reducing costs and capital expenditures.

Teva Pharmaceutical use several external contract manufacturers to achieve operational and cost benefits. the company continue to strengthen its third party operations unit to strategically work with its supplier base in order to meet cost, supply security and quality targets on a sustainable base in alignment with its global procurement organization.

During 2016, the company continued to invest in its manufacturing capabilities, focusing on strategic growth areas, including building a modified release parenteral facility in Croatia and initiating construction of a biologics facility in Ulm, Germany. The company continue to evaluate its capabilities and capacity utilization to ensure efficient alignment with its ability to deliver the highest quality products.

its policy is to maintain multiple supply sitsces for its strategic products and APIs to appropriately mitigate risk in its supply chain to the extent possible. However, its ability to do so may be limited by regulatory and other requirements.

its principal pharmaceutical manufacturing facilities in terms of number of employees in Teva Global Operations (TGO), as of December 31, 2016, are listed below:

Raw Materials for Pharmaceutical Production

Teva Pharmaceutical sitsce a large portion of its APIs from its own manufacturing facilities. Additional APIs are purchased from suppliers located in Europe, Asia and the United States. The company have implemented a supplier audit program to ensure that its suppliers meet its high standards, and take a global approach to managing its commercial relations with these suppliers.

the company currently have 20 API production facilities, including one acquired as part of the Actavis Generics acquisition, producing approximately 300 APIs in various therapeutic areas. its API intellectual property portfolio includes approximately 600 granted patents and pending applications worldwide.

the company has expertise in a variety of production technologies, including chemical synthesis, semi-synthetic fermentation, enzymatic synthesis, high-potency manufacturing, plant extract technology, and peptides synthesis, vitamin D derivatives synthesis and prostaglandins synthesis. its advanced technology and expertise in the field of solid state particle technology enable it to meet specifications for particle size distribution, bulk density, specific surface area and polymorphism, as well as other characteristics.

its API facilities are required to comply with applicable current Good Manufacturing Practices (cGMP) requirements under U.S., European, Japanese and other applicable quality standards. its API plants are regularly inspected by the FDA, European agencies or other authorities as applicable.

Environment, Health and Safety

Teva Pharmaceutical is committed to business practices that promote socially and environmentally responsible economic growth. During 2016, the company continued to make significant progress on its multi-year plan to move closer to its long-term environment, health and safety (EHS) vision of Target Zero: zero incidents, zero injuries and zero releases. Among other things, in 2016 the company :

completed the development and continued the implementation of its global EHS management system, which promotes proactive compliance with applicable environment, health and safety requirements, establishes minimum expectations throughout its global operations and helps drive continuous improvement in its EHS performance; provided EHS regulatory surveillance tools for all countries where, the company has significant operations;

proactively evaluated EHS compliance through self-evaluation and an internal audit program, addressing non-conformities through appropriate corrective and preventative action whose progress is tracked; and established targets to reduce the environmental impact of its operations, through energy and water conservation, recycling and reuse of waste products.

Quality

Teva Pharmaceutical is committed not only to complying with quality requirements but to developing and leveraging quality as a competitive advantage. In 2016, the company successfully completed numerous inspections by regulatory agencies of its finished dosage pharmaceutical plants, continued discussions with authorities about drug shortages and participated in several industry-wide task forces. The company continue to focus on maintaining a solid and sustainable quality compliance foundation as well as making quality a priority beyond compliance, as part of its corporate culture and behavior, ensuring that quality is reflected in all environments to enable reliable and high quality products.

Following an FDA inspection earlier this year, the company voluntarily discontinued all manufacturing activities at its facility in Godollo, Hungary, in order to assess and remediate quality concerns. In May 2016, the FDA issued a U.S. import alert for all products from this facility, which can only be lifted after the FDA confirms regulatory compliance. On October 14, 2016, the company received a warning letter from the FDA, which cites deficiencies in manufacturing operations, laboratory controls and data integrity. the company has currently decided to reduce its operations from this facility.

Following the closing of the Rimsa transaction, the company identified issues concerning Rimsa's pre-acquisition quality, manufacturing and other practices. Therefore, in September 2016, the company filed a lawsuit alleging fraud and breach of contract against the sellers of Rimsa. Rimsa's sellers also filed a lawsuit seeking a declaratory judgment against Teva, which was dismissed in February 2017. the company has conducted an assessment and are currently executing a remediation plan in order to resume operations at the Rimsa facility.

References

1. ^ https://tevapharm.com