Teva Pharmaceutical Industries Limited Sponsored ADR Aktie

Okay. Great. Great. Well, good morning, everyone, and thank you for joining us. My name is Matt Dellatorre, and I'm a biopharma analyst here at Goldman Sachs. And we're really excited to kick off the conference this morning with Teva Pharmaceutical, where I'm joined by Richard Francis, the company's CEO.

Richard, thank you for being here.

My pleasure, Matt. Good to be here.

Maybe just to kind of kick us off, give us an overview of where Teva stands today, including your core franchises, both branded and generic, your key pipeline priorities and just how you're thinking about the outlook and strategy for the company over the coming years.

Well, thanks for that question. So the outlook and the strategy for the next coming years is more of the same. So we sort of go back to the foundations of Pivot to Growth, the 4 pillars: deliver on our growth engines, step up innovation, create generics powerhouse and focus the business, which is all about capital allocation. And we've been executing that religiously for 3.5 years, and I think you've seen the results of that.

But specifically, I think the way for people to think about it is when you talk about the branded business, if you think about delivering our growth engines, we have, I think, put AUSTEDO on a clear path to more than $3 billion of peak sales, which I think was something which took a bit of time for people to realize was possible and now people see that. And we had good growth last year, good growth this year, good growth in Q1, and we're on track for our full year guidance. And then UZEDY continue to grow that extremely well, both on TRx and on revenue. And AJOVY, the one that everybody forgot about, we've now said it's going to be a $1 billion product. So I think we have those, soon to be joined by olanzapine, our long-acting product for schizophrenia, which is based on the same long-acting technology as UZEDY. So excited to bring that to the market in Q4.

So if you think about those first 3, those first 3 products, AJOVY, UZEDY and AUSTEDO, they've been growing our innovative business over 30% last year. Soon to be joined by olanzapine. And then next year, we're going to be launching ecopipam, our product for Tourette's that we did a business development, the acquisition of Emalex. So those 2 are another growth drivers. And then obviously, in 2028, we have DARI, dual-action rescue inhaler, as well as potentially emrusolmin for MSA. So from a branded point of view, you can see just some fundamental good foundations for growth. And then we'll talk about the pipeline later, what could be added to that. But if you just think about those, that's good.

And then the step-up innovation, the Pillar 2, I think we've really reenergized the pipeline, and we'll probably talk about duvakitug, anti-IL-15, emrusolmin for MSA and the multiple indications we have on duvakitug?in our target as well as for anti-IL-15. So we're really excited that we continue this growth beyond '30 into '40. And then that's the sort of the branded innovative business, which people didn't realize that we had 3.5 years ago, and now everybody has seen the potential of it.

And then on our generics business, we've turned that around from a volatile and somewhat declining business to a growing business, and we've significantly increased the amount of biosimilars we have. We now, I think, have 10 in the market. We have the second largest -- third largest portfolio in the world, and I think we'll soon be the second. And so we have a clear path to creating a generics business, which has a significant amount of biosimilar portfolio within that.

And so I think -- and then the final thing is, which you didn't really ask, but I'm just giving you a bit of a monologue here, so I apologize, Matt, is focus the business. And so capital allocation to drive that has been really a core capability that we've built whether it's the acquisition of Emalex, whether it's some of the partnerships we've done with Blackstone or Royalty Pharma to accelerate our pipeline or whether it's making sure we grow our in-brand products with the right sales and marketing. I think we've shown we can do that in a very disciplined way. And then obviously, we did announce in Q1 that we're going to have the potential to do buybacks in the future because as and when we see a good return on capital because we think that's a good thing for shareholders.

Great. Great. Yes, I want to dive in on capital allocation in a moment. Maybe before we do that, though, the stock has doubled since we were here last year. You speak with investors regularly. In your view, what do you feel is the most underappreciated part of the business still, if any?

Well, yes, there's no if, any, I think. Look, I'm pretty measured, so I'm sure this -- don't discount this too much, but I think it's all undervalued. But let me break it down because that feels like -- it feels like a trite answer. It doesn't mean to be. So when I think about -- if you think about our generics business, let's start with that. So we've taken that to stable over the last -- well, actually grown over the last 3 years, and we've changed the portfolio, and we're bringing biosimilars into the U.S., bringing biosimilars into Europe. But not only bringing in, we're actually becoming a market leader in many of the biosimilars we bring. And I'd just remind everybody that SIMLANDI, our biosimilar Humira, will, I think, soon be #1 biosimilar in the U.S. We launched that 2 years late, and I think we are 11th to the market. That just shows timing is good, and I'd always want to be first, but it's how you manage that very complex market and what capabilities do you have, what scale do you have.

So I think our generics business because the surge of biosimilar portfolio coming through, I think, is probably underestimated as an opportunity for not just stability but value creation in the future. But then the more obvious one is, I think as people have caught up with the innovative story at Teva, they -- it's sort of moving so fast, they can't quite catch up. So the AUSTEDO, we had the IRA overhang, that got taken away, and then people have to sort of ground themselves on this $3 billion, which we've told them about before, and I went, "Okay, $3 billion," "greater than $3 billion." And then I think if I just talk about AUSTEDO, UZEDY, olanzapine, AJOVY and ecopipam, those 5 products, because in our hands, the amount that they can grow, I don't think they're valued with that growth trajectory on them by anybody out there, maybe by you, but not by many people out there. Because I think what we've shown over 3 years, we can execute regardless of the product profile, where it's competitive area like migraine or schizophrenia. So I think that part is really still has some valuation.

But probably the sole biggest is I don't think there's any value in our pipeline or not enough. And I think if you look at DARI, which has a super high probability of success, but we'll know at the end of this year, and you look at anti-IL-15 and you look at duvakitug and you look at emrusolmin, I mean we have 7 readouts this year. So I think this will be the year that people start to go, "Okay, tell me more about this pipeline." And we're already hearing a lot of people wanting to talk about anti-IL-15, duvakitug new indications because I think people are starting to realize we're very good at picking the products to move into the clinic, and we're very good at engineering antibodies. And so because of that, I think people now need to know a bit more about it. But those, I think, are drastically undervalued.

So I think those are the elements of it. And look, I'm comfortable with that. I used to be quite uncomfortable with being undervalued. But as you say, we doubled from here from last year, and we'll see where we end up next year. But our stepping stone is in the execution we know we need to do to continue to create growth, top and bottom line, EPS and create shareholder value, is very clear in our minds. And we know what we need to do. And even if you risk adjust some of that, I think we still end up in a very, very good place.

Great. Great. Maybe going back to capital allocation. You highlighted this a moment ago. This has been a major theme for you all in first half. You had the announcement of the Emalex acquisition. You all did 2 funding deals with Royalty Pharma and then Blackstone for your kind of innovative products. A month ago, you announced investment-grade credit rating, the first of -- I guess, 3 more -- potentially 2 more coming up. And then also the potential authorization of a share repurchase program with earnings.

So clearly, you guys are taking a diversified approach to capital allocation, and you've been making a lot of progress. So maybe, I guess, the question here is just walk us through maybe the underlying strategy that kind of ties that all together and then how should we think about the next few years in terms of that strategy? Does it evolve? I think you mentioned a moment ago, more of the same. But I guess how should we just think about how that kind of stuff is going to look over the coming years?

Yes. So I think -- I'm really proud of our approach to capital allocation. So we talk about capital allocation at Teva all the time. We don't talk about resources. We don't talk about budget. We talk about capital, and that capital has to work for us. And that was really important because when we started this journey 3.5 years ago, we couldn't increase our OpEx. So we had to reallocate capital, and we reallocated it based on it could give us a return. And where we took it from was not going to give us a return, and maybe that gave us a negative. So we have to balance that out. So we became very clear about if we do something, we do it meaningfully. And any things in Teva that have capital, they have to earn the right to have capital. So that's everything. So that's a different mindset than I've ever experienced any other company, and that's on purpose.

So when we think about the things you said, if you just think about those, so we have not really increased our percentage of revenue OpEx since I've been here. We've transformed our pipeline, the funding of our pipeline. We've transformed the funding of our innovative products, and yet we haven't changed that. That's capital allocation. Because we have to take it from one place, we have to put it in another. And we do that, and we do it in pretty big numbers. I mean it's not a little bit here, a little bit there. We move big amounts of capital. We did that while we religiously paid down debt. So we're paying down debt.

And people forget that now we're investment grade, which is for one of the rating agencies, nearly 2 years ahead of when we said we're going to do that, right? And these are pretty hard markets, these rating agencies. And I think in the next quarter or 2, we'll get the other 2. So that shows when they look under the hood. And they really evaluate the vital signs of the patient, they're saying this is on a good trajectory. So I think we've done that.

And then we've made the decisions around partnerships. And to get partnerships, by the way, which I think are on good terms. So the partnerships we have with Royalty Pharma and the partnership with Blackstone, I think they're really good terms for us and they are good terms for Blackstone. But nobody got a good deal from Teva. It was a fair deal. And that's because of the quality of our assets and the quality of our strength of our positioning and our finance at that point. So I think that's one.

And then the Emalex Biosciences deal we did, I just remind people, we said we're going to do a deal like that, between $500 million and $1 billion derisked asset, that had its Phase III results, that we could put into our machine and we could make it a great success, but we don't want to put capital at risk with the turnover of Phase III results. So we did what we said we're going to do. And I think that's going to be a pretty good return on capital. So we have done a lot. Going forward, I anticipate a bit more of the same, and we're constantly looking at our long-range plan, how we allocate capital. But we do want to make sure we're building our pipeline. We've got a lot of indications of duvakitug, anti-IL-15, to fully push those through.

But you'll also see some potential deals like Emalex coming through again, but they've got to be right. They've got to be the right risk profile for us. But we know that our balance sheet is improving quite dramatically over the next few years, and our cash flow is going to improve dramatically. So we're planning for what that means, which is also why we talked about potential buybacks, that we've got to think about this capital is coming, let's not have it when it arrives and go, "What do we do with it?" We're planning for what money we're going to have and how we're going to allocate that now, which means we can do it in a more controlled fashion.

But hopefully, people will see we're so disciplined in the past. As we go forward, it will be more of the same, but in a really disciplined way. We have to get a return on the capital deploy. And we always think for long-term value creation, but I think we're very mindful of the fact that long term is becoming shorter now. And for Teva to keep proving us to be a rising star, we want to keep showing that we can give a good return on capital long term.

Great. Great. So I think you kind of answered this, but -- and we'll talk about the Emalex deal a little bit more in detail. But how are you thinking about kind of the cadence type and size of maybe further BD going forward? And are you guys seeing a lot of kind of opportunities like Emalex, which maybe went a little bit under the radar, but then when you guys announced it, people were like, "Okay, this is highly strategic for you guys, fits that kind of mold that you highlighted"? Is there a lot more opportunities out there like that?

There are, but it's super -- so I mean, look, I mean, I always joke, you got to kiss a lot of frogs to find a prince. And I'd say I was kissing a lot of frogs. And -- so although it was well received, we have been looking at many companies in the last 3 years. And I can tell you, we've been in situations where we haven't been able to get to a price because once again, go back to our discipline on capital allocation, we won't pay something that we don't think is going to be a good return on that capital and good return for shareholders' capital. So there are a lot out there, but we follow -- as a team, we work incredibly well. So as myself; Eric Hughes, Head of R&D Alan Littman, the Head of BD; obviously, Eli Kalif, CFO. And then depending on where it is, it could be one of the regional heads, often Chris Fox, who's based in the U.S. So we're very tight. We take BD at the executive level. We don't -- that's not delegated. We do it because we see the importance of it for driving value.

But yes, I think there's more out there, but it's got to be the right price. There's so many times that I have boards who think their assets worth more than -- it was that their company is worth more. And actually, just of the things we have looked at that I have a different value, none of them have transacted. Maybe I was more right than they were, but I think it's a tough world we live in and to get a return on capital, commercializing products in the U.S. and Europe, it's really hard now, really hard. And I think biotech companies need to really think about can they really compete in this very challenging commercial environment -- challenging payer environment and what return can they give their investors on their capital and how quickly can they do it? And I think I tried to help them understand that, and it's not too easy.

But we're on. We keep looking. We're constantly talking about it. And hopefully, we'll be able to do some more. But, one, we've got to be mindful of how much we can take in because commercially, we're launching a product every year. And often, these are synergistics, that's good like ecopipam will be. But at the same time, you can't necessarily plan it. Some deals come along. You get three together, and sometimes you go through a period where you just can't find the right one.

Great. Maybe switching to the pipeline. You guys are entering a busy catalyst period starting kind of midyear, and we're going to see, I guess, the IL-15 data probably in the coming weeks in vitiligo. And so I think there's a lot of excitement around on the pipeline. Maybe kind of just working through that pipeline chronologically in terms of the next launches. The next one is long-acting olanzapine, where there's a lot of excitement in terms of pent-up demand in that market for a long-acting option for that molecule. You all have a 4Q PDUFA.

I guess what are you guys most focused on from a commercial readiness perspective, given you have UZEDY already on the market? And then kind of given your latest interactions with the FDA, how are you guys feeling on the regulatory side in terms of the label being clean and potential AdCom or something like that?

So I mean on the -- I'll do it in reverse because it's quicker. So from the FDA, we're still in a part of the process where there's not a huge amount of communication. I think that we've had has gone well. I wouldn't necessarily read anything into that because it's sort of more of the administrative type. I think now we're entering the period where it gets a bit more interactive. But we feel really confident about the data set, the quality of the data. I mean, over 4,000 patients have now been injected and there is no PDSS. So I think we feel very comfortable. They have a really important product for a very needy patient population. But there's probably more to come on that, Matt, as we're now into a period where there will be more discussions.

From a readiness, this is one of those where we've spent a huge amount of time and effort on it. I mean we have UZEDY, which is in the market. We're talking to the same physicians. We're talking to them, the same nurse practitioners, the same formulary committees in hospitals, the same payers, it's Medicaid and Medicare predominantly. So we're in these every single day, and we built a huge amount of credibility. So we've done really well with UZEDY because we're very credible when we go to all of these different stakeholders. And I think we've become known as -- I think we're now considered to be one of the top three psychiatric companies in the world, right, from only a few years ago.

I tell you that because as we launch olanzapine, that's very different from when we launched UZEDY. So now we're launching olanzapine with all of those relationships, all of that understanding. And we clearly know there is a lot of enthusiasm around olanzapine. Don't forget there are a lot of Phase III sites in the United States as well, so people have practical use. But that capability we have in that team, I think, is exciting. We are working hard to make sure, from day 1, we create access to olanzapine.

I think the one thing I'd say is, and I've made sure people understand this, there's not going to be any meaningful revenue this year because there'll be a bit of stocking. But -- and even next year, I think H1, I wouldn't anticipate too much. Because first, we need to get into the Medicaid. So we just get on all the Medicaid. Some will adopt it straight away, and some have time lags, and so we need to get through that. And then on Medicare, we think that's going to be -- as it was with UZEDY, it still is, a long negotiation. So the reason why I tell people about that is that doesn't mean I don't think we'll get a lot of prescriptions. I think we'll get a lot of prescriptions. We'll get a lot of sampling. I think people will use this a lot. But to the point where it becomes a real revenue driver will be a bit later because we won't agree to deals that are not in line with the value and the premium we place on this product, which I think is important for long-term value creation. We did that with UZEDY. We showed we have discipline.

But I'm really excited about olanzapine for a couple of things. One, there's obviously -- it's going to help us create a $1.5 billion to $2 billion franchise. But also when you speak to psychiatrists and when you speak to nurse practitioners, there is a patient population so in need of a long-acting -- don't forget, these patients when they have an episode, their brain is slightly damaged and the ability for that molecule to work as effectively as it did before goes down. So every episode you need to stop because the long-term ability to have an efficacious treatment would decline otherwise. So there's a real, real need here. And I feel that -- I feel very privileged to be in a position that we launch something where physicians know the molecule, they think it's the most efficacious, they want to use it, they just don't have a long-acting. So I'm really excited about that launch and the potential that can have to create this $1.5 billion to $2 billion franchise.

Great. So maybe think about it kind of taking off mid-'27, kind of second half of '27?

Yes. And I think we've got credibility. We show -- we saw what we did with UZEDY. We did not do any deals with Medicare. We didn't think they value the product. And maybe they will this time. Okay, this one will come to the table. I think they'll take time. So I think that just means we have to grind through it. But we do know physicians will go through a prior auth. They will demand the product because they demanded UZEDY, and olanzapine has a far bigger unmet medical need there. But that's the right way to think about it, yes.

Okay. Great. I guess simultaneously, you'll be launching ecopipam from the Emalex deal in Tourette's syndrome. It seems like base case assumptions are probably like a mid-'27 launch or perhaps late '27 launch. You all have highlighted clearly synergies with your existing neuro franchise. You'll add a pediatric sales force, though. Maybe -- I guess, maybe kind of walk us through the broader how we should think about synergies with your existing commercial infrastructure. And then how should we think about the indication expansion strategy? I think there was potential that it could be used in stuttering, but just kind of high-level thoughts on the longer term?

Yes. So I mean, that's another one I'm really excited about. I mean the unmet medical need in Tourette's is huge. I mean there's 100,000 pediatric children who have Tourette's, 50,000 are on therapy, so half aren't. The ones on therapy don't stay on it long because you tend to end up an antipsychotic, which -- I think we're both parents. If your child has Tourette's, you don't necessarily want to put them on antipsychotic to deal with Tourette's. So there's a real -- they may start on it, but they don't stay on it. So they drop off very quickly. So we think there's a real unmet need here for a safe and efficacious product.

So I feel -- so it's another one, I feel super excited about the fact that I can, as a father, bring something to what is a very destabilizing condition for people in their formative years with a real unmet medical need. So I think -- and if you think about it, 100,000, 50,000 on therapy, not very good at staying on therapy. That feels a bit like AUSTEDO. It feels like the muscle we built with AUSTEDO, underpenetrated, how do you create awareness, how do we make sure patients start and stay on the right therapy. That's something which we've built that muscle up really well in AUSTEDO, which I'd say is hard, probably harder because they have schizophrenia, they also have AUSTEDO, they also have tardive dyskinesia. But we've got that capability.

So I feel we can make a really big impact on this. We are doing -- there's a lot of synergies, but we also do want to have a good launch. So as you said, we're having a pediatric team put together.

And then for the other indications, just to let everybody know, from a deal perspective, the deal was done on Tourette's. So anything that comes through that's stuttering the others, that will be an upside. But I didn't model that into the case from a capital allocation and return on capital. But we'll definitely look at that. And we'll also look at life cycle management, is there a way we can, even for Tourette's, improve the product offering for the children?

Great. Maybe switching to DARI for asthma, which kind of flies a little under the radar. This could be another, I guess, potential launch next year as well, late '27, early '28.

Probably early '28.

Early '28. [indiscernible] from a clinical perspective, and you all have highlighted a differentiated device and broader label than the current competitor product from AstraZeneca. So it creates kind of an attractive commercial setup. I guess, assuming we see positive Phase III data in early '27, walk us through, I guess, the key points of execution from a commercial perspective and how confident you are in achieving that potential, I think, $1 billion in peak sales you all have highlighted?

Yes. So we should have -- we have the potential to have some data this year. The Phase III will finish. Obviously we could have some data this year. I think it's just a question of -- it's an exacerbation study, so if that's all done. But it will be finished this year, whether we have -- I'd like to think that we could announce something, but we'll see. Then I think we're thinking about developing altogether. I think I sort of conceded to the fact that it's probably '28 that we'll launch this. But we'll see.

But in a way, it's interesting when you're launching olanzapine this year, ecopipam next year. DARI, the year after might not be a bad little cadence. And we could have emrusolmin for MSA in '28 as well. So it'd be not that I do like this. If they come along, we'll launch them, but that spread might not be too bad. But going back to your question of, look, this is a super -- it's another one that's really unmet medical need. I think over 5,000 people in the U.S. die every year because they don't have a dual-action rescue inhaler. So this is really serious. I think Astra is out there forging the market, creating the market. And I think it takes a lot to change the market, to change prescribing behaviors. So I think I'm glad we're following them. They can put the muscle, and they're a good respiratory company. They have a legacy there.

But I do think the fact that 25% of patients are pediatric patients, and we will have the pediatric indication, and we have a very simple device. So for me, the way I get to -- and I think I've said up to [indiscernible] 10 million patients in the U.S. [indiscernible] I mean there's nowhere near that now. So as that starts to come through, the pediatrics will come on us. And if we get 25% of that market, I think you're between $500 million and $1 billion. And then we'll probably start to encroach into the non-pediatric because we just have a very simple device. And I think in asthma, the simplicity of the device in many indications has been shown to be very important.

But I think DARI to me is one of those that will just, I think -- it won't be a spiked launch. I think we'll have some excitement around olanzapine and ecopipam and potentially emrusolmin and duvakitug. I think DARI will be slow and steady, but it will go on for a long, long, long time and be one of those, maybe a bit similar to AJOVY that just keeps on giving, and become sort of your hard-working portfolio opportunity. But that's why, to think about it, we're going to have to put a bit of resource behind that because it's not synergistic with any of our neurology or immunology.

You could argue there's a tiny bit of pediatric overlap with ecopipam. I don't think so. I'm not -- I don't try to be too precise on synergy there. I want to make sure we get the right launch. But that's also where I think we look at building around the DARI to make sure we have the right sales and marketing share of voice there, but being thoughtful about how much money we put behind it, knowing that it's one that's going to take time.

Great. Maybe switching to TL1A, kind of your crown jewel in some sense of the pipeline. The data to date, both induction and maintenance in IBD, suggests a potentially best-in-class profile, particularly in Crohn's disease. And so I realize this is a highly competitive space, and you all are making limited disclosures ahead of potential developments. But you did recently announce the $400 million Blackstone funding deal, and you're expected to disclose additional Phase II proof-of-concept studies indications later this year. Maybe without spilling all the details, give us a sense of maybe what's happening kind of behind the scenes and how we should think about the pace and the breadth of this development over the next, say, 2 to 3 years?

Yes. So let me start. It's an important question because -- so firstly, ourselves and our partner, Sanofi, feel that duvakitug has massive potential. So let me be really clear on that. That doesn't mean just in IBD. I think we both think it has significant potential there, but we think across multiple indications. So the good thing is we're very aligned on the fact that we think this is -- as a pipeline and a product, and we want to go after it like that. We will be announcing 2 new indications this year and starting them this year. That is the aim. But then we'll have more indications to come.

And that just goes to show that we believe, like some other companies who have a TL1A believe, this is a multiple indication asset. So I think just the ambition we have around this with Sanofi is very much aligned. And I really see us pursuing this in many indications over multiple years. And the good thing about it is it's -- okay, we believe it's very efficacious in IBD, but if you look at its safety and its tolerability, it's excellent. So if any product you're going to move into multiple indications, it's a product that has the profile. And as I speak to Sanofi about it, they have a very similar product in DUPIXENT, which is efficacious and very safe, and that allowed them to go into other indications. So I think we have a partner who understands this. So the ambition is there. We'll probably start to see some news flow on that. But let's not have any question about the ambition of it.

And I'd just remind you, in IBD, I think the market when we launch is now predicted to be between $35 billion and $40 billion, right? And that market is super unsatisfied. You can talk about efficacy, but I think we'll come out, and I think we'll still have either a leading efficacy in both Crohn's and UC, but we'll definitely have the best safety profile and tolerability. We won't have monitoring and won't have black box because, I mean, I think there's already been so many thousands of patients treated with the TL1As.

So I think people are probably discounting where TL1A fits in the treatment path. I think it will be a lot higher up, a lot quicker than people think just because it's efficacious and it's safe. And why would you not do something that doesn't require monitoring and doesn't have concerns about a black box? So I just remind people in IBD, I think, think about the size of the market when we launch in '29 and think about a profile like that.

Great. There's going to be a number of readouts this year from competitors. Maybe most notably, Merck will have Phase III data in UC. And they're also supposed to share Phase II proof-of-concept data in SSc-ILD, which could kind of give the field insights in terms of, I guess, the impact on fibrosis and maybe open up another category for the class. I guess how important are competitor readouts to your guys' development program and strategy? And is there anything that you guys view as particularly important for your program?

Look, I like the fact that they're all doing the work they're doing. I mean, I suppose I think about it, I'm not a scientist, so this will probably make Eric cringe a bit, but I think about our competitors are doing these proof of concepts, I believe categorically, we have the best TL1A by design. So it's by design, it's not just emotional. It's by design. And the level of potency, specificity, and neutralizing antibodies, so it's fact. And that's why you saw the difference in induction and maintenance in UC and CD. So because of that, I look forward to the data being turned over because those proof of concepts, in a way, are proof of concepts.

So as soon as we see those, then -- just to let you know, we have listed out, I don't know, 10 to 15 indications that have the potential scientifically. And whether they all come up, they don't because other things come out, other targets come out and more relevant. So things move around a bit, but there's real scientific rationale. So as these turn over, then I think it will give us a real insight. But maybe then that allows us to think about moving to indications where we know we have the best TL1A. So if their TL1A has good data, we know we're the best TL1A. So that gives us an interesting opportunity.

Great. Maybe now switching to IL-15. You all have your proof-of-concept vitiligo data in the coming weeks. And then celiac disease in second half following your $500 million funding deal with Royalty Pharma. Clearly, you and Royalty have seen positive results in vitiligo already. But maybe walk us through how differentiated a profile we should expect here relative to some of the current treatments in vitiligo, the oral JAKs, for instance? And I guess, what drives your level of confidence in celiac?

So look, I mean, that -- touching on vitiligo. So I haven't seen any data. So we're going to have it in a few weeks, so we'll see that. But the sort of the product profile that we have, the TPP is -- there's rationale to think we'll be more efficacious. But let's just say we are in the boundaries of efficacy that's out there. We're an injection that's once every 3 months. And we have -- and if we have what we believe we'll have is a very good side effect and safety profile. So we're not a topical that has to be applied twice a day. We're not something which has to be monitored or something that may come out with a black box. So every 3 months, we're safe and tolerable and the same efficacy. Now will the efficacy be better? I don't know. But if you just put it like that, I think for a dermatologist and a patient, it's a bit of a no-brainer. I've sold products that are more or less differentiated than that, and there's a real opportunity.

On the celiac, I think we'll see that data in the second half of the year. I think that will be really interesting to see whether this is an opportunity to sort of modify the disease and not just treat the symptoms. And so I think people are now starting to understand how big the celiac market is and how big the opportunity is. So I think that data will be really important. And I think that could -- it's amazing as we've run that study, the level of interest has increased significantly because people don't understand the severity of celiac in the severe patients and how that really destabilizes their life. So I think this is another -- a bit like vitiligo, no one knew about that market, and now they see that as a multibillion-dollar market. I think celiac will be a lot, lot bigger. But we'll have that data in the second half of the year. And I think that will be some really high-quality data with some endpoints that I think will really stimulate the market.

But I would add that in between that, we have a futility analysis on emrusolmin for MSA. So no news, but if it keeps going, there's some news there. We have the Phase III readout of DARI towards the end of the year. We have the PD-1 IL-2 readout in oncology, first-in-human data, the dose escalation study, at the end of the year as well, and we launch olanzapine. So I think we have -- and then we'll launch 2 more indications in duvakitug. So we have sort of 7 readouts and 2 more announcements. So I think from a reposition, we've always said we are transforming Teva from a pure-play, world-class generics company to a world-class biopharma company. I think that's already happened.

When I look at your notes and other people, people are already saying that. But I think this year will be the actual -- the final paragraph that underlines this is a world-class biopharma company and now how do we think about it from a value, how should we value it, how should we value the multiple, what multiple should it be on and what is its earnings going to be, top and bottom line, what is its cash flow going to be in 2030? Because those things will have changed dramatically with Teva in the next few years. And I'd encourage people to look at that.

Great. Well, with that, Richard, thank you for joining us. It's really exciting, and we look forward to all the updates in the coming months.

Thanks, Matt. We appreciate you hosting us. Thank you very much.

Jason Gerberry, I cover biotech and pharma. Pleased to be introducing Teva Pharmaceuticals and Eric Hughes, EVP, Global R&D and Chief Medical Officer. So Eric, thanks for joining us.

Good to be here. Thank you for having us.

So I thought I'd focus the discussion initially just on some corporate strategy matters, and you did recent Royalty and Blackstone deals. And so how should investors think about sort of those deals as a template for the future? You also did your first BD deal as well. So how you're thinking about capital deployment, but also giving up economics on certain drugs to expedite those through development? Are these in part done given you have margin targets and there's a desire to ensure that you deliver on those. So maybe we could start there.

Well, thanks again for having me. And yes, there's a fundamental way in which Teva is approaching our deals. So we have a relatively robust late-stage pipeline with a relatively high POS. So the way to create value is to go at pace. So these deals are really just the way in which we can -- I'd like to say, future-proof some of our programs. We've done deals on 4 of the 5 programs we've got. And what that does is gives us the gun powder to go really quickly. So we've done a deal with Royalty Pharma on olanzapine LAI. We did an Abingworth deal with DARI. We did a Blackstone deal with duvakitug. Now we've done the Royalty Pharma deal with anti-IL-15. And what that does is it keeps us unconstrained on speed. So the teams have really leaned into it. And you can see we've executed on these programs.

There's another fundamental part about that is that acceleration to get the launch a couple of years forward, to get launch going quickly, the value there is far greater than any cost that we're seeing in these deals. So that's one thing. And also, we're sharing the risk. So that -- those deals, they're sharing risk with us. So for us, it's a natural thing we'll lean into. Whether we do more in the future, it all depends, but it's all about unconstraining the speed in which we can develop the drugs.

To that end, right, you have the -- I'm going to botch the name, ecopipam right? So now you've got a launch opportunity in '27. You've got olanzapine LAI, which effectively is launching in 2027. You've got DARI, which launches probably sometime in '27 as well. I don't know if this is by design, but are you kind of like leveraging these deals to have a new indication or a new drug that launches every year through the end of the decade?

Yes. So I mean, just to sum it up, that's with ecopipam added to the list, that's 5 submissions in the next 5 years. So that's a fantastic runway on relatively derisked programs. So yes, the deals help just executing that with speed. And so we don't have to worry about any ups and downs in our budget. We're just moving quickly because that's going to generate the vast majority of the value on these programs. It's frustrating to see in my prior lives prioritizing programs. If you have to prioritize your programs, there's programs you shouldn't be doing. So we know that these programs all should be moving forward as quickly as possible.

Okay. There's a lot of focus on the upcoming IL-15 data that you're going to have for vitiligo. That's -- remind us that's a Phase I study, single-arm where you'll be looking at -- basically, the clinical endpoints are VASI based on face and body. But maybe if you could just educate us a little bit in terms of what you can glean from these single-arm studies? Are these proof of concept in your mind that inform pivotal study as a next step?

Yes. Yes. So the anti-IL-15 program for vitiligo, there's a lot to unpack here. The first thing I'd say is it's a great opportunity for our molecule. When we compare our molecules to others out there in the competition, we believe we have the most potent. It has a half-life of 38 days. We were focused on every 3 months giving a dose, a subcutaneous dose every 3 months. So there's a large convenience factor for the potential in vitiligo. Now getting to vitiligo, vitiligo, I think, is an underappreciated indication. This is more than 3 million people in the U.S. and the EU right now. And in my experience in dermatology conditions, patients are motivated. And although maybe vitiligo is underappreciated now, it's just like psoriasis 15 years ago where people didn't think there was any need for treatments there, and that's grown into a massive market.

So I think there's a great opportunity here. Patients are motivated. And when it comes to the anti-IL-15 program, there's only been one molecule approved. It's a topical JAK that can only treat 10% of your body and vitiligo is a whole body disorder. So systemic therapy is what's needed. There's oral JAKs that are being developed right now. That's a daily pill you take and there's the baggage of the JAKs with their profile. So we come in, I think, with a very good option for patients where you have a good safety profile with -- we hope, good efficacy that's going to be stacked up against the JAKs, but then there's a convenience factor after that. So if you get a very well-tolerated, safe treatment with a subcutaneous shot every 3 months, you're now treating those patients who need systemic therapy conveniently.

So the study is a proof of concept. It's 24 weeks. In those 24 weeks, you get only 2 shots of our anti-IL-15 one on day 0 and one at 12 weeks. And we follow them for the normal endpoints, the facial VASI you mentioned. So facial VASI 75 is the regulatory endpoint and the total VASI -- and the patients we brought in the study are very similar to the patients you see in a normal registrational program. So you have a certain level of facial VASI at baseline and a certain amount of total body. And that's important because the topical that's out there was targeted really to a more mild population. These systemic therapies are now at the moderate to severe level.

Your comment about like comparing this to psoriasis and maybe 20 years ago, psoriasis. I'm curious how well in the medical literature is segmentation characterized for those with more moderate-to-severe disease or perhaps a facial component to disease. I imagine these are going to be the most highly motivated to seek out systemic treatment. So I wonder from that 3 million, is this 20%? Is this 50% that have this perhaps more severe disease phenotype that would be motivated to treat?

Yes. I mean I can't give you a number today. But as we've seen, that will progress. The more disease awareness there is, the more that people learn that there's treatments, the numbers just keep growing. So it will start, obviously that people who are most disturbed by the facial things that you see in your hands and your arms are also disturbing the patients. But that number will continue to grow in my experience, where it will be probably a bigger market than we anticipate right now.

I think psoriasis is 30% on advanced therapy. So that could be potentially a proxy for 1 million patients?

Yes and that's how it starts. Yes. So the more severe, you can use that as a proxy, but then you'll see the more moderate people look for treatments.

So 24-week endpoint, that's about halfway through what will be a Phase III endpoint, which would be a full year. Can you talk a little bit about how this disease manifest over a 52-week period. Is it more of a slower onset. It takes time to accumulate to show clinical benefit in a clinical trial. So what I'm asking ultimately is what can investors -- how to think about 24-week data and stacking that up in terms of the clinical benefit. Other drugs see at 24 versus 52 week?

Yes. So yes, traditionally, in this disease area. So to start off with, actually, that's one of the nice things about this indication. It's a very clear pathway to registration. It's been shown how we do this. We know what we have to do. So if you're in a good molecule, you can move quickly. So traditionally, you do about 24 weeks in your Phase II, so you can get your signal, get an idea of where you're going. But to your point, it does continue to get better in general. When you look at the JAKs and you look at the topical JAKs, and it gets back to the disease mechanism.

So vitiligo is a destruction of the melanocytes that produce the color in your skin. And when you shut down the T cells that are causing the destruction, it takes time for those monocytes to then repopulate the skin. They usually grow out from the follicles and then repigment. So there's probably going to be a defined theoretical rate at which it gets better. So although Phase II is a 24-week readout and you should see an effect by 24 weeks, it will continue to get better at 48 weeks as those melanocytes continue to repopulate the skin. So we expect that to happen as well.

Okay. So I imagine there's going to be a desire for investors to benchmark this to upadacitinib, which is the oral JAK that's out there. And so does an oral JAK work faster on this disease versus, say, how IL-15 might work? And so -- because that could be relevant to how you look at 24-week data.

Yes. So that's a good point. There's a total difference in the activity of these different classes. So JAKs are more immediate, fairly broad suppression of the immune response. IL-15, the cytokine is a key cytokine in the way that vitiligo and celiac disease behave. IL-15 is driving the expansion and the migration of these intraepithelial lymphocytes into the skin. So while JAKs is a daily suppression in a broad sense of the inflammation, IL-15 could be considered potentially in the future as a disease modifier where you're blocking the cytokine that's driving those pathogenic cells into the skin and then preventing them from being resident in the skin. So you're stopping the cells from even being there. So that could be more of a long-term effect potentially, but it could be really modifying the disease pathology. So they're very different and IL-15 is a little bit more targeted in the way that it's going to be treating vitiligo.

Okay. So a couple of quarters ago, there was the potential to file this if everything went well 2031 to 2034, now it's 2031. So I'm wondering is what's changed now being 2031? Is it that you feel more confident about the data and how fast you can recruit a study because people will be excited about what the drug offers? Or is there something different about how you're thinking about trial design that could be faster?

Yes. So I think that's all of the above. And I think that the key thing is that we hit an inflection point where we have a very extensive Phase I program for this molecule that we've been running. We've been running proof-of-concept studies in celiac disease, and we're seeing the biomarkers we need to believe and we're confident in the dose and the exposure. We have defined the PK/PD when you're looking at free IL-15, which we measure uniquely in this program as well as the NK cells. So we have a very good idea of the dose range that we need to interrogate and like you had alluded to, vitiligo is a very clear pathway. And the endpoints that we see in the absence of any safety issues, we can move very quickly here, knowing where we need to go. So it's a totality of the data we're seeing and the confidence we have in the pathway forward. And that's largely why we structured the Royalty Pharma deal on vitiligo because it's something you can easily calculate.

Okay. And then you also have celiac as an indication to develop for this drug. And does the royalty deal contemplate financing for celiac? And the -- I think the trial that's ongoing is a gluten challenge type of study. So what can be gleaned from that? I know investors will look to with this mechanism, Amgen had a less potent drug that didn't work in the clinic. And how much confidence you can glean from this type of study? And I believe that the measurement you look at is what villous atrophy efficacy measure. Is that a registrational endpoint?

Yes. So yes, there's a lot there. And you're right, we based the deal with Royalty Pharma on the vitiligo, but the long-term payout, it does include the total package of IL-15. But getting to the disease itself, celiac disease and vitiligo are very similar in the driving characteristics. So you can think of the skin as the outward-facing epithelium and the gut is the inward-facing epithelium. And it's these T cells that the IL-15 are expanding and driving to these surfaces. So there's a lot of overlap. In fact, many -- there are a certain number of patients who have both diseases at the same time. So there's a lot of evidence that our anti-IL-15 is working in both of the diseases. I mentioned that we're very potent, have a great half-life.

But we've also done a lot of preclinical work, especially in celiac disease where we actually looked at nonhuman primates where 1% of those animals actually generate celiac disease. And we've done some great preclinical work with the molecule that shows that you can block the migration of those pathogenic cells into the epithelium, reverse antibodies and actually really protect their gut. And we're seeing -- we saw that in our first proof-of-concept study with our celiac program, where looking at a biomarker called FABP, fatty acid binding protein, we protected the gut from actual insults with the molecule. And in fact, over time, if you overread the data a little bit, you can actually think that we are treating an underlying smoldering celiac disease patients had. So that was a really strong biomarker data and the first proof of concept.

But the second one that we'll read out in the second half of this year is a placebo-controlled proof of concept and 50 patients, and we're looking at biopsies of the gut, at the baseline and 8 weeks after a 6-week challenge with 3 grams of gluten. So that will be a great proof of concept showing that we can achieve that regulatory endpoint to answer your question, both you want to show gut histology changes and you want to show patient-reported outcomes in a Phase III study. So those 2 things will have a very good sense going into Phase II and III with celiac after this study.

Okay. I'm realizing that my entire discussion guide is all about your branded efforts, but I wanted to step back and just ask how are you spending your time between the branded R&D effort versus the generic R&D effort? And as we think about Teva, which has a lineage in generic pharmaceuticals, I'm just sort of wondering where the R&D effort really is being put? Is it more of a selective approach? In this year, Revlimid coming out of the numbers, right? You rebased your U.S. generics business, which is very small now as a percentage of your total business. But I just wonder on the go-forward R&D operation and where you're spending your time, just curious if you can kind of frame that.

