Hello, and welcome to the Q1 2025 Teva Pharmaceutical Industries Limited Earnings Conference Call. My name is Alex, and I'll be coordinating the call today. I'll now hand it over to your host, Christopher Stevo, Head of Investor Relations, to begin. Please go ahead.

Thank you, Alex. Good morning everyone. In the course of this call we are going to be making some forward-looking statements and any statements we make regard only as of today and we undertake no obligation to update them in the future. And if you have any additional questions on our forward-looking statements you can see the relevant sections of our SEC filings and our Forms 10-K and 10-Q. Additionally during today’s call all comments made to revenue growth year-over-year will be in local currency terms unless otherwise noted by one of us. And with that I will turn it over to Richard Francis.

Thank you, Chris, and good morning to everyone. I appreciate you joining us today. I'm eager to discuss our agenda, which includes myself, Eli Kalif, our CFO, and Eric Hughes, the Head of R&D. We'll cover the business update for Q1 and share insights into our path to achieving our 2027 targets, which we feel very confident about. As a reminder, our growth strategy began in 2023 aimed at returning our company to growth. We are proud to report that we have achieved nine consecutive quarters of growth, driven by our strategic pillars, innovation, and a strong generic performance. Throughout the presentation, you will see our continued success with products like Austedo, Ajovy, and Uzedy. Eric will provide updates on our pipeline, highlighting the olanzapine filing later this year and the Phase three trial for duvakitug. Our generic business also shows consistent growth, supported by upcoming biosimilar launches that I will discuss later. We remain focused on capital allocation, directing resources to areas with the highest returns. Regarding TAPI, discussions are ongoing, and further comments will come with a formal announcement. Moving on to our results, revenue increased by 5% to 3.9 billion, adjusted EBITDA rose by 3%, and our non-GAAP EPS increased by 8% to $0.52. We generated solid free cash flow for the quarter, and our net debt to EBITDA ratio is just above 3. As noted, this marks our ninth consecutive quarter of growth, underscoring the effectiveness of our strategy and investment in innovative brands. Let's delve into the factors contributing to this success. Our innovative brands achieved sales of 589 million, a 45% increase year-over-year, led by Austedo, which grew by 39%, Ajovy by 26%, and Uzedy, which doubled to 39 million. I'm pleased to report that our generic business also grew by 3% this quarter, and we saw positive trends for TAPI. Focusing on Austedo, we delivered strong performance, particularly in the U.S., where sales increased by 40%. This growth results from both rising TRx and the expanding use of Austedo XR, which now sees over 60% of new patients. The advantages of Austedo XR include reduced pill burden, optimal dosing, and improved patient adherence. This success allows us to raise our guidance for the year by 50 million to a new target of 1.950 billion. Uzedy continues to gain momentum, with TRx growth of 177% on a smaller base. We have secured over 60% market share in the risperidone long-acting market, positioning us for competition across the wider long-acting market. Our strong product profile enables us to achieve a therapeutic dose swiftly without supplementary therapies, appealing greatly to physicians. Ajovy is also performing well, growing by 26%, and we reaffirm our guidance of 600 million. This robust growth demonstrates our ability to successfully market our innovative brands globally, with notable success in Europe and international markets. We are the leading preventative CGRP injectable in the top U.S. headache centers and among 28 markets in Europe. Our generic business continues to see growth at 3% year-on-year, with increases across all regions. While growth has slowed compared to previous years due to prior year launch comparisons and a lack of repeated tenders in Europe, Q1 is seen as a high-point for growth in 2025. In the biosimilar sector, we are executing a portfolio strategy, beginning to launch multiple products, including two in Q1: biosimilar Humira and biosimilar Soliris. We plan to launch five additional products between 2025 and 2027, dependent on FDA approvals, which will significantly enhance our biosimilar business growth. Now, moving to our 2027 targets, our confidence stems from two key areas: driving top-line growth and managing operating expenses and capital allocation. We anticipate continued growth from brands like Austedo and Ajovy, projecting Austedo to reach $2.5 billion in sales by 2027. The strong performance of Uzedy will also complement our long-acting franchise for schizophrenia, alongside the forthcoming launch of olanzapine. Our generic business is expected to stabilize from 2025 to 2027, cushioning the impact of Revlimid's market changes. Although we foresee a slow decline for legacy brands like COPAXONE and BENDEKA, the innovative portfolio, characterized by high margins, will be the primary growth driver. Regarding capital allocation, our aim is to transform Teva from a generics-focused company into a leading biopharmaceutical player. We plan to modernize our organization, streamline operations, and optimize procurement to achieve net savings of $700 million by 2027. This positions us well for reaching a 30% operating margin in that timeframe. With that, I’ll hand it over to Eli Kalif, who will guide you through the financial details related to our target operating margin.

