UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report:

Commission File number: 001-16174

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

ISRAEL

(Jurisdiction of incorporation or organization)

5 Basel Street

P.O. Box 3190

Petach Tikva 4951033, Israel

(Address of principal executive offices)

Eyal Desheh

Acting President and Chief Executive Officer

Teva Pharmaceutical Industries Limited

5 Basel Street

P.O. Box 3190

Petach Tikva 4951033, Israel

Tel: 972-3-914-8171

Fax: 972-3-914-8678

(Name, telephone, e-mail and/or facsimile number and address of Company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
American Depositary Shares, each representing one Ordinary Share	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

946,868,125 Ordinary Shares

711,965,389 American Depositary Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x                    Accelerated filer  ¨                    Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

þ US GAAP

¨ International Financial Reporting Standards as issued by the International Accounting Standards Board

¨ Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

¨ Item 17

¨ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

INDEX

		Page
Introduction and Use of Certain Terms			1
Forward-Looking Statements			1
Part I
Item 1:	Identity of Directors, Senior Management Advisers		2
Item 2:	Offer Statistics and Expected Timetable		2
Item 3:	Key Information		2
	Selected Financial Data		2
	Operating Data		3
	Balance Sheet Data		3
	Dividends		4
	Risk Factors		5
Item 4:	Information on the Company		18
	Introduction		18
	Strategy		19
	Transaction Highlights		20
	Our Segments		21
	Generic Medicines		21
	United States		23
	Europe		23
	Rest of the World Markets		25
	Specialty Medicines		28
	Central Nervous System		28
	Oncology		31
	Respiratory		32
	Women’s Health		33
	Other Activities		35
	Research and Development		35
	Operations		42
	Environment		44
	Organizational Structure		44
	Properties and Facilities		45
	Regulation		47
	United States		47
	Europe		51
	Rest of the World Markets		53
	Miscellaneous Regulatory Matters		54
Item 4A:	Unresolved Staff Comments		54
Item 5:	Operating and Financial Review and Prospects		55
	Introduction		55
	Highlights		56
	Results of Operations		57
	Segment Information		57
	Generic Medicines		58
	Specialty Medicines		64
	Other Activities		69
	Teva Consolidated Results		70
	Liquidity and Capital Resources		74
	Supplemental Non-GAAP Income Data		77
	Trend Information		81
	Off-Balance Sheet Arrangements		82

		Page
	Aggregated Contractual Obligations		82
	Critical Accounting Policies		83
	Recently Issued Accounting Pronouncements		88
Item 6:	Directors, Senior Management and Employees		89
	Directors and Senior Management		89
	Compensation of Executive Officers and Directors		96
	Board Practices		106
	Statutory Independent Directors, Designated Independent Directors and Financial Experts		107
	Committees of the Board		108
	Employees		112
	Share Ownership		112
Item 7:	Major Shareholders and Related Party Transactions		113
Item 8:	Financial Information		114
Item 9:	The Offer and Listing		115
	ADSs		115
	Ordinary Shares		115
Item 10:	Additional Information		117
	Memorandum and Articles of Association		117
	Taxation		122
	U.S. Taxation Applicable to Holders of Our Ordinary Shares and ADSs		122
	Israeli Taxation Applicable to Holders of Our Ordinary Shares and ADSs		124
	Taxation Applicable to the Company		124
	Documents on Display		127
Item 11:	Quantitative and Qualitative Disclosures about Market Risk		127
	General		127
	Exchange Rate Risk Management		128
	Interest Rate Risk Management		130
Item 12D:	Description of Teva American Depositary Shares		131
Part II
Item 13:	Defaults, Dividend Arrearages and Delinquencies		131
Item 14:	Material Modifications to the Rights of Security Holders and Use of Proceeds		131
Item 15:	Controls and Procedures		132
Item 16:	[Reserved]		132
Item 16A:	Audit Committee Financial Experts		132
Item 16B:	Code of Ethics		132
Item 16C:	Principal Accountant Fees and Services		133
Item 16D:	Exemptions from the Listing Standards for Audit Committees		134
Item 16E:	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		134
Item 16F:	Change in Registrant’s Certifying Accountant		134
Item 16G:	Corporate Governance		134
Item 16H:	Mine Safety Disclosure		134
Part III
Item 17:	Financial Statements		135
Item 18:	Financial Statements		135
Item 19:	Exhibits		136
Consolidated Financial Statements			F-1
Financial Statement Schedule			S-1

INTRODUCTION AND USE OF CERTAIN TERMS

Unless otherwise indicated, all references to the “Company,” “we,” “our” and “Teva” refer to Teva Pharmaceutical Industries Limited and its subsidiaries, and references to “revenues” refer to “net revenues”. References to “U.S. dollars,” “U.S.$” and “$” are to the lawful currency of the United States of America, and references to “NIS” are to New Israeli shekels. References to “MS” are to Multiple Sclerosis. Market data, including both sales and share data, is based on information provided by IMS Health Inc., a provider of market research to the pharmaceutical industry (“IMS”), unless otherwise stated. References to “ROW” are to Rest of the World markets. References to “P&G” are to The Procter & Gamble Company and references to “PGT” are to PGT Healthcare LLP, the joint venture we formed with P&G.

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements, which express management’s current beliefs or expectations with regard to future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these statements relate to, among other things:

• our business strategy;

• the development and launch of our products, including product approvals and results of clinical trials;

• projected markets and market size;

• anticipated results of litigation;

• our projected revenues, market share, expenses, net income margins and capital expenditures; and

• our liquidity.

The forward-looking statements contained herein involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements.

You should understand that many important factors, in addition to those discussed or incorporated by reference in this report, could cause our results to differ materially from those expressed in the forward-looking statements. Potential factors that could affect our results include, in addition to others not described in this report, those described under “Item 3—Key Information—Risk Factors.” These are factors that we think could cause our actual results to differ materially from expected results.

Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statements or other information contained in this report, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures we make in our reports on Form 6-K filed with the U.S. Securities and Exchange Commission (“SEC”). Please also see the cautionary discussion of risks and uncertainties under “Item 3: Key Information—Risk Factors” starting on page 5 of this report. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

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PART I

ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not Applicable.

ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3: KEY INFORMATION

SELECTED FINANCIAL DATA

The Israeli Securities Law allows Israeli companies, such as Teva, whose securities are listed both on the Tel Aviv Stock Exchange and on certain stock exchanges in the U.S. (including the New York Stock Exchange), to report exclusively under the rules of the SEC and generally accepted accounting principles in the United States (“U.S. GAAP”). Except as otherwise indicated, all financial statements and other financial information included in this annual report are presented solely under U.S. GAAP.

The following selected operating data for each of the years in the three-year period ended December 31, 2013 and selected balance sheet data at December 31, 2013 and 2012 are derived from our audited consolidated financial statements set forth elsewhere in this report, which have been prepared in accordance with U.S. GAAP. The selected operating data for each of the years in the two-year period ended December 31, 2010 and selected balance sheet data at December 31, 2011, 2010 and 2009 are derived from our audited financial statements not appearing in this report, which have also been prepared in accordance with U.S. GAAP.

The selected financial data should be read in conjunction with our consolidated financial statements, related notes and other financial information included in this report.

The currency of the primary economic environment in which our operations in Israel and the United States are conducted is the U.S. dollar. The functional currency of some subsidiaries and associated companies is their local currency.

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Operating Data

	For the year ended December 31,
	2013			2012			2011		2010		2009
	U.S. dollars in millions (except per share amounts)
Net revenues		20,314			20,317			18,312		16,121		13,899
Cost of sales		9,607			9,665			8,797		7,056		6,532
Gross profit		10,707			10,652			9,515		9,065		7,367
Research and development expenses		1,427			1,356			1,095		951		825
Selling and marketing expenses		4,080			3,879			3,478		2,968		2,676
General and administrative expenses		1,239			1,238			932		865		823
Legal settlements and loss contingencies		1,524			715			471		2		434
Impairments, restructuring and others		788			1,259			430		408		204
Operating income		1,649			2,205			3,109		3,871		2,405
Financial expenses—net		399			386			153		225		202
Income before income taxes		1,250			1,819			2,956		3,646		2,203
Income taxes		(43	)		(137	)		127		283		166
Share in losses of associated companies—net		40			46			61		24		33
Net income		1,253			1,910			2,768		3,339		2,004
Net income (loss) attributable to non-controlling interests		(16	)		(53	)		9		8		4
Net income attributable to Teva		1,269			1,963			2,759		3,331		2,000
Earnings per share attributable to Teva:
Basic ($)		1.49			2.25			3.10		3.72		2.29
Diluted ($)		1.49			2.25			3.09		3.67		2.23
Weighted average number of shares (in millions):
Basic		849			872			890		896		872
Diluted		850			873			893		921		896

Balance Sheet Data

	As at December 31,
	2013		2012		2011		2010		2009
	(U.S. dollars in millions)
Financial assets (cash, cash equivalents and marketable securities)		1,245		3,089		1,748		1,549		2,465
Working capital (operating assets minus liabilities)		2,493		3,589		3,937		3,835		3,592
Total assets		47,508		50,609		50,142		38,152		33,210
Short-term debt, including current maturities		1,804		3,006		4,280		2,771		1,301
Long-term debt, net of current maturities		10,387		11,712		10,236		4,110		4,311
Total debt		12,191		14,718		14,516		6,881		5,612
Total equity		22,636		22,867		22,343		22,002		19,259

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Dividends

We have paid dividends on a regular quarterly basis since 1986. Our dividend policy is regularly reviewed by the Board of Directors based upon conditions then existing, including our earnings, financial condition, capital requirements and other factors. Our ability to pay cash dividends may be restricted by instruments governing our debt obligations. Dividends are declared and paid in NIS. Dividends are converted into U.S. dollars and paid by the depositary of our American Depositary Shares (“ADSs”) for the benefit of owners of ADSs, and are subject to exchange rate fluctuations between the NIS and the U.S. dollar between the declaration date and the date of actual payment.

Dividends paid by an Israeli company to shareholders residing outside Israel are generally subject to withholding of Israeli income tax at a rate of up to 25%. Such tax rates apply unless a lower rate is provided in a treaty between Israel and the shareholder’s country of residence. In our case, the applicable withholding tax rate will depend on the particular Israeli production facilities that have generated the earnings that are the source of the specific dividend and, accordingly, the applicable rate may change from time to time. A 15% tax will be withheld on the dividend declared for the fourth quarter of 2013.

The following table sets forth the amounts of the dividends declared in respect of each period indicated prior to deductions for applicable Israeli withholding taxes (in cents per share).

	2013		2012		2011		2010		2009
	In cents per share
1st interim		32.0		26.3		23.2		18.8		14.5
2nd interim		32.2		25.0		23.5		18.1		15.1
3rd interim		32.6		25.7		21.9		19.3		15.9
4th interim		34.3		31.1		26.8		21.8		18.7

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RISK FACTORS

Our business faces significant risks. You should carefully consider all of the information set forth in this annual report and in our other filings with the SEC, including the following risk factors which we face and which are faced by our industry. Our business, financial condition and results of operations could be materially adversely affected by any of these risks. This report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this report and our other SEC filings. See “Forward-Looking Statements” on page 1.

Our success depends on our ability to develop and commercialize additional pharmaceutical products.

Our financial results depend upon our ability to commercialize additional generic and specialty pharmaceutical products, particularly during this period of transition when our leading specialty medicine, Copaxone^®, faces increasing competition. Commercialization requires that we successfully develop, test and manufacture both generic and specialty products. All of our products must receive regulatory approval and meet (and continue to comply with) regulatory and safety standards; if health or safety concerns arise with respect to a product, we may be forced to withdraw it from the market.

The development and commercialization process, particularly with respect to specialty medicines as well as the complex generic medicines that we are increasingly focusing on, is both time-consuming and costly and involves a high degree of business risk. Our products currently under development, if and when fully developed and tested, may not perform as we expect. Necessary regulatory approvals may not be obtained in a timely manner, if at all, and we may not be able to produce and market such products successfully and profitably. Delays in any part of the process or our inability to obtain regulatory approval of our products could adversely affect our operating results by restricting or delaying our introduction of new products.

Our leading specialty medicine, Copaxone^®, faces increasing competition, including from orally-administered therapies and potential generic versions.

Any substantial decrease in the revenues derived from our specialty medicines would have an adverse effect on our results of operations, several of which currently face, or will soon face, intense competition. Our multiple sclerosis franchise includes our Copaxone^® products and laquinimod (a developmental compound for the treatment of MS). The profitability of our multiple sclerosis franchise is comprised of Copaxone^® revenues and cost of goods sold as well as S&M and R&D expenses related to our MS franchise. It does not include G&A expenses, amortization and non-recurring items. Our MS franchise profitability was $3.3 billion, $3.0 billion and $2.8 billion in 2013, 2012 and 2011, respectively. Profitability of our multiple sclerosis franchise as a percentage of Copaxone^® revenues was 76%, 74% and 79% in 2013, 2012 and 2011, respectively.

Although Copaxone^® remains the leading therapy for multiple sclerosis to date, it faces intense competition from existing injectable products, such as Avonex^®, Betaseron^®, Extavia^®, Rebif^® and Tysabri^®, and from oral treatments, such as Gilenya^®, which was introduced in 2010 by Novartis, Genzyme’s Aubagio^®, which was introduced in 2012, and Biogen’s Tecfidera^®, which was introduced in 2013. These new oral treatments provide especially intense competition in light of their substantial convenience in comparison to injectables such as Copaxone^®. Also, our patents on Copaxone^® have been challenged, and as a result we may face generic competition in the United States as early as May 2014. In addition, our business strategy for Copaxone^® relies heavily on the successful introduction of a three-times-a-week product and the migration of a substantial percentage of current daily Copaxone^® patients to this new version. The failure to achieve our objectives for the new version would likely have a material adverse effect on our financial results and cash flow.

We could be subject to material fines, penalties and other sanctions and other adverse consequences arising out of our ongoing FCPA investigations and related matters.

We are required to comply with the U.S. Foreign Corrupt Practices Act (the “FCPA”) and similar anti-corruption laws in other jurisdictions around the world where we do business. Compliance with these laws has been subject to increasing focus and activity by regulatory authorities in recent years. Actions by our employees,

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or third-party intermediaries acting on our behalf, in violation of such laws, whether carried out in the United States or elsewhere in connection with the conduct of our business (including our business practices currently under investigation, as described below) may expose us to liability for violations of the FCPA or other anti-corruption laws and accordingly may have a material adverse effect on our reputation and our business, financial condition or results of operations.

Beginning in 2012, we received subpoenas and informal document requests from the SEC and the Department of Justice (“DOJ”) to produce documents with respect to compliance with the FCPA in certain countries. We have provided and will continue to provide documents and other information to the SEC and the DOJ, and are cooperating with the government in their investigations of these matters. We are also conducting a voluntary worldwide investigation into certain business practices that may have FCPA implications and have engaged independent counsel to assist in the investigation. In the course of our investigation, which is continuing, we have identified issues in Russia, certain Eastern European countries, certain Latin American countries and other countries where we conduct business that could rise to the level of FCPA violations and/or violations of local law. We have brought these issues to the attention of the SEC and the DOJ.

Our internal investigation is not complete and additional issues or facts could become known to management as the investigation continues, which may expand the scope or severity of the potential violations and/or extend to additional jurisdictions beyond those described above. Our investigation is expected to continue through the end of 2014 and may continue beyond that date.

Due to the ongoing nature of these investigations, at this time we cannot predict any likely outcomes in these matters, and accordingly we cannot assure you that we will not be materially and adversely affected. The DOJ, SEC and other agencies and authorities have a broad range of civil and criminal penalties they may seek to impose (on the Company and/or individuals) for violations of the FCPA and other similar laws. We may be required to pay material fines and/or penalties and/or disgorge any profits earned from improper conduct. Our operations in the affected countries may be negatively impacted, and we may be subject to injunctions or limitations on future conduct, be required to modify our business practices and compliance programs and/or have a compliance monitor imposed on us, or suffer other criminal or civil penalties or adverse impacts, including lawsuits by private litigants or investigations and fines imposed by local authorities. In addition, there can be no assurance that the remedial measures we have taken and will take in the future will be effective or that there will not be a finding of a material weakness in our internal controls. Any one or more of the foregoing could have a material adverse effect on our reputation and our business, financial condition or results of operations.

Research and development efforts invested in our pipeline of specialty and other products may not achieve expected results.

We must invest increasingly significant resources to develop specialty medicines, (including our strategic focus on developing new therapeutic entities, as well as the development of complex generics), both through our own efforts and through collaborations and in-licensing or acquisition of products from or with third parties. The development of specialty medicines involves processes and expertise different from those used in the development of generic medicines, which increases the risks of failure that we face. For example, the time from discovery to commercial launch of a specialty medicine can be 15 years or even longer, and involves multiple stages: not only intensive preclinical and clinical testing, but also highly complex, lengthy and expensive approval processes which can vary from country to country. The longer it takes to develop a product, the less time there will be for us to recover our development costs and generate profits.

During each stage, we may encounter obstacles that delay the development process and increase expenses, leading to significant risks that we will not achieve our goals and may be forced to abandon a potential product in which we have invested substantial amounts of time and money. These obstacles may include: preclinical failures; difficulty enrolling patients in clinical trials; delays in completing formulation and other work needed to support an application for approval; adverse reactions or other safety concerns arising during clinical testing;

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insufficient clinical trial data to support the safety or efficacy of the product candidate; and failure to obtain, or delays in obtaining, the required regulatory approvals for the product candidate or the facilities in which it is manufactured.

Because of the amounts required to be invested in augmenting our pipeline of specialty and other products, we are reliant on partnerships and joint ventures with third parties, and consequently face the risk that some of these third parties may fail to perform their obligations, or fail to reach the levels of success that we are relying on to meet our revenue and profit goals. There is a trend in the specialty pharmaceutical industry of seeking to “outsource” drug development by acquiring companies with promising drug candidates, and we face substantial competition from historically innovative companies for such acquisition targets.

We may not be able to reduce operating expenses to the extent and during the timeframe intended by our cost reduction program.

In December 2012, we announced a cost reduction program intended to result in $2 billion in cost reductions by the end of 2017, with half of that targeted by the end of 2014. As part of this program, we are reducing our employee headcount by approximately 10%. This program, the first of its magnitude in our history, is a significant pillar of our strategy, with much of the expected savings targeted for reinvestment in our business. The announced plan for headcount reductions has generated intense governmental and union opposition in Israel and may generate similar opposition in European countries and other locations where we have significant numbers of unionized employees. If such opposition limits our ability to carry out workforce-related aspects of our cost savings program or causes us to grant significant financial concessions, our ability to achieve planned cost reductions will be further impacted. If we are unable to achieve our cost reduction targets during the expected timeframes, our results of operations will be negatively affected and our ability to execute other aspects of our strategy may be slowed or undermined.

We may not be able to find or successfully bid for suitable acquisition targets or licensing opportunities, or consummate and integrate future acquisitions.

As a key part of our strategy, we continue to be engaged in various stages of evaluating or pursuing potential acquisitions, collaborations and licenses, among other transactions. Our reliance on acquisitions and other transactions as a means of growth involves risks that could adversely affect our future revenues and operating results. For example:

• We may fail to identify transactions that would enable us to execute our business strategy.

• Competition in the pharmaceutical industry for target companies and development programs has intensified and may result in decreased availability of, or increased prices for, suitable transactions.

• We may not be able to obtain necessary regulatory approvals, including those of competition authorities, and as a result, or for other reasons, we may fail to consummate an announced acquisition.

• The negotiation of increasing numbers of transactions may divert management’s attention from our existing business operations, resulting in the loss of key customers and/or personnel and exposing us to unanticipated liabilities.

• We may fail to integrate acquisitions successfully in accordance with our business strategy or achieve expected synergies and other results.

• We may not be able to retain experienced management and skilled employees from the businesses we acquire and, if we cannot retain such personnel, we may not be able to attract new skilled employees and experienced management to replace them.

• We may purchase a company that has excessive known or unknown contingent liabilities, including, among others, patent infringement or product liability claims.

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Manufacturing or quality control problems may damage our reputation for quality production, demand costly remedial activities and negatively impact our financial results.

As a pharmaceutical company, we are subject to substantial regulation by various governmental authorities. For instance, we must comply with requirements of the U.S. Food and Drug Administration (“FDA”), European Medicines Agency and other healthcare regulators with respect to the manufacture, labeling, sale, distribution, marketing, advertising, promotion and development of pharmaceutical products. Failure to comply strictly with these regulations and requirements may damage our reputation and lead to financial penalties, compliance expenditures, the recall or seizure of products, total or partial suspension of production and/or distribution, suspension of the applicable regulator’s review of our submissions, enforcement actions, injunctions and criminal prosecution. We must register our facilities, whether located in the United States or elsewhere, with the FDA as well as regulators outside the United States, and our products must be made in a manner consistent with current good manufacturing practices (“cGMP”), or similar standards in each territory in which we manufacture. In addition, the FDA and other agencies periodically inspect our manufacturing facilities. Following an inspection, an agency may issue a notice listing conditions that are believed to violate cGMP or other regulations, or a warning letter for violations of “regulatory significance” that may result in enforcement action if not promptly and adequately corrected.

In recent years, there has been increasing regulatory scrutiny of pharmaceutical manufacturers, resulting in product recalls, plant shutdowns and other required remedial actions. We have been subject to increasing scrutiny of our manufacturing operations, and several of our facilities have been the subject of significant regulatory actions requiring substantial expenditures of resources to ensure compliance with more stringently applied production and quality control regulations. These regulatory actions also adversely affected our ability to supply various products worldwide and to obtain new product approvals at such facilities. If any regulatory body were to require one or more of our significant manufacturing facilities to cease or limit production, our business could be adversely affected. In addition, because regulatory approval to manufacture a drug is site-specific, the delay and cost of remedial actions, or obtaining approval to manufacture at a different facility also could have a material adverse effect on our business, financial position and results of operations.

We may be susceptible to significant product liability claims that are not covered by insurance.

Our business inherently exposes us to claims for injuries allegedly resulting from the use of our products. As we continue to expand our portfolio of available products (including products sold by companies we have acquired), we have experienced a significant increase in both the number of product liability claims asserted against us and the number of products attracting personal injury claims. For example, during 2010 and 2011, juries awarded approximately $800 million in compensatory and punitive damages against us and our distributors related to claims involving our propofol product. We expect the potential for product liability claims to increase further if recently proposed regulations that permit companies to change the labeling of their generic products take effect.

Many of the products we sell are not covered by insurance, and even those that are covered are subject to a very high deductible and/or self-insured retention. Product liability coverage for pharmaceutical companies, including us, continues to become more expensive and increasingly difficult to obtain and accordingly the trend is to seek coverage only for catastrophic liability. In addition, where claims are made under insurance policies, insurers may reserve the right to deny coverage on various grounds.

Our patent settlement agreements, which are important to our business, are facing increased government scrutiny in both the U.S. and Europe, and may expose us to significant damages.

We have been involved in numerous litigations involving challenges to the validity or enforceability of listed patents (including our own), and therefore settling patent litigations has been and is likely to continue to be an important part of our business. Parties to such settlement agreements in the U.S., including us, are required by law to file them with the Federal Trade Commission (“FTC”) and the Antitrust Division of the DOJ for review.

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The FTC has publicly stated that, in its view, some of the brand-generic settlement agreements violate the antitrust laws and has brought actions against some brand and generic companies, including us, that have entered into such agreements. Accordingly, we may receive formal or informal requests from the FTC for information about a particular settlement agreement, and there is a risk that the FTC may commence an action against us alleging violations of the antitrust laws. See “Competition Matters” in Note 14 to our consolidated financial statements.

Such settlement agreements may further expose us to claims by purchasers of the products for unlawfully inhibiting competition. We are currently defendants in private antitrust actions involving numerous settlement agreements, and in 2013 we recorded a provision of $495 million in connection with certain modafinil antitrust litigation, including amounts paid to settle certain of the claims. However, there can be no assurance that such amount will be sufficient to settle the matter with the remaining plaintiffs.

Similarly, the European Commission (“EU Commission”) has placed our European operations, as well as those of several brand and generic companies, under intense scrutiny in connection with its inquiry into possible anticompetitive conditions in the European pharmaceutical sector. The EU Commission has initiated proceedings against us in connection with one settlement agreement, and is investigating another agreement. Although we have argued that those agreements did not restrict competition, the EU Commission may rule against us, possibly imposing fines. It is also possible that the EU Commission would open investigations relating to subsequent agreements we have entered into. More generally, there is a risk that the increased scrutiny of the European pharmaceutical sector may lead to changes in the regulation of our business that would have an adverse impact on our results of operations in Europe.

Because we have substantial international operations, our sales and profits may be adversely affected by currency fluctuations and restrictions as well as credit risks.

In 2013, over 48% of our revenues came from sales outside the United States, a percentage that we expect to increase as we expand our non-U.S. operations. As a result, we are subject to significant foreign currency risks, including repatriation restrictions in certain countries. An increasing amount of our sales, particularly in Latin America, Central and Eastern European countries and Asia, is recorded in local currencies, which exposes us to the direct risk of devaluations, hyperinflation or exchange rate fluctuations. We may also be exposed to credit risks in some of these markets. The imposition of price controls or restrictions on the conversion of foreign currencies could also have a material adverse effect on our financial results.

In particular, although the majority of our net sales and operating costs is recorded in, or linked to, the U.S. dollar, our reporting currency, in 2013 we recorded sales and expenses in 37 other currencies. Approximately 55% of our operating costs in 2013 were incurred in currencies other than the U.S. dollar, particularly in euros, Israeli shekels, Hungarian forints, Canadian dollars, Japanese yen and the British pound. As a result, fluctuations in exchange rates between the currencies in which such costs are incurred and the U.S. dollar may have a material adverse effect on our results of operations, the value of balance sheet items denominated in foreign currencies and our financial condition.

We use derivative financial instruments and “hedging” techniques to manage some of our net exposure to currency exchange rate fluctuations in the major foreign currencies in which we operate. However, not all of our potential exposure is covered, and some elements of our consolidated financial statements, such as our equity position or operating profit, are not fully protected against foreign currency exposures. Therefore, our exposure to exchange rate fluctuations could have a material adverse effect on our financial results.

The success of our specialty medicines depends on the effectiveness of our patents, confidentiality agreements and other measures to protect our intellectual property rights.

The success of our specialty medicines depends substantially on our ability to obtain patents and to defend our intellectual property rights. If we fail to protect our intellectual property adequately, competitors may manufacture and market products identical or similar to ours. We have been issued numerous patents covering

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our specialty medicines, and have filed, and expect to continue to file, patent applications seeking to protect newly developed technologies and products in various countries, including the United States. Currently pending patent applications may not result in issued patents or be approved on a timely basis or at all. Any existing or future patents issued to or licensed by us may not provide us with any competitive advantages for our products or may be challenged or circumvented by competitors.

We are currently engaged in lawsuits challenging the validity and/or enforceability of the patents covering Copaxone^®, our leading specialty medicine, Azilect^®, Fentora^®, Nuvigil^®, ProAir^® HFA and Treanda^®. While we intend to defend the validity of these patents vigorously, and will seek to use all appropriate methods to prevent their infringement, such efforts are expensive and time consuming. Due to the nature of litigation, there can be no assurance that such efforts will be successful. Our ability to enforce our patents also depends on the laws of individual countries and each country’s practices regarding the enforcement of intellectual property rights. The loss of patent protection or regulatory exclusivity on these or other specialty medicines could materially impact our business, results of operations, financial conditions or prospects.

We also rely on trade secrets, unpatented proprietary know-how, trademarks, data exclusivity and continuing technological innovation that we seek to protect, in part by confidentiality agreements with licensees, suppliers, employees and consultants. If these agreements are breached, it is possible that we will not have adequate remedies. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. Furthermore, our trade secrets and proprietary technology may otherwise become known or be independently developed by our competitors or we may not be able to maintain the confidentiality of information relating to such products.

Healthcare reforms, and related reductions in pharmaceutical pricing, reimbursement and coverage, by governmental authorities and third-party payors may adversely affect our business.