Yes. So the fun thing for me is I've got all of it under -- in my shop in R&D. So I've got a Head of Biosimilars, I've got a Head of Generics and I've got a Head of Innovative Medicines. And it's been a great experience over the last 3 years because one of the things I found -- I always kind of thought this was true, but I really have found that there's a lot of synergies that we get out of the knowledge base from our generics work from our biosimilars that we apply every day to our innovative group. So I will say this, I've been saying this for 3 years. We have one of the best device groups I've ever seen. I've been in a lot of big pharma companies. This group really knows how to make devices. We actually can make other people's devices better.

We have extraordinary formulation capabilities. And you throw that on top of this wonderful discovery we have in Sydney, where they make excellent antibodies. They can protein engineer anything. So when I have a problem on formulations, frequently, I don't go to my innovative head. I go to my generics head. If I have a device problem, I talk to the generics guys. And the production and the biologics capabilities that we have from biosimilars and our knowledge base there can easily be applied to all these programs. So there's a lot of synergies for me.

If I could squeak in one generics question then, right? Like when we think about the GLP-1 opportunity, right, there's seemingly some parallels to insulins in my mind, right? So basal insulins, price came down, no generic could ever be sold at scale at the pricing that was where it evolved to. The concern with GLP-1s is that pricing is coming down and is expected to come down even more such that when sema or tirzepatide is available generically with the patents, can you make money in that business and put all the money into making that at scale? So where do you guys stand? You've never went after insulins as it pertains to GLP-1, which is the hot topic within generics.

Yes. So I mean, I'll just kind of speak off the [ culture ] here a little bit about GLP-1s. We've actually gotten the first GLP-1 generics approved. I think that's a very strong business case for us to move forward, treating them as generics. I know we got a lot of questions 2 or 3 years ago about you should getting the GLP-1s, you should be innovative in that space. We consciously didn't do that, and that was actually an excellent decision because a lot of the investment we would have had to put into a GLP-1 program would be taking away from the opportunities we have in all this other pipeline. So I think I'm happy to look back and say that was a great move. We played the way we should play in GLP-1s, and that's what we'll do.

Okay. Let's shift gears to your TL1A program and really good data, maintenance data in both UC and I don't think you have the maintenance data yet in Crohn's, but you have the UC data.

We have both.

Okay. Maintenance and both. Now as we look ahead, there's a couple of dynamics playing out. We're seeing competitor combinations in the I&I world and Merck has Phase III data for its TL1A. So where is your focus in terms of development and thinking ahead to like the next step because I&I is a very dynamic marketplace. And so do you think single agent has a pretty viable opportunity in front of it? Or do you see kind of the space evolving more to combos and you want to like establish a solid monotherapy profile and then ultimately playing for combinations?

Yes. So I'll start off by saying I&I is a great space to be in. I mean it's got one of the largest growth potentials of all therapeutic areas, so does neuroscience. So our focus at Teva in neuroscience and I&I is a great place to be. And we've built a lot of muscle now, not only in the development space, but in the commercial space as well. So getting on to what the opportunity here for duvakitug is. I'll start off with the basics. The fundamentals are great on duvakitug. We think we have the most potent TL1A. We have the most selective TL1A. We have the lowest antidrug antibodies that have been reported out there right now. We had numerically the best induction data in both Crohn's and ulcerative colitis in the TL1A space. And now we just showed the maintenance data as our first milestone this year, again, showing numerically very high numbers, not only best-in-class, potentially best in disease.

So the opportunity for monotherapy for duvakitug is big. We're great to have the Phase III studies going with Sanofi. They're ahead of schedule on the enrollment at this point. We're going to continue to press making sure that we launch on time and within the pack. I think that ulcerative colitis will be in the magical 18-month window of launch. We will also probably be maybe second in the Crohn's disease space. So we're right in there. And I think at the end of the day, efficacy is king. So I'll answer your question about combination therapies, but monotherapy has so much to be shown to show going into the launch of this new class of drug. It's a totally new biologic class because remember, people with Crohn's disease and ulcerative colitis frequently, about half of them fail their therapy after 1 year. And this is a chronic disease.

There's over 4 million people with IBD, and they're all cycling through therapy as they fail. 20% of ulcerative colitis still get surgery, 70% of the people with Crohn's disease are still getting surgery. So there's a lot we can do for these people right now with a new monotherapy class. So that's a focus. Having said that, looking towards the future, I'm a guy who always believed in combination therapies across multiple therapeutic areas. I think there's a lot of opportunity there. As we bring together different classes, TL1A actually right now looks like a great class to combine with because the safety profile is strong at this point. And if that continues, combining it in different ways is a great idea.

That's all envisioned within the Sanofi partnership. If you were to, say, advance a molecule with bispecific properties that targets both TL1A and say, integrin or some other common mechanism. Is that all envisioned and that would roll up within the Sanofi partnership?

So we're free to do that. And they're actually doing that, and we're actually doing it as well. So it's actually a pathway we both can interrogate. And to be honest, our group in Sydney is very good at it. We're filing an IND for TSLP and IL-13 at the end of this year. And that knowledge base and our ability to combine these different drugs. Remember, we make all these biosimilars, too. We can bring many things together very rapidly in a very robust plan.

Just want to be clear here. So if Sanofi were the one to develop it, right, would that be a risk to you now that they can move forward with their bispecific? Or is that envisioned within the partnership? And...

I don't want to get into the details of partnership, but there's freedom to operate, yes.

Okay. Maybe -- with respect to Phase II proof-of-concept studies, where are you guys at in terms of exploring other indications? I know some competitors are. If you can just remind us where the effort is.

That reminds me of IL-15 too, but I'll do TL1A first. So we've already have our plans together for the next 2 indications with Sanofi, we will be announcing it probably later this year. But the way we approach it is for TL1A, I mean, it's so interesting this class where it's an amplifier of many different cytokine pathways. It's not just hitting one, it's an amplifier. So the potential is in -- we call it T2s, non-T2 or even fibrotic disease areas because this is also a unique class and the fact it has a direct potential impact on fibrotic cells. So that's something we always kind of hoped anti-inflammatories would do, but this one has a potential direct effect. So we bucket them in those big categories, and we're going to be choosing our indications in a way that follows the science, has the biggest market potential, maybe builds the label as broadly as possible and as quick as possible to develop.

Okay. Your alpha-synuclein, the oral agent, it's easier to say than emrusolmin.

Emrusolmin, that's correct.

So you got a Phase II futility analysis later this year. And so it's a really tough-to-treat population. It's been a great drug for drug development for others. And so I just wonder the significance of surviving a futility analysis, right? Because we should expect the control arm, the placebo group to pretty rapidly deteriorate. So if you can survive a futility analysis, can you speak to that and how that derisks this maybe versus other disease categories where you survive a futility analysis?

Yes. So there's a number of good points you made there, and it starts with the disease area itself. So it is a very rapid disease. You can see these people decline very quickly in a study. There's some differentiating factors here. I think that you mentioned it being a kind of a graveyard for drug development. I think that we have to make better molecules. And I think emrusolmin is the first molecule, which is a small molecule. It's brain penetrant, and it gets to the very genesis of this alpha-synuclein protein aggregate. It blocks it at the very beginning. It's not an antibody that's trying to mop up the stuff that's been released and is killing other brain cells. So it's great that we've seen some trends in efficacy with antibodies out there, but I'm hopeful that a small molecule that gets to the very upstream genesis of the problem could have a significant impact.

But again, this is a high unmet medical need. They progress very quickly. The futility analysis will tell us whether we're in the game. So I wouldn't belittle it and -- but we're moving very quickly. We're making sure that this study is as robust as possible with big sample size because if it hits, this would be the one -- my regulatory guy and I say all the time, if it works, we'll be the first one to ask for accelerated approval because these people need treatment desperately. 50% of them are in a wheelchair at 5 years, most of them have passed away by 10.

So the injectable options, which are RNA targeted and I believe there is some antibody approaches.

There's RNA targeting, there's antibodies and there's actually also an iron chelator, I think, out there.

I don't think the antibodies are using any sort of brains shuttling technology. The RNA-targeted questionable as intrathecal injections, whether they're crossing -- getting in the brain, right? So the premise here that an oral agent is the best approach to crossing blood-brain barrier and achieving target knockdown, which you can't measure in a clinical setting.

Yes. So you're pointing out all the challenges of this disease area right now and why a small molecule that's brain penetrant is really -- has the potential to have hopefully the greatest impact. All the other ones have a challenge. Certainly, antibody penetration across the blood-brain barrier is a challenge. And that has a long way to go.

Okay. Well, looking forward to the update there. You also have Phase III data in asthma for DARI, a program that doesn't get a lot of discussion.

I'm glad you brought it up.

It seems very derisked, right? You take a steroid and a SABA and we've got validation for that approach from AstraZeneca's AIRSUPRA. Maybe talk a little bit about your Phase III design, how it's different and how you see your approach is ultimately differentiated versus AIRSUPRA?

Yes. So I really like this program because it illustrates a lot of the great things that we can do at Teva. Teva makes a lot of inhalers. We're very good at developing them. They're a lot harder than you think. And this actually DARI inhaler epitomizes what we do best. And we put 2 drugs in a dry powder inhaler, advanced technologies. It makes a device that's very easy to use. You just click it open and you inhale whenever you want and close it up. This is in contrast to an MGI, metered dose inhaler, which is the typical spray that you inhale -- you have to inhale and coordinate at the same time. And sometimes you have to use a big spacer if you're a little kid and you can't inhale, right? So it really is a convenient device.

It doesn't require a lot of cleaning. It's easy to use, and it's particularly well suited for kids. So getting to the study, which is a great, big study that Teva is running that's got pediatrics, adolescents and adults in it. So it's probably the biggest study that had all 3 patients population in it. It will get us a good label because remember, 25% of the entire population is pediatrics, and you'll have a great device. So we'll let the market be developed by our competitors, but we'll come in, I think, with a better label and a better device.

Where are the guidelines now on ICS/SABA?

So that's actually -- I'm glad you brought that up. This is the first time I've ever launched or developed the drug -- in the guidelines. So that's a great place to be.

[Technical Difficulty]

Well, we're at time. Thank you Eric for joining us.

Thank you very much.

Hello, and welcome to the Teva Pharmaceutical Industries Limited Q1 2026 Earnings Conference Call. My name is Alex. and I'll be coordinating today's call. [Operator Instructions].

I'll now hand it over to Chris Stevo, SVP, Investor Relations. Please go ahead.

Thank you, Alex. Good morning and good afternoon, everyone. Thank you for joining us on our first quarter call. I'd like to note that before we posted our press release this morning on earnings, we also posted a press release on the Emalex transaction as well as the slide deck relating to that transaction. And you can find those materials in the same section as you can find our earnings materials.

Before I turn the call over to our CEO, Richard Francis, I want to remind everyone that we will be making forward-looking statements on this call. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance.

Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described in our earnings press release and our most recent 10-Q and 10-K filed with the SEC. Any statements we make are only as of today, and we undertake no obligation to update these statements subsequently.

With that, Richard Francis.

Thanks, Chris. Good morning and good afternoon, everybody. Thank you for joining the call. On the call with me today will be my colleague, Dr. Eric Hughes, Head of R&D and Chief Medical Officer; and Eli Kalif, the Chief Financial Officer.

So starting with, as I always do on the Pivot to Growth strategy slide. And we launched this Pivot to Growth strategy 3 years ago, and it's based on 4 pillars: deliver on your growth engines, step up innovations, sustain generics powerhouse and focus the business.

And as you will see through the rent presentation today, we've made great progress across all of these pillars. On deliver your growth engines, you'll see AUSTEDO and UZEDY and AJOVY continue to drive good, solid growth. Step up innovation, you'll hear from Eric about the exciting pipeline we have and some data readouts and milestones we have this year. Our sustained generics powerhouse, you'll see the growth to start -- to see the growth of the emergence of our biosimilar portfolio and lastly, focus our business. You'll see that we remain dedicated allocating our capital to the highest return opportunities.

And Eli will walk you through some of this and also give you an update on the organizational effectiveness work we've done and how we are on track to achieve our $700 million of savings in 2027. But before I do that and to pick up on what Chris has just said, I'd like to talk a bit today about the announcement we made on the acquisition of Emalex Bioscience. This is the first acquisition under the Pivot to Growth strategy. And with this acquisition of Emalex we take ownership of ecopipam, a first-in-class asset with compelling efficacy and favorable tolerability in Tourette syndrome.

Now to let you know a bit about Tourette's. This is a serious life-altering pediatric neurological disorder with limited good options today. So this is a market of serious unmet medical need where current therapies really do not satisfy the need. They either have efficacy, but have challenges with tolerability or they don't quite have the efficacy, but they have the tolerability profile. That's because of that failure, that only about half of patients are actually treated and a few of them, 1/3 stay on therapy after 1 year.

So we see this as a clear opportunity to help patients expand the market, something we have successfully done with AUSTEDO and UZEDY. And as you know, we have strong CNS capabilities at Teva, whether that's in sales, marketing, market access, patient services, and we believe leveraging these will help drive penetration and growth. It's well noting that this transaction is highly aligned to our Pivot to Growth business development strategy.

ecopipam has a derisked mechanism, strong pivotal data, no major development overhangs and orphan dynamics that support attractive pricing, to ensure this is a high-quality, value-accretive asset that accelerates our shift towards innovative revenue and profitable growth without compromising our balance sheet discipline.

Now I'm just going to just give you an insight into the next slide, the treatment landscape because this will explain why we're so excited about ecopipam. Patients generally start on behavioral therapies. And if these fell, families are left with difficult choices. They either have alpha-2 antagonist, which are generally safe, but maybe do not offer the efficacy for many patients.

The next step is antipsychotics, which can be effective, but come with meaningful metabolic and neurologic side effects that lead many families to discontinue or even avoid them all together. I think we can understand there would be a real hesitation in putting a 10-year-old on an antipsychotic for the next decade. That is not a sustainable long-term solution for a chronic pediatric condition.

ecopipam changes that equation. It delivers meaningful efficacy with a good side effect profile, positioning it to become a preferred late-line therapy, and we fully expect pricing to reflect that value.

Now on the next slide, you'll see some of the transaction details. Now I'll leave this for Eli to go through in more detail. But one area that I want to highlight is that the asset carries a gross margin significantly above our corporate average and that it has no impact on our ability to hit our 2027 targets and those beyond.

Now with that, I'm going to move into the quarter 1 results. So we had a good start to the year, solid performance driven by continued strength of our innovative portfolio, and you'll see the growth of AUSTEDO, AJOVY and UZEDY in a couple of slides. Our revenues came as expected, down 1% or up 7%, excluding both the Japan divestment and including generic REVLIMID.

It's great to see that we are able to mitigate the decrease in generic revenues also as planned and as I shared with you in the past few months. So the figures. Revenue down 1%, as I said, at $4 billion, adjusted EBITDA up 2%, reaching $1.1 billion, non-GAAP EPS grew 2%, reaching $0.53. Free cash flow grew 76%, reaching $200 million.

Net debt to EBITDA is now at 2.42x. It's worth noting these all compared to Q1 2025. But let's double click and go into a bit more detail on what's behind this $4 billion. As you can see, strong growth of our innovative portfolio. All of these grew 41% instead of -- in coincidence we also grew 41%, up to $578 million. UZEDY's strong performance, up 62% at $63 million. And AJOVY also performed well, growing at 35% to $196 million. Our generics revenue performance was as expected, down 13%, excluding Japan, or flat, excluding both the Japan and generic REVLIMID.

Now I want to walk you on to the next slide. I think this is a really interesting slide. This shows the transition that's been taking place at Teva from a pure-play generics company to a world-leading biopharma company. And as you can see, this is pretty significant and the speed of change is significant. Since 2022, the amount of revenue that's been driven by our innovative portfolio is up from 9% to over 20%.

And as you can see by this slide, we continue to see this grow to 2030 and beyond. What is an important aspect that I always draw people's attention to is the gross margin and how our gross margin is fundamentally changing at Teva because of this portfolio shift. And as you see in 2030, we anticipate a gross margin of above 60%.

Now let me dive into the individual products, starting with AUSTEDO, another strong quarter in -- for AUSTEDO in the U.S., reaching $559 million, up 41% year-over-year, with global results marrying that growth. Now growth has been driven by a combination of TRx, where we had a 13% growth and milligram growth of 20%, reflecting new patient growth and improved adherence. We continue to see the benefit from the shift towards once daily AUSTEDO XR, which now represents over 60% of new patients.

And it's clear that the convenience and simplicity of AUSTEDO XR are proving to be major drivers of the franchise durability. It is worth noting that as we talked about in Q4, where we had some buildup of inventory in the channel, that has not all been drawn down in Q1. Now for AUSTEDO, we're reiterating our guidance of $2.4 billion to $2.55 billion for the year.

Now moving on to UZEDY. Q1 performance for UZEDY was strong with revenues up 62% year-on-year and underlying growth driven by continued prescription growth of 75% TRx. Now this all reflects the fact that we have a very strong product profile, subcutaneous, low volume, no loading dose between therapeutic levels within 24 hours. But it also highlights the excellent commercial capabilities we have in the United States.

Now I'm pretty proud of some numbers that I'd like to highlight. So since UZEDY has -- was launched, it's nearly doubled the market share of risperidone LAI from 5% to 9%. Now this is a massive accomplishment to drive such a change in what has been a static market for so long. So congratulations to the team. We also now to see expansion into the combined market of Risperidone and [ paliperodone ] LAIs.

It's worth noting that UZEDY is positioned as the of LAI choice with over 86% of its NBRx is coming from patients transitioning from orals and those who are naive to antipsychotic drug therapy. And once again, we are reiterating our guidance for the year.

Now I can't talk about UZEDY without talking about the upcoming launch of olanzapine, where we're very excited about this. Now let me explain why we're so excited. Well, the significant global opportunity is clear. Olanzapine currently holds 19% of the oral market, but lacks a viable long-acting options for a patient population that would meaningfully benefit from one.

Second, as I've just described with UZEDY, this is an area where we will have clear synergies, sales force, market access, MSLs, patient services, et cetera. But more than that, we have real know-how the team has built up know-how over the last 3 years with UZEDY. And as you see on this slide, the investigator excitement is palpable. People are really looking forward to the launch of this product as there is a clear unmet medical need.

Now moving on to AJOVY. AJOVY is a great example of how well we execute commercially innovative products globally. And despite being a late entrant to the crowded CGRP injectable market, AJOVY has steadily grown consistently outpacing the overall injectable market, as you can see from the figures on this slide. Where we launch, we generally end up as what -- #1.

And as you can see on the slide, Q1 growth was driven primarily by the U.S. and ex U.S., Europe, particularly where we had market share gains, volume growth and valuable growth when it comes to access. Now moving on to our pipeline. I always struggle not to talk about this in great detail because I know Eric likes to talk about it, but I am excited about it.

What I will just say is, we have 7 milestone readouts this year. We always started the year with duvakitug maintenance data which we thought was excellent. But now we're going to have the anti-IL-15 vitiligo data in Q2. And then in H2, it's really a lot of data readouts coming through, whether that's the futility analysis on emrusolmin, whether that's the anti-IL-15 data and celiac disease, whether that's the DARI conclusion of our Phase III results, whether that's the launch of olanzapine LAI or whether that's the first in human PD-1 IL-2.

But the worth noting is that these will all add up to over $10 billion of peak sales. Now moving on to our generics business. Moving into the third pillar of our Pivot to Growth strategy. This performed as planned. Global generics were down 13%, mainly due to generic REVLIMID or flat if you take out generic REVLIMID.

Now looking at the U.S. we were down 28% or up 10% excluding REVLIMID, and this increase was driven mainly by the higher revenues from our portfolio of biosimilar products. EU was down 1% due to seasonality of some of our products as well as launches and international markets was down 9%, excluding Japan. Now as I've just mentioned, the generic growth in the U.S. was -- has now started to be driven by our biosimilar portfolio. So let me give you sort of a review of where we are.

We currently have 11 biosimilar products on the market, 4 more, which will be covering $16 billion of originated brand sales expected between now and 2027 and another 9 more after that, covering $58 billion of originated brand sales. So what does that mean? It means we have increased our portfolio by over 50% in the last 3 years, and it's starting to have a meaningful impact on our generics business.

It is worth noting that we start to be launching biosimilars on a regular basis in Europe. So to conclude and before I hand it over to Eric, I want to reiterate our 2027 financial targets on the Pivot to Growth journey. Revenue mid-single digit, non-GAAP operating income of 30%, net debt to EBITDA of less than 2x and cash to earnings of 80%.

And with that, I will hand over to my colleague, Eric.

Thank you, Richard. And as Richard mentioned, I do like to talk about this slide for 2 good reasons. One, there's a big impact we can make for patients across a number of different indications. And two, this represents 4 submissions over the next 5 years. And when the deal closes for the Emalex deal, that would be 5 submissions in the next 5 years, a real accomplishment for the teams at Teva and the R&D group, and we're very excited about this future potential for our pipeline.

First, I want to talk about olanzapine LAI. I have a little bit of a late-breaking announcement. We just did our EU submission just yesterday and we'll be looking forward to the validation of that acceptance by the EU in the coming months. So very exciting. The team did a great job at accelerating that submission. And as you know, we've done the submission for the FDA back in December, and we believe the process of the review is going as planned, and we're looking forward to that approval by the end of this year.

Now on to the dual action rescue inhaler program, our DARI program in Phase III. I'm very excited that we've now completed the enrollment of the large Phase III program called FLAIR. This is -- we enrolled over 2,700 patients. And more important thing about this large study is we have a very large sample size of both pediatrics and adolescents in this study, which is a very important component of this program because 25% of the patients with asthma are pediatrics and adolescents.

And our unique dry powder inhaler is uniquely positioned to be really advantageous for this patient population. I'm also happy to report that over 60% of the events had occurred at this point. So we're on track for end of the year completion of events for this study.

Moving on to our first milestone that we announced in our press release back in February for duvakitug. That was our maintenance data. And just as a review, remember, this study looked at ulcerative colitis and Crohn's disease patients with an induction period of 14 weeks and they rolled over into a maintenance period for 44 weeks.

Now maintenance is very important because this is a chronic disease and patients who suffer with it cycle through therapies frequently. So having a drug that can maintain its response and continue on for years is very important. So we were very excited to see that the data at our 44-week time point showed great maintenance. We had ulcerative colitis patients maintaining 55% on of their -- or 56% of their response at 44 weeks for ulcerative colitis.

And for Crohn's disease for the endoscopic response, they maintain 55% of that response at the high dose. And it's also nice that we had a dose response between the low and high dose. And that you should remember, this is given subcutaneously every 4 weeks from maintenance. So patient-friendly and good results.

But how does that compare? We're excited to see data here that we think is best in class. But when you look across the entire landscape, this has the potential to be best in disease. So you can see that our numbers stack up favorably when you do a cross-study comparison against, TL1A is in development, anti-IL-23s that are approved and the JAKs that are approved. So favorable. We're very hopeful and excited to see what the results of the Phase III program look like.

So the fundamentals of duvakitug are very strong. The antibody has high potency, high selectivity and immunogenicity. We've shown in our induction data that we have very favorable results of that 14-week induction period, all given subcutaneously. And the safety profile continues to be strong and favorable. And then we've recapitulated those results with strong maintenance data out to 44 weeks now, again, with good safety, with Q4 dosing and all subcutaneous, so the fundamentals are there, and that brings us to the last slide on duvakitug the Phase III study.

We're working very closely with our partner, Sanofi. I'm happy to report that the study is on track and has started well, and we're looking to accelerate this program. The SUNSCAPE and STARSCAPE programs, I think, will be incredibly important for defining this class of molecule.

Now moving on to another Teva born and raised antibody from our labs in Sydney is our anti IL-15 program. This program is now currently in 2 proof-of-concept studies for vitiligo and celiac disease. The exciting thing about this molecule, similarly to duvakitug. It has the potential to be approved someday in multiple different indications. So we're looking at vitiligo and celiac today with alopecia areata, atopic dermatitis and eosinophilic esophagitis are all possible things in the future for this molecule.

And just as a review of what we're expecting this year, we have a proof-of-concept study running in vitiligo. One thing to take away from this study, which it should emphasize, what I think will be a potential great product profile is the fact that we're running a 24-week study, but only has 2 shops given subcutaneous once at day 0 and once at week 12. And then we'll have a week 24 readout for the VASI score, which is the endpoint for registration in vitiligo. Those results will be coming out at the end of this first half.

And then in the second half, our celiac disease program will read out. Again, showing the product profile, this is a single-dose study with a readout after 12 weeks of therapy. And here is a classic proof-of-concept study where we give a dose of either active or placebo, and we challenge the patients with 6 weeks of gluten, about 3 grams per day. So -- and then at 8 weeks, we will get the biopsy.

And what we'll be looking at and reporting in the second half is the protection of the gut from damage according to the villous height-to-crypt depth ratio on an endoscopic biopsy. So a very exciting program. I think moving forward to the data, and that's going to be the first half for vitiligo and the second half for celiac.

And finally, the last program I want to just mention because I think it's such an important indication for multiple system atrophy, our emrusolmin program. This is a differentiated small molecule, brain-penetrant molecule that attacks the alpha-synuclein at the very genesis of the pathogenic aggregations.

We're on track. The enrollment is going very well. In fact, we're going to over enroll this study to make sure it's robust, while keeping at arm time and we're on track for the futility analysis at the end of this year. Again, we have orphan designation and Fast Track designation from FDA.

So I'll just want to end with our very exciting slide about the milestones that we're achieving this year. First, I mentioned to duvakitug readout in maintenance, we thought there was great data showing the value of duvakitug. The anti-IL-15 program mentioned the vitiligo in the first half readout and then celiac disease in the second half. The DARI program fully enrolled Phase III program on track for the final readout and final exacerbation by December.

Emrusolmin, we're on track to the futility analysis. The olanzapine LAI program is under FDA review now, and we did our submission just yesterday in the EU. And finally, we'll be having IL-15 -- PD-1-IL-2 data at the end of this year. So it's a great year. I appreciate all the work that's being done in R&D and the extra effort everyone is putting into this.

And with that, I'm going to pass it off to Eli Kalif.

Thank you, Eric, and good morning and good afternoon to everyone. I would like to start my review of Q1 '26 results with the following key messages: First, we started the year with a solid first quarter results driven by continued strength in our innovative portfolio.

Second, the increasing mix of our innovative revenue, along with our transformation programs give us the confidence to improve margins throughout 2026 and on track to achieve our 30% operating margin target in '27.

Third, we continue to monitor the geopolitical situation in the Middle East. Our operations remain uninterrupted with no material impact on our 2026 guidance.

And lastly, our capital allocation strategy remains focused on driving our pivot to growth strategy and creating a shareholder value. The agreement to acquire Emalex and the potential share buyback program reflects our ongoing commitment to the disciplined approach for capital allocation.

Now moving to Slide 35. Before I start with the results, I would like to remind everyone that our Q1 '25 financial results included approximately $75 million revenue contribution from the Japan business venture which was divested on March 31, 2025. For like-to-like comparison, I will exclude the contribution of this business from last year when discussing our financial results for this quarter.

Now starting with our Q1 GAAP performance. Our Q1 revenue were approximately $4 billion, up 4% in U.S. dollars or down 1% in local currency compared to Q1 '25. Our key innovative product, AUSTEDO, AJOVY and UZEDY continued to show strong momentum, largely offsetting lower generics due to the loss of revenue from generic REVLIMID that we had expected.

GAAP net income, EPS were $360 million and $0.31, respectively. Turning now to our non-GAAP performance. Our non-GAAP gross margin in Q1 '26 was 52.9%. This gross margin performance was better than our expectation, mainly driven by continued strong growth in our key innovative products and a favorable product mix within generics.

Non-GAAP operating margin decreased approximately 50 basis points year-over-year to 24%, mainly due to higher planned investment in sales and marketing to support our innovative growth. Overall, we ended the quarter with a non-GAAP EPS of $0.53 compared to $0.52 in Q1 '25. Our free cash flow in Q1 was $188 million, up from $107 million last year. As I shared on our previous earnings call, our Q1 '25 results included approximately $300 million revenue contribution from our generics REVLIMID. Excluding this contribution, and the divestment business in Japan, our revenue increased by 7% in local currency and adjusted EBITDA by 28% in Q1 '26.

On Slide 36, I would like to remind everyone of the margin trajectory I showed last year in May and how we plan to go from approximately 26% operating margin in '25 to our 30% target in '27. This represents approximately 400 basis point improvement over 2 years, driven by our continued portfolio shift towards high-growth and high-margin innovative products as well as $700 million of cost savings expected from our transformation program and despite the impact of losing revenue from our generics REVLIMID in 2026.

In 2025, we made significant progress towards these goals by improving our underlying operating margin to 26.8%, which was ahead of our initial expectations for 2025. Moving to Slide 37, we continue to make progress on our margin expansion journey in '26 with a solid start in the first quarter.

Overall, we are transforming Teva into a structurally higher gross margin business with a growing innovative portfolio mix and the transformation of our manufacturing cost base. In addition, our OpEx transformation allow us to keep operating expenses as a percentage of revenue stable, as we reinvest significant savings from our G&A towards our innovative portfolio and pipeline to position us for both the short-term and the long-term growth.

Moving to Slide 38. We're also making significant progress in our Teva transformation programs to deliver sustainable margin improvement. During Q1, we continued to execute on our targeted programs and remain on track to achieve approximately 2/3 of our total $700 million savings target to be realized by the end of 2026.

In relation to these programs, we have already recorded approximately $205 million in restructuring costs in 2025 and cash outflow of approximately $100 million. In Q1 '26, we recorded an additional restructuring cost of approximately $25 million. And for the full year of 2026, we expected cash outflow of approximately $90 million to $100 million, all of which are already incorporated in our guidance.

These transformation efforts, along with our ongoing portfolio shift towards innovative products, gives us the confidence to grow underlying EBITDA in '26 and in '27 and to achieve our 30% operating margin target by 2027. Now on Slide 39, let me provide some additional details on our agreement to acquire Emalex with a couple of key messages. First, as Richard highlighted earlier, Emalex is highly aligned with our Pivot to Growth strategy. Second, we are maintaining a strong balance sheet with no change to our 2027 leverage target of 2x net debt to EBITDA.

Now turning to the key terms of this transaction. The upfront consideration is $700 million in cash with additional commercial milestones of up to $200 million. We expect the transaction to close in late Q2 or early Q3, subject to customary closing conditions.

Moving to the financial impact. We expect the product to have a gross margin profile of approximately 80% subjected to regulatory approval and launch in 2027. I will discuss changes to our 2026 financial guidance to reflect these acquisitions on the next slide. But importantly, we expected Emalex to meaningfully contribute to our revenue growth and margin expansion after ecopipam is launched and scaled and be accretive to our non-GAAP EPS starting in 2028.

And finally, we remain on track with our 2027 financial targets, including our 30% operating margin. We expect the higher operating expenses related to Emalex in 2027 to be absorbed by the initial revenue uptake from ecopipam following its launch as well as additional efficiency measures. Now let me turn to our 2026 outlook on Slide 40.

As I mentioned earlier, we had a solid start to the year with a strong underlying revenue, margin, cash flow performance in Q1. largely offsetting tough comparison related to generics REVLIMID revenue last year. We're also excited about Emalex acquisition, which is expected to further sense and build upon our strong commercial infrastructure in the CNS space.

Based on our Q1 results and our visibility into the rest of the year, we are reaffirming our 2026 outlook range on an underlying basis, excluding, Emalex for all financial metrics provided on our Q4 earnings calls, including growing our EBITDA in 2026.

However, even though Teva is acquiring 100% of Emalex shares, we expect the acquisition will be treated as an asset deal. And therefore, the upfront consideration of $700 million will flow through R&D line as IP R&D expenses in the P&L. We also expected approximately $75 million of additional operating expenses in 2026 related to Emalex starting Q3, including the transaction costs.

The changes to our 2026 guidance range for operating profit, EBITDA and EPS are slowly reflecting this additional $775 million expenses related to the acquisition. There is no change to our free cash flow guidance range of $2 billion to $2.4 billion. Excluding the Emalex acquisition, our effective tax rate outlook range of 16% to 19% also remains unchanged.

Moving on, we continue to expect 2026 non-GAAP gross margin to be in the range of 54.5% to 55.5% during the year. Our operating expenses are expected to be in the range of 27% to 28% of revenue, with the first half of the year higher than the second half, reflecting planned investment in the first half, along with the higher impact of the transformation program cost savings in the second half of the year.

Now with the expected operating expenses and the transaction costs related to Emalex, we expected our operating expenses for 2026 to be towards the higher end of our 27% to 28% range. Lastly, let me provide you with some directions on how to think about quarterly progression for the rest of 2026. We continue to expect revenue to gradually increase over the course of the year.

Also the Q1 revenue were slightly better than our expectation due to a less-than-expected destocking in the channel and timing of some orders from Q2 to Q1. Since the inventory levels in the channels remain elevated, we may see these dynamics evolve during the rest of the year.

In addition, as mentioned last quarter, we expected AUSTEDO revenue in Q4 '26 to be down year-over-year due to the different purchasing patterns and pricing environment expected ahead of the IRA implementation in January '27. The Our non-GAAP margins are also expected to gradually ramp up over the course of the year, in line with the revenue trajectory as well as savings from the ongoing transformation programs.

However, we expect margins to be stable in Q4 versus Q3, reflecting the anticipated channel dynamics related to AUSTEDO in Q4, 2026. Lastly, our capital allocation strategy remains focused on driving our Pivot to Growth strategy. Over the last few years, we have made significant progress to strengthen our balance sheet and are now at a short distance from our target leverage of 2x net debt to EBITDA and achieving an investor-grade credit profile.

We believe we are well positioned to achieve these goals and our execution has been recognized by the major credit rating agencies. The progress we have been making allows us to continue to invest organically in our innovative portfolio and pipeline as well as provide flexibility to execute thoughtful and accretive business development to create a long-term shareholder value as we are doing with Emalex.

In addition, our Board of Directors has instructed the management to plan for a share repurchase program that may be implemented subjected to meeting applicable legal requirements. The timing and the exact amount of repurchase will be subjected to further board approval and will be dependent on the various of other factors, including market conditions, share price and other investment opportunity aligned with our Pivot to Growth strategy.

We believe this potential use of capital will further enhance long-term shareholder value while preserving financial flexibility to continue to invest in our business and to execute on our Pivot to Growth strategy. With that, I will now hand it back to Richard for his closing remarks.

Thank you, Eli. So moving on to this slide. I just wanted to once again reiterate why we are excited by our Emalex deal and why it fits perfectly with the strategy of Pivot to Growth and the criteria we laid out for business development? Let me just go through those.

First, it is a rare neurological asset squarely within our core therapeutic focus area. Second, it's a natural fit for our CNS franchise, leveraging the commercial infrastructure and capabilities we already have in place. Third, it is financially accretive, driving revenue growth starting in 2027, margin expansion begin in 2028 and creating both strategic and financial optionality over time. Fourth, the risk profile is highly attractive. Pivotal studies are complete. The program is well understood and the regulatory filing is expected in the second half of 2026.

And finally, this transaction has no impact on our commitment to 2x net debt to EBITDA by 2027. To summarize, this is exactly the type of disciplined, value-creating transaction. We said we would pursue. I'm very excited about the impact this is going to have for patients who today have very limited treatment options.

Before I conclude, let me remind you of some of the drivers that we believe make Teva an attractive investment and how our Pivot to Growth strategy continues to execute as planned, transforming Teva into a leading innovative biopharma company. We expect our innovative portfolio to continue driving growth well beyond 2027. It's currently anchored by AUSTEDO, which we are reiterating our target of reaching more than $2.5 billion in 2017 and over $3 billion peak sales, along with our innovative products UZEDY and AJOVY, we'll continue to drive our product mix and profitability.

And as I said, we are also preparing for the exciting innovative launches coming up, starting with olanzapine this year. And then for my concluding slide, the growth journey continues. Innovative brands, double-digit growth for upcoming launches Emalex's attractive acquisition of first-in-class neuroscience treatment aligned with our strategy and financial targets, near-term value unlocking milestones from our world-class pipeline, a stable outlook for our generics powerhouse, accelerating the Pivot to Growth strategy.

And with that, I would like to open the floor to questions. Thank you.

Thank you, Richard. Alex, while you're queuing up the callers, [Operator Instructions].

[Operator Instructions] Our first question for today comes from Louise Chen of Scotiabank.

Congratulations on the quarter I wanted to ask you about your Emalex acquisition. And if you could give more color on the synergies with your CNS franchise, especially on the pediatric side.

And then as a follow-up, how do you think about the peak sales potential of this asset? And what kind of assumptions support that thought?

Louise, thank you for the question. So yes, so when it comes to ecopipam, we're very excited about this asset because of this significant unmet medical need. Now there are about 100,000 children, pediatrics, who suffer from Tourette's, only about 50,000 of those actually go into therapy. And as I said, less than 30% stay on therapy after 1 year.

So clearly, there is a significant unmet medical need. As I sort of talk about this, this probably makes you very familiar with the work we've done with AUSTEDO and to a certain degree, UZEDY. So then going back to the part of your question around what are the synergies. So we clearly have synergies in many aspects of our business from patient services to managed markets to MSLs and to a certain degree, to our sales force.

We will have to put in place a small pediatric sales force to focus on ecopipam. That said, it is worth noting just the deep expertise we have in movement disorders here at Teva, we have with neurologists and we have with the psychiatric community. So I think for that reason, we're very excited about the fact that we can really offer some meaningful hope to what is a very different condition for children.

With regard to your question around peak sales, I'll just go back to this is a significant opportunity. And as we get closer to launch this product, we'll start to give an idea of what we think this could be. But I think at this moment, as we're still thinking about the unmet medical need, the lack of treatment options and a significant unmet medical need from a patient perspective. Thank you for your question, Louise.

Our next question comes from Glen Santangelo of Barclays.

I mean, Richard, clearly impressive growth in the innovative portfolio. And I think in your closing remarks, you reiterated the greater than $2.5 billion in sales number. for AUSTEDO in '27. And I'm just trying to sort of reconcile some comments you made earlier this year about '27, where you expected low single-digit growth. And when we unpack this quarter and you normalize for FX and the Japan business venture and generic REVLIMID, this looks like a 7% growth quarter to us. And I was wondering, Eli, if you could maybe confirm that.

And then I'm trying to reconcile the growth rate in the business currently versus your expectation for that low single-digit growth in '27. Not that you want to guide on '27 at this point, obviously, but we're looking down the pipe and you see olanzapine coming in, now you have ecopipam, which may be a modest contributor next year. I'm just trying to reconcile all the big moving pieces around how we should be thinking about the balance of this year and the growth rate into next year?

Glen, thanks for your question. I'll try and sort of unpack it. And I think what I'm hearing is maybe -- and maybe if you can advise me is that maybe you're feeling that we could be slightly conservative towards 2027? Is that the question?

Yes. Yes. It just kind of feels Richard, that you're growing much faster than that at this point and you're expecting maybe some modest growth in AUSTEDO next year with some contribution from your pipeline next year. I'm just trying to reconcile your thoughts around that low single-digit expectation for next year.

Okay. Now I get it. Okay. So thanks for that clarification. So I think when it comes to let's start specifically with AUSTEDO. I think as I pointed out and as Eli pointed out, there's a few moving parts here. And one of those, and probably the biggest moving part is how the IRA impacts us sort of pre IRA, which is Q4. What happens to our inventory, what happens to the channel? Will there be a drawdown because of the pricing change in 2027.

