Teva Pharmaceutical Industries Limited

Ladies and gentlemen, thank you for standing by. Welcome to today's TESA fourth quarter and full year 2020 financial results. At this time, all participants are in a listen-only mode. There'll 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 and wait for your name to be announced. In the interest of time, please limit yourself to one question and one follow-up question only. must advise you that this conference is being recorded today, Wednesday the 10th of February 2021. I would now like to hand the conference over to your speaker today, Kevin Mannix, Senior Vice President, Head of Investor Relations. Please go ahead, sir.

Thank you, Sharon, and thank you everyone for joining us today to discuss Teva's fourth quarter and full year 2020 financial results. We hope you've had an opportunity to review our press release which was issued one hour ago. A copy of the release as well as a copy of the slides being presented on this call can be found on our website at www.tevapharm.com. Please note that the discussion on today's call includes certain non-GAAP measures as defined by the SEC. Management uses both GAAP financial measures and the disclosed non-GAAP financial measures to evaluate and manage the company's operations to better understand its business. Further, management believes the inclusion of non-GAAP financial measures provides meaningful supplementary information and facilitates analysis by investors in evaluating the company's financial performance, results of operations and trends. A reconciliation of GAAP to non-GAAP measures is available in our earnings release and in today's presentation. To begin today's call, Core Schultz, Teva's Chief Executive Officer, will provide an overview of the fourth quarter and full year performance, recent events, and priorities going forward. Our Chief Financial Officer, Eli Kalif, will then review the results in more detail before providing an overview of Teva's 2021 financial outlook. Joining Core and Eli on the call today is Brendan O'Grady, Teva's Head of North America Commercial, 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. And with that, I'll now turn the call over to Cor. Cor, if you would, please.

Thanks, Kevin. And welcome, everyone, to this call, and thank you for your interest in Tether. I will review some of our key business highlights, and then Eli will review the financials, and then we'll have time for Q&A. I'm very happy to report that we met all our key components of our 2020 financial guidance. As you've seen, our revenues came in at 16.7 billion, the non-GAAP operating income at 4.4 billion, and the non-GAAP EBITDA at 4.9 billion. The non-GAAP EBS came in slightly above our guidance at $2.57, and the free cash flow came in at 2.1 billion. On the business side, a lot of important things happened. You could say the overarching thing for 2020 was the COVID-19 pandemic. and the successful navigation of the pandemic by the company and by the employees. We did our utmost to protect the employees and by doing so, we were able to protect our supply chain with minimal disruption and also continue our R&D programs and our product launches. I'll get back to Ostedu, Ejovi and Tuxima on the following slides, but I'd like to mention the very successful launch of the first versions of the treatments Truvada and Tripla for HIV treatment. So generic versions of those products were launched by us in the fourth quarter in the US, a very successful generic launch. We also just launched in the US Nubaring, and we're very happy to have this approval for complex generic. We're also very pleased with the phase three results we got from our Risperidone LAI. As you know, patients suffering from schizophrenia really need better long-acting therapy, where they don't have to have intramuscular injections, where they don't have problems with reconstitution. And this product is a ready-to-use, long-acting product, subcutaneously injected by a thin needle, so it will improve convenience and compliance, hopefully with strong benefits for people suffering from schizophrenia. We also launched DigiHaler, the whole DigiHaler portfolio in the US, and in these times of e-health, we are very optimistic that the DigiHaler portfolio of products can help people suffering from asthma and other respiratory diseases to improve the treatment and the compliance with their treatment to the benefit of their health outcomes. If we move to the next slide, then I'll just give you a few comments to our revenue development and we did have a strange year in the sense that in Q1 2020, as you can see from the European green bar, there we had a unexpected extra sales in the form of patient-level hoarding as the pandemic hit and the first lockdowns happened in Europe. So we basically sold 200 million more in the first quarter in Europe than we would normally do. And then that came back as 200 million less in Q2. And then we sort of normalized in Europe at the end of the year in Q4. In the U.S., we