Q3 2022 Teva Pharmaceutical Industries Ltd Earnings Call
Okay.
Good day, and thank you for standing by welcome to the <unk> third quarter 2020.
<unk> financial results conference call.
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I would now like to handle.
So I'll speak of today run math senior Vice President head of Investor Relations.
Thank you.
Thank you everyone for joining us today to discuss our third quarter 2022 financial results.
We hope you had.
An opportunity to review our earnings press release, which was issued earlier this morning.
A copy of this press release as well as a copy of it.
The slides being presented on this call can be found on our website.
Dot com.
All forward looking statements on slide number two.
Additional information regarding these statements and our non-GAAP financial measures is available on our earnings release.
Our SEC forms 10-K and 10-Q.
To begin today's call.
Providing an overview of the first quarter performance.
Vance and priorities going forward.
Our CFO will follow up.
Financial results in more detail.
<unk>.
Two financial outlook.
Core and early on the call today.
So it was the head of North America business, who will be available during the question and answer session that will follow the presentation.
Yeah.
Please note that today's call, we'd wind up what exactly one hour.
That I will now turn the call over to core core if you would please thank you Ron and welcome to all of you.
Let's take a look at the highlights for the third quarter.
He came in with revenue of $3 $6 billion.
EBITA came in at $1 1 billion in U S dollars. The GAAP diluted earnings per share were five cents and non-GAAP diluted earnings per share were at 59 sites.
We did see significant headwinds on the revenues in Q3.
On itself, we had a net impact of $215 million and year to date, we've seen an impact of 510 million that's of course compared to 2021.
Just to give you an idea about how you can think about it we have an estimated.
Guidance on the revenue.
Symbol 15 billion half of that is U S. Dollar sales in the U S more or less and half of it is.
Non U S dollar sales.
The dollar has been strengthening against nearly every currency. So if you imagine we have half the revenues seven and a half billion and there's a strengthening let's say, 1% then that means that our revenues go down by 75 million U S. Dollars. So each percent increase of the U S. Dollar is a 75.
<unk> million reduction on our revenue and of course, then when you get your operating profit.
There are some offsetting elements. So it's roughly 20 million reduction in U S. Dollar operating profit for each person that the dollar strength is just so you get an idea about the free cash flow came in nicely at $685 million and we continue to reduce our debt in accordance with our strategic game and win.
Now down to 19 billion first time in many years that we are below 20, which is really nice to see.
Now the revenues are still affected by the strengthening of the dollar and the dollar remained strong here in the beginning of the fourth quarter. So we've adjusted our guidance on revenues, but we have been able through a lot of measures to keep our guidance on the adjusted EBITDA adjusted EPS and free cash flow. So we are reaffirming.
Guidance in early we'll talk more about that later.
Both a stable and a jewelry are doing very fine, we'll take a look at that in a couple of minutes.
And in Europe , we've seen a good development of the business. So net of the exchange effect I just talked about we've seen 5% growth in our generics and OTC revenue what you see revenue in Europe , and that's of course, reflecting our strong position there and also some good new product launches.
We have also seen substantial progress on the nationwide opioid settlement and in just a few minutes I'll give you some more details on that and.
And then on the U S generic drug antitrust litigation, we have made some more settlements you know these are all the lower.
So roughly around a billion or 1%.
Sorry, 1 million U S dollars or 1% of the U S population and lately, we have settled in Georgia, and Arkansas, and we expect to see more of that in the coming months. So let's move on to the opioid litigation updates.
So as you remember we have reached an agreement in principle, some months ago, and we've accrued for that in our half year earnings. So that's really unchanged, we still have that accrual and we've been having a lot of progress on that so in the coming periods, we expect to initiate the actual price.
As of having the opt ins and opt outs and so on on the both the state level and on the subdivision level.
We have also.
Completed the details of our agreement with Allergan and that was already part of the overall accrual that we did at the half year, but that's now sort of been being done in details crossing the Ts and dotting. The I's. We've also as you might've seen concluded a settlement with New York, which is the litigation in New York.