It's hard to understand and predict that. So I think for one of those reasons -- for that reason, I think we have to be thoughtful at AUSTEDO and see how this plays out. Do we have any conservatism and concern and worry about the untreated patient population that still need to go on AUSTEDO. Do we have any worry about our ability to execute and get more patients on to AUSTEDO, onto the right dose, onto the right compliance adherent programs? No, absolutely not.

We remain very, very confident about the long-term growth of AUSTEDO, and that's why I reiterated the $3 billion peak sales. It's just a bit of timing there, Glen, and just seeing how that plays out. With regard to some of the other growth drivers, UZEDY and AJOVY, soon to be olanzapine, as you know, we tend to like to really get a couple of quarters under the belt to really understand what this looks like. So we don't sort of get ahead of ourselves. So that's what we're thinking about.

So I think maybe as we talk about 2027 guidance, will come to the end of the year and be able to give clarity on that. But I think 1 quarter is -- we're pleased with the quarter, but let's get some more quarters under our belt before we start predicting what the future could be. So hopefully, that helps you. But I'm pleased that you see the strength in the underlying innovative business.

And let's talk about what that could be in '27 and beyond. But maybe for me to conclude, I'd say it is a bit beyond '27, '28, '29. I hope you can see the opportunity for us to keep growing this company, keep growing our innovative portfolio and keep growing our gross margin and thus keep growing our EPS. Thanks for the question, Glen.

Our next question comes from Matt Dellatorre of Goldman Sachs.

Congrats on the strong quarter and the deal announcement. Maybe first on capital allocation broadly. If we think about free cash flow of $2.5 billion to $3 billion over the next several years, could you maybe comment on what you see as a fair base case at this point on how you might allocate across potentially additional BV now, maybe share repurchases and then further debt pay down.

And then maybe one on the branded pipeline. What is the latest expectation for the indication expansion strategy for duvakitug? And is there anything that you're particularly focused on from a competitive landscape perspective this year or over the coming months?

Thanks for the question, Matt. And clearly, as I'm suffering from some sore throat, I'm going to quickly take a break and hand the capital allocation to Eli and then the 2 new indications to Eric.

Over to Eli.

Okay. Thanks for the question, Matt. So look, we ended the quarter with $3.7 billion cash on the balance sheet. If you think about midpoint for this year, like $2.2 billion free cash flow, we generate almost $200 million already it's like another $2 billion to build, so it's get you like to the $5.7 billion, considering the closing on Emalex, it go to $5 billion and we have another tranche by October to pay like $1.8 billion.

So most likely we're going to be north than $3.2 billion by end of the year, a very strong balance sheet from our perspective. So as we move forward and we keep growing our EBITDA and totally transforming our gross margin projections looking on $2.4 billion to $3 billion kind of run rate beyond, I would say, '26 on free cash flow.

What we actually announced this morning about the buyback, this is basically kind of a part of a natural evolution of our capital allocation, which really focuses us now on maximizing shareholder value. It's basically giving us kind of creating additional optionality to the management to allocate capital. And we are able to do it because the balance sheet become more stronger. What we're going to see going forward, we're going to see maybe another 1 or 2 deals with a couple of hundreds of millions. We are not actually going to do something bigger than that in the short term.

If something will come in front of us, then we'll require any other financing. We still have our revolver, like, $1.8 billion that we are not utilizing -- we're -- as I mentioned, we are growing EBITDA and we're growing our free cash flow. And so anything around that, I would say, a quantum, it should not actually depart us from our 2x net debt to EBITDA. But the rationale here is to come to the 2x net debt to EBITDA and then going forward, looking on our debt management in order to make sure that we have enough flexibility to grow the business.

Thank you, Eli. And now, Eric, on the 2 new indications for duvakitug.

Yes. Thank you, Matt, for the question. So duvakitug, as we always say, has a great potential across many different indications. We and Sanofi bucket these possibilities in T2, non-T2 and fibrotic indications. And we have a very clear pathway on how we choose those based on market size, scientific justification and regulatory chances of success as well as speed.

So we've aligned on those indications. We'll be announcing those before the end of the year. I think that's great excitement around that. One of the things I'm glad to see, though, right now is the effort and the speed in which we're interrogating the Phase III programs in the inflammatory bowel space, the opportunity there is massive.

And I think we are highly differentiated from the other molecules out there, and that's the great success that we've been focused on so far. But we will be announcing those. I think that the indications across this field will advance quickly. Thank you.

Our next question comes from Dennis Ding of Jefferies.

I have 2 on the Emalex transaction. So your slides don't really mention anything about the adult population, but the Phase III hit on both peds and adults as a secondary. So I'm curious if you expect a broad label that covers both peds and adults. And how meaningful can that be on the TAM beyond the 50,000 children that you noted that are on therapy. And if you can maybe also comment on the efficacy in the adult-only population as well.

And then as a follow-up, can you just help us narrow down pricing? I mean you mentioned rare in your slides, but that's still fairly broad.

Thank you, Dennis. What was the last part, pricing? Okay. So I'll tag team the first one with you, Eric. So just to be clear, this is a pediatric treatment, ecopipam for pediatric Tourette's, so to be clear about that. And if you look at the patient population, the majority are pediatric. So hopefully that answers your question.

When it comes to pricing in rare and orphan, yes, we think because of the significant unmet medical need, we think about the size of the population that we think that allows us to have a pricing within the range that is normal for orphan and rare I hope that answers your question. Dennis, do you want to add something to it, Eric?

Yes. And yes. Thanks, Dennis. About the question about adults. It was a small population of adults in the Phase III study. Those efficacy results trended along with the pediatric results.

But I would build on what Richard said, the efficacy in the pediatrics is particularly important because when you're thinking about a novel mechanism like this, a D1 receptor antagonist and the profile of safety, particularly for the pediatric population. There's no weight changes, there's no metabolic findings, there's no extrapyramidal signal that you would see with a D2 receptor antennas.

This is a product that can deliver a great efficacy profile. But the more important is that, the safety for the pediatric population is something we're very proud to be part of, and I think that's the true value.

Our next question comes from Jason Gerberry of Bank of America.

I've got a generics pipeline question. So Teva has a settlement to launch generic TYVASO nebulizer this year but has chosen not to launch for business reasons, but I'm wondering if the company would reconsider, given that, that drug and dosage format are set to launch in the large IPF category, I think some analysts have that being a $4 billion to $5 billion indication. And I think a license would give you sole source as a generic for pre extended period of time.

So just wondering what's going on there. Is it simply difficult to get a generic approval. And then as my follow-up, I noticed on your slides with the IL-15 for vitiligo, it's now listed as accelerated path 2031 time to BLA versus before it was a range of '31 to '34. So have you had a regulatory interaction, are you confirmed now on that accelerated path?

Jason, thanks for the question. With regards to the generic pipeline, we don't talk about our generic pipeline for competitive reasons as well as legal and others. So I'm sorry, I can't really give you any more color to that. But I'll let Eric give you some color on the anti-IL-15.

Yes. Thank you, Jason, for noticing. That was a change that we made for this announcement. It's really driven by the fact that the team is executing. We have a very clear pathway in which we're going to design our Phase II, Phase III study. So it's greater confidence in our execution at this point. But thank you for noticing.

Our next question comes from Umer Raffat of Evercore ISI.

I just thought I would spend a little bit of time on the Emalex acquisition as well. Maybe first, unlike in a traditional pharma company where you sort of inherit a range of molecules, which have their own expiries. I feel like the advantage you guys have is you get to decide how you want to stack on the LOEs.

And I guess my first question is knowing that this molecule is an old Merck drug or there's probably not a composition patent and the method of use is also likely pegged to early 2030s because of some of the earliest work done in Tourette's in back in 2014. I guess my question is, is it really just orphan exclusivity? And would that effectively become an overlapping with AUSTEDO IPs? That's #1.

And #2, how -- is there any preliminary FDA feedback on whether the duration of trials run so far it's sufficient to satisfy them on suicide ideation and neuro side disorders in general?

Thanks for the questions. So we expect ecopipam to be covered by orphan drug exclusivity. So that gives us 7 years from the date of FDA approval. So that sort of takes us into the 2033, 2034 time lines. But in addition, Emalex is granted patent expiring in 2035 curing methods of treating Tourette syndrome using ecopipam.

Now this pattern is likely to be eligible for patent term extension and Emalex has filed an additional application covering methods of treating Tourette syndrome, which could expire in 2043, if granted. So -- and then going back to your comment, on AUSTEDO XR, we also believe without going into the detail that we have a clear path of patent extension into the 2040s as well for the XR formulation. So I think that, I think we feel pretty good. But when it goes on to the FDA question. I'll hand that to Eric.

Yes. Thank you, Umer, for the question. So yes, there is a long development history and a very large data package that's associated with this molecule. It actually started with Schering-Plough, a company I used to work at and then went on to Merck. But the -- focusing on the Tourette's program. This program includes 2 well-controlled studies. Remember, there was a Phase II study that showed on treatment responses and changes from baseline in the [ AIMS ] score and then there was a randomized withdraw Phase III study that showed a great persistence compared to placebo, both statistically significant and powerful.

And that database from orphan disease is robust. It doesn't meet all requirements, but from an orphan disease, we're fairly confident that on top of the history of the compound is satisfactory for approval. Now according to -- I mean, to address your specific question about suicidality. The rates of suicidality were extremely low, just a handful, and it was actually balanced within the placebo-controlled parts of these studies.

So -- and more importantly, the studies were run very carefully with lots of measures on many different aspects, particularly suicidality, extrapyramidal syndrome and with this intense monitoring, there was actually no signal at all with regards to suicidality and any changes from baseline. And more importantly, on the extrapyramidal syndrome. There was no disorder or signal of motor events in this.

And the reason I bring all this up is that they were very thorough studies in a placebo-controlled way that shows that there's no weight gain. There's no metabolic changes. There's no extra extrapyramidal syndrome -- symptoms of motor dysfunction that you see. This highly differentiates it from the D2 receptor antagonist that, as a parent, I would not normally want to put a pediatric patient on a molecule like an antipsychotic that causes that sometimes permanent changes.

So the profile of the D1 agonist is very, I think, conducive of this patient population, the side-effect profiles, very well tolerated. And more importantly, if you have an efficacious drug that the patient can actually stay on, that's the important thing. It doesn't matter what your efficacy is if the patient can't continue. In fact, their long-term 1-year study in the open-label extension at the 1 year, 66% of the patients stayed on drug compared to 20% or 23% of a normal antipsychotic treatment. So though, the totality of this information, I think, is favorable, and I think that would be appreciated by regulators.

Our next question comes from David Amsellem of Piper Sandler.

A couple for me. So on Emalex, just piggybacking the last question, do you think that there will need to be a REMS here regarding suicidal ideation or potentially other risks. Just wanted to get some color on your thought process there.

And then as you think about other indications, I believe Emalex had a program in restless leg syndrome. I believe it was augmentation. So can you talk about what you're planning to do there?

And then lastly for Richard, I think you've alluded to in terms of M&A strategy, in terms of building the neuroscience pipeline, looking at that more inorganically either by M&A, whereas immunology, you're going to focus more on organic development. Is that still the case? Or are you taking more of a flexible approach as you think about those 2 verticals?

David. Thanks for the question. I'll hand the first 2 to Eric.

Yes. Thank you for the question,. So we don't see this program having a REMS. Given the class of these drugs, you might expect the black box for suicidality, but that's typical of this class of medications. We haven't made a final decision on the restless legs syndrome indications, but that's something we can entertain in the future.

And then to the question of M&A, you're right, David, we tend to talk about neuroscience inorganically, and we tend to talk about immunology more organically from a pipeline point of view. That said, it always goes back to what is our goal at Teva to create a world-class biopharma company and to make sure we are creating value for patients and shareholders, and it comes back to capital allocation and what is the most appropriate way to allocate capital.

And so while those themes are true, we still look and scour and think about how we can really add to this Pivot to Growth strategy on a continuous basis. Being very disciplined in what we do and how we do it, both internally and externally. When you have a pipeline internally, you do have to allocate capital. And we think about that as disciplined as you would externally. But broadly, you remember correctly, and that fits with our strategy. Thank you.

Our next question comes from Chris Schott of JPMorgan.

Congrats on the acquisition. I just had 2 here. Maybe first on the Emalex acquisition. I know you're not going to comment on peak sales. But any comments on how we should think about the ramp post approval here, given unmet need? I'm just trying to get my hands around, are there payer dynamics that could result in a slower ramp? Or is this something that could go relatively quickly just given the market as it exists today?

Second one for me was just going back to AUSTEDO and kind of quarterly gating dynamics. I totally understand what you're saying about 4Q. But can you just talk about the next few quarters? It seems like there was some destocking that was expected this quarter that maybe didn't fully occur? Is there anything we should just be keeping in mind for 2Q and 3Q that could result in maybe growth rates that are below the underlying volumes, et cetera. So anything there would be great.

Chris, yes, thanks for the questions. So with regard to Emalex, I'm not giving peak sales guidance, but giving ramp-up guidance. So look, I think we go back to, I think, what you've identified in your question is a significant unmet need in a patient population, which is pediatric, which obviously gets a lot of focus and attention. That said, as usual with Teva, we like to be very thoughtful and diligent and really understand what this could look like.

There is a big unmet need. We are excited about it. So I don't want to be too coy, but when it comes down to the things you've touched upon, which are around, patients going on to therapy, good access, appropriate access. Those are the things we like to think through. So I think your excitement, which I sense within the question is appropriate, but we'll need a bit more time before we start to sort of give you a real line of sight on that.

With regard to AUSTEDO, yes, so we just didn't see the drawdown in Q1 that we expected. So how does that play out, probably plays out a bit into Q2 and Q3. But then there's the fundamental question about Q4. So we just have to see how this goes. What I always go back to, when I'm having these conversations internally is, okay, but what are we doing on the leading indicators, the TRx, the milligrams all the things we're doing around our coverage, new prescribers, the depth of prescribing.

And all of those indicators are looking very much on track. So I feel very good about that because my line of sight is the $3 billion plus. It's not so much the short term, I feel we have that line of sight clearly laid out. But that's how I think about how does that play out to Q2 and Q3, just keep those in mind, underlying indicators are good. Destocking -- let's see how that plays out in Q2.

And then we'll give you some probably more indications as we get that data in Q2 ourselves to say this is how we think it could trend for the rest of the year. So I hope that helps, Chris. Thanks for the question.

Our next question comes from Ash Verma of UBS.

So just in terms of the $700 million payout for BV that you're doing, how does that change your time line to get to investment grade debt. Is that something that can still be achieved this year?

And then just as a follow-up, with the geopolitical developments in the Middle East, is that creating any kind of an impact on your shipping or freight cost or any challenges in terms of getting materials in and out of different geographies?

Ash. I'll hand both of those over to Eli.

Ash, thanks for the question. So first of all, nothing going to change in terms of trajectory to reach investor grade this year. And the $700 million, actually, it's a number that will flow as expected from the nature of the deal to the IP R&D line, as well from our balance sheet from a cash perspective. But according to our trajectory on growing EBITDA this year, and keep generating cash. We don't see this 1 impacting on all those metrics that we need to achieve to become investor grade.

And on the other element, look, we are monitoring very closely in the situation on the conflict with Iran in the Middle East. And I can tell you that there was kind of a few elements, call it, nominal increase on some spend related to transportation and some energies, but this one are very minimal, and we're able to monitor it and everything that considering our cost base for '26 is already in the range in our guidance.

Thanks, Eli. Thanks, Ash. Next question, I think a final question I believe.

Our final question for today comes from Leszek Sulewski of Truist.

Just one for me on the IL-15. So what's your confidence level for the upcoming vitiligo readout and later celiac, given the Sanofi and Amgen readouts?

And then second on that, how competitive do you think the data has to be versus what we've seen from the dual inhibition approach of the IL-2, IL-15?

Thanks, Les. Thanks for the question. I'm going to hand that straight to Eric.

Yes. Thank you for the question. So the IL-15 program, I think the target is becoming more and more validated at this point. I think that the bar here is to look at what Phase II results and Phase III results have been most recently for the oral JAKs. Those are systemic treatments at this point. And I think the most recent data is a good target.

Remember, we're coming out with 24-week data, always compare the times because the endpoints -- the disease matures on treatment over time. So we're going to be showing you a 24-week data. So I choose that probably from the Phase II and the Phase III results. And I think our program had the chance to be competitive and also have the chance to be a systemic therapy that's easily taken every quarter as a subcutaneous shot. So that really is a differentiating profile from what's being developed now.

Thanks, Eric. I think that concludes today's call. Thank you for all your questions and interest in Teva. We look forward to giving you an update again in Q2. Thank you very much. Bye-bye.

This concludes today's conference call. Thank you all for joining.

All right. Good morning, everybody. Why don't we get started for our first presentation? We're very excited to host Richard Francis. He's the President and CEO of Teva Pharmaceuticals and we do have Eli Kalif, they are the front row. If you just want to raise your hand and show everybody. And we got Chris Stevo and Sanjeev Sharma representing the IR team. So we're happy that everyone could sort of join us.

Well, it was -- 2025 was a gigantic year for Teva, not only financially, I mean, a lot of accomplishments in the pipeline. So maybe as a good place to start, Richard -- I'm sorry, before I should have did that. Before we do that, I probably should introduce myself. Sorry, this is the first presentation of the conference, so I'm just warming up.

I'm Glen Santangelo. I'm the analyst at Barclays that covers the stock. So please feel free to follow up. If anyone has any interest in the name afterwards, we'd be happy to spend some time with you.

So Richard, thank you for joining us. We're excited that you guys could kick it off. Maybe as a good place to sort of level set the conversation, maybe you can sort of walk through some of those 2025 highlights, not only financially, but you had a lot of key pipeline updates. So maybe that's a good place to start talking about some of the accomplishments of last year, and then we can sort of dive right in?

Absolutely, yes. So thank you for hosting us. I always appreciate it. Good to talk to you. So '25 was a very important year. We've started the transition of Teva from a pure-play generics company to a biopharma company. We started that in 2023, the pivot to growth strategy. And I think we really gained momentum. And I think the way that's best exemplified is probably in this idea that transition to an innovative company sounds great on paper, and it sounds a great way to drive long-term value creation, but it's about the math, does it play out that way.

And last year, our innovative portfolio was over $3 billion, and it grew at 35%. So real momentum across all our leading brands, AUSTEDO, UZEDY and AJOVY. And so I think fundamentally, you've seen that drive down through the P&L. Our gross margin has changed, our ability to drive EBITDA and ability to drive EPS and create real shareholder value. So I think the skepticism could it be done has passed now. And I think now the questions always are, how quickly can you move this? How quickly can the transition of the portfolio continue? And what does the end game look like? And that's starting to now come to fruition with the pipeline.

And so although we had some -- we made great progress on the pipeline, really '26, it becomes sort of the breakout year. We have 7 milestones for '26. We have -- we started the year with the duvakitug maintenance data, which once again, I think, position it as the best TL1A out there. Q2, we're going to have the first data in anti-IL-15 in vitiligo. In Q3, we're going to have the anti-IL-15 data in celiac disease. In Q3, we're also going to have the futility analysis of emrusolmin in MSA, so a go and no go.

And then in Q3, we'll also have the readout of our dual-action rescue inhaler in asthma. And also in Q3, we'll launch olanzapine, our long-acting treatment for schizophrenia that joins its sibling, UZEDY which is doing really well on the market. And then in Q4, we have the first-in-human data on our PD1-IL2. So that doesn't sound much like a pure-play generics company. But that's sort of so -- 2025 now was a really good year. But as in Teva, it's all about the next year, and it's all about making sure we nail it in '26.

Yes. Well, I mean, so many good things to talk about in '25. And before we start diving into some of your branded drugs, I mean, is there anything that disappointed you last year? Anything that maybe was a little bit less than what you thought or I don't know if there was any sort of negative surprises?

Look, I mean, I'm generally quite a glass half full, half empty type of guy. As people who work with me, it's probably quite depressing sometimes. So I'm always looking for what is more. So I think there's things we could have done better across our business. But if I really step back and look at it objectively, we've moved the company on many parallels, whether it's our generics business, whether it's our biosimilar business, whether that's our manufacturing cost base, whether it's our innovative. So I think we've moved things in parallel at speed across quite a large company. So I think I'm very pleased with that.

So I think for once, I'm not saying we couldn't do things better, I think they're more in the margins. And I think one of the things I was particularly proud of is we started this organizational effectiveness, this cost efficiency program, and we achieved our goal in '25 when we started it, and that set us up well for '26 to achieve 2/3 of the $700 million. So when I reel off the things we've done, probably the one thing actually and I think about it, I would have liked to have done some BD. I would have liked to in-license something. But we have a real focus on capital and the return on capital deployed. We have a good organic growth engine. We can do a lot organically. We'd like to add something to it, but it's got to be the right price, and it's got to fit in. And if ultimately it isn't, we're good at holding the line and staying disciplined.

Okay. All right. So why don't we dive into your branded portfolio now? Why don't we start with AUSTEDO, 30% growth 3 years in a row. I mean, that's probably surprising to you, right? I mean, essentially, you crossed $3 billion right now in your 3 branded products, but with AUSTEDO, obviously, is the majority of that. So maybe that's a good place to start. And what's sort of given you the ability to grow maybe much faster than you would have expected, right?

I mean, I seem to remember you guys put out that $2.5 billion goal in 2027, and we seem to be getting there faster than expected. So maybe could you talk a little bit about some of that brand strength and maybe what's driving that to help us kind of assess the durability of that recent trend?

Yes. No, look, I think it comes down to 2 particular areas. One would be what is the market opportunity? So I think that plays an important part. And then, what is our focus on our capabilities? So the market opportunity as much as this is still surprising, 85% of patients who are diagnosed with tardive dyskinesia are still not on therapy. It's a very dynamic market where people come on and they come off. And so the opportunity to drive real growth and change people's lives is huge still.

So that's the sort of market dynamic. And I think what we've done and a lot of what we do at Teva is about applying real prioritization, real focus, having clear expectations, applying the right level of resource, having a great team with great capability, but clear expectations setting. So when we set the $2.5 billion in '27, for me, that was one where the organization then had to step up and say, okay, let's work back. What do we need to achieve in '23, '24 and '25 to get there?

And so a really talented team, super focused, and that team keeps getting better. It's very impressive. And so great market. Excellent execution. And as you say, we may get to the $2.5 billion ahead of -- a year ahead, which sort of is quite surprising to many who obviously, as you said, didn't believe it was ever going to happen. But I think that's a testament to understand the opportunity, applying the right resources and executing flawlessly.

Could we talk about the XR transition in there as well because that's having a pretty -- we see it having a pretty big impact on the pricing, right, which I'm sure there's a margin that's associated with that? If you could just sort of talk about maybe where we are in that transition process?

Yes, it's a good point, Glenn. Thanks for bringing it up. So obviously, we have this patient dynamic, lots of new patients coming in, but also we launched the XR formulation once a day. What that has allowed patients to do is to titrate to a more efficacious dose easier because they do that easier, they end up on a higher sort of average dose. Still, by the way, less than the Phase III clinical trials. There's still some way to go, but we have seen that. And if you look in all our quarterly results, we do emphasize the growth in milligrams per patient. And it's been in the 20% for quite some time.

So the opportunity to bring more patients in is that the opportunity to get those patients on XR, which helps them get on to a more optimal dose, which helps them be more compliant and adherent. If you think about that, there's so many opportunities we have to keep growing the brand. But as you've highlighted, the milligrams does correlate to value. So that is a value driver. And we still have a long way to go to get patients -- majority of patients on XR and majority of patients on the optimal dose. So I see -- that's why when we talk about the greater than $3 billion for the asset, we have a high degree of confidence in that and I think people are starting to also get confident in achieving that number.

And when I think about the guidance for this year, $2.4 billion to $2.55 billion from memory, right, that kind of implies only 6% to 13%. I say only after 3 years of compounded 30% growth. So I get that. It feels like it continues to be an underpenetrated opportunity. It feels like we got the ongoing XR tailwind. It feels like maybe there's some competitive share gains. And I don't know if you want to talk about the competitive dynamics of that market, but it still feels like there's a lot of those tailwinds that are kind of still in your favor and maybe we're seeing the deceleration of growth from the law of large numbers, some pricing in there, but I don't know if you want to just sort of touch on that?

Yes. So it's -- so a couple of things to focus on there is as you saw, we had a really big Q4. In Q4, we highlighted that we had about $100 million benefit from the channel stocking in and a bit of gross to net, mostly the channel stocking in. So that sort of sucks out of Q1. And so if you take that out and reverse that out, we've grown at between 11% to 18% this year, 18% at the high end. And I think 18% off a 30% compound growth, as you said, it should come down because we're growing off a bigger base. So I still think it's really healthy.

The one thing I take the opportunity to highlight this year and people ask about the range, part of that is because we had destocking in Q4, but also part of it is we're not quite sure how it's going to play out in Q4 this year with the IRA price being initiated in Q1 of '27. So are people going to have different inventory levels in Q4? Maybe. So we'll see how that plays out. We're watching what the other -- the first wave of IRA drugs have done. We've got a good idea. But that just to help people understand that range. It's less about new patients coming in, less about our ability to execute. It's more about those dynamics, which are hard to predict.

I think just sort of moving on, it feels like to me a little bit AJOVY and UZEDY, they sort of get lost in the shadow of AUSTEDO. I don't know if there's any high-level commentary you want to make on those 2 drugs because they continue to be great growth drivers for the company. And now I think your branded revenues are up to almost 20% of the total revenues, and they're meaningful contributors as well. I don't know if there's anything you wanted to add on that front?

Yes. No, I think it's really important, actually, I'm glad you brought up. So firstly, let's take UZEDY. UZEDY is a long-acting risperidone schizophrenia product. And when that was launched, expectations, I think, generally were really low. And that's probably fair enough, big incumbent brand in that sector, other brands, genericized. So really, really difficult competitive environment. We've come in, I think the high end of the guidance this year is $280.

So really shown a great product, great product profile and well executed, what a brand can do. So I think actually, this shows -- this is -- this really shows the capability that we have in our team to take a difficult market to understand the dynamics of it, to have the strategic thinking to understand the price and the access is a really important sort of ratio. And so I think UZEDY, people need to look at it and go, wow, what is done because we're going to talk about olanzapine probably shortly. And then that's the franchise of $1.5 billion to $2 billion.

And then AJOVY, I think it just shows what commercial products can do in Teva's hands. So AJOVY was sort of given up on. The injectable CGRPs, the orals have come in, the market has gone, it's very competitive, big players across all of our regions, we continue to grow at double digit, over 20%, and we're taking market share. How do we do that? Same thing. Great focus, great planning, great execution. Those fundamentals we're good at. So I'd say, AUSTEDO, UZEDY and AJOVY have a lot in common. It's about excellence in planning, understand the market execution, which is worth talking about because when we talk about olanzapine, DARI, duvakitug, all the products that are coming to market, we will launch them really well.

Okay. We're going to talk about olanzapine, duvakitug and the rescue inhale in 1 second, but I just have one last question before we move to the pipeline. You have a world-class generics business. We talk about it a lot. I don't know if there's sort of any high-level commentary you want to make with respect to pricing trends. We have biosimilars now sort of flowing through there. Maybe the cadence of those biosimilar launches a little slower than maybe you would have thought. I don't know where we stand, but it's such an important component because of the cash flow of your business that it generates that enables you to do all this other sort of R&D and business development activity. Any high-level generics commentary and then we'll...

Yes, absolutely. Once again, I think sometimes if you look at generics on its own, there's some really impressive results to talk about, but we've talked about some other exciting areas. But let me talk about generics. So this is quite a volatile business. But in the 3 years, we've generated a CAGR in the mid-single digits across the whole business. And it's one of the largest in the world. So it's a big business to do that over.

I think some of the exciting things we've done that are ahead of us now to come is we have a biosimilar portfolio of 28. We've launched 10 now. We have 10 on the market. We're going to launch another 6 by '27. We're going to launch the rest starting '28 going forward. We're going to keep adding to that. So now we have the second largest biosimilar portfolio. So if you think about all that growth and performance we've driven in our generics business, it's been without biosimilars. So I think if you think about this, it's like thinking a car that is getting even more efficient, a really, really good engine, and we're applying biosimilars to it. That's the turbo.

So I think we're setting ourselves up for, I think, a very positive future for our generics because we've changed the portfolio and we've changed the manufacturing network. So we're going to start to see our COGS coming down, which allows us to protect our gross margin. So a lot of good things, and that does allow us to keep fueling the pipeline, which we'll talk about because we have a really big broad pipeline and it's late stage. So we need to fund that.

Okay. Let's move on. On the TL 1A, you obviously just published the 44-week data. That looked probably stronger than I think most people were expecting and so I mean, what was your sort of interpretation of that data readout? Does that make you incrementally more bullish? And any high-level thoughts as you're embarking on these Phase III trials?

Yes. Look, we were always bullish because we know we've made the one -- the best TL 1A, and we made it by design. So we didn't fall into having the best. We designed it to be the best, and it is the best induction and maintenance. And so I think the frame is and I'll ask people to think about, we don't think we have the best TL 1A to compete with TL 1As in UC and CD. We think we now have an asset that will compete across [MOAs] . So we think because its efficacy, its safety and its tolerability, no monitoring, we believe there'll be no black box.

So we think this could be really a big player in UC and CD. So for us now, I think Sanofi posted $2 billion to $5 billion of peak sales in UC and CD, and we sort of took that. I challenge whether that's ambitious enough, but we'll wait. And I always remind people if it's the $2 billion, which I struggle to understand why, it's a game changer for Teva, but it won't be based on the efficacy of the data we're seeing.

So I mean, I think when you announced that Sanofi partnership, some people were surprised, right? And now we've had the Blackstone sort of partnership announced more recently. Could you just touch on that quickly on why you did that?

Yes. No, that was a Royalty Pharma partnership. So look, I think the key principle for people to understand is, and it's a key belief we have at Teva is we have a great pipeline, but pipelines, in my view, is all about bringing to the market as fast as possible. That is the sole link. Bringing to the market as fast as possible, you create significant value. That's our job. Now we happen to have a really, really exciting big pipeline with many indications. Duvakitug could end up in 5 to 10 indications, right? So we have big ambitions.

Anti-IL-15 is going to be in 3, possibly 4 and 5. And so for us, it was all about let's not get stuck in the rounding error of what this financing can do long term for multibillion-dollar assets. Let's just get it to the market as fast as possible. And that's our key principle. And I think what you've probably seen in 3 years is a company that seems to have no pipeline innovative to have now one of their busiest late-stage pipelines. And so that's our approach, move fast, get it to market, create value, create shareholder value and maximize that patent life.

Okay. Olanzapine, I think in your opening remarks, you talked about commercialization in 3Q this year. Is that...

Depending on the FDA, it should arrive in either September or October. So let's say, Q4, October.

Okay. I mean, maybe could you give us a history lesson of sort of the time line here? I mean, I know there was some past -- there were some historical issues with some of the long-acting injectables and maybe talk about why olanzapine may be different?

Yes. So first, let's talk about the olanzapine molecule. The olanzapine molecule is considered the most efficacious molecule. So it's used to treat severe schizophrenia. It's the most used molecule in the U.S. and in Europe, 20% of schizophrenia patients are on olanzapine in the U.S. and 30% in Europe. So it's -- no one will debate it's the most efficacious. Now it hasn't had a long-acting. There's one long-acting that was launched in the market that isn't being used because you have to monitor the patient after you inject because of a side effect called PDSS. So there is no long-acting.

Now if you look at what happened with the non- olanzapine molecules, 13% of those transferred to long-acting when they became available. So one could use that as an analog and say, the oral olanzapine market, one could expect 13% to transfer to our long-acting olanzapine. You could also say it could be a lot larger because a patient has severe schizophrenia, they have to be compliant. So they really need to be on long-acting, which is why we see a lot of excitement.

So the potential here is we've said $1.5 billion to $2 billion for our portfolio, you said it has olanzapine, I'm very comfortable with that. I think there's now great excitement. Could it be more? We said we can do $1.5 billion, $2 billion. Let's get those numbers on the score board, and then we'll see what we can do. But we've got to launch it first. We're launching in Q4. And I would take the opportunity to tell people what does a good launch look like. It's not revenue, which [indiscernible] but it's about sample, physician use, breadth and depth of physician use formally on P&T committees at hospitals where it can be used.

So just broad usage generated excitement and experience. And then we'll start to make sure we get good access on Medicaid. On Medicare, it will probably be a bit slower. What we learned with UZEDY is -- what we're not prepared to do is give away value based on the product profile. So we'll hold for the right access at the right value. That could take time, but we've planned for it to take time. And what we saw with UZEDY is physicians value the product profile we're bringing to the market with UZEDY. They will value it even greater with olanzapine. So I just watch that revenue maybe towards more second half of '27 because it's about access usage and sampling because we're trying to create a franchise that's going to be a big one and live for a long time. So we need to be thoughtful about how we introduce it from a pricing point of view.

Okay. Can we switch over to the asthma program?

Absolutely, yes.

Okay. Could you remind people of the current competitive landscape there? You currently have a Phase III trial sort of going on. Could you sort of reiterate your confidence in that trial and sort of what you're seeing thus far?

So the data readout is going to be in second half of this year, around about Q3, where we're going to have the read of the Phase III study. So dual-action rescue inhaler in the U.S. guidelines have been issued that 10 million American asthma patients should be on a dual-action rescue inhaler. One has been launched by AstraZeneca a couple of years ago. So they're shaping the market. It's the first time there's been one here. So they're educating physicians on using this.

And by the way, there are over 5,000 fatalities every year because of the lack of a dual-action rescue inhaler being used. So there's a real need here. Now so we come to the market late, which is generally you don't want to come to the market late. This is the one you do because a very good respiratory company like AstraZeneca is forming the market. We come in. What's our differentiation? We will have a better device, but the key differentiation is we'll have a pediatric indication. So 25% of this market is pediatric. So we can come in and follow them, so to speak, and say, okay, use our dual-action rescue inhaler because that's a pediatric indication.

We only have a few more minutes left. I'm amazed at how fast the clock has gone. There's so much to talk about here. But outside of duvakitug, olanzapine and DARI, there's more, and you addressed some of those in your opening prepared remarks. Let me just give you a minute just to talk about anything else in the pipeline that you want to share with the audience and that you think everybody should be focused on?

Well, obviously, the anti-IL-15, the vitiligo data, obviously, Royalty Pharma came in as the earliest ever partnership they've done on financing in an asset. And so I think, obviously, what they've seen excites them. And so I think the vitiligo data will come out in Q2. I think it's interesting because that means we can get to market in '31, which is because there's a regulatory path that's been already shown by Incyte and other company as a topical out there. And so if you think about it and then we have the celiac disease, but the way to think about with Teva, we're going to launch olanzapine this year.

In '28, we'll launch DARI, dual-action rescue inhaler. Maybe we'll launch emrusolmin for MSA rare disease. And then in '29, we'll launch duvakitug. That will take a year sabbatical, and then we'll have in '31, an anti-IL-15 vitiligo. And then we're going to announce 2 more indications for duvakitug this year. So if you think about it, our challenge is how do we keep launching these products while maintaining good growth on our innovative portfolio.

It's just crazy. I mean, you think about your $3 billion in branded revenues today and you wind the clock forward 5 years from now and think about where this company could be, right? I mean , you talk about the innovation transition, right? It's happening right in front of our eyes, right?

Yes. I mean, look, I mean, I think just on that point, our pipeline has over $13 billion of peak sales in it. And it's not a pipeline based on Phase I. It's a pipeline -- that's a late-stage pipeline. You start to -- you can risk adjust that, but you put that into our P&L where our gross margin is right now, it's a game changer for value creation.

Yes. All right. We got a couple of minutes left, and I got 2 questions left. Let's talk about guidance. Could you talk about some of the key drivers in the revenue and EBITDA guidance? And I think one of the things that we wanted to talk specifically about was the cadence of that throughout 2026 because you got Revlimid in 2025 that maybe is messing with some of the quarters. So anything with respect to the '26 guidance that you think is worth calling out?

Yes, I really appreciate you calling that actually, because as we're doing this transition from a pure-play generics to a biopharma company, there's lots going on in our P&L. There's lots going on in our portfolio. And so when you think about guidance, so firstly, what's important, our EBITDA is going to hit $5 billion. It's going to have a 5 in front of it, okay? I won't say anything more. That after losing Revlimid is, I think, a massive achievement, and it's reflective of the portfolio transition as well as the cost.

Now on how that progresses, H1 and H2 are always -- H1 is always lighter than H2 of Teva from a gross margin and from a revenue point of view. But particularly in Q1, what I'd highlight is our gross margin will probably be more reflective of Q1 in '25 minus Revlimid, which is -- I think that was around 51% gross margin because obviously, we don't have Revlimid this year. So I think it's worth thinking about that. And then you'll see our gross margin continue to improve throughout the year and then probably the 55%.

So if anybody is modeling, please model that in there. That's just about the portfolio transition and the fact that we've lost over $1 billion of generic Revlimid, which from a modeling point of view, I think, is important. But just remember, you lose $1.1 billion of Revlimid, you lose a lot of profit, yet we grow EBITDA. How do you grow EBITDA? You only do that with the transition of a portfolio that we've spoken about, $3 billion innovative at 35% and also very, very rigorous cost programs to put in place, which we're executing. So Teva is going to come out of '26, fitter, leaner, more set up for continued shareholder value creation.

You say leaner, and this is going to be my last question. I want to give you the last word here. I mean, obviously, so much positive stuff has happened in '25. We've talked about the strength of the brands. We've talked about sort of the development in the pipeline. We didn't really talk about sort of your cost-saving initiatives and the 30% out margin target you have for 2027. So there's a lot to sort of unpack there.

And it looked like to me, the stock was getting a fair amount of the credit up at $36, $37, and now it's sort of pulled back here to the $31 level, and we can maybe talk about macroeconomic, we could talk about the Middle East conflict, whatever it is. But I want to give you the last word here to tell the investors what you think is important, where they should be focused on? I know we have obviously touched, but I want to give you the last word if there's anything else that you want to emphasize to the investors?

Yes. Look, I mean, when people -- it's -- I think if you look in your rearview mirror, then you think, wow, the stock doesn't really work. It's in a great place. I never look in the rearview mirror. I look about what's in front, what the value creation that's in front of us. And there's 2 things I think is really worth thinking about and if you then let the math play out. One is our EBITDA is just going to keep growing. And so we're at $5 billion this year. We're going to keep growing. Our cash flow is going to grow, not exponentially, it's going to go really significant.

I mean by 2030, we're going to have over to $3.5 billion, maybe even more close to $4 billion of free cash flow. How does that happen? It happens because our portfolio is transitioning so fast with this product we talked about. But our cost-saving programs, we are maniacal about cost savings, capital allocation. Our capital goes to sales and marketing, our pipeline and making sure our factories have the right equipment in them. Everything else doesn't get capital because it doesn't drive shareholder value. It's a service part. And so the shareholder value to come. I always say we're 1/3 of the way through the story, right? So don't sit on the sidelines too long because -- and then I think you'll be disappointed.

Excellent. All right. Richard Francis, thank you very much.

Thanks a lot.

Okay. Welcome back. We're ready for our next session. Thank you very much for joining us. I'm Marc Goodman, one of the biopharma analysts at Leerink. And we're lucky enough to have the CEO of Teva Pharmaceuticals, Richard Francis. Thank you very much for joining us.

Obviously, one of the key things that you've been focused on since you've gotten there is this Pivot to Growth strategy. Just give us a sense of where we are in that process? I think that will be helpful to kind of kick things off.

