Teva Pharmaceutical Industries Limited

at this time all participants are in listen only mode. There will be a presentation followed by a question and answer session at which time if you wish to ask a question you will need to press star 1 on your telephone. I must advise you the conference is being recorded today. I would now like to hand the conference over to your first speaker today, Kevin Mannix. Please go ahead.

Thank you Laura and thank you everyone for joining us today to discuss Tevis third quarter 2019 financial results. Thank you very much. Thank you for joining us. To begin today's call, Cor Schultz, Teva's Chief Executive Officer, and Mike McClellan, Teva's Chief Financial Officer, will review the third quarter results. Question and answer session will follow their presentation. Joining Cor and Mike on the call today is Brendan O'Grady, Teva's Head of North America Commercial. And with that, I'll now turn the call over to Cor. Cor, if you would, please.

Thank you, Kevin, and welcome, everybody. It's a pleasure to review the third quarter highlights. Our revenues came in at a bit more than $4 billion, very much in line with the last three quarters as we've been discussing before. We are seeing now a nice stable development of our revenues. Our gap diluted loss per share was $0.29 in the third quarter. This was primarily affected by the cruel for the opioid litigation. On a non-gap basis, our diluted earnings per share were $0.58. The primary change there was a change to the tax, estimated tax for the full year, and that reduced the EPS by around $0.04. The non-GAAP EBITDA is around a bit more than $1 billion. It's very stable, again, the last three quarters. So really the take-home message here is we are seeing the operational stabilization we've been talking about. We can see that the run rate on the operating profit is stable, and we also saw a nice cash flow of some $550 million in the third quarter. So all in all, we're very happy about the financial results. Commercially, I'll touch upon a few topics. I'll touch upon North American generics. the nice growth we see on Osteto, Trixima, which is a new launch we're having in biosimilars. And then of course also on the restructuring program and then positive development on NETDEAD. But let's go first to the restructuring and take a status on that. So if we can take a look here at the actual spent base in 2017, it was $16.3 billion. As some of you might recall when we announced the restructuring nearly two years ago, we promised we would bring this down by $3 billion to an absolute number of $13.3 billion in 2019. We are perfectly on track to doing that. You can see here that the MAT right now is $13.4 billion. but of course as we swap the fourth quarter last year with the fourth quarter this year, when we complete the year, we can see from all indications that we will hit the 3 billion cost reduction. This has of course come through thousands of actions and initiatives around the world. We've seen the number of FTEs go down by more than 11,500 and we're also in the continued process of restructuring our manufacturing network and right now we have in the period closed down or sold 11 sites and we have five more sites where we have announced that they are in the process of being closed or divested by the end of 2019. So we are approaching just above 60 manufacturing sites and that's of course a very complex and ongoing process but that's the background also for the reduction in the spend level which we are very of course satisfied with. The long-term target remains a reduction of our net debt CVDA below three. There's no change there. And we continue to allocate by far most of our cash flow to the reduction in debt. And I'm happy to show you here that in the same restructuring period, we have so far been able to reduce the debt by 8.3 billion US dollars. If we look at the global generic sales, then you can also see a stabilization here. Of course, these sales will always swing a little bit quarter by quarter, depending on the actual launches that we're seeing. But we've seen a very high number of launches this year. I think year to date in the U.S. alone, we have about 40 launches. So we see a very healthy business, basically driven by the fact that we have more generic projects in the pipeline than anyone else. and that naturally leads to a high level of launch activity both in the US and in Europe and in the international markets. So I'm very satisfied with that stabilization and it goes hand in hand with an overall stabilization of the pricing environment both in North America and in Europe on generics. If we look at Osteto, then the successful penetration of the market continues both for Huntington's Dyskinesia and for Tardive Dyskinesia. And if you look at the revenue, it's a little up and down per quarter, but that's more due to random elements of shipments and so on. And we continue to see a strong growth and we expect the product to keep growing. I've told you before that in Tardive Dyskinesia, we have an estimated patient population potentially of some 500,000 Americans suffering from Tardive Dyskinesia. and we have one competitor, but between us and that one competitor, we are still only at a very low level of patients receiving treatment in the US. So we're quite convinced that this product can keep on growing for the foreseeable future. If we move to Adobe, then Adobe is off to a very good start. We see increased revenues. We have a normalized TRX share right now of around 19%. We've seen a weakening of the neutral branch here. We contribute this to the lack of us having an auto-injector and as the class is penetrating more and more, we see patients deciding to go for products that have an auto-injector. We're expecting a positive clarification with FDA on the approval of our auto-injector for the US in the coming months and we've just received a positive opinion from CHMP in Europe So we will be launching the auto-injector in Europe also in the coming months. On Copaxone, I'm happy to share with you the sales numbers for the third quarter. We saw a very stable development both in North America as well as in Europe. So this is of course very positive. We continue to see a slow erosion in the TRX count in North America. and we are optimistic that we will maintain a significant business in capacity both in North America and in Europe. One announcement we've made today is the anticipated launch of Truxima, the first approved rituximab biosimilar in the US. We'll be launching on November 11 and this will be with the full oncology label. This is very exciting because, as you know, part of our strategy is leadership in biopharmaceuticals, including biologics such as biosimilars. And so far, we have seen biosimilars penetrate less in the United States than they have been penetrating in Europe. We believe that there are several reasons for that. And one of the reasons is that in order to penetrate, you need, of course, competitive but you also need dedicated patient support and services and you also need a good commercial footprint in the area where you're penetrating and due to our long experience and strong position in oncology we believe that we know how to penetrate this market to the benefit of both patients and payers in the oncology space in the United States. So this is going to be very exciting and I'll be sharing with you in three months how we actually end up performing. I'm sure that one thing that's on everybody's mind is the opioid litigation situation. We were happy to settle the track one, but we were even more happy to see an agreement in principle with a group of Attorney Generals. We believe that the agreement in principle is the best way forward for the Patients, the people in the United States suffering from addiction. We believe our commitment to supplying Suboption Generic for the next 10 years to all the people suffering from addiction who can use this product to get out of their addiction and can be an element in that whole process. That's the best way forward. We hope that this framework will materialize and that in materializing together with other defendants, we will be able to help alleviate some of the burden from the misuse of opioids in the United States. If we look to the future focus and the present focus, then of course we remain focused on maximizing the profits from our existing core businesses. We remain focused on increasing the sales our new brands such as Osteto and Adjovi and I should add that we are working on the launches. We are launching Osteto and Adjovi in more countries as we speak and also in the coming period. We are executing on our biopharmaceutical R&D strategy and I'll be sharing more of that with you in February and as well in February I'll share with you our manufacturing strategy which will of course be focusing on delivering efficiencies and optimization. And all of this we do to secure a strong free cash flow and of course secure the debt repayment. And before I turn over to Mike, I would like to add a few extra elements. One is a warm thanks to Mike for the great collaboration I've had with him over the last two years and for everything he's done for Tether. As you know, Mike is leaving the company for personal reasons, and he committed to stay on until today, and I'm very grateful for that. We have announced today also that we have appointed a new CFO, Eli Kalif, who has a strong background in finance and manufacturing, as well as other relevant elements for us. He will be starting on the 27th of December, and until then, I'll be your interim CFO. So with that, I'll hand it over to Mike.