And it started in the way that New York basically signs in onto the National agreement, which has a certain value and then they also get what you called a trial pump because they have a verdict against us they get some some extra money and what's important for US is of course that the nation National agreement is what we already had.
Crude for we had also accrued for the premium for New York most of it and we now have an arrangement where the extra money. They get vacated over 18 years, which is good for us because it means that it's very manageable in relations to our cash flow and our debt situation. So we are quite satisfied with that outcome and then as I said.
We are looking into that in the coming period at some point in time, we will have to go through the normal process of the states opting in and then the subdivisions of chicken. So the nationwide agreement and we're quite optimistic that we will get a very very high number of states and subdivisions joining and then that way we will put the.
D of opioid litigation behind US she was a benefit hopefully of the U S people and also good for us as a company. So that we can focus on the future.
Now talking about the future, let's look at the current situation on revenue and how it's been developing and I'd like to just point to the latest.
Chart here all the latest Oh here you can see that it's roughly $3 6 billion as we just talked about.
If you add the 215 that we lost on exchange rates you see it sort of gets to the 3.8, a range, which is very similar to where it's been sort of up and down over the last many quarters. So the main change here is really that we've seen this appreciation of the U S. Dollar other than that we have very stay.
Business in all the different areas of our business.
But let me just comment on our two key products.
Oh steel first so you will see here that our stereo grew 30% versus last year to $260 million and we see a very strong development continue on a stable with nice increase in both revenues and prescriptions.
So in patients and number of doctors writing the product. So all in all it's looking very positive and we are on track to reach around $1 billion in sales in 2022. So so that's very positive and of course, very nice to see more and more people being treated for tardive dyskinesia with this nice drug.
If we move to Adobe then we also here have a very nice positive development you can see the.
ER scripts in the U S. The <unk> keep on growing you can see how the market share in Europe is nearly 33% in U S. It's around 25 and as you know, we recently launched with a partner in Japan, and they are already up to 28%. So as I've said before we have a target here that we wanted.
Get it leased to a third of the market of 33% and I think it's fair to tell you that ive already told Europe . There that's getting too easy now so they have a new target of 50%, which is exciting of course for them and me now if we go on to cost management then of course, there's a lot of discussions about the inflationary.
And so on these days and of course, we also have some inflationary pressures on things like energy and other elements of our manufacturing cost base. We are trying to compensate by being more efficient and as you know we've had a strong efficiency drive for the last five years, we're continuing that and that is to some extent.
You would see shaking the worst out of the inflationary pressure and here you can see that we have year to date at 27.3 in operating margin and we are very committed to and feel very secure about reaching the 28% next year, which is our 'twenty 'twenty three end of year targets.
The net debt continues to decline.
Just a little fun fact here or there.
Last five years, we have paid $20 billion of cash to the bondholders.
15 billion that is the reduction in the debt.
And the five building is of course, roughly a billion in interest rate every year. So 70 billion out of the accounts are from us to them and we will continue to do that until we get the debt down and we get the interest rate payments down in parallel of course.
So on the pipeline if we take a look at that then I think I'll only comment on one key event and they just said we've just re filed risperidone.
Schizophrenia, and we are very optimistic about it we did a complete quality check of all clinical data. It looked good and we re filed it with the FDA and hope to be able to launch this product sometime during the first half of next year.
Yeah.
If we look at in all elements of our business. Our ESG ratings. Then of course, you all know that a lot of elements go into this environmental social and governance ratings and all the ratings a little different.
And we've been able to improve all of these which we're very happy about it goes well hand in hand with the sustainability linked bonds, where we did the $5 billion refinancing a year ago. So we are happy to see this continued improvement some of the scales are where you want to have a high vol. A number unless you want to have a low number but I can tell you that.
All of these five important ESG ratings have been improved during the last 12 months.