Thank you, Richard and good morning and good afternoon to everyone. I really would like to start with the following key messages that I believe are important and I would like you to take away from our call today. Firstly, Q1 came with a solid performance, demonstrating our constant execution. Secondly, our continued improvements on strengthening our balance sheet and more specifically, our working capital and leverage. Third, our confidence in the targeted programs to deliver approximately $700 million of net savings in line with our Pivot to Growth strategy, solidifying our 30% operating profit margin targeted by 2027. And lastly, the new confirmed U.S. tariffs have been absorbed within our full year updated guidance for 2025. Now moving to Slide 18 to review our Q1 2025 financial results. Starting with our GAAP performance please note that throughout my remarks, I will refer to revenue growth mainly in local currency terms unless I specify otherwise. Q1 was financially solid with a revenue of approximately $3.9 billion growing at 2% in U.S. dollars or 5% in local currency net of negative FX impact of approximately $100 million after hedging. This is our ninth consecutive quarter of growth since we established our Pivot to Growth strategy in May 2023. We saw a strong momentum in our innovative products, particularly on Austedo, Ajovy, and Uzedy. For generics, we saw broad-based growth across all the regions. GAAP net income and earnings per share were $240 million and $0.18, respectively. Now let's look at our non-GAAP performance. Our non-GAAP gross margin grew by 140 basis points year-over-year to 52.8%. The main drivers of this increase were positive shift in the portfolio mix, especially Austedo's strong continued growth, partially offset by negative FX impact. Our gross margin in Q1 were slightly better than our normal seasonality and our internal expectation for Q1 benefiting from favorable timing of shipments and improved product mix towards the end of the quarter. About two thirds of that gross margin improved flow through to operating margins, which grew by 100 basis points year-over-year. We ended the quarter with a non-GAAP earnings per share of $0.52, an increase of $0.04 or 8% year-over-year. Total non-GAAP adjustment in the first quarter of 2025 were $388 million. Turning to Slide 19. We have significantly transformed our balance sheet and cash generation capability over the last five years to enable growth. I'm really proud of our team's efforts across operational and commercial processes, which have led to improved net working capital as a percentage of revenue and reduced cash conversion days while, at the same time, creating a more nimble supply chain. These efforts have unlocked approximately $1.7 billion of capital since the end of 2021, which we have consistently deployed to reduce leverage and reinvest in the business. Our gross debt at the end of Q1 was $16.7 billion compared to $17.8 billion at the end of the year. This decrease in our gross debt was mainly due to a repayment of $1.4 billion of notes at maturity, partially offset by exchange rate fluctuations. Our net debt was $15 billion and the net debt-to-EBITDA remained just over three times. As I mentioned in January, our free cash flow guidance represents a slight decrease compared to 2024, mainly due to our deliberate efforts to streamline our accounts receivable securitization program as well as taking into account higher scheduled legal settlement outflow this year. I believe excluding such legal payments highlights the improvement in our underlying cash generation which has consistently led to a cash conversion in line with our long-term target of 80% or more. As we have moved into our growth acceleration phase of our strategy, we are now focusing on further enhancements to free up additional capital, which can reinvest in our business. On Slide 20, I know that all of you have questions about tariff, and I wanted to address this for you. While the situation regarding trade and tariffs remain dynamic, based on what we know today, and the tariffs that are already in place on China, we have absorbed this impact in our revised guidance for 2025, and we do not see any material impact on our business. Importantly, I want to remind everyone that Teva has a substantial U.S. manufacturing footprint. A significant amount of the U.S. innovative revenue is U.S. manufactured, including Austedo, our largest product. Our U.S. manufacturing footprint includes eight manufacturing sites, the largest among the generics players. Teva is also uniquely positioned given our very limited exposure to China and India from a sourcing perspective. While we continue to closely watch ongoing development, we are taking proactive measures in our supply chain to mitigate potential risk. At this point, we feel well-positioned in our ability to navigate the potential impact from the U.S. tariffs. Moving to Slide 21. As Richard mentioned earlier, we are transforming Teva with the targeted programs to become a world-class biopharma company. Our commitment remains clear, to deliver sustainable margin improvement without compromising our ability to innovate and to invest in our long-term growth. What you see from this slide is that overall, these transformation programs will deliver approximately $700 million of net savings between 2025 and 2027 and provide us a clear path to our 30% operating margin targeted by expanding gross margin to be between 57% to 58% by 2027, while keeping operating expenses at the range of 27% to 28% of revenue despite continuous investment in growth and pipeline. On Slide 22, I really want to spend time and to show you the bridge between our current margins and our 30% target in 2027 and how savings from these transformation programs as well as the ongoing portfolio shift towards high-growth and margin innovative products are enabling us to achieve our operating margin goals. Over the next couple of years, we expect