Good morning, everyone. My name is Balaji Prasad. I'm the Senior Analyst for the Specialty Pharmaceuticals sector for Barclays. It is my privilege to kick off our SpecPharma track with Teva Pharmaceutical Industries. I have the privilege of hosting Richard here on stage with me, CEO of Teva. Also, I do want to call out Eli Kalif, CFO of Teva, not on the stage, but on the front row, and Chris and Dave and Sanjeev from the Teva team. Thank you all for joining us. To all our investors, thank you for joining us here in Miami. Starting with Teva, it's been a great call for us over the last couple of years. The turnaround has been exceptional. Recently, the company also reported its Q4 and gave out its 2025 outlook. We saw a bit of sell-off post this.
In terms of the pipeline progress and in terms of the execution and true stabilization of the business, it has been a phenomenally impressive one. I hand it over to Richard to start with some opening remarks, with your recent Q4 earnings and your 2025 outlook, and then dig into some questions.
Great. Balaji, thank you for hosting. I always appreciate it. Thank you, people, for coming in or tuning in. Thank you for your opening remarks. I mean, I think we probably do not think about it as an impressive turnaround in Teva. We just set out a strategy in 2023. It was really clear, pivot to growth, and we have been executing that relentlessly. What I think I am really pleased with, and I think has got traction, is the fact that we have our strategy and our four pillars: deliver on our growth engine, step up innovation, create a generic powerhouse, and focus the business. I think everything you and I will talk about today, or I will be talking with investors today, relates back to one of those pillars, clearly.
What we've achieved over two years in taking the company from five, six years of revenue decline to eight quarters of growth, to growing the revenue and our innovative, to accelerating the pipeline, we're obviously the headlines of Duvakitug, but olanzapine with no PDSS, bringing UZEDY to the market, ICS/ SABA now in the clinic, and going well with acceleration there. Reframing what Austedo can do from, I think, when we started this pivot to growth, I think some of your colleagues had it as $1.4 billion peak. Obviously, we have a range, and a higher range this year of $2 billion. I think what we've shown is this strategy, we focus on it, we execute it, and we deliver. Our generics business, we've moved from decline to stabilizing to growth now, and then focus the business capital allocation.
We're very, very thoughtful about capital allocation. Obviously, the TAPI divestment shows that we take action when we think about where should we apply capital, to make sure we get the best return for investors over the long term. I think we've executed a lot. There's a lot more to come. I think, you know, part of talking to you today is about reemphasizing why we have a lot of confidence, not just in 2025, but in the future as well.
Thank you, Richard. A lot more to come. I'll pick on the last point. As we look at, we are two months into 2025, already in March. As you think about the year now, what are the key priorities for you? As you gave out the 2025 guidance, what were all the pushes and pulls that you're thinking about in the guidance that you gave? Fairly healthy top line. I think it was the EBITDA, which was a matter of concern for investors. Lay that out for us.
Yeah, no. Look, excited about 2025 because we're going to keep executing what we've executed for 24 months, which, you know, I don't think of it necessarily as a turnaround, but when you're reinvigorating a company, you need to have 36,000 people clear about what they have to do. When it comes to 2025, it is we do what we did in 2023 and 2024, and we just do it even better. It is quite, it's hard, but it's a bit as simple as that. For me, the pushes and pulls are 2025. Austedo, I think we've continued to show that we are world-class at commercializing innovative products. I think people doubted us in 2023, and we've just shown, I think now we're really good. We have a range of up to $2 billion with Austedo.
I'm excited about what we can do there. UZEDY, I think we've also shown in a very difficult area in schizophrenia, long-acting, that we can launch a product into a crowded area and we get real traction, as you saw with us ending last year at $170 million. We're excited about driving UZEDY. I think on the top line, and then you throw in that Austedo, which people have forgotten about, we did $500,000,000, now we're going to do $600 million. Then you think about submitting olanzapine to launch in 2026. I think we have a lot to do there. I'm excited about Duvakitug hitting phase III in IBD this year. I'm excited about announcing some more indications this year, which really reemphasizes we are a biopharma company, we're not just a generics company.