The continuing increase in expenditures for healthcare has been the subject of considerable government attention almost everywhere we conduct business, particularly as public resources have been stretched by financial and economic crises in the United States, Western Europe and elsewhere. Both private health insurance funds and government health authorities continue to seek ways to reduce or contain healthcare costs, including by reducing or eliminating coverage for certain products and lowering reimbursement levels. In most of the countries and regions where we operate, including the United States, Western Europe, Israel, Russia, certain countries in Central and Eastern Europe and several countries in Latin America, pharmaceutical prices are subject to new government policies designed to reduce healthcare costs. These changes frequently adversely affect pricing and profitability and may cause delays in market entry. We cannot predict which additional measures may be adopted or the impact of current and additional measures on the marketing, pricing and demand for our products.

Significant developments that may affect pricing in the United States include (i) the enactment of federal healthcare reform laws and regulations, including the Medicare Prescription Drug Improvement and Modernization Act of 2003 and the Patient Protection and Affordable Care Act of 2010, and (ii) trends in the practices of managed care groups and institutional and governmental purchasers. Changes to the healthcare system enacted as part of healthcare reform in the United States, as well as the increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, may result in increased pricing pressure by influencing, for instance, the reimbursement policies of third-party payors. Recent healthcare reform legislation may increase the number of patients who have insurance coverage for our products, but provisions such as the assessment of a pharmaceutical manufacturer fee and an increase in the amount of rebates that manufacturers pay for coverage of their drugs by Medicaid programs may have an adverse effect on us. It is uncertain how current and future reforms in these areas will influence the future of our business operations and financial condition.

In addition, “tender systems” for generic pharmaceuticals have been implemented (by both public and private entities) in a number of significant markets in which we operate, including Germany and Russia, in an effort to lower prices. Under such tender systems, manufacturers submit bids that establish prices for generic

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pharmaceutical products. These measures impact marketing practices and reimbursement of drugs and may further increase pressure on competition and reimbursement margins. Certain other countries may consider the implementation of a tender system. Failing to win tenders, or the implementation of similar systems in other markets leading to further price declines, could have a material adverse effect on our business, financial position and results of operations.

Governmental investigations into sales and marketing practices, particularly for our specialty pharmaceutical products, may result in substantial penalties.

We operate around the world in complex legal and regulatory environments, and any failure to comply with applicable laws, rules and regulations may result in civil and/or criminal legal proceedings. As those rules and regulations change or as interpretations of those rules and regulations evolve, our prior conduct or that of companies we have acquired may be called into question. In the United States, we are currently responding to federal investigations into our marketing practices with regard to several of our specialty pharmaceutical products, which could result in civil litigation brought on behalf of the federal government. Responding to such investigations is costly and involves a significant diversion of management’s attention. Such proceedings are unpredictable and may develop over lengthy periods of time. Future settlements may involve large cash penalties. In addition, government authorities have significant leverage to persuade pharmaceutical companies to enter into corporate integrity agreements, which can be expensive and disruptive to operations. See “Government Investigations, Pricing and Other Investigations” in Note 14 to our consolidated financial statements.

Uncertainties related to our recent management changes may adversely affect our business, strategy and financial results.

In January 2014, we announced the appointment of Erez Vigodman as our President and Chief Executive Officer, effective February 11, 2014. Mr. Vigodman is our fifth CEO since 2007 and the fourth since 2012. As a result of these frequent management transitions, we may face uncertainties regarding our future business strategy and direction. These uncertainties may cause or result in disruption of our business or distraction of our employees and management; difficulty in recruiting, hiring, motivating, and retaining talented and skilled personnel, including current members of management; and difficulty in negotiating, maintaining, or consummating business or strategic relationships or transactions. If we are unable to mitigate these or other potential risks, our revenue, operating results, and financial condition may be adversely impacted.

We have significantly increased our leverage in recent years and substantially increased our refinancing activities, making us increasingly reliant on access to the capital markets at favorable terms.

Over the last eight years, our short- and long-term indebtedness has increased from approximately $2.1 billion to approximately $12.2 billion. As a result, our principal and interest payment obligations have increased substantially, as have our costs relating to financing activities. The degree to which we are leveraged could affect our ability to obtain additional financing for working capital, acquisitions, refinancing of existing debt or other purposes and could make us more vulnerable to industry downturns and competitive pressures as well as interest rate and other refinancing risks. In addition, due in part to the continuing effects of the unstable economic environment, capital markets have been more volatile in recent times. Such volatility may adversely affect our ability to obtain financing on favorable terms at a time when we face the need to access the capital markets regularly. Our ability to refinance existing debt and meet our debt service obligations will be dependent upon our future performance and access to the capital markets, which will be subject to financial, business and other factors affecting our operations (including our long-term unsecured credit ratings), many of which are beyond our control.

The failure to recruit or retain key personnel, or to attract additional executive and managerial talent, could adversely affect our business.

Given the increasing size, complexity and global reach of our business and our multiple areas of focus, each of which would be a significant stand-alone company, we are especially reliant upon our ability to recruit and retain highly qualified management and other employees. In 2013, we added new senior management personnel,

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including a new strategy officer, among others, and in early 2014 we named a new chief executive officer, who is the fourth person to lead our company since 2012. In addition, the success of our research and development activities depends on our ability to attract and retain sufficient numbers of skilled scientific personnel. Any loss of service of key members of our organization, or any diminution in our ability to continue to attract high-quality employees, may delay or prevent the achievement of major business objectives. In addition, there is a risk that we will not strike the appropriate balance between retaining existing managerial talent and achieving the targets of the cost reduction program mentioned above.

We have significant operations in countries that may be adversely affected by political or economic instability, major hostilities or acts of terrorism.

We are a global pharmaceutical company with worldwide operations. Although over 80% of our sales are in the United States and Europe, we expect to derive an increasing portion of our sales and future growth from other regions such as Latin America, Central and Eastern Europe and Asia, which may be more susceptible to political and economic instability.

Significant portions of our operations are conducted outside the markets in which our products are sold, and accordingly we often import a substantial number of products into such markets. We may, therefore, be denied access to our customers or suppliers or denied the ability to ship products from any of our sites as a result of a closing of the borders of the countries in which we sell our products, or in which our operations are located, due to economic, legislative, political and military conditions, including hostilities and acts of terror, in such countries.

Our executive offices and a substantial percentage of our manufacturing capabilities are located in Israel. Our Israeli operations are dependent upon materials imported from outside Israel. We also export significant amounts of products from Israel. Accordingly, our operations could be materially and adversely affected by acts of terrorism or if major hostilities were to occur in the Middle East or trade between Israel and its present trading partners were curtailed, including as a result of acts of terrorism in the U.S. or elsewhere.

The manufacture of our products is highly complex, and an interruption in our supply chain or problems with internal or third party information technology systems could adversely affect our results of operations.

Our products are either manufactured at our own facilities or obtained through supply agreements with third parties. Many of our products are the result of complex manufacturing processes, and some require highly specialized raw materials. For some of our key raw materials, we have only a single, external source of supply, and alternate sources of supply may not be readily available. For example, we purchase raw materials for most of our oral contraceptive products, which make up a substantial portion of our women’s health business, exclusively or primarily from the same external source. If our supply of certain raw materials or finished products is interrupted from time to time, or proves insufficient to meet demand, our results of operations could be adversely impacted.

We also rely on complex shipping arrangements throughout the various facilities of our supply chain spectrum. Customs clearance and shipping by land, air or sea routes rely on and may be affected by factors that are not in our full control or are hard to predict.

In addition, we rely on complex information technology systems, including Internet-based systems, to support our supply-chain processes as well as internal and external communications. The size and complexity of our systems make them potentially vulnerable to breakdown or interruption, whether due to computer viruses or other causes that may result in the loss of key information or the impairment of production and other supply chain processes. Such disruptions and breaches of security could adversely affect our business.

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Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business.

A significant invasion, interruption, destruction or breakdown of our information technology systems and/or infrastructure by persons with authorized or unauthorized access could negatively impact our business and operations. We could also experience business interruption, information theft and/or reputational damage from cyber attacks, which may compromise our systems and lead to data leakage either internally or at our third party providers. Our systems have been, and are expected to continue to be, the target of malware and other cyber attacks. Although we have invested in measures to reduce these risks, we cannot assure you that these measures will be successful in preventing compromise and/or disruption of our information technology systems and related data.

Our revenues and profits from generic pharmaceutical products typically decline as a result of competition, both from other pharmaceutical companies and as a result of increased governmental pricing pressure.

Our generic drugs face intense competition. Prices of generic drugs typically decline, often dramatically, especially as additional generic pharmaceutical companies (including low-cost generic producers based in China and India) receive approvals and enter the market for a given product and competition intensifies. Consequently, our ability to sustain our sales and profitability on any given product over time is affected by the number of new companies selling such product and the timing of their approvals.

In addition, intense pressure from government healthcare authorities, particularly in highly regulated European markets, to reduce their expenditures on prescription drugs has resulted in lower pharmaceutical pricing, causing decreases in revenues and profits.

Furthermore, brand pharmaceutical companies continue to defend their products vigorously. For example, brand companies often sell or license their own generic versions of their products, either directly or through other generic pharmaceutical companies (so-called “authorized generics”). No significant regulatory approvals are required for authorized generics, and brand companies do not face any other significant barriers to entry into such market. Brand companies may seek to delay introductions of generic equivalents through a variety of commercial and regulatory tactics. These actions may increase the costs and risks of our efforts to introduce generic products and may delay or prevent such introduction altogether.

Our specialty pharmaceuticals business faces intense competition from companies that have greater resources and capabilities.

We face intense competition in our specialty pharmaceutical business. Many of our competitors are larger and/or have substantially greater experience in the development and marketing of branded, innovative and consumer-oriented products. They may be able to respond more quickly to new or emerging market preferences or to devote greater resources to the development and marketing of new products and/or technologies than we can. As a result, any products and/or innovations that we develop may become obsolete or noncompetitive before we can recover the expenses incurred in connection with their development. In addition, for these product categories we must demonstrate to physicians, patients and third-party payors the benefits of our products relative to competing products that are often more familiar or otherwise more well-established. If competitors introduce new products or new variations on their existing products, our marketed products, even those protected by patents, may be replaced in the marketplace or we may be required to lower our prices.

In addition, our increased focus on innovative and specialty pharmaceuticals requires much greater use of a direct sales force than does our core generic business. Our ability to realize significant revenues from direct marketing and sales activities depends on our ability to attract and retain qualified sales personnel. Competition for qualified sales personnel is intense. We may also need to enter into co-promotion, contract sales force or other such arrangements with third parties, for example, where our own direct sales force is not large enough or

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sufficiently well-aligned to achieve maximum penetration in the market. Any failure to attract or retain qualified sales personnel or to enter into third-party arrangements on favorable terms could prevent us from successfully maintaining current sales levels or commercializing new innovative and specialty products.

Decreased opportunities to obtain U.S. market exclusivity for generic versions of significant products may adversely affect our revenues and profits.

Our ability to achieve continued growth and profitability through sales of generic pharmaceuticals is dependent on our success in challenging patents, developing non-infringing products or developing products with increased complexity to provide opportunities with U.S. market exclusivity or limited competition. The failure to continue to develop such opportunities could adversely affect our sales and profitability.

To the extent that we succeed in being the first to market a generic version of a significant product, and particularly if we are the only company authorized to sell during the 180-day period of exclusivity in the U.S. market, as provided under the Hatch-Waxman Act, our sales, profits and profitability can be substantially increased in the period following the introduction of such product and prior to a competitor’s introduction of an equivalent product. Even after the exclusivity period ends, there is often continuing benefit from being the first generic product in the market.

However, the number of significant new generic products for which Hatch-Waxman exclusivity is available, and the size of those product opportunities, has decreased in recent years, and patent challenges have become more difficult. Additionally, increasingly we share the 180-day exclusivity period with other generic competitors, which diminishes the commercial value of the exclusivity.

The 180-day market exclusivity period is triggered by commercial marketing of the generic product or, in certain cases, can be triggered by a final court decision that is no longer subject to appeal holding the applicable patents to be invalid, unenforceable or not infringed. However, the exclusivity period can be forfeited by our failure to obtain tentative approval of our product within a specified statutory period or to launch a product following such a court decision. The Hatch-Waxman Act also contains other forfeiture provisions that may deprive the first “Paragraph IV” filer of exclusivity if certain conditions are met, some of which may be outside our control. Accordingly, we may face the risk that our exclusivity period is triggered or forfeited before we are able to commercialize a product and therefore may not be able to exploit a given exclusivity period for specific products.

We have sold and may in the future elect to sell generic products prior to the final resolution of outstanding patent litigation, and, as a result, we could be subject to liability for damages in the U.S., Europe and other markets where we do business.

Our ability to introduce new products depends in large part upon the success of our challenges to patent rights held by third parties or our ability to develop non-infringing products. Based upon a variety of legal and commercial factors, we may elect to sell a generic product even though patent litigation is still pending, either before any court decision is rendered or while an appeal of a lower court decision is pending. The outcome of such patent litigation could, in certain cases, materially adversely affect our business. For example, we launched a generic version of Protonix^® (pantoprazole), despite the fact that litigation with the company that sells the brand versions was still pending at the time. In 2013, we settled the pantoprazole litigation and recorded aggregate charges of $1.6 billion in 2012 and 2013 related to this matter.

If we sell products prior to a final court decision, whether in the United States, Europe or elsewhere, and such decision is adverse to us, we could be required to cease selling the infringing products, causing us to lose future sales revenue from such products and to face substantial liabilities for patent infringement, in the form of either payment for the innovator’s lost profits or a royalty on our sales of the infringing products. These damages may be significant, and could materially adversely affect our business. In the United States, in the event of a finding of willful infringement, the damages may be up to three times the profits lost by the patent owner. Because of the discount pricing typically involved with generic pharmaceutical products, patented brand products

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generally realize a significantly higher profit margin than generic pharmaceutical products. In addition, even if we do not suffer damages, we may incur significant legal and related expenses in the course of successfully defending against infringement claims.

Any failure to comply with the complex reporting and payment obligations under the Medicare and Medicaid programs may result in further litigation or sanctions, in addition to those that we have announced in previous years.

The U.S. laws and regulations regarding Medicare and/or Medicaid reimbursement and rebates and other governmental programs are complex. Some of the applicable laws may impose liability even in the absence of specific intent to defraud. The subjective decisions and complex methodologies used in making calculations under these programs are subject to review and challenge, and it is possible that such reviews could result in material changes. A number of state attorneys general and others have filed lawsuits alleging that we and other pharmaceutical companies reported inflated average wholesale prices, leading to excessive payments by Medicare and/or Medicaid for prescription drugs. Such allegations could, if proven or settled, result in additional monetary penalties (beyond the lawsuits we have already settled) and possible exclusion from Medicare, Medicaid and other programs. In addition, we are notified from time to time of governmental investigations regarding drug reimbursement or pricing issues. See “Government Investigations, Pricing and Other Investigations” in Note 14 to our consolidated financial statements.

Sales of our products may be adversely affected by the continuing consolidation of our customer base.

A significant proportion of our sales is made to relatively few U.S. retail drug chains, wholesalers, managed care purchasing organizations, mail order distributors and hospitals. These customers are continuing to undergo significant consolidation. Net sales to one such customer in 2013 accounted for 17% of our total consolidated sales. Such consolidation has provided and may continue to provide them with additional purchasing leverage, and consequently may increase the pricing pressures that we face. Additionally, the emergence of large buying groups representing independent retail pharmacies, and the prevalence and influence of managed care organizations and similar institutions, enable those groups to extract price discounts on our products.

Our net sales and quarterly growth comparisons may also be affected by fluctuations in the buying patterns of retail chains, major distributors and other trade buyers, whether resulting from seasonality, pricing, wholesaler buying decisions or other factors. In addition, since such a significant portion of our U.S. revenues is derived from relatively few customers, any financial difficulties experienced by a single customer, or any delay in receiving payments from a single customer, could have a material adverse effect on our business, financial condition and results of operations.

The large amount of intangible assets and goodwill recorded on our balance sheet may continue to lead to significant impairment charges in the future.

We regularly review our long-lived assets, including identifiable intangible assets and goodwill, for impairment. Goodwill and acquired indefinite life intangible assets are subject to impairment review on an annual basis and whenever potential impairment indicators are present. Other long-lived assets are reviewed when there is an indication that an impairment may have occurred. The amount of goodwill and identifiable intangible assets on our consolidated balance sheet has increased significantly in recent years to $25.5 billion as a result of our acquisitions, and may increase further following future acquisitions. For example, in 2013, we recorded identifiable intangible assets impairment charges of $393 million. Changes in market conditions or other changes in the future outlook of value may lead to further impairment charges in the future. In addition, we may from time to time sell assets that we determine are not critical to our strategy or execution. Future events or decisions may lead to asset impairments and/or related charges. Certain non-cash impairments may result from a change in our strategic goals, business direction or other factors relating to the overall business environment. Any significant impairment charges could have a material adverse effect on our results of operations.

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Our tax liabilities could be larger than anticipated.

We are subject to tax in many jurisdictions, and significant judgment is required in determining our provision for income taxes. Likewise, we are subject to audit by tax authorities in many jurisdictions. In such audits, our interpretation of tax legislation might be challenged and tax authorities in various jurisdictions may disagree with, and subsequently challenge, the amount of profits taxed in such jurisdictions under our inter-company agreements. For example, in 2013, we paid the Israeli tax authorities approximately $790 million in additional income taxes, applying the provisions of Amendment 69 to the Israeli Law for the Encouragement of Capital Investments, 1959 to certain previously tax-exempt profits, as well as to settle tax assessments for the years 2005 to 2007. Although we believe our estimates are reasonable, the ultimate outcome of such audits and related litigation could be different from our provision for taxes and might have a material adverse effect on our consolidated financial statements.

The termination or expiration of governmental programs or tax benefits, or a change in our business, could adversely affect our overall effective tax rate.

Our tax expenses and the resulting effective tax rate reflected in our consolidated financial statements are likely to increase over time as a result of changes in corporate income tax rates, other changes in the tax laws of the various countries in which we operate or changes in our product mix or the mix of countries where we generate profit. We have benefited, and currently benefit, from a variety of Israeli and other government programs and tax benefits that generally carry conditions that we must meet in order to be eligible to obtain such benefits. If we fail to meet the conditions upon which certain favorable tax treatment is based, we would not be able to claim future tax benefits and could be required to refund tax benefits already received. Additionally, some of these programs and the related tax benefits are available to us for a limited number of years, and these benefits expire from time to time.

Any of the following could have a material effect on our overall effective tax rate:

• some government programs may be discontinued, or, as is the case in Israel from 2014 and on, the applicable tax rates may increase;

• we may be unable to meet the requirements for continuing to qualify for some programs;

• these programs and tax benefits may be unavailable at their current levels;

• upon expiration of a particular benefit, we may not be eligible to participate in a new program or qualify for a new tax benefit that would offset the loss of the expiring tax benefit; or

• we may be required to refund previously recognized tax benefits if we are found to be in violation of the stipulated conditions.

Because our facilities are located throughout the world, we are subject to varying patent laws that may adversely affect our ability to manufacture our products.

We are subject to legislation in all countries where we have manufacturing facilities relating to patents. Modifications of such legislation or court decisions regarding such legislation may adversely affect us and may impact our ability to export product-manufactured in any such country in a timely fashion. Additionally, the existence of third-party patents in such countries, with the attendant risk of litigation, may cause us to move production to a different country (with potentially serious timing delays) or otherwise adversely affect our ability to export certain products from such countries.

Our failure to comply with applicable environmental laws and regulations worldwide could adversely impact our business and results of operations.

We are subject to laws and regulations concerning the environment, safety matters, regulation of chemicals and product safety in the countries where we manufacture and sell our products or otherwise operate our business. These requirements include regulation of the handling, manufacture, transportation, storage, use and disposal of materials, including the discharge of pollutants into the environment. In the normal course of our

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business, we are exposed to risks relating to possible releases of hazardous substances into the environment, which could cause environmental or property damage or personal injuries, and which could require remediation of contaminated soil and groundwater. Under certain laws, we may be required to remediate contamination at certain of our properties, regardless of whether the contamination was caused by us or by previous occupants of the property.

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ITEM 4: INFORMATION ON THE COMPANY

Introduction

Teva Pharmaceutical Industries Limited is a fully-integrated global pharmaceutical company. Our business includes two primary segments: generic medicines and specialty medicines, as well as certain additional activities that are not part of these segments. As the world’s largest generic company with an established specialty medicines portfolio, Teva is strategically positioned to benefit from the current changes in the global healthcare environment.

Teva’s business strategy seeks to capitalize on the growing global need for medicines, and evolving market, economic and legislative dynamics. These dynamics include the aging population, increased spending on pharmaceuticals in emerging markets, economic pressure on governments and private payors to provide cost-effective healthcare solutions, legislative and regulatory reforms, unmet patient needs, an increase in patient awareness and the growing importance of over-the-counter (“OTC”) medicines.

We believe that our targeted strategy, dedicated leadership and employees, world-leading generics expertise and portfolio, global reach, integrated R&D capabilities and global infrastructure and scale position us to take advantage of opportunities created by these dynamics. These strengths are expressed across our business, as follows:

• Teva is a leader in the global generic medicines industry, with a leading position in the United States and in Europe. We also have a significant presence in Canada, are growing in Russia and Latin America, established a major presence in Japan and entered the South Korean market.

• Our broad technological capabilities enable us to provide an unparalleled array of generic products. These capabilities include solid dose manufacturing, formulation expertise, complex active pharmaceutical ingredients (“APIs”) and injectable, inhalation and other delivery devices.

• We are also one of the world’s leading manufacturers of APIs, with operations around the globe, and we produce APIs not only for our own use but also for many other pharmaceutical companies.

• We have a specialty pharmaceutical business with a growing late-stage pipeline, focused on the central nervous system and respiratory therapeutic areas, with selective investments in oncology, women’s health and other areas that fit with our strategy.

• We are in the process of expanding our central nervous system, respiratory, oncology, women’s health and other specialty businesses, by focusing on new therapeutic entities (“NTEs”), which are known molecules that are formulated, delivered or used in a novel way to address specific patient needs. We are leveraging our strength in integrated generic and specialty R&D, our scalable production network, market access and knowledge to create a substantial opportunity for growth in this area.

• We have an important and growing global OTC business, primarily through our joint venture with The Procter & Gamble Company (“P&G”), combining our production capabilities and market reach with P&G’s marketing expertise and expansive global platform.

In 2013, approximately 50% of our revenues were generated from generic medicines, including APIs sold to third parties. Approximately 40% of our revenues were generated from specialty medicines, primarily Copaxone^®, Treanda^®, Azilect^®, Nuvigil^®, ProAir^® HFA and Qvar^® and others. Our remaining revenues were generated from our other activities, primarily our joint venture with P&G, and our Hungarian and Israeli distribution services for third parties.

In 2013, we generated approximately 42% of our generic revenues in the United States, approximately 35% in Europe (which for the purpose of this report includes all European Union (“EU”) member states, Norway, Switzerland, Albania and the countries of former Yugoslavia) and approximately 23% in our ROW markets (primarily Japan, Canada, Latin America, Israel and Russia).

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For a three year breakdown of our revenues by segment and by geography, see “Item 5—Operating and Financial Review and Prospects—Results of Operations.”

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. Our executive offices are located at 5 Basel Street, P.O. Box 3190, Petach Tikva 4951033, Israel, and our telephone number is +972-3-926-7267. Our website is www.tevapharm.com.

Strategy

Our strategy is based on our commitment to tailoring our generic, specialty and other activities to the needs of individual markets and to providing relevant options for patients, physicians and customers. We recognize that fundamental changes are required to meet the changing demands of a global healthcare landscape. We continuously seek to meet the needs of all of our stakeholders by leveraging our geographic reach, focused specialty medicines portfolio, integrated R&D programs, leading manufacturing and distribution capabilities and pricing flexibility to achieve a balanced and integrated approach to all our activities.

The key elements of our strategy consist of the following:

• Accelerating our growth platforms. In our generics business, we are focusing on high-value medicines, medicines with higher barriers to entry and branded generics. In the United States, we are working to establish a leadership position in high-value generics by pursuing first-to-market opportunities and developing complex generic products, as well as by concentrating on high-margin, low competition products. We expect to continue to pursue Paragraph IV patent challenge opportunities, where available. In Europe, we are focusing on profitable growth, leveraging the synergies with our specialty and OTC medicines. In our ROW markets, we use our global footprint, broad portfolio, branded generics and market knowledge to help ensure sustainable and profitable growth. In all markets, we work closely with our customers to strengthen and maintain high value, mutually beneficial relationships.

• Extending our global presence. In countries where we already have a strong presence, such as Russia and Japan, we are enhancing and refining our portfolio to meet local needs, and seek to further increase our presence in order to achieve market leadership. In other markets, we will seek to grow our existing business to obtain a critical mass. We will also expand our early stage businesses in markets such as South Korea and China and seek to enter new markets such as Brazil and certain Southeast Asia markets, either through partnerships or direct investment in the local markets. In our specialty business, we are continuing the global expansion of our existing products into new markets, leveraging on our proven success, technologies, patient understanding and capabilities. For OTC medicines, we have been increasing the presence of our joint venture with P&G in emerging markets, and are expanding existing local brands into new geographies.

• Protecting and expanding our core specialty franchises. We are vigorously protecting and extending our multiple sclerosis (“MS”) franchise, including through the development of three times a week, 40 mg Copaxone^®, and exploring opportunities to expand into other neurodegenerative and central nervous system (“CNS”) diseases. Our intent remains, as always, to provide patients with the best and safest treatments for their diseases. Building on our record of supporting and helping patients with chronic conditions, we will also enhance our presence in pain treatment with our current and new opioid-based products and investigate other non-opioid alternatives. In the respiratory therapeutic area, we will improve the life cycle of our current products, develop existing molecules on our innovative multi-dose powder inhaler platform, and investigate new technological platforms and disease areas. In addition, we will make selective investments in women’s health, oncology and other areas.

• Developing New Therapeutic Entities. As part of our strategy to expand our specialty business, we are focusing on NTEs, which are known molecules that are formulated, delivered or used in a novel

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way to address specific patient needs. As a result of our strength in integrated generic and specialty R&D, our scalable production network and market access and knowledge, we believe this area represents a substantial opportunity for growth. We are also seeking to improve our existing medicines and make them more convenient and potentially more efficacious.

• Executing strategic business development transactions. Our approach to business development is highly strategic, disciplined, and focused on enhancing our core specialty franchises (primarily in the CNS and respiratory therapeutic areas), and making selective investments in new or growing geographies. We will balance investment in growth with return to investors, and allocate our capital resources accordingly. In addition, we will continue to divest assets that are not part of our core strategy.

• Reducing our operating costs. In December 2012, we announced a cost reduction program intended to result in $2 billion in cost reductions by the end of 2017, with half of that targeted by the end of 2014. As part of that program, we are reducing our employee headcount by approximately 10%. We are focusing particular attention on improving our procurement systems by leveraging our purchasing power and improving our production network, supply chain, and resources deployment processes.

Transaction highlights

• NuPathe Inc.: In January 2014, we entered into a definitive agreement to purchase NuPathe Inc. (“NuPathe”). This transaction is expected to close in late February 2014. NuPathe’s leading product is Zecuity^®, the first and only prescription migraine patch approved by the FDA for the acute treatment of migraine with or without aura in adults.

• MicroDose Therapeutx: In July 2013, we acquired MicroDose Therapeutx, Inc. (“MicroDose”), a pharmaceutical and drug delivery company focused on inhalation technologies and products for lung diseases and infections.

• Sale of Animal Health Unit: In January 2013, we sold our U.S.-based animal health business, exiting the business.

• South Korea Business Venture: In December 2012, we formed a business venture in South Korea with Handok Pharmaceutical Co., Ltd. (“Handok”). We are responsible for manufacturing and supplying a wide range of generic and innovative medicines, and Handok is responsible for sales and marketing, distribution, and regulatory affairs.

• XEN402: In December 2012, we entered into a collaborative development and exclusive worldwide license agreement with Xenon Pharmaceuticals Inc. (“Xenon”) for its compound XEN402. XEN402 targets sodium channels found in sensory nerve endings that can increase in chronic painful conditions, and is currently in Phase II clinical development for a variety of pain-related disorders.

• Neurosearch A/S Assets: In October 2012, we acquired from Neurosearch A/S (“NeuroSearch”), a Danish company, the rights, assets and obligations relating to Huntexil^® (pridopidine/ACR16), a drug candidate being developed for the symptomatic treatment of hand movement, balance and gait disturbances in Huntington’s disease.