to expand our operating margin by approximately 400 basis points. As we have communicated before, during this period, we'll experience the impact of revenue cliff from generic Revlimid in 2026 as well as headwinds in 2027 related to IRA Medicare Part D negotiation for Austedo. While we are not providing specific revenue and operating profit guidance for 2026 and 2027 today, the transformation programs and our expected growth trajectory led by our innovative portfolio give us the confidence to grow EBITDA in 2026 and in 2027 both in dollars and margin terms. We are transforming Teva into a structurally higher gross margin business through improvement in our portfolio mix and transformation of our manufacturing cost base, network simplification, and procurement optimization. With a significant gross margin expansion, our OPEX from transforming programs will allow us to keep OPEX as a percentage of revenue stable through 2027 as we redirect significant savings in our G&A towards our innovative portfolio and pipeline, which in turn enable us to drive both short-term and long-term growth. With these dynamics, we expect to expand our operating margin in 2026 by 125 basis points to 200 basis points, more than offsetting profit headwinds related to generic Revlimid within the same year and by another 125 basis points to 250 basis points in 2027. It is also important to note that our strong revenue growth and margin trajectory alongside our ongoing deleveraging during this period will allow us to achieve our target of two times net debt-to-EBITDA ratio by 2027. Now let's discuss our updated 2025 non-GAAP outlook on Slide 23. As I mentioned earlier, our performance in Q1 was solid, delivering revenue growth, improved margin, and cash flow while navigating the impact of macroeconomic headwinds, including negative FX movements. Before I get into the details of our revised guidance, you may recall from our Q4 call in January that 2025 guidance included a full year contribution from both Teva API and the Japanese generics business. It excluded any milestone payments from Sanofi but did include Teva's 50% share of duvakitug R&D expenses. While we are still in ongoing discussions on the sales of Teva API business, Teva concluded the divestiture of its business venture in Japan, as planned on March 31, 2025. Accordingly, we are revising our 2025 guidance today to reflect the inclusion of only the actual Q1 contribution from the Japan business venture and removing the nine months expected contribution from the divested business. For the rest of the year, we have now excluded approximately $250 million and $40 million for the revenue and operating profit, respectively, for the Japan business venture. Next to the 2024 actual results, we have included a 2024 Pro Forma, reflecting Japan contribution in the equivalent period to assist you with modeling a year-over-year comparison. In terms of the underlying changes in the guidance, as Richard highlighted earlier, with a strong Q1 performance, we have increased the low end of our expected revenue range by $50 million for Austedo. With this element in mind, we now expect our 2025 revenue to be between $16.8 billion and $17.2 billion. This reflects a reduction of $200 million to the top end of our range or $100 million at the midpoint of our original revenue guidance from $17.1 billion to $17 billion. Our revised guidance reflects slightly higher growth of approximately 4% at the midpoint versus 2024 Pro Forma given the lower growth and margin profile of the divested Japan business. While we are going to see a majority of the savings from our transformation programs materialize between 2026 and 2027, we do expect to start seeing the savings in the second half of 2025. Combining that with our Q1 performance and the visibility we have today, we are raising the lower end of our 2025 non-GAAP outlook for operating income and EBITDA by $200 million or by $100 million at the midpoint. Accordingly, our earnings per share guidance range is increased by $0.10 to between $2.45 and $2.65. Now let me double click on some thoughts on the quarterly phasing for the rest of the year, especially as it relates to Q2. We continue to expect our non-GAAP gross margin to be between 53% to 54% for the full year. Given that the timing of the shipments and our product mix helped our Q1 margins slightly, we expect flat to slightly higher gross margin in the second quarter when compared to the first with further progress expected in the second half of the year driven by revenue trajectory and portfolio mix. As a reminder, our fourth quarter gross margins are expected to reflect a step down in the generic Revlimid revenue, consistent with the quarterly cadence we have seen in recent years. In addition, we continue to expect our operating expenses to be between 27% to 28% of revenue for the full year with the second half being lower than the first, driven by operating leverage, in line with expected ramp-up in revenue. Our guidance continued to exclude any contribution from potential development milestone payments from our partner, Sanofi, for the Phase III initiation of our anti-TL1A program, duvakitug. We will revise our guidance to include these milestone payments when they're earned. And also, as I just said earlier, the revised guidance already absorbed the immaterial impact of the confirmed tariff. Moving to Slide 24, we showcased our consistent capital allocation strategy, which is clear and designed to fuel our long-term growth and innovation while strengthening our balance sheet through a further deleveraging and meeting our financial commitments. And finally, before I conclude my review of the first quarter results and hand it over to Eric, I want to reconfirm our 2027 financial targets. And based on what I just said on 2026 and 2027, we are laser-focused on our execution and are on track to achieve these targets. With this, I will now hand it over to Eric to discuss our pipeline.

