Okay, welcome back. We're ready for our next session. Thank you very much for joining us. I'm Marc Goodman, one of the biopharma analysts at Leerink Partners. We're lucky enough to have the CEO of Teva Pharmaceutical Industries, Richard Francis. Thank you very much for joining us. Obviously, one of the key things that you've been focused on since you've gotten there is this Pivot to Growth strategy. Just give us a sense of where we are in that process. I think that'll be helpful to kinda kick things off.
Well, thanks. Thanks, Marc, and thanks for having us. Really appreciate it. So yeah, the Pivot to Growth strategy was started three years ago with the aim of getting the company back to growth after many years of decline. Where are we in that journey? Well, we had three phases. One was return to growth, and then the next one is accelerate, where we're in that phase now of accelerating growth. That's all about accelerating the transformation from Teva from a pure-play generics company to a world-class biopharma company. I think we're really in the thick of that.
I think we've shown, if you remember, the Pivot to Growth strategy was based on four pillars: deliver on our growth engine, which was all about selling more of our innovative products, step up innovation, which was about bringing our products to the market, innovative products through the clinic quicker, create a generics powerhouse, and focus the business, which is about capital allocation. I think this phase we're in now, you know, is there more to come? Well, more to come is actually it's a really exciting time for Teva because obviously you've got AUSTEDO. We've got through the IRA. We're on a really good growth trajectory. We've got UZEDY, which is on a good growth trajectory. AJOVY, we reinvigorated, we're saying that's gonna do $1 billion now peak sales.
This year we have seven milestones, and they are all milestones really from our innovative side. We have the maintenance data of duvakitug that came out. We have the Anti-IL-15 vitiligo data in Q2. We have the futility analysis of emricasan in Q3. In Q3, we have the celiac disease data of Anti-IL-15. Then we have the data readout of DARI, our dual-action rescue inhaler in asthma. Then we launch olanzapine in Q4, then we have PD1 IL-2 in Q4 at the end of the year, first in human data. That's a lot to say, but when you ask me what's more to come. We've not stabilized the business. We've grown the business the last three years through growing both our generics business and our innovative business.
The innovative business now is gonna start to really accelerate 'cause of the assets we're bringing to market. I think we're entering a really exciting phase of the strategy to what we are.
Excellent. Just a little to wrap your head up. Just before we dive into innovative business, just give us an update. Where's the generics business today? What should we be expecting for this year?
Absolutely, and we're very proactive in it. The third part of that strategy is to create a generic powerhouse. If not soft work powers. That's intent. How do we do that? Well, we make sure that when we start the Pivot to Growth strategy, we reduced our coverage of products losing patent from 100% to around 65%. We did that because when we look at the data, the majority of value was from those 65%. We were covering everything at a lower returns. We focused that market more value. portfolio. We have 10 biosimilars on the market. We've been launching another seven between now and 2026 and another 10 after that, and we're keeping into that.
We ought to have now from almost a standing start, the second-largest biosimilar portfolio in the world, and we keep adding to that. That drive significant opportunity in our generics business. The final thing, we're rationalizing the manufacturing network to drive more efficiency, more COGS reduction, which will help our gross margin. You put all that together, it's a scale generics and biosimilar business that'll be run efficiently. What we've said to people is model that 1%-2% going forward as a CAGR forever. Obviously, we've overachieved that in the past and so I'm not gonna get drawn as to is that the right number. That's what we model so people can model it, and that's the big of our performance as to how that can help us pay on innovation.
Going from strength to strength. Scale, and we had to manufacturers. These things take time, but we're well on that.
That one to persist.
Yeah.
U.S., OUS-
Yes.
-frame or?
No, that's an interesting question because when I arrived here, I realized, you know, everything's about the U.S., which obviously I understand. As we've been probably talking about it, this year we lose our generic remnant completely. To the U.S. business as a percentage of our overall generic business is now less than 25%. Doesn't mean it's not a great business, and we'll be adding more biosimilars to it. I always wanna just make sure people understand that ratio.
Yeah.
