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Hello, everyone, and thank you for joining us today for the IL-15 Celiac Disease Phase 2a Topline Results Conference Call. My name is Sami, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Christopher Stevo, Head of IR, to begin. Please go ahead, Christopher.

Thanks, Sami. Good morning, and good afternoon, everyone. Thank you for joining us for the celiac disease results for TEV-'408 (Anti-IL-15). The materials are posted to our website this morning in the Investor Relations section, as always, please see those.

And before I turn the call over to Richard Francis, I'd like to remind everyone that we'll 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 Forms 10-Q and 10-K filed with the SEC. Any statements that we make are only as of today, and we undertake no obligation to update these statements subsequently. Now it is my pleasure to give you Richard Francis.

Thank you, Chris. Good afternoon and good morning, everybody, and I do appreciate you joining the call. Today marks another major step forward for Teva as we continue to execute on the pivot to growth strategy, a strategy that was launched 3.5 years ago to transform Teva from a world-class pure-play generics company into a world-class biopharma company.

Now as many of you will know in the conversations and interactions we've had, a major part of this was expanding our innovative portfolio. In fact, that was pillar 2 of the 4 pillars of the strategy. This was about stepping up innovation. And I think you'll see today that we continue to make great progress on stepping up innovation here at Teva. Go on to the next slide.

We set out this year to have 7 milestones. We had to update that, and it became 8 milestones as we have the transaction and ecopipam came into our pipeline. But for a world-class biopharmaceutical company, I think this is a very impressive lineup that we have here. We have made significant progress on executing on these milestones.

Already, we've had the duvakitug maintenance data. As I mentioned, we've had ecopipam when the NDA was accepted. We've had the top line results of vitiligo. And as of today, you'll be hearing from Eric about the celiac disease 2a top line results.

But I will remind you, there's still quite a lot more to come this year with the DARI, emrusolmin, olanzapine LAI anticipated approval in Q4 and finally, the Anti-PD-1/IL-2. So what does this all mean for Teva? If you go on to the next slide.

It means we have an opportunity to have 5 submissions in 5 years. And it's worth pointing out that these products and these programs and their indications have the potential to generate over $10 billion of sales for Teva going forward.

Now for any company, that would be significant. But for a company of Teva's size, I think this really creates an opportunity to create a biopharma company that has a growth trajectory for many years to come and create real shareholder value.

I'd also like to point out that 2 of the assets in this -- on this chart, duvakitug (anti-TL1A) and anti-IL-15 are products where we have multiple indications, so often referred to as a pipeline in a product. And we've clearly shown this is possible with the 2 new indications that were announced earlier this year for duvakitug.

And now we have the second data for anti-IL-15 of celiac disease backing off the data we gave you a quarter ago with vitiligo. So lots to be excited about, 5 submissions in 5 years of assets that all have the potential to achieve over $1 billion in peak sales and some considerably more. creates a really exciting time for Teva to continue on this growth trajectory, both on top and bottom line. But I know you want to get into the data. So without further ado, I'm going to hand you over to Dr. Eric Hughes, Head of R&D and Head of our CMO. Over to you, Eric.

Thank you, Richard, and it's great to be here and have the chance to talk about some new data and our pipeline. I'm really excited to be here and talk about this next step in our IL-15 program.

Just to start off first, celiac disease, it's a very important disease. 1% of the population in the U.S. and EU are affected, and that's up to 5.1 million people. But most importantly, 50% of these people, even if they can strictly adhere to a gluten-free diet still have symptoms. And there's currently no therapies for these folks.

So this is a very important disease. I think it's unmet medical need, and it's something that is highly overlooked, I think, and underserved at this point. We'll talk a lot about normal gut villi that you see here on the right of the slide, where you have nice normal villi where it is a high surface area to absorb nutrients.

But in celiac disease, this architecture is highly blunted in the gut. And this is a basic pathophysiology of the disease. Moving on to give you a little bit more flavor to understand the data we'll talk about today. As I mentioned, there's normal gut villi with these finger-like projections. And the basic pathology in the disease process is the exposure to gluten, which causes a stress response in the epithelium of the gut lining.

This leads to a release of IL-15, a key cytokine in the pathogenesis of the disease. And that release drives the migration and proliferation of pathogenic into epithelial lymphocytes. These are the cells that rush into the gut lining and cause the inflammation and ultimately, the destruction of the villi.

And you can see on the right-hand side, again, a gut epithelium that's blunted with its villi, lower surface area, poor ability to absorb nutrients and infiltrated with many different lymphocytes.

So that's the basic pathology. And I think it's a very important aspect to remember because one of the things I'll harp on today is that these anti-IL-15 therapies, including [ours], are really driving at a disease modification.

We are, by definition, changing the course of the disease with these treatments.

Moving on to the first slide of our data. I just want to start from the beginning. This, again, as Richard mentioned, a homegrown antibody from the labs of Teva, just like our duvakitug program. It's the same scientists who do a great job at designing these antibodies. And just like duvakitug, we're focusing on the fundamentals of drug development throughout the process. And we start with our antibody. how does it compare to other antibodies we've created in our labs based on the IP of other competitors.

And you can see here that we're more potent by 2 different assays, considerably up to 50x more potent when you look at different assays. And on the bottom, in a transgenic IL-15 mouse, we can suppress IL-15 in a greater extent in a directional comparison to these other antibodies. So again, the fundamentals of the antibody is higher affinity, better suppression preclinically.

Now Teva also did something completely unique in the field right now. Years ago, we took a population of macaques, nonhuman primates -- and about 1% of macaques actually spontaneously develop celiac disease. So that was a great opportunity in a nonhuman primate preclinical model to see what effect does anti-IL-15 therapies do. And you can see here quite clearly on the left, there's some histology of the gut on monkeys that were challenged with gluten and either treated with placebo or TEV-'408. And you can see quite clearly that the normal architecture that you see on the lower part is dysregulated and disturbed on the top.

And you can see in a quantitative fashion that, that villous height to crypt depth, that actual measure of the blunting of the histology in the monkeys really showed a strong effect. We also showed that the intraepithelial lymphocytes were in a statistical fashion also decreased.

In the monkeys, you also actually saw a decrease in the serology of the anti-gluten antibodies and transglutaminase antibodies. So a really strong preclinical signal that, in fact, anti-IL-15 really is a disease-modifying antibody.

Now moving on to now some human data. When we started our Phase I program, which is pretty extensive, you can see that we looked at a nice PK profile from low to high doses. We observed a half-life of approximately 38 days, which really extends the capability of the molecule to be in a more broad schedule out to 3 months. And you can also see on the right-hand side, when you look at the 2 top doses, we suppressed the free IL-15 considerably, almost below -- well, essentially below the level of detection out to 80 or 90 days. So again, the fundamentals of the antibody are strong, long half-life and clear target engagement up to 80 or 90 days in healthy volunteers.

I'll also note something that the team did extraordinarily well, and that's the follow-up. We have a follow-up out to 2 years in our Phase I program. So again, the antibody itself is strong. The preclinical data has been unique and strong. And the Phase I data is probably the most extensive I've ever seen in a program at this stage. Now moving on to our first celiac study.

Remember, we actually are going to be talking about data from our second celiac challenge study, but our first one showed some very encouraging data. It was a safety study in celiac patients.

We also looked at a number of biomarkers. And I thought one of the most interesting biomarkers that we looked at and we've talked about before was this FABP, this fatty acid binding protein. And what you can see here quite clearly is that patients who received placebo and then were challenged with gluten showed a bump in the fatty acid binding protein. And the fatty acid binding protein is a marker of gut inflammation and health. So when you see a release of that, you show that there's -- you're inferring that there's inflammation going on.

So those people who received placebo had a bump. But then the patients who received TEV-'408, you can see that not only they didn't get a bump, -- but if you overread the data, you can actually see an improvement over time, and it goes below their baseline.

And this is very encouraging. Obviously, we're protecting the gut according to this biomarker from the challenge of the gluten. But also the curious possibility here is that we're actually treating smoldering disease that was at the baseline of the patients to begin. So that was another bit of data that we are very excited about in our first celiac patient challenge study.

What we learned from that study, we actually rejiggered and the team did a great job in executing this next study, this Phase 2a study challenging celiac patients in. Again, this was in 50 patients randomized 1:1 to placebo or active. Again, we gave a single dose on day 1 and 2 weeks later started a 6 weeks challenge. And I want to emphasize that. Remember, everything you see today is a single dose of TEV-'408. That's all we gave in this study, there was a challenge of 8 weeks. And we'll be following these folks out to week 80.

But the important thing in this study that was differentiated from the first study is we did a 6-week challenge, and this study has biopsies in it. The first one is just a safety and biomarker study.

This one has biopsies. And as I mentioned, it's 50 patients, 3 grams per day for 6 weeks. The primary endpoint is the villous height to crypt depth ratio, which is important when we think about Phase II and Phase III.

We also look at intraepithelial lymphocytes and a number of other biomarkers. So now getting on to the actual data today. So we were super encouraged. The joke I wanted to make today that the study was so well run that even the statisticians were happy.

So everything went in the right direction on the study. Here, I'm just going to be talking about the primary and key secondary endpoints. But when it comes to the primary endpoint, villous height to crypt depth, we had a very robust study design. We protected the gut. When you look at the placebo dropped to 0.88 on the ratio when compared to the TEV-'408, you can see it only went down to 0.43. So the important point here is that the delta is 0.45. And that is numerically a very high reported result in one of these challenge studies.

So that villous height to crypt depth actually showing a protection of the damage to the gut epithelium is key. I would then point you to the right-hand side where we're looking at the count of the intraepithelial lymphocytes. So the count of these pathogenic cells for every 100 enterocytes.

And this is one of the basic ways of measuring celiac disease. And here, again, you can see basically the TEV-'408 didn't move at all. The placebo went down by a remarkable -- I mean, the number of cells went up by a remarkable 27.6 with a delta of 27.23.

So that's an extremely robust, again, statistically significant effect. I'd also mention that the primary endpoint was not only statistically significant, but the threshold of 0.4 was met, which is clinically meaningful.

So these are -- in such a relatively small study, remarkable results showing a very robust response. And then the last thing I'd just highlight on this slide, too, was we've seen the trends in the symptoms actually in the study.

We looked at the celiac disease symptom diary, which is the standard PRO, and we see a clear trend towards protection from symptoms. So when it comes to actually thinking about what a patient will experience, that's important as well. So these are the key aspects of how we're going to move forward in Phase II and Phase III.

So again, it was very well-tolerated treatment. Overall, you'll see in the future presentations of the data that it's a very favorable safety profile. So how does that compare to other proof-of-concept studies and gluten challenges out there.

Right now, we think that we're looking very favorable. Remember, we -- with a single dose, saw statistically and clinically meaningful change on the villous height depth with this challenge. You can see here other compounds in development, slightly smaller studies without necessarily a statistical change on this endpoint. So we're very pleased with the results. Again, the power of a single dose over 3 months is another evidence that the compound based on its fundamentals, its potency, its PK, its target engagement is doing what we expect it to do. So when you think about celiac disease and what it represents, there's 1.6 million people already diagnosed out there.

There's no options for therapy for these patients. And the peak sales and the possibilities here are high. There's no pharmacotherapy out there. I challenge people to say that gluten-free diet is good enough for these patients out there.

50% of these patients don't respond to a gluten-free diet anyways. And we saw clinically significant and clinically meaningful results today with a single dose. And this builds upon what we've already shown earlier this year.

I was very pleased with the results in vitiligo. That, again, was a 2-dose study over 24 weeks. And I'd just remind you of the results we saw in 2 representative patients here who saw themselves or experienced much improved skin.

That's a remarkable another clinical study that shows we have activity. And just to summarize about how many -- how much data we're accumulating at this point. We've had, as I mentioned before, a very robust Phase I study, including 115 patients that went out to 2 years. We had our first celiac challenge patient -- challenge study in Ib where we learned and saw encouraging biomarkers.

Today, we talked about very robust challenge data with biopsy endpoints that are key for our development into Phase II and then Phase III that we'll build upon. And then we also had the vitiligo data. So all of these have been accumulating our confidence in the target, our confidence in the safety.

It's been very well tolerated to date and no concerning signals have been identified. We're moving forward as quickly as possible and very excited by the program. And that reminds me -- where do we go from here?

Right now, we are working very diligently on getting our vitiligo study initiated this year, our Phase II/III seamless design. We will also be next focusing on bringing this exciting data we had today to FDA and other regulatory authorities to design the next step for celiac disease. That's going to be our next focus.

But in the future, we can imagine parallel work with other targets. There's a natural progression in thinking about Alopecia Areata, Eosinophilic Esophagitis and even potentially Atopic Dermatitis in the future, which we have preclinical data to support.

