Q2 2025 Teva Pharmaceutical Industries Ltd Earnings Call

Richard Francis: Hello, and welcome to the Teva Pharmaceutical Industries Ltd Q2 2025 earnings conference call. My name is Alex. I will be coordinating the call for today. If you would like to ask a question once the presentation has finished, please press star followed by one on your telephone keypad. I will now hand it over to Christopher Stevo, Senior Vice President, Investor Relations. Please go ahead.

Hello and welcome to the Teva Pharmaceutical Industries Ltd Q2 2025 earnings call. My name is Alex, and I will be coordinating the call for today.

If you'd like to ask a question, once the presentation has finished, please press star, followed by 1 on the telephone keypad.

And I hand it over to Christopher Stevo, SVP, Investor Relations. Please go ahead.

Christopher Stevo: Thank you, Alex. Good morning and good afternoon, everyone. On this call, we will be making forward-looking statements, and we disclaim any obligation to update those statements after today's call. If you have more questions about our forward-looking statements, please feel free to see our disclosures under SEC Forms 10Q and 10K. Also, during today's call, we will be often referring to sales growth in local currency as well as sales growth excluding the prior year results of our recently divested Japanese business venture. Please bear that in mind. With that, let me turn it over to Richard.

Thank you, Alex. Good morning and good afternoon, everyone.

On this call, we'll be making forward-looking statements. And we disclaim any obligation to update those statements after today's call. If you have more questions about our forward-looking statements, please feel free to see our disclosures under SEC forms 10q and 10K.

Richard Francis: Thank you, Steve. Thank you, Chris. Welcome, everybody. Good morning. Thank you for joining the call. I will be joined today with Eric Hughes, my Head of R&D and CMO, who will be walking you through the pipeline. Eli Kalif, CFO, will go through the financial update. Starting with, as I always do, the pivot to growth slide. Next slide, please. The four pillars of our pivot to growth slide. We have been executing this since 2023, and I am pleased to say it has delivered continuous growth, and we enter our 10th consecutive quarter of growth. I will give you an update on how we are doing on all of these pillars today, but you will see on delivering our growth engines, our innovative portfolio of AUSTEDO, UZEDY, and AJOVY continues to perform really well.

Also, during today's call, we'll be off and referring to sales growth and local currency, as well as sales growth, excluding the prior year results of our recently, devastated Japanese business venture. So please bear that in mind and with that, let me turn it over to Richard.

Thank you, Steve.

Thank you, Chrissy even um and welcome everybody. Good morning, thank you for joining the call. I'll be joined today uh with Eric Hughes, my head of R&D and CMO who will be walking you through the pipeline and Ellie Khalif CFO will go through the financial update.

So starting with, as I always do the pivot to growth slide next slide, please.

The four pillars of our pivot to growth slide. We've been executing this since 2023, and I'm pleased to say it's delivered continuous growth as we enter our tenth consecutive quarter of growth.

Richard Francis: On Step Up Innovation, Eric will walk you through how excited we are by our late-stage pipeline and how we are progressing that very quickly. On sustained generics powerhouse, you will see that our generics business is stable. I would remind you this is reflecting strong prior year comparisons and some phasing, but I will go into that in a bit more detail later on. On focus, the business will give you an update on the Teva transformation programs that we announced in Q1 and at our capital markets day, and you will see that we are well on track to deliver the savings that we committed to. If you move to the next slide, revenues were up to $4.2 billion, up 1%. I think not only is this the 10th consecutive quarter of growth, but what I am particularly pleased about is where this growth is coming from.

Now, I'll give you an update on how we're doing on all of these pillars today, but you'll see on delivering our growth engines, our in Innovative portfolio or asteto, you said, in a jovi continues to perform really well.

On Step Up Innovation, Eric will walk you through how excited we are by our late stage Pipeline and how we're progressing that very quickly.

On Sustained Generics, Powerhouse, you'll see that our generic business is stable. Uh, I would remind you, this is reflecting strong prior comparisons and some phasing, but I'll go into that in a bit more detail later on. And on Focus, the business will give you an update on the tether transformation programs that we announced in Q1 and at our Capital Markets Day, and you'll see that we're well on track to deliver the savings that we committed to.

Richard Francis: As you will see throughout the deck, this is driven by our innovative portfolio of AUSTEDO, AJOVY, and UZEDY. This has enabled us to have good, strong growth of our adjusted EBITDA up 7% and our non-GAAP EPS up 10%. Our net debt to EBITDA is just over 3. If we go on to the next slide, a slide that I do like to show externally and internally because after many years of sales decline, we are in our 10th quarter of consecutive growth. It is also a good slide just to highlight that prior comparison year that we have. In Q2 24, we had 11% growth, and so that is just worth noting. We remain committed and confident that we are going to hit our mid-single-digit average growth rate that we committed to for our 27 targets. The average growth rate is between 2023 and 2027.

And consecutive quarters of growth. But what I'm particularly pleased about is where this growth is coming from. And as you'll see throughout the deck, this is driven by our innovative portfolio of Stereo Jovia and USDI.

And this has enabled us to have good strong growth of adjusted eida up 7% and our non-gaap EPS up, 10%.

And our net debt to eidar is just over 3.

So, we go on to the next slide, a slide that I do like to show, uh, externally and internally. Because, after many years of sales decline, we are in our 10th quarter of consecutive growth.

It's also good slide. Just to highlight that prior comparison year that we have in Q2 24 we had 11% growth. Um, and so that's just worth noting.

But we remain committed and confident that we're going to hit our mid single digit average growth rate that we committed to for 20 our 27 targets. Um,

and that we average growth rate is between 2023 and 2027.

Richard Francis: Let us go into a bit more detail on the revenue. The revenue, as I said, was up 1%. If you look, I am excited about where this is coming from. AUSTEDO, just below $500 million, up 19%. UZEDY, up 120% at $54 million. AJOVY, a very strong 31% at $155 million. Our global generics business declined 2%. Just to reiterate what Christopher Schott said, this is excluding the Japan divestiture. I will go into a bit more detail as to what is driving this generics, but I would remind you of the strong comparison year that we had last year. On TAPI, it is down 11%. I would say in terms of Q2 results, this is more of an anomaly and not indicative of TAPI's normal results.

So, let's go into the bit more detail on the revenue. So, the revenue, as I said, was up 1%. But if you look, uh, I'm excited about where this is coming from a sto just below 500 million up 19%. Uh, you set it up 120% at 54 million and a govt, a very strong 31% at 155.

Our Global generics business declined, uh, 2%. And just to reiterate what Chris said, this is excluding, uh, the Japan diversity, uh, and I'll go into a bit more details as to what's, uh, driving this generics. But I would remind you of the strong comparison here that we had last year.

Richard Francis: There are several things that have impacted their seasonality and just timing of shipments, but we expect TAPI to grow for the full year. Now, going into the innovative portfolio in a bit more detail. As you can see, AUSTEDO grew 22% in the U.S., our major market, up to $495 million. Because of these strong results, we are in a position to narrow the range here, and we have brought up the bottom part of the range to $2 billion. This performance was driven by good TRX growth and particularly growth of XR, which you will see has fueled our growth in our milligrams, which is up 34%. This is important to understand because as we grow our XR, which we see as very beneficial for patients and their compliance and their adherence, it does obviously change the dynamics around TRX.

Now on tap it's down 11% um and I say in terms of Q2 results I would say this is more of a anomaly and not indicative of tapies, uh, normal results. And there are several things that have impacted this seasonality and just timing of shipments, but we expect happy to grow for the full year.

So now going into the Innovative portfolio in a bit more detail.

As you can see, Asteto grew 22% in the U.S. Major Market, up to $495 million.

Um, and because of this strong results, we're in a position to to narrow the range here. And we we brought up the bottom part of the range to 2 billion. Um, now this performance was driven by good TRX growth and particularly growth of XR, which you'll see has been, uh, has fueled our growth in our milligrams, which is up 34%.

Richard Francis: That means the number of scripts that will come through will be less because people move to XR. We have explained that a number of times, but I just wanted to reiterate that. As we move on to UZEDY, another strong performance. I am really excited to be in a position to raise the guidance to $190 million to $200 million, up 120% year on year. This just shows the good capability that we have in our U.S. team to execute, but also the good product profile. As Eric Hughes and I often talk about, the physicians do really like UZEDY. It is easy to use. It gets to therapeutic levels within 24 hours, subcutaneous. It is not required to be kept in a refrigerator, and it is in the pre-filled syringes.

And this is important to understand because as we grow our XR, which we see as very beneficial for patients and their compliance, and their adherence, it does obviously change the Dynamics around TRX. And that means the number of scripts that will come through will be less because people move to XR. And we've explained that a number of times, I just wanted to reiterate that

now, as we move on to your seti,

Another strong performance. Uh, and really excited to be in a position to raise the guidance to 190 to 200 million up 120% year on year.

And this just shows the good capability that we have in our us team to execute, but also the good product profile.

As Eric. And I often talk about the positions, do really like you said it it's easy to use. It gets to therapeutic levels within 24 hours, subcutaneous know it. It isn't required to be kept in a refrigerator and it's in the pre pre-filter ends.

Richard Francis: As you can see, we have made real progress in competing in the risperidone market and in the long-acting market. To continue this impressive growth, we want to move to actually compete in the broader market of schizophrenia. So we will be looking for patients to benefit from this on other molecules currently. Now, this impressive performance of UZEDY, I think it is worth just reminding everybody that we will be finally in olanzapine, and we will be in a position to launch our long-acting olanzapine next year. The capability we have built in this team, the knowledge of the patients, the physicians, and the payers gives real optimism that we can develop a world-class long-acting franchise in schizophrenia.

Now as you can see, we've made real progress in competing in the respiratory do market and in the long active Market. But now to continue to this impressive growth, we want to move to actually competing in the broader Market of schizophrenia. So we'll be looking for patients uh to benefit from this on other molecules currently.

Now this impressive performance of your study, I think it's worth just reminding everybody that we will be filing. A land subpoena will be in a position to launch our long-acting olanzapine next year. And the capability we built in this team, the knowledge of of the patients, the Physicians and the payers, give us a real optimism that we can develop a world-class long-acting franchise in schizophrenia

Richard Francis: Once again, I would like to move on to AJOVY now, our third and final of our innovative portfolio. We have got a bit of a trend here. We have increased the guidance here on AJOVY as well because of the strong performance. We are up from $600 million to $613 million to $640 million, that range. I often say this, but it is worth reiterating. I am really impressed with our ability to execute in what is a very competitive market. Not only are we facing all CDRPs, but it is a competitive injectable market as well. The team, whether it is in the U.S., Europe, or international markets, continue across many of these areas to grow our market share and to show a level of competitiveness. Moving on to our second pillar, which is Step Up Innovation.

And once again, I'd like to move on to a Joby. Now our third and final of our Innovative portfolio.

Uh, we've got a bit of a trend here. We've increased the guidance here on a job as well because of the strong performance. So we're up from 600 million to 630 to 640 that range.

And I often say this, but it is worth reiterating: I'm really impressed with our ability to execute in what is a very competitive market. Not only are we facing all CDPs, but it is a competitive injectable market as well. The team, whether in the U.S., Europe, or international markets, continued across many of these areas to grow our market share and to show a level of competitiveness.

Now moving on to our second pillar which is step up uh innovation.

Richard Francis: This is a slide that Eric Hughes will go into a lot more detail. I will just highlight a couple of things which I am particularly pleased about, is one, the late stage of this pipeline. We have products either come to the end of the phase 3 and about to be filed, or in the middle, or about to start with Duvakitug. I would also draw your attention to is two of these products can be in multiple indications. Duvakitug is one, and Anti-IL-15 is another. If you just take them with the indications we have listed here, I would say the totality of this, this pipeline will generate in peak sales over $10 billion of sales. That is really exciting for any company. But a company in the transition to a biopharma company like Teva, I think that is particularly exciting.

