Q4 2024 Teva Pharmaceutical Industries Ltd Earnings Call
Hello and welcome to the fourth quarter and full year 2024 Teba Pharmaceutical Industries Earnings Conference Call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question once the presentation has finished, please press star followed by one on your telephone keypad. And I'll hand it over to your host, Bruce Stivo, SVP, Investor Relations. Please go ahead.
Thank you, Alex.
Good morning and good afternoon, everyone.
I'd like to remind you briefly that we're going to be making forward-looking statements on this call. Any statements we make are as of today only, and we undertake no obligation to update these statements afterwards.
And if you have any questions about forward-looking statements or other risk disclosures, please see our SEC filings under Forms 10-K and 10-Q. And with that, let me turn it over to Richard.
Richard: Thank you Chris and good morning, good afternoon everybody. Thank you for dialing in for the call. Really excited to talk to you today about the 2024 performance of Teva and the lookout for 2025.
Richard: So, as usual, I'm going to go back to the strategy, the pivot to growth strategy, what we set out in 2023 and what we accomplished of this strategy in 2024. As you remember, it's based on four pillars, deliver on our growth engines, step up innovation, create a sustainable generics powerhouse, and focus the business.
Richard: And I'm really pleased to say that we've made really good progress across 2024 on all of these pillars.
Richard: As you'll see, Estero had another great year, up 34%. You said he had a very strong year, beating his target of $100 million at $117. And Ajobi grew at 18% and breached the half-a-billion-dollar number. And Step Up Innovation.
Speaker Change: Great progress there by Eric and his team. Obviously, we saw the results of DIVI-Q2 at the end of last year, where we think we have best-in-class and best by design. And on Lanzapine, we had the full safety data set, so we now know we don't have a PDS or any PDSS.
Speaker Change: in this patient population in this trial. And Dari, we've really moved fast into the clinic with our ICS-SABA, and 91% of sites are recruited. On the generics business, all regions are growing for the second year straight, which is good, and our product launches have shown good performance to drive that growth.
Speaker Change: And then on focus to business, it was good to see external endorsement of the improvement of Teva with all the credit ratings improving their outlook for the company. And it's good to see that our TAPI business is back to growth, four quarters of growth and full year growth.
Speaker Change: So, really good start and really good progress on the pivot to growth strategy.
Speaker Change: And how does this translate into growth? Well, as you see, eight quarters of growth we've had now after a number of years of decline. So there's a consistency here, which really pleases me. And congratulations to the team.
Speaker Change: Just like to highlight here, just for transparency, we have highlighted that one-off payment we got from Sanofi in Q4 2023. But this performance puts us on track to hit our 5% CAGR that we committed to in 2027.
Now to give you a bit of detail on this...
Speaker Change: and the numbers what drove the 9% in revenue. I'll go into a bit of detail but let's start at the high-level P&L. Sixteen and a half billion of revenue up nine percent at the high end of our outlook.
Speaker Change: Our adjusted EBITDA was $4.8 billion, also up 9%, and our non-GAAP EPS $2.49, up 10%.
Speaker Change: Free cash flow up 10% also 2.1 billion and it's good to see that our net debt to EBITDA is now close to touching 3. And I remind you all that we did give a guidance up twice throughout the year so I think this performance is a strong performance and one we're very proud of.
Speaker Change: But let me now go into a bit of detail as to what's behind this.
Speaker Change: So, all three of our businesses grew, our innovative business, our generics business, and our API business. As you see, led by Esteto up 36%, close to $1.7 billion, really strong performance again there. Ajobi up 18%.
Speaker Change: As I said, just over half a billion, and you said 117. The generics business is close to 9.5 billion, up 11% and API at 3%. So across all of our businesses, we've driven this 9% growth.
Speaker Change: Now let's go into the innovative business first. So on a setup...
Speaker Change: I want to be clear. We are on target to hit our $2.5 billion in 2027. And you'll see why. Why are we confident about that? It's because the U.S. revenues of $1.642 billion is a 34% growth, and we've got strong TRX growth of 34% also.
Speaker Change: I'd like to point out it's a nice contribution from the rest of the world now starting to kick in with $46 million and because of this confidence we have our outlook of $1.9 to just over $2 billion for 2025 I think shows the strong belief we have in this product.
Speaker Change: I'd like to remind everybody there's still a huge unmet medical need. Of the 800,000 patients who suffer from tardive dyskinesia, only 6% are on treatment. So we see a long runway for this product.
Now moving on to Yossadi.
Speaker Change: Yossedi, really pleased with what the team has done here. I think it goes to show what a really good differentiated product we have and what a world-class team we have out in the field.
Speaker Change: We did $117 million for the full year, so we beat our guidance of $100 million, and we're planning to do $160 million in 2025.
So another growth contributor going into this year.
Speaker Change: As we move on to Ajovi, you know, I'm very proud of Ajovi. It's an interesting product, and when I came here, I think people weren't sure what this could do going forward. But I think the company and the team have shown what they can do, even in a very competitive market across all of our regions.
The 18% growth I think shows the ability
for our teams, whether it's in Europe, USA.
for International Markets.
Speaker Change: to take market share. And we've grown market share across all of our regions here. So, congratulations to the team. And because of that, we're giving guidance of $600 million for 2025. So, really good, strong contribution from our innovative business and a good, strong growth going forward into 2025.
Speaker Change: Now moving on to the second pillar, which is step-up innovation, which Eric will go into a lot more detail But I can't help talk about it because I'm so excited about it So if you look at our late stage products here, Lanzapine, ITS Sabadari, and Dubiquitoq
Speaker Change: These are all products which are coming to markets which have significant unmet medical need.
Speaker Change: and we're coming to the market, you know, in the near term. Alanzapine will be in 26.
Speaker Change: ICS Darry will be in 27 around about that and Dubuque Tug will be towards a year or two later. So really excited about this and we'll be entering phase three with Dubuque Tug this year and we'll be talking about some indications as well.
Speaker Change: Now, early stage pipeline is also exciting. I'd remind people that the Anti-IL-15 and the Anti-PD-1-IL-2 were developed and created by the same team who created what we believe is best-in-class TL1A to the Quitoq. So very excited about this pipeline, and I know it will go into a bit more detail.
Speaker Change: Now moving on to the third pillar, which is our Craters Sustainable Generics Powerhouse, starting with our biosimilars. Our strategy was to build a broad portfolio, and we're up to 18 assets now, and you saw us do a couple of partnerships, a few partnerships last year to build out.
and this portfolio even further.
