Earnings Call Transcript - TEVA 2026-11-03

Operator

Hello, everybody, and welcome to the Q3 2026 Head of Pharmaceutical Industries Earnings Conference call. My name is Elliot, and I'll be coordinating your call today. If you would like to ask a question during today's event, please press star followed by one on your telephone keypad. Today, we ask you to limit yourself to one question and one follow-up. If you have additional questions, please rejoin the queue. I would now like to hand over to Christopher Stevo, Head of Investor Relations. Please go ahead.

Christopher Stevo, Head of Investor Relations

Thank you, Elliot. Good morning, and good afternoon, everyone. Thank you for joining us for our third quarter earnings call. As usual, our materials are posted to our website this morning, so please feel free to see them there. And before I turn the call over to our CEO, Richard Francis, I'd like to remind everyone that we'll be making forward-looking statements on this call. The company cautions that investors that any forward-looking statement involves risk and uncertainty 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 our earnings press release and our most recent form 10Q and 10K filed with the SEC. Any statements that we make are only as of today, and we undertake no obligation to update those statements subsequently. However, I will now undertake the obligation to give you our CEO, Richard Richard Francis,

Richard Francis, CEO

Thank you, Chris. Good morning and good afternoon, everybody. Thank Thank you for joining the call. With me today on this call would be Dr. Eric Hughes, Head of Global R&D, Chief Micro Officer, and Ellie Khalif, CFO. Now, moving on to the next slide. As I always do, I start with the Pivot to Growth Strategy and the four pillars. We launched this in 2023, and I'm going to give you an update in Q3 as the progress we've made against this strategy. Starting with delivering our growth engines, you'll see that the innovative portfolio continues to perform well. Estedo, Joe Bini, Setti, all delivering strong Q3 performance, and our innovative portfolio is up 33%. And we're raising full-year guidance across all of these products. Now, the importance of these products can be seen in our financials, and you'll see that our revenue is stronger, our margins, and our free cash flow also become stronger. Now, looking to the second pillar, step-up innovation, you see that we have eight major milestone readouts this year, but also So, we've seen some good progress, and the approval of well-trueza was a significant moment for Teva as well as the patients suffering from schizophrenia. We also have good progress in Ecopypan, and we have FDA fast-track designation for our anti-IR-15 candidate for CLEC disease. And so, looking ahead, we have four additional potential submissions over the next five years. With regard to an announcement we made earlier in the week, Emma Solman, after an independent data monitoring committee met on a pre-specified interim utility analysis, we have given the We discontinued the PACE 2 study. It's quite pointed out there were no safety concerns. Now, while this outcome was not what I had hoped for, and I'm deeply disappointed for the patients we were hoping to serve and the physicians who helped us on this journey, I'm particularly proud of the teams and the effort we put into this program. What we have learned, we will take forward with even more determination. Now, another change to our pipeline that happened before the earnings was regard to BioXL and the acquisition of BXCL501. This is an asset we think is going to further strengthen our neuroscience franchise and our psychiatric portfolio. There's a big unmet medical need, we believe, in treating agitation at home, and we think this in the hands of Teva could really help these patients with this unmet need. Now, moving on to Sustained Genetics Powerhouse. Biosimilas, you'll see throughout the presentation, are becoming a significant growth driverless now at Teva and our genetics business. We have 15 products on the market and 16 more in our pipeline, and more opportunities to expand this. And actually, earlier today, you may have seen the press release that showed we have further strengthened our partnership with Samsung with two FDA-approved AT&T and F-Alpha biosimilas. On the final pillar on capital allocation, with the latest S&P upgrade, Terra has now achieved investment-grade status across all three major rated agencies, reflecting the continued strength of our financial profile. We also, in this last quarter, refinanced $4.9 billion of senior notes, so please don't have done that. And then with regard to ADS conversions to ordinary shares in the New York Stock Exchange, we've now opened up the opportunity for border investor access to Teva. So now starting with what I think was the highlight of Q3 for us, which was the launch of Welltruza, the approval of Welltruza. Now, this is a milestone for Teva, but more importantly, a milestone and an advancement of treatment for patients living with schizophrenia. Schizophrenia. Let's be clear, it starts with the patient. Schizophrenia is a devastating disease, and every relapse can have a significant impact on patients and their families. With Wiltruza, it brings a proven olanzaphrine efficacy in a once-monthly subcutaneous injectable with the opportunity to help patients stay on treatment and reduce relapses. Wiltruza is the first and only long-acting injectable with no loading dose, no oral supplementation, or post-injection And because of this, we believe Wiltruza can make a real difference for patients suffering from schizophrenia. So where's the opportunity? Well, on the next slide, you can see it's significant. With 2.2 million people who are diagnosed with schizophrenia in the U.S., approximately 1.7 million are treated, and approximately 20 percent of the prescription are for all olanzapine. We all know that olanzapine has a well-established efficacy and And then safety profile, and that is going to prove the strong foundation for Wiltruza. But also, we all agree that our commercial organization is very well positioned to succeed with Wiltruza, building on the great work that has been done over the last three years with Yuseti, and I'll go into that in more detail later. But when you combine these two products, we have a portfolio designed to address a broad spectrum of unmet needs with Yuseti and Wiltruza, highly differentiated and yet complementary. They're anchoring the two proven molecules of risperidone and olanzapine. And because of this, we have confidence in achieving the peak sales of $1.5 to $2 billion. But now let's move on to the financial. Now, Q3 2026 reflects Tether's transition to a biopharma company. And the facts are in the numbers here. So let me walk you through that. So revenues declined 2%, but gross margin grew to 58.7%. That's up 3 and 45 basis points. Our EBITDA was 7%, and our non-GAAP EPS was up 10%. Now, I remember way back in 2023 when I presented the first quarter's CEO, and our gross margin was approximately 48%. So this really shows the substantial progress we've made in transitioning this company from a pure-play genetics to a biopharma company. Now, this isn't a one-quarter effect. It reflects deliberate choices we have made to transition the business. We set out in 2023 to become a biopharma company, and these results show that that transformation is happening. And what I'd highlight is there is more to come. Now, these