So again, we've shown, again, another clinical efficacy point today that really builds this as a pipeline and a product as a key cytokine in multiple different indications.

And finally, I'll just wrap up by saying, again, this program like duvakitug is a homegrown antibody from the labs of Teva.

We build upon fundamentals, developing very potent antibodies that have favorable PK that can be used and shown in strong preclinical data now in celiac and vitiligo that we have a very safe and potentially highly effective molecule that's convenient for patients to take once every quarter.

So we have Fast Track designation in celiac disease. We'll move into Phase II as quickly as possible when we take this data to FDA. We've already engaged with FDA on vitiligo and have a seamless design moving very quickly to start this year. In the future, we'll look at expanding indications, as I mentioned, but the data today highly support moving forward in celiac disease. So I appreciate your attention. I think now I can hand it over to Chris, and we'll probably take some questions.

Thanks, Eric. And before I hand it over to Sami to start the Q&A session, I just want to remind people to please keep their questions as brief as possible, one question and then one follow-up if need be.

And if they have any further questions, you're more than welcome to get back into the call. And also, I want to remind people that Eli, Richard and Eric are all joining for the Q&A session now for your questions. And with that, Sami, please go ahead.

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

So 2 quick ones for me. So I wanted to better contextualize the change in villous height to crypt depth here. You had a 6-week gluten challenge. So I guess my question here is, can you talk about the magnitude of that gluten challenge in terms of how much gluten you're introducing and duration of gluten exposure and how that ties into worsening of villous height to crypt depth over time?

And the reason I'm asking is because we did see data for other agents such as the Forte Biosciences agent. I believe that was a 2-week gluten challenge, and it looked like they had stabilization on villous height to crypt depth. So I'm just wondering here is how you would contextualize this slowing of, I guess, for lack of a better term, disease progression here.

So that's number one. And then number two, also a question for Eric is, how should we think about the kind of symptomatic assessments that you may look at in future studies, be it Phase IIb or registration quality studies and help us better understand what you're going to be looking for both in terms of GI symptoms and non-GI symptoms. It might be early to answer that, but I figure I'd ask anyway.

Great. Thank you, David, for the questions. And let me take them one by one here. So the villous height crypt depth measurement and the amount of gluten challenge, both the dose and the duration. So this is a little bit of the art and the science of these gluten challenge studies. There's no one absolute answer.

When it comes to Teva, we learned, we did a 14-day challenge the first time with 3 grams, and we did a 6-week challenge the second time. The important thing here is you want to have a strong enough signal with the amount of gluten you use, but you have to do it in a way that people can finish the study.

So if you've known anyone who has a gluten-intolerant or celiac disease, 3 grams is what we gave. That's essentially a slice of normal bread. And some people, that is almost impossible to tolerate. It's very challenging. So you have to be able to have a patient population that is sensitive but tolerable to that dose. And then you have to choose a duration dose that people can tolerate. From our learnings and our experience, the team did an excellent job at executing the study, getting the people to the end of the 6 weeks and then getting the biopsy at that time is really kind of threading the needle here. So there's -- my answer is there's no one defined way in which you do this, but it's the way in which you execute and the team's excellence and their ability to really learn and pivot and design and execute the study is really the key here.

You can see from our data that the 3 grams for 6 weeks and then making sure we finish the study well gave a great signal-to-noise ratio. So we -- I think we -- the team hit it right on the head. But again, other people do it different ways. It's all about execution at this point. And my final thing on this is these are challenged studies.

These are somewhat atypical in the dose that we give because we want to get a signal and show the potential of the compound. When you go into Phase II and III, if you do what we call a SIG study, which is a simulated inadvertent gluten exposure study, those are probably going to be lower doses.

So there's more physiologic and inadvertent exposures in the real world. So this is a well-designed study showing the signal and the power of the compound. And that's why we chose 3 grams per day for 6 weeks. Now your other question, the symptoms. And I think the symptoms are super important because that's what the patient will experience. I think the FDA appreciates that symptoms are important in the patient experience and the fact that we should change and improve the gut histology of the patients.

That's why both of those will be included in Phase II and Phase IIIs moving forward. We use the celiac disease symptom diary, which I believe is pretty much becoming the standard at this point for how we measure that.

That's a measure that includes abdominal pain, diarrhea, nausea, bloating and fatigue. Fatigue is usually separated differently from the quantitative components of the measurement, but those are the symptoms that are most important for people with celiac disease.

Certainly, the people I know, those are the critical ones. So you can -- we'll talk about our symptoms in the future presentations, but we do see a very nice trend in how we protect people from those symptomatology that they experience. Thank you for your question.

Our next question comes from Louise Chen from Scotiabank.

This is Corey Rosenbaum on for Louise. Congrats on the data. Can you just discuss how the positive celiac disease and vitiligo data from earlier in the summer inform your confidence in TEV-'408's potential across other IL-15-mediated diseases? And secondly, I know the study enrolled adults with celiac disease. How are you thinking about development in pediatric and adolescent populations and what would need to happen before expanding into those groups?

Thanks, Corey. And your first question is how does this add to our confidence in the program in general was the first question?

In other potential indications.

Yes, I'm sorry. Yes. So yes, so IL-15, you can see is pretty much a key driver of a lot of these surface diseases. You'll see programs across the landscape now developing across the dermatology and GI space.

I think there's a lot of pull-through from vitiligo, celiac disease to Alopecia Areata. I think most people would assume that there's going to be a strong pull-through to that. I believe, as I mentioned before, eosinophilic esophagitis will be important.

It's encouraging to see other companies going to atopic dermatitis and even like lichen planus, which are other surface indications, topicological dermatologic indications that are important. Obviously, atopic dermatitis is very big, and I've mentioned that before.

Lichen planus is an underappreciated disease that has no therapies as well. So there's the world of indications for anti-IL-15 therapy as the safety continues to be strong, keeps opening up. So I think that this is another inflammatory program that has a long way to go in multiple different indications. Now a very important question about pediatrics. So that's a great question. Certainly, people with celiac disease started developing it frequently early in their life. In fact, it's frequently underdiagnosed early in life.

For these programs at this point, we'll have to continue to develop the safety, prove the efficacy in the adult population. And most certainly, we'll be developing along the way pediatric programs as the FDA requires. So that would be probably a future indication that we certainly look forward to. Thank you for the question, Corey.

Our next question comes from Dennis Ding from Jefferies.

This is Anthea on for Dennis. Congrats on the great data. Could you talk a little bit more about the regulatory path for celiac and your initial thoughts around that? And how you're thinking about mucosal damage prevention versus mucosal healing?

And then secondly, how are you thinking about developing this yourself versus partnering out with -- to a pharma company to co-develop similar to TL1A.

Eric, maybe you want to take the first 2 and then asking the same thing.

So yes, I'll do the first 2, and I'll probably pass the partnering out to Richard. But Anthea, thanks for the question. So the regulatory path, I'm not going to give too much clear detail right now because we are going to be going to the FDA with this new data soon.

And that will be a negotiation. I think that in general, when it comes to celiac development, I've mentioned many times before that it's going to be a component of these biopsy readouts and the symptoms. I think that regulators see the value in both because you want to make sure that you're disease-modifying the basic pathology of the disease. like I believe anti-IL-15 can do. But more importantly, you want to make sure the patients feel and experience a better quality of life. And I think that that's why I highlighted the symptoms today trending in the right direction, which is very encouraging.

So those 2 things will be used. I think that when you think about different study designs in the future, I think that one of the things that's becoming more commonplace is this idea of low-level inadvertent planned exposures to low levels of gluten. And I think that's probably the best way to move forward. But that's something we need to still discuss with regulators at this point.

And the question of prevention versus healing, that's a more broad question. I think that's something we also have to be discussing about how far can we drive a label. I personally have an aspiration that this should be all comers, people who want to be able to have a normal diet.

And so beyond just the people who don't respond to gluten-free diets, I think there's a great value in being able to travel and live your life the way you want it to be. So those are the discussions we have to have with regulators and make sure that how we design the Phase II and III studies achieve those goals. And let me pass off the last question about partnering to Richard.

Thanks for the question, and thanks for Eric. as you've seen over the last few years, Teva has developed an excellence in commercial execution across a number of therapy areas. And so based on that capability, based on understanding these disease areas through the work we're doing in clinical development, we have no plans to partner these products.

As you saw by some of the partnering we did on financing with Royalty Pharma, we're in a position to develop these in multiple indications all the way through to launch. Thank you for the question.

Our next question comes from Melanie Fong from Bank of America.

This is Jason on for Melanie. Maybe just Richard -- Eric, can you talk a little bit about what you want to learn from Phase II? Do you want to explore another dose? Or are you looking for evaluating the impact of the drug with longer gluten challenge and longer treatment exposure?

Just trying to get a rough sense of what we can learn incremental in Phase II. And when I look at the placebo effect to your gluten challenge, minus 0.9 on the measure, it looks like historically, it was like minus 0.2 to minus 0.6. So your gluten challenge seems to be maybe having more of an impact on patients.

And so I assume all the patients in this Phase II were able to stick it out in this trial. But as you think about longer trials, I'm just wondering how you employ gluten challenge with the goal of keeping patients in the study.

Great. Thanks, Jason. So yes, what do we want to do in Phase II? And again, we need to take the data we have right now and have this discussion with the regulators. But certainly, my goals are -- I'll fall back on the fundamentals. We want to make sure that we recapitulate and show symptom improvements and biopsy results. So that's why this study today was so important. We have a very good idea of what we can do with regards to those endpoints.

We'll want to make sure we push the duration more and more because we have to start building up the safety database and the duration of therapy and follow-up so that we can have the safety database for the submission. So -- and we'll do more than one dose because we have to do dose ranging to fulfill our commitments with regulators and understand the modeling and simulation on dose.

Those are the fundamentals and dose is the most important thing when it comes to a submission success. So those are my goals in Phase II, and then we'll recapitulate those in Phase III. You don't want to change too much along the way because we want to make sure that you're going to succeed. So that will be our next steps with our discussions with the health authority.

Now according -- back to your question about the gluten and the robustness of the study design. Yes. So as I mentioned before, there's -- in these studies where it's a pretty strong dose of gluten, you want to balance your signal to the ability to complete the study so that you really have a good comparison. This study was run very well. The majority of subjects got all the way to the end, and we had a good comparison. It was balanced between placebo and active. So that's why we're confident in the numbers we were able to generate today.

When we talk about the Phase II and the Phase III and this thing I keep talking about this simulated inadvertent gluten exposure, getting that dose right that it's tolerable over a very long duration of time, but also give you the signal you need is going to be the important next step.

And we're already in discussions with our experts, and we'll have that discussion with the regulators next. Thanks for the question, Jason.

Our next question comes from Matt Dellatorre from Goldman Sachs.

Congrats on the positive results. Maybe just on the multi-dose Phase II that you're going to start shortly, I guess, what's a reasonable base case for time lines for that study? And then time lines also for moving into Phase III? And then I guess, as we think about the target profile for that next Phase II and ultimately the Phase III, I guess, would repeating this level of VHCD ratio be viewed as success?

And then in terms of benefit on symptoms and the celiac disease symptom diary score, could you quantify how -- what kind of impact would you want to see there? Is that -- would that be a quantified number that you would share? And then, Eric, you did also mention you want people to have a normal diet and be all comers.

So I just wanted to clarify, would patients who have gluten disease or celiac disease, would they -- after taking this therapy, would many of them actually be able to kind of just live a normal life in terms of the diet?

Okay. Thanks, Matt. You got a lot of questions here, but I'll get them one by one. So I'm going to first disappoint you on the first one. So the duration of the Phase II and the time lines of the Phase II, that's going to be really dependent on the design we settle on with FDA. So I can't really comment on how fast it is, and that would also trickle over to what I envision for the Phase III. So this is going to be a step-by-step process. We'll do Phase II and Phase III. That's about all I know today.

But that we can update you in the future about how our discussions go. How I would generate or how I would measure success when it comes to the biopsy. In general, 0.4 change on the biopsy of villous height to crypt depth is considered clinically meaningful. So that's pretty much the answer I can give today.

And I hope to see that in a study design in the future. It's a little bit more challenging when you do long-term low-dose studies to get that amount of change, but that's certainly what we want to -- our aspiration is.

When it comes to the symptoms diary, the CDSD measurement, I'm looking for a statistically significant change in symptoms. That would be the simple goal there. And the PROs will tell us whether their experience, their quality of life is improving. I mean we'll probably add other PROs in the future to demonstrate the true value to people's lives. And I think that gets to your last question about all comers. I speak sometimes a little bit too passionately about celiac disease because I think that certainly, in my experience and my training back in the '90s, I was taught that this was all in the minds of the patient, which is obviously completely wrong.