Speaker Change: But I think what is exciting to see is in between now, this year, 25 and 27, we will launch seven assets into the United States.
Speaker Change: and we'll launch four biosimilar assets into Europe. So this is really starting to build momentum and acceleration for our biosimilar business. And that will also help us drive growth on the top and bottom line towards our 2027 targets.
Now going into the core generics business.
Speaker Change: Another strong year and as I said across all regions and this was where we just started to tighten our capability and our focus operationally. We've improved our ability to launch our new products across all regions on time more often. We've improved our supply chain making sure we can supply the market on time more often.
Speaker Change: And we're also doing some work, we did some work in 24 and this will continue to make sure we improve that efficiency within our supply chain so we can reduce our cogs and become even more competitive over the long term.
Speaker Change: but this T.E.R.E.X. business grew at 11%, so very strong. Now let me give you a bit of detail on what the regions did.
Speaker Change: and I think all the regions stepped up to drive this 11%. Another year of strong growth by the US team, so congratulations to them.
Speaker Change: and Europe, 6%. As you know, this is a very big business, and we've seen mid-single-digit growth from Europe now consistently, so another strong year for the team. And international markets at 15% consistently deliver double-digit growth.
Thank you.
Speaker Change: Now, moving on to the final pillar, which is focus to business, and this is where TAPI comes in. I'm really pleased with the work the TAPI team have done. We've taken this business from decline to growth, and the momentum is increasing, and we have confidence that we can continue this growth into mid to high single digits.
Speaker Change: The third-party business and the pipeline is growing significantly in 2024. We continue to see that happen in 2025, and we continue with the divestment process.
Speaker Change: Now talking about the fourth pillar, we always talk about capital allocation. We're very much focused on this at Teva.
Speaker Change: And just to remind everybody, you know, when, as we generate, uh,
Speaker Change: More cash, more capital. We'll put that to pay down our debt. That's the number one priority. But then we'll invest in the growth engines. As you see, we get a good return on that investment with Estedo, Ajovi, and Yosetti.
Speaker Change: And then with this exciting pipeline, Eric also will get the capital to make sure that we can maximise that, obviously because some of this pipeline will have the opportunity to go into a number of indications. And then we'll supplement all of this with business development.
Speaker Change: So that's what we've done in 25 from a business point of view, now I'll hand over to Eric who's going to talk you through that pipeline that we're so excited about.
Thank you, Richard.
Eric: I first wanted to start off by saying we were very excited by the announcement of our top-line results for our Doola Keetook program last month. The data speaks for itself. Great dose response in both ulcerative colitis and Crohn's disease, and these treatment effects are the highest reported for this MOA. So great work by the team, and we're very excited to show these results.
Eric: You know, this was a validation of what we've been saying about the fundamentals of this program.
Eric: Duva Ketogh has high potency in vitro, has high selectivity for the DR3 receptor, has low anti-drug antibodies.
Eric: It shows a rapid, profound, and prolonged suppression of the free TLNA levels in the serum.
Eric: And we've consistently shown a favorable safety and tolerability profile to date. So, very excited by the data.
Eric: And we're very pleased that this will be presented as late breakers for both ulcerative colitis and Crohn's disease at the ECHO conference on February 22nd in Berlin. So great work by the team.
Thank you. Thank you. Thank you.
Eric: Now, this next slide, I could also say it speaks for itself, but I don't want to say that today. I want to really walk through this, because this is a very important slide when it comes to our Duba-Ki-Tuk program.
Eric: You know, TLNA is produced by a variety of cells, mucosal cells and immune cells, and the stimulus for the release of free TLNA is both microbial and non-microbial signals.
Eric: But TL1A acts as a key amplifying signal. It binds to a variety of different cells in the immune system. It secretes a variety of different cytokines and triggers different signaling pathways.
Eric: It also binds to fibrotic cells and has an impact on fibrosis and the maturation of a fibrotic matrix.
Eric: Now, what does this mean? Well, it means that you can envision many different indications that this program could go into from Crohn's disease all the way down to idiopathic pulmonary fibrosis.
Eric: And to really put this in context, you know, we've listed a number of marketed products that you all know very well. We know the impact that all these programs and these products have on patients.
worldwide.
But it's important to remember these programs
Eric: and products only hit specific subsets of these signaling pathways. So it's really exciting to think about the prospect of what a compound like Duva-Ki-Tug could do when hitting this amplification signal of a variety of different cellular pathways.
Eric: So it really is a portfolio and a product, and the future, I believe, is very bright for the birth of this new class of MLA.
Eric: Moving on to our Dual Action Rescue Inhaler Program. Very exciting program, very big program for TEPA. You know, it's important to remember there's 11 million people in the U.S. today who are still using a single albuterol, like a Saba single agent for their asthma exacerbation, so it's a large population. But we already know that GINA guidelines actually recommend using a Dual Action Rescue Inhaler.
Eric: You should be getting a beta agonist plus a steroid when you have an asthma exacerbation. So HEVA is very proud to be bringing forward an easy to use dual action rescue inhaler dry powder inhaler device.
Eric: Our product doesn't require any priming, it doesn't require any shaking, no hand-breath coordination is needed, no spacers are needed, and it's not complicated by cleaning. It's simply open, inhale, and close. So it's an easy-to-use product, both by pediatrics and adults.
Eric: And just to remind you what our Phase 3 program looks like, you know, it's a three-arm study. It's a large study of over 2,000 patients.
Eric: that we use two different doses compared to albuterol alone. You know, it's exciting that we're including patients all the way down to the age of four through adulthood. It's a primary endpoint looking at asthma exacerbations and it's an event-driven study.
Eric: So, you know, our focus this year is enrolling it, we've got over 91% of our sites up and running at this point, and this is going to be a very big focus for us in R&D this year.
Eric: And last but not least our Lanzapine LA program is right on schedule. Our last patient last visit will be imminently at the end of this month.
Eric: We're looking to present the full safety database in the second quarter of this year at a conference, and we're looking for the MDA submission in the second half of this year. Very excited about this program. I think it's going to be an important product for patients with schizophrenia.
Eric: And last I just wanted to point out and pause for a minute and say how far we've come in the innovative programs at TEPA over the last two years. You know I'm proud to say that all these programs now have dosed or are dosing and all these different indications at this point.
Eric: As I mentioned, Alon's been at LAI. We're looking for the submission this year after the presentation of the last data in the safety.
Eric: The DARI program, as I mentioned, is our biggest Phase III study to date at Teva, and we've really got a good head start on our site initiations.
