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Edited Transcript of TEVA.TA earnings conference call or presentation 7-Aug-19 12:00pm GMT

Q2 2019 Teva Pharmaceutical Industries Ltd Earnings Call

Petah Tikva Aug 14, 2019 (Thomson StreetEvents) -- Edited Transcript of Teva Pharmaceutical Industries Ltd earnings conference call or presentation Wednesday, August 7, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brendan O'Grady

Teva Pharmaceutical Industries Limited - EVP of North America Commercial

* Kåre Schultz

Teva Pharmaceutical Industries Limited - President, CEO & Director

* Kevin C. Mannix

Teva Pharmaceutical Industries Limited - SVP of IR

* Michael McClellan

Teva Pharmaceutical Industries Limited - Executive VP & CFO

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Conference Call Participants

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* Akash Tewari

Wolfe Research, LLC - Director of Equity Research & Senior Research Analyst

* Christopher Thomas Schott

JP Morgan Chase & Co, Research Division - Senior Analyst

* David A. Amsellem

Piper Jaffray Companies, Research Division - MD and Senior Research Analyst

* David William Maris

Wells Fargo Securities, LLC, Research Division - Senior Analyst

* Elliot Henry Wilbur

Raymond James & Associates, Inc., Research Division - Senior Research Analyst

* Esther P. Rajavelu

Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst

* Gregory B. Gilbert

SunTrust Robinson Humphrey, Inc., Research Division - Analyst

* Kenneth Charles Cacciatore

Cowen and Company, LLC, Research Division - MD and Senior Research Analyst

* Liav Abraham

Citigroup Inc, Research Division - Director

* Randall S. Stanicky

RBC Capital Markets, LLC, Research Division - MD of Global Equity Research and Lead Analyst

* Umer Raffat

Evercore ISI Institutional Equities, Research Division - Senior MD & Senior Analyst of Equity Research

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to the Teva Pharmaceutical Industry's 2nd Quarter Financial results (Operator Instructions). I must advise you that this conference is being recorded today, Wednesday, August 7, 2019 and I would now like to hand the call over to your first speaker today, Kevin Mannix, Senior Vice President, Head of Investor Relations.

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Kevin C. Mannix, Teva Pharmaceutical Industries Limited - SVP of IR [2]

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Good morning everyone, thanks for joining us today to discuss our 2nd Quarter 2019 financial results. We hope you've had an opportunity to review our earning press release. A copy of the release as well as a copy of the slides being presented on this call can be found on our website at www.tevapharm.com as well as through the Teva Investor Relations app.

Please note that the discussion on today's call includes certain non-GAAP measures that are defined by the SEC. Management uses both GAAP financial measures and the disclosed non-GAAP financial measures internally to evaluate and manage the company's operations to better understand its business. Further, management believes the inclusion of non-GAAP financial measures provides meaningful supplementary information and facilitates analysis by investors in evaluating the company's financial performance, results of operations and trends. A reconciliation of GAAP to non-GAAP measures is available in our earnings release and in today's presentation.

To begin today's call, Kåre Schultz, Teva's Chief Executive Officer; and Mike McClellan, Teva's Chief Financial Officer, will review the second quarter results. Question-and-answer session will follow the presentation and joining Kåre and Mike on the call is Brendan O'Grady, Teva's Head of North America commercial. And with that, I'll now turn the call over to Kåre. Kåre, if you would, please.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [3]

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Thank you, Kevin. Good morning, everybody. Thanks for calling in. We have very nice quarterly results that we would like to present to you. We have seen revenues up $4.34 billion, which was in line with our expectations. We saw a GAAP diluted loss per share of $0.63 and a non-GAAP diluted EPS of $0.60, and we saw a non-GAAP EBITDA of $1.14 billion. Free cash flow was $0.17 billion. And basically, we are seeing what we also saw last quarter, a stable North American generics business. It's, of course, supported by a long list of new launches and the ongoing effect of the portfolio optimization that we initiated some 1.5 years ago.

We also see a continued strong growth of AUSTEDO having sales of $96 million in the second quarter, up 30% over the first quarter and continuing a very, very good trend. We are satisfied with the TRx share on AJOVY, and we are very happy about the launches that we're undertaking right now in Europe.

On the restructuring plan, we see a spend base reduction completely in line with our plans, which basically means that we will achieve the 2-year target of a $3 billion reduction compared to 2017. And we also see a small reduction this quarter of our net debt, and just for information, we did make a scheduled reduction in the gross debt by paying down $1.6 billion in July.

As you can see, we are reaffirming the 2019 financial guidance and this goes, of course, for all elements of the guidance. If we go to historical development of revenue and profitability, I'd just like to remind you our situation in late '17 when I joined, where we saw generic competition coming on in COPAXONE, and we basically knew that revenues were going to fall roughly $4 billion on a yearly basis. That's also what you see. You see the quarterly revenue coming down from some $5.3 billion to $4.3 billion. But you also see now the beginning of the trough, as I've been calling it -- the trough of '19, which is basically where the revenue stabilizes. You also see that the gross margin that was coming down is also stabilizing now just about 50% and the operating margin is stabilizing now around 23%, which is, of course, not our long-term target, our long-term target, as I'll get back to, is 27%. So we still need to see improvements there.

Talking about the trough, let's look at the operating profit. If we look at that in the same historical period, then you also see the very big effect of the revenues declining and us only being able to take down the cost quarter-by-quarter, but still the effect now is that we're stabilizing the operating profit at around roughly $1 billion per quarter and you see that the net income is around $650 million right now. And that results, of course, in the earnings per share stabilizing right now around $0.60. Now this is -- as I said before, this is what we expect to be the trough year. It's not that there will be a dramatic turnaround in the coming years, but the trendlines will slowly change and we'll start to see moderate increase in revenues and moderate increases in EPS going forward. But just to remind everybody, this year will be the lowest year in terms of operating profit and also in terms of average earnings per share.