Well, thanks, Marc, and thanks for having us. We appreciate it. So yes, the Pivot to Growth strategy was started 3 years ago with the aim of getting the company back to growth after many years of decline. And where are we in that journey? Well, we have 3 phases. One was return to growth, and then the next one is accelerate, where we're in that phase now of accelerating growth. And that's all about accelerating the transformation from Teva from a pure-play generics company to a world-class biopharma company. And I think we're really in the thick of that.

I think we've shown, if you remember, the Pivot to Growth strategy was based on 4 pillars: deliver on our growth engine, which was all about selling more of our innovative products; step up innovation, which is about bringing our products to the market, innovative products through the clinic quicker; create generics powerhouse and focus the business, which is about capital allocation. And I think this phase we're in now and you say, is there more to come, more to come is actually, it's a really exciting time for Teva because we obviously got AUSTEDO. We got through the IRA. We're on a really good growth trajectory. We've got UZEDY, which is on a good growth trajectory. AJOVY, we've reinvigorated, we say that's going to do $1 billion peak sales.

And this year, we have 7 milestones, and they are all milestones really from our innovative side. So we have the maintenance data of duvakitug that came out. We have the anti-IL-15 vitiligo data in Q2. We have the futility analysis of emrusolmin in Q3. In Q3, we have the celiac disease data of anti-IL-15. And then we have the data readout of DARI, our dual-action rescue inhaler in asthma. And we launch olanzapine in Q4, and then we have PD-1 IL-2 in Q4 at the end of the year, first-in-human data.

Now that's a lot to say. But when you ask me what's more to come -- so we've not stabilized the business. We've grown the business the last 3 years through growing both our generics business and our innovative business. The innovative business now is going to start to really accelerate because of the assets we're bringing to market. So I think we're entering a really exciting [indiscernible].

[indiscernible] innovative business, just give us an update. So where is the generics business today? What should we be expecting for this year?

Yes. We're very proactive in it. So the third part of that strategy [indiscernible] How do we do that? Well, we make sure that when we start the Pivot to Growth strategy, we've reduced our coverage of products losing patent from 100% to around 65%. We did that because when we look at the data, the majority of [indiscernible] is from those 65%. So we're covering everything [indiscernible]. So we focus [indiscernible] So we have 10% [ of the market ], [indiscernible], we launch [indiscernible] and another 10 after that, and we keep [indiscernible]. So we have now [ almost a standing start ], the second largest biosimilar portfolio in the world, and we can keep adding to that. So that will drive significant opportunity in our generics business.

And the final thing is we rationalize the manufacturing network to drive more efficiency, more COGS reduction, which will help our gross margin. So you put all that together, a very -- so scale generics and biosimilar business that will be run efficiently. What we've said to people is model that 1% to 2% going forward as a CAGR forever.

Now obviously, we've overachieved that in the past. And so I'm not going to get drawn to is that the right number. That's what we model so people can model it, and that's [indiscernible] performance as to how that can help us [indiscernible] innovation. So [indiscernible]

[indiscernible] U.S., OUS?

That's an interesting question because when I arrived here, I realized everything is about U.S., obviously understand. But as we probably talked about it this year, we lose our generic [indiscernible] completely. And so the U.S. business as a percentage of overall generic business is now less than 25%. It doesn't mean it's not a great business, and we'll be adding more biosimilars to it. But I always want to just make sure people understand that ratio. So the majority of our generics business is Europe, and then international, and then the U.S. And I think that also should give people confidence about that CAGR going forward.

Now there could be reasons -- because we launched a lot of biosimilars now in the U.S. -- that the U.S. may overperform that CAGR in certain years. But I remind people that launches of biosimilars and generics are a bit like London buses. You can wait a long time and nothing comes along, and then suddenly, you have 3 or 4 buses. And that's just timing of patent cliffs. You can't -- I'd love to plan [indiscernible]. That's why I say think of it as a CAGR because our job is to grow the business, both top and bottom line over time, not to try and do it every specific year because it's almost impossible to do.

And maybe a quick question on just the macro environment and what's happening. Obviously, Teva is an Israeli-based company, so it's a sensitive time. Maybe you can just give people a sense of just exposure and how you're dealing with it?

Yes. Obviously, it is. It's definitely a time that, that part of the world, there is a lot going on, to say the least. But just to give a context of numbers, less than 2% of our revenue is based in Israel and less than 8% of our manufacturing. So from a business continuity point of view, I think we're very well placed. And obviously, for the last 2.5 years, unfortunately, we've been dealing with conflict. And so how we manage our supply chains, our inventory and things like that, we're well skilled in that.

I think probably the most important thing is how we look after our colleagues and our employees to make sure they are being looked after. We run a global business that's fast paced. And at the same time, we've got to make sure that we're looking after them in what is a difficult time, I mean, as you've seen by the news. But I think if there's one thing I say about Teva since I've been in 3 years is we've transformed the company in 3 years despite some of that [indiscernible] conflict and that tragedy in that country. And I says more about the quality of Teva, [indiscernible] the quality of our people, which I find [indiscernible] to be part of.

Let's flip gears to AUSTEDO. So relatively good outcome on the IRA negotiations. Congrats on that, that would be great. You've reiterated your '27 target of $2.5 billion. That kind of feels like it's an easy target now, just given what you're [indiscernible] looking for this year. So how are you thinking about that? And also just give us a sense of the guidance for this year, volume and pricing dynamics that drive that guidance for this year?

Yes. Okay. There's a lot in that question.

I'll let you run.

Yes, give me a bit of a -- so it's interesting. So forgive me, I smiled when you said it looks like that '27 of $2.5 billion...

Yes. No one would have believed that 2 years ago.

Two years ago, when we said that, everybody just said, "Look, he has no idea what he's talking about." So I'm sort of in a way, pleased that what happened when you asked that question. Look, there's a lot that we still need to do. There's a lot of opportunity for AUSTEDO, a lot of untreated patients, 85% of patients are still not treated. So we've talked about this being bigger than $3 billion.

Now yes, we're confident we're going to hit $2.5 billion in '27. Could it be better? Could it be $2.5 billion or not? I don't get drawn into that because we've got to get through '26. And to your point, '26 has had some puts and takes. We've got the IRA coming up in '27. How does that impact how people want to think about us this year? Will Q4 be a year where they draw down inventory because they're waiting for the new price in Q1 '27?

What I focus on is how many patients are coming in, how many of those patients are getting XR, how are we looking for compliance and adherence. And all those programs we've had in place are getting better every single year. So I feel we're in a good place. And forgive me, but we'll give guidance on '27 at the time when that's due in Q1 '27. But our aim is to maximize it. Within our guidance for AUSTEDO, we obviously have $2.55 billion. So we could hit it a year early. But we do have a bit of a range there because of the things I've said.

You didn't ask, but I'm going to take the -- because you talked about the pricing dynamics. And right now, we've entered this year focused very much on value and access. So it has become more competitive. We see value and access have to go hand in hand. And so we're mindful of that. I think we've shown we're very good at value and access. We did it with UZEDY. We've done it with AUSTEDO. We've done it with AJOVY, understanding that access isn't everything without value. And I think we manage that very closely. And I think we're well positioned for '26, but there's still a lot to execute.

But the growth rate of -- I mean, if you hit $2.5 billion this year, so that would be what growth rate?

Well, that would put us in the mid-teens.

Mid-teens?

Yes.

So was this -- is there any pricing that's helped or negative in that number? It's all volume?

It's -- most of that's been driven by volume because obviously, we have to renegotiate on access. So it goes back to that previous question. This is about driving more patients in. But it's also about the use of the once-a-day AUSTEDO, [indiscernible] more going on to the once-a-day. That's easier to titrate -- they titrate better, which means they end up on a more optimal dose. Also, the compliance and adherence programs which we started 18 months ago are getting better because you have the breadth of those compliance programs.

I know it sounds quite boring, but those are really important. You have somebody comply and adhere, the value that can add to the brand is pretty significant. And although that's sort of meat and potatoes, we weren't doing that particularly well 3 years ago. And every year, we're getting better at that.

What percent of the patients have migrated to the once-a-day now?

So roughly about all the new starts, over 60% now are starting on XR. So that's a wash through. I don't know what that's the...

But what are the other 40% doing? I don't understand. Why do they want it twice a day?

Well, sometimes that's -- I mean, that's about physician choice, sometimes maybe patient choice. Sometimes it's habit. You got to get to all these physicians and explain to them, and sometimes, it's is habitual. I think that will diminish over time. So yes.

Yes, it just seems a little strange. And okay. So AUSTEDO post-IRA, like how do we think about that?

Well, we said over $3 billion in peak sales. I keep getting asked, "What exactly," "Can you put a number out there?" And I'm not. We put out a lot of numbers 3 years ago, which -- it's a good thing to do to help people refocus on what Teva could be, really give them clarity on what we're looking at. But I don't see the urgency to do that above the -- we said above $3 billion. If at some point, we think it's going to help people understand the opportunity, we could do that. But right now, just think of it as above $3 billion.

And I'll remind people, if you put AUSTEDO above $3 billion, you put UZEDY and olanzapine, we're going to launch this year at $1.5 billion to $2 billion, you put AJOVY at $1 billion, but the company has just been transformed. Just absolutely transformed. And then we're going to talk about the pipeline in a bit, and you can layer that on. So I think -- I always remind people, whether you think it could be more or you agree with us, it's still a good place we're going to end up.

Well, it's a good segue to the LAI franchise. I mean, UZEDY has been great, and you have another product coming. Just give people a sense of the differentiation of this olanzapine product that's supposed to be approved later in the year?

Yes. I mean -- so olanzapine, we're going to hopefully have approved around about Q4 this year. We launched UZEDY a couple of [indiscernible], a long-acting risperidone. The great thing about this, it shows our -- the product we brought to the market is what the physicians need. Subcu, get to therapeutic levels within 8 to 24 hours. It's -- you don't have to be reconstitute it, so it's pre-filled syringe.

And that -- when UZEDY was launched, nobody gave it any potential because there's a big brand there, there's a few brands there. It's genericized. In fact, Teva launched a generic risperidone long-acting in the year we launched UZEDY. So you could probably pick not a worse market to launch in. And I think the team have done a phenomenal job, and everybody is now looking at UZEDY hitting the $280 million potential this year.

So what I say all of that is when it comes to olanzapine, we are calling on these physicians. We are calling on these hospitals. We know who the formulary committee members are. We know who the payers are. We know where we have to go because we're in those places every single day with UZEDY. So that means the expectations around olanzapine should be high because I'd argue there is no long-acting olanzapine that's used because the one in the market has a side effect that stops people using it.

So the unmet need is huge, and we've shown that we know what to do. We've shown we've got credibility. And then we'll bring 2 products to the physician, where one is for mild to moderate and one is for moderate to severe. So the position is easy. It's the same technology. They know us. I think we've built a lot of credibility. So that's why we say $1.5 billion to $2 billion for that franchise. And we can debate whether that's high enough, but let's just get to $1.5 billion, $2 billion, then we can argue.

So why are people using UZEDY? Like, what's the hook?

So here's interesting. So we have -- they use UZEDY for a couple of things which I thought were important, but didn't realize how important. So one is -- and I'll go in sort of order -- particular order. So subcutaneous. That's a nice to have, surely. No. For a schizophrenia patient to have an intramuscular injection means they have to often drop their trousers or something. They don't want to do that. So that makes them less adherent, less want to have a long-acting.

Second thing is you get to therapeutic dose with UZEDY in 8 to 24 hours. The others, it can take a week, and you have to give them additional oral medication to supplement that. So you've got to balance that. You injected them now or -- that's just difficult to manage. UZEDY, you inject it, subcu. Within 8 to 24 hours, you're at therapeutic levels. Physicians really like that.

And the other thing, it's pre-filled. You don't have to reconstitute. It can be kept outside the fridge. And these are patients who have had an episode. They've come in with an episode, so they need to be controlled quickly. And that's why the physicians have -- see the real value of that product. And here's an interesting thing, which I think -- because that could be my sales pitch.

That was a good one.

It's a good one, isn't it? But here's the crux of it. We do not have very good coverage with Medicare, yet we have good sales growth. So the reason that happens is because the physicians are phoning up saying, I need to use UZEDY. And they say, well, it's not listed. They say, why? They say because I get to therapeutic levels of 8 to 24 hours, I can discharge the patient, it's subcu the patient. So all the attributes come through. A physician will only do that because he needs the product. And I think that's a testament to the quality of that product.

And then we have a great team. I mean, look, I'm English. I'm a bit sort of -- I don't talk us up too much, but I'll say one thing. Our commercial team, not just in the U.S., across the globe, particularly in the U.S., is excellent. And what we've done with UZEDY shows it's excellent. What we've done with AUSTEDO shows it's excellent. What we've done with AJOVY shows it's excellent. So we've done great things with UZEDY because of a great team.

And by the way, not doing -- not contracting with the Medicare is not an easy thing to do when you're launching because you have people like me saying you got to perform better, you've got to perform better. I don't give me access an issue. I need to perform better, but we have a great team who said, look, this is about seeing the value over time. It's not about the first 3 or 4 quarters of a launch.

Which is why I remind everybody, as of being launched, look at it on the leading indicators, the scripts, the sampling, the breadth of usage, the depth of usage rather than the revenue because we're not going to discount our way to access. We want to hold the line as to get the right value for access. And that probably mean revenue, there's probably not going to be any particular revenue in '26. And in '27, it will be more towards the end of the year as we drive it through because this is about creating a $1.5 billion to $2 billion franchise. It's not about having a great first year because then, you just discount your future.

And so I guess the first question that someone asks on olanzapine, okay, great drug, but boy, sure has gained a lot of weight on that. So how does that work? Do you think that will be a pushback?

No, because we're not asking physicians to use olanzapine. We're saying where you use olanzapine oral. So you already have that.

You're already comfortable with the molecule.

You've already used it. You already had that discussion with the patient, but you clearly need efficacy because it's most efficacious. Now put them on a longer-acting. And a longer-acting for a severe schizophrenic patient is really important because they've got to be compliant.

Yes. Let's go through some of the pipeline things you mentioned. So what's the next pipeline you made a point to read out?

So we've got olanzapine launches this year. Then we have DARI, our dual-action rescue inhaler in asthma. That will have a Phase III readout in Q4.

So just tell us about that product just for a second. So the hook for that product and why it's going to be important.

So this product is a -- so the guidelines in the U.S. are that 10 million Americans suffering from asthma should be on a dual-acting rescue inhaler. There hasn't been one. Astra launched one about 18 months ago. So they're creating the market. They're creating awareness of the guidelines and saying you should use theirs. We'll come 3 years, 3.5 years after them. One would argue not an ideal situation, normal. But as we've got to create the market, I'd rather have Astra, who's got quite a pedigree in respiratory to create that market.

We come in, and what's our differentiation? We will have a broad indication, but we will uniquely be the ones with a pediatric indication. So we'll only have a -- we are the only ones with the pediatric. And that means 25% of the market is pediatric. So we're not competing because they can't actually -- they don't have an indication for pediatrics. So we have that.

And the other one is our device is very, very simple. Theirs is more complex. So I think there will be a spillover into people who just struggle to use the Astra device. But let's just say it gets divided. We take pediatrics, they take 75% of the market. That's still a $1 billion product for us.

Did they not want to go after pediatrics? Did it not work?

Well, I mean, they -- no. When you go after an indication, you tend to start with adults, adolescents, and then you've got a big market. As with all of us, pediatrics is super, super hard to do the study. It's hard to get kids into a study. So we went after that. We've got all. We've got all -- so our Phase III will have all patients in it. We just knew pediatrics was going to be an important part for us to differentiate, so we went after it. Will they in time? They may well do. I'm not sure that would be a priority for them because they have 75% of the market. So it's like we -- all of us when we develop products, pediatrics tends to come last.

Definitely. And that product is -- how big is that product for Astra right now?

I don't know. They're still sort of creating the market. So I think I haven't looked at their latest...

That's okay. That's just one. It's probably a couple of hundred million dollars or something. Okay. So okay, what's next?

So then we have that -- then we have -- as I said, there's a futility analysis on emrusolmin, a treatment for multiple system atrophy, a rare disease. So if that is successful, there's a potential that -- and I say if because that has a low POS, I'll agree.

Yes. So what will we see there?

So we'll just see whether the study continues or not. So if the study continues, that means it passed the futility. Right? But that means it could theoretically launch in '28 because it's obviously a disease that people die within -- average within 5 years. And that would be a significant product.

That said, I'm not counting on that because the probability is relatively low. The capital deployment to make that happen, that study is low as well. And then after that, in '29, we'll launch duvakitug in UC, ulcerative colitis and Crohn's disease. And then 2030, probably a gap year. And then 2031, vitiligo anti-IL-15. And then we go into Crohn's disease, and then we'll launch 2 more indications in duvakitug this year. So those 2 indications will probably start to come through in the early '30s.

So the theme building here, hopefully, in people's minds is this. So coming like Teva, we'll be launching an innovative product roughly every 18 months, sort of right through the '30s, at least towards the end of the '30s. And then if you layer that on to thinking about so what does that mean for Teva? Well, because of our base -- because of our business right now is we are at about a 55% gross margin. Everything we launch on top of that pulls up our gross margin. And if we keep focused on our operating expenditure management, which we're very good at, we'll grow our EBITDA, we'll grow our free cash flow and we'll grow EPS.

Talk about the vitiligo program a little bit. I think that's probably a little bit underappreciated.

Well, look, underappreciate -- everything is underappreciated at Teva, right? Now I know I always say that, but I really think our pipeline has no value placed on it.

There's not a lot of people going after vitiligo. So maybe you can talk about it.

Well, okay. So look, a couple of data points on vitiligo. So firstly, there is a twice-a-day topical in the market that generates upwards of $800 million of revenue, twice-a-day topical vitiligo. So that regulatory path is very clear for us.

The second thing is we did a financing deal with Royalty Pharma. So Royalty Pharma, this is the earliest investment they've made, as in earliest in the life cycle of a product. So they've seen something that they find attractive to fund it. And ours will be a subcutaneous injection every quarter. So you think going from a twice-a-day topical to every quarter injection.

And look, what I think and we've started to realize is vitiligo is -- is this the psoriasis ischemia, atopic dermatitis of 15 years ago where we all said it's going to be tiny, biologic?

I remember, yes.

You remember. We're both old enough to remember that. I don't know, but I'd go back to -- I think it really could be pretty significant. But let's say it's not and it just does $1 billion, it's a game changer for Teva. So we're really excited because it's another in-house antibody. So duvakitug was antibody, TL1A, IL-15 is antibody, and then we can talk about PD-1 IL-2, which is another in-house because we have great antibody engineering. So we know our IL-15 is a good IL-15. So we're excited. The data will come out in Q2, as in first-in-human. Forgive the pun, but I think we will see.

So they've not seen first-in-human data yet, but they did the deal with Royalty Pharma?

They've seen everything we have, right?

So the data is not there yet?

But we -- the data for those -- I think it's -- I don't know exactly, the number of patients involved will only come out in Q2. But they've seen enough. And I believe Pablo and his team, I think, do 350 due diligences a year, he told me. And I think they do less than 10 deals. So that makes me feel like...

Yes, yes, yes. Well, I see the differentiation. Clearly, the market is there. I agree with you, it could be the next take a topical and turn it into an injectable and grow the market exponentially. So it does make sense. That's probably what they see. But as far as data, they haven't really seen that much?

Well, there's a lot of -- I mean, we're in the clinic, we're in humans. There's a lot of data before that. You don't get to go into the clinic. So I think they've seen enough. But that's probably -- you want to ask Pablo next time you have them on stage.

Right. Okay. Fair enough. Fair enough. The TL1A, so just give us a quick update there, what we're going to see in this?

So TL1A, we had the maintenance data come out in Q1. So we had really good induction data of our Phase II, which I think was seen as best-in-class, maybe best in disease. The maintenance data came out, reinforce that. So I think we're the best TL1A. And now we -- people are talking about whether we could be the best in disease. And now the Phase III has been up and running since Q4 last year. Good study design. So the aim is to keep recruiting as fast as possible and get to the endpoint.

This year, we're going to announce 2 more indications with our partner, Sanofi. And then the important thing is to make sure they're in the clinic and we move those fast. And yes, another thing. If you think about Teva, so TL1A and anti-IL-15 are multiple indications in one product, right? So...

Which is why you needed help.

Which is why we needed help, but it also means a TL1A that could go to 4, 5, 6, 7, 8 indications for any company is crazy good. For Teva, it's amazing. IL-15, celiac disease, vitiligo, alopecia, maybe atopic dermatitis, we've got 4 in one product there. Those are really rare to find those. I mean, I haven't had one in my career, now I've got 2. So good things to come to those who wait.

Yes, very interesting. So you did a deal with Blackstone. Tell us about this deal, how did this originate and what's the...

So we have a principle, a philosophy at Teva when we did the Pivot to Growth strategy where we saw the innovative pipeline, we had the potential. It was a very simple principle, which is a pipeline is only really valuable if you bring it to market as fast as possible. So for us, it's about bring as many indications as fast as possible to market. That's the goal. How do we do that? It's about building capability and obviously having the financing capability to do it. So duvakitug is about bringing multiple indications to the market as quickly as possible.

I think of these big products, pipeline is in a product. And I think when I talk to those CEOs, I ask them, is there anything they wish they would have done differently? They'll say, if I'd known, I wish I start all the indications at the same time. So for me, it's about how do you maximize these products. And obviously, having Blackstone as a partner helps us finance those, be very ambitious. But another area of due diligence to them to look at the asset and say, what value does this have over what period of time? What's the data in what is still, one could argue, a competitive market, UC and CD.

Yes. So I mean, a very interesting pipeline, a lot going on. Is your business development team even working, I mean, given how busy you've got your own pipeline?

Yes. So business development is. In fact, we've been actively trying to bring in-licensed products to Teva. The challenge we have there is that we have opportunity cost. I mean, we have capital to deploy, and we have a lot of organic opportunity. And so to find something, it needs to be the right price, synergistic, and we want to take no risk. So these will all be either the Phase III readouts happen or they will be commercialized because we don't want to take on -- we don't need to take on any more risk. We don't need to deploy capital at risk.

So is the goal maybe even a commercialized asset, or that's a...

Yes. I mean, we've been looking actively for the last 2 years, but it's finding the right asset at the right price and those two.

I mean, I don't know whether you looked at -- I assume you looked at Avadel, whether you cared about it or not. I'm just -- is that the type of thing that may have been of interest? Like...

Anything that...

Just because it's on the market, it's not really necessary?

Yes. Exactly. I think anything like that, that we can bring in that we think we're synergistic. We think we can sell any product better than anybody else too.

Yes. Interesting. Good. Thank you.

Hello, and welcome to the Duvakitug IBD Ph2b Maintenance Topline Results Conference Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand it over to Chris Stevo, SVP, Investor Relations. Please go ahead.

Thanks, Alex. Good morning and good afternoon, everyone. I just want to remind people, we'll be making forward-looking statements today, and we undertake no obligation to update those statements. And if you have any questions, please see our SEC filings under Forms 10-K and 10-Q.

And with that, I'm very pleased to give you Richard Francis.

Thank you, Chris. Good morning, good afternoon, everybody. Thank you for joining the call. So moving on to Slide 4. This is a very exciting milestone on the journey that we started on pivot to growth back in 2023 to transformed Teva from a pure biogenerics company to a world-leading biopharma company. And obviously, on this slide, you'll see that 2026 is a year of milestones. We have many milestones.

I'm really excited that today, we're talking about duvakitug and the maintenance data for the UC and CD Phase II study. But I'd just remind you that we have many more milestones coming this year with anti-IL-15 vitiligo in the first half of this year, Phase Ib top line results, celiac with anti-IL-15 as well. In the second half of the year, DARI will have the pivotal Phase III study readout and then emrusolmin futility analysis of the Phase II. And as you know, we're excited about the potential launch of olanzapine at the end of this year and then finally, anti-PD1-IL2. So a lot of exciting data coming out from our innovative pipeline. So really a key year.

Now the reason why this is so important and exciting, if you move on to Slide 5, is this really has the ability to accelerate the transformation that we've started here at Teva. If you look across this pipeline from olanzapine to DARI, duvakitug, emrusolmin, anti-IL-15 to PD-1. These all have the ability to be $1 billion products in their indications. And as you see, the estimated market size that we're all entering is significant and growing. So not only do we have a high-quality pipeline, it is well positioned to continue to drive our innovative portfolio growth for many years to come.

And I do remind you that our innovative portfolio is already growing at high double digits. So exciting times for Teva on this transition, but today's call is about duvakitug. And without further ado, I would like to hand you over to Eric Hughes, Head of R&D and our CMO. So over to you, Eric.

Thank you very much, Richard. It's exciting to be here today to talk about our duvakitug program. And I always like to start first, what is the unmet medical need here. As a physician, I know there's a long way to go in ulcerative colitis and Crohn's disease. I think it's very important to remember that less than 50% of people even on advanced therapies, only less than 50% achieve a clinical remission. And more importantly, that responsiveness can be lost over time just over the first year.

What does this result then? Well, about 20% of patients with ulcerative colitis still get at least one surgery in the -- despite their treatment. And in Crohn's disease, in particular, over 75% of people still get at least one surgery in their lifetime. So there's more that we can do for these patients, and they need more treatments and better durability of their response.

We move on to the next slide. I always like to start with this. Our Teva team created an antibody that's strategically designed. We made a very potent antibody that blocks the binding of TL1A to the DR3 receptor, which is the important signal of inflammation that was first related to IBD early in the days of the discovery of TL1A. But in addition, we designed an antibody that binds the TL1A trimer in a way that it allows the binding to the DcR3 receptor. This is an important aspect of our antibody because not only do we block the bad signal, but we maintain the way in which the body normally maintains the homeostasis to these exuberant TL1A responses. So I applaud the team for thinking thoughtfully about the biology and making a very potent antibody.

Next slide. So what have we been showing in our program? When I look back at the Phase IIb study induction portion of the study we're talking about today, we were very pleased to see a very robust placebo-adjusted numbers for both ulcerative colitis and Crohn's disease. And we also showed that both treatment-experienced and treatment-naive patients responded similarly, which is great for a biologic.

We also showed a very favorable safety profile to date. And you'll see that we confirm that as well in the long-term follow-up. One of the other important things is we showed that we had about 3% to 5% antidrug antibodies, low antidrug antibodies. Hopefully, that will show that it is contributing to our durable response. And last but not least, we've always given the entire program and we will be giving the program in Phase III as a subcutaneous dose, which is convenient for patients.

So if I can go to the next slide, just to review what did we show about a year ago. So a year ago, we finished up the induction portion, and we were very pleased to see that we had in ulcerative colitis here on the left side of the screen, a delta of 27.4% in our ulcerative colitis group, and we also showed a nice dose response.

And similarly, in Crohn's disease, even more impressive delta, we had about a 34.8% in endoscopic response in Crohn's disease. So both results were very robust, very well-controlled study with a dose response. This really set us up nicely for Phase III because we could make a strong modeling and simulation model that would really predict what our responses would be going to the future. So that induction phase of the study, we are very pleased to have.

And on the next slide, you can see how does that induction phase compare across the treatment landscape. You can see here, we're showing TL1As on the left-hand side with that delta I mentioned in ulcerative colitis of 27% and all the way across the 23s as well as the JAKs in Phase III data, you can see it's a very competitive profile in ulcerative colitis.

In Crohn's disease on the right, you can see that delta we saw in induction of about 35% and see how it compares to the other TL1As in development as well as the 23s and the JAKs. So when I see this, I'm very pleased by our placebo-adjusted rates being very competitive, not only for TL1As, but the treatment landscape that we see in ulcerative colitis and Crohn's disease today.

But moving on to the next slide, what do we really want to talk about today and what do we have the press release this morning about? I just described the first part of this study was the induction phase on the top of this slide here. We looked at 900 and 450 milligrams against placebo for that 14 weeks of the induction. Now those people who were treated with the active drug were then determined to be either responders by clinical remission or clinical response for both ulcerative colitis and Crohn's disease. And those responders went into our maintenance phase. This is a classic rerandomization design to show the durability of the response.

So those responders were then rerandomized into duvakitug at 900 or duvakitug at 450. And again, it was maintaining the blind with a rerandomization. And today, we'll be talking about that data at the 44-week time point at the end of this long treatment period.

So if we can move on to the next slide, this is the exciting part of today. We're very pleased to see the ulcerative colitis data for clinical remission. Again, the same endpoint for the primary endpoint we used in the induction phase. You can see, again, a nice dose response between 450 and 900, and we're very happy to see that 58% at the highest dose for clinical remission. So a great durable response over 44 weeks of additional therapy.

And then now with Crohn's disease, in a similar way, looking at a very objective endpoint of endoscopic response, which is the same primary endpoint we saw in the induction phase, again, a great number with a dose response up to 55%, very, very robust objective endpoint. So we're very proud to see these numbers for the maintenance. I mentioned when I started that durability of response is incredibly important. Ulcerative colitis and Crohn's disease are chronic illnesses that we're not succeeding in today and people need not only the response but a response that lasts. And I think this is -- this strengthens the potential of duvakitug.

Now if we go to the next slide, what does this look like in the treatment landscape out there? There are many different things that people can be treated with. But again, people cycle through these therapies because of that durability. And what we can see here on the left is ulcerative colitis is a cross-study comparison again. So all the caveats need to be thought of with that. But still, what -- how does this look like with what people see today in the labels and in the data out there.

So on the left-hand side, you can see ulcerative colitis. At that top dose, we saw about 58% achieving and maintaining clinical remission. And you can see how that compares to other TL1As in development. But also more importantly, this sees what -- how we compare to IL-23s and the JAK from their Phase III labels. And in ulcerative colitis, that looks pretty -- what's the word I'm looking for, competitive. So I'm very happy to see that effect being maintained over a full year of therapy.

But then looking at the Crohn's disease, you can see, again, in this objective endpoint of endoscopic response, very competitive 55% response rate. And then you can see how that compares to other TL1A and 23s and the JAK out there. Again, we -- for clarity, we pointed out in this cross-study comparison that the solid bars are rerandomization designs and the hash bars are those studies which were treat-throughs. But no matter how you look at it, it looks like a very competitive result.

And when I look at this, I think of myself as this is not -- I don't think we just have the potential of being best-in-class. We have the potential of being best in disease. So that was what was so exciting when we saw the results. So very happy with the execution by the team. I'm very happy for the patients in this study.

So if I go to the next slide, we've gone through a number of milestones now throughout this program. First, we talked about the antibody itself. In our hands and in our in vitro assays when we compare it to antibodies we make from the patents out there, we believe we have the most potent antibody in TL1A class. We have the greatest selectivity for the DR3 receptor. And in our Phase II study, I believe we posted some of the lowest antidrug antibodies out there, 3% to 5%.

We showed in the induction study that we started off with here some great results in both ulcerative colitis and Crohn's disease. Remember, these were the only well-controlled -- placebo-controlled studies for Crohn's disease that we bucketed together in the same study, and we saw great treatment responses irrespective of whether they're naive or treatment-experienced, and we had a favorable safety profile and again, with low immunogenicity.

And today, I'm very happy to show this durability of response. It's very important that we have a durable response for these patients with such a chronic disease and in a situation where you cycle through therapies. Our goal is to have deep, durable steroid-free remission. This hopefully will translate into fewer surgeries, fewer hospitalizations and improved long-term outcomes for patients' quality of life. So that gives me a great hope of what we can do with this program. So -- and that continued favorable safety profile adds to that hope that I have.

And finally, I just want to go over what are we doing now? Well, we've already moved into Phase III with our partner, Sanofi, the UC program called SUNSCAPE and the CD program called STARSCAPE. I'm very proud of the design we put together with our partner with an open-label feeder arm, a favorable randomization to active versus placebo and all subcutaneous treatment from induction through maintenance.

So very convenient for patients and a very attractive, I think, Phase III study design. So we'll be looking forward to executing as we always do. I always like to remember, we were the fastest to translate -- to transfer from Phase II to Phase III. And I hope that excellence in execution continues. Our enrollment has already gotten off to a great start.

And the final slide, just to talk about more of the potential of the class. It's exciting to be on a program that is a totally new biologic class. We're hitting a cytokine TL1A that is an amplifier of many different pathways. And I think ulcerative colitis and Crohn's disease was just the beginning of what the potential of this molecule has.

We look at it as buckets. There's T2 inflammation, there's non-T2 inflammation, and there's the upside possibility of TL1A having a direct effect on fibrosis. Remember, fibrotic cells actually have DR3 receptors. So a very interesting possibility here where we're not only potentially hitting inflammation, but also potentially fibrosis. So very exciting. We'll be excited to announce new indications later this year, but I'm just very happy with the results we have today.

And I just want to end with a slide that Richard started with. For Teva this year, we have lots of events happening. It's a very exciting year, 7 different events, and this is just the first step of our journey in 2026. Today, we talked about the maintenance data for duvakitug. We'll be presenting -- releasing data for anti-IL-15 in vitiligo and celiac this year. The DARI program, one of the largest studies Teva's ever run, will be reaching its final asthma exacerbation by the end of this year. Our emrusolmin futility analysis will be at the end of this year. Hopefully, our olanzapine approval will come in the second half of this year. And finally, we'll be having human data for our anti-PD-1 program.

So very exciting year. The teams are working extremely hard. I appreciate all the effort that's going into this. And with that, I think I'm going to open it up and hand it to Chris for Q&A.

Thanks, Eric. So for the Q&A session, we'll have Richard, Eric and Eli available to answer any questions. And Alex, before you start the Q&A, I just want to remind people to please limit themselves to one question and one brief follow-up. And if we have time, we'll certainly let you back in the queue to ask more questions. So please go ahead, Alex.

[Operator Instructions] Our first question for today comes from Dennis Ding of Jefferies.

Congrats on the data. I had a question on ADAs. I'm curious if you have any new data on ADAs with longer treatment, if you've also looked at efficacy broken out by ADAs and if there's any relationship there? And then number two, sort of like a bigger picture bispecific strategy question. It seems like most of your peers are looking at TL1A and IL-23 bispecific, though most are going after [ P19, ] while Pfizer and Roche, they're going after P40. So I'm curious how you're thinking about the 2 and the puts and takes between one over the other? And when should we expect Teva to unveil its own TL1A bispecific strategy?

Great, Dennis.

Thank you for the question. So first...

Sorry, yes, thank you. Thanks, Dennis, for the question. So first, with regards to the ADAs and the efficacy. So we have to batch those things, and this is just a top line report. So we actually haven't run the later batched samples yet. But looking back on the beginning of the study, we only saw about 3% to 5% when it comes to ADAs depending on the indication. So with such a low number of ADAs and with such high response rates, right now, it's hard to make any correlation. So I don't anticipate that to be a significant correlation, but we'll report that when we get the data with regards to the efficacy.

Now getting on to the bispecifics. So we're always encouraged by the fact that so many people are now interested in TL1A. I think that given the good safety profile we're seeing to date is encouraging when it comes to the concept of combination therapies. I think combination therapies are something that we'll continue to develop.

I would remind you that Teva makes a lot of antibodies. We've made a lot of biosimilars. We've been leaders in making the TL1A antibody. So our ability in our labs down in Australia, this is their sweet spot. They can make bispecifics very well. In fact, we have a great bispecifics for TSLP and IL-13 in development right now. And suffice it to say, we are looking at many different combinations. But I think that the fact that there's such great interest in this possibility, it shows you the strength of this biologic class.

Our next question comes from Louise Chen of Scotiabank.

Congratulations on the data. So I wanted to ask you how do you think your induction and maintenance data read through to your Phase III UC and CD studies? And as a quick follow-up, I wanted to ask you, what do you think would constitute a commercially and clinically meaningful outcome in those studies relative to what we saw today?

Richard, I can take that one. Yes. Okay. So thank you, Louise. Yes, so the read-through to Phase III. So there's aspects of the Phase III program that I'm very encouraged by. Our modeling and simulation for our dose selection, I think, is very strong based on the fact that we had a great dose response, great PK and well antidrug antibodies. So our translation in the Phase [ III, ] I think, will be robust. So if I think if we see data that's similar to what we're showing from the Phase II, I believe this program will be extremely competitive in IBD for both ulcerative colitis and Crohn's disease. Hopefully, that answers your question, Louise.

I think the second part was around commercial competitiveness, Eric?

yes I'm sorry, yes. So thinking about how that translates, if this translates to Phase III, I think the commercial competitors, as you can see by the comparisons we've made from what's in the literature and what's in the labels, the U.S. labels for the -- many of the different programs that are doing very well in the commercial space, we're competitive. So I expect that we will continue to show deep durable and steroid-free remission. That will translate into great value for payers, fewer surgeries, fewer hospitalizations and I hope to show all of this with increased quality of life for patients. So those are all things that people will value and that payers, I think, will be willing to pay for because I think this will have an impact on the disease. So yes, I think we have a great opportunity in the commercial world.

Yes. And if I could add on to what Eric has just said. It is worth remembering that this is a $38 billion market. And so what proportion of that duvakitug can take, I think, in such a sizable market, which is growing, and as Eric has highlighted, has significant unmet medical need. I think it's an exciting opportunity with the efficacy we're showing, but just a sizable market makes it an important opportunity for Teva.

Our next question comes from Glen Santangelo of Barclays.

Eric, I just want to follow up on the report today. So the dose response clearly looks good. And I'm just kind of curious to get your take, and you sort of touched on it in your prepared remarks, but is sort of looking at the Merck 50-week trial maybe the best comparison here? And how should we account for the differences in the dosages, the dosing between the 2 different studies?

So when I always talk about the dose response, the dose response is important because when you come to making a model and you're trying to simulate responses, you want to be on a curve where you have differentiation between the doses. So that data helps us predict how we can see doses going forward. The more data, obviously, the model gets better.

I don't want to comment too much on the comparators that we have in TL1A. I would remind you that for both ulcerative colitis and Crohn's disease, we have a well-controlled study with a good dose response. So it gives me confidence in how we can predict our dose going forward. And there's also a differentiation and how I started this whole story, Glen, is that we have a different antibody. We bind in a different way. We block the DR3. We allow the decoy receptor to engage the biologically active trimer.

So we believe that we're actually clearing more TL1A along the way. So when you compare doses between programs, you have to -- there's a lot of caveats there because there's different potency. There's different selectivity. There's different ways in which it's being cleared. There's different antidrug antibodies. So our dose, I'm confident in the dose we select, and I think that our data stands to really predict that well.

Our next question comes from David Amsellem of Piper Sandler.

So I wanted to come back to combination therapy and bispecifics, but wanted to introduce the topic of biomarker-enriched populations here. So on one hand, the space in terms of drug development seems to be moving towards these novel combinations that are being tested. But on the other hand, we hear a lot more about biomarkers and biomarker-enriched populations where potentially there could be monotherapy cases to be made in biomarker-enriched subgroups.

So with that in mind, how are you thinking about that, Eric, in terms of testing biomarkers, in other words, high TL1A expression? I know your Phase III program was all comers. But as you think about duvakitug down the road, how are you thinking about biomarker-enriched populations? How are you thinking about the evolution of drug development in IBD towards these kind of patient enrichment?

Thanks, David. Yes. So just quickly to comment again on combinations. Combinations, I think, are exciting. I think there's a great potential there. Always the goal is to increase efficacy while maintaining a safe profile. So those will develop. They're early in the process. Certainly, we're looking at that and certainly, some of our competitors are looking at that as well. So that's something that's way down the road but exciting nonetheless.