This is a a slide that will go into a lot more detail. So I just highlight a couple of things which I'm particularly pleased about is 1, the late stage of this pipeline. So we have products either come to the end of the phase 3 and about to be filed or in the middle or about to start. We do the key to what I'd also draw your attention to is 2. These products uh can be in multiple indications. So do the key tick is 1 and anti 15 is another. But if you just take them with the indications, we've listed here and take their totality of this, this pipeline will generate in Peak sales, over 10 billion of sales.

Richard Francis: If you go on to the next slide, that is where I think I can really reiterate our confidence in hitting our 2027 numbers from an innovative point of view of $3.5 billion to $4 billion because obviously we will be launching olanzapine LAI next year, and you have seen the momentum we have in UZEDY. As we get to 2030, and we have said we will have greater than $5 billion of innovative sales, I remind everybody that we expect to see AUSTEDO to continue to grow to 2030 and beyond UZEDY. There is also, we have shown the performance of AJOVY, but that will be joined by olanzapine LAI, a dual-action rescue inhaler, and Duvakitug. The thing to remember as well is that as we drive this innovative portfolio, we are changing our profitability because these are very different levels of profitability than our generics business.

So that is a really exciting for any company but a company in the transition to a buy a Pharma company, like Teva, I think that's particularly exciting.

And if you go on to the next slide, that's where I think I can really reiterate our confidence in hitting our 2027 numbers from an innovative point of view of $3.5 to $4 billion because obviously, we'll be launching on Anthropy next year. And you've seen the momentum we have in your city. But as we get to 2030, and we've said we'll have greater than $5 billion in innovative sales.

I remind everybody that we can, we expect to see a stereo to continue to grow to 2030 and Beyond you Saidi. And there's also we've shown the performance of a jove but that'll be joined by olanzapine Daria. Dual action rescue inhaler and do the K2

now, the thing to remember as well is that

As we drive this Innovative portfolio, we are changing our profitability because these are very different levels of profitability than our generic business.

Richard Francis: Moving on to our third pillar, our generics powerhouse. As you can see here, the generics business performed at 2% across our global business. I remind everybody that there was a tough comparison year where we had an 11% growth the prior year. I have put up here a two-year KGuard just to show that when we think about generics, we think about this on a multi-year period because obviously some years we have more launches than others. Let me just give you a bit more detail here. In the U.S., this was driven by two things. Our prior year comparison where we launched Victoza and we had a big launch with Victoza in the U.S. in Q2 2024, as well as some phasing and timing of shipments of generic Revlimid. If you exclude these, our U.S. generic business grew.

Now, moving on to our third pillar, our generic Powerhouse. So,

as you can see here, uh,

the generics business performed at 2%.

Across. Um,

Our Global business.

and I remind everybody that there was a tough comparison here where we had an 11% growth uh, the prior year

And so I have put up here, a 2 year cake. I just to show that when we think about generics we think about this on a multi-year period because obviously some years we have more launches than others but let me just give you a bit more detail here. So in the US,

This uh this was driven by 2 things. Our prayer comparison where we launched big toes and we had a big launch with pictoa in the US and Q2 20224 as well as some phasing and timing of shipments of generic revlimid.

Richard Francis: That just shows the healthiness of the business we have in the U.S. From an EU point of view, we did actually grow the business 8% in the prior year, which is very high for such a big business. Although that growth has come down, it reflects once again just the phasing. New product launches, some tenders which only happen on a two-year basis, and some competitive stockouts which we took advantage of last year, and they are no longer there. We remain very confident about growing our generics business going forward. For the full year, we are just reiterating that our guidance for our generics business will be flat to low single digit.

Now, if you exclude, these are us, generic business, grew, just so so that just shows the healthiness of the business we have in the US.

And from an EU point of view.

We did actually grow the business 8% in the prior year, which is very high for such a big business. Although that growth has come down, it reflects, once again, just the phase of the new product launches, some tenders which only happen on a 2-year basis, and some competitive stockouts, which we took advantage of last year and are no longer there.

Richard Francis: The confidence going forward is based on the fact that we have 15 complex generics to launch, multiple other generics to launch across our EU and international markets, as well as eight biosimilars which we will be launching between now and 2027. Talking about biosimilars, let us move on to biosimilars now. As you can see here, it is an exciting time for our biosimilars. We are seeing some really good sales momentum in the U.S., and that has been driven by our established brands as well as our new launches with Solarity and Solaris that we generic Solaris that we launched in Q1 of this year. I would like to remind you that we have a portfolio play here, and so we have more launches to come. In fact, we have five additional launches in the second half of 2025 and to 2027.

But we remain very confident about growing our generic business going forward. For the full year, we're reiterating that our guidance for the Gen X business will be flat to low single digits.

The confidence going forward is, is based on the fact that we have 15 complex generics to launch multiple other genetics to launch across. Our our

Uh, EU and international markets as well as 8 by a similar, which will be launching between now and 2027.

Talking about bios. Let's move on to buy a similar now. And as you can see here,

Uh, it's an exciting time for our buyers Summers. We've seen some really good sales momentum, um, in the US, and that's been driven by our established Brands, as well as, our new launches with, um, Celerity and Solaris that we generic Solaris that we launched uh, in q1 of this year.

Richard Francis: Our ability to hit the goal of generating $400 million of additional sales by 2027, which we announced at our capital market day, we remain very confident about. It is good to see that our strategy of a portfolio play is starting to play out. Moving on to the final pillar of our pivot to growth strategy on focusing the business, I just wanted to give you an update on where we are in the Teva transformation. As you know, we announced that with transforming Teva, we had to become a world-class biopharma company. To do that, we put together a modernization program which will allow us to generate $700 million of net savings. This is after the reinvestment in our innovative pipeline and our innovative portfolio. We have also committed to deliver two-thirds of this by the end of 2026.

And I'd like to remind you, we have a portfolio play here, and so we have more launches to come. In fact, we have 5 additional launches in the second half of 2025 and into 2027. So, our ability to hit the goal of generating $400 million of additional sales by 2027, would you announce that at our Capital Markets Day? We remain very confident about this, and it's good to see that our strategy of the portfolio play is starting to play out.

Now, moving on to the final pillar of our pivot to grow strategy, on focusing, the business. I just wanted to give you an update of where we are in the Teva transformation. As you know, we announced that we're transforming teas, we had to become a world-class bio Pharma company and to do that.

We put together a modernization program which allow us to generate 700 million of net savings and this is after the reinvestment in our Innovative Pipeline and our Innovative portfolio.

Richard Francis: As you can see by this slide, we are well on track. We have already achieved 20% of this two-thirds, showing you we have good momentum, good execution, and delivering on these savings. Moving on to TAPI, I do want to give you a brief update on the deal here. The deal is still in active and advanced discussions. While I am disappointed that I do not have a definitive update to provide you at this time, my main focus is on delivering the best outcome for our shareholders, and we will reach the final decision in the third quarter. Before I hand the baton to Eric, I just wanted to give you an update on how we feel about the full year and our guidance for 2025. We are confident to hit our guidance in 2025.

We also committed to deliver two-thirds of this by the end of 2016.

To live in on these savings.

Now, moving on to Tappy, I want to give you a brief update on the deal here.

The deal is still inactive, and while advanced discussions are ongoing, I’m disappointed that I don’t have a definitive update to provide you at this time.

My main focus is on delivering the best outcome for our shelters, and we'll reach the final decision in the third quarter.

so before I hand the bat into Eric, I just wanted to give you an update on how we feel about the full year and our guidance for 2025

Richard Francis: When you think of it from a revenue point of view, the way we are going to get there has slightly changed. I think it has changed in a positive way. As you can see by this slide, our innovative portfolio is going to overdeliver on what we thought at the start of the year, and we raised guidance across all of the products: AUSTEDO, UZEDY, and AJOVY, totaling an additional $95 million for the year. Our GX business, as I have said, we predict will either be flat or low single-digit growth. Because of that, we believe from a revenue point of view, we will hit our mid or slightly below our midpoint of our revenue guidance. Eli will go into a bit more detail on that and the confidence we still have in our EBITDA and our EPS. With that, I will hand over to Eric.

now we're confident to hit our guidance in 2025 and when you think of it from a revenue point of view,

the way we're going to get, there is a slightly changed and I think it's changed in a positive way. As you can see by this slide, our Innovative portfolio is going to over deliver on what we thought at the start of the year and we rate guidance across all of the products, instead of you Saidi and a jovi, totally in, uh, an additional 95 million for the year.

Igx business, as I've said, we predict will either be flat or low single-digit growth, and because of that, we believe from a revenue point of view, we will hit our mid or slightly below our midpoint of our revenue guidance. But Eliyahu Kalif will go into a bit more detail on that and the confidence we still have in our EBITDA and our EPS. So with that, I'll hand over to Eric Hughes.

Eric Hughes: Thank you, Richard. As Richard mentioned, we are fortunate to have three phase 3 programs with a relatively high probability of success running right now with a large patient impact. Our schizophrenia program with olanzapine LAI can approach a diagnosed patient population of 4.7 million. Our DARI program in asthma can potentially impact 39 million patients that are diagnosed with asthma. Finally, Duvakitug, our potential best-in-class TL1A molecule, can treat 4.1 million. So our phase 3 program, which is running at full speed now, can impact a large patient population. In addition, we have a burgeoning and strong phase 2 program with Emerson in multiple system atrophy and Anti-IL-15 in celiac disease and vitiligo. So very exciting, both phase 3 and phase 2 programs running at full speed.

Thank you, Richard.

As Richard mentioned, you know, we are fortunate to have 3 phase 3 programs with a relatively high probability of success running right now. With a large patient impact, our schizophrenia program with olanzapine Ali can approach a diagnosed patient, population of 4.7 million, our Dari program and Asthma can potentially impact. 39 million patients that are diagnosed with asthma and finally, do have a key to our potential best-in-class tiene. Uh, molecule can it treat, you know, 4.1 million, so our phase 3 Program, which is running at full speed. Now can impact a large patient population. In addition, we have a burgeoning and strong Phase 2 program with Emer Salman and multiple system. Atrophy and anti-, 15 in cuac disease and Vitiligo. So very exciting, both phase 3 and Phase 2, programs running at full speed.

Eric Hughes: Our olanzapine LAI program is on track with our expected submission in the fourth quarter of this year. We will be presenting our full maintenance out to 48 weeks and our period two of the study with both the efficacy and safety in the third quarter of this year. To date, we have seen no PDSS, and we are pleased with the data maturity that we have now, and it is all on track. I am excited about our dual-action rescue inhaler program. It is a large asthma study. It is driven by asthma exacerbations, and our enrollment is on track for the end of this year. Duvakitug in partnership with Sanofi is right on track. Just to remind everyone, this is a large study.

Our lancip and lei program is on track. Uh and with our expected submission in the fourth quarter of this year, we'll be presenting our full maintenance uh full maintenance out to 48 weeks and our Period 2 of the study with both the efficacy and safety and the third quarter of this year to date. We've seen no PDFs and we're pleased with the the data maturity that we have now, and it's all on track.

I'm excited about our Google action rescue inhaler program. It's a large uh asthma study. It's a driven by asthma exacerbations and our enrollment is on track for the end of this year.

Eric Hughes: Both indications will be over one year. We are testing two doses in the study, and there are over 1,000 patients for each indication, both ulcerative colitis and Crohn's disease. We are anticipated to be starting that phase 3 program in the fourth quarter of this year. Our Emerson program is moving right on track. We started enrollment at the end of last year. This is a robust phase 2 study, placebo-controlled. I am pleased to say that our enrollment is actually exceeding our expectations at this point. So we are looking to have this study fully enrolled in 2026. We did announce a partnership with Husson Pharma. This is a strategic partnership where we are advancing our PD1 IL-2 rapidly. We are capitalizing on the burgeoning infrastructure in China and the patient unmet medical need there.