Eric: Duva Ketoglu was a great end of the year presentation with the data and we're excited to be working with Sanofi to get the phase three started this year. Emer Solomon is dosing a high unmet medical need for multiple system atrophy. Anti-IL-15 is now in celiac and vitiligo. And last but not least, we're now dosing patients.
Eliyahu: and our Anti-PD-1 IL-2 Program in Oncology. So it's been a great two years. I'm looking for more this year. And with that, I'm gonna pass it off to Eliyahu.
Eliyahu: Thank you, Eric, and good morning and good afternoon to everyone. I will begin my review of our 2024 financial results, focusing on our fourth quarter performance.
Eliyahu: I will follow up this one with the introduction of our NANGAP Outlook for 2025 and some of its important assumptions to help you to better understand our financial guidance for this year.
beginning on slide 27.
Eliyahu: I would like to remind everyone that in the fourth quarter of 2023, Teva entered to exclusive collaboration with Sanofi to develop and commercialize Teva's anti-TL1A asset, Duva Ketog.
Eliyahu: As we communicated previously, per the terms of the collaboration agreements, Teva received an upfront payment of $500 million in the fourth quarter of 2023, which we recognized as revenue.
Eliyahu: This payment positively contributed $500 million, both our revenue and free cash flow, and had a positive contribution to our adjusted EBITDA of approximately $430 million.
Thank you. Thank you.
During the presentation, I will discuss certain results, including revenue.
Profits and Free Cash Flow
Eliyahu: for the quarter and for the full year of 2024, excluding the impact of this upfront milestone payment in 2023, to also provide you a like-to-like comparison of our financial results.
Now, starting with our cue for gut performance.
Eliyahu: Revenue in the fourth quarter of 2024 were $4.2 billion, a decrease of 5% in both U.S. dollars and local currency terms, compared to the fourth quarter of 2023.
Eliyahu: Excluding the Sanofi payment, revenue increased 7% in both U.S. dollars and local currency terms compared to the fourth quarter of 2023.
Eliyahu: This increase was mainly driven by a strong growth from our key innovative products
Eliyahu: Ostetto, Giusetti, and Ajovi grow from our generics products across all our segments globally as well as from sale of certain products rights.
Eliyahu: In Q4 2024, we recorded a gap operating loss of $29 million compared to a gap operating income of $755 million in the same quarter of last year.
Eliyahu: The main driver of the decrease was the Sanofi upfront payment as well as the goodwill impairment charge in Q4 2024 related to our API reporting unit.
Eliyahu: Our gap net loss and net loss per share were $217.19 respectively, which were primarily driven by the decline in operating income that I just explained.
Turning to slide 28.
Eliyahu: You can see that the total NAND gap adjustment in the fourth quarter of 2024 were $1,033,000,000.
Eliyahu: This included impairment of a long-lived asset of $517 million, mainly related to the classification of our business ventures in the plan and our API business as a health force sale, as well as a $280 million goodwill impairment charge also related to that same business.
Now, moving to slide 29.
Thank you.
who will review our non-gap performance.
Eliyahu: As I already mentioned, our fourth quarter revenue were approximately $4.2 billion.
Eliyahu: Our R&L revenue in 2024 were $16.5 billion, an increase of 8% in U.S. dollars and 9% in local currency terms compared to 2023, excluding the contribution from the Sanofi upfront payment.
Eliyahu: Next, let's move down to P&L, starting with the Gross Profit Margin.
Eliyahu: Our non-GAAP gross profit margin was 54.8% compared to 58.2% in Q4 2023.
Eliyahu: Excluding the upfront payment in 2023, our gross profit margins improved by approximately 150 basis points year over year.
Eliyahu: This improvement was driven by ongoing improvement in our portfolio mix, mainly coming from Osteto, as well as the sale of certain product rights.
Eliyahu: As we have communicated previously, sell of this legacy brand and generic product rights is in line with our strategy to constantly optimize our product portfolio with a focus on long-term profitability.
Eliyahu: Overall, we saw a gradual and sustainable improvement in our gross profit margin.
Eliyahu: This was despite significant FX headwinds which negatively impacted our revenue by approximately $257 million and a gross profit by $187 million, mainly as a result of stronger U.S. dollars against the currencies of certain of our international markets.
Eliyahu: Nangap operating margin was 27.6% in Q4 2024, slightly below the fourth quarter of 2023 excluding the upfront payment last year, mainly due to higher operating expenses.
Eliyahu: as a percentage of revenue reflecting our deliberate investment in R&D and sales marketing to drive growth in both of our key innovative products as well as a further acceleration of our pipeline.
Eliyahu: Turning to EPS, we ended the quarter with a non-GAAP earning per share of $0.71 compared to $0.69 in Q4 2023, excluding the upfront payment, mainly driven by higher absolute levels of operating income.
Now, moving to slide 30.
Thank you. Thank you.
Eliyahu: This slide highlights our focused and balanced approach to drive steady improvements in profit and cash flow, as we continue to invest in our business for short and long-term growth.
Eliyahu: As I mentioned earlier, excluding the upfront payment last year, our gross profit and free cash flow improved in 2024 driven by our portfolio mix with a strong growth coming from our key innovative products.
Eliyahu: This allows us to reinvest a portion of that gross profit into the sales marketing and R&D to support our growing innovative portfolio and progressing our key pipeline assets.
leading to high operating expenses.
Eliyahu: We believe this balanced cost allocation is important for us in the short term to create a business with both long-term growth and profitability, with a growth of a mix in higher margin innovative portfolio.
and many more. Thank you. Thank you.
Eliyahu: Our free cash flow in 2024 was just over $2 billion.
at the end of the point of our guidance range.
Eliyahu: increasing by approximately 10% versus 2023, excluding the upfront payment from Sanofi, driven by higher net profit and our ongoing efforts to improve our working capital management, partially offset by higher legal payments.
Eliyahu: These payments include a settlement related to a legacy litigation that we have put behind us to focus on our growth strategy.
Moving to the next slide.
Thank you. Thank you. Thank you.
Eliyahu: I want to remind everyone of our commitment to continue to de-leverage as we remain focused on executing the next phase of our pivot to growth journey.
Eliyahu: Throughout 2024, we continued to reduce our net debt, which was approximately $14.5 billion at the end of the year.
Eliyahu: Our gross debt was $17.8 billion compared to $19.8 billion at the end of 2023, mainly reflecting the repayment of approximately $1.6 billion of our senior notes at maturity.
Eliyahu: We also improved our net debt to EBITDA ratio, which is now approximately three times, and on track to our 2027 targets of two times leverage.