With regards to the biomarker, so I always joke, I got into this business 20 years ago actually as a biomarker development guy in the early space. Biomarkers are challenging. And one of the interesting things about TL1A, though, TL1A was really kind of discovered as a novel cytokine that was actually highly associated with Crohn's disease and ulcerative colitis. So the history in this field is very enticing.

Throughout my career, though, I've learned that you need a lot of data to be confident of a biomarker. So that's why we've always planned to do this program as an all-comers. And you need thousands of patients before you have a confidence that you have a strong association with a biomarker. I certainly see that as a hope. If we do identify one that has a high sensitivity and a high specificity, that's something I would be happy to develop and then you could actually increase your potential for monotherapy.

So I think that, that's always a possibility, but we always need to have more data to be able to be confident. I think we're in the early days, and we have some great biomarkers that we're working on now and testing in our studies, but we need to be confident before we go out there and say, this is something people should use to choose because remember, these patients are cycling through therapies.

You don't want to disabuse someone who's failing on a therapy, the chance, even if we were low to get on a new treatment because we want to prevent those surgeries, and we want to prevent those hospitalizations and those relapses. So that's my take on it. And I think it will just be a matter of time before we have enough data to confidently say we have a good biomarker.

Our next question comes from Umer Raffat of Evercore ISI.

I have a couple here on this trial, if I may. Perhaps first, the doses, I think one of your slides indicates you have 2 doses in Phase III. I saw Clin Trials indicates 3 doses, but I couldn't tell if it's 3 doses or 3 cohorts. And the reason I ask is because I think one of the more important things in this data today is perhaps what's not shown, which is you took a bunch of responders from induction, which were on either 450 or 900 and then they were rerandomized, meaning you technically have data in here on patients that went from 900 in induction to 450 in maintenance.

And that's my question, what did the response rates look like in those? Because when we look at Roche data, it looks like stepping down in dose from induction to maintenance, they lost, whereas keeping the dose flat helped. So conversely, if you actually did retain all those responses going from 900 to 450, that starts to be perhaps the most direct differentiator.

Great. Thank you, Umer. I appreciate the question. And let me clarify, I think your interpretation of the Phase III is right. There's 3 cohorts, but there's 2 active doses in Phase III. So we're actually -- I'm actually very excited to have 2 doses that is interrogated in the Phase III. So it gives us more optionality for patients potentially in the future. So just as a clarification, it's 2 doses in the Phase III program.

Now with the rerandomization design, so rerandomization designs are very common. You can also do treat through, both are acceptable to health authorities. And you're right, people go in, either having received 900 or 450 in the induction and then they're rerandomized. So there's 4 different pathways that people go. They go from 900, rerandomized at the high and the low dose or they go from 450 rerandomized at the high and the low dose.

And I'd love to talk about that all today, but I have to limit myself to what was in the press release with regards to the data, and we'll present that in the conferences coming up in the future. Suffice it to say, as we say in the press release, what we've seen in the primary end point has been consistent across many of the different efficacy endpoints Thanks, Umer.

Our next question comes from Ash Verma of UBS.

Congrats on all the progress here. So just maybe like in terms of the commercial, what do you think about your potential order of entry versus other TL1A competitors? Is that something of a disadvantage or you don't necessarily think that way? And just secondly, on this Phase II UC and CD design, so can you confirm like is the -- is it going to be a Q4W those? Or is it going to be Q2W because that's another differentiating aspect versus some of the other programs that you've seen?

Great. So yes, I can address that question about the commercial order of entry. So the rule of thumb that I have is that if you're within an 18-month window, the order of entry actually doesn't matter. It's the efficacy that matters. So we're well within that 18-month window. I think it's even a better position for the Crohn's disease. So I'm not so much worried about the order of entry at this point. I'm making sure that we maximize the efficacy on this program. And it's about execution.

I mentioned that we transitioned from Phase II to Phase III the fastest with our partner, Sanofi, and we'll get off to a great start with our Phase III program. And with data like this, it does make people think carefully about which study you want to go into. Do you want to go into a study that's looking like it has great induction and durability. So I think it comes down to execution, and we're in a good position with regards to the order of entry, and it's going to be dependent on the efficacy.

Now with regards to the Q4 versus Q2 in response, all I can say today is that this study looked at Q4. So we're very confident in a competitive profile of a monthly dosing, and we haven't announced yet what we have in our Phase III program. But I'm pleased to see that today, Q4 dosing works -- seems to work very well. Thank you, Ash.

Our next question comes from Jason Gerberry of Bank of America.

Mine is, as you think about the evolving data that you're generating here, how do you think about future head-to-head trials against market leader IL-23 in the IBD space? When we look at AbbVie, the most successful company in this area, they got head-to-head trials against prior generation biologics up and running prior to approval of the lead indications. And so what I wonder is, when I look at this data, it seems like maybe worst case, you'd be noninferior, but there's a really big upside case that warrants doing head-to-head trials here. So curious if you're seeing things that way and anything you can say on that front would be much appreciated.

Thanks, Jason, for the question. I actually love this question. Head-to-heads are an important way of assessing programs. We're going to have to look at the evolving data and decide whether that's something we want to do. I think that even asking the question is a great thing today. But again, we'll have to look at the data very carefully and see what the benefits and pros of doing that in the future. I'm just happy with the results we're showing today. With these cross-study comparisons, I think that we're in a good position to have a great option for patients in the future, and it's all about the efficacy we can generate in Phase III.

Our next question comes from Matt Dellatorre of Goldman Sachs.

Congrats on the data. Maybe just on the potential of this mechanism to have an impact on fibrosis. You touched on this a bit briefly, but could you share if there's anything in the study data that you saw that either increases or decreases your confidence on that aspect? And then maybe just kind of in conjunction with that, what's the likely venue for the full data?

Yes. Thank you, Matt. That's a great question. Scientifically, it's the most interesting question for me. We don't have proof yet that we're having a direct effect on fibrosis. It's going to take some time. Usually, in the work I've done in fibrosis in the past, it's really based on the biopsy data and that can be variable at times. So -- but we're going to monitor that. We'll look at serum markers. We'll look at biopsy markers. We'll look at everything we can do to show an actual direct effect on fibrosis.

If I were to speculate, the most interesting thing is the fact that we're having such good responses in Crohn's disease. I mean Crohn's is -- I would describe it as almost a hyperfibrotic disease. And if we're seeing these great effects on the objective endpoint of an endoscopic endpoint, that gives me hope that maybe we do have some direct effect on the fibrosis that still needs to be shown, and it's going to require a lot of data to get it there.

There'll be more indications coming out in the future that looks directly at fibrosis. That's when we're going to really get a good sense of whether there is a direct treatment effect on fibrotic pathways itself. But it certainly is the clear upside in this biologic. It's the first time, as I said at the very beginning, where we're potentially not only hitting inflammation, but directly having an effect on fibrosis. And particularly in Crohn's disease, in my opinion, that's where that could be really beneficial to patients.

Thanks for the question.

Our next question comes from Les Sulewski of Truist.

You noted hypertension as a pooled AE in the maintenance portion. Was the signal dose dependent? And were there any -- were these events transient? Or do they require intervention? And are there any concerns regarding systemic vascular remodeling that could lead to a label restriction? And then second, for the open-label feeder Phase III, how are you mitigating the risk of functional unbinding? And then for the Phase III, are there any changes to the subcu auto-injector? Or is it identical to the one used in the RELIEVE study?

Okay. So -- and I'm just writing down your questions. You had multiple ones and I have to follow up. But when it comes to the safety, the safety is exactly the same we saw in the beginning in the induction part of the phase of the study. The common -- most common AE is over 5%. I think we said were nasopharyngitis and respiratory illness and then hypertension. There is no dose dependency of any of this. There was no interventions for this. These are common AEs that we're measuring hypertension throughout the study. So there's really nothing in the safety that we can see at this point. It was very similar to the induction.

And your question about the vascular, I think, effects, we do not see any signal of vascular effects at this point. So I'm confident in the safety so far, and we'll have a full data set over 1,000 patients in each of the indications from Phase III. And you asked a question of functional unbinding. Could you ask that -- could you explain that again? Is that in the maintenance you're talking about?

Yes, this open-label feeder into the Phase III, essentially, how are you mitigating the risk of functional unbinding or I guess, patient's expectancy bias in the maintenance portion?

No, that's a very good point. And so the open-label feeder is not baked into the blinded portion of -- and the statistical analysis of the common -- the comparison to placebo. So that really -- remember, the functional -- the open-label feeder is just really building up our safety database that allows us to reach the numbers that you require for any submission with regards to your total safety exposure. So yes, they're treated differently in the Phase III study. And I missed your last question. What was your last question?

The drug device combo, is it the same for Phase III as it was in RELIEVE?

Yes. So I always like to emphasize our program has always been totally subcutaneous. So we have direct correlation from our Phase II program to our Phase III. Our Phase III is using a prefilled syringe that will then enable our auto-injector, which is using the same syringe. So we're locked and loaded and ready for launch with an auto-injector.

At this time, we currently have no further questions for today. Therefore, that concludes today's conference call. Thank you all for joining. You may now disconnect your lines.

Hello, and welcome to the Teva Pharmaceuticals Industries Limited Q4 2025 Earnings Conference Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand over to Chris Stevo, SVP, Investor Relations. Please go ahead.

Thank you, Alex. Good morning, and good afternoon, everyone. Thank you for joining us on our fourth quarter call. Before I turn it over to our CEO, Richard Francis, I just want to remind everyone that we will be making forward-looking statements on this call. Any statements we make are only as of today, and we undertake no obligation to update those statements subsequently. And if you have any questions about our forward-looking statements, feel free to see the appropriate sections in our SEC Forms 10-K and 10-Q.

With that, Richard Francis.

Thank you, Chris. Good morning, good afternoon, everybody. Great to have you on the call. Also on the call with me today will be Dr. Eric Hughes, Head of R&D and Chief Medical Officer, who will be walking you through some exciting developments in our pipeline. And then Eli Kalif, my CFO, who will go through the Q4 and the full year results.

So starting with, as I always do, the Pivot to Growth strategy and the progress we've made over the last 3 years. As you know, the foundation is the 4 pillars: deliver on our growth engines, I think you'll see in the results that we continue to have great momentum around our innovative portfolio of AUSTEDO, UZEDY and AJOVY and some great progress on our innovation, so step-up innovation. You'll see that we filed olanzapine last year, completed the recruitment of the DARI study, dual-action rescue inhaler and started our Phase III study for duvakitug in UC and CD.

And then sustained generics powerhouse, good progress. Our aim is to get this business back to stability, and we have done that. And now we see some exciting growth emerging from our biosimilars portfolio, and I'll talk a bit about that. And then focus the business. This is all about making sure we allocate capital to the correct areas to give the best return. And we'll walk you through a bit of the progress we've had on our transformation program, which is the aim is to have $700 million of net savings by 2027. We made excellent progress in '25, and we're on track to hit the 2/3 by the end of this year 2026.

So now moving on to the actual results. So I'm pleased with these results. Now just to orientate you on this slide, the numbers on the left include the Sanofi milestones and the numbers on the right do not. So starting with the revenues. So a 5% increase in revenues at $17.3 billion. EBITDA grew 12% up to $5.3 billion. EPS grew 19% to $2.93 and free cash flow was up 16% to $2.4 billion. And our net debt to EBITDA is now at 2.5x, which is, as you know, our goal for 2027 is to 2x. So we're well on our way to do that.

Now a slide that I've shown over the last 12 quarters actually, to show that our return to growth, which was our strategy, part of the Pivot to Growth strategy when we launched it in 2023. And as you see, we've consecutively done this. And we did that in Q4, where the growth was up 11%. Now that did include the milestone from Sanofi. If you take that away, we were slightly down at 1%.

But let's look at it over a 3-year period. So over a 3-year period, these are impressive results, once again, reminding you that we had multiple years of sales decline. And so in 2023, we actually grew the business 4%, in '24, 11% and then last year, 2%. So we're well on track for our CAGR of mid-single digit, as you can see from the slide there.

Now let's get into a bit of detail as to what's driving these good results. So on the next slide, you'll see the innovative performance is one of the key areas of growth for us. And AUSTEDO, UZEDY and AJOVY hit $3.1 billion for the year. This is up about 35%. So excellent results there. And I'm really pleased to tell you that in Q4, we surpassed $1 billion for our innovative portfolio that you see on the screen here.

But in a bit more detail, AUSTEDO grew at 34% at $2.26 billion. UZEDY was up 63% at $191 million, and AJOVY continues to perform, was up 30% at $673 million. Our generics business was flat, worth noting this excludes Japan from these numbers. Now I've talked a lot about moving from a pure-play generics company to a biopharma company. I think these results show we clearly have done that. And now it's a question of just how much we can keep driving this innovative portfolio and the pipeline that comes through.

Now moving on to a bit more detail. I wanted to talk to you a bit about AUSTEDO. So AUSTEDO had a really strong quarter in quarter 4, as you can see, $725 million, up 40% for the quarter. And for the full year, $2.2 billion, up 35%. And this was delivered with good underlying growth. As you can see, TRx is 10%, and there's a 19% rise in milligram volume. This is driven by both new patients and better adherence. It's worth noting that AUSTEDO XR now accounts for 60% of new patients.

Now -- very impressive results here. Now we did have in Q4, these numbers did reflect some year-end inventory stocking and some favorable gross to net. And Eli will talk a bit more detail about that. But if you actually take that out, then we still grew at 20% in Q4. So once again, the underlying growth of this product is very strong. And because of that, we're giving the guidance of $2.4 billion to $2.55 billion for 2025 (sic) [ 2026 ]. I think it's worth noting that if we do hit the upper end of that, then that means we've hit the $2.5 billion a year ahead of schedule. But we'll talk in a bit more detail of the puts and takes to that range.

Now moving on to UZEDY. UZEDY also had another strong quarter, $55 million, up 28% and for the full year, up an impressive 63% to $191 million. TRx volume grew an impressive 123% year-over-year. And it's worth noting that more than 83% of the NBRx generated -- was generated by patients transitioning from oral therapies or treatment naive, which confirms that UZEDY is expanding the long-acting injectable market, not just taking share.

Now another impressive fact on UZEDY is it's the fastest-growing long-acting injectable in its category. And because of this momentum, our guidance reflects this. And as you see, we have a guidance of $250 million to $280 million for 2026.

Now moving on to AJOVY. AJOVY had a strong quarter as well, up 43% year-on-year at $211 million. And for the full year, it's $673 million, up 30%. So once again, for a product that's fairly mature, really strong growth. AJOVY continues to be #1 preventative anti-CGRP injectable in the top U.S. headache centers, and it leads in 30 markets across Europe and international. And this continued growth is driven by, I think, our commercial excellence, our ability to continue to take market share to manage the pricing and the payer environment in the U.S. and to continue to expand in new geographies. And because of this strength, we're giving a guidance of $750 million to $790 million.

Now moving on to the pipeline. So we talked about the products we have in the market and the excellent progress we made on those, but the pipeline is really exciting here. And I do want to mention this, even though I know Eric will talk a bit about it. The things I always remind people about this slide is every product we're going to launch has a potential of over $1 billion. The size of the markets we're entering into are significant and our entry points into these markets are in the short term. And if you look at the total, the total of the portfolio can be over $10 billion of peak sales.

There's an addition to this slide that some of you may not have seen, which is we will be announcing 2 new indications for duvakitug later this year, once again, highlighting that is a pipeline in a product. Now moving on to our generics business. Our generics business, our aim was to get this back to stability, and we've done that. And the generics business was flat in 2025 versus 2024. Now one of the things that I do always highlight is you need to look at the generics business over a multiyear period because of the fact that some years, you have more launches than others. That's just part of the business. And as you see here, our 2-year CAGR is 6%.

But for 2025, the U.S. grew at 2%, international markets, 1% and Europe declined 2%. Now we continue to see good performance from our biosimilars business, and I think I'll move on to that now to talk you through that. And where we started with biosimilars over the last 3 years, we've made tremendous progress. It's worth noting that we now have 10 assets in the market globally, and we're going to launch 6 additional between now and the end of 2027. Then we have another 10 assets that are going to start launching from '28 and beyond.

So some impressive numbers here. So the aim was to build a world-leading portfolio, and we've done that. In fact, I think we have the second largest portfolio of biosimilars now in the industry, and we've launched the most biosimilars since 2020. And because of this, we're well on track to grow our biosimilars business by $400 million by 2027. Now to close out, as you've seen by some of the numbers we've talked about, we're well on track to hit our 2027 guidance. The CAGR, I talked about, we currently stand at 6%. The operating margin will go into a bit more detail, but with the success of our innovative portfolio, we're very confident about 30%. Net debt to EBITDA at 2x, we're already at 2.5x and cash to earnings is 80%, Eli will walk you through a bit more detail on that.

But with that, I'll hand you over to Eric to talk about our exciting pipeline.

Thank you, Richard. Starting with the slide that Richard went over briefly. One of the things about this pipeline is there's 3 Phase III programs and 2 burgeoning Phase II programs. And the market potential is big, like Richard mentioned. But more importantly, it's the unmet medical need that we take pride in and what we're potentially going to address. And finally, I'd like to say that we planned over 5 years for submissions. So we're very proud of the fact that we've turned around this innovative pipeline and moved it forward so quickly.

But I first want to highlight olanzapine LAI. We got the submission in on December 9, and we're looking forward to the EU submission in the second quarter of this year. We've shown that this olanzapine LAI that can address an unmet medical need in schizophrenia has great safety and efficacy, and we want to discuss that with the health authorities and hopefully get that approval at the end of this year. So something very exciting to look forward to.

Next, on our DARI program, our dual-action rescue inhaler, we're very proud of the fact that we finished the targeted enrollment of this study at the end of 2025. And in fact, we're going to continue enrolling it to accelerate the back end of the study. And the most important thing about that enrollment, one of the things that's most difficult is the fact it has pediatrics, adolescents and adult patients. So I think that the opportunity here for a differentiated product of a dry powder inhaler and the fact that we have the potential to have adolescents and pediatrics in the label is a true differentiator for this program, addressing a large unmet medical need in asthma.

And then moving on to duvakitug, a very exciting brand-new biologic class that's in development. A year ago, we showed really exciting Phase II data in both ulcerative colitis and Crohn's disease, posting very good numbers in both with a nice dose response. But now we're excited to be looking forward to the maintenance data in the first half of this year. And the important thing about the maintenance data is that we will show hopefully the durability of response. And that's really what people need in ulcerative colitis and Crohn's disease. These are chronic diseases that people frequently fail on their advanced therapies and need more.

So durability in the long term is most important. And just a review, this represents 58 weeks of exposure, looking at 2 different doses given subcutaneously every 4 weeks. And Richard also mentioned that we started our Phase III programs with our partner, Sanofi, the SUNSCAPE and STARSCAPE, started right on time, and we're accelerating those programs and executing very well, and we'll be looking forward to new indications this year.

And then moving on to anti-IL-15. We had a very exciting announcement at JPMorgan that Royalty Pharma provided funding for our program in vitiligo for a Phase II/III program. This is really great external validation of our program, what we will -- what we believe is a very differentiated product to address a number of unmet medical needs. First, in vitiligo, this is something that systemic therapies are needed for, and that results will be available in the first half of this year. But also celiac disease, we're running our second proof-of-concept study with a biopsy endpoint that will be available in the second half of this year.

But in addition to that, alopecia areata, atopic dermatitis and eosinophilic esophagitis are all possible targets for this very important cytokine. And then on to emrusolmin. One of the things I've been very impressed with is the rate at which we've been enrolling this study. This is a Phase II study looking at critical endpoints of an important unmet medical need. I always like to remind people the mean survival in this disease after diagnosis is 6 to 10 years. So this is a very important unmet medical need. We are working hard to make sure that this study not only enrolls quickly, but we will over-enroll to make sure that this Phase II program is as pristine as powerful as possible, really potentially capitalizing on the ability to accelerate this approval.

And before I get on to my last slide, I just wanted to do a shout out for the AJOVY team at Teva. They've done a great job in generating data in migraine, and it's very satisfying to see our innovation is recognized by the New England Journal of Medicine with a publication this month. This is great work by the team and really got that sort of the approval for the only and first CGRP antagonist to be approved for pediatrics with episodic migraine. So very proud and great work and kudos to the team.

But finally, I just want to go over something that we take with great pride. We have a very exciting 2026 coming up with many different milestones in the R&D organization. The duvakitug data, as I mentioned, will come out in the first half. For anti-IL-15, vitiligo data in the first half and celiac data in the second half of 2026. We'll be looking for that final event in the asthma exacerbation study of DARI by the end of the year, which would be completing the Phase III study. The emrusolmin will be targeting a futility analysis at the end of this year, even in the face of accelerating and increasing the enrollment in that Phase II study. And obviously, we're looking for the anticipated approval of olanzapine LAI at the end of the year, and we'll be talking about our first human data for our anti-PD-1 IL-2. So a really exciting year full of catalysts. We're looking forward to all these milestones.

And with that, I'm going to pass it off to Eli Kalif.

Thank you, Eric, and good morning and good afternoon to everyone. I will review our 2025 financial results, focusing on our fourth quarter performance, followed by our outlook for 2026. I would like to start with the following key messages that highlight our consistent execution throughout 2025. First, we delivered solid Q4 and full year results, driven once again by our fast-growing innovative portfolio, which is also driving a meaningful shift in our margin profile. This was our third consecutive year of growth since we launched our Pivot to Growth strategy.

Second, we continue to strengthen our balance sheet with a net debt reduced to approximately $13 billion and a net debt-to-EBITDA ratio of 2.5x, well on track to achieve our target of 2x and our journey to investment-grade ratings. Third, we made significant progress on our transformation programs, achieving $70 million of our planned savings in 2025, staying on track to deliver approximately $700 million savings by 2027, achieving our 30% non-GAAP operating margin targets. And lastly, with our performance in 2025 and outlook for 2026, we are well positioned to achieve our long-term financial targets for 2030.

Now moving to Slide 28. Before I start with the results, I would like to remind everyone that in the fourth quarter of 2025, Teva initiated a Phase III of UC and Crohn's indication for our duvakitug program. As per the collaboration agreement with Sanofi, we received $500 million in Q4 of 2025 for this development milestone. This payment positively contributed $500 million to both our revenue and free cash flow and had a positive contribution to our adjusted EBITDA of approximately $410 million.

During this presentation, I will be discussing our results for the quarter and for the full year of 2025, excluding the impact of these milestone payments. In addition to these payments, I will also be excluding any contribution from the Japan business venture, which we divested on March 31, 2025, to help to provide you with a like-to-like comparison of our financial results.

Now starting with our Q4 GAAP performance. Our Q4 revenue were approximately $4.2 billion, up 2% in U.S. dollars or down 1% in local currency year-over-year. Our key innovative products, AUSTEDO, AJOVY and UZEDY continued strong momentum, all meeting or exceeding our guidance for the full year. This strong growth in our innovative portfolio and stable generics was offset by lower proceeds from the sale of certain product rights compared to Q4 2024. GAAP net income and EPS were $480 million and $0.41, respectively, including the payments for the development milestones.

Now looking to our non-GAAP performance. Our non-GAAP gross margin increased by 80 basis points year-over-year to 56.2% and resulted in our full year gross margin at 54.7%, well above the top end of our guidance range. This increase was mainly driven by a stronger-than-expected growth in our key innovative products, mainly AUSTEDO. Non-GAAP operating margin decreased by approximately 120 basis points year-over-year to 26.7%, mainly because of the higher planned investment in OpEx to support our innovative growth.

Overall, we ended the quarter with a non-GAAP earnings per share of $0.68 compared to $0.70 in Q4 2024. Total non-GAAP adjustments in Q4 were $649 million. This included impairment charge of $77.3 million, mainly related to a manufacturing facility in Europe. Our free cash flow in Q4 was approximately $800 million and $1.9 billion for the full year, coming at the higher end of our guidance range, excluding the development milestones related to duvakitug.

Moving to Slide 29. We are making significant progress in our Teva transformation programs to deliver targeted savings of approximately $700 million by 2027 through a well-defined and planned efforts. During 2025, we achieved $70 million of initial savings, demonstrating solid momentum and execution and continue to expect roughly 2/3 of our total savings target to be realized by the end of 2026. These transformation efforts, along with the ongoing portfolio shift towards high-growth and high-margin innovative products provide a clear path to achieving our 30% operating margin target by 2027, even as we continue to invest in our business for long-term growth.

Now let me turn to our 2026 outlook. As I mentioned earlier, 2025 was a year of a strong progress on our Pivot to Growth strategy. We delivered revenue growth, expanded profits and margin, invested in our innovative products and pipeline and made significant progress towards our journey to investment-grade ratings. In 2026, we remain focused on continuing this momentum and executing on accelerate growth path to our strategy.

Starting with our revenue guidance for 2026. We expect full year revenue of $16.4 billion to $16.8 billion. This represents a range of approximately 1% growth to 2% decline compared to 2025 on a normal base, excluding the $500 million development milestone payments and $75 million contribution in 2025 for the Japan business venture. This revenue guidance is consistent with our previous communication and reflects continued strong momentum in our innovative portfolio, including AUSTEDO, AJOVY and UZEDY combined with a low single-digit growth in global generics business.

It's expected to largely offset revenue headwinds of approximately $1.1 billion from generic Revlimid in 2026. We expect non-GAAP gross margin in 2026 to be in the range of 54.5% to 55.5%, showing a further improvement over a strong 2025, driven again by the ongoing positive shift in our portfolio mix and the cost savings from our ongoing transformation programs. As a result, and as previously communicated, we expected our non-GAAP operating income and adjusted EBITDA to both growth in absolute dollars and as a percentage of revenue compared to 2025.

Our operating expenses are expected to be in the range of 27% to 28% of revenue with a higher impact of the transformation program cost savings in the second half of the year. We expect finance expenses to be approximately $800 million in 2026, lower than 2025, reflecting the reduced debt levels and ongoing deleveraging. Our non-GAAP tax rate is expected to be in the range of 16% to 19%, slightly higher than 2025, which benefited partially from IP-related integration plans and the recognition of certain U.S. tax attributes. This brings us to expected non-GAAP earnings per share range of $2.57 to $2.77.

Our 2026 free cash flow is expected to be in the range of $2 billion to $2.4 billion, representing a strong ongoing improvement in our cash conversion profile and consistent with our long-term targets. Now lastly, let me provide you with some directions on how we think about quarterly progression in 2026. We expect revenue to gradually increase over the course of the year with the revenue in the second half of 2026 slightly higher than the first half.

Q1 is expected to be light, mainly due to the following: First, a year-over-year decline in our U.S. generics revenue, mainly because of approximately $300 million in generic Revlimid revenue from Q1 of 2025 that is going away. Second, on AUSTEDO, during Q4 of 2025, on top of AUSTEDO's strong underlying performance, we had the benefit of a year-end inventory build and a onetime gross to net of approximately $100 million. While we expect a strong year-over-year growth for AUSTEDO in Q1 2026, we expect Q1 revenue to reflect the sequential impact of these onetime benefits.

We also expect AUSTEDO revenue in Q4 '26 to be potentially down year-over-year due to a different purchasing patterns and pricing environment ahead of the IRA implementation in January 2027. Our non-GAAP margins are also expected to be gradually ramped up over the course of the year, in line with the revenue trajectory as well as savings from the ongoing transformation programs. The onetime revenue dynamics that I just talked about will also impact gross margin in Q1 beyond the normal seasonality we see going from Q4 to Q1. Free cash flow is also expected to ramp up over the course of the year.

Now on the next slide, I would like to highlight the strong free cash flow trajectory that we are on. There are 3 main elements that are going to continue to drive incremental free cash flow, going from approximately $1.9 billion in 2025, excluding duvakitug milestone payments to more than $3.5 billion by 2030. First, our innovative portfolio is uniquely positioned to continue to grow strongly, driving higher margins and free cash flow. In addition, we are on track to achieve $700 million savings from transformation programs by 2027. We don't stop here, and we'll continue to drive modernization of Teva beyond 2027.

Second, we continue to strengthen our balance sheet through working capital and CapEx optimization. And lastly, we continue to deleverage, reduction in our debt expected to result in lower finance expenses by approximately 50% by 2030, and we expect to see a reduction in our legal payments over time.

Now turning to the next slide on capital allocation. Our capital allocation strategy is focused on driving our Pivot to Growth strategy. This means keep investing in our key growth drivers and our world-class innovative pipeline. We are also making significant progress towards our target of 2x net debt-to-EBITDA and an investment-grade credit ratings. This progress is recognized consistently by the major credit rating agencies, including the recent upgrade by S&P and an improved outlook by Moody's.

With the progress we have been making, I expect to see us achieving these goals in not-too-distant future, which also position us very well to thoughtfully evaluate additional ways of returning capital to our shareholders. Finally, before I conclude my review of our 2025 performance, I would like to reiterate our long-term targets. We are clearly on the journey to be a leading innovative biopharma company. With our growing innovative mix, a number of key pipeline developments this year and our free cash flow trajectory, we are confident about the directions we are on to achieve our 2027 and 2030 financial targets.

With that, I will now hand it back to Richard for his closing remarks.

Thank you, Eli, and thank you, Eric. So the next slide I'm going to go on to here is the one Eric showed, but I think it's one that's worthy of being repeated. A really exciting year here for Teva with regards to milestones on our innovative portfolio. We have 7 milestones here on this slide. So very proud of that, very proud of what the team has achieved. Obviously, we have some exciting data around vitiligo and anti-IL-15 and celiac disease. We have the olanzapine launch later this year. We have the duvakitug maintenance data, the futility analysis, which could accelerate our ability to get to market with emrusolmin treating this very serious disease. So lots of opportunity here to continue this transition to a world-class biopharma company.

Congratulations once again to the R&D team for moving this through so quickly. In just 3 years, we progressed this pipeline at record speed. Now it's because of this pipeline, it's because of the continued strong performance we have in our innovative portfolio that I mentioned earlier and Eli also mentioned, is why we're confident about the opportunity to continue to grow Teva top and bottom line and why we think it's an attractive investment opportunity. Because as you can see here, not only do we have significant headroom for AUSTEDO, AJOVY, we have the LAI franchise with UZEDY performing well, but olanzapine about to join it this year.

I highlighted the amount of biosimilars that will be launched over the next few years. And then as we look forward, that pipeline, the readouts I just mentioned will start to come to fruition. So we'll be able to continue this momentum going forward. To move on to my final slide, just to conclude. Our growth journey continues. We have 3 years of consecutive growth. We have a 6% CAGR. Our innovative brands are growing at double digit, and they have headroom to keep growing. We have near-term milestone readouts, 7 in '26. And we have a stable outlook for our generics business, and we continue to focus on accelerating our Pivot to Growth journey.

And with that, I'll open the floor to questions. Thank you.

Thanks, Richard. Alex, before you line up the question queue, I just want to remind callers, please limit yourself to one question and one follow-up. And if time permits, we will be more than happy to answer additional questions from you if you get back in the queue. Thank you.

[Operator Instructions] Our first question for today comes from David Amsellem of Piper Sandler.

So I have one question on AUSTEDO and one on UZEDY. So helpful color on the guide, but I wanted to dig more deeply into the various pushes and pulls regarding AUSTEDO in 2026. Can you talk about net pricing dynamics and what's baked into your assumptions ex the gross to net favorability in 4Q and ex stocking? How should we be thinking about what your assumptions are regarding net pricing as we move through the year? And then how should we be thinking about what your assumptions are regarding volume growth, particularly on a per milligram basis. So that's number one.

And on UZEDY, kind of a similar question. There's a lot of volume growth, obviously, but there's obviously significant government exposure, particularly Medicaid. So how should we be thinking about net pricing there? And what kind of assumptions you baked into your UZEDY guidance?

David, thanks for the questions. So let me start with AUSTEDO. I think the main point to highlight first here is we're really pleased with the momentum we have with the TRx growth we have, with the adoption of XR and the continued growth of the milligrams, as you saw there at 19%. So the fundamentals are really strong. We see a huge opportunity to continue to grow this from a TRx point of view with the amount of patients who are still untreated. So that fundamental is really strong. I think when it comes to the pricing, I think as we communicated last year, our aim has always been to make sure we get value and access.

And so we've been very diligent about that for this year. And so obviously, it has got more competitive, but we've taken a very disciplined approach to that. And so I think we've maintained that value and access. So I don't think you could think of that as anything that's -- anything of any significance there. And I think the thing to think about with AUSTEDO is what we've finished 2025 with some really strong growth, both on our top line as well as on our milligrams and TRx. And as I said, if you back out that inventory build and the gross to net is still very strong performance.

And so if you look at how we're performing across this range, I think we have a very strong range here. It does take into account some expectation that there may be some destocking in Q4 in 2026, but we'll see how that plays out. But probably the final thing I'll say on AUSTEDO, just to help give some clarity. If you do look at the range we've got and you back out the inventory build that we had in Q4, the growth of the brand is about -- the range is from 11% to 18%. So very strong growth on what is a lot bigger base. So I think that helps answer your question on AUSTEDO.

On UZEDY, then as you've seen, very strong growth on UZEDY, really strong growth on TRx and continued really good change in the dynamics of this market that shows the quality of the product. But to your question, I think it's always important to understand that we have Medicaid and Medicare. And so we have that mix. And obviously, we know one is more profitable than the other. And how that mix plays out we've taken into account with our guidance and our range. But we see this product continued momentum, particularly as you look at the TRx being so high. So I think this product, we have a lot of enthusiasm around, but that's the fundamentals around the pricing. We factored them in, and it really comes down to those 2 channels. Thanks for the question, David.

Our next question comes from Louise Chen of Scotiabank.

Congrats on the quarter. So my first question was, I wanted to ask you where you see the greatest disconnect between what you're excited about in your pipeline and what the Street is really missing on those products? And then second one, just a follow-up on AUSTEDO, I wanted to ask you how we should think about modeling 2027 in light of IRA and any other pushes and pulls you see here?

Okay. Thanks for the questions there. So the pipeline, I'll probably tag team this a bit with Eric. What -- look, I'll never say anybody is missing anything because everybody is very experienced in this business. I do think that our pipeline has come along very fast, think of fast side, maybe that's caught people unaware. But I think the quality of our antibodies, the quality of anti-TL1, the quality of duvakitug, I think, will show out in the data. So I think probably what's going to happen, I'd anticipate is as we turn over these cards and we see the data, then I think Teva will get recognized for what is a world-class pipeline. But it's probably a bit surprising for people to see just the quality of the pipeline that's emerged in such a short space of time. But maybe I'll hand it to Eric to give his view on that.

Yes. Thank you, Richard, and thank you, Louise, for the question. I would emphasize something Richard said. I think the speed at which we turn around the innovative portfolio is quite honestly caught people by surprise. We've turned on a brand-new biologic for duvakitug, which is probably the best-in-class product for TL1A. We've launched or we will launch, hopefully, olanzapine LAI this year. But don't take our word for it. We've had external validation on 4 of these 5 programs. Olanzapine LAI got Royalty Pharma funding. Duvakitug was partnered with Sanofi, who saw the value.

The DARI program was acknowledged by Abingworth. The anti-IL-15 program was recently acknowledged again by Royalty Pharma. And even emrusolmin, we've received Fast Track designation and an orphan designation. So across the entire innovative pipeline, we've accelerated them, I think, a little bit to the surprise of investors. But just look at the external validation that we've had in the pipeline and take that into consideration of your valuation.

Thank you, Eric. And then moving on to your final question about -- I think it was sort of asking for guidance on AUSTEDO in 2027, which I'm not going to give. Obviously, we've said we're going to do $2.5 billion for AUSTEDO in 2027. We remain very committed to that. As you see in our range that we have announced today, there's a potential that we will hit $2.5 billion in 2026. So we'll have to see how this plays out. I think the most important thing for AUSTEDO is to keep reminding everybody that 85% of people who suffer from tardive dyskinesia are still not treated. And so the opportunity to keep helping these patients to bring these patients in and give them therapy, I think, is a significant growth driver for AUSTEDO.

So we also have the work we're doing on making sure that people can benefit from AUSTEDO XR. And as you can see there, 60% of new patients go on to AUSTEDO XR, and we know that helps with compliance and adherence, which obviously also in turn increases value. So I think we have a lot of value drivers for AUSTEDO, but I really don't want to get drawn into 2027 guidance at this moment. I think what I'm hoping people would see is what we have great momentum from '25. We're carrying that into '26, and we'll talk about '27 maybe this time next year.

Our next question comes from Ash Verma of UBS.

Congrats on all the progress. So maybe just first one, how are you thinking about funding the R&D? So increasingly seeing more royalties and/or profit share. Just when you think about it strategically, how do you balance not giving away attractive economics to your partner versus seeing a meaningful increase in your internal R&D spend as you fund the growing pipeline? And then secondly, on the TL1A upcoming maintenance data, we've seen some competitors that the maintenance data versus the induction sort of went up on efficacy measures by high single digit to mid-teens in terms of percentage points. Is that a fair expectation to have as you look towards your upcoming results?

Ash, thanks for the question. I'll tag team this with Eric again. But on the R&D funding, I think the question was, how are you going to fund this? Are you going to be giving away value if you keep doing these partnerships? So I think the way we think about it is we have a big late-stage pipeline. We have a lot of opportunities to drive significant value creation. And when you have a good pipeline, in my experience and my belief is it's about moving it faster to the market to have patients benefit from it and to get revenue. And so we're moving a big pipeline really quickly here.

Now how does it impact the economics? It really doesn't impact the economics in any meaningful way for a couple of reasons. One is these -- all these brands will be above $1 billion. Some of them will be multiple billion brands. The second thing is, which is an interesting fact that I think people miss on Teva is we're starting with a company with a very different gross margin than many other biopharma companies. So every time we launch an innovative product, it transforms our gross margin, which transforms our ability to drive EBITDA to drive EPS and cash flow.

So as I said, the fact that these are not in any way giving away value in the broadest sense. But even with regard to Teva, they don't because of where we actually start this journey. The other thing I'd also like to highlight on this, we are launching so many products over such a short period of time that, that is the focus we're on. And we're going to have a potential to launch 4 products in 5 years, and we're going to actually announce more and more indications. So I think the pipeline is about making sure we move it quickly to the market. But in no way are we giving away value. I'd say we're accelerating value because of the speed we're moving.

And then with regard to the key to the TL1A maintenance data, what are our expectations? I'll hand it over to Eric to answer, and then I'll conclude.

Sure. Yes. Thanks, Ash, for the question regarding what we anticipate from the maintenance data of TL1A. So I'd start off by saying what's the history we've been telling with regard to duvakitug at Teva. We started by saying that we found in our in vitro work that we had the most potent antibody, the most selective antibody and the one that probably has the lowest antidrug antibodies. I think it's about 3% to 5% we saw in our Phase II study.

So with that, we went into our Phase II program that we executed very well at speed. And then we came up with the highest reported numbers for both ulcerative colitis in Crohn's disease in 2 very well-controlled and run studies. So the in vitro translated into a very good result in Phase II. So if you translate that into what we anticipate in the maintenance, if you think that we have the most potent, the most selective, the lowest antidrug antibodies and that we can execute the study well, I would hope that when we lock the database, we see great results. So I'm bullish on it. Hopefully, that comes true, but we'll see what the data shows.

Thanks, Eric. We stand by the fact that we have and we believe we have the best TL1A.

Our next question comes from Jason Gerberry of Bank of America.

