Teva Pharmaceutical 4Q15 Recap; Busy 2016 Expected; Reiterate Outperform

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1 EQUITY RESEARCH QUARTERLY UPDATE February 11, 2016 Stock Rating: OUTPERFORM mo. Price Target $77.00 TEVA - OTC $ Yr. EPS Gr. Rate NA 52-Wk Range $72.31-$54.17 Shares Outstanding 851.9M Float 832.3M Market Capitalization $51,560.5M Avg. Daily Trading Volume 5,890,336 Dividend/Div Yield $1.36/2.39% Book Value $27.37 Fiscal Year Ends Dec 2016E ROE 13.2 % LT Debt $8,566.0M Preferred $0.0M Common Equity $23,313M Convertible Available Yes EPS Diluted Q1 Q2 Q3 Q4 Year Mult. 2013A x 2014A x 2015A x Prior (E) NM 2016E x Prior (E) NM Revenue ($/mil) Q1 Q2 Q3 Q4 Year Mult. 2013A NM 2014A 5.0B 5.0B 5.1B 5.2B 20.3B NM 2015A 5.0B 5.0B 4.8B 4.9B 19.7B NM Prior (E) B 19.9B NM 2016E 4.9B 6.8B 7.1B 7.5B 26.3B NM Prior (E) B NM HEALTHCARE/BIOPHARMACEUTICALS 4Q15 Recap; Busy 2016 Expected; Reiterate Outperform SUMMARY Teva reported 4Q15 revenues and adjusted EPS of $4.9B/$1.28 compared to our estimates of $5.1B/$1.32 and consensus of $4.8B/$1.29. The Copaxone revenue miss ($960M vs. $998M) was somewhat discouraging given script trends (YE discounting ahead of January increase?), but we still see upside to overly conservative consensus 2016 numbers, and we're raising our Copaxone estimates accordingly. The company deferred 2016 guidance until after the AGN deal closes. Management seemed very confident in the AGN deal closing (March/April) and fielded several questions on their future M&A plans, which appear to slant toward branded/ specialty following some deleveraging. Of note, FDA has not yet delivered the generic EpiPen CRL, so we await further details, hopefully in the near term. Lowering our 2016E EPS in part on timing of AGN deal closing (pushing back by one quarter). KEY POINTS Revenue for FY15 was $19.7B, down 3% vs Excluding the negative impact of foreign currency effects, which totaled $1.3B (in 2015 vs 2014), revenues increased by 4%. Non-GAAP net income increased 6% to $4.7B vs as a result of gross profit margin expansion (59.9% to 62.2%) and decreased selling and marketing expense (17.4% vs. 18.6% of rev.). Copaxone. One puzzling aspect of the 4Q15 print was US Copaxone rev. weakness despite strong/stable market share. It's possible that TEVA offered add'l discounts prior to taking the 7.9% price increase at the start of '16 as an offset (the lack of pricing transparency spares nobody), but even assuming weakening pricing for '16, we still see substantial upside to Copaxone expectations. M&A in progress. Management provided reassurance in the AGN generics deal closing, although timing could slip from March to April due to lengthy pipeline review (marketed drug review completed). Meanwhile, TEVA expects to close the RIMSA acquisition as well as the Takeda joint venture in Japan during 1Q16. M&A down the road. Management sees the AGN acquisition driving significant de-leveraging starting in 2016, allowing TEVA to return to its M&A ambitions. Commentary signals that brand/specialty pharmaceuticals are priority (perhaps a nod to prior NTE strategy), and we expect CNS to be a leading area of focus for business development. Reiterate Outperform, $77 PT. While the 4Q15 print wasn't exactly confidence boosting amidst an ugly overall market, we continue to believe TEVA is an attractive 2016 and longer-term story with multiple upside drivers. Volatility in spec pharma keeps persisting, but we still view TEVA to be a source of relative stability within the group. Stock Price Performance Company Description Teva is a leader in the global generic pharmaceuticals market and the largest US generic company. Proprietary products include MS drug Copaxone. Akiva Felt Akiva.Felt@opco.com Carlos Solorzano, Ph.D Carlos.Solorzano@opco.com For analyst certification and important disclosures, see the Disclosure Appendix. Oppenheimer & Co Inc. 85 Broad Street, New York, NY Tel: Fax:

2 TEVA (OUTPERFORM) - $ YEAR PRICE PERFORMANCE INVESTMENT THESIS Source: Bloomberg TEVA 2016 Our Outperform thesis on TEVA is predicated on our belief that after several years of management turnover and the company staying on the sidelines of the booming M&A landscape in specialty pharma, TEVA is emerging as a turnaround story fueled by business development opportunities that mesh well with its existing strengths and franchises. With the generic Copaxone overhang mostly abated by success of conversion to 3x/weekly dosing, we expect investors to focus on future growth through M&A, where TEVA appears to be just getting started on dealmaking. BASE CASE ASSUMPTION Copaxone market share continues to be eroded as more generic versions of glatiramer acetate are introduced and as Teva loses exclusivity on 40mg/mL version SD-809 and TEV are approved by FDA, and there is modest adoption of treatments given their efficacy and competing therapies CATALYSTS 1Q/April 16 Anticipated closing of AGN generics and Rimsa acquisitions 1Q16 Start of Phase 3 pivotal trials of TEV in chronic and episodic migraine 1Q16 Potential approval of abuse-deterrant hydrocodone Vantrela ER March 2016 PDUFA for reslizumab in asthma May 2016 PDUFA for Austedo (SD-809) in Huntington's disease UPSIDE SCENARIO Lower than expected Copaxone share erosion Clinical success, FDA approval, and commercial success of SD-809 in Huntington's disease/tardive dyskensia and of TEV in chronic and episodic migraine FDA grants generic EpiPen AB rating DOWNSIDE SCENARIO Copaxone market share is eroded by generic glatiramer acetate SD-809 and TEV do not show significant clinical benefits and/ or are not approved by FDA Integration issues related to AGN generics and Rimsa acquisitions, which hinder cost synergies Poorly received M&A PRICE TARGET CALCULATION Our $77 price target is based on a discounted cash flow valuation discounted at 9% through 2020 and a terminal value (0% terminal growth) of $25.7B discounted at 10%. Our DCF includes the contribution of sales of SD-809 in Huntington's disease, which Teva is gaining through the acquisition of Auspex Pharmaceuticals. KEY RISKS Key risks to our price target include: (1) failure to meet sales expectations for Teva's branded pharmaceutical assets, including Copaxone 3x/weekly, (2) disappointing sales in Teva's generics business and/or failure for the company to secure ANDA approvals and prevail in IP litigation; (3) Teva failing to meet investor expectations of building growth through smart business development transactions. 2 Akiva Felt:

3 TEVA (OUTPERFORM) - $77.00 Exhibit 1: Anticipated Upcoming Milestones for s (TEVA) Expected Date 2Q15 mid-2015 Event Description Anticipate closing of Auspex acquisition Expect NDA filing for SD-809 (Auspex) in Huntington's disease mid-2015 Potential Phase 2 data for SD-809 in Tardive Dyskinesia mid-2015 Potential Phase 1b data for SD-809 in Tourrette's Nov 2015 FS and FP RespiClick Phase 3 results in Asthma 18-Jan-16 Launch of BENDEKA (bendamustine HCl injection) 1Q16 Potential approval of abuse deterrant opioid Vantrela ER 1Q16 Anticipate closing of $2.3B Rimsa acquisition 1Q16 Start of Phase 3 pivotal trials of TEV in chronic and episodic migraine Mar-16 PDUFA date for Reslizumab in Asthma March-April 16 Anticipate closing of Allergan generics $40.5B acquisition May-16 PDUFA for SD-809 in Huntington's disease 2Q16 Anticipate launch of joint venture with Takeda in Japan 3Q16 Pridopidine Phase 2/3 results for motor performance in Hungtington's Disease 2016 Anticipate NDA filing for SD-809 in Tardive Dyskinesia 2016 Expect data from proof-of-concept (POC) study for SD-1077 in Parkinson's disease Anticipate top-line data from Laquinimod CONCERTO Ph3 study in MS Potential data from Ph3 study of Laquinimod in Crohn's Disease Potential FDA filing for Pridopidine in Huntington's disease 2016/ Potential data from Ph3 study of Laquinimod in Lupus Nephritis Expect FDA approval for SD-809 in Dyskinesia 2017 Anticipate NDA filing for Laquinimod in Crohn's Disease Anticipate NDA filing for Laquinimod in Lupus Nephritis BLA submission of TEV for chronic and episodic migraine Potential approval for Laquinimod in Crohn's Disease Potential approval for Laquinimod in Lupus Nephritis Source: Company Documents and Oppenheimer & Co. 3

4 TEVA (OUTPERFORM) - $77.00 s (TEVA) 2012A E 2017E 2018E ($mn) [FY - DEC] FY:12A FY:13A Q1A Q2A Q3A Q4A FY:14A Q1A Q2A Q3A Q4A FY:15A Q1E Q2E Q3E Q4E FY:16E FY:17E FY:18E Copaxone US sales 2,767 3, , , ,200 2,948 2,685 ROW sales 1,229 1, , Total Copaxone sales 3,996 4,328 1, ,107 1,121 4, ,054 1, , ,004 1, ,974 3,606 3,244 Azilect Respiratory franchise , Women's Health franchise Provigil Nuvigil Treanda Deuterated Chem franchise Active pharmaceutical ingredients Total Revenues By Region - United States 10,438 10,461 2,629 2,537 2,660 2,808 10,634 2,921 2,952 2,734 2,642 11,249 2,809 3,963 4,036 4,146 14,953 14,420 14,005 Europe (1) 5,673 5,988 1,507 1,521 1,408 1,387 5,823 1,267 1,200 1,199 1,224 4,890 1,239 2,021 2,158 2,263 7,682 8,460 9,808 ROW 4,206 3, , ,015 3, ,066 3,689 3,873 4,067 Total pharmaceutical sales 20,317 20,314 5,001 5,045 5,058 5,168 20,272 4,982 4,966 4,823 4,881 19,652 4,882 6,839 7,129 7,474 26,324 26,753 27,880 Total revenue 20,317 20,314 5,001 5,045 5,058 5,168 20,272 4,982 4,966 4,823 4,881 19,652 4,882 6,839 7,129 7,474 26,324 26,753 27,880 Total revenues 20,317 20,314 5,001 5,045 5,058 5,168 20,272 4,982 4,966 4,823 4,881 19,652 4,882 6,839 7,129 7,474 26,324 26,753 27,880 COGS 9,665 9,607 2,304 2,384 2,249 2,279 9,216 2,146 2,064 2,052 2,034 8,296 2,050 2,941 3,065 3,214 11,270 11,504 11,988 Gross profit 10,652 10,707 2,697 2,661 2,809 2,889 11,056 2,836 2,902 2,771 2,847 11,356 2,832 3,898 4,063 4,260 15,053 15,249 15,892 Operating expenses Research and development 1,356 1, , , ,843 1,605 1,673 Selling and marketing 3,879 4, ,006 3, , ,163 1,212 1,271 4,475 4,414 4,600 General and administrative 1,238 1, , , ,527 1,405 1,464 Acquisition of in-process R&D Litigation settlement, impairment and restructuring 1,974 2, , Total expenses 8,447 9,058 1,725 1,736 1,697 1,947 7,105 2,087 2,240 1,761 1,916 8,004 1,567 2,150 2,237 2,340 8,295 7,896 8,233 Operating income 2,205 1, , , , ,352 1,264 1,748 1,827 1,921 6,759 7,353 7,659 Interest expense (income) , ,291 1,258 1,238 Impairment of financial assets Pre-tax income 1,819 1, , , , ,425 1,504 1,598 5,468 6,095 6,421 Taxes (137) (43) ,039 1,158 1,220 Tax rate 16% 12% 16% 21% 19% 14% 62% 28.9% 27% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% Net income - GAAP 1,963 1, , , ,122 1,186 1,262 4,299 4,807 5,071 GAAP adjustments 2,708 2, , , , ,600 1,500 1,500 Net income - adjusted 4,671 4,255 1,038 1,054 1,134 1,125 4,351 1,165 1,230 1,165 1,136 4,681 1,130 1,522 1,586 1,662 5,899 6,307 6,571 GAAP EPS $2.25 $1.49 $0.88 $0.88 $1.02 $0.80 $3.58 $0.52 $0.63 $0.12 $0.55 $1.82 $0.76 $1.16 $1.23 $1.31 $4.45 $4.98 $5.26 Dilutes shares outstanding - GAAP Dilutes shares outstanding - adjusted Cash EPS (2) $5.35 $5.01 $1.22 $1.23 $1.32 $1.31 $5.53 $1.36 $1.43 $1.35 $1.28 $5.84 $1.16 $1.55 $1.62 $1.70 $6.03 $6.44 $6.72 Adjusted EPS incl. options expense $5.35 $5.01 $1.22 $1.23 $1.32 $1.31 $5.07 $1.36 $1.43 $1.35 $1.28 $5.42 $1.16 $1.55 $1.62 $1.70 $6.03 $6.44 $6.72 Margin analysis - GAAP Gross profit 52.4% 52.7% 53.9% 52.7% 55.5% 55.9% 54.5% 56.9% 58.4% 57.5% 58.3% 57.8% 58.0% 57.0% 57.0% 57.0% 57.2% 57.0% 57.0% Research and development 6.67% 7.02% 7.06% 6.82% 8.15% 7.33% 7.34% 6.66% 7.77% 7.48% 9.14% 7.76% 7.0% 7.0% 7.0% 7.0% 7.00% 6.00% 6.00% Selling and marketing 19.1% 20.1% 19.7% 18.3% 18.8% 19.5% 19.0% 18.5% 17.3% 16.2% 18.8% 17.7% 17.0% 17.0% 17.0% 17.0% 17.0% 16.5% 16.5% General and administrative 6.09% 6.10% 6.04% 5.99% 5.79% 6.19% 6.00% 6.16% 6.54% 6.55% 5.96% 6.30% 5.8% 5.8% 5.8% 5.8% 5.80% 5.25% 5.25% EBITDA 10.9% 8.1% 19.4% 18.3% 22.0% 18.2% 19.5% 15.0% 13.3% 20.9% 19.1% 19.3% 25.9% 25.6% 25.6% 25.7% 25.7% 27.5% 27.5% Operating Income 10.9% 8.1% 19.4% 18.3% 22.0% 18.2% 19.5% 15.0% 13.3% 20.9% 19.1% 17.1% 25.9% 25.6% 25.6% 25.7% 25.7% 27.5% 27.5% Pre-tax income 9.0% 6.2% 17.8% 16.8% 20.3% 16.9% 17.9% 11.2% 12.5% 6.5% 17.6% 12.0% 19.3% 20.8% 21.1% 21.4% 20.8% 22.8% 23.0% Net Income 9.7% 6.2% 14.9% 14.8% 17.3% 13.3% 15.1% 9.0% 10.9% 2.1% 9.9% 8.0% 15.0% 16.4% 16.6% 16.9% 16.3% 18.0% 18.2% Growth rates (y-o-y) Total Revenue 10.9% 0.0% 2.0% 2.5% 0.0% -4.8% -0.2% -0.4% -1.6% -4.6% -5.6% -3.1% -2.0% 37.7% 47.8% 53.1% 34.0% 1.6% 4.2% Research and development 25.6% 5.2% 7.3% 1.5% 18.4% -7.8% 4.3% -5.9% 12.2% -12.4% 17.7% 2.5% 2.9% 24.0% 38.2% 17.3% 20.8% -12.9% 4.2% Selling and marketing 11.5% 5.2% -1.1% -6.2% -2.2% -11.1% -5.4% -6.3% -6.6% -17.9% -8.9% -9.9% -10.0% 35.2% 55.4% 38.7% 28.7% -1.4% 4.2% General and administrative 32.8% 0.1% -1.6% -5.3% -1.3% 1.3% -1.8% 1.7% 7.6% 7.8% -9.1% 1.8% -7.8% 22.0% 30.8% 49.0% 23.2% -8.0% 4.2% EBITDA -29.1% -25.2% 11.2% % 38.8% 68.2% 139.6% -22.9% -28.4% -9.2% -1.2% -3.8% 68.8% 164.0% 80.8% 106.3% 77.9% 8.8% 4.2% Operating Income -29.1% -25.2% 11.2% % 38.8% 68.2% 139.6% -22.9% -28.4% -9.2% -1.2% -15.2% 68.8% 164.0% 80.8% 106.3% 101.6% 8.8% 4.2% Pre-tax income % -68.6% 169.8% % % 63.2% % -27.3% -13.7% 20.6% 33.9% 7.3% 72.0% 207.6% 48.0% 21.9% 63.9% 11.5% 5.3% Net Income 5.3% -8.9% 8.1% 3.5% 5.8% -6.6% 2.3% 12.2% 16.7% 2.7% 1.0% 7.6% -3.0% 23.7% 36.1% 46.3% 26.0% 6.9% 4.2% Source: Company Reports, Oppenheimer & Co. estimates. 4

5 TEVA (OUTPERFORM) - $77.00 Stock prices of other companies mentioned in this report (as of 2/11/16): Allergan Plc (AGN-NYSE, $274.55, Not Covered) Disclosure Appendix Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Analyst Certification - The author certifies that this research report accurately states his/her personal views about the subject securities, which are reflected in the ratings as well as in the substance of this report. The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Potential Conflicts of Interest: Equity research analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firm including the Oppenheimer & Co. Inc. Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. Oppenheimer & Co. Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, Oppenheimer & Co. Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, Oppenheimer & Co. Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest. All price targets displayed in the chart above are for a 12- to- 18-month period. Prior to March 30, 2004, Oppenheimer & Co. Inc. used 6-, 12-, 12- to 18-, and 12- to 24-month price targets and ranges. For more information about target price histories, please write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager. Oppenheimer & Co. Inc. Rating System as of January 14th, 2008: 5

6 TEVA (OUTPERFORM) - $77.00 Outperform(O) - Stock expected to outperform the S&P 500 within the next months. Perform (P) - Stock expected to perform in line with the S&P 500 within the next months. Underperform (U) - Stock expected to underperform the S&P 500 within the next months. Not Rated (NR) - Oppenheimer & Co. Inc. does not maintain coverage of the stock or is restricted from doing so due to a potential conflict of interest. Oppenheimer & Co. Inc. Rating System prior to January 14th, 2008: Buy - anticipates appreciation of 10% or more within the next 12 months, and/or a total return of 10% including dividend payments, and/or the ability of the shares to perform better than the leading stock market averages or stocks within its particular industry sector. Neutral - anticipates that the shares will trade at or near their current price and generally in line with the leading market averages due to a perceived absence of strong dynamics that would cause volatility either to the upside or downside, and/or will perform less well than higher rated companies within its peer group. Our readers should be aware that when a rating change occurs to Neutral from Buy, aggressive trading accounts might decide to liquidate their positions to employ the funds elsewhere. Sell - anticipates that the shares will depreciate 10% or more in price within the next 12 months, due to fundamental weakness perceived in the company or for valuation reasons, or are expected to perform significantly worse than equities within the peer group. Distribution of Ratings/IB Services Firmwide IB Serv/Past 12 Mos. Rating Count Percent Count Percent OUTPERFORM [O] PERFORM [P] UNDERPERFORM [U] Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do not correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assigned buy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform. Company Specific Disclosures Oppenheimer & Co. Inc. expects to receive or intends to seek compensation for investment banking services in the next 3 months from TEVA. Additional Information Available Please log on to or write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager. Other Disclosures This report is issued and approved for distribution by Oppenheimer & Co. Inc. Oppenheimer & Co. Inc. transacts business on all principal exchanges and is a member of SIPC. This report is provided, for informational purposes only, to institutional and retail investor clients of Oppenheimer & Co. Inc. and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The analyst writing the report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security recommended in this report, the recipient should consider whether such recommendation is appropriate given the recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, and encourage 6

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