Welcome to the Jefferies London Healthcare Conference. My name is Dennis Ding, Biotech and Pharma Analyst here at Jefferies, and I have the wonderful pleasure of having Richard Francis here, CEO of Teva. Welcome.
Thank you. Thank you very much for having me.
Obviously, you know, you guys have made a lot of progress this year and just over the last several years. Can you just give us a brief overview of where we are on this pivot to growth journey that you guys are on?
Yeah, no, thank you. Thank you for the question. There are three stages to the pivot to growth strategy. The first stage was to return to growth, and we've obviously done that, 11 quarters of consecutive growth, so really pleased with that. The next phase was accelerate growth, and that's predominantly around our innovative business to continue to accelerate that growth. After that, it's maintain growth. We're in the middle of the, I suppose, the book, the middle chapter. Very pleased where we're at, but I think there's a lot more to come based on where our innovative products are and where our pipeline is.
Okay. And kind of big picture speaking, like as you think about 2026, what are the pushes and pulls in terms of the guidance? You know, I know you're not going to give revenue guidance today, obviously, but how are you thinking about that?
Yeah, so you're right. I'm not going to give guidance today. I suppose in a way, it's a bit of more of the same. What I mean is, you know, the transformation of Teva in the last three years has been, I think, extraordinary. I talk about that from a mathematical point of view, a financial point of view. If you look at where the growth is driven across the P&L, you'll see that the innovative business has grown. I mean, Q3 was 33%, over $800 million now of sales of our innovative business. The reason why I specify that, the importance of that is that fundamentally changes our gross margin, which changes our ability to generate growth in our EBITDA, which changes our ability to grow EPS.
That is so important because obviously, to continue to return value to shareholders, we have got to keep growing our EBITDA and keep growing our EPS. To do that, we need to keep growing our gross margin, and we have the ability to do that with our innovative portfolio. I think we have shown tremendous progress in 2025. Your question was 2026. Without giving guidance, it is a bit more of the same in that our innovative business, we expect AUSTEDO to keep growing strongly. UZEDY is on a good trajectory. AJOVY is going to keep growing strong as well. Do not forget, these products grew at, you know, 38%, 24%, and 19% in Q3. Good growth rates.
We're hoping that we'll be adding our long-acting olanzapine in Q4, around about October to Q4 of next year when we launch that in the U.S., which we see as another big opportunity in schizophrenia. As we go into 2026, the innovative portfolio continues to get a bigger aspect of our revenue, a bigger contributor to our gross margin, a bigger contributor to our EBITDA, and thus helping continue to grow EPS. I think that's what I would say is probably the highlights. The other things worth mentioning, which I do not think I would have said when I was here three years ago, is our pipeline where we would have completed our recruitment for diarrhea dual action rescue inhaler and asthma. We will enter two new indications, duvakitug for our TL1A.
We'll have a data readout of our anti-IL-15 in vitiligo and celiac disease, and we may have some data in oncology in our PD-1 IL-2. We will have a futility analysis, emrusolmin, our treatment for MSA. Now, I said all those because I just really like saying those because that's a huge innovative pipeline. Once again, to show the transformation of Teva to have such a late-stage pipeline with readouts, I think shows the work we've done in the last three years.
Yeah. Okay. Do you think about 2026 as sort of a quote-unquote transitional year, you know, in terms of the overall top line? Because Revlimid is going away and the innovative portfolio is growing. How should we think about revenue in 2026? Should we be expecting kind of flattish year-over-year growth on revenue? What about on EBITDA? Should we expect continued margin expansion there?
I have to say, I do admire your persistence. Trying to get guidance out of me. How do I answer that question without actually answering it? I suppose I'll start with we're going to grow our innovative business continuously, as I said. I think we're losing, you know, about $1 billion of Revlimid, our generic Revlimid. That's a huge chunk of revenue. We have said we're going to grow EBITDA. I will answer that question. We're growing EBITDA, and I think that is worth pausing on. We are going to lose $1 billion of revenue in a company that has $16.8 billion of sales, and we're going to grow our EBITDA next year.