So when it comes to who should have access to a treatment like this, I think, obviously, people who don't respond to a gluten-free diet, which is 50% of the population right there, certainly deserve a treatment. But I believe the folks who have to change their entire life and think about this in every needle of the day deserve something that can free them up from that.

And I think that that's going to be the important discussions in the future when we talk about PROs with health authorities and make sure that we answer that question for health authorities about what the value is for all people who have celiac disease. Thanks, Matt.

Our next question comes from Ash Verma from UBS.

Congrats on the progress here. So just trying to understand the next steps here. How much of dose finding work do you need to do in a Phase II? Is it more sort of tinkering the level of gluten that you would give?

Or is it actually looking at different levels of the dose that you're providing for the drug? And then in the maintenance setting, could the dose be different compared to the induction data that you've shown today?

Great. Thanks, Ash. Great question. So when we're talking about the Phase II dose ranging, that is dose ranging of the drug. And I can't get into too much specifics here because it will probably be highly dependent on how we have our discussion with regulators.

But as you always do, you need to have dose ranging so that you have a strong understanding of your dose and response ratio. I mean I would argue we have a very good dose response model already that has been developed with free IL-15 and other biomarkers across the program for a long duration. So we're going into Phase II with a lot of knowledge built on a lot of great fundamental science that the Teva team has already done. So it would be most likely or will be a dose ranging of the drug itself and not necessarily the gluten. Your second question when it comes to maintenance.

One of the things that I think differentiates our programs from others right now is we went right into it without a loading dose, we're planning on 2 every 3 months. So I don't think that has to change necessarily for maintenance. I want to make this as simple and as convenient for patients as possible, and we started there.

So I wouldn't back up or regress in the convenience of the program at this point. So I think that a simple shot every 3 months is what we'll focus on going forward.

[Operator Instructions] Our next question comes from Umer Raffat from Evercore ISI.

Can I touch up on 2 quick points. First, first, the sample size, 50 patients went in. How many patients are informing the analysis that's being shown?

Secondly, the biopsy results that we're looking at, were they centrally read? And was the biopsy orientation perfectly vertical?

And then third, I understand the gluten background is 3 grams a day. Other trials have as much as 8 grams a day, which impacts how much placebo deteriorates. So as we think about the effect size and the absolute numbers we're comparing, should we be comparing percentage numbers?

Should we even be comparing versus trials which have much more gluten background per day? I'm just trying to put this all into perspective on the interpretability of this data set today.

Great. Thanks, Umer. Let me go one by one. So the first one, the sample size. So 50 patients in the study, the vast majority of patients got through to the end, and they were balanced between placebo and active. So the comparison and our confidence in the data are very high. The biopsy orientation, you're absolutely right. When you do the reads of the villous height to crypt depth, you always have to make sure and the pathologist knows this, that you have to slice -- what you measure has to be a slice through the entire length of villous.

So you have to make sure that you're seeing -- they're always in different orientations when you slice the data -- the tissue, but you always have to make sure you have a clean slice from the very tip all the way through to the crypt of that villous.

So you have to have a clean measurement when you do this. And then obviously, the intraepithelial lymphocytes is more straightforward where you count the number of IELs to enterocytes.

So that's a pretty standard way of doing it, and we make sure that our pathologist is well versed in that. And then your final question is about the gluten. And I'm not really sure exactly what you were asking.

Was it the interpretability? I know that there's been a lot of questions about the dose in different challenge studies. If it was the interpretability in these POC studies with these relatively high doses of gluten, I really do think it's a little bit of an art and science. You have to make sure that you have a dose and a population of people who are responsive but not intolerant of gluten that you get the right people in and that you have the right duration and that you have the right support to get them through the study.

So that's the combination of why we settled on this population 3 grams per day for 6 weeks. And I think at the end of the day, it shows that the drug does the effect that we need for Phase II and III.

Our next question comes from Luisa Hector from Berenberg.

I have a couple. Eric, I'm curious what you would expect to see in the longer-term follow-up of the Phase IIa? Would you expect a kind of waning when there is damage -- or are the placebo patients sort of permanently worse off?

And then a question on what the FDA might require. Do you have sort of a minimum number of patients that need to be on a maintenance dose for 12 months?

So what are the requirements there? And can you get to that without doing a gluten challenge all the way?

Great, Luisa. Thank you. Fantastic question, is particularly interesting in the sense that we do have a long-term follow-up in this study. And I expect this question from many others, but what is the actual long-term effect of this treatment?

We -- our responsibility -- my responsibility is to make sure that we dose the compound based on the best data we have. So we can clearly show that we can suppress IL-15 for 90 days. And that's why we're going to stick with a Q3-month dosing or quarterly dosing.

But the effect might be longer lasting than that. In fact, we do suppress these cells for a while after dosing, and we will continue to gain information like we have throughout the entire program about the recovery of the cells and the kinetics of this entire effect.

So there's a possibility it can last longer. I think that we have a very robust data set that tells us quarterly dosing will work now. But we will get more data in this follow-up to see how the patients do, what they're feeling long term, and we'll have more to talk about in that follow-up maintenance that you mentioned.

But the possibility exists that since we're disease-modifying potentially, that effect might last longer than we even anticipated. So great point. I think that's just more data will determine what that -- the true answer is. So the follow-up is important. Now your question about what's required.

The basics of any program is traditionally, you have 300 patients at 6 months and 1,000 or 1,400 patients total in the safety database. Those are generalities for each program.

So usually, when you have a strong effect like this, statistically, you might be able to go smaller, but really safety will drive the long-term submission time lines. I hope that answers your question, Louise.

We currently have no further questions. So I'd like to hand back to Richard for some closing remarks.

Thank you, and thank you, everybody, who took the time to dial in to the call today. Really appreciate your interest in Teva. I would remind you of some of the comments I made earlier in the presentation about 2026 being an exciting year as we progress on our pivot to growth strategy.

We've had a number of readouts, which we have conference calls for. But just to remind you, we still have quite a few to come. Obviously, there will be the completion of the DARI study in asthma.

We will also have the futility analysis for -- and we're fastly approaching the opportunity to be launching our long-acting olanzapine into the market in Q4 as well as now the exciting news that we have priority review for ecopipam and the ability to launch that early in 2027.

So some great progress here at Teva on our innovative portfolio, some great progress by Eric and his team, and I want to congratulate and thank him for that. And I look forward to connecting with many of you over the next few months to highlight some more interesting milestones from Teva. Thank you. Goodbye.

This concludes today's call. We thank everyone for joining. You may now disconnect your lines.

Hello, everybody, and welcome to the Q2 2026 Teva Pharmaceutical Industries Earnings Conference Call. My name is Elliott. I'll be coordinating your call today. [Operator Instructions]

I would now like to hand over to Christopher Stevo. Please go ahead.

Thank you, Elliot. Good morning and good afternoon, everyone. Thank you for joining us on our second quarter call. Obviously, our materials are posted to our website this morning. So please see those. .

And before I turn the call over to our CEO, Richard Francis, I'd like 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 forms 10-Q and 10-K filed with the SEC. Any statements that we make are only as of today, and we undertake no obligation to update these statements subsequently.

With that, Richard Francis.

Thanks, Chris, and good morning and good afternoon, everybody. Thank you for joining the call today. And on me joining me on the call today will be Dr. Eric Hughes, Head of Global R&D and Chief Medical Officer; and Eli Kalif, our Chief Financial Officer. .

Now, moving on to decide how we start with the pivot to growth side. Our strategy that we launched in 2023 just based on these 4 pillars. We'll summarize how we've performed against these 4 pillars in quarter 2. But just to give you a quick overview on delivery on our growth engines, AUSTEDO, AJOVY and UZEDY all delivered strong Q2 performance, and we are raising our full year revenue guidance for these products. It's worth reminding you that the innovative portfolio is reshaping our financial profile with stronger revenue growth, margins and free cash flow.

As we move on to the second pillar step-up, innovation in our pipeline this year will provide 8 major milestones, and this now includes ecopipane, and this gives us the potential for 5 submissions over the next 5 years. With regard to creating the generics powerhouse, biosimilars are becoming a growth platform within generics. We now have 15 products in the market and 14 in our pipeline, and we see additional opportunities through further partnerships.

And on our final pillar, focused the business, I think we made great progress on our capital allocation. We've had 1 of the agencies of greatest Fitch to Ingresso grade, and we see the other 2 doing this in the not-too-distant future. We also allocated capital to the acquisition of Amylyx. We closed that deal in June, and we're expecting the launch next year if FDA approves.

And then finally, the conversion of the ADS to ordinary shares and the ability to list on the New York Stock Exchange should make investing in Teva accessible to more investors.

Now, moving on to the financials. Now, I'm really proud of this slide and you may ask why, but let me walk you through why. Now we have stable revenues despite nearly 8% of headwinds from generic REVLIMID loss year-over-year. We're growing our profit margin as well, 80 basis points. improving gross margins year-over-year driven by strong innovative growth despite this loss of genetic REVLIMID. We've actually grown our EBITDA, obviously excluding the Amylyx acquisition. And our free cash flow is up 31% as a result of our disciplined capital allocation.

Now if I go on to the next slide, I'll give you a bit more detail. As you can see, the innovative portfolio has had a strong quarter, up 43% year-on-year. AUSTEDO, up 40%; UZEDY, up 43% and AJOVY, up 56%. Generics is down 15%, and this is largely due to lower generic contribution versus 2025.

But if I now go into a bit more detail, starting with the AUSTEDO, a core growth driver here. This is another strong quarter. In the U.S., revenue reached $676 million, up 33% year-over-year and global revenue up 40%. Our demand remained strong with TRx up 14% and milligram growth up 21%, supported by new patient starts and adherence. AUSTEDO XR now represents over 60% of new patients, strengthen convenience, adherence and long-term durability. And because of this strong quarter, we are now increasing our outlook by $50 million at the midpoint. So it's now $2.45 billion to $2.6 billion.

It's worth noting that the midpoint there is $2.5 billion, which was the target we gave ourselves for 2027. So we have a chance of beating this year early. But I think more importantly, we see continued momentum and a significant untreated population that still could benefit from AUSTEDO, and hence, our confidence in greater than $3 billion of peak sales.

Now moving on to UZEDY. UZEDY continues to grow with strong momentum. It is the fastest-growing long-acting injectable treatment for schizophrenia amongst atypical LAIs. Revenue grew 43% to $77 million in Q2 based on strong demand, and that was reflected in our TRx up 63% year-over-year. The commercial execution has been impressive, and this can be seen with UZEDY nearly doubling the risperidone long-acting share and has now gone from 5% to nearly 10%. And UZEDY is capturing nearly 80% of the risperidone LAI market. And because of this strong performance, we are increasing the outlook by $15 million at the midpoint, so the new guidance is $270 million to $290 million.

Now, this continued excellent execution has given us great confidence in the upcoming launch of olanzapine, which I'll now move on to. So olanzapine represents a meaningful next growth opportunity with FDA action and U.S. launch anticipated in Q4 of this year. The unmet medical need is significant. Olanzapine holds roughly 20% of U.S. all prescriptions while olanzapine LAI uses less than 1% of the LAI market. Now, we know this market. We can really leverage the synergies with UZEDY, but also the deep knowledge of the schizophrenia market, whether that's physicians, patients, nest practitioners or some of the long-term care facilities.

Our direction of travel is clear to deliver a best-in-class launch that expands treatment options and reinforces our leadership in the LAIS. Olanzapine together with UZEDY gives us a compelling path to expected peak sales of $1.5 billion to $2 billion of revenue.

Now moving on to AJOVY. AJOVY demonstrates our ability to execute in competitive innovative markets wherever they may be. We continue to outpace the injectable market growth, and we lead in many of the markets despite entering late. Q2 global revenue reached $244 million, up 56% year-over-year. The U.S. revenue grew 83%, driven by improved contracting, favorable gross to net and market share gains. Ex U.S. momentum remained strong, supported by volume growth and leading brand shares across Europe and international markets. Because of this strong quarter, we're increasing our outlook by $90 million at the midpoint. So now the range is $850 million to $870 million. And looking beyond 2026, we see a clear part to $1 billion peak sales for AJOVY.

Now moving on to the newest member of the innovative family, a first-in-class opportunity with compelling efficacy and favorable tolerability in Tourette syndrome, a serious pediatric neurological disorder with limited treatment options. We've already filed with the FDA with a potential launch in the first half of 2027. Now, the unmet medical need is clear. There are 100,000 pediatric patients who live with Tourette syndrome, only 50,000 are treated, and only 20% to 30% remain on therapy after 1 year. So this shows there is a real need for product like with compelling efficacy and favorable tolerability. Now, we're well positioned to execute on this, leveraging our CNS capabilities and the experience we've garnered with AUSTEDO, AJOVY and soon-to-be long-acting olanzapine.

