August 5, 2011

Aaron (Ronny) Gal, Ph.D. (Senior Analyst) ronny.gal@bernstein.com +1-212-756-4208 Alan Sonnenfeld alan.sonnenfeld@bernstein.com +1-212-823-3977 Paul Stephano, MD paul.stephano@bernstein.com +1-212-407-5914

Teva: Reviewing the Investment Case

Ticker TEVA SPX

Rating O

CUR USD

4 Aug 2011 Closing Price 41.26 1200.07

Target Price 55.00

TTM Rel. Perf. -23.3%

EPS 2010A 4.55 85.28 2011E 4.93 96.26 2012E 5.96 105.44 2010A 9.1 14.1

P/E 2011E 8.4 12.5 2012E 6.9 11.4 Yield 2.3% 2.2%

O Outperform, M Market-Perform, U Underperform, N Not Rated

Highlights

The slides below are from a presentation made today (August 5th) in which we argued the investment case for Teva. It is provided here as reference to investors in call format.
Investment Conclusion

Teva is rated Outperform, PT $55.

Details

U.S. Pharmaceuticals/Specialty

Exhibit 1 Comments from investors on the invite to the conference call

Is it time to come out from under my desk?

My investment case has evolved into "hope and pray", is there a slide on that?

Why a SHORT call. (duration) Teva traded down another buck after-close on fear you are downgrading it
Source: Clients

See Disclosure Appendix of this report for important disclosures and analyst certifications.

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 2 Summary of perspectives

Furthest in transition of business model away from maturing US GRx business Valuation is highly attractive Without Copaxone, Teva is a growth company Near term catalysts are there Risks and how to mitigate them
Source: SCB Analysis

U.S. Pharmaceuticals/Specialty

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 3 Growth in Core US generic business is coming to an end

2011 Product Total # w/o Resp % of >$100M Market w/o 1 LIPITOR (100%) 2 ZYPREXA (100%) 3 4 5 6 7 8 9 10 11 12 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 LEVAQUIN (100%) TAXOTERE (100%) GEMZAR (100%) XALATAN (100%) FEMARA (100%) SUBOXONE (50%) YAZ-28 (100%) STRATTERA (75%) CADUET (100%) COMBIVIR (100%) ASACOL (50%) UROXATRAL (100%) NASACORT AQ (100%) PRANDIN (100%) VFEND (100%) PROMETRIUM (100%) AROMASIN (100%) LEVAQUIN IV (100%) VIDAZA (50%) ARTHROTEC (100%) FENTORA (75%) METADATE CD (100%) PATANOL (50%) PRIMAXIN I.V. (100%) PREVPAC (100%) TREXIMET (75%) AMRIX (100%) BRx ($M) $20,241 30 12% 7,272 2,915 1,514 1,214 806 685 669 506 424 394 384 337 326 315 249 244 216 183 173 159 158 142 137 134 123 119 116 112 88 125 2012 Product BRx ($M) $37,272 46 23% 6,053 4,336 3,957 3,525 2,779 1,877 1,634 1,345 1,264 1,108 797 593 583 539 506 492 484 408 399 373 319 318 286 274 269 265 252 219 209 196 165 150 145 142 133 122 108 106 104 101 83 78 61 47 38 30 111 2013 Product BRx ($M) $17,331 39 11% 3,098 2,313 1,406 1,122 1,093 767 687 676 506 400 395 379 322 315 286 275 246 246 233 193 189 182 181 159 159 158 146 145 128 120 114 112 102 100 100 93 83 68 33 SPIRIVA FLOVENT HFA SYMBICORT PROAIR HFA ASMANEX TWISTHALER 2014 Product BRx ($M) $15,778 35 10% 6,296 1,740 832 689 645 611 495 460 385 358 290 286 269 240 198 179 148 146 144 136 115 109 107 106 100 100 85 82 82 76 64 64 61 53 28 COMBIVENT PROVENTIL HFA XOPENEX HFA 2015 Product BRx ($M) $13,577 30 8% 4,413 1,307 1,296 904 681 587 451 428 346 340 339 286 284 191 181 172 168 122 119 112 111 106 101 100 87 85 82 78 68 31 2016 Product BRx ($M) $ 12,525 22 8% 3,654 1,363 1,306 987 699 641 494 486 446 328 322 291 242 201 184 180 172 171 120 111 100 28

