Good day, thank you for standing by. Welcome to Teva's Fourth Quarter and Full Year 2022 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Ran Meir, Senior Vice President, Head of Investor Relations. Please go ahead.
Thank you, Nadia. Thank you everyone for joining us today. We hope you have had an opportunity to review our press release, which was issued earlier this morning. A copy of the press release, as well as a copy of the slides, being presented on this call, can be found on our website at tevapharm.com. Please review our forward-looking statement on slide two. Additional information regarding this statement and our non-GAAP financial measures is available on our earnings release and in our SEC form, 10-K and 10-Q. To begin today's call, Richard Francis, Teva's CEO, will provide an overview of Teva's 2022 results and business performance, recent events and priorities going forward. Our CFO, Eli Kalif, will follow up by reviewing the financial results in more detail, including our 2022 financial outlook.
Joining Richard Francis and Eli Kalif on the call today is Sven Dethlefs, Teva's head of North America business, who will be available during the question and answer session that will follow the presentation. Please note that today's call will run approximately one hour. With that, I will now turn the call over to Richard Francis. Richard, if you would, please.
Thank you, Ran, and welcome everyone. I'm excited to be here today. I'd like to start by saying it was great meeting many of you in San Francisco at JPMorgan last month. I look forward to getting to know Teva shareholders, investors, and analysts, so we can have an open dialogue going forward. I'm excited to be here because there's a lot of opportunity at Teva. The team has done a tremendous work to get the company back to a solid foundation. Now there's an opportunity to get back to growth. Before I start my review of Teva's 2022 results and discuss our guidance for 2023, I would like to update you that I've already initiated a strategic review process with my leadership team.
Our team's already hitting the ground running, and we are working hard on analyzing some of the core strategic questions, how the segments we operate in are going to evolve over time, and we understand what options we have. It's gonna be a very clear, purposeful strategy with real intent behind it. Every function, every dollar should follow that strategy going forward. Once the work is done around mid-year, I'll come back with the team, and we'll present that to the market. Let's move on to some highlights for 2022. We ended 2022 with revenues of $14.9 billion and adjusted EBITDA of $4.6 billion. GAAP diluted loss per share was $2.12, and non-GAAP diluted earnings per share was $2.52.
You should note that our revenues are still affected by the strength in the US dollar during the fourth quarter. We therefore still see significant headwinds from exchange rate movements on our revenues. We had a net impact of $7.8 million for the full year compared to 2021. Free cash flow in 2022 was $2.2 billion. We continue to reduce our debt in accordance with our strategic targets. Net debt is now down to $18.4 billion. Moving to the business overview. AUSTEDO, our leading brand, is growing very nicely, up 20% year-over-year. AJOVY also grew across all three geographies, U.S., Europe and international markets. I'll further discuss these two products in a few minutes. We've also seen nice growth in our generics and OTC revenues in Europe, reflecting our strong position there and also some successful product launches.
We've also seen good growth in generics and OTC in our international markets through a combination of volume growth as well as price adjustments to address inflation. Good to see 9% growth in Europe and 5% in international in local currency terms. We're also excited about the progress we're making on our pipeline. We recently initiated a phase III trial of subcutaneous long-acting olanzapine schizophrenia. Together with UZEDY on risperidone long-acting product, which I'll talk about in a few minutes, we're developing an exciting franchise for patients suffering from schizophrenia. The nationwide opioids litigation settlement we announced last month that we're moving on with these settlements after receiving broad support from the state attorneys general. We already settled with 49 out of the 50 states, the final process for the state subdivisions has begun.
Given the very positive response from states, we remain optimistic that the settlements will garner similar support forward. Moving on to the next slide to look at our revenue and how it's developing. Overall, you'll see a fairly stable with a portfolio of products in geographical spread that are well balanced. I'd like to point out that in 2022, Q4 was the strongest quarter in terms of revenue similar to previous years. If you exclude the impact of FX, revenues in Q4 2022 were actually up 1% compared to the fourth quarter of 2021. In local currency terms, we had a nice single-digit growth in both Europe and international markets. Moving to the next slide and expanding on the comment I just made on Europe. It's a market that I'm very positive about. Europe is good, stable business with Teva.
In markets like Europe, if you have a good pipeline, good go-to market model, the business is predictable, you can drive continued growth. We believe we have all of those elements in our European business. We have good portfolio, good pipeline, strong leadership in many of the markets. This also supports a good margin profile, as you can see from the slide. This is all paying out well. As you can see, revenues grew in Europe in the fourth quarter, 4% in local currency terms, which we're very pleased about. Moving on to AUSTEDO, our next slide. Quarter four was a record quarter for AUSTEDO, as we continue to see strong growth in both total and new prescriptions. Revenues grew 20% for the full year and 22% in the fourth quarter.
I'm happy to see strong continued development, nice increases of both revenue and the numbers of prescriptions. All in all, the trajectory looks positive. We will elaborate on it when we talk about our 2023 outlook. To better understand the potential of AUSTEDO, I'd like to take a look at the next slide. As you can see, there are approximately 785,000 patients suffering from tardive dyskinesia in the U.S. Unfortunately, only 15% of these patients are diagnosed, and an even more disappointing 5% are getting treated. Clearly there is a lot of unmet need. Of course, we are working hard to broaden that base, making sure they can benefit the product, reaching more patients who need this therapy. This will drive increased prescriptions and also present a significant long-term growth potential for AUSTEDO.