Now, this moves on to a slide, which I've never been able to show before actually in my rather long career. And I apologize for the small font, but we had to get everything on 1 slide. And what this highlights is just the innovative pipeline we have and our potential to launch 1 asset per year for the next 5 years, transforming Teva into a leading biopharma company. The near-term launches are clearly sequenced, olanzapine in '26, in '27, followed by DARI and the Q2 '28 to '30. Obviously, all subject to regulatory approvals. But looking up to '35, we see further upside from the additional indications that we've announced that for dubicictid as well as the additional indication of anti-I15 as well as our. We also are pursuing more business opportunities as well as development opportunities that is.

Now, moving into our pipeline slide. I'll try and be short on this and allow Eric to talk more through this, but there are some points which I think are worth mentioning. One is, this is a near-term pipeline with many catalysts, as I mentioned in my opening remarks. With agile, we saw the Vitiligo data where we're going to see the CDEC data in the second half of the year. We've got this near-term launches with olanzapine and filed. DARI is progressing well. We've announced 2 new indications for Ducato. So together, all these assets represent over $10 billion of peak sales, although I have realized we said that before, and that was prior to actually adding to this slide as well as the 2 new indications of, so I must remember to update it.

Now, what does this all do for Teva? Will it fundamentally transforms our growth profile. Our growth is really accelerating with revenue moving from $4.9 billion in 2022 to an expected $16.5 billion to $16.8 billion this year. And our portfolio is shifting towards higher value innovation with innovative revenue expected to reach 22% of total revenue in 2026, up from 9%, and you can see where it's heading to 2030.

Now, with regards to margins, we are creating stronger margins with gross margins expected to expand from 54% to more than 60% by 2030 plus. And this is once again fueled by our inhibitive portfolio.

Now, moving on to our generics business. Our generics business is down 15% versus Q2 2025. But I don't think that tells the full story. If you exclude generic REVLIMID, our generic business remained stable. Global Generics was down 2%, the U.S. up 1%, and our ex U.S. decrease mainly was due to lower product launches this year and the cost and cold season. While 2026 is expected to be somewhat softer, we continue to see a stable generics business capable of delivering 1% to 2% annual growth over the long term, supported by a steady flow of our new product launches.

I remain very excited about the future of our generics business. And 1 of the main reasons I'm confident is the growth rate that is starting to emerge from our biosimilar portfolio and pipeline.

Let me move on to this now. So biosimilars are transforming our generics portfolio. Before pivot to growth, we had 3 biosimilars. Today, we have 15 in the market. And in the next few years, we expect to double it. It's not just the size of our portfolio, it's the execution. In the U.S., 2 out of our 5 products are ranked #1, and our third is neck and neck, and I believe, soon to become number one. In the U.S. -- in the EU, where we have just launched 3 biosimilars, early signs are very positive. We continue to seek partnering to increase this portfolio, and I believe we are becoming the partner of choice because of this excellent execution. And based on our current momentum, we are on track to exceeding our $800 million by 2027.

To conclude before I hand over to Eric, we're on track to hit our financial growth targets of mid-single revenue growth, non-GAAP operating income target of 30% and a net debt to EBITDA below 2% and cash conversion earnings of 80%.

And with that, I will hand over to Eric.

Thank you, Richard. Now moving on to our first slide here. I know Richard showed this briefly, but I first wanted to just say it's become very complicated, but it's become very complicated in a great way. We're looking at 5 potential submissions over 5 years. I'll just highlight a few important things on the slide. We've now added ecopitane, which was submitted in June for Tourette syndrome. And we've now added 2 new indications for Duvaqetob. That's hydrogenitis superteva and fibrosenatic Crohn's disease. Two very important indications that I'll get into with a little bit more detail later on. But it's great to see this pipeline and we're executing on it every day.

First, I'll start with olanzapine LAI. We are on track for the action date in the fourth quarter of this year. We've had our EU MAA accepted earlier this year. And we just presented a number of different abstracts at the psych Elevate Conference and the Page conference. So all things are go right now on olanzapine LAI, and we're looking forward to an approval at the end of this year.

On to ecopitane. Now, 1 of the things that gets me excited first, that this is a mechanism, a brand-new first-in-class mechanism of a D1 antagonist. But even more importantly, this is the first dedicated launch for a treatment for Tourette syndrome. So I think that's going to be a very important aspect of this launch with disease awareness and providing a new treatment for a large unmet medical need.

I mean, I'm proud of the fact that we have 2 well-controlled studies, the Phase II showing a decrease in the tick syndrome, not only statistically significant, but clinically meaningful reductions. And we also showed in Phase III, a decrease in the relapse rate, statistically and clinically with a 50% reduction. Since they're all very good signs. But most importantly, this is a treatment that is well tolerated and durable. 66% of the patients in the long-term follow-up remained on treatment with a sustained tick reduction, and we're looking forward to that approval next year. So something to look forward to.

Now, moving on to our DARI program, the dual action rescue inhaler for asthma. We have fully enrolled this study over 2,700 patients which includes pediatric, adolescents and adults. We're right on track to see that final event. This is an event-driven study. Our forecast is at the end of this year, and we'll be able to present that data in the early half of 2027. But this is a really great program for patients with asthma. It's answering an unmet medical need, answering the need and the treatment that's dictated in the guidelines.

We'll be providing a great treatment with a dual action retail with a dry powder inhaler that's easy to use and with a label that includes pediatrics potentially.

Now, moving on to Duvaqito, very exciting this year. We had our publication of our induction data in Nolans for both 2 parallel manuscripts for ulcerative colitis and Crohn's disease. It's great to see the team's work being recognized by such a high impact journal and kudos to their great work. So congratulations to the team.

But now furthermore on Duviqita, our Phase III program being run with our partner, Sanofi, is right on track. Our Sunscape and Starscape program in ulcerative ions Crohn's disease. But today, we are very proud to announce the fact that we're adding 2 new indications into our research that includes hydrogeni superativa, which will unlock that non-T2-based indication group and fibrosin Crohn's disease, which unlocks the fibrotic bucket of indications, but also expands and doubles down on our intention and labeling for IBD in the future. So this is a very exciting announcement that we're doing with our partner, Sanofi. I'll get into a little bit more about the importance of these 2 indications next.

First, hydrogen super tivo. This is an area I've worked in before. It's an important unmet medical need. This is a result of painful inflammatory abstasies that for skin folds in the body. These people suffer in silence with many different aspects of the disease can be disfiguring and really impact their daily life. It's not uncommon. It's about 1% of the adult population. And there's -- there are treatments out there that had been approved, but there's a long way to go with the amount of efficacy we can achieve.

Anti-1 therapy in this area, I think, is perfectly suited. It's a complex disease with multiple different pathways involving both Th1 and Th17 cells, and it has a significant fibrotic component to it. So the pleiotropic effects of TL1A therapy might really be suited well for this. It's also important to note that 15% of people with IBD actually have hydro genius supertiba as well. So there's a lot of scientific rationale here and it's an important market that we can grow in.

In addition, we talked about fibrosynotic Crohn's disease. Now this is a very important aspect of people with Crohn's. We've already posted Phase II data with great efficacy in our Phase II study with duvacitub. But now, we're looking at even worse cases of Crohn's disease. 50% of people with Crohn's disease have this fibrostynotic component. And this is where fibrosis, inflammation and edema causes almost total obstructions of the gut. This leads to more hospitalizations, more surgeries, increased health care cost. It's really a driver of some of the worst parts of Crohn's disease.

So we're very happy to advance the science. No 1 has been approved for this indication at this point. And I think this is showing our confidence in Crohn's disease and how we want to double down and make that label as patient-friendly as possible. So I'm very excited to be exploring this indication with duvaqito.

Now moving on, we showed some great data from our proof-of-concept study earlier last month. with patients with vitiligo and our anti IL-15 program. I always like to start out by saying, first and foremost, it was great to see the patient's perception of their disease change. So 75% of the patients reported an improvement in their facial vitiligo. And here, I'm showing 2 patients who gave a special consent to show the results that they've seen in the study. Now, remember, these 2 patients just had 2 shots of our anti IL-15 antibody. And over a 24-week period, you can see quite a change in both the woman on the left and the gentleman on the right, almost total depigmentation of the cheeks on the women filled in very nicely over 24 weeks. And then the patient on the right, some dramatic changes from total deep implementation with a darker skin care.

So these are results that changed the perception of a patient and is very conveniently done with just 2 shots. But as happy as I am about the perception change for the patients. We also met the important regulatory end points. The numbers we posted for the 50, the F 75 and the T body are very competitive for systemic therapies in this area. And this really drove the fact that we went right into our Phase IIb/III study, which will be executed and started this year, so we're moving at speed. We're excited to see the data, and we're moving as quickly as possible.

And finally, I'll just mention what's coming up next. So we'll have a readout in the second half of this year and our second Celiac proof-of-concept study. This study is important because it's actually looking at biopsy results after a gluten challenge. So remember, the basic pathology of Celiac disease is the fact that when you have an immune reaction to gluten, there's destruction of the normal bile in the gut and where you have this nice high surface area of villus that absorbs nutrients in the gut when a patient with CIC disease takes gluten that there's almost a complete destruction of that normal villus on -- as you see on histology. And we hope to see in the scrutiny challenge by the biopsies that in fact, we protect the villi from that destruction when we use the anti-IL-1 treatment. So we're looking forward to the readout. That will be the second half of this year, but I think this will be a great advance for patients with CAC potentially based on that data.

So on my final slide, I just want to walk through the fact that we are marching through our milestones in 2026. We showed the maintenance data first this year for duvaqito. We did the filing for Ecopytan, our new player on the field. And then, we also showed the vitiligo data just recently for our anti-IL-5 program. We'll have the Celiac data in the second half of this year. DARI is on track for that last event, that last exacerbation by the end of this year, and we'll have that data to talk about in the early part of 2027. Emera Solman is on track to have the futility analysis at the end of the year. We're looking forward to the approval of olanzapine LAI at the end of this year, and then we'll have some anti-PD-1 IL-2 human data by the end of this year as well. So very exciting. We keep executing, and we're looking forward to all these events this year.

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

Thank you, Eric, and good morning and good afternoon to everyone. I would like to start my review of Q2 '26 results with the following key messages: First, we delivered a solid second quarter results, driven once again by the continued strength of our innovative portfolio. Second, with the increasing mix of innovative revenues, together with our transformation programs, we remain on track to achieve our 30% operating margin target by 2027.

And lastly, our disciplined capital allocation strategy and the execution is increasingly recognized by the leading credit rating agencies, including the recent upgrade to investment grade by Fitch.

Now moving to Slide 34. Before I discuss our Q2 results, let me briefly recap the MLX Basins acquisition, which closed in June. As Richard highlighted earlier, further strengthens our position in CNS, where we already have strong commercial and development capabilities. From an accounting perspective, as we discussed last quarter, the transaction was treated as an asset acquisition. As a result, we recorded a $724 million as IP R&D expenses during the second quarter. This included the upfront cash consideration, net liabilities acquired as well as the transaction costs.

The upfront consideration flow through cash flow from investment activities and, therefore, does not impact free cash flow. As I go through our Q2 performance, I will be making reference to the MLX related impact on our financials to provide a better view of our underlying performance.

Now starting with our Q2 GAAP performance on Slide 35. Q2 revenues were approximately $4.1 billion, down 1% in U.S. dollars or 3% in local currency compared to Q2 2025. This decrease was largely driven by lower generics, mainly generics reveled and was largely offset by continued strong growth of our key innovative products, AUSTEDO, AJOVY and UZEDY. GAAP net loss and loss per share were $576 million and $0.49, respectively.

Turning now to our non-GAAP performance. Our non-GAAP gross margin in Q2 '26 was 55.4%, an increase of 80 basis points, reflecting a strong growth in our innovative portfolio. Non-GAAP operating margin was 9%, including the impact of MLX related expenses of $726 million. Excluding MLX, our non-GAAP margin would have been 26.6%, slightly below Q2 last year, mainly reflecting higher planned investments in sales and marketing in the first half of this year to support our innovative growth.

Overall, we ended the quarter with a non-GAAP EPS of $0.02. The impact from MLX on EPS was $0.61, without which our non-GAAP EPS would have been $0.63. Our free cash flow in Q2 was strong at $622 million, up 31% versus last year. To provide you with some additional color, our Q2 '25 results included $318 million revenue and $223 million EBITDA contribution from our generic REVLIMID. Our financial results this quarter reflected a strong underlying performance if you exclude the impact of generics REVLIMID.

Moving to the next slide. As a reminder, our operating margin expansion to 30% is driven by 2 structural elements. The first is a portfolio shift towards higher growth, higher margin innovative products. The second is our transformation program. Altogether, this is approximately 400 basis points of improvement since we announced this program in May last year, despite the impact of generic REVLIMID. This is our core of our financial transformation, moving from a company historically driven by generics to a bar from a company. We continue to make progress to achieve these targets as reflected in our 2026 guidance.