Now, Dubai, keto and partnership with Sophia is right on track, just to remind everyone. This is a large study; both indications will be over 1 year, whereas we're testing 2 doses in the study, and there are over 1,000 patients for each indication. Both ulcerative colitis and Crohn's disease, and we are anticipated to be starting that Phase 3 program in the fourth quarter of this year.

Our Emer Salman program is moving right on track. We started an enrollment at the end of last year and this is a robust Phase, 2 study, uh Placebo control. And I'm pleased to say that our enrollment is actually exceeding our expectations at this point. So we're looking to have this study fully enrolled in 2026

Eric Hughes: So this is a strategic partnership that really supports our PIPSI growth partnership strategy. Our Anti-IL-15 program is moving right on track. We believe we have a differentiated Anti-IL-15 molecule with greater potency, great PK, low anti-drug antibodies. We are excited to show some biomarker data at our capital markets day, showing a potential impact by a single dose of our molecule on the protection of the gut, as you can see in the graph on the right, where we protected the bump in this biomarker showing a protection of the gut lining with one dose of Anti-IL-15. This is very exciting data. We are looking forward to more in the future. Finally, I just want to touch base on our anti-TSLP IL-13 program. This is an AI-generated antibody with a novel dual-specific activity for both a well-known IL-13 and anti-TSLP target.

Now, we did announce a partnership with Husan Pharma. This is a strategic partnership where we're advancing our PD-1, aisle 2, Rapid, or capitalizing on the burgeoning infrastructure in China and the patient unmet medical needs there. So, this is a strategic partnership that really supports our pip to growth partnership strategy.

Our Auntie aisle 15 program is moving right on track. We believe we have a differentiated anti aisle. 15 molecule with greater potency great PK low, anti-drug antibodies and we are excited to show some biomarker data at our Capital markets day, showing a potential impact on a by a single dose of our molecule, uh, on the protection of the gut. As you can see in the graph on the right where we protected the bump in this biomarker, showing a protection of the gut lining with 1 dose of anti-al 15. So, very exciting data. We're looking forward to more in the future.

Eric Hughes: We think this is a very active way of treating type 2-driven diseases. We are looking forward to bringing that into humans in the first half of 2027. With that, I am going to pass it off to Eli Kalif.

And anti-TSLP targets. We think this is a very, uh,

Active way of treating type 2-driven diseases, and we're looking forward to bringing that into humans in the first half of 2027.

And with that, I'm going to pass it off to Ellie Khalif.

Richard Francis: Thank you, Eric, and good morning and good afternoon to everyone. I would like to start today with the following key messages that demonstrate our consistent execution over the last few quarters, including Q2. First, Q2 came in with a solid performance driven by our fast-growing innovative portfolio, despite a tough year-over-year comparables of our generic business. Second, we continue to improve and strengthen our balance sheet. More specifically, we reduced our working capital days and leverage, which was recognized by the leading credit rating agencies in their most recent upgrades to Teva Pharmaceutical Industries Ltd.'s credit ratings. Third, we remain confident in and on track for achieving our 30% operating margin target by 2027 and have already made tangible progress in implementing targeted programs to deliver approximately $700 million of net savings by 2027. Lastly, while we continue to wait for clarity around potential U.S.

Thank you, Eric and good morning and good afternoon to everyone. I would like to start today with the following key messages, that demonstrate our consistent execution, over the last few quarters, including Q2.

first Q2 came in with a solid performance driven by our first fast growing Innovative portfolio, despite tough year-over-year, comparables of our generic business

Second.

We continue to improve and stress, on our balance sheet, more specifically reduce our working capital days and leverage, which was recognized by the leading credit rating agencies in their most recent upgrades.

To teas credit ratings.

Richard Francis: tariffs on pharmaceuticals, including further details on what was announced earlier this week for Europe, we have absorbed the already confirmed tariff into our 2025 guidance, which remains unchanged. Now, moving to slide 30 to review our Q2 2025 financial results, starting with our GAAP performance. Please note that throughout my remarks, I will refer to revenue growth in local currency terms unless I specify otherwise. I would also like to remind everyone that on March 31st, 2025, we closed the divestitures of our business ventures in Japan, which marketed mainly generics products along with some legacy innovative products. This divestiture was consistent with our strategy to focus on profitable growth as well as our capital allocation framework.

Third, we remain confident in and on track for achieving our 30% operating margin target by 2027 and have already made tangible progress in implementing targeted programs to deliver approximately $700 million of net savings by 2027. And lastly, while we continue to wait for clarity around potential U.S. tariffs on pharmaceuticals, including further details on what was announced earlier this week for Europe, we have absorbed the already.

confirmed tariff into our 2025 guidance, which remains unchanged

Now, moving to slide 30.

To review our Q2 2025 Financial results.

Starting with our Gap performance.

Please note that throughout my remarks, I will refer to revenue growth in local currency terms unless I specify, otherwise

I would also like to remind everyone that on March 31st 2025. We closed the diversity of our business ventures in Japan, which marketed mainly generic products along with some Legacy Innovative products.

This diversity was consistent with our strategy to focus on profitable growth as well as our Capital allocation framework.

Richard Francis: During the presentation, I will be referring to certain results that exclude the contribution from this Japan business venture from Q2 2024 to provide you with a like-for-like comparison of our Q2 2025 financial results. For your reference, we have a slide in the appendix showing the contribution from the business venture from Q1 2024 through Q1 2025, the last quarter in which we consolidated the business. Our Q2 results were solid, with revenue of approximately $4.2 billion growing 2% in U.S. dollars or 1% in local currency, excluding the Japan BV. As Richard Francis highlighted earlier, this was our 10th consecutive quarter growth, driven by continued strong momentum in our key innovative products: AUSTEDO, AJOVY, and UZEDY, despite a tough prior year comparable in our generics revenue. GAAP net income and EPS were $282 million and $0.24, respectively.

During the presentation, I will be referring to a certain result that excludes the contribution from this Japan business venture from Q2 2024 to provide you with a like-for-like comparison of our Q2 2025 financial results.

For your reference, we have a slide in the pending showing the contribution from the business. Venture from Q1 2024 through Q1 2025, the last quarter in which we consolidated the business.

Our Q2 results were solid, with revenue of approximately $4.2 billion, growing 2% in US dollars or 1% in local currency, excluding the Japan BV.

As Richard highlighted earlier, this was our 10th consecutive quarter, growth driven by continuous strong momentum, in our key, Innovative products Osteo, a jovi and ye despite a tough prior year comparable in our generic Revenue.

Richard Francis: FX movements during the quarter, net of hedging effects, positively impacted revenue by $49 million, but had a minimal impact on operating income compared to the second quarter of 2024. Looking at our non-GAAP performance, our non-GAAP gross margin, excluding Japan, increased by 130 basis points year over year to 54.6%. This increase in gross margin was higher than our original expectation, driven by a positive shift in portfolio mix, especially with AUSTEDO's continued growth and impact of the sales of certain product rights in Europe, partially offset by low revenue from legacy innovative products like Copaxone. Non-GAAP operating margin increased by approximately 170 basis points year over year to 27.1% and benefited from lower R&D expenses in the second quarter of 2025, mainly due to a decrease in non-recurring milestone payments for certain biosimilars collaboration.

GAAP net income was $20,082 million and earnings per share (EPS) was $0.24, respectively.

Ethics movements during the quarter net of hedging effects, positively impacted Revenue by 49 million, but at a minimal impact on operating income compared to the second quarter of 2024.

Now, looking at our nanga performance,

Our Nan, GAAP gross margin, excluding Japan, increased by 130 basis points year-over-year to 54.6%. This increase in gross margin was higher than our original expectation.

Driven.

by positive, shifts in portfolio, mix, especially with a continued growth

And impact of the cell of a certain product rights in Europe partially offset by lower revenue from Legacy Innovative products like Copaxone.

Richard Francis: Overall, we ended the quarter with a non-GAAP earning per share of $0.66, an increase of $0.05 or 10% year over year. Total non-GAAP adjustments in the second quarter of 2025 were $486 million. This included approximately $154 million of restructuring costs, mainly related to optimization of the Teva Pharmaceutical Industries Ltd. Global organization and operations in connection with our ongoing transformation program. Our free cash flow grew strongly by 47% to $476 million, mainly driven by higher net income as well as working capital improvements. Turning to slide 31, we continue to strengthen our balance sheet to support our pivot to growth strategy and the journey towards an investment-grade credit rating. During the second quarter, we refinanced approximately $2.3 billion of the near-term debt maturities, mainly in 2026, 2027, and 2029, to better align them with our free cash flow generation.

Non-GAAP operating margin increased by approximately 107 to 170 basis points year over year to 27.1% and benefited from lower R&D expenses in the second quarter of 2025, mainly due to a decrease in non-recurring milestone payments for certain collaborations.

Overall, we ended the quarter with the 9 Gap. Earnings per share of 66 cents and increase of 5 5 cents or 10% year-over-year.

To Nan Gap adjustment in the second quarter of 2025 with 486 million.

Musician and operations in connection with our ongoing transformation programs.

Our free cash flow, grew strongly by 47% to 476 million, mainly driven by higher net income, as well as working Capital Improvements.

Turning to slide 31.

We continue to strengthen our balance sheet.

To support our people, we aim to grow our strategy and advance towards an investment grade with great ratings.

Richard Francis: Importantly, we did that while keeping our cost refinancing costs of capital at a similar level, demonstrating our improved credibility and profile in the market. This significant ongoing improvement in our balance sheet is recognized by the leading credit rating agencies. All three major agencies have upgraded Teva Pharmaceutical Industries Ltd. credit ratings over the last 12 months, including two rating upgrades prior to the refinancing in the second quarter. Our gross debt reduced to $17.2 billion at the end of Q2, compared to $17.8 billion at the end of 2024, due to the repayments of $1.4 billion of notes at maturity, partially offset by exchange rate fluctuations. Our net debt was 15.1 billion, and the net debt to EBITDA remained just over three times.

During the second quarter we refinanced approximately 2.3 billion of the near-term debt maturities, mainly in 2026 2027 and 2029 to better align them with our free cash flow generation.

Importantly, we did that while keeping our post refinancing costs of capital as similar levels to demonstrating our improved credibility and profile in the markets.

This significant ongoing improvement in our balance sheet is recognized by the leading credit rating agencies. All three major agencies have upgraded our credit ratings over the last 12 months, including two rating upgrades prior to the refinancing in the second quarter.

Richard Francis: As I highlighted during our capital market day in May, we are on track to achieve two times net debt to EBITDA by 2027 and an investment-grade rating, while still making deliberate investments in the business to execute on the accelerated phase of our pivot to growth journey. Moving to slide 32. As we announced last quarter, we are transforming Teva with a targeted program to deliver sustainable margin improvements without compromising our ability to innovate and invest in our long-term growth. These programs are expected to deliver approximately $700 million of net savings between 2025 and 2027.

Our gross debt reduced to 17.2 billion at the end of Q2 compared to 17.8 billion. At the end of 2024 due to the repayments of a 1.4 billion of notes at maturity partially offset by exchange rate fluctuations. Our net debt was 15.1 billion and the net debt to ibida remained just over 3 times.

As I highlighted during our Capital Markets Day in May, we are on track to achieve 2 times net debt to EBITDA by 2027.

And an investment-grade rating while still making deliberate investments in the business to execute on the accelerated phase of our pivot to growth journey.

Moving to slide.

32.

As we announced last quarter.

We are transforming Teva with the targeted programs to deliver sustainable margin improvements without compromising, our ability to innovate and invest in our long-term growth.

Richard Francis: This transformation program, together with the ongoing portfolio shift towards high growth and margin innovative products, provides a clear path to achieving our 30% operating margin targeted by 2027, by expanding gross margin to be between 57% to 58%, while keeping operating expenses in the range of 27% to 28% of revenue, despite continuous investment in the business. We have kicked off these programs to transform our operation with a tangible progress already in place as of today. We expected roughly two-thirds of the $700 million savings to be realized between 2025 and 2026, including approximately $70 million of initial savings in the second half of this year. The savings in the second half translated to an annualized run rate of approximately $140 million, or about 20% of the overall net savings target.