So just to give you a little bit of color on the spend base reduction, this is a massive undertaking. This is the whole organization reducing by more than 10,000 people in a very, very short time span. This is divesting or closing some 20 factories around the world. So a major undertaking. I have to say that everything is being executed according to plan. And the simple math of the spend base in the first half is that we spent $6.6 billion, which basically means that the yearly equivalents is 13.2 and our target, as you know, is 13.3, which is $3 billion less than the actual spend we had in 2017. And this, of course, includes everything. So there's nothing excluded or any tricks there. So it's a really nice development, and we can see that everybody is executing according to the plan.

Now if we move on to the drivers of future growth, then we have 2 main drivers, AJOVY and AUSTEDO, and we are very happy about the strong launch we've had of AJOVY. We still have about 20% direct share in U.S. and we have just started the launches in Europe. We've seen a moderate decline in the indirect share. We think it's related to a couple of factors, 1 being the fact that we stopped this full paydown on all scripts which means that some scripts where we are not covered actually do get declined at the pharmacy level and we also see that in some cases, the patients do prefer an auto-injector and therefore, of course, we are eagerly awaiting the approval and launch of our own auto-injector for AJOVY.

If we turn to AUSTEDO, then we continue to see very, very strong growth of AUSTEDO, both in terms of prescriptions and in terms of sales. Of course, that's always some quarterly variances, but we think that the numbers we see here are very much a reflection of the true situation in the marketplace. It's well covered by basically all health plans, and the gross to net situation is also very stable. So this is really exciting for us.

If you think about the patient numbers here, then the scripts we have right now is equivalent to little more than 8,000 patients on the drug and it's a combination of Huntington's chorea and tardive dyskinesia. And as I said before, our estimates are that there is around 500,000 people in the U.S. suffering from tardive dyskinesia. So in that sense, you can say we are only scratching the surface with the therapy for the moment and we have very, very good reception among specialists and among patients.

The drag on our business, if we go to the next slide, is really the development in COPAXONE. There's nothing new here. And you can see we had a pretty linear volume decline, which has been more or less stable. Of course, again, here, we have some quarterly variations and that's, of course, because we have a volume decline and we had increased rebating over time in order to maintain this volume. And that means that the quarters can go a bit up and down due to various rebates, rebate accruals, and so on. But if you really look at the underlying trend, then you can say that we are sort of halving -- are losing half of the value of the business on a yearly basis. And that's also what we are expecting for this year. So we're still expecting to have revenue of around $800 million in the U.S. this year and then, of course, which we don't show you on this slide, but which you can see in our numbers, we have a relatively stable situation in Europe with a moderate decline. We had a win with the European patent office so that we are more optimistic now about maintaining a solid COPAXONE business in Europe.

Now with all the operational elements performing well, everything been on track, it is, of course, I would say, interesting and to some extent frustrating that we have seen a significant drop in the share price and the market capitalization of the company. And for me personally, being many years in the industry and having a very strong commitment to compliance, believing that compliance in all elements and at all levels of the business is a prerequisite for a having a successful pharmaceutical business, it is maybe -- especially annoying to be involved in 2 legacy legal situations. As you all know, we are involved in an opioid litigation and we are involved in investigations on allegations of price-fixing. We do, of course, in these situations always assess what is in the best interest of the company, our shareholders and we act upon that. We have, of course, done extensive document research, discovery together with external law firms and so far, with all the evidence that we have in our hands, we deny any liability because we have not seen any evidence of us having any misconduct in the opioid situation or any misconduct in the price -- pricing area. So we will continue to defend ourselves, and we do not see the opioid situation, which is a very tragic situation in U.S. We do not see that as a situation that will be solved by litigation. We think there's a more systemic need for change, which is the way to improve that situation for patients going forward.

On the pricing, we do collaborate, of course, with DOJ in their criminal investigation. We have been collaborating with them since 2016. And as I said in our discovery process, we have not found any documentation that sort of substantiates the allegations. So we continue to defend ourselves in denying these allegations.

Now if we look at the business going forward and our financial targets for the business going forward, then I'd just like to repeat these, we have talked about it before, but just so that everybody knows what our long-term plan is and one key element is as I said in the beginning to improve the operating margin. Now that happens by a lot of elements. One element is, of course, that you optimize your product portfolio, the gross margin on the product you're selling, you optimize the manufacturing cost of the products you sell and you make sure that you have a good and strong overall margin development. As I showed you earlier, we are at the level of 23% right now and we want to improve that up to the level of 27%.

The cash to earnings is quite simple because we need the cash in order to reduce our debt and, of course, we have a long-term plan to keep on reducing our debt. The simple math is that right now we probably have a net earnings of some $650 million per quarter, that's $2.6 billion a year, 80% of that, that's roughly just around $2 billion. So as you see, we're also guiding $1.6 billion to $2 billion on the cash flow. So we're really aiming at getting to that level where we, on a consistent basis, generate most of the result as cash. There will always be quarterly fluctuations with a big balance sheet as ours. Of course, there are quarterly fluctuations, but on an yearly basis, it's very important that we meet this target of the 80% cash to earnings. And that is important because we need to reduce the debt. As you know, our net debt-to-EBITDA ratio right now is about 5, and we really want to get below 3. And the only way to do that is generate cash and pay back the debt. So we will continue to use all of our cash flows to really pay down debt. And as I have stated many times, we do not plan to raise equity, we plan to continue to use cash to reduce the outstanding debt and we think that's the best way to create value for our long-term shareholders.

Now with these financial targets, I'd like to turn over to Mike, who will go through the financials in detail.

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Michael McClellan, Teva Pharmaceutical Industries Limited - Executive VP & CFO [4]

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Thank you, Kåre. Good morning, everyone. As always, we will start with a review of our GAAP performance on Slide 15. Teva posted a quarterly GAAP loss of $689 million and a loss per share on a GAAP basis of $0.63 for the second quarter of 2019, as we will detail in the next slide, the GAAP results were mainly impacted by legal settlements and impairment items.

So turning to Slide 16. In the second quarter, we experienced non-GAAP adjustments amounting to an impact of $1.3 billion on net income. These adjustments consisted primarily of $646 million provision for legal settlements. This is mainly related to opioid litigation as well as the impairment of intangible assets and product rights amounting to $460 million and amortization charges of $285 million for the quarter, similar to what we had in Q1 of 2019.

