Teva Pharmaceutical Industries Limited

Hello and welcome to the Teva Pharmaceutical Industries Limited Q1 2026 earnings conference call. My name is Alex. I'll be coordinating today's call. If you'd like to ask a question at the end of the presentation, you may press star followed by one on your telephone keypad. And I hand it over to Chris Devo, SVP, Investor Relations. Please go ahead.

Thank you, Alex. Good morning and good afternoon, everyone. Thank you for joining us on our first quarter call. I'd like to note that Before we posted our press release this morning on earnings, we also posted a press release on the MLX transaction, as well as a slide deck relating to that transaction. And you can find those materials in the same section as you can find our earnings materials. Before I turn the call over to our CEO, Richard Francis, I want to remind everyone that we will be making forward-looking statements on this call. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described in earnings press release in our most recent 10Q and 10K filed with the SEC. Any statements we make are only as of today, and we undertake no obligation to update these statements subsequently. With that, Richard Francis.

Thanks, Chris. Good morning and good afternoon, everybody. Thank you for joining the call. On the call with me today will be my colleague, Dr. Eric Hughes, head of R&D and chief medical officer, and Ellie Cleaf, the chief financial officer. So starting with, as I always do, on the pivot to growth strategy slide, we launched this pivot to growth strategy three years ago, and it's based on four pillars. Deliver on your growth engines, step up innovations, sustain generics powerhouse, and focus the business. And as you'll see through the presentation today, we've made great progress across all of these pillars. On delivering our growth engines, you'll see Esteto, New City, and Ejovi continue to drive good, solid growth. Step-up innovation, you'll hear from Eric about the exciting pipeline we have and some data readouts and milestones we have this year. On sustained generics powerhouse, you'll start to see the growth and the emergence of our biosimilar portfolio. And lastly, focus our business. you'll see that we remain dedicated to allocating our capital to the highest return opportunities. And Ellie will walk you through some of this and also give you an update on the organizational effectiveness work we've done and how we're on track to achieve our $700 million of savings in 2027. But before I do that, and to pick up on what Chris has just said, I'd like to talk a bit today about the announcement we made on the acquisition of Amilex Bioscience. This is the first acquisition under the Pivot to Growth strategy. And with this acquisition of Amilex, we take ownership of Ecopipan, a first-in-class asset with compelling efficacy and favorable tolerability in Tourette syndrome. Now, to let you know a bit about Tourette's, this is a serious life-altering pediatric neurological disorder with limited good options today. So this is a market of serious unmet medical need where current therapies really do not satisfy the needs. They either have efficacy, but have challenges with tolerability, or they don't quite have the efficacy, but they have the tolerability profile. Now, it's because of that failure that only about half of patients are actually treated and a few than a third stay on therapy after one year. So we see this as a clear opportunity to help patients expand the market, something we have successfully done with Esteto and Uceti. And as you know, we have strong CNS capabilities at Teva, whether that's in sales, marketing, market access, patient services. And we believe leveraging these will help drive penetration and growth. It's worth noting that this transaction is highly aligned to our pivot to growth business development strategy. EcoPyPam has a de-risk mechanism, strong pivotal data, no major development overhangs, and orphan dynamics that support attractive pricing. ensure this is a high quality value accretive asset that accelerates our shift towards innovative revenue and profitable growth without compromising our balance sheet discipline. Now, I'm just going to just give you an insight into, on the next slide, the treatment landscape, because this will explain why we're so excited about ECOPIPA. Patients generally start on behavioral therapies, and if these fail, families are left with difficult choices. They either have alpha-2 antagonists, which are generally safe, but maybe do not offer the efficacy for many patients. The next step is antipsychotics, which can be effective, but come with meaningful metabolic and neurologic side effects that lead many families to discontinue or even avoid them altogether. I think we can understand there would be a real hesitation in putting a 10-year-old on an antipsychotic for the next decade. That is not a sustainable long-term solution for a chronic pediatric condition. Ecopython changes that equation. It delivers meaningful efficacy with a good side effect profile, positioning it to become a preferred later line therapy, and we fully expect pricing to reflect that value. Now, on the next slide, you'll see some of the transaction details. Now, I'll leave this for Ellie to go through in more detail. One theory I want to highlight is that the asset carries a gross margin significantly above our corporate average and that it has no impact on our ability to hit our 2027 targets and those beyond. Now, with that, I'm going to move into the quarter one results. So we had a good start to the year, solid performance driven by continued strength of our innovative portfolio. And you'll see the growth of Esteto, Jobin, Yoseti in a couple of slides. Our revenues came, as expected, down 1%, or up 7%, excluding both the Japan divestment and including generic rev limit. It's great to see that we are able to mitigate the decrease in generic rev limit revenues, also as planned and as I shared with you in the past few months. So the figures. Revenue down 1%, as I said, at $4 billion. Adjusted EBITDA up 2%, reaching $1.1 billion. Non-GAAP EPS grew 2%, reaching $0.53%. Free cash flow grew 76%, reaching $200 million. Net debt to EBITDA is now at 2.42. It's worth noting these are all compared to Q1 2025. But let's double-click and go into a bit more detail on what's behind this $4 billion. As you can see, strong growth of our innovative portfolio. All of these grew 41%. Esteto, in coincidence, also grew 41%, up to $578 million. Yasedi's strong