Eliyahu: As you can see on these slides, the execution of our pivot to growth strategy along with our disciplined capital allocation policy over the last several quarters has been recognized by the leading credit ratings agencies.
Eliyahu: All three major agencies have upgraded Teva, Query Threatenings, and Outlook.
Eliyahu: in the last six months to reflect our improved growth prospects and continue strengthening our balance sheet.
Eliyahu: These upgrades are testament of our focused execution, and we remain committed to achieving an investment-grade rating in line to our 2027 financial targets.
Eliyahu: Of the 70 global biopharma companies rated by S&P, Teva is one of only two with a positive credit outlook.
Eliyahu: A positive outlook indicates that an issuer's credit metrics are expected to improve.
Now, let's turn our attention to the 2025 NAMGAP Outlook.
As Richard and Eric talked about,
Eliyahu: And as reflected in our financial results of 2024, that was a very strong year with our progress in our pivot to growth strategy.
Eliyahu: We delivered solid revenue growth, improved margin and cash flow, and invested in our key growth drivers and our promising pipeline, while navigating the impact of macro headwinds such as foreign exchange movement,
Eliyahu: As a reminder, in 2024, approximately 47% of our revenue were denominated in currencies other than U.S. dollars.
Eliyahu: In general, an increase in the U.S. dollars versus other currencies in which we operated, subjected to our edging strategy, has an impact on our revenue, profit, and cash flow.
Thank you. Thank you. Thank you.
Eliyahu: In 2025, we remain focused on executing the next phase of our strategy. We are also mindful of the industry dynamics, including the effect of the Inflation Reduction Act in the U.S. markets.
Eliyahu: Our financial guidance considering this evolving dynamics, as well as the headwinds from foreign exchange movement.
Now, before I talk about the specifics,
Eliyahu: I thought it would be helpful to lay out our financial guidance to make comparison as simple as possible in light of the ongoing divestiture process of the Teva API in Japan's generics business.
Eliyahu: The guidance range we are providing today assumes a full-year contribution from these assets in order to allow like-to-like comparison.
Eliyahu: We plan on revisiting our guidance to include only their actual pre-divestiture financial results upon closing.
Eliyahu: The guidance also excludes any contribution from potential development milestone payments from our partner, Sanofi, for the Phase III initiation of our anti-TL1A program, Duvac-Fitog.
Eliyahu: We will revise our guidance to include these milestone payments when they are earned.
Eliyahu: With this in mind, we expect 2025 revenue of $16.8 billion to $17.4 billion.
Eliyahu: This represents a growth of 2% to 5% compared to 2024.
Eliyahu: driven by the continuous strong momentum in our innovative portfolio, including Ostedo, Ajovi, and Uzeti, along with a generic business that will grow, although more slowly than 2024.
Eliyahu: We expect gross margin in 2025 to be stable and consistent with 2024 level, approximately in the range of 53 to 54 percent.
Eliyahu: As I mentioned earlier, our gross margin in 2024 benefited partially from the sale of certain product rights consistent with our strategy.
Eliyahu: Our gross margin performance in 2025 is driven by continuous improvements in our portfolio mix, driven by strong growth in our innovative portfolio, and a cost optimization program offsetting the adverse effects of the foreign exchange movements I just mentioned.
coming to our NANGAP Operating Profit.
Eliyahu: As I mentioned earlier, our focused investment in our key growth assets and our pipeline will continue, consistent with our strategy to drive both the short and long-term growth of the company.
Eliyahu: With that in mind, we expect our operating expenses to be approximately 27-28% of revenue for the full year, representing both higher R&D expenses and sales marketing expenses compared to 2024.
Eliyahu: As a result, our non-GAAP operating income is expected to be between $4.1 billion to $4.6 billion.
Eliyahu: And our non-gap adjusted EBITDA is expected to be between 4.5 and 5 billion.
Eliyahu: Both consistent with the 2024 levels at the midpoint of our guidance range.
Eliyahu: We expect finance expenses to be approximately $900 million in 2025, lower than 2024, reflecting a lower start of the year debt level and additional net reduction forecast over the course of 2025.
Eliyahu: We expect our non-GAAP tax rates to be in the range of 15% to 18%. This brings us to the expected non-GAAP earnings per share in the range of $2.35 to $2.65.
Eliyahu: We expect our 2024 free cash flow to be in the range of $1.6 billion.
Eliyahu: to 1.9 billion. This represented a slight decrease compared to 2024, mainly due to our deliberate efforts to streamline our accounts receivable securitization program.
as well.
Eliyahu: as we take into account higher legal settlement outflows in 2025 aligned with what I mentioned earlier.
Eliyahu: Lastly, as you know, we do not provide quarterly guidance, but I thought I would like to be helpful to provide you some insights regarding the expected quarterly progression. Currently,
Eliyahu: With expected revenue, we are expecting gradual increase over the course of the year, with the revenue in the second half of 2025 slightly higher than the first half.
Eliyahu: Our non-GAAP margin are also expected to gradually ramp up over the course of the year, in line with the revenue trajectory, as well as improvement in our cost optimization program we have initiated. With that,
Eliyahu: This concludes my review and now I will hand it back to Richard for a summary.
Thank you, Eli. So, to...
If I could go on to the next slide, please.
and many more. Thank you. Thank you.
Thank you.
Eliyahu: The journey of the Pivot2Growth continues, and in 2025, these are the things we're going to focus on with our four pillars. So for Esteto, it's aiming towards this target we have.
Eliyahu: of 1.9 to 2 billion. You said either 160 million and the GOV over 600 million. So this is about driving these and delivering on these growth engines. Step up innovation, I think Eric's talked about that. Getting the phase three started is a clear focus.
and then finalizing the indications.
Eliyahu: filing a lanzapine and completing the pediatric recruitment for DARI RICS-SABA. So some really big milestones I think we have there for step-up innovation and then for the generics business
Eliyahu: It's about making sure we continue to do the good work we started in 24, which is...
Eliyahu: Making sure we launch these complex generics that we have 16 over 24, sorry 25 to 26 on time Making sure we launch our biosimilars that we have the seven in the US and the four in Europe on time over 25 and 26
Eliyahu: and then making sure we improve the efficiency of our business to make sure we have a good supply chain that's cost effective.
Eliyahu: And then on focus of business, it's doing what Eli said and what I said earlier, making sure we're allocating capital to the right areas of this business to drive short and long-term growth of this company.
Eliyahu: And then if I go on to the next slide, just to remind everybody, this pivot to growth is a journey. We've sort of completed the first part, which was return to growth, and then it's all about making sure we can continue this growth and driving.
this through our innovative portfolio.