To reiterate our long term financial targets that we communicated a quarter ago.
We have four targets one is the operating income margin, we want to keep on driving it up and get to 30% in 2027.
We need of course to keep on driving that down you just saw that so also on a steady track there we need to get to around two times net debt to EBITDA in 2027, and we will do that the cash earnings of course have to see around 80% in order to be able to get the debt down and then we are committed to revenue growth and that basically.
It means that we will do it in a combination of organic revenue growth.
<unk> selected project or products in licensing to secure that we see our revenues growing forward. We are committed to utilizing the cash flow to pay down debt and we do not plan to raise equity so with that I'll hand over to illegally.
Thank you Cor and good morning, and good afternoon to everyone.
I'll begin my review of the third quarter of 2022 financial result on slide 15.
Starting with our GAAP performance.
Revenues in the third quarter of 2022 were $3 6 billion, representing a decrease of 8% or 2% in local currency terms.
Impaired to the third quarter of 2021.
The decrease in revenues was mainly driven by foreign exchange headwinds into both of our European and international markets businesses.
In North America, a strong uplift of a stereo partially compensated a decrease in revenues in our generic business.
Zone, and Deca entry Honda.
In Q3, 2022, we recorded a GAAP operating income of $419 million compared to $623 million in Q3 2021.
Net income of $56 million compared to $292 million in Q3, 2021, and GAAP earnings per share of <unk> <unk> compared to 26% in the same period a year ago.
The year over year decline of a GAAP operating income net income and earnings per share was mainly driven by higher legal settlements and loss contingencies as well as lower gross profit and was partially offset by lower operating expenses.
In recent months the global economy has been impacted by fluctuating foreign exchange rate approximately 47% of our revenues are denominated in currencies other than U S dollars.
The threat of the U S dollar versus other currencies in which we operated negatively impacted our revenues results of operation profit and cash flows.
As Scott discussed earlier.
The continued strengthening of the U S dollar versus other currencies during the third quarter of 2022, net hedging effects negatively impacted revenues and operating income by $250 million and $53 million respectively.
Compared to the third quarter of 2021.
On a year to date basis, we saw the same trends regarding U S dollar appreciation, which net of hedging effect negatively impacted revenues by $510 million compared to the first nine months of 2021 and that was a result of the impact of a stronger U S dollar, especially versus the euro.
I will further discuss the macroeconomic environment as part of our non-GAAP financial outlook review.
Turning to slide 16.
You can see that net non-GAAP adjustment in the third quarter of 2022 were $602 million versus $360 million in Q3 2021.
We recorded a legal settlement and loss contingencies of $195 million.
This was mainly related to an update of the estimated settlement provision recorded in connection with the remaining opioid cases as well as an estimated provision recorded for the claims brought by attorney General's representing states and territories throughout the U S. In the generic drug antitrust litigation.
Additional notable non-GAAP adjustments include amortization of purchased intangible assets totaling 165 million. The majority of which is included in cost of goods sold.
Moving to slide 17.
For a review of our non-GAAP performance.
I've already discussed our third quarter revenues, which totaled approximately $3 6 billion now lets move down the P&L and look at the margin.
Our non-GAAP gross profit margin was 53% compared to 53, 6% in Q3 2021.
The decrease in non-GAAP gross profit margin was mainly driven by macroeconomic headwinds affecting our operating cost as well as lower revenue from copaxone, partially offset by higher revenue from a stereo and a favorable mix of generics products in our Europe segment.
Our non-GAAP operating margin improved to 27, 2% versus 26, 8% in Q3 2021.
This increase was driving mainly by lower spend base, which I will discuss in the next slide.
We ended the quarter with a non-GAAP earnings per share of.
<unk> 59 said 50.
59% flat compared to Q3 2021.
Now, let's take a look at our spend based on slide 18.
As you can see our quarterly spend base declined by $227 million or by $70 million net of FX impact.
Looking at our total spend base on a year to date basis, it declined by $594 million or $212 million net of ethics.
