Teva Pharmaceutical Industries Limited

Good day and thank you for standing by. Welcome to the Teva second quarter 2021 financial results conference call. At this time all participants are in listen only mode. After the speaker's presentation there will be a question and answer session and to ask a question during the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance please press star 0. and I would now like to hand the conference over to your speakers today and Mr. Kevin Mannix, Senior Vice President, Head of Investor Relations. Please go ahead, sir.

Thank you, Ella, and thank you everyone for joining us today to discuss Teva's second quarter 2021 financial results. Joining me on today's call is Kaur Schultz, Teva's Chief Executive Officer, Eli Kalif, Teva's Chief Financial Officer and Brendan O'Grady, Teva's Head of North America Commercials. We hope you've had an opportunity to review our press release which was issued about an 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.tebafarm.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 disclosed non-GAAP financial measures internally to evaluate and manage the company's operations in order to better understand Thank you for joining us.

Welcome to all of you, and thanks for your interest in Teva. I'll start by the financial highlights. Our revenues came in at 3.9 billion, which is roughly the same as a year ago, and it was really driven very much by Jovi and Osteto, and it was also affected by the continued slightly lower script volume due to COVID-19 restrictions in Europe, in generics and OTC, and to some extent also lower total market in the segments where Ajovi and Osteto competes. So overall, given this situation, we were very satisfied with the revenue as they came in. The adjusted EBITDA came in at 1.2 billion and the gap diluted EPS came in at 19 cents and the non-gap diluted EPS at 59 cents, very much in line with our expectations and the consensus estimate. The free cash flow came in at 625 million also a number we were satisfied with. Our debt reduction continues as we've laid it out several years ago according to our plan and the net debt to EBITDA ratio is now down to 4.7. The 2021 revenue outlook is lower to reflect the ongoing impact of COVID-19 from 16.4 to 16.8 billion down to 16 to 16.4 billion. However, operating income, EBITDA, EPS, and free cash flow remains already guided, so it's reaffirmed. And the reason for this is basically that we have been awaiting the consequences of COVID in the total market, and therefore we've been cautious since the beginning of the year, of course, on our spend. And now we can see that we have had a relative to our plans negative effect of COVID-19 on total market volumes in the first and second quarter. Nothing to do with the market share of our products, but basically just a phenomenon and many more. We do expect this to change. We can see it's changing in the US due to the lifting of sanctions and we can also see the first signs is changing in Europe due to the lifting of sanctions within the last one or two months. If we go to the next slide, then you see the revenue development here from 19, 20 and 21. And you can see we have a very stable situation. Thank you for joining us. Next slide, please. Hosteto continues to grow, and you can see here the script numbers, the total script numbers per quarter, where we had a new all-time high here in the second quarter. You can also see the revenues per quarter, and they are a little up and down, and there's some true-ups of rebates in there sometimes. There's some wholesaler swings in there sometimes. There's been a little bit of a, as you would say, lower wholesaler purchasing in the first quarter, which is correct in the second quarter. On the line, we see a strong trend of growth aligned with the TRXs. We see a stable pricing. And we are, you could say, starting a new initiative, which was started in May, which is a DTC campaign targeted at, you could say, targeted dyskinesia. And targeted dyskinesia is, of course, a huge unmet need in the United States. We estimate there's around 500,000 people suffering from it, and only a fraction is treated so far. The campaign so far has resulted in expanded activity on our websites and we are optimistic that this will continue to drive growth in prescriptions and consequently also continued growth in sales. As a consequence of the slower market development compared to what we expected, we have lowered the outlook for Aestheto for the full year from $950 million down to $850 million. Next slide, please. Adobe shows solid net sales growth in the second quarter of 2021, and it's really based on both the U.S. and the European performance. As you see here to the left, the U.S. performance in terms of TRX is showing a very steady growth. It's increasing steadily quarter over quarter, and we saw record high sales in North America. The same thing is the case in Europe, where you can also see here we show the market share, and you can see how the share has gone from around 10%, and many more. So we are very optimistic about the future growth of Adobe. If we go to the next slide, then it shows Troxema, our biosimilar, and it shows how it continues to grow and share in the market. Right now, we're also here around 25%, and the market has been improving after a sort of overall market slowdown in the first quarter, probably related to COVID, has started to improve, and we expect it to continue to improve in total growth. and many more. Our financial long-term ambition is really to secure a business with a good operating margin with a good cash conversion and with an ever decreasing debt in order to basically stabilize the financial situation for the company. And I can say when it comes to the operating margin, we are well underway since it bottomed out in 2019. We have been improving it significantly. And right now we are just shy of 27%, which is the target for this year. And of course, we're aiming for the 28% in 2023. and we are very confident that we can meet this target for the operating margin. Let's go to the next slide, please. Yeah, I was just talking about our long-term financial targets. They are unchanged and, of course, they should be achieved by the end of 2023. And I just mentioned the operating income margin of 28%. Cash earnings, we want that to be above 80% and then we want the net debt to be down ratio that's currently standing at 4.7 to come down below 3. Now, when we execute our business, we deliver more pharmaceutical products, more medicines to the world than any other pharma company. And that's, of course, very, very important for the patients who use the products every day. They get high-quality medication that serves them well in treating the condition they have. But there's also another aspect to what we do when we are the leading generic company in the world. And that is that we help to create sustainable healthcare systems where the authorities or insurance companies or whoever pays for the medication, the private individual, get a chance to have a sustainable and affordable access to medicine. And we've started two years ago to have an independent external company do a report on what is the real economic benefit of our activities. and I'm just going to show you a few snapshots here. The report is available. You can find it online. It's from Matrix Global Advisors and here you can just see some highlights that we saved the U.S. healthcare system some $29 billion in 2020 and you can see we've done it by state. We have the details by state in the report but you can also see that the savings, they ended up, some of them with the government, some of them with private healthcare insurers and some of it out-of-pocket co-pays that got reduced and so on. And just the savings directed to the patients were $4 billion. So a significant contribution to the US healthcare system. Now the same can be said for all countries where we operate. We don't do the report on all countries. That would be a very, very big task. But we did do it for nine countries in Europe. And also here you can see the same pattern that we have been saving the countries a lot of money. And on top of this, of course, When we do generics and biosimilars, we also create a lot of economic activity, which basically means that we contribute to society not only in the form of savings in the healthcare system, but also in the form of job creation and the form of economic growth and support to GDP in the various countries. So this was just a little teaser. If you're more interested in this, take a look at the report. You can find it online. But with this, I think we should move on to have a look at the financials. So I'll hand over to our CFO, Eli Kalif.