Q3 2024 Teva Pharmaceutical Industries Ltd Earnings Call
Hello and welcome to the Q3 2020-24 Clever Farm, the Food Clause in the Sri Lamented Airlines Conference School. My name is Alex Albecourt, I'm from the Court State. If you'd like to ask a question once the presentation has finished, please press star one on the telephone keypad.
Speaker Change: On our founder, O'Jowhost and our Mayor Senior Vice President had a reverse relations. Please go ahead.
Speaker Change: Thank you Alex and thank you everyone for joining us today. We hope you have had a chance to review a Q3 results of the press release which was issued earlier this morning. Copy of the press release along with the slides presented during this call or available on our website at IR.TVform.com
Speaker Change: Please review our forward-looking statement on slide number two. Additional information regarding these statements and our known gas financial measures is available on our annual list and on our SSI for our own 10K and 10Q.
Speaker Change: To begin today's call, Richard Francis, David C. O. will provide an overview of David's third quarter business performance, research event and our focus and priorities going forward. Then Dr. Eric Hughes, our Ed of R&D and Chief Medical Officer, will discuss progress on our innovative pipeline.
David Francis: I will see you all, Eliy Khalif will follow up by reviewing the third quarter financial results and our updated financial outlook in more details.
David Francis: Please know that today's call will run approximately one hour and with that I will now turn the call over to Richard Richard, if he would be.
Richard: Thank you, Ran, and good morning, good afternoon, everybody. Thank you for joining Tevers, third quarter, 22, 24 results.
Richard: So I'm going to walk you through a presentation today which the backbone of it is an our pivot to growth strategy.
Richard: And as you know we launched this last year to get to have a back to growth, it's focused on four pillars. Believe on our growth engines, step up innovation, create a sustainable generic powerhouse and focus the business.
Richard: and Thibault presentation myself, Eric and Eli, which are the progress we're making across this strategy.
Richard: But just to give you some sort of areas to focus on as you'll see in the live on our growth engines, we are driving strong performance with our innovative portfolio of a stedo, a joe-ve, and you're setting.
Richard: and Step Up Innovation Eric will show you the great work. His team has done a building a deep pipeline, this coming to fruition and we've got some exciting milestones and data points coming up in there to meet him.
Richard: and then on our Sustainable Generic Spirehouse, we'll see the performance we have across all of our regions and I'll give you a bit of context as to what's driving that was behind that.
Richard: and then finally focused the business. We're very pleased to see that some of the credit ratings have looked at Tevin, see the future is brighter. And also we'll give you an update on Tapi and the investment process there.
Richard: But I'm moving on to the next slide, as you see, the consistency with which we are driving growth at Tever is impressive.
Richard: From quarter one, 2020, three to now, the 15% growth we see in quarter three, 2024 shows the consistency and this all comes from the execution of our strategy and the diligence folks we have operations.
Richard: Now let me get into a bit more detail as to what's behind this number.
Richard: 15% Well, revenues of 4.3 billion as I've set up 15%.
Richard: Adjusted Abaddahl of 1.3 billion up 17% and RAPA
Richard: and his last 16%.
Richard: Also we have strong free cash at 922 million and it's good to see that our net EBITDA is now touching three shows our focus on our debt repayment. Now because of these strong financial results
Richard: I'm going to be able to give an increased outlook for the full year and I'll leave that pleasure to early-clear my CEO to talk about a bit later in the presentation.
Richard: But now to go into a bit more detail as what's behind this 15% growth. As you can see from this slide.
Richard: What I'm pleased about in this slide is the fact that I, in every two business, I generate business and I'll tap the ape-type business, all driving growth.
Richard: Now, as you see, a stedo continues to perform impressively with 28% growth, a joe of 21% is our global driver, and then you say, they strong launch and momentum down, I'm going to put more detail later about what's behind that.
Richard: Then we have a 17% growth in our global generic business and you'll see that that comes from all of the regions.
Richard: and then tapy, it's third quarter of a turn to growth. We were turned to growth in Q1, we cemented that in Q2 and now we're solidifying that in Q3.
Richard: Balaji Dabel click on each one of these to give you a bit more detail. So starting with a sted-out.
Richard: 435 million for Q3, impressive growth of 28% and strong TRX growth of 36%. So the team are doing an exceptional job here, and I'd like to reaffirm the guidance of 1.6 billion for a stedo for the full year.
Richard: Now moving on to Jovey, the oldest member of our innovative family, but it still continues to impress at 21% growth versus Krutta's quarter-three, 2020-23.
Richard: What I like about this, this is a highly competitive market, but it shows what Kevin can do across all of his regions, all of his geographies, and with this level of competition.
Richard: and as you can see, regardless of which area you look at, market share is impressive, whether it's in Europe, whether it's an international market for workers and the US. Show it the full muscle that we have in our commercial teams.
Richard: Now moving on to your setting, which is the newest member of our family, our innovative family.
Richard: Good momentum with our launch. US revenues of 35 million in Q3, 24 and that gives us a year to date number of 75 million.
Richard: Because of this strong performance, we're increasing guidance for the full year, up from 80 million to 100 million.
Richard: and was behind this really is above excellent execution by the team here in the US. It's also driven by a great product profile that meets both physician and patient's needs.
Richard: and Oga talked about that for many occasions, but just to reiterate.
Richard: This is a product which is a subject genius, pre-filtre lens that doesn't have to be refrigerated and very importantly for a physician
Richard: It allows the patient to get to therapeutic those within 8 to 24 hours, which is a very important criteria when treating these patients.
