EXHIBIT 2019
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`EXHIBIT 2019
`EXHIBIT 2019
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`Cephalon Exhibit 2019
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`Agila V. Cephalon
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` IPR2016—00026
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`Table of Contents
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`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, 2014
`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
`Group Executive Vice President, Chief Financial 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
`American Depositary Shares, each representing one Ordinary Share
`Securities registered or to be registered pursuant to Section 12(g) of the Act.
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`Name of each exchange on which registered
`New York Stock Exchange
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`None
`(Title of Class)
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`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.
`851,871,888 Ordinary Shares
`729,850,138 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
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`CEPHALON, INC. -- EXHIBIT 2019 0001
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`Table of Contents
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`INDEX
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`
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`Introduction and Use of Certain Terms
`Forward-Looking Statements
`Part I
`Item 1:
`Item 2:
`Item 3:
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`Item 4:
`
`Item 4A:
`Item 5:
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`Identity of Directors, Senior Management and Advisers
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` Offer Statistics and Expected Timetable
` Key Information
`Selected Financial Data
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`Operating Data
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`Balance Sheet Data
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`Dividends
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`Risk Factors
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`Information on the Company
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`Introduction
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`Strategy
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`Our Segments
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`Generic Medicines
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`United States
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`Europe
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`Rest of the World Markets
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`Specialty Medicines
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`Central Nervous System
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`Respiratory
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`Oncology
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`Women’s Health
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`Other Activities
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`Research and Development
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`Operations
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`Environment
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`Quality
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`Organizational Structure
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`Properties and Facilities
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`Regulation
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`United States
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`Europe
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`Rest of the World Markets
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`Miscellaneous Regulatory Matters
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` Unresolved Staff Comments
` Operating and Financial Review and Prospects
`Introduction
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`Highlights
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`Results of Operations
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`Segment Information
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`Generic Medicines
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`Specialty Medicines
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`Other Activities
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`Teva Consolidated Results
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`Liquidity and Capital Resources
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`Supplemental Non-GAAP Income Data
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`Trend Information
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`Off-Balance Sheet Arrangements
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`CEPHALON, INC. -- EXHIBIT 2019 0002
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`Table of Contents
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`
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`Item 6:
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`Item 7:
`Item 8:
`Item 9:
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`Item 10:
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`Item 11:
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`Item 12D:
`Item 13:
`Item 14:
`Part II
`Item 15:
`Item 16:
`Item 16A:
`Item 16B:
`Item 16C:
`Item 16D:
`Item 16E:
`Item 16F:
`Item 16G:
`Item 16H:
`Part III
`Item 17:
`Item 18:
`Item 19:
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`Aggregated Contractual Obligations
`
`Critical Accounting Policies
`
`Recently Issued Accounting Pronouncements
`
` Directors, Senior Management and Employees
`Directors and Senior Management
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`Compensation of Executive Officers and Directors
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`Board Practices
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`Statutory Independent Directors, Designated Independent Directors and Financial Experts
`
`Committees of the Board
`
`Employees
`
`Share Ownership
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` Major Shareholders and Related Party Transactions
` Financial Information
` The Offer and Listing
`ADSs
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`Ordinary Shares
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` Additional Information
`Memorandum and Articles of Association
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`Taxation
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`U.S. Taxation Applicable to Holders of Our Ordinary Shares and ADSs
`
`Israeli Taxation Applicable to Holders of Our Ordinary Shares and ADSs
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`Taxation Applicable to the Company
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`Documents on Display
`
` Quantitative and Qualitative Disclosures about Market Risk
`General
`
`Exchange Rate Risk Management
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`Interest Rate Risk Management
`
` Description of Teva American Depositary Shares
` Defaults, Dividend Arrearages and Delinquencies.