One for Eli, just I didn't catch this, but can you talk about in 2026 guide, sort of what's the gross margin outlook versus the OpEx spend ratio? I think the latter would be in that 27% to 28% range you guys have talked about historically, but I just wanted to make sure that, that was confirmed from a modeling perspective. And then just for my follow-up, on vitiligo, I was trying to maybe understand kind of what we're going to get with this upcoming Phase Ib. Will we get VASI75 scores through the full evaluable period? Are you expecting most of these 30-plus patients to make it through the full evaluable period? Just kind of wondering how robust that data will be.

Thanks, Jason. Thanks for the question. So over to you, Eli, on the gross margin.

Jason, thanks for the question. So on gross margin, we end up the year, if we exclude the 2 milestone payments at a 54.7% gross margin. We are looking to be in the range of 54.5% to 55.5% in 2026. In terms of the OpEx, there are kind of mainly 2 dynamics there. First of all, -- and as I mentioned in my prepared remarks, we're going to see a bit higher OpEx, still in the range between 27% to 28% in the first half versus the second half just because of the revenue dynamics during the year. But there is also another element inside the OpEx, we're going to see more reduction in our G&A and actually shifting that reduction in between R&D and sales and marketing and able to stabilize it at the range of 27% to 28%. So this one didn't change versus our prior communication.

Yes. And the thing I'd add on to that, Jason, is gross margin is a really exciting story for us because as you see, as we continue to grow our innovative portfolio, we continue to launch products, that gross margin will just keep going up. It's just going to be a question of how much, but it will keep going up because of the fact that we're changing our portfolio so dramatically. Now with regard to the vitiligo data, I'll hand over to Eric.

Yes. Thank you, Jason, for the question. So the data that we're going to be presenting in the first half of 2026 is a single-arm study for patients with vitiligo. It's about 38 patients in total. It will have the traditional and known endpoints for this field, which is facial VASI and total VASI. So it will be easily comparable to other treatments out there. And that reminds me the important thing here is that there are limited treatments for vitiligo today. There's one approved, which is a topical that only covers 10% of your body. And ones that are in development are the ones that what we need, things that are systemic in treatment, not only the face, but the entire body, more than just 10%. So one of the exciting things we think about when we talk about our anti-IL-15 program in vitiligo is this has the potential to be a once subcutaneous shot every 3 months. So a quarterly shot potentially to treat a systemic disease. So we're looking forward to that. You'll -- I think you'll get data that we'll be able to compare it to other treatments out there in development and approved.

Our next question comes from Chris Schott of JPMorgan.

Just sticking on IL-15. On the development time lines in vitiligo, can you just elaborate what exactly you need for that 2031 pathway versus '34? And I guess, is there a similar opportunity in celiac there as well? And if I can just do a really quick one, just coming back to AUSTEDO. I think you were talking about roughly $100 million benefit in 4Q, and it sounds like that's between rebate and inventory. Just when we think about destocking in 1Q, can you just clarify how much of that was inventory and how much was kind of this reversal of rebates?

Thanks for the question, Chris. Eric, do you want to start with the anti-IL-15, vitiligo and celiac?

Sure. So thank you for the question on IL-15. So just to start off with IL-15 is it's a key cytokine in a number of different indications I mentioned before. We're working on vitiligo and celiac. I'm excited by both the potential for alopecia areata, atopic dermatitis or eosinophilic esophagitis. They're all interesting and important for this cytokine. For vitiligo, we're particularly excited because this is a program that we can move quickly. It has precedents for the regulatory endpoint. It's an endpoint that you can easily measure. You see the results. So that makes it a little bit more easy. And there's an unmet medical need here. We need systemic therapies, as I mentioned before. So we're thinking out of the box at Teva, we are accelerating this program in a clever pathway of a Phase II and Phase III study that we can work very quickly with the regulators. So the potential for a once quarterly dose subcutaneous shot is very exciting for us.

Thanks, Eric. And then on the AUSTEDO question, Chris, the way to think about that $100 million is the vast majority, the vast majority pretty much was the inventory. So that's why, obviously, we have a lot of confidence about 2026 in our numbers. So hopefully, that helps, Chris.

Our next question comes from Umer Raffat of Evercore ISI .

If I look at the delta versus consensus this quarter, it looks like it's driven by sales and marketing when I take out the one-timer impact of the milestone. And coincidentally, I feel like this is probably the highest sales and marketing spend quarter we've seen in the last 3 years or so. So I'm curious why that is, especially because it's happening in the middle of the transformation that's underway, number one.

Secondly, for '26 guidance, is it fair to say that the Royalty Pharma $75 million payment for Phase IIb is embedded within the EBITDA? And is there any other milestones that are baked into the EBITDA guidance as well from TL1A or anything else? And then finally, on vitiligo, OPZELURA obviously has not necessarily done too well, but as Eric pointed out, has limited coverage. But is it fair to say that on the scores like OPZELURA showing about 30% facial VASI75 score, you would want to be tracking meaningfully north considering Royalty Pharma is all excited and they're not funding celiac only doing vitiligo. I'm just curious about your overall take on expectations.

Umer, thanks for the questions. You got a few into that one question there. So thanks for that. On the sales and marketing and the OpEx, I'll hand that to Eli to talk about.

Okay. Umer. So first of all, about the question about Royalty Pharma, out of the $75 million, the way that we're viewing, it's actually going to spread over '26 and '27 with 1/3 out of the $75 million going to happen in '26. It's more kind of backloaded for '26 year. And that's the only thing that's embedded there. We don't have any other, I would say, assumptions in our EBITDA related to TL1A milestones or anything like that. As far as related to the sales and marketing, if you actually back out the higher revenue due to the milestone, you get to kind of a 15.4% on sales and marketing.

But going forward, next year, we're going to see that one actually 16%, and why? Because we are keeping investing in our growth engine, which is AUSTEDO and actually heading to next year, building kind of investment into our olanzapine launch. So we're going to see that one increasing. But all in all, the whole bucket going to be, from a dollar perspective, really kind of flat, but also from a percentage perspective due to the fact that you will see our transformation program going to impact the G&A, as I mentioned to Jason, and that's kind of a reduction in G&A going to split in between the R&D investment and into the sales and marketing.

Thanks, Eli. And look, one thing I'll just add on to the back of that before I hand it over to Eric. If you think about the guidance for this year, the EBITDA range, I think, is showing the value of the programs we put in place, the value of driving our innovative portfolio, the fact that when we talk about our transformation program, it was $700 million of net savings after investing in our growth drivers. And so we've allowed ourselves to make sure that we can drive this innovative portfolio, which helps drive that EBITDA, but at the same time, our efficiency programs help also drive the EBITDA. So I think we're very pleased and proud of the fact that our EBITDA starts with a 5 in front of it, which I think is important. But we're very mindful of how we spend our money and where we allocate our capital. When it comes to vitiligo, I'll hand that over to Eric.

Thank you, Umer, for the question. So when it comes to what data we've seen with the topical out there today and what's in development, I always want to be competitive on any endpoint what you talk about. So hopefully, when we lock the database and get that results, we can show that we're competitive against what's available. But again, let's focus again what patients need. They need systemic therapy that's conveniently given. So it's almost inappropriate to compare it to a topical on 10% of your body. But certainly, we hope to be competitive.

Our next question comes from Les Sulewski of Truist.

Congrats on the progress. I just wanted to focus on the biosimilars side. So what's the launch cadence and expected profitability profile, particularly given the U.S. channel and PBM dynamics? And then what are the prerequisites for targeting the 10 new products beyond 2028? And you've previously evaluated or mentioned reevaluating BD within the space. So what type of, whether it's in-licensing, co-development or tuck-ins fits your leverage and margin profile today? And has that bar changed given the latest policy dynamics?

Thanks for the questions. So talking about biosimilars, yes, it's an exciting time. And I think the fact that we built the second largest portfolio and continue to add to it in such a short space of time is a testament to the prioritization we put behind it. But to sort of give you a bit of specifics and -- when we talk about -- we have 10 in the market now, we have 6 to launch between now and '27. Those 6 -- majority of those will be across both U.S. and Europe, which is important because we haven't actually had a presence in Europe of any significance. And we know that market is a market with quicker uptake, more predictability and some very clear returns. So excited about that.

And to name just a few, we have biosimilar Prolia, biosimilar Xgeva, biosimilar Simponi, biosimilar Eylea and biosimilar Xolair. So we have a lot coming through of those markets and most of those are in both. I think it's Simponi that's just in the U.S. Now you highlighted the 10. And you sort of -- in your question, it sounded like we had targeted 10. No, we have 10. They are in our pipeline. But we're just going to add to that. So we have 10, which is why I said we can start launching '28 onwards, but we are continually adding to that.

And the final part of your question is doing this through partnerships, how does that work out in gross margin. So we are going to continue doing it through partnerships, and it still is attractive from a gross margin point of view with the right partnership. It's still accretive to our business, our generics business significantly. So that's how we do it. And you'll probably start to see some deals coming through already in the first half of this year as we already build out this portfolio beyond the '26.

So -- and then the final thing I'll add on that, this biosimilar portfolio is coming through thick and fast, and that's going to really help us drive the generics business going forward, both in Europe and in the U.S. But thanks for your question.

Les, could you repeat your BD question, please?

Essentially, I just wanted to get a sense of if there's a potential for you to kind of dive a little bit deeper via BD within the space, if there's anything available out there via partnerships that you've previously had and essentially what's your strategy for that space?

Sorry, are you asking about biosimilars?

Yes. So that's what I thought. So that's -- I think I answered that question, Les. We'll continue to do the partnerships. Some of those we already have good, big partnerships with companies that we think we can have the potential to expand those, whether that's mAbxience, whether that's Samsung. So I think we're looking at expanding. But also we have other companies that have approached us to be their partner because obviously, the performance we've had in the U.S. has been impressive. We have the fastest-growing biosimilar Humira. We have a very fast-growing business now in the U.S. So I think people are seeing that. But yes, it will be through partnerships, the majority of it.

Our next question comes from Dennis Ding of Jefferies.

I had 2, if I may. Number one, sort of a big picture question on R&D. What is your R&D philosophy at Teva? And I guess how much derisking do you think we'll get around the R&D platform from the data readouts this year? I'm also curious what else could be planned for 2027 as you advance some of these newer drugs forward? And then number two, just a question around BD. I'm curious as you transition to a novel biopharma company, if your BD philosophy has changed at all and if Teva might be interested in doing acquisitions in, let's say, the classic biotech space rather than what's historically been spec pharma.

Thanks, Dennis. Thanks for the question. I'll tag team that with Eric and maybe start on the philosophy of R&D or maybe we call it the strategy.

Yes. No, thank you for the question, Dennis. And this is a very important question. And I think that the philosophy in the way that we operate at Teva is we are ruthlessly driven by data. We have, first and foremost, a pipeline in Phase III and Phase II that's relatively derisked. I think emrusolmin is probably the lowest on the probability of success. But when you think about our programs, we use known science, we combine it in a way that will execute well and quickly with regulatory approvals. And that's based and driven solely on data. One of the things I've noticed and been able to achieve here at Teva is when we see data, we pivot and we move forward with it. That's something I hadn't been able to do in my career in other places. So speed and execution driven by data with this philosophy of known science and derisked assets is how we will move forward. I think that's baked into every one of our programs at this point.

Thanks, Eric. And then to move on to your next question, you said what about BD and as we pivot into a biopharma company. So firstly, thank you for the recognition that we are pivoting. And I think we pivoted. But anyway, we'll keep showing that with the pipeline as it comes out. But yes, we are actively looking at BD. We think we have a commercial powerhouse of the team. I think you've seen that with the results of AUSTEDO, UZEDY and AJOVY. And so we want to add to that team. Now that said, we have, as Eric highlighted, a really exciting pipeline. So the organic growth we have coming through is impressive. So we're not desperate to do BD. We don't have to. At the same time, it fits into our TA areas of CNS neurology and immunology, then I think it's very synergistic, and it makes a lot of sense.

So we are very active in that. What is interesting, I think, within the last year to 18 months, the amount of approaches we've had has significantly increased. And I think that's because they see Teva as a partner both from an R&D perspective, the speed which we move things through the clinic is exciting, but also primarily because of the commercial capability and muscle we have and the focus we give assets when we have an asset, whether it's in development, we focus and we move it quickly, whether it's in the market, we focus and we actually drive sales.

So I think we'll hopefully be able to talk about some things going forward, but we are very disciplined in our capital allocation, and we think it's the right asset at the right time at the right price, we'll definitely do it. But because of the pipeline we have that's coming through, we can stick to that in a very disciplined way, and we will because going back to that fourth pillar of the Pivot to Growth strategy, it's about focused capital allocation, making sure we give a good return on that in the short, medium and long term and create value for shareholders. So thanks for your question, Dennis.

And I think with that, I think that is the final question. We went over a bit, but I think we did start a couple of minutes late. So thank you for your questions and your interest in Teva, and I look forward to following this up later with our Q1 results. Thank you.

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

Good morning, everybody. I'm Chris Schott from JPMorgan, and it's my pleasure to be introducing Teva today. From the company, we have CEO, Richard Francis. Richard has been at Teva for roughly 3 years in the company and the stock have had obviously a great run here. So looking forward to updates from Richard on progress of the business, and we'll jump into some Q&A after that. So with that, over to Richard.

Thanks, Chris. Thanks for having us. Thank you, everybody, for coming. Absolute pleasure to be here today to talk about Teva Pharmaceuticals. Obviously, I represent everybody in the company. I just get the privilege to talk about it. And today, I'm particularly pleased to be able to talk you through where we are on our pivot to growth strategy, a strategy we launched 3 years ago. And that strategy was designed to get Teva back to growth, obviously, the clue is in the title there. But more fundamentally, it was to transform Teva from a leading global generics company to a leading biopharma company.

Now I remember when I said that in New York in 2023, there are a lot of people who are extremely skeptical. But we had a plan. We had a clear plan. We've executed on that plan year-on-year. And I think you'll see the fruits of that labor and the transition we have now to a what I believe is a world-leading biopharma company that has a very, very bright future. Now the pivot to growth strategy was based on 4 pillars: deliver on our growth engines, step up innovation, create generics powerhouse and focus the business. Now we've made big inroads in this, deliver on our growth engines. We'll talk a bit about the innovative business we have of AUSTEDO, UZEDY and AJOVY and the continued strong performance we've had of those. Step up innovation. Once again, a bit of skepticism. Is there innovative capability at Teva? Is there a pipeline that can really fuel a biopharma company?

I think I'll show you some slides today that will say absolutely yes. Emphatically yes. And the progress we made, as you saw at the end of last year, duvakitug moved into Phase III studies on UC and CD and our partner Sanofi. We also had a Fast track designation applied to emrusolmin treatment for MSA and our anti-IL-15 treatment for celiac disease. So I say those just as highlights of the things how much we progressed in 3 years, but the fact that those are also recognized by the authorities.

Create a sustainable generics powerhouse. There was a bit of volatility when we started this journey in generics. We've actually smoothed that out. We've had some good growth in our generics and going forward, you'll see a stable generics business over the future. And focus of the business, it's all about capital allocation, make sure we allocate capital to the right areas to drive the right growth, the right return on capital and the right shareholder value. Now I'll remind you that this is a sort of 3-phase strategy. We did the first phase, return the company to growth after several years of decline. So that wasn't straightforward. And we've had 11 quarters of consecutive growth since the start of 2023.

So a real achievement there. We're in the accelerate phase, this is about accelerating the innovative revenue of the company and making sure that portfolio continues to grow. And that will be supported from the pipeline, which I'll talk more about. And then the final phase is maintained. We have to create a long-term sustainable global leading biopharma company. It's not a 5-year plan. This is a 20-year plan. And everything we're doing is setting Teva up for success over the long-term future.

Now when I talk about this biopharma company, there's 1 way of changing a company is just change the sign above the door. So global leading generics to global leading biopharma. But obviously, that's not credible. What is credible is the substance beneath it. And I think the first thing I want to start about is just the financials, the facts. The facts are you cannot transform the company's financials like we have without transforming the portfolio. And as you see here, we've obviously changed the growth trajectory, which I've talked about, moving from declining revenue to consistently growing revenue. But we've grown our revenue in our innovative business, and we're doing that in a very strong fashion.

And that's driving a gross margin transformation, as you can see by this slide, is also leading to an improvement in our free cash flow and our EBITDA and our operating margin. And at the same time, we're reducing our debt. So as you look at it in '27 and then you look at it beyond, the numbers don't lie. And as we had -- our gross margin will continue to increase as our portfolio continues to grow, our free cash flow will continue to increase. Our earnings per share will continue to increase so it's a really exciting story. But when I talk about a biopharma company, you have to back it up with the financials. And I think this slide really highlights that. You'll also see that it's driven by our pipeline, which I'll come on to and talk about why we're so excited about our pipeline.

But before I do, let's talk about innovation and the products we're commercializing now. And where we started in '23 and where we are now, this is transformative. We have doubled -- over doubled the revenue of AUSTEDO in this 3-year period. And we have changed the expectations when people thinking that peak sales will be $1.4 billion and now we're having raised eyebrows about, is it really $3 billion. That's a transformation expectations. Congratulations to the team in the U.S. for making that happen. And there's still a lot of opportunity there.

But then on AJOVY, a product most people have forgotten about it had its moment in the sun. We've refocused that across all of our regions, and we've had double-digit growth in the last 3 years. And so we transformed a product which people have forgotten about and now we're going to say this is going to be a $1 billion product in a very competitive market where we have orals as well as other injectables. And then on UZEDY. UZEDY, I mean, we're talking about congested markets, this is 1 of the most congested markets when you're in schizophrenia. We're the fastest-growing treatment in schizophrenia, and that's because we have a great product profile.

And one of the exciting things that we're going to add to that family with olanzapine at the end of this year with our long-acting olanzapine. And so we'll have probably, I think, one of the world-leading schizophrenia franchises and we're confident about that achieving $1.5 billion to $2 billion. So when it comes to innovative, I always sort of remind myself of the question marks people had can Teva commercialize innovative products. And what I can emphatically say is not only can we, I think we do it pretty much better than anybody else. Now what does that do to the financials? It's, as I say, transformative. And I think this is important for anybody looking to invest in Teva.

Just the growth profile of this company is driven predominantly by our innovative business, but that changes our financials from a gross margin point of view. And as you see, we've doubled the innovative business in these 3 years, and we're going to aim to keep doubling that. And so that allows us to transform our gross margin. We're very frugal on our OpEx. And so if we continue to do that, which we will, then we'll drive an EBITDA and operating margin expansion, increasing free cash flow and obviously an increase in earnings per share. So I think a very attractive opportunity. Now once again, I always go back to the numbers because it's easy to talk a good game and maybe to create a nice narrative but I think what's important is to make sure that you have some real substance behind these numbers. And as you see on the innovative, we've doubled the business every 2 years.

And broadly speaking, we aim to do that going forward. How do we do that? Well, excellence in commercial execution, as I just talked about in the previous slides, really good. In competitive markets, we can become one of the best. Now you've seen that with AUSTEDO, you've seen that UZEDY, we were about to launch olanzapine. But as you see, we will -- in 2027, we'll also be in a position where we can launch DARI our dual action rescue inhaler that will be supported also by emrusolmin and then duvakitug in the coming years. So there's reasons to believe in this growth. Not only do we have still to meet the peak sales of the products we currently have in our market, we're going to be constantly adding new products to this portfolio. Hence, the reason that we think we can get to over $10 billion in peak sales.

And 1 thing is worth reminding, obviously, $10 billion in peak sales transformative for any company. But a company like Teva, it is a game changer because where we start the journey where we're going to end this journey going back to some of those financials I spoke about. So how do we get to $10 billion? But here's the slide, which super proud to talk about because I think for me, this is a high-quality pipeline. Why is it high quality because the targets we're going after, we believe are validated. The reason the probability of success is high. But also the unmet need is high. The market size is high, our reason to be competitive, I believe we can win in these markets is also high. But it's late stage. I mean I'm not talking about preclinical stuff here. This is all in the clinic.

So let me sort of quickly touch upon it, whether it's our schizophrenia franchise, we're going to be competing in a $9 billion market. As I said, we got $1.5 billion to $2 billion. DARI dual action rescue inhaler, all of our products, we believe, will be -- have peak sales of $1 billion or more, $1 billion or more. We've got a list here. Duvakitug, this is a $38 billion market now in UC and CD. And we believe we have the best TL1A, and maybe we have an asset here that can compete with other MOAs as well and other modalities. And we'll have some data on that, as I'll talk about a bit later.

We have other indications. And all I can say to you now is those other indications will be billion-dollar indications. And then emrusolmin the treatment for MSA that will come out and we'll have some data on that this year as with IL-15 and vitiligo and celiac. But as you look at this pipeline, we clearly have an opportunity to have $10 billion in peak sales. But what's interesting, we will be a company who is launching pretty much a product every year going forward. There may be a gap, which will probably be nice to take a bit of a breather, but that's quite extraordinary from a company that doesn't -- wasn't known for innovation, to start to innovate and be launching in this regularity, I think, is really exciting.

It goes back to the validity, I think we have behind this $10 billion of sales. Now the exciting data -- and so this is a data readout that feels like a biopharma company because in the first half of next year, we will have the maintenance data on duvakitug. Now you know we had, I think some really exciting data for the induction of Phase II data at the end of 2024. We saw that as best-in-class. So it's going to be important to see what the maintenance data looks like, and we'll be able to announce that in the first half of this year. But that's just one of the readouts. Then we have the vitiligo Phase Ib top line results for anti-IL-15 and that's a product we're particularly excited about. But it's nice to know that other people think it's a great asset.

And as you saw earlier in the week, Royalty Pharma have joined us on this asset. They finance it to the tune of $0.5 billion. And I can tell you when you get a company like Royalty Pharma partner with you, they do some extreme due diligence. And this is one of the earliest assets they've invested in. So I think their belief in it sort of validates our belief in it. But we also have celiac disease Phase II/1a data coming up in the second half of next year. And so once again, I've just talked about duvakitug having multiple indications. We have anti-IL-15 which already has multiple indications, and we believe it can go into more indications. That's worth noting because just on duvakitug and just on anti-IL-15, we probably have somewhere between 5 and 10 indications. Pretty transformative for any company.

But as you see, we have many other assets. And then we have our dual action rescue inhaler. We've completed the recruitment of the patients at the end of last year. So we're looking to have a data readout at the end of this year. It's an exacerbation study. So we are bit contingent on that. But excited about that. If that goes well, which we're anticipating it will, we'll be able to launch that in 2027. Then emrusolmin, the treatment for MSA, futility analysis, round about midyear, second half of next year. Recruiting really fast. That's a common theme at Teva. We recruit our Phase II and III studies really fast. And then olanzapine I've talked about. And then just per people's interest, we have our anti-PD-1 IL-2 first in human data at the end of this year.

And once again, we think this is an exciting asset, but we'll let the data talk for itself when it comes out. Now because of that, I'm going to show this slide, which is, obviously, I always think that maybe this company is undervalued, but I think people who stand in my position often say that. And so I thought I'd put a bit of data up here to maybe validate what I feel. And as I compare Teva to some of the world-leading biopharma companies, when I just think about what's going to drive the revenue in the short term, the top brands we have, what's going to drive the revenue from the pipeline and then how we value. It seems to me just on this limited data, that there's opportunity for excitement around Teva.

And some people with the recent rally on the stock and Chris mentioned how much the stock has gone up, say, well, have you missed the opportunity, I'd say, this is the start of the journey. This is absolutely the start of the journey. I know that maybe seem hard to believe but if you go back to that pipeline, you go back to those products I mentioned, the peak sales they have. This is really the start. And so we're taking a look at it if you haven't, because there's a lot of opportunity still there. Now to digging a bit into 3 of the assets. I just picked 3 because we have a lot, but duvakitug, this is an antibody that was designed in-house, so by our team in Sydney. So congratulations to them for engineering, which I think is the best TL1A out there. We saw that in the Phase II results. It shows high level of potency. It's high level of specificity and its low neutralizing antibodies. All of those are critical when you're treating a chronic disease.

We think that's why we had such great induction data in our Phase II. And it'll be exciting to see if that's continued in the maintenance data, which is important because these patients will be on the therapy for a long time. Now the treatment for MSA multiple system atrophy, a horrible disease, a fatal disease, which is debilitating very quickly, people end up in a wheelchair and then the mortality rates are very high in a short space of time. Huge unmet medical need, nothing out there right now. We think with emrusolmin, we have a small molecule that crosses the blood-brain barrier and has an opportunity to be disease modifying. So very excited about it. Unfortunately, this is a big opportunity. I say unfortunately because there's obviously patients, 65,000 patients who suffer from this. But from a blockbuster potential, if we're successful, and we'll have a futility analysis in the second half of this year.

We've designed the Phase II study to have enough patients in it that this could potentially be registrational, depending on the efficacy. And this will be a profound opportunity to make an impact on these patients. And so we say $2 billion. And from the previous slide, duvakitug just in those 2 indications, we have $3 billion to $5 billion of peak sales. And then anti-IL-15 that I spoke about, another antibody another in-house antibody designed by the Sydney team, again, real capability, designed specifically to do what we needed to do. So great quarterly dosing here, which we think in vitiligo and in celiac disease will be exciting. But as I said, it can go into multiple indication where this pathway, this target, this biology has been -- seem to be effective. And once again, the peak sales are all above $1 billion. And the market sizes here are just at their stock because they're growing, there is no treatment -- effective treatment for celiac disease. And with vitiligo, there's only -- there isn't any systemic. So the opportunity for a condition like this having a systemic, I think, is significantly high.

Now talking about our generics business. And I think it's a sign of the progress we've made. I have 10 minutes into my presentation before I talk about generics. The generics business, our aim was to stabilize our business when we started this pivot growth strategy, we did more than that. We actually grew it. And going forward, we see this as an important part of Teva. And we see this as growing sort of low 1% to 2% CAGR going forward one because it's such a huge business to grow it any faster than that is difficult. What's exciting is the amount of biosimilars we have. We were late to the party with biosimilars, but we have 16 coming through. We have 10 we've already in the market, another 6 before '27 we'll launch. But the aim is to have about 20 to 30 biosimilars in our portfolio, and we're actively doing partnerships all the time to make that happen. So now the important part of our generics business, apart from being a global leader is it throws up a significant amount of cash which helps us pay down our debt but also helps fuel that big significant pipeline we've got.

So this is a really important partnership that we have at Teva with our generics business. Now looking into the numbers. So that's the setup now comes to the numbers. We issued a press release on Sunday about the outlook. We're not obviously got our earnings in a few weeks, so we'll actually close out 2025. But it's really just to let everybody know where we were heading at this late stage. So revenue is going to be to the lower end of our guidance. Operating margin is to the mid to high point, EBITDA is to the midrange. EPS is to a higher range and free cash flow is to the higher range. So I think we've made some operationally, I think the numbers say it all. And the reason why we are able to drive this level of performance, particularly in our EBITDA, free cash flow and EPS is because of this transformation of our portfolio.

I do highlight here that duvakitug we've excluded from these numbers because we have a milestone payment from Sanofi which is $0.5 billion at the end of last year. We exclude that just because we always want to be transparent about our operational performance on what we're doing and how we're driving that business. But at the same time, it's nice to know that obviously, that's come in. And our net debt, which I mustn't forget to talk about is getting close to our IG rating. And as we move on to '26, '27 and beyond. To give a bit of guidance, our top line is flat to slightly down. Don't forget, we lose our generic Revlimid, that's $1.1 billion of revenue. So that goes in 2026. So I think being flat to slightly down is a great achievement.

And I think it's worth noting that to be able to grow EBITDA and operating margin and free cash flow, when you're losing $1.1 billion of revenue, you can only do that if you're driving a transformation in your portfolio and driving an innovative portfolio. There's just no other way of doing it, right? And although we're driving efficiencies and cost savings, you can only do that if you have an innovative portfolio growing rapidly. In '27, we continue this trend. We hit our 30% operating margin. Our EBITDA continues to grow. Our cash flow continues to grow, our net debt will be below 2x, and we'll realize all our operational affecting the synergies of $700 million net. So really exciting times.

And I think we're in the final sort of stage of this sort of chapter of getting ourselves to a world-leading biopharma company with a very predictable and an exciting future. And then my final slide is to sort of say what the future looks like. It is a world-leading biopharma company, and it's based -- and the definition of that is based on the substance, the substance is the change in revenue, the change in gross margin, the change in free cash flow, the operating margin change, all hard numbers, and that's driven by a portfolio which is growing rapidly is over 30% in Q3, nearly $1 billion. And we're going to be adding to that this raft of innovative products and don't forget I remind you it's a long list already anti-PD-1 -- sorry, anti-IL-15 and duvakitug have multiple indications. So this is really the tip of the iceberg. So with that, thank you for your time and attention. And we'll now go to Q&A.

Appreciate the comments there. Maybe just a big picture question to start out here. I guess, Richard, as you reflect back on the innovative portfolio and I guess, the approach how that's evolved since you became CEO. Talk about how you've been able to kind of transform the business like this. And then as we think of the business going forward, what should we think about in terms of cadence of launch of new products coming to the pipeline, et cetera? Is there more here, I guess, if we think about the evolution of the innovative business.

Yes. Look, it's something I'm really, really proud of. I mean I sort of mentioned it there in my talk that to be questioned as to whether we can actually sell innovative products or develop them, which you were to then end up, I think, selling them and be upper quartile and developing them and be in the upper quartile. And the facts say that I think is -- I'm very proud of how we've done it. We have a maniacal focus on prioritization. We prioritize ruthlessly, and we said AUSTEDO, UZEDY, and AJOVY must be successful. We allocate the right amount of money and capital, and we make sure we have the right talent and people in place.

And I think money is probably the smaller aspect, the other is just having a talented team and that talented team is, as you've seen, is focused in different markets AUSTEDO, UZEDY, and AJOVY very, very different markets, very different challenges, not easy. And I think they've shown how good they are. But that's about focus prioritization. We measure stuff. I mean we're operationally so focused.

The same on development. I mean this pipeline, you can argue has come out of nowhere. And I think credit to Eric and his team for not only bringing things into the clinic, but prosecuting them in the clinic faster than pretty much any study in any TA we've done. I think we're either the fastest now or the top quartile. So I think it's about making sure the company is very clear on what its priorities are. The capital follows that. We have the right talent in place to do it. And then we're just religiously focused on doing that month-to-month, quarter-on-quarter, year-on-year.

Excellent.

Sorry to answer your question about launches. It's -- I skip over it a bit because I'm sort of excited by the present, but we do launch olanzapine this year. We will launch DARI next year. There's a chance we'll launch emrusolmin in '28, and then '29 we'll launch duvakitug. Then we may have a little breather and then we'll launch vitiligo anti-IL-15, and then we'll launch in celiac disease. And then we may have the 2 indications that we're starting duvakitug this year, they may be start to come through in the early '30s and so it is almost every year, and maybe that's just 1 thing we've got to be really, really careful and thoughtful about because I've never been in the company no matter how big.

That launch is a product that's transformative to that TA every year. But we're thoughtful about it. We've been planning olanzapine launch for 2 years. And so we've got into a cadence. But it is exciting. And I think that's another reason why I say to people even if you discount half of what I've said, it's still an amazing future.

And can we think about -- there's been a pretty steady cadence of parts coming into the pipeline? Should we think about that as -- it seems you have a great runway in the next few years, but that every year or every couple of years, we're going to see more of these internally developed programs. Is that reasonable to think about?

Yes. I mean, look, I think Eric and I aligned and Eric can talk now. We don't really care where they come from. We definitely don't have that bias per homegrown. What we happen to have is just a super talented antibody engineering team. And so Eric can talk a bit about the IL-13 TSLP that we've got coming into the clinic, probably early '27. But we're just looking to bring transformative medicines that have a high probability of success so we'll never be the explorers, we're never going to try and find a cure that no one's ever touched. We're clever in how we sort of understand targets and understand how we can do something better either through partnerships or through our antibody engineering. But maybe you want to add that.

We're fully aligned on this. What we look at is neuroscience is our heritage and our expertise, and we're burgeoning immunology expertise. That's our focus. Like Richard said, we don't care where it comes from, whether it's our great labs in Sydney or a BD opportunity that comes up. That's how we're going to play the game. But making sure that we have programs that are high probability known science bringing them together. When it comes to the internal, I'll emphasize again, we can make great antibodies, we do great protein engineering, and we can bring many different things together. So that will continue to spin-out molecules. But the focus on bringing in neuroscience, great franchise we have in the LAIs right now with UZEDY and hopefully olanzapine, that's our focus, and we'll stick to that and be a very efficient group. We just focused on all these late-stage assets because it's great to have 3 Phase III programs and 2 great Phase II coming up.

Excellent. Maybe just looking at the near-term numbers. I think you've given a fair amount of color on '26, '27. Just remind us like kind of how the business is shaping up this year? Pushes and pulls we need to consider in there? And maybe as part of that, I think we're all kind of turning your hands around generic Revlimid what's reflected in that guidance for Revlimid for this year, guidance.

Yes. So it's a really good question because I know I do spend a lot of time looking at your model other models right, a bit of geek like that. And I think it's worth reminding, we lose $1.1 billion of Revlimid. And so if you think about the U.S. business, that sort of brings it to about $2.5 billion. So make sure your models have that. That, by the way, some other nuances here. We had nearly $300 million of generic Revlimid in Q1 '25. So we don't have any of that. So that will be something to model in and our gross margin will be hit by that. We will start off with a lower gross margin at the start of the year than the end of the year, but those 2 factors will play an important part. So I'd ask people just maybe go of the spreadsheet and get on that. So that's a significant change.

And so when I think about, when we say flat to slightly down, our innovative business continues to grow very strongly. But to lose $1.1 billion of -- and we have nothing in '26. By the way, we're not trying to be clever. There is no way I can sensibly or the team can sensibly model what generic Revlimid could be. And with so many people coming in to forecast 0, I don't think is actually a bad forecast. And for us to plan financially for that. But we're not -- I don't want to be clever but there's nothing in the back pocket, there is 0 in that, and I honestly believe it will be 0, close to 0.

Very helpful. Looking then longer term so beyond '27, just talk a little bit about the growth you need to see on the innovative business to hit that mid-single-digit target?

Well, I think we've got to see -- to a certain degree, we obviously have AUSTEDO growing strongly. That would sort of taper a little bit just because the base gets bigger and bigger, right? And so that's just natural. I think AUSTEDO stays -- sorry, UZEDY stays on a pretty good growth trajectory, although we are now starting to move into other molecules. So it's not about taking from risperidone long acting, it's now moving into the paliperidone and other things like that. And AJOVY I still see some good traction. I think olanzapine helps us to drive that. I think the one thing I'd say about olanzapine, I feel confident about the mid-single digit. But for me, I'm always thinking about how do we create long-term value.

And so for olanzapine, the 1 thing I would say is, although the pent-up demand I think is pretty strong, we will not contract aggressively unless we see the right pricing agreements because we see this as a meeting of huge unmet need. So it depends how the negotiations go as to whether that will hit a fast uptake trajectory from a revenue point of view or whether it will do a bit like we did with UZEDY. We took longer because we didn't contract because we didn't see the contracting to reflect the right value of the product. So those are the things and then don't forget in '27, we've got DARI we launched. The difference in DARI versus the product from AZ is we will have a pediatric indication. And pediatric indication is 25% of the population.

And to remind everybody as well, the reason why dual-action rescue inhalers are being put in the guidelines is because I think there's upward of 5,000 Americans die every year because they don't have them. If you think of that from a pediatric, children -- so I think we have a chance of actually moving that product well, because of the focus on children, and that comes in '27 so you put all those together, I feel confident about the mid-single digit. But I think more important, I've sort of gone beyond '27 now. What does that mean for '28? What does that mean for '29, what does that mean for '30? And that's when you start to get to the $5 billion, $6 billion, $7 billion of innovative revenue.

Yes, absolutely. I think you've highlighted in the presentation a lot of data updates this year. Maybe if you were to still those down, what are you most excited about as you think about the updates this year?

Well, yes, there's a lot going on in 2026. So we'll be very busy. And the way it's been -- I mean, it started with the end of 2025 with the submission of olanzapine, which we're very excited about. But going into 2026, we'll have the maintenance data as Richard mentioned from duvakitug for both ulcerative colitis and Crohn's disease is in the first quarter. Then we'll have the vitiligo data from the proof-of-concept study that we're very excited about. Royalty Pharma helped us out in making sure that study that program moves quickly. After that, we'll have the second half celiac disease data. It's another proof-of-concept study with biopsy data in celiac disease.

But then we're going to have a futility analysis for emrusolmin in multiple system atrophy, a very high unmet medical need, and it's enrolling very quickly. We'll probably even over enroll that because we want to make that study as pristine as possible for potential accelerated approval. But then on top of that, there will be probably some data from our first-in-human studies of PD-1 and IL-2, and we'll probably be announcing our new indications for duvakitug in this year. So there's a lot going on. And I should mention one of the things that you were just talking about with the DARI program. DARI is a big program. It's a huge important need for asthma. Pediatrics, adolescents and adults are in that study. We achieved the initial targeted enrollment of those patients. Everything out there who does drug development, those pediatrics, adolescents are hard. We're on track. We'll probably over enrolled that too, but we're on a trajectory to get that last event at the very end of the year in December for that event-driven study.

I think we have pretty interestingly the Royalty Pharma agreement with the IL-15. Can you just talk a little bit about, a, why you kind of sought a partner to help finance that and b, what data did they have access to, to make that decision?

Yes. So first and foremost, the Royalty Pharma is a great group to work with. This is the second deal we did with them. They funded our olanzapine LAI that allowed it to go full steam ahead and we were able to accelerate that program. So as Richard mentioned, we have a whole bunch of things all of a sudden lined up, ready to go. That takes a lot of funding, a lot of bandwidth to do. So these deals are just allowing us to keep everything going. So the great partners, they are -- they do great due diligence. They look at every last thing under the hood. And it starts with the fundamentals. They saw that our anti-IL-15 has great potency. It has a 38-day half-life. We've shown target engagement with suppression free IL-15 at the 90 days.

That gives you the potential of thinking about a quarterly dose subcutaneous shot. And so they've looked at that. They looked at all our documents, all our basic science and they are following us in the proof-of-concept study. So we're looking forward to that data when it finally locks.

And I think if I'm not wrong, that's one of the earliest deals they've ever done in early stage. And I think I would imagine the only reason why they do that is because the quality of the asset and the quality of the data.

Can I pivot over to AUSTEDO. We had the IRA price negotiations. That was a big topic of debate last year, happy to have that in the rearview mirror. Can you just walk us through a little bit about how you're thinking about the $2.5 billion target for 2027 in light of those -- now your full visibility on that price component of it?

Yes. Firstly, I think it's worth reminding people that we forecast in and then we were going to be part of the IRA back in '23 to '27. And everybody said, you shouldn't because you're not going to sell enough to be in the IRA. So I'd like to point out, we actually backed our ambition with modeling that we were. And we were, which is we were right. But then we know. And I think the team, Chris and Dollaway here did a fantastic job in negotiating with the IRA to get why still, which is -- I suppose you would say is a good result. I still think it's completely fair, but I'm going to get over that. So when I think about the $2.5 billion, I always felt confident that $2.5 billion in '23, I did in '24, I did in '25, I did obviously, even more clarity now absolutely feel confident, why do I feel confident apart from having a world-class team is there's so many patients who aren't treated for tardive dyskinesia, so many patients. And so the unmet medical need is massive.