Thank you, Eli. I’d like to outline the progress of our development programs. First, we are excited to present the long-term safety data for Period 2 of our Phase 3 study of olanzapine LAI at the Psych Elevate meeting this month, and we're on schedule for our submission in the latter half of this year. Regarding our DARI program, our dual-action rescue inhaler for asthma, I’m pleased to report that the study is kicking off globally. I have traveled to three different continents and have achieved significant milestones. We've exceeded our site initiation targets and are on pace for complete study enrollment by the end of this year, with results expected in the second half of next year. Our duvakitug program is also on track to begin Phase 3 with Sanofi in both ulcerative colitis and Crohn's disease. Lastly, emrusolmin addresses a critical unmet medical need in multiple system atrophy. We believe it has unique qualities, and we are actively enrolling patients in that study, aiming for full enrollment by the second half of next year. Additionally, we are advancing our IL-15 and anti-PD-1 IL-2 programs in the clinic. Our development efforts do not cease once a drug is approved; life cycle management is a crucial aspect of our operations. I’m particularly proud of where we’ve taken Austedo XR. Initially, the product was launched requiring multiple prescriptions for the highest dose. Now, with the introduction of a titration kit and a once-a-day pill formulation, it’s much simpler for physicians to prescribe the optimal dose for their patients, significantly reducing the burden on patients. For new prescriptions, over 60% of patients are now opting for Austedo XR, which has also led to a 50% to 75% decrease in pill burden for many. Our studies have shown that 95% of patients using the titration kit reach the appropriate dose, which enhances efficacy and supports adherence. Furthermore, Austedo XR is user-friendly, as reported by 98% of our patients. Another source of pride is our duvakitug program, which garnered significant attention at the ECHO Conference and again at the DDW Conference. We are still on track to commence our Phase 3 program with Sanofi in the second half of this year and are exploring additional indications for the future. Finally, I want to highlight the potential of olanzapine LAI as a valuable addition to our long-acting injectables portfolio alongside Uzedy, which has been performing well. We will present the data at Psych Elevate later this month, following a productive pre-NDA meeting with the FDA on April 9th. We remain on course for our NDA submission in the second half of this year. Now, I’ll turn it over to Richard for his concluding comments.