So now turning to our non-GAAP performance on Slide 17, which shows a solid performance for the quarter. Quarterly revenues were $4.3 billion, a decrease of $364 million or 8% nominal, 5% net of FX compared to the second quarter of 2018. The decrease was mainly due to generic competition for COPAXONE as well as a decline in revenues from TREANDA/BENDEKA, ProAir, lower revenues in Europe and a decline in Japan. This was partially offset by higher revenues from AUSTEDO, AJOVY, QVAR and our ANDA business in the U.S.

Compared to Q2 2018, we experienced a negative FX impact of $125 million, net of FX revenues in Q2 2019 decreased by $240 million. Gross margin was 50.5% compared to 49.7% for the same period in 2018. The improved gross margin was driven by improved profitability of our North American generic business and to a lesser extent by the discontinuation of our OTC joint venture, which had a part of its profit share recorded previously against cost of goods sold. This improvement was partially offset by the decline in sales in COPAXONE.

Operating income in the quarter declined by 18% compared to the same period in 2018. The decrease was mainly attributable to the decline in COPAXONE and other specialty brands as well as lower income, other income, which declined by $106 million. This was mainly due to legal recovery of lost profits that we booked in Q2 of 2018, which did not repeat. These declines were partially offset by our ongoing cost-reduction program.

Non-GAAP earnings per share in the quarter were $0.60, $0.18 lower than the same period a year ago. The decrease was mainly due to lower operating profit, partially offset by lower finance expenses. We will dig deeper into the trends in revenue and cash flows later in the presentation.

So turning to Slide 18. We've been highlighting for several quarters now, including in our 2019 guidance provided in February the impact of the stronger U.S. dollar on our result as approximately 50% of our revenue come from sales denominated in non-U. S. dollar currencies. We see that exchange rate movements during the second quarter of 2019 had a negative impact of $125 million on revenue, while the impact on operating profit was smaller at $47 million. The main currencies relevant to our operations that decreased the most in value against the U.S. dollar were the euro, U.K. pound and Russian ruble. We do expect that the U.S. dollar will remain strong for the remainder of this year.

Turning to Slide 19. I'd like to highlight some of the revenue trends we've seen throughout the different segments and regions. Starting with North America, I'd first I'd like to highlight our North American generic business, which continued its solid performance, reaching sales of $946 million in the quarter, supported by a diverse portfolio and further stabilization of the business.

QVAR also continued to perform well in the second quarter with $60 million in revenue. We do see sales of TREANDA/BENDEKA that are in-line with the trend we saw in the first quarter of 2019. The decline versus second quarter of 2018 was mainly due to increased competition of another bendamustine solution known as the Big Bag.

Revenues in Europe declined by 6% compared to the first quarter, mainly due to lower sales of generics, including OTC products that are stronger in the first quarter due to the cough and cold season. Our international markets were down 6% compared to the second quarter of 2018, mainly due to FX. Sequentially from Q1, sales were up 11% due to stronger performance of generics and a seasonal impact that we see in these markets.

Lastly, other sales were up 6% compared to Q2 of '18 and 8% sequentially. This line primarily consists of sales of APIs to third parties and certain contract manufacturing services. The increases are primarily due to stronger sales in our API business.

Turning to Slide 20. Free cash flow for the quarter was $168 million, a decrease of $192 million versus the first quarter of 2019 primarily to the expected accounts receivable working capital drag that I described back in February when we provided our 2019 guidance. The effect of this drag was especially seen in Q2 as accounts receivable working capital declined from an inflow of $206 million in Q1 to an outflow of $286 million in Q2, a swing of nearly $500 million between the quarters.

On Slide 21, we present a bridge between Q2 EBITDA and the free cash flow. And here, you can see the overall working capital effect I described. We do expect free cash flow to improve significantly in the second half of the year, mainly due to the receivable drags dissipating, the annual bonus payment of $390 million in the first half not repeating and inventories coming down due to normal seasonality.

Turning to Slide 22. We ended the second quarter with a net debt of $26.6 billion and a net debt-to-EBITDA ratio of 5.72. As you may recall during April, we also entered into a $2.3 billion unsecured syndicated revolving credit facility, which replaced the previous $3 billion revolving credit facility that we had. This new RCF can be used for general corporate purposes, including repaying existing debt.

As of June 30, 2019, no amounts were outstanding under the RCF and as of today, we have $500 million outstanding under the RCF.

So now turning to our financial outlook for 2019 on Slide 23. Today, we are reaffirming all aspects of our annual guidance that were first presented in February and reaffirmed in May, including earnings per share in the range of $2.20 to $2.50 and free cash flow from $1.6 billion to $2 billion for the year. Where we end up in the ranges of the full year will depend on the performance of the branded products, especially COPAXONE and AJOVY, the timing of generic launches, foreign exchange rates, especially the euro and our expense management.

At this point, I would like to address a second press release that you may have seen this morning. For personal reasons, I have decided to resign from Teva and relocate my family. This is a very, very difficult decision for me. But as many of you know, when you move to a new country, it's always a challenge. And when family issues come up that make it difficult to sustain that, sometimes you have to make a decision that's in the best interest of your family. This decision has no real influence from the situation of Teva. We do have our business challenges, but I'm really convinced that the employees, management and Board of this company are doing the right things to address this challenge, to put Teva on a solid footing and then allow us to grow in the future. I'm fully committed to the next 3 months with the company through the earnings call on November 7, 2019 for the third quarter. And I will do everything to support Kåre, the Board and the company in finding and training my replacement. So I wanted everyone to know that this is really a personal decision and it's been a difficult one for me, but one that I really felt I have to make.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [5]

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Yes, and on that note, I'd just like to thank Mike for his tremendous efforts and for the very, very good working relationship we've had since I started at Teva. It's been real pleasure to work together with Mike, and I wish Mike and his family, all the best in the future and we'll still be working together for the next 3 months. So it's a little early to say goodbye to Mike, but we'll get a chance if you want to do that after the third quarter.

So with that, we will move into the Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Randall Stanicky from RBC Capital Markets.