Richard: So, great work with you, Sadi, and I look forward to seeing continued momentum there.
Richard: Now stay with innovation, I'd like to move on to our pipeline.
Richard: But only briefly, because I want to leave that to Eric to go into a bit more detail. But I think what I'd like to show is just the progress we're making.
Richard: and the depths we're creating in our innovative pipeline.
Richard: for all of us in the last one.
Richard: Exciting Catalyst coming on.
Richard: I'd like to highlight the fact that we have achieved the phase three target injections without any PDSS and our land's have been studied, so very excited about that. And obviously when it comes to our TL1A
Richard: There is news to be announced towards the end of the year, but Eric will give you more detail on that.
Richard: Now moving on to by similar, another area we're excited about to drive our pivot to growth in the short medium and long term.
Richard: We pleased the fact that our proliya biocimula has been accepted for review by the US FDA and the EU-MEA.
Richard: and because of this, we anticipate a decision by both agencies in the second half of the next year. Just to remind you, this product is a $3 billion brand and so once again we see good opportunity to drive growth to ever in the short medium and long term.
Richard: Now moving on to the...
Richard: Paisem LaPoufela is a whole. As you can see, we are building a big portfolio up to 17 by Somers now. As you see, this target is nearly 60 billion of brand value.
Richard: What I pleased about here is we have a number of launches coming up in the short term, but we are building a long-term portfolio to drive our growth both medium and long-term. And as you can see on this slide and then an announcement we made in Q3.
Richard: We do have, we have started a collaboration with map science where we brought two, we pointed on two oncology bisoner assets, so once again, building out the depth of our stable of bisoner's head
Richard: Now moving from biocimulus to generics.
Richard: Impressive Grossa Generic 17% globally and really pleased to see this growth continue across all regions.
Richard: As you can see here, the US is up 30%, he is up 8% and our international market is up 13% all in local currency.
Richard: And what's behind this is the work we've been doing for the last 20 months, focusing on product launches, focusing on supply chain and commercial execution And I think it shows we're getting traction across all regions of Tever, we drive an Argentina out of business forward
Richard: Now, the final part of that growth that I talked about in the earlier slide was TAPI, and this is the third quarter of growth for TAPI, 4% to congratulations to the team. And this shows that their strategy is working. The continued focus on our CDMO expansion, is gaining traction and the 4% growth.
Richard: and Results of that. We would like to highlight that we are on track for our
Richard: Now with that?
Richard: I would like to hand over to Eric Hughes who will walk you through some of that exciting pipeline I was talking about over to you, Eric
Eric Hughes: Thank you, Richard.
Eric Hughes: Let me start off with our Anti-TL1A program. I'm very proud of our Duvati Tog team for accelerating this program and we're very excited to the top line results that's on track for the fourth quarter of this year.
Eric Hughes: Just as a reminder, it studies include both also to quite as an end-crowns disease.
Eric Hughes: It has 240 patients, 120 for each indication, and we have two doses against placebo.
Richard: This is the induction phase of the study and the primary endpoint is at week 14 And just a reminder everyone, the primary endpoint for also a Christ will be clinical remission using the modified Mayo score And for Crohn's disease it will be the endoscopic Arria So we're very excited about that team is done a great job
Richard: Moving on to the Alonza Pina Eli program, which is right on track.
Richard: We've now presented our period one of the study that's the eight week endpoint and you can see here that our pan score was right on target with all three doses.
Richard: That was presented last month externally and we're very excited about this program because this is a program with a formulation that's...
Richard: specifically designed to be.
Richard: Pervent PDFs. We have not seen that today, and as Richard mentioned, we have exceeded the target that we have designed into the program as expected. We'll be bringing in our last patient in at the end of this year and we will be presenting that data in the first half of 2025. So, very excited to get the full data set presented externally.
Richard: Moving on to the anti-ISIL 15 program, we've now presented our phase one data last month.
Richard: We already enrolled our POC study and see the act of these. This is a high affinity anti-iral 15 antibody. It really actually has great robust rapid and prolonged effects on free-yol 15.
Richard: You can see this graph, in fact we have suppression of the higher dose here almost out to 80 days So we're very happy to see these initial phase 1 results or glad to be in C-Lect disease already
Richard: but I'd also like to announce today that we've now initiated our second indication for our anti-alty.
Richard: 15 Programme, expanding the potential of this multi-indication product.
Richard: You know, Vittalai Goff, you don't know, is an autoimmune disease that impacts patients' quality of life by really depleting the melanocyte in the skin, causing a discoloration. And this can be highly impact on us, and it's that psychological burden on patients with that.
Richard: and pressing a lot of depression and anxiety in their daily life. For many of the patients over one third of these patients had more than 10% of their body affected.
Richard: and we believe that I also have a key side of kind and blocking these cytotoxic teas cells from depleting namalocin monocytes in the skin. And why is this important? Well, there are treatments to be heard with topical treatments but since it's such an extensive disease for some patients, not having a safe and effective and easily given systemic treatment is really needed. So we're very excited about starting that study and in rolling our first patient.
Richard: and finally moving on to Emersonman. We're very pleased to announce that we've enrolled our first subject here where we're running a robust phase two study with 200 participants against placebo for full 48 weeks.
Richard: and just remind you, Emersonman is a small molecule that penetrates the brain and reaches the sight of where the alpha siniculin is being produced in the brain cells.
Richard: and his Alpha Syndicate in Agra Gets.