We continue with our ongoing efforts to transform our global operational network and ongoing activities.
<unk> of operating expenses.
We continue to face the strengthening of the U S dollar versus other currencies as well as spend increases due to inflationary pressures as we keep focusing our efforts on reducing and optimizing our cost of goods sold we expect the overall annual spend base to decrease to $11 billion in 2022.
As I've mentioned in previous quarters.
Ongoing efforts are expected to continue to help us partially mitigated the global macroeconomic headwinds, including inflation and higher cost of labor and eventually lead to a stabilizing operating margin at the level of 28% in 2023 with the ultimate goal of 30% operating margin.
By end of 2027.
Turning to free cash flow on slide 19.
Our free cash flow in the third quarter of 2022 was $685 million as I've mentioned in the past that was free cash flow tends to face headwinds at the start of the year in.
In addition, we faced challenges due to the timing of certain items related to our working capital.
As a result of operational ramp ups in relation to our annual production plan.
The decrease in our free cash flow in the third quarter of 2022 compared to the third quarter of 2021 resulted mainly from changes in working capital items, primarily a lower reduction in our inventories level compared to the third quarter of 2021.
Today, we are reaffirming our 2022 free cash flow guidance, which we initially provided in February our 2022 free cash flow is expected to be in the range of $1 9 billion to $2 2 billion.
We expect the free cash flow generation will pick up during the fourth quarter as we continue to drive working capital improvement.
We remain on track to achieve our objective of 80% or greater free cash flow conversion by the end of 2023 as part of our ongoing and.
Our long term financial targets.
Turning to slide 20.
Our net debt at the end of Q3, 2022 was 19 billion compared to $20 9 billion at the end of 2021 the.
The decrease in our gross debt is related to the bond maturities paid in Q3 2022 as well as the positive effect of exchange rate fluctuation.
Our net debt to EBITDA ratio decrease coming at four times for Q3 2022.
We expect it to further decline as we continue to make progress towards our long term target.
Debt reduction continues to be our primary focus and main use of cash upcoming.
<unk>, including approximately <unk> 7 billion in the reminder of 2022.
So now turning to our non-GAAP financial outlook for 2022 on slide 21.
I described earlier.
How the strengthening of the U S dollar versus other currencies in which we operated negatively impact our revenue earnings and cash flow. Additionally, high levels of inflation have recently resulted in significant economic volatility and monetary tightening by central banks.
We have implemented certain measures in response to such macroeconomic pressures and are continually considering.
Various initiatives to allow us to mitigate and offset the impact of these macroeconomic factors.
The higher costs, we have experienced during the recent period have already impacted our operations and will likely continue to have an effect on our financial results.
At current rates, we still expect that fluctuation related to the strengthening of the U S dollar versus other currencies to have an unfavorable impact on revenues and therefore consistent with what we had communicated in July at this time it is prudent to adjust our guidance range.
For full revenue from the previous range of $15 billion to $15 6 billion to the new range of $14 8 billion to $15 4 billion.
This lowers the midpoint of our range by $200 million.
We are reaffirming our full year 2022 guidance range for operating income EBITDA earnings per share and free cash flow.
Though we were able to absorb some of the inflationary pressures this year and partially mitigate at certain spend categories. We may still faced volatile environment and as such we are keeping the broader outlook range for these items.
This concludes my review of <unk> results for the third quarter of 2022.
And now we'll open the line for Q&A.
Operator, if you would please.
Thank you.
A reminder to ask a question you will need to press star one on one on your telephone.
Thanks for your name to be announced to ensure everyone has the opportunity to ask a question today. Please limit yourself to just two questions.
We will now take the first question.
It comes from the line of Elliot Wilbur from Raymond James. Please go ahead. Your line is open.
Thanks, Good morning, just.
First question.
Free cash flow and maybe just thinking a little bit about longer term dynamics there.
And.
Just trying to incorporate the.