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Randall S. Stanicky, RBC Capital Markets, LLC, Research Division - MD of Global Equity Research and Lead Analyst [2]

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Kåre, just because it seems to be the primary issue in the stock, I appreciate the comments around the opioid situation. And last quarter in May, you had made some comments that you wouldn't be surprised if this went to the Supreme Court and the next month Teva, in June, settled the Oklahoma case. So what is Teva's stance here? Are you open to more broad settlements? And as you call out exploring alternatives to litigation, is that what you mean there, I'm just trying to get a sense of Teva's strategy going forward. And then I have one follow-up.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [3]

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Okay. Thank you for that question. In any specific litigation situation, we try to assess what's in the best interest of the shareholders and of the company. And the specific analysis of the situation in Oklahoma is what led to our settlement. In that connection, we did not admit any wrongdoing or any responsibility. We still believe that the right solution to the opioid issue is not through litigation. We still deny any wrongdoing. We don't think we broke any law or did anything wrong, but it is a very serious issue, of course, affecting lots of people in a very negative way. And it does make sense for society to take action and improve the situation. Going forward, we will take the stand that we have not done anything wrong, but that we would like to participate if there is a way, in a holistic way, to improve the situation to the benefit of the American people going forward. Now what kind of solution that might be, it's too early to speculate.

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Randall S. Stanicky, RBC Capital Markets, LLC, Research Division - MD of Global Equity Research and Lead Analyst [4]

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Okay. That's helpful. And then secondly, on AJOVY, it came in light of consensus. Can you just, a, confirm if the $150 million in revenue or sales outlook for the year still stands and, b, just talk about the competitive dynamics? And where you think gross to net is settling out at?

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [5]

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Yes, sure. Maybe I'll give you a brief comment and Brendan can give some more color to it. Overall, I'm very happy about the launch of AJOVY. We are above 20% TRx and we think that's a very nice and good start. There are some swings right now among all the 3 competitors on the sales we booked for the quarter, simply for reasons that we have a lot of, I guess, all of us, coupons, paydowns, a lot of elements going into the gross to net, which are more complicated in the early phases than it will be once the market settles down. So we are in the face of, say, increasing the ratio of scripts that get paid for, therefore, improving the gross to net and we are also in the face, of course, of continued rollout to more and more target doctors, and so on. But maybe Brendan, you can give few more comments to it.

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Brendan O'Grady, Teva Pharmaceutical Industries Limited - EVP of North America Commercial [6]

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Sure. Happy to Kåre. So if you look at the U.S. market, the CGRP market is a very competitive one, not surprising with 3 launching so close together. We've taken a little bit different approach than, I think, some of our competitors have. We try to focus on profitability for the asset. So we've approached payers in a very specific way, and we've grown our coverage to about 70% acceptable coverage, which we think is good to achieve our financial goals. We added Aetna on their preferred formula July 1. We continue to build formulary access and we're in negotiations now for 2020. So we think we'll have the access that we need to get to our financial goals. As Kåre mentioned, we stopped doing the copay buy-down for plans that had AJOVY on an exclusion list or an NDC block. That impacted our new-to-brand share. And due to the overwhelming demand that we've seen, we actually sacrificed some samples in Q2 to make sure that we had ample trade stocks. So as a result of doing both of those things, it impacted our new-to-brand share. We expect our new-to-brand share to recover in the second half of the year, and of course, we're anxiously awaiting the approval of our auto-injection device. And the launch of that device, which we expect in the next 6 months, that will be a second stimulus, really a second phase of our launch, and we expect a significant boost to our new-to-brand and our TRx share as a result of that.

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Randall S. Stanicky, RBC Capital Markets, LLC, Research Division - MD of Global Equity Research and Lead Analyst [7]

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And the hundred...

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Brendan O'Grady, Teva Pharmaceutical Industries Limited - EVP of North America Commercial [8]

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As for gross to net, I won't really comment on that because every company probably has their own gross to net there, but it's stable at this point.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [9]

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I'd just like to be very specific in answering your questions about the $150 million. I think it's likely that we will be slightly shy of the $150 million on AJOVY. On the other hand, I think then on AUSTEDO where we set a target of $350 million, we'll probably be significantly above that. So all in all, you could say new product sales where were estimating $0.5 billion will probably be slightly above the new product sales target for the year.

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Operator [10]

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Next question comes from the line of Akash Tewari from Wolfe Research.

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Akash Tewari, Wolfe Research, LLC - Director of Equity Research & Senior Research Analyst [11]

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So number one, we noticed that you took a $646 million payment for legal settlements and loss contingencies, that was specifically related to opioid-related matters. Can you help us contextualize like we're seeing headlines that, like, distributors are proposing a $10 billion settlement and today, you're taking a relatively small legal fee for opioid-related matters. Why is there this kind of disconnect? And why do you have this confidence that the settlement amount will be kind of in the $600 million range and not in the multi-billion range? And maybe just on CGRP for 2020. Consensus numbers are near $300 million, which imply a pretty significant script acceleration and you're mentioning that maybe 2019 numbers may come in a little lower. How much do you think long-term Wall Street models need to come down on CGRP? And how big is kind of the EU opportunity for this class and for AJOVY?

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [12]

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So I think Mike will address the first question and I'll take the second.

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Michael McClellan, Teva Pharmaceutical Industries Limited - Executive VP & CFO [13]

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Yes, so let's be clear that what we have in our Q2 is an accrual, which is related-- the $646 million -- is related mainly to opioids. You do have the $85 million settlement for Oklahoma in there. And based on the settlement for Oklahoma, what it does from a purely technical accounting perspective is that once you've settled one of these cases you do show a disposition at least to consider other settlements. So we went through a very thorough process of trying to normalize, first, the Oklahoma settlement as being the first one, there's usually a premium attached to that and then see, with all of the other cases what from a range of possibilities we could have in terms of future settlements. It's a pretty wide range and what happens in terms of accounting is if you have a range and you have no point on that range that's more likely than any other, which we don't know at this point -- we don't have enough information based on current situation to know where this is going to go -- you end up booking the low-end of the range and that's what we've done. So at this point, as we saw from Kåre's presentation, we still don't see that we have a huge liability in this case in terms of causing this epidemic, but we do know that there is a lot of cases going on and there is a likelihood that some of these could settle in the future. So that's where the number comes up. The number that you see externally is everyone's speculation. Nobody actually has something concrete at this point other than speculation of rumors that they hear about different competitors might be interested in or extrapolations of the 2 small data points you have being our settlement in Oklahoma and Purdue's settlement in Oklahoma. So it's very complicated and that's how we ended up with the numbers that we have.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [14]

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Thank you, Mike. And on the CGRP market and our revenues in 2020, it's too early to give a firm guidance, but the simplistic math is we have around 10,000 normalized scripts per week right now and that's after less than a year in the market. So very simplistic assumption is a year from now it might be around 20,000. If you multiply 20,000 per week with a gross price of $575 with a significant gross to net deduction, and I'm sure you can do the math, and you'll probably get to a number, which is pretty close to the overall number you mentioned.

