Teva Pharmaceutical Industries Ltd (TEVA) September 2026 Conference Transcript

President and Chief Executive Officer of Teva Pharmaceuticals, interviewed by Christopher Schott at JPMorgan.

Lively music to cut off the conference here. Well, thanks everyone for joining us. Again, I'm Chris Schott from JPMorgan, and it's my pleasure to be hosting this conversation with Richard Frenches, CEO of Teva. It's obviously been a really amazing story the last few years as you've transformed the company. So we're going to just kick off some bigger picture questions, then we'll dig into some details on the product portfolio pipeline, and we'll leave a few minutes for questions at the end. So with that, Richard, maybe just a bigger picture question. You're coming up on your fourth year as CEO of Teva. There's obviously been a lot of progress across the portfolio. Can you just talk about the biggest changes you've seen at the organization as you've kind of transformed the company and just how you think about the positioning of the company going forward? Well, firstly, thanks, Chris, for hosting.

I appreciate it. I think getting the early session in. That's a question we could spend 45 minutes talking about, but I'll try and make it as succinct as possible. And I think if I just pick some sort of simple headlines is, so when we started this, and probably the reason you didn't cover us back then was we were a pure play generics company. And you probably had big question marks as well. And with Pivot to Growth, you said we're going to become a world-class biopharma company. Now, that seemed like a hard leap of faith for anybody to believe. But when you think about what we've done, it's really been focused on accelerating our innovative business and stabilizing our generics business and fundamentally changing our portfolio. And it comes down to the four pillars we have. Deliver our growth engine, step up innovation, create Generics Powerhouse and focus the business. And so the biggest change has been by taking a pure play Generics company and making it now a very credible and one of, I think, the most exciting biopharma companies. But to do that has to have substance. And so, you know, delivering our growth engines, all the products we have in the market right now are growing at double digit, innovative business growth, 40% in Q2, and a lot of long-term potential growth there. Step up innovation, Eric Hughes, the head of R&D. When people didn't think we could do R&D, we now have, I think, one of the most attractive and I would say good risk profile, late-stage pipelines out there. And our generics business, not only did we stabilize it, we grew it, and we've changed the portfolio with biosimilars there very quickly. And then the final part was focus of the business, capital allocation. I think what the conversations we have is about where do you allocate capital? Where's the best return short, medium and long term? And if you look at this transition over the last four years, we haven't changed our OPEX as a percentage of revenue at all throughout that period, really, which means we've had to reallocate capital to do all those things that I've said, because it takes money to launch innovative products. It takes money to put things through the clinic. So I think the biggest change has been the strategy, but the execution of the strategy quarter on quarter, which I think is one of the things we had to show people is a strategy which is very detailed was still questioned that we've executed. And I'd like to think we've become known as a company that does what it says. And we're quite transparent about what we want to do so we can be measured against it, which is a bit uncomfortable. But I think if anybody reads through any transcripts, we're super consistent. And we know that when people don't believe the targets we have, um we know we have to achieve them to get to get belief but now i think we have that momentum yeah in terms of where we are in that journey do you feel like you've got the right people in place and the right assets in place that we think of this as more a sustained growth story from here or are we still kind of in the transition process i guess for the organization i think it's more the former i mean um it's quite extraordinary so i've been i've been doing you know farmer for 35 five years. And when I look at what Teva has in front of what we have in front of us now from an innovative pipeline, it's extraordinary. And I sort of pinch myself sometimes. What I mean by that? Well, we have two of the kids who got T1A, which we now have in four indications in the clinic. Well, two indications in the clinic, about two more about to go in. So we have a pipeline and a product, which I've never had, by the way. I've heard other CEOs talk about it. And then we have IL-15, which we've shown some data in CELAC disease, which at Mitelago. And we know there's two other indications we can go to. So that's another pipeline of the product. So we have two products, which are pipeline of the product, but then we have our late stage, Alanzapine, Ecopypan, Dari. So we have, and I think you mentioned that we basically have a launch every year for the next five years, and then probably a launch every 18 months for the considerable future. So for me, this is exactly what you said. I think we just have a story now where if we can keep executing i'd even argue to plus or minus we will still create keep growing this company top and bottom line which means we keep creating value for shareholders and and i think that part is clearer than it's ever been so we were talking before we get on stage and people say to me you know have i missed the boat and i say absolutely not you haven't because you missed the a good upside but those were the those are really hard yards all that transformation. Now it's really hard, but it's execution of things we know are really good. We know a great value. We know are coming. We know Alansby is coming. We know Ecopypen is coming. We know Diary is coming. We know Duvikito is coming. NTR15 is coming. So we know those come. We just got to execute. So for me, hard work still, but probably a far clearer line of sight to that continued growth story.