We're very proud of that. I think there's a lot of things that we're excited about in 2025. I think one of the interesting challenges, and in a way, as much as it's a tiny bit frustrating, I'm sort of pleased. In our guidance, people expected more for Teva. In a way, there's been a long time since people expected more from Teva. As you say, our top line is pretty healthy. We've grown on a 9% and a 6% after five, six years of decline. Okay, people expect more. I appreciate that. On the EBITDA, we could talk a bit more about that. I think the pushes and pulls on the top line are around, are we going to hit the high end of Austedo?
Are we going to hit the high end of our innovative products? Are our new product launches going to come on, you know, on time? Because we risk adjust our new product launches in generics because of timing uncertainty. Obviously, you know, around the biosimilar uptake and what that could be. I think we have a lot of belief in our top line, but that's what we have to keep executing. I would also, and it's important to reemphasize, is when you look at Teva, it's important how you think about how we phase a year because our H2 is always bigger than our H1. That's been consistent in the two years I've been here. I think it's probably for eternity, but definitely since I've been here.
Q1 is, it reflects that is, is a, I suppose, a slower start to the year. I just always remind people to take into account what has happened in 2023 and 2024. We have strong years, but H2 and H1. I would also maybe emphasize that when people think about gross margin, they also think about that is the gross margin grows throughout the year. Even, just to be specific on that, you know, there is 150 to 250 basis points difference in Q1, versus other quarters going forward towards the end of the year. It is important to do that when modeling. The direction of travel for 2025, as you see on the top line, I am very pleased about, confident of, because it still goes down to execution again.
Got it. Maybe just looking beyond 2025 and continuing on the EBITDA part of the question, I think the other thing which is weighing on the mind of investors is, generic Revlimid in 2026 and where that leaves you for your 2027 EBITDA guidance.
Yeah. Look, I mean, let me, and I'll take a bit from the last question and this one, Balaji. In 2025, we've got those pushes and pulls on the top line which get us to the higher end, and I think that's going to impact the EBITDA as well. I think we, you know, as much as people are focused on that midpoint, I think there's a, there's good opportunity for us to move towards the higher end of our guidance if we execute well. The one everybody's now thinking about is, what does 2026 have to look like with Revlimid ? Generics cliff, which is a bit of an oxymoron, I suppose.
Yeah.
There are three reasons why I and the team have a high degree of confidence in 2027 and why we have a high degree of confidence in 2026. First, I'll start by saying in 2026, we will grow OP as a percentage and we will grow EBITDA. Okay. For 2026, we will grow EBITDA, and obviously we'll grow EBITDA in 2027 and we'll grow that as a percentage. Now, how and why do we have confidence in that? It's based on three factors. One is revenue, revenue of our innovative products getting traction. So Austedo, as you can see, we've consistently executed that. It finished in the low 30% growth. We continue to show we can drive momentum. We have UZEDY. We have AJOVY now with momentum, and we've been launching our olanzapine.
All of those, I believe, will continue to drive, as well as our generic product launches, as well as our biosimilars. That helps us drive good revenue. Those are all good margins because our new product launches in generics and biosimilars as well as innovative. The second one is our value-added program, value acceleration program, sorry. This is around our manufacturing base, which is still significant, 50 plus sites. This is where at Teva, we've never driven an efficiency program. We've closed sites, but we haven't driven efficiency in a site. If you think about what drives down cost of goods, it's running a site very efficiently. We put that program in place mid-year of last year, and that's going to play out to 2027.
Probably more starts to hit late 2026 and 2027 just because of what it takes to drive efficiency in manufacturing. That is a big chunk of cost improvement. The final thing is an organizational effectiveness program, which we launched at the start of this year, which is about understanding that Teva has been an accumulation of many companies over the years, but it has never been set up to be a biopharmaceutical company. Where do we want to invest capital? We want to invest capital in innovation. What choices do we need to make and how do we need to think about driving efficiencies? That is going to create, you know, a not insignificant cost saving. I come back to answer your question, why am I confident about growing EBITDA in 2026 and 2027?
The revenue, we have a clear line of sight on even taking out Revlimid , and we can debate maybe plus or minus on that. The COGS improvement program, and I've done that before. I know how to deliver that, and we will deliver that. The cost, the organizational effectiveness program, we know how to deliver that. Those are things, those last two we absolutely control because we make decisions on it, investment or not investing. When you put those three together, that's what gives me clarity that we can grow the EBITDA in 2026 and 2027. Final thing I'll say on that, because hopefully that's of interest to people, is we'll give more detail on that in Q1. We'll go through, break that down, to make people understand the more of the specificity around that.