Moving to Slide 37. Looking at the first half of 2026, the underlying business continues to demonstrate the strength of our strategy and execution. As you can see, the first half revenue performance reflects strong growth in our innovative portfolio and biosimilars, offsetting more than $600 million of revenue impact from generics REVLIMID. Our non-GAAP operating margin in the first half also demonstrate ongoing improvements in our gross margin profile.

As I highlighted last quarter, we expected higher operating expenses in the first half of this year versus the second half, mainly due to the timing of planned investments to support our growing innovative portfolio and upcoming launches. We expect OpEx to normalize with operating leverage and higher impact of the transformation program savings in the second half.

Moving to Slide 38. Our balance sheet continued to improve and this is a key enabler of our Pivot to Growth strategy, driving EPS and free cash flow. Over the last few years, we have made significantly improved our leverage profile. At the end of -- our net debt was $12.9 billion, with a net debt-to-EBITDA ratio of 2.8x. Excluding MLX, our net debt-to-EBITDA would have been 2.3x, well on track to achieve our 2x target by 2027. As we continue to pay down our debt, it is expected to result in significantly lower finance expenses by 2030. At the same time, we have continued to transform our working capital management, driving significant improvement as a percentage of revenue, resulting in lower cash conversion cycle. These efforts, combined with the fast-growing innovative portfolio and transformation programs are expected to drive long-term earnings and free cash flow growth.

As you can see on the next slide, our execution is increasingly recognized by our leading credit hedging agencies. In May, Fitch upgrade Teva to an investment-grade rating, marking Teva returned to IG for the first time since 2017. This was our third upgrade from Fitch in less than 2 years, underscoring Teva transformation journey. About 2 quarters ago, S&P and Moody's has also upgraded our rating and outlook, respectively. These upgrades are another validation of our disciplined execution and stronger financial profile.

With our continued transition to an innovative biopharma company, we are well positioned to get additional rating upgrades. Now, turning to our 2026 outlook on Slide 4. Based on our solid first half results and visibility into the second half, we are raising the midpoint of our full year revenue guidance range by $75 million, and reaffirming the outlook range for operating profit, adjusted EBITDA, EPS and free cash flow.

Let me provide you some color on our guidance assumption starting with the revenue. First, our innovative portfolio is performing strongly across all 3 products, AUSTEDO, AJOVY and UZEDY. With the first strong half of performance, we are increasing the combined guidance of this product by approximately $150 million at the midpoint, reflecting a combined 2026 revenue outlook of approximately $3.7 billion and growth of approximately 17% over 2025.

On the other hand, we expect our Global Generics revenue for the full year to be flat to down low single digit in local currency compared to 2025, excluding the impact of generic REVLIMID mid and the divestment Japan business. This is mainly due to a fewer high-value launches in '26, lower seasonal on OTC and increased competition in some markets.

Moving to the other elements of our financial outlook. We continue to expect 2026 non-GAAP gross margin to be in the range of 54.5% to 55.5%. In addition to the MLX related expenses this year, our operating expenses are expected to be approximately 28% of the revenue for the full year. This is at the higher range on our overall 27% to 28% OpEx, reflecting a deliberate investment we are making to support our growing innovative portfolio and our biosimilars. Our guidance range for the operating income and EBITDA reflect this higher growth investment in OpEx and also a less expected in the second half.

Now, let me provide you some additional thoughts on our quarterly phasing for the rest of the year. Overall revenue is expected to be increased over the rest of the year. For AUSTEDO, we continue to see elevated levels of inventory in the channel and expected normalization of this excess inventory in the next 2 quarters. We also continue to expect AUSTEDO revenue in Q4 '26 to be down year-over-year due to the expected changes in purchasing patterns and pricing environments ahead of the IRA implementation in January.

In addition, we are preparing for a Q4 launch for our olanzapine LAI. Since the initial volume is expected to be largely samples or vouchers as we establish a payer coverage, you should expect no revenue in Q4. Our non-GAAP margin, we expected improvements in the second half, in line with revenue as well as higher savings from ongoing transformation programs, while gross margin are expected to decline slightly in Q4 versus Q3 due to the anticipated revenue dynamics related to AUSTEDO. Our operating margins are expected to improve sequentially in Q4, driven by the OpEx savings.

Moving to the next slide on capital allocation. Over the last few years, we have made significant progress in strengthening our balance sheet. This progress allow us the financial flexibility to invest in our innovative portfolio and pipeline, evaluating value-accretive BD opportunities, along with the optionality of returning capital to our shareholders through a buyback when appropriate.

And lastly, I would like to briefly touch on our planned transition to direct ordinary share listing on the New York Stock Exchange. We believe this change will make Teva shares more accessible to a broader investor base. who will be able to buy ordinary shares directly in a seamless manner in addition to the potential inclusion in the leading indexes. We look forward to completing this transition in September and believe it represents another example of our focus on creating a long-term shareholder value.

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

Thank you, Eli. So once again, I want to just highlight the fact that we are at a really exciting time at Teva delivering on our acceleration phase of the pivot to growth strategy. As you can see from this slide, we have multiple opportunities to drive the revenue in the short term, medium and long term, and this innovative portfolio is very extensive. I'd also like to add the number of biosimilars we'll be adding as we start to launch these into the market. as well going forward.

So in the near future, our incremental growth will come from the next generation of innovation, but we'll have much more to come after that. And so to conclude, we continue our growth journey. The themes are very clear. In a critical year for Teva, we delivered exactly what we said we were going to do. Our pipeline is advancing at speed and our with disciplined capital allocation we believe, is what sets us apart.

And with that, I look forward to answering some of your questions with the team here. Thank you very much.

And while Elliott is queuing up the questions, I just want to remind everyone if you could try to ask 1 question and 1 brief follow-up, and we'll be happy to take you back into the queue if you want to ask subsequent questions, but just so as many people get a chance to ask questions as possible. So Elliot, whenever you're ready, we can go ahead.

[Operator Instructions]

First question comes from Jason Gerberry with Bank of America.

Congrats on the quarter. So I just wanted to follow up. So strong performance on AUSTEDO. I think you mentioned 60% new patient start share. Trying to get a sense of your confidence level going into next year that AUSTEDO won't be disadvantaged in formularies as a lower WACC price drug, the payers will be observant of the fact that they shouldn't be using the IRA negotiated price point to advantage the competitor drug. So I just wanted to get your overall sense there. And just as my brief follow-up, any comments on the tariff update in the U.S. and how the supply chain is configured to potentially manage that risk? .

Thanks, Jason. So could you repeat the last question? I just missed it.

Yes. Sorry, the last question was just any thoughts on Trump's proposed tariffs in the U.S. and how the supply chain is configured to mitigate that risk?

Okay. Thanks for the question, Jason. So I'm glad you sort of recognize the strong performance of AUSTEDO of 40%. I do want to maybe slightly correct you. I think you said 60% of new starts. The 60% I referred to as 60% of new AUSTEDO starts on the AUSTEDO XR, just as a clarification. That said, we still have very good TRx growth and very good milligram growth, highlighting the impact that AUSTEDO XR does have on the ability for patients to get on the optimal dose and adhere and comply better.

And then to your question on the payer dynamics for 2027. I think this is something that we spent a lot of time looking at. There's a few obviously scenarios that can play out this way. But it's worth highlighting that all Medicare plans are required to cover negotiated products in their Part D formularies. That would be like obviously AUSTEDO XR. And so based on that, I think based on the product profile and the significant patient demand as well as the physician excitement around AUSTEDO XR. I think we remain confident in our ability to continue to make sure we can capture a significant amount of patients as we move into 2027. Obviously, how this impacts revenue, we're not really talking about that. We've highlighted the fact that we'll give guidance. When we give guidance on the company, we'll get more data as we go through. And obviously, we end up having more discussions with some of the payers towards the end of the year. But we remain very confident about that.

And I'd just like to highlight what I said in my notes, very committed and to above $3 billion of peak sales based on the significant untreated patient population and clearly the momentum that we have around the brand and the execution of the team.

Now, with regard to your second question on the recent announcement from the administration on the Trump tariffs. Obviously, this news has only just come out, so we're digesting this and understanding what that could look like. But I would also point out that we do have a number of factories in the United States. I think we're 1 of the largest generic manufacturers in the U.S. But we have a bit of time to work this 1 out and understand what the administration is trying to do. And as you can imagine, we've always been in close discussions with the administration being such a contributor to the health care system in the United States. So thanks for your question.

We now turn to Uma Raffat with Evercore ISI.

I just wanted to spend a second on the IL-15 ahead of the Celiac readout and just drill down a couple of dimensions. One, I believe the last patient in was April 7, which means they should have been done by early June with the week 8 end point. So I'm just trying to understand sort of the timing of data. I would have thought it could have been as early as today, perhaps along with earnings. I realize that's not what the expectation was, but just wanted to understand the timing and sort of where you are in data analysis. .

Also, there's some prior disclosure you've shown on a Phase Ib exploratory celiac study, which shows this separation versus placebo. But the biomarker that it was shown for on the Y-axis was not laid out. What was the biomarker?

And then finally, could you remind us what's the amount of gluten per day background that's being used in your ongoing celiac study or your already completed celiac study?

Thanks for the question. I feel you're almost as demanding as I am with regard to wanting to see results as fast as possible. But with that, I'll hand it over to Eric to answer.

Thank you, Umer. Thank you for the very specific and up-to-date question. So first, the question about the enrollment. So the enrollment that you see on clinical drives. The changes you see there don't always correlate to when we're doing the database lock. So that's the simple answer. I have this. So there's nothing slow or fast about it. It's just as it is. So we'll have that data in the second half of this year.

With regards to the question about the biomarker in the first POC, so that was an FSB free acid binding protein. I think I got that right, free acid binding protein. And that's a biomarker, it's not uncommonly used to measure gut inflammation, and that separation we saw from placebo versus active upon that gluten challenges. Really, I mean, it was exciting to me to see that because that really indicated that we're having an impact, and 1 of the things I always like to mention, if you speculate or overread the data, not only did we protect that got with this biomarker by that readout, but it seems to actually get better on -- from the baseline. So whether we are treating a smoldering celiac those patients is something fun to speculate about. So it was this free acid binding protein in that study.

And then your final question was the amount of gluten challenge we're giving in the biopsy study that's going to read out in the second half of this year. So we're giving 3 grams every day for 6 weeks. That's a significant challenge in that study. And I think that team thought about there's various different ways you can do it, but that's a significant amount. I'm always impressed to see that we can enroll patients that are willing to do that. So hopefully, that answers all your questions.

We now turn to Louise Chen with Scotiabank.

I wanted to ask you about your biosimilars opportunity. You seem to be talking about that more. And just curious if you could give us a little bit more color on why the growth opportunity is becoming more meaningful now to you? And is there anything in the U.S. market that's changing here any potential actions for the regulators or payers in the horizon that could open up this market even more?

Louise, thanks for the question. So you're right, we are excited. I am excited about the biosimilars. We've been working on this hard to get the portfolio and to get this to market. And I think there are a couple of reasons why I'm excited. One is just the performance of the team we have in the U.S. in the market. And to give you some context, we have not always been first to the market. But what we've shown and what I highlighted today is 2 out of our 5 products in the U.S. market are #1. And I think a third 1 is about to become #1. And that just shows, I think, our capability, which leads a bit into part of your second question, what has changed in the U.S. market?

Well, actually, nothing really is changing. It's actually a very difficult complex, fragmented market. And why do I sound somewhat positive about that, I'm not. But what I know is with ever because of our reach and our scale and our scope of what we do, we're able to navigate what is a very fragmented complex market. And I think that's why you're seeing my excitement and about the performance we have in the U.S. If there's changes, I think that will be positive as well because we'll benefit from that. But we have more and more products coming to the U.S.

Now in Europe, where we really have been starved of biosimilars. And now, we start to launch them in Europe. What we're seeing is the first indications are that when we launch them, as you would expect, once again from Teva, which is a major player in all European markets, our ability to perform very well early on early signs of saying that we can do that. So the reason why in totality I'm excited is, as you put these 15 biosims together, another 14 that are coming through and more partnerships we're doing. I think this will be a major growth driver for our generics business as a whole. And so that's where my enthusiasm lies, and I hope we'll have a lot more data points to highlight that. And maybe to conclude, we did set ourselves a target for $800 million by 2027, as I said today on the call. We're well on track to exceed that already. So thanks for the question, Louis.

We now turn to Dennis Ding with Jefferies.

I had a question on celiac. So you guys have talked about using 4 Phase Ib as the bar on CD but that was 0.127 placebo adjusted and had very wide error bars. So this is actually a 2-part question. Number one, why shouldn't we use the CALYPSO data as a bar, which is around I think 0.4 to 0.5 million?