Right.

I know this is a transition year of sorts, 2026 with with general gravel med when you think about the growth profile of teva 2027 plus like how should we think about the growth for the business from here yeah i think it's so it's it's a growth business so we'll we'll we'll keep growing and i think we've we've talked about you know around the mid single digit i think we talked about the capital market stake but i don't think that really tells the whole story you know growth is one but but what i've realized and if anybody's new to the Teva story, the thing to focus on is a weird line in our P&L, which is gross margin. Look at the gross margin. So when I started, the gross margin was 48%. It's now 20% to 55%. Now, the reason why that's maybe the area of opportunity is because when we talk about revenue growth, but if your revenue growth is fundamentally driven by an innovative portfolio, which has gross margin in the 90% and you keep managing your OPEX in a disciplined way, then you have to grow your EBITDA, then you have to grow your EPS and you have to grow your cash flow. Which I think I'm not as good on the finance as you are, Chris, but that means you create for shareholder value. And so, no, I didn't really mean that. And so for me, the growth story is one on revenue, but how does that translate to creating value for shareholders? Well, it's because we're going to change the gross margin, we're going to change the operating margin. We're going to change our cash flow on EPS. And we talked about that for 2030. I mean, here's an interesting stat I quickly read up on this morning. I think our innovative sales in 2022 were 1.2 billion, right? We're sort of tracking at a billion a quarter now. That's a fundamental change in a very short period of time. And that's just going to be magnified as we go forward. So the revenue growth is one, but the type of revenue we're growing, I think is the real exciting part.

And it seems like there's a number of companies, I think, have attempted to the transition that you've now done. And it does seem like when I look at where you were on margins and where I look at like a full biopharma company, there's a long way to go. And that seems like that's a pretty exciting growth story.

And that's why I think sometimes people forget because you're just not used to looking at it. When I was at Biogen, I can't remember. I think the margin was ridiculous, like in 98%. So we just is actually our strength it's our secret sauce because if we can be disciplined in what we do how we arcade capsule and keep launching keep growing and we're very good at commercializing products to your point the 55 becomes a 60 the 60 becomes a 65 then we'll talk about where it where it's the ceiling but it's a long way away yeah absolutely um speaking of targets you put out there can you talk about on the operating margin front progress you're making i know you at the time it seemed like a very kind of aggressive target you get for 2027 you're a long way there but just where are we in that journey?

And how do I think about maybe the second part of that question, the cadence of operating margin expansion as we look beyond 2027?

Yeah. So 2027, we said we're going to do 30% operating margin, which as you say, everybody couldn't quite back in the maths on that. And it was hard to back in the maths, but there's probably two key areas which have made it a high degree of confidence we know is going to happen, despite losing generic Revlimid, which I think we should get a bit of credit for, is the portfolio, once again, has changed dramatically. So as we keep executing on Estedo, Ajovi, Ussedi, we launch Alanzapine, these are high-margin products, and we're very good at selling them. The portfolio makes changes, which changes the gross margin, which obviously with discipline, OPEX management will hit your OP. That's one. But then the other thing is, as much as we are disciplined on OPEX, we've gone after our cost structure very aggressively in the last two years. And by the way, I'm sometimes asked internally, when will the efficiency programs stop? And I say, they'll never stop. They'll never stop because it's about capital allocation. And some things deserve to give a good return on capital now, but in three years' time, there'll be something that will do more and this can be made it more efficient. So our OE, we're saving 700 million of costs after investment by the end of 27, and we're well on track to do that. So portfolio and 700 million of savings gives a high degree of confidence we're going to hit the EOP of 30%. But I think your question, which I've been asked more and more is, okay, but what's it going to go going forward? So two things I'll say on that. Firstly, when I looked at top pharma, whatever that is, 10, 12 companies their op margin not many were above 30 which surprised me because they don't have a billion dollar general business so i'm struggling to understand that so firstly we're up to 30 i think but based on a mix that's an achievement where can it go well obviously i think you go go higher no question what we need to manage and what we're thinking about as a team is do we want to set a target on that we're going to give a line of sight because one of the questions I'm getting with investors is we like what you've done with operating margin. We have a really rich pipeline. Don't sacrifice the pipeline for short on operating margin. And I understand that. And I think we're trying to work out how we manage that. At the same time, I've become somebody who realizes that you don't want to offer a return to investors in the future. Because as I sort of say to myself, tomorrow never comes. So you've got to give people a return, I think, on a consistent basis maybe more in the future but i think still some in the short and medium term particularly with teva to keep this belief in momentum so operating margin will go up we haven't given a target we're thinking about whether we knew to do a new 2027 target type thing for 30 31 32 and and we're still in that debate yeah it seems like the story to me becomes more top line at some point as you go through that process um you've mentioned the branded pipeline and we're going to go through those specific assets in a minute.