results include IPR and D-Impact, and Elia will present and explain in a few minutes. Now, moving on to the next slide. Our total revenues are $4.4 billion. Innovative Esteda was up 32% year-on-year, as I mentioned. Esteda was up 21% globally at $751 million. Esteda was up 96% at $85 million, and the JV was up 61% at $269 million. Generics were down 16%, and this was largely due to the low contribution of the generic revenue. But now let me go into a bit more detail. So on to Esteda. Esteda reaches a $2.5 billion target one year ahead of schedule. Really, really proud of this, and congratulations to the team for making this happen. So revenues in the U.S. were up to $727 million, up 21%, and the fundamentals remain strong. U.S. TRX grew 18%, and milligrams of dispense grew 23%. Now, given this strong momentum, we're increasing our outlook by 75 million at the midpoint, so our study will now be 2.55 billion to 2.65 billion. So congratulations to the team on that. I would like to highlight that the opportunities for us better remain strong. You see that the market growth can remain. New patients with 85% of patients not treated, you see a strong opportunity to keep growing this product to greater than 2 billion of peak sales as we previously communicated. Now moving on to your study. Your study is the fastest-growing LAI for schizophrenia. Revenues grew 96% to $85 million in Q3, and the underlying demand remains strong, with Terex up 62% year-over-year. Now, the excellent commercial execution is expanding the market, with your study nearly doubling Risperidone-LAI's share from 5% to 10%, and capturing approximately 83% from Risperidone-LAI. It is worth noting that, if you remember back to 2025, Q3 and Q4, we did have some one-off negative impacts, so it's worth keeping that in mind when we plan forward. That said, we increased our outlook on your study by $20 million at the midpoint. Now the range is $290 million to $310 million. It probably doesn't need pointing out, but I will, that this continued excellent execution gives us a solid foundation from which to know what we're doing. Now moving on to Ajovi. JV extends, continues to extend its global leadership in migraine, continues to outperform the injectable market, and lead in many markets where we've launched. Global revenue leads to $269 million, up to 61% year-over-year, with strong momentum across many markets. In the U.S., revenue grew at 89%, while ex-U.S. momentum remained strong, supported by volume growth as well as market share gain. Because of this strong momentum, we increased our Now, I'd like to point out this doesn't happen by chance. And if you remember, when we started on this journey in 2023, nobody was talking about Ajoky, but we reinvigorated it. And I think this reflects something broad about Fedr. We do things with intent, and we execute with intensity. And that's why looking beyond 2026, we see a path to greater than 1 billion of good sales for Ajoky. Now, moving on to a couple of new products on our pipeline that I've touched upon earlier. Firstly, EcoPython. This is a first-in-class opportunity for Tourette's syndrome, combining compelling efficacy and favorable tolerability in a serious pediatric neurological disorder with limited treatment options. There are 100,000 pediatric patients who live with Tourette's syndrome every year. 50,000 are treated, but unfortunately, only 20% to 30% remain on therapy after one year. We hope to help that, and hope to help these patients and these children. Our next key milestone is obtaining regulatory approval, which we anticipate in Q1, 2027. Now moving on to the latest addition to our innovative pipeline, the asset that we acquired from BioXL, which is BXCL501. This is expected to address another clear-on-let need for patients experiencing acute agitation at home, Extending our patient focus in neuroscience and bringing potential benefits to nearly 7 million patients. The XCL 501 could be the first at-home team for acute agitation and in regulatory approval, adding another differentiated opportunity and significant value to our neuroscience portfolio. This also highlights another example of discipline and capital allocation, finding differentiated assets where Tether can have real value. Now, my colleagues will go into more detail We're going to sell on ECO pipeline and BXCL 501 next week at our R&D date. Now moving on to the next slide. When we talk about growth and we talk about the impressive growth in Q3, it's worth pointing out that we have a decade-long runway of growth catalyst. And as you can see here, we have a maturing pipeline that I will talk about in more detail next week. But as you look at 2030 beyond, it really does get quite congested, this slide. And that's a very exciting opportunity for Febba and for potential investors. Now, moving on to the next slide, a slide which we've talked about for the last couple of years. But now we're starting to see some of these products actually come to the market. Obviously, we've spoken about Lertruza. We've spoken about the near-term opportunity in QW for EcoPython. Now we've added BXF CL501. So we have a pipeline here that we are going to deliver over 10 billion of sales going forward. But we'll give more detail on this at our R&D day next week. Now moving on to the generics business. Now, generic powerhouse we're going to have is resilient beyond Revlimid, which is exciting. And let me show you the fundamentals that go to this. If you take away generic Revlimid, it's a global generics business through 1%, with the U.S. down 3%, Now, we expect our generics business to be flat to slightly up in 2026, but we continue to be positive about the long-term growth trajectory of this business, 1% to 2% over the long term. Now, I remain very optimistic about the future of our generics business. One of the main reasons we're kind of confident is that the growth rate is really around our rapidly expanding So now if I move on to this, we will see this clearly on this slide. It's one of the fastest-growing biosimilar businesses we have there. We set out to achieve 800 million of sales by 2027. Well, I'm in a position to tell you today that we're going to do that in 2026, a year ahead of schedule. And at the same time, we're expanding our portfolio from nine assets in 2024 to 15 today and potentially 18 in 2027. But it's worth noting, this is not simply about adding assets. We're deliberately shifting our portfolio towards biosimilar, an increasingly important growth driver for our general business. And what's important, it's not just about the portfolio, it's how we execute it. And as you can see, three out of the five US biosimilars are ranked number one. While in Europe, we're building leading positions across several important markets. If you go on to the next slide, we're going to We continue on this journey, expanding our portfolio and bringing these biosimilars to markets in both the US and Europe. As you can see here, we have the potential to be 31 already, but I've also realized that this slide is already out of date because of the deal we announced today with Samsung, so it should be 32. So apologies for that, but it does really reflect the speed we move at Teva. So, based on this solid foundation of innovation and the portfolio transition of our genetics business with biosimilars, I can move on to the next slide to say we are firmly on track to achieve our 2027 targets that we laid out back in 2023. And with that, I'm going to hand over to Eric.