That's why, I think people can think about the EBITDA growing year on year to 2027 and being still a hockey stick, which I've always said because of those big factors, but not being something that should be unknown.
Okay, great. I'm sure many investors will be happy to hear about the EBITDA trajectory in 2026 and probably they'll take that out as a positive from here. At least the slope of the hockey stick is going to be more, more gradual than the steep spike that we expected to see in 2027.
Yeah. I mean, look, I hope people, what it shows is people, there's the three elements.
Yeah.
The last two we control.
Right.
I think one thing people have learned of Teva in the last two years, we execute. We can execute. If we're going to do something, we'll execute. I think, I'd like to think that gives people confidence in how they can model and how they can forecast.
Got it. The other thing, which is more near-term and I think more markets definitely looking forward to is, the potential news around divestment of TAPI and when we expect to hear that. Where do you stand currently as it relates to buyers and timelines, and if you can give any kind of comments around the valuations around this business at all?
Yeah. The aim is to close this still in the first half of this year. Around valuations, obviously, because we're deep in that, that's not something we can go into too much, but I'll give you some framing to help. You know, I think about this as sort of driving a few areas to think about the value of TAPI. One is the absolute number that we get and the cash and how that can be deployed and the benefit of that. There's a second one, and there's another two, which are not insignificant and very important for us, which is the improvement in net working capital we have from, as TAPI gets divested. Networking capital is one, and then also the CapEx avoidance, which is also significant for TAPI.
You think about those and you go back to that fourth pillar of our Pivot to Growth strategy, which is focused capital allocation. You know, the value of TAPI, which is a great business, of divesting it, it allows it to grow and really achieve some good market share in this $87 billion API market. For us, it allows us to really focus on being a biopharma company and making sure when it comes to net working capital, CapEx, general capital allocation, we keep applying it to the Austedos, the olanzapines, the Duvakitugs, the IL15s, the Emrusolmins, which is going to drive mid to long-term value over and above what we could achieve by keeping TAPI. The value proposition, what I'm saying, is bigger than just the sticker price.
As much as that is, that's still important for us from a driving investment in the company and reducing debt, there is a longer-term capital allocation advantage for the divestment.
Got it. Maybe shifting towards the business and the business side of things with Austedo, I think your turnaround, especially on that, has been remarkable, the focus on it and driving it to growth. One thing which weighs on it definitely is, of course, the IRA price negotiation and what the trajectory of the product is going to be post-2027 and the margin profile, especially. How should investors think about this product post-2027?
Isn't it great you're asking that question? Because, I mean, I probably, at least I think it's great that people are saying, okay, $2.5 billion, you're not even asking me about $2.5 billion in 2027, which probably means you think we can still hit it with IRA, which I think is the right assumption. Because if you think about where we could end this year, the guidance could get us to $2 billion. What does that mean we have to do in 2026 if we keep our trajectory, which we seem to be executing very well, was be 2027? You have almost now discounted the $2.5 billion, which when we met two years ago, I wish I could replay that conversation back to you. Anyway, what's it going to be post-2027? It's going to keep growing.
Let me tell you why. Even with the impact of the IRA, whatever that turns out to be, it is because there is only 15% of this market that has been penetrated, you know, of the 800,000 people with tardive dyskinesia, hardly any of them are on treatment. The opportunity to keep growing this product into the years way beyond 2027 is significant. That is one. The other part is the opportunity to make sure patients get on the right dose and stay on it and adhere and comply. There is still big opportunity. We have just started executing. There are people excited about what we have done in two years.
When I think about what we can achieve, improving our programs, improving our patient support, improving the compliance, as well as getting more patients into the market, educating more physicians to diagnose patients when they arrive in their clinics, I think this product goes way beyond 2027.
Okay. Got it. And maybe staying on the specialty side of things about UZEDY, it's been off to a great start and maybe kind of dissect for us what has enabled this performance that we have seen and, and as we think about going further and you, and in your comments, you said that this is a crowded market and that's something that we are all cognizant of when we model the product. So how should we think about the uptake over in the medium to longer term too?