But broadly speaking, can you talk about the R&D capabilities of the company? Because I know that's one thing I get from investors is a little bit of skepticism of how does this company go from a generic company to having all these branded assets now. So can you talk a little bit as you look at that organization, you've run that organization, the capabilities that are within? A really good question.

And I sort of remind people, which I've always believed, is companies don't have capability. People have capability. and people happen to be in companies. And so when we were at Teva and I was working, obviously worked closely with Eric Hughes, the head of R&D. I can remember, literally February of 2023, I sat there and showed me the pipeline. I'm like, how do we have a TIL 1A? How do we have it? He said, well, we do, but they're just not being And Eric, congratulations to him. He built a great capability of both in R&D. And so we had some great talent internally that hadn't been invested in and hadn't been given resources. So we resourced that. And then we brought people in from the outside who we know have the capability. So I think our R&D team is world-class because the people are world-class. Despite people saying, well, Teva, can you do innovative? I do remind people about compact CERN and some other things Teva did, but I understand that muscle may be atrophied a bit, but we have very talented people. And so then the other thing I'd say on that is two things is all our antibodies come out of our R&D facility or research facility in Sydney. And I'd argue that our antibodies, and we'll talk more about this over the next probably 12 to 18 months, are by design the best antibodies. And I know that seems an extraordinary statement, but I think we're seeing that with TL1A, WK2 in the data. We'll see that with anti-R50 in the data. We have a T-slip IL-13 coming to the clinic in Q1, which I think you'll start to see how cool that is. And then our PD-1 IL-2, which we'll have data at the end of this year, which people say, well, everybody's done a PD-1 IL-2. It's not as simple as that. It's how you engineer it that creates the opportunity i don't know what the results will be but i think that another one will show that our engineering capability i would say is probably the best of anybody because people don't spend time on engineering an antibody they just find an antibody make it target something and get efficacy we spend a lot of time saying what is the optimal way from a manufacturing yield neutralizing antibodies things that may be seem a bit trivial but longer term i think add real value I know you talked about this a little bit, but on that balancing of investment that you have these capabilities, you've got a pipeline that's now maturing.

I think one of the differences I think of those top 10 or 12 biopharma companies versus Teva is percent of revenue that goes into R&D. How do you think about that line item and the P&L trending over time? Is that something you can manage and you'll find resources? Or do we have to think about that as maybe upsetting some of this gross margin expansion over time?