Moving on to AJOVY. Full year, our revenue grew more than 20% globally. This was despite the foreign exchange headwinds we faced in Europe and international markets. I think AJOVY is a great example of Teva's strong commercial and execution capability. As you know, AJOVY was not first to market in the U.S. and Europe, we're still capturing really strong market share and actually second in Europe. That's very impressive and another proof point for me that the innovative and commercial go-to-market capabilities of Teva are strong. What we're seeing now in the U.S. is really about slow growth around the injectable anti-CGRP therapies. While most of the growth in migraine space is driven by the oral therapies. Outside the U.S., we expect AJOVY to benefit from continued patient growth and launches in additional countries in Europe and international markets.
Moving on to the pipeline. The next slide, please. In my six months at Teva, I have met with R&D teams, and I have to say that I'm very impressed with the capabilities and the people we have. I was also pleasantly surprised by an innovative pipeline. We plan on sharing more details on it when we discuss our updated strategy around mid-year. Let me highlight a couple of exciting assets that are under regulatory re-review. Firstly, our biosimilar to HUMIRA is expected to launch in July 2023, pending FDA approval, which I'll talk about in a bit more detail in a few minutes. I'm also happy that the FDA has accepted or reviewed the BLA for our biosimilar STELARA, and we anticipate that the review will be completed in the second half of this year. Moving to our innovative medicines pipeline.
As I said before, we are building a strong foundation for the schizophrenia franchise. Yesenia is an important product for patients suffering from schizophrenia, which I'll elaborate on the next slide. olanzapine long-acting, another exciting prospect in the treatment of schizophrenia we recently moved into a phase III trial. Both olanzapine and Yesenia represent complementary approaches to schizophrenia patient management by addressing unmet needs in the long-acting market. Together with AUSTEDO, which treats tardive dyskinesia, a side effect of schizophrenia treatment, we're building a strong franchise on schizophrenia therapies. Moving on to the next slide to talk about Yesenia. As you know, we have resubmitted the files to the FDA for review and expect to have a decision in the first half of this year.
Just to frame the market landscape, there are approximately two million treated schizophrenia patients in the U.S., and approximately 10% of them receive long-acting injectable products. This long-acting category is growing steadily. In terms of sales, the overall schizophrenia long-acting market in 2021 was estimated to be $4 billion. Relative to other therapies in the market, Yesenia, our product, will have more patient-friendly injection mechanism, which is subcutaneous, a small needle, and is lower volume. It comes in a ready-to-use pre-filled syringe. Basically, an easy and effective way to get your therapy. We're very much looking forward to bringing these benefits to the patients who are suffering from schizophrenia, and who need stable therapy to avoid relapses. Given these profile advantages, we're happy with Yesenia. We are talking about a 20% market share over time.
Let's talk about HUMIRA, which I know has been getting a lot of attention recently and is the largest product in the history to face biosimilar competition with annual revenues of over $17 billion. Based on most recent updates from our partner, Alvotech, we're preparing for the launch on the 1st of July this year. The FDA has confirmed that the target date for the decision on Alvotech's application is April 13th of this year. The FDA has also confirmed that the data provided by Alvotech is sufficient to support a determination of interchangeability. An approval, of course, requires a satisfactory outcome from a facility inspection or re-inspection, should I say, which is scheduled for March.
It should be noted that while we are still waiting for the approval in the U.S., Alvotech's biosimilar HUMIRA is currently being marketed in 17 countries around the world, including Canada and numerous markets across Europe. To be clear, we have risk-adjusted its contribution to our 2023 guidance, similar to the way we risk-adjust other significant launches in the U.S. market. That said, we believe biosimilar to HUMIRA and other biosimilar products will continue to be an important pro-product in our portfolio beyond 2023. Moving on to the next slide. ESG is everyone's business at Teva. Let me be clear about that. The board and the executive management team firmly believe that the issue is critical and acceptable to our long-term sustainability and success. Over the last few years, the teams worked hard to lay strong ESG foundations and formalize our ESG strategy.
We have set ambitious and meaningful targets that are tied to our business, enhance the reporting of disclosures, and strengthen our governance. Our ESG strategy focus on advancing health and equity through our medicines, minimizing the impact of our operations and products on the planet, and dedicating the company to quality, ethics, and transparency. Now let's talk about our 2027 long-term targets. First of all, I'd like to say, as I said in the beginning, I do think the management team has done a great job over the last few years to get the company back to a solid foundation. As we define our strategy going forward over the next few months, we will look for the opportunities to prioritize and to reallocate to best position Teva for long-term growth and success.
We'll come back and share that with you with our new strategy around mid-year. Please stay tuned. I'm very much looking forward to it. With regard to these long-term financial targets, these will re-remain in place. With that, I will hand over to Eli to walk you through the financials.
Thank you, Richard. Good morning and good afternoon to everyone. I'll begin my review of our 2022 financial results, with my main focus being on the fourth quarter performance. This will be followed by an introduction to our 2023 non-GAAP outlook and some of the important assumptions behind it. Beginning on slide 16. I would like to start with our Q4 GAAP performance. Revenues in the fourth quarter of 2022 were $3.9 billion, representing a decrease of 5% or increase of 1% in local currency terms compared to the fourth quarter of 2021. This increase was mainly due to higher revenue from ANDA generic products in our Europe segment, AUSTEDO, and AJOVY, partially offset by lower revenue from generic products and certain respiratory products in our North America segment, as well as COPAXONE.
In Q4 2022, we recorded a GAAP operating loss of $855 million compared to operating income of $78 million in Q4 2021. We had a net loss of $1.2 billion compared to $169 million in Q4 2021, and a GAAP loss per share of $1.10 compared to $0.14 in the same period a year ago. GAAP operating loss, net loss, and loss per share were mainly due to goodwill impairment charges in the fourth quarter of 2022, partially offset by lower legal settlements and loss contingencies. The goodwill impairment charges were mainly related to exchange rate fluctuations in our international markets and update projections in our Teva TAPI business.