And then number two, if you can comment on the interpretability of your data, if you get, let's say, 0.15, 0.2 or 0.3, if you would consider that clinically meaningful? Or is there anything else in your data disclosure that you should point us to?

Over to you, Eric?

Yes. Thank you, Richard. So Dennis, we're using the bars that we can refer it against. I'm sorry. Forte is the 1 that's reported the number of 0.127. The CALYPSO data, I'm not sure if that's something readily available to us right now. So if we can get that data, that would be great to compare it to. I think the important thing is that you have to remember, these are all somewhat artificial gluten challenge they are different from study to study.

We designed a study that we think will give a nice result based on a single dose. Remember, we're doing a single dose looking at a 6-week challenge with a pretty good burden of gluten. The important thing is that we see that delta between the placebo, which should change the most. And hopefully, the active will stay similar.

So the 1 that's document is the most and I think is the most comparable is the forte result of 0.127 that you mentioned, and that's the delta between placebo and active. So I'm still kind of saying that that's going to be what we're going to measure ourselves against with regards to the results that we have access to.

The CALYPSO data, I'm not familiar with that. I'm not sure if that was posted or is available right now. So maybe we can follow up with you on comparing that. There's a lot of different things we're going to get -- we're going to learn from this study, not only the biopsy data, which is critically important for determining how we set up the Phase II and III studies, but also experiential or symptomatology data. So a lot to come there, but I think we're going to stick with comparing to forte at this point.

We now turn to David Amsellem with Piper Sandler.

So 1 on 408 and then 1 on ecopypane. On 408, particularly with Forte getting acquired, I wanted to get your thoughts, Eric, on how you view 408 mechanistically versus compounds that focus on CD122 and act on IL-15 and IL-2? And how you think those agents may or may not have an advantage with respect to 408. So that's a broad question. And I guess, multiple indications encompassing vitiligo and celiac and maybe others. .

And then secondly, on ecopitane, can you talk to positioning in the marketplace? As you think about D1 antagonism activity, do you think that there's potential that this could be used ahead of the currently approved antipsychotics that are primarily D2 acting? How do you think about that and particularly considering that those agents are generically available?

Okay. Eric, do you want to start on the NGL50?

Yes. Okay. Thank you for the question. So first, and maybe discuss the competition and how we approach the development of anti IL-15 versus how Forte approach it. There's nothing wrong with the 2 different approaches. You can hit the receptor like Forte has done or you can hit the leg and like we have with. There's a couple of things that we consider strategically when we design molecules. We like to go after the ligand. It's clean. You hit the free ligand and the cytokine in the system.

When you hit a receptor, you run the risk of creating some off-target complications doing that. So we just by strategy, do it a different way, but there's nothing wrong with either way. One other more subtle thing that you can do when you hit the ligand is you can measure target engagement. We measure the free anti-IL-15 level in the system. So that gives us a good idea of how much activity we are seeing at any 1 point over time. So we've shown the suppression of free IL-15 for out to 80 or 90 days on a single dose. That really drives evidence-based way of choosing your dose selection and schedule. That's why we are interrogating a dose given once every 3 months. It is a quarterly shot that we're developing as a subcutaneous shut.

So there's just strategic differences. Whether 1 is better than the other? We don't know. I'm just very confident in our modeling and simulation of how we'll move forward with a simple to get subcutaneous shot every 3 months. So that -- those are the biggest differences I see.

It's great to see the acquisition. I mean, it shows the value people are putting in these indications like vitiligo and celiac disease. I'm fairly confident these will be indications that grow just like we saw psoriasis growth, just like we saw atopic dermatitis. Once we get good treatments that are easy to give, they will be used and the market will increase. So that's your first answer.

For, the positioning of ecopipane, right now, people go through those first behavioral treatments for Tourette disease, then they try off-label drugs and like glyphenesene and other treatments that aren't approved, but actually have some modest effect. They're not great, but they're well tolerated. Then they advance on to antipsychotics, which have activity, but the tolerability is poor, particularly in a pediatric population. So the differentiation, the thing we're bringing to the table at is a brand-new mode of action. It's a D1 antagonist. It's much more tolerable. We believe in our hands. It was very tolerable in the Phase III and Phase II studies.

And we think that at first, they might not be first-line therapies, but over time, when people see this tolerability and the efficacy that it would probably be advanced over time. So that's how I see the order of entry and the value proposition that we have with.

Yes. And if I can add to that, Eric. I think the numbers back it up. As I said, there's 100,000 pediatric patients who suffer from Tourette syndrome, only 50% are treated. And I think that highlights why are they not treated. And I think it goes to that -- there isn't a product that gives efficacy and safety. And then that theory is further endorsed by the fact that only 20% to 30% remain on therapy.

And once again, an assumption around that is I'm not sure parents want their children to be on antipsychotic long term or some of the other drugs don't work that effectively. So either way you look at it, I think where there's a big unmet medical need for an efficacious safe, well-tolerated product. And I combine that with the expertise we have in the U.S. with AUSTEDO, UZEDY and AJOVY to how to treat certain patient populations and our experience with psychiatrists and neurologist. And I think that's why we have a lot of excitement around how we can help these patients, these children with this very distressing condition.

We now turn to Ash Verma with UBS.

Great. Can you talk about the TL1A new indication just for the fibronostics indication that you mentioned, what type of addressable market is that in terms of U.S. and European patients? And then for HS, what would be the development path and trial design look like? Is it typical Phase II, Phase III with a focus on high 50 as a primary end point?

Thanks for the question. I'll hand that 1 to Eric, you are having a busy day today.

Yes. So thanks for the question. The 2 indications I'm very excited about these 2 indications. And just to review how we think about the indications with our partner, Sanofi, first, the scientific justification has to be there, the market opportunity, the possibility of regulatory success, and of course, the speed. Those are the 4 benchmarks we use when choosing it. So why then HS and fibrosinotic cronies. There's a lot of great science around the fact that TL1A is upregulated in these disease areas, the fact that Th1 and Th17 cells are involved, you need a drug like do we keep to that has potential effects on multiple different pathways.

And then you add in the fact that there's a potential direct effect on fibrosis. All those things add up to the fact that HS is probably a very good indication going to, not to mention the fact that 15% of patients who have IBD also have HS. So there's a lot of science and reason to believe that this is a good treatment. HS is another market that's growing. You see this out there with the competition. It's a high unmet medical need. This will continue to grow. So the market opportunity is definitely there.

I think we have a good chance on the probability of success, and it's something we can execute very quickly. Usually, these primary endpoints are around 16 weeks. You can -- that's how we'll approach it most likely. And at this point in the development, we'll do a traditional Phase IIb study that will drive then a Phase III program. So that's what the timelines are looking at for HS.

Now, turning to fibrostynatic Crohn disease. This is another 1 I really think is a great idea. This is an area that's great unmet medically. There's no approved therapies for the indication of fibrostononic Crohn disease. And this is really 1 of the main drivers of the complications of Crohn's disease, where you have potential obstruction. You have hospitalizations. You have increased costs, increased symptomatology.

So if you can have a drug that potentially not only blocks the inflammation, but then really starts to work on these majorly obstructive fibrotic indemitist lesions in patients with Crohn's disease, that's a major differentiator for a drug launching into IBD. So hopefully, someday, we're not just talking about turning off inflammation in Crohn's disease, we're talking about changing the structure and the major complications within the disease.

So when I think about the opportunity here, it's not just scientific unlocking fibrosis, it's driving a better label, a broader opportunity for patients and a broader opportunity for the market for the company. So that's the thinking behind the 2 indications, I think that they're spot on.

I think we have time for 1 more question. Is that right?

Our next question comes from Sneha with Barclays.

Yes. This is Glen Santangelo. I think you got the name wrong. But essentially, Elliot, I just had 2 quick questions for you, if I could. I mean essentially, last quarter, I think you talked about the Osteo inventory sort of issues. And I thought the expectation was that those inventory levels would come down a little bit this quarter, but it seems like that wasn't the case. And I think you suggested that those inventory levels remain sort of elevated. So how should we think about that in 3Q and 4Q within the guidance expectations that you laid out?

And then secondly, I did want to ask about EBITDA. I mean given the strength in the innovative brands this quarter and how well you did on revenues and gross margin, you maintained the EBITDA guidance. And I was just kind of curious if there was anything different in terms of your expense outlook, that's kind of worth calling out given that you maintain that EBITDA guidance?

Glenn, Richard, thanks for the question. I'll start with the stat and then I'll hand to Eli for the EBITDA question. So with regard to this inventory, you're right, we had that inventory build in Q4 2025. And we're expecting to draw down. We saw some of that drawdown occur in the first half of the year, but not fully complete. And so we need to see the rest of that come down in the second half of the year and Q4.

And then just to reiterate what I think we've also been saying is how will Q4 levels play out anyway, knowing that the IRA price effectuation comes in, in Q1 2026. And I think that sort of is something that we also are keeping in mind when we think about guidance in AUSTEDO.

And then I go back to the fundamentals, is the TRx good? Yes. Is the milligram is growth good? Yes. Is our breadth and depth of prescribers good? Yes. So I think that gives us, obviously, confidence about where the product is heading, why we feel confident about $3 billion plus in peak sales. But just those are the dynamics as we manage through this inventory, both the early part of it from Q4 '25 and then understanding how that's going to play out in Q4 of this year.

And then on the EBITDA, I'll hand that 1 to Eli.

Thanks for the question. Yes. So look, as I mentioned in our prepared remarks and you saw from the slide the 3 main products, AUSTEDO, AJOVY and UZEDY at the midpoint now moving to $150 million. But net-net-net, what you see on the top of our top line, you see a midpoint of EUR 75 million, and this is related to kind of an offset that we see due to some softness in generics, as I mentioned.

All in all, it's very important to remember, like this is a really strong performance mainly when you think about the context on a tough prior year comp with removing $1.1 billion revenue and $700 million equivalent EBITDA from REVLIMID. Now, if you go to the range on the EBITDA that we said, and we need to understand that I mentioned that we're going to be at the higher range of the OpEx, around 28%, and this is related to some continuous investment that we are doing in order to make sure that our innovative portfolio in biosimilars are performing. And also we had slightly a bit on less, I will mention, and some other in-lines costs that we had in our first half and going to have in the second half. You saw the announcement on OCREVUS and small here, small there. So it's kind of a maybe a very small 20, 30 basis points on the total, if you look on annual revenue. But this is all dynamics related to investment related to supporting our innovative and biosimilars portfolio.

Thanks for the question, Glen. And I have realized actually -- we're actually going to take some more questions there. So 2 more questions. So next question.

We now turn to Matt Dellatorre with Goldman Sachs.

Great. Maybe coming back to TL1A, -- it seems like you guys are leaning kind of fairly heavily into these fibrosis heavy diseases. So I guess maybe how far could you go in that direction in terms of additional fibrotic indications? Are you going to kind of see how these play out and then go from there?

And then Eric, you touched on this briefly, but I guess, how should we think about in the sense of would this be primarily a differentiator on your CD label? Or could it be a separately indication different label?

And then maybe just briefly touching on the commercial side. I know you guys are prepping for 2 major launches over the next 12 months with olanzapine and EcoPPAM. Maybe just walk us through launch preparations so far? And what you guys are just most focused on from an execution perspective for both of those launches?

I'll let Eric start with TL1A 22. Over to you, Eric.

Yes. So thanks for the questions, Matt. And first, to start with the TL1A, the choice of HS and fibers Crohn's disease, first and foremost, they are inflammatory diseases with a major fibrotic component to it. So these are great ways to get into the field and show whether we're having a true effect. We still have to prove that TL1A has that antifibrotic effect. But these are great avenues to get in there and learn. Once we've shown that, yes, maybe we could in the future go to truly only antifibrotic or fibrotic diseases such as IPF or something like that. But right now, we need to prove the principle. And these are great indications because -- on the way to learning those things, we will show the great value in indications that have a high unmet medical need.

Now, going on to the question of fibrostenotic Crohn's disease, and what is our for what those will do in the future? I believe and I hope to have that as a labeled indication someday if we show good results. So that's the intention of those. So that really could differentiate us within the space of inflammatory bowel disease. So that's the intention.

And then the question about the launch of the ecopipane and our preparations, maybe, Richard, did you want to take that?

Yes. No. We do -- as you framed it, I had 2 major launches, we're very excited about. I think with regard to olanzapine, I think it's worth noting that we've been preparing for this launch for some time, thinking about how best to approach it, but that preparation has really been high quality, not just because of the team's thinking because we're out in the market every day, understanding the physicians, the patients, the payers, the intricacies of this market. And so the team has put a huge amount of effort into preparing for this, which is why we are very optimistic and enthusiastic about our ability to really help these patients who need a long-acting therapy for these severe schizophrenia patients. So I think very confident and looking forward to seeing that launch.

