Good morning, everyone. Thanks for joining us. For those of you who don't know me, I'm Glen Santangelo. I'm the Spec Pharm analyst at Jefferies and cover Teva amongst some other things, and we're very excited to be hosting Teva, and to my right, the CEO of the company, Richard Francis. So thank you all for getting out in the rain this morning and joining us. We have 25 minutes. It's going to be a rapid-fire, sort of fireside chat, Q&A with Richard, and so we look forward to it. Good morning. How are you?
I'm good, Glen. How are you today?
All right. Excellent.
Welcome to the London weather.
Thanks. All right. So maybe a good place to start is, you know, Richard, you've been CEO, what, six or seven quarters now? A lot has sort of transpired in that.
Seven quarters of growth, Glen.
Seven quarters of growth. I mean, it's been an impressive run. The stock price performance in the last 12 months has been spectacular. And so I guess at a high level, maybe just to sort of level set the conversation, what do you think has been resonating the best with investors? And what have you been sort of most happy with? And sort of where do you see, you know, how do you perpetuate this momentum? Like, where do you see the value coming from over the next kind of couple few years?
Yeah. So firstly, thank you for hosting us, Glen. I really appreciate the chance, and thank you, everybody, for coming. So firstly, to remind everybody, you know, two years ago almost, we put together the Pivot to Growth Strategy, which was a strategy which we detailed out what the company was going to do over the next five years in precision and how we're going to drive growth. So it wasn't a tagline. It wasn't a bit of marketing. It was a very detailed plan that we follow every single month, every quarter. And we know what we're going to do every single month, every single quarter. So the fact that we've turned a company that was declining year on year, I think, for six years into growth, I think is a remarkable achievement of Teva and the team.
But it goes down to being focused on the four pillars: delivering our growth engine, step up innovation, create a generic powerhouse, and focus the capital of the business. And we've been doing that quarter on quarter. So, and as I did rather humorously point out, it's been seven quarters of growth. But that growth has come from exactly where we said it would come in driving on our growth engines, which is Austedo, Uzedy for schizophrenia, and Ajovy for migraine. And I think we've shown what we can do in the innovative market. We've accelerated our pipeline, which we'll probably talk about. And we've returned generics to not stability only, but actually growth, particularly in the U.S. So I think we've done a lot that we said we're going to do, but there's a lot more of the plan to execute.
So I think if the question is, is there more to come from a value creation, I would say absolutely, because we're planning to execute more. So I think somebody did ask me this morning whether the bus had come and gone on the share price. And I said, well, now we're in London. You wait for a bus for a long time, and then three come at once. And so I'd like to think that we've had the first bus with regard to Teva, and there are more to come because we have more to come on Austedo. And just to remind everybody, when we launched the $2.5 billion sales in 2027, people had in their forecast $1.4 billion peak. And we're going to do $1.6 billion this year. So there's a lot more value to come.
I mean, clearly, there's been a transformation here, right? You know, from a generics powerhouse to more of an innovative, branded company. And you talked about Austedo and Ajovy, and you believe there's more to come. And it's almost like, you know, sitting in my seat, I mean, I've only covered the company, you know, for a couple of years, but it's still pretty obvious to me that people still view you more as a generics company and maybe don't give you enough credit for being more of an innovative company. And, you know, this maybe you can just quickly review third quarter results because it seems like you got the best of both worlds. You had a generics business that grew way faster than I think anybody expected. And as you just alluded to, out of Austedo and Ajovy, for example, you're getting much greater growth than expected.
Yeah, exactly. Thanks for pointing that out. I mean, it's, look, we're very proud of our generics business and our generics heritage, but we are not a generics company. We're a pharma company with a world-class generics business, which, as you saw, you know, grew at high double digits, you know, 70% in the U.S., 8% in Europe, and I think 14% in emerging markets. So that's good growth across all our regions. But then on our innovative products, if I just talk about the innovation, you know, innovative products, you know, up 28% for Austedo. We reforecasted Uzedy up for the year from $80 million- $100 million, and Ajovy grew at 21%. Now, those have been doing those numbers quarter on quarter. And once again, to reiterate, I think that Austedo is going to get to $2.5 billion in 2027. It won't be its peak sales. That's 2027.