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Michael McClellan, Teva Pharmaceutical Industries Limited - Executive VP & CFO [15]

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In Europe also, 20% Europe.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [16]

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Yes. In Europe, we're having the first launches as we speak. In Europe so far, we are seeing a, I would say, pricing environment, which means that we're seeing prices which are similar to U.S., which is normally not the case in Europe and we see very good reception in the first countries. It's too early to say what the long-term potential will be. Theoretically, of course, the prevalence of migraine is identical in Europe and U.S. The population is bigger in Europe, but there are more hurdles to reimbursement. So long-term, you could speculate that the potential is roughly of the same size in Europe as in U.S., but due to the way reimbursement works with country-by-country negotiations, you typically have a slower ramp-up of volumes in Europe because you sort of get approval for reimbursement country-by-country and this is a process that can take anywhere from 1 month to 3, 4 years.

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Operator [17]

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Next question comes from the line of David Amsellem from Piper.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [18]

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David?

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David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [19]

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Can you hear me?

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [20]

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Yes.

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David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [21]

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Okay. Sorry about that. So just couple quick ones. One, I may have missed this earlier, but can you comment on Forteo? And as we're getting into the fall, any thoughts on contribution and then further afield extent of the competition? So that's #1. And then secondly, on AUSTEDO. I'm trying to get a sense of how you think penetration will evolve. This is a fairly untapped market. And I guess the question is as the footprint of both Ingrezza and AUSTEDO grows, do you expect more restrictive control on the part of payers as VMAT2 class grows here and longer-term will you have to contract more aggressively, does it become more of a zero-sum game between you and Neurocrine, so help us understand your long-term thinking there?

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Brendan O'Grady, Teva Pharmaceutical Industries Limited - EVP of North America Commercial [22]

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Sure. So I'll take the Forteo question first and then I'll work into AUSTEDO. In regards to Forteo, I'm not going to really comment on specific product launches for the rest of 2019. To date, we've launched 27, actually I think maybe 28; we launched Ziac last night, so that's launching today. So these 28 generic launches year-to-date, we have another 12 to 15 so that'll bring our number into the 40-ish range for the rest of the year. So we're right on plan where we want to be with new product launches in generics. The only ones that I will specifically comment on is Restasis, that gets asked about quite often. We're ready to go, we're awaiting word from the FDA, that could be imminent. We'll wait and see. It's the -- the FDA can be unpredictable so you never really know. And the other one is EpiPen Jr. EpiPen Jr is imminent, we'll be launching that within the next couple of weeks and we'll have that in the channel for the back-to-school season. So that's kind of how generic looks for the rest of the year.

In regards to AUSTEDO, as Kåre mentioned, it is a very big market in TD. There's about 500,000 patients. We have just scratched the surface. I think you can see from the uptake that AUSTEDO continues to enjoy, there continues to be acceptance in the market and we're quite pleased with the product's performance. I think that in regard to payers, we have very good formulary access among payers with a stable gross to net. And I think that the dynamics will allow AUSTEDO to continue to grow in both tardive dyskinesia and Huntington's disease without any significant controls going forward.

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Operator [23]

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Next question comes from the line of Elliot Wilbur from Raymond James.

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Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Division - Senior Research Analyst [24]

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First question for Kåre. Going back to the company's longer term or, I guess, objective target margin of around 27% given where you are currently 23%, seems like the leverage with respect to additional cuts from SG&A, R&D are obviously not what they were over the past couple of years. So it really has to come as a result of product mix benefit or continued plant rationalization. And then just trying to think about sort of a timeline with respect to that target. I mean is it reasonable to assume kind of a 50 to 75 basis point improvement in gross margin over the next several years? Or do you think that's a range you could actually do better than? And then wanted to ask a question of Mike with respect to, obviously, you've reiterated free cash flow expectations for the year, but wanted to confirm, in fact, that your CapEx objectives are still the same?

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [25]

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So you're absolutely correct that in order to achieve the improvement on the operating margin the majority of that improvement will not come from a reduction in R&D and SG&A. We can still maybe optimize a little bit, but that's really not where it's going to come from. It has to come from a combination, as you said yourself, product mix where the growth of AUSTEDO and AJOVY will help us and then continued improvement of the manufacturing cost, making manufacturing more efficient. Now we're not going to do a big splash restructuring, but we will do ongoing optimization of our manufacturing footprint. I said before, and I'll repeat now that once the restructuring program is fully executed, which will be at the end of this year, then we will share with you our longer-term plans for how to optimize manufacturing going forward.

And in terms of how much can this combination of product mix and the manufacturing optimization, how much can that generate in terms of improvement in operating margin and in terms of improvements in gross margin then it's my experience from having done other long-term projects of a similar nature that you can achieve somewhere between 50 and 100 basis points per year. It doesn't come linearly because you do have some step changes when you change your manufacturing footprint or when you launch products in more markets, and so on. But my expectation would be that we will be able to improve the margins in that range of between 50 and 100 basis points per year going forward. And it's a long-term commitment where you keep on doing this. It's thousands of different activities and changes you do, but it's a sustainable improvement methodology and I believe that we'll be able to do that going forward.

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Michael McClellan, Teva Pharmaceutical Industries Limited - Executive VP & CFO [26]

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Yes. So in terms of free cash flow, clearly, we need to ramp up in the second half. We did see the first half was burdened by bonus payments in the first and second quarter as well as an accounts receivable drag. And also the seasonality of inventory, we tend to stock up a little bit in the first half and then it will decline in the second half, which is a cash aid and that's usually due to the plant shutdowns towards the end of the year. So we are still on track with our expectations for free cash flow, but we do have to ramp it up quite a bit in the second half.