The majority of our generics business is Europe, then international, then U.S. I think that also should give people confidence about that CAGR going forward. Now, there could be reasons because we launch a lot of biosimilars now in the U.S., that the U.S. may overperform that CAGR in certain years. I remind people that launches of biosimilars and generics are a bit like London buses. You know, you can wait a long time, nothing comes along, then suddenly you have three or four buses. That's just timing of patent cliffs. You know, I'd love to plan what, you know, three new product launch, so much more accomplished, right? Other years we don't have many at all.
That's why I say think of it as a CAGR, because our job is to grow the business both top and bottom line over time, not to try and do it.
Yeah.
You know, every specific year, 'cause it's almost impossible to do.
Yeah. Maybe a quick question on just the macro environment and what's happening. Obviously, Teva is Israeli-based company, so it's a sensitive time. Maybe you can just give people a sense of just exposure and how you're dealing with it.
Yeah, obviously it is. It's, you know, it's definitely a time that part of the world there is a lot going on, to say the least. Just to give it context of numbers, you know, less than 2% of our revenue is based in Israel and less than 8% of our manufacturing. From a business continuity point of view, I think we're very well-placed. Obviously, for the last 2.5 years, unfortunately, we've been dealing with conflict, how we manage our supply chains, our inventory and things like that, we're well-skilled in that. I think the, you know, probably the most important thing is how we look after our colleagues and our employees and to make sure they are being looked after.
You know, we run a global business that's fast-paced, and at the same time, you know, we've got to make sure that we're looking after them in what is a, you know, a difficult time. I mean, as you've seen by the news. I think if there's one thing I'd say about Teva since I've been here three years is, we've transformed the company in three years despite some of that difficulty and conflict and that tragedy in that country. I think it says more about the quality of Teva, the quality of our people, which I find, you know, a privilege to be part of.
Let's flip gears to AUSTEDO. Relatively good outcome on the IRA negotiations. You know, congrats on that. That was great. You've reiterated your 2027 target of $2.5 billion. That kind of feels like, you know, it's an easy target now and just given what our data's, you know, looking for this year. How are you thinking about that? Also just give us a sense of the guidance for this year, volume and pricing dynamics that drive that guidance for this year.
Okay. There's a lot in that question.
Yeah.
So, uh
I'll let you run.
Yeah. Give me a bit of a... It's interesting. Forgive me, I smiled when you said, you know, it looks like, that 27, $ 2.5 billion.
Yeah. 'Cause no one would have believed it two years ago.
Two years ago. Two years ago when we said that, everybody just said, "Look, he has no idea what he's talking about." I'm sort of in a way pleased at having you ask that question. Look, there's a lot that we still need to do. There's a lot of opportunity for AUSTEDO, a lot of untreated patients. 85% of patients are still not treated. We've talked about this being bigger than $3 billion. Now, yes, we're confident we're gonna hit $2.5 billion in 2027. Could it be better? Could it be $2.5 billion or not? I don't get drawn into that because we've got to get through 2026.
Yeah.
To your point, 2026 has, you know, had some puts and takes. We've got the IRA coming up in 2027. How does that impact how people want to think about us this year? Will Q4 be a year where they draw down inventory because they're waiting for the new price in Q1 2027? What I focus on is how many patients are coming in, how many of those patients are getting XR, how are we looking for compliance and adherence? All those programs we've had in place are getting better every single year. I feel we're in a good place. Forgive me, but, you know, we'll give guidance on 2027 at the time when that's due in Q1 2027. Our aim is to maximize it.
Within our guidance for AUSTEDO, we obviously have $2.55 billion. We could hit it a year early. We do have a bit of a range there because of the things I've said. You didn't ask, but I'm going to take it because you talked about the pricing dynamics and, you know, right now we've entered this year focused very much on value and access. It has become more competitive. We see value and access have to go hand in hand. We're mindful of that. I think we've shown we're very good at value and access. We did it with UZEDY, we've done it with AUSTEDO, we've done it with AJOVY, understanding that access isn't everything without value. I think we manage that very closely.
I think we're well-positioned for 2026, but there's still a lot to execute.
I mean, if you hit $ 2.5 billion this year.
Yeah.
That would be what growth rate %?
That would put us in, you know, in the mid-teens.
Mid-teens.
Yeah.
Is there any pricing that's helped or negative?
No.
In that number? It's all volume.
It's most of that's been driven by volume, 'cause obviously we had to renegotiate on the access.
Yeah.