Uzedy is showing what it can do in a very competitive schizophrenia market, and Ajovy growing at 21% in Q3 shows that even with a very competitive market across all regions, we're growing market share, so that's an innovative company performance. If you couple that with a pipeline of TL1A, ICS/SABA, olanzapine Phase II readout, IL-15 in vitiligo, and celiac disease, Emrusolmin in multiple system atrophy, MSA, that feels like a company that's an innovative company, or at least part of a, you know, our company is innovative, so I think we can start to shrug off that just a generics company tag.
Before we dive into the individual brands and the pipeline, I, you know, I just want to sort of reflect on this year, right? Because when we look at sort of your overall operational growth in 1Q, 5%, 11% in 2Q, and then 15% in 3Q, you know, multiple guidance raises along the way, I guess, where have you been most surprised on the upside, most pleased? And then maybe more importantly, because I know there's a lot of good news here, people are always kind of wondering where maybe have you underperformed relative to your expectations and maybe what hasn't gone as well?
So it's interesting to maybe take each of those pieces individually. So firstly, when we launched the guidance for this year, everybody said it was ambitious. I think to remind people of that, it was an ambitious guidance, and we've raised it twice. So I think that shows, you know, people not how they should think about Teva, that we're very specific and precise. We want to deliver what we say we're going to do, and we're very consistent about that. We will do what we say we're going to do. We'll be very clear about what we're doing. We won't make it hard to work out. So what has surprised? I think our innovative business, obviously, Uzedy, we gave a target for $80 million. And I think people thought that was a bit of a stretch. That was above most people's guidance.
And now we've just raised it to $100 million. So I could say that hasn't surprised me. I'm pleasantly surprised. I think you'll find Teva always wants more. And so we're building a team who really is very ambitious. The innovative side, obviously, Austedo, we moved that up a bit. So I think it shows we've got even more traction with Austedo. There are many reasons to believe Austedo is going to continue to grow. And part of that's about all the work streams we put in place last year as well in the investment. But on the generics, I think I always remind people our generics business, 65% of it is outside the U.S., and that has grown well for a long time, and it's very profitable. That has continued to perform and actually slightly increased its performance.
But the U.S. is probably where we've got stability a bit quicker than we anticipated. When we launched the strategy in New York last year, if I remind you, we didn't really give generics much of a growth to 2027. We said it was going to be quite modest, very modest, in fact. Now, we've probably helped improve our generics business quicker than we thought. I think there's still a lot of work to do, to be clear. We've got a great pipeline. We've got to launch it more on time. We've got to improve our manufacturing efficiency and our supply chain. But we've made inroads into that. And I think that's probably also led us to have an improvement. What could we do better? As long as, you know, this doesn't get aired to my employees, I'd say probably everything. But some of it's marginally different.
That wasn't said with humor. You know, one of the challenges that Teva has been to make the organization realize that it is a world-class organization. It was for 124 years. It had five difficult years. You should not be defined, and everybody here should not define Teva by its last five years. It should define it by what it always was and what it's capable of. I think I keep reminding the team that we are outperforming our competitor in the tardive dyskinesia market, and we shouldn't be surprised about that because we are really good, and we're going to get better. I think that that's probably the most challenging thing, and then, you know, we are doing quite a lot of work on our network and our manufacturing.
I think the ability to move that at speed is something that I'm probably ambitious on.