PLAVIX (100%) SEROQUEL (100%) SINGULAIR (100%) ACTOS (100%) LEXAPRO (100%) DIOVAN (100%) DIOVAN HCT (100%) TRICOR (100%) GEODON (100%) PROVIGIL (100%) ADDERALL XR (100%) LUNESTA (75%) SEROQUEL XR (75%) NASONEX (50%) SUBOXONE (50%) AVAPRO (100%) ACTOPLUS MET (100%) AVALIDE (100%) AVANDIA (100%) TRILIPIX (75%) EXFORGE (100%) ENTOCORT EC (100%) LIDODERM (25%) MAXALT (100%) REVATIO (100%) ENABLEX (100%) ELOXATIN (100%) MAXALT MLT (100%) CLARINEX (100%) AVANDAMET (100%) ATACAND (100%) FOCALIN XR (34%) VIRAMUNE (100%) VIDAZA (50%) XELODA (25%) MEPRON (100%) ALLEGRA-D 24 HOUR (75%) SUPRANE (50%) LAMICTAL XR (100%) METROGEL (100%) PATADAY (40%) COMBIGAN (75%) ORACEA (25%) MYFORTIC (25%) HECTOROL (20%) AZILECT (25%) Respiratory ASTEPRO

CYMBALTA (100%) OXYCONTIN (75%) CONCERTA (100%) NIASPAN (100%) ACIPHEX (100%) ZOMETA (100%) LOVAZA (75%) ZEMPLAR (100%) VIAGRA (50%) XELODA (75%) RECLAST (100%) TEMODAR (100%) ARIXTRA (100%) ASACOL (50%) LIDODERM (25%) VALCYTE (100%) TRAVATAN Z (75%) RENVELA (75%) LIALDA (75%) TOBI (75%) DACOGEN (100%) RENAGEL (75%) TREANDA (50%) VIVELLE-DOT (75%) SUSTIVA (75%) ZOMIG (100%) FOCALIN XR (33%) VENOFER (100%) PRECEDEX (100%) XIBROM (100%) RANEXA (50%) SIMCOR (100%) FASLODEX (75%) NUVIGIL (50%) RAPAMUNE (50%) TACLONEX (75%) TRAVATAN (75%) AVINZA (50%) FOSRENOL (25%)

NEXIUM (100%) CELEBREX (100%) ACTONEL (100%) EVISTA (100%) RESTASIS (100%) DETROL LA (75%) LOESTRIN 24 FE (100%) VYVANSE (50%) AVELOX (100%) LUMIGAN (100%) MICARDIS (100%) LIDODERM (25%) NASONEX (25%) MICARDIS HCT (100%) LUNESTA (25%) KENALOG (100%) ARGATROBAN (100%) FOCALIN XR (33%) XIFAXAN (100%) DEXILANT (75%) ZEMPLAR (100%) ZIANA (25%) TESTIM (50%) SUPRANE (50%) RAPAMUNE (50%) NATAZIA (50%) BYSTOLIC (34%) TRAVATAN Z (25%) RENVELA (25%) HECTOROL (40%) TOBI (25%) INTEGRILIN (25%) RENAGEL (25%) VIVELLE-DOT (25%) TRAVATAN (25%) Respiratory ADVAIR Discus