Richard: are the genesis of the problem that's terribly degenerative and relentless disease that most people are in wheelchair by five years after diagnosis and frequently many don't survive past 10 to 12 years.
Richard: So a high-unmet medical need, we're making sure there's a very robust study and we've been enrolled our patient just last month.
Speaker Change: And finally, I just want to go over the slide that Richard had briefly mentioned. I hope you can see from this slide that we have a robust innovative pipeline in multiple indications with multiple novel molecules. Our want to paint Eliyahu's on track will have our full study safety read out in 1st half of 2025. Our duplicate program is right on track with our top line results coming out in the Q4 of this year and also request end-prone studies. We've expanded anti-alph 15 from C-Lact disease and into Vitaligo. We're working on initiating that study, which I mentioned we've already started.
Richard: Our anti-PD-1 IL-2 screened its first patient, and we're looking to fully enroll that study in the second half of 2026.
Richard: Our ICF-SABA, our Dual Action Rescue Inhaler for Asthma, is rapidly enrolling in Phase 3, and we're working to accelerate that as fast as possible. And finally, as I mentioned, Emer Solman has enrolled his first patient in Multiple System Atrophy, a great unmet medical need that we're proud to be in.
Richard: And with that, I'll pass it off to Eli Kalif.
Eli Kalif: Thank you, Eric, and good morning and good afternoon to everyone.
Eli Kalif: I'll begin my review of our Q3 2024 financial results with slide 24, starting with our GAAP performance.
Eli Kalif: Revenues in the third quarter of 2024 were $4.3 billion, an increase of 13% in US dollars or 15% in local currency terms, compared to the third quarter of 2023.
Eli Kalif: The increase in revenue was mainly driven by growth from generics products across all our segments globally
Richard: and from the recent launch of GeneXus Victoria in the U.S.
Eli Kalif: and a strong growth from our key innovative products, including Gustedo, Ajovi, and NewZeddy, as well as from the sale of certain product lines in our Europe and international market segments.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: foreign exchange rate.
Speaker Change: during the third quarter of 2024 and the year to date, including hedging effects, have negatively impacted our revenues and profitability compared to the same period last year.
Speaker Change: with a negative year-to-date impact of approximately $250 million on our revenue and $190 million on our gross profits, mainly as a result of the stronger U.S. dollars against the currencies of certain international markets in which we operate.
Speaker Change: In Q3 2024, we recorded a gap operating loss of $51 million, compared to a gap operating income of $344 million in the same quarter last year.
Speaker Change: This reduction was mainly due to a goodwill impairment charges related to our API reporting unit and a higher legal settlement and the lost contingencies recorded in the third quarter of 2024, partially offset by higher gross profit.
Speaker Change: Gap net loss in Q3 2024 was $437 million, and a gap loss per share was $0.39, compared to a net income of $69 million and an earning per share of $0.06 in Q3 of last year. The higher gap net loss in the third quarter of 2024 was mainly due to the operating loss that I just discussed.
Speaker Change: Turning to slide 25.
Speaker Change: You can see that the total NANGAP adjustment in the third quarter of 2024 were $1.2 billion. This includes a $600 million goodwill impairment charge related to our API reporting unit, in line with our intention to divest this business.
Speaker Change: In addition, we recorded a legal settlement and the lost contingencies of $450 million, including a provision of $350 million in connection with a decision by the European Commission in its antitrust investigation into Copaxone, which we intend to appeal.
Speaker Change: Now, moving to slide 26.
Speaker Change: For a review of our NAND gap performance
Speaker Change: As I mentioned earlier, our third quarter revenues were $4.3 billion, an increase of 13% in U.S. dollars or 15% in local currency terms, compared to Q3 of last year.
Speaker Change: Our non-GAAP gross profit margin was 53.7%, compared to 53.5% in Q3 of last year and 52.9% in Q2 of 2024.
Speaker Change: This improvement in our NAND gap gross profit margin was mainly driven by expected improvement in our portfolio mix, primarily Austedo, partially offset by an adverse impact from foreign exchange improvements, including hedging effects that I just mentioned.
Speaker Change: We expect our gross margin to further improve in the fourth quarter, with a further ramp in Q4 revenue and continuation of our cost optimization efforts.
Speaker Change: Nangap Operating Margin was 28% in Q3 2024.
Speaker Change: compared to 26.5% in Q3 2023.
Speaker Change: The increase in the non-GAAP operating margin in the third quarter of 2024 was mainly due to lower operating expenses as a percentage of revenue consistent with our expectation of the second half of the year and reflecting a higher revenue.
Speaker Change: The lower spend on R&D in the third quarter was largely due to a benefit of reimbursement from our strategic partnership to support our key late-stage innovative programs.
Speaker Change: We continue to invest both in our existing innovative portfolio as well in our pipeline.
Speaker Change: As Eric highlighted earlier, we are looking forward to sharing Phase 2 top-line results this quarter for our Anti-TL1A program in partnership with Sanofi, as well as Olanzapine LAI Full Phase 3 external readout in the first half of 2025.
Speaker Change: Turning to EPS, we ended the quarter with a non-GAAP earning per share of $0.69 compared to $0.60 in Q3 2023, mainly driven by higher non-GAAP operating income I just discussed.
Speaker Change: Now moving to slide 27.
Speaker Change: which I highlight steady improvements in our margins and cash flow as we continue to invest in our business to drive short and long-term growth.
Speaker Change: As you can see, our gross margin and gross profit has gradually improved throughout this year, driven by our portfolio mix and disciplined cost management.