Thank you, Eric and thank you, Eli. So I'd just like to remind everybody that the growth we've seen in Q1 in the last two years, we have plans to continue that as part of the Pivot to Growth strategy. As you can see, we're in the acceleration phase and this will be driven by Austedo, Ajovy, Uzedy, olanzapine, as we've highlighted. And that will soon be supported by DARI, our asthma product. And then as you see beyond 2028, we have multiple opportunities to continue to drive growth in our innovative portfolio as well as it's being supported by the growth in generics, which includes our biosimilars business. So we have a clear target to hitting our 30% operating profit beyond 2027. Now final thoughts. Q1, good solid start to the year. Revenue up 5%. Great contribution from our innovative portfolio. I think we've highlighted a very clear path towards 30% operating margin, and you'll see that start to come through next year and then finalized in 2027. And also the fact that we're on track for olanzapine submission and the start of our Phase 3 in duvakitug. Now to close, I just wanted to invite everybody to attend the Accelerate and Innovation Strategy Day later this month in New York. This is where we'll highlight in even more detail the second phase of the Pivot to Growth strategy, where we accelerate growth. So I look forward to seeing many of you there in person. And with that, I'll hand it over for questions. Thank you.

Thank you. Our first question for today comes from David Amsellem of Piper Sandler. Your line is now open. Please go ahead.

Thanks. So I wanted to take a step back from the details on the savings and how you get there in 2027 and ask a general question regarding what Teva wants to be, on one hand, you talk about being a generics powerhouse, on the other hand, there's this transition to being a global biopharma company. And I realize it's not an either/or but can you help us better understand where your generics business, particularly your oral solids business fits in with the overall strategy and particularly how you're thinking about generics R&D as it relates to, again, this new Teva going forward? So that's number one. And then number two, regarding the savings, is this sort of the beginning or sort of the destination, if you will, in terms of savings, in other words, is there the potential to extract even more efficiencies as we think longer term beyond 2027? Thanks.

Hi David, thanks for the question. So to answer the first question, when we started this Pivot to Growth journey, Teva was a pure-play generics company. And now I think we've shown and this quarter is a great example of the amount of progress we've made on driving our innovative portfolio in the market as well as the pipeline, which Eric just highlighted. So I think we're well on our way to becoming a leading biopharmaceutical company. But I would remind you that in Pivot to Growth, we have four pillars. And the third pillar on Pivot to Growth is a sustainable generics powerhouse. And we think that's an important part of this journey that we're on. We see the benefits of having a powerhouse generics in our company. It helps fuel our innovation, fuel discipline to our cost base. So we think they are complementary. So I hope that answers your question. With regard to savings, is this $700 million a destination or is it a journey? It is a journey. I think what you've seen with the last two and a half years at Teva, capital allocation is really important to us. And so we're always thinking about how do we fuel our long-term growth drivers. And to do that, we have to be very thoughtful about how we spend our money. And so I think this era of cost efficiency, harmonization, and frugality will continue. Obviously, this is the first big step forward, but it's something which we'll constantly look at because we have so many opportunities to drive this company forward from a growth perspective, we have to think carefully about making sure we think about costs and their allocation specifically. So I hope that answers your question, David. Thank you for the question.

Thank you. Our next question comes from Jason Gerberry of Bank of America. Your line is now open. Please go ahead.