ABILIFY (100%) NAMENDA (100%) GLEEVEC (100%) ANDROGEL 1% (100%) ZYVOX (100%) AVODART (100%) ALOXI (100%) Aggrenox (100%) ORTHO-TRI-CY LO 28 (100%) NORVIR (75%) WELCHOL (100%) LIDODERM (25%) ANGIOMAX (75%) INTEGRILIN (75%) TREANDA (50%) BARACLUDE (100%) INTUNIV (100%) ORTHO EVRA 3 (100%) PATANOL (50%) CARBATROL (100%) PRISTIQ (25%) EMEND TRIFOLD PACK (100%) KEPPRA XR (75%) NUVIGIL (50%) VIMPAT (75%) RETIN-A MICRO (75%) BYSTOLIC (33%) ZIANA (75%) PATADAY (33%) TACLONEX (25%) Respiratory

CRESTOR (100%) ZETIA (100%) VYTORIN (100%) ALIMTA (100%) BENICAR (100%) BENICAR HCT (100%) SENSIPAR (100%) CUBICIN (100%) EPZICOM (100%) KALETRA (75%) PREZISTA (75%) CIPRODEX (100%) COREG CR (75%) AZOR (100%) ORACEA (75%) TRIZIVIR (100%) RELPAX (75%) TYGACIL (100%) ISTODAX (75%) MULTAQ (75%) NATAZIA (50%) RETIN-A MICRO (25%) Respiratory SEREVENT DISKUS

13 ZYPREXA ZYDIS (100%)

104

942 268 163

4,734 1,960 868 853 847 263

U.S. Pharmaceuticals/Specialty

44 45 46 47

Source: IMS, SCB Analysis

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 4 Teva is furthest in diversifying away from the maturing business

70%

NA Generic Revenue / Total Company Revenue

60%

50%

40% 62% 49% 20% 26% 50%

30%

10%

0% TEVA
Source: IMS, Company Disclosures, SCB Analysis

MYL

HSP

WPI

U.S. Pharmaceuticals/Specialty

Exhibit 5 Transition in model will continue toward brands and RoW

2Q11 2015E

4500 4000 26% 3500 3000 EU 2500 44% 2000 1500 1000 500 0 ROW

20000 18000 16000 EU 14000 17%

2Q11 Revenue ($M)

2015 Revenue ($M)

12000 10000 8000 6000

47%

ROW 27% 9% 7% 3% 3% 14%

19% 6%

11% 3% 2%

4000 2000 0

MSFranchise

Respiratory

Women's Health

NA Generics

O-US Generics

Teva

Azilect

MSFranchise

Respiratory

Women's Health

NA Generics

Source: IMS, Company Disclosures, SCB Analysis

O-US Generics

Other Brands

Azilect

Teva

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 6 Revenue will accelerate post 15 as Copaxone headwinds dissipate and branded business matures
CAGR 25,000
(2012 - 2015)

CAGR
(2016 - 2020)

20,000 9%
Revenue ($M)