Speaker Change: And at the same time, we continue to make focus on investment to support our growing innovative portfolio through our marketing and other initiatives, as well as the progress on our key pipeline assets, leading to higher operating expenses.
Speaker Change: We expect this dynamic to continue in the fourth quarter with a further improvement in our margins consistent with our full year guidance.
Speaker Change: We also remain focused on optimizing our working capital management.
Speaker Change: Over the past few years, we have strategically put the programs in place to ensure that our operational processes, commercial terms, and financial solutions supporting growth sales,
Speaker Change: with a reduced net working capital investment. As a result, we have achieved significant improvement in our net working capital as a percentage of revenue.
Speaker Change: Our free cash flow in the third quarter of 2024 and a year to date reflects this progress we have made throughout this year.
Speaker Change: The year-to-date increase of 42% in our free cash flow compared to last year is driven by higher net profit, driven by revenue mix, as well as our ongoing efforts to improve our working capital management, partially offset by higher legal payments.
Speaker Change: As a reminder, during the third quarter of 2024, we made the second payment of the nationwide settlement in connection with the opioid litigation.
Speaker Change: Our free cash flow year-to-date includes $390 million of opioid legal settlement payment, which was increased of $210 million compared to the first nine months of 2023.
Speaker Change: Excluding these payments, our cash conversion year to date was 82%.
Speaker Change: Reflecting on these results, we are re-framing our 2024 full year free cash flow guidance range of $1.7 billion to $2 billion, which we initially provided in January.
Speaker Change: Turning to slide 28.
Speaker Change: As you can see, we continue to reduce our net debt.
Speaker Change: which was $15.7 billion at the end of Q3 2024.
Speaker Change: Our gross debt was $19 billion compared to $19.8 billion at the end of 2023.
Speaker Change: This decrease in our gross debt was mainly due to a repayment of $956 million of 6% senior notes at maturity in April 2024, partially offset by $88 million from exchange rate fluctuations.
Speaker Change: Our net debt to EBITDA further improved during the third quarter coming at three times, reflecting the ongoing progress with our free cash flow generation as well as higher EBITDA.
Speaker Change: After the quarter closed on September 30th, in mid of October, we also repaid the maturity of another $685 million of our senior notes. Currently, there are no additional maturities outstanding for 2024.
Speaker Change: As of September 30th and as of today, there is no amount outstanding under our 1.8 billion revolving credit facility.
Speaker Change: Moving to the next slide.
Speaker Change: I want to share how the execution of our pivot to growth strategy, along with our disciplined capital allocation policy over the last several quarters, has started to be recognized by the leading credit trading agencies.
Speaker Change: In June, S&P upgraded its outlook to Teva, credits from stable to positive, reflecting improved growth prospects and continued deleveraging of our balance sheet.
Speaker Change: while maintaining our double B minus rating.
Speaker Change: In the last two months, both Fitch and Moody's have also upgraded Teva Credit Outlook, with Fitch upgrading our rating to Double B. The upgrade by Fitch marked the first time in over a decade that Teva's credit ratings have been upgraded.
Speaker Change: This upgrade reflects our focused and consistent execution of the strategy on multiple fronts, including return to and delivering sustainable growth, significant ongoing progress in reduction of our debt,
Speaker Change: improving operational efficiency and putting uncertainties related to legacy litigation behind us. We are pleased with these upgrades and remain committed to achieving an investor-grade rating.
Speaker Change: Now, let's turn our attention to our 2024 NANDGAP Outlook on slide 30.
Speaker Change: As Richard highlighted earlier.
Speaker Change: Our year-to-date results reflect Stolich's progress across our business.
Speaker Change: Our key innovative products continue to see strong growth, driven by significant unmet needs in the markets we serve, and supported by our focused investment to drive awareness and improve patient experience.
Speaker Change: With the year-to-date revenue progress with Uzeti, we are now expecting Uzeti revenue for the full year to be at $100 million, compared to our prior expectation of $80 million, reflecting soaring demand and growing adoption.
Speaker Change: We also expect Copaxone revenue to be higher than our previous guidance, reflecting lower than expected erosion from combating therapies.
Speaker Change: In addition to the strong momentum in our innovative portfolio, our core generic business continues to perform well across all our key markets.
Speaker Change: Therefore, to reflect our results in the first nine months and
Speaker Change: Expected performance in the fourth quarter. We're raising our 2024 full-year revenue guidance to $16.1 billion to $16.5 billion.
Speaker Change: This reflects an increase of $100 million from the previous guidance range we provided last quarter.
Speaker Change: We are also raising the lower end of 2024 NANGAP outlook for operating income and EBITDA by $100 million and our earning per share guidance range by $0.10 to be between $2.40 and $2.50.
Speaker Change: We continue to expect our NAND gap gross margin to be between 53-54% for the full year, with a further improvement in our fourth quarter, and operating expenses to be in the 27-27.5 range for the full year, as provided at the beginning of the year.
Speaker Change: And as I mentioned earlier, free cash flow are expected to be between $1.7 to $2 billion for the full year.
Speaker Change: With this, I conclude my review of Teva's results for the third quarter of 2024, and now I will hand it back to Richard for a summary.
Richard: Thank you Eli and thank you Eric. So moving on to our financial targets for 2027. We're on track to meet these. I think you can see from the robustness of our business across all segments.
Richard: You can see the confidence we have in meeting these targets. Bid single-digit growth, operating income margin of 30%, net debt adjusted EBITDA of two times, and cash-to-earnings of 80%.
Speaker Change: Now moving on to my final slide is to reiterate that we are executing with precision our pivot to growth strategy.