Thank you for taking my question. Richard, I'd like your perspective on the Section 232 investigation into pharmaceuticals, particularly regarding the concern of overreliance on critical medicines. There are suggestions of subsidies from the Chinese government for certain medications. What do you believe is a practical solution here, considering that producing these products in the U.S. tends to be more expensive? Do you think government subsidies would be necessary to achieve the desired outcome? I understand this may be a challenging question, but as a leader in the U.S. generics space, your insights would be valuable on this issue that's generating a lot of concern in the markets. Additionally, regarding Austedo, which is sold in Israel, can you share what the price is there? I'm interested in how it compares to the U.S. price under the most favored nations clause. Thank you.

Hi Jason, thank you for your question. Regarding the situation in the U.S., let me reiterate what Eli mentioned. Currently, we have successfully mitigated the impact of tariffs, and we are prepared to adapt if circumstances change. Our organization has demonstrated the agility to respond to significant macro changes like this. Additionally, when considering Teva's position in the market, it is important to note that we do not depend on China for manufacturing and have minimal exposure to India. With nine sites in the United States, including the U.S. manufacturing of Austedo, our operational footprint and supply chain provide us with a distinct advantage in this evolving market. As for the outlook on medicines and generic medicines in the U.S., there is ample opportunity for discussion. Teva is one of the largest suppliers, with one out of 14 prescriptions in the U.S. being filled with Teva products. We are committed to being actively involved in the conversation to ensure that the U.S. continues to benefit from our generics portfolio, which is constantly evolving. Regarding Austedo, it's important to highlight that our sales outside the U.S. are quite limited, so pricing discussions in those markets won't significantly affect us. Our primary focus remains on enhancing our U.S. business. However, as we expand our innovative portfolio, we plan to introduce it globally, starting with the U.S. while being mindful of the dynamic market when entering other regions. Thank you for your question, Jason.

Thank you. Our next question comes from Umer Raffat of Evercore ISI. Your line is now open. Please go ahead.

Thanks for taking my questions guys. I have two, if I may. First, I just wanted to be super, super, super clear about 2026 and what you're saying. Should we be expecting a flattish EBITDA versus 2025 as our base case because I noticed you said the transformation cost cuts 'offset' the generic Revlimid. But when you spoke about 2027, you used the words, generic Revlimid is 'compensated'. So presumably generic Revlimid is only partially offset in 2026 and you need help from other stuff like Austedo to offset the other half. So at best, is that a flattish EBITDA in 2026 as a base case? And then secondly, Eli, I noticed net debt went up by $500 million versus where it was in December. And I can see why it could be flattish because there wasn't a lot of free cash flow generated in 1Q. But why would it go up by $500 million? Thank you.

Hi Umer, thanks for the question. So I can be very clear on 2026. EBITDA will go up in absolute dollars and our OP will go up, so just to be very clear about that. And what I'd like to highlight is that some of these organizational effectiveness programs we're putting in place will move very rapidly on them. So a significant amount of those will hit in 2026. And don't forget, we have the innovative business continuing to show strong growth as that will play into it. But to be very clear, our EBITDA in absolute dollars will go up next year as it will in the percentage. Over to you, Eli, for the next question.

Yes, Umer thank you for question. Yes, you're right. What we saw this quarter, mainly due to the close of Japan business, we actually as part of it, we need to share the cash between the BC. So if you actually refer to Slide 55 in the appendix, when you see the trend on the net debt and the component of that one, usually we are sitting on around $2 billion of cash balance. This quarter, it went down to $1.7 billion because we distribute the residual cash that belong to the partner post the close as a dividend, around $380 million. And then if you think about how the Euro got kind of reevaluate by end of March, we actually also got kind of a $200 million of FX. So those elements versus how we end up year-end at 40.5 give us this $0.5 billion to the 15.

Thank you. Our next question comes from Ash Verma of UBS. Your line is now open. Please go ahead.

Yeah, hi, thanks for taking the questions. So maybe just on potential tariff scenario, can you talk about your ability to pass through potential price increases for generics to PBMs and how does that vary for commercial versus government channel? And then secondly, on the cost optimization bucket that you talked about, can you expand a little bit on what sits within the second bucket here, prioritizing the resource allocation, just want to make sure that the investment in the business continues despite the initiatives?