12% 4% -20% 8%

15,000

13% -21% 7%

Other Brands Total Womens Health Total Copaxone Total Respiratory

10,000

5%

7%

OUS Generics Total NA Generics

5,000 -9% 0
2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E

-5%
2020E
PE 2013 7.3 13.5 10.0 9.0 8.3 10.0 7.4 8.8 7.5 8.5 7.4 6.9 6.8 6.9

Source: IMS, Company Disclosures, SCB Analysis

U.S. Pharmaceuticals/Specialty

Exhibit 7 Valuation I: On a comparable basis, Teva significantly cheaper than Big Pharma
Company 2011 2012 AZN 7.13 6.08 BMY 2.25 2.04 GSK 3.72 4.03 LLY 4.32 3.69 MRK 3.73 3.85 NVS 5.57 5.80 PFE 2.25 2.28 ROG 12.69 14.11 SNY 4.84 4.67 Average (Excluding BMY) Average -1 Standard Deviation (34.1%) Teva w/o Laq 4.92 6.09 Teva 4.95 6.08 Teva Cons 5.05 5.63 EPS 2013 6.03 2.01 4.21 3.98 3.81 5.75 2.36 15.07 4.72 2014 6.17 2.26 4.53 2.91 4.17 6.34 2.49 15.68 5.14 2015 6.16 2.20 4.89 3.35 4.49 6.83 2.64 16.42 5.33 CAGR 0% 3% 7% -3% 5% 6% 5% 5% 5% 4% 2% 4% 3% 2011 6.2 12.1 11.4 8.3 8.5 10.3 7.7 10.5 7.3 8.8 7.0 8.4 8.3 8.2 2012 7.3 13.3 10.5 9.7 8.2 9.9 7.6 9.4 7.6 8.8 7.5 6.8 6.8 7.3 2014 7.2 12.0 9.3 12.3 7.6 9.1 7.0 8.5 6.9 8.5 6.6 6.8 6.5 6.9 2015 7.2 12.3 8.6 10.7 7.0 8.4 6.6 8.1 6.6 7.9 6.5 6.4 6.1 6.7 Dividend Yield 3.9% 4.9% 4.9% 5.5% 4.8% 3.5% 4.6% 5.0% 3.7% 4.5% 2.3% 2.3% 2.3%

6.02 6.04 5.94

6.06 6.30 5.99

6.45 6.81 6.14

Source: Thomson, Company disclosures, SCB Analysis

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 8 Valuation II: Teva below 3-yr industry PEG

Generics Specialty Big Pharma Biotech 22x 20x 18x 16x 14x BMY 12x 10x 8x AZN 6x WCRX 4x 2x EPS CAGR ('12-15) -15% -10% -5% 0x 0% 5% 10% 15% 20% 25% 30% 35% NVS PRX MRK PFE MYL EDNP TEVA IPXL BIIB MRX WPI HSP AMGN GILD VRX CELG PRGO AGN P/E ('12)

LLY

Source: Thomson, SCB Analysis

U.S. Pharmaceuticals/Specialty

Exhibit 9 Valuation III: Not just EPS, strong FCF generation

FCF per Year Strong FCF Yield (Market Price $41.26)

6,000

16.0% 14.0% 12.0%

5,000

Free Cash Flow ($M)

4,000
FCF Yield

10.0% 8.0% 13.5% 6.0% 4.0% 11.0% 14.1% 13.7% 13.9%

3,000 4,932 2,000 4,060 5,095 4,910 4,924

1,000

2.0% 0.0%

2011E 2012E 2013E 2014E 2015E

2011E

2012E

2013E

2014E

2015E

Source: IMS, Company Disclosures, SCB Analysis

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 10 Teva excluding Copaxone (or Laquinimod) would Grow EPS at 13% CAGR
Copaxone Global revenues COGS R&D SG&A (incl.SNY royalty, 5% G&A) Pre-tax profit contribution Tax (at 8%) Net income EPS contribution 2011 3,308 430 100 765 2,012 161 1,851 $2.08 2012 3,666 477 100 783 2,306 184 2,122 $2.41 2013 3,097 403 100 728 1,867 149 1,717 $1.98 2014 2,393 -23% 311 100 632 1,350 108 1,242 $1.45 2015 1,766 -26% 194 50 545 976 78 898 $1.06
CAGR (2012 - 2015) $6.45 2% $5.39 13%