The strengthening of the U.S. dollar versus other currencies during the fourth quarter of 2022, including hedging effects, negatively impacted our revenue and GAAP operating income by $217 million and $132 million, respectively, compared to the fourth quarter of 2021. Turning to slide 17. You can see that the total non-GAAP adjustments in the fourth quarter of 2022 were $2 billion, and this is versus $1 billion in Q4 2021. The most notable non-GAAP adjustment was a goodwill impairment charges of $1.3 billion, which I just mentioned. Moving to slide 18 for review of our non-GAAP performance. I've already discussed our fourth quarter revenue, which totaled approximately $3.9 billion. Annual revenues were $14.9 billion, a decrease of 6% or 1% in local currency terms compared to 2021.
For the full year, we saw the same trend regarding U.S. dollar appreciation, which including hedging effects, negatively impacted revenue by $780 million compared to 2021. Let's move down to the P&L and look at the margin. Our non-GAAP gross profit margin was 64.2% compared to 66.1% in Q4 2021. The decrease in non-GAAP gross profit margin was mainly due to the higher revenue with the lower profitability from the ANDA in our North America segment, partially offset by higher revenue from AUSTEDO in our North America segment and a favorable mix of generic products in our Europe segment. Our non-GAAP operating margin in Q4 2022 was 29.1% versus 30.4% in Q4 2021.
This decrease was mainly driven by lower gross profit margin mentioned above, partially offset by lower operating expenses, which I will discuss in the next slide. 2022 for year non-GAAP operating margin was 27.7%, similar levels as in 2021. We ended the quarter with a non-GAAP earnings per share of $0.71 compared to $0.77 in Q4 2021, mainly due to the negative impact from foreign exchange fluctuation and the lower gross profit, partially offset by lower operating expenses as well as lower tax rate. Let's take a look at our spend base on slide 19. As you can see, our quarterly spend base declined by $97 million and increased by $38 million net of FX.
For the full year 2022, our total spend base declined by $699 million or $174 million net of FX. Annual decrease in our spend base was due to a lower cost of goods sold related to a lower annual revenue, as well as ongoing active management of operating expenses. Looking ahead to 2023, we expect the overall spend base to remain at the level of $11 billion as we continue with our ongoing efforts to transform our global operational network and ongoing active management of operating expenses. If you look at slide 20, we continue our journey to improve margins by reaching 28% operating margin by end of 2023, despite of some of the macroeconomic headwinds related to the inflationary pressures.
While we continue to face this pressure, our ongoing efforts to reduce and optimize our cost of goods sold and operating expenses are expected to continue to help us partially mitigate these global macroeconomic headwinds. As Richard mentioned earlier, we continue to target 30% operating margin by end of 2027. Turning to free cash flow on slide 21. Our free cash flow in the fourth quarter of 2022 was $1.1 billion. The increase in our free cash flow in the fourth quarter of 2022 compared to the fourth quarter of 2021 resulted mainly from the sale of accounts receivable under a U.S. securitization facility entered into November 2022. Partially offset by changes in working capital terms.
For the full year 2022, free cash flow was $2.2 billion, an increase of 2% compared to 2021, and on the high end of our 2022 guidance. Free cash flow into 2022 was largely affected by the sale of accounts receivable under a new U.S. securitization facility entered into in November 2022. Partially offset by an increase in inventory levels, lower proceeds from the divestitures of business and other assets, as well as higher payments of legal settlements in connection with the Opioid litigation. Turning to slide 22. Our progress continue in terms of reducing down our debt. The net debt at the end of Q4 2022 was $18.4 billion compared to $20.9 billion at the end of 2021.
The decrease in our gross debt in 2022 was mainly due to the debt repayment, partially offset by exchange rate fluctuation. The decrease in our net debt was mainly due to our free cash flow generation during the year. Our net debt to EBITDA ratio continued to decrease, coming in 4x for Q4 2022. Looking at slide 23. Debt reduction continued to be our primary focus. As you can see, we have made significant progress in the last 6 years as we had committed to reduce the level of the debt we had on our balance sheet. During these 6 years, we have paid back approximately $20 billion to our bondholders, including interest payments, and we expect our net debt to further decline as we continue to make progress towards the 2027 long-term target. Turning to slide 24, which represents our upcoming debt maturities.
If you recall, we did a $5 billion SLB refinancing to address the 2022, 2023, and 2024 maturities back in November of 2021. We continue to assess market conditions for opportunities to refinance upcoming maturities. Given the interest rate environment, we expect this to result in a higher financial expenses in 2023, which I will discuss in a few moments. Looking at the cash conversion on slide 25. We established a target of 80% by end of 2023. In 2022, we made further progress on this. As we keep focusing on our net working capital enhancement, our efforts to optimize our working capital term in light of our revenue mix is key for our liquidity. We are really happy to see that it came in at 80%, up from 77% in 2021.
As Richard mentioned earlier, we continue to manage our business and working capital with a focus on generating cash to earnings at this level. Let's turn our attention to our 2023 non-GAAP outlook, which we are introducing for the first time today. Here in slide 26, you will find the five main components of our outlook. Revenue, operating income, adjusted EBITDA, earnings per share, and the free cash flow, as well as additional components, including expected revenue range for key products. Our company worked hard throughout 2022, navigating and addressing the ongoing impact of the geopolitical and macroeconomic headwinds. We expect this volatile environment in the market to continue in 2023 based on leading global financial institutions forecast. We begin with 2023 total revenue, which we expect to be between $14.8 billion and $15.4 billion.