How do you do that?
You do that because you know it's going to happen and you plan for it, and you set your revenue on a trajectory from an innovative point of view. That means your innovative business grows. It grows at a different margin, which throws a different level of EBITDA, profitability. If you keep a disciplined approach to OpEx, then you have a chance to, you'll grow EBITDA. You'll grow EBITDA also because when we knew Revlimid was going to end in 2026, which we knew some time ago, we put into place an organizational effectiveness plan, which means we're going to save $700 million by 2027, and 2/3 of that $700 million will be saved by the end of 2026.
One thing I hope we've become known for at Teva is we do what we say we're going to do, and if we say we're going to do 2/3 by the end of 2026, we will do 2/3 by the end of 2026. You combine our innovative portfolio with our operational excellence organizational effectiveness program, as well as we'll still be growing the other parts of our business ex-Revlimid, then we can grow our EBITDA. That's probably the most you're going to get out of me on guidance type question.
Thank you, Richard. We are very persistent here at Jefferies. Maybe we can double-click on the innovative portfolio, just AUSTEDO, right? You guys reiterated your 2027 guidance of at least $2.5 billion. Talk about the underlying drivers of that growth and how you guys will get there.
Yeah, no, I'm very proud of what we've done with AUSTEDO as a company. It's been a real change in trajectory since 2023. Obviously, we had the IRA negotiations this year, and we announced in our earnings that those have concluded, and they haven't changed our forecast for 2027, which is the $2.5 billion. Also, haven't changed our peak sales, which we think will be over $3 billion. Now, there's two things I think worth noting in that is when we started on the journey with AUSTEDO in 2023, we said it was going to do $2.5 billion in 2027. Nobody believed us. Like, nobody believed us. I think every analyst had us down at $1.4 billion peak sales or $1.5 billion.
We're going to do over two, you know, we're going to do $2 billion, I think I'm giving our guidance on that this year. And so I, and then when we gave that $2.5 billion, I said that we'll take into account IRA. Now, what's quite interesting is people said, well, you won't be in IRA because you're only going to do $1.4 billion in peak sales. So why are you worrying about IRA when you're not ever going to be in it? So I tell you that because I think it shows the level of detail and analysis we put around something. We thought, okay, if we do get $2.5 billion, which we believe we will, we will be in IRA.
If we're going to be in IRA, then we need to take into account the discount we're going to have to make our $2.5 billion, and then how do we build back? I tell you that because I just think that shows a level of discipline and thoughtfulness to how we forecast. To then answer your question about how do we get to $2.5 billion and beyond, you know, the opportunity and the tragedy in AUSTEDO is the opportunity is 85% of patients with tardive dyskinesia are not treated, which is the opportunity and the tragedy at the same time. We believe we can continue to educate physicians and patients and caregivers to make sure those people seek treatment, and when they seek treatment, we can get them onto AUSTEDO. I think there's many other opportunities to grow the brand.
The adherence and compliance in this disease can be improved dramatically, and we work very hard on that, as well as making sure patients end up on the right dose. You know, we launched AUSTEDO XR over a year ago, and the ability for patients to end up on a more optimal dose is definitely happening with XR. All those things combined, more patients coming in, more patients being compliant and adherent, more patients on a more optimal dose for them therapeutically, allows us to be confident about the $2.5 billion, but also confident about the $3 billion, you know, post 2030.
Got it. Your competitor did recently highlight that they're going to take a fairly more aggressive approach in 2026 in terms of access. Maybe talk a little bit about that and your priorities in 2026 in terms of formulary positioning, access, and, you know, et cetera.