Eliyahu: And I think we have really good reasons to stay very positive and optimistic because of the pipeline that's coming through now, because of the biosimilars that are coming through, the fact that we've returned our generics business to growth across all of our regions.
Eliyahu: and the fact that we have plans put in place to drive margin expansion from a portfolio point of view on the top line, but also from a cost of goods and efficiency point of view on the bottom line.
The group for questions, please.
Eliyahu: Thank you. As a reminder, if you'd like to ask a question, please press start, followed by 1 on your telephone keypad.
Eliyahu: Our first question for today comes from Yoon Choi of Evercore ISI. The line is now open, please go ahead.
Eliyahu: Hi guys, this is Umer filling in for you and Joy. I had a couple of questions if I may. First, maybe just big picture, as it relates to the EBITDA trajectory going forward, I know there's
Eliyahu: Clearly investments that will be made on the TL1A program. Just curious how the spend will break out for Teva versus Sanofi as it relates to...
Eliyahu: The new indications as well as it relates to the Phase 3 program.
Eliyahu: But then also there's some Osteo headwinds coming as well from an IRA perspective. So how do you think about EBIDTA trajectory going forward in general?
Eliyahu: And secondly, on API business, I noticed in the reconciliation slides,
Eliyahu: There are some goodwill impairments as well as tangible impairments. Just trying to understand, have your expectations on API business pulled back in from a valuation perspective?
Thank you.
Eliyahu: Thanks, Umer. Thanks for the call. I think we'll tag team on this. I'll start with a bit and then...
Eliyahu: Eli can chime in and then maybe even Eric a bit. So firstly on the border question of
Carson, and Abigail.
Eliyahu: Obviously, the partnership we have is about sharing both the upside and the cost to get there for Duvaquito, so it'll be a 50-50 share of the OPEX going forward.
Eliyahu: What Eric talked about, the multiple indications we're going to be thinking about going into. I think from that point of view, it goes back to capital allocation and making sure we're focusing the capital on the right areas and do the key to it is definitely a priority.
Eliyahu: as we think about it just generally over the course of the business to 2027.
Eliyahu: What Eliyahu has also highlighted is we have a lot of good things to invest in. I think we've shown when we invest, we get a very good return, as in the investments we did in our innovative portfolio, the market is steady, Jovian and Yossedi have really delivered strong growth.
Eliyahu: and also the investments we did in the pipeline have created real value creation in the short term but definitely in the long term. So I think for us we're aiming to grow Ayurveda. We want to grow obviously for that 27 target.
Eliyahu: but we want to make sure we're investing in the short term to allow us to not really just hit the 27 target but to make sure we're really accelerating this business.
beyond that.
Eliyahu: Would you like to add anything else to that, Eric? I think that the only thing I'd add is that the structure and the reason we did the deal with Sanofi and why it was so important. I mean it was a strategic way of, you know, making it possible to achieve the full potential of what a DIVA-Keyto program could achieve and having a partner like Sanofi cost-sharing is a really good way to have locked and loaded this for the future.
Thanks, and then maybe with...
Eliyahu: Umer, just on the spend, to come back on the R&D, just kind of high level, from 23 to 24 average, if we were looking about 45 to 55 generics innovative, we're looking now to kind of a third and two-thirds in between the mix of generics and innovative in terms of how we're actually allocating cost into the R&D.
Eliyahu: And yes, if in 2023-2024 we're an average of like below 6%, we're going to be above 6% in R&D over revenue for the coming years, of course, also for 2025.
Eliyahu: and as far as related to the API business and on December 31st we classified the API business as a health for sale and that's actually
Eliyahu: putting the three elements, which is the R&D related to that business, the manufacturing and the commercial.
Eliyahu: and into a HESIT asset, L4Cell, which classifies the net assets.
Eliyahu: And before you do that kind of an element, you need to kind of do kind of some analysis related to the expected structure.
Eliyahu: and that before integrated kind of the Google assessment and after that in terms of assets that those that you now collapse into that classification. We're not providing any information related to valuation and because I mentioned it in the past we really would like to respect the process.
Eliyahu: and working with our advisor on that perspective. But I will mention that pretty much nothing changed from what I said before in terms of the trajectory and the process on setting the API business.
Thanks for the question, Umer. Thank you.
Speaker Change: Thank you. Our next question comes from Jason Gerberry of Bank of America. Your line is now open. Please go ahead.
Hey guys, thanks for taking my questions.
Hey.
Speaker Change: So I just have a couple on the guide. I'm just wanting to understand a little bit.
Speaker Change: At your midpoint, you're growing sales, I think 600 million, of which about 300 million of that's estetto, but yet there's no operating leverage.
Speaker Change: driving through the P&L. So maybe, can you help us understand that a little bit more? And then on a Zeti, in the second half of last year, you averaged, I mean, you summed up to about $80 million in sales.
Speaker Change: That's about 160 million run rates. I'm just kind of curious, as we look to 2025, are you just being conservative on the outlook for that product? Or are there some Part D redesign considerations that may be an impediment to growth? So those are my questions. Thanks.
Thank you. Thank you. Thank you.
Thanks, Jason. Thanks for the questions.
Speaker Change: So, I'll start actually in reverse, so with regard to Yossedi, firstly I'm glad you've noticed the strong performance of the team, so thank you for that, it was a good year in 2024. I do just want to point out that Yossedi does fall into now the...
Medicare Part D redesign immediately.
Speaker Change: And so we take that hit straight away on Jan 1st.
Speaker Change: So, you know, that is the thing that I think may be the disconnect.
Speaker Change: We still see the opportunity to drive strong growth of the product from a prescription point of view, but we have to let that play out.
Speaker Change: And then from an OP guide, which I think was a bit similar to the question that was prior, but I think a bit more detail you want, you know, I think what we have also in...
Speaker Change: This IRA redesign doesn't just touch Yuseti, it actually hits Osteto, although we've got the phase in.
Speaker Change: with Estero, it still hits us and I think that's just something for people to to start to understand and obviously
Speaker Change: You know Stato is a big product now because of the success once again that was driven by the team in 2024 so that's part of it. We do have our legacy innovative plans still declining and then we have a big FX here as well.
Speaker Change: So, I think those are the things that sort of contribute a bit to that. And then the thing we at least highlighted around, we are probably going to be investing a bit more to make sure the opportunities that we've got in front of us, which I think everybody sees are really clear, we don't.