Teva EPS w/ Copaxone Teva EPS w/o Copaxone

$4.92 $2.85

$6.10 $3.69

$6.02 $4.04

$6.06 $4.62

x12 = $44

Source: IMS, Company Disclosures, SCB Analysis

Exhibit 11 Driven by revenue shifts to brands

Drug Total NA Generics OUS Generics Total Generics ProAir QVAR QNAZE Respiratory xUS Total Respiratory Provigil Nuvigil Actiq Fentora Amrix Treanda Tamper-resistant HYCD Other product sales Total CEPH Neupogen biosimilar Neulasta follow on Testosterone gel Debrase DiaPep277 Cancer products Total Teva Other Brands Azilect Seasonique Lo Seasonique Plan B (incl. One Step) Cenestin / Enjuvia / Bijuva Paraguard Theramex EU Women Health Other Women's Health Pipeline (DR-103, NOMAC-E2, TVR) Total Womens Health All Brands Total Total w/Copaxone Annual 2010 6589 5165 11754 359 195 319 875 Annual 2011E 4429 7477 11906 325 264 419 1010 268 68 35 57 11 141 0 163 743 Annual 2012E 4539 8157 12696 310 301 8 450 1071 230 294 133 78 22 610 0 647 2013 Annual 2013E 4000 8545 12545 302 333 70 473 1178 45 247 120 79 20 666 100 642 1919 Annual 2014E 3665 8962 12627 293 363 116 508 1282 33 233 106 80 0 699 200 655 2007 41 120 80 75 75 391 551 7 24 51 21 109 100 51 128 492 4743 17369 19857 Annual 2015E 3390 9411 12801 286 396 100 546 1329 21 240 105 81 0 731 300 672 2149 100 250 80 75 75 25 605 571 6 19 53 21 111 110 49 202 571 5247 18048 19884 CAGR '12 - '15 -9% 5% 0%

U.S. Pharmaceuticals/Specialty

Generics

Respiratory
7% -55% -6% -8% 1% -100% 6% 1% 2%

CEPH

3 8

46 64

74 75 64 213 507 9 30 49 21 107 91 54 64 425 4263 16808 20028

20% 6%

Other Brands

0 317 111 16 55 57 86 0 44 0 369 1561 13316 16117

11 400 93 31 60 47 90 42 60 0 424 2592 14498 17826

110 470 22 38 63 27 105 70 57 13 396 4080 16776 20516

77% 7% -37% -20% -5% -9% 2% 16% -5% 13% 9% 2% -1%

Womens Health

Source: IMS, Company Disclosures, SCB Analysis

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 12 And addition of Cephalon plus synergies

TEVA w/o Copaxone, EPS by Source

5.50 4.63 4.25 4.00 3.85
0.22 0.41 0.32 0.32 0.62

5.12
0.50 0.43

EPS CAGR
Total: 11% TEVA: 5% CEPH: 18%

3.80
0.27 0.13

0.24 0.31

Minority interest Synergies

2.50
3.76 3.69 3.82 4.01 4.31

CEPH Teva

1.00

-0.07

-0.08

-0.50

2011E

2012E

2013E

2014E

2015E

Source: IMS, Company Disclosures, SCB Analysis

U.S. Pharmaceuticals/Specialty

Exhibit 13 Tevas near term catalysts

Teva potential catalyst table: next 6 months Catalyst Resolution of manufacturing issues Winning inequitable conduct on Copaxone Winning Copaxone patent case Cephalon clinical pipeline data CONFIRM shows Copaxone non-inferior to BG-12 Clarity on how FY:11 numbers will be met Earnings guidance for Teva includes $6 in 2012 Timing 3Q11-2Q12 3Q11 Odds 75% 90% Magnitude Description Important, but Management expects gradual return to capacity (incremental ~$100M in gradual (+5-6%) Irvine; ~$50? from Jerusalem) Moderate (+2-3%) Significant (+4-5%) Modest individually (2-3% each) Moderate (+2-3%) Significant (+4-5%) Significant (+4-5%) Trial started well for Teva; odds of prevailing look good Trial starts Sept 7, 2011; decision by 2Q11 but legal advisors may 'call' the case earlier Includes: Ph2b results from Lupuzor (odds 33%); aTNFa (odds 25%); first Ph3 of Nuvigil in bipolar depression in 4Q11 (50%); TR-HYCD Ph3 results (80%) Expectations are low for Teva in CONFIRM, with many expecting statistical significance of BG-12 vs. Copaxone Realistically, shold see appearance of products or comments from management Current range $5.30-$5.86; Teva will not (should not) provide guidance earlier