Speaker Change: This is a strategy I think we've shown really good traction over the last 20 months but also I'd like to highlight that we see the potential going forward.
Speaker Change: Some of the things we've highlighted in our pipeline around Olanzapine, ICS-SABA, the Biosilma portfolio, the generics business has now moved from stabilization to growth. We have many opportunities in this pivot to growth strategy to keep growing the company over the short, medium, and long term.
Speaker Change: So with that, I'd like to conclude the presentation and open up the floor to questions.
Speaker Change: Thank you. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad.
Speaker Change: Our first question for today comes from Umer Raffat of Evercore ISI. Your line is now open, please go ahead.
Umer Raffat: Hi guys, thanks so much for taking my questions and congrats on all the executions.
Umer Raffat: I have three, if I may. First, I'm curious what your expectation is on placebo response in the TL1A Phase II trial coming up.
Umer Raffat: Second, on Yazeti, the launch performance is clearly now tracking ahead, and I wonder what does that mean for you in terms of how you're thinking about the peak sales for a long-acting Olanzapine?
Umer Raffat: And then finally, on long-acting olanzapine, I noticed you have a new trial of three extended release formulations with different release rates. Why do that at this point?
Speaker Change: Thanks for the questions.
Speaker Change: I'll hand over the first one to Eric and then I'll take the Yosetti one and then hand you back the Lansky one.
Eric Hughes: Thanks, Richard. Thanks, Umer, for the question. So, placebo responses in ulcerative colitis and Crohn's disease are variable. You can see in the studies that have been recently completed there are differences. Sometimes those differences are related to how they calculate certain aspects.
Speaker Change: of the modified Mayo score, but it's hard to predict, and I'll just leave it at that with regards to the study.
Speaker Change: Actually, why don't you take the olanzapine one as well? Oh, yes, and the olanzapine LAI studies that have just come online. So that's part of our European submission package that we're running for a PK analysis of the olanzapine LAI.
Speaker Change: Thanks, Eric. And then on Yosetti, yes, we're obviously very pleased with the work the team have done and shown the capability of driving growth in that market.
Speaker Change: I think...
Speaker Change: what I say with regard to a lansipine
Speaker Change: Yeah, we believe we have a real asset in olanzapine, a real unmet need, because there hasn't been a long-acting olanzapine in the market. I think we've shown in a congested market with Yosetti, if we have a differentiated product and a quality team behind it, what we can do. That gives us a lot of optimism for olanzapine, because of the unmet medical need, and the fact that we will be coming to this market.
Speaker Change: Maybe not a standing start. If I remind everybody, with Yesedi...
Speaker Change: That came along and we really didn't do the level of...
Speaker Change: pre-launched that we would like to do normally. And so I think the team have done a good job in picking up the ball and getting running quickly. That won't be the case with the lands of being. We know the positions, we know the payers, we know the hospitals, we know the former committees, we have to, we've got good relationships with them because we have a good asset in your study.
Speaker Change: And so for us, the ability to prepare ourselves and to make sure the market's prepared for Lanzapin, I think we put ourselves in a very good position.
Speaker Change: What that looks like as a potential, I think, as we start to really get into the detail of the data and understanding the landscape with regard to key opinion leaders and payers and patients, well, we will clarify that. But we're very optimistic and very enthusiastic about it. Thanks for the question, Zuma.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: Thank you. Our next question comes from Balaji Prasad of Barclays. The line is now open, please go ahead.
Balaji Prasad: Thank you. Congratulations on the results and great to see the all-round growth and pipeline progress. But firstly, I wanted to start off with a bigger thematic question, Richard.
Balaji Prasad: So making America had received significant push under the previous Trump presidency, especially as the supply chain situation post-COVID exposed the U.S. generic vulnerabilities, and will likely be a priority again, I think.
Speaker Change: In such an event, is there a structural tailwind, or how can PEWA leverage?
Speaker Change: such a possible push in the generics and biosimilars world and what does it do for margins in the long run. That's one. Two, on the pipeline front, we recently hosted a CNSKOL call on Olanzapine LAI. We discussed in depth around the no monitoring requirement and said that's needed for it to be a big drug, a billion dollar drug.
Speaker Change: So, with the safety data available till now, can you comment on your expectations or confidence with such a label? Thank you.
Speaker Change: Thanks, Balaji. Thanks for the question. I'll take the first one, which is...
Speaker Change: which is a tricky one because obviously we're dealing in something that's happened real time. I think first and foremost I'd like to point out that, you know,
Speaker Change: Tebra is any company, I'm sure, that's a global company, works with any administration productively. So I think we'll do that here. And with regard to any policy changes which impact the generative market,
Speaker Change: And then obviously as a major player, the major player in the U.S. generic market, I think that's something that, if it benefits a company like Tether, then obviously that is helpful.
Speaker Change: I think for us we'll have to wait and see how that plays out.
Speaker Change: Talking about is something that that may happen, but I think it still hasn't crystallized so over the next
Speaker Change: in a few months, actually until into next year when the administration is actually in place.
Speaker Change: As soon as we see what that looks like, then we can probably comment more on that in other earnings.
Speaker Change: But maybe to hand the other question on the lands being over to Eric.
Eric Hughes: Yes, so to review for the Elanspine LAI program and what we've designed the program in conjunction with the FDA, as we mentioned before, we've exceeded as expected.
Speaker Change: the targeted number of injections that we need for the submission package. We have not seen any PDSS, you know, in real time at this point. We'll have our last patient come in towards the end of the year. But we're excited because.