With regard to icopipane, based on the time of the FDA, this will probably could come out in the later part of Q2 next year. So once again, the asset has been transacted. We have it. We've been working and thinking about this for some time when we got close to the transaction. And we think this falls into our wheelhouse again. It's a rare disease, undertreated patient population, how do we get these patients motivated to seek therapy, how do we educate the physicians on a new therapy. This probably sounds very much like the things we've been saying around AUSTEDO because it is. And so that capability and that knowledge will leverage significantly.

Obviously, putting the resources in place and getting the right people in place, we're very good at that. The unmet need is significant. So very excited about that. And I think the timing actually works out, these are over a year apart. And we've got to get used to this because as I said in my remarks, we'll be launching a new product every year. So this is a muscle that we've been building. We're enthusiastic about it. We're not in all of it. We're leaning into it. And so I think you'll see an excellent launch of. But obviously, we'll give you more update as we get closer to that.

So thanks for your questions, Matt. Next question, I think is this last question? This is our last question. So who is it.

Our next question comes from Chris Schott with JPMorgan.

Just this is a Catarina on for Chris. Just 2 very quick ones. So first, just on AJOVY guidance for the year is coming up nicely. Just how much of this is volume versus price? And any other kind of color you can provide in terms of the trends you're seeing for that product? And then just on Europe very quickly, coming in a little lighter than expected. Just again, anything to call out there? And how should we think about results in the second half for Europe?

Thanks for your question. So on a go, we're very pleased with the performance of this. And as I said, this is across all markets. So we've got good growth in international, good growth in Europe and good growth in the U.S. As I highlighted in my remarks, in the U.S., there is some favorability on the contracting and what we've done there on gross to net, but also market share gains in the U.S.

We've also got market share gains in Europe and in international markets. And it's important to note that we are growing above the market in all of our regions. So that, I think, gives us an underlying good trajectory across all regions, but some good work down. I always remind people, when we started this journey with pivot to growth, AJOVY had been forgotten about. And now we're talking $1 billion asset. I think that's credit to the teams across all 3 of the regions that they've been able to do that.

Now, you also asked a question around Europe and the softness in Europe. And I think this goes back to something I mentioned also is we don't have as many high-value launches as we had last year. We also had a very low cough and cold season, and we have a particularly significant portfolio in cough and cold, so that impacted us.

On the positive side, we are launching more biosimilars. They've only just started, so we haven't really seen the traction of those. But we have more and more to come into Europe, which is a very attractive biosimilar market and is 1 that I've been disappointed that we haven't been in. But we've done a lot of work on this portfolio, and we're bringing more and more biosimilar to the market almost year-on-year. As I said, we have 14 more to launch, and we're going to consistently add more to that portfolio, and we'll end up with a portfolio mid-30s, close to 40%. That's our ambition. So hopefully, that answers your questions, Katherine, but thanks for the questions.

And then do we have 1 more, a bit confused? No, we don't have any more. So thank you, everybody, for your time and attention today. Thanks for the questions, and thank you, as always, for the interest in Teva.

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

Hello, and welcome to the IL-15 vitiligo Phase Ib 24-week Efficacy 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. 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 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. And any statements we make are only as of today, and we undertake no obligation to update these statements subsequently.

And with that, Richard Francis.

Thanks, Chris. Good morning, good afternoon, and thank you, everybody, for joining the call. Today, I'm very excited to share with you our anti-IL-15 vitiligo Phase Ib 24-Week Efficacy Results. And today, joining me on the call is Dr. Eric Hughes, Head of R&D and Chief Medical Officer, who will go through the details of the results. And then at the end, we'll have a Q&A to answer your questions.

Now the slide you see up, today is very exciting, the milestone on our pivot to growth journey as this slide highlights the progress we've made in transforming Teva into a world-leading biopharma company. As you see by what's in front of you on this slide, that 2026 is a year of milestones. Originally, we had expected 7, but with the addition of ecopipam's NDA filing, we now have 8 key events expected this year. Now, in that context, I'm really proud to talk about today's anti-IL-15 Phase Ib Results in vitiligo.

But I remind you, besides today's news, we have already shared the duvakitug maintenance data for UC and CD in Phase II in February. We also acquired ecopipam and filed it with the FDA a few weeks ago. And I'd like to remind you that we have many more milestones coming up in the second half of this year with Phase IIa top line results for Celiac for anti-IL-15. DARI will have its pivotal Phase III readout. And then for emrusolmin, futility analysis of the Phase II. And I'm also excited about the potential to launch olanzapine at the end of this year. And then finally, we have the anti-PD-1/IL-2 data coming up right at the end. So a lot of exciting data coming out from our innovative pipeline. So a really key year as we transition to a world-class biopharma company.

Now if we go to the next slide, the reason why this is really important to create value and sustainability for Teva is, if you look across this pipeline from olanzapine to ecopipam to DARI to duvakitug to emrusolmin to anti-IL-15, all of these have the ability to be billion-dollar products in their indications. And in fact, any one of which could be transformational to Teva.

As you can see by this slide, the size of the potential markets that they are entering into is significant and growing. We have a high-quality pipeline that is well positioned. We continue to drive our innovative portfolio for growth for many years to come. I do remind you that we expect our innovative portfolio to generate $3.5 billion of revenue in 2026. So everything on this slide will be building upon this already fastly growing platform.

I'd also like to point out that 2 programs on this list, anti-IL-15 and TL1A duvakitug will have multiple indications. And for anti-IL-15, as I hand over to Eric, I know he'll talk to you about vitiligo data, but also talk to the potential this product has in other indications.

So with that, I'll hand over to Eric.

Great. Thank you, Richard. And it's great to be here on the call today to talk about this exciting new data we have for our anti-IL-15 program. So if I can have the first slide.

Vitiligo is an important disease. It's an autoimmune disease that destroys melanocytes because of an immune reaction. It's a pretty common disease. It's about 0.5% to 2% of the global population. So many people are afflicted with this and many are undiagnosed still.

There is a psychological burden to the disease. It's not just a skin discoloration. It can cause anxiety, depression and social isolation. The only FDA-approved treatment right now is a topical that covers less than 1% -- less than 10% of the body surface area. So what's really needed is new treatments that are systemic in nature to treat the whole body because it's not just the face, it's the entire body that can be affected.

Come to the next slide. So why is IL-15 important? Well, it's a key Cytokine in the pathogenesis vitiligo. What happens is keratinocytes under stressful conditions, which are a number, can cause the secretion of IL-15. And it's that IL-15 localized in the dermis itself that drives the production and residence of CD8-positive T lymphocytes that are cytotoxic, and they attack the melanocytes and destroy those cells that cause the pigment within the skin. So with our antibody, blocking that IL-15 signal, blocks the continued proliferation and resonance of these cells in the skin, which will impact the destruction of the melanocytes and potentially have the potential to be a disease-modifying treatment. So it's a very exciting biology and a real targeted therapy for vitiligo.

On the next slide. So what differentiates our anti-IL-15 antibody? Well, first, it's, we believe, the most potent anti-IL-15 antibody out there. It was very well designed by our own labs at Teva. So it's a Teva-born molecule, same team that made duvakitug made this molecule. And its half-life is very long. So it's a clinically relevant dosing. You can see that you have a 38-day half-life, which is very important when it comes to the convenience for patients.

And that 38-day half-life that you see on the left-hand side of this slide translates into strong target engagement that you see on the right hand of the slide. This graph is showing the suppression of free IL-15 level in the serum. And what you can see here is a remarkable target effect where rapid reduction below the limit of quantitation happens within 1 or 2 days. And then at the top dose, you can see here, there's suppression below the limit of quantitation up to 80 to 90 days.

So clearly, with the half-life and the target engagement we see, the potential for dosing every quarter, that is once every 3 months is a strong possibility for this molecule. So we're very excited about this. The potential of a very easy to give safe molecule that's a subcutaneous shot once a quarter.

Come on the next slide. So let me do a little bit of a tutorial on how we measure -- yeah, go back one, how we measure the VASI score. So if we go back one more slide. Go back one slide. And forward one.

Okay. Well, I'll just start with this slide. So going over the study design. This is a proof-of-concept Phase Ib study. It was designed where we give one dose at day 0 and then one dose at week 12. And so over a 24-week period, which is the endpoint of the study, we've only given 2 shots of the medication subcutaneously. So it's looking at about 38 patients, and we looked at VASI scores of both Facial-VASI and Total-VASI.

It's important to note that 66% of the patients in the study actually had skin involvement that was greater than 10% of their body. And we will be monitoring the subjects out to 80 weeks. So a simple study looking at a conveniently given subcutaneous shot with an endpoint at 24 weeks. If I can go to the next slide. Here, going to this slide I was referring to before, just a quick tutorial on how we look at and measure a Facial-VASI and Total-VASI. It's a fairly simple methodology, but it's actually very reproducible with our dermatologic investigators.

And when you look at the Facial-VASI, it's a simple measure of using your fingertip, looking at the number of areas or the surface area involved in the face. So you use a fingertip, look at the areas of depigmentation, count up the number of fingertips and then multiply that by the level of involvement at each going from 0 where there's full pigmentation to 100% where there's no pigmentation, and you multiply that and get a score. In a similar way, you do the Total-VASI, which is a -- using a hand, which is about 1% of your surface -- body surface area, and you use the number of hand counts to quantitate the Total-VASI and again, multiply it by the extent of involvement in those areas. And that gets you to these 2 scores. These are regulatory endpoints that can be used for a Phase III study.

If we go to the next slide. Now getting to the exciting part, looking at the data that we saw in this study. Those patients with a Facial-VASI score from baseline to 24 weeks after just 2 shots of the treatment achieved a 42% response rate for Facial-VASI50. That's a 50% improvement in their facial score. And then the Facial-VASI75, where 75% of your face improves, those people or about 21% of the population achieved that. And then with Total-VASI, which is a 50% improvement of your total body, 7% achieved that. So we're very happy with these results.

This is very consistent with other Phase II studies with other oral systemic treatments. But for me, actually, the most interesting and satisfying fact was not only did we get these regulatory endpoints, but when you ask the patients what they thought their skin did during the study, the response was pretty impressive. With the Facial Patient Global Impression Change score, which is a validated score in vitiligo, 75% of the patients in the study said that their facial skin improved. And half of those were much to very much improved. And then when you look at the Total Patient Global Impression score change, 55% of those patients said that their skin improved.

So I've done work in dermatology before. And I think that the regulatory endpoints, we're glad to see we achieved a very competitive profile, but it's even more important that a patient who's looking at their skin every day and thinks about this on a daily basis, actually thought that their skin is perceived as improving was very impressive. So we're very happy to see that. And I think that will drive a lot of patient satisfaction with a potential treatment in the future.

Come to the next slide. So how does this compare? So one of the things that we have been mentioning is we want to be compared to systemic therapies. Upadacitinib is an oral JAK therapy that was actually just got a positive opinion from the CHMP, I think, just last week. When we look at the Facial-VASIs and the T-VASIs compared to that at 24 weeks, I think that they're comparable, if not favorable. So 42% compared to 38% and 39% for the Facial-VASI50. For the Facial-VASI75, we see a 21% versus 19% and 14%, and a Total-VASI of 7% versus 6% and 11%. So this is very encouraging for what we think about the effect that we're seeing.

And it's important to remember, our product is a shot once every quarter. And it has, to date, a favorable safety profile. When you compare that to an oral JAK that has to be given each day and then has a certain black box warning in their label, we think this is a good value proposition for patients given the convenience and hopefully, the safety that we show in the future.

If I can go to the next slide. One thing we did for today, which I'm very thankful for, 2 of the patients in the study, they're not representative of everyone. These are 2 patients that said they had very much improved skin on their face. They were kind enough to consent and give us a permission to use the pictures from their baseline to their week 24 time point. And what you can see first on the left-hand side, this woman had significant hypopigmentation with a wide area of her face. You can see almost loss of pigmentation completely.

And then at 24 weeks, you see a considerable improvement in that discoloration she had, particularly on her cheeks and her nose and above her brow. On the -- gentleman on the right, similarly, with a slightly darker skin saw a clear repigmentation on the brow, around the nares and around the mouth as well. So this is pretty -- to me, a dramatic effect where you can see even on the normal picture, the changes that you can see in the color of the skin. So I think this can have a huge impact on a person's quality of life and all the troubles that they run through in their mind every day when they're looking in the mirror.

So we're very proud of that, and we're very happy that these people were kind enough to let us use their pictures today. Like I say, a picture is worth a thousand words, really puts the numbers in perspective. Go to the next slide. So one thing we think about vitiligo, what is the opportunity here? And what's the level of unmet medical need we see in vitiligo? Well, today, before any systemic therapies are even available, we think there's about 4.1 million people in the U.S., EU, U.K. and Japan. And the targeted group, the therapies that these will -- the patients will be targeted for is about 2.7 million.