Eric Hughes, Other

Thank you, Richard. I'm going to have my first slide. I just want to review really quickly the progression of our innovative growth drivers. This is led by a trio of neuroscience products with the approval of Welltrusa, and now the hopeful approval in 2027 of Ecopypan for Tourette's disease, and then finally, our new drug, dexmedetomidine, that is being used for the treatment of agitation. We're looking for a producidate in Q4 this year. So really a great spearhead leading with our neuroscience portfolio. But following on to that is our burgeoning inundated pipeline in immunology, leading off with DARI, which will be ending our Phase 3 study soon with our last exacerbation hopefully around the end of this year. We're also progressing through the ketone. It's obviously in Phase 3 at this point with ulcerative Crohn's disease. We're also initiating hydrogenated sucreateva and psychosomatic Crohn's disease with our partner Sanofi. And then finally, our team program, we have exciting new data this year in our proof of concept study in vitiligo and city activities. So a real engine of growth for innovative drivers. On the next slide, though, the real bell of the ball today is Waltruza. This is a fantastic product for patients with schizophrenia, building upon the known efficacy of Ilanzapine, but we really delivered on the label with no loading dose, no oral supplementation, and no post-injection monitoring. I just have to give a shout out to the R&D team for doing such a great job in its development, and I appreciate that our data set was so well received by the FDA to give a label that really gives something that patients can use in the future. So kudos to the team. But, you know, on the next slide, I just want to really go over there's been a lot of momentum just since the last earnings call in Q2. Since then, we have the announcement of the priority We've had the submission of the IMD for the hydrogenized supertiva study and we announced and shared some top-line data that showed clinically significant changes in our gluten challenge for Cygnath disease. We had presented our viriligo data at the EADD conference in September. We achieved the futility analysis for Emre Sulman. Unfortunately, that didn't turn out the way we wanted. The team did a great job in executing the study, and we'll review the loads of data that we've produced to see how we'll bring that program forward in the future. But really, the well-true is it was a big announcement on October 8th. And then finally, we presented at UEGW the Duda Kikot data on the maintenance data, how we started the entire year, bringing it full circle and presenting that great data for Duda Kikot. So lots of momentum just in the last quarter, so we're very proud of that work. And if I go to the next slide, so you can see we're marching down the catalysts that we had outlined at the very beginning of the year. Duvacitos, Ecopypan, Antiole 15, Dari, Emerson, and now we're adding Laltruza, and we'll be talking about P1, L2, and dexamethatomidine in the future R&D meeting next week. And finally, I'm just going to end with the fact that I was going to be quick today because we'll be talking a lot more about the, you know, some deep dives into our pipeline, You know, some new programs and new data that we'll present next week on November 11th at our R&D Day. I hope people can call in and listen to the webcast. If you need more details, just visit our website or write to us. And with that, I'm going to pass off to Eli Khalif.

Eli Kalif, CFO

Thank you, Eric, and good morning and good afternoon to everyone. I would like to start my review of Q326 results with the following key messages. First, sustaining innovative Second, continue to maintain credible tasks to 30% operating margin by 2027. Capture the full benefit of the transformation program, including structural cost savings, productivity improvement, and operating leverage from a more favorable growth And lastly, execute a disciplined capital allocation strategy, preserve financial flexibility while prioritizing debt reduction and sustained execution on our financial policies, resulting in investment-grade profiles, targeted business development investment with acceleration of innovative R&D, and focus on shareholder return. Now, starting with our Q3 gap performance on slide 30. Before I discuss our Q3 results, let me briefly explain why we also reflected the IPR&D impact. IPR&D can result in a significant upfront and milestone expenses related to investments in externally acquired or licensed pipeline assets. Given the transaction-driven nature of these expenses, starting with Q326, We present the impact of these transactions on our results to provide a clearer and more comparable view of our underlying operating performance. Q3 revenue were approximately $4.4 billion, down 2% in US dollars and in local currency, compared to Q325. This decrease was largely driven by low generics products, many generics revenue, and was largely offset by continuous strong growth of our key innovative products, Spetal, Adjovi, and UZEDI. GAAP net profit and profit per share were $233 million and $0.20 respectively. Turning now to our non-GAAP performance. Our non-GAAP gross margin in Q3 26 was 58.7%, an increase of 245 basis points, reflecting a variable mix of products with strong growth in our key innovative products, partially offset by low revenue from generics products, mainly generics revenue. NANDGAP operating margin was 31.7%, to 182 basis points above 23 last year. This increase in operating margin was mainly due to a higher gross margin, partially offset by higher plan investments in sales and marketing to support our innovative growth, and allowed preparation for wheelchairs as well as by capital gains from the sale of property in Europe. Overall, we ended the quarter with a non-GAAP ETS of 86 cents, 10 to cents higher compared to Q3 25. Our fee cash flow in Q3 was in line with our expectations at $495 million, slightly below last year. In October 26, we repaid approximately $1.8 billion of our debt maturity. As of today, no amounts are outstanding under our revolving credit facilities. To provide you with some additional color, our Q325 year-to-date results included approximately $1 billion revenue and $730 million EBITDA contributions from our generic revenue. Our Q325 results included $430 million revenue and $300 million EBITDA contributions from generic revenues. Excluding this, our financial results year-to-date and for this quarter reflect a strong Moving to the next slide. As a reminder, our operating margin expansion to 30% is driven by two structural elements. The first is the portfolio shift towards higher growth, higher margin innovative products. And second are the Tava transformation programs. We continue to make solid process with our day-to-day operating margin, reaching 28% on our updated 2026 project. Guidance of 27.8% to 28.2%, all excluding for IPR&D expenses. Looking ahead to 2027, we expect a further 180 to 220 basis points of improvement, driven by the full expected impact of our transformation program and continued innovative growth while compensating for generics revenue erosion. This is the core of our financial transformation, moving from a company historically driven by generics to a bar from a company. Moving to slide 32, focused financial management has been an important source of cash creation for us, and importantly, it has allowed us to redirect capital towards high return opportunities. From 2022 through 2026, improvements in networking capital generated approximately $1.3 billion of incremental cash, with additional approximately $160 million from lower interest expenses. Together, that represents roughly $1.5 billion of cash generation that we have been able to redeploy into the business, including accelerating our innovative pipeline and investing in our broader priorities. Looking forward, we see the opportunity to continue this dynamic. Between 2027 to 2030, we expect to generate an additional of approximately $500 to $900 million from net working capital, together with approximately $1.4 to $1.6 billion from interest expense to savings, bringing the accumulated opportunity to approximately $3.4 to $4 billion. By the end of 2030, we expect to reach negative net working capital as a percentage of revenue. And importantly, as the business grows, this becomes increasingly powerful. We are freeing up capital and reinvesting it in higher rates of return, while continuing to grow and create further capacity for investment. At the same time, we remain focused on maintaining the right balance sheet. We have repaid approximately $12 billion of debt since 2019 and remain on clear path for the net debt to EBITDA two times by the end of 2027. With approximately $2.7 billion expected free cash flow in 2027, compared with the less than $1 billion of annual maturities from 2028 to 2030, and approximately $2.5 billion of free cash flow expected in 2030, we believe we have a significant financial flexibility to continue investing in our growth while maintaining appropriate leverage. So this is really a reinforcing cycle. Disciplined financial management generates cash. That cash is reinvested into a high-return growth opportunity, and as a business growth, we create even a greater capacity to invest. Now, turning to 2026 outlook on slide 33. Based on our strong performance year-to-date and the visibility into the reminder of the year, we are raising our full-year revenue guidance range to $16.7 billion to $17 billion, which is an increase of $175 million to our midpoint. We are also updating our outlook range for operating profit, adjusted EBDA, ETS, and free cash flow. As Richard mentioned earlier, the acquisition of DXCL 501 from BioXcel is now closed. Here is a reminder of the deal terms. The agreement provides for $57.5 million upfront payments as well, up to $67.5 million in potential contingent payments linked to the timing of expected FDA approval and certain sales milestones. Let me provide some color on our guidance assumption, starting with the revenue. First, our innovative portfolio continues to perform strongly across all three products, OSTEDO, AJOVI, and UZEDE. We are increasing the full-year guidance for all the three products, with OSTEDO now expected at $2.55 billion to $2.65 billion, AJOVI at $930 million to $960 million, and UZEDE at $290 million to $310 million. We expected our global generics revenue, full year, to be slightly up in local currency compared to 2025, excluding the impact of generics revenue and the divested Japan business. We continue to expect 2026 NANDGAAP gross margin to be in the range of 54.5% to 55.5%. We now expect 2026 operating income to be in the range of $3.8 billion to $3.9 billion, With an operating margin of 22.6% to 23.1%. Excluding IPR&D, this range will be between 27.8% to 28.2%. Our operating expenses continue to reflect the deliberate investment we are making to support our growing innovative portfolio and biosimilars. Our guidance for operating income and adjusted EBITDA reflect this continued growth investment in OPEX, with adjusted EBITDA now expected to be in the range of $4.023 billion to $4.043 billion. Excluding the IPR&B, this range will be between $5.1 billion to $5.3 billion. We continue to expect finance expenses to approximately $800 million and a tax rate in the range of 20% to 23%. Our diluted EPS guidance is now $1.92 to $2.11, and we are also increasing our guidance for free cash flow to be in the range of $2.1 billion to $2.4 billion for the full year. Now, let me provide you some additional thoughts on Q4. For OSTEDO, we continue to expect revenue in Q426 to be down year-over-year due to expected changes in the purchasing patterns and the pricing environment ahead of the IRA implementation in January. In addition, we are preparing for the Q4 launch of Wiltruza. Since the initial volume is expected to be larger samples or vouchers as we establish a payer coverage, we continue to expect No major revenue contribution in Q4. Over the last several years, we have consistently delivered on our commitment and made significant progress across our key financial metrics. Today, we are not providing detailed 2027 guidance outlook, but looking ahead, we expect this momentum to continue with a mid-single-digit growth on revenue CAGR from 23 to 27. We outlined on slide 69 more comprehensive information about our financial trajectory. Moving to the next slide on capital allocation. Over the last few years, we have made significant progress in strengthening our balance sheet. This progress allows us with financial flexibility to invest in our innovative portfolio and pipeline evaluating value-accretive business development opportunities, along with the optionality of returning capital to shareholders through buybacks, when appropriate. And lastly, I would like to briefly touch on our transition to a direct ordinary share listing on the New York Stock Exchange. We believe this change is making Teva shares more accessible to a broader investor base. We are now able to buy ordinary shares directly in a seamless manner and strengthening our position in the U.S. capital market. Together with our recent return to This represents another important milestone in our transformation. We believe this transition reflects the momentum we're building through our pivot to growth strategy and further enhance our ability to invest for long-term growth and create shareholder value. With that, I will now hand it back to Richard for his closing remarks.