This is very much in line with our revenue levels in 2022. We expect continued momentum of AUSTEDO, with total annual revenue to grow to approximately $1.2 billion or 24% in 2023. AJOVY is expected to benefit from continued patient growth in the U.S., Europe, and international markets. Global sales for AJOVY are expected to be approximately $400 million in 2023. We have factored into our guidance the continued erosion of global Forfida revenue, which we expect to decline during 2023 to approximately $500 million. The majority of the decline is expected in the U.S. The expected ongoing growth of Austedo and AJOVY is greater than the offset effect by the decline in Forfida sales.
Our non-GAAP operating income is expected to be between $4 billion and $4.4 billion, and our non-GAAP adjusted EBITDA is expected to be between $4.5 billion and $4.9 billion. As discussed earlier, we continue to explore opportunities to refinance upcoming debt maturities to align our debt maturity profile for the coming years. With our core operational performance, there could be a meaningful step-up in our finance expenses if we were to pursue any refinancing due to the higher interest rate environment. We expect an increase of approximately $100 million, reaching $1 billion in 2023. Looking at our tax rate, in 2022, our non-GAAP tax rate was 11.7%. As we look ahead to 2023, we expect our tax rate to be in the range of 14%-17%.
You might recall that our non-GAAP tax rate in 2022 was below our initial guidance, as it was mainly affected by realization of the loss related to an investment in one of our U.S. subsidiaries. This expected increase in our financial expenses, the tax rate is expected to have significant impact on our EPS 2023 outlook in comparison to 2022. This brings us to the expected earnings per share in the range of $2.25-$2.55, using a share count of approximately 1.1 billion shares. 2023 free cash flow is expected to be in the range of $1.7 billion-$2.1 billion. This guidance reflects our expected higher finance expenses, which I have outlined before, as well as increased legal expenses related to the nationwide opioid settlement.
As you know, we do not provide quarterly guidance, but I thought it would be helpful to share with you how we are thinking about the progression of the both revenue and earnings throughout the year. Based on our expectation today, we anticipate that similar to the progress in 2022, the first quarter will be the lowest of our four quarters of revenue earnings, with a gradual pick-up in the second quarter. I hope this color will assist you with your modelings. This concludes my review of Teva's results for the fourth quarter and fiscal year 2022. Now, I will hand it back to Richard for a summary.
Thanks, Eli. Before moving to the Q&A, I'd just like to summarize some key points. I'm happy with the progress that has been made so far, and I wanna congratulate the entire team, all my colleagues across the globe on a solid Q4 and full year 2022. AUSTEDO and AJOVY continue to drive growth. As I mentioned before, there's still a large unmet need that will drive growth in the future for AUSTEDO in the U.S. AJOVY continues to see good traction, particularly in Europe and international markets. We have strong performance in Europe and international markets, and our European business is steadily growing with leadership positions in most markets. We have an exciting pipeline across innovative medicines, biosimilars, and generics, and these interesting and differentiated assets will set us up for future growth.
We remain committed to our long-term financial goals around growth, improving margin, and driving down debt. Finally, I look forward to sharing with you sometime in mid-year our updated strategy to ensure how we can position Teva for long-term success. With that, thank you for listening, and I'll now hand you back to the operator for Q&A.
Nadia, we're ready for the Q&A please.
Hi, everybody. We have some technical issues with the operator. We are working to fix it.
Yes. Speakers, please accept my apologies for the delay. We'll start the Q&A session. The first question comes now from the line of Umer Raffat from Evercore ISI. Your line is open. Please ask your question.
Hi, guys. Thanks for taking my question. Umer here. Couple of things, if I may. First, on guidance, I think there's a little bit of confusion on how much HUMIRA is in the number. I guess said differently, what people are really focused on is it still a growth year off of 2022 if there was no HUMIRA? That was first. Second, I wanna touch up on the PL one A program a little bit. Could you tell us if the asthma trial was a complete zero? I know it was terminated. Also, for the IBD phase II you initiated in August last year, how's the recruiting tracking? Could you be in a position to take an interim analysis on 14-week data perhaps later in 2022, which could inform a more accelerated phase III start, just given how competitive this could get?
Thank you.
Hi, Umer. Thanks for the question. On guidance, as I mentioned, we do have HUMIRA in there. It's risk adjusted. I think your question was, if we don't have HUMIRA, will we still be able to drive growth? I think I'll let Eli contribute, but what I would say is we have a number of opportunities to drive revenue in 2023. HUMIRA is part of that, but obviously we also talked about Otezla. We've also got UZEDY, and we have other pipeline products that we haven't highlighted in this call. It is an important part, but we've risk adjusted it to take into account the uncertainty. Maybe I'll let Eli give some more color.
Yes, Umer, you see the range that we have there, and you can look on the midpoint versus the 22 revenue. It's, kind of, a modest increase. I will say that, to echo Richard, what he mentioned, HUMIRA is in the guidance and is risk adjusted, and we have a few other elements that might potentially hedge that element if it does not come true.
Thanks, Ali. Going on to your question on the PL1A, Umer. Glad you brought it up because I think this highlights some of the interesting assets we do have in our pipeline, which we'll, as I said, fully discuss in mid-year when we do a review of our pipeline and let people see some of the things that I'm excited about. To try and answer your question, we have initiated a clinical phase II basket trial that started in August of 2022 in ulcerative colitis and Crohn's disease. That is underway. I can't give much more information than that, as I said, mid-year, we'll probably be able to go into a lot more detail on the clinical development plans for that asset and some of the others. Thanks for your question.
Thank you. Now we'll go to the next question. The next question comes from.
Can I just repeat the next question please?
Yes, of course. The next question comes from line of Gary Nachman from BMO. Your line is open. Please ask your question.
Okay, great. Good morning. Thanks. Richard, you have a clear strategy of building out your biosimilar capabilities while a competitor decided to sell off its biosimilar business.
Gavin, your line is open.