All right. Let's rifle through these brands real quickly. Austedo and Austedo XR, you know, we have the $1.6 billion in guidance for this year and $2.5 billion in 2027. I mean, talk about sort of, you know, help us bridge that growth gap. And I think if I just heard you correctly, you don't even believe that that 2027 level is a peak sales estimate. Like, help us create that bridge, and what gives you the confidence in that bridge and maybe even longer term beyond the $2.5 billion that you were just suggesting?
Yeah. So to remind everybody, there are about 800,000 people suffering from tardive dyskinesia. A fraction of those, you know, 100,000, let's say, are on therapy. So the unmet medical need is huge. So one is there's that that we have to go after. We've obviously driven direct-to-consumer campaigns to pull those people into the office that have no therapy and to drastically improve their life. So that's one. And then the things we're putting behind that, Glen, you know, when I came, we didn't have a world-class innovative team who understood what was needed to do across all the areas from what's field force size, what capability do we need around specialty pharmacy, what's adherence, what's our compliance programs, what's our back office services with regard to helping patients get through their insurance. All of those things, we hadn't really got to a performing level or invested in.
We've done those. Now, those are not at their maximum at all. So all of those we're improving month on month. It's a great team, but some of those things were only put in last year, and you don't get to peak performance within 12 months. So I think huge unmet need. We've resourced the product appropriately. We've built the capabilities. It's a great team now. And that team is executing a great plan. But that plan has not peaked in any way.
All right. Maybe a similar question for Uzedy, as you just sort of commented, you raised the guidance expectation for 2024, you know, on that product from $80 million - $100 million. Maybe talk about what's gone better, you know, for you as far as that's concerned and maybe as you sort of high-level forecast heading into 2025. Do these trends continue into 2025?
Yeah. So just to remind everybody, the schizophrenia market, the long-acting market is worth $4 billion. But there are long-acting risperidones out there. So it's a very competitive market. And you could argue that we came very late. But we have, excuse me, we have a differentiated product in that subcutaneous pre-filled syringe. But I think the real differentiator is physicians, once they've injected it, will get to therapeutic levels within eight to 24 hours. Now, if somebody has an episode, they need to be controlled really quickly. And the other therapies, you have to, you can inject them, but then you have to give them oral supplementation to try and get them to the right levels. And then you have to monitor them. So either hospitalize them. So that's pretty complex. So we haven't had that.
So I think we've got a good product offering, credit to the R&D team on that. But then we've actually gone out and we've executed, segmented the physicians, gone on to hospital formularies quickly, worked on access, and done that very well in a very, very competitive managed segment. So it's one of the hardest, right? And I've been in the specialty sector a long time. So I think what we've shown there is we can really understand the market well. We can execute well. We can overcome some of the barriers. And I think that is why we've got Uzedy to where it is. Now, what I'd remind everybody is, okay, we've had a good year, and we've got to build on that. But olanzapine will be sold to exactly the same physicians. Have to go to exactly the same formulary committees in the hospital.
Have to go to exactly the same payers. So not that we've used Uzedy as a dress rehearsal, but we've built that muscle. And I don't think we launched Uzedy particularly well last year because we weren't prepared, because we weren't focused as a company on that. But when we come to launch olanzapine, that team will have had two years in the field describing Uzedy, describing the same technology which we use in olanzapine. So I think Uzedy's down to just really good understanding the market, really good execution, and that will build into olanzapine, which will probably be one of the questions we'll get into.
Maybe that's a good segue right into let's talk about the pipeline. You know, we get a lot of questions around the current efficacy and safety issues with some of the other long-acting injectable products. I mean, why do you think sort of your product has sort of maybe successfully solved for some of these problems? And, you know, you've been able to target, you know, the right number of patients with no PDSS. Like, what do you think sort of differentiated about your product versus some of the others on the market?