• PGT Healthcare: In November 2011, we formed a consumer health care joint venture with P&G, combining our OTC pharmaceutical businesses in all markets outside North America. We manufacture products to supply the joint venture’s markets as well as P&G’s existing North American OTC business. We own 49% of the joint venture, and P&G owns 51%. As of December 2012, the OTC products of Cephalon (Mepha) were included in the joint venture.

• Cephalon: In October 2011, we acquired Cephalon, Inc. (“Cephalon”), a global biopharmaceutical company with a marketed portfolio and pipeline of specialty products. This acquisition helped to diversify our specialty portfolio and enhance our innovative pipeline.

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• Japanese Transactions: In September 2011, we acquired the remaining shares in Taisho and the remaining 50% of our Japanese joint venture with Kowa Company Ltd. that we did not already own. In July 2011, we acquired Taiyo for $1.1 billion in cash. Taiyo had developed a large portfolio of generic products in Japan, with over 550 marketed products, and had advanced production facilities. Since April 2012, the majority of our Japan-based companies have operated under a single company known as Teva Seiyaku.

• Corporación Infarmasa: In January 2011, we acquired Corporación Infarmasa, a company in Peru with over 500 branded and unbranded generic pharmaceuticals.

• Laboratoire Théramex: In January 2011, we acquired Laboratoire Théramex, whose product portfolio included a variety of women’s health products sold in over 50 countries, primarily in Europe.

Our Segments

We operate our business in two segments:

• generic products, which includes chemical and therapeutic equivalents of originator pharmaceuticals in a variety of dosage forms, including tablets, capsules, ointments, creams, liquids, injectables and inhalants, as well as our API business; and

• specialty products, which includes several core franchises, most significantly medicines for CNS disorders (with a strong emphasis on MS, neurodegenerative disorders, and pain) and respiratory medicines, as well as other areas such as oncology and women’s health. Our specialty business also includes our emerging NTE activity.

In addition to these two segments, we have other activities, primarily PGT Healthcare, our OTC joint venture with P&G, distribution services primarily in Israel and Hungary, and sales of medical devices.

Generic Medicines

Generic pharmaceuticals are the chemical and therapeutic equivalents of originator pharmaceuticals and are typically sold at prices substantially below those of the originator’s product. 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 U.S. FDA inspections, and must receive regulatory approval prior to their sale in any given country. In the United States, the world’s largest generic market, generic pharmaceuticals 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 and invalidated or otherwise circumvented.

We develop, manufacture and sell generic pharmaceutical products in a variety of dosage forms, including tablets, capsules, ointments, creams, liquids, injectables and inhalants. We 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.

Sales of generic pharmaceuticals 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 encouraging generic substitution and the publication by regulatory authorities of lists of equivalent pharmaceuticals, which provide physicians and

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pharmacists with generic alternatives. In addition, various government agencies and many private managed care or insurance programs encourage the substitution of generics for brand-name pharmaceuticals as a cost-savings measure in the purchase of, or reimbursement for, prescription pharmaceuticals. Further, in countries as diverse as France, Japan and Brazil, 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. We believe that these factors, together with an aging population, an increase in global spending on pharmaceuticals, economic pressure on governments to provide less expensive healthcare solutions, legislative and regulatory reforms and a shift of decision-making power to payors, should lead to continued expansion in the global generic pharmaceuticals market, as well as increasing competition in this market.

In markets such as the United States, the Netherlands and Israel, generic pharmaceuticals are 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 drugs 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. In contrast, in Russia, Ukraine and Kazakhstan, some Asian and Latin American countries as well as certain European markets, generics are sold under brand names alongside the originator brand. In many of these “branded generic” markets, pharmacists dispense the specific pharmaceutical product 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, France, Italy and Spain, are hybrid markets with elements of both approaches.

We have an integrated global R&D function, encompassing both our generic R&D organization, which has capabilities in a wide range of dosage forms and therapeutic areas as well as in specialized product families, and our specialty R&D organization.

Through coordinated global research and development activities, we seek to establish leadership in high-value generics, both by pursuing first-to-market opportunities and by developing complex generic products. Our generic product development strategy is to establish a leadership position in high-barrier, complex products, while continuing to pursue Paragraph IV patent challenge opportunities in the United States and early launches globally.

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

Our position in the generics market is supported by our API R&D and manufacturing activities, which provide significant vertical integration for our own products. APIs used in pharmaceutical products are subject to regulatory oversight by national health authorities. We produce approximately 300 APIs for our own use and for sale to third parties in many therapeutic areas. We utilize a variety of production technologies, including chemical synthesis, semi-synthetic fermentation, enzymatic synthesis, high potency manufacturing, plant extract technology and peptides synthesis. Our advanced technology and expertise in the field of solid state particle technology enable us to meet specifications for particle size distribution, bulk density, specific surface area, polymorphism, as well as other characteristics.

Below is a description of our generic medicine business by the main geographic areas in which we operate.

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United States

We are the leading generic drug company in the United States. We market approximately 375 generic products in more than 1,100 dosage strengths and packaging sizes, including oral, injectables and inhaled products. We believe that the breadth of our product portfolio provides us with a strategic advantage, particularly as consolidation continues among purchasers, including large drugstore chains, wholesaling organizations, buying groups and managed care providers. Our growth strategy focuses on complex generic products that provide added value to our patients and customers, utilizing new and advanced technologies.

Marketing and Sales. In the United States, our wholesale and retail selling efforts are supported by advertising in professional journals and leading pharmacy websites, as well as participating in key medical and pharmaceutical conferences. We continue to strengthen consumer awareness about the benefits of generics through partnerships and digital marketing programs.

A substantial majority of our U.S. generic sales are made to retail drug chains and wholesalers, which continue to undergo significant consolidation and globalization. Our customer-centric approach to research and development, sales, and operations, has provided mutual strategic advantages to our customers. We are committed to the success of our customers in this segment and focus closely on them as important business partners.

Competitive Landscape. In the United States, we are subject to intense competition in the generic drug market from other domestic and foreign 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. We believe that our primary competitive advantages are our ability to continually introduce new and complex generic equivalents for brand-name drug products on a timely basis, our quality and cost-effective production, our customer service and the breadth of our product line. We believe we have a focused and competitive pricing strategy.

Europe

Europe, which we define as the 28 countries in the European Union, Norway, Switzerland, Albania and the countries of former Yugoslavia, is a diverse region with a population of over 500 million people. Despite their diversity, the European markets share many characteristics that allow us to leverage our pan-European presence and broad portfolio.

We are the leading generic pharmaceutical company in Europe overall, and a market-leading company in most countries, serving patients in all European countries. No single market in Europe represents more than 25% of our total European generic revenues, and as a result we are not dependent on any single market that could be affected by pricing reforms or changes in public policy.

Our strategy in Europe is to focus on growth through sustainable and profitable business, meeting the needs of our customers and their patients. We leverage our global strengths with local relationships, seeking profitable business and market leadership by offering a comprehensive portfolio, partnership capabilities and competitive pricing, according to market circumstances.

The pharmaceutical market in each European country has distinct prescribing and dispensing habits, varying pricing and reimbursement mechanisms and different product ranges. Most markets are generally characterized by highly developed, government-funded healthcare and social planning, in which most healthcare is funded—and often directly managed and provided by the public sector.

The generic market in Europe is characterized by a slow transition from branded generics, where the physician plays a key decision-making role in choosing the supplier of a generic drug, towards a generic model

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where the key decision maker is the pharmacist. This transition is likely to take many years to complete. In the meantime, generic penetration in European countries varies widely, driven by government policy or reimbursement mechanisms, rather than by patient or healthcare professional preference.

Some European countries, such as Germany, the United Kingdom, the Netherlands, Poland and the Czech Republic, have relatively high levels of generic penetration of over 50% in volume. Other markets in Southern Europe have not yet attained such a high level of generic penetration but are moving in this direction. In 2013, the European generic pharmaceutical market grew overall, due to continuing government action in some markets with lower generic penetration rates that drove increases in generic market share. However, these measures were accompanied in some markets by aggressive price reductions via tendering or the application of reference pricing. Despite the economic crisis of the past two years, Europe remains a fundamentally affluent region with a growing need for quality healthcare for its aging population. The financial crisis, which led to government spending reductions, also resulted in growth for generic pharmaceuticals in many countries since generics were used to help contain healthcare costs.

Pricing and reimbursement mechanisms in Europe are typically set by government regulation and are used to regulate or influence market behaviors, for example, by encouraging the use of generics. In many markets, such as Spain, Germany, Italy and Finland, reimbursement for generic prescription pharmaceuticals is usually based on the price of a reference (or comparable) branded pharmaceutical. Other markets, such as Austria, require the price of a new generic product to be a certain percentage lower than the originator brand. In the United Kingdom, retail generic pricing is set by the market, but reimbursement is determined by regulations based on pharmacy purchase profit.

In 2013, several generic manufacturers, including ourselves, declined to participate in certain hospital tenders, and the market experienced product shortages in some instances. The tender market continues to be volatile, but we participate where doing so aligns with our strategy of taking a selective approach to competing for business, focusing on pursuing sustainable, profitable business and not business at any price.

Our largest European generic markets are described below:

Germany is the largest European pharmaceutical market. We have a product portfolio of approximately 450 molecules, and our ratiopharm brand continues to be a leader in the retail generics market. We compete selectively and successfully for health insurance tenders, a key element of the German retail generics market. In 2013, we focused strongly on a selective approach to this market, where we competed on the basis of winning sustainable and profitable business.

In France, we have a portfolio of over 300 molecules. We are strongly focused on a selective approach to generate sustainable and profitable business that is customer centered.

In the United Kingdom, we are the largest supplier by volume to the National Health Service. We have a portfolio of more than 315 molecules and supply one in six prescriptions dispensed, focusing on independent retail pharmacies.

In Italy, we have a generic portfolio of over 220 molecules. Our business in Italy continues to be the generic market leader, supplying about a fifth of the country’s generic medicines’ needs.

In Spain, our generic product portfolio has approximately 210 molecules. The Spanish market was characterized in 2013 by continuing pricing and reimbursement reforms, and the introduction of tendering in Andalucía, Spain’s largest region. We remain committed to our strategy of competing for sustainable and profitable business, rather than for market share alone.

Competitive Landscape. The generic market in Europe is very competitive, with the main factors being price, time to market, reputation, customer service and breadth of product line. In addition, brand pharmaceutical companies try to prevent or delay approval of generic equivalents by employing various tactics.

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In Germany, there is a high rate of generic penetration with a relatively large number of competitors of varying sizes and capabilities. Tenders are an important feature of the German market, operated by approximately 200 statutory healthcare funds across Germany, and are a result of reforms initiated by the government that have shifted the market from a physician-influenced branded model to a payor-influenced substitution model, representing a key opportunity for generics. Although tenders in Germany do not represent the majority of all pharmaceutical purchasing, they are a significant market influence and have contributed to pricing pressure in the German retail market.

In France there is an increasingly competitive landscape, with many competitors and strong pricing pressure. In 2012, the government introduced a new “Tiers Payant” scheme designed to increase generic penetration, in which co-payment increases for the patient if a branded product prescription is chosen instead of an available generic version. This immediately increased generic market penetration.

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 the pharmacy is unregulated leading to very strong price-led competition although pricing is heavily influenced by the “Category M” scheme that limits pharmacies’ reimbursement profit.

In Italy, there is a relatively low but growing rate of generic penetration with an increasing level of influence, and ability to substitute, by the pharmacist. The market consists of 20 semi-autonomous regional governments and is influenced by regional independent pharmacy groups. The market environment continued to be challenging for much of 2013, but stabilized somewhat in the latter part of the year. Government reforms to encourage generic penetration have been slower than expected, but the government austerity program and its consequent encouragement of generic penetration is beginning to offset the reduction in growth in the overall Italian pharmaceutical market.

In Spain, the generic pharmaceutical market largely consists of domestic companies. Growth in this market stalled for part of 2013 due to the continuing economic situation, but overall government and regional reforms have bolstered the use of generic medicines.

Rest of the World Markets

Our ROW markets include all countries other than the United States and those included under Europe. Our key ROW markets are Japan, Russia, Latin America, Canada and Israel. The countries in this category range from highly regulated, pure generic markets such as Canada, to hybrid markets such as Japan and Brazil, to branded generics markets such as certain Commonwealth of Independent States markets and Latin American markets. We consider Japan, Russia and the Latin American countries to be “emerging” generics markets that are characterized by rapid growth and relatively high sales of branded generics and OTC products, while Canada and Israel are “mature” generics markets that have higher generic penetration rates and therefore lower growth rates. We intend to expand our ROW market presence by growing our early stage businesses in markets such as South Korea. We further seek to enter new markets or enhance our existing presence in countries such as China, Brazil and Southeast Asia, either via partnership or by creating a direct presence.

Below are details of our operations in our larger ROW markets:

Japan

Our presence in Japan was established and strengthened through the acquisition of several generic companies. In April 2012, we integrated our generic operations into a single entity, Teva Seiyaku (Teva Pharma Japan, Inc.), which includes production and R&D capabilities, as well as a strong sales and marketing team.

Japan is the second largest pharmaceutical market in the world, with annual sales of approximately $100 billion in 2013. The generic pharmaceutical market constitutes approximately 40% of the total market in volume

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and about 10% of the total market value. The generic market is expected to continue growing by approximately 10% in 2014 due to government incentive programs targeted at both physicians and dispensing channels, and due to patent expirations of major drugs.

The Japanese pharmaceutical market is transforming from a branded generics market, driven by physicians’ choice of brands, to a pharmacy substitution market with an increased proportion of generic prescriptions. In addition, pharmacy chains are slowly emerging, which we expect will result in increased generic penetration. At present, almost half of all generic drugs is sold in pharmacies, a quarter is dispensed by hospitals, and a quarter is sold by physicians.

Generic drugs are distributed by large national wholesalers, which distribute as well as promote both branded and generic products, and by hanshas, or small agents, specializing in the sale of generics. Direct sales remain extremely limited due to the highly fragmented nature of the market. Teva continues to establish strategic partnerships with key national and regional wholesalers and top hanshas in order to ensure distribution to all customer segments.

Competitive Landscape. The Japanese generic pharmaceutical market is still relatively fragmented but is consolidating. The four leading generic pharmaceutical companies now capture approximately half of the market in volume. The market is being further transformed by new business models such as joint ventures between branded and generics companies, pharmacy chains and wholesalers pursuing a backward integration strategy as well as local branded companies venturing into the generics business. The market is being further transformed by the entry of branded and generic global companies.

Russia

In Russia, which is primarily a branded generic market, we market a diverse portfolio of branded generic products, as well as OTC pharmaceutical products and specialty products. We have a portfolio of approximately 130 products sold to both retail and hospital channels. We are currently one of the largest pharmaceutical companies in Russia.

The Russian government seeks to encourage the use of generic products in order to reduce the cost of pharmaceuticals. Russian pharmaceutical law is currently under review and undergoing continual changes, with the goal of increasing access and controlling pricing of products. The government is further seeking to encourage local production of pharmaceuticals by providing incentives for domestic or localized foreign producers.

Competitive Landscape. The Russian market includes large local manufacturers as well as international pharmaceutical companies, both generic and innovative. As part of Russia’s 2020 pharmaceutical strategy, companies with a local manufacturing presence will receive favorable treatment. We are building a manufacturing facility in Yaroslavl, Russia, which is expected to be operational by 2015.

Latin America

We market a broad portfolio of generic medicines in most Latin American countries. Our products are generally manufactured in our facilities in Mexico, Chile, Argentina and Peru. We have a strong presence in most of the major markets. During 2013, we maintained our leadership position in Argentina, Chile, Peru and other Latin American countries and continued to build our presence in Mexico by adding new therapeutic classes, launching and registering new products, and strengthening the performance of our existing product portfolio.

According to IMS, total pharmaceutical retail sales in the region exceeded $75 billion in 2013 and are expected to continue to grow at a double-digit rate in the near future. Brazil, Mexico, Chile and Argentina are the largest pharmaceutical markets in the region, with substantial local manufacturing and, due to the historical absence of effective patent protections for innovative drugs, a history of reliance on generic and branded generic medicines.

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We intend to further expand our operations in Latin America, taking advantage of the expected increases in spending on healthcare (and on pharmaceuticals in particular), stronger regional economic performance and growing populations by leveraging our strong local presence, seasoned sales forces, comprehensive product portfolio in a wide range of therapeutic areas, and manufacturing expertise.

Competitive Landscape. In Latin America, the pharmaceutical market is generally fragmented, with no single company enjoying market leadership in the region. Local generic companies predominate, especially in Brazil, Argentina and Chile. These local companies, as well as multinational brand companies, compete with our local operations in all of the markets. Our strengths in the region include our comprehensive range of products, which cover a wide range of therapeutic categories, strong sales forces and the opportunity to leverage our global product portfolio.

Canada

In Canada, we manufacture and market prescription pharmaceuticals and continue to be one of the two leading generic pharmaceutical companies in terms of prescriptions and sales. Our generic product portfolio includes over 300 products in various dosage forms and packaging sizes.

Our generic sales force in Canada markets generic products to retail chains, retail buying groups and independent pharmacies, reaching approximately 8,800 outlets across Canada. We continue to see consolidation of independent retail pharmacies and increased expansion of retail chains and buying groups: the top five retail chain customers in Canada represent approximately half the market (in terms of value). Our customer base continues to change as the number of non-aligned independent community pharmacies join pharmacy banner store groups or sell their operations to larger chain drug operators. These larger corporate accounts work closely with selected suppliers, listing products as part of a chain-wide formulary. In 2013, Canada’s largest national grocer, Loblaw, purchased the largest national pharmaceutical retail chain, Shoppers Drug Mart. Collectively, these two customers comprise 26% of the generic retail market.

We continue to experience increased government regulation on pricing, including a price reduction to 20% of brand reference price in the province of British Columbia as of April 1, 2014 and potentially, a reduction in price to 18% of the referenced brand product in 2014 for an additional ten products. This is in addition to the six products that were reduced to 18% of the brand price in April 2013. We pursue exception pricing on products that have become unprofitable as a result of government-imposed price reform.

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.

Competitive Landscape. In Canada, the competitive landscape continues to intensify with the increasing presence of multinational companies. The five major generic companies (including Teva) are either subsidiaries of global manufacturers or privately held, Canadian-owned firms. These top manufacturers satisfy approximately 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 addition, several of our customers continue to intensify their efforts to provide private label products, which have the potential to compete with our products; however, our strategy is to become a key supplier to these retail chains and add value through our core supply chain competency.

Israel

We are a leading provider of professional healthcare products and services in the Israeli market. In addition to generic and specialty pharmaceutical products, we sell and distribute a wide range of healthcare products and services in Israel. Our distribution company provides logistical support and distributes third-party products.

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The Israeli generic pharmaceutical market is a full substitution market (by regulation) and is dominated by four government mandated health funds which provide an extensive range of healthcare services, including pharmaceuticals, to all citizens. Prices for our products in Israel, and particularly for our generic portfolio, are significantly affected by pricing regulations and governmental policies, as well as the structure of the market. Israeli pricing regulations use a reference pricing mechanism which takes into account pricing in several European countries, leading to relatively low prices.

Competitive Landscape. Generic competition, which has increased in recent years, is expected to continue, with additional pressure on prices coming from the health funds and other institutional buyers.

Specialty Medicines

Our specialty medicines business, which is focused on delivering innovative solutions to patients and providers via medicines, devices and services in all key regions and markets around the world, includes several core therapeutic areas, most significantly medicines for CNS disorders (with a strong emphasis on MS, neurodegenerative disorders, and pain) and respiratory medicines. We also have specialty products in oncology, women’s health and other areas. Our specialty business also includes our emerging NTE activity, which focuses on enhancing known molecules through new delivery methods, unique combinations or device innovations to address specific patient needs.

Our specialty medicines business faces intense competition from both branded and generic pharmaceutical companies. We believe that our primary competitive advantage is our integrated R&D organization, the body of scientific evidence substantiating the safety and efficacy of our various medicines, physician and patient experience with our medicines, and our medical and marketing capabilities, which are tailored to product and market needs.

The United States is currently our primary market for specialty medicines. Our specialty medicines organization in the United States focuses on our therapeutic areas, with sales and marketing professionals within each area who seek to address the needs of patients and healthcare professionals. We are able to tailor our patient support, payor relations and medical affairs functions to the unique characteristics of each therapeutic area and product.

We have built a specialized capability in the United States to help patients comply with their treatments, ensure timely delivery of medicines and assist in securing reimbursement. This program, known as “Patient Services and Solutions” reflects the importance of supporting patients with the assistance of Web-based and other tools and is a critical part of our success in this market. We believe this capability provides us with an important competitive advantage in the specialty medicines market. We are in the process of expanding this program to other regions and other diseases.

Below is a description of our key therapeutic areas and global products:

Central Nervous System

Our CNS portfolio includes Copaxone^® for the treatment of multiple sclerosis, Azilect^® for the treatment of the symptoms of Parkinson’s disease and Nuvigil^® for the treatment of sleep disorders, as well as several novel therapies for the treatment of pain.

Copaxone^® (glatiramer acetate injection), our largest specialty medicine, is the leading multiple sclerosis therapy worldwide and is approved in more than 50 countries, including the United States, all European countries, Russia, Canada, major Latin American markets, Australia and Israel. Copaxone^® is indicated for 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.

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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. Our MS portfolio consists of Copaxone^® as well as laquinimod, a Phase III 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. Both preclinical and clinical research indicates that Copaxone^® may reduce brain volume loss and increase the production of factors that enhance neuronal repair. Copaxone^® provides a proven mix of efficacy, safety and tolerability.

At the beginning of 2012, we completed the phased assumption from Sanofi of marketing and distribution responsibilities for Copaxone^® in all European countries, Australia and New Zealand. Sanofi is entitled to receive 6% of the in-market sales of Copaxone^® in each applicable country in Europe for two years following our assumption of responsibilities in that country. Although we have recorded higher revenues as a result of these changes, we also became responsible for certain marketing and administrative expenses, which are no longer shared with Sanofi.

In January 2014, the FDA approved our supplemental New Drug Application (sNDA) for Copaxone^® 40 mg/mL administered three times a week. This new formulation will allow for a less frequent dosing regimen administered subcutaneously for patients with relapsing forms of multiple sclerosis (MS). We also filed for marketing authorization in the EU, Canada, Russia, Australia and other markets globally, with approvals expected over the next several months.

Patient enrollment is complete for the GLatiramer Acetate low frequenCy safety and patIent ExpeRience (GLACIER) study, a Phase IIIb, open-label, randomized, multi-center, parallel-arm study to assess the safety, tolerability and patient experience of Copaxone^® 40 mg/mL three times a week as compared to the currently approved 20 mg/1mL once daily dose. The GLACIER study includes 200 patients with RRMS from 30 U.S. sites who have been on glatiramer acetate injection 20 mg/1mL once daily for at least six months prior to screening. Preliminary results are expected in early 2014.

Copaxone^®, our leading specialty medicine, was responsible for a significant portion of our revenues in 2013, and a significantly higher percentage contribution to our profits and cash flow from operations during such period. Copaxone^® faces competition from existing injectable products, such as the four beta-interferons Avonex^®, Betaseron^®, Extavia^®, and Rebif^® as well as from Tysabri^®, a monoclonal antibody. In addition, the market for MS treatments continues to change significantly as a result of new and emerging therapies. In particular, the increasing number of oral treatments, such as Gilenya^®, which was introduced in 2010 by Novartis, Biogen’s Tecfidera^®, which was launched in the United States in the second quarter of 2013, and Genzyme’s Aubagio^®, which has been approved in some markets, including the United States, continue to present especially intense competition due to the convenience of oral administration.

Our U.S. Orange Book patents covering Copaxone^® expire in May 2014. As a result, generic competition to the 20mg product in the United States may begin as early as May 2014, assuming FDA approval. We have patents expiring in May 2015 in most of the rest of the world. A number of our competitors in the U.S., including Momenta/Sandoz, Mylan/Natco and Synthon, have filed ANDAs for purported generic versions of Copaxone^® challenging our patents.

The FDA is enjoined from granting final approval to any purported generics prior to May 24, 2014, and given the inability of state-of-the-art analytical techniques to fully characterize the active ingredients of Copaxone^®, as well as published results showing significant differences in gene expression between Copaxone^® and a purported generic version, the regulatory pathway for their approval is uncertain. We believe that any

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purported generic version should be studied in pre-clinical testing and full-scale, placebo-controlled clinical trials with measured clinical endpoints (such as relapse rate) in RRMS patients to establish safety, efficacy and immunogenicity. Furthermore, because of the chemical complexity of Copaxone^®, we believe that it can only be safely manufactured using a series of proprietary methods that have been perfected by Teva for more than 20 years.

On December 6, 2013, we filed a citizen’s petition requesting that the FDA refuse to approve any Abbreviated New Drug Application (“ANDA”) for a purported generic version of Copaxone^® without scientific data demonstrating that (1) the proposed generic product contains the identical active ingredient as Copaxone^®, (2) the immunogenicity risks associated with the proposed generic product are no greater than the risks associated with Copaxone^®, including a demonstration that the risks of alternating or switching between the two products are no greater than remaining on Copaxone^® and (3) the proposed generic product is bioequivalent to Copaxone^®. This citizen’s petition includes the results of a new gene expression analysis demonstrating significant differences between the biological impact of Copaxone^® and purported generic versions of Copaxone^®, which may have unknown safety and efficacy ramifications for patients.

Azilect^® (rasagiline tablets) is indicated as initial monotherapy and as an adjunct to levodopa for the treatment of the signs and symptoms of Parkinson’s 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.

Azilect^® was launched in Israel in March 2005, followed by a rolling launch in various European markets, and became available in the United States in 2006. Currently, Azilect^® is approved for marketing in 45 countries. We market Azilect^® jointly with Lundbeck in certain key European countries. We exclusively market Azilect^® in the United States and certain other markets, while Lundbeck exclusively markets Azilect^® in the remaining European countries and certain other markets.

Azilect^® is protected in the United States by several patents that will expire between 2016 and 2027. We hold European patents covering Azilect^® that will expire in 2014. Supplementary Protection Certificates have been granted in a number of European countries with respect to the patent expiring in 2014, extending its term to 2019. Azilect^® has data exclusivity protection in EU countries until 2015. Azilect^® is subject to various patent challenges in the United States and Canada. In 2013, a court upheld the validity of our U.S. patent and barred the launch of one competitor’s generic version of Azilect^® until the patent expires in February 2017. An appeal is pending. Certain other competitors are permitted under a settlement agreement to launch their generic versions shortly prior to expiry of the same patent.

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.

Provigil^® (modafinil) is indicated for the treatment of excessive sleepiness associated with narcolepsy, obstructive sleep apnea (“OSA”) and shift work disorder (“SWD”). Provigil^® began to face generic competition in the United States in March 2012 and, as a result, sales decreased substantially.

Nuvigil^® (armodafinil), the R-isomer of modafinil, is indicated for the treatment of excessive sleepiness associated with narcolepsy, OSA and SWD. It was launched in June 2009.

Following the results of the third Phase III clinical trial of Nuvigil^® as adjunctive therapy for treating major depressive episodes in adults with bipolar I disorder, Teva decided not to proceed with regulatory filings for Nuvigil^® for this indication.

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In early 2012, we reached an agreement with Mylan Pharmaceuticals, providing Mylan the ability to sell its generic version of Nuvigil^® in the United States beginning in June 2016, or earlier under certain circumstances. Nuvigil^® is protected by several patents, the latest of which expires in 2024, with a pediatric extension. In April 2013, we prevailed in patent litigation against several other generic companies in the United States with respect to our polymorph patent that expires in 2024, which has been appealed by generic challengers.

Several products, including methylphenidate products, compete with Nuvigil^®.

Our CNS portfolio also includes Fentora^® (fentanyl buccal tablet) and 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) for relief of muscle spasm in acute, painful, musculoskeletal conditions. An extended release hydrocodone with potential abuse deterrent properties is in Phase III clinical development, with results expected in mid-2014.

Oncology Products

Our oncology product line is led by Treanda^®, Synribo^® and Granix^® in the United States and by Tevagrastim^®/Ratiograstim^® outside the United States. Our oncology portfolio also includes several development programs, including custirsen sodium.