2Q12

80%

Q3:11-4Q:11

By drug

3Q11

66%

4Q11 Nov. 11 (guidance)

50% 75%

Source: IMS, Company Disclosures, SCB Analysis

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 14 Teva has a deep branded pipeline

Product Obatoclax Cancer Custirsen (OGX-011) CT-011 Women's Health DR-103 NOMAC / E2 Transvaginal Ring Cinquil QNAZE Advair Spiromax Respiratory Advair HFA MDI Symbicort Spiromax Flovent Spiromax Flovent HFA MDI Debrase (Nexobrid) Other Tamper-resistant HYCD DiaPep-277 Revascor High Risk High Reward StemEx Lupuzor Anti-TNF ab Larazotide AT-1001 MultiGene Angio Indication SCLC CRPC NSCLC DLBCL Oral Contraceptive Oral Contraceptive Infertility / OAB Asthma Allergic Rhinitis Asthma / COPD Asthma / COPD Asthma / COPD Asthma Asthma Removal of BurnInjured Tissue Pain Type I Diabetes Heart Failure Leukemia and Lymphoma Lupus Sciatica Celiac disease PAD/CLI Next Milestone Ph III CRPC 1st Ph III CRPC 2nd Ph III Ph II (colorectal) Ph III US Approval Ph III Ph III US Approval Ph III Ph III EU Submission Ph III EU Submission EU Approval Ph III Ph III Ph III Ph III POC POC POC Ph I/IIa Timing of milestone 4Q14 2Q13 1Q14 2H11 4Q11 2H13 2H11 2H12 2012 2012 2012 2H11 2012 2H11 2H11 4Q11 4Q11 2014 2H11 Mid-12 2Q12 2013 2H11 800 Potential Peak Sales ($M) 1,000 750 500 150 100 200 500 200 Approval Window Opens 2015 YE2014 2015 2012 2013 US 2012 YE2014 2012 US 2013 EU 2015 US 2013 EU 2013 EU 2015 US 2013 EU 2012 EU, US 2014 2013 2014 2015 2013 2015 2016 2016 2016 Probability of Success Medium Medium Medium-Low High High Medium-High Medium-High High High High High High High High High Medium-Low Low Low Low Low Low Low Total Profit (EPS) 720 Probability Adjusted Peak Sales ($M) 500 375 150 135 90 140 350 180

250 300 400 1,500 270 1,500 750 600 1,000

225 270 120 150 27 150 75 60 100 3,817 2.14

Assuming 50% Profit Margin, 890 Shares

Source: IMS, Company Disclosures, SCB Analysis

U.S. Pharmaceuticals/Specialty

Exhibit 15 Risks

Lose Copaxone either through inequitable conduct or invalidity / non-infringement trials CONFIRM Data shows BG-12 significantly more effective than Copaxone Further delay in base business remediation Management credibility issues continue
Source: SCB Analysis

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 16 Copaxone: Inequitable Conduct trial Likely to Favor Teva

Correlation of RBL assay toxicity with molecular weight of batches Combined Copaxone safety and efficacy analysis

RBL Release (%)

Best Trade-off

Efficacy (EAE Model) Safety (RBL Model)

MW

MW

Teva project managers present credible argument why they believed and still do, that low molecular weight Copaxone is better choice than high MW
Source: Company Disclosures, SCB Analysis

U.S. Pharmaceuticals/Specialty

Exhibit 17 CONFIRM results: Expectations for strong BG-12, but its Never In the Stock
How will BG-12 compare to Copaxone in CONFIRM?