This programs are expected to deliver approximately 700 million of the net savings between 2025 and 2027 this transformation programs. Together with the ongoing portfolio shift towards high growth and margin Innovative products. Provide a clear path to achieving our 30% operating margin targeted by 2027 by expanding, gross margin to be between 57.

to 58% while keeping operating expenses in the range of 27 to 28% of Revenue, despite continuous investment in the business,

we have kicked off these programs to transform our operation with a tangible progress already in place. As of today, we expected the roughly 2/3 of the 700 million savings. To be realized between 25 and 26, including approximately 70 million of initial. Save initiated initial Savings in the second half of the year.

Richard Francis: With a clear action plan of these programs, along with our expected growth trajectory led by our innovative portfolio, we are confident in growing adjusted EBITDA in 2026 and in 2027, both in US dollars and margin terms. In relation to these programs, we recorded approximately $150 million of restructuring costs in the second quarter and expected an overall cash outflow of $70 million to $100 million in 2025. Both the expected savings in the second half and these cash outflows are already considered in our full-year guidance range for 2025. Moving to the next slide, to our 2025 non-GAAP outlook. As I mentioned earlier, our performance in Q2 and the first half has been solid, delivering revenue growth despite a tough prior year comparables and improving margins and cash flow, while making significant progress on our transformation program to achieve our 2027 financial target.

The savings in the second half translated to an analyzed run rate of approximately $140 million, or about 20% of the overall net savings target.

With a clear action plan of these programs. Along, with our expected growth trajectory led by our Innovative portfolio. We are confident in growing adjusted ibida in 2026 and in 2027 both in US Dollars and margin terms.

In relation to these programs, we recorded a few 150 million dollars of restructuring costs. In the second quarter and expected an overall cash outflow of 70 to 100 million in 20 2025.

Both.

The expected savings in the second half, and these cash outflows are already considered in our full-year guidance, range for 2025.

Moving to the next slide.

To our 2025 Nan Gap Outlook.

Richard Francis: Based on our year-to-date results and the current view of the second half, we are reaffirming our 2025 outlook range for revenue, operating profit, and adjusted EBITDA, while increasing the lower end of our EPS range by $0.05. Let me provide some color on the assumptions that we have factored into our guidance, starting with the revenue. First of all, our innovative portfolio is delivering very well across our three key products: AUSTEDO, AJOVY, and UZEDY. With a strong first-half performance, we have increased our combined guidance for them by approximately $100 million at the midpoint. With increased expectations of our combined 2025 revenue outlook for these three products, it is around $2.9 billion versus $2.3 billion in 2024, reflecting growth of approximately 23% year over year. Second, FX movements have favorably impacted our revenue since the beginning of Q2, mainly due to the weaker USD versus the euro.

As I mentioned earlier, our performance in Q2, and the first half has been solid, delivering Revenue growth, despite a tough prior year, comparables and improving margins and cash flow while making significant progress on our transformation, programs to achieve our 2027 Financial targets.

Let me provide some color on the assumptions that we have factored into our guidance, starting with the revenue.

First of all, our Innovative portfolio is delivering very well across our tricky products.

Instead of a jovi, a new Zi.

With a strong first-half performance, we have increased our combined guidance for them by approximately $100 million at the midpoint.

With increased expectations of our combined, 2025 Revenue outlook. For these 3 products it's around 2.9 billion versus 2.3 billion in 2024, reflecting growth of approximately 23% year-over-year.

Richard Francis: While our hedging programs offset some of these FX benefits, overall, we do see a net positive impact on our revenue guidance range as compared to our May guidance. However, as Richard Francis discussed earlier, we expected our global generics revenue for a full year in 2025 to be flat to modestly growing in the local currency as compared to 2024. This is mainly due to the tough prior year comparables and increased competition on prior launches, as well as the delay in timing of certain generic launches. Overall, with the pluses and minuses that I just talked about, we still expect our revenue to be in our 2025 guidance range of $16.8 billion to $17.2 billion. Although, based on our current trajectory, we are likely going to be around or slightly below the midpoint.

Has verbally impacted our Revenue since the beginning of Q2, mainly due to the weaker USD versus the Euro, while our heading programs offset, some of these ethics benefits. Overall, we do see a net positive impact on our Revenue. Guidance range as compared to our May guidance.

However, as Rachel discussed earlier, we expected our Global generic revenue for a full year in 2025, to be flat to modestly growing in the local currency as compared to 2024. This is mainly due to the task prior year, comparables and increased competition on a fair launches as well as the delay in timing of a certain Jenner.

Lounges.

Richard Francis: Moving to the other elements of our financial outlook, we continue to expect our non-GAAP gross margin to be between 53% to 54% for the full year. Given our year-to-date gross margin performance, we expect our gross margin for the year to be above and at the midpoint of this range, with a sequential improvement from Q3 to Q4. We are also reaffirming our non-GAAP outlook for adjusted EBITDA and operating income. As reflected by the increased revenue outlook, we expect to continue strengthening our innovative portfolio in the second half, combined with the expected savings of approximately $70 million from our transformation programs and the FX benefits. These factors are expected to offset the impact of relative softness in generics. Therefore, based on what we know today, we expect our non-GAAP operating income, adjusted EBITDA, and EPS to be at the midpoint of our guidance range or above.

Overall, with the pluses and minuses that I just talked about, we still expect our revenue to be in our 2025 guidance range of $16.8 billion to $17.2 billion. Although, based on our current trajectory, we are likely going to be around or slightly below the midpoint.

Moving to the other elements of our financial outlook, we continue to expect our non-GAAP gross margin to be between 53% to 54% for the full year. Given our year-to-date gross margin performance, we expect our gross margin for the year to be above and at the midpoint of this range, with a sequential improvement from Q3 to Q4.

We are also reaffirming our Nan Gap, outlook for adjustability and operating income.

As reflected by The increased Revenue Outlook. We expected to continue strengthened in our Innovative portfolio in the second house. Combined with the expected Savings of approximately 70 million from our transformation programs and the ethics benefits

Richard Francis: Accordingly, we are raising the lower end of the EPS range by 5 cents to the new range of $2.50 to $2.65. Our free cash flow guidance range remains the same, between $1.6 billion to $1.9 billion. Now, let me provide some additional thoughts on the quarterly phasing for the rest of the year. Overall revenue is expected to ramp up through the rest of the year. Although Q3 faces a tough comparison, especially in generics, due to the prior year new product launches, we expect sequential improvements in the fourth quarter, driven by an expected increase in our innovative product revenue, as well as phasing of generics revenue. We also continue to expect our operating expenses to be between 27% to 28% of revenue.

These factors are expected to offset the impact of relative softness in generics. Therefore, based on what we know today, we expect our non-gaap offering income adjusted evida and EPS to build the midpoint of our guidance range or above.

Accordingly, we are raising the lower end of the EPS range by 5 cents, to the new range of 2.50 to 265.

Our free cash flow, guidance range Remains the Same between 1.6 billion to 1.9 billion.

Now, let me provide some additional thoughts on a quarterly phasing for the rest of the year.

Overall revenue is expected to ramp up through the rest of the year.

Although, Q3 faces a tough comparison, especially in generics, due to the power year. New product, launches we expect sequential improvements in the fourth quarter driven, by an expected increase in our Innovative product Revenue as well as saving of generics Revenue,

Richard Francis: Given the phasing of a certain investment in S&M and R&D, we expect OpEx to increase sequentially in Q3 before stepping down in Q4 to be consistent with our full-year range. Moving to the next slide. Our capital allocation strategy is consistent. It is clear and is designed to fuel our long-term growth while strengthening our balance sheet. Our improving free cash flow generation and portfolio optimization position us very well to achieve our net debt to EBITDA target for the two times by 2027 and to sustain that ratio after that. We believe reaching that leverage target and an investment rating will allow us to review different ways of returning capital to our shareholders. Finally, before I conclude my review of the second quarter results, I would like to reaffirm our 2027 financial target.

we also continue to expect our operating expenses to be between 27 to 28% of Revenue.

Given the phasing of a certain investment in SNM and R&D, we expect Opex to increase sequentially in Q3 before stepping down in Q4 to be consistent with our full year range.

Moving to the next slide.

Our Capital allocation strategy is consistent. It is clear and is designed to fuel our long-term growth while threatening our balance sheet.

Our improving free cash, flow generation and portfolio optimization position.

Positioning and gas is very well to achieve our net debt to EBITDA target for the 2 timeslot.

Will allow us to review different ways, returning Capital to our shareholders.

Richard Francis: Based on the progress to date and our continued focus on execution, we are confident that we are on track to achieve this target. With that, I will now hand it back to Richard for his closing remarks. Thank you, Eli. Thank you, Eric. Going to the next slide. Thank you. Delivering on the acceleration phase of our pivot to growth strategy, this is a slide that I like a lot because it shows the potential that we have right in front of us here at Teva. As I've highlighted, our growth ambitions towards 2027 can be fueled by our innovative portfolio, AUSTEDO hitting $2.5 billion, AJOVY continuing to grow, and UZEDY continued to grow and joined by olanzapine LAI, which allows us to have the ambitions for a $1.5 to $2 billion peak sales of our long-acting franchise in schizophrenia. We aim to double our biosimilar business.

On execution, we are confident that we are on track to achieve these targets.

With that, I will now hand it back to Richard for his closing remarks.

Thank you Allie. Thank you Eric. Um so we go to the next slide. Thank you. Um so delivering on the acceleration phase of our pivotal strategy. This is a slide that I I like a lot because it shows the potential that we have right in front of us here at Teva.

As I've highlighted, our growth ambitions towards 2027 can be fueled by an innovative portfolio instead of hitting $2.5 billion. We will continue to grow, and you said it, continue to grow and join by olanzapine.

and the Ambitions for a 1.5 to 2 billion Peak sales of our long-acting franchise and schizophrenia

Richard Francis: If you look beyond that, which I would encourage you to do when you look at Teva as a biopharmaceutical company, you can see that AUSTEDO will continue to grow beyond 2028, as will our long-acting franchise, as will our biosimilars. It will be joined by our dual-action rescue inhaler, which we think has peak sales potential of a billion, Duvakitug, and the indications that Eric has outlined, as well as UZEDY. The path to continued growth, I think, is clear for Teva. If you go on to the next slide, when we bring it back to the thoughts around 2025 and beyond, we continue to deliver on our pivot to growth strategy.

and we're going to double our by a similar business. But if you look beyond that, I wish I'd encourage you to do. When you look at tever as a bio pharmaceutical company. You can see that Australia will continue to grow Beyond 28. As will our long-acting franchise as will our bio similars and it will be joined by our dual action rescue inhaler which we think is Peak sales potential of a billion. Do the ketogenic and the indications that Eric has outlined as well as emry soulman.

So the part to continued growth, I think is clear for ta.

If you go to the next slide, we will bring it back to the thoughts around 2025 and beyond.

Richard Francis: I am really pleased to show that the 27% increase in revenue of our innovative portfolio shows the strength, the capability we have there. We have highlighted a very clear path to 30% operating margins and the ability to hit our other 2027 targets. This once again is through this good, strong, innovative growth, our stable generics business, and the ability to modernize and transform Teva in saving $700 million. Our innovative pipeline shows we have near-term catalysts with olanzapine LAI submission and the start of our Duvakitug Phase 3 results. The pipeline also shows we have potential to continue to grow this company way into the future. Both Eli and I have highlighted we are well on track for Teva's transformation. We have already achieved 20% of our $700 million of savings in the last few months that we have been executing this.

We continue to deliver on our pivot to growth strategy and I'm really pleased to show that the 27% increase in Revenue. In Innovative portfolio shows the strength of the capability, we have their

We highlighted a very clear path to 30% operating margins and the ability to hit our other 2027 targets.

and this once again, is through this

Good strong Innovative growth, our stable, generic business and the ability to modernize and transform whatever in Saving 700 million.