Treanda^® (bendamustine hydrochloride for injection) is approved in the United States for the treatment of patients with chronic lymphocytic leukemia (“CLL”) and patients with indolent B-cell non-Hodgkin’s lymphoma (“NHL”) that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen. In September 2013, the FDA approved a new, easier to use, liquid formulation of Treanda^®.

In October 2012, we received a complete response letter from the FDA addressing our sNDA for the use of Treanda^® as a first-line treatment of patients with NHL in combination with rituximab. Although the BRIGHT study had met its endpoint of non–inferiority, the FDA requested additional data, specifically progression-free survival data, which was not available from this trial. No further registration trials are planned in the United States.

Treanda^®’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.

In November 2013, the FDA granted orphan drug exclusivity for Treanda^®, for the NHL indication through October 2015. With the previously granted six months of pediatric exclusivity, regulatory exclusivity for this indication is now extended through April 2016. Treanda^® also has orphan drug exclusivity for the CLL indication through March 2015, extended to September 20, 2015 based on the previously granted pediatric exclusivity. We also hold rights to Treanda^® in certain other countries.

Tevagrastim^® (also marketed as Ratiograstim^® or Granix^® tbo-filgrastim) is a Granulocyte Colony Stimulating Factor (“G-CSF”) based medicine that stimulates the production of white blood cells and is primarily used to reduce the risk of infections in oncology patients receiving chemotherapy. It is also marketed as Ratiograstim^® and Biograstim^® in the EU and as Granix^® (tbo-filgrastim) in the United States.

Filgrastim was the first biosimilar G-CSF to be approved by the EU in September 2008. Based on clinical trials, filgrastim has been approved in the EU for multiple indications and is available in most European countries.

In the United States, the product was the first new G-CSF to be approved in more than ten years and was approved via a Biologics License Application by the FDA in 2012. Granix^® is not considered a biosimilar in the

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United States and is not interchangeable with Neupogen^®. The product launched in November 2013. The product is also approved and available in Japan and certain other ROW markets.

Competitors to Teva’s tbo-filgrastim include Neupogen^®, and in Europe, also Zarzio^® and Nivestim^®, which are also G-CSF products.

Lonquex^® (lipegfilgrastim) a novel glycoPEGylated long-acting G-CSF, was granted approval by the European Medicines Agency and launched in November 2013 in Germany. The product was submitted for approval in Russia. It is indicated for the reduction in the duration of neutropenia and incidence of febrile neutropenia in adult patients treated with cytotoxic chemotherapy for malignancy (with the exception of chronic myeloid leukemia and myelodysplastic syndromes).

Lonquex^® is protected by patents expiring in 2024 in Europe, with the potential for patent term extensions. In the United States, Lonquex^® is protected by patents expiring in 2026.

Eporatio^® (erythropoietin) stimulates the production of red blood cells and is indicated for the treatment of renal anemia or chemotherapy-induced anemia. Clinical trials have demonstrated that Eporatio^® has an efficacy and safety profile equivalent to that of Roche’s NeoRecormon^®. Eporatio^® is approved in all 27 EU member states, Norway, Switzerland and Iceland.

Synribo^® (omacetaxine mepesuccinate for injection) was granted accelerated approval by the FDA on October 26, 2012, for the treatment of adult patients with chronic phase or accelerated phase chronic myeloid leukemia (“CML”) with resistance and/or intolerance to two or more tyrosine kinase inhibitors. Synribo^® provides a new treatment option in the CML treatment landscape and is administered subcutaneously. It is dosed twice daily for 14 consecutive days of a 28-day cycle at treatment induction, and twice daily for seven consecutive days of a 28-day cycle during maintenance once a response is achieved. It was launched in the United States in November 2012. We have granted marketing rights for Synribo^® to Hospira in Europe, the Middle East and certain African countries.

Synribo^® is protected by new chemical entity exclusivity until October 2017 and by orphan drug exclusivity until October 2019. It is also covered by patents in the United States expiring in 2019 and 2023. A term extension has been requested for the patent expiring in 2023.

Respiratory Products

Teva is committed to achieving a leading presence in the respiratory market by delivering a range of medicines for asthma, chronic obstructive pulmonary disease (“COPD”) and allergic rhinitis. Our portfolio is centered on optimizing respiratory therapies for patients through novel delivery systems and therapies that address unmet needs.

In recent years, we have continued to build upon our experience in the development, manufacture and marketing of inhaled respiratory drugs delivered by metered-dose and dry powder inhalers, primarily for bronchial asthma, COPD, allergic rhinitis and respiratory syncytial virus. In addition, we have invested in high quality manufacturing capability for press and breathe metered-dose inhalers, multi-dose powder inhalers, nasal sprays and nebulized therapy. In 2013, we acquired MicroDose Therapeutx to expand our development portfolio with a new chemical entity for treatment of RSV infection and innovative inhaler technology.

Below is a description of our main respiratory medicines:

ProAir^® hydrofluoroalkane (“HFA”) inhalation aerosol with dose counter (albuterol sulfate) is indicated in patients four 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

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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, which is marketed in the United States only and is the leading quick relief inhaler, is protected by various patents expiring between 2014 and 2028. It is subject to patent challenges in the United States.

Three major brands compete with ProAir^® HFA 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 diproprionate 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^® is the fastest growing inhaled corticosteroid in the United States, capturing 31.9% of the market. We market QVAR^®, which is manufactured by 3M, directly in the United States and major European markets. QVAR^® is protected by various patents in the United States expiring in 2014 and 2015.

Four 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.

Qnasl^® Nasal Aerosol (beclomethasone diproprionate HFA in a nasal actuator) is a synthetic corticosteroid medication indicated for the treatment of seasonal and year-round nasal allergy symptoms in adults and adolescents 12 years of age and older. It is administered as a nonaqueous spray propelled by HFA. This medicine was launched in 2012 in the United States, and is currently being studied in a Phase III trial for a pediatric indication. Qnasl^® is protected by various patents in the United States expiring between 2014 and 2027.

Major competitors of Qnasl^® are Veramyst^® (fluticasone furoate) and Flonase^® (fluticasone propionate) by GlaxoSmithKline, Rhinocort Aqua^® (budesonide) by AstraZeneca, Nasonex^® (mometasone) by Schering and Omnaris^® and Zetonna^® (ciclesonide) by Dainippon Sumitomo.

Women’s Health Products

Currently, our women’s health product line focuses on several therapeutic areas, including oral and non-oral forms of contraception (including emergency contraception), intrauterine contraception, hormone therapy treatments for menopause/perimenopause, and therapies for use in infertility and urinary incontinence.

Below is a description of our main women’s health products:

Emergency Oral Contraception

Plan B One-Step^® OTC/Rx (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 hours after unprotected intercourse or contraceptive failure. In June 2013, it became the first emergency contraceptive FDA-approved to be available without age or point of sales restrictions. Teva 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.

Extended Regimen Combined Oral Contraception

Quartette™ (levonorgestrel/ethinyl estradiol and ethinyl estradiol) tablets are extended-regimen oral contraceptives approved for the prevention of pregnancy. Quartette™ is the only extended-regimen oral contraceptive with an ascending dose of estrogen. Quartette™ is marketed in the United States.

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Quartette™ is protected by patents expiring in 2025 and 2029, as well as regulatory exclusivity expiring in March 2016.

Seasonique^® and LoSeasonique^® (levonorgestrel/ethinyl estradiol tablets and ethinyl estradiol tablets) are extended-cycle oral contraceptives, originally launched in the United States in 2004 and in 2009 respectively. The products face generic competition in the United States. We are currently looking to expand the market for these products in European and Latin American countries.

Combined Oral Contraception

Zoely^® is a 28-day regimen combination contraceptive oral pill (consisting of 24 active pills and 4 placebo pills). Zoely^® is the first and only monophasic contraception combining E2 physiological estrogen (17ß-estradiol) with NOMAC (nomegestrol acetate) progestin, which has a strong anti-gonadotropic activity, having minimal effect on metabolism and less impact on metabolic and haemostasis parameters than currently marketed products.

Zoely^® is a joint development between Théramex (a Teva subsidiary) and Merck & Co. We hold both trademark rights worldwide as well as the marketing rights for Zoely^® in several European countries. In addition, we have non-exclusive rights in some emerging markets such as Brazil. Zoely^® is protected by patents in Europe until 2017, while supplementary protection certificates extending to 2022 have been granted by several European countries. A phase IV program has been initiated recently, including a large post-marketing surveillance study in collaboration with Merck Sharp & Dohme.

Non-Oral, Non Hormonal Contraception

ParaGard^® T380 A (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.

Menopause Hormonal Treatment

Enjuvia^® (synthetic conjugated estrogens) is an oral treatment of moderate to severe vasomotor symptoms associated with menopause. Enjuvia^® is a plant-derived formulation of ten synthetic conjugated estrogens, including sodium D^8,9 dehydroestrone sulfate, and is available in five dosage strengths. The Enjuvia^® delivery system allows slow release of estrogens over several hours due to its Surelease^® technology. We have Orange Book listed patents for Enjuvia^® expiring in 2021.

Other Products

We also market the following products in some European markets: Orocal^®, a calcium supplement for the treatment of osteoporosis with or without D-vitamin; Colpotrophine^®, for vaginal atrophy; Lutenyl^®, for menopause; Monazol^®, for fungal dermatitis; Estreva^®, for estrogen deficiencies; Antadys^®, for dysmenorrhea; and Leeloo Gé^®, an oral contraceptive.

Competitive Landscape. The oral contraceptives market is highly competitive and fragmented. The main competitors to our women’s health line include Yasmin^® and Yaz^® franchise from Bayer, which was recently expanded to include the Yaz Flex^® flexible dosage regimen oral contraceptive, launched in Australia in September 2012 and expected to be launched in Europe in 2014. In addition, there are other competing forms of contraceptives, such as intrauterine devices, patches and vaginal hormonal contraceptive rings.

In the intrauterine device (“IUD”) market, Bayer’s hormonal IUD Mirena^® is the market leader with a lower dosed follow-on product (called Jaydess^® in Europe and Skyla^® in the United States). Actavis (Watson) has increased its women’s health portfolio with the acquisitions of Warner-Chilcott and Uteron Pharma; it has

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marketing authorizations for both markets and distribution agreement with Medicines360 in the United States to market a hormonal IUD with expected launch in 2014. NuvaRing^® from Merck is a vaginal hormonal contraceptive ring, and we expect the competitive landscape to continue evolving towards non-oral deliveries.

Other Activities

Our other activities are comprised of our OTC business and other sources of revenues, which are not included in our generics and specialty segments described above.

Consumer Healthcare Joint Venture

PGT is our consumer healthcare joint venture with P&G. The joint venture includes the branded OTC medicines of the two companies in categories such as cough/cold and allergy, digestive wellness, vitamins, minerals and supplements, analgesics and skin medications, and operates in markets outside North America. Its leading brands are Vicks^®, Metamucil^®, Pepto-Bismol^®, and ratiopharm. The joint venture also develops new brands for certain global markets. We own 49% and P&G holds 51% of the joint venture.

PGT’s strengths include P&G’s strong brand-building, consumer-led innovation and go-to-market capabilities; our broad geographic reach, experience in R&D, regulatory and manufacturing expertise and extensive portfolio of products, and each company’s scale and operational efficiencies. It intends to introduce the partners’ product and brand portfolios into additional countries and to expand into new OTC categories (such as prescription products that have become OTC products).

Others

We have other sources of revenues, primarily sales of third-party products for which we act as distributor, mostly in Israel and Hungary, as well as sales of medical devices and other miscellaneous items.

Research and Development

Our research and development activities span the full breadth of our business, including generic medicines (finished goods and API), specialty pharmaceuticals, new therapeutic entities (“NTEs”), which are known molecules that are formulated, delivered or used in a novel way to address unmet patient needs, and OTC medicines. All research and development activities, except for API, have been integrated into a single unit, Teva Global R&D.

One major area of focus is the development of new generic medicines. We develop generic products in all therapeutic areas. Our 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 in the United States, Israel, India, Mexico, Europe and Latin America, include product formulation, analytical method development, stability testing, management of bioequivalence and other clinical studies, and registration of generic drugs in all of the markets where we operate.

Over the past several years, our generic R&D capabilities have expanded 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 for generic drugs. We have more than one thousand generic products in our pipeline (each product being equivalent to a molecule, dosage form and market combination).

In addition, Teva’s generic R&D supports PGT in developing OTC products, as well as in overseeing the work performed by contract developers of products selected by PGT.

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Our API R&D division operates independently from Teva Global R&D, and focuses on the development of processes for the manufacturing of API, including intermediates, chemical and biological (fermentation), which are of interest to the generic drug industry, as well as for our proprietary drugs. Our facilities include a large center in Israel (synthetic products and peptides), a large center in Hungary (fermentation and semi-synthetic products), a facility in India and additional sites in Italy, Croatia, Mexico and the Czech Republic (for development of high-potency API). Our 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 us to improve our cost structure.

Another major area of focus for Teva Global R&D is the development of novel specialty products in our key therapeutic areas of CNS and respiratory, with select projects in additional areas. These specialty R&D activities range from the discovery of new compounds, preclinical studies (including toxicology, pharmacokinetics, pharmacodynamics and pharmacology studies) to clinical pharmacology and the design, execution and analysis of clinical trials. We conduct these activities for both small molecules and biologics. Our specialty R&D activities also include process development.

Our specialty pipeline includes product candidates in several therapeutic areas, with a focus on CNS and respiratory products, with selective innovation in areas such as oncology. We intend to continue to supplement our specialty pipeline, as necessary, by in-licensing or acquiring products including small molecules and biologics, focused in critical therapeutic areas, to create a robust and sustainable pipeline.

Below is a table listing selected pipeline products in clinical development:

Project / Compound	Potential Indication	Route of Administration	Clinical Phase (month and year of entering Phase III)
CNS
Laquinimod	RRMS, progressive forms of MS	Oral	US—III (Nov 2007) EU—reviewing EMA decision
Extended release hydrocodone	Chronic pain	Oral	III (Oct 2010)
TV-7820 (pridopidine)	Motor disorders	Oral	II
TV-45070 (XEN 402)	Painful disorders	Oral and topical	II
RESPIRATORY
DuoResp® Spiromax® (budesonide & formoterol)	Asthma/COPD	Oral inhalation	EU—submitted
QVAR® Breath Actuated Inhaler (beclomethasone)	Asthma/COPD	Oral inhalation	III (Dec 2013)
Albuterol MDPI	Asthma/COPD	Oral inhalation	III (Oct 2012)
QNASL® (beclomethasone HFA)	Pediatric allergic rhinitis	Nasal inhalation	III (Oct 2012)
Reslizumab	Severe asthma with eosinophilia	Intravenous	III (Feb 2010)
Fluticasone & salmeterol Multi Dose Powder Inhaler (“MDPI”)	Asthma	Oral inhalation	II
Fluticasone MDPI	Asthma	Oral inhalation	II
Teva-MicroDose RSV	Respiratory syncytial virus	Oral inhalation	II

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Fluticasone & salmeterol HFA Metered Dose Inhaler	Asthma/COPD	Oral inhalation	I (Bioequivalence)
LAMA Breath Actuated Inhaler	COPD	Oral inhalation	I
ONCOLOGY
Balugrastim (albumin fused G-CSF)	Neutropenia	Subcutaneous	EU—submitted
Custirsen/TV-1011 (OGX-011)	Metastatic castrate resistant prostate cancer	Intravenous	III (1st line: Dec 2010; 2nd line: Oct 2012)
Custirsen/TV-1011 (OGX-011)	Non-small cell lung cancer	Intravenous	III (Oct 2012)
WOMEN’S HEALTH
Ovaleap® (XM17, follitropin alfa)	Female infertility; anovulation; assisted reproductive techniques; hypogonadism	Subcutaneous	EU—approved
Milprosa® (progesterone vaginal ring )	Luteal support for in vitro fertilization	Vaginal Ring	US—submitted
LeCette® (Desogestrel and ethinyl estradiol)	28-day oral contraceptive	Oral	US—submitted
CARDIOVASCULAR
Revascor® (mesynchymal precursor cells)	Congestive heart failure	Intracardiac injection	III (Jan 2014)
Revascor® (mesynchymal precursor cells)	Acute myocardial infarction	Intracardiac injection	I
OTHER
Laquinimod	Crohn’s disease	Oral	II

CNS

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

In 2011, we conducted two Phase III studies, in both of which the observed safety and tolerability profile of laquinimod was considered favorable. A third Phase III study of laquinimod, was initiated in February 2013, with the primary endpoint of impact on disability progression.

In June 2012, we submitted a Marketing Authorization Application to the European Medicines Agency (“EMA”). In January 2014, EMA announced its conclusion that the risk-benefit profile of laquinimod is not favorable. We intend to request a re-examination of this opinion. In August 2012, we submitted a New Drug Submission to Health Canada.

Based on data from the Phase III studies conducted to date, we are planning further clinical studies of laquinimod as add-on therapy in patients with relapsing-remitting multiple sclerosis and as monotherapy in patients with progressive forms of MS.

Laquinimod is currently in Phase II evaluation for Crohn’s Disease.

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

Extended Release Hydrocodone is our formulation of hydrocodone, an opioid analgesic, utilizing our OraGuard™ technology, with potentially abuse-deterrent properties methods, including resistance to crushing and dose dumping when taken with alcohol. A Phase III study was completed in August 2011, but did not demonstrate a statistically significant difference between the hydrocodone and placebo treatment groups. A statistically significant difference was demonstrated in change from baseline to week 12 in mean weekly average WPI score, a secondary endpoint. A newly designed Phase III study was initiated in March 2013 and results are expected during the first half of 2014. We intend to file with the FDA in late 2014.

TV-7820 (pridopidine) is an oral small molecule dopamine stabilizer being developed for the symptomatic treatment of motor disorders (including Huntington’s disease, or “HD”), which we licensed from Neurosearch A/S in late 2012. Phase II clinical development is planned to begin in early 2014.

Pridopidine is protected by patents expiring in 2020 worldwide.

TV-45070 (XEN 402) is a small molecule intended to treat pain locally at its source 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 II trial to evaluate effectiveness in alleviating the pain of post-herpetic neuralgia, topical TV-45070 led to significantly more meaningful reductions in pain than placebo.

TV-45070 is currently in Phase II development for a variety of pain-related, neuropathic and inflammatory disorders. A first study of the topical formulation in an inflammatory disorder will be initiated in early 2014.

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

Respiratory

The primary area of focus of our respiratory R&D is the development of products that are based on our proprietary delivery systems, which include:

• an advanced breath-actuated inhaler (“BAI”);

• Spiromax^®/Airmax^®, a novel inhalation-driven multi-dose powder inhaler (“MDPI”);

• Teva MicroDose, a unique nebulization device; and

• Steri-Neb^®, our advanced sterile formulations for nebulizers.

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

Our proprietary MDPI device (Spiromax^®) is protected by patents expiring in 2021.

DuoResp^® Spiromax^® is a combination of budesonide and formoterol utilizing our proprietary Spiromax^® device. Results of our studies confirm that we have demonstrated bio-equivalence to the marketed product (Symbicort^® Turbohaler^®). An application for marketing authorization was submitted in Europe in January 2013. Approval is expected in 2014.

QVAR^® BAI (beclomethasone) is an oral aerosol corticosteroid in development for the treatment of asthma delivered using our advanced breath-actuated inhaler. The Phase III clinical program was initiated in December 2013.

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Albuterol MDPI is a dry-powder inhaler formulation of albuterol in our multi-dose powder inhaler device that is designed to be an improvement to our ProAir^® HFA. Results of two safety and efficacy studies have confirmed the safety, efficacy, pharmacokinetic and pharmacodynamic profile of albuterol MDPI. The Phase III program is ongoing with the new drug application (“NDA”) filing planned for 2014.

QNASL^® (beclomethasone HFA Nasal) is a nasal aerosol corticosteroid indicated for the treatment of adult and adolescent perennial allergic rhinitis (PAR) and seasonal allergic rhinitis (SAR). We are currently conducting a Phase III program to gain a pediatric indication. We plan to file a sNDA in 2014.

Reslizumab is an investigational humanized monoclonal antibody (mAb) against interleukin-5 (IL-5). IL-5 has been shown to play a crucial role in the maturation, growth and chemotaxis (movement) of eosinophils, inflammatory white blood cells implicated in a number of allergic diseases. We are investigating reslizumab in Phase III studies as a possible treatment for severe asthma with eosinophilia. Results of these studies are expected in 2014.

Fluticasone & salmeterol MDPI is a new formulation of this combination using our multi-dose powder inhaler device, with an enhanced lung delivery that is designed to allow lower doses to achieve the same clinical outcomes as Advair^® Diskus. Phase II trials were completed in 2013, and initiation of the Phase III program is planned for 2014.

Fluticasone MDPI is a new formulation of this combination using our multi-dose powder inhaler device, with an enhanced lung delivery that is designed to allow lower doses to achieve the same clinical outcomes as Flovent^® Diskus. Phase II trials were completed in 2013, and initiation of the Phase III program is planned for 2014.

Teva-MicroDose RSV is a transformational innovative inhaled delivery technology being developed for the treatment of respiratory syncytial virus (“RSV”) infection. RSV is the most frequent cause of hospitalization of infants and young children in industrialized countries. The molecule in development is an inhalable small molecule anti-viral fusion inhibitor that acts by targeting and blocking the viral fusion protein. Teva-MicroDose is designed to be a unique type of nebulizer that is both small and portable and allows fast dosing without the need for dose preparation. Phase II clinical trials were initiated in 2013.

Fluticasone & salmeterol HFA MDI is designed to be comparable to Advair^®/Seretide^® HFA, delivered in a well established press-and-breath device. We expect to complete clinical studies in 2014.

Long-Acting Muscarinic Antagonist (“LAMA”) BAI is an oral aerosol LAMA in development for the treatment of COPD, delivered using our advanced breath-actuated inhaler. We completed a phase I study in 2013 and plan to enter Phase II as well as initiate a Japanese bridging study in 2014.

Oncology

Balugrastim (albumin fused G-CSF) is a long-acting G-CSF using albumin-fusion technology initially developed by Human Genome Sciences to prolong plasma half-life. Balugrastim is designed to provide clinical efficacy and safety profiles comparable to Neulasta^®. The U.S. balugrastim biologics license application (“BLA”) was withdrawn in October 2013 from the FDA review process following ongoing consultation with the agency in preparation for the late cycle review meeting, pending the provision of additional confirmatory data.

We submitted balugrastim for registration in Europe in April 2013.

Custirsen/TV-1011 (OGX-011) is an antisense drug. In December 2009, Teva and OncoGenex entered into a global license and collaboration agreement to develop and commercialize custirsen/TV-1011 (OGX-011). Custirsen was developed by Isis Pharmaceuticals Inc. and licensed to OncoGenex, and is designed to inhibit the

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production of clusterin, a protein associated with cancer treatment resistance. Custirsen was developed to increase the efficacy of chemotherapeutic drugs and may have broader market potential to treat various indications and disease stages.

In November 2012, enrollment was completed in a large Phase III randomized trial of custirsen in combination with docetaxel and prednisone in the initial chemotherapy treatment of patients with castrate-resistant prostate cancer. Results are expected in 2014. Enrollment is ongoing for two additional Phase III studies: a randomized trial of custirsen in combination with cabazitaxel and prednisone for the second-line treatment of patients with castrate-resistant prostate cancer, and a randomized trial of custirsen in combination with docetaxel for the second-line treatment of patients with non-small-cell lung cancer.

Custirsen is protected by patents expiring in 2020 in Europe and in 2021 in the United States.

Women’s Health

Ovaleap^® (XM17, follitropin alfa) is a biosimilar product to Gonal-f^® for the treatment of female infertility. The product was approved for marketing in Europe in September 2013.

Milprosa^® (progesterone vaginal ring) is a silicone-based, flexible ring designed to be dosed weekly for luteal support for in vitro fertilization. Clinical studies indicated that Milprosa^® is not inferior to the approved progesterone gel and is safe and well-tolerated, with a profile consistent with the known profile of progesterone. We filed an NDA with the FDA in 2010 and received a complete response letter in 2011 requiring a safety/efficacy study in women over 34 years old prior to approval or as a post-marketing commitment. We plan to file a complete response to the FDA’s letter in 2014.

Milprosa^® is protected by patents expiring in 2030 in the United States, with patents pending in Europe.

LeCette^® is a 28-day oral contraceptive with 21-day regimen of desogestrel and ethinyl estradiol followed by a 7-day regimen of ethinyl estradiol alone. Phase III clinical development was completed in 2013 and an NDA was filed during September 2013.

In clinical trials, LeCette^® has demonstrated a safety profile similar to that of other 28-day oral contraceptives.

LeCette^® is protected by patents expiring in 2022 in the United States.

Cardiovascular

Revascor^® (mesynchymal precursor cells) consists of human stem cells, the immature cells that give rise to different types of mature cells that make up the organs and tissues of the human body. In December 2010, we entered into a strategic alliance with Mesoblast Ltd. to develop and commercialize Mesoblast’s mesenchymal precursor cell therapeutics for hematopoietic stem cell transplantation in cancer patients, certain central nervous system disorders, as well as certain cardiovascular conditions, including congestive heart failure and acute myocardial infarction.

In January 2011, interim results from the ongoing multi-center Phase II trial of Revascor^® for patients with congestive heart failure were announced. Based on these Phase II results, and timely finalization of the chemistry and manufacturing controls requirements, we initiated a Phase III study in early January 2014. This study will include an interim analysis after an initial cohort of patients has completed six months of follow-up.

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New Therapeutic Entities (“NTEs”)

A strategic area of focus of Teva Global R&D is the development of new therapeutic entities. NTEs are known molecules that are formulated, delivered or used in a novel way to address unmet patient needs. Examples of NTEs include fixed-dose-combinations that improve adherence and therefore efficacy (for use in HIV, for example), drugs with prolonged half-lives to reduce frequency of administration, drugs with modified pharmacokinetic profiles to reduce side effects), drugs that are administered orally instead of by injection, drugs that are delivered in ways that address the needs of special patient populations (for example, children and the elderly), and drugs that are approved for new indications. NTEs that have achieved significant commercial successes include J&J’s Duregesic^® fentanyl patch, Purdue’s Oxycontin^® and Lundbeck’s Namenda^® for Alzheimer’s disease.

The successful development of NTEs requires access to a wide range of specialty and generic R&D capabilities: an understanding of medical needs, clinical and regulatory development, formulation know-how and special technologies, intellectual property and access to a large portfolio of generic molecules. The integration of our specialty and generic R&D groups into a single organizational unit—Teva Global R&D—creates an infrastructure that includes the entire range of capabilities required for the development of NTEs.

This organization is supported by a dedicated process for generating and screening ideas for NTEs. Drawing on a wide range of internal and external sources, we are generating more than 100 NTE ideas per year, of which we expect ten to be approved for development each year. At the end of 2013, 15 NTE products are part of the Teva portfolio, including:

• Four abuse deterrent tablets containing various opioids, for the treatment of pain, using our proprietary abuse deterrent OraGuard^TM technology which deters against various tampering methods including crushing and dose dumping when taken with alcohol;

• Once-a-month and once-every-three-months injections of risperidone for the treatment of schizophrenia;

• Adasuve^® (loxapine) inhalation powder, an in-licensed inhaled antipsychotic for the treatment of acute agitation associated with schizophrenia or bipolar I disorder, will be launched in the United States in early 2014 ;

• A once-a-day fixed combination of a prostaglandin agonist and a beta blocker, for the treatment of glaucoma;

• Four fixed-dose combinations of several antiretrovirals for the treatment of HIV; and

• Additional projects for the treatment of Crohn’s Disease, Parkinson’s disease and dependence.

These products incorporate various technological abilities and formulation specialties such as tamper-deterrence, delayed release and rapid release, which will form the basis for future development of NTEs.

Because NTEs involve proven targets with known efficacy and safety profiles, we expect their development to involve reduced risks and costs, and shorter timelines compared to novel drugs. On the other hand, there are multiple avenues to exclusivity for NTEs, leveraging both regulatory and patent exclusivity to protect novel formulations, combinations and indications. Therefore, we believe that rewards from an NTE have the potential to be sustained over long periods.