Yeah, so consistent, I never talk about competition, so I won't talk about competition. What I would say is we're very much focused on the $2.5 billion and what we need to achieve that. I think, you know, in a space where you have 85% of patients untreated and you have two players, in my experience over 30 years, it's about the patients. That said, the market, I do think becomes more challenging. I think what we have to do at Teva, and we do very well because we're very disciplined, is balance, access, and value. I think, you know, access and value are really important to create long-term value. I think that we're very focused on that, and I think we've shown that not just with AUSTEDO, but we've also shown it with UZEDY.
UZEDY is a great example, our long-acting treatment for schizophrenia, which I think has surprised people of how well it's done. Hasn't surprised us, by the way, but it surprised people. I think it surprised people because it's a very competitive area. It's genericized and how we've done so well. Part of it was making sure that we didn't sacrifice value for access. Access is only valuable if it's valuable, if it adds, if you maintain a certain price. I think, you know, when it comes to AUSTEDO, what I think is that market's getting more managed, managed carriers getting tighter. We know that, we forecast that, and that still, you know, makes me very confident about what we can achieve in 2026, and that sets us up for achieving our $2.5 billion in 2027.
Got it. Now with sort of line of sight to that $2.5 billion in 2027, maybe remind us of your commercial footprint for AUSTEDO. If you're happy with that, is that optimized already, or can you see opportunity there to expand, to be a little bit more aggressive?
Yeah, I can give you some flavor on that. I think a lot of this goes back to how we think about capital allocation at Teva. We always talk about capital. We do not talk about resources. We talk about capital being deployed in a way that will give a return. You know, I very much think my role is to create, with my executive team, a company that is of sustainability over the long term, and it creates shareholder value. That is what we are here to do. That is what we are paid to do. To answer your question, which I know is very specific about AUSTEDO, just to give you an example, when I arrived, AUSTEDO was not getting the resources, the capital, or had the ambition to do what it should do. We reallocated resources really aggressively, really quickly.
I tell you that because if you look at our OpEx expenditure as a percentage of sales, it doesn't really change. You know, and I believe that's really important. Our discipline around the percentage we spend on OpEx as a percentage of sales, we believe should remain constant because I think that discipline allows us, as we grow our revenue, as we grow our margins, to really create a more valuable company and give return to shareholders. Because if we break that discipline, then I think we start spending more because we just think we can. Going back to the question on AUSTEDO, we gave AUSTEDO all the resources it needed. We always give AUSTEDO resources it needs. It's a priority. Because it's a priority, it means other things are not a priority, and we take resources from other parts of the company. We reallocate.
We do not add. And we have, that is the way the organizational effectiveness program of $700 million of savings is after we have allocated more resources to our pipeline and to our innovative portfolio. I think you were trying to maybe fish around as to, once again, go back to the competition and how they actually allocate resources. AUSTEDO will always get what it needs. UZEDY will always get what it needs. And olanzapine, when we launch, it will get what it needs to maximize the value of those assets, while maintaining the discipline on the P&L. We do that by taking assets, resources, capital, should I say, from other parts of the business. I think we have become very agile at doing that.
Yeah, perfect. If we can switch over to UZEDY and the olanzapine LAI, maybe talk a little bit first about UZEDY, just, you know, the progress since the launch, the opportunity there, and how the learnings from UZEDY informs you of your olanzapine launch in late 2026.
Yeah, no, thanks. I love this question because I think UZEDY is an example of how good Teva can be. You know, and I'm English, so I don't, I'm not used to saying things like that because it's a bit bold. Just to set the scene for those who don't know it, so long-acting risperidone, this long-acting market has a big Goliath who dominates this market. It is genericized. It has generic long-acting products. One of them we actually launched. If you're going to launch a product into a competitive environment, this is the one you do not pick. This is the toughest. To then launch into that and be successful, you have to have a great product, great go-to-market capability, and a great ability to change prescribing habits and maintain value in the toughest scenario. I think we've done that.