I think with regard to olanzapine, the Medincell technology, which allows us to have very constant therapeutic levels over the whole duration of the month, I think, and we have that with Uzedy, which is also why it gets the therapy level really quickly and then is constant, is a beautiful technology. And don't forget, by the way, the subcu and the, doesn't have to be kept in the fridge and it's a pre-filled syringe. When you're dealing with these patients, that is a big advantage because, you know, particularly the severe patients, these are not, these patients don't want an intramuscular injection. They don't want to have to, you know, remove clothing. So all of those things built together, but it's that therapeutic level that's really, really key and the ability to have consistency.
And that has obviously led to the technology meaning we've had no PDSS in our clinical studies, any of our clinical studies. And we've actually gone over the amount of injections we needed now, and we've had none. So I think that's pretty categorical. We had discussions with the FDA on what would be needed, and we've now done those. So I think, you know, that's very appealing.
And the other thing I'd say about Olanzapine, which gives us a tiny insight into the market, is that we recruited that study nine months faster. Now, schizophrenia is a really hard area to recruit patients. Now, part of that's down to Eric Hughes and his team, excellent execution, which we're good at because we're focused on it. But I think I have to admit part of it is down to the physicians wanting to take part in the study. They want a long-acting olanzapine.
They think olanzapine is a great molecule for efficacy, but they want a long-acting. So I think there was, that always helps. And so there's a lot of excitement around it. And don't forget, they're familiar with the technology because they're using Uzedy.
Could you maybe just update us on next steps on the regulatory front as investors start to look towards the launch timeline? I mean, is this something that we could see by the end of 2025?
Launch?
Yeah.
No, unfortunately not. I'd love that. I'd love to push for that. I mean, the most important thing is we get all the safety database together. Once we've got the safety database together, we'll submit it next year. That file is really important. We want to make sure our file is done properly. And so we'll get that in, and then we'll be in a position to launch in 2026. Obviously, I want to launch as soon as possible. But at the same time, I want to make sure we do that in the proper way.
All right. Maybe let's turn to the other, obviously big pipeline product that everybody focuses on is the Anti-TL1A, obviously a very competitive class, two competitors with strong sort of phase two results. Can you talk about maybe Teva's asset and what's differentiated about it?
Yeah, I think first I'd like to remind everybody that when we started talking about TL1A last year, everybody was worried how far behind we were. And once again, credit to our R&D team led by Eric Hughes. We accelerated that Phase II study. Now we're in a position to have a full readout at the end of this year, which we weren't communicating with the team.
It'll come in the next 45 days?
Yep. We said at the end of this year, yeah. That's exactly how many days we got left.
I don't know.
I'll trust you on that one. But yes, yes, it will. But that we've accelerated the study. The reason why that's important is because also as we move into phase three next year, the ability to keep that type of pace going through our phase three program with Sanofi. So now you asked me about the TL1A. We think it's the best TL1A out there. We think it's the most potent, it has the best specificity, and it has the lowest neutralizing antibodies. And we think those are really key to having the most efficacious product. We have shown data where we've actually made the competitors' products and looked at those. So I think we built and engineered ours.
By the way, Teva has probably, in my experience, and I've spent most of my time in pharma and biotech, one of the most impressive antibody engineering teams I've ever seen. And Eric Hughes will say the same. So we designed, and our TL1A is not our first TL1A. We've made many TL1As, and this is the one we ended up on. So the reason why we think it's the best is we've made it the best, and we look at what everybody else did. So I think that will give us confidence that when we get to the market, we will have something that has the best efficacy because of those factors. And I would remind people that neutralizing antibodies are going to be really critical. And we have good data because we did a phase three study in respiratory. And so we know what our levels will be.
I think in an indication of UC and CD where you're cycling through therapies, knowing that you have a low level of neutralizing antibodies is important when it comes to selecting what you'll probably use first line.
Richard, one thing that I found frustrating, you know, in the wake of the three Q print, which looked like a great print, and all of a sudden the stock is up, and then all of a sudden it was down and kind of slid a little bit, and I appreciate we went into the quarter with the stock up 80% year to date, and maybe it was. I'll say, I'll use the word crowded a little bit, but on the conference call, you got a lot of questions around TL1A. Was the company trying to signal anything? I mean, anything in that conversation that you think might have been misconstrued? I mean, because quite honestly, I still struggle to understand the stock price reaction post the quarter, appreciating that expectations were sort of high.