And I would actually start to say I think we're actually starting to really get some momentum now in educating physicians, nurse practitioners, caregivers, patients themselves that come in and seek the treatment. So for me, it's all about the unmet medical need, the untreated patient population, which is huge. So I feel very confident about the $2.5 billion. As I often say, I'm beyond the $2.5 billion. I'm looking at the $3 billion. And when we can get there and how do we build the plan together and we have that already in place. So yes, I feel we're in a very good place. It's hard work. By the way, this doesn't -- this makes the gradient harder for us to climb. But that's not something we shy away from in Teva.

And maybe just 1 follow-up on AUSTEDO. The ex U.S. franchise there. How do you think about the opportunity there?

Yes. I think it's more tapered. I think we don't think of that as significant. One is because of pricing, can we get the right price. There's obviously the MFN need to take into consideration. We didn't really factor that in as a massive lever for AUSTEDO. But we're still working through that, and we still see potential opportunity, but it's more measured. I think the opportunity in international markets probably speaks more to olanzapine where the use of long-acting injectables in schizophrenia is high, a lot higher than the U.S. and the appetite for olanzapine would be high. And the pricing comparisons are not too distant, not too far apart. So I think that's an opportunity for us from an international expansion.

Great. Maybe just turning to olanzapine. As we are thinking about approval later this year at launch, how do you think about the price dynamics there? It seems like on one hand, it's a fairly unique asset and it seems like all the KOL feedback is a big unmet need. Why wouldn't this be something you could get price relatively quickly or reasonable price on the drug?

Because it's not always that straightforward. People don't always pay for the value of what we're giving them, and that's just the pharmaceutical industry I think. So your logic is correct. But the practicality. I think -- so look, I think what we've learned with UZEDY is we believe we know what the value of our product is, and we will stay firm on that and allow us to work with physicians who will drive this drug. Don't forget, I'll remind you UZEDY we did not get agreements on with many of the payers, many of CMS Medicare and Medicaid because we didn't agree Medicare on the price and so physicians phoned up and demanded it. And why did they demand it because there's an unmet need because when a patient has a schizophrenic episode, they need to be treated and get to a therapy dose as fast as possible, UZEDY does that.

And what we saw is how those positions will mobilize to ask and obviously, when it is schizophrenia, payers don't rely push back too hard because it's a schizophrenia patient having an episode. With olanzapine, I think that opportunity is even greater so our confidence to hold the line. But it should be -- should it be priced appropriately, should it be seen as the innovative product, it is absolutely should. We're just expecting a relatively tough ride because that's just how the world is moving. If it gets easier, that's great. But once again, as we plan financially, we're not planning for that huge bolus of revenue in '26 and we'll be measured in '27 because once again, we'll not give value away just for the short term.

Yes. Makes sense. Last few minutes here. TL1A, can you talk a little bit about -- I guess maybe a 2-part question. First, the timing of the Phase IIIs that these are up and running, and then, b, just the competitive landscape here. I think we're seeing some initial Merck data as we go through 2026. How you're feeling about your positioning of your asset versus some of your peers?

Yes. So I can start with the fundamentals. When we look at our antibody, it's got the greatest potency we compare to in-house molecules we make. It's got great selectivity. Remember, our MOA is slightly different. We're blocking the DR3, but we're actually maintaining the [ Decoy ] receptor. So fundamentally, we have an advantage, we believe, in the biology, and we have the lowest antidrug antibodies. So the fundamentals of the molecule is strong. That predicted and we showed in Phase II showed very strong data in both the well-controlled study and ulcerative colitis and Crohn's disease, and we posted some very good numbers there.

I was particularly excited about the Crohn's disease and the fact that we did as well in treatment experienced patients as naive. So the fundamentals, the initial clinical data are very strong. But remember, this is a chronic disease. We need to have durability of response. So we're looking forward to that data at the end of the first quarter, that maintenance date of 44 weeks out. So I think all of these things add up, the fundamentals make it particularly strong profile. So strong within the TL1A class and hopefully strong across the class, looking at the landscape of competition. So I think there's a lot of upside. There's also the uniqueness of the biology. This is covering many different cytokine pathways as an amplifier and it might have direct antifibrotic effects. So there's a lot to uncover here. And I think it's many years into the future. I'm like Richard, I'm thinking beyond 2027, now into the 30s, which is very exciting.

Maybe just last question. As we think about the delevering process kind of getting to the place you've been highlighting for a few years now. How do we think about business development? What's kind of the focus? What type of assets do you ideally want to bring in kind of maybe just elaborate a little bit more on that?

Yes. No, it's a good point. It's interesting as we come to this conference, no one asks us about our debt anymore. One we've done a great job of paying it off and we'll be investment grade this year at some point. But when it comes to that cash flow, we're starting to generate significant amounts of cash flow. BD is an aspect we've been focused on. We want to bring in some assets into our Neuroscience franchise and maybe into immunology. And we want it to be late stage. We don't want to take on any significant risk because we don't think it's still we have the right balance sheet for that or the appetite. But the 1 challenge is you've seen in the portfolio we got a list on this slide, it's going to be something that can -- we can allocate capital to fairly because we've got some good stuff internally.

That said, the commercial team is so good here. I want to give them more products to sell. And so we're active about that. I'd like to think we could -- we'll be announced something like in the next 12 months, but it's going to be the right price, and we will not overpay. We know what return on capital we want, we know how valuable money is. And so we'll stay disciplined and we can because we've got a great pipeline, and we've got a great innovative portfolio is performing really well in the market.

Excellent. Well appreciate all the comments and congrats on the progress.

Thanks, Chris. Thank you for having us.

Yes. Thank you.

So just continuing on the third and final day of our Citi Global Healthcare Conference. I'm Traver Davis, health care sector specialist at Citi, and we're delighted to have Teva with us. From the company, we have Richard Francis, President and CEO. Thanks for joining us.

Maybe to start, just hand the floor to you for a few minutes, high-level overview, current state of affairs, where you are in the growth journey. Any highlights from the third quarter that you reported about a month ago? And we'll jump into questions from there.

Great. Well, thank you for having me. Pleasure to be here. So obviously, we started on the pivot to growth strategy 3 years ago at Teva. The strategy was designed to move us from a leading generics company to a biopharma -- a world-leading biopharma company. I think we've made tremendous progress on that journey. I think there was a bit of skepticism at the start whether that was possible. But I think in 3 years, we've shown that we've fundamentally changed the setup of the business, the financials of the business and the future financials of the business.

We took a product like AUSTEDO, which had -- analysts had peak sales at about $1.4 billion. It's going to do over $2 billion this year, and it's going to do peak sales of $3 billion, or over $3 billion. We've launched UZEDY, a long-acting schizophrenia product, into the market. We've driven continued growth of AJOVY, our migraine product. So I think on our -- deliver on our growth engines, which is the first pillar, we've done tremendous progress, and I think, shown we can really sell innovative products.

And then on our second pillar, which is step up innovation, we've transformed our pipeline and the speed we've moved it through. So obviously, we had a Phase III data readout on olanzapine, a long-acting product for schizophrenia that will be launched next year. We have now duvakitug, our TL1A in UC and CD, partnered with Sanofi in Phase III that started this quarter. We have DARI, our dual-action rescue inhaler, which will complete its Phase III recruitment this year, and we'll read out next year. And we have data readouts next year on duvakitug in maintenance, anti-IL-15 in vitiligo and celiac, a futility analysis for emrusolmin in treatment for multiple system atrophy, the data readout for DARI for the asthma study, and oncology product, PD-1-IL2 data readout.

So if anybody questioned our ability to develop innovative products, I think next year will be a defining moment for us. And at the same time, we have a global generics business, and we have done more than stabilize that. We've actually grown that in the last 3 years. And we've done all that while focusing our capital and making sure we can grow our EBITDA and we grow EPS and return -- and we've created value for the company and shareholders.

So I think this pivot to growth is pivot to a biopharma company, I think it's gone from what was described as a story of fiction to nonfiction as every quarter goes on. And obviously, there were some catalysts for people to get even more excited about Teva and one of those was the IRA and we'll probably talk about that. But I think we've shown our ability to not only forecast but negotiate well to have a good outcome for -- or acceptable outcome for the IRA.

Great. Maybe start with, you sort of outlined the journey and where you've come from. Maybe let's talk about 2026. I know you're not going to provide guidance or anything like that. But so -- how should we think about next year in terms of pushes and pulls? Obviously, there's a lot of innovation going on, but you also have a base business as well. So maybe sort of lay out how we can think about '26 from start to finish, catalysts and any sort of things to be aware of financially?

Yes. So '26 is an important year for Teva. We lose -- obviously, we've had the benefit in our generics business or generic Revlimid, and that's over $1 billion, and that will go next year. We've committed to grow our EBITDA next year.

So to lose over $1 billion of sales and grow your EBITDA, I think, can only be done if you're on this transformation journey. And that requires us to continue to grow our innovative business, AUSTEDO, UZEDY and AJOVY, launch olanzapine. Those are very high-margin products compared to the rest of the business. So if we do that, that helps grow our EBITDA, but also on top of that, some of the organizational effectiveness, cost programs we put in place will have -- which we said we will save $700 million by '27, we'll save $500 million by the end of '26. So that contributes to growing the EBITDA. And then obviously, the rest of our business, excluding Revlimid, OTC, biosimilars, with a lot of biosimilars launching and multiple launches of generics. That allows us to grow EBITDA.

On the top line, people ask me that, that is flat to slight decline. You don't lose $1 billion in any company without having some impacts, but in Teva definitely. But I think the commitment we've made is to the EBITDA. And I think that's really important. So I say that's the catalyst. We have a lot of data readouts next year, as I mentioned, but we'll have olanzapine launch around about end of Q3, Q4 next year, which to add to our already successful launch of UZEDY.

I guess in terms of -- you talked about the innovative portfolio and sort of the mix moving to higher-margin products. So we have that for next year. But if we go out, say, 3 to 5 years, how should we think about Teva from a margin perspective as new innovative products come to the portfolio, higher margins and some of the lower-margin products sort of fall to the back?

Yes. That's a really, really important question, one that I think is so unique to Teva. So let me explain, when I started in Q1 2023, we had a margin of -- for that quarter, I think, 48%, around 48%, maybe just a bit above. This -- we'll end the year around about 54%, maybe a bit above. The journey we're on, on gross margin, which makes it so unique at Teva is that gross margin will grow next year. It will grow in '27. In '27, we already said we're going to be 57% to 58%. It'll grow in '28, '29, '30, '31, '32. There's not a biopharma company that can keep growing gross margin because normally, you're trying to defend gross margin, but we keep growing.

And the reason why we keep growing it because our innovative portfolio that I mentioned is growing. It grew at 33% in Q3. It's over $800 million now a quarter. But we're going to add to that next year olanzapine. We're going to add that the year after DARI, our dual-action rescue inhaler. We're going to add to that the next year with emrusolmin, the treatment for MSA. We're going to add to that the year after with duvakitug.

So we just keep adding that keeps growing the top line, but it keeps growing in innovative and that innovative has a different gross margin. So the exciting thing is we're on a growth journey, we're on an innovative growth journey and because that we're transforming our gross margin, and if we -- not if, we will show our discipline on OpEx, which means the EBITDA will grow, which means the EPS will grow, which means the cash flow will grow. And that's in a big company. So I think that is really, really exciting. And I think that's probably been a bit missed by some people.

Maybe just zooming in on some key products. So AUSTEDO, you recently had news there with the IRA-negotiated pricing being announced. I think investors have broadly perceived this to be a positive outcome. I guess it's funny to sort of celebrate a price reduction, and a significant one, to be fair. But maybe you can just kind of walk us through the dynamics there, your feelings on the outcome and what impact you can sort of expect or we can expect in the marketplace.

Yes. So let me just sort of also -- I think because I'd like Teva to take a bit of recognition for the fact in 2023, we forecast that Teva was going to do $2.5 billion in '27. Nobody believed us. They said peak sales of $1.5 billion. And we said because it's $2.5 billion, internally, we forecast that we would be in the IRA and we'd have to have a bit of discount in that. So not only -- and I think that shows good strategic and mature thinking and being sensible.

Now obviously, as I said, it started to do really well, people started to say, "Oh my goodness, if you're in IRA, you'll be impacted, will you hit $2.5 billion?" And I kept saying, we forecast the IRA hit, and [ we still ] hit it. But -- so there's some long-term strategic, sensible, adult thinking in that, I'd tell you that. But then it came to the negotiations. And obviously, we leaned heavily into that. And you're right, it's very strange that we get recognized for having a good price decrease. That seems very hard to sometimes understand.

But what that means for us going forward is we have certainty on $2.5 billion in '27, and we have certainty in our minds on $3 billion, peak sales of over $3 billion going forward. What does it mean for next year? I think it means we've got to keep on growing the product. We've got to keep making sure we get patients who are untreated into the physician's office, get them diagnosed and get them treated with AUSTEDO and do all the programs we've got around compliance, adherence and titration.

And then that allows us to get into '27. And then in '27, I think we're going to have a better idea of how it's going to impact the product when we look at what happens in '26 with the first wave of IRA drugs, and whether there -- is neutral? Is there a volume upside? All these things that people talk about, which we'll be able to get a better angle on.

So I know a majority of the business is Medicare, right? So -- but there's also some commercial exposure. So how should we sort of think about the impacts to commercial, maybe as '26, '27 and just kind of maybe thinking even longer term?

Yes. Well, I think that's something which we believe, to your point, the majority of business is -- more the minority is in commercial. So I think it has less of an impact on the direction of travel of the product. So I think as people sort of debate what this means and how commercial plans will use this, I think we'll see how that plays out.

I think one -- you have to understand this is a debilitating disease that's treated by specialists, very few patients have it and they're in a terrible situation. So I think the physician involvement, the patient involvement and the experience and the efficacy and the safety of the product will play a significant part in this still. And by the way, we've seen that in -- as we launched UZEDY into a crowded market, how those components are really important about which drug gets chosen.

So I think we've taken all of those things into account and the puts and takes, and I think that makes us confident that we can hit the $3 billion.

Got you. So you have a competitor in this category, they recently highlighted they're going to take a more aggressive approach, I think that's even their words, in terms of access. So how should we be thinking about that as it relates to AUSTEDO and how you might react to that?

So look, I think what we -- we're a very, very disciplined company, and we're always thinking about the long term about where we're driving value. And so we think about access and value together. And just to show you how disciplined we are in that, when we launched UZEDY into a crowded market with two huge brands that have been there a long time, other launched brands and a genericized long-acting market, we didn't succumb to seeking access over value. And we held the line.

And we -- in fact, we didn't get listed, and we still haven't been listed for a lot of areas when it comes to Medicare. What we realized is the quality of the product, the quality of the interactions meant that the physicians use this, and if -- you've seen the performance of UZEDY. And so I think for us, it's about always value and access, access and value. You have to do those if you can create long-term value and sustainability. So that's the approach we take.

Got you. And that 2027 guidance for the $2.5 billion or at least $2.5 billion, can you just talk about the underlying drivers there in that growth, and sort of how you'll get there from start to finish?

So I think obviously, unfortunately, it's a hugely untreated market. So there's still 85% of the market that goes untreated. So that creates a huge opportunity. Now to realize that opportunity, we've obviously done quite a bit of DC, direct-to-consumer advertising, both the patients who have the condition and the caregivers who may be able to identify it. We also spend a lot of time and effort educating physicians and nurse practitioners, who often see the patients, to ask the right questions, to understand and to diagnose.

But when you think about it, so part of it is about bringing patients into the channel, getting them treated on to drug. But then for us, as Teva, to keep growing this business. It's about making sure they could convert from script to on-drug, which -- there's a leak there, they get on the titration pack, which means they titrate to the optimum dose. They then get involved in our adherence and compliance programs.

And if you do all of those, then you have the ability to continue to grow the brand. But it's really important that -- we spend a lot of time on that at Teva because as much as it's about bringing patients in, that's one of it. But the opportunities for there to be leakage on this patient journey is huge. And so the value creation that we can have by getting patients to be more compliant, to be on the more optimal therapy, to be supported is significant. And obviously, the other part of driving AUSTEDO is as we move -- as patients are prescribed more and more than once a day, that has led to patients being on a more optimal dose. So that also creates a value opportunity.

So those are the things. It's multidimensional. There is not one sort of area we're particularly focused on. But that also gives me confidence that this $3 billion will happen because it's not just about driving patients in, it's about all the other aspects of it.

And you talked about still relatively low rates of penetration of the VMAT2 inhibitors and or lower rate of diagnosis too, but about just the overall TD population and sort of how that factors into your growth expectations? I know when you guys launched or -- and your competitor launched, the sort of the view of the market size was certainly smaller than it is today, but can we even see this grow even further?

Well, I don't know about -- I mean, the opportunity, as I said, is unfortunately significant because there's just so many patients who aren't treated. But I think this goes back to -- don't [indiscernible] when Teva started out [indiscernible] ever speak about Teva. We weren't set up from a capability point of view like we are now. So we understand how do you -- a lot of my past has been in biopharma and biotech. It's about how do you create awareness, how do you educate, how do you get early treatment, how do you get patients moved on to treatment, how do you keep them compliant. But we didn't put those programs in place. So I don't think we necessarily stimulated the market as much as you'd normally see at the start of this journey, but we're investing heavily in that now.

So whether the market could grow bigger than it is, I think it's less relevant and less needed. It's about how do we make sure patients who aren't treated, are treated. And there's another dynamic within this. There are new patients who are naive to treatment who we need to get on and they need to be diagnosed and got on. But there's also patients who have gone on to therapy and then quit therapy. And how do we get those patients back, and we call them returning quitters. So there's a lot of opportunities to keep helping patients to have a high quality of life and to also growing the brand.

So for me, that's why I think this -- AUSTEDO has a significant future ahead of it. And we've said over $3 billion of sales. And I would highlight for Teva, that is significant financially. That is a significant driver of our gross margin improvements, of improvements to our profitability and our ability to grow EPS.

Yes. So I just wanted to zero-in on that. So you spoke to next year expecting to grow EBITDA. And I'm sure AUSTEDO is a big part of that. So maybe just take it out a few more years. I mean, how much contribution from the product do we expect to drive that EBITDA profitability? And then we can touch on other products that I'm sure will contribute to that as well.

Well, actually, last. I think the Teva story right now is about moving to biopharma, and the star of that show is AUSTEDO and quite rightly, but it's going to be joined on stage by a lot of other products. I mean UZEDY starting to create a stir; olanzapine, everybody is getting excited about because the unmet medical need there; DARI, our dual-action rescue inhaler, there are 10 million Americans that should be on a dual-action rescue inhaler, and there's only other one in the market, so that's a significant growth driver; and then we have emrusolmin which could launch in '28 because we powered that study to be a registrational study and then duvakitug in '29.

So if you think about it, as each one of those is launched, our -- the emphasis of AUSTEDO on our P&L gets diluted. It's something we'll still maximize, but it's -- in my career, I've rarely been in a position where there are so many opportunities to launch products every year into a business which has a fundamentally lower gross margin than the products you're launching. And from a financial point of view, the ability to create value and create a more valuable company, that is -- I've never seen it because we launched olanzapine, we launched DARI, we launched emrusolmin, duvakitug, anti-IL-15, we are just going to keep growing the top line, and we're going to keep dragging up the gross margin. If we stay diligent on our operating expenses, we grow EBITDA, we're going to grow EPS and cash flow, and that's exciting. So AUSTEDO is important, but it gets less important.

Right, right. Maybe just hopping over to another opportunity, I know you guys are excited about the long-acting olanzapine. So maybe just walk us through what you view as the opportunity there.

Yes. So for the opportunity for olanzapine, I think is significant. And it's based on the fact that olanzapine as a molecule is the most prescribed molecule in schizophrenia, so 20%. And it's used for moderate to severe, so it's seen as the most efficacious. Now in moderate to severe, in any schizophrenia patient, you want a long-acting because it improves compliance and adherence, which is critical in this condition. But in severe patients, you really want to be compliant. And there is no long-acting that's used in the market right now.

And so the data we've got on olanzapine to show that it's safe, efficacious and effective and has no PDSS is really significant. And so when we look at what we've achieved with UZEDY in a very congested market, we've built a real capability and muscle there from our sales force, from a managed markets, from a hospital care, from an MSL, from a patient support, we just put olanzapine in that. But olanzapine doesn't have a competitive market to walk into. It will be the only long-acting. And we already know there's significant excitement around it.

So for me, this is a big growth driver. It will be launched at the end of Q3, Q4 next year. And so I think this will be a growth driver for us in '27, '28, '29. That's why we've said $1.5 billion to $2 billion for our schizophrenia franchise, which I'll remind you, that's material for Teva on a significant level. You've got AUSTEDO, $3 billion, you've got a schizophrenia franchise at $1.5 billion to $2 billion, that's exciting.

All right. So with UZEDY doing quite well, I think you took up the guidance for that product earlier this year. You talked about it being a competitive market. So maybe just walk us through the sort of the commercial dynamics as they stand today and into the future.

Yes. So look, I think this speaks to just understanding the unmet medical need. So UZEDY entered a very congested market. So how has it done so well? It's done so well because we've created a very relevant product profile, I'll come back to that, and we have great execution. We've got great execution in AUSTEDO. We can talk about AJOVY. But everything we do commercially, we're very, very good at by design.

But on UZEDY, it's a subcutaneous, only subcutaneous. It's in a pre-filled syringe. And very importantly, it gets the therapeutic doses within 8 to 24 hours. So if you think about that from a physician's point of view, most patients, but particularly schizophrenia patients do not like an IM injection. They don't want to have to remove their trousers to have that done. The fact that it is prefilled, great simplicity. And the fact that it's a therapeutic dose, this is so important because when you have a patient having an episode, you need to control them as quickly as possible, and get their symptoms managed. No other long-acting risperidone can do it in 24 hours. So you have to give them oral supplementation to try and balance that. And then you got to work out how you balance it. You may have to keep them in hospital for a period of a few days just to see if you managed it.

So the simplicity for both the patient and the physician is extraordinary. So that hence -- and so what's the proof of the quality of that profile? Okay, the TRx is up 119% in Q3. But what's important is we haven't actually got the access, the broad access, which means physicians have to phone up and say, I want this, and they obviously get it because we've got good growth in TRx. But that shows the physician is motivated to ask for something, and it also shows that the physician is listened to.

And the rationale, by the way, we've shown some data that shows the cost effectiveness of using UZEDY because you don't stay in a hospital. So you get prescribed, you can leave. So I think we've got a great product profile.

We have the same with olanzapine, but in a far bigger unmet need. And don't forget, we know these people. We know the physicians. We know the people on the D&T committees in the hospital. We know the payers. We know the nurse practitioners. We know everybody. They know us. We've shown them we're credible. Our product is credible. And so when we come to the market with olanzapine, we leverage all those things I said about UZEDY, but it's in a patient population that really does need a long-acting.

So with UZEDY, you've talked about maintaining sort of price discipline. So kind of where you are? Where are you with that in that process?

Well, I mean, we are still -- it's improving, but we haven't discounted to get access at scale because we think we have a valuable product. And I think the market's shown we have a valuable product because physicians see a need for it. And I think that's improving all the time. But I think it just shows that holding the line on what you believe is value is really important because it pays dividends.

Now as that -- as we lean into a launch in olanzapine, where one could argue there's a far bigger unmet medical need, I think -- I'd like to think what we've done in the last 2 years helps to create a clearer conversation with the payers to -- that they'll know what our expectations and our willingness to hold the line. Because to create a $1.5 billion to $2 billion franchise is about getting the right value with the right access, and it's that order in schizophrenia because what we've shown is the unmet need means you will get value, and you'll get access because the physician will drive it. We want to have easier access, but we want to do that at a price that satisfies both needs.

And how about the label expansion into bipolar? So can you sort of just frame the potential impact of that label expansion for that franchise?

Yes. Look, I think it's -- it has sort of a halo effect in that it makes the brand feel more complete and okay, now it has bipolar, this sort of helps the physicians from the totality of the data. Is it significantly material to where the product can go from peak sales? No. Does it have some benefit? Yes. But I think the trajectory we're on UZEDY now is a really good trajectory. And what we see now is we obviously, are the #1 prescribed LAI in risperidone, but now we're moving into the paliperidone market. And because of those attributes, we're seeing a good uptake there.

Maybe shifting gears to TL1A, just walk us through where you are in development. I know you're progressing to Phase III. How are you thinking about this opportunity from the perspective of the indication set that you could go after?

Yes, I'm super excited about duvakitug. The Phase II data that we presented last year in December, was super exciting, I think, best-in-class in our minds, no question. We've entered Phase III now this quarter 4. That's going very well. It's -- there's a lot of enthusiasm to get patients into that. So that's encouraging and probably based on the Phase II results.

Just to let you know, it's an important data readout, we'll have the maintenance data in Q2 of next year, which I think will be important because in Crohn's and UC, having good induction data is good, but ultimately, you want the maintenance. So how that plays out will be important.

We will also in first half of next year, go into two new indications with Sanofi for duvakitug. We're not going to announce those necessarily. We'll see whether we communicate them, but the idea is to start them in H2, we've chosen those already.

And so when we think about the ability for UC and CD, we've said this is a $3 billion to $5 billion product. I have a reason to -- I have a lot of belief in this product and how it's been engineered that it could actually be bigger than that based on the fact that it could compete against other modalities. But then we'll have two more indications in Phase II, [ if things go ] well and move into Phase III. So duvakitug could keep on giving as a growth driver for us on scale because, again, this is $3 billion to $5 billion, we get 50% of that. That's material again for Teva. That's relatively near term, that's '29. So I get pretty excited about duvakitug.

And just maybe remind us of the economics of the partnership. You mentioned having half of it, but in terms of the share of development and also once it becomes commercial?

Yes. So when we chose a partner, Sanofi, there's a reason why we like the partnership with Sanofi. One is -- because a lot of people wanted to partner. But one is they're good in immunology, they're good in developing assets with multiple indications as they've done with DUPIXENT, they have a good clinical trial development team and regulatory team. And to be crude, they need it because DUPIXENT's patent expiry is on the horizon. So they wanted a multi-indication asset.

But for us, what was really important is we wanted a big -- we wanted 50% of the economics. And so when it comes to the profitability, we get 50% of it. When it comes to the expenses, we pay 50% of the R&D costs. So I think this is something which is a significant point for Teva and allows us to really think about the future in a sustainable way.

So we get to do multiple indications, we get to have a partner who's good at developing that, thinking through indications because they've done a lot of work on that, move through the clinic, have a share -- a cost share scheme there, but then from a profitability, we get 50%.

It's great and certainly encouraging that at this point, Teva gets to talk a lot about pipeline, right? Anything underappreciated in the pipeline, you think that investors don't spend enough time on?

All of it. I mean, I say -- no, I say that jokingly because none of it is valued in our current models, none of it. So -- which is sort of absurd. But I used to be a bit frustrated by that. I'm okay with it now. If people have to see the data to appreciate it, then I can wait. We're in this in Teva for the long haul.

And so I think TL1A is the best, no question. I think the data will continue to show that. I think our anti-IL-15 in vitiligo and celiac disease, we'll have a data readout in Q2, I think that's going to show people about how good we are at antibody engineering. So I think that's going to be super exciting. And the vitiligo could be here in 2031. And then our PD1-IL2 at the end of the year is going to show in oncology. We're not going to go into oncology, we'll partner that. But that's another one where I think we'll be able to show our capability, but none of that's valued. DARI, even though we're going to have a data readout on our asthma study next year, that's not valued. And olanzapine is not valued, and we're going to launch that next year.

So it's all underappreciated, but I think that is -- you introduced Teva, I think, appropriately. We're transitioning from a world-leading generics company to a biopharma company. And we're really now picking up pace on that. And as I meet more and more investors, people realize that. But it has been a fast change and caught people a bit unaware. But I think one of the things that I love about our pipeline is I believe it has a lot less risk. It's late stage and there's a lot less risk than most pipelines in biopharma and really good targets with really good revenue-generating opportunities.

So I think it sounds like a father talking about the children like they're all great, but they -- here's the thing that I think is super exciting. We will launch olanzapine next year; the year after, we will launch DARI; the year after that, we may launch emrusolmin in multiple system atrophy; the year after that, we'll launch duvakitug. Then we may have a little pause just to gather our breadth. And then the year after that, we launch anti-IL-15.

And so while we're still growing AUSTEDO, while we're still growing UZEDY, so that is -- I think maybe people are starting to realize that sounds like quite a unique story. In a world of LOEs, where our first significant LOE is 2040, that's a lot of growth to get through.

I want to get your thoughts on biosimilars. We had Commissioner Makary here on Tuesday morning. We also had Alex Azar here yesterday. And the topic got some airtime, right? So we know that the agency is pushing to simplify clinical trial requirements, right? But we also know there's another side of it, too, in terms of the payers and the rebate wall and all that kind of thing. So I mean, certainly, you're in this business, and it sort of sounds like a positive that the FDA wants to push to simplify clinical trial requirements, tailwind, headwind in some ways?

No, I think it's a tailwind. I think it's great. I mean we've been lobbying both in Europe and the U.S. to take away Phase III trial design. I don't think it was ever needed. I think it was put in place by the innovative companies to try and slow down and increase cost, just to be controversial. So I think it's great. By the way, just to let you know, it doesn't create an influx of people developing biosimilars.

Right. It could be a potential headwind if we see a flood of developers, right?

And the flood, just let me just give you some scale here, to develop a biosimilar without Phase III now is between $70 million to $120 million per product. So flood, I'm not sure that's going to happen. More, maybe. But our strategy is really clear. We want to have a big portfolio of biosimilars. We're going to do that through partnerships. We want to get to about 25 biosimilars and constantly have 25, so we just want to be launching lots of biosimilars all the time, both in the U.S. and Europe.

And Europe is a big growth driver for us because don't forget Teva hasn't really been in biosimilars. We came to the party late. We're now starting to see the work we've done in the last 3 years, and we'll have launches in Europe, we'll have launches in the U.S., and we're shown we're very good at executing on that.

So for me, what the FDA have done is really exciting, I'd like to think there should be changes to the reimbursement system in the U.S. There's a lot of money being wasted. I think that's getting a bit more focus now. But I'm not -- we're saying we're going to double our business in biosimilars by '27, put $400 million on it. I'm not expecting PBMs to go away to make that happen.

We tend to predict quite conservatively like if the environment has a chance of getting worse, we'll predict it will get worse. And if it doesn't, we'll benefit. But I think in the U.S., that's a big sea change that could and should happen. In Europe, it's already straightforward. You launch, you get good conversion. And actually, what people forget is in Europe, biosimilars, you increase the volume in the market. So people get treated with biologics now earlier in their disease. So the volume of people treated with an anti-TNF, with some of these products has gone up significantly because when it's cheap, why not treat somebody's arthritis earlier, right?

So I think the future looks good for biosimilars. The removal of the Phase III is -- I'm pleased by, I see it as a complete tailwind.

And you mentioned the U.S. in Europe being quite different in terms of biosimilar penetration and part of that is PBMs and the access side. What really needs to change on that front?

Well, we've got 3 minutes left. So I mean, that's -- look, I think we -- if you -- if this country managed to get its head around how reimbursement is done, have pay-in is done because there's a lot of good things there. You don't need the IRA. IRA is irrelevant. If you just allow generic entrants to be done really effectively and efficiently or biosimilar entrants, you're going to save a huge amount of money. To create something as complex and as arbitrary and as poorly designed as the IRA was not necessary.

I think PBMs need to be held accountable for the fact that are they really delivering value or are they -- biosimilars should penetrate immediately in the U.S. I mean there is no legitimate argument for that not happening. If you really investigate that, there's no legitimate -- if you do that, then you save a fortune, which allows the health authority to spend more money or that money on innovation and allow access to innovation. The ecosystem, if it's looked after, can be beautiful. But I think the PBMs need to be held accountable, and they need to be looked at as to what value do they add? Because they probably add some value in negotiation, but how do they look at it in the whole ecosystem.

Right. So it sounds like what you're saying is it has to be regulator driven. Is that right?

Yes. I mean, because look, they clearly have struggled to do it the right way. And to me, it's a very simple regulatory intervention, but maybe I don't quite see it the way that others do.

One more minute left. Last question on capital allocation. Latest thoughts on Teva and how you plan to allocate your capital?

Yes. So capital allocation is a really important part of Teva. I think allocating capital to make sure you get a good return on that capital is something we talk about a lot. And we've had to talk about it a lot in the last few years because we have so many opportunities to drive growth that means we have to allocate capital. We just can't spread it thin. So we reduced the investment in our generics pipeline because it was too big. It wasn't going to get a good return on all that capital. We focused it more. We allocated that capital to our innovative pipeline.

So from a capital allocation is keep investing in our pipeline and innovation, keep investing in our products in the market from innovation, making sure we drive efficient capital allocation in our manufacturing network to make sure it's optimal, has a COGS reduction in the cost of goods every year. And then making sure we think about our business and where it's set up and how it's set up to -- are all of these business aligned to the strategy of the company and increasing the value of the company and increasing the value to shareholders. And that's how we think about capital. We don't allocate resource. We allocate capital. And then because of that, people have to think about what return it gives over what period of time.

Great. We're up on time. Thank you so much for joining us.

That's our pleasure. Enjoyed it. Thank you.

Welcome to the Jefferies London Healthcare Conference. My name is Dennis Ding, biotech and spec pharma analyst here at Jefferies.

And I have the wonderful pleasure of having Richard Francis here, CEO of Teva. Welcome.

Thank you. Thank you very much for having me.

So obviously, you guys have made a lot of progress this year and just over the last several years. So, can you just give us a brief overview of where we are on this pivot to growth journey that you guys are on?

Yes. No, thank you. Thank you for the question. So, there are three stages to the pivot to growth strategy. The first stage was to return to growth, and we've obviously done that 11 quarters of consecutive growth. So really pleased with that.

And then, the next phase was accelerate growth, and that's predominantly around our innovative business to continue to accelerate that growth.

And then after that, it's maintain growth. So, we're in the middle of the, I suppose, the book, the middle chapter, very pleased where we're at, but I think there's a lot more to come based on where our innovative products are and where our pipeline is.

Okay. And kind of big picture speaking, like as you think about 2026, what are the pushes and pulls in terms of the guidance? And I know you're not going to give revenue guidance today, obviously. But how are you thinking about that?

Yes. So, you're right. I'm not going to give guidance today. So I suppose, in a way, it's a bit of more of the same. And what I mean is the transformation of Teva in the last 3 years has been, I think, extraordinary. And I talk about that from a mathematical point of view, a financial point of view. And so, if you look at where the growth is driven across the P&L, and you'll see that the innovative business has grown. I mean Q3 was 33%, over $800 million now of sales of our innovative business.

Now, the reason why I specify that and the importance of that is that fundamentally changes our gross margin, which changes our ability to generate growth in our EBITDA, which changes our ability to grow EPS. And that's so important because obviously, to continue to return value to shareholders, we've got to keep growing our EBITDA and keep growing our EPS. But to do that, we need to keep growing our gross margin, and we have the ability to do that with our innovative portfolio. So, I think, we've shown tremendous progress in '25.

So, your question was '26. So without giving guidance, it's a bit more of the same. In our innovative business, we expect AUSTEDO to keep growing strongly, UZEDY is on a good trajectory, AJOVY, going to keep growing strong as well. But don't forget, these products grew at 38%, 24% and 19% in Q3. So, good growth rates.

And then, we're hoping that we'll be adding our long-acting olanzapine in around about October to Q4 of next year when we launch that in the U.S. which we see as another big opportunity in schizophrenia. And so, as we go into '26, it will be -- the innovative portfolio continues to get a bigger aspect of our revenue, a bigger contributor to our gross margin, a bigger contributor to our EBITDA and thus helping continue to grow EPS. So, I think that's what I would say is probably the highlights.

The other thing that's worth mentioning, which I don't think I would have said when I was here 3 years ago is our pipeline, where we would have completed our recruitment for DARI: Dual-Action Rescue Inhaler in Asthma. We will enter two new indications duvakitug for TL1A. We'll have a data readout of our Anti IL-15 in vitiligo and celiac disease. And we may have some data in oncology and PD1-IL2.

And we will have a futility analysis, emrusolmin, our treatment for MSA. Now, I said all those because I just really like saying those, because that's a huge innovative pipeline. And once again, to show the transformation of Teva to have such a late-stage pipeline with readouts, I think shows the work we've done in the last 3 years.

Yes. Okay. Do you think about 2026 as sort of a clinical transitional year in terms of the overall top line? Because Revlimid is going away and the innovative portfolio is growing. So, how should we think about revenue in 2026? Should we be expecting kind of flattish year-over-year growth on revenue? And then what about on EBITDA, should we expect continued margin expansion there?

Well, I have to say, I do admire your persistence, get guidance out of me. So, how do I answer that question without actually answering it?

So, I suppose I'll start with we're going to grow our innovative business continuously, as I said. I think we're losing about $1 billion of Revlimid, our generic Revlimid. That's a huge chunk of revenue. But we have said we're going to grow EBITDA. So I will answer that question.

We're growing EBITDA. And I think that is worth pausing on. So, we are going to lose $1 billion of revenue in a company that has $16.8 billion of sales, and we're going to grow our EBITDA next year. So how do you do that?

You do that, because you know it's going to happen, and you plan for it and you set your revenue on a trajectory from an innovative point of view. I mean, your innovative business grows. It grows at a different margin, which throws a different level of EBITDA profitability. And if you keep a disciplined approach to OpEx, then you have a chance to -- you'll grow EBITDA.

And you'll grow EBITDA also, because when we knew Revlimid was going to end in '26, which we knew some time ago, we put into place an organizational effectiveness plan which means we're going to save $700 million by '27 and 2/3 of that $700 million will be saved by the end of '26.

And one thing I hope we've become known for Teva is, is we do what we say we're going to do. And if we say we're going to do 2/3 by the end of '26, we will do 2/3 by the end of '26. So, you combine our innovative portfolio with our operational excellence, organizational effectiveness program as well as we'll still be growing in other parts of our business, ex Revlimid, then we can grow our EBITDA.

So that's probably the most you're going to get out of me on guidance type question.

Thank you, Richard. We are very persistent here at Jefferies. Maybe we can double-click on the innovative portfolio, just AUSTEDO, right? You guys reiterated your 2027 guidance of $2.5 billion -- of at least $2.5 billion. Talk about the underlying drivers of that growth and how you guys will get there?

No, I'm very proud of what we've done with AUSTEDO, as a company. It's been a real change in trajectory since 2023. And obviously, we had the IRA negotiations this year and we announced in our earnings that those have concluded and they haven't changed our forecast for '27, which is $2.5 billion. We also haven't changed our peak sales, which we think will be over $3 billion.

Now there's two things, I think, worth noting in that, is when we started on the journey with AUSTEDO in '23, we said it was going to do $2.5 billion in '27. Nobody believed us. Like, nobody believed us. And I think every analyst had us down at $1.4 billion peak sales or $1.5 billion. We're going to do over -- we're going to do $2 billion. I think I've given our guidance on that this year.

And so -- and then when we gave that $2.5 billion, I said that will take into account IRA. Now what's quite interesting is people said, well, you won't be an IRA, because you're only going to do $1.4 billion in peak sales.

So, why are you worrying about IRA, when you're not ever going to be in it? So I tell you that because I think it shows the level of detail and analysis we put around something and we thought, okay, if we do to get $2.5 billion, which we believe we will. We will be an IRA. If we're going to be an IRA, then we need to take out -- take into account the discount we're going to have to make that $2.5 billion and then how do we build back.