Innovative pipeline shows, we have near-term catalysts with the lanipaa.

But also the pipeline shows with potential to continue to go this company way into the future.

Richard Francis: With that, thank you for your attention, and I will hand it to the Q&A. Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, that is star followed by two. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Thank you. Our first question for today comes from Umer Raffat of Evercore ISI. The line is now open. Please go ahead.

Both Ellie and I have highlighted we're well on track for de's transformation. We've already achieved 20% of our 700 million dollars of savings in the last few months that we've been executing this.

So with that, thank you for your attention and I'll hand it to the Q&A.

Thank you. As a reminder, if you'd like to ask a question, please press star followed by 1 on your telephone keypad. If you'd like to remove your question, press star followed by 2.

As a reminder, if you're using a speaker-phone, please remember to pick up your handset before asking your question. Thank you.

Our first question for today comes from Omar, rapat of a call. Isi the lines now open. Please go ahead.

Eli Kalif: Good morning, guys. This is Yifeng Liu for Umer Raffat. Thanks for taking our questions and congrats on a good quarter. Our question is regarding AUSTEDO and the IRA negotiation. Is it possible to share any color on what the range of discounts that you guys are expecting and how this compares to the first round and give you some details if possible?

Good morning, guys. This is why for Omar thanks for taking our questions and congrats now.

Good quarter. Um, our question is regarding Osteo and the IRA negotiation is it possible to share any color on? What is what's the range of this country? You guys are expecting

Um and how this compared to the first round. Um and give some some details if possible.

Richard Francis: Hi, yeah, thanks for the call. Thanks for the question. Unfortunately, I am going to give a very boring answer. We are not going to comment on anything to do with the IRA because we are in the middle of negotiations with CMS. So you will have to wait until we get to the conclusion of that before we make any announcement.

Hi. Yeah. Thank thanks for the call. Thanks for the question. Um, unfortunately, I'm going to give a very boring answer. We're not going to comment on anything to do with the IRA because we are in uh the middle of negotiations with CMS. Um, so you'll have to wait till we get to the conclusion of that before you make any announcement.

Eli Kalif: Okay. If I may, a second question. Do you guys expect any impact from the tariffs announced in Europe this year?

Okay? And if I may ask a question, um, do you guys expect any impact from the tariffs, um, announced in Europe this year?

Richard Francis: I will hand that to Eli, but I would just remind you when we were on the Q1 earnings call, we talked about the work we had done in preparation for tariffs. The team have done very comprehensive work to understand how we can mitigate the impact on our business. That said, there is a lot of ambiguity about what has really occurred with these tariffs. We are very keen to understand the detail of what is included, what is not included, and then obviously which one of those mitigation plans we can put in place. With that, I will hand it to Eli. He will give you his perspective as well.

Eli Kalif: Yes, thanks, Yapi, for the question. I just want to remind that more than 50% from the products that we're selling in the U.S. is actually manufactured in the U.S. We have eight sites, and also our leading product, AUSTEDO, is manufactured in the U.S. As part of the rest of the world, we have very limited exposures on China and India. When we're actually looking on Europe, and even if you were thinking about Israel, as Richard mentioned, we are trying to really understand how this one is going to play in between generics or innovative. I would say that we have a very, very flexible and full-value chain in terms of our manufacturing and how we're able to manage this one. Most importantly, we're also trying to learn about the timing that this one will enable companies to implement. Is it a one-year, two-year, or three years?

So, I'll, I'll hand that to Ellie. But I, I would just remind you when we're on the q1 earnings call. We talked about, uh, the work we had done, uh, in preparation for tariffs. And so, the team have done, very comprehensive worked to understand how we can mitigate the impact on our business. That said, there's a lot of ambiguity about what is really occurred with these tariffs. And so we're very keen to understand the details of what is included, what is not included. And then obviously, which 1 of those, uh, mitigation plans we can put in place but with that I'll hand it to Ellie. Who will give you his perspective as well.

Eli Kalif: Overall, I think that we are positioning very well in terms of all that we work with the done so far. Currently, we don't see any meaningful impact.

This 1 going to play in between generics or Innovative and I will say that we have a very, very flexible and full value chain and in terms of our manufacturing and how we're able to manage. And this 1 H, most importantly what also trying to learn about the timing that this 1 will enable to companies to implement. Is it a 1 year or 2 year 3 years? But, uh, overall, I think that we are positioning very well in terms of all the to work with the done so far and currently we don't see any meaningful impact.

Richard Francis: Thank you very much.

Eli Kalif: Thank you.

Thank you very much. Thanks for the question. Thank you.

Richard Francis: Thank you. Our next question comes from Ashwani Verma of UBS. The line is now open. Please go ahead.

Thank you. Our next question comes from Ash farmer of UBS the lines now open, please go ahead.

Ashwani Verma: Yeah, good morning. Thanks for taking our question. So, just on AUSTEDO, good to see the acceleration here and wanted to get a sense on the BID to XR conversion. You are already seeing that around more than 60% in new patients. But when can we see that type of share be replicated in all patients, not just new patients? That is one. And then secondly, if you can provide a little bit more color on the tariff impact on U.S. versus Europe. So you said that it is absorbed in your 2025 financial guidance, but how does that impact your P&L going forward? And I know they called out some exclusion of certain generics. If you can shed some light on what that constitutes. Thanks.

Yeah, good morning. Thanks for taking our questions, so just on a stero like, uh, good to see the acceleration here, um, and wanted to get a sense on the B to excel conversion. So you're already seeing that at a more than 60% in new patients. Um, but when can we see that type of share be replicated in all patients, not just new patient. Uh, that's 1 and then secondly, yeah, if you can provide a little bit more color on the

That is the impact on the U.S. versus Europe. So, you said that it's absorbed in your 2025 financial guidance. But how does that impact your P&L going forward? And I know they called out some extrusion of certain genetics; if you can shed some light on what that constitutes.

Thanks.

Richard Francis: Hi, Ash. Thanks for the questions. I will tag team a bit with Eli on this again. Starting with AUSTEDO, I am glad you have noticed the great performance of AUSTEDO of 22% in the U.S. as the team continues to execute very well and showing our commercial capability. With regard to XR, yes, you are right. We are converting our patients. New patients are moving onto XR. We have some patients who convert from BID. This is one where I would say the direction of travel is clear as AUSTEDO XR will become the predominant drug that is used. That just takes a bit of time. When patients are stable, obviously, there is no need to change them. The desire to use that for new patients is very high amongst our physicians for the obvious reasons around compliance and adherence.

Hi Asha, thanks for the questions. Um so I'll talk to him a bit with early on this again but starting with the status. I'm glad you've noticed the, the great performance of of a stereo of 22% in the US as the team continues to execute very well and show our commercial capability with regard to XR. Yes, you're right. We are converting or patients. Uh, new patients are moving on to XR. We have some patients who convert from B. Um, but this is 1 where I'd say the direction of travel is clear is uh, a state of XR will become.

Richard Francis: We will sort of give maybe interim updates on how that is progressing. I think the line of sight to having the majority of the patients on XR in the future is clear. With regard to the tariffs, I think your question was how do we see the impact of the tariffs over the longer term, and particularly with regard to Europe? Once again, I would just reiterate that there is a lot of uncertainty about what has happened. I will just highlight, for example, are generics in, are they out, are certain generics in, are they out? I think the way we have always played this on tariffs is to be very conservative.

The predominant, uh, drug. That's used that just takes a bit of time when patients are stable, obviously, there's no need to change them. Uh, but the desire to use that for new patients is very high, amongst our physicians for the obvious reasons around compliance and adherence and so, we'll sort of give maybe interim updates on how that is progressing. But I think the, the, the line of sight to having the majority of the patients on XR in the future, um, is clear.

With regard to the tariffs. Um,

I think your question was, uh, how do we see the impact of the tariffs over the longer term? Um, and particularly with regard to Europe, uh, once again, I just reiterate that there's a lot of uncertainty about what has happened. Um, I just highlight, for example, um,

Richard Francis: When we talked about the mitigation plans in Q1 and what Eli just mentioned, we think about this very comprehensively and probably with a more glass half empty approach as in let us plan our business so that we can manage the tariffs and not have them impact our P&L going forward. There is a lot of uncertainty, so we need to see how that plays out. Maybe I will hand it back to Eli to reiterate some of the points you just made.

Eli Kalif: Yes. So when you mentioned about our guidance, I want to repeat again, we have absorbed the already confirmed tariff into our 2025. Currently, from what we heard this week on Europe, this one, it is something that we are still trying to understand, as I mentioned, because also the investigation around the 232 was not concluded yet, and we are waiting for like everyone that that is when it will happen in the next few weeks. All in all, when we are looking on our supply chain, our ability to actually build inventories and to manage our manufacturing steps, we do not see here currently any meaningful impact for the short term. As I mentioned, we will see how administration will manage the timings to implement those tariffs once those happen. That will allow us to actually manage it very thoughtfully.

Our genetics in? Are they out or certain generics in? Are they out? I think the way we've always played this on tariffs is to be very conservative. And so when we thought talked about the mitigation plans in q1 and what Ellie just mentioned, we think about this, very comprehensively, and probably with a more glass half empty approach is in uh, let's plan our business so that we can manage, um, the tariffs and not have them impact our pnl going forward. But there's a lot of uncertainty so we need to see how that plays out, but maybe I'll hand it back to Ellie to reiterate some of the uh the points you just made. Yeah, yes as so. When you mentioned about our guidance, I want to repeat again, we have absorbed the already confirmed tariffs into our 2025 and currently, from what we heard this week on Europe This 1 it is something that we still trying to understand as I mentioned because uh also the investigation around the 232 and was not concluded yet. And we're waiting for like everyone that that's when will happen in the next.

A few weeks. But all all in all, when we are looking on our supply chains, our ability to actually build inventories and to manage our manufacturing. Uh, steps we don't see here currently any meaningful impact for the short term. And as I mentioned, we will see how um Administration will manage the timings to implement those Towers. Once those those happen that will allow us to actually manage managing it very Softly.

Richard Francis: Ash, apologies, I forgot your last question.

Apologies, I forgot your last question.

Ashwani Verma: Just on the exclusion of certain generics, if you can shed some light on what that actually constitutes.

Uh, just on the Extrusion of certain generics, if you can check some light on what that actually constitutes.

Richard Francis: What do you mean the exclusion of certain generics? Sorry, I'm a bit.

What do you mean the exclusion of certain generics? So a bit.

Ashwani Verma: Oh, this is in the tariff announcement that the.

Richard Francis: Oh, right.

Ashwani Verma: Certain.

Richard Francis: Okay, yes.

Ashwani Verma: Yeah.

Richard Francis: Sorry, I seem to be a bit confused there. I think it's just we don't fully understand the specificity of that. As I'm probably sure you've seen the same as us with the headlines, it's slightly confusing as to what is included and what's not. To reiterate Eli's points, we just want more clarity on that just to understand what the impact is, what we can do to mitigate that, and what does that look like over what time period. A bit of uncertainty there, but we're hopeful that we'll have clarity in the not-too-distant future, and then we can make sure that we do our best to mitigate it. A lot is unknown still. Thanks for your questions, Ashwani Verma. Thank you. Our next question comes from Jason Gerberry of Goldman Sachs. The line's now open. Please go ahead.

Oh, oh, this is in the, uh, the tariff announcement, uh, that, uh, all right, certain, okay. Yes.

Specificity of that. Uh, as I'm probably you sure, you've seen the same as us with the headlines. It's it's slightly confusing as to what is included and what's not. And and

Reiterate Ellie's points. We just want more clarity on that, just to understand what the impact is what we can do to mitigate that. And and what does that look like over? What time period. So a bit of uncertainty there, but we're hopeful that we'll have Clarity in the not too distant future and then we can make sure that we, uh, do our best to mitigate it. But a lot is UN unknown. Still?