Yes. Can you hear me?
Yeah, we can. Can you hear me, Gary? I don't know what's going on here.
Oh, okay.
Please stick with us.
That's okay. I'll start over. You have a clear strategy of building out your biosimilar capabilities while a competitor decided to sell off its biosimilar business. How much more critical mass do you need to maximize value in that market long term? How do you see market formation, particularly with HUMIRA biosimilars, and the benefit of having an interchangeable available? How does that impact your payer discussions, if you could give us some color on that? Just on the generics business, Richard, will you be able to get back to a $1 billion per quarter or so in North America? You know, that was previously a target the company had. Just talk about some of the dynamics there, and you think you'll be able to stabilize that business, will it continue to decline?
Maybe talk a little bit at high level about the pipeline and maybe how that could return that business to growth over time. Thank you.
Thanks, Gary. Thank you for your question and sticking with us on the technical issues. On the biosimilar one, I'll take a stab at these questions and also maybe tag team it with Sven, my colleague. On the biosimilar, I don't wanna comment on other companies' strategies, we're focused on our own. What I would say, and I've got history here, I do believe in the biosimilar opportunity in the market. I think it's significant. I think it's significant in U.S., and I think it's significant in Europe and the rest of the world. I do believe it has an opportunity to drive growth over the short, medium, and potential long term.
I do think, to answer one of your parts of your question, it does require you to have a deep pipeline. I think one of the things is you've got to be able to continuously launch biosimilar products as they become available. I think the team has done a good job here in building out a pipeline. We wanna make sure we continue to do that. We wanna make sure we continue to have a geographical spread of that pipeline as we go forward. Yeah, I see biosimilars as an opportunity to drive growth in the short, medium term. When we talk about the market formation of biosimilar HUMIRA, you know, what I would say is, let's not forget the size of the prize here. This is over $17 billion in the U.S.
I was part of the introduction of HUMIRA into the European market. This is a big asset where I think payers and healthcare authorities can garner some significant savings. I think that's gonna bear out over time. I'll let Sven talk a bit about how quickly that can happen. I personally believe the interchangeability and some of the product profile characteristics we have for our biosimilar HUMIRA really differentiate us and allow payers to think about actually switching and transferring patients a bit more easily than they would on other products that don't have those characteristics. I'll let Sven answer a bit of that.
On the GX, I'll take a stab at that as well in that, look, I obviously don't have history with this one billion comment, and so, I can leave that behind from my perspective. What I would say is, in the U.S., stability of our generics business should be driven by our pipeline, what we launch, when we launch, and the ability to do that. What we focused on and what we'll continue to focus on is complex generics. Now, obviously, they have unpredictability, but when you do get them to the market, they are very profitable and sustainable.
I think for me, it's not so much about getting back to a revenue number, it's about making sure you have a GX business that is profitable, predictable, and allows you to get the growth in the right areas, and that comes back to profitability. I'll hand over to Sven to give his view on those key questions.
Thanks, Gary. I think you are interested in the HUMIRA market formation and the benefit of interchangeability. In what concerns market formation, I think we will go through three phases. Phase I is right now because Amgen already entered the market with a non-interchangeable HUMIRA biosimilar. We have the next inflection point, which will be our market entry. It's July 1st. We see a clear transition towards biosimilars with the formulary changes that come in 2024. There will be basically, hope, three phases for HUMIRA market formation. I believe we are well-positioned. We have discussions with all our customers on the July 1 date. Our customers very well recognize the importance of interchangeability, and I believe it has become even more important since AbbVie has guided to this year's stay on formulary.
If you have AbbVie, the originator, on formulary, of course you need an interchangeable biosimilar to really drive uptake of biosimilar generics in the space. We also did recently market research on the question of pull-through with pharmacists and HCPs. Here we also saw that interchangeability is actually well-known in this professional community, and especially HCPs look for interchangeability designation when writing a biosimilar other than HUMIRA. I believe overall our product profile is quite strong. We have high concentrations with a pre-interchangeable product. We are working towards FDA approval. For that reason, I believe we can participate with phase II market formation starting in July. Adding to Richard's comment about the complex generics of the U.S. generics business and our run rate.
The run rate was $3.75 billion in 2021 and $3.55 billion in 2022. Our focus is now this year on creating a HUMIRA success. Of course, to bring more complex generics to the market, because what we've seen in our portfolio is despite the hurdles that you have for FDA approval of complex generics, they show themselves to be very resilient and drive longer-term value. Especially, when we look at our gross margin structure, you can see how important complex generics became over the last years. For this year, we talk about especially Forteo as an opportunity, Restasis as a second opportunity, then the other complex generics that we also talked about in the previous years, such as the Statex or Crestor.
We have a couple of other, complex generics in the pipeline, potentially to be launched in 2023 if we get, FDA approvals.
Thank you.
Great. Thank you very much.
Yes, sir.
Thank you. We'll now take our next question. Please stand by. This is for the line of Glen Santangelo from Jefferies. Please go ahead.
Oh, yeah. Thanks for taking my question. Hey, Eli, I just wanted to unpack the revenue guidance a little bit more, if I could. I mean, essentially last quarter, you guided fiscal 2022 revenues of $14.8 billion-$15.4 billion, and now you're kind of just rolling that same guidance on 2023. obviously you're building in some contributions from the growth in AUSTEDO and some risk-adjusted contributions from Simlandi and HUMIRA. I was wondering if you could just talk about the offsets to that, to those numbers, to that growth. Will it be the same, you know, in 2023 as it was in 2022? Should we expect sort of a similar type of deceleration U.S. generics business and a similar type of runoff in COPAXONE?
Is there something else we should be thinking about, for example, like FX playing a bigger role?