Okay. Hi Ash, good to hear from you. I'm probably going to tag team this with Eli. So I think broadly speaking on the tariffs, probably the simplest way to think about this is we've had the ability to mitigate tariffs as they stand here. And we also, as I've said, contingency planned for any other eventuality that could happen. And I think that's an important aspect of it. Now the opportunity to pass through and have that as a simplistic approach is something that we've leveraged less. I think we need to think a bit more about the ability to leverage other aspects of our supply chain and the fact that we do have a significant footprint in the United States. So that's sort of once I'll start with that on the tariffs. On the second part on the efficiency savings and the OPEX, what is really important to understand as we drive our Pivot to Growth strategy, we see the opportunity to drive significant revenue in our innovative business going forward. And to do that, we really need to think about how we allocate capital, where we drive efficiencies. So when you think about it, and I think your question was, are we cutting too much and are we not able to invest in our business? Absolutely not. The reason why we've driven this and we've driven this with such purpose is to make sure that we do think about capital allocation. And so the innovative portfolio that we have in the United States, that will also start to be launched in other European markets in the next couple of years. And the pipeline that Eric has will be resourced appropriately. That is why we're taking this action now to improve our capital allocation across the organization. But maybe, Eli, I can hand it to you to add any other comments.

Yes. And I think, Ash, you mentioned into the second paragraph related to the prioritization resource allocation from a short slide. I think the main element there is that we are constantly looking on how we're able to rationalize our manufacturing footprint. And today, we're actually running the 35 sites, if I exclude the TAPI sites. And we're actually planning to get it below 30 sites by 2027. And then with this one coming a few other elements that's driving also our ability to run a more lean manufacturing activities and our ability to also structure some organizational elements in our manufacturing cost base. So all in all, according to what Richard mentioned, this is about our ability to really become a biopharma company and to react to actually any element related to cost.

Yes. And I think maybe just to close out, I think the simplistic way I think about Ash is G&A and TGO down in costs, that allows us to invest more in R&D and sales and marketing. And because that TGO cost reduction impacts COGS, that also gives us a nice lift in our gross margin. Thanks for the question Ash.

Thank you. Our next question comes from Chris Schott of J.P. Morgan. Your line is now open. Please go ahead.

Yeah, great. Thanks so much for the questions and all the color on the restructuring details today. Maybe just building on some of the earlier comments on the timing of the $700 million as we think about 2026 versus 2027. I guess I was a bit surprised the magnitude of operating margin improvement in 2026 is so much similar to 2027 despite most of the Revlimid headwinds hitting next year. So can you maybe help get my hands a little bit around the gating of the improvements there? And then the second question, maybe on the same theme. On the net savings, I know there's some reinvestment. What's the gross number we're talking about here, so I guess, how much is being freed up to be reinvested, I know $700 million is flowing through, but what's the reinvestment kind of scale that we're thinking about here as well? Thanks so much.

Hi Chris, it's great to hear from you. I'll share the response with Eli. Regarding your question on our expected impact in 2026, we can look at it in three key areas. We are enhancing our EBITDA and operating margin through revenue growth, cost of goods management, and operational expense management. Our innovative products, such as Austedo, Uzedy, and Ajovy, have been performing strongly, and we anticipate their continued growth well into 2026. These products also have a high gross margin, which is significant. Additionally, improvements in manufacturing efficiency, as Eli mentioned, will help lower our cost of goods, starting to affect our figures in 2026, with more impact in 2027. This will enhance our gross margin. Lastly, the operational expense savings will also significantly contribute in 2026, allowing us to further invest in our innovative portfolio for continued growth. We have a clear plan in place, and we are confident in our ability to execute it by 2026, at the latest by 2027. I hope that addresses most of your questions, and now I'll pass it to Eli to discuss the net savings. Over to you, Eli.