So, I tell you that because I just think that shows a level of discipline and thoughtfulness to how we forecast. So then answer your question about how do we get to $2.5 billion and beyond, the opportunity in the tragedy in AUSTEDO is the opportunity is 85% of patients with tardive dyskinesia are not treated, which is the opportunity and the tragedy at the same time. And so, we believe we can continue to educate physicians and patients and caregivers to make sure those people seek treatment. And when they seek treatment, we can get them on AUSTEDO.

But I think there's many other opportunities to grow the brand. The adherence and compliance in this disease can be improved dramatically, and we work very hard on that as well as making sure patients end up on the right dose. We launched XR AUSTEDO over a year ago and the ability for patients to end up on a more optimal dose is definitely happening with XR.

And so, all those things combined, more patients coming in, more patients are being compliant and adherent, more patients on a more optimal dose for them therapeutically allows us to be confident about the $2.5 billion, but also confident about the $3 billion post 2030.

Got it. So, your competitor did recently highlight that they're going to take a fairly more aggressive approach in 2026 in terms of access. And maybe talk a little bit about that and your priorities in 2026, in terms of formulary positioning, access and et cetera.

Yes. So consistent, I never talk about competition. So I want to talk about competition. What I would say is, we're very much focused on the $2.5 billion and what we needed to achieve that. I think in a space where you have 85% of patients aren't treated and you have two players. In my experience over 30 years, it's about the patients. That said, the market, I do but I think, it becomes more challenging.

And I think what we have to do at Teva, we do very well because we're very disciplined is balance access and value. And I think access and value are really important to create long-term value. And I think that we are very focused on that. And I think we've shown that not just with AUSTEDO, but we've also shown it with UZEDY. UZEDY is a great example of long-active treatment for schizophrenia, which I think has surprised people of how well it's done, hasn't surprised us, by the way, but it surprised people. And I think it surprised me, because it's a very competitive area. It's genericized and how we've done so well.

Part of it was making sure that we didn't sacrifice value for access. Access is only valuable if it's valuable, if it adds -- if you maintain a certain price. And so, I think when it comes to AUSTEDO, what I think is that market is getting more managed, managed care is getting tighter. We know that, we forecast that, and that still makes me very confident about what we can achieve in '26, and that sets us up for achieving our $2.5 billion in '27.

Got it. So, now with sort of line of sight to that $2.5 billion in 2027, maybe remind us of your commercial footprint for AUSTEDO? And if you're happy with that, is that optimized already? Or can you see opportunity there to expand to be a little bit more aggressive?

Yes, I can give you some flavor on that. So, I think a lot of this goes back to how we think about capital allocation at Teva. So, we always talk about capital. We don't talk about resources. We talk about capital being deployed in a way that will give a return. I very much think my role is to create with my executive team, a company that is of sustainability over the long term, and it creates shareholder value. That is, is what we're here to do, that is what we paid to do.

So, to answer your question, which I know was very specific about AUSTEDO. Just to give you an example, when I arrived, AUSTEDO was not getting them the resources, the capital or had the ambition to do what it should do. So, we reallocated resources really aggressively, really quickly. And I'll tell you that because if you look at our OpEx expenditure as a percentage of sales, it doesn't really change. And I believe that's really important. Our discipline around the percentage we spend on OpEx as a percentage of sales, we believe should remain constant, because I think that discipline allows us as we grow our revenue, as we grow our margins to really create a more valuable company and give return to shareholders.

Because if we break that discipline, then I think we start spending more, because we just think we can. And so, going back to the question on AUSTEDO, we gave AUSTEDO all the resources it needed. We always give AUSTEDO resources it need. It's a priority. And because it's a priority, it means other things are not a priority, and we take resources from other parts of the company, but we reallocate, we don't add. And we have -- that's the way the organizational effect in this program of $700 million of savings is after we've allocated more resources to our pipeline and to our innovative portfolio.

So, I think you were trying to maybe push around as to, once again, go back to the competition and how they actually allocate resources. AUSTEDO always get what it needs. UZEDY will always get what it needs. Olanzapine, when we launch, it will get what it needs, to maximize the value of those assets, while maintaining the discipline on the P&L. And we do that by taking assets, resources, capital, should I say, from other parts of the business. And I think we've become very agile at doing that.

Yes. Perfect. If we can switch over to UZEDY and olanzapine LAI. Maybe talk a little bit first about UZEDY and just the progress since the launch, the opportunity there and how the learnings from UZEDY informs you of your olanzapine launch in late '26?

Yes. No, thanks. I love this question because I think UZEDY is an example of how good Teva can be. And I'm English, I don't -- I'm not used to saying things like that, because it's a bit bold. But just to set the scene for those who don't know it, so long-acting risperidone. This long-acting market has a big Goliath who dominates this market. It is genericized. It has generic long-acting products, one of them we actually launched.

So, if you're going to launch a product into a competitive environment, this is the one you do not pick. This is the toughest. To then launch into that and be successful, you have to have great product, great go-to-market capability and a great ability to change prescribing habits and maintain value in the tougher scenario. And I think we've done that. And we forecast to do the $200 million this year. And we think this is part of our franchise, which can do $1.5 billion to $2 billion.

So I think you said, I talked about that with so much enthusiasm, because the discipline we had on the value and access, the ability to generate awareness and usage without access, I think shows the capability we have.

Now if you apply that to a long-acting olanzapine, which will come next year, where it's not genericized, there is no long-acting incumbent that's used. So, it's completely different. It's a far better environment to launch into, yet we built the muscle, the capability, that level of competency with UZEDY. And that team, be it in payers, the managed markets, be it the hospital formularies, be it the physicians, be it the patient associations will be the same team that launches olanzapine. So, I think we've set ourselves up for a really good opportunity to launch olanzapine incredibly well, a lot better than UZEDY, despite I think, the tremendous work we've done in UZEDY.

So -- and these are complementary. The other thing I'll say is UZEDY and olanzapine or long-acting olanzapine, we can treat 80% of people with schizophrenia. UZEDY is used for people with mild to moderate, and olanzapine is used for people with moderate to severe. And these are both long-acting. So, the same technology we use.

So, I think the ability to turn this into a franchise of $1.5 billion to $2 billion is truly possible, because we have the right products, and we have the right go-to-market model and with the right capabilities.

Got it. And for the long-acting olanzapine, I believe you guys will be submitting the NDA very shortly.

Correct.

Setting up for late '26 launch. But is there an opportunity to accelerate that to pull that forward with the priority -- with the national priority review voucher?

There is a possibility. That said, we're looking at it across all of our portfolio, all the drugs we have, both in innovative and in generics and biosimilars. So, we look across all of that. Obviously, this is right at the -- we're, as you say, about to submit. And so, the ability to expedite that has to be thoughtful and how many months we would say versus allocate into other one of our pipeline. So, we just got to think about that, but it's a nice optionality.

But either way, we plan to 10 months later, be in the U.S. market with olanzapine, which I think really helps us get a good start in '26 and then in 27, start to really see some of that revenue come through, which once again goes back to the '27 targets of mid-single CAGR growth of our revenue, but a 30% operating margin.

When we started this journey 3 years ago, I think people really struggled to understand how could we get to 30% operating margin. And now I think people see a really clear line of sight to that and olanzapine plays a part in that in '27, but more going onwards to '28, '29, '30. I think that's when our revenue innovative portfolio gets bigger and bigger. And hence, the reason why I say it will be a $5 billion plus innovative portfolio by 2030.

Got it. And then if we can talk about the pipeline and the 2026 catalyst flow, which ones are most important to you and to the company?

Yes, that's a great question and I love answering this question again, because it's about our pipeline, which I think is an extraordinary pipeline. One, because it's very late, which is nice because it's value creation coming through. And I think it's derisked. And obviously, that's a subjective view. But I think it's derisked based on the view that, these are targets that are well known. MOAs are well understood. So that's how I define that.

What are the things I'm excited about? I'll just tell you the more, because I don't know how to really prioritize them. But we're going to have the data on for Anti-IL-15 in vitiligo and celiac, some proof-of-concept, which would be really interesting. We move that quickly through the clinic.

We will have a futility analysis on emrusolmin, treatment for MSA. We will have going to two Phase II indications with duvakitug, TL1A, which is currently in Phase III started in UC and CD. We will probably have some data on our PD-1 IL-2 in oncology. And we will have fully recruited our DARI: Dual-Action Rescue Inhaler by the end of this year. And so, we will potentially have a data readout on our asthma product next year, depending on how many exacerbations we have because it's dependent on that.

So, I'm excited by them all, because that's the transformation of Teva. We will have all of these readouts, some very, very important milestones, others just on the journey to becoming a world-class biopharma company based on the fact that we have this late-stage pipeline.

And I sort of remind people that we'll launch olanzapine in '26, we'll launch DARI in '27, we'll launch emrusolmin in '28. We'll launch duvakitug in two indications in '29.

While we're still growing AUSTEDO, we're still growing UZEDY, still growing AJOVY. And so, we had this company that people are understanding is an innovative company, but all of our products are still on a growth trajectory, and we're adding new products to it.

And then after that, we'll have obviously the IL-15s in vitiligo and the celiac disease, and we'll have the two indications, which I'm not going to tell you what they are until the duvakitug come to the market post 2030. So there's just lots of growth opportunity, which is why that pipeline, I think, is incredibly exciting.

Yes. Which ones do you think are the most underappreciated by investors?

All of them.

Maybe, it's all of them.

Yes. All of them. No, I mean, all of them. All of them, because none of them have got any valuation, which clearly, I am drinking the Kool-Aid, I'm a bit obsessed with the company, but I just don't get that.

Olanzapine should be valued. DARI should be valued and duvakitug should be valued, at least a bit. if there's anybody out there, just give us a bit.

But I think it should be. I mean, duvakitug the Phase II results, I think, were phenomenal. The Dual-Action Rescue Inhaler, we know is going to work, right?

Olanzapine, we've seen all the data at all the conferences. So the fact that these are not valued, I think, is maybe a slight lag on the understanding of where Teva is heading. But hey, I don't really mean this, but I can wait.

And then at some point, it will happen, and it will be valued. There's always a time delay, it seems. It's like a satellite link delay, whatever. You say something and somebody hears it. But we're in it for the long game. This is about creating a sustainable long-term company that's going to be here forever as it's already been here for 126 years. And that's what I'm focused on. That's what the executive management are focused on. And hopefully, investors and people start to realize that pipeline and value it a bit more. I think it's coming, but we'll see.

And if I can ask a little bit about TL1A. Just when you look at the landscape across the industry and some of the competitors, it seems like it's being explored in many, many different indications, right? So like what approach are you and your partner, Sanofi, taking to this target? Would you take a similarly broad approach? Or would you kind of do things in a staggered fashion in terms of running Phase II proof-of-concept studies and then seeing how that plays out, et cetera? I'm just trying to gauge just the level of, I guess, like how big do you think this class could be? And like how quickly can you actually move on that?

Well, that's a very exciting question. So I think it can be very, very big. And let me explain why. So look, a couple of things is we knew this was going to be a massive opportunity, which is why we partnered, because we knew this could go into so many different indications that my belief, I've never had a product like duvakitug. I've never in my career had a product which can go to so many indications.

And so, what I've seen in being an observer in other companies, if you have one of those, go at it, go at it with ambition, go at it fast and do everything you can do.

Now the constraining factor there is capability, capital and just can you do it. And that's why picking a company like Sanofi as a partner was so important because, one, they have experience with Dupixent. Two, they have the ambition and they have the wherewithal. And also they have the necessity, Dupixent will come off patent in the not-too-distant future. And so, they need to replace that with assets, which have multiple indications. So, we both -- having a partner had that same ambition was really important to me. They have that ambition, and we've worked through all the indications.

And by the way, it's a long, long list. And what is really exciting about duvakitug is, this is an efficacious product, but it has a very clean profile. And that's really important when you go into multiple indications, because you need to have that as sort of the #1 criteria.

And then after that, it's about discussing where you go, what's the likelihood of success, what's the commercial opportunity, what's the speed to market. And once again, working with a capable and experienced part like Sanofi, we really get that insight. And so, I'd like to think this is a product that can keep on giving.

But I remind people that even if, which it won't happen, we just stayed in UC and CD, it's a game changer for Teva, a game changer. But we won't. We'll have two more indications next year, and I think it will keep going and keep expanding. So, then it's just transformative from our point of view without all the other products I mentioned. And by the way, anti-IL15 will be in multiple indications and the other drugs. So, super excited about the opportunity around duvakitug. We want to maximize it. We have the right partner to maximize it to help us financially and from a capability. We both have the same ambition. So, I think we're in a good place. Now it's just about execution.

Perfect. And I think that's all the time that we have, but thank you so much, Richard, and we really looking forward to 2026.

Thank you, Dennis.

All right. Good day, everybody. My name is Ash Verma. Welcome to UBS Global Healthcare Conference. I'm really excited to have Richard Francis from Teva join us. Richard, thanks a lot for making the trip. I know a lot of disruption with the flights and everything. So thanks for joining us. And it's been a pretty exciting story, then we want to go over a few different items of the latest updates that have happened. Maybe just for the audience, like if you want to ask any question, there is a QR code, and I will get that on my iPad here, and we can cover it that way.

So with that out of the way, yes, Richard, maybe if you can give us a little bit of a sense of like high level, where are we in the story? You just reported third quarter earnings. Just if you hit a couple of few highlights and then we can go over there.

Well, firstly, Ash, thank you for having us. I really appreciate it. Yes, that's an open-ended first question, so I've got to be careful to keep it quite tight. So where we are on the story, nearly 3 years ago, the pivot to growth strategy was put in place for Teva. And obviously, they had 3 phases, which we laid out, one was to return to growth, accelerate growth and maintain growth. The first few years about return to growth. And after many years of decline, that wasn't a small achievement, and we returned to growth. We had our 11th consecutive quarter of growth in Q3.

And then we are now into the phase of accelerate growth. Now the return to growth, probably the nuggets about that are the intensity, which we focus on our innovative business, our patented business, both in market and in the pipeline as well as stabilizing our generics business. And we have done all of those. And I think Q3 was a really good example of how the finances showed up the math. I always call it the math, the maths don't like. And so in Q3, we grew our innovative business now to over $800 million for the quarter, up 33%. AUSTEDO up 38%, AJOVY up 19% and UZEDY up 24%. So over $800 million of innovative sales. And that throws off a completely different gross margin level of profitability.

So when I started this journey with the team, our gross margin in Q1 2023, I probably should mention this, I probably shouldn't. It was 48%. And now we're tracking to be in the 54% to 55%. And why has that happened is, obviously, we've driven efficiencies and a lot of things we should do, but our portfolio shift has happened, and those maths are fundamental, and they will keep changing. And I think in Q3, you saw the nuggets of that is stable generics business, growing at 2% and innovative business growing at 33%, a pipeline that's maturing and getting really close to either being submitted or launched with olanzapine next year, DARI the year after, duvakitug in Phase III, Phase II starting next year. It's a fundamentally different company.

And then maybe I'll stop because I'll keep going on. But when I started this journey with the team, people said, remember, you asked the first question in New York, right, which I won't go back to. But people said this is a crazy idea to move the largest generics company in the world to an innovative company, a leading biopharma company. And I remember saying it may sound like fiction. But over each quarter, it will become more and more nonfiction. And I think today, the reality is we are a biopharma company that has a world-class generics business, and we have a world-class class innovative portfolio both in the market and the pipeline.

Great. Excellent. Yes, I've been very, very excited for your success. And yes, it's been a tremendous turnaround. And AUSTEDO, obviously, a big part of it -- like the third quarter for AUSTEDO was particularly strong. Maybe if you can talk about like what are the different dynamics of what is driving that? Is it some part of it volume, some just going from IR to XR getting that type of an advantage? And how much of it is like volume versus price?

Yes. I think this is a really good example of how Teva has completely transformed. I think one of those first question I was asked is can Teva sell innovative products, which, by the way, I was shocked to the question because I used to work at Biogen for many years, and Teva was probably one of the hardest competitors with COPAXONE. So I always thought they could, maybe the muscle had atrophied a bit.

But I think going back to your question on AUSTEDO, that what's driving it? There are so many different aspects that the team have put in place here, and Chris Fox is here, who runs the U.S., which are phenomenal, not just making sure we have the right sales force with the right coverage with the folks on the right quartile, but understanding the patient journey. So it's how do we move patients from script onto drug? How do we get them titrated in the appropriate way? How are they supported with adherence and compliance? How do we get them on the optimal efficacious dose. All of those things are multilayered and many different programs we have. And all of those keep getting executed.

And when people say, how did you go to 38% in Q3? I probably say, well, that journey started 2 years ago. And that -- and all of those things keep getting honed and refined. But still, the fundamentals are 85% of the patients who should be on therapy or not. So the team are getting more of those bought into the office and treated. More of those get titrated on a titration pack a sample. And more of those end up on a more optimal dose because as we move to the XR, it's easier for physicians to move them to titrate them. So all of those things come together, which allows to have a strong quarter. There are a couple of things which I mentioned that the comparison to the prior quarter in '24 was probably a bit favorable because we launched XR in quarter 2 '24. And so we stocked in more there. So I think Q3 '24 was maybe slightly suppressed because of that.

And there was a little bit of gross to net favorability in Q3 this year, but nothing of any significance that rechanges the direction of travel for this. So I think it's a multi-leg story. We do lots of different things well every day, and I think that's what's driven it.

One of the things that just your competitor, Neurocrine, they have gone into pretty aggressive contracting earlier this year. And sometimes these things happen in cycles that one competitor taking more price hit and then growing volume and then the other competitors turn. So I wanted to understand, is there any type of that dynamic going on with the AUSTEDO that there is more of a contracting coming as a competitive reaction to what Neurocrine did?

Yes. Look, I mean, I'm pretty consistent with this. I never talk about competitors, particularly in the market like AUSTEDO where you have 85% of patients, 85% of nearly 800,000 patients are not treated. To me, this is an opportunity for us in the market to help patients. And so I'd say that first and foremost. The other thing we've said consistently is actually, all the markets we operate in, this is going to be constantly challenging. Managing value and access is a constant discussion that you have to have because I think what we've shown across our portfolio is that you need both. Access with that value is erode of returns. So you need to think about that carefully.

So I think what we've done is position ourselves well this year. We've positioned ourselves well next year to make sure we balance that value and access. But for me, it goes back to the fundamentals. This is all about getting more patients into the market, getting more patients -- physicians to treat those patients because that's the opportunity and that's a responsibility that we have to help those patients. So I think that's the fundamental. We -- when we plan and budget across all of our portfolio, we plan for the payer market to get harder and harder every year forever, ever. So we think like that all the time. And so when that does happen, I'd like to think we're not shocked. We prepared for it.

But we showed that with UZEDY. UZEDY is a great example of the team doing a phenomenal job balancing value and access. Because once again, we think our portfolio that we're bringing to the market brings real value and has real need in the market. There are many patients who can benefit from our AUSTEDO, UZEDY, AJOVY and soon to be olanzapine. So we think that has value. We need to retain that value because long term, we want to give returns. We want to increase the value of this company. We give returns to our investors. So to do that, you have to be very disciplined on things like access and making sure you create long-term value.

Got it. All right. So I guess pretty exciting update with the third quarter that you reiterated your 2027 guidance, I mean -- and so yes, I think with now having a clear line of sight on the long-term goal for AUSTEDO brand. Yes, what I'm trying to understand is that it's a very promotion-sensitive brand like we get that. And in the past, you've talked about it how you want to expand the sales and marketing footprint on AUSTEDO. So now that you have like a clear line of sight that IRA is not a big impact or something that you can absorb, then what's your focus in terms of growing the commercial footprint on AUSTEDO?

Yes. So maybe we actually approach it slight different than you think. We never waited for IRA. We -- because I think that's for the long term, the $2.5 billion, we were comfortable with because we made an assumption in 2023 that was going to happen. Now obviously, I think we've got a lot more comfort and the market a lot more comfort when we actually negotiated the number, and we knew that the [ 2.5 and the 3 ] were really going to happen. But going back to your sales and marketing, we've always invested to make this brand a global blockbuster because our philosophy is you play to win and then you deal with failure when it happens, but you don't hedge.

So I think with AUSTEDO, we've always -- and the commitment we've made to the brand and to the patients we serve is always with a real intent to help them. Now if things change along the way, we'll adapt. But we weren't waiting the IRA. We had always believed and I always believe the team and negotiations were going to work out in line with what we had forecasted. But I just want to be clear that this doesn't open the floodgates of -- because I think we've always allocated the amount of resources required to actually optimize that brand. And we'll do that across all of our brands.

But that comes back to a very thoughtful but disciplined and maybe slightly aggressive capital allocation that we do at Teva. We -- in fact, here's a humor story, which is -- so I'm sure I can share this well. I'm going to share it anyway. So yesterday, my Head of R&D sent me an audio that he managed to work out to put together some data points to a podcast on capital allocation. That's my Head of R&D, that's the coolest thing the Head of R&D sends out. He may live to get that. And then today at breakfast, we're talking about capital allocation and how we have to allocate capital more aggressively to drive long-term value.

And -- and so I just tell you that because it's an interesting story, but one that I think is unique at Teva. We do not think about budgets as something you get every year because you had it last year. We do not think about things just need money because they've always needed it. Sales and marketing for AUSTEDO, our pipeline duvakitug Phase II results. We think about how we're going to drive long-term value and create long-term value for our shareholders. And that means we have to be really talking about capital allocation. And I thought it was just really nice that my -- Eric Hughes, Head of R&D did that.

Yes. That's great. So I know there is a lot of focus on just the IRA MSP, where it will come down to, which I don't know if you are willing to talk about that...

Look, it maybe early in the morning, but it's no way that early in the morning...

I'll try to ask it in a few different other ways, let's see. So I know your...

I think -- amongst you and me, that I can tell you. But I know that's going to happen.

Maybe just like ask you something that has been disclosed by a lot of companies about their branches like where is the -- where is the net pricing that you're realizing at AUSTEDO right now, like before IRA. Is that something that...

See that's almost a trojan horse there, isn't it? But I saw it because it's just a big and it's wooden and it's a massive horse. So we move on to the next question.

All right. Okay. So yes, maybe we move on. So we'll find out...

By the way, just coming back always I should apologize. But your previous 2 questions were about competitive environment and access. There's no way, I will give anything that impedes our ability to do the right thing for the brand. So -- but we'll always help our investors. We're always helping the IRA team will always help them model and understand what it looks like because I don't want to leave people in the dark, but at the same time, from a competitive point of view, I don't want to put my U.S. team at any disadvantage just because I want to carelessly answer questions.

Yes, that makes sense. Maybe just we switch over to UZEDY. So for UZEDY, I know like since you launched, I mean, the uptake has been pretty strong. And one of the things that you talked about was that you want to maintain pricing discipline that not give away like discount unless you need to, so where are you in that process? It's still working out like the slightly premium compared to the other LAIs in the market? And just talk about the uptake of what's resonating with the physicians?

Yes. No, I think this is a really good example of just the quality of capability we now -- we have built and we've utilized and maybe it was always there at Teva. So UZEDY competes in a very competitive segment of risperidone and now I take paliperidone of -- there has been -- there's some big, big brands in there. It's been genericized as well. And TRx was up 119%. And I think that goes to show 2 things. One is the quality of the product and the product profile. And these are really important attributes. The fact that subcutaneous does not be kept in a fridge and it can get therapeutic dose within 24 hours, really important for physicians, and we've really found that.

And the quality of our teams in talking to the physicians, the nurse practitioners, the forming committee members of the hospital. So we're very, very good at that community and the patient associations. But that value, we knew we had a valuable product. We knew it made a difference to physicians and patients. And so we are mindful not to place the easy access, like give a discount and get access and then volume will follow. We've sort of created a demand from physicians because they value the product and we use that to maintain the value and help improve the access.

But I think this is a really important story and I think it's a really important little micro case study of Teva. At a time when you're trying to grow your innovative business, you're trying to move the company from a generics to an innovative pharma company, you're trying to do a turnaround and you're try to make people believe all these things and you want to have a next quarter of growth. The easy thing to do is the discount to get access because you think that would just get to the next place. That would just help you get there. And we didn't. And the team didn't.

And credit to the team, I talked to them about it and I said, look, should we be going for a bit more access? I said no, this is a great product, long-term value. We need to hold the line. And that's the quality of people we have at Teva, and that's what we did. But we had all the conditions to maybe challenge that decision, and we did. That's why UZEDY, I think, is a really good opportunity. And that's why when we launched olanzapine next year, which clearly does not have a competitive market there are no generics. There aren't any big brands. It is a segment that really needs a long acting. And we're going to go to those physicians, those formulary committees, those nurse practitioners, those payers who we've been working with for 2 years with UZEDY.

And I think now we're becoming a real partner in psychiatry and in schizophrenia, but one that really knows the value we have and the value we want. And I think olanzapine obviously has even more of that. So that's when I reiterate the $1.5 billion to $2 billion for our schizophrenia franchise, I truly believe that's possible. You put that with the $2.5 billion to $3 billion [indiscernible] I mean this is a different company. with different numbers and different levels of growth of both top and bottom line for the future.

But it also has an implication like when you're not necessarily giving a way free product, what that also means that like your time to get to the $1.5 billion, $2 billion, let's say, for both of these products combined might be a little bit further out. Is that possible 2030 to hit...

Yes. Maybe it's interesting. I mean it goes back to math. I love my math. It's like give you less at more value or more at lower value. I mean the end destination is probably the same, just getting in a different way. So I think for me, haven't necessarily thought about it like that. I've just thought about it as what is the value that we have, and we should retain. And I think for me, it's -- you're going to be very, very careful thinking volume is going to solve any growth trajectory in innovation. I think ultimately, it's about creating something of value, an unmet medical need and helping people understand that deeply and then you have something really valuable.

I think if any time you sort of try and rush forward -- those launches are really important. Those first -- I've learned throughout my career, those first 6 to 12 months are really important. And I think discipline and understanding of the market. And the patients, once again, back to the team in the U.S., they understand the patient journey and the points of inflection of treatment and decision-making is deep and it's only going to get better.

On the olanzapine LAI, so yes, you have a filing that is planned and hopefully, everything gets resolved with this government shutdown. But just talk to us about what is sort of the base case scenario that you're running with? Is there possibility of some sort of accelerated path here?

So we're really excited about olanzapine for the things I mentioned. I mean, I think it's going to be an amazing product for patients who really need a long acting. Don't forget that olanzapine is for moderate to severe patients with schizophrenia and compliance is key there really key. But to answer your question, we're going to file it this quarter. I'm hopeful despite the amount of hours I've spent on Tarmac at various airports in the last 10 days around this country, that's not going to affect the FDA. And with regard to whether we use any sort of voucher to accelerate it, we have a big portfolio of a lot of products, both in innovative and generic and we're looking at where could be the best use of something like that.

So we'll come back on that. But we're planning for a launch in the second half of next year, which is sort of -- if that can be accelerated, great. But once again, it's that long-term value creation at Teva. If there's other things that could benefit from that within our portfolio, we'd probably think about those as well.

Okay. And then on duvakitug, so good to see the Phase III being launched on CD and UC. I think one of the other things that you've also talked about is just additional indications. So just what's happening on that front?

Yes. So I listened to Eric a lot, not just on capital allocation, Head of R&D, but tells me about this is the first -- the fastest transition from Phase II to Phase III for trial in UC CD. So quite -- that's from a company that's not supposed to know how to do innovative work. So I'm so excited about that. Eric and I exchanged messages all the time about recruitment, how it's going. And then we're going to announce some Phase IIs or whether we announce them next year, or we keep the secret until people go to clinicaltrials.gov we'll see.

But look, I think maybe I take this moment to say it's interesting that the first few questions we've had about the $2.5 billion to $3 billion of AUSTEDO, the successful launch of UZEDY and then the potential launch of olanzapine, duvakitug, UC and CD Phase III and 2 more indications. In less than 3 years, this definitely doesn't feel like a generics company feels like a world-class biopharma company already with assets that can create real long-term value and be a value creation for shareholders in my view. So I appreciate you're asking the right questions because this is what everyone wants to talk about because this is why it's so exciting to be at Teva right now.

Great. on DARI, so that's the other pipeline program. There's a lot of focus on that. So I think -- so just in terms of like tracking on the time line here, if you can talk about enrollment finished by the end of this year and get the data and kind of compare contrast like to the GSK as a competing product?

Yes. So DARI dual action rescue inhaler, team has done an amazing job. Once again, I emphasize at this point because I'm very proud, but we moved olanzapine faster through a Phase III schizophrenia study than anybody has ever done, and that's supposed to be really hard. We moved our Phase II trial for duvakitug to UC and CD faster than anybody have done. And I think now we're going to do DARI in Phase III and asthma and pediatric faster than anybody has ever done. And so if anybody says we can't do development, we can. And the intensity, once again I know this enrollment in pediatric adolescents and adults because we have an app that I can look at all the time, which I'm sure Eric sometimes wishes, I didn't.

But we're on track to do all the recruitment by the end of this year. This is -- by the way, this is an exciting opportunity. The guidelines suggest that 10 million Americans should be on a dual-action rescue inhaler. We're coming to the market with a great device because we have a lot of experience in devices. And we see this as a big market that has real long-term value. We're obviously following AstraZeneca, who are creating the market, getting these guidelines really understood by physicians, and their script data looks very impressive and strong. So I think for us when we come to the market, which will be in '27, I'd like to think that we're following the guidelines which are very well understood and will be differentiated not just because of our device, but we'll have the pediatric indication, which is 25% of the population. So it's 25% of those 10 million.

Good. Good. So yes, now let's switch over to the generics and biosimilars space. So yes, a lot of different developments on that. I guess the one thing that I wanted to understand, so there is a lot of talk recently about just FDA simplifying these clinical trial requirements, right? And it can be looked at in a positive or a negative? Like -- so what I wanted to understand what -- how do you think about it? Like for Teva, what does this mean? Is it a -- is it a worry that now there will be all of a sudden like a cottage industry that shows up for biosimilar or is that not necessarily the case because you think that the quality of the assets that you get to the market are going to be differentiated versus the crowding that might happen?

Yes. No, it's a fair question. So in biosimilars, firstly, a couple of things which I think mean -- so I think it's a good thing, because I just don't think it was actually necessary. So I think wasting money on things you shouldn't have to do clinical trials where you know you've already proven it. So I think that's just sensible because we can put that capital to other use to ultimately help society. But -- so I think it's a good thing. Does it mean there's going to be a wave of competitors? No. The reason why especially technically, it's really hard, that people forget that. To develop biosimilars, you still have to have a good technical capability.

Second, it's still not cheap. It's $70 million to $100 million per biosimilar. So for a small company or a generic company, that's a lot of money. If you want to do 5 or 6 that's going to chew up a lot of money. So I don't think -- I think maybe there'll be more -- but for us, our strategy always was we want to have a huge portfolio. I mean we have the fastest-growing portfolio in that, the second largest. I think we'll soon be probably the largest. We want to have over 30 biosimilars, and we're doing that through partnerships, which we started 3 years ago. We saw partnerships was the best way of doing that in a capital-efficient way.

And so for me, maybe that creates an opportunity to have deeper partners -- deeper partnerships with -- as you saw, we don't one the Samsung. We have some with Labscience, part of Fresenius and we have Alvotech. But we can do -- go deeper on some of these and maybe expand it. You saw we have one with more [ Formycon ] in Europe. So for me, it just helps us on that journey to have a bigger portfolio. And I think I see this as a positive thing. And I think hopefully, those comments help you understand that it's not going to create a wave of people coming. One, it takes a lot of time and the capability is high. And the money is still -- or the capital required is still not insignificant.

So when you think about just kind of the pushes and pulls of pursuing this as a partnership opportunity versus like doing it in-house. I mean, just like given what has happened recently with 2 different CROs that you've gotten with the partnered asset. Like how does that play into your thinking that like -- if I'm doing that in-house, maybe sort of potentially like less risk and more of a tighter control that you can manage versus trying to get it from a partnership where there can be a potential risk from that?

Yes. So first, I'd say that the thing you have to talk about internally, which we did is opportunity cost, unlimited capital. So if we do it internally, yes, I'm sure Eric could actually do this. But what's the opportunity cost to do it? Does that mean we don't do another Phase II in duvakitug. Does that mean we don't accelerate [ emrusolmin ]? Does that mean we don't do a third indication in anti-IL-15. There's an opportunity cost. Capital has to be allocated really thoughtfully with a mindset.

And the great thing about Teva now is we're in a position where we can have a discussion? Do we do biosimilar development internally or do we do all this innovative? Do we give more sales and marketing to AUSTEDO, UZEDY, olanzapine? And we have those capital allocation discussions. We operate as an enterprise team. We do not operate in a functional way. So here's the thing. When we did the pivot to growth back in first quarter '23, we did analysis and we looked at the [ R NPV ] of revenue and EBITDA, if we did a partnership or if we do it internally biosimilar. And it's the same. Actually, EBITDA is slightly better if you do a partnership on a risk-adjusted NPV.

So I give those numbers, that's how we think, right? And so could we do it better? Here's the other thing I would say, it's like we always think every company always thinks they can do things better than others, right? In some instances maybe we could. But in others, we're very good at picking people with really good capability and being, I think, humble enough to saying, actually, those guys can do it. We have a lot of partners across our whole generics business. So biosimilars, injectables, some interesting technologies. And I think picking the right partner, which has the right capabilities is the right thing. And so I stand by it.

Now capital allocation is really important, opportunity costs, understanding the opportunity cost and being mindful. Otherwise, you're just going to keep spending money and then you keep promising a return in the future. But as you know, the future never happens, it's always in the future.

Yes. Maybe just taking a pause for the audience in the room, if you have any questions that you want us to bring up, feel free to submit that, and I'll get this on my iPad. Just a couple of others, like while we are waiting for that to get populated. So yes, I think there is a lot of focus, obviously, on the 2026 dynamics. And I guess it's a very good thing to see that you're kind of reiterating that mid-single-digit CAGR on revenue. But like 2026 has a little bit of a unique dynamic that you have REVLIMID going away. So yes, I'm trying to understand like what is the growth -- what is essentially like the growth levers that you're pulling to offset that? And can you stay on this path of going towards mid-single digit?

Yes. So look, I think this is a question I like because I think it shows a lot about the discipline at Teva now. So we knew we were going to lose generic Revlimid in '26. And we didn't take that as an opportunity to say, okay, can you give us a break? It's a big product, we're going to lose it now. Let's just discount '26 and let's just move on to '27, we did. And we've put a few things in place. One, we make sure we're accelerating our innovative pipeline and our products in the market. So our innovative growth, we talked about being at 33%. If we keep driving our innovative growth in '26, that's going to throw off obviously a significant amount of revenue, which has a very high gross margin, which is a significant amount of profit.

We put that together with our organizational effectiveness programs, which are going to save 2/3 of $700 million by the end of next year, as well as we're going to launch more biosimilars launch more complex generics next year, and our base generic business will keep improving the efficiency. That's why we've been able to say we'll grow EBITDA next year. We'll grow EBITDA in absolute numbers and we'll grow an operating margin. That's not easy, but we plan for it. We also understood that we had a transformation of our portfolio coming through. So I think for me, there's a bit about the revenue in the CAGR, which I think we feel comfortable on.

But the thing I'm really proud of is what we can do on the level of profitability and keep driving the company towards our 2027 targets, which are mid-single-digit CAGR growth on revenue, but a 30% operating margin. Those things to do together when you lose a product like Revlimid, which is high margin, I think that shows a real discipline in the company and a real focus on really wanting to lean into these challenges, not accept them. So I think, great. That's why I expanded on your question a bit because I think for us, '26 is a moment where I'd like to think that people can see this company has really moved from where maybe it was historically a few years ago and to where it's heading. And I think both on planning ahead, the transformation of our portfolio, the thoughtful approach to costs and expenses and capital and that sort of comes together in '26.

Just in the last couple of minutes. So yes, I know a lot of focus on TAPI as well and it has taken life of its own, like divesting and not divesting it? Like what is the latest? And I'm just curious to understand, I think your decision to like restart the process? Like why do that versus retaining the business at this point?

It goes back to strategy and capital allocation. Strategy, the pivot to growth strategy is not a tagline. It's a detailed plan for the next 10 years. And we know exactly what we have to do over each year. And so TAPI is an amazing API business, it's second largest globally. Does it help us fulfill our goals of becoming a world-class biopharma company with a valuation that we think is appropriate? No, it doesn't, despite how good it is. So because of that, it's not aligned to the strategy. And so we should stick with that principle.

What we have learned throughout this process, though, is that Teva is in a position now that it goes a bit back to access. We don't get forced into doing things that we don't think will give a return to shareholders and it will help this company be successful going forward. And so if we see that we know what we want when it comes to TAPI, particularly from a partnership agreement because we'll obviously be partners with whoever acquires this for 10 years plus. So that's really important. We also know the change in geopolitical situation has changed dramatically since we started this process.

So I think we can think of this very differently. And we're in a position now in a financial position where we can be really thoughtful. But it ultimately goes back to all the decisions we have to make and we should make are, are they in the best interest of the company? Are they in the best interest in terms of driving sustainability long term. And ultimately, if we do those, they'll be in the best interest of shareholders, which is what we are paid to do. And so I think we should stay disciplined on those. And I think there's a few questions you've asked, which I hope show our thoughtful, disciplined approach to decisions. And so I feel very comfortable with what we did on TAPI. And we will start a process again. And I think the world has an opportunity now that wasn't maybe there in 2024 to come back to table and take another look at TAPI.

Are there any other noncore parts of your portfolio? I know like investors like to think about OTC, which is growing pretty well and it's kind of customary to divest that for a lot of companies. Is that opportunity?

That's a standard play. We believe if you've got an OTC business, you quickly sell it. Well, our OTC business, I think a couple of things is, one, I suppose it goes back to a core principle is how do we create value -- long-term value in this company. And we can be a bit cookie cutter about that, what's driving long-term value? What's going to drive our gross margin? What's going to drive our long-term operating margin? What's going to drive long-term EPS growth?

Now our OTC business right now has a real purpose in driving our pivot to growth. it's a slightly different OTC business. It's a very pharmacy benefit based. So it's not your sort of toothpaste or stuff like that. It's really medicines. And right now, you see a lot of synergies with our generics business, and we see it helping us drive our financials. It's part of the -- people say, how do you replace 1 billion of generic Revlimid, I say, well, we have a generics business. We have 10 complex generics. We have another 10 biosimilars we're launching, and we have our OTC business that grows at double digits.

So I think it's aligned to the strategy, it's aligned to profitability. It's synergistic with what we do. People come to us all the time asking about it, bankers asking whether we would -- but I'd say it's a life to our strategy. So it's really clear, it's a really easy decision. But every year, we reassess where is our capital, what's absorbing capital, where could we put capital and what's the best return for the medium to long term? Because our goal is to create a long-term prosperous Teva, long term, we're talking they will never ever see the challenges that saw the path. It will be here way after I've gone, and it will be set up for success. And that's about making these thoughtful decisions on where you put capital now and how you're going to keep allocating capital going forward.

So I suppose it's a long answer to your question, we'll always look at parts of the business and say, are they aligned to our strategy? Are they worthy of receiving capital versus other things? And if they don't adhere to those, and say, well, maybe there's another owner of that. But that's how we sort of look through it.

Great. All right. With that, thank you so much for your time and looking forward to learning more about Teva.

Thanks, Ash. Appreciate -- appreciate you hosting us today. Thanks, everybody.

Thanks, everybody.