In a way, it can be all of the above. Okay. But maybe I'll tell you how we think about it. So we think about capital allocation as firstly, really, really seriously. So we don't talk about resources. We don't talk about budget. We talk about capital. So if you get given capital, you have to give a return on the capital. Hence the reason why our efficiency program has been so hard, we've driven that so hard, is because we think there are some things we do in the company that don't justify having capital because they are just – they're relatively low-value things. So let's not try to do them exceptionally well. Let's just do them enough to help the company operate. But when you think about it, it's interesting. What I've said to us is you get capital when you give a return on it. So right now, if you look at our investment in innovation, if you take into account the partnerships we have and financing with royalty pharma, et cetera, our percentage versus revenue is probably towards the higher end of the industry, if you gross it up. But what I also say is, I'm very happy, not that this would happen, but just to make my point, in a year that we spend nothing on R&D. Because if the assets don't deserve the capital, why would you give them capital? And I say to Eric all the time, we only apply capital to assets in our pipeline if we generally think we'll give a return. If we don't there are no pet projects and the joke we have is if he's not willing to invest his bonus in it we're not going to invest our capital but i think that's really important because i have been at companies where too much the budgets that budget every year and i don't believe that should be the case i think we have a lot of exciting assets these products in the pipeline and that's challenged us to say do we do we grow our opex base a lot and explain to people well maybe the 30% is hard to do. And we thought, well, no, we're not going to renege on our promises. And two, there's capital elsewhere that we can invest in. And doing the deals with Royalty Pharma, Blackstone, two things that appealed to me on that, which I didn't fully understand at the time. One is the way they validated the science was brutal. That was like a colonoscopy. So when they came away going, your anti-R15 is great. I thought, okay, that's good. I didn't realize how good you are at due diligence. And they take some of the risk, which I think a very sensible thing to do. Same with Blackstone, same with Abbeyworth. So we get validation, we get the capital, and now we can go across all of these indications at speed. Because another question you could have asked me, and probably will, is, well, aren't you diluting your return? Because you don't earn it at all. So two things, I did the analysis and I realized most of the top 20, 30 drugs in the world have a royalty stream because they weren't invented in Big Pharma, which is another challenge to why R&D gets so much money if things are invented elsewhere. The second thing is, go back to my gross margin comment with 55%. So if you give up 2% royalty or 3% royalty, it makes a difference. But the third thing I said to the team, I said, having 100% of a pie, piece of a pie that arrives late across less indications, if you do the analysis and have more indications, you arrive a year early, the difference is just gigantic. So it's just a no-brainer. So ours is the principle we have in R&D, we have a good asset. We move as fast as we possibly can, and we'll work out the finances later. But it's so hard to find good assets. In my career, to see a pipe like this, we're not going to mess around. Get it to market as fast as possible, maximize it, and we'll manage the capital allocation on that journey.

Great. Maybe just pivoting into the branded portfolio, esteto obviously grown very nicely these last few years the other questions we get is just how much more room is there for this one to continue to grow so where are we in terms of i know there's a you know you're pushing the doses higher the penetration rate's still low but just is this still a business that we can think about a lot of growth going forward we can yeah and and the fundamentals are to be point is uh extraordinarily 85 percent of patients with tardive dyskinesia are still not treated.

And so there's a huge opportunity to treat more patients. The other things that we've made real traction on is, firstly, we have introduced titration for patients so they can titrate easier. That helps them end up on a more efficacious dose, more sort of in line with the clinical trials. And we put together adherence and compliance programs. And while we've heard about those many times throughout our career, here, the difference they make are meaningful. So a lot of patients still coming in, making sure those patients get onto the optimal milligrams, making sure they adhere to that and are compliant to that. You attack all of those, you can fundamentally keep driving this asset for many years, which is why I say greater than 3 billion peak sales is something that when I look at those elements is very achievable.

Yeah. Competitive landscape, have you seen any changes at all as you think about your closest competitor here?

Look, it's a really competitive market and so i think we we know that there are two of us in it it's very competitive what i always say is um it's about making sure we capture a good share of the patients coming in we mobilize those patients to come in we educate the physicians to identify tardive dyskinesia and we keep doing that well then i think you know because there's something untreated that everybody can grow it is competitive um but for us that's about making sure we perform really well we're at operational excellence. We have the right levels of capital deployed to do that. But it's about execution. And I think we've shown since the start of Pivot to Growth, we have executed quarter and quarter very well. And that's a muscle that we're very good at, but we're not complacent. It's competitive. And so we've got to be mindful of that. Great.

Can you just talk a little bit about 2026 results for this one?

I know there's been some inventory dynamics, but as you just kind of think about underlying growth, what's the trend been first though yeah so so to to explain to people instead of um there's a bit of puts and takes so the the channel filled up a bit at the end of last year q4 uh which you try your best to control but you can't not ship product um which we we told everybody should uh uh flow out this year it is slowly slower than i would do if i managed that inventory sure there you go uh it's And so that's going to make the comparison of Q4 this year and Q4 last year will probably be down with another part of that is what's going to go back to the wholesalers, knowing that we have the IRA 27 discount, one would like to think they'll draw down their stock even more so they then take stock at the new price. So those are the things that I think, the things to think about Estedo, that quarter Quarter four is an interesting quarter, we keep communicating, that will be down. Now, your question is, what is then like in TRX and all those things? I think we're still showing that we're very competitive in TRX, very competitive on the milligram growth, because that's important. If you look at all our quarterly earnings, the milligram growth is happening, quote on quote, I think we're up 20% in the last quarter. And then adherence and compliance is improving. So all of those things that I talked about, we're all heading in the right direction. And sometimes I say to the team, you know, I say, you know, how can we keep getting better on, you know, compliance and adherence? You know, how come it's not quicker? And I forget that you have to do this through all the specialty pharmacies, all the patients. And while you can hit some very effectively, there's still a big patient base that hasn't got all of those programs at an optimal level. So the good thing is I can see this having an impact for many years to come.