I think as we go into the end of the year, there's just some nervousness around the readouts coming up. I don't know if there's any sort of reflection back on that conversation on the 3Q call that you had mentioned to anyone, or maybe I'm making too much out of nothing.
No, no. Look, I mean, I think the fact that you're following our share price a lot and understanding all the detail of it, I appreciate, Glen, because as you said, it's not a stock that everybody looked at for the last few years. Look, I think the Q3 numbers were excellent, really, really good. And they aligned to exactly what we said we were going to do. So everything we said we were going to do, we did. And we did it better than we thought. So I think that's what investors and everybody in the community wants to know and hear. Was there anything that on the call that, no, I don't think so. I think, you know, on every question we answer, we answer with clarity and a measuredness. We're not a rah-rah company. We're not a pessimistic company. We're a thoughtful company.
I think on TL1A, you know, the readout's going to be this year. So I think there are people trying to maybe second guess, but we haven't seen the data. Nobody's seen the data. So we have no idea. And so I don't want to get into understanding why the stock went which way. Then we had an election as well in one country at the same time. But what I'd answer on that, it goes back to maybe that first question. The stock price now is relevant, but irrelevant. And I mean what I mean by the value we're creating at Teva is built on a very detailed strategy where we have a lot of things organically to do. And if we do those plus or minus 10%, we're going to have a great company that's going to be valued very differently.
And we can debate what that value is going to be, but it is going to be higher than today. And it would be higher today than regardless of what the Q3 earnings have done. So I think for me, that's what I stay focused on with the employees. And I say, we've got a three to five year journey here. Let's execute on that. And we'll end up in a good place, but let's not get sort of bogged down by the quarters because we know exactly what we're going to do every quarter next year already.
Fair enough. I apologize. I had to ask because I get the question.
No, no, it's a good question. I wish I had the.
Maybe just because we got five minutes left. Let's round out the innovative pipeline. Anything beyond olanzapine and TL1A that you just want to quickly highlight?
Yeah.
That you're most excited about?
There's one that I feel a bit sorry for because it's not talked about, and it should be talked about, which is our ICS/SABA. And so this is probably the unsexy one in the pipeline that's become quite sexy with TL1A, olanzapine, IL-15, Anti-PD1- IL2. And the reason why I really like it is because the POS, I believe, is very high because we know what these two molecules do. We knew how to put them together. We knew how to make devices. And as you know, a company also based in this country has launched their rescue inhaler, the combination in the U.S. And we believe we'll come to the market later, but we'll come with a differentiation of ICS/SABA, which will have a pediatric indication, which is 25% of the patient population.
There are 10 million people in the U.S. that should be on a combination. And of those, 25% will be pediatric. We will have a pediatric indication. So even if our only differentiation is that, then I think we'll do well. And that will come out around about 2027. So I think people should be looking at that. The other one is IL-15, which we're going to have a readout in celiac disease. And we're doing a proof of concept in vitiligo. But it has more indications to come, as does TL1A. And we've been talking to Sanofi about more indications. So by the way, those two products you could call slightly overused pipeline in a product. But we always think about our pipeline as deeper than it is because TL1A will have more indications. IL-15 will have more indications.
And then probably the last one is Emrusolmin, which is our treatment for MSA, as I mentioned at the start. An exciting, huge unmet medical need, very distressing disease and condition. We've built a phase II study that's powered to a large patient population, a large number of patients, to allow us that if we see some good data, we can accelerate that through to the market quickly, which will be beneficial for the patient. So there's a lot there. By the way, Glen, I hope that sounds very innovative because it is.