` Material Modifications to the Rights of Security Holders and Use of Proceeds
`
` Controls and Procedures
`[Reserved]
`
` Audit Committee Financial Experts
` Code of Ethics
` Principal Accountant Fees and Services
` Exemptions from the Listing Standards for Audit Committees
` Purchases of Equity Securities by the Issuer and Affiliated Purchasers
` Change in Registrant’s Certifying Accountant
` Corporate Governance
` Mine Safety Disclosure
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` Financial Statements
` Financial Statements
` Exhibits
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`Consolidated Financial Statements
`Financial Statements Schedule
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`Page
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` 113
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` F-1
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`CEPHALON, INC. -- EXHIBIT 2019 0003
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`

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`Table of Contents
`
`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, the joint venture we formed with P&G. References to “R&D” are to Research and Development. References to “S&M” are to Selling and
`Marketing. References to “G&A” are to General and Administrative.
`
`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;
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`•
` the development and launch of our products, including product approvals and results of clinical trials;
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`•
` projected markets and market size;
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`•
` anticipated results of litigation;
`
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`•
` our projected revenues, market share, expenses, net income margins and capital expenditures; and
`
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`•
` our liquidity.
`
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`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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`1
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`CEPHALON, INC. -- EXHIBIT 2019 0004
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`Table of Contents
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`PART I
`
`IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
`ITEM 1:
`Not Applicable.
`
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`OFFER STATISTICS AND EXPECTED TIMETABLE
`ITEM 2:
`Not Applicable.
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`ITEM 3:
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`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, 2014 and selected balance sheet data at
`December 31, 2014 and 2013 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, 2011 and selected balance sheet
`data at December 31, 2012, 2011 and 2010 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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`2
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`CEPHALON, INC. -- EXHIBIT 2019 0005
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`

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`Table of Contents
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`Operating Data
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`Net revenues
`Cost of sales
`Gross profit
`Research and development expenses
`Selling and marketing expenses
`General and administrative expenses
`Impairments, restructuring and others
`Legal settlements and loss contingencies
`Operating income
`Financial expenses—net
`Income before income taxes
`Income taxes
`Share in losses of associated companies—net
`Net income
`Net income (loss) attributable to non-controlling interests
`Net income attributable to Teva
`Earnings per share attributable to Teva:
`Basic ($)
`Diluted ($)
`Weighted average number of shares (in millions):
`Basic
`Diluted
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`Balance Sheet Data
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`Financial assets (cash, cash equivalents and marketable securities)
`Working capital (operating assets minus liabilities)
`Total assets
`Short-term debt, including current maturities
`Long-term debt, net of current maturities
`Total debt
`Total equity
`
`
`3
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`For the year ended December 31,
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`2010
`2013
`2012
`2011
`2014
`
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`U.S. dollars in millions (except per share amounts)
` 20,272 20,314 20,317 18,312 16,121
` 9,216 9,607 9,665 8,797 7,056
` 11,056 10,707 10,652 9,515 9,065
` 1,488 1,427 1,356 1,095
`951
` 3,861 4,080 3,879 3,478 2,968
` 1,217 1,239 1,238
`932
`865
`
`650
`788 1,259
`430
`408
`
`(111) 1,524
`715
`471
`2
` 3,951 1,649 2,205 3,109 3,871
`
`313
`399
`386
`153
`225
` 3,638 1,250 1,819 2,956 3,646
`
`591
`(43)
`(137)
`127
`283
`
`5
`40
`46
`61
`24
` 3,042 1,253 1,910 2,768 3,339
`
`(13)
`(16)
`(53)
`9
`8
` 3,055 1,269 1,963 2,759 3,331
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`3.58
`1.49
`2.25
`3.10
`
`3.56
`1.49
`2.25
`3.09
`
`
`
`
`
`
`853
`849
`872
`890
`
`858
`850
`873
`893
`
`3.72
`3.67
`
`896
`921
`
`
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`2010
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`2014
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`As at December 31,
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`
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`2011
`2012
`2013
`
`
`(U.S. dollars in millions)
`1,549
`1,245
`3,089
`1,748
` 2,601
`3,835
`2,493
`3,589
`3,937
` 1,642
` 46,420 47,508 50,609 50,142 38,152
` 1,761
`1,804
`3,006
`4,280
`2,771
` 8,566 10,387 11,712 10,236
`4,110
` 10,327 12,191 14,718 14,516
`6,881
` 23,355 22,636 22,867 22,343 22,002
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`CEPHALON, INC. -- EXHIBIT 2019 0006
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`Table of Contents
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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. Commencing in April 2015, our dividends will be declared and paid in U.S.