So your confidence overall of that $3 billion longer term target seems.

Well, look, I mean, I think we've been talking for quite a few years. I don't put out targets without really having an ability to understand how we're going to deliver them. There's no hope in that. We've got a very structured execution of what is needed to make it happen. Is it hard? Yeah. Do we tend to achieve our targets? Absolutely. So, yeah, I have a high degree of confidence.

Great. Mitch, elsewhere in the branded portfolio, Ajovi has been another success story of the company. Can you talk a little bit about what's enabled teva to drive the growth here i mean i typically think about franchises like this that launch and maybe slow a bit but it's hard to reinflect you've clearly reinflected it yeah so what's enabled that and another maybe similar question like what's the the path from here for jovi yeah so jovi is a great example i mean it's sort of a bit there's some similarities to esteto so at teva we had when i came in very few growth opportunities and one thing we're really really good at is prioritization.

Prioritization, when it's done really well, means you just don't do other things. It's a really brutal prioritization. So we said Estedo has to hit $2.5 billion. Let's not debate it. You're either on the bus, you're off the bus, but once we're here, let's make it happen. And Ajovi said, well, this is the twilight of its life. Well, don't see that. Looked at the market, said, no, there's more to come. and by the way it has to do better and if we're going to be good and innovative we have to show we can do it across all three regions so part of it is just saying we have to do better now let's build a plan to make sure we do better we didn't allocate a lot more capital we have a lot more focus a lot of different expectations we worked out what we had to do better and so what has surprised me though because to your point you rarely reinvigorate a brand we've not even reinvigorated we've accelerated it uh and we continue to so now which is extraordinary we talk about JV being a billion dollar brand. And I think most people could put that in there. I think we even have to think about what is the long-term target for that, because the growth rate you saw in Q2 was extraordinary across all regions. But I think to do that growth, we have to take market share. We have to grow above the market in every region. So we grow way above the market. I think the market grows at 6%. And as you saw, we're growing at 20% across all of us. So we're taking market share. And that's just excellent execution against some of the biggest pharma companies out there.

Excellent. Just an issue of time here, we're shifting over to the pipeline. Olanzapine LAI, I know we're heading into a Bidufa. Can you just maybe just to start with frame the opportunity here for Olanzapine? It's one that we're pretty excited about, but just maybe just to set the stage for the conversation. Yes.

So Olanzapine is exciting. So Olanzapine molecule is the most use molecules to treat schizophrenia patients. It's 20% of patients who are on olanzapine. Now, olanzapine doesn't have a long-acting treatment that's used really. So you've got 20% of the patients who have a severe schizophrenia, and olanzapine is the treatment of choice, but compliance and adherence becomes key because if you have any lack of compliance, you don't have a breakthrough, and that can lead to hospitalization, and it can be pretty devastating for the patient. So they need long-acting. And so when you think about the opportunity, the way to sort of maybe an analogy you can build is, well, in the non-olanzibine market, what happened? So when long-actings were approved, 13% of patients moved across. So you could just say, well, if that is just replicated, 13% of olanzibine patients moved to the long-acting landscape from Teva, that creates a pretty significant opportunity. You could argue, people do challenge me, but won't more patients come to a long-acting landscape because of that need for compliance and errors? I'd say, yep, that could be the case. But if you just think about it being 13% and you think about what that looks like, that's where we get to the one and a half to two billion franchise for Yoseti and Olanzapine. And although I get challenged sometimes, is that not enough? I said, well, if you plug that into your models, it's a game changer for us still. And if we do better, we're pretty transparent at coming back insane. But it's still a challenging market from a Medicaid and Medicare. It's managed very aggressively. But I think we see a clear line of sight to that range.

On that dynamic of the challenging payer environment here, how should we think about the launch curve for this one and getting access to the payers here? Yeah.

