Earnings Call Transcript - TEVA Q3 2024

Operator, Operator

Hello, and welcome to the Q3 2024 Teva Pharmaceuticals Industries Limited Earnings Conference Call. My name is Alex, and I'll be coordinating the call today. Please review our forward-looking statements on Slide 2. Additional information regarding these statements and our non-GAAP financial measures is available on our earnings release and in our SEC forms 10-K and 10-Q. To begin today's call, Richard Francis, Teva's CEO, will provide an overview of Teva's third quarter business performance, recent events, and our focus and priorities going forward.

Ran Meir, Senior Vice President, Head of Investor Relations

Thank you, Alex, and thank you, everyone, for joining us today. We hope you have had a chance to review our Q3 results press release, which was issued earlier this morning. A copy of the press release, along with the Slides presented during this call, are available on our website at ir.Tevapharm.com. Please review our forward-looking statements on Slide 2. Then, Dr. Eric Hughes, our Head of R&D and Chief Medical Officer, will discuss progress on our innovative pipeline. Our CFO, Eli Kalif, will follow up by reviewing the third quarter financial results and our updated financial outlook in more detail. Please note that today's call will run approximately one hour. And with that, I will turn the call over to Richard. Richard, if you would, please.

Richard Francis, CEO

Thank you, Ran, and good morning, good afternoon, everybody. Thank you for joining Teva's third quarter 2024 results. I'm going to walk you through a presentation today, which the backbone of it is our pivot to growth strategy. And as you know, we launched this last year to get Teva back to growth and it's focused on four pillars: deliver on our growth engines, step up innovation, create a sustainable generics powerhouse, and focus the business. The consistency with which we are driving growth at Teva is impressive. From quarter 1 2023 to now, the 15% growth we see in quarter 3 2024 shows the consistency. Revenues of $4.3 billion, adjusted EBITDA of $1.3 billion, and our EPS is up 16%. Because of these strong financial results, we're going to be able to give an increased outlook for the full year. I'm pleased about our innovative business and generics business driving growth. AUSTEDO continues to perform impressively, with 28% growth and AJOVY at 21%. UZEDY has a strong launch momentum. TAPI has returned to growth with a third quarter of 4%. I'm excited about the progress and future potential.

Eric Hughes, Head of R&D and Chief Medical Officer

Thank you, Richard. Let me start off with our anti-TL1A program. I'm very proud of our Duvakitug team for accelerating this program, and we're very excited for the top line results that's on track for the fourth quarter of this year. We are looking at a study that includes both ulcerative colitis and Crohn's disease. We're very happy with the clinical data we’ve gathered and the enthusiasm around these studies. Additionally, our Olanzapine LAI program is right on track, and I'm excited about the overall pipeline and progress made.

Eli Kalif, CFO

Thank you, Eric, and good morning and good afternoon to everyone. I'll begin my review of our Q3 2024 financial results. Revenues in the third quarter of 2024 were $4.3 billion, an increase of 13% in US dollars, or 15% in local currency terms, compared to the third quarter of 2023. The increase in revenue was mainly driven by growth from generics products across all our segments globally. We've also seen improvements in our net debt, which was $15.7 billion at the end of Q3 2024. Our gross debt was $19 billion compared to $19.8 billion at the end of 2023. We are focused on optimizing our working capital management and cash flow generation, which has improved our position significantly.

Richard Francis, CEO

Thank you, Eli, and thank you Eric. We are on track to meet our financial targets for 2027. The strategy is working well, and I believe we have many opportunities for growth. I’d like to conclude the presentation and open up the floor to questions.

Umer Raffat, Analyst

Hi guys. Thanks so much for taking my questions and congrats on all the execution. I have three if I may. First, I'm curious what your expectation is on placebo response in the TL1A Phase 2 trial coming up. Second, on UZEDY, the launch performance is clearly now tracking ahead, and I wonder what does that mean for you in terms of how you're thinking about the peak sales for long-acting Olanzapine? And then finally on long-acting Olanzapine, I noticed you have a new trial of three extended release formulations with different release rates. Why do that at this point?