In terms of CapEx, we'll probably be a little bit lower than our original expectations. I think we expected $650-ish million in the beginning of the year. We are probably closer to the $600 million. So some of that will contribute to a better cash flow in the second half.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [27]

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Next question?

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Operator [28]

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Next question comes from the line of Greg Gilbert from SunTrust.

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Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [29]

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I'll ask my 2 right upfront. First, Brendan, you have commented on generic Forteo and NuvaRing in the past. Can you comment on them further today, or should we read into anything negative that you do not want to comment on those anymore? And then for Kåre, bigger picture question, when you took the job you knew you were signing up for a major turnaround that would be painful in many ways, but I suspect you did not sign up for a massive opioid story that could take years to resolve and create investor concern about bankruptcy and stuff like that. So my question is are you committed to sticking around to see this through? And assuming the answer is yes, how are you ensuring that key employees are willing to do the same?

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Brendan O'Grady, Teva Pharmaceutical Industries Limited - EVP of North America Commercial [30]

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So I'll take the NuvaRing and Forteo question and I'll let Kåre answer. So quite simply, we continue to work with the FDA with both NuvaRing and Forteo. And just because the unpredictability of when these may get approved that's why I didn't mention them. Certainly they could be later this year or they could drag into sometime in 2020. So we don't really know at this point. We continue to work with the FDA. And as soon as we get approval, obviously, we'll be ready to launch the products.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [31]

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And you're absolutely right when I took the job, I was fully aware that there was a big challenge on the revenue side where we were seeing revenue decline, which we've seen pretty much as it was predicted and we had to push hard to get approvals so that we could launch AUSTEDO, AJOVY, and so on and start driving growth on products. Which is a normal thing which in all the jobs I've had in the industry is a key element, of course. So optimizing cost drastically through the restructuring program, ensuring launch of new products to drive future sales growth was a key element of it. And I think we're succeeding very well there. At the same time, there was a huge step in managing the debt and doing the refinancing, and so on was also clearly an element. Now in all pharmaceutical companies there's also an element of litigation and in my career, I've been part of several litigations that took long time. I remember some product litigations that went on for probably around 10 years in the U.S. So these things are, like you said, things that take a long time and when I joined, I did know, of course, that Teva had the long list of potential litigations going forward. I am surprised, as you correctly point out, to the political nature of the opioid situation in the U.S. and I'm also surprised about the way it has developed. I'd say I'm not the kind of guy who ever quits unless the job is done. So, of course, I'll see it through, I'll get the job done. I have a 5-year contract. If I have to stay longer, I'll do it. So from my personal point of view, I have this funny thing that I like it when it's difficult, I have always liked it better when it's difficult than when it's easy. So in that sense I'm in a very happy situation you could say because it is definitely challenging and difficult.

When it comes to my colleagues, the best way to keep your colleagues is, of course, to be a good boss and give them the chance to work independently and solve the problems and issues and that's what I'm doing. And I think it's remarkable that actually apart from Mike who for personal family-related reasons are leaving now, I have exactly the same management team as I appointed now nearly 2 years ago. So I'm not really worried about that. I am, of course, very focused on how to manage these complicated legacy litigations best possible way and we will continue to do that to the best of our ability for years to come into the future. So the short version is I'm committed to the company.

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Operator [32]

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Next question comes from the line of Umer Raffat from Evercore.

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Umer Raffat, Evercore ISI Institutional Equities, Research Division - Senior MD & Senior Analyst of Equity Research [33]

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Kåre, Mike, I want to apologize in advance, but this is a tough one. I'm sure you both appreciate that a CFO departure when cash flows are tough and the company is going through these issues, investors won't exactly fully be satisfied with the explanation that Mike is looking to relocate with family. So I wanted to give you an opportunity to really address this beyond the prepared remarks. In one sense, given where Teva stands, presumably, Mike could be doing this job anywhere for that matter. So I'm sure you understand why The Street won't be satisfied with what you guys shared so far. And I just wanted to offer an opportunity to explain that beyond? And also, while we're at it, Mike, can you go over what percentage of maturities beyond 2019 need to be refinanced? And what's the incremental financing rate for that?

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Michael McClellan, Teva Pharmaceutical Industries Limited - Executive VP & CFO [34]

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Yes, so I'll address it, it's not prepared remarks. I'm definitely making a personal decision and you can say, yes, you can do your job from anywhere, but you can't, you need to be with your teams. Unfortunately, Israel's not located that close to anywhere I need to be and I've been doing this for 2 years. I've been commuting most of the time, living by myself either in hotels or in an apartment in Israel and it's just not sustainable. So that's the whole story. If you want to read more into it, I can't stop you from it, but that really is the whole story.

When it comes to refinancing the maturities, basically, we know that when we get to 2021 and 2023, those $4 billion debt stacks are probably little more than we're going to be able to generate organically. So we will try to get out in front of those. We're constantly watching the market to see when is the right time to refinance without drastically increasing our interest cost. Unfortunately, in the last 8 weeks, the publicity and the trial by media from both opioids and the price-fixing has had a big effect on our spread. So we're looking at all the different options that we have. We don't want to do anything too hastily that becomes a permanent change in our capital structure or puts us in a bad position in case some of these things work themselves out to be more positive than The Street and the speculators are currently looking at. But it's a very intense situation. So we are managing it. We're in constant discussion with our Board, with management, with our banking partners, people watching the market. But in a quantum, we'll probably need to refinance $2 billion to $3 billion in the coming years and then potentially maybe another $1 billion to $2 billion as we get to the 2023 maturity. So that's kind of what we'll be looking at. We need to find the right approach to do it that's most beneficial for the company and hits the market in the right timing with the right story.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [35]

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And Umer, if I can just add a little bit because I understand your question about Mike's departure. I think Mike doesn't really want to talk about it in terms of details, and I think we should respect his privacy, but he does have a very serious health issue in his close family and the place where he needs to be for that reason is not a place where he can function as the CFO of Teva. And I think it would be respectful not to go into more details, but it really is, in that sense, related to a really very serious health issue. So not Mike, but in his family and with that I think we should move on.