didn't have the same swings. We didn't have the same hard lockdowns as we saw in Europe. And you basically see we were sort of going at the normal run rate of around $2 billion per quarter. And then in Q4, we had the lift up basically coming from the launch of Truvada and Atripla. And the rest of the business was pretty steady over the quarters, no dramatic changes there. If we move to the next slide, and then I'll give a few comments to Esteto. Ostero keeps growing very strongly. We had a 65% increase over 19 in our revenues in 2020, and we also expected to keep on growing strongly as you will see from our guidance. We have a good growth in prescriptions, good growth in our sales, and what I always mention when we talk about Osteto is the huge potential. There's a huge unmet medical need in the form of tardive dyskinesia. We are estimating that we have around 500,000 patients suffering from tardive dyskinesia in the US. Of course, not everybody will be treated at all times. but as you can see from our patient numbers and if you look at the numbers of our one and only competitor, then we are only scratching the surface in meeting the medical needs of people suffering from tardive dyskinesia. So for that reason, I'm optimistic that Osteto will continue to grow also the coming years. If we move to the next slide, then we have a bit of a roller coaster story for Adobe in the US. We had a really good launch, and then we lost competitive power, you could say, due to the fact that we did not have an auto-injector. Our two competitors both launched with an auto-injector. We were delayed regulatory-wise, and you saw our NPRX share go from 30 all the way down to 11. Then we finally launched our auto-injector, which I think is best in class, very high-quality Swiss product, really easy to use. and if you combine that new and better device, which then meant that we got back into a better capture rate with an NBRR share of around 25%, if you combine this better device and the increase in our capture rate with the fact that we do have unbeaten efficacy and we have a longer duration of action than any of the competitors and due to the longer duration of action, we can offer both quarterly and monthly therapy Then I'm actually quite optimistic about the potential for Adobe in terms of market share. And I've been saying since the launch that we would be happy to get 25% of the market. I'm sort of upping that ambition a bit. and saying that I really think with the unsurpassed efficacy, the longer duration of action and a clearly high quality, very convenient auto-injector, I don't see why we cannot have a long-term aspiration in the U.S. of having a third of the market. And that, by the way, fits very well with Europe, where in some of the countries where we have launched, and that's many by now, in some of the countries where we launched early, we are already now getting close to a third of the market. So good development on the market share for Adobe. We move to the next slide. Then many of you probably remember that I've been talking about biosimilars as a future cornerstone of our presence in, you could say, the overall generic space. And here we had to prove ourselves with the launch of Truxima because we had to prove that we could get a good market share. Ben, you could say some disappointment on the penetration rate for biosimilars in the U.S. over the last 5 to 10 years. I think with Truxima, we have proven that we can get the volume share. We are up to 24% now. I don't think that we will go from 24 to 48% in the next 12 months, but I do think we have a sustainable market share that we can increase. There's more competition now. We have two competitors and the originator, but this is a very good business for us. It's a solid market share we have already. We think we can expand it, and we're very optimistic also about the benefits of our broad future portfolio in biosimilars, which I'll actually address on the next slide. So if you look at our overall biosimilar and specialty pipeline, then you can see here that we, by now, we have a very broad biosimilar pipeline, roughly 10 products, half of them our own internal developments, half of them what came in with the in-licensing deal we made with Alvatech. And we're very excited about this, and we think it will be a very good business for us for the coming many years. I can also mention here that you can see that Risperidone LAI, of course, we're getting ready for submission there. Hopefully, we can submit, get approval, and launch sometime next year. And of course, we're also waiting to see the outcome for the competing product to Fasinomat. Fasinomat, which has an advisory committee coming up, so it will be exciting to see there what happens. And together with our partner, Regeneron, we'll be following that closely, hoping that we can file the product this year. I won't give any more comments to all the details, but you can see we have a broad portfolio of both biopharmaceuticals and biosimilars. If we move