The teddy bear is a secondary weapon that is almost completely unbreakable and does next to no damage. However, every time you successfully hit an enemy with the bear equipped, you restore life.

To get it, go to the West and recover the Scorpion Sword from the clock tower. Go to the spot where you encounter the second golem (atop the clock tower). Find a time portal to return to the present, and go through the water at the end of the room. Break through the wall in front of you to get the teddy bear.