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Michael McClellan, Teva Pharmaceutical Industries Limited - Executive VP & CFO [36]

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Next question.

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Operator [37]

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Next question comes from the line of Esther Rajavelu from Oppenheimer.

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Esther P. Rajavelu, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [38]

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I have a couple. First one is on AJOVY and the launch in EU. What kind of competitive dynamics are you facing there that are either similar to or different from the U.S? And how are you thinking about the ramp in that market?

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [39]

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Yes, so in the EU, there are couple of things that are similar in the sense that it's the same 3 products, it's the same 3 competitors, but a little bit of twist because, of course, it's Amgen in the U.S., it's Novartis in Europe, but it's also Lilly and it's also us. Now in Europe, the access is different in the sense that you don't have these competitive access negotiations. You basically have a situation where typically less negotiations with the authorities, they decide on a certain price level and that's the price level given to a drug class and that would be the same typically for these 3 drugs. And then you have, you could say, more of a similarity in that then you compete on disseminating the clinical information, informing doctors about the opportunities, and so on. And in that sense, it's quite similar. So I would expect that longer term we will see same solid uptake country-by-country. The hurdle is, as I said before, that before we get general access in a market, the national health authorities -- because you're typically talking about nationalized health systems so the national health authorities, they need to make up their mind on at what level and for which population they want to reimburse this therapy. In this case, it's pretty obvious that it's, of course, people suffering from chronic migraine and it's preventive therapy for migraine. So you're probably talking about these 4 migraine days per month on average, and we do expect that we will get to the access. And once you get access, it will typically be for all 3 players. So it's a more level playing field in terms of access and then, of course, you have the same kind of promotional activity, clinical, scientific activity as you have in other markets. So our expectation in terms of final market share is kind of similar to what it is in the U.S. So we're expecting in Europe and U.S. to have somewhere between 20% and 30% market share. That's our best guess.

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Esther P. Rajavelu, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [40]

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Yes. And I have 2 more quick ones. Going back to Slide 5 of your presentation when you talked about gross margin improvement, how much of that year-over-year improvement was related to manufacturing efficiency versus the product mix of pricing? And are there geographic variability to the improvements? And then my last question is on the CFO search. Have you initiated the search? And what kind of timing are you expecting given where you are today?

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [41]

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Yes. So I can't really give you the fine details on the margin development, but I can tell you that we are seeing improvements in the gross margin from manufacturing, both in the U.S., but also in the European market. And I can tell you that, that there's still a drag element coming from the loss of COPAXONE sales, and there is, of course, some improvement coming from the new launches. I won't get into the fine detail numbers there, of course, relatively small those swings. As you can see, it's not a major change, it's more the trend line and it's more the fact that by doing the constant optimization of the portfolio and the manufacturing, we do believe we can do this 50 to 100% -- 100 basis points per year improvement goings forward.

In terms of the CFO search, we have just initiated that and we hope, of course, to identify somebody so that once we get to the full year reporting in February, we will have a new person on board. Mike is here to do the third quarter, so we think we'll have a good and solid situation.

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Operator [42]

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Next question comes from the line of Ken Cacciatore from Cowen & Company.

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Kenneth Charles Cacciatore, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [43]

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Mike, I know we'll have you next quarter as well but sorry to hear you're leaving and, obviously, I'm hoping all the best for your family. Kåre, I hate to revisit the opioid situation, but just trying to understand if you could help us understand some of the nuance besides just that Oklahoma was first? Is there some way you can describe why that made more sense and how it could be nuanced different from others? And then also as part of that, obviously, Teva bought Cephalon a while ago so that brought ACTIQ and Fentora so just trying to understand the differences in the settlement between the generic component that led to these settlements or maybe your exposure versus the brand exposure that you took on with the Cephalon acquisition. So maybe we can better understand why a generic "manufacturer" would have reached this settlement as opposed to continue to fight? It would seem if you were just supplying generic drugs and not selling them you wouldn't want to -- you would want to continue to litigate, but trying to understand if there is something going on in the branded side that really more forced your hand?

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [44]

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So let me answer the last part of the question first and then I'll get back to the overall. The last part of the question whether there is anything with these brands that was specific in the Oklahoma case and made us do the settlement. That's not the case at all. I can actually tell you, anecdotally that in the 10-year period that was discussed in Oklahoma, I think we had 247 scripts all in all of those 2 products in Oklahoma. So that is a nonissue whatsoever. However, I have to step back to the beginning and say this is a political situation. This is a political situation where people are pointing to somebody to blame for the opioid epidemic, in this case they point to the manufacturers and what's different between the Oklahoma apart from the fact it was the first, very few companies were in that case, as you know, only 3 companies, the first company had settled so there were only 2 companies left. It is a local judge in Oklahoma. It's not part of the federal court system, it's a state court. The MDL case, which is coming up now is in the federal system. It's like 85% of the volume of plaintiffs. So from our point of view, you could say it's a better time to fight or to get a global settlement in the MDL case in Ohio than it was in Oklahoma. So it was a specific assessment of the situation that led us to the conclusion that it was in the best interest of the company and the shareholders to do the settlement in Oklahoma not because we believed we have done anything wrong whatsoever, or have any direct responsibility whatsoever and not because there was anything to special products we have, which are really developed for terminally ill cancer patients.

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Operator [45]

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Next question comes from the line of Liav Abraham from Citi.

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Liav Abraham, Citigroup Inc, Research Division - Director [46]

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On the legal settlement and contingency charge that you took of $646 million, in your assessment of the potential liability there, did you include all the opioid cases outstanding or just the state attorney general cases, did you include all the cities and counties and Native American tribes, et cetera?

And then secondly, just coming back to AJOVY, even if you're going to do slightly shy of $150 million in revenues this year, you're still anticipating a significant ramp in revenues in the back half of the year. So maybe you can address how you get there, is there going to be a change in strategy or are you going to start a DTC program, what is going to get you to that significant ramp in the second half?

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Michael McClellan, Teva Pharmaceutical Industries Limited - Executive VP & CFO [47]

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So thanks, I'll take the first one. So that settlement is meant to encompass the settlement accrual, is meant to encompass everything and as I described earlier, it's more of an accounting perspective on a wide range that we've taken a booking there.