to the next slide, then another cornerstone of our strategy is to continuously improve our manufacturing in terms of efficiency and cost and thereby increasing our gross margin and our operating margin. Now, I won't talk about all these elements. I've talked to you about it before. It's really not rocket science. It's what you do when you want to improve your manufacturing operation. It's more than a thousand soft projects under these five categories. I'll just mention two things where you can clearly see and where we're sharing with you what we're doing. On the network side, I'll show you just in a minute how we've developed by reducing the number of manufacturing sites we have and we'll continue that. And that, of course, benefits by increasing the scale effect on the remaining sites, increasing and concentrating the volumes. And also on the supply chain, just given COVID-19 and everything that's been happening, you could say consolidation and the overview and the smart use of IT for reviewing your Thank you very much. The state in Israel in its vaccination program where we are playing a key role being the company doing all the logistics, getting the vaccines from the airport into the warehouse, into all the 400 vaccination centers in Israel and thereby securing a very fast vaccination process in Israel based on logistics and of course supplier products. If we move to the next slide, then I promise you to give you a short look into our consolidation of our manufacturing sites. What you can see here is that over the last three years, we've gone from 80 to around 60 manufacturing sites, but we're not stopping there. As you can see here at the bottom, we have additional 11 sites where we have announced that they will either be divested or closed, and that of course sets us up for a reduction down to 50 sites. and then I'm sure later on we can do even more consolidation. And we have different examples. We have recently divested in countries such as Japan, Thailand, Russia, Serbia and so on. So it's a lot of smaller sites that we are closing and concentrating the volume on our bigger sites and thereby getting better manufacturing efficiencies. And you can see that on the next slide. Here I'm showing you the operating margin. and you can see the negative development from 17 to 19, basically as a consequence of the loss of revenue on Copaxone, which was a very high operating margin product. And then you can see how we are fighting our way back, moving from 24.5% operating margin in 19 up to 26.3 in 2020. The midpoint of our guidance for this year is 26.8. and our long-term target at the end of 23 is 28%, and that's a target we are firmly committed to. If you move to this next slide, then you can see another development that we are firmly committed to, the reduction in our net debt, and you can see the development since I joined the company in Q3 17 until now, where we have reduced the debt by some 10 billion. You should continue to see that going forward. The only reason why the graph has gone a little flat the last two quarters is actually the currency adjustment on our Euro-denominated debt, which has led, of course, to some increase in the dollar converted number for that debt, which has slowed down the debt reduction a little bit, but it will pick up again strongly here in 2021. And if we move to my last slide here, then I'm happy to repeat the long-term financial targets. and there's no change here apart from the design. We've moved to three green round circles and that's of course you could say our little contribution here warming up to the next slide which is an ESG slide. But these are financials, 28% operating income margin at the end of 23, we're firmly committed to that. More than 80% cash earnings and a net debt to EGWO three times. And in order to secure that, we will, of course, use our cash flow to pay down debt. And as a side remark, which I've said for the last three years, we don't have any plan to raise equity. We want the current shareholders to get the full benefit or improvements in the business. Now, I have a last slide on ESG. which I'd like to show you. I won't comment on all the great things we're doing. I've just picked the E, so to speak, the environmental piece. I just want to review briefly our 2030 environmental long-term targets. One is focused on greenhouse gases to cut our emissions by a third. Another is focused on the energy, both the energy efficiency and also the continued increase in use of renewable energy sources. and then the last one is really focused on waste and recycling of waste and then reducing and minimizing antimicrobial discharge. It's a project we do together with a lot of other companies in the pharmaceutical industry to basically secure that we won't have problems with resistant bacteria and to ensure that we have a reduction in the risk of this happening to all of us by working together across the pharmaceutical industry. So with this, I would like to hand over to Eli, who will review the financials.