And currently, there's no approved treatment for that systemic therapy right now. But it's important to note, there's analogs in dermatology that really drive what we think will happen in the future. Psoriasis and atopic dermatitis are great examples where a disease area that was probably underappreciated 15 to 20 years ago as safe and effective biologics came out really drove the advance and the size and the understanding of the unmet medical need.

So psoriasis obviously grew to a very significant population, same thing with atopic dermatitis. We think that there is the potential that as we have better therapies like we hope we're developing here, we will drive the development of this market and really create a disease awareness when new therapies come out. So we're excited by the future opportunities here. So if I can have the last slide.

I'm sorry, I did want to mention too, anti-IL-15 is a very important cytokine, not only for Vitiligo, but there's a lot of crossover and carry through with other diseases such as Alopecia Areata. We have evidence preclinically of Atopic Dermatitis, but also in gastroenterology, such as Celiac disease and Eosinophilic Esophagitis. And that reminds me that, remember, we'll have our proof-of-concept study in Celiac disease readout in the second half of this year. But there's a lot of great potential for Anti-IL-15 therapy across multiple disease areas, and we're excited to be looking at those in the future.

So if I can have the next slide. Now we believe we have a differentiated product. This is an internally developed anti-IL-15. We believe it has the highest potency of the anti-IL-15's in development right now. It has a prolonged half-life of about 38 days, which will allow us a convenient dosing every quarter based on our data today and our target engagement biomarker data as well. I think the data today are encouraging. I think it's in line with the systemic therapies that have been also seen in Phase II. We're moving forward with our Phase II program this year.

And I also should mention that it's been very well tolerated, really no safety signals seen to date, and we're very happy about that. So we've already met with the FDA. I'm very happy to say that we're now incorporating feedback from them into our Phase II study, and we're very excited to get that going this year. As I mentioned, in the second half of this year, we'll also have the proof-of-concept data readout from our Celiac study. And we're excited in the future to be expanding into other indications that are a natural fit for anti-IL-15 therapy.

And with that on the next slide, I'm going to pass it back to Chris and we'll entertain questions if anyone has them. Thank you.

Thanks, Eric. And while Alex is preparing the queue for the Q&A, [Operator Instructions] and with that, Alex, please go ahead with the first question.

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

Just one for me. On the long-term follow-up data, do you expect a big rebound in IL-15 once you stop the drug like you saw in the PK study? And how do you think that could manifest in safety? And given the durability of the IL-15 knockdown, I'm curious if there's a plan to approach dosing differently for induction and maintenance, and a 6-month dosing could be possible for maintenance?

Thank you, Dennis, for the question. So first, I'll talk about the long-term follow-up. So one of the things that our team has done which I'm very proud of, they did extensive follow-up even of our Phase I study. So we took some of our Phase I studies up to like 400 days. And we've actually characterized the suppression of IL-15 and then the recovery, as well as other things like NK cells. So we have a very good sense of the suppression level, the rebound and then it comes back to baseline.

And there's no associated AEs with the rebound of the IL-15. And in fact, that's really consistent with just the way in which the body recovers the homeostatic levels of NKs and the effects of IL-15. But it all comes back to baseline, and we would follow that out for a long period. And that's exactly why we follow the patients in this study out to 80 weeks. So we'll have a very good data set. I think the regulators appreciate long-term follow-up. So we're confident in how the drug works and how the body responds to it.

Now you mentioned in your other question about, I believe, in an induction dose and a maintenance dose. We're approaching this program with no induction dose. We are starting right off with the dose, and we're going to continue that way. I think that given the characteristics of the disease pathology, the loading dose is probably not necessary because I think we're shutting down the IL-15 within just a few days with the doses we're using, and that's probably not going to be necessary even in the fact that there's an exuberant expression within the skin. I think that the way that we're setting the program is the most convenient for patients, just the one subcutaneous shot and then continue that same shot every quarter. That convenience, and I think the biology indicates that, that's a good pathway to go.

Our next question comes from Matt Dellatorre of Goldman Sachs.

Congrats on the positive data. Maybe first on efficacy. Clearly, the data compare favorably to the oral JAKs. [ I'm just ] curious maybe what you're seeing in the early washout period, what you think you might be able to achieve on F-VASI at 48 weeks. It looks like RINVOQ did maybe 23% to 25% on a non-adjusted basis, F-VASI75. And then realized you guys just use a single dose here, should we expect you to do further dose finding in Phase IIb? Or are you all happy with this specific dose?

Great. Thanks, Matt, for the question. Yes. So your first point, and you broke up a little bit there. So correct me if I got the question wrong. But I think your first question is what would you expect at 48 weeks. So if you look at programs out there and the data that's been published and what our expectations are here, when you think about Vitiligo and how the disease happens, T-cells go in there and kill off the melanocytes. And then when you stop that destruction, the melanocytes have to then repopulate into the skin.

Usually, they come back from germinal centers at the hair follicle. So it takes time for these cells to come back and then recolor the skin. So the reason I bring that up is that time is something that helps you. So from 24 weeks to 48 weeks, we do expect -- we'll have to obviously test this, but we do expect the -- these scores to increase. You've seen that in other Phase II programs as well and Phase III programs.

So that's expected. There is a time element to the recovery, I believe, in Vitiligo. So that's my answer for the 48 weeks. With dose finding, this is a proof-of-concept study. We looked at one dose. Of course, we will be doing a dose-ranging study in our Phase IIb, and then that will rapidly transform into a Phase III study. One of the things that we're working on right now and have discussed with FDA is a seamless study design, which is a rapid way in which we can progress this compound quickly and use the known endpoints very efficiently.

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

Just wanted to follow up on the dose question. So you outlined the PK/PD data in healthy volunteers, 5 doses and then show the 2 doses on the free IL-15 levels. Can you clarify which of those doses you studied in the Phase Ib? Just, kind of, wanted to get a sense of are you leaving efficacy on the table? And as you look at doses in Phase IIb, have you studied that dose level 2 that appears to have the maximal free IL-15 suppression levels in this study, or if that's planned to be evaluated in the subsequent Phase IIb?

Thanks for the question, Jason. So I can't tell you the dose today. That will be presented in the congresses for the proof-of-concept study. But to your question about how do we approach Phase IIb now? This is a proof-of-concept single dose. We will be doing dose ranging. And that's important because I frequently obsess around our modeling and simulation. There is dose optimization we can do for the dose between the data we have on our PK, the data we have on our free IL-15 and the data we have on our NK cell reduction. So all those together, I think I'm pretty confident in how we're going to select the doses for Phase II.

Our next question comes from David Amsellem of Piper Sandler.

So on the percentage of patients with total body surface area coverage of over 10%, I think you said it was that 66% of patients in the Phase Ib that had over 10% coverage. What's your expectation or what should we expect regarding those patients in the Phase IIb? Is it going to be all comers? Or is it going to be patients with over 10% BSA coverage? That's number one. And then secondly, with that 2/3, 1/3 mix in the Phase Ib, how do you think that may have influenced the data on T-VASI and F-VASI that you had disclosed this morning?

Sure. So I'll answer the last question first. So we didn't see any effect on the baseline level on efficacy. It was very similar across the board. Getting back to the question of what do you expect to come into a Phase IIb study. So when I look at the publications out there today, looking at some of the studies had different baseline factors. In general, you see about 60%, 70% of the patients greater than 10% from what I see.

When we design the Phase II, it's going to be very clear. The baseline factors will include greater than 0.5 on the Facial-VASI, plus greater than 5 on the Total-VASI. So I think that's consistent with all Phase III programs at this point and what I think is expected by regulators at this point. So the population here reflected what we'll probably see in the future and our baseline factors will be based on a 0.5 Facial-VASI with a 5 on the Total-VASI.

Our next question comes from Louise Chen of Scotiabank.

Congratulations on the data. So I wanted to ask you if you think there are any read-throughs from your data today to your upcoming Phase IIa Celiac disease readout and any of the other products that you mentioned on Page 16 of your presentation? And then I also wanted to ask you, is there an opportunity to combine your drug with other Vitiligo drugs that are on the market?

Great. Louise, thank you for the question and comment. I'm just writing my notes down here. So Louise, first, your first question on the read-through. So I think most people in the field when they look at vitiligo, they would say Alopecia Areata goes hand-in-hand with vitiligo. So I would like to think that we have a decent shot when we do those studies, but it needs to be shown still. That's just the potential.

I also think there's a read-through with Celiac disease. I mean IL-15 is a key cytokine when it comes to Celiac disease. We have some great preclinical data in nonhuman primates. We have some great target engagement data. We had our first proof of concept in Celiac patients where we showed fatty acid binding proteins clearly differentiating between active and placebo. The second study that we'll read out at the second half of this year for proof of concept with the biopsies, I think, hopefully, will show similar effects. We still have to see the data.

But I do think there's quite a bit of read-through with these related diseases. In fact, many people who have Vitiligo frequently have Alopecia. People who have Celiac disease frequently have Vitiligo. So there is a lot of crossover, I believe, between the 2 -- the number of indications that we're looking at. And your other question was an interesting one about the use of combination therapies. That's a very interesting question.

I don't know whether you could add a JAK to an IL-15. I mean they're vastly different mechanisms. The exciting part about IL-15 is it's really potentially impacting the disease process itself. That is the T-resident memory cells where you're decreasing those and affecting them within the skin. And that could be theoretically a prolonged effect. JAKs, for example, are much more immediate tamping down and a broad tamping down of the inflammatory response in the moment. So that's a very interesting possibility. Theoretically, since there's such different mechanisms, you could do that.

I think you have to prove the safety and efficacy. But potentially a more interesting possibility is there is a study out there where there was an Anti-IL-15 that showed minimal activity in vitiligo, but with UVB light therapies, they showed a pretty dramatic effect, which scientifically might make sense because you're getting rid of the cells that are destroying the melanocytes, then you're adding that stimulus. This is purely speculation, but there is some data out there that suggests that, that might actually be something to study in the future.

Our next question comes from Chris Schott of JPMorgan.

I just want to come back to the Phase II Celiac data. Can you just help set some expectations here on what type of benefit you're hoping to see in that indication? And when we start to think about maybe the broader suite of indications beyond vitiligo and Celiac, is your plan to kind of maybe fully derisk these first 2 indications before you expand? Or should we start think about Teva starting to scale up some of those other indications that you lay out in the slides that's kind of in parallel with these first 2?

Thanks, Chris. Yes, great question. So the Celiac study is a -- that we'll read out in the second half of this year, it is a study in approximately, I think it's about 50 patients. It's a placebo-controlled study. It's a gluten challenge proof-of-concept study. So this is an important study to give us a sense of what effect are we actually having on the gut histology. So in this study, we dose them with either placebo or active. And then 2 weeks later, and it's just a single dose, 2 weeks later, we challenge them with 8 weeks of a gluten diet.

And then we do a biopsy at baseline and then we do a biopsy at the end of the 8 weeks. And the important thing, as I mentioned, is to give us a sense of are we affecting the gut lining when people are exposed to gluten? This is important because that will drive our understanding of the endpoint in our registrational studies because that will likely be a combination of both the gut histology and a patient-reported outcome. So the proof-of-concept study that will read out later this year in Celiac disease is just that. It's somewhat of an artificial study, but it tells us whether we have a true effect on a very important outcome.

That's an effect on the histology of the gut. And we'll use -- I would level set everyone that we'll use whatever publications are out there to compare our effect on that crypt depth to villous height ratio. That's going to be the most important readout of that study. Then your second question was what are we thinking about other indications for this. So I think that I have an order in my head to me. It's vitiligo, Celiac with Alopecia Areata, probably all going in simultaneous development. So it's just a matter of speed, and that's what we're trying to do the best here at Teva is to move very quickly. So we'll do probably those 3 in parallel, and I think we're moving pretty quick on them right now.

Our next question comes from Ash Verma of UBS.

This is Di on behalf of Ash. One question. Do you see any notable difference between the active and stable vitiligo patients just in terms of like response rate?

Yes. Great question. So we did look at that. We did have both active and stable. And just for everyone's knowledge, active is -- if they've had any change within the previous 3 months before the study, stable is considered anything that hasn't changed in the previous 3 months before the study. We looked at that, and they're very small numbers at this point when you start dividing up the study. Numerically, actually, the stable looked a little bit better than the active, but that has to be studied in a greater sense in the future with bigger numbers. But actually, it was kind of encouraged by the fact that it's stable, or slightly better.

Our next question comes from Umer Raffat of Evercore ISI.

I have a couple here, if I may. Just to clarify some of the things you've mentioned, Eric. First, let me start off on some of these efficacy comparisons versus some of the JAK studies. So the JAK studies were enrolling