You know, we forecast to do the $200 million this year, and we think this is part of our franchise, which can do $1.5 billion-$2 billion. I think UZEDY, I talk about that with so much enthusiasm because the discipline we had on the value and access, the ability to generate awareness and usage without access, I think shows the capability we have. Now, if you apply that to a long-acting olanzapine, which will come next year, where it is not genericized, there is no long-acting incumbent that is used. It is completely different. It is a far better environment to launch into. Yet we have built the muscle, the capability, that level of competency with UZEDY.
That team, be it in payers, the managed markets, be it the hospital formularies, be it the physicians, be it the patient associations, will be the same team that launches olanzapine. I think we've set ourselves up for, you know, a really good opportunity to launch olanzapine incredibly well, a lot better than UZEDY, despite, you know, I think the tremendous work we've done in UZEDY. These are complementary. The other thing I'll say is UZEDY and olanzapine, or long-acting olanzapine, will treat 80% of people with schizophrenia. UZEDY is used for people with mild to moderate, and olanzapine is used for people to moderate severe. These are both long-acting. The same technology we use.
I think the ability to turn this into a franchise of $1.5 billion-$2 billion is truly possible because we have the right products and we have the right go-to-market model and with the right capabilities.
Got it. For the long-acting olanzapine, I believe you guys will be submitting the NDA very shortly.
Correct.
Setting up for late 2026 launch. Is there an opportunity to accelerate that, to pull that forward with the priority review voucher?
There is a possibility. That said, we're looking at it across all of our portfolio, all the drugs we have, both in innovative and in generics and biosimilars. We look across all of that. Obviously, this is right at the, you know, we're, as you say, about to submit. The ability to expedite that has to be thoughtful and how many months we would save versus allocate it to one of our pipelines. We just got to think about that. It is a nice optionality.
Either way, you know, we plan to, you know, 10 months later be in the U.S. market with olanzapine, which I think really helps us get a good start in 2026 and then in 2027 start to really see some of that revenue come through, which once again goes back to the 2027 targets of, you know, mid-single KGA growth of our revenue, but a 30% operating margin. You know, when we started this journey three years ago, I think people really struggled to understand how could we get to 30% operating margin. Now I think people see a really clear line of sight to that olanzapine plays a part in that in 2027. More going onwards to 2028, 2029, 2030, I think that is when our revenue, our innovative portfolio gets bigger and bigger.
Hence the reason why I say it'll be a $5 billion+ innovative portfolio by 2030.
Got it. And then if we can talk about the pipeline and the 2026 catalyst flow, which ones are, you know, most important to you and, you know, to the company?
Yeah, that's a great question. I love answering this question again because it's about our pipeline, which I think is an extraordinary pipeline. One, because it's very late, which is nice because it's value creation coming soon. I think it's de-risked. Obviously, you know, that's a subjective view, but I think it's de-risked based on the view that these are targets that are well known, MOAs that are well understood. That's how I define that. What are the things I'm excited about? I'll just tell you them all because I don't know how I've really prioritized them. You know, we're going to have the data on for anti-IL-15 in vitiligo and celiac, some proof of concept, which will be really interesting. We moved that quickly through the clinic. We will have a futility analysis on emrusolmin, our treatment for MSA.
We will have going to two phase II indications with duvakitug and TL1A, which is currently in phase III, started in UC and CD. We will probably have some data on PD-1 IL-2 in oncology. Oh, we will have fully recruited our diarrhea dual action rescue inhaler by the end of this year. We will potentially have a data readout on our asthma product next year, depending on how many exacerbations we have because it's dependent on that. I'm excited by them all because that's the transformation of Teva. We will have all of these readouts, some, you know, very, very important milestones, others just on the journey to becoming a world-class biopharma company based on the fact that we have this late-stage pipeline.