It goes back to that previous question. This is about driving more patients in.
Yeah.
It's also about the use of the once a day AUSTEDO. Patients are more going onto the once a day. That's easier to titrate. They titrate better, which means they end up on a more optimal dose. Also, the compliance and adherence programs, which we started 18 months ago are getting better 'cause you have to, you know, it's the breadth of those compliance programs. I know it sounds quite boring, but those are really important. You know.
Yeah.
You help somebody comply and adhere, the value that can add to the brand is pretty significant. Although that's sort of meat and potatoes, you know, we weren't doing that particularly well three years ago, and every year we're getting better at that.
What percent of the patients have migrated to the once a day now?
Of roughly about all the new starts, over 60% now are starting on XR.
Yeah.
That starts to wash through. I don't know what that's at.
What are the other 40% doing? I don't understand. Why do they want it twice a day?
You know, sometimes that's about I mean, that's about physician choice. Sometimes maybe patient choice. Sometimes, it's habit. You know, you've got to get to all these physicians and explain to them.
Yeah.
Some of it's habitual. I think that's that'll diminish over time.
Yeah.
Um-Say, um-
Yeah. It just, you know, just seemed a little strange. Okay, AUSTEDO post IRA. Like, how do we think about that?
We said over $3 billion in peak sales. I keep getting asked, you know, what exactly can you put a number out there? You know, we put out a lot of numbers three years ago, which, you know, it's a good thing to do to help people refocus on what Teva could be, really give them clarity on what we're looking at.
Yeah.
I don't see the urgency to do that above We said above $3 billion. If at some point, you know, we think it's gonna help people understand the opportunity, we could do that. Right now, just think of it as above $3 billion. I'll remind people, if you put AUSTEDO above $3 billion, you put UZEDY and olanzapine we're gonna launch this year at $1.5 billion-$2 billion, you put AJOVY at $1 billion. The company's just been transformed.
I know.
Just absolutely transformed. Then we're going to talk about the pipeline in a bit.
Yeah.
You can layer that on. I think I always remind people whether you think it could be more or you agree with us, it's still a good place we're gonna end up.
Well, it's a good segue to the LAI franchise. I mean, UZEDY's been great, and you have another product coming. Just give people a sense of the differentiation of this olanzapine product that's supposed to be, you know, approved later in the year...
I mean, so olanzapine we're gonna hopefully have approved around about Q4 this year. We launched UZEDY a couple of months ago, a long-acting risperidone. You know, the great thing about this, the product we've brought to the market is one the physicians need. It's sub-Q. You get to therapeutic levels within 8-24 hours. You don't have to reconstitute it, so it's pre-filled syringe. When UZEDY was launched, nobody gave it any potential because there's a big brand, there's a few brands there. It's genericized. In fact, Teva launched a generic risperidone long acting-
Yeah
...the year we launched UZEDY.
I know.
You could probably pick not a worse market to launch in, and I think the team have done a phenomenal job and everybody's now looking at UZEDY hitting, you know, the $280 potential this year. What I say all of that is when it comes to olanzapine, we are calling on these physicians, we are calling on these hospitals. We know who the formerly committee members are, we know who the payers are. We know where we have to go 'cause we're in those places every single day with UZEDY. That means the expectations around olanzapine should be high, because I'd argue there is no long-acting olanzapine that's used, because the one in the market has a side effect that stops people using it.
The unmet need is huge, and we've shown that we know what to do. We've shown we've got credibility. We'll bring two products to the physician where one is for mild to moderate and one is for moderate to severe. The position is easy. It's the same technology. They know us. I think we've built a lot of credibility. That's why we say $1.5 billion-$2 billion for that franchise. You know, we can debate whether that's high enough. Let's just get to $1.5 billion-$2 billion, then we can argue.
Why are people using UZEDY? Like, what's the hook?
Here's an interesting. They use UZEDY for a couple of things which I thought were important, but I didn't realize how important. One is, and I go in sort of order, you know, particular order. Subcutaneous. Subcutaneous, okay, that's a nice-to-have surely. No. For a schizophrenia patient to have an intramuscular injection means they have to often, you know, drop their trousers or something. They don't wanna do that. That makes them less adherent, less want to have a long-acting. Second thing is, you get to therapeutic dose with UZEDY in 8 to 24 hours. The others, it can take a week, and you have to give them additional oral medication to supplement that. You've got to balance that. You know, I injected them, now oral sub. That's just difficult to manage.