`dollars.
`
`Dividends paid by an Israeli company to non-Israeli residents 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 and distributed for the fourth quarter of 2014.
`
`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).
`
`
`
`1st interim
`2nd interim
`3rd interim
`4th interim
`
`
`2011
`2012
`2013
`In cents per share
` 32.0
` 26.3
` 23.2
` 32.2
` 25.0
` 23.5
` 32.6
` 25.7
` 21.9
` 34.3
` 31.1
` 26.8
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`2010
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` 18.8
` 18.1
` 19.3
` 21.8
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`2014
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` 34.7
` 35.3
` 32.1
` 33.8
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`4
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`CEPHALON, INC. -- EXHIBIT 2019 0007
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`

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`Table of Contents
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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 develop and commercialize additional generic and specialty pharmaceutical products, particularly
`after the expiration of our U.S. Orange Book patents covering our leading specialty medicine, Copaxone . 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 $3.2 billion, $3.3 billion, and $3.0 billion in 2014, 2013 and 2012, respectively. Profitability of our multiple sclerosis franchise as
`a percentage of Copaxone revenues was 75%, 76%, and 74% in 2014, 2013 and 2012, respectively.
`®
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`Although Copaxone remains the leading therapy for multiple sclerosis to date, 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 Tecfidera by Biogen, Gilenya by Novartis, and
`®
`®
`Aubagio by Genzyme, continue to present significant and increasing competition. Copaxone also faces competition from existing injectable products,
`®
`®
`such as the four beta-interferons Avonex , Betaseron , Extavia and Rebif , as well as from the two monoclonal antibodies Tysabri and Lemtrada . The new
`®
`®
`®
`®
`®
`®
`oral treatments provide especially intense competition in light of their substantial convenience in comparison to injectables such as Copaxone . Also, our
`®
`U.S. Orange Book patents on Copaxone expired in May 2014 and, subject to further judicial review, in September 2015. As a result, a generic version of our
`®
`20mg/20mL product could be sold in the United States if FDA approval is obtained. In addition, our business strategy for Copaxone relies heavily on the
`®
`continued migration of a substantial percentage of current daily Copaxone patients to a new three-times-a-week version and the maintenance of patients on
`®
`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.
`
`
`5
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`CEPHALON, INC. -- EXHIBIT 2019 0008
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`Table of Contents
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`We may 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, 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.
`
`For several years, we have been conducting a voluntary worldwide investigation into business practices that may have implications under the FCPA.
`We have engaged outside counsel to assist in the investigation, which was prompted by the receipt, beginning in 2012, of 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 these agencies in their
`investigations of these matters. In the course of our investigation, which is continuing, we have identified certain business practices and transactions in
`Russia, certain Eastern European countries, certain Latin American countries and other countries in which we conduct business, which likely constitute
`violations of the FCPA and/or local law. In connection with our investigation, we have also become aware that affiliates in certain countries under
`investigation provided to local authorities inaccurate or altered information relating to marketing or promotional practices. We have brought and continue to
`bring 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. Our investigation is expected to continue through the
`end of 2015, and may continue beyond that date.
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`We cannot predict at this time the impact on the Company as a result of these matters and accordingly 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.
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`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.
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`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; 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.
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`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.
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`We may not be able to reduce operating expenses to the extent and during the timeframe intended by our cost reduction program.
`In October 2013, we accelerated the goals of our previously announced cost reduction program to $2.0 billion by the end of 2017, with half of that to
`be achieved by the end of 2014 and 70% by the end of 2015. As part of the acceleration, we planned to reduce our employee headcount by approximately
`10% by the end of 2014. 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.
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`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 sources of new specialty and other products, or a means of growth, involves
`risks that could adversely affect our future revenues and operating results. For example:
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` We may fail to identify transactions that would enable us to execute our business strategy.
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` 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.
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` 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 re