Eric Hughes: The scientific story is very strong, I believe, when it comes to our formulation.
Eric Hughes: It's designed to control spikes.
Speaker Change: in the PK. It's a subcutaneous shot so it's very unlikely to hit a large vessel like a
Speaker Change: our competitors that I have a problem with.
Speaker Change: And, you know, we have a clinical data set and phase one data that shows in very intensive PK that we don't have this problem. I think at the end of the day, though, it also, you know, there's a...
Speaker Change: important unmet medical need for patients. They need an option for onzapine and a long-acting injectable. So I think with all those things, the fact that we've
Speaker Change: Thanks, Eric. Thanks for the question, Balaji.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: Thank you. Our next question comes from David Amsellem of Piper Fandler. Your line is now open, please go ahead.
David Amsellem: And I think we've got to start putting more pressure on lenalidomide and getting into some of the dynamics there. And how are you thinking about new contributors?
David Amsellem: Patients from, are those switches from oral...
David Amsellem: And then the third one, if I may, is just how you're thinking long-term about any impact
David Amsellem: on LAI.
David Amsellem: Antipsychotics from the availability of muscarinic agonists in schizophrenia. Thank you.
Speaker Change: Thanks for the questions, David. I think I'll...
Speaker Change: I'll give my view on those and then maybe ask Eric to chime in.
David Amsellem: So on the U.S. Genetics Business of 2025, obviously we'll give guidance on that at the start of the year, but let me sort of...
David Amsellem: help answer your question at least a bit and how we're thinking about it. Yes, obviously the team have done a great job with Revlimid, but I'd also like to add that we have launched other complex generics in the U.S. this year.
David Amsellem: with Victoza, Oceotide and Forteo and others. And so that's part of, obviously, we get the benefit of those when we move into 25, but we also have some good launches planned for 25 with Symbicort, Saxenda, etc. So
David Amsellem: I think we've already shown as we focus on launching our generics and our complex generics, we have the ability to do that better than we've done it in the past.
David Amsellem: We then add into that, as you've highlighted, our biosimilars, Biosimilar Humira, Biosimilar Stelara, that obviously you put that together collectively. I think that puts us in a very good position to manage the change that we're going to have with Revlimid in 2026. So that's how we think about it.
David Amsellem: With regard to Yossedi, I'll sort of start a bit on that. I'd like Eric to give a sort of physician's point of view as well as the new entrants.
David Amsellem: So you said there's a couple of things I think that we benefited from. One is a great product profile. So there's a really good product profile and because of that, physicians see the benefit of using it over other long actings. That ability to get to therapeutic dose within 8 to 24 hours is really critical when you have a patient who's having an episode.
David Amsellem: Then we have some more practical ones about subcutaneous pre-filterings out of the refrigerator, all important when working in these institutions.
David Amsellem: And the second is we have a great commercial team here in the U.S. that's really focused on executing, understanding dynamics of the market, understanding dynamics when it comes to physician, payers, patient journey. That's a real capability we have at Teva, which maybe people didn't appreciate. So those are the things that have driven it. And we're taking it from both orals.
David Amsellem: and we're taking it from other Long Act teams.
David Amsellem: What is interesting, we are getting a lot from all of us.
David Amsellem: So it's showing that when people reach for a long-acting...
Speaker Change: They're reaching for your study more and more.
David Amsellem: But then actually, when they come to question the long acting they're on...
David Amsellem: then they also reach for YSEDI more and more. So I think that just goes to show that product profile. Now, before I hand over to Eric, I would say new entrants to the market, actually, we think are a good thing, because one, optionality for patients is good, but it stimulates the market even more. And so for us, with good products like YSEDI and Olanzapine, we think we can benefit from that. But maybe I'll hand over to Eric now.
Eric Hughes: Yeah, when it comes to Zeddi.
Speaker Change: and its product profile and I've been very encouraged by the uptake of the Zeti because when we developed it we were always
Eric Hughes: Proud of the product profile, I mean it's a pre-filled syringe, it's subcutaneous.
Eric Hughes: The PK, the drug levels get up to active levels within 24 hours. There's no PO supplementation. We're already presenting data showing how people can switch onto this very convenient product. When you're in a psychiatrist's office, it's very busy. You want to be able to have something ready and easily administered to your patients.
David Amsellem: So, you know, that's what I've been proud of. And as far as muscular endicates, there's new muscular endic treatments for schizophrenia. You know, we keep a close eye on that. We're very happy to see new MOAs come into this field. It is a BID oral medication, though, and, you know, there'll be also step throughs when it comes to reimbursement and the use of other generic treatments. So though if it's a BID oral treatment, adherence has been and always will be a problem with this population. And that's why it's a different value proposition when it comes to our long acting injectables.
David Amsellem: Thanks for the questions, David.
Speaker Change: For more information, visit www.FEMA.gov
Speaker Change: Thank you. Our next question comes from Jason Gerberry of Bank of America. The line is now open. Please go ahead.
Jason Gerberry: Hey, good morning guys. Thanks for taking my questions.
Jason Gerberry: Just on TL1A, for the fourth quarter update, I just wanted to confirm...
Jason Gerberry: that will get placebo-adjusted.
Speaker Change: UC Mayo remission scores at week 14 just so we have some relative sense of benchmarking against competitors. And is the Crohn's subgroup powered to show stats?
Jason Gerberry: And then, just on TAPI...
Jason Gerberry: Can you just maybe give us an update where you're at in the process that underpins confidence for a first half 25?