Richard Francis, CEO

Thank you, Eli. So, in summary, Terra is now a more focused high growth by a pharma company, and our pivot to growth strategy is delivery. The growth engine of our innovative portfolio is accelerating. Estedo, Musetti, and Ajobe are growth drivers, and we're excited by the recent FDA approval of World Chooser. In the near future, our incremental growth will come from the next generation of innovation. And to conclude on the next slide, as we continue our journey, three themes are clear. In a pivotal year for Tebba, we delivered as promised. Our pipeline is advancing with speed. Our disciplined capital allocation is what sets us apart. And to build on what Eric said, we are looking forward to seeing you at our R&B Day next week in New York City. With that, I'll open the floor to questions.

Christopher Stevo, Head of Investor Relations

Thank you.

Operator

If you would like to ask a question, please press star.

Christopher Stevo, Head of Investor Relations

Sorry, Elliot. Before you get the queue ready, I just wanted to remind people you should try to limit yourself to one question and one follow-up, and if you have additional questions, we're happy to have you back in the queue and I'll answer as many as time permits. Sorry, go ahead, Elliot.

Operator

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. And as a reminder, if you're using a speakerphone, please remember to pick up your handset before asking a question. Our first question today comes from Yoon Choi with Evercore ISI. Your line is open. Please go ahead.

Umer Raffat, Analyst — Evercore ISI

Hi, guys. Sorry. Thanks for taking my question. Omer here. I wanted to touch up on two things here. First, the last slide has this interesting disclosure on a possible 57% to 58% gross margin in 2027. I believe that's a new disclosure, which is up quite nicely from the full year 26 of about 55% gross margin. My question is this. If Austedo is flattish next year because of IRA implementation, can you speak to what enables that 200 to 300 BIPs in gross margin expansion, which is presumably not branded business driven? Second, speaking of Osteo more specifically, I just wanted to run some math with you. First, we heard Gilead mention about $1.5 billion in IRA impact to BICTARBI, which represents something between a quarter to a third of BICTARBI's Medicare exposure. So considering Osteo's Medicare exposure is about $1.5 billion, is it reasonable to assume something like half a billion or so in IRA exposure for Osteo into next year? Thank you.

Richard Francis, CEO

Thanks, Uma. Thanks for the question. And I appreciate the fact that you looked through all of the slides in the attendance. So thank you for that. So I'll hand over to Ellie to talk a bit about the gross margin. But I think one thing I'd say on a high level is when we did disclose the direction of travel with our gross margin back at our capital market today, I think what you're seeing is the fact that The transition to a biopharma company is accelerating that because our portfolio is transitioning at speed at a scale combined with some of our efficiency drives. But I'll hand that to Elliot to give you a bit more context in detail.

Eli Kalif, CFO

Thank you, Omar, for the question. We did mention in the past with 50%, 70%, 58%, and while keeping the 27% to 28% OPEX, get us to the 30% OPEX. But that's just kind of a high level. But what I will mention is the following. If you look on just, you know, this quarter, we're actually able to be about 58 percent. To compare it to last year, the same quarter was a bit above 55 percent. This is kind of a 350 basis point, mainly coming from the innovative shift that we have on our revenue mix. And what we're going to see next year, and to remind everybody, we have the $700 million on consummation savings. I think around two-thirds of it is actually related to OPEX, and we are going to actually utilize it and recognize it this year. But the rest of the program is more kind of back-loaded related to our network optimization, which is going to impact our COB. So if you think about us ending the year close to, I would say, in the higher range of 65.5%, we get 200 basis points to the midpoint of the 50, 70 to 58%. It's kind of the 100 basic points going to manufacturing and optimization of our cobs, and 100 basic points going to our innovative revenue shift.