Pending opioid litigation settlements and sort of think about what could potentially be a new floor on that number we've kind of guess sort of put out have been thinking about a floor in terms of free cash flow of around 2 billion, and obviously expecting somewhere north of $350 million to be paid out annually in connection with the with the settlement but.
Thinking about sort of what could be the new floor over the next couple of years I mean is it reasonable to.
Subtract that from sort of the lower end of the base line number that we've been talking about for the last couple of years 192.2, or do you still think that it's reasonable to assume that that $2 billion floor is is defensible going forward even with the.
The litigation settlements and then if I could just ask you to provide some more granularity or color into performance trends within the North American segment.
Specifically thinking about <unk>.
Biosimilar trend and then obviously, what's happening with respect to U S. Generics because certainly the number was quite.
Quite a bit below expectations, so just trying to get a little bit more insight into the.
And two the dynamics there thanks.
Thanks Elliot so.
Give you a quick answer on the free cash flow and then spent will give you some more details on North America, and the Biosimilars and generics. So the free cash flow that we're expecting in the coming years is at that level that you're talking about so the level of $2 billion and that is taking into account. What you also mentioned quite correctly some.
Place close to 350 cash outlay.
Yeah, and we don't see any dramatic changes to that the whole nationwide agreement is based as you know on a 13 year payment schedule with equal installments and actually.
New York settlement that we just did is partly the nationwide and partly an even longer payment schedule of the trial pump you can call, which has over 18 years. So that's not putting additional pressure on our cash flow, but I can also just ask <unk>. If you are a quick comment and then we'll move on to Sweden.
Thanks score, yes, Elliot thanks for the question and I think that you know.
Part of our.
<unk> to reach the 80%.
Cash conversion is also our management of working capital. So you can say.
That that level that core mentioned around two 2 billion is kind of a combination of all.
Our efforts to generate more cash on working capital improvements as well as from the business. So I would say that we are safely. There. Thanks, and then spin if you could comment on North American sales, Yes, Hi Elliot.
So for North America sales the sales came in below our run rate our target run rate of $1 billion U S. Dollar.
I think we said in the last quarter that we had a strong first half with the launch of generic revlimid researching and south sales above this run rate in the second half of 2022, we do not have any significant additional launches for that reason the generic sales run rate is below this $1 billion U S dollars.
This will only improve in 2023 when we.
Anticipate more launches into the U S generics business other than this.
Our biosimilar sales were quite stable in Q3, we have a stable volume market share in the U S business that has stabilized over the last month and on the generic price erosion level. I think also here, we see some improved rates as compared to what we've seen a year ago.
It is an incremental stabilization across various product categories, we always analyze it by a different product categories and we expect this to continue in 2023. So we have from the price erosion charges I think a stable outlook.
And on the sales side as I said, it will improve with more product launches coming into our <unk>.
<unk> business.
Thank you spent.
The next question.
Q.
We will now take the next question.
It comes from the line of Glen Santangelo from Jefferies. Please go ahead. Your line is open.
Yes, thanks, and good morning, and thanks for taking the question Hey, I just wanted to talk and go back to some of your long term targets I think what investors are really focused on here is trying to understand.
Transition all of the growth algorithm on the revenue side back into positive territory and you gave a lot of detail.
Last quarter about the 13 Biosimilars in development.
Didn't really talk much on this call about.
Similar for Humira potentially coming in the middle of next year to the previous question you were just talking about the wave of sort of generics that.
That are coming over next year and actually the next four years I think you sort of laid out on the last call and so I was wondering.
If you could maybe give us a little bit more detailed thoughts around that growth algorithm and what it will take to sort of inflect. The revenues back into positive territory and if you have any early thoughts on 2023, not that you want to give guidance or anything, but how we should think about that.
Revenue transition taken into consideration the continued headwinds from Copaxone and the generics in North America. Thanks.