Speaker Change: close of that and you've made really good progress on the net debt deleveraging so
Speaker Change: I'm really just trying to get a handle on some of these legal matters, like the recent European fine. Like, is that something that you take a cash hit on more in the near term, or given the multi-year appeals process, something that maybe there's not a cash hit for a while? Thanks.
Speaker Change: Thanks, Jason. Thanks for the question. I think I'll hand the first one to Eric.
Eric Hughes: Yeah, thank you. I appreciate the question. So, yes, both ulcerative colitis and Crohn's disease is placebo-controlled in the study, and we will provide the placebo-adjusted numbers. That's critical, you know, in thinking about Umer's question early on. The placebo is key. And I would remind you, too, that this is the first placebo-controlled, randomized study for Crohn's disease with this MOA. So, you know, we're proud to be the first one to do that, and that's what we're targeting to give you.
Speaker Change: Thanks, Eric. And I'll maybe tag-team this with Eli a bit. So just starting on the TAPI, we're well on track with that, and we should be in a position to...
Jason Gerberry: Complete that divestment in H1 of 2025 as we've already previously announced. With regard to debt, before I hand that to...
Jason Gerberry: Eli, just on the European announcement, I'd just like to point out that, as you saw in our press release, we don't agree with that decision, and we are going to appeal that, and that will take...
Jason Gerberry: Many, many years, unfortunately, but we are going to appeal it because we don't agree with it.
Jason Gerberry: And so there's no cash impact in the short term because of that.
Jason Gerberry: And we think we have a, you know, a good case.
Jason Gerberry: With that, I'll hand it over to Eliyahu to maybe comment if there's any questions relating to debt or...
Eliyahu: Yeah, so thank you, thank you, thank you, Jason. So first of all about the, you asked also about what does it mean in terms of
Jason Gerberry: So, for the coming several years, we don't see this one as a cash event.
Jason Gerberry: We were able to structure with certain levels of facilities in order to accommodate any pledge that we were required to do as part of the appeal process until a final judgment.
Jason Gerberry: It's partly related to the net debt and the leveraging.
Jason Gerberry: As I mentioned in my prepared remarks, in October, we made another payment of maturity. So, for 2024, we don't have...
Speaker Change: Any of these?
Jason Gerberry: But we do have, in the first quarter of 2025, around $1.4 billion, one in January, one in March.
Jason Gerberry: In total, $1.4 billion, so next year it's kind of more front-loaded in terms of...
Jason Gerberry: But that will actually, we will be able to manage it versus our organic free cash flow generation and our ongoing prediction. Other than that, we're still constantly looking on the market to decide if and when we will need to require to make any refinancing plan heading to the 26 and 27 towers.
Speaker Change: Thanks, Eliyahu, and thanks for your questions, Jason.
Speaker Change: Thank you. Our next question comes from Chris Schott of J.P. Morgan. Your line is now open. Please go ahead.
Chris Schott: Great. Thanks so much. Just a couple of quick ones from me.
Chris Schott: Maybe use the pipeline first on Emru's Solomon.
Chris Schott: Can you just talk about, is there a filing pathway for this one based on the phase two?
Chris Schott: or would we have to think about a phase three kind of program coming from there?
Chris Schott: My second question was on TL1A and to the extent that the Phase II data reads out successfully. Just can you remind us how quickly you can move that forward into Phase III, just given the competitive landscape that's out there?
Chris Schott: And then finally, just a bigger picture one.
Jason Gerberry: Can you talk about the overall level of investment going on at Teva right now? You've obviously accelerated the pipeline. You've made some really good investments on that front. But to the extent we continue to see kind of this momentum in the core business,
Jason Gerberry: How should we think about that upside flowing through the P&L versus going into incremental investments and further accelerating some of these growth drivers? I'm trying to get a sense of, like, do we reach a point where there is more of it flowing down to the bottom line, or should we think about kind of a balanced approach as you invest in the business? Thank you.
Speaker Change: Thanks Chris. Thanks for the questions. First two I'll give to you...
Speaker Change: Eric, and then the next one on investment, I'll start and maybe ask Eli to also contribute. So over to you, Eric. Yeah, so I'll take the second one first on TL1A, our Duva Key to a program. You know, we're running this in partnership with Sanofi, and one of the great things about the partnership is we've already started it. You know, a year ago, we started this relationship and we're working very closely with them. So as soon as we get the data, we're preparing to as rapidly as possible to start phase three with them. Targeted in 2025, and we'll have further announcements in that about that next year.
Speaker Change: The MR-SOMA, and I did mention that, you know, we're trying to make that Phase 2 study as robust as possible. You know, it's 200 patients, placebo-controlled with one active arm. This is a great unmet medical need. These patients need treatments.
Speaker Change: So, if we see responses in there, I'll be the first one to, you know, push for an approval and an accelerated pathway, but it's all going to be dependent on the data, but that's certainly our hope for these patients.
Speaker Change: And then on the final question around investments, I think I'll probably start with reiterating how we think about capital allocation at Teva. And the first part of that, when we announced the pivot to growth, was obviously to pay down debt. Then it was to invest in our growth drivers, and then to do BD. Now as we've, as you've highlighted.
Speaker Change: Chris, we've made really great progress on driving our innovative portfolio in the market, but also accelerating our pipeline.
Speaker Change: So for us, this is always about creating long-term sustainable value and to do that
Speaker Change: You know, we've had the opportunity.
Speaker Change: and the need to invest in these potential growth drivers.