Richard Francis, CEO

Thanks, Ali. And look, one thing I'd say about that trajectory of gross margin upwards, it will just keep continuing. It's just a question of by how much, but it will continue because of the transformation of our portfolio, because of the transformation of the launches we have coming up. Now, to answer your second question, Numa, generally speaking, yes, you're right. So that's probably the first thing to say. Without getting into guidance, you know, consistent with our past practices, we'll provide guidance in 27 next year. But yes, we have a high degree of confidence that instead we'll achieve 2.5 billion next year and greater than 3 billion a peak. 2027 was always a year we planned for. We have strong fundamentals of setting the IRA impact, and so that's what gives us the confidence in that. I'd say, just to give any more broader context, what has really changed is the company is having a portfolio of bribery in addition to February. So, once again, when I'm giving guidance in 2027, we expect Teva's revenues to grow again. And then potentially maybe the XCL 501. So our portfolio of innovation allows us to continue to grow beyond 27, in 27, and beyond. And that allows us to grow our margins. So, you know, I think it's a good question. I appreciate you asking it because it's multi-layered, but it fundamentally comes back to the execution of the pivot-to-growth strategy, the execution of moving us to a fire pharma company with a fast-growing innovative portfolio. Thanks for the question, Nehru.

Operator

We now turn to Douglas Thao with H.C. Wainwright. Your line is open. Please go ahead.

Douglas Thao, Analyst — H.C. Wainwright

Hi. Hi. Good morning. Thanks for taking the questions. Maybe two questions on Osteto and Ajovi. You know, first, in terms of Osteto, I noticed you've continued to have an acceleration in terms of the milligrams per patient, and I'm just curious. Some of that is obviously just coming from natural migration to XR, but I'm curious within the XR franchise alone sort of how much How much continued traction have you had? I know you're not, patients are generally not getting to the 36.6 that was in the phase three trial, and how much of a focus is it, you know, to sort of get patients ultimately to that level? And then just in terms of Ajovi, where we've sort of had the franchise really renewed growth recently, I'm just curious, when you think about the prospects, what you're necessarily seeing in the U.S., it looks like you're doing better on a revenue standpoint per patient, sort of how you see share shaking out. You've definitely taken share from Amovig over the long term, and how much growth will come from U.S. versus ex-U.S.? Thank you. Yeah.

Richard Francis, CEO

Okay. Firstly, thank you. I think it's the right word for the coverage, so I appreciate that. And thank you for your questions. So let me try and pick them up. So firstly, I'm going to start with Stato. So you talked about the milligrams growth there, 22% to Q3. And let me sort of, how that has happened is a couple of things. Firstly, there was the launch of XR, but then there was also the launch of the ability to get a titration pack through prescription, because one of the things about Esteto is you need to titrate up to the optimal dose to get efficacy. So having a titration pack prescribed and then having XR once a day just makes that process simpler. And so that's what's really different now. We haven't actively gone out there to drive conversion from BD to XR. We've let the physician make that choice. But because of the fact that those two things are in place, we've seen that continuously improve, which is good for the patients, because we want to have the patients on the most efficacious dose. And one of the challenges and opportunities with Estedo is that people start to feel efficacy pretty quickly, but we want to make sure they go onto something that is most optimal for them. But that's down to the physician to use the circulation pack and XR to help do that. So that's the fundamental of that. And we see, you know, continuous progression of that this year and going forward. Now, on to your question around Jovi. Jovi, I think, was around about the U.S. performance and how strong that is, and then the rest of the world performance. So let me sort of talk you through the U.S. performance first. So here's performance. And it goes back to what I said in my opinion remarks. It's about a focused execution on delivering a strategy at a brand level. What do we want to do globally, and what do we want to do locally, and what capabilities do we need to put around that, what resources, and what choices do we need to make? And I think in the U.S., we've seen the work of the team there to make decisions on making sure we have the right access and the right value. And when you do that, as well as the growing market share, then you have the ability to...

Louise Chen, Analyst — Scotiabank

Phone one disconnected.

Richard Francis, CEO

Then, with regard to the rest of the world, you have the opportunity, and as you've seen We've seen that we continue to grow in Europe and international markets above market, significantly above market. And because of that, we grow market share. And so if you do that, we continue to see the revenue growth. I think what this highlights, because I know this is an unusual situation, but with focus, capability and the right resources and the right ambition and expectations, you can revitalize a brand. And I think we've seen that with the Joby. And so that's why we remain confident that it's going to exceed 1 billion in peak sales, which sounds obviously like a big number, particularly when we started our conversations nearly four years ago. Hopefully, I'll answer your questions. Thanks very much.

Operator

We now turn to Glenn Santangelo with Barclays. Your line is open. Please go ahead.

Glen Santangelo, Analyst — Barclays

Oh, yeah. Thanks for taking my questions. Richard, just two things I wanted to hit on quickly. You know, when you were talking about sort of the biosimilar launch slide, you sort of commented how congested it's becoming. But as I'm sure you're aware, you know, you've seen a bunch of, you know, incremental litigation in the space. For example, you know, Janssen seeking a PI on Symponi and, you know, Genentech bringing a suit on Zolaire and, you know, a lot of concern around Antivio and, you know, on the launch timing there, just sort of given the IP at Takeda. And I'm just kind of curious how Teva thinks about navigating all that potential litigation and making the decision on whether to launch these products. Because on that slide, it seems like you have some incremental contribution coming in in 27 from these drugs. And then secondly, I did want to ask about, you know, 27 related to EcoPiPAM and BXL501. I'm sure you're going to touch on this at the R&D Day next week, but I'm just kind of curious at a high level. Are you expecting any type of reasonable contribution from those two drugs in the second half of 27? Thanks, and I'll stop there.