Yeah. Thanks Glen Good question. So let me give you a bit more details and some of it is of course, a repeat of what I explained already a quarter ago. So if you look at the generic piece.
The revenues then first of all we have a stable business outside the U S, which will have a single digit positive growth. So that's Europe , that's international markets as you know.
No the pricing is quite stable.
You know in the top three in all the European markets and also doing well in international markets. So that piece is sort of growing you could see low single digit and that's very stable and we have the U S marketplace, where we will in the coming years have a substantial number of Biosimilar launches next.
Yeah. We can just mentioned that you sit biosimilar humira humira potentially biosimilar Stella.
End of.
Of course, you never know exactly how it plays out you never know how exactly how big a share you did but we think where the if not the best one of the best to manage the whole commercial part of a biosimilar launch. We think we've proved that with trucks EMA has done a substantially more than $1 billion sales already.
So we think we know how to do it and we got the products coming in we also have a quite a number of complex generics. Some we've been waiting for a while to get the FDA approvals such as coming on now and we are quite optimistic about getting some of those approvals as well so that of course on the generic side ads.
Two a positive also single digit growth on on generics and then the last piece of course on the innovative products, where you're absolutely right that Copaxone, we will continue to decline, but as you've also just seen today of stereo and Joey will continue to increase and just a little.
In fact last year the Copaxone, that's declining was roughly equal to our stable and Joey that's increasing combined so I think.
<unk> did a $1 billion. The other two together did the $1 1 billion something like that this year as you've just seen in the guidance Copaxone will be around 700. The two wells combined will be about $1 4 billion. So that shows you that now we're getting to the point, where it's like instead of Copaxone being the biggest one and then getting to be the same.
Now it's half of what the state of <unk>, and you're always doing which basically means that in the coming years net dynamic year by year will get better. This year, it's close to breakeven you could say the laws on Copaxone is the same as the gain but in the coming years the gains on our state of any Joey will be bigger than the losses on copaxone again that will contribute.
Two growth in the innovative medicines and then of course Risperidone.
Assuming that we get that launched which I'm very optimistic about in the first half of next year that will also contribute to growth. So all in all all of these different elements are pointing in the right direction towards what we mentioned.
Single digit growth in 2027 on the revenue line. Thank you for the question.
Thanks for the detail.
Thank you.
As a reminder, if you wish to ask a question. Please press star one on one on your telephone.
We will now take the next question it comes from the line of Matt <unk>.
From Evercore. Please go ahead your line is open.
Morning, guys. Thanks for taking my question.
I wanted to focus.
On Biosimilar Humira do you think you need an inspection to get the approval on the upcoming but so far or do you think you can get an approval without a new FDA inspection.
And can you confirm for us that the interchangeable version is the one that has the best sofa coming up not the one that had the CFO .
And secondly, this 749 schizophrenia molecule. That's now in phase III can you tell us a little more about what the molecule is and what you've seen in phase one because it was not unclean trials. Thank you very much.
Thank you very much and I will have to answer you on home IRA and into Changeability and inspections and so on and then I'll tell you about the.
Antipsychotic, that's going into phase III.
Hi.
Yeah.
The second question was on the interchange ability.
The action date, that's the action date that is coming up in December is on the interchange ability.
BLA and the other question was whether there is a site re inspection necessary. So just as a reminder, the file and the FDA interactions are managed by Alphatec not by US and I believe I would take already published that they are in.
In discussions with the FDA about the sides a re inspection.
And how it will be conducted.
And on the.
<unk> 44749.
As a long.
<unk> version of Olanzapine.
And it's a very promising as you know it's the same prolongation methodology, that's been useful Risperidone L. A I and I'm sure you've seen the phase III data, there which are excellent.
For once monthly and once every six month therapy.
And as we all know there's a big need for better long acting therapies for schizophrenia simply due to the fact that that's the way too.
Your adherence and any relapse in schizophrenia has a potential damaging effect on the cognitive capabilities of the patients.