Speaker Change: As we've done, I think, that very thoughtfully to make sure we manage our OPEX level, and as you hear from Eli on a regular basis, the percentage of OPEX versus revenue is something we focused on and we're keeping constant.
Speaker Change: So we think about that balance.
Speaker Change: Very carefully, what do we need to invest to create a sustainable long-term growing business?
Speaker Change: But also, what do we do to make sure we can increase value for shareholders? And that's something which we do think about. I don't think we ever think that there's one extreme or the other. I think we need to try and deliver both over the medium and long term, and that's why we committed to that 30% operating margin in 2027. We need to do that thoughtfully.
Speaker Change: to make sure that we're not missing out on opportunities to drive long-term growth and the short term. So maybe that's my opening statement. Eli, do you have anything to add to that? Thanks. I will just add, Chris, if you go back in the last three quarters here to date, we generate
Eli Kalif: In dollar wise, $600 million incremental gross profit versus year-to-date, a year ago.
Speaker Change: We really...
Eli Kalif: kind of allocate around 45% from that one into back to OPEX to invest in the business and the rest really flow through and enable us to extend our margin, be it the EBITDA extension.
Eli Kalif: And I think that pattern we'll try to manage as we move forward with how Richard mentioned and how we're going to position our capital allocation.
Speaker Change: Thanks for your questions, Chris. Appreciate it.
Chris Schott: Thank you.
Speaker Change: Thank you. Our next question comes from Ash Verma of UBS. Your line is now open, please go ahead.
Ash Verma: Hi, thanks for taking my question. So I just wanted to clarify on the API business, you've taken a cumulative $1 billion impairment charge in the last two quarters. What's sort of driving that? Is there
Speaker Change: Some of the KOL feedback suggests that it's a harder endpoint to show meaningful benefit in a short-term study like this. What you see, you sort of have a more realistic clinical remission endpoint, if you can comment on that. Thanks.
Speaker Change: For more information, visit www.fema.gov
Speaker Change: Hi Ash, thanks for your questions. I'll hand the tappy one to Eli and then Eric if you can take the 201A.
Eli Kalif: Thank you Ash. So related to TAPI,
Eli Kalif: Internally, as you know, TAPI is a standalone unit and it includes both commercial and operational functions.
Speaker Change: Now...
Speaker Change: the Goodwill, which is kind of a legacy asset in that perspective, and adjusting it for the potential expected deal structure. The impairment has no connection to the great performance that we have with TAPI, as long as with the business plan that we are projecting.
Speaker Change: Thanks, and then the next question, Eric? Yeah, Ash, thanks for the question. For Crohn's disease, yes, our primary endpoint is endoscopic endpoint. You're right, that is more challenging on the shore end of the study to show a difference. Our key secondary endpoint is the clinical remission, so those two should be a good judge of the activity of the compound.
Speaker Change: Great. Thanks, Eric. Thanks, Eliyahu. Thanks for your questions, Ash.
Speaker Change: Thank you. Our next question comes from Yifeng Liu of HSBC. Your line is now open. Please go ahead.
Yifeng Liu: Good morning and thanks for taking my questions.
Yifeng Liu: I've got two questions. One, could you talk about how you're seeing the pricing environment of generic medicine this year and how you see it evolves maybe into 2025?
Speaker Change: And the second question is also on TL1A. Could you maybe tell, share a bit more color on the baseline split between UC and then Crohn's disease across your three groups, if that's possible. Thank you.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: Hi Yifeng, thank you for the question. So let me start on the Gingerix one on pricing.
Speaker Change: So there's nothing that's changed in the pricing environment in the U.S. Obviously, the general pressure is downward because of the nature of the business. And so the way we
Speaker Change: The tackle out is by launching new products and improving our product supply and our cost of goods. That's something which we've been focused on significantly for the last 20 months.
Speaker Change: And so for us, when we look about pricing pressures for 2025, we expect the market to be the same. Our general...
Speaker Change: The point of view on this is...
Speaker Change: Prices will be pushed down and so how we offset that is by launching more products as we've talked about in the US and we We do this regularly in the EU and international markets and then improving our supply chain And I think we've shown we have improved in this area and we're doing that better and that's hence the reason you'll see the performance of our business being robust and strong across all regions
Speaker Change: And I maybe hand over the tail one question to you, Eric.
Eric Hughes: Yes, thank you, and I hope I interpret your baseline split question correctly, but in the study, it's designed that it's fixed. Half of the study is ulcerative colitis and half of the study is containing Crohn's disease patients.
Eric Hughes: When it comes to the baseline characteristics of the patients, they're both going to be moderate to severe patients.
Eric Hughes: A good proportion will probably be biologically experienced patients, they can have up to three different biologics.
Eric Hughes: and or some advanced oral therapies. And we'll probably have about half of them have experienced steroid use as well.
Speaker Change: Thanks Eric, thanks for the time. That's super helpful, thank you.
Eric Hughes: Thank you.
Speaker Change: Thanks for the question.
Speaker Change: Next question, please.
Speaker Change: Thank you. I'll now hand back to Richard Francis for any closing remarks.
Richard Francis: Okay, well, thank you once again for your interest in Teva Pharmaceuticals. I appreciate the questions and your time.
Richard Francis: Hopefully you see once again in quarter three our execution of our pivots growth strategy continues to gain momentum. We can continue to execute on the things we said we were going to execute on and they have continued to deliver performance and value. We look forward to giving you an update for quarter four at the start of next year and to give you guidance for next year. Thanks very much. Have a good day.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: Thank you all for joining today's call. You may now disconnect your lines.