Richard Francis, CEO

All right, Dan, thanks for the questions. So on the biosimilar with regard to litigation, yeah, that's pretty much the business we're in when it comes to generics and biosimilars, you know. We want to bring these products to the market, and people want to litigate and stop us doing that. So it sort of is not a surprise to us. Obviously, we'd like that not to be in place, but we strategically plan and we financially plan with realism. So when we think about our portfolio of 32, now, we take into account the puts and takes. And I think when I started on this journey, I said to people who asked me, which is going to be the most successful biosimilar? I said, I don't know, because there's too many variables, IP, litigation, launch timing, none of competitors, price erosion, etc. It's when you have a portfolio, you allow yourself to manage those risks in a more thoughtful way that allow you to continue to grow. And because of that, I feel very confident of the direction we're on with our Biosumma business. And I think what's important noting now, we are reaching a certain momentum and scale that this is going to fundamentally change the portfolio of our genetics business. And I think that's something for people to maybe double-click on and recognize. So I think that's one. The other thing I tell in a biosimilar business is, to some degree, it doesn't follow all the traditional rules, you know, as I said, three out of five of our biosimilars in the U.S. are number one. We were not number one for the market. So that just shows you it's not as straightforward as people think, and I like that. And the same in Europe. We come to Europe late in many instances, but we're also showing that we can be number one in those markets because of the capability and infrastructure we have in place. So I think Biosimilar, you know, he was talking more about it, but we're going to keep expanding that portfolio, and litigation will come, and we'll deal with that as and when it comes, but it won't derail us. Now on EcoPypan and BCXL501, look, I've got to ensure you turn up next week, so I can't tell you anything. All I'll say is a good question and the right question, and we'll start to give you some insight into why we're excited about these two products, whether we'll give you any guidance on that. You'll have to wait and see. But I'm glad you're starting to focus on those, because I think in our hands, as we've shown, we can really drive value. We just had that conversation on JV. But I think when you look at ECO pipeline with a significant unmet need, and you look at BCXL501 with a significant unmet need and agitation, I think we're very excited about what we could do with those. So apologies, but I'll see you in New York next week.

Glen Santangelo, Analyst — Barclays

No worries. Thanks. We'll see you next week.

Operator

Our next question comes from David Amselen with Piper Sandler. Your line is open. Please go ahead.

David Amsellem, Analyst — Piper Sandler

Thanks. So, I actually have a couple of Echo Piper questions, more longer-term focus. So, you didn't provide peak sales potential for the product in your slide, unlike other products in the pipeline or recently approved. So maybe just a question on how you're thinking qualitatively about how impactful this product could be. How are you thinking about access dynamics, mix of Medicaid versus commercial, and how long do you think it's going to take to get good access? Any pricing analogs that you can help us with in terms of how to think about that? And then do you think this is a product that could slot in ahead of the approved antipsychotics that are commonly used? I know that's a bunch, but it's obviously an important driver going forward. Thanks.

Richard Francis, CEO

Thanks, David. Thanks for the question. No, it's a really good question, and I'll give Erica a heads up. We'll talk about that third line moving ahead of antipsychotics. But I think you've touched upon all the variables there that we're thinking about. So, first off, there is the fact that we've got to think about what is the appropriate price for such an innovative product that's going to bring compelling efficacy and good tollability and safety. And we're doing a lot of work on that now because, obviously, that is a very important factor in this equation. And so that's another reason why we don't want to start talking about sales and peak sales because you want to get that work done, and we want to make sure that as thorough as it can be. So, as we've said in the past, you know, the pricing will reflect something of a rare autumn nature, where there's a significant unmet need in a pediatric population. The second thing that comes down to, then, is access, and how do we want to approach access, and how, as you know, we are very thoughtful about access, and we think about, you know, the long-term value of a product and how you have to be thoughtful in what you do with regards to access around that, and so we're working through that. With regards to Medicaid and commercial, you know, the mix is a bit different here. So I think, you know, we're looking at more commercial plans on this, which, as I've stated in the past, is, you know, is a change for us because we've spent a lot of our time dealing in Medicaid and Medicare. So I think that's how I would think about it. But I'll hand over Derek. But what I would say is when I get to speak to physicians and when I actually get to speak to patients, and I've actually even come across some people who suffer from Tourette's, then there is a clear opportunity for an efficacious and safe and well-tolerated product to move ahead of an antipsychotic. But maybe I'll hand that to the doctor in your room.

Eric Hughes, Other

Thank you, Richard. So, you know, I think that the value of EcopyPAN comes down to the data sets that we've generated today. You know, there's two well-controlled studies, both in Phase 2 and Phase 3 now. One was a, you know, 30% reduction in the tick experience for the patients and a 50% reduction in the relapse rate. So, it's great data, but more importantly, the, you know, side effect profile was, you know, favorable, I think, where you saw, you know, very good tolerability, no metabolic effects, you know, good activity for their ticks, and, you know, no abnormal movement disorders. So when I think about how physicians might use this in the future, sure, they might step through what they do today with alpha-ageneric receptor agonists, which is off-label, then they might go on antipsychotics, but I think when they get used to what the profile is of echopypan and understand both the efficacy and the safety profile, it will move up in that list of possibilities out there. I think that long-term efficacy, you remember, you know, only about mid-20s do people stay on their therapies today. In our long-term follow-up, you know, 66% of the patients stay on the drug for about to a year. So I think the profile, once physicians get used to it, it will move up in that armamentium.

Richard Francis, CEO

Thanks, Eric. Thanks for that answer. Thanks for the question, David.

Operator

Our next question comes from Jason Gerbery with Bank of America. Your line is open. Please go ahead.

Jason Gerberry, Analyst — Bank of America

Good morning. Thank you for taking my questions. So, one question for Eric. What does the timeline look like for TEVA's efforts to advance a TL1A bispecific into the clinic? I know you guys have some efforts that had been ongoing pre-clinically, so anything you can update there in terms of timeline? And then my follow-up question is just, does the U.S. government agreement exclude TEVA from some of the generic tariff headline proposals, or I don't know what to call it exactly, but, you know, does the agreement provide exemption from any generic tariff risk? Thanks.

Eric Hughes, Other

So, I can start to answer the question on the T1A bispecific. So, I'll disappoint you right after that. I'm not going to tell you much because we have an R&D day next week, and, you know, we may be talking about bispecific programs with our T1A. And I would mention that, you know, we are one of the first in the T1A space. We have a very potent, high-dose selective drug with low antibody, anti-drug antibodies in full phase three. But I think that our scientists are the experts in T1A, and we'll hear more about that next week.

Richard Francis, CEO

Jason, with regard to your question on generics, an only agreement with the U.S. government, as they laid out some time ago, it's a two-year time frame they've put in place to come to some sort of agreement. And so there's nothing that's been concluded there. But as you can imagine, a company like Clever is always at the table. And so as and when we get more information, we'll let you know.

Operator

We now turn to Louise Chen with Scotiabank. Your line is open. Please go ahead.

Louise Chen, Analyst — Scotiabank

Hi, thanks for taking my questions and congratulations on the quarter. I wanted to ask you first, what's your latest thinking on M&A and business development? And then secondly, if you could talk about your R&D philosophy a little bit more and the efficiency at which you move products through your pipeline. Thank you.