Okay. Thank you, Glen, for the question. A few dynamics in that range. First of all, if you look on the midpoint of 15.1, you will see versus 2022 a kind of a modest growth, calling it like a 2%. But this is based on, you know, a risk adjusted in terms of several launches, mostly related with North America. Now, if you think about the combination of AUSTEDO, AJOVY and COPAXONE, that's actually around $20 million higher than how we came in 2022. We believe that there is still a modest opportunity both in AJOVY and in AUSTEDO as we actually running now the trend on the direct. That's one element.
A few other elements really related to our stabilized business in Europe in terms of generics and OTC. We see there also kind of a modest growth. You know, we live in kind of a environment which is very volatile in terms of FX, and we keep kind of enough stress in order to make sure that we are capturing any potential rebounding in terms of mostly on the Euro appreciation as in Euro.
Okay. Thank you for all those details. Maybe I'll just ask one quick follow-up question on the balance sheet. Richard, you sort of seem to suggest that debt reduction remains a primary focus, but how do you think more broadly about the leverage situation, right? You know, as Eli sort of talked about in his prepared remarks, right, there are significant maturities coming up in the next sort of few years that are at or above the level of free cash flow you're generating now. Ultimately, you know, there's gonna be some opioid payments that are gonna have to be made. How do you think about getting that debt down, you know, to those sort of 2027 targets?
You know, just sort of given the current level of cash flow that you're generating, how should we think about that over the next couple of years, in 23 in particular? Thanks.
Thanks for your follow-up question, Glen. What I'd say before I hand over to Eli is we think and plan about about our debt and the payment of our debt thoroughly and long term. The way we think about some of the payments we have to pay in 2023, 2024 and 2025, we've been working on for some time. Firstly, just to give you that background, and maybe, Eli, if you could go into more specifics about that.
Okay. Yes, Glen. Looking mostly on liquidity and free cash flow and the debt. I will start by if you look on the guidance we gave for the free cash flow, $1.7-$2.1, that means point one point nine if you compare it to where we actually end at 2022, calling it around 15% kind of a reduction. This is mostly related to the fact that we are considering coming back to the market to address our 2025 maturity debt stake. We will, according to the current interest rate environment, we need to step up in our funds for this element that I mentioned already in my prepared remarks.
This is the third out of this, I would say decree. Other elements, according to the ongoing development with the timeline on the opioid settlement, we see ourselves paying the first payment, and that actually modeled in our free cash flow generation into Q3 2023. This is around an incremental of additional $300 million versus what we paid in 2022. So this is some of the dynamic on that viewpoint.
If you look on the lower end, it's actually 1.7, part of the refinancing that we're planning in 2023, actually planning to actually get a bit lower debt take for 2023, 2024, and 2025 to the level of 1.7, 1.8 in order to make sure that we have, you know, enough cushions to drive the business and mostly because of those two elements that I mentioned. As I mentioned in my prepared remarks, we have ongoing actions going on our working capital. You know, that cash conversion improvement in the last 3 years mainly coming from those elements.
High level, in terms of liquidity, we see ourselves really strongly positioned in order to have the ability to serve the debt as well, to meet our commitments in terms of obligations, mostly the coming office settlement.
Okay. Thanks for the details, sir.
Thank you. We'll now take our next question. Please stand by. This is from the line of Jason Gerberry from Bank of America. Please go ahead.
Hey, guys. Thanks for taking my questions. Just wanted to follow up on that free cash flow comment. I think that you used the term incremental for the $300 million of added opioid costs, but I think you had some payments for opioids in 2022. Should we think about that as like the $300 plus, you know, what was kind of the run rate of payments in 2022, or just the total of about $300 million of opioid-related payments? Then on the 2023 guidance elements, just wanted to ask the HUMIRA question a little bit differently. Everybody's saying 2023 is gonna be more of a modest year of biosimilar HUMIRA uptake.
You know, if you were able to get the interchangeability, mindful that you're giving guidance on a risk-adjusted basis, but is there a big upside scenario, or is it too early to say, and you need to kinda get to July contracting before you can kind of, comment on that? Thanks.
Okay. Thank you, Jason. Thank you for the question. I think I'll hand you obviously the approach to the cash to Eli, and then I can talk about the opportunity with HUMIRA and some of the variables in that. Eli first.
Yeah. Jason, thanks for the question. I will clarify. As you recall, we had already before getting to that mature development on the Nationwide, we had already stated that we settled. And during 2022, we paid already around $130 million in our free cash flow. And that amount will have kind of a carryover of around $150 million for next year. Now, this is not including the $300 million Nationwide that we will need to pay according to the current trajectory of the process in Q3 2023. So you can actually model around $430 million-$450 million that's going to be paid for opioid this year. Is it clear?
Yeah, that's clear. Thank you for clarifying that.
Yeah. Okay.
HUMIRA. Our plan and the risk adjustment that we took, I think that was the topic. First of all, we plan at having an interchangeable product in July so that we get approval for it. Just as a reminder, the review process by the FDA for the interchangeable HUMIRA from our partner, AbbVie, has been concluded, and the outstanding issue for approval is now the site inspection that was scheduled for March 6th. We expect if the site inspection will be successful, we get approval for both BLAs that are with the FDA. The guidance that we have. Is there an upside? Of course, there's an upside. It's, we sign all the contracts, and we have a limited number of competition within these contracts. We are quite confident that we can generate pull-through because of the product profile.
We have to wait and see, for the next step, and I would say we take it step by step. We're quite confident in approval. We also, are quite confident in our ability to supply the market with the required volumes, and that's all on track.
Jason, Is it okay? Is that what you need?
Yep.
I know we were down.
Great. Thanks.
Cool.
