Teva Pharmaceutical Industries Limited

Welcome to the TEVA Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ron Meir, Senior Vice President, Head of Investor Relations. Please go ahead.

Thank you, Sandra. Thank you, everyone, for joining us today. We hope you have an added opportunity to review our press release, which was issued yesterday. A copy of this press release, as well as a copy of the slides being presented on this call, can be found on our website at serapharm.com. I am joined today on the call by Cor Schultz, Deva's CEO, Eli Kalif, our CFO, and Sven Dittles, Deva's head of North America Business. We have today quite a busy agenda. We will start the call with an update from Cor on the progress achieved on the Open Litigation Front, This will be followed by Cord's and Eliyahu's review of the second quarter business and financial results, as well as the updated outlook for 2022. And we will end the presentation part of today's call with a strategy update from Cord and discussion of our new long-term financial targets. Please note that today's call will run approximately 70 minutes. Before we begin, please see our forward-looking statements. Disclaimer on slide number two. Additional information regarding this statement and our non-GAAP financial measures is available on our earnings release and our SSE forms 10-K and 10-Q under risk factors. And with that, I will now turn the call over to Cor. Cor, if you would please.

Thank you, Ryan. Welcome, everybody. It's a pleasure to update you on the overall litigation. As you have seen in our release, we reached an agreement in principle with the working group of both the states, the tribes, and the plaintiff lawyers representing the states and subdivisions and reached financial terms for a nationwide opioid settlement. We will be paying 4.25 billion dollars Thank you very much. will be donating these products over 10 years and there will be the option for states to go for a cash value instead of the actual product donation. Of course we are hopeful that many will accept the donation and in that way help combat the opioid epidemic. We have revised our provision to reflect all the details of the agreement we have in principle on a nationwide settlement. The agreement is contingent upon final documentation among the working group and us. And of course, like other big nationwide agreements, it's also predicated upon it that you will need a certain participation from the states and the subdivisions which will be sent forward in the final agreement. The agreement is also contingent upon us reaching an agreement with Allergan with respect to any indemnification obligations and Allergan reaching a nationwide opioid settlement. Once the documentation is finalized, the nationwide agreement will need to be adopted by a sufficient number of plaintiffs, which would then resolve in the vast majority of opioid-related claims and litigation by states, subdivisions, and Native American tribes in the United States to be settled. There are no remaining trials currently scheduled against us in 2022, with the possible exception of the relief phase of the trial in New York, opioid litigation. Additionally, Cheddar, New York State and its subdivisions are engaged in ongoing settlement negotiations. We expect that the documentation for the nationwide settlement agreement will be finalized in the coming weeks, with the actual nationwide settlement sign-on process for state subdivisions and tribes to follow. Next slide, please. Let me now turn to the second quarter and the financial highlights. Revenues came in at 3.8 billion, adjusted EBITDA came in at 1.1 billion, the GAAP diluted loss per share was 21 cents, the non-GAAP diluted EPS was 68 cents, and the free cash flow came in at 301 million. We continued to reduce our debt and the debt has now been reduced to 20 billion. Our 2022 revenue outlook has been revised, mainly due to continued foreign exchange headwinds. We've seen the dollar appreciate significantly during the last year against the euro as much as 14-15%. Our guidance for operating income, EBITDA, EPS and free cash flow remains unchanged. On the business side, we'll comment on Osteto and Adobe in the coming slides. but I'd like to point out that North America Generics had a strong quarter with good contribution from the generic version of Revlimid but also continued strong sales of Epipen as well as the biosimilar Truxima which is the biosimilar version of Ritoxin where we still have a high market share. In Europe we also saw a very strong volume uptake of both our generics and OTC. And we actually saw that the revenue in local currency was up 12%. So we're seeing a normalization of volumes following the COVID-19 restrictions that have been lifted. We also had a biosimilar product launched in the UK, the biosimilar flu census. Next slide please. If you look at the revenue development here, then you need to be aware that we report this in ongoing currency, ongoing realized currencies, which basically means that when you're comparing to Q221, we do see a decline in US dollar terms. Had we reported it in the local currencies, then the revenue would basically be flat. and that means that in Europe we do not see in local currency a decline but rather see a small increase and in North America we see stable revenues as well as international markets. In international markets of course there has been a negative influence on our revenues in Ukraine due to the conflict there but overall the revenue in international markets is in line with expectations. Next slide please. Osteto continues to grow very nicely. We see a continuous growth in the TRS and in the patient numbers. On the revenue side, we have some quarterly ups and downs, as we've always had, but we are happy about the revenue in the second quarter, and we can reconfirm our outlook for the full year, where we expect to sell a billion dollars. Next slide, please. Joe is also doing very fine. You can see here how the scripts are continuing to grow in the US and you can also see how the market share in Europe continues to grow. We now have a market share of above 30 in Europe and we have an aim now of a third of the markets. We are now number two in the European market coming from a late launch position as number three. We strongly believe that the efficacy and safety of adjovi is very very good also compared to competition and we are optimistic about the future sales growth of this key product. Next slide please. The margin continues to evolve positively along with our operational plans to optimize manufacturing, optimize our commercial operation. You see here that the first half year margin is above the first half year margin last year. And the reason why we have a difference between the first half year margin and the full year margin is that we always had a strong fourth quarter in terms of revenue for a lot of practical reasons. And that means that we still expect to see an uptick for the full year compared to the first half and means that we are on our way to hit the long term financial target for 2023. The debt, as I alluded to earlier, continues to decline. We are now down to 20 billion. Of course, we won't stop here. We will continue to drive down debt, and I'll be commenting later on what our long-term target will be for the debt development. We are very committed to our patients. As you know, we serve around 200 million patients every day, but we also try to serve these underprivileged people around the world with medicine, because that's what we can do to help people. And here you can see some examples around the world, how we support vulnerable groups with mental health, with oncology treatment, in both Africa, North America, Europe. And if you're interested in this, then there's a lot more information on all these programs on our website as part of our ESG reporting, where you can also see all the things we're doing to meet the targets we've set for our bonds, our sustainability-linked bonds, where we have targets both for access and for climate. With this, I'll hand over to Eli Kalif, who will comment on the numbers for the second quarter.