So the most important thing is to create long-term value. So this is not about cutting a deal with particularly Medicare at any cost. And I think just to let everybody know, we have not cut a deal with Medicare on UCEDD and we're three years into a launch because the discounts they want, we do not think reflect the value of the product. And so we have done our deals with Medicaid because you have to do Medicaid and that's state by state. But Medicare, we haven't. And so that means physicians ask for your study and they get it because it's a schizophrenia patient. And they explain why your study is needed versus other long acting. So for Lansbury, get back to the question. We want to get Medicaid covered as quickly as possible. That depends on the state. Some are day one, some are within three months, some are six and some are 12. I think after 12 months, 85% of the market Medicaid should have us listed, but it's almost we can't speed that up. So the way to think about the launch is we're not going to have a significant amount of We're not going to have revenue really this year. There'll be a bit of stocking and the first half of next year, not a lot because we're not trying to get access through Medicaid, so we don't open up. So it'll be TRX, hospital formaries, sampling programs, how many physicians have used us, what is their breadth? What is their depth? That's what we're going to go after because that creates sustainable value. And then you'll start to see the revenue kicking in the second half of next year. And then we'll have the right value and access balance. And then I do think at some point, I don't quite know when, Medicare will come and say, well, you said Ian and Lanzapine, we should probably cut a deal because now you have such a scale. And then we'll probably have a sensible conversation, I hope. But that's the way to think about it.

And I think what I encourage investors to look at is we'll be transparent. what is our t-rex what is our breadth what is that so you can see the leading indicators because that's what i'm focused on and then i think okay i can see how this is going to create value i don't want to chase the dollars to sacrifice value long term but we should in terms of revenue though we should think about pretty modest revenue i think you said this year but even first half of next year just this year absolutely um maybe just one other one that's on on uzeti can you just compare and contrast a little bit if we're trying to just think about that launch and how that progressed versus how you're envisioning Alantapine playing out?

Yeah, so I'll be pretty bold on this one. So Alantapine is going to launch so much better than Yoseti, right? Just a lot, lot better. That's how we've set it internally, and I've looked at the graphs, I've looked at everything we've done, and we're aligned in that as a team. And the reason we're aligned is because we have that Yoseti muscle. So I can't, you know, we're in the offices of the physicians every day, we're in the hospitals, we know the people on the D&T committee, We know the nurse practitioners. We know the long-term care institutions. We know where everybody is. So we need to maximize that. And we are going to maximize that. So the launch curve will be very different. And it will be a better launch than you said.

And maybe the other end of the story, I look at J&J and the franchise they have in long-acting atypicals. Why can't this be a much bigger franchise for Teva than $1.5 billion to $2 billion?

I'd say, look, without saying it emphatically can't, it could be. But there's a lot of work we have to do to make that even possible. The way that it has changed, though, is when those products launched, there was no management of schizophrenia patients, literally none. Every schizophrenia patient got what they needed, and so there was no managed care. The world is very, very, very different now. And so I think that's one, and how that is managed. So, but look, I don't want to say things, you know, could it be bigger? It absolutely could. I want to get through the first 18 months and then probably, you know, we'll have that conversation. But I remind people, if we still tap out in this one and a half to two billion, at the margins we've got, that's a game changer for Teva. I got asked last week, you know, and you may even ask me, so I'll get ahead of it. Celiac, 1 billion, that seems a bit modest with the amount of people who have celiac disease. And I go, well, look, I haven't really gone into the details of forecasting celiac, but if it's 1 billion, it's another game changer for us, right? And so it goes back to that gross margin at the start we talked about. When you keep laying on high-margin products, should a landsby and you said it'd be bigger than 2 billion? Could be. But from a value creation, let's cross that bridge in a few years because we're going to create so much value in the short term on those if you want to call them conservative targets measured targets there we go there we go uh you've got another launch next year with Tourette's as well talk a little bit this is the first kind of acquisition we had seen Tevadoo in some time what attracted you to this asset and and how are you thinking about the the landscape you're entering there yeah so this is um I'm super excited about this asset one because you know you you can get emotionally attached to things and as a as a father three children i when i learned about tourette's and i learned that you know it impacts many people in the in the development phase of their their life it is huge and it's really really quite sad i mean it's devastating for patient for the child as well as the parents and so when you see the efficacy of this product you think this is something you could really transform and when i look at what treatment is currently there first it's obviously psychotherapy then it's off-label use of uh of a product which doesn't really have efficacy and then you go on to actually schizophrenic drugs which do have long-term side effects so you have a child as a parent i don't want to put my child on a schizophrenic product then it's going to have some long-term effects uh because it has some modest efficacy in tourette's so i think we have this untapped market so why i'm excited firstly that's sort of almost impact we can have on people's lives the second thing is there's a hundred thousand children who suffer from tourette's fifty percent fifty thousand one therapy of those only i think 20 to 30 percent down therapy after a year that tells you everything about both the efficacy and the tolerability and then when i think about what we've done in esteda what we've done in your study where we've attracted patients back into the office. We've educated physicians. We've educated caregivers with Tourette's. That's a playbook we can apply exactly to Ikepaipan. And I have to say, this is a patient community that has no support because those indications in the psychiatric drug were add-ons way later. And it's such a small patient population. They're not really looked after them. When we went to the physician and patient association meeting, the excitement about a treatment designed for them, not an added indication later, for them with a company dedicated to CNS and neurology was palpable. So I feel this could be an amazing opportunity to transform lives and a great revenue driver for us over the forthcoming years.