Richard Francis, CEO

Hi, Umer, thanks for the questions. I will hand over the first one on TL1A Duvakitug to Eric, and then I'll take the UZEDY one and then hand you back the Olanzapine one.

Eric Hughes, Head of R&D and Chief Medical Officer

Thanks, Richard. Thanks, Umer, for the question. So, placebo responses in ulcerative colitis and Crohn's disease are variable and it's hard to predict. But I believe we will provide the placebo adjusted numbers as it's crucial for understanding the results.

Richard Francis, CEO

Thanks, Eric. And then on UZEDY, we're obviously very pleased with the work the team has done. We believe we have a real asset in Olanzapine, a real unmet need. That gives us a lot of optimism for Olanzapine because of the unmet medical need and the fact that we'll be coming to this market with a solid pre-launch strategy. We are very enthusiastic about it.

Balaji Prasad, Analyst

Thank you. Congratulations on the results and great to see the all-around growth and pipeline progress. I wanted to start with the structural tailwind regarding 'Make in America' in generics and biosimilars. Do you see this as a potential benefit for Teva? Also, could you comment on the expectations of confidence with such a label for Olanzapine LAI?

Richard Francis, CEO

Thanks, Balaji. With regard to any policy changes impacting the generic market, if it benefits a company like Teva, then obviously that is helpful. But we’ll have to wait and see how that plays out. And regarding Olanzapine, we're excited about our formulation’s strength and chances in the market. We've designed this in conjunction with the FDA, and I think that our chances here are good.

David Amsellem, Analyst

Thanks. Can you comment on how you're thinking about US generics for 2025, especially in terms of drivers that can offset pressure on lenalidomide? And could you provide insight into the UZEDY ramp and where you're getting patients from?

Richard Francis, CEO

Thanks for the questions, David. On the US generics business, we are confident in our launches of new products and complex generics as we transition into 2025. Regarding UZEDY, our commercial team is executing well, and we are seeing patients switch from both oral formulations and other long-acting medications. We're pleased with this trend.

Jason Gerberry, Analyst

Just on TL1A, for the fourth quarter update, could you confirm that we'll get placebo adjusted UC Mayo remission scores at week 14? Additionally, can you provide an update on TAPI?

Richard Francis, CEO

Thanks, Jason. Yes, we will provide placebo-adjusted numbers. We're on track with TAPI and should be able to divest in H1 2025 as we have made significant progress.

Chris Schott, Analyst

Just a couple of quick ones, can you discuss the filing pathway for Emrusolmin based on the Phase 2? And if TL1A data reads out successfully, how quickly can you move it into Phase 3?

Richard Francis, CEO

Thank you, Chris. For Emrusolmin, if we see responses in Phase 2, I’ll push for an accelerated pathway for approval. Regarding TL1A, we plan on moving into Phase 3 as soon as we gather confident data.

Ash Verma, Analyst

I wanted to clarify on the API business. What's driving the significant impairment charges in the last two quarters? And regarding TL1A, what's the rationale for the endpoint selection for Crohn's?

Richard Francis, CEO

Hi Ash, regarding TAPI, we are reviewing our allocated net assets and adjusting due to divestment discussions. The impairment is not connected to great performance. Eric, could you comment on the TL1A endpoint?

Eric Hughes, Head of R&D and Chief Medical Officer

Yes, Ash, for Crohn's disease, our primary endpoint is endoscopic endpoint. While it is challenging, our secondary endpoint is the clinical remission. I believe these will judge the activity of the compound well.

Yifeng Liu, Analyst

Could you talk about how you're seeing the pricing environment for generic medicine this year into 2025? Also, any details on the baseline split for UC and Crohn's in your TL1A groups?

Richard Francis, CEO

The pricing environment in the US remains pressured downward. We are tackling that by launching new products. Regarding TL1A, half of our study is designed for UC and half for Crohn's, with moderate to severe patients overall. Thank you once again for your interest in Teva Pharmaceuticals. We appreciate the questions and your time. We look forward to updating you for quarter four at the start of next year.

Operator, Operator

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