Speaker Change: uh not invest enough in those to make sure we can create the long-term success that we planned in Pivot to Growth but maybe Eliyahu I'll let you yeah yes so Jason thanks for the question just to kind of a level set right if we end up the year with 50.3 percent
Speaker Change: On gross margin, if you actually back out the impact of $190 million on ethics, this company is running at 54.5%.
Speaker Change: You know, from the fact that we have the majority, part of our revenue is non-dominated U.S. dollars.
Speaker Change: with the ethics fluctuation in what we saw in the last few months and mostly on your dollars, we actually remained focused on how to guide.
Speaker Change: and we're actually baking in some impact on ethics and this is why you see a kind of the guidance with 53 to 54 percent.
Speaker Change: And, you know, on top of what Richard mentioned, we will see some acceleration on cost, as we mentioned, in terms of R&D and a few other elements related to that one. But, you know, as a percentage of revenue.
Speaker Change: We are actually improving our investment in our OPEX and therefore we don't see much flow through to the EBITDA just because of the fact that we are able to grow the business and we were able to show it in the last two years.
Thanks, Harry. Thanks for the question, Jason.
Speaker Change: Thank you. Our next question comes from David Amsellem of Piper Samba. Your line is now open, please go ahead.
Thank you. Thank you. Thank you.
David Amsellem: Thanks. So, I know you're getting a lot of questions on Red Limit and...
What.
the business looks like in 26.
David Amsellem: with Revlimid Roading. But can you just give us a more detailed road map on how you're thinking about...
newer products that could make up for the impact of
David Amsellem: losing sales on Revlimid? Is it going to be mostly biosimilars weighted or complex small molecule weighted? Can you just talk about, you know, what specific products and what kind of products do you think are going to make up for that shortfall for next year?
Speaker Change: And then secondly, I know you probably can't give too much in the way of detail on this, but regarding the lawsuit versus CMS, any color on just sort of timing for arguments and how we should think about next steps there? Thank you.
David Amsellem: Thanks David, thanks for the questions. So on the revenue, yeah let me see if I can I can answer that to your satisfaction.
David Amsellem: Once again, great performance that we've seen by the team in the U.S. to drive the success of LevelMid, but that does create a headwind.
David Amsellem: potentially in the future if we're not too careful. So how do we deal with that?
I sort of want to take it to a macro.
level.
David Amsellem: So, firstly, because of the way the company is structured now and the growth rates we have in our innovative business and our ex-U.S. business, I think from an overall growth rate of the company, I think we're in a position to weather the, if you want to call it, loss of exclusivity, which sounds a bit strange with the generics, but that cliff.
David Amsellem: than we ever would in the past. So I think that's important. But if you break it down a bit more specifically, because I think that's where your question was, from a generics business,
David Amsellem: Remember that two-thirds of our business is not in generics, and as you saw, that's growing very strongly, and that's very profitable. So that's something that balances it.
David Amsellem: Then going in and clicking, double-clicking to go deeper into the U.S., which is, I think, specifically where your question is.
David Amsellem: We have 16 complex generic launches that we're going to do in 2025 and 2026, so one of the things we have to do is is maximize those.
David Amsellem: and launch those on time and maximize those. The other is we have a number of biosimilars that are coming out in 25 and some in 26 in the US and so we need to maximize those as well as we've had some biosimilars that have launched.
David Amsellem: um slowly in the market but we see those have an opportunity to contribute in 26. So you have all of those things going together and our aim and our ambition is to is to manage that that drop-off uh which by the way we we've planned for it being a cliff.
David Amsellem: And if I take you right back to the beginning again, but on a macro level, don't forget, we have a Stato accelerating, we have your SETI accelerating, we have a Joby accelerating.
We have a Lanzapine launched in 26.
We'll have an ICS server not far behind that.
David Amsellem: And so we have a lot of things to continue the trajectory of growth.
David Amsellem: Now, I know the focus will be on 26, and we'll look to manage that as best we can. But if you look at 27, 28, and beyond, I think the direction of travel for the revenue and the bottom line is clear based on all of those assets we have coming through. But I hope that helped, David.
David Amsellem: Yeah, that's helpful. Thank you. And the CMS lawsuit question? Oh, yeah. Sorry.
David Amsellem: Forget about that lawsuit. So yes, so you're right. Unfortunately, I can't say too much about it.
Because obviously we're in litigation
David Amsellem: But I think, so as we get more clarity on that, we'll let you know from a timing point of view, we may have something that we can talk about later in the year, but obviously this is not something where we're necessarily in control of the timelines.
Thanks for your questions, David. Thank you.
Thank you. Thank you. Thank you.
Speaker Change: Thank you. Our next question comes from Balaji Prasad of Barclays. Your line is now open, please go ahead.
Speaker Change: Thank you for watching. I'm Chris Schott. I'll see you next time.
Balaji Prasad: Hi, good morning and thanks for the questions, a couple for me, for Eliyahu and Richard. Firstly, on the free cash flow decline this year in guidance, nearly 200 to 500 million dollars have declined.
Speaker Change: Can you quantify the impact of these accounts receivable securitization programs? Is this a one-off, or is this purely a timing issue, and should we expect a normalized curve into 2026?
That's one. And two...
Speaker Change: Probing further on the EBITDA guidance, I'm trying to understand if we set aside generic revenue impact, is there any reason to think that the complex generics and biosimilar segments will be dilutive to EBITDA relative to their own profitability in 2024 with the new launches coming in?
Thank you. Thank you.
Speaker Change: So thanks Balaji, good to hear you. I'll hand over the free cash flow to Eli who can explain that.
Eli: Yeah, so Balaji, you know, we were very transparent and we mentioned that we are looking to reduce the program on the securitization. To quantify the numbers, it's between 100 to 200 million dollars. Of course, it depends on the mix.
Eli: of you know the receivable as we move forward with the year in terms of timing but that's kind of the the element and of course as I mentioned in my prepared remarks
Eli: We're going to have kind of a legacy of settlements, payments that actually get kind of a timing now in 2025 versus 2024.
Thank you. Thank you.
Eli: And then do you want to take a bit of the Avatar guidance? Yeah, so...
Eli: So our EBITDA, let's say a guidance on the top level is including growth in generics, that is including growth in biosimilars, right? Which means it's actually contributing to our margin with flow through to the EBITDA.
Eli: And we just need to remember that, as I mentioned, if you look actually on the higher range,
and
Eli: of the revenue and the contribution from the top line to the bottom line, which means for growing from the midpoint to the higher point, we're not actually spending more on OPEX. And this is just about how we view the element in the mix in terms of ethics and our ability to grow mostly on the innovative part.