The payer environment for this one, anything unique about this we should be watching?

That's a good question. Look, I think there's an opportunity here to get the right value on this product. We want to think carefully about that. So we're doing a lot of work now because obviously this can launch in Q1 next year. But it is a pediatric orphan and you can think about the opportunity that you can have a price that is associated with a pediatric and an orphan. So I think, but once again, going back to what I said on Lansing, we want to make sure we have the right access and the right value. This isn't all about access. This isn't all about value. is that balance. And we've done that well on Ajovi, we've done that well on Yoseti, and we've done that well on Estedo in a very competitive environment. So we're applying that same skill set to this. But yes, it is a different pricing than probably we're used to. Yeah.

On the TL1A, I mean, we've mentioned a few times, I'm just watching this immunology landscape and it's evolving quickly with lots of different modalities and great for patients in terms of improving standard of care. When you think about that asset, let's maybe talk about how you think about it competitively versus other TL1As, and then maybe more holistically with where this fits into the IBD landscape overall?

Well, I think, firstly, for people who are new to the story, our TL1A is better than everybody else's, which is what people in my position tend to say. But the reason why it goes back to what I said right at the start with our antibody engineering team in Sydney, this is our fourth TL1A, I remind people of that. And the other three were good, but we kept working on making it better. So we know we have more potency, better specificity, lower neutralizing antibodies. We know all the things we have better. Because, by the way, we made the other antibodies. And so we know what they did. So we know we have the better one. The phase two, I think, showed that. Now, you can't cost and pay, I know, but I think most people saw it and said, it looks like you are the better one. So I think we're better by design, not by luck. And so I think in the TL1A field, that will give us a competitive advantage. I think TL1As will play out very well because they're very safe and well-tolerated. And people forget in IBD, it's a nasty condition, you see in CD, but there are a lot of products which either have black box warnings or have to have some safety monitoring. I think, Eric, I heard there's like 7,000, 8,000 patients now treated with a TL1A, and it's a very well-tolerated and safe antibody. So I think we have that. So I think T1A will be used because of its efficacy and its safety and tolerability higher up the treatment dynamic. And I think that's something which people aren't fully appreciating because physicians want to use things that efficacious and safe and can be tolerated. Then you can be on them a long time. Combine that with neutralizing antibodies. So I think T1As will be used a lot. I'd like to think that we'll be the most used T1A because we're the best T1A.

Absolutely. On the topic of combination therapy, it seems to be kind of an emerging theme. How does Teva think about combos? It seems like given the safety of the drug, it could be a great combination kind of candidate, I guess.

Yeah, that's interesting. Eric, my head of R&D, keeps educating me on this. He says, firstly, you've got to get a drug to work. And if you have a drug that works really well, that is amazing. The fact that people are moving ahead saying, well, how about a combination, bi-specific, tri-specific? One is that when you have a safe, efficacious, anything you add to it, The assumption is it makes it more efficacious and doesn't touch the safety and tolerability, which is a bit sort of hopeful. And then what more does it give on efficacy that it damages the other side of the equation? So I think, firstly, a lot has to play out over many years. And the other thing that I have been educated on is every bispecific is different. And so I go back to our PD-1 and IL-2. So when I started talking about that three years ago, we said, PD-1 and IL-2, they've been tried, they don't work, or they're not good enough. And what I realized is people literally take a PD-1 and R2 and put them in a syringe, and that's a combination. That's a bi-specific. And then you can engineer them together, and that's the same as everybody else is. But then we don't know how you engineer them together is important. So again, back to 1A, look, we have bi-specifics in our pipeline. We have tri-specifics in our pipeline. We have many things. We don't talk about them because what we're looking to understand is, does it improve the benefit-risk profile? And what is the need? And let's see how TL1A comes out in these conditions. If it gives a really good level of efficacy, one could argue, do you really want to tamper with that? But we're open to it, but I think that has a long way to play it. And the thing I'll pitch is, we're about to move into the clinic, our T-slip IL-30. Now, I think people say, well, other people have T-slip IL-30s. And I'll say, wait till you see the engineering on our T-slip IL-30. It is extraordinary. And I think what people are going to understand is the enhanced engineering we have at Teva means people need to start looking at the capability of that engineering and how that differentiates a single asset or a bispecific or a trispecific, and it can be very, very different.