Thank you. Yes. We'll now move to our next question. Please stand by. This is from Balaji Prasad from Barclays. Please go ahead.
Hi. Good morning, everyone. Richard, you have articulated the importance of biosimilars for Teva over the next few years. As I look at the long-term guidance that you provided of mid-single digits, I want to understand the role of specialty segments within this, especially as you look at the pipeline and the late-stage assets in specialty as sparse.
Secondly, coming to this year's guidance, excluding FX and biosimilar HUMIRA, are there any other major variables which influence the $600 million revenue or $400 million EBITDA spread? Thanks.
Thank you for the question. I'll take the first part and then maybe tag team with Eli on the second part. I think your question was around sort of driving growth to our specialty portfolio going forward. Let me sort of touch a bit upon that. I think I highlighted within the call already that the opportunity we still see around AUSTEDO and AJOVY, AUSTEDO particularly, when you look at the patient numbers that are still have not been treated, I think the opportunity is significant to bring that therapy to a lot more patients. I see that as a major driver.
AJOVY I see as a driver that can probably be worthwhile outside the U.S. as we expand more into Europe and the international market because of the introduction of the, your therapies into the U.S. I would touch upon the pipeline as well. You said either risperidone product. We have olanzapine, that product has gone into phase III clinical trials. I think. Then we have our innovative pipeline, which we'll talk about mid-year, which I see more as the medium term. Excited about it, and I think that could bring some significant growth going forward, obviously, if that gets through the clinical development phase.
I think we have, you know, a number of assets already, and that's not mentioning some of the complex generics that Sven spoke about earlier, which we're still waiting for FDA approval. I think we're well positioned in our pipeline across specialty, biosimilars, and complex generics. Obviously, the challenge always is making sure we get this to market in a timely fashion, and that's what we're gonna be working hard on. Now, with regard to the spread on the revenue, I'll let Eli take that. I think your comments were about you understand the FX, you understand the biosimilars, but what else is driving that? Eli, if you could help me clarify that.
Yes. Balaji, thank you for the question. Yes, you know, when you drive a kind of a range when you start the year, you look on mostly on programs that require some price adjustment. In addition to HUMIRA in the U.S. generics, we have few of them that were rate-adjusted, so they might come and be better than what we expect. This is part of that part of that range. Also the solid business that we have with Europe generics can also see, even considering, I would say, the average price run rate in 2022, we see this one also with the growth potential. This is those two elements I would say are still part of those range.
Thank you for the question.
Thank you. We'll now take our next question. Please stand by. This is from the line of Elliot Wilbur from Raymond James. Please go ahead.
Thanks. Good morning. Maybe I could ask Sven to just follow up on the last question with respect to sort of the range of possibilities within the North America generic segment in 2023, and specifically thinking about new product launch opportunities. If there's anything you can highlight in terms of date certain items or launches with certainty pursuant to settlements, and then maybe specifically just some of the complex generics that could enter the equation in 2023. I know we've been talking about teriparatide and cyclophosphamide for three presidential administrations here, and obviously the FDA's been slow on complex generics, but any additional clarity you could add there with respect to the new product dynamic in 2023 would be helpful.
For Richard, you know, outside of the reiteration of the company's prior long-term financial targets, you know, wondering if the strategic review or the updated strategic plan in fact could modify any of those parameters. I'm thinking specifically about the 2027 debt to EBITDA target of 2x. Certainly seems like financial markets, equity holders will be much more comfortable with a higher leverage ratio, 2.5 to 3 times, if they were comfortable with the company's use of discretionary capital in terms of pursuing pipeline enhancement initiatives and additional strategic investments. I'm wondering if there's maybe some flexibility, particularly with respect to that parameter, 'cause it would free up quite a bit of cash flow for reinvestment into pipeline and longer term growth assets. Thanks.
Thank you. Thank you for those two questions, Elliot. Some of that I'm going to order you can answer them. I'll ask Sven to answer the one around the, the almost complex generics approvals that you've been through the last three presidential campaigns.
Yes. The usual suspects. Thanks for the question, Elliot. U.S . that are naturally driven by patent expiry dates. It will be more driven by FDA approvals and settlement entries. As you also pointed out, HUMIRA we already talked about. Fort eo, we received the CRL that we answered to the FDA. We are working with them closely to sort out this issue. Just as a reminder, this product has been launched many years ago in Europe already with the EMA approval, and we know how to manufacture of it, of course, and I believe the product is high quality and that we will get the FDA allowing to give us approval.
We have the re-entry of Resomix, of course, due to our settlement date, that is working on an annual cycle. We re-enter this market with a higher volume indication within the settlement with BMS. We have, of course, Xulane, which is a new drug on the list for launch this year. I have a couple of other products that we say prepare for launch, assuming that we get FDA approval. Since we have made some experiences with the FDA about how difficult it is to get complex generics approved, I don't want to give you certain, let's say, names now. I think that once we get approval, we will communicate more on that.
Overall, I can say that complex generics are still quite attractive for us because if you analyze in the classical 80/20 analysis, our gross margin and the cash contribution within the generics portfolio, complex generics are certainly a major stabilizer in our business in North America. We also see that our price decline is quite stable in the base business, so that has improved over the last year, and we don't expect dramatic changes in that space. Overall, I would say U.S. generics will develop if we get all the approvals that we discussed on a regular basis in this call.
Thank you, Sven. To answer your question about the pay down of debt and the EBITDA target we gave in 2027 and flexibility around that, if I heard you correctly, Elliot. Look, we're in the midst of doing our strategic review and understanding our plan going forward, that's a strategy that's gonna deliver growth. That's the whole point of putting that strategy together. I think what we think is important and what is the team has worked hard on is to get credibility around our debt and our repayment of it over the last few years. We don't want to squander that too quickly.