And with Olanzapine, that's been a warning for a C. Drowsiness syndrome, you basically fall asleep and that's because if you take a long acting olanzapine.
<unk> injection is a risk that the drug gets in your bloodstream and they just simply faint or fall asleep. So for that reason right now to say three hours in the Doctor's office and wait after you get the injection, which means that very few people actually use it on the other hand, we are developing a subcutaneous version here, where we think there'll be no risk of it.
Which means there'll be a lot more convenient easy to use for the merits for the doctor for the patients. So we're very excited about that.
Thank you for the questions next question. Please.
Thank you.
We will now take the next question.
One moment please.
And the next question comes from the line of Jason <unk> from Bank of America Securities. Please go ahead. Your line is open.
Oh, Hey, guys. Thanks for taking my questions.
Just a follow up on the Biosimilar humira situation.
We think specifically about 2023.
If approval does get pushed in Q, maybe the second quarter or middle of next year is there a risk that from a contracting perspective youre unable to participate in the market specifically in 2003.
Or do you see that as a dynamic process.
Reopened for bidding every quarter and then just.
Follow up on the rising European energy cost dynamic and how that impacts your business.
Yeah July 1st so in the contracting itself of course, you only contract. Once you launch in July this holiday settlement agreements with EPPY have been structured and then I don't expect that we will see in Biosimilars quarterly.
Renewal of bits of businesses like you see on the generic size because the customer is different it's pbms and not because sailing groups that you contract with and secondly, the supply chain and how the supplies broke a tube I would say a complicated to allow it fast switch over between different biosimilars. So.
Once you are in the business you should be.
Let's say enjoying the business for longer periods like or as compared to a generic speeding that we see in the U S generics market.
Thank you spent on the energy cost and that's it.
Specifically in Europe . That's an issue then let me first of all make it very clear that all our factories had taken precautions and Don modifications to energy systems and so on so that we can continue.
I'll be waiting on interrupted despite the changes in the European energy markets. We have also a secure.
Supplies of various types of energy, including the gas that we need the oil that we need and so on there's an inflationary effect. This year, which is included in our numbers and as you said, it's in the Cox line cost of goods sold line and to some extent that is Marty.
Modified by some of the hedging we do on our energy contracts next year. We have also made sure to contract most of our energy of course at somewhat higher prices.
You have noticed that the price had been coming down again over the last month or so after a peak. So we are seeing things are.
Relatively normalizing of course some of the efficiency gains were doing will be eaten up by this that is hadn't already this year to the extent we've been covering these increased costs and it's going to happen again next year. It is not a dramatic it's something we can manage and as I said from an operational point of view, we are completely safe.
And from a cost point of view, we're doing our best to reduce the total impact of these increases in energy prices. Thanks for the question next questions. Please.
Thank you.
We will not take the next question.
It comes from the lineup Terry <unk> BMO capital. Please go ahead your line is Nelson.
Hi, Good morning. This is Dennis resonate on for getting up and thank you for taking our questions.
In regards to the business development can you talk about the characteristics of potential asset you're looking at what kind of where and how they fit into the overall pipeline.
If you can just kind of quantified and clarified the current D. D landscape in general are there many interesting interesting assets out there at work and licensing. Thank you.
So thanks for that question. So in the BB area, but we are really looking for is looking for individual products or individual projects that will fit nicely with the portfolio. We have both are on the portfolio, which is focused on neuroscience and immunology and our commercial portfolio, which is.
Quite broad so we're not looking to buy a company is we don't have the money for it or we don't have the appetite for it but we're looking to find products that will fit nicely with our commercial footprint already and we've done quite a number of deals. If you might've noticed we have done deals in the Biosimilar area, we just talked about the outlets.
Deal and also done deals are in Europe on Biosimilar Lucentis reasonably we've done deals with different research groove on earlier projects such as <unk>.