We believe that the combination of our integrated organization, dedicated processes and the extensive efforts to develop NTEs, together with their favorable risk/ reward profiles, will provide us with significant opportunities to enhance our CNS, respiratory, oncology and women’s health pipeline.

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Terminated Projects

During 2013, we also terminated the development of the following projects:

• Nuvigil^® (armodafinil), the R-isomer of modafinil, for bipolar disorder.

• Obatoclax, a Pan Bel-2 inhibitor with particular potency for the dominant protein Mel-1.

• Oxybutynin vaginal ring (DR-3001), a silicone-based, flexible ring designed to be dosed once a month to treat overactive bladder.

• Laquinimod for the treatment of lupus arthritis.

Operations

We believe that our global infrastructure provides us with the following capabilities:

• global research and development facilities that enable us to have a leading global generic pipeline, as well as the broadest generic product line in the United States;

• 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 economies of scale;

• API manufacturing capabilities that offer a stable, high-quality supply of key active ingredients, as well as vertical integration efficiencies; and

• high-volume, technologically advanced distribution facilities that allow us to deliver new products to our customers quickly and efficiently, providing a cost-effective, safe and reliable supply.

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

Pharmaceutical Production

We operate 50 finished dosage pharmaceutical plants in North America, Europe, Latin America, Asia and Israel with two additional sites currently under construction. These plants manufacture solid dosage forms, sterile injectables, liquids, semi-solids, inhalers and medical devices. In 2013, Teva produced approximately 64 billion tablets and capsules and over 700 million sterile units. 26 of our plants are FDA approved, and 31 of our plants have EMA approval.

Our two primary manufacturing technologies, solid dosage forms and injectables, are available in North America, Latin America, Europe and Israel. The main manufacturing site for respiratory inhaler products is located in Ireland. The manufacturing sites located in Israel, Germany, Hungary and the Czech Republic comprise a significant percentage of our production capacity.

We strive to optimize our manufacturing network, in order to maintain our goal of supplying high quality, cost-competitive products on a timely basis to all of our customers globally. In addition, we also use several external contract manufacturers to achieve operational and cost benefits.

During 2013, we continued to invest in our manufacturing capabilities, focusing on strategic growth areas, including the construction of a new oral solid dosage facility in Russia and a new OTC manufacturing facility in India. We invested in expanding our manufacturing facility in Japan and in our global sterile manufacturing centers in Hungary and Croatia. In addition, our state-of-the-art logistics center in Shoham, Israel began to operate during 2012, significantly increasing our technological and logistical capabilities. We constantly review these capabilities and our capacity utilization to ensure that they align with our ability to deliver the highest quality, best in class and most efficient products.

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Our policy is to maintain multiple supply sources for our strategic products and APIs to the extent possible, so that we are not dependent on a single supply source. However, our ability to do so may be limited by regulatory or other requirements.

Our principal pharmaceutical manufacturing facilities in terms of number of employees are listed below:

Facility Location	Total Number of Site Employees		Principal Market(s) Served
Ulm, Germany		2,198	Europe and other non-U.S. markets
Debrecen, Hungary		1,851	Europe and other non-U.S. markets
Kfar Saba, Israel		1,772	North America, Europe and other markets
Zagreb, Croatia		1,678	North America, Europe and other markets
Opava, Czech Republic		1,422	North America, Europe and other markets
Takayama, Japan		1,153	Asia
Godollo, Hungary		1,101	North America, Europe and other markets
Haarlem, Netherlands		847	North America, Europe and other markets
Toronto, Canada		767	North America and Europe
Jerusalem, Israel		660	North America and Europe
Krakow, Poland		584	North America, Europe and other markets
Forest, VA, U.S.		552	North America
Maipu, Santiago, Chile		535	Latin America
Waterford, Ireland		470	North America, Europe and other markets
Runcorn, U.K.		460	North America, Europe and other markets
Sellersville , PA, U.S.		406	North America
Irvine, CA, U.S.		388	North America
Cincinnati, OH, U.S.		380	North America

Raw Materials for Pharmaceutical Production

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

We have 21 API production facilities located in Israel, Hungary, Italy, the United States, the Czech Republic, India, Mexico, Puerto Rico, Monaco, China and Croatia. We produce approximately 300 APIs in various therapeutic areas. Our API intellectual property portfolio includes over 600 granted patents and pending applications worldwide.

We have 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. Our advanced technology and expertise in the field of solid state particle technology enable us to meet specifications for particle size distribution, bulk density, specific surface area and polymorphism, as well as other characteristics.

Our API facilities meet all applicable current Good Manufacturing Practices (“cGMP”) requirements under U.S., European, Japanese, and other applicable quality standards. Our API plants are regularly inspected by the FDA, European agencies or other authorities as applicable. During 2013, inspections of our API facilities worldwide found our manufacturing practices to be in compliance.

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Environment

Teva is committed to business practices that promote socially and environmentally responsible economic growth. In 2013, we continued to restructure and strengthen our environment, health and safety (“EHS”) efforts. We have designed and are implementing a global EHS management system to align, streamline and enhance our EHS performance. We hired senior managers responsible for EHS, sustainability and occupational safety, and formed a Corporate EHS Committee consisting of global senior executives who will have oversight of all material EHS matters in Teva and a Global EHS Management team to guide and direct our EHS efforts.

We have drafted a global environment and sustainability plan which is built on three pillars:

• Zero incidents: we strive for zero releases to the environment;

• 100% compliance: we are putting systems in place aligned with internationally recognized standards to assure full compliance; and

• Reduce impact: we are working to optimize our operations to streamline processes and reduce our environmental footprint through efficient use of resources.

In order to assure compliance in an ever-changing business and regulatory environment, we continuously update and advance our environmental control systems. Some examples of recent efforts include:

• Six upgraded waste water treatment plant projects in China, Croatia, India, Israel and Italy;

• Three upgraded air emissions control projects in Croatia and Israel;

• Three ground water and soil remediation projects based on historic contamination in Hungary, Israel and Italy; and

• Numerous projects at API plants to assure compliance with Pollutant Release and Transfer Register and Extended Producer Responsibility legislation.

Five of our production sites are externally certified to ISO14001.

We believe that we are in substantial compliance with all applicable environmental, health and safety requirements.

Organizational Structure

In 2013, we announced the formation of a global Specialty Medicines group, which is responsible globally for our specialty medicines business, which strives to bring patients and customers medicines adapted to their needs. Our generic medicines business is managed by geographic location; however, as a whole, the generic medicines business is managed by Teva’s CEO.

In addition, our activities are conducted by three global divisions, Teva Global Operations (“TGO”), Teva Global R&D and Quality, and by global support functions including finance, legal, information system, business development, human resources and communications.

TGO’s responsibilities include manufacturing and commercialization of APIs, manufacturing of pharmaceuticals, procurement and supply chain. Teva Global R&D is responsible for our overall research and development of generic medications, NTEs and specialty products.

As of December 31, 2013, we are organized into four commercial units, by region: (1) the Americas, (2) Europe, (3) Eastern Europe, Middle East, Israel and Africa, and Asia-Pacific (“EMIA-APAC”), and (4) Japan and South Korea. Within the regions, the individual countries are responsible for all commercial activity, including the sale and distribution of both generic and specialty medicines.

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Our worldwide operations are conducted through a network of global subsidiaries primarily located in North America, Europe, Latin America, Asia and Israel. We have direct operations in approximately 60 countries, as well as 50 finished dosage pharmaceutical manufacturing sites, with two additional sites currently under construction, in 25 countries, 21 API sites and more than 20 pharmaceutical R&D centers. The following sets forth, as of December 31, 2013, our principal operating subsidiaries in terms of aggregate total revenues:

Name of Subsidiary*	Country
Teva Canada Limited	Canada
Teva Santé SAS	France
ratiopharm GmbH	Germany
Teva GmbH	Germany
TEVA Pharmaceutical Works Private Limited Company	Hungary
Teva Italia S.r.l.	Italy
Teva Seiyaku	Japan
Teva Limited Liability Company	Russia
Teva Pharma S.L.	Spain
Teva UK Limited	United Kingdom
Teva Pharmaceuticals USA, Inc.	United States

* All the listed subsidiaries are 100% held by Teva.

In addition to the subsidiaries listed above, we have operations in several other locations, including China, India, Turkey and other emerging and smaller markets.

Properties and Facilities

Listed below are our principal facilities and properties in various regions of the world and their size in square feet as of December 31, 2013:

Facility Location	Square Feet (in thousands)		Main Function
Israel
Ramat Hovav		1,355	API manufacturing and R&D
Kfar Saba		738	Pharmaceutical manufacturing, research laboratories, warehousing, and offices
Shoham Logistics Center		538	Distribution center
Jerusalem (3 sites)		522	Pharmaceutical manufacturing, research laboratories and offices
Netanya (3 sites)		503	API manufacturing, pharmaceutical warehousing, laboratories, distribution center and offices
Petach Tikva		335	Corporate headquarters
Ashdod		130	Manufacturing of hospital supplies
Assia—Petach Tikva		118	R&D laboratories
United States
North Wales area, PA (4 sites)		808	Teva USA headquarters, warehousing and distribution center
Greensboro, SC		500	Manufacturing, packaging and offices
Forest, VA		408	Manufacturing, packaging and offices
Irvine, CA (8 sites)		342	Pharmaceutical manufacturing and R&D laboratories
Phoenix, AZ (2 sites)		336	Manufacturing, packaging and offices

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Facility Location	Square Feet (in thousands)		Main Function
Cincinnati, OH		305	Pharmaceutical manufacturing, R&D laboratories and packaging
Miami, FL (3 sites)		223	Manufacturing, R&D laboratories, warehousing and offices
Kutztown, PA		211	Warehousing
Sellersville, PA		206	Pharmaceutical manufacturing, packaging and R&D laboratories
Frazer, PA		194	Manufacturing, packaging and offices
Salt Lake City, UT		188	Offices
Pomona, NY		181	Pharmaceutical manufacturing and R&D laboratories
Guayama, Puerto Rico		170	API manufacturing
West Chester, PA		165	Laboratories
Overland Park, KS		154	Offices
Mexico, MO		144	API manufacturing
Canada
Toronto, Ontario		335	Offices, pharmaceutical packaging, warehousing, distribution center and laboratories
Stouffville, Ontario		155	Pharmaceutical manufacturing and R&D laboratories
Markham, Ontario		122	Pharmaceutical manufacturing and warehousing
Europe
Debrecen, Hungary (3 sites)		2,549	Pharmaceutical manufacturing, API manufacturing, R&D laboratories and warehousing
Ulm, Germany (2 sites)		1,740	Pharmaceutical manufacturing, warehousing and offices
Opava, Czech Republic		1,466	Pharmaceutical and API manufacturing, warehousing and distribution center
Krakow, Poland		939	Pharmaceutical manufacturing and warehousing
Zagreb, Croatia (5 sites)		869	Pharmaceutical manufacturing, packaging and warehousing, API manufacturing and R&D laboratories
Weiler, Germany		425	Pharmaceutical manufacturing and packaging
Waterford, Ireland (2 sites)		413	Pharmaceutical manufacturing, warehousing and packaging
Savski Marof, Croatia		378	API manufacturing
Sajababony, Hungary		374	Mixed use
Zaragoza, Spain (3 sites)		325	Pharmaceutical manufacturing, R&D laboratories
Kutno, Poland		290	Pharmaceutical manufacturing, warehousing and packaging
Glasshoughton, England		247	Warehousing and distribution center
Runcorn, England (2 sites)		241	Pharmaceutical manufacturing, warehousing, laboratories and offices
Haarlem, The Netherlands		232	Laboratories
Gödöllõ, Hungary		211	Pharmaceutical manufacturing, hospital supplies manufacturing, R&D laboratories, distribution center, packaging and warehousing

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Facility Location	Square Feet (in thousands)		Main Function
Dublin, Ireland (2 sites)		188	Marketing, manufacturing
Santhiā, Italy		177	API manufacturing, R&D laboratories and warehousing
Eastbourne, England		163	Warehousing and packaging
Vienna, Austria		113	Warehousing & offices
Vilnius, Lithuania (2 sites)		97	Pharmaceutical manufacturing and R&D laboratories
Asia
Gajraula (U.P.), India		1,200	API manufacturing
Takayama, Japan		1,009	Pharmaceutical manufacturing
Hangzhou, China		609	API manufacturing
Malanpur, India		302	API manufacturing
Goa, India		285	Pharmaceutical manufacturing and R&D laboratories
Teda, China		193	Marketing, manufacturing, warehousing and R&D Laboratories, offices, API manufacturing
Ahmedabad, India		183	OTC manufacturing, packaging, warehousing and laboratories
Kasukabe, Japan		169	Pharmaceutical manufacturing
Koka, Japan		151	Pharmaceutical manufacturing
Nagoya, Japan (2 sites)		141	Offices
Latin America
Santiago, Chile		240	Pharmaceutical manufacturing, warehousing and R&D laboratories
Mexico City, Mexico		240	Pharmaceutical manufacturing, warehousing and R&D laboratories
Lima, Peru (3 sites)		221	Pharmaceutical manufacturing, warehousing and R&D laboratories
Munro, Argentina		155	Pharmaceutical manufacturing, warehousing, R&D laboratories and packaging

We lease certain of our facilities. In Israel, our principal executive offices and corporate headquarters in Petach Tikva are leased until December 2018. In North America, our principal leased properties are the facilities in North Wales and Frazer, Pennsylvania, which have lease terms expiring between 2016 and 2022. We own and lease various other facilities worldwide.

Regulation

United States

Food and Drug Administration and the Drug Enforcement Administration

All pharmaceutical manufacturers selling products in the United States are subject to extensive regulation by the United States federal government, principally by the FDA and the Drug Enforcement Administration (“DEA”), and, to a lesser extent, by state and local governments. The federal Food, Drug, and Cosmetic Act, the Controlled Substances Act (“CSA”) and other federal statutes and regulations govern or influence the development, manufacture, testing, safety, efficacy, labeling, approval, storage, distribution, recordkeeping, advertising, promotion, sale, import and export of our products. Our facilities and products are periodically

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inspected by the FDA, which has extensive enforcement powers over the activities of pharmaceutical manufacturers. Noncompliance with applicable requirements may result in fines, criminal penalties, civil injunction against shipment of products, recall and seizure of products, total or partial suspension of production, sale or import of products, refusal of the government to enter into supply contracts or to approve NDAs, ANDAs, or BLAs and criminal prosecution by the Department of Justice. The FDA also has the authority to deny or revoke approvals of marketing applications and the power to halt the operations of non-complying manufacturers. Any failure to comply with applicable FDA policies and regulations could have a material adverse effect on our operations.

FDA approval is required before any “new drug” (including generic versions of previously approved drugs) may be marketed, including new strengths, dosage forms and formulations of previously approved drugs. Applications for FDA approval must contain information relating to bioequivalence (for generics), safety, toxicity and efficacy (for new drugs), product formulation, raw material suppliers, stability, manufacturing processes, packaging, labeling and quality control. FDA procedures generally require that commercial manufacturing equipment be used to produce test batches for FDA approval. The FDA also requires validation of manufacturing processes before a company may market new products. The FDA conducts pre-approval and post-approval reviews and plant inspections to implement these requirements. Generally the generic drug development and the ANDA review process takes about three to five years.

The federal CSA and its implementing regulations establish a closed system of controlled substance distribution for legitimate handlers. The CSA imposes registration, security, recordkeeping and reporting, storage, manufacturing, distribution, importation and other requirements upon legitimate handlers under the oversight of the DEA. The DEA categorizes controlled substances into one of five schedules—Schedule I, II, III, IV, or V—with varying qualifications for listing in each schedule. Facilities that manufacture, distribute, import or export any controlled substance must register annually with the DEA. The DEA inspects all manufacturing facilities to review security, record keeping and reporting and handling prior to issuing a controlled substance registration. Failure to maintain compliance with applicable requirements, particularly as manifested in the loss or diversion of controlled substances, can result in enforcement action, such as civil penalties, refusal to renew necessary registrations, or initiation proceedings to revoke those registrations. In certain circumstances, violations could lead to criminal prosecution.

The Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”) established the procedures for obtaining FDA approval for generic forms of brand-name drugs. This Act also provides market exclusivity provisions that can delay the approval of ANDAs. One such provision allows a five-year period of market exclusivity period for NDAs involving new chemical entities and a three-year period of market exclusivity for NDAs (including different dosage forms) containing new clinical(s) trial essential to the approval of the application. The Orphan Drug Act of 1983 grants seven years of exclusive marketing rights to a specific drug for a specific orphan indication. The term “orphan drug” refers, generally, to a product that treats a rare disease affecting fewer than 200,000 Americans. Market exclusivity provisions are distinct from patent protections and apply equally to patented and non-patented drug products. Another provision of the Hatch-Waxman Act extends certain patents for up to five years as compensation for the reduction of effective life of the patent which resulted from time spent in clinical trials and time spent by the FDA reviewing a drug application.

Under the Hatch-Waxman Act, a generic applicant must make certain certifications with respect to the patent status of the drug for which it is seeking approval. In the event that such applicant plans to challenge the validity or enforceability of an existing listed patent or asserts that the proposed product does not infringe an existing listed patent, it files a “Paragraph IV” certification. The Hatch-Waxman Act provides for a potential 180-day period of generic exclusivity for the first company to submit an ANDA with a Paragraph IV certification. This filing triggers a regulatory process in which the FDA is required to delay the final approval of subsequently filed ANDAs containing Paragraph IV certifications until 180-days after the first commercial marketing. When this occurs, the FDA generally may not approve the ANDA until the earlier of 30 months or a court decision finding the patent invalid, not infringed or unenforceable. Submission of an ANDA with a Paragraph IV certification can result in protracted and expensive patent litigation.

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The Best Pharmaceuticals for Children Act, signed into law in 2002, continues the so-called “pediatric exclusivity” program begun in the FDA Modernization Act of 1997. This pediatric exclusivity program provides a six-month period of market exclusivity both to certain listed patents and to regulatory exclusivities for all formulations of an active ingredient, if the sponsor performs and submits pediatric studies acceptable to the FDA on any one single dosage form within specified timeframes. An effect of this program has been to delay the launch of numerous generic products by an additional six months.

The Medicare Prescription Drug, Improvement and Modernization Act (the “Medicare Modernization Act”) of 2003 modified certain provisions of the Hatch-Waxman Act. Under the Medicare Modernization Act, the 180- day period of generic exclusivity rights may be forfeited under certain specified circumstances, including if the product is not marketed within 75 days of a final court decision. In 2012, Congress passed legislation to create a generic drug user fee program (GDUFA) in order to augment the FDA’s congressional appropriations. User fee funding is anticipated to be sufficient to eliminate the backlog of ANDAs pending with the FDA by the end of Fiscal Year 2017 as well as provide enhanced review metrics over the statute’s five-year period. Additionally, generic drug user fees are intended to bring parity between the U.S. and foreign inspections by 2017 in order to ensure a consistent standard of quality for all drugs intended for the U.S. market. Implementation of the program began on October 1, 2012. In July 2012, Congress also passed legislation that allowed the FDA to continue to collect user fees, payments to supplement the appropriations that the agency receives from Congress, for brand products and a new user fee program for biosimilar products. As part of this legislation, Congress included a provision that extended the period of time that a generic applicant has to receive tentative approval of its ANDA to preserve eligibility for 180-day exclusivity. Applications that were submitted during the 30-month period preceding the signing of the bill (January 9, 2010 to July 9, 2012) are entitled to a 40-month period to receive FDA review before triggering a forfeiture. This provision sunsets at the end of the five-year timeframe established by the statute. However, for the applications to which this applies, the benefit is significant. Prospectively, the FDA will continue to collect the newly created user fees applicable to generic products, funding new resources and with the goal of improving future ANDA review times.

The passage of the Food and Drug Administration Amendments Act (FDAAA) in 2007 strengthened the FDA’s regulatory authority on post-marketing safety and granted the agency the authority to control drug marketing and labeling, to require post-approval studies, to establish active surveillance systems, and to make clinical trial operations and results more available to the public. Another provision provides for a 180-day period for the FDA to respond to citizen petitions submitted to the FDA that could delay the approval of generic applications. That 180-day period was reduced to 150 days as part of legislation passed in July 2012. A key provision also allows the FDA to require a risk evaluation and mitigation strategy for drugs associated with greater safety risks.

The Generic Drug Enforcement Act of 1992 established penalties for wrongdoing in connection with the development or submission of an ANDA by authorizing the FDA to permanently or temporarily debar such companies or individuals from submitting or assisting in the submission of an ANDA, and to temporarily deny approval and suspend applications to market generic drugs. The FDA may suspend the distribution of all drugs approved or developed in connection with wrongful conduct and also has authority to withdraw approval of an ANDA under certain circumstances. The FDA may also significantly delay the approval of a pending NDA or ANDA under its “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities Policy.” Manufacturers of generic drugs must also comply with the FDA’s cGMP regulations or risk sanctions such as the suspension of manufacturing or the seizure of drug products and the FDA’s refusal to approve additional ANDAs.

On November 13, 2013, the FDA proposed a rule that would require generic manufacturers to participate in the “Changes Being Effected” process to initiate labeling changes for generic medicines without prior FDA

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approval. If adopted, the rule would allow different labels to be in use at the same time. Currently, generic and brand drug labeling must be identical except for small exceptions explicitly designated by statute. If the rule were to become final as proposed, Teva’s potential product liability exposure could increase. Comments on the proposed rule must be submitted by March 13, 2014.

Products manufactured outside the United States and marketed in the United States are subject to all of the above regulations, as well as to FDA and United States customs regulations at the port of entry. Products marketed outside the United States that are manufactured in the United States are additionally subject to various export statutes and regulations, as well as regulation by the country in which the products are to be sold.

Our products also include biopharmaceutical products that are comparable to brand-name biologics, but that are not approved as biosimilar versions of such brand-name products. Of this portfolio, Tev-Tropin^® and Granix^™ are sold in the United States, while others are distributed outside of the United States. As part of these efforts we filed a BLA for our G-CSF product in 2009, which was approved by the FDA in 2012, and was launched in November 2013. While regulations are still being developed by the FDA relating to the Biologics Price Competition and Innovation Act of 2009 (“BPCI”), which created a statutory pathway for the approval of biosimilar versions of brand-name biological products and a process to resolve patent disputes, the FDA issued three substantial draft guidance documents in February 2012 that are intended to provide a roadmap for development of biosimilar products. These draft guidance documents address quality considerations, scientific considerations and questions and answers regarding commonly posed issues.

Healthcare Reform and Certain Government Programs

In early 2010, the United States Congress enacted the Patient Protection and Affordable Care Act of 2010 (the “PPACA”). The PPACA seeks to reduce the federal deficit and the rate of growth in health care spending through, among other things, stronger prevention and wellness measures, increased access to primary care, changes in health care delivery systems and the creation of health insurance exchanges. Enrollment in the health insurance exchanges began in October 2013. The PPACA requires the pharmaceutical industry to share in the costs of reform, by, among other things, increasing Medicaid rebates and expanding Medicaid rebates to cover Medicaid managed care programs. Other components of healthcare reform include funding of pharmaceutical costs for Medicare patients in excess of the prescription drug coverage limit and below the catastrophic coverage threshold. Under the PPACA, pharmaceutical companies are now obligated to fund 50% of the patient obligation for branded prescription pharmaceuticals in this gap, or “donut hole.” Additionally, commencing in 2011, an excise tax was levied against certain branded pharmaceutical products. The tax is specified by statute to be approximately $3 billion in 2012 through 2016, $3.5 billion in 2017, $4.2 billion in 2018, and $2.8 billion each year thereafter. The tax is to be apportioned to qualifying pharmaceutical companies based on an allocation of their governmental programs as a portion of total pharmaceutical government programs.

The Centers for Medicare & Medicaid Services (“CMS”) administer the Medicaid drug rebate program, in which pharmaceutical manufacturers pay quarterly rebates to each state Medicaid agency. Generally, for generic drugs marketed under ANDAs, manufacturers (including Teva) are required to rebate 13% of the average manufacturer price, and for products marketed under NDAs or BLAs, manufacturers are required to rebate the greater of 23.1% of the average manufacturer price or the difference between such price and the best price during a specified period. An additional rebate for products marketed under NDAs or BLAs is payable if the average manufacturer price increases at a rate higher than inflation, and other methodologies apply to new formulations of existing drugs.

In addition, the PPACA revised certain definitions used for purposes of calculating the rebates, including the definition of “average manufacturer price.” CMS has proposed, but not yet promulgated, a regulation implementing aspects of the PPACA in the Medicaid drug rebate program.

Various state Medicaid programs have implemented voluntary supplemental drug rebate programs that may provide for states with additional manufacturer rebates to the states in exchange for preferred status on a state’s formulary or for patient populations that are not included in the traditional Medicaid drug benefit coverage.

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Europe

General

In Europe, marketing authorizations for pharmaceutical products may be obtained through a centralized procedure involving the EMA, a mutual recognition procedure which requires submission of applications in other member states following approval by a so-called reference member state, or a decentralized procedure that entails simultaneous submission of applications to chosen member states.

During 2013, we continued to register products in the EU, using both the mutual recognition procedure and the decentralized procedure. We continue to use the centralized procedure to register our generic equivalent version of reference products that originally used this procedure.

The European pharmaceutical industry is highly regulated and much of the legislative and regulatory framework is driven by the European Parliament and the European Commission. This has many benefits, including the potential to harmonize standards across the complex European market, but it also has the potential to create difficulties affecting the whole of the European market.

The implementation of some elements of the European Falsified Medicines Directive were enacted into national laws during 2013. The provisions of the Directive are intended to reduce the risk of counterfeit medicines entering the supply chain and also to ensure the quality of API manufactured outside of the EU. Teva worked diligently at the European and country levels to ensure there was no disruption to the supply chain and safeguarded supplies of medicines to the patients who depend on them.

The implementation of new European pharmacovigilance legislation has changed our global pharmacovigilance obligations. These new requirements are intended to improve patient safety. However, they increased our administrative burden and therefore costs, and there are proposals from the European Commission to introduce fees that industry pays for the simplification and maintenance of the European pharmacovigilance system as well as fees for the assessment of pharmacovigilance reports, study protocols and referrals. The principle of the proposal has been agreed, but the actual financial proposals are currently in the last stage of discussion and will most probably be implemented for 2014. This will lead to further increased costs in 2014.

The procurement model in parts of Europe for the supply of important secondary care products such as oncology injectable medicines creates a challenge for governments and the pharmaceutical industry. We do everything we can to supply medicines for life-threatening conditions, while at the same time the market creates few incentives for us to do so. Until the procurement model recognizes that stability and sustainability, and the need to allow manufacturers to earn a return on their investment, are important components in purchasing decisions, shortages will be almost impossible to avoid. In 2013, we declined to participate in certain tenders and ended our supply in others since the procurement model for this segment was not sustainable. If the situation remains unchanged, we may withdraw certain products from the market because they are commercially nonviable. We continue to work with governments and our customers on ensuring that the patient’s needs are protected, but we believe that governments can do more to ensure security of supply by creating adequate incentives for manufacturers to maintain manufacturing capacity.

European Union

The medicines regulatory framework of the EU requires that medicinal products, including generic versions of previously approved products and new strengths, dosage forms and formulations of previously approved products, receive a marketing authorization before they can be placed on the market in the EU. Authorizations are granted after a favorable assessment of quality, safety and efficacy by the respective health authorities. In order to obtain authorization, application must be made to the competent authority of the member state concerned. Besides various formal requirements, the application must contain the results of pharmaceutical (physico-chemical, biological or microbiological) tests, pre-clinical (toxicological and pharmacological) tests and clinical trials. All of these tests must have been conducted in accordance with relevant European regulations and must allow the reviewer to evaluate the quality, safety and efficacy of the medicinal product.

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During 2013, we continued to register products in the EU, using both the mutual recognition procedure (submission of applications in other member states following approval by a so-called reference member state) and the decentralized procedure (simultaneous submission of applications to chosen member states). We continue to use the centralized procedure to register our generic equivalent version of reference products that originally used this procedure.