Yes, Chris thanks for the question. So to make it kind of a bit simple, if you think about us growing the business, it means that we need to invest more in OPEX. What we are doing here is that part of those kind of savings allowing us to keep at the OPEX range between 27% to 28% as a percentage of revenue. Although from a dollar perspective, we are growing our OPEX numbers, but the percentage stays more or less the same because we are growing revenue, which means that element that's supposed to actually increase the OPEX is offset by those savings. And then optically what you will see, you will see that actually the gross profit is actually increasing at the range of around 400 basis points. Now when you mentioned about phasing, I think that we try to be transparent as much as we can at this stage. And on the slide on the bridge that I explained on the right side, we phase the 2025, 2026, and 2027 and provide a kind of a meaningful range of expansions on the basis points. At that point to go into kind of a more specific, I think that we will see it in our coming Capital Markets Day when you can get you kind of more color around the phasing.

Thanks Chris.

Thank you. Our final question for today comes from Yifeng Liu of HSBC. Your line is now open. Please go ahead.

Thanks so much for taking my questions. Could you please comment on biosimilar dynamics and what you've seen this year so far versus previous years and how are you thinking about the trend over this in the next couple of years? And second, maybe is on your LAI portfolio. We hear some of the new emerging anti-cell therapeutics, a new mechanism of action. How do you see this dynamic evolve in both the context of monotherapy and adjunctive therapy? Thanks.

Thank you, Yifeng. Let me address those questions. The biosimilar market is indeed broad, but I don't see significant changes in its dynamics. It's crucial to understand that the U.S. and European markets operate differently and have varying levels of market penetration. As you've pointed out, our portfolio is set to enter the U.S. and European markets in the coming years. In the U.S., I expect a slow but steady progression, which will depend on the product and distribution channel. We're excited to introduce two new biosimilars in the first quarter, and the U.S. team is well-equipped to handle this emerging market. In Europe, we have the chance to launch a biosimilar product this year, with more to follow in subsequent years. The healthcare systems there allow for quicker penetration and uptake of biosimilars. It's essential to realize that our biosimilar portfolio will expand globally over time, and we believe it can drive significant growth through 2027. Regarding your question on long-acting injectables (LAIs), I'll address part of it and then pass it to Eric for his insights. In the schizophrenia market, we’ve identified a strong demand for efficacy and safety, which has a solid history. Since launching Uzedy in the risperidone market, we’ve gained strong traction, thanks to a product that is both position-friendly and patient-friendly. The uptake has been robust compared to the LAI market, and we see potential for expansion into other molecules. Physicians prioritize the history of efficacy and safety when starting treatment in schizophrenia. Olanzapine is recognized as the most effective schizophrenia treatment, and the lack of a widely used long-acting olanzapine creates excitement for our product scheduled to launch next year, including in Europe. The entry of new therapies is generally met with enthusiasm and is beneficial for patients, but physicians seek assurance of efficacy and safety. I'll now pass it on to Eric for further comments.

Yes. Thank you, Richard. Yes, there's a few things I just want to add to what Richard just said. So we've always welcomed new mechanism of actions for the treatment of schizophrenia. Schizophrenia has a wide need for new treatments. There's still a large unmet medical need for patients with schizophrenia. The good news with the treatments we have today, we can treat them. But the real value for long-acting injectables is addressing the adherence problem. That's the real reason that people still fail, they relapse, they get hospitalized and their disease progresses. So new MOAs are welcome. But right now, getting a long-acting injectable and having a formulation that is easy to use as we've developed for Uzedy and we're submitting for olanzapine, this is using, as Richard said, a tried and true and tested MOA that people know. Now we're advancing it into a better way of giving it. And that really will impact what we need to do for patients. So we're very pleased with this franchise we're building and what we'll bring to the care of patients with schizophrenia.

Thanks Eric. Thanks Yifeng for the question.

Thank you. At this time, we currently have no further questions. So I'll hand back to the management team for any further remarks.

So thank you, everybody who dialed in. Thank you for your interest in Teva and your questions today, and I look forward to updating you in person at our Capital Markets Day later this month in New York. Thank you.

Thank you all for joining today's call. You may now disconnect your lines.