Yeah. Look, I think this is another great example of, when you said UZEDY was launched, I think there were two reasons to doubt it. One, Teva, can they really launch a product into schizophrenia, crowded market innovation? Two, it's a crowded market. Can it survive in that against some big players? I think what we've shown is, once again, going back to our commercial muscle, we are really good. We've got a really highly capable team who's dissected what is a very complex market from a patient flow. Same thing is UZEDY is a fantastic product. The differentiation of the product is clear.
You know, one of the, you know, whether it's be a pre-filled syringe , pre-filled syringe , whether it's subcutaneous, doesn't have to be kept in the fridge, but probably the biggest is you can inject it and within 8-24 hours, you get to therapeutic levels. No other long-acting has that. When a physician sees a patient with an episode, you have to think, I need to either inject you, watch you, or, being, as an inpatient and then give you other, oral supplements. They don't have that. The product profile with our commercial execution has meant we've had, we've navigated what is complex and we've got real traction and real excitement around this product. Now, what I would say, you asked about what does that mean for UZEDY? I think it means it has a very bright future.
What it means for olanzapine, we're calling on exactly the same physicians with exactly the same technology, with a product that is clearly differentiated from risperidone because those products are used in different patient types. We know the payers, we know the hospital formularies, we know the decision makers, we know the physicians, we know the nurse practitioners. Our ability to not only drive UZEDY, but also to have a good uptake of olanzapine, I think is something to rethink about because that muscle can be applied to olanzapine and it'll be stronger and stronger as we go on this year with UZEDY. I feel it just shows once again, we can execute launches really well. We can drive innovation and we understand complex markets and we can navigate those very well.
Great. Let me bring the olanzapine into the discussion then. I mean, again, we saw, we saw the data again, very compelling data. I think the key question seems to be really around, around the label now. What's the label going to be and is there going to be a observation clause in the label? I mean, how do you think about this and, and I mean, extrapolate this to a commercial success?
Yeah. So look, obviously we did talk to the FDA before we did our study. And so they agreed on the criteria needed to evaluate whether it had PDSS or not. So we think we've obviously, we've had no PDSS. So we think we've aligned what the FDA wants. Eric Hughes, my Head of R&D, always says, you still don't know what the FDA will do at the last minute, but we think we have a very clean product. We have a good safety and tolerability profile. We have a good set of data. So, you know, we're submitting that to the FDA this year. So I think we have a high degree of confidence that we fulfilled all the criteria. So, but we'll have to wait and see because ultimately that's their decision.
Okay.
What I can say, the physician excitement is high because obviously we call on these physicians with UZEDY. They've seen the data and so they're excited about olanzapine coming to the market because that is their favorite number one molecule to treat moderate to severe. I think we're very optimistic about it, but we'll have to see what the FDA say.
Understood. Depending upon what the FDA says, can you lay out the scenario analysis, maybe what could be a realistic range for it in terms of market opportunity, assuming label being either way?
Yeah. Look, I think there is no long-acting olanzapine that's used of any volume. I think the more we speak to physicians, we see the value of long-acting in schizophrenia is huge because, as people are aware, if you have an episode with schizophrenia when you're on medication, that medication becomes less efficacious every episode you have. You want to stop having episodes. Episodes primarily are driven by lack of compliance. You want to be on a long-acting. What we think with olanzapine, because it's used for the most severe schizophrenic patients, the need to have compliance is even higher. Our belief is there's a real rationale to say on those patients, you would adopt even more long-acting patients. Now in the standard market, it's 13% of the schizophrenia market has moved, 13%, 40% has moved to long-acting.
One could model that for olanzapine. I think that's a significant market. One could also argue it could be higher based on the fact that these are severe patients who need to be compliant. We're working through that, but we think it's a significant product. We're obviously in research now with payers and physicians to understand really where this product could be placed. We've seen a high degree of positivity around it because there's a huge unmet need. These are the worst patients who need to be treated and need to be maintained. Long-acting is really needed.
Got it. Maybe one quick question on Duvakitug. I think we have discussed that a lot recently. You're looking to initiate phase III in 2H 2023, 2H 2025. Are there any kind of still dating factors and points that influence the initiation of the clinical trials for phase III? Maybe beyond that, how do you see the TL1A categories fitting in the treatment paradigm of IBDs?
Yeah. We will initiate the phase III this year in IBD. That will happen. We will also be announcing other indications for Duvakitug with our partner Sanofi. To your final question, I think this is an exciting one. How does TL1A, how does Duvakitug fit into IBD? The more I look at this category, the more I think Duvakitug can play a really significant role, primarily for two reasons, and they're pretty basic reasons. It's going to show, I believe, a high degree of efficacy and its safety and tolerability profile is excellent. If you look at this category, there's not really a product that has that combination. Some of them have efficacy. Some of them don't have efficacy. Some of them have, you know, black box. Some of them have monitoring issues and certain things.
I think we have a very good, safe, and tolerable product. You can see that from, you know, the asthma study we did. You can see that from the study we've just completed already. The data is significant. I think, you know, throughout my time in the industry, efficacy with safety and tolerability together is really rare. In IBD, it's really needed because the cycling through, because of lack of efficacy or tolerability or side effects, is significant. I think Duvakitug can become a real cornerstone in the treatment of IBD. Now we've got to wait to see what the phase III looks like, but I think we're very positive and confident about what that could be.
Got it. I want to spend a quick minute on the biosimilar side of things. Again, probably something where we have not seen as much information as the market would like to, but help us understand both the ramp of SIMLANDI in 2025, what are the dynamics here between the three, three entities involved? And then beyond, SIMLANDI, also SELARSDI having recently launched this. How should we, how should we factor this into our thoughts and what is the cadence going to be for 2025 and beyond?
Yeah, look, I think I've often said, I think this is going to be a longer game in the U.S., not necessarily in Europe. Europe is quick. You get great penetration, you get good prices, and the U.S., it's still evolving as a market. I think it's going to be slower. That said, I think you highlighted there's different segments of the market. There is the private label, there is the pharmacy channel, there is the buy and build. I think they all have slightly different dynamics and slightly different uptakes. I think the one thing we're focused on is driving that business profitably. We're not looking to drive big market share at low prices.
We're trying to build what we have already with our biosimilar businesses, sustainable business that helps drive our top line, but also our bottom line. I think we're making good progress. I think it's steady but sure. We're not looking to create an inflection point by sacrificing price because I think for us it's about value creation in the medium to long term. I see that evolving. I think there's opportunities based both with the launch of SELARSDI, but also with the potential launch of SIMLANDI, the potential launch of Prolia. We have multiple launches this year, depending on the timelines, where there's a slightly different dynamic. There's a slightly different brand. There's a slightly different channel. I think that gives us opportunity to start to see how this could really play out. As I always say, we're in this for the long term.
It's a portfolio play. It's not any particular one. That's why I said, you know, some of the things that could move us to the high end of our guidance could be there's a slightly higher uptake of some of our biosimilars.
Got it. I know we just ran out of time, but I'll put in one final question. I think one of the things that I'm flagging to investors is clearly as investors look for safety stocks in volatile times like what we have seen last couple of weeks. I think Teva is one that I've been flagging as one where the business is intact, really not exposed to any of these volatilities. The question that I do get is around tariffs and what if, like, if you see more tariffs on the pharmaceutical side of things with China and then you and Mexico, probably less for you and potentially India, how insulated is a business from tariffs and any impact on supply chain?
Yeah. I mean, it's obviously a topical question right now. I think what I would say is, one in 14 scripts in the United States is a Teva script. We are a massive supplier of pharmaceutical medicines and, and one would argue very, very cost-effective pharmaceutical medicines to the U.S. market, which helps underpin the healthcare system. You know, of that, around 40%, 45% are actually manufactured in the U.S. We have a significant manufacturing and volume presence in the United States. Outside of that, it tends to be manufactured in Europe. Once again, these are cost-effective medicines. I think they have a real volume, which add real value to, I think, the U.S. healthcare system. I think to do the volume we have and we supply, I think that's a pretty good balance.
We do supply, you know, not an insignificant amount from Israel as well. For us, I think just because the value proposition we bring to the U.S. healthcare system, I think that would be taken into account in any discussions and the fact that we have such a big footprint and a big amount of volume that's manufactured already in the U.S. We're sort of watching that closely, to understand what that could look like.
Okay. Great. That's a good point to leave this discussion at. Richard, thank you so much for joining us and for sharing your thoughts. I wish you and your team a very productive conference.
Thank you. Likewise.
Thank you so much.
Thanks for having me.