Relapse rate reduction 3% 6% 0% 3% 8%

EDSS risk reduction

Statistically inferior Numerically inferior Essentially the same Numerically superior Statistically superior

17% 42% 42% 47% 33%

Source: SCB Analysis

10

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 18 Business model remediation delays could hamper recovery

Irvine: Injectables
Millions

$80 $70 $60

Injectables Revenue ($M)

Tevas comments during 2Q11 conference call on Return of Manufacturing:

...With respect to injectables, we pretty well guided on this before that Irvine would be up to about $100 million run rate by the end of the year and we f eel good about that..

$50 $40 $30 $20 $10 $0

Nov-09

Feb-10

Jun-10

Jul-10

Aug-10

Sep-10

Nov-10

Feb-11

May-10

Jerusalem: Oral Solids

55

May-11

Oct-09

Dec-09

Mar-10

Oct-10

Dec-10

Mar-11

Apr-10

Apr-11

Jun-11

Jan-10

Jan-11

50

Oral Solids TRX (M)

45

...And you couple that with the Jerusalem, which was an issue; Irvine, which was an issue that we spoke to, and those are all improving. Jerusalem we're over, we feel great about it, approvals are coming again. Irvine, it's coming back slowly

40

35

30

Jul-08

Nov-08

Jul-09

Nov-09

Jul-10

Mar-09

May-09

Mar-10

May-10

Nov-10

Sep-08

Sep-09

Sep-10

Jan-09

Jan-10

Jan-11

Mar-11

U.S. Pharmaceuticals/Specialty

Source: IMS, Company Disclosures, SCB Analysis

Exhibit 19 We rely, in part, on management description of their business, but management credibility is low after multiple errors in judgment

Both Irvine and Jerusalem problems originally described as immaterial; ended up as significant problems Lovenox delayed for over a year now, despite Teva expectations for near simultaneous approval with Momenta Launch of Protonix ended-up being a mistake; yet to find out how costly Laquinimod celebrated way too early
Source: SCB Analysis

May-11

11

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 20 Thoughts about the stock action

After persistent decline, investors reticent to call bottom; the shareholder base is turning over. The name will likely move slowly
CONFIRM shock value may take name lower; others will wait for the result 2H11 catalyst will be needed to build confidence, then, we think we can have sustainable rally

A critical point is clarification how the company will generate strong 4Q11
Expectations far below management guidance Management expect broad growth off 2Q position; undisclosed launch not a big part of the story

Eventually, generics are good counter-cyclical play, although it may take a bit to play out
US generic prices are low, impact on pricing in Europe will be limited Note material volume growth in 2012
Source: SCB Analysis

U.S. Pharmaceuticals/Specialty

12

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Exhibit 21 With Cephalon, Teva will earn ~$6 in 2012, growing EPS at 2.3% to 2015
Annual 2010 5,165 Annual 2011E 17,081 748 17,829 6,956 10,873 1,064 2,561 1,143 5,645 5,229 (37) (7) (68) 5,117 661 4,455 (61) 4,394 $ 890 891 $ $ 4.94 4.93 $ $ $ 5,195 242 (209) 5,229 604 29 632 4,596 Annual 2012E 18,482 2,034 20,516 7,461 13,054 1,618 3,023 1,156 6,491 150 6,564 (35) (18) (252) 6,259 924 5,334 (70) 5,264 $ 884 884 5.96 5.96 0.19 6,360 501 (569) 6,292 1,002 110 1,112 5,180 (1,000) (2,000) (868) (202) 1,110 3,061 9,700 (6,639) $ $ $ Annual 2013E 18,087 1,931 20,018 7,546 12,472 1,412 2,962 1,047 6,148 375 6,324 12 (18) (192) 6,126 824 5,302 (105) 5,197 $ 877 877 5.93 5.93 0.55 5,949 447 210 6,605 1,073 103 1,176 5,429 (1,000) (2,000) (912) (205) 1,312 4,373 7,700 (3,327) $ $ $ Annual 2014E 17,820 2,008 19,829 7,756 12,072 1,448 3,092 1,019 5,921 450 6,151 82 (18) (112) 6,103 809 5,294 (105) 5,189 $ 866 866 6.00 6.00 0.74 5,721 449 359 6,529 1,181 97 1,278 5,250 (1,000) (1,800) (957) (208) 1,285 5,657 5,900 (243) $ $ $ Annual 2015E 17,694 2,141 19,836 7,912 11,924 1,389 3,121 1,013 5,589 450 6,335 150 (18) (36) 6,431 871 5,560 (105) 5,455 856 856 6.37 6.37 0.94 5,759 531 432 6,722 1,404 91 1,495 5,227 (1,000) (1,005) (212) 3,010 8,667 5,900 2,767 12-15 CAGR -1% 2% -1% -3% -5% 1% -4.3%