So we'll monitor this as we go along and see if there is any change necessary, but given the information we have today and the way we see this, this is what we've recorded in Q2.

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Brendan O'Grady, Teva Pharmaceutical Industries Limited - EVP of North America Commercial [48]

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I'll take the next question regarding AJOVY and the ramp in the second half of the year. So if you look at from Q1 to Q2 our paid prescriptions increased from 40% to 60%. We will -- we continue to see that increase during Q3. So it's a mix of transitioning patients from free coverage to paid reimbursement as well as continuing to gain new patients. So as we go through Q3 and we go through Q4, we'll continue to see that dynamic improve. As I said, our payer coverage has improved and we continue to convert patients so that's how we'll get to our year-end number.

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Michael McClellan, Teva Pharmaceutical Industries Limited - Executive VP & CFO [49]

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Next question.

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Operator [50]

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Your next question comes from the line of Chris Schott from JPMorgan.

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Christopher Thomas Schott, JP Morgan Chase & Co, Research Division - Senior Analyst [51]

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My first question was on the North America generic business. You've been sitting at revenue just below -- a bit below about $1 billion a quarter this year. Should we think about that kind of $1 billion run rate as a decent run rate for that business going forward? Or could we actually start to see that number grow over time as some of these second half opportunities, as they come to fruition? And then my second question was a bigger picture one. Just thoughts on what we saw with the Upjohn-Mylan transaction a few weeks back and how you think about transformational M&A at Teva as you look at your product portfolio and geographic footprint? Is a transaction like that. If there's a transactions like that at the right opportunity was available something that could make sense for the organization? Or are you really much more focused on just optimizing the portfolio you have today?

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [52]

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Yes, I'll give the quick go with the generics and then Brendan can give some more comments and I'll end up with commenting on the Upjohn-Mylan thing. So, I think, the $1 billion quarter plus/minus, of course, depending on specific launches and so on is a steady run rate. I don't see a big change that this will improve significantly and I don't see a big risk that it will decline significantly. I think we'll be at around the $4 billion level for the years to come based on our strong portfolio with a lot of launches coming up. It is a fact that launches, they move in time. Sometimes you launch earlier than you thought, sometimes you launch later than you planned, but on average when the whole thing is moving, it sort of evens out based on how many products you have in the pipeline, how many you are preparing to enter into the marketplace. And that, combined with the fact that we've seen a relative stabilization of the pricing environment leads me to believe that this $4 billion a year level for North America is a sustainable long-term level. But Brendan, how do you see it?

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Brendan O'Grady, Teva Pharmaceutical Industries Limited - EVP of North America Commercial [53]

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No, I see it on was the same way. I mean, if you look at quarters, you see the North American run rate is anywhere between $900 million and $1.1 billion and that's largely dependent upon the new product launches, how many you launch in a particular year, how many of them are high-value launches, what the market looks like when you get there. So we've had quarters where we have been closer to $900 million. We have been quarters where we've been close to $1.1 billion. So as Kåre mentioned, we kind of see this as a sustainable business going forward at around the $4 billion mark give or take depending upon the launches in any particular year.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [54]

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And on the Upjohn-Mylan merger I would like, of course, to wish them good luck with it. It doesn't really change your operational environment a lot when you merge and the 2 parties have, of course, worked together a long time, including on EpiPen and I would, of course, wish them good luck solving the manufacturing issues. But while they haven't been solved, I would also just make a little commercial for the generic EpiPen, which is available in all pharmacies and if it's not there, you could call and get it so nobody should be short on EpiPen this fall thanks to the generic version that we're marketing. That thing aside, we are not really seeking transformational M&A. We are sort of going about it the long-term way, improving our operational performance year-on-year, working down our debt. I do recognize this takes time and that the legal overhang now has a risk of it taking longer. That doesn't change the endgame. The endgame is of a very strong and sustainable profitable business.

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Operator [55]

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Final question comes from the line of David Maris from Wells Fargo.

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David William Maris, Wells Fargo Securities, LLC, Research Division - Senior Analyst [56]

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Mike, thank you for the candor about your planned departure, please know we all wish you and your family the best as you get through this. On the debt side of things, do you think you can refinance a significant amount of the debt prior to a settlement. And if so, what debt do you expect to refinance first and if you wanted to help us understand what the kind of blended rate of the first tranche or stack of debt that you would like to refinance, what the blended rate is of that and what you expect the current market to be for it, that would be helpful.

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Michael McClellan, Teva Pharmaceutical Industries Limited - Executive VP & CFO [57]

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No, thanks for your kind words. I think as long as the overhang is there, it's going to be a little trickier with refinancing, but we do think there are pathways to get the right quantum in the right timing to do it. If you look at our overall cost of debt, most of this was borrowed back pre-Actavis acquisition at a very low rate because the company was investment grade at that point and the market was very buoyant so you'll be looking probably at taking out some of the '21, maybe even the '23 and it will go from the roughly 3% interest rates that you see today to anywhere 6%, 7%, 8%, 9%, depending on where the market is at the time we come in. And that's why we're going to be looking at this very cautiously. We don't want to overload the P&L with interest expense because of a short-term consideration of these litigations, but we will hope that they clear up a little bit in the coming months, at least in terms of what the quantum could be and what's the time frame. I think it's pretty clear that if major amounts are going to be expected from the industry that they're going to have to be over a long time frame. I don't think any of the players in the industry could handle large upfront cash amounts and then if it becomes something more to ways they've settled other large product situations where you've got a future excise tax on these kind of sales or things like that, that could also help. So we don't know how this is going to resolve itself. We don't know the quantum. We will just be looking to tap the markets at the right time to optimize our situation without trying to explode too much of the debt costs.

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Kåre Schultz, Teva Pharmaceutical Industries Limited - President, CEO & Director [58]

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Thank you, everybody, for calling in. This ends our quarterly call.

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Operator [59]

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Thank you. That does conclude our conference for today. To listen back to the replay of this conference, please dial 0044-3333-009-785 and enter the conference ID 826-0368 followed by the hash key. Thank you for participating. You may now all disconnect.