UZEDY, you inject it sub-Q. Within 8 to 24 hours, you're at therapeutic levels. Physicians really like that. The other thing, it's pre-filled. You don't have to reconstitute. It can be kept outside the fridge. Don't forget, these are patients who have had an episode, so they've come in with an episode, so they need to be controlled quickly, and that's why the physicians have see the real value of that product. Here's an interesting thing, which I think... Cause, you know, that could be my sales pitch, yeah?
That was a good one.
It was a good one, isn't it? Here's the crux of it. We do not have very good coverage with Medicare, yet we have good sales growth. The reason that happens is because the physicians are phoning up saying, "I need to use UZEDY." They say, "Well, it's not listed." They say, "Why?" They say, "Because I get to therapeutic levels within 8 to 24 hours. I can discharge the patient. It's sub-Q. The patient." All the attributes come through. You know, a physician will only do that because he needs the product, and I think that's testament to the quality of that product. We have a great team. I mean, look, you know, I'm English, so I'm a bit sort of, you know.
I don't talk us up too much, but I'll say one thing. Our commercial team, not just in the U.S., across the globe, but particularly in the U.S., is excellent. What we've done with UZEDY shows it's excellent. What we've done with AUSTEDO shows it's excellent. What we've done with AJOVY shows it's excellent. We've done great things with UZEDY because of the great team. By the way, not contracting with the Medicare is not an easy thing to do when you're launching, 'cause you have people like me saying, you know.
You gotta do it.
...you gotta perform better.
Yeah.
You gotta perform better. Don't give me access and issue. I need you to perform better. We have, you know, a great team. We've said, "Look, this is about seeing the value over time. It's not about, you know, the first three or four quarters of a launch." Which is why I remind everybody, you know, olanzapine launch, look at it on the, in the, the leading indicators, the scripts, the sampling, the breadth of usage, the depth of usage rather than the revenue. We're not going to discount our way to access. We wanna hold the line as to getting the right value for access, that probably mean revenue. There's probably not gonna be any particular revenue in 2026.
In 2027, it'll be more towards the end of the year as we drive it through, 'cause this is about creating a one and a half to $2 billion franchise. It's not about having a great first year.
Yep
...because then you just discount your future.
I guess the first you know, question that someone who's, oh, olanzapine, okay, great drug, but boy, sure does gain a lot of weight on that. How does that work? You think that'll be a pushback?
no, because we're not asking physicians to use olanzapine. We're saying where you use olanzapine oral, so you already have that.
You're already comfortable...
You've.
using the molecule.
You've already used it. You've already had that discussion with the patient, but you clearly need efficacy 'cause it's the most efficacious.
Yeah.
Now put them on a longer acting. A longer acting for a severe schizophrenic patient is really important 'cause they've gotta be compliant.
Yeah. Yeah. Let's go through some of the other pipeline things you mentioned. What's the next pipeline?
So-
data point to read out?
We've got olanzapine launches this year. We have DARI, dual-action rescue inhaler in asthma. That will have a phase III readout in Q4.
Just tell us about that product just for a second.
Yeah.
The hook for that product and why it's gonna be important.
The guidelines in the U.S. are that 10 million Americans suffering from asthma should be on a dual-action rescue inhaler. There hasn't been one. AstraZeneca launched one about 18 months ago, they're creating the market, they're creating awareness of the guidelines and saying you should use theirs. We'll come three years, three and a half years after them. One would argue not an ideal situation normal, as we've gotta create the market, I'd rather have AstraZeneca, who's quite a pedigree in.
Sure
... respiratory to create that market. We come in, what's our differentiation? We will have a broad indication, but we'll uniquely be the ones with the pediatric indication. We'll only have a We are the only ones with the pediatric. That means 25% of the market is pediatric.
Mm.
We're not competing 'cause they can't actually don't have an indication for pediatric. We have that. The other one is our device is very, very simple. Theirs is more complex. I think there will be a spillover into people who just struggle to use the AstraZeneca device. Let's just say it gets divided. We take pediatrics, they take 75% of the market. That's still a $1 billion product for us.