In the last couple of minutes here, maybe we'll talk about the generic business for a few minutes here. I know there's a lot of moving pieces this year with RevelMed and some of the headwinds there. Just talk a bit about the growth you envision for the generics and how we maybe bridge from what we're seeing in the business today versus a longer-term outlook for that franchise.

Yeah, so I always find it four minutes left of the 45, we get to generics three and a half years ago. Four years ago, it was the other way around. Good transition of the business. Yeah, exactly. The questions, I suppose, are really – and by the way, it's right. It should be that order because it's about value creation and what the business is doing. That said, our generics business, I first remind people it was declining before 2023, and then we grew it, and that is a phenomenal turnaround. We did that through executing better on both our pipeline, bringing things to market more often on time, meaning the first wave that creates value. We improved our manufacturing, our supply chain, because we weren't supplying all that we could. we did that and then our commercial model we were more disciplined in how we actually price our assets in the market so we did those and that's the muscle we keep building on now i've always said our k-guard going forward is one to two percent that's partly because i want to every to just model it on that and it's not down it's not up it is what it is it does it throws off a good amount of cash it really helps us give scale and manufacturing it gives us presence around the world to maximize our innovative it does a lot of good things the reality is we've done a lot of great work on our portfolio and we've now got 15 biosimilars in the market and when we started the conversation i think we had three or something four we have another 14 in the pipeline and we're going to add to that at real pace what that does is it changes the makeup of our genetics portfolio it moves it into a more heavy biosimilar which biosimilars traditionally have a more stable revenue they have a better gross margin so more predictability and so i think maybe the the generics questions when we next sit down will be can you help us understand is it really one or two percent growth and maybe it could be more but for us it's about changing that portfolio changing the manufacturing changing our supply chain we've done a lot of good work there so i do see that as being more of a growth driver going forward which is helpful and important still outweighed by the innovative. But we have made some good progress.

And maybe last question, another one that's changed quite a bit the last few years. How do you think about deploying capital from here? I know the first few years as a CEO, I know it was a lot of debt pay down. Here's another side of that. How do we balance of more tucking acquisitions like we've seen versus a dividend versus repo? How are you balancing all those?

Yeah. So, I mean, look, I think it's interesting. Once again, the last question is on debt. It used to be the first question. But what I think what we've done on debt, and going back to your question on R&D investment and how we do this, I hope people take away as we're really focused on capital deployment. We've got to pay down debt, but we've got to keep investing on growth divers. It's not, let us pay down debt, then we'll do this. We have to do both. We have to be dynamic. And we've done that. And we've got investment grade now across all three rating agencies a year ahead of when we said we'd go to. So I think that's a real testament to not only pay down the debt, but how they see where we're heading. What do we always said there are four things we're going to do. Pay down debt, Invest in our growth drivers, the Estetos, the launchers. Invest in our pipeline, do BD, and then return capital to shelters. Now, the number one's gone because we pay down our debt. So we're left with the other three. And those are still relevant. We've got a lot of products to launch. We have to do that. We've got a pipeline to feed. We are going to do more BD. We're actively looking all the time. But as you saw with MLX and you probably saw with the BioXL, we have a view on what we should pay for things. and because we have a good pipeline we're disciplined and a lot of things we don't get to the price that sellers want and so we walk away it goes back to our discipline on capital allocation and there on the fourth point you know we'll return capital to shareholders but on that just to measure manage expectations you know we don't see as a dividend being a good allocation of capital because we have too many growth drivers and i think that's why we need to invest and then on buybacks we think about i don't think about this as a yearly we do that we think about when we think the stock, if we buy the stock, it'll give a return on that acquisition of that stock. And we think about it that way. So it'll be when we see that happening. Because I think at the end of the day, we have to give a good return on capital. And as long as it does that, then if we do that, then I think we're going to create value return for the shareholders as well. So that's how we think about it.

Excellent. We'll think about it.

Thank you for joining us today. Thanks, Chris. Appreciate the time. Thank you.