performance up 62% at 63 million, and the JV also performed well, growing at 35% to 196 million. Our generics revenue performance was as expected, down 13%, excluding Japan, or flat, excluding both Japan and generic Revlimid. Now I want to walk you on to the next slide. I think this is a really interesting slide. This shows the transition that's been taking place at Teva, from a pure play generics company to a world-leading biopharma company. And as you can see, this is pretty significant and the speed of change is significant. Since 2022, the amount of revenue that's been driven by our innovative portfolio is up from 9% to over 20%. And as you can see by this slide, we continue to see this grow to 2030 and beyond. What is an important aspect that I always draw people's attention to is the gross margin and how our gross margin is fundamentally changing at Teva because of this portfolio shift. And as you see in 2030, we anticipate a gross margin of above 60%. Now, let me dive into the individual products, starting with Esteto. Another strong quarter for Esteto in the US, reaching $559 million, up 41% year over year, with global results mirroring that growth. Now, growth has been driven by a combination of TRX, where we had a 13% growth and milligram growth of 20, reflecting new patient growth and improved adherence. We continue to see the benefit from the shift towards once-daily Esteto XR, which now represents over 60% of new patients. And it's clear that the convenience and simplicity of Esteto XR are proving to be major drivers of the franchise durability. It is worth noting that, as we talked about in Q4, where we had some buildup of inventory in the channel. That has not all been drawn down in Q1. Now for Estetta, we're reiterating our guidance of 2.4 to 2.55 billion for the year. Now moving on to USETI. Q1 performance for USETI was strong with revenues up 62% year-on-year and underlying growth driven by continued prescription growth 75% TRX. Now this all reflects the fact that we have a very strong product profile. subcutaneous, low volume, no loading dose, reaching therapeutic levels within 24 hours. But it also highlights the excellent commercial capabilities we have in the United States. Now, I'm pretty proud of some numbers that I'd like to highlight. So since UCEDD was launched, it's nearly doubled the market share of risperidone LAI from 5% to 9%. Now, this is a massive accomplishment to drive such a change in what is being a static market for so long. So congratulations to the team. We're also now to see expansion into the combined market of risperidone and paliperidone LAIs. It's worth noting that Yosedi is positioned as the LAI of choice with over 86% of its NBRXs coming from patients transitioning from orals and those who are naive to antipsychotic drug therapy. And once again, we are reiterating our guidance for the year. Now, I can't talk about Yasedi without talking about the upcoming launch of Olanzapine, where we're very excited about this. And let me explain why we're so excited. Well, the significant global opportunity is clear. Olanzapine currently holds 19% of the oil market, but lacks viable long-acting options for a patient population that would meaningfully benefit from one. Second, as I've just described with Yasedi, This is an area where we will have clear synergies, Salesforce, market access, MSLs, patient services, et cetera. But more than that, we have real know-how. The team has built up know-how over the last three years with your setting. And as you see on this slide, the investigator excitement is palpable. People are really looking forward to the launch of this product as there is a clear unmet medical need. Now moving on to Jovi. Adobe is a great example of how well we execute commercially innovative products globally. And despite being a late entrance to the crowded CGRP injectable market, Adobe has steadily grown, consistently outpacing the overall injectable market, as you can see from the figures on this slide. Where we launch, we generally end up as number one. And as you can see on the slide, Q1 growth was driven primarily by the US and ex-US, Europe particularly, where we had market share gains, volume growth, and valuable growth when it comes to access. Now moving on to our pipeline. I always struggle not to talk about this in great detail because I know Eric likes to talk about it, but I am excited about it. What I will just say is we have seven milestone readouts this year. We always started the year with the dubiketric maintenance data, which we thought was excellent, but now we're going to have and the anti-IL-15 vitiligo data in Q2, and then in H2, it's really a lot of data readouts coming through, whether that's the futility analysis on MS, whether that's the anti-IL-15 data in CLEC disease, whether that's the DARI conclusion of our phase 3 results, whether that's the launch of a Lanspin LAI, or whether that's the first inhuman PD-1 IL-2. But the worth noting is that these will all add up to over 10 billion of peak sales. Now moving on to our generics business. Moving into the third pillar of our pivot to growth strategy. This performed as planned. Global generics were down 13%, mainly due to generic Revlimid or flat if you take out generic Revlimid. Now looking at the US, we were down 28% or up 10% excluding Revlimid. And this increase was driven mainly by the higher revenues from our portfolio of biosimilar products. EU was down 1%. due to seasonality of some of our products, as well as launches, and international markets was down 9%, excluding Japan. Now, as I've just mentioned, the generic growth in the US has now started to be driven by a similar portfolio. So let me give you a sort of a review of where we are. We currently have 11 biosimilar products on the market, four more, which will be covering $16 billion of originator brand sales expected between now and 2027, and another nine more after that covering $58 billion of originator brand sales. So what does that mean? It means we have increased our portfolio by over 50% in the last three years, and it's starting to have a meaningful impact on our generics business. It is worth noting that we start to be launching biosimilars on a regular basis in Europe. So to conclude, and before handing it over to Eric, I want to reiterate our 2027 financial targets on the pivot to growth journey. Revenue mid-single digit, non-GAAP operating income of 30%, net debt EBITDA of less than two, and cash to earnings of 80%. And with that, I will hand over to my colleague, Eric.