Where are we looking into neuroscience and all that exciting deals. So so that's really what you should think about that we're looking for project or product specific use that can strengthen our portfolio either in the marketplace to drive revenues shorter term or in our Andy portfolio. Thank you for the question and the next question. Please.
Thank you.
We will now take your next question.
And it comes from the line of <unk> cause I'm not from your B S. Please go ahead your line is Shelton.
Hi, good morning, Thanks for taking our questions. So I had to wanted to just this alphabet by similar products like spell out an idea I'd like coming from the same facility and is that something that needs to be resolved Ozelle. That's first and then the second one <unk>.
So I wanted to check on the D. D. C. You think that's a very promotion sensitive market I know you're <unk> campaign in 2021 is that being renewed or did you intend to continue D. D. C. This is an important drug in your portfolio and I think a competitor is making a lot of investment on on the <unk>.
Thank you for those two questions swim handle both of them.
So the I would take facility or the products that you mentioned <unk> and your mirror and the others that we contracted the drug substance is manufactured in the same facility that is also no.
Subject to the F D a discussion on your mirror.
Drug product itself that manufacturing is in the in several locations in with several subcontractors.
Set up in Europe .
Reviewed the set up I think it's adequate to supply us and we also confident that the F D a discussion where to an old positive Indians.
So that's on track on the question on a federal so we did not continue our television campaign, we had a very effective thing television campaign, but in Q3, we did not continue it we analyzed our targets of patient activation that an expansion of our prescriber base have been achieved in our analysis suggests that we can generate the best.
The return of our marketing investments no downstream.
Moving from patient activation in the <unk> to the area off sales sales force effectiveness Salesforce Department.
Patient titration and adherence management and that does not exclude of course that <unk> returned to television but at the moment, we believe you'll get the highest return on marketing spend in downstream activities. Thank you for the question.
Next question please.
Thank you.
We will not take the next question.
It comes from the line of David <unk>. Please go ahead. Your line is open.
Thanks, So I just wanted to drill down on product concentration.
And the North American a generic business what portion of the business comes from the Epipen generic and also trucks.
And I guess, where I'm going with this is I'm trying to get a better read on to the.
The relative importance of those two products for the business. How are you thinking about the competitive landscape four trucks going forward and then same question on an epipen bearing in mind that there are some companies developing some non injectable alternative dosage ones with epinephrine or are you thinking about that as well. Thank you.
Thank you for that question I'll pass it on to spend it.
Thank you for the questions so to eczema, an epipen out of course, <unk> an hour generics portfolio.
You have another if you're doing a b C analysis about the <unk> and the gross margin that we generate and generics out of the round about 300 products that we have in North America and then of course, we have the Canadian business as well, we have I I believe a healthy and very classic concentration of anchor products.
<unk>, an epipen, we have a couple of inhaler product, so asthma products, they die Inca products, as well and patches and complex injectables. So that's quite good I would say unhealthy portfolio distribution and they are very stable and resilient that is also one of the reasons why taebo and it's.
Pipeline for North America is committed to the development of complex generics.
Among them many of them that we already discussed here for teal restasis and so forth because we believe that over time, you can drive a very stable and resilient generics business with these type of a complex products.
And does.
Second question was I just on the competition is anything expect it on a P and to have an epipen I don't think they'd be able to get a generic substitute. Your blood you tried the second one or third one into the market I think he had the competition is more happening with the products that are.
Five O five two developments they.
They come with new modes of action or a different convenience for the patient. So that of course, we will also find it's market epipen as a Brandon are generic golf course.
Well established in this category is the market leaders and.
Everybody knows how to use them and for that reason, we don't see a dramatic shift in market share distribution in this category.
Yeah, and then an instruction maybe we can just says has already alluded to we have a stable market share we really heavy about the performance there and we don't expect any major upheavals in that market. So thank you for what are the questions next question. Please.
And no further questions on the phone at this time please continue.
Thank you very much. Thank you everyone for listening in and have a nice day.
That does conclude our conference for today. Thank you for Patricia they changing my own disconnect.
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