I think as we work through the strategic review and understand the opportunities and the need for capital, both within the company to allocate resources to drive some of our pipeline on our in-market products, as well as to do some BD&L, we need to think about that. I'd also like to say that I think we think we have the ability to pay down our debt in the fashion that we've outlined and still be able to have some capital to allocate to drive the company back to growth. We're in the midst of that, but I appreciate your point of view and your questions to challenge that. We'll be able to give a bit more clarity on that mid-year.
Thank you.
Thank you.
We'll now take our next question. Please stand by. This is from the line of Chris Schott from JPMorgan. Please go ahead.
Great. Thanks so much for the questions. Just two for me. I guess first maybe Eli, how should we be thinking about gross margins this year? I know you're targeting flat OpEx, but just maybe a little bit more color on the components of OpEx as we think about 23. The second one was just kind of a bigger picture question on the biosimilar business. You know, as you talk about this, you know, as this continues to ramp and it's an important growth driver for Teva, I guess, does a continued kind of partner-centric approach make the most sense for the company? Would these be capabilities you would wanna develop, I guess, to be more in-house over time as you think about kind of really trying to maximize the value of this opportunity? Thanks so much.
Thanks, Chris. Thanks for the question. Eli, you take the first one, and then I can chime in with a view on the second.
Thanks, Chris, for the question. We end up 2022 around 54% gross margin. Actually, when we are actually looking on 2023, we are going to see a bit higher, and I would say additional 0.3%. One of the things that we need to remember that the macroeconomic headwind, actually overall, if you look on the numbers, hits us around 2% on our revenue, so call it around $300 million. With all the activities that we've already done and all those, I would say, optimization that were part of our long-term financial target to expand our margin, they have helped us, as I mentioned in my prepared remarks, to partially offset that element.
There is also kind of element on revenue mix, you can actually see that with the growth of AUSTEDO and as well on AJOVY and a few other elements that we are actually working on. We're going to see a very modest increase, but not more to the level of 54.65% I would say in 2023, which means that our ability to keep the current level on the OpEx will stay the same, and the residual amount will flow through the operating margin.
Thanks, thanks, Eli. On the biosimilars, I think the question, Chris, was around, you know, as we move forward, we see it as a growth driver. Is this continued partner strategy or not? Firstly, let me clarify that although we have a good and productive partnership with Alvotech, which is delivering a nice pipeline, we also have, I think it's six in-house biosimilars that we've developed ourselves. You know, I'm going back to a comment I made on an earlier question. What I think is important with biosimilars is that we have a broad and deep pipeline that we can, that we can address most of these large biologics when they come off patent. To do that, to do that effectively from a capital allocation point of view, I think it's a combination.
It's a combination of partnering, and it's a combination of doing some things in-house. That's what I see going forward, that combination, just to make sure we have that, the right pipeline and we're launching the products at the right time. Thanks for your question, Chris.
Thank you. We'll now take our final question. Please stand by. The last question is from Rishi Parekh from JPMorgan. Please go ahead.
Hi, how are you doing? Thanks for taking my questions. I just wanna confirm a few things and then talk about or ask a few questions on your balance sheet. With regards to your free cash flow at $1.7 billion-$2.1 billion, I wanna confirm that that includes the $450 million of opioid payments or is it a different number?
Yes, it's including.
Okay, great. Then with regards to your maturities, if I heard you correctly, I think you said that you're gonna address your 2023, 2024 and 2025 maturities, which is different than what you had said at the JPMorgan conference. I was hoping that you could just walk us through what led to that change. Is it something related to your free cash flow or, you know, something related just to the interest rate environment? But I'd love to just have you walk through that.
Yeah. You know, when we actually test the market, you don't appreciate that the interest rate environment is higher than what's expected to tender on our test take. That means that we will have impact on our financial center. That will flow through impact on our free cash flow. This is one. The second thing is that, you know, as we move forward and we see ourselves now more inside a positive momentum with the opioid, we actually want to make sure that we have enough cushion to manage that availability, coming back to your first question. That's actually already embedded there, embedded there. You know, we used to have kind of a 2.1-1.9 range on the debt take.
Actually, the 2023 is 2.1, 2024 is 1.9. We're going to take it lower a bit in order to make sure that we have enough cushion there to manage it, and it will be part of the coming refinancing, which majority will be focused on the debt take of 2025.
you know, with the drop-down in your AR financing next year to $500 million, can you walk us through why it's declining by $500 million next year? Is that also affecting your thoughts around how you're looking to address your debt maturities this year?
Yeah. I don't understand the drop on the AR for next year on where you actually considering that one. I can mention the dynamics. This year in terms of the working capital, we were able to optimize our date outstanding tables as well, DSO. That actually offsets part of inventory increase in order to support our production plans for mostly for the first half of the year.
Yeah, sorry. I was just referring to the, you know, new AR facility that you entered into. I think it's $1 billion through November of this year, and then it drops to $500 million from November 2023 onwards to November 2025. I was just hoping for an explanation behind that drop.
Yes. Actually the facility is around $1 billion. We are not using the full of it. We use $800 million as an opportunity for us to be flexible on that program by actually initiating further enhancement on other elements of working capital that will allow us to be more flexible and re-reduce that program going forward.
Okay, great. I will follow with my direct questions later. Thanks.
Yeah. Thanks.
Thank you. Thank you for the question. I'd like to thank everybody for their questions and interest in the call today. I'd like to also apologize for some of the technical issues at the start, that's always something you can't sometimes control, but I appreciate you bearing with us. On that, I'd like to close the call. Once again, thank you for your interest and look forward to talking to you on future calls.
Thank you. This does conclude the conference for today. Thank you for participating, and you may now disconnect.