Did they not wanna go after pediatrics? Did it not work?
Well, I mean, No. When you go after an indication, you tend to start with adults, adolescents.
Yeah
... and then you've got a big market. As with all of us, you know, pediatrics is super hard to do the study.
Yeah.
You know, it's hard to get kids into a study. We went after that. We've got all. Our phase three will have all patients in it. We just knew pediatrics was gonna be an important part for us to differentiate, so we went after it. Will they in time? They may well do. I'm not sure that'll be a priority for them because they have 75% of the market.
Right. Right. Right.
You know, it's like we all of us when we develop products, pediatrics tends to come last.
Definitely.
we-
How big is that product for AstraZeneca right now?
I don't know. They're still sort of creating the market.
Yeah
I haven't looked at their latest.
No, that's okay. I just wondered. It's probably a couple hundred million dollars or something. Okay. Okay, what's next?
We have that. We have a... As I said, there's a futility analysis on emrusolmin on a treatment for multiple system atrophy, a rare disease. If that is successful, there's a potential that... I say if, 'cause that has a low POS, I'll agree.
Yep.
Um-
What will we see there?
We'll just see whether the study continues or not. If the study continues, that means it passed the futility.
Okay.
Right? That means it could theoretically launch in 2028 'cause it's obviously a disease, but people die within, average within five years, and that would be a significant product. That said, I've got capital on that because the probability is relatively low.
Yeah.
The capital deployment to make that happen, that study is low as well. After that, in 2029, we'll launch duvakitug in UC, in ulcerative colitis and in Crohn's disease. 2030, probably a gap year. 2031, vitiligo and TEV-'48125. We go into Crohn's disease, we'll launch two more indications in duvakitug this year. Those two indications will probably start to come through in the early 2030s. The theme building here, hopefully in people's minds, is so a company like Teva will be launching an innovative product-
Yeah
... roughly every 18 months, sort of right through the 30s, at least towards the end of the 30s. If you layer that onto thinking about, what does that mean for Teva? 'cause of our base, 'cause our business right now is we are at about a 55% gross margin. Everything we launch on top of that-
Yeah
... pulls up our gross margin, and if we keep focused on our operating expenditure management, which we're very good at, we'll grow EBITDA, we'll grow our free cash flow, and we'll grow EPS.
Talk about the vitiligo program a little bit.
Yeah.
I think that's probably a little bit underappreciated.
Well.
Let's-
Underappreciated? Everything's underappreciated at Teva.
Yeah.
Right? I know I would say that. I really think our pipeline has no value placed on it.
There's not a lot of people going after vitiligo, so maybe you could.
True
... talk a bit.
Well, look. Okay.
Okay.
Look, a couple of data points on vitiligo. Firstly, there is a twice-a-day topical in the market, that, you know, generates upwards of $800 million of revenue, twice-a-day topical vitiligo, so that regulatory path is very clear for us. The second thing is, we did a financing deal with Royalty Pharma . Royalty Pharma , this is the earliest investment they've made in the... as in earliest in the.
Yeah
... in the lifecycle of a product. They've seen something that they find attractive to fund it. And ours will be a subcutaneous injection every quarter. If you think you're going from a twice-a-day topical to every quarterly injection.
Yeah.
Look, what I think and we've started to realize is vitiligo Is this the psoriasis, eczema, atopic dermatitis of 15 years ago, where we all said it's gonna be tiny? biologic came on.
I remember, yeah.
You remember? We're both old enough to know that. I don't know, but I'd go back to... I think it really could be pretty significant. Let's say it's not, and it just does $1 billion, it's a game changer for Teva.
Yeah.
We're excited because it's another in-house antibody, duvakitug is our antibody, TL1A IL-15's our antibody, and then we can talk about PD-1/IL-2, which is another in-house. We have great antibody engineering. We know our IL-15 is a good IL-15, we're excited, but it's like. The data will come out in Q2, as in first in human. Forgive the pun, but I think we will see.
They've not seen first in human data yet?
No.
They did the deal, Royalty Pharma.
They've seen everything we have, right?
The data's not there yet. I'm just saying.
The data for those, I think it's. I don't know exactly the number of patients involved, will only come out in-
Uh-huh
... Q2. They've seen enough, and I believe that, you know, Pablo and his team I think do 350 due diligences a year, he told me.