In 2005, a legal pathway was established to allow approval of Similar Biological Medicinal Products (“biosimilars”) using abbreviated marketing applications. Appropriate tests for demonstration of safety and efficacy include preclinical or clinical testing or both. The reference product for this testing is the brand-name drug, and the scientific principles and regulatory requirements for comparability are followed. Guidelines have been issued providing a more detailed interpretation of the data requirements for specific products, and further guidance is being developed by the respective authorities in conjunction with the pharmaceutical industry.

In order to control expenditures on pharmaceuticals, most member states of the EU regulate the pricing of such products and in some cases limit the range of different forms of a drug available for prescription by national health services. These controls can result in considerable price differences among member states.

In addition to patent protection, exclusivity provisions in the EU may prevent companies from applying for marketing approval for a generic product for either six or ten years (the period is selected by each country) from the date of the first market authorization of the original product in the EU. The 2005 legislation, applicable to all members of the EU, changes and harmonizes the exclusivity period for new products where the application for marketing approval was submitted after October 2005 for products filed via the national pathway or November 2005 for products filed via the centralized procedure. The period before marketing approval for a generic product can be pursued (known as data exclusivity) is eight years (from either six or ten years before) following approval of the reference product in the EU. Further, the generic product will be barred from market entry (marketing exclusivity) for a further two years, with the possibility of extending the market exclusivity by one additional year under certain circumstances for novel indications. Given that reference products submitted after October or November 2005 will take at least one year to be assessed and approved, the 2005 exclusivity provisions of “8+2+1” years will affect only generic submissions for marketing approval lodged in late 2014 onwards.

The term of certain pharmaceutical patents may be extended in the EU by up to five years upon grant of Supplementary Patent Certificates (“SPC”). The purpose of this extension is to increase effective patent life (i.e., the period between grant of a marketing authorization and patent expiry) to fifteen years. Previously, longer extensions had been available; for example, French and Italian patents granted before the current SPC legislation came into force were extended by up to eight and eighteen years, respectively.

Subject to the respective pediatric regulation, the holder of an SPC may obtain a further patent term extension of up to six months under certain conditions. This six-month period cannot be claimed if the license holder claims a one-year extension of the period of marketing exclusivity based on the grounds that a new pediatric indication brings a significant clinical benefit in comparison with other existing therapies.

Orphan designated products, which receive, under certain conditions, a blanket period of ten years of market exclusivity, may receive an additional two years of market exclusivity instead of an extension of the SPC if the requirements of the pediatric regulation are met.

The legislation also allows for research and development work during the patent term for the purpose of developing and submitting registration dossiers.

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Rest of the World Markets

Japan

The registration of existing or new generic drugs in Japan is subject to Pharmaceutical and Medical Device Agency approval and requires carrying out local bioequivalence studies, as well as upholding stringent quality, stability and stable supply requirements. Generic prices are regulated by the Ministry of Health, Labor and Welfare and are set at 60%-70% of the equivalent branded drug prices (to be revised in April 2014), depending on the number of competitors. Generic drug prices are company specific, reflecting the actual net selling price by a company and are subject to ongoing price reductions of approximately 8-10% every two years.

The Japanese government provides comprehensive healthcare coverage, and the majority of healthcare expenditure is funded by the government. In order to control growing healthcare costs, beginning in 2008 the Japanese regulator adopted a coordinated policy to promote the use of generic drugs by utilizing a series of targeted incentive programs. The government’s stated goal is to reach at least 60% generic penetration in 2018. In April 2010 and 2012, new financial incentive schemes were established, encouraging pharmacies to substitute generic drugs for branded ones and doctors to prescribe generic drugs. The next reform, which is scheduled for April 2014, is likely to further increase generic penetration.

Russia

The Russian government is implementing its 2020 pharmaceutical sector strategy, which emphasizes localization of production and aims to harmonize the Russian pharmaceutical regulations with international principles and standards. Russia’s pricing regulations, which took effect in 2010, impose price restrictions and mark-up regulation on pharmaceuticals listed on the Essential Drug List (EDL). In accordance with this legislation, as of January 1, 2010, EDL manufacturers must perform annual price review calculated according to the methodology of the Ministry of Health. The law does not regulate prices for non-essential medicines. The legislation also includes safety measures, including obligatory GMP requirements, to be implemented by January 1, 2015, with the goal of ensuring production of high-quality pharmaceuticals and, from July 2013, stipulates prescription by INN. Customs duties for pharmaceuticals were amended effective September 2013.

Israel

The Israeli Ministry of Health requires pharmaceutical companies to conform to internationally recognized standards, such as GMP, which were recently changed significantly to meet EU standards. Other legal requirements prohibit the manufacturing, importation and marketing of any medicinal product unless it is approved in accordance with these requirements and strict pharmacovigilance procedures and regulations.

Latin America

Historically in Latin America, the regulatory requirements for product approval were low and there has been limited enforcement of patents and other intellectual property rights. For instance, in most of the Latin American countries bioequivalence testing was not mandatory for generic approval, but the requirement is currently changing. Moreover, in recent years, Latin America has seen increased enforcement of intellectual property and data protection rights through the acceptance of trade agreements with the United States and other developed countries. The market has also been characterized by an increased demand for high-quality pharmaceutical products, as the major markets in the region have adopted more stringent regulations governing pharmaceutical product safety and quality. Nevertheless, pricing pressures for pharmaceutical products, which are subject to direct or indirect price controls, in many countries in Latin America, are expected to continue to exert political and budgetary constraints that may foster the continued growth of generics and may have a negative impact on pricing. With respect to biosimilars or follow-on biologics, new regulatory pathways for approval are in development in the region.

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Canada

The Canadian Federal Government, under the Food and Drugs Act and the Controlled Drug and Substances Act, regulates the therapeutic products that may be sold in Canada and the applicable level of control. The Therapeutic Products Directorate (“TPD”) is the national authority that evaluates and monitors the safety, effectiveness and quality of drugs, medical devices and other therapeutic products. The TPD requires companies to make an abbreviated new drug submission in order to receive approval to manufacture and market generic pharmaceuticals.

The issuance of a market authorization or “Notice of Compliance” is subject to the Food and Drug Regulations, which provide, among other things, up to eight and one-half years of data exclusivity for innovative new drugs not previously approved for sale in Canada. Issuance of a Notice of Compliance for generic drug products is also subject to the Patented Medicines (Notice of Compliance) Regulations under the Patent Act. The TPD will not issue a Notice of Compliance if there are any relevant patents listed on the Patent Register maintained by Health Canada, which were listed prior to the filing of the generic submission. Generic pharmaceutical manufacturers can serve a Notice of Allegation (“NOA”) upon the brand company and, as is frequently the case, the brand company may commence litigation in response to the NOA. In such cases a Notice of Compliance will not be issued until the earlier of the expiration of the automatic 24-month stay or resolution of the litigation in the generic company’s favor.

Every province in Canada offers a comprehensive public drug program for seniors, persons on social assistance, low-income-earners, and those with certain specified conditions or diseases, and regulates the reimbursement price of drugs listed on their formularies. Formulary listings are also used by private payors to reimburse generic products. To be listed in a provincial formulary, drug products must have been issued an NOC and must comply with each jurisdiction’s individual review process. Most provinces in Canada have implemented price reforms aimed at reducing the reimbursement price of generic products. Canadian provinces have been working separately and collectively to effect price reforms on a select number of high volume generic products. Ontario and Quebec regulations (representing 60% of the Canadian market) also include certain limitations related to trade allowances paid to pharmacy customers and Quebec requires generic companies to report the details of all such transactions.

Facilities, procedures, operations and/or testing of products are subject to periodic inspection by Health Canada and the Health Products and Food Branch Inspectorate. In addition, Health Canada conducts pre-approval and post-approval reviews and plant inspections to determine whether systems are in compliance with the good manufacturing practices in Canada, Drug Establishment Licensing requirements and other provisions of the Regulations. Competitors are subject to similar regulations and inspections.

Miscellaneous Regulatory Matters

We are subject to various national, regional and local laws of general applicability, such as laws regulating working conditions. In addition, we are subject to various national, regional and local environmental protection laws and regulations, including those governing the emission of material into the environment.

Data exclusivity provisions exist in many countries worldwide and may be introduced in additional countries in the future, although their application is not uniform. In general, these exclusivity provisions prevent the approval and/or submission of generic drug applications to the health authorities for a fixed period of time following the first approval of the brand-name product in that country. As these exclusivity provisions operate independently of patent exclusivity, they may prevent the submission of generic drug applications for some products even after the patent protection has expired.

ITEM 4A: UNRESOLVED STAFF COMMENTS

None

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ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Introduction

Overview

We are a fully integrated global pharmaceutical company, with extensive R&D, manufacturing and distribution capabilities. Our business includes two primary segments: generic medicines and specialty medicines, as well as certain additional activities that are not part of these segments, such as our joint venture with Procter & Gamble for the sale of OTC products. As the world’s largest generic company with an established specialty medicines portfolio, we are strategically positioned to benefit from current changes in the global healthcare environment.

We operate in pharmaceutical markets worldwide, with major operations in the United States, Europe and other markets.

Our business strategy seeks to capitalize on the growing global need for medicines and evolving market, economic and legislative dynamics. These dynamics include the aging population, increased spending on pharmaceuticals in emerging markets, economic pressure on governments and private payors to provide cost-effective healthcare solutions, legislative and regulatory reforms, unmet patient needs, an increase in patient awareness and the growing importance of OTC medicines.

We believe that our targeted strategy, dedicated leadership employees, world-leading generics expertise and portfolio, global reach, integrated R&D capabilities and global infrastructure and scale position us to take advantage of opportunities created by these dynamics.

Strategy

The key elements of our strategy consist of:

• Accelerating our growth platforms by focusing on high-value generics, generics with higher barriers to entry and branded generics;

• Extending our global presence by enhancing and refining our portfolio and increasing our presence in order to achieve market leadership in existing markets, and expanding in various emerging markets, including in Latin America and Asia;

• Protecting and expanding our core specialty franchises of CNS, respiratory and pain treatment, as demonstrated by the recent approval of thee-times-a-week Copaxone^® 40 mg/ml. We will also make selective investments in women’s health, oncology and other areas;

• Developing new therapeutic entities (“NTEs”) as part of our strategy to expand our specialty business. NTEs are known molecules that are formulated, delivered or used in a novel way to address specific patient needs. We currently have 15 NTE products in our development pipeline;

• Executing strategic business development transactions by focusing on enhancing our core specialty franchises and making selective investments in new or growing geographies. We will also continue to divest assets that are not part of our core strategy; and

• Reducing our operating costs by $2 billion in cost reductions by the end of 2017, with half of that targeted by the end of 2014. We are focusing particular attention on improving our procurement systems by leveraging our purchasing power and improving our production network, supply chain, and resources deployment processes.

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Segments

We operate our business in two segments:

• Generic products, which include chemical and therapeutic equivalents of originator pharmaceuticals in a variety of dosage forms, including tablets, capsules, ointments, creams, liquids, injectables and inhalants. We are the leading generic drug company in the United States and Europe, and we have a significant or growing presence in our ROW markets. We are also one of the world’s leading manufacturers of APIs.

• Specialty products, which include several core franchises, most significantly medicines for CNS disorders such as Copaxone^®, Azilect^® and Nuvigil^®; oncology medicines such as Treanda^®; respiratory medicines such as ProAir^® HFA and QVAR^®, as well as other areas such as women’s health. Our specialty business also includes our emerging NTE activity.

In addition to these two segments, we have other activities, primarily PGT Healthcare, our OTC joint venture with P&G, distribution services, primarily in Israel and Hungary, and sales of medical devices.

Highlights

Significant highlights of 2013 included:

• Our revenues amounted to $20.3 billion, flat compared to 2012, as higher revenues of our specialty medicines and OTC products were offset by the decline in sales of generic medicines.

• Our generic medicines segment generated revenues of $9.9 billion and profitability of $1.7 billion, down 5% and 20%, respectively. The decline in revenues was mainly due to lower sales in the United States and ROW markets. Profitability was affected by product mix and increasing costs.

• Our specialty medicines segment generated revenues of $8.4 billion and profitability of $4.6 billion, up 3% and down 3%, respectively. Specialty revenues were up mainly due to higher sales of Copaxone^®, Treanda^® and Azilect^®, which were partially offset by the decline in Provigil^® sales. Profitability was impacted by higher R&D and S&M expenses.

• G&A expenses amounted to $1.2 billion and net financial expenses amounted to $399 million, in line with last year.

• Legal settlements and loss contingencies for the year amounted to $1.5 billion, primarily due to the pantoprazole settlement, compared to $715 million for 2012. Impairments, restructuring and others amounted to $788 million for the year, compared to $1.3 billion in 2012.

• Operating income amounted to $1.6 billion, a decrease of $556 million compared to 2012, mainly due to higher legal settlements and loss contingencies, partially offset by lower impairments, restructuring and others.

• Cash flow from operating activities amounted to $3.2 billion, a decrease of $1.3 billion compared to 2012.

• Net income attributable to Teva in 2013 amounted to $1.3 billion, compared to $2.0 billion in 2012.

• In 2013, we paid $577 million in Israeli corporate tax on previously exempt income of $9.4 billion, applying the provisions of Amendment 69 to certain exempt profits accrued prior to 2012.

• In January 2014, we entered into a definitive agreement to purchase NuPathe Inc. for approximately $144 million to be paid at closing, plus additional cash payments of up to $130 million in sales milestones for Zecuity^®. Zecuity^® is the first and only prescription migraine patch approved by the FDA for the acute treatment of migraine with or without aura in adults. This transaction is expected to close in late February 2014.

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• In January 2014, the U.S. Food and Drug Administration approved our sNDA for Copaxone^® 40mg/mL, a higher dose of Copaxone^® with a three times a week dosing regimen for patients with RRMS.

Changes in Senior Management

Erez Vigodman will become our President and Chief Executive Officer on February 11, 2014, succeeding Eyal Desheh, who will return to his previous position as Group Executive Vice President and Chief Financial Officer. Mr. Desheh has served as Acting President and Chief Executive Officer following Dr. Jeremy Levin, who stepped down as President and Chief Executive Officer on October 30, 2013.

Results of Operations

The following table sets forth, for the periods indicated, certain financial data derived from our U.S. GAAP financial statements, presented as percentages of net revenues, and the percentage change for each item as compared to the previous year;

	Percentage of Net Revenues Year Ended December 31,								Percentage Change Comparison
	2013			2012			2011		2013-2012			2012-2011
	%			%			%		%			%
Net revenues		100.0			100.0			100.0		*			11
Gross profit		52.7			52.4			52.0		1			12
Research and development (R&D) expenses		7.0			6.7			6.0		5			24
Selling and marketing (S&M) expenses		20.1			19.1			19.0		5			12
General and administrative (G&A) expenses		6.1			6.1			5.1		*			33
Legal settlements and loss contingencies		7.5			3.5			2.6		112			52
Impairments, restructuring and others		3.9			6.2			2.3		(37	)		192
Operating income		8.1			10.8			17.0		(25	)		(29	)
Financial expenses—net		2.0			1.9			0.9		3			152
Income before income taxes		6.1			8.9			16.1		(31	)		(38	)
Income taxes		(0.2	)		(0.7	)		0.7		(69	)		(208	)
Share in losses of associated companies—net		0.2			0.2			0.3		(13	)		(25	)
Net loss attributable to non-controlling interests		(0.1	)		(0.3	)		*		(70	)		(689	)
Net income attributable to Teva		6.2			9.7			15.1		(35	)		(29	)

* Represents an amount of less than 0.05%.

Segment Information

The following table presents segment revenues and profitability for the past three years:

	Generics
	Year Ended December 31,
	2013				2012				2011
	U.S.$ in millions/% of Segment Revenues
Revenues	$	9,906	100.0	%	$	10,385	100.0	%	$	10,196	100.0	%
Gross profit		4,095	41.3			4,518	43.5			4,605	45.2
R&D expenses		494	5.0			485	4.7			459	4.5
S&M expenses		1,945	19.6			1,971	19.0			2,087	20.5
Segment profitability*	$	1,656	16.7	%	$	2,062	19.9	%	$	2,059	20.2	%

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	Specialty
	Year Ended December 31,
	2013				2012				2011
	U.S.$ in millions / % of Segment Revenues
Revenues	$	8,402	100.0	%	$	8,150	100.0	%	$	6,493	100.0	%
Gross profit		7,326	87.2			7,173	88.0			5,622	86.6
R&D expenses		909	10.8			793	9.7			616	9.5
S&M expenses		1,850	22.0			1,686	20.7			1,099	16.9
Segment profitability*	$	4,567	54.4	%	$	4,694	57.6	%	$	3,907	60.2	%

* Segment profitability is comprised of gross profit for the segment, less S&M and R&D expenses related to the segment. Segment profitability does not include G&A expenses, amortization and non-recurring items. See note 21 of our consolidated financial statements and “Operating Income” below for additional information.

Generic Medicines Segment

Revenues

Our generic medicines segment includes sales of generic medicines as well as API sales to third parties. Revenues from our generic medicines amounted to $9.9 billion, a decline of $479 million, or 5%, in 2013 compared to 2012. In local currency terms, sales decreased 3%.

Our largest market for generics is the United States, with revenues of $4.2 billion, down $200 million from 2012, represented 42% of total generics revenues in 2013. Revenues of generic medicines in Europe amounted to $3.5 billion, flat compared to 2012. In local currency terms, European sales decreased 2%. Revenues of generic medicines in Europe represented 35% of total generics revenues in 2013. In our ROW markets, revenues from generic medicines in 2013 amounted to $2.2 billion, a decrease of 11% compared to 2012. In local currency terms, ROW sales decreased 1%. Revenues from generic medicines in ROW markets represented 23% of total generics revenues in 2013.

API sales to third parties in 2013 amounted to $692 million, a decrease of 13% compared to 2012. In local currency, sales decreased 12%. The decrease resulted from lower sales in each of our three geographical areas, the United States, Europe and our ROW markets.

Comparison of 2012 to 2011. In 2012, revenues from generic medicines amounted to $10.4 billion, an increase of 2% compared to $10.2 billion in 2011. In local currency terms, revenues increased 5%. U.S. revenues were $4.4 billion, an increase of 11% from 2011. Revenues from generic medicines in Europe amounted to $3.5 billion, a decrease of 11% from 2011. Generic medicines revenues in our ROW markets in 2012 were $2.5 billion, an increase of 9% from 2011.

The following table presents generic segment revenues by geographic area for the past three years:

	Year Ended December 31,						Percentage Change
	2013		2012		2011		2013-2012			2012-2011
	U.S. $ in millions
United States	$	4,181	$	4,381	$	3,957		(5	%)		11	%
Europe*		3,485		3,482		3,929		§			(11	%)
Rest of the World		2,240		2,522		2,310		(11	%)		9	%
Total Generic Medicines	$	9,906	$	10,385	$	10,196		(5	%)		2	%

* All members of the European Union, Switzerland, Norway, Albania and the countries of former Yugoslavia.

§ Less than 0.5%.

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United States Generic Medicines Revenues

In 2013, we led the U.S. generic market in total prescriptions and new prescriptions, with total prescriptions of approximately 523 million, representing 15.3% of total U.S. generic prescriptions. We intend to continue our U.S. market leadership based on our ability to introduce new generic equivalents for brand-name products on a timely basis, specifically, with a focus on complex generics and other high-barrier products that we believe will create more value for patients and customers, strong emphasis on customer service, the breadth of our product line, our commitment to quality and regulatory compliance and cost-effective production.

Revenues from generic medicines in the United States during 2013 amounted to $4.2 billion, down 5% compared to $4.4 billion in 2012. The decrease resulted mainly from a decline in sales of the generic version of Lexapro^® (escitalopram oxalate) for which we had exclusive rights in the first half of 2012, the lack of royalties related to the sales of the generic equivalent of Lipitor^® (atorvastatin) under our agreement with Ranbaxy, which we received in the first half of 2012, and a decline in sales of the generic version of Actos^® (pioglitazone) and Actoplus met^® (pioglitazone/metformin), which were launched in the third quarter of 2012. These decreases were partially offset by higher sales of the generic version of Pulmicort^® (budesonide inhalation) and the generic version of Adderall IR^® (amphetamine salts IR), the exclusive launch of niacin ER, the generic equivalent of Niaspan^®, as well as products that were sold in 2013 that were not sold in 2012.

Among the most significant generic products we sold in the United States in 2013 were generic versions of Pulmicort^® (budesonide inhalation), Adderall^® (mixed amphetamine salts), Niaspan^® (niacin ER), Adderall XR^® (mixed amphetamine salts ER), Tricor (fenofibrate), Accutane^® (isotretinoin, which we market as Claravis™), Provigil^® (modafinil) and Catapres-TTS (clonidine transdermal patch).

Comparison of 2012 to 2011. Total generic sales in the United States in 2012 amounted to $4.4 billion, up from $4.0 billion in 2011. The main contributors to this increase were launches of key products during 2012 as well as higher royalties related to sales of the generic equivalent of Lipitor^® (atorvastatin).

Products. In 2013, we launched generic versions of the following 21 branded products in the United States (listed by date of launch):

Generic Name	Brand Name	Launch Date		Total Annual U.S. Market at Time of Launch $ millions (IMS)*
Carbamazepine ER capsules 100, 200 & 300 mg	Carbatrol®		Jan-2013	$	100
Rizatriptan benzoate tablets 5 & 10 mg	Maxalt®		Feb-2013	$	348
Propofol injectable emulsion 10 mg/ml 20 mL vial	Diprivan®		Mar-2013	$	92
Oxymorphone tablets 5 & 10 mg	Opana®		Apr-2013	$	61
Fluoxetine / olanzapine capsules 25 mg / 3 mg	Symbyax®		Apr-2013	$	11
Levalbuterol inhalation solution 0.31, 0.63 & 1.25 mg	Xopenex®		Apr-2013	$	402
Topotecan injection 1 mg/mL, 4 mg	**		May-2013		—
Sildenafil tablets 20 mg	Revatio®		May-2013	$	275
Etoposide injection 20 mg/mL***	VePesid®		May-2013	$	8
Leucovorin injection 350 mg vial***	Wellcovorin® I.V.		May-2013	$	8
Acitretin capsules 10, 17.5 & 25 mg	Soriatane®		Jul-2013	$	133
Temozolamide capsules 5, 20, 100, 140, 180 & 250 mg	Temodar®		Aug-2013	$	430
Amoxicillin / clarithromycin / lansoprazole ER tablets 500/30/500 mg	Prevpak® Kit		Sep-2013	$	75
Niacin ER tablets 500, 750 & 1000 mg	Niaspan® ER		Sep-2013	$	1,121
Adenosine injection 3 mg/mL 20 & 30 mL vials	Adenoscan®		Sep-2013	$	63
Paricalcitol capsules 1, 2 & 4 mg	Zemplar®		Sep-2013	$	115
Rabeprazole sodium DR tablets	Aciphex®		Nov-2013	$	830
Tobramycin inhalation solution	Tobi®		Nov-2013	$	345
Dexmethylphenidate HCl ER capsules 40 mg	Focalin XR®		Nov-2013	$	26
Imiquimod cream 5%	Aldara®		Dec-2013	$	146
Duloxetine DR capsules 20, 30 & 60 mg	Cymbalta®		Dec-2013	$	5,432

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* The figures given are for both branded and generic versions for the twelve months ended in the calendar quarter closest to our launch or re-launch.

** Approved via 505(b)(2) regulatory pathway; not equivalent to a brand product.

*** Products were re-launched.

We expect that our generic medicines revenues in the U.S. will continue to benefit from our strong generic pipeline, which, as of January 24, 2014, had 133 product registrations awaiting FDA approval, including 36 tentative approvals. Collectively, these 133 products had U.S. sales in 2013 exceeding $81 billion. Of these applications, 97 were “Paragraph IV” applications challenging patents of branded products. We believe we are first to file with respect to 53 of these products, the branded versions of which had U.S. sales of more than $40 billion in 2013. IMS reported brand sales are one of the many indicators of future potential value of a launch, but equally important are the mix and timing of competition, as well as cost effectiveness. The potential advantages of being the first filer with respect to some of these products may be subject to forfeiture, shared exclusivity or competition from so-called “authorized generics,” which may ultimately affect the value derived.

The FDA requires companies to submit abbreviated new drug applications (ANDAs) for approval to manufacture and market generic forms of brand-name drugs. In most instances, FDA approval is granted upon the expiration of the underlying patents. However, companies may be rewarded with a 180-day period of marketing exclusivity, as provided by law, for being the first generic applicant to successfully challenge these patents. As part of our strategy, we actively review pharmaceutical patents and seek opportunities to challenge patents that we believe are either invalid or not infringed by our generic version. In addition to the commercial benefit of obtaining marketing exclusivity, we believe that our patent challenges ultimately improve healthcare by allowing consumers earlier access to more affordable, high-quality medications.

In 2013 we received, in addition to 17 final generic drug approvals, eight tentative approvals which remain tentative at December 31, 2013. A “tentative approval” letter indicates that the FDA has substantially completed its review of an application and final approval is expected once the relevant patent expires, a court decision is reached, a 30-month regulatory stay lapses or a 180-day exclusivity period awarded to another manufacturer either expires or is forfeited. The outstanding tentative approvals received are for generic equivalents of the following products:

Generic Name	Brand Name	Total U.S. Annual Branded Market $ millions (IMS)*
Valsartan tablets 40, 80, 160 & 320 mg	Diovan®	$	2,069
Guanfacine ER tablets	Intuniv®	$	496
Entecavir tablets 0.5 & 1 mg	Baraclude®	$	301
Varenicline tablets 0.5 & 1 mg	Chantix®	$	377
Paricalcitol injection 2 mcg/ml and 5 mcg/ml	Zemplar®	$	202
Dexmethylphenidate ER capsules 15, 25, 30 & 35 mg	Focalin XR®	$	399
Darunavir tablets 75, 150, 400 & 600 mg	Prezista®	$	517
Ethinyl estradiol / norethindrone acetate tablets	Loestrin 24  FE®	$	425

* The figures given are for the twelve months ended December 31, 2013.

Europe Generic Medicines Revenues

Teva defines its European region as the 28 countries in the European Union, Norway, Switzerland and Albania and the countries of former Yugoslavia. It is a diverse region that has a population of over 500 million people. Revenues presented include those from all 36 countries currently in our European region.

Revenues from generic medicines in Europe in 2013 amounted to $3.5 billion, in line with 2012. In local currency terms, revenues decreased 2%, mainly due to lower sales of API to third parties. During 2013, the euro and the Hungarian forint strengthened against the dollar, while the British pound weakened.

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As in previous years, European regulatory measures aimed at reducing healthcare and drug expenditures have led to slower growth in the generic medicines market, and have adversely affected our revenues in some markets. In France, Spain, Italy, Germany and Poland, governmental measures (such as tenders and price-referencing) have reduced prices. We have adjusted our strategy to address these changes, shifting from a market share-driven approach to a model emphasizing profitable and sustainable growth.

We continue to monitor activities in the European countries which, based on our internal assessment, are still experiencing economic stress, and are taking action to limit our exposure in these countries.

As of December 31, 2013, Teva had received 993 generic approvals in Europe relating to 173 compounds in 340 formulations, including 2 European Medicines Agency (“EMA”) approvals valid in all EU member states. In addition, Teva had approximately 1,632 marketing authorization applications pending approval in 31 European countries, relating to 207 compounds in 414 formulations, including 3 applications pending with the EMA. We register products in the EU, using both the mutual recognition procedure (submission of applications in other member states following approval by a so-called reference member state) and the decentralized procedure (simultaneous submission of applications to chosen member states). We continue to use the centralized procedure to register our generic equivalent version of reference products that originally used this procedure. We register generic products in countries that are part of our European market region, but are not EU members, with the applicable authorities in these countries.

Listed below are generic revenues highlights for 2013 in our most significant European operations in terms of size:

• Germany: Generic revenues in 2013 decreased 5%. In local currency terms, generic revenues decreased 8% compared to 2012. This decrease is due to our strategic focus on sustainable and profitable business, leading to lower participation in the tender market, and due to the limited number of new products launched during the year.

• France: Generic revenues in 2013 increased 2%. In local currency terms, generic revenues decreased 1% compared to 2012, due primarily to increased competition.

• United Kingdom: Our generic revenues in 2013 increased 2%, or 4% in local currency terms, compared to 2012. This was mainly due to our commercial initiatives and our ability to respond quickly to shortages in the market. We maintained our position as the largest generic pharmaceutical company in the U.K.