Thanks for your questions, Ash.

Thank you. Our next question comes from, Matt delatore of Goldman Sachs, the Line is now open. Please go ahead.

Jason Gerberry: Great. Thanks for taking the question and congrats on the continued progress. Maybe starting with Duvakitug, could you all share anything on the broader development program or when we might expect updates there, in particular how competitor programs are informing your indication expansion strategy? Will we see Phase 2 IVD maintenance data later this year? If so, what do you want to see there? Lastly, for the long-acting lending, is there a possibility for a priority review there? Thank you.

Great. Thanks for taking the question and congrats on the continued progress. Um, maybe maybe starting with Dua, could you go? I'll share anything on the broader development program. Uh, or when we might expect updates there in particular, how competitive programs are. Informing your, your indication expansion strategy and then what we see, Phase 2, be IBD, maintenance data data later this year. If so, what do you want to see there? And then maybe this lastly um, for the long-acting or lens of being, is there a possibility for a priority review there. Thank you.

Richard Francis: Hi, Matt. Thanks for the questions. I'll hand those straight over to Eric.

David Amsellem: Sure. Thank you, Matt, for the question. For Duvakitug, we are working very closely with our partner, Sanofi, on choosing the indications we will go into. To be clear, we will announce those once we have initiated the study. That is something you will have to stay tuned for. Right now, we are super focused on getting the phase three started, which I must say we have checked all the boxes. We have got all our ducks in a row, and those studies will be starting right on time. That is our main focus. With regard to the phase two data, that is actually something that is maturing right now. That is a 44-week follow-up from our phase two study that we will be finishing up towards the end of this year, and we will be presenting that data in the first half of 2026.

David Amsellem: Just to that point, that is important data. The maintenance of the effect in this patient population is very important. These patients suffer from a chronic disease that usually they start a therapy, they fail that therapy, and they have to move on to the next. Durability will be very important, and we are looking forward to that data. For the olanzapine LAI, we do not anticipate having a priority review for that program. That is why it is important to get that study wrapped up and submitted as soon as possible. That is what we are focused on right now, and we anticipate that approval in 2026.

Hi Matt. Uh, thanks for the questions. I'll hand those straight over to Eric. Sure. Thank you, Matt for the question. So, for Dua Ki to we're working very closely with our partner sathy on choosing. The indications will go into to be clear. We'll announce those once we've, uh, initiated the study. So that's something that you have to stay tuned for right now. We're super focused on getting the phase 3 started, which I, I must say we've checked all the boxes. We've got all our uh, ducks in a row. And those studies will be starting right on time. So that's our, our main focus um with regards to the phase 2 Data. That's actually um something that's maturing right now, you know that's a 44 week follow-up from our Phase 2 study. That will be finishing up towards the end of this year and we'll we'll be presenting that data uh, at in the first half of 2026, um, and just to that point, ma'am, that's important data. You know, the maintenance of the effect in this patient population is is very important. You know, these patients suffer from a chronic disease that, you know, usually they start a therapy, they fail that

They have to move on to the next, so durability will be very important, and we're looking forward to that data for the Alonzo Lei. You know, we don't anticipate having a priority review for that program. That's why it's important to get that study wrapped up and submitted as soon as possible. So, that's what we're focused on right now. We anticipate that, you know, approval in 2026.

Richard Francis: Thanks, Matt. Thanks for your questions.

Thanks Matt. Thanks for your questions.

David Amsellem: Great. Thank you.

Richard Francis: Our next question comes from Jason Gerberry of Bank of America. The line's now open. Please go ahead.

Great, thanks. Thank you.

Our next question comes from Jason Gerber of Bank of America.

Balance now open, please go ahead.

Yifeng Liu: Hey, guys. Thanks for taking my question. On AUSTEDO, revenue growth seems to be tracking volume growth, but not reflecting the benefit of mix in the milligram shift. I am just wondering if you can speak directionally to how that is impacting gross to net. As we think about this IRA process, is it against the price point at the start of the year, such that if you were increasing your gross to net, effectively, that is sort of front-running any IRA discounts in the future? As it pertains to the tariffs, and if it is a China-focused policy on national security, could you specifically outline what % of key starting materials come from China, and if 1.5 years is sufficient time to move things around such that there is not a heightened reliance on China for key starting materials?

Hey guys, thanks for taking my question. Um, so on a sto Revenue growth seems to be tracking volume growth, but not reflecting the benefit of mix in the milligram shipped. So, I'm just wondering if you can speak directionally to how that is impacting growth to Nets. And as we think about this Ira process is, is it against the price point at the start of the Year? Such that, if you are increasing your gross, Nets, you know, effectively, um, at sort of front running any Ira discounts in the future and then, um, as it pertains to the tariffs. And if it is a China focused policy on National Security, could could you specifically outline what percent? He's starting materials come from China and if 1 and a half years is sufficient, time to move things around such that there is not, uh, a heightened Reliance on China, for key starting materials,

Richard Francis: Jason, thanks for your question. With regard to AUSTEDO, I think the question was around the correlation between TRX, milligrams, and the revenue. It is not a perfect sort of, and there are timing issues around. One thing I would say is what we are seeing in the data we have is exactly what we expect to see with regard to the transition to XR, the transition to XR that has on TRX because there are less scripts, and what that then also looks for in milligrams. I think we see that as actually playing out exactly as we expected. One thing that, I think we see it clearly, but just to sort of maybe help understand a bit of a nuance there, we did launch XR in Q2 2024 in doses, and because of that, there was a slight stock in to do that.

Okay. Jason, thanks for your question. So with regard to aeta, I think the question was around the correlation between, um,

TRX milligrams and the revenue. Um, so

It's not a perfect uh sort of and there's timing issues around to this 1 thing. I, I so I firstly, I would say is what we've seen is in, in the data, we have is exactly what we expect to see with regard to the transition to XR. Uh, the transition to XR that has on TRX, because there's less scripts and what that then also looks for in milligrams. So I think we see that as actually playing out. Exactly, as we expected. Now, 1 thing that

Richard Francis: I think when you are thinking about it, about prior year comparisons, that may be something you have picked up upon. But when we go into the detail that I have just emphasized, we see it playing out exactly as we thought, and because of that, we are very comfortable and confident. I think that is the way I think about it on that. On the IRA question about pricing, I do not really want to go into any detail on that because we are still in negotiations with that. I think once again, when it comes down to IRA, I think the best thing is we will just make the announcement when we have that finalized because I think that is the most prudent thing to do.

Detail that I've just emphasized, we see it playing out exactly. As we, we, we thought and because of that we're very comfortable and and and confident. Um, so I think that's the way I think about it on that, on the IRA question, uh, about pricing. I don't really want to go into any detail on on that because we're we're still in negotiations with that. So I think, once again, when it comes down to Ira, I think the best thing is we'll just make the announcement uh, when we have that finalized, um, because I think that's the most prudent thing to do.

Eli Kalif: Jason, I think the question you asked about China on the tariff, there is almost nothing that we are actually bringing from China. Four years ago, we closed and sold the active pharmaceutical ingredients business there. We are really not depending on anything there. There is nothing there. So I cannot even provide you a percent.

And then just want to think the question you asked about China on the, on the tariffs.

Richard Francis: I think, just to add on to that, Jason, that is why when Eli Kalif talks about the work we have done and the strength of our supply chain, that is what we mean. I think we have taken some actions in the past to make sure we are not reliant on certain areas geographically. Obviously, we did that ahead of what has happened, but I think that has put us in a strong position, at least one where we can manage the future a lot better than we would if we had not done that. Thanks for your question, Jason.

There is almost nothing that we are actually bringing from China. Uh, you know, 4 years ago, we closed and sell the API business there. We we really, really not depending on anything there. It's, there is nothing there. So it's not, I cannot even provide you a present.

And I think, just to add on to that, um, Jason, I think that's why when early talks about, um,

the work we've done and uh, the strength of our supply chain. So that's what we mean. I think we've taken some actions in the past to make sure we are not reliant on certain areas geographically and obviously we did that ahead of what happened but I think that has put us in a, in a, in a strong position at least 1, where we can, um, manage the future a lot better than we would if we hadn't done that.

Thanks for your question.

David Amsellem: Thank you.

Richard Francis: Thank you. Our next question comes from David Amsellem of Piper Sandler. The line's now open. Please go ahead.

Thank you. Our next question comes from David amelon of Piper Sandler. The Line is now open. Please go ahead.

Kearney Kim: Thanks. Two from me, one on generic Revlimid, one on UZEDY. First on generic Revlimid. I just wanted to clarify your comments on the total revenue guidance. How much of where revenue lands this year is a function of Revlimid being light in Q4? Maybe just help us understand the dynamics as we move through the back half of the year regarding the product. I understand that the situation is fluid, but just help us understand how to think about generic Revlimid in Q3 and Q4. Secondly, on UZEDY with the bumped-up guidance, would you say that even that is conservative just given the growth in prescription volumes, at least based on third-party data? I understand that there is the Medicare Part D redesign, but just given how it is growing, what is your view on the extent to which even your new range is conservative there? Thanks.

Um, thanks 2 for me, 1 on, generic rev limit 1 on new zi first, non generic rev limit. Uh, I just wanted to to clarify. Um, your comments on the total revenue guidance. Um, how much of where Revenue lands this year? Um, is a function of rev limit being light in in 4 q and maybe just help us understand the Dynamics. As we move through the back, half of the Year regarding the product. I understand, um, that the situation is fluid, but just help us understand how to think about uh generic rev limit in 3Q and 4 q and then secondly, on zedi with the, uh, bumped up. Guidance, would you say that even that is conservative just given the uh, growth in prescription volumes at least based on third-party data? And um, I understand that there's the Medicare Part D redesign but just given how it's growing, what's your view on the Cent which year and even your new range is conservative there. Thanks.

Richard Francis: Thanks for the question, David Amsellem. So if I understand, the Revlimid question was also sort of built into the generics to the overall forecast and the generics forecast. To give you a bit of context, obviously, when we think about our generics business going forward and we say flat, low single digit, that is based, you have highlighted somewhat on generic Revlimid, but it is also based on launches we have coming up both in the U.S. and in other markets. I think it is multifactorial, which is why we think we have that range. It is not contingent solely on Revlimid. I think we have had launches already in this quarter, and we will have more launches coming towards the end of the year. We also have, as we have highlighted, good sales momentum in our biosimilar business in the U.S. as well.

Uh, thanks for the question, David. So, if I understand the, the relevant question was also sort of built into the generics uh, to the overall forecast and the generics forecast. Um,

so, to give you a bit of context,

Richard Francis: I say all of those things just to make sure people understand there is a robustness to our generics business, which means we have a lot less volatility, which is what we set out to do at the start of this strategy. Now to get specific on your question about Revlimid, the ordering patterns of this have changed. Whereas we do maybe one large order a quarter and they were very predictable, as we used to because we are a global generic player and we know how this plays out, that becomes shorter term as we get to the end of these sort of situations where more competition comes in. We are very used to that. So there is a change in those phasings.

Obviously, um, when we think about our generic business going forward and we say flat to a low single digit, that is based, you know, you've highlighted somewhat on, on generic rev limit but it's also based on launches we have coming up, um, both in the US and in other markets. So I think it's it's multifactorial which is why we think we have that range. It's not contingent solely on rev limit. I think we've had launches already in this quarter and we'll have more launches coming towards the end of the year. We also have as we've highlighted good sales momentum and I'll buy a similar business in the US as well. So I I say all of those things just to make sure people understand there's a robustness to our genetics business, which means we have a lot less volatility with what we set out to do at the start of this strategy.

but now, to get specific on your question about rev limit,

The uh, the ordering patterns of this have changed. And so, whereas we do, maybe 1, large order a quarter, and they were very predictable as we used to because we're a global genetic plan. We know what how this plays out that becomes shorter term, um, as we get to the end of these, these sort of situations where more competition comes in. And so we're very used to that.