Richard Francis, CEO

Hi, Louis. Thanks for the question. So, M&A, so what we think about is efficient deployment of capital for the time, and obviously, we're thinking about that a lot, and we have been thinking about that a lot in the last few years, despite that people thinking today wasn't going to come. And what I mean by today is an ever-improving balance sheet, investment grade, and, as Elise pointed out, an opportunity for the company to really generate some free cash. And so, obviously, we know our balance sheet is going to start to improve significantly. Because of that, we were always planning for this day. I hope that's something that people start to realize. We do plan long-term forever, and so we start to think about what can be around the corner. And so, yes, we do think about more business development deals. As we think about potential MA, but it has to be one that we feel that is good value. It drives the long-term value of the company, puts us on a sustainable footing to become a world-class biopharma company. And I think hopefully you've seen with the deals we've done, we're very thoughtful about how we deploy capital externally and making sure we do things that we know will drive a good accretion short-term as well as long-term. And so that's our philosophy. The balance sheet gives us a bit more flexibility, but our discipline will not change. Now on the R&D philosophy, are you going to tell them anything?

Eric Hughes, Other

I might give them a headline. So, yeah, thanks for the question, Louise. You know, I think it's a pretty simple strategy and philosophy we have. We'll talk about it more next week. It's really about using known science to increase your POS, you know, speed and execution. It's true, whether or not AI, and there's disciplined capital and using partnerships where you can increase your bandwidth and your funding. So it's straight up simple, but you have to execute it.

Richard Francis, CEO

Thanks, Ari. Thanks, Lisa. Thank you for the question. Next question.

Operator

We now turn to Dennis Sting with Jeffries. Your line is open. Please go ahead. Hey, guys.

Dennis Ding, Analyst — Jefferies

Good morning. Two questions, if I may. One on valtrusa. So, you framed the market as 2 million in the U.S. diagnosed and 20% on oral olanzapine. So, you're essentially inclined that TAM is around 400,000. But how does the TAM change given many patients don't tolerate olanzapine because of weight gain and then they eventually discontinue? And valtrusa likely will have a similar side effect profile. So, where do you see weltrusa being realistically used? And I guess in a way, I'm asking if you have an estimate for, you know, how many patients have shown efficacy on olanzapine, tolerate the weight gain, but are also showing evidence of noncompliance. So, that's question number one. And then question number two, for biosimilars, can you please clarify again and confirm on slide 20 that you're looking to launch a biosimilar symphony in the U.S. in 2027? And I'm just wondering because, you know, how are you thinking about the litigation aspect here as a barrier for a U.S. launch, and the reason we ask is because the four-day bench trial that J&J has against BioThera starts March 2028, and I'm assuming your partner's bench trial will be scheduled around the same time frame. So, just help me, you know, help me reconcile the timing differences here and if what you're implying is that you'll be aggressive in pursuing a settlement to ensure a 2027 U.S. biosimilar symphony launch. Thanks so much. Okay.

Richard Francis, CEO

Thanks, Tony. Thanks for the question. So, I will tag team the first one with Eric. But the way that we think about it is the reason why olanzapine commands such a large portion of the market in schizophrenia is because it is very efficacious, and it's seen as the gold standard when it comes to efficacy. So while you've identified some of the metabolic challenges it has, when it comes to managing schizophrenia, when patients have severe schizophrenia, efficacy is the number one priority. And that's why olanzapine has maintained that segment of the market. So obviously, when it comes to severe schizophrenia, compliance becomes key, and that's why we think Maltuza comes in. So, in a way, we're not dealing with that side effects. They're already known, and people are picking Alanzibib because of the efficacy, both the physician and the patient. But I'll let Eric give more context to that.

Eric Hughes, Other

Yeah, I'll add a little bit more color, but, you know, well, Truza, its value is its known efficacy and its known safety profile. So, as a physician, you're using something but bringing something new to it with the LAI. So, 20% of the market approximately already uses Alanzibib. That's how well-known it is and how used they are of using it. So bringing that convenience and that hopefully added benefit of lower relapses and a better adherence with an LEI is really the value proposition here. I think that really defined it very easily for a physician to choose who should get it. And, you know, I'd add that we've done the same thing with Yuzeti in a carotid space of risperidone here while launching into a market for LAI that really has no viable alternative at this time.

Richard Francis, CEO

Thank you, Eric. And then when you go on to the question you had on the biosilma symphony, you know, when we talk about launch readiness, you know, we talk about the ability to be able to launch. We may or may not launch, and that depends on a number of factors, but we always set ourselves up that we are in a position to launch, if possible, and so that's the way to think about it. Now, obviously, IP litigation can go in many different ways, but what I always insist upon is we are ready, so if things do go the way we plan them or we are hoping that they do, we are there to make sure this access is made available to patients.

Operator

Our next question comes from Dan Clark with Lee Rink Partners. Your line is open. Please go ahead.

Dan Clark, Analyst — L.E.K. Partners

Great. Thanks so much. Good morning, everyone. I wanted to ask my first question on the OSTETA slide. You mentioned there are new capabilities in place to support MFP effectuation next year. Can you just give some color on what those are and sort of how those might impact, you know, either sales or kind of price next year? And then my second question, just a little more clarity on how you're thinking about the timing of Wiltruza revenue next year. Should we think about that being more easier as you work to secure access or any color you could find that would be very helpful? Thank you.

Richard Francis, CEO

Thanks, Benny. Thanks for the question. So starting in reverse order, on Wiltruza, revenue expectations are in the latter half of the year. Let me explain a bit why. So, we've launched in this quarter, and this is all about making sure we get access and familiarity with the product, both in the hospital form and with the physicians. Now, as you may be aware, we have the majority of our patients in Medicaid and Medicare. And so, to get access to lotteries, we have to get access on Medicaid form and reason. And that is something which is limited by each plan. And so some will do that at launch, and some will do that six months, nine months, 12 months. At 12 months, we'll have about 85% of Medicaid coverage. So access is one of the big rate limiting factors. And obviously, then we have Medicare, but it's really Medicaid. Now, the things we do on the inputs to make that happen is we have sampling, we have hospital formulas to make sure the hospital formulas have it on. But ultimately, it comes down to that access. That means you're not going to see revenue of any particular value in the first half of next year. But as a lot of those states come on board, then we see the opportunity to positions to start using well-truths more broadly. And that's why we say the second half of next year. And obviously that changes significantly in the full year in 2028. But that's how I think about it. What we will do is make sure we update you all on some things I call the inputs or the leading metrics around TRX, around access, breadth of use by physicians, depth of use by physicians. But we feel very confident in where we're heading. We'll choose it because of the things that Eric has mentioned around the product profile, the unmet medical need, and the fact that we have a really strong capability with Uceti. And then on Esteto, I think the question was around what capabilities have we built to minimize the impact of the IRA and the fluctuation of that. It's really doing a bit more of the same in that we've been planning for this for some time. So we're not suddenly walking into 2027 unprepared. We've been preparing this for multiple years, as we said, on the pivot to growth strategy in 2027. We knew this was going to happen. So, in 23, 4, 27, we knew this was going to happen. So, we've been building capability, putting our strategy around this. So, I think we're well-placed. That goes down to many factors around how we manage the patients, how we manage gastro-pharmacy, how we manage access, how we manage multiple parts of the patient journey. And those were put in place some time ago. And so that gives us a level of confidence that we can keep growing this product to over 3 billion in time. And so 27 is just merely a stage on the journey to that. And as I repeat, we always plan for 2027. And so in no way are we daunted by the challenge ahead of us.