• Italy: Generic revenues in 2013 increased 21%. In local currency terms, generic revenues increased 16%. The increase is primarily the result of improvements in our supply management.

• Spain: Generic revenues in 2013 decreased 1%. In local currency terms, generic revenues decreased 4%, primarily due to the introduction of a tender business model in Andalucía, which reduced sales, partially offset by new launches and increased sales in other regions. We maintained our leadership in the generic market.

ROW Generic Medicines Revenues

ROW markets include all countries other than the United States and those in our European region. We began including, as of January 1, 2013, certain South Eastern European countries in “Europe”. The comparable revenues in 2012 and 2011 have been presented according to the new definition.

Our ROW region includes both pure generic markets, such as Canada and Israel, and markets in which generic medicines are sold under brand names, such as Russia, Ukraine and several Asian and Latin American countries. Sales of branded generic medicines usually generate higher gross margins, but involve higher marketing expenditures than non-branded generics.

In our ROW markets, generics revenues amounted to approximately $2.2 billion, a decrease of 11% compared to 2012. The decrease was mainly due to lower revenues in Japan, Canada and certain Latin America

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markets, partially offset by higher revenues in Russia. In local currency terms, revenues decreased 1%. We consider Japan, Russia and the Latin American countries to be the major “emerging” generics markets, which are characterized by rapid growth and relatively high revenues of branded generics, while Canada and Israel are “mature” generics markets that have higher generic penetration rates and therefore lower growth rates. Generic medicines revenues in our emerging generics markets in 2013 amounted to $1.7 billion, a decrease of 11% from $1.9 billion in 2012. Revenues in our mature generics markets amounted to $564 million for the year, a decrease of 11% compared to 2012.

Below are our revenues in these markets which represent approximately 87% of total revenues in the generic ROW markets:

In Japan, our generic revenues in 2013 decreased 20%, or 3% in local currency terms, compared to 2012. Our results in Japan mainly reflect certain quality and supply issues, which resulted in product shortages during the year. The Japanese generics market as a whole is expected to grow continuously, bolstered by new government incentives to increase generic penetration. In recent months, we have enhanced remediation efforts to address the operational difficulties.

In Latin America, revenues of our generic medicines decreased 5%, yet increased 11% in local currency terms, compared to 2012. The increase in local currency terms was primarily driven by volume growth accomplished through focused marketing programs promoting our generic and branded generic medicines, as well as price increases. We achieved growth in most markets and continued to defend our market share across the region.

We continue to expect revenues to be adversely affected by drug price legislation in certain Latin American markets in the near future. Revenues may be further adversely affected by exchange rate fluctuations in certain Latin American markets which may significantly reduce our sales in the region.

Our generic medicines revenues in Russia in 2013 grew 6%, or 11% in local currency terms, as compared to 2012. The growth was mainly attributable to higher sales of branded generics, partially offset by lower revenues from governmental tenders for generic products. We maintained our leading position in the Russian generic pharmaceutical market, slightly increasing our market share.

In Canada, where we are one of the two leading generic pharmaceutical companies, generic revenues decreased 13% in 2013, or 10% in local currency terms, compared to 2012. The decrease was primarily due to price reforms, partially offset by sales from new generic product launches.

Generic medicines revenues in Israel in 2013 increased 3% compared to 2012. In local currency terms, revenues decreased 2% due to lower sales of API to third parties.

Comparison of 2012 to 2011. In 2012, generic medicines revenues in the ROW markets in 2012 were $2.5 billion, an increase of 9% compared to 2011. The increase was mainly due to the inclusion of a full year of revenues of Taiyo in Japan, and the further consolidation of our activities in the country, as well as growth in certain Latin America markets, partially offset by lower revenues in Canada, Russia and Israel. In local currency terms, revenues grew 11%.

Generic Medicines Gross Profit

In 2013 gross profit from our generic medicines segment amounted to $4.1 billion, a decrease of $423 million, or 9%, compared to $4.5 billion in 2012. The lower gross profit was mainly a result of a change in the composition of revenues in the United States and Canada, mainly royalties related to sales in the United States of the generic equivalent of Lipitor^® (atorvastatin) under the agreement with Ranbaxy, higher charges related to inventories, a decrease in profits from API sales to third parties, as well as lower sales of other generic medicines, partially offset by sales of higher profitability products in the United States.

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Gross profit margin for our generic medicines segment in 2013 decreased to 41.3%, from 43.5% in 2012. This 2.2% decrease in gross margin was mainly a result of the change in the composition of revenues in the United States and Canada (which decreased gross margin by 1.6 points), the higher charges related to inventories (which decreased gross margin by 1.1 points), the decrease of API sales to third parties and lower sales of other generic medicines (which, in the aggregate, decreased gross margin by 3.4 points), partially offset by sales of higher profitability products in the United States (which increased gross margin by 3.9 points).

Comparison of 2012 to 2011. Generic medicines segment gross profit amounted to $4.5 billion in 2012, compared to $4.6 billion in 2011. Gross profit margins were 43.5% in 2012, compared to 45.2% in 2011.

Generic Medicines R&D Expenses

Research and development expenses relating to our generic medicines for 2013 were $494 million, an increase of 2% compared to $485 million in 2012. As a percentage of segment revenues, R&D expenses were 5.0% in 2013, compared to 4.7% in 2012.

Our R&D activities for the generic medicines segment include both (a) direct expenses relating to product formulation, analytical method development, stability testing, management of bioequivalence and other clinical studies, regulatory filings and legal expenses relating to patent review and challenges prior to obtaining tentative approval, and (b) indirect expenses such as costs of internal administration, infrastructure and personnel involved in generic R&D.

Generic Medicines S&M Expenses

Selling and marketing expenses related to our generic medicines in 2013 amounted to $1.9 billion, a slight decrease of 1% compared to $2.0 billion in 2012, mainly due to lower expenses in Europe, partially offset by higher royalty payments in the United States mainly related to higher sales of our generic versions of Pulmicort^® (budesonide inhalation).

As a percentage of segment revenues, selling and marketing expenses increased to 19.6% in 2013 from 19.0% in 2012.

Comparison of 2012 to 2011. Generic medicines S&M expenses in 2012 amounted to $2.0 billion, compared to $2.1 billion in 2011.

Generic Medicines Profitability

The profitability of our generic medicines segment is comprised of the gross profit for the segment, less selling and marketing expenses and research and development expenses related to this segment. Segment profitability does not include general and administrative expenses, amortization and non-recurring items. See note 21 of our consolidated financial statements and “Operating Income” below for additional information.

Profitability of our generic medicines segment amounted to $1.7 billion in 2013, compared to $2.1 billion in 2012. The decrease was due to factors previously discussed, primarily lower revenues and lower gross profit, which were partially offset by a reduction in selling and marketing expenses.

Generic medicines profitability as a percentage of generic medicines revenues was 16.7% in 2013, down from 19.9% in 2012. The decrease was mainly due to lower gross margin (2.2 points) and higher S&M expenses as percentage of generic medicines revenues (0.6 points), as well as higher R&D expenses as a percentage of generic medicines revenues (0.3 points).

Comparison of 2012 to 2011. Generics profitability amounted to $2.1 billion in 2012, the same as in 2011. As a percentage of revenues, generic profitability as a percentage of generic medicines revenues amounted in 2012 to 19.9%, down from 20.2% for 2011.

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Specialty Medicines Segment

Revenues

Specialty medicines revenues in 2013 amounted to $8.4 billion, an increase of 3% compared to 2012. In the United States, our specialty medicines revenues amounted to $6.0 billion, an increase of 3% from 2012. Specialty medicines revenues in Europe amounted to $1.7 billion, an increase of 8% from 2012. In local currency terms, specialty medicines revenues in Europe grew 6%. ROW revenues were $670 million, a decrease of 7%, or 3% in local currency terms, compared to 2012. Our specialty medicines segment also includes our NTE development program, although we have not yet realized any revenues from this program.

Comparison of 2012 to 2011. In 2012, specialty medicines revenues amounted to $8.2 billion, compared to $6.5 billion in 2011. United States revenues were $5.9 billion, an increase of 22% from 2011. Specialty medicines revenues in Europe amounted to $1.6 billion, an increase of 42% over 2011. Specialty medicines revenues in our ROW markets in 2012 were $718 million, an increase of 24% over 2011. The increase was mainly due to the acquisition of Cephalon in October 2011.

The following table presents revenues by therapeutic area and key products for our specialty medicines segment for the past three years:

Specialty Medicines Revenues Breakdown

	Year ended December 31,						Percentage Change
	2013		2012		2011		2013-2012			2012-2011
	U.S. $ in millions
CNS	$	5,505	$	5,464	$	4,412		1	%		24	%
Copaxone®		4,328		3,996		3,570		8	%		12	%
Azilect®		371		330		290		12	%		14	%
Nuvigil®		320		347		86		(8	%)		303	%
Provigil®		91		417		350		(78	%)		19	%
Oncology		982		860		268		14	%		221	%
Treanda®		709		608		131		17	%		364	%
Respiratory		905		856		878		6	%		(3	%)
ProAir®		429		406		436		6	%		(7	%)
Qvar®		328		297		305		10	%		(3	%)
Women’s Health		463		448		438		3	%		2	%
Other Specialty		547		522		497		5	%		5	%
Total Specialty Medicines	$	8,402	$	8,150	$	6,493		3	%		26	%

Central Nervous System (“CNS”)

Our CNS specialty product line includes Copaxone^®, Azilect^®, Nuvigil^®, Fentora^® and several other medicines. In 2013, our CNS sales reached $5.5 billion, an increase of 1% over 2012, primarily due to higher Copaxone^® and Azilect^® revenues, partially offset by a decrease in revenues from Provigil^® and Nuvigil^®, following the introduction of generic modafinil in the United States in 2012.

Copaxone^®. In 2013, Copaxone^® (glatiramer acetate injection) continued to be the leading multiple sclerosis therapy in the U.S. and globally. Our sales of Copaxone^® grew to $4.3 billion, an 8% increase compared to 2012 Teva sales and 7% over the in-market sales of the comparable period.

Until February 2012, global in-market sales included sales of Copaxone^® by both Sanofi and Teva. In February 2012, we completed the assumption from Sanofi of the marketing and distribution rights of Copaxone^®. Therefore, commencing with the second quarter of 2012, all global sales were made and recorded by Teva.

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Copaxone^® revenues in the United States in 2013 increased 11% to $3.2 billion due to price increases of 4.9% in October 2012 and 9.9% in January 2013, in addition to a slight volume increase. Our U.S. market shares in terms of new and total prescriptions were 27.9% and 33.1%, respectively, according to December 2013 IMS data.

Revenues in the United States accounted for 75% of global Copaxone^® revenues in 2013, an increase from 72% of global in-market sales in 2012.

In January 2014, the FDA approved our sNDA for Copaxone^® 40mg/mL, a higher dose of Copaxone^® with a three times a week dosing regimen for patients with RRMS.

Our business strategy for Copaxone^® relies heavily on the successful introduction of a three-times-a-week product and the migration of a substantial percentage of current daily Copaxone^® patients to this new version. The failure to achieve our objectives for the new version would likely have a material adverse effect on our financial results and cash flow.

Our Copaxone^® revenues outside the United States amounted to $1.1 billion during the year, 2% higher than 2012. The increase mostly reflects higher revenues in Europe driven by volume growth, which were partially offset by lower revenues in our ROW markets, mostly due to the timing of tenders in Russia.

Non-U.S. in-market sales decreased 1% compared to 2012. The effect of foreign exchange fluctuations on revenues was immaterial. Sanofi is entitled to receive 6% of the in-market sales of Copaxone^® in the applicable European countries for a period of two years from our assumption of the distribution and marketing responsibilities.

A purported generic glatiramer acetate was approved and launched in Argentina in the first quarter of 2013. We continue to express concern regarding the safety of purported generics without proven bioequivalence, specifically if launched in markets without strong pharmacovigilance programs. The launch did not materially affect our global sales of Copaxone^®.

As part of a government tender procedure in Mexico, a local manufacturer was allowed to bid to provide a purported generic glatiramer acetate and was awarded a substantial part of the tender in 2013 and 2014. We are pursuing legal action seeking to revoke the local manufacturer approval. The award did not materially affect our global sales of Copaxone^®.

Copaxone^®, our leading innovative medicine, was responsible for $4.3 billion (including $3.2 billion in the U.S.), or approximately 21%, of our revenues in 2013, and a significantly higher percentage contribution to our profits and cash flow from operations during such period. Copaxone^® faces competition from existing injectable products, such as the four beta-interferons Avonex^®, Betaseron^®, Extavia^® and Rebif^® as well as from Tysabri^®, a monoclonal antibody. In addition, the market for MS treatments continues to change significantly as a result of new and emerging therapies. In particular, the increasing number of oral treatments, such as Gilenya^®, which was introduced in 2010 by Novartis, Biogen’s Tecfidera^®, which was launched in the United States in the second quarter of 2013, and Genzyme’s Aubagio^®, which has been approved in some markets, including the United States, continue to present especially intense competition due to the convenience of oral administration.

Our U.S. Orange Book patents covering Copaxone^® expire in May 2014. As a result, generic competition to the 20mg product in the United States may begin as early as May 2014, assuming FDA approval. We have patents expiring in May 2015 in most of the rest of the world. A number of our competitors in the United States, including Momenta/Sandoz, Mylan/Natco and Synthon, have filed ANDAs for purported generic versions of Copaxone^® challenging our patents.

The FDA is enjoined from granting final approval to any purported generics prior to May 24, 2014, and given the inability of state-of-the-art analytical techniques to fully characterize the active ingredients of Copaxone^®, as well as published results showing significant differences in gene expression between Copaxone^® and a purported generic version, the regulatory pathway for their approval is uncertain. We believe that any purported generic version should be studied in pre-clinical testing and full-scale, placebo-controlled clinical trials with measured clinical endpoints (such as relapse rate) in RRMS patients to establish safety, efficacy and immunogenicity. Furthermore, because of the chemical complexity of Copaxone^®, we believe that it can only be safely manufactured using a series of proprietary methods that have been perfected by Teva for more than 20 years.

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On December 6, 2013, we filed a citizen’s petition requesting that the FDA refuse to approve any ANDA for a purported generic version of Copaxone^® without scientific data demonstrating that (1) the proposed generic product contains the identical active ingredient as Copaxone^®, (2) the immunogenicity risks associated with the proposed generic product are no greater than the risks associated with Copaxone^®, including a demonstration that the risks of alternating or switching between the two products are no greater than remaining on Copaxone^® and (3) the proposed generic product is bioequivalent to Copaxone^®. This citizen’s petition includes the results of a new gene expression analysis demonstrating significant differences between the biological impact of Copaxone^® and a purported generic versions of Copaxone^®, which may have unknown safety and efficacy ramifications for patients.

Comparison of 2012 to 2011. In 2012, in-market global sales of Copaxone^® were approximately $4.0 billion, an increase of 3% over 2011. U.S. revenues in 2012 accounted for 72% of global in-market sales of Copaxone^®.

Azilect^®. We jointly market Azilect^® (rasagiline tablets) with Lundbeck in certain key European countries. We exclusively market Azilect^® in the United States and Germany and certain other markets, while Lundbeck exclusively markets Azilect^® in the remaining European countries and certain other international markets.

Global in-market sales, which represent sales by Teva and Lundbeck to third parties, reached $493 million in 2013 compared to $420 million in 2012, an increase of 17%. Our sales of Azilect^® amounted to $371 million, an increase of 12% compared to 2012. The increase in sales reflects both price increases and volume growth in the United States, as well as volume growth in Europe.

Comparison of 2012 to 2011. In 2012, in-market global sales of Azilect^® were $420 million, an increase of 7% over 2011.

Nuvigil^®. Our global Nuvigil^® sales in 2013 amounted to $320 million, compared to $347 million in 2012. Nuvigil^®’s market share in terms of total prescriptions of the U.S. wake category was 42.8% at the end of 2013.

Provigil^®. Our sales of Provigil^® in 2013 amounted to $91 million, compared to $417 million in 2012. Provigil^® began to face generic competition in the United States in March 2012 and as a result, sales decreased substantially.

Oncology Products

Our specialty oncology product line includes Treanda^®, Synribo^®, and certain other products, as well as our biosimilar products indicated mainly for the treatment of side effects of oncology treatments. Sales of these products amounted to $982 million in 2013 as compared to $860 million in 2012. The increase resulted primarily from higher sales of Treanda^® as well as higher sales of our biosimilar products. During the year, we launched new G-CSF products in both the United States and Europe.

Sales of Treanda^® amounted to $709 million in 2013, compared to $608 million in 2012, primarily due to volume growth.

Comparison of 2012 to 2011. In 2012, sales of our oncology product line reached $860 million, an increase of 221% from $268 million in 2011, due to the acquisition of Cephalon.

Respiratory Products

Our respiratory product line includes our specialty respiratory products, mainly ProAir^®, Qvar^® and Qnasl^®. Revenues from our specialty respiratory products increased 6% in 2013 to $905 million, primarily due to higher revenues in the United States, partially offset by lower sales in Europe.

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ProAir^® (albuterol HFA), which we sell only in the United States, is a short-acting beta-agonist (“SABA”) for the treatment of bronchial spasms linked to asthma or COPD and exercise-induced bronchospasm. ProAir^® revenues in 2013 amounted to $429 million, an increase of 6% compared to 2012, mainly due to volume growth. ProAir^® maintained its leadership in the SABA market, with a market share of 53.9% in terms of total number of prescriptions during the fourth quarter of 2013, an increase of 2.0 points compared to the fourth quarter of 2012.

Qvar^® (beclomethasone diproprionate HFA) is an inhaled corticosteroid for long-term control of chronic bronchial asthma. Qvar^® global sales in 2013 amounted to $328 million, an increase of 10% compared to 2012, due to increased sales mainly in the United States, driven by volume growth. Qvar^® maintained its second-place position in the inhaled corticosteroids category in the United States, with a market share of 31.9% in terms of total number of prescriptions during the fourth quarter of 2013, an increase of 5.0 points compared to the fourth quarter of 2012.

Comparison of 2012 to 2011. In 2012, sales of our respiratory products amounted to approximately $856 million, compared to $878 million in 2011.

Women’s Health Products

Our women’s health product line includes our specialty women’s health products such as Paragard^®, Plan B One-Step^®, Zoely^®, Enjuvia^®, and the recently-launched Quartette^TM but does not include generic women’s health products, sales of which are reported as part of our generic medicines revenues.

Revenues from our global women’s health products amounted to $463 million in 2013, an increase of 3% from $448 million in 2012. The effect of foreign exchange fluctuations on revenues was negligible. The increase in revenues is mainly due to higher sales of women’s health products in Europe and Latin America, as well as the launch of Quartette™ and Plan B One-Step^® OTC in the United States in the third quarter, partially offset by lower sales of other products in the United States.

Comparison of 2012 to 2011. In 2012, sales of our women’s health products amounted to $448 million, an increase of 2% from $438 million in 2011.

Specialty Medicines Gross Profit

In 2013, gross profit from our specialty medicines segment amounted to $7.3 billion, an increase of 2% compared to $7.2 billion in 2012. The higher gross profit was mainly a result of higher sales of specialty medicines.

Gross profit margin for our specialty medicines segment in 2013 was 87.2% compared to 88.0% in 2012. The slight decrease in gross margin was mainly a result of the lower sales of Provigil^® (which decreased gross margin by 0.4 points) and lower sales of other specialty medicines (which decreased gross margin by 0.6 points), partially offset by higher sales of Copaxone^® (which increased gross margin by 0.2 points).

Comparison of 2012 to 2011. Specialty medicines segment gross profit amounted to $7.2 billion in 2012, compared to $5.6 billion in 2011.

Specialty Medicines R&D Expenses

Research and development expenses relating to our specialty medicines in 2013 were $909 million, an increase of 15% compared to $793 million in 2012, primarily as a result of increased investment in our NTEs and respiratory pipeline. As a percentage of segment revenues, R&D spending was 10.8% in 2013, compared to 9.7% in 2012, reflecting these increased investments. Our specialty R&D activities focus primarily on product candidates in the CNS and respiratory therapeutic areas, with selective focus on oncology and other areas that fit our strategy.

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Specialty R&D expenditures include upfront and milestone payments for products in the development phase, the costs of discovery research, preclinical development, early- and late-clinical development and drug formulation, clinical trials, product registration costs, changes in contingent consideration resulting from acquisitions and other costs, and are reported net of contributions received from collaboration partners. Our specialty R&D spending takes place throughout the development process, from drug discovery through pre-launch marketing activities, including (a) early-stage projects in both discovery and preclinical phases; (b) middle-stage projects in clinical programs up to phase III; and (c) late-stage projects in phase III programs, including where an NDA is currently pending approval, and continuing for life cycle management studies for marketed products. Furthermore, our NTE R&D activities are managed and reported as part of our specialty R&D expenses.

We consider phase III, or late-stage development, to be our most significant R&D programs, as they could potentially affect revenues and earnings in the relatively near future. In addition, we incur indirect expenses that support our overall specialty R&D efforts but are not allocated by product or to specific R&D projects, such as the costs of internal administration, infrastructure and personnel. Our specialty segment R&D expenses include such unallocated expenses.

The following table presents the composition of our specialty R&D expenditures and the number of projects by stage of development:

	2013 Expenditure U.S.$ in millions		No. of Projects as of Dec. 31, 2013		2012 Expenditure U.S.$ in millions		No. of Projects as of Dec. 31, 2012		2011 Expenditure U.S.$ in millions		No. of Projects as of Dec. 31, 2011
Early stage: discovery and pre-clinical	$	57		N/A	$	76		N/A	$	75		N/A
Middle stage: clinical up to phase III		147		16		228		18		91		18
Late stage: phase III and registration		396		16		324		19		291		28
NTEs		19		14		1		—		0		—
Unallocated R&D*		308				254				226
Total gross R&D expenses**		927				883				683
Total net R&D expenses		909				793				616

* Unallocated R&D expenses are indirect expenses that support our overall specialty R&D efforts but are not allocated by product or to specific R&D projects, such as the costs of internal administration, infrastructure and personnel.

** Gross R&D expenses includes full cost programs that are partially funded by third parties.

Specialty Medicines S&M Expenses

S&M expenses related to our specialty medicines in 2013 amounted to $1.9 billion, compared to $1.7 billion in 2012.

As a percentage of segment revenues, selling and marketing expenses increased to 22.0% in 2013 from 20.7% in 2012.

The increase was primarily due to higher expenditures related to launches of new products such as Lonquex^® and Granix^® during 2013, as well as preparation for additional product launches planned for 2014.

Comparison of 2012 to 2011. Specialty medicines S&M expenses in 2012 amounted to $1.7 billion, compared to $1.1 billion in 2011.

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Specialty Medicines Profitability

The profitability of our specialty medicines segment is comprised of the gross profit for the segment, less selling and marketing expenses and research and development expenses related to this segment. Segment profitability does not include general and administrative expenses, amortization and non-recurring items. See note 21 of our consolidated financial statements and “Operating Income” below for additional information.

Profitability of our specialty medicines segment amounted to $4.6 billion in 2013, compared to $4.7 billion in 2012, a decrease of 3%. This is a result of the factors discussed above, namely higher R&D and S&M expenses, partially offset by higher gross profit.

Specialty medicines profitability as a percentage of segment revenues was 54.4% in 2013, down from 57.6% in 2012, a decrease of 3.2 points. The decline was mainly attributed to lower gross profit (0.8 points), higher R&D expenses as a percentage of specialty medicines revenues (1.1 points) and higher S&M expenses as a percentage of specialty medicines revenues (1.3 points), as discussed above.

Our multiple sclerosis franchise includes our Copaxone^® products and laquinimod (a developmental compound for the treatment of MS). The profitability of our multiple sclerosis franchise is comprised of Copaxone^® revenues and cost of goods sold as well as S&M and R&D expenses related to our MS franchise. It does not include G&A expenses, amortization and non-recurring items. Our MS franchise profitability was $3.3 billion, $3.0 billion and $2.8 billion in 2013, 2012 and 2011, respectively. Profitability of our multiple sclerosis franchise as a percentage of Copaxone^® revenues was 76%, 74% and 79% in 2013, 2012 and 2011, respectively.

Comparison of 2012 to 2011. Specialty medicines profitability amounted to $4.7 billion in 2012, compared to $3.9 billion in 2011, an increase of 20%. As a percentage of revenues, specialty medicines profitability was 57.6%, compared to 60.2% in 2011.

Other Activities

In addition to our generic and specialty medicines segments, we have other activities, primarily PGT Healthcare, our OTC joint venture with P&G, distribution services, primarily in Israel and Hungary and sales of medical devices.

OTC

Our revenues from OTC products in 2013 amounted to $1.2 billion, an increase of 24%, compared to $936 million in 2012. Our revenues related to PGT amounted to $910 million, an increase of 22%, compared to $747 million in the previous year. In local currency terms, revenues grew 26%. Revenues grew in all regions, partially offset by a small decrease in Latin America.

PGT’s in-market sales in 2013 amounted to $1.5 billion. This amount represents sales of the combined OTC portfolios of Teva and P&G outside North America. Sales grew in all regions in local currency terms due to increased commercial activities and price increases.

Revenues from OTC products in the United States to P&G, which commenced in the fourth quarter of 2011 pursuant to a manufacturing agreement, amounted to $254 million in 2013, as compared to $189 million in 2012.

Comparison of 2012 to 2011. In 2012, our OTC revenues were $936 million, an increase of 22% over 2011, primarily due to the contributions of the ratiopharm business.

Others

Other sources of revenue include sales of third party products for which we act as distributors (mostly in Israel and Hungary) and medical products, as well as miscellaneous items.

In 2013, we recorded sales of $841 million, similar to sales of $846 million in 2012.

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Comparison of 2012 to 2011. In 2012, we recorded sales of $846 million, a slight decrease compared to sales of $858 million in 2011.

Teva Consolidated Results

Revenues

Revenues in 2013 amounted to $20.3 billion, flat compared to 2012. In local currency terms, revenues increased 1%. Our revenues were positively affected by higher sales of our specialty medicines and of our OTC products, mainly in our ROW markets, offset by lower revenues of our generic medicines. Please see “Generic Medicines Revenues” and “Specialty Medicines Revenues” above. Exchange rate movements during 2013 in comparison with 2012 negatively impacted overall revenues by approximately $166 million.

Comparison of 2012 to 2011. Revenues in 2012 amounted to $20.3 billion, compared to $18.3 billion in 2011, an increase of 11%.

Gross Profit

In 2013, gross profit amounted to $10.7 billion, an increase of 1% compared to 2012.

The higher gross profit was mainly a result of factors previously discussed under “Generic Medicines Gross Profit” and “Specialty Medicines Gross Profit” above. Gross profit was further affected by lower charges related to the amortization of purchased intangible assets, costs related to regulatory actions taken in facilities and inventory step-up charges, which decreased from $1.4 billion in 2012 to $1.2 billion in 2013.

Gross profit as a percentage of revenues was 52.7% in 2013, compared to 52.4% in 2012. The increase in gross profit as a percentage of revenues primarily reflects the lower amortization of purchased intangible assets, costs related to regulatory actions taken in facilities and inventory step-up charges (which increased gross profit as a percentage of revenues by 1.1 points), partially offset by lower profitability of our generic medicines segment (which decreased gross profit as a percentage of revenues by 0.8 points).

Comparison of 2012 to 2011. Gross profit increased in 2012 to $10.7 billion from $9.5 billion in 2011, an increase of 12%. Gross profit as a percentage of revenues was 52.4% in 2012, compared to 52.0% in 2011.

Research and Development (R&D) Expenses

Net research and development expenses for 2013, including the purchase of in-process R&D, were $1.4 billion, an increase of 5% compared to 2012. Specialty R&D expenses were $909 million and generic R&D expenses were $494 million in 2013, compared to $793 million and $485 million, respectively, in 2012. As a percentage of revenues, R&D spending was 7.0% in 2013, compared to 6.7% in 2012.

In 2013, we increased our R&D spending, primarily as a result of the factors previously discussed under “Generic Medicines—R&D Expenses” and “Specialty Medicines—R&D Expenses” above.

Comparison of 2012 to 2011. R&D expenses increased in 2012 to $1.4 billion from $1.1 billion in 2011, an increase of 24%.