Yeah, yeah.
I think they do less than 10 deals. That makes me feel like-
Yeah, yeah.
I think-
Well, I see the differentiation. Clearly, the market's there. I agree with you, it could be the next, you know, take a topical and turn it into.
Yeah
... you know, injectable and grow the market exponentially, so it does make sense. That's probably what they see. As far as data, they haven't really seen that much.
Well, there's a lot of, I mean, you know, we're in the clinic with humans. There's a lot of data before that.
Yeah.
You don't just go to into the clinic. I think they've seen enough. That's probably one to ask Pablo next time you have him on stage.
Right, okay. Fair enough, fair enough. The TL1A, just give us a quick update there, what we're gonna see in this.
TL1A, we had the maintenance data come out in Q1, so we had really good induction data of our Phase 2, which I think was seen as best in class, maybe best in disease.
Yeah.
Maintenance data came out, reinforced that, so I think we're the best TL1A. Now people are talking about whether we could be the best in disease. Now, you know, the phase III's been up and running since Q4 last year. Good study design, so the aim is to keep recruiting as fast as possible, get to the endpoint. This year we're going to announce two more indications with our partner Sanofi. You know, the important thing is to make sure they're in the clinic and we move those fast. Yes, another thing. If you think about Teva, so TL1A and anti-IL-15 are multiple indications in one product.
Yeah.
Right?
Which is why you needed help.
Which is why we needed help, but this also means, you know, a TL1A that could go to four, five, six, seven, eight indications, for any company is crazily good.
Yeah.
For Teva, it's amazing. IL-15, celiac disease, vitiligo, alopecia, maybe atopic dermatitis. You got four in one product then. You know, those are really rare to find those. I mean, I haven't had one in my career. Now I've got two.
Yeah.
You know? good things become to those, come to those who wait maybe.
Yeah, very interesting. You did a deal with Blackstone.
Yeah.
Tell us about this deal. How did this originate? What's the.
We have a principle, a philosophy at Teva when we did the Pivot to Growth strategy, where we saw the innovative pipeline we had, the potential. It was a very simple principle which is a pipeline is only really valuable if you bring it to market as fast as possible. Ours is about bring as many indications as fast as possible to market. That's the goal. How do we do that? It's about building capability and obviously having the financing capability to do it. Duvakitug is about bringing multiple indications to the market as quickly as possible.
You know, I think of these big products, pipelines in a product, and I think when I talk to those CEOs and I ask them is there anything they wish they would've done differently, they'll say, "If I'd known, I wish I'd started all the indications at the same time.
Right, yeah.
For me, it's about how do you maximize these products? Obviously having Blackstone as a partner helps us finance those, be very ambitious. Another area of due diligence, you know, to them, to look at the asset and say, "Well, what value does this have over what period of time? What's the data in what is still, you know, what could argue, you know, a competitive market, UC&CD?
Yeah, yeah. I mean, very interesting pipeline.
Yeah.
A lot going on. Is your business development team even working? I mean, given how busy you've got your own pipeline with.
Business development is. In fact, we've been actively trying to bring in licensed products to Teva. The challenge we have there is that we have, you know, opportunity cost. I mean, we have capital to deploy, and we have a lot of organic opportunity.
Yeah.
To find something, it needs to be the right price, synergistic, and we wanna take no risk. These will all be either the phase III readouts happen or the deal already commercialized 'cause we don't wanna take on. We don't need to take on any more risk.
Yeah.
We don't need to deploy capital at risk.
Is the goal maybe even a commercialized asset? That's not-
Yeah, absolutely. I mean, we've been looking actively for the last two years, but it's finding the right asset at the right price.
Yeah.
those
I mean, I don't know whether you looked at Abilify, whether you know, cared about it or not. I'm just. Is that the type of thing that may have been of interest? Like.
Anything that.
Just 'cause it's on the market, and it's early.
Yeah
... and it's growth cycle.
Exactly. I think anything like that we can bring in that we think we're synergistic-
Yeah
that we think we can sell any product better than anybody else, to be honest.
Yeah. Interesting. Good. Thank you. Thanks for joining us.
Oh, it's cool.
Lot going on. Wow.