Richard Francis: That means that as we have seen in Q2, it impacts our phasings, and that will probably have the potential to do that in Q3 and Q4. We see that happening more in Q4 just because of the basis that it gets the more competition comes in and towards the end of the year. It is unpredictable, I think, is what I am trying to highlight there. I also hope to have highlighted the fact that we have other factors growing our generics business and other factors that allow us to have a confidence in giving a guidance too flat to low single digit. I just remind you of the fact that when you take out Revlimid in Q2 and the Victoza launch, we grew the generics business in the U.S.

Uh, so there's a, there's a change in those phases. And so, that means, as we've seen in Q2 it impacted our facings, uh, and that will probably have the potential to do that in Q3 and Q4,

We see that happening more in Q4 just because the basis that it gets uh the more more competition comes in and towards the end of the year. But it's unpredictable I think is what I'm trying to to to highlight there but also hope to have highlighted the fact that we have other factors going on generics business and other factors that allow us to have a a confidence in giving a guy to to, to single digit. And then I just remind you of the fact that

Richard Francis: I just emphasize that because I know we have had lots of conversations over the years, and our aim was to take away the volatility of a generics business. We have actually been growing it very significantly. So even the fact that we are relatively flat, I think it shows the good work we have done. Now on UZEDY. I appreciate your enthusiasm and your confidence in us and the U.S. team and execute team. I think what we're trying to highlight is, and what we've always tried to do is to make sure that we set what we believe is possible. What I would reiterate on UZEDY, it's a great product profile, but we have really done a great job in becoming the long-acting risperidone of choice. Now we have to venture into other parts of the schizophrenia market where other molecules are used.

When you take out uh, rev limit in Q2 and this big to the launch, we grew the generics business in the US.

Shows the good work we've done.

now on you Saidi,

Um so I I I appreciate your enthusiasm and your confidence in in us and the US team and execute team. Um I think what we're trying to highlight is and what we've always tried to do is to make sure that we uh,

Richard Francis: I think, we see that as probably maybe slightly tougher to do, even though we have a great profile. You clearly think that's probably not the case, and your confidence in us is appreciated. But that's what we're thinking about, a bit about how do we start to take UZEDY into other molecules in the long-acting schizophrenia market. We think we have the profile to do it, by the way. We have a lot of confidence in this product and where this product can go. But I think that's the thing that probably is we just want to see you play out a bit more in Q3 to understand. But I appreciate your support, and I appreciate the fact that you like that we've raised it to 190 and 200 million as a range. Thanks for your questions, David. Thank you. Our next question comes from Christopher Schott of J.P.

We set what we believe is possible. Uh what I would reiterate on your study, it's a great product profile but we have really uh done a great job in becoming the long-acting respirator owner of choice. So now we have to venture into other parts of the schizophrenia Market where other molecules are used. And so I think, you know, we see that as probably maybe, um, slightly tougher to do even though we have a great profile, you clearly think that's probably not the case and your confidence in US is appreciated. But that's what we're thinking about a bit about how do we start to, uh, um,

Take uh, you said it into other molecules in the in in the long active schizophrenia Market. We think we have the profile to do it. By the way, we have a lot of confidence in this product and where this product can go. But I think that's the thing that probably, as we just want to see you play out a bit more in quarter 3, to understand. Um but I appreciate your support and appreciate the fact that you like that, we've raised it to 190 and 200 million uh as a range.

Thanks. Thanks for your questions, David.

Richard Francis: Morgan. Your line's now open. Please go ahead.

Our next question comes from Chris Shot of JP Morgan.

Your line is now open. Please go ahead.

Jason Gerberry: Great. Thanks so much. Just two for me. On the top line guidance, obviously, great to see the higher branded guidance. Coming back to the slower generic growth, is there any read across as we think about 2026 and beyond for that generic business, or is what you are talking about here just some more timing and shorter-term dynamics as we think about, again, the generic piece of the business? The second question for me was another one on guidance. Obviously, very strong gross margin performance this quarter. Sounds like part of that is mixed, part of that is maybe more one-time. Can you just update us on expectations for second-half gross margins given the new product mix? Just how should we be thinking about that progressing over the next few quarters?

Richard Francis: Thank you. Hi, Chris. Thanks for the questions. Let me start to talk a bit about the generics. I appreciate the fact you're seeing the good branded growth. I think it's important to reiterate as we transform to a biopharma company to have a portfolio branded of our size growing at 27% is a great achievement and the momentum we have. To answer your question on generics, I think it is worth just reiterating the prior year comparison. The full year growth we had in generics in 2024 was 11%. When I talk about prior year comps, I think it is fair to say we had a great year in 2024, and we're lapping that now. If you take that down to the regional level, we had great performance across all of our regions in that quarter. 16% in the U.S., 8% in the EU, and 22% in IM.

Uh great. Uh, thanks so much, just 2 for me on, on the top line, guidance. Obviously great to see the the higher branded, um, guidance. But just coming back to the slower generic growth, is there any read across as we think about 2026 and beyond for that generic business, or is what you're talking about here? Just some more timing and shorter term Dynamics as we think about, uh, the again, the generic piece of the business. And then uh, second question for me, was another 1 on guidance, you obviously very strong gross margin performance, this quarter sounds like part of that mix part of that maybe more 1 time can you just update us on expectations for second half gross margins. Um given the new product mix just how should we be thinking about that progressing over the next few quarters? Thank you.

Hi Chris, thank thanks for the questions. So um

let me start to talk a bit about uh the the generics and appreciate the fact you've seen the good branded growth. You know. I think it's important to reiterate as we transform to a bio Pharma company to have a portfolio branded of our size growing at 27% is a great achievement and the momentum we have but to answer your question on generics

I think it is worth just reiterating the, the prior comparison. You know, the the full year growth we had in generics in 204 was 11%. So when I talk about prior comps, I think, you know, it is a fair, it's fair to say, we had a, a great year in 24, and we're lapping that now.

Richard Francis: Those are real big comparative years. To get to the heart of your question, Chris, is what does this mean for the long-term trajectory of our generics business? I remain absolutely confident in what we need to achieve by 2027 for our generics business. If you remember, at the capital markets day, we started to communicate that where we wanted to get our generics business to in 2027 was flat to where we ended it in 2024, i.e., absorbing all of the generic Revlimid loss, which I know we all understand is a very big number. How do we do that? How does this year, I think is your question, impact our ability to do that? In no way does it change. Let me explain why.

Um, and and if you take that down to, uh, the regional level, we had great performance across all of our regions. In that course, you know, 16% in the US 8% in EU and 22% in Im. So those are real big comparative years but

To get to the heart of your question. Chris is, you know, what does this mean for the long term to trajectory of our, our generic business?

I remain absolutely confident in what we need to achieve by 2027 for our generic business. If you remember at the capital markets day,

We started to uh communicate that where we wanted to get our uh General exposure to, in 27 was flat to where we ended it in 24. I absorbing all of the, uh, generic relevant loss, which I know we, we all understand is a is a very big number.

So how do we do that? And how does this year? I think, is your question impact our ability to do that.

Richard Francis: Our ability to keep driving our business, our generics business, relies on a number of factors: our base generics business, which includes complex generics, our biosimilar business, and our OTC business. Over this two-year period, to continue to get to where we need to in 2027, our base generic business needs to grow at roughly a 2%, 2.5% CAGR. Across all of our regions, Europe, U.S., and international, that is very achievable with the pipeline we have. We have a deep pipeline. We have a good manufacturing and supply chain. So I feel very confident about that. On our biosimilars, which we think, which we believe is going to grow to $400 million as well and contribute to our generics performance, as I've said, we've had a good start to this year. We see good momentum in the U.S.

In no way. Does it change and let me explain why?

our ability to keep driving our business, our genetics business, relies on a number of factors are based on Eric's business,

Which includes complex genetics, our biosimilar business, and our OTC business.

Richard Francis: We are going to be launching a generic Stelara, a biosimilar Stelara in Europe in Q3. We have two more launches in the U.S. So I think we have good momentum there. The OTC performance we are looking for also is a continuation of what we performed in the past. I have no concern about us hitting our 2027 growth targets for generics. I also do not see that this year is anything other. It is not a blip. I would not describe it as a blip, Chris. I would describe it as a high prior year comparison, which I think we have weathered actually very well because it shows the underlying strength of our generics business.

Now over this 2 year period to continue, to get to where we need to in 2027 our base, generic business needs to grow at roughly 2% 2 and a half percent kagar across all of our regions Europe us. Uh, and international that is very achievable with the pipeline. We have, we have a deep pipeline, we have a good manufacturing, it's a supply chain. So I feel very confident about that on our bios, which we think, which we believe is going to grow, 400 million, but as well. And contribute to our genetics performance, as I've said, we've had a good start to this year. We see good momentum in the US. And we are going to be launching, uh, a generic star, a by similar Stellar in in, in, in Europe, in quarter 3.

Richard Francis: I see it as a sign of confidence in the work we have done to strengthen our generic business and also the fact that with our innovative business growing so well, we are a balanced company and we continue on this very predictable growth going forward. With that, I will hand for the gross margin questions to Eli. Over to Eli.

Describe it as a blip. Chris, I describe it as a high priority comparison which I think we've weathered actually very well because it shows that underlying strength of our generic business. Um, so I I I see it as a sign of confidence in the work, we've done to strengthen our generic business and also the fact that with our innovative business growth so well.

We're a balanced company, and we can continue on this very predictable growth going forward.

Eli Kalif: Okay, Chris, thanks for the question. So, look, if we are looking on Q2 by itself, 54.6%, there is around 110 basis points inside that are coming from three main elements. One, we had a certain product sales in Europe. Additionally, there are some tailwinds on S6, as I mentioned. Also, we need to remember that Japan's business was diluted to our gross margin by at least 30 basis points. So, if you actually baked out this 110 basis points, you come to a 53.5%. You look on Q2 or Q1, which was 52.8%. You take that dilutive element on Japan, you see that we are actually moving by 52.5% to the level of 53.5% on the inline basis, which is a sustaining business that we have. That means that the innovative piece across all the elements that we are working on contributes to the expansion and organic gross margin.

But with that, I'll hand for the gross margin questions. Uh to Ellie over to Ellie. Okay Chris thanks for the question. So look, if we were looking on Q2 by itself 54.6%, there is around 110 basis. Point inside that coming from 3, main elements 1 is we had a, a certain products right sales in in Europe. Uh, additionally. There is some, um, a Tailwind on on S6, as I mentioned and also, we need to remember that. Japan business was diluted to a gross margin by at least 30 basis point. So if you actually backed out this 110 basis point you come to a 53.5%, you look on Q2, sorry q1 which was 52.8 to take that dilute development on Japan. Uh, you see that we're actually moving by 52.5 to the level of 53.5% on the inline basis, which is a standing business that we have

Eli Kalif: What you are going to see in the next quarter, we are going to be above the midpoint and very close to the 54%, which I believe that the full year we are going to be at the higher range or like 54% at minimum. This is one, this is the main kind of dynamics inside.

This means that the innovative piece across all the elements that we're working on contributes to the expansion. Um, organic gross margin, what you're going to see in the next quarter, we're going to be above the midpoint and very close to 54%, which I believe that is full year. We're going to be at the higher range, or like 54% at minimum, so, um,

This is 1. This is are the main kind of a Dynamics inside.

Richard Francis: Thank you, Ellie. Thanks for the question, Chris. Thank you. Our next question comes from Les Slewski of Tourist. Your line is now open. Please go ahead.

Thank you, Alex. Thanks for the question, Chris.

Thank you. Our next question comes from Les Solooki of Tres.

Your Line's not open. Please go ahead.