Operator

We now turn to Joseph Tom with TD Securities. Your line is open. Please go ahead.

Joseph Tommy, Analyst — TD Securities

Hi there. Good morning, and thank you for taking my questions. Maybe one on the commercial side first. Just as you're seeing about the LAIs, obviously one of the benefits can be time on therapy and increased compliance. What are you seeing in terms of real-world Busetti refill rates, any kind of patient time on therapy, and has that matched your kind of expectations ahead of launch? And then maybe one on the pipeline. We've seen a few celiac data sets this year. How is TEVA balancing kind of speed to market versus competition and also signing off, you know, perfectly with the FDA and what endpoints they want in clinical trial success? Thank you.

Richard Francis, CEO

So, thanks for the question, Joe. So, on the compliance and adherence, I can't give you any sorts of specifics to well-truths, but what we see with the other long-actions in the market is there is increased, as you imagine, compliance and adherence. You go from having a daily pill or multiple pills to have an injection once a month, or in your city's case, once every two months, then obviously compliance and adherence increases significantly. So we think that is a benefit, obviously, for the patient to realize that efficacy, but obviously the continuation of therapy. And by the way, compliance and adherence, I'm sure you know, is really important in schizophrenia because every relapse you have actually damages the brain. And so the effectiveness of the medication after that, you know, starts to slightly go down. So you want to avoid anything. So compliance and adherence are key, which is why, you know, when you have a product like USETI that is easy to use, easy to administer, no loading dose, gets to blood levels within 24 hours, it gets used significantly because they want our patients to comply. And we see the same opportunity for our two users. So I don't have any details of that. Maybe we'll look into that and see if we can find some data sets. But it seems to be very clear from what we've seen with your study. But thank you for that question. Now, moving on to CLEC and the pipeline. I'll offer that one to Eric to talk a bit about that and our approach to that.

Eric Hughes, Other

Yes, and thanks for the question on COI disease, and, you know, in the broader question around FDA and endpoints and speed to market. You know, our teams take advantage of all possible ways of speeding things up. You know, there's been a lot of change in the biosimilar space that we were part of the conversation very early on, and we've been part of the conversation with accelerating normal phase rate programs where you use one to two federal trials. We always look at every option depending on what the science tells us. The celiac disease, you know, we're moving very quickly in that space, you know, with the data that we've generated recently in our proof of concept study, that's driving our conversation on how to design our phase twos and our phase threes, and we'll get into a little bit more of that next week, but we certainly, you know, have really honed in on, you know, what we're going to think those celiac design studies are going to be. You know, at the same time, we're moving very quickly into the angle, which is a very clear endpoint and pathway to registration.

Christopher Stevo, Head of Investor Relations

Thanks for the question. Elliot, excuse me. I just have to apologize. We have time only for one more question, but we can follow up with the cell-side analyst afterwards, as we discussed before. So, please stay tuned, and we can take any additional questions after the call. So, we could have our last question, please, Elliot.

Operator

Of course, our last question comes from Chris Schott with J.P. Morgan. Your line is open. Please go ahead.

Chris Schott, Analyst — J.P. Morgan

Great. Thanks so much for the question. Maybe just a two-parter around how you're thinking about investment going forward. I guess when we look at R&D programs like the TSLIP, IL-13, or maybe any other broader immunology-type programs you'd look at, would you look to partner these like you did with The TL1A, or do you feel like these are assets that Teva can now move forward on their own, given the broader kind of footprints, investment opportunity, etc., that you have on the branded side? And maybe just a second part to that. I know you just had a futility with Emerald Solon. Would you take another bet like that of a, you know, kind of a high-risk, high-return asset, or has the BD shift also moved towards more de-risked assets, given the evolution of the company? Thanks so much.

Richard Francis, CEO

Thanks, Chris. Thanks for the question. So, on the example, on Tuesday of Pile 13, you know, the way we think about it, and you'll hear a little bit more this next week at the R&D Day, it's pretty simple. If we find science that works, we'll prosecute it aggressively and quickly, and we'll work out the money on the way, so to speak. But what does that mean is we stay respectful of our commitment to increase shareholder value and to be respectful of margins. But at the same time, because of where we start, from a gross margin point of view, we have more flexibility than most companies. And so that's how we think about it. Do we need to partner financially with T-Cup R13? We'll see how that plays out. We'll see how many indications that can go to. We'll see how many people want to be part of that, whether that's financing or whether that's other companies. I think that just shows the optionalities we have at Teva to deal with products which have multiple indications in exciting areas. So that's one. On the second part, which is on that, forget now, really, it's a sign. Am I?

Christopher Stevo, Head of Investor Relations

Oh, yes.

Richard Francis, CEO

Does that stop us going after those maybe no probability of success as it's going forward? Yes, I suppose it's the simple answer to that. And then the question would probably be, well, why did you do this one? Well, when America and I came together back in 2023. We looked at it and thought, actually, the ability to actually get to this point we have today required very little capital. We actually understood the science pretty well and thought, actually, this could have a chance. And so because of that, we actually went forward and did it. So the capital allocation was a big part of it. We didn't have to. There was no opportunity cost for doing this one, so to speak. Going forward, we don't see the need to do that. We want to focus on things which have a high probability of success. That is our R&D strategy. That is our BD strategy. And that's how we think we can consistently give good returns to our investors over a long period of time, by really being thoughtful about capital allocation and risk. Thanks, Chris. Thanks for your question. And I think that's the last question. So I want to thank everybody for their interest in Teva and their continued interest in Teva. And I look forward to meeting many of you in New York at the R&D Day next week. Thanks very much. Thank you, everyone. Thank you, Elliot.

Christopher Stevo, Head of Investor Relations

Thank you.

Operator

Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.