Eli: Yeah, and I think the thing I'd add to that, Eli, and it's important because
Speaker Change: I think we've been very focused on how we allocate capital within TAVA to drive what has been a significant turnaround at this company in two years. We've been able to actually drive the top line while managing the bottom line.
Speaker Change: But it's worth noting that the tremendous growth we've seen over eight quarters [inaudible]
Speaker Change: and the change in direction of Estetto and our innovative products and our pipeline is creating significant value I think going forward in the short and mid-term but definitely long term and I think we've got to be
Speaker Change: good custodians of a capital to make sure we are driving these opportunities because these opportunities I think we've shown over the last two years do create significant value for the company and for the shareholders. So that's one of the things we're always trying to do and manage and hopefully you've seen us do that.
Thanks for the question, Balaji.
Speaker Change: Thank you. Our next question comes from Ash Verma of UBS. Your line is now open, please go ahead.
Ash Verma: Yeah, thanks. Thanks for taking my question. So I wanted to go back to the operating margin guidance one more time. So this year you're seeing 100 WIPS margin compression, which is in the opposite direction compared to where you're trying to get to.
Ash Verma: to 30% by 2027. So are you still confident in the long-term outlook given that you will have more headwinds like RebLimit stepped down in 2026 and Austedo IRA impact in 2027? I have a follow-up that I'll come back to.
Ash Verma: Okay, good to hear you, Ash. So, yes, in short, yes, absolutely. And it comes down to primarily...
Ash Verma: innovative portfolio. And let me explain. So, as you've seen, the momentum we have with our innovative portfolio is clear, and that's going to keep
Ash Verma: driving the top line, but it changes our gross margin significantly, which just flows down through the P&L. So the biggest thing we do is we improve our portfolio mix. And I think people...
Ash Verma: You know, when we think about how are the sales of this company are going to be made up in 27 versus now, they'll be very different. There'll be a lot of innovative sales there. So that drives a very different trajectory. And I am very confident about Esteto. And I remind everybody, despite the great growth, and you know, 34% growth, 34% TRX growth.
Ash Verma: There's only 6% of the 800,000 patients who've targeted dyskinesia on treatment, and I remind people that we are confident we're going to hit the 2.5 billion in 2027, but the 2.5 billion is not the peak sales of Esteta.
and so it's this is primarily driven by
Ash Verma: by revenue. But then we have other factors going to be contributing to the EBITDA, which is we have put together a
Ash Verma: a value acceleration program in our TGO cost base, which is huge, to improve our efficiency within tech ops and that will drive improvement in our gross margin for our generics business, which is still significant, as well as improvement in our bottom line.
Ash Verma: And so those things coupled with the fact that we'll be launching also.
Speaker Change: more new product launches, and biosimilars which drive growth, which once again, I think when we looked at 27 back in 23, and I remember you were there at that meeting,
you know.
Speaker Change: There was a lot of pessimism as to whether we could grow this GenerX business and whether we could actually bring the biosimilars to the market. I think we've shown we can. So those are the factors why we believe we will hit the 30%. So it is a bit of a hockey stick. I think I've been consistent in saying it is going to be a hockey stick. But it's based on some good fundamentals of growth from the top line, supported by
Speaker Change: thoughtful capital allocation and efficiencies we're driving through the business. Is there anything you want to add to that Eliyahu?
Okay.
So maybe a second question.
Speaker Change: Yeah, just on the TL1A, so just looking at these echo content abstracts.
Speaker Change: So it seems like the 900 mg dose, as opposed to...
Speaker Change: 450 is the one that is pretty convincingly beating the placebo, both in the naive and biologics-experienced patients. The higher dose seems pretty much very good here. So what I wanted to ask was, like, what was the rationale for you to discontinue your third dose earlier, which was the highest, and is there any potential to bring that back?
Thanks.
Yep.
David Amsellem: Yeah, thanks for the question Ash. So, yeah, we're excited to be presenting the Duva-Keytug data at the ECHO conference and, you know, when it comes to the dose response,
David Amsellem: You know, it's always good in a dose ranging phase two study to have a dose response. That really makes the modeling and simulation of your dose going forward much more robust. So we're in the middle of doing that work right now with our partner Sanofi. You know, we removed that dose early on because our biomarkers, as you can see across our program, that we really do suppress the free tLNA very well at all the doses we've been looking at.
David Amsellem: One of the other reasons we removed that higher dose is because we wanted to actually have more power in these arms. And I think that was a really good decision because it gave us a great data set for both the ulcerative colitis and the Crohn's disease. Remember, this is the first.
David Amsellem: well-controlled blinded study for Crohn's disease of this MOA. So the data is robust. The way that we redesigned the study is actually good and we'll see what the modeling simulation is.
But it's nice to see that we have this.
David Amsellem: very safe, high therapeutic index right now, and we have a lot of places we can go with it.
and many more. Thank you. Thank you.
Thanks for the 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: Thanks for taking my question. I've got two, please. One on capital allocation. You talk about business development opportunities, given that you are already quite established in neuroscience and potentially in the future immunology. Are there any other therapeutic areas or spaces you...
Yifeng Liu: are interested in branching out. And the second question is on Duva-Keyturk, and just wonder if you could share any other colors that you could on the upcoming phase three development plan. Thanks.
Speaker Change: Hi Yifeng, thanks for the question. So are there capital allocation business development, are there TAs?
Speaker Change: So firstly, immunology and neurology or CNS offers a huge variety of diseases, conditions and indications. So I think that's a pretty big playing field, but where we, a couple of things to think about is
Speaker Change: We believe we have a CNS capability and infrastructure that we want to leverage, both from an R&D and a commercial capability.
so we're really focused on that. Immunology, yes.
Speaker Change: That said, as Eric's talked about, with Diva Ketogh having multiple indications, and also one of our other products in the pipeline, IL-15, anti-IL-15, having multiple indications, we feel we have a lot of immunology already in our pipeline, which I don't think people necessarily fully appreciate. But we still look there. And then outside of that...
Speaker Change: We do believe that rare disease creates an opportunity for Teva. Now, that would primarily be, once again, if possible, aligned to our therapeutic areas of CNS and immunology, which there is a large potential out there. So that's how we think about business development. And on Dubiquitug, I'll hand that over to Eric.