Selling and Marketing (S&M) Expenses

S&M expenses in 2013 amounted to $4.1 billion, an increase of 5% over 2012. As a percentage of revenues, S&M expenses were 20.1% in 2013 compared to 19.1% in 2012.

In 2013, we increased our S&M spending, primarily as a result of the factors discussed under “Generic Medicines S&M Expenses” and “Specialty Medicines S&M Expenses” above.

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Comparison of 2012 to 2011. S&M expenses in 2012 amounted to $3.9 billion, an increase of 12% over 2011. As a percentage of revenues, S&M expenses increased from 19.0% in 2011 to 19.1% in 2012.

General and Administrative (G&A) Expenses

G&A expenses in 2013 amounted to $1.2 billion, similar to 2012. As a percentage of revenues, G&A expenses maintained a level of 6.1% in 2013, to the same as in 2012.

Comparison of 2012 to 2011. G&A expenses in 2012 amounted to $1.2 billion, an increase of 33% over 2011. As a percentage of revenues, G&A expenses increased to 6.1% for 2012 from 5.1% for 2011.

Legal Settlements and Loss Contingencies

Legal settlements and loss contingencies for 2013 amounted to $1.5 billion, compared to $715 million in 2012. The 2013 expenses are comprised mainly of an additional charge of $930 million relating to the settlement of the pantoprazole patent litigation and a charge of $495 million relating to the modafinil antitrust litigation.

Impairments, Restructuring and Others

Expenses for impairments, restructuring and others amounted to $788 million in 2013, compared to $1.3 billion for 2012.

Impairments

Impairment of long-lived assets for 2013 amounted to $524 million in 2013, comprised of:

1. Identifiable intangible assets—$393 million:

a. Product rights impairment of $227 million, primarily comprised of a $112 million impairment based on current market conditions and supply chain challenges in Japan, product rights impairment of $41 million of multiple products in Europe, and a $23 million impairment of product rights for Cenestin^® related to API constraints. Impairments of product rights in 2012 were $233 million.

b. In-process R&D impairments amounted to $166 million, mainly comprised of a $99 million impairment of armodafinil (Nuvigil^®) for the treatment of bi-polar disorder following the negative results of the third pivotal clinical trial and a $54 million impairment of Zoely^® following negative Phase III trial results. In 2012, in-process R&D impairments amounted to $625 million.

2. Non-current investments—$70 million, mainly comprised of $25 million for Mediwound Ltd. and $15 million for Andromeda Biotech Ltd. In 2012, non-current investments impairment was $23 million.

3. Property, plant and equipment—$61 million, based on management decisions regarding their expected use, which triggered a reassessment of fair value. In 2012, property, plant and equipment impairment was $190 million.

The carrying value as of December 31, 2013 of Teva’s in-process R&D asset Revascor^®, mesynchymal precursor cells, is $258 million. This drug candidate is in a Phase III trial for congestive heart failure. Adverse results may lead us to reevaluate the fair value of the asset, which may lead to impairment. Such a loss may also lead us to reassess the current carrying value of our equity interest in Mesoblast Ltd., which is $334 million.

Restructuring

In 2013, Teva recorded $201 million of restructuring expenses, compared to $221 million in 2012.

In October 2013, management announced the acceleration of its company-wide cost-savings plan, which includes several initiatives, including a reduction in the number of employees. Expenses for the corporate

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restructuring program are estimated to be approximately $1.1 billion. Most costs are likely to be incurred throughout 2014, as the details of the plan are finalized and accounting criteria for expense recognition are met.

Contingent Considerations

An expense of $36 million was recorded against contingent consideration recorded in 2013, mainly in connection with the Cephalon acquisition. In 2012, a $40 million contingent consideration benefit was recorded as a result of impairing long-lived assets that decreased associated milestone payment liabilities, previously recorded in connection with the Cephalon acquisition.

Operating Income

Operating income was $1.6 billion in 2013, down from $2.2 billion in 2012. As a percentage of revenues, operating income was 8.1% compared to 10.8% in 2012.

The decrease in operating income was due to factors previously discussed, primarily higher expenses in connection with legal settlements and loss contingencies, and higher S&M expenses, changes in contingent consideration related to business combination as well as higher R&D expenses. This decrease was partially offset by lower impairments of long-lived assets and higher gross profit as well as lower restructuring expenses. Foreign exchange rate movements during 2013 in comparison with 2012 lowered our operating income by $126 million.

The decrease of 2.7 points in operating income as a percentage of revenues was mainly due to higher expenses in connection with legal settlement and loss contingencies (4.0 points) and higher selling and marketing margin (1.0 points), changes in contingent consideration related to business combination (0.4 points) as well as a higher R&D margin (0.3 points), partially offset by lower impairments of long-lived assets (2.7 points) as well as a higher gross margin (0.3 points).

Comparison of 2012 to 2011. Operating income in 2012 amounted to $2.2 billion, a decrease of 29% over 2011. As a percentage of revenues, operating income decreased to 10.8% in 2012 from 17.0% in 2011.

The following table presents a reconciliation of our segment profitability to Teva’s consolidated operating income for the past three years:

	Year ended December 31,
	2013		2012		2011
	(U.S.$ in millions)
Generic medicines profitability	$	1,656	$	2,062	$	2,059
Specialty medicines profitability		4,567		4,694		3,907
Total segment profitability		6,223		6,756		5,966
Profitability of other activities		214		197		219
Total profitability		6,437		6,953		6,185
Amortization		1,180		1,272		707
General and administrative expenses		1,239		1,238		932
Legal settlements and loss contingencies		1,524		715		471
Impairments, restructuring and others		788		1,259		430
Other unallocated amounts		57		264		536
Consolidated operating income	$	1,649	$	2,205	$	3,109

Financial Expenses-Net

In 2013, financial expenses amounted to $399 million, compared to $386 million in 2012. The increase is mainly due to financial expenses in connection with early redemption of senior notes and others, partially offset by lower interest expense.

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Comparison of 2012 to 2011. In 2012, financial expenses amounted to $386 million, compared to $153 million in 2011. The increase resulted from higher interest expense as we increased our debt to fund our 2011 acquisitions.

Teva operates in certain territories where the official exchange rates deviate significantly from unofficial market rates and remittance of cash outside the country is limited. As a result, Teva is exposed to a potential income statement devaluation loss on its total monetary balances in these territories, which, as of December 31, 2013, amounted to approximately $200 million.

Tax Rate

In 2013, we booked a tax benefit of $43 million, or 3% of pre-tax income of $1.3 billion. In 2012, the tax benefit amounted to $137 million, or 8% of pre-tax income of $1.8 billion. In 2011, the provision for taxes amounted to $127 million, or 4% of pre-tax income of $3.0 billion. The effective tax rate is the result of the geographic mix and type of products sold during the year, and a variety of factors, including different effective tax rates applicable to non-Israeli subsidiaries that have tax rates above Teva’s average tax rates (including the impact of impairment, restructuring and legal settlement charges on such subsidiaries). In addition, the mergers between subsidiaries and incentives programs to which our subsidiaries are entitled further contributed to the tax benefit for 2013.

The statutory Israeli corporate tax rate, which was 25% in 2013, was increased to 26.5% in 2014. However, our effective consolidated tax rates have historically been, and continue to be this year, considerably lower than the statutory rate because of tax incentives we benefit from in Israel and other countries. Most of our investments in Israel were granted Approved Enterprise status, which confers certain tax benefits. These benefits included a long-term tax exemption for undistributed income generated by such projects, effective until 2013, and lower tax rates on dividends distributed from other projects, the source of which is Approved Enterprise income, for certain periods, as described in “Item 10—Additional Information—Israeli Taxation.” We also benefit from other investment-related and R&D-related tax incentives in many of our facilities around the world.

In the future, our effective tax rate is expected to fluctuate as a result of various factors, including changes in the product mix and geographical distribution of our income, the effect of mergers and acquisitions, and the effects of statutes of limitations and legal settlements which may affect provisions for uncertain tax positions. We expect that the tax rate in future years will be significantly higher than this year, as a result of the product mix projected for these years and the expiration of the Israeli incentives regime we currently benefit from.

Net Income

Net income attributable to Teva in 2013 was $1.3 billion, compared to $2.0 billion in 2012. This decrease was due to the factors previously discussed, primarily our lower operating income as well as lower tax benefits.

Comparison of 2012 to 2011. Net income attributable to Teva amounted to $2.0 billion in 2012, compared to $2.8 billion in 2011. This decrease was primarily due to our lower operating income.

Diluted Shares Outstanding and Earnings Per Share

The average weighted diluted shares outstanding used for the fully diluted share calculation for 2013, 2012 and 2011 was 850 million, 873 million and 893 million shares, respectively.

At December 31, 2013, 2012 and 2011, the share count for calculating Teva’s market capitalization was approximately 848 million, 857 million and 883 million shares, respectively. The decrease in number of shares outstanding is mainly due to shares repurchased pursuant to our share repurchase programs. For additional information, see “Item 16E–Purchases of Equity Securities by the Issuer and Affiliated Purchasers” below.

Diluted earnings per share amounted to $1.49 in 2013, a decrease of 34% compared to diluted earnings per share of $2.25 in 2012. Diluted earnings per share amounted to $3.09 in 2011.

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Impact of Currency Fluctuations on Results of Operations

Because our results are reported in U.S. dollars, changes in the rate of exchange between the U.S. dollar and the local currencies in the markets in which we operate (primarily the euro, Israeli shekel, Russian ruble, Canadian dollar, British pound, Japanese yen and Hungarian forint) affect our results. During 2013, the following main currencies relevant to our operations decreased in value against the U.S. dollar: the Russian ruble by 2%, the Canadian dollar by 3%, the British pound by 1% and the Japanese yen by 18%, while the following currencies increased in value against the U.S. dollar: the euro by 3%, the Israeli shekel by 7% and the Hungarian forint by 1% (each on an annual average compared to annual average basis).

As a result, exchange rate movements during 2013 in comparison with 2012 negatively impacted overall revenues by approximately $166 million and reduced our operating income by $126 million.

Liquidity and Capital Resources

Total balance sheet assets amounted to $47.5 billion at December 31, 2013, compared to $50.6 billion at December 31, 2012. Our total balance sheet assets at December 31, 2012 were unusually high as we issued $2.0 billion of debt at the end of 2012, which we then used in part to redeem $1.0 billion of debt in January 2013. In addition, intangible assets decreased mainly due to the amortization of product rights and impairments, as did inventories. This decrease was partially offset by an increase of property, plant and equipment and long term assets.

Inventory balances at December 31, 2013 amounted to $5.1 billion, compared to $5.5 billion at December 31, 2012. The decrease resulted from lower inventory balances mainly in the United States and Germany, as well as from foreign exchange fluctuations.

Accounts receivable at December 31, 2013, net of sales reserves and allowances (“SR&A”), were $420 million as compared to $638 million at December 31, 2012.

We continue to monitor activities in the European countries which, based on our internal assessment, are still experiencing economic stress, and are taking action to limit our exposure in these countries.

Accounts payables and accruals decreased to $3.3 billion at December 31, 2013, compared to $3.4 billion at December 31, 2012.

Our working capital balance, which includes accounts receivable, inventories, deferred taxes and other current assets net of SR&A, accounts payable and other current liabilities, was $2.5 billion at December 31, 2013, compared to $3.6 billion at December 31, 2012. The decrease in working capital is mainly due to the reduction in inventory levels as well as the net effects of charges and payments related to legal settlements and loss contingencies.

Investment in property, plant and equipment in 2013 amounted to $1.0 billion, compared to $1.1 billion in 2012. Depreciation amounted to $458 million in 2013, compared to $428 million in 2012. The increase in depreciation was mainly due to higher property, plant and equipment balances, as well as the different asset mix.

Cash and cash equivalents and short term and long term investments at December 31, 2013 amounted to $1.2 billion, as compared to $3.1 billion, at December 31, 2012 mainly due to debt repayment, payments made in connection with litigation settlements and tax related payments.

2013 Debt Movements

At December 31, 2013, our debt was $12.2 billion, a decrease of $2.5 billion from $14.7 billion at December 31, 2012, mainly due to debt prepayment.

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In December 2013, we entered into a five-year Japanese yen 35 billion term loan credit agreement at Japanese LIBOR+0.3%. Shortly after signing the agreement, we drew down the entire amount available under the facility.

In November 2013, we repaid $1.1 billion of the floating rate senior notes issued in November 2011 as part of the financing of the Cephalon acquisition.

In May 2013, we repaid $200 million of the floating rate senior notes issued in November 2011 as part of the financing of the Cephalon acquisition.

In March 2013, we repaid an aggregate amount of approximately $750 million of debt comprised of $500 million principal amount of 5.55% senior notes due 2016 and of $248 million of the European Investment Bank floating rate loan due 2015.

In addition, in January 2013, we repaid $1 billion principal amount of our 1.7% senior notes due 2014.

2012 Debt Movements

In December 2012, we issued senior notes in an aggregate principal amount of $2.0 billion, comprised of $1.3 billion due 2022 bearing interest of 2.95% and $0.7 billion due 2020 bearing interest of 2.25%. The proceeds of these notes were used to pay down $0.7 billion of bank term loan at LIBOR+0.85% incurred in connection with the Cephalon acquisition and to redeem, in January 2013, $1.0 billion of 1.7% senior notes also issued in connection with the Cephalon acquisition.

In December 2012, we entered into a five-year $3.0 billion unsecured syndicated credit facility, which replaced the previous $2.5 billion facility.

In November 2012, we prepaid $0.3 billion of our three-year bank term loan, which we entered into in connection with the Cephalon acquisition.

In June and August 2012, we repaid an aggregate amount of $1.0 billion of a bank term loan at LIBOR plus 0.55% entered into in connection with the Cephalon acquisition.

In April 2012, we issued Swiss franc 450 million 1.5% senior notes due October 2018 and senior notes in an aggregate principal amount of euro 1 billion due 2019 bearing interest of 2.875%. The proceeds of these notes were used to repay the 1.5% senior notes due in June 2012, which were issued in connection with the ratiopharm acquisition, as well as the $500 million principal balance of our credit facility with HSBC.

In March 2012, we entered into a Japanese yen 100.5 billion senior unsecured fixed rate term loan credit agreement for terms of 5 and 7 years with 0.99% and 1.42% interest rates, respectively. In April 2012, we drew down the entire amount available under the facility and repaid the borrowings used to finance the acquisition of Taiyo.

Aggregate Debt

Our debt at December 31, 2013 is effectively denominated in the following currencies: U.S. dollar 52%, euro 30%, Japanese yen 13%, Swiss franc 4% and Canadian dollar 1%.

The portion of total debt classified as short term at December 31, 2013 was 15%, down from 20% at December 31, 2012 as a result of repayment of short term debt.

Our financial leverage decreased to 35% at December 31, 2013 from 39% in December 31, 2012.

Our average debt maturity remained stable at six years as of December 31, 2013.

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In December 2012, we entered into a five-year $3.0 billion unsecured syndicated credit facility, which replaced an earlier $2.5 billion facility. As of December 31, 2013, we had $2.8 billion available under this facility. In early January 2014, we repaid the $0.2 billion drawn from this facility.

In January 2014, we entered into a $1.0 billion term loan agreement at LIBOR + 1.1% for a term of five years, with repayment in three tranches, after three, four and five years. We have until March 31, 2014 to draw funds under this facility.

Shareholders’ Equity

Our shareholders’ equity was $22.6 billion at December 31, 2013, compared to $22.9 billion at December 31, 2012. The decrease resulted primarily from dividend payments of $1.1 billion, as well as share repurchases of $0.5 billion, partially offset by net income attributed to Teva of $1.3 billion.

Exchange rates also had a significant impact on our balance sheet, as approximately 42% of our net assets (including both non-monetary and monetary assets) were in currencies other than the U.S. dollar. When compared with the end of 2012, changes in currency rates had a negative impact of $24 million on our equity as of December 31, 2013, mainly due to the decrease in value against the U.S. dollar of: the Chilean peso by 10%, the Peruvian nuevo sol by 10%, the Russian ruble by 8%, the Canadian dollar by 6% and the Indian rupee by 13%. The negative impact was partly offset by the 4% increase in value of the euro against the U.S. dollar. All comparisons are on the basis of end of year rates.

Cash Flow

Cash flow generated from operating activities for 2013 amounted to $3,237 million, a decrease of approximately $1.3 billion from 2012. The decrease was mainly due to higher payments for legal and Israeli tax settlements, partially offset by improvements in working capital.

In January 2014, we paid an additional $200 million related to our pantoprazole settlement. The remaining $600 million will be paid during the balance of 2014.

Cash flow generated from operating activities in 2013, net of cash used for capital investments and dividends paid, amounted to approximately $1,220 million, a decrease of $1,518 million from 2012. The decrease resulted mainly from lower cash flow generated from operating activities, along with higher dividend payments.

In Europe, a significant portion of our profits is at risk due to the potential depreciation of the euro. We hedge part of the exposure resulting from the strengthening of the U.S. dollar against the euro.

Dividends

We announced a dividend for the fourth quarter of 2013 of NIS 1.21 (34.3 cents according to the rate of exchange on February 4, 2014) per share, an increase of 5% from NIS 1.15, which was the dividend declared for the third quarter of 2013. The dividend payment for the fourth quarter of 2013, which is expected to take place on March 10, 2014, will be made with respect to ADSs on the basis of the then current U.S. dollar-NIS exchange rate.

Commitments

In addition to financing obligations under short-term debt and long-term senior notes and loans, debentures and convertible debentures, our major contractual obligations and commercial commitments include leases, royalty payments and participation in joint ventures associated with research and development activities.

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We are committed to pay royalties to owners of know-how, partners in alliances and certain other arrangements and to parties that financed research and development, at a wide range of rates as a percentage of sales of certain products, as defined in the agreements. In some cases, the royalty period is not defined; in other cases, royalties will be paid over various periods not exceeding 20 years.

In connection with certain development, supply and marketing, and research and collaboration or services agreements, we are required to indemnify, in unspecified amounts, the parties to such agreements against third-party claims relating to (1) infringement or violation of intellectual property or other rights of such third party; or (2) damages to users of the related products. Except as described in our financial statements, we are not aware of any material pending action that may result in the counterparties to these agreements claiming such indemnification.

Certain of our loan agreements and debentures contain restrictive covenants, mainly the requirement to maintain certain financial ratios. We are currently in compliance with all applicable financial ratios.

Our principal sources of short-term liquidity are our existing cash investments, liquid securities, and available credit facilities; primarily our $3 billion syndicated revolving line of credit, as well as internally generated funds, which we believe are sufficient to meet our on-going operating needs. Our cash in hand is generally invested in bank deposits as well as liquid securities that bear fixed and floating rates.

Supplemental Non-GAAP Income Data

The tables on the following pages present supplemental non-GAAP data, in U.S. dollar terms, as a percentage of revenues and the change by item as a percentage of the amount for the comparable period, which we believe facilitates an understanding of the factors affecting our business. In these tables, we exclude the following amounts:

	Year Ended December 31,
	2013			2012			2011
	U.S. dollars in millions
Amortization of purchased intangible assets		1,180			1,272			706
Expense in connection with legal settlements and reserves		1,524			715			471
Impairment of long-lived assets		524			1,071			201
Restructuring expenses		201			221			192
Costs related to regulatory actions taken in facilities		43			128			170
Changes in contingent consideration related to business combination		36			(40	)		—
Acquisition and other expenses		27			7			37
Accelerated depreciation		9			—			—
Purchase of research and development in process		5			73			15
Inventory step-up		—			63			352
Financial expenses related to early repayment of senior notes and other		110			32			—
Net of corresponding tax effect*		(673	)		(798	)		(465	)
Minority interest changes related to impairments of co-owned assets		—			(36	)		—

* Amount is net of $248 million for Amendment 69 and settlements with the Israeli tax authorities in 2013.

The data so presented—after these exclusions—are the results used by management and our board of directors to evaluate our operational performance, to compare against work plans and budgets, and ultimately to evaluate the performance of management. For example, each year we prepare a detailed work plan for the next fiscal year. This work plan is used to manage the business and is the plan against which management’s performance is measured. All such plans are prepared on a basis comparable to the presentation below, in that

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none of the plans take into account those elements that are factored out in our non-GAAP presentations. In addition, at quarterly meetings of the Board at which management provides financial updates to the Board, presentations are made comparing the current fiscal quarterly results against: (a) the comparable quarter of the prior year, (b) the immediately preceding fiscal quarter and (c) the work plan. Such presentations are based upon the non-GAAP approach reflected in the table below. Moreover, while there are always qualitative factors and elements of judgment involved in the granting of annual cash bonuses, the principal quantitative element in the determination of such bonuses is performance targets tied to the work plan, and thus tied to the same non-GAAP presentation as is set forth below.

In arriving at our non-GAAP presentation, we have in the past factored out items, and would expect in the future to continue to factor out items, that either have a non-recurring impact on the income statement or which, in the judgment of our management, are items that, either as a result of their nature or size, could, were they not singled out, potentially cause investors to extrapolate future performance from an improper base. While not all inclusive, examples of these items include: legal settlements and reserves, purchase accounting expense adjustments related to acquisitions, including adjustments for write-offs of R&D in-process, amortization of intangible assets and inventory “step-ups” following acquisitions; changes in the fair value of contingent consideration related to business combination; restructuring expenses related to efforts to rationalize and integrate operations on a global basis; material tax and other awards or settlements—both in terms of amounts paid or amounts received; impairment charges related to intangible and other assets such as intellectual property, product rights or goodwill; the income tax effects of the foregoing types of items when they occur; and costs related to regulatory actions taken at our facilities (such as uncapitalized production costs, consulting expenses or write-offs of inventory related to remediation). Included in restructuring expenses are severance, shut down costs, contract termination costs and other costs that we believe are sufficiently large that their exclusion is important to understanding trends in our financial results.

These data are non-GAAP financial measures and should not be considered replacements for GAAP results. We provide such non-GAAP data because management believes that such data provide useful information to investors. However, investors are cautioned that, unlike financial measures prepared in accordance with GAAP, non-GAAP measures may not be comparable with the calculation of similar measures for other companies. These non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses our performance. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all events during a period, such as the effects of acquisition, merger-related, restructuring and other charges, and may not provide a comparable view of our performance to other companies in the pharmaceutical industry.

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Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP.

The following table presents the GAAP measures, the corresponding non-GAAP amounts and related non-GAAP adjustments for the applicable periods:

		Year ended December 31, 2013
		U.S. dollars and shares in millions (except per share amounts)
		GAAP		Non-GAAP Adjustments			Non-GAAP		% of Net Revenues
	Gross profit1		10,707		1,188			11,895		59	%
	Operating income1,2		1,649		3,549			5,198		26	%
	Net income attributable to Teva1,2,3		1,269		2,986			4,255		21	%
	Earnings per share attributable to Teva—diluted4		1.49		3.52			5.01
(1)	Amortization of purchased intangible assets				1,136
	Costs related to regulatory actions taken in facilities				43
	Accelerated depreciation				9
	Gross profit adjustments				1,188
(2)	Expense in connection with legal settlements and reserves				1,524
	Impairment of long-lived assets				524
	Restructuring, acquisition and other expenses				269
	Amortization of purchased intangible assets				44
					2,361
	Operating income adjustments				3,549
(3)	Tax effect and other items				(673	)
	Financial expense				110
	Net income adjustments				2,986
(4)	The weighted average number of shares was 850 million for the year ended December 31, 2013. Non-GAAP earnings per share can be reconciled with GAAP earnings per share by dividing each of the amounts included in footnotes 1-3 above by the applicable weighted average share number.

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		Year ended December 31, 2012
		U.S. dollars and shares in millions (except per share amounts)
		GAAP		Non-GAAP Adjustments			Non-GAAP		% of Net Revenues
	Gross profit1		10,652		1,419			12,071		59	%
	Operating income1,2		2,205		3,510			5,715		28	%
	Net income attributable to Teva1,2,3		1,963		2,708			4,671		23	%
	Earnings per share attributable to Teva—diluted4		2.25		3.10			5.35
(1)	Amortization of purchased intangible assets				1,228
	Costs related to regulatory actions taken in facilities				128
	Inventory step-up				63
	Gross profit adjustments				1,419
(2)	Impairment of long-lived assets				1,071
	Expense in connection with legal settlements and reserves				715
	Restructuring, acquisition and other expenses				261
	Amortization of purchased intangible assets				44
					2,091
	Operating income adjustments				3,510
(3)	Tax effect and other items				(834	)
	Financial expense				32
	Net income adjustments				2,708
(4)	The weighted average number of shares was 873 million for the year ended December 31, 2012. Non-GAAP earnings per share can be reconciled with GAAP earnings per share by dividing each of the amounts included in footnotes 1-3 above by the applicable weighted average share number.

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		Year ended December 31, 2011
		U.S. dollars and shares in millions (except per share amounts)
		GAAP		Non-GAAP Adjustments			Non-GAAP		% of Net Revenues
	Gross profit1		9,515		1,190			10,705		58	%
	Operating income1,2		3,109		2,144			5,253		29	%
	Net income attributable to Teva1,2,3		2,759		1,679			4,438		24	%
	Earnings per share attributable to Teva—diluted4		3.09		1.88			4.97
(1)	Amortization of purchased intangible assets				668
	Costs related to regulatory actions taken in facilities				170
	Inventory step-up				352
	Gross profit adjustments				1,190
(2)	Expense in connection with legal settlements				471
	Restructuring, acquisition and other expenses				244
	Impairment of long-lived assets				201
	Amortization of purchased intangible assets				38
					954
	Operating income adjustments				2,144
(3)	Tax effect and other items				(465	)
	Net income adjustments				1,679
(4)	The weighted average number of shares was 893 million for the year ended December 31, 2011. Non-GAAP earnings per share can be reconciled with GAAP earnings per share by dividing each of the amounts included in footnotes 1-3 above by the applicable weighted average share number.

Non-GAAP Effective Tax Rate

The provision for non-GAAP taxes for 2013 amounted to $630 million on pre-tax non-GAAP income of $4.9 billion. The provision for taxes in the comparable period of 2012 was $661 million on pre-tax income of $5.4 billion, and in 2011 was $592 million on pre-tax income of $5.1 billion. The non-GAAP tax rate for 2013 was 13%, as compared to 12% in 2012 and 2011. The annual non-GAAP effective tax rate for 2013 was primarily the result of the mix of products (both type and location of production) sold during the year. In general, we benefit more from tax incentives on products for which we also produce the API. In addition, tax benefits resulting from mergers between subsidiaries and tax incentives our subsidiaries are entitled to further reduced the tax expenses for 2013.

In the future, the effective tax rate is expected to fluctuate as a result of various factors, including changes in the products and geographical distribution of our income, the effect of any mergers and acquisitions, and the effects of statutes of limitations and legal settlements which may affect provisions for uncertain tax positions. We expect that the tax rate in future years will be significantly higher than this year’s, as a result of the product mix projected for these years and the expiration of the Israeli incentives regime we currently enjoy.

Trend Information

The following factors are expected to have an effect on our 2014 results:

• a decrease in sales of Copaxone^® as a result of changes in the competitive landscape, including the potential introduction of a purported generic version in the United States;

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• the impact of currency fluctuations on revenues and net income, as well as on various balance sheet line items;

• substantial restructuring and impairment expenses relating to improvements in our production network, supply chain and resource deployment processes; and

• an increase in specialty S&M expenses, as a result of several planned launches, including Copaxone^® 40 mg/mL.

For additional information please see “Item 4—Information on the Company” and elsewhere in this Item 5.

Off-Balance Sheet Arrangements

Except for securitization transactions, which are disclosed in note 17c to our consolidated financial statements, we do not have any material off-balance sheet arrangements as defined in Item 5.E of Form 20-F.

Aggregated Contractual Obligations

The following table summarizes our material contractual obligations and commitments as of December 31, 2013:

	Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt obligations, including estimated interest*	$	14,415	$	1,607	$	2,746	$	1,948	$	8,114
Operating lease obligations		452		117		170		89		76
Purchase obligations (including purchase orders)		1,731		1,720		11		—		—
Total	$	16,598	$	3,444	$	2,927	$	2,037	$	8,190

* Long term debt obligations mainly includes senior notes and convertible senior debentures as disclosed in notes 12 and 13 to our consolidated financial statements.