Total TEVA standalone revenue CEPH standalone revenue Combined entity Total COGS Combined gross profit R&D Combined entity S&M Combined entity G&A Combined entity Total Op expenses Total pre-tax synergies Operating Income (Loss) Teva standalone interest exp + other inc. CEPH standalone interest exp + other inc. Interest at 4% annually Pre-tax income Total taxes Income before minority interest Minority investment Net income Share Count - Basic Share Count - Diluted EPS (Basic) EPS (Diluted) Accretion vs. TEVA standalone TEVA CF operations CEPH CF operations Additional CF from merger Total CFO Teva CapEx CEPH CapEx Total CapEx $ $

1Q11 4,080

2Q11 4,212

3Q11 4,068

4Q11 4,721 748 5,469 1,920 3,549 348 784 364 1,716 -

4,933 (144)

1,114 (38)

1,091 20

1,190 (27)

1,833 8 (7) (68) 1,766 276

-1.2%

4.0% 0.9% -1.9%

4,789

1,076

1,111

1,164

4,176 (32) 4,144 $ 896 921 4.62 4.55 $ $

955 (19) 936 $ 902 902 1.04 1.04 $ $

998 (14) 984 $ 892 896 1.10 1.10 $ $

1,013 (14) 999 $ 883 883 1.13 1.13 $ $ $

1,490 (14) 1,476 $ 884 884 1.67 1.67 0.16 899 242 (209) 932 788 29 817 116 (100) (1,000) (167) (50) (1,202)

1.2%

2.3%

3,055

900

1,324

1,886

234

226

(644)

U.S. Pharmaceuticals/Specialty

FCF Uses of FCF Share buyback Debt paydown Dividend Options expense Net change in cash Total cash Total debt Net cash 748 6,218 (5,470) 1,157 6,218 (5,061) 3,153 12,700 (9,547)

1,951 11,700 (9,749)

Source: IMS, Company Disclosures, SCB Analysis

13

August 5, 2011 Aaron (Ronny) Gal, Ph.D. (Senior Analyst)

ronny.gal@bernstein.com +1-212-756-4208

Disclosure Appendix
Valuation Methodology

We value generic companies on next year EPS multiples. Companies with diverse revenue sources and better strategic position are given a higher multiple. Based on our Teva 2012 EPS of $5.82, we arrive at a target price of $55 (~9.5x).
Risks

The downside risks to Teva achieving our price target are: Deterioration of Copaxone revenue due to rapid entry and adoption of oral MS agents (Gilenya, BG12) or rapid success of a Paragraph IV challenge on Copaxone. Inability to monetize its Paragraph IV portfolio or adverse rulings and substantial fines on at-risk launches. Intensifying global competition in commodity generics beyond our current estimates. Failure of late stage branded/specialty/biosimilars programs

U.S. Pharmaceuticals/Specialty

14

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12-Month Rating History as of 08/04/2011

Ticker Rating Changes TEVA O (RC) 05/09/11 M (RC) 07/26/10

Rating Guide: O - Outperform, M - Market-Perform, U - Underperform, N - Not Rated Rating Actions: IC - Initiated Coverage, DC - Dropped Coverage, RC - Rating Change

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CERTIFICATIONS
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Approved By: CDK

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