Yifeng Liu: Good morning. Thank you for taking my questions. A couple for me. First, can you provide some puts and takes around the uptake in EBITDA margin in the second half? Is this level sustainable or a high watermark for the year? Second, as you are progressing across the cost reduction initiative, are you finding additional opportunities for savings beyond the $700 million? Can you provide some cadence around the primary areas of focus? Lastly, how are you thinking about capital allocation? Perhaps a share buyback opportunities and then second around BD expansion and M&A. Thank you.

Good morning. Thank you for taking my questions. Um, a couple for me so first. Um, can you provide some puts and takes around the uh, uptake in Iva down margin in the second half and is this level of sustainable or high water marks for the year. Um, and then second as you progress in the uh, the cost reduction initiative, are you finding additional opportunities, uh, for savings beyond the 700 million and can you provide uh, some Cadence around the primary areas of focus? And then lastly, how are you thinking about Capital, allocation, you know perhaps a um a share buyback opportunity and then second around BD expansion and m&a thank you.

Richard Francis: Thank you, Les. I will tag team some of those with Eli. Maybe I sort of give a quick overview on some of them, then Eli can also chime in. I am really pleased that you have seen the EBITDA performance. I think this is really important when we think about creating long-term shareholder value. Growing the top line is obviously critical, and we want to keep doing that. When you do it in the right way, as we have done with an innovative portfolio with strong growth, that will always help us change gross margin, as Eli said, but also allow us to go down and hit EBITDA and ultimately hit EPS. I think that direction of travel is clear. Our ability to keep growing our innovative portfolio adding to it allows us to do that. That is sort of at a high level, I would say.

Thank You, Les hommes. A tag team. Some of those with uh with um Ellie and maybe I sort of give a quick overview and on some of them and then La can also chime in um I'm really pleased that you've seen the the abidar performance. I think this is really important when we think about creating long-term shareholder value, you know, growing the Top Line um is obviously critical and and we want to keep doing that but when you do it in the right way as we've done with an Innovative portfolio uh with strong growth that will always help us change gross margin as as said but also allow us to go down and hit epidural.

Richard Francis: On the cost reduction, I love these questions where we do something and everybody sees if we can do a little bit more. What I would say is the work we are doing is to modernize Teva, is to make Teva a more agile place to work where we can do things quickly. We can make sure capital allocated to the areas of best return to drive the company forward. That is continuous. We are continuously looking at that. Does that mean we change the number on $700 million? No, we are going after that. We see that we plan very carefully and thoughtfully financially. Our ability to make sure we are allocating capital to the right areas is a continuous process throughout this business.

And ultimately hit Epps. And I think that direction of travel is clear. So our ability to keep growing our Innovative portfolio adding to it allows us to do that. So that's sort of, at a, at a high level. Um, I would say on the cost reduction, um,

I love these questions. Where were we? We do something. Again, everybody sees if we can do a little bit more. Um, so what I would say is.

Richard Francis: I would say we want to become a company that has a mentality that we look at this every year, almost every quarter, and we do not have these periods where we go into restructuring or major changes. It is a continuous for us. On the capital allocation, with regard to, as Eli said on his capital allocation slide, we touched all of your points. Yes, we look at business development and I will go into a bit more detail. We look at returning capital to shareholders as well. On the BD side, we have been very active in this area looking for some time because we know that we want to add innovative products to what is a very capable team here at Teva. That said, we want to do that through inline decency.

The the work we're doing is to modernize Teva is to make Teva a more agile place to work where we can do things quickly, we can make sure capital is allocated to the areas of best return uh to drive the company forward. That is continuous. So we're continuously looking at that. Does that mean we change the number on 700 million know? We're going after that? We see that we've planned very carefully and fully financially, but our ability to make sure we're allocating Capital to the right areas is a continuous process throughout this business. So I

I would say.

We want to become a company that has mentality that we look at this.

Every year almost every quarter and we don't have these periods where we go into uh restructuring our major changes. It's a continuous for us. Um on the capital allocation. Um with regards to as early as capital allocation slide, uh, we touched all of your points. Yes. We look at uh uh, Business Development and are going to a bit more detail. And we look at, you know, returning Capital to shareholders as well.

Richard Francis: We want to take products at the right time with the right risk profile to justify allocating capital to them. Those are not always easy to find at the right time, but we have spent a lot of time on it. We have increased the capability to do assessments within our team here. That is something we are looking at. Those are my views on those three questions, but I will hand them over to Eli because I think he would like to add his perspective as well.

Christopher Stevo: Yeah. I think about the EBITDA, your question, the way that we view it and how we are actually looking on the second half of the full year, we will be above the midpoint after the higher range. The main dynamics there are coming from a few things. First of all, the three main products: AUSTEDO, AJOVY, and UZEDY, those are now yielding to a $2.9 billion revenue. This is the higher margin, but if you compare it to last year with the $2.3 billion, the first half of this year is actually more meaningful in the year versus the first half last year. So we are actually progressing now to around 45% versus the full year.

Team here at ta. Uh, that said we want to do that through in licensing. We want to take products at the right time with the right risk, profile to justify allocating Capital to them. And so, you know, those are not always easy to find at the right time, but we've spent a lot of time in it, we, we, we have, uh, increased the capability to do assessments within our team here. Um, so that is something we are looking at. So those are my views on those 3 questions. But I'll have some I'll hand them over to Ellie because I think he'd like to to add his perspective as well.

Christopher Stevo: Last year, at that point, we were actually doing from that $2.3 billion, like 40%, which will give us kind of the confidence that it is kind of starting to be more balanced in between the first half and second half, that allowing already to bank profits. The other element you need to understand is that as we move forward, we are keeping investing in our OpEx, which means we are not taking our OpEx down. We are keeping investing. So in between, how we are able to flow through profits to the bottom line and how we keep investing in those products, mostly with AUSTEDO, we will see a benefit in terms of the margin on EBITDA and OP, and we also reflect that piece in the midpoint for the EPS coming from the innovative.

Yeah, so I think um, about the eida, your question, the way that we view it and how we actually looking on the second half and the full year, um, we will be above the midpoint, uh, after the higher range and the main Dynamics there, it's coming, uh, from a few things. First of all, this the the 3 main products, uh, Osteo or Jovi those 1. Now yielding to a 2.9 billion Revenue. This is the higher margin. But, uh, if you compare it to last year with a 2.3 billion, the first half of this year, is actually more meaningful in the year versus the first half last year. So, we actually progressing now to around 45%, versus the full year last year at that point, we were actually doing from that 2.3 billion like 40%, which mean, give us kind of the confidence that it's kind of a starting to be more balanced in between the first half of the second half that allowance already to bank.

Christopher Stevo: If you couple it with our savings from our program, which currently we see a line of sight of $70 million, we are totally offsetting any softness on generics and with incremental profits. I think that to sum it, we are going to be above the midpoint, close to the high range. I think there is another point here that we should mention on the capital allocation. I think this is about timing. Yes, we are constantly looking on BD and also to understand how those ones can actually interpret a higher multiple for us in terms of the trajectory of the growth aligned with our strategy.

Profit the other elements you need to understand that. As we move forward, we are keep investing in our topics which mean we are not taking our oppax down, we're keep investing. So in between our able to flow through profits, to the bottom line, and how we keep investing in those products, mostly with with the stow. And we will see and a benefit in terms of the margin on EPA and Opie. And we also reflect that piece in the midpoint for the EPs and coming from the Innovative. And if you couple it with the, our savings from our programs, which currently we see a line of sight of 70 million and we are totally offsetting any softness on genetics and with incremental profit. So I think that to sum it, we're going to be above the midpoint uh close to the higher range. And I think there is another Point here that we should mention on the capital location. I think this is about timing and and

Christopher Stevo: But most importantly, when we are talking about shareholder buybacks or any kind of a capital return to our shareholders, we are still in a trajectory to enhance our free cash flow, to make sure that we are enabled to fuel our business, managing our working capital and our growth, as well as allowing us the flexibility to do these types of things. So we are constantly reviewing that one, and once we will have kind of a more information around that one, we will share with you.

Yes, we are constantly looking on VD and also to understand how those 1 can actually, uh, interpretate a higher multiples for us in in terms of the trajectory of the growth aligned with our strategy. But most importantly, when we're talking about um, shareholder BuyBacks or any kind of capital return to our shareholders, we are still in a trajectory to enhance our free cash flow to make sure that we enable to fuel our business managing our working capital and our growth as well. Allowing us to flexibly.

Ability to do these type of things. So we're constantly reviewing that 1 and once we have kind of a more information around that 1 we'll share with you

Richard Francis: Thanks for your questions.

Thanks for your questions, Les.

Eric Hughes: Thank you. Our final question for today comes from Kearney Kim of Morningstar. The line's now open. Please go ahead.

Thank you. Our final question for today comes from keoni, Kim of Morning Star.

The lines now open, please go ahead.

Eli Kalif: Hey, yeah, thanks for taking my question, and congrats on the good quarter. Just a quick one on the Solarity progress. I just wanted to ask how the product rollout is going. Do you know if the landscape is similar to what we saw with Humira, where it will take some quarters before the biosimilar really picks up, or does this kind of space look a little differently? Thanks.

Hey, thanks for taking my question and congrats on the good quarter. Um, just a quick 1 on the Celerity progress. Um, yeah, I just wanted to ask how the product roll out is going, um, you know, if the landscape similar to what we saw with whom where it'll take some quarters before the basics up or does this kind of space look a little differently? Thanks.

Richard Francis: Great. Thanks, Kearney. Thanks for your question. What I would say to sort of step back is every biosimilar can play out slightly differently, and we are aware of that. I think I have been communicating that in the last two years. Humira is different. Biosimilar Humira is different from biosimilar Stelara is different from biosimilar Stelara. We are okay with that because I think we have a very agile team in the U.S. here who understands the different dynamics based on the different pathway to the physician, the different, whether it is a pharmacy benefit or not. That said, I think the team has started to execute on this well because of that capability we have. I think we see this as a good opportunity. That is one of the things that is fueling our confidence and our revenue growth in our biosimilars.

Great. Um, thanks Jerry. Thanks for your question. Um,

so what I'd State this was a step back is

Um, if you buy a similar sort of compliance slightly differently, um, and we're aware of that, I think we become, I've been communicating that for the last 2 years, um, um, humorous, different, by by some humorous different from by a similar, Stellaris different from bio Solaris. So and, and we're okay with that, because I think we have a very agile team in the US here. Understands the different Dynamics based on the different uh,

Uh, Pathway to the to to to the position, the different, whether it's a pharmacy uh, benefit or not.

Richard Francis: I think the overarching is this is a portfolio play strategically. We aim to bring 20 biosimilars to the market. I will not try and pick the ones that are going to be the superstars now because it is different. It is very dynamic. As I said, we are okay with that because we are going to bring eight biosimilars to the market by 2027. We do not need all of those to be superstars. We will work hard to make sure they are, but we do not. That is why we are confident in being able to double our revenue to $800 million for our biosimilars by 2027. Hopefully that answers the question. Good start in one of our products, but also good performance about others that we have in the U.S. Thanks for your question.

Going to bring a bottomless to the market by 2027.

We don't need all of those to be Superstars. We'll work hard to make sure they are, but we don't that's why we're confident in being able to double our Revenue to 800 million for our bios by 2027. So I hope that that answers the question. Good Start uh, in 1 of our products. Uh, but also good performance about other others that we have in the US.

Richard Francis: I think with that, I think we have gone over a bit, so I apologize for that, but we wanted to make sure we had a chance to answer as many questions as we could. I appreciate your time and your interest in Teva, and I look forward to catching up with you, many of you, over our road show. Thank you very much. Goodbye.

So, thanks for your question.

And I think with that, I think we have gone over a bit, so I apologize for that. But we wanted to make sure we had a chance to answer as many questions as as we could. I appreciate your time and your interest in, in tether. And I look forward to catching up with you, many of you over our road show. So thank you very much.

Goodbye.

Eric Hughes: Thank you all for joining. You may now disconnect your lines.

Thank you all for joining. You may now disconnect your lines.