Yeah, sure, for sure. But I can't let you go without talking about generics because it is a cornerstone of the company, right? So I mean, great growth in 3Q, again, phenomenal growth, right? But we're coming to that critical fourth quarter that's impacted by sort of your Revlimid headwinds, just the way the nature of your contract works, right? And so when we look at some of the key launches this year, Victoza, you know, Humira, which falls into that generics business, Sandostatin, you know, how should we think about that revenue growth trend in 2Q and 3Q versus 4Q? Because a lot of people got, you know, got faked out by 4Q last year, right? Because we all mismodeled Revlimid a little bit in 4Q, given the nature of your contract.
But it feels like you have a lot of other products to sort of absorb the impact of that timing in 4Q. Is that a fair assessment? Anything you'd call out as it relates to 4Q?
I'd probably just remind everybody that 65% of our business is outside the U.S., so that quarter four will be pretty predictable. Those businesses doing well, they'll continue to do well. They don't have that fluctuation that you see in the U.S. with Revlimid, but Revlimid is a quarter two and quarter three agreement, and so that gets taken out of quarter four, and so you have to accept that. Obviously, we have launched Victoza, octreotide, and we've had other launches at the start of last year, and so, you know, that's the thing you've got to model and take into account.
Any quick sort of comments on Humira and Stelara for people on your sort of biosimilar launches, how they're going, what's going better or worse than maybe what you thought?
Yeah, no, so look, people ask me a lot about biosimilars because I'm a big believer in the opportunity, particularly in the U.S., but also in Europe. But I'd say that Humira, our biosimilar Humira, we've obviously came to the market late, but I think we've contracted well. We've done our private label. And I think, you know, we'll get into some traction in Q4. I think 2025, I think we're optimistic about what the market will do. We see some of the brand being taken off formularies in the first of January and the first of July. I think that's a big opportunity. We'll also have Stelara, which now we can negotiate. So we didn't have that opportunity with Humira. So I think from a biosimilar point of view, that is a pipeline. We have another five coming out before 2027 as well.
So that will also generate our growth, which when we gave our guidance, we risk adjusted our biosimilars quite a bit.
I got 20 seconds for two financial questions, right, so I understand we're not giving guidance here today and you're not giving guidance today, but when I sort of look at the way the street has the year modeled, fiscal 2025 up only 4%, it seems like you got a lot of big tailwinds next year. You talked about Humira and Stelara, a number of key generic launches, continued growth on sort of the branded side. Seems like a little bit, you know, it seems like a conservative expectation by the street, and these are my words, not yours. I just want to sort of take your temperature about how you're feeling here in mid-November as you head towards 2025, and it feels like there's a lot of growth drivers that should sort of carry this momentum into 2025.
So, firstly, I think thanks for the question because I think it's been a long time since Teva has been talked about in that way. We returned to growth in 2023 and 2024, which people didn't think would happen. And now we're discussing what could be the guidance for 2025 and what is that number going to be, which I think is exciting that we're having that conversation. Obviously, I won't get drawn into guidance because we want to give Q1. But I think you're right. There are a lot of reasons to believe this company is going to continue on its growth trajectory. All those pillars of the Pivot to Growth, driving our growth engines, the innovative pipeline, the generics powerhouse are coming together. There's still a lot of work to be done, but that's a lot of opportunity to create great value.
We'll come back with guidance next year. But I'm glad you see the positive work that we've done. Makes you think about 2025 in a positive way. And look, we reiterate our 2027 targets of 5% CAGR, 30% operating margin, 80% cash conversion, and net debt down to two times net EBITDA. We're on track to do those. We're committed to do those. And so I think those questions sort of go together. And 2025 has to play its part in that.
For what it's worth, I mean, I'll talk my book. I mean, seeing the stock trade at less than seven times next year's EBITDA still seems like a big opportunity to me. Thank you very much, Richard. We appreciate the comments. Thanks, everyone, for joining us.