Eric Ketogh: Thank you, Richard. Thanks for the question. Yeah, so we're focused on the Phase 3 program with our partner Sanofi. You know, we're working diligently. The pathway forward is, you know, fortunately clear in this disease area. We know what the end point should be. We know what the requirements are and we are going to be consistent with what the FDA guidance is. So that's one of the great things about these disease areas. It's what we have to do is clear. Right now, we just have to
Eric Ketogh: put the final touches on our plan for the Phase III study design itself, which is really based on the modeling and simulation that we'll use from this first study. You know, beyond that, I think that we're excited about other indications in the future. We're thinking about that very hard. We're keeping it close to our chest, but I think I want to focus back on that slide about the potential of what Duvety could bring to patients in a very broad way with many different indications. That's going to be the exciting next step.
Thanks for the interest.
Thanks for the question, Yifeng.
Speaker Change: Thank you. Our next question comes from Glen Santangelo of Geoffreys. Your line is now open, please go ahead.
Glen Santangelo: Thanks for taking my question. Hey, Eli, I hate to come back to the EBITDA guidance, but I did have a follow-up question.
Glen Santangelo: You know, when you look at 2024, it looks like your operating expenses increased 9 percent. And, you know, if I'm doing my math right, most of it looks like it was an increase in sales and marketing versus R&D.
Glen Santangelo: and G&A, and so I'm kind of curious, embedded within that 25 guidance, could you give us a sense for how much of an operating expense?
Glen Santangelo: increase you're assuming this year versus last year? And will it be more weighted towards sales and marketing or R&D? And then maybe as a part of that, can you talk about the impact that FX had in the top line and the operating profit guidance that you've given?
Glen Santangelo: Okay, thank you very much for the question. So, first of all, in terms of the dynamics in the opics.
Glen Santangelo: We are pretty much kind of, you know, aligned with our DNA, the movement on growing the sales marketing.
Glen Santangelo: which is growing versus last year. But we need to understand that inside our R&D with what we call and what we actually introduce those financing programs that allowing us to finance.
Glen Santangelo: Those ones actually supporting our Olanzapin, our ICS-SABA, and of course the share cost that we have with Sanofi on the TL1A. As we move forward, we are, as you know, about to, in 2025, to submit the Olanzapin, which means that the cost on the Phase III is actually getting down. We will see now more support on the rest of other programs.
Glen Santangelo: What is this conversation about? Yes, this really has to do with implementation as a whole. Where are we. The transmission science training sessions have been on slide suggestions, so this was a national project focused on non-product significance … Maybe longer specifically, but around the age of 30 this is what was done in 2016.
Glen Santangelo: As far as related to the FX, last year we saw $190 million, it's kind of a 1.2%, you will assume that that's more or less the range that we are considering in the spread in the current revenue trajectory guidance.
Thanks for the question, Glen.
Speaker Change: © 2013 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services
Speaker Change: Thank you. Our next question comes from Chris Schott of KP Morgan. The line is now open, please go ahead.
Chris Schott: Great. Thanks so much. Just two questions for me. Can you talk a little bit more about the fourth quarter U.S. generic business? I know the first three quarters saw a very healthy growth. I think this quarter was a little bit less. I'm just trying to understand, is that just timing or something we should be kind of watching there?
And my second question was coming back to the 2027.
Chris Schott: 30% operating margin target. Just tell me a little bit how much, what type of gross margins should we be thinking about for Teva in that time frame? I think we're all just trying to kind of bridge with what seems like a...
Chris Schott: a pipeline that really deserves investment, launching a bunch of important products. It seems like gross margins is kind of one of the levers there, and I'm just trying to get a sense of like how big of a step up we should be anticipating versus the targets for this year. Thank you.
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Speaker Change: Hi Chris, thanks for the questions. So I'll tag team a bit with Eli on that. So with regard to US generics, you're right, I think you said the fourth quarter you felt was a bit light. I think that was the question with US generics. I'd just like to remind you that Revlimid is
Eli: allocated the majority of sales allocated in quarter 2 and quarter 3 and so that's where you see that sort of quarterly fluctuation in the U.S.
Speaker Change: That said, I'd like to point out that we did have a few good launches last year.
Speaker Change: that helped minimize that, which I think is important. So we had, obviously, Big Tozer, we had Ocotide, just to name a couple, which I think sort of lessened that. But there is that seasonality, which you've always had in, with regard to the Revlimid allocation, that's Q2 and Q3.
and then on the gross margin
Speaker Change: I'll sort of start it, and I think your first question was in two parts. I think it's, you know, what is the gross margin going to be when we think about 2070? You can take that. Then I think there was a more sort of...
high-level question which is
Speaker Change: How do you aspire to hit your OP and your gross margin, and make sure you don't under-invest in the pipeline, which I think is also a very good question. So the way we think about it goes back to capital allocation, and a big part…
Speaker Change: is making sure we do invest. And I think you've seen over the last two years, we've actually invested
We've been all in in our pipeline.
Speaker Change: We've accelerated TL1A when we didn't have SNOF, we've accelerated lanzapine, and we've accelerated ICS-SABA, and we've moved some other products into the clinic.
Speaker Change: So I think we look after the pipeline really carefully, but we look after capital at the same time. So I think that's a balance that we always think carefully about. And as we move forward, I think as the pipeline matures, we'll continue to show that due diligence.
Speaker Change: But what we need to keep doing, and we believe we will be keep doing, is driving the top-line revenue, particularly from our innovative, because that changes the gross margin and it changes the profitability, which allows us to do that without really breaking our investment sort of guidance. That's the balance we have to manage.
Speaker Change: But I I like that challenge because it's all focused on driving long-term growth
Speaker Change: will move in the next, I would say, in 26 to 27 in average, because we have kind of, I would say, more acceleration on R&D this year. So this is why I mentioned that we may end up with even 28% this year.
Speaker Change: but if we think about it on that trajectory on 27% OPEX and you know our view on 30% OP it gives you kind of a range of 56 to 57% that said that it's not most likely will be linear because it's really related to our
Speaker Change: on the innovative portfolio in terms of our ability to grow that business, and also related to what Richard mentioned in our acceleration programs that we're working on across our global operations. So you can say, in average, a 70 to 100 basis point increase year over year, up to a range of 56 or 57 by end of 2027.
and others. Thank you. Thank you.
Speaker Change: I hope that answers your questions, Chris. Thanks for your questions.
Speaker Change: Thank you. At this time, we'll take no further questions, so I'll hand back to the speaker team for any further remarks.
Thank you. Thank you. Thank you.
Speaker Change: Now, once again, I'd just like to thank everybody for dialing in to have a call. Thank you for your interest and your questions. And we look forward to giving you an update in a few months on the first quarter of 2025. Have a good day.
Thank you. Thank you.
Speaker Change: Thank you all for joining today's call. You may now disconnect your lines.
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