I sort of remind people that, you know, we'll launch olanzapine LAI in 2026, we'll launch DARI in 2027, we'll launch emrusolmin in 2028, we'll launch duvakitug in two indications in 2029. While we're still growing AUSTEDO, we're still growing UZEDY, still growing AJOVY. We have this company that people are understanding is an innovative company, but all of our products are still on a growth trajectory and we're adding new products to it. After that, we'll have obviously the anti-IL-15s in vitiligo and in celiac disease, and we'll have the two indications, which I'm not going to tell you what they are, and duvakitug come to the market post-2030. There is just lots of growth opportunity, which is why that pipeline I think is incredibly exciting.
Yeah. Which ones do you think are the most underappreciated by investors? Maybe it's all of them. Yeah.
All of them. No, and I mean all of them. All of them, because none of them have got any valuation, which clearly I am drinking the Kool-Aid. I'm a bit obsessed with the company, but I just don't get that. olanzapine should be valued. DARI should be valued and duvakitug should be valued at least a bit. You know, if there's anywhere out there, just give us a bit. I think it should be. I mean, duvakitug , the phase II results I think were phenomenal. The dual action rescue inhaler, we know is going to work. Right? Olanzapine, we've seen all the data at all the conferences. The fact that these are not valued, I think is maybe a slight lag on the understanding of where Teva is heading. Hey, I don't really mean this, but I can wait.
At some point, it will happen and it will be valued. There's always a time delay, it seems. It's like a satellite link delay with Teva. You say something and somebody hears it. We're in it for the long game. This is about creating a sustainable long-term company that's going to be here forever, as it's already been here for 126 years. That's what I'm focused on. That's what the executive management are focused on. Hopefully, investors and people will start to realize that pipeline and value it a bit more. I think it's coming, but we'll see.
If I can ask a little bit about TL1A, just, you know, when you look at the landscape across the industry and some of the competitors, it seems like it's being explored in many, many different indications, right? Like what approach are you and your partner Sanofi taking to this target? Would you take a similarly broad approach, or would you kind of do things in a staggered fashion in terms of running phase II proof of concept studies and then seeing, you know, how that plays out, etc.? I'm just trying to gauge just a level of, I guess, like how big do you think this class could be and like how quickly can you actually move on that?
God, that's a very exciting question. I think it can be very, very big. Let me explain why. Look, a couple of things is we knew this was going to be a massive opportunity, which is why we partnered, because we knew this could go into so many different indications that, you know, my belief, I've never had a product like duvakitug . I've never in my career had a product which can go into so many indications. What I've seen and been an observer in other companies, if you have one of those, go at it, go at it with ambition, go at it fast and do everything you can do. Now, the constraint factor there is capability, capital, and just can you do it?
That is why picking a company like Sanofi as a partner was so important, because one, they have experience with DUPIXENT. Two, they have the ambition and they have the wherewithal. Also, they have the necessity, you know, DUPIXENT will come off patent in the not too distant future. They need to replace that with assets which have multiple indications. We both, you know, having a partner had that same ambition was really important to me. They have that ambition and we've worked through all the indications. By the way, it is a long, long list. What is really exciting about duvakitug is this is an efficacious product, but it has a very clean profile. That is really important when you go into multiple indications because you need to have that as sort of the number one criteria.
After that, it's about discussing where you go, what's the likelihood of success, what's the commercial opportunity, what's the speed to market. Once again, working with a capable and experienced partner like Sanofi, we really get that insight. You know, I'd like to think this is a product that can keep on giving. I remind people that even if, which it won't happen, we just stayed in UC and CD, it's a game changer for Teva, a game changer. We won't. We'll have two more indications next year, and I think it will keep going and keep expanding. It is just transformative from our point of view without all the other products I mentioned. By the way, anti-IL-15 will be in multiple indications and the other drugs. Super excited about the opportunity around duvakitug . We want to maximize it.
We have the right partner to maximize it, to help us financially and from a capability. We both have the same ambition. I think we're in a good place. Now it's just about execution.
Perfect. I think that's all the time that we have, but thank you so much, Richard, and really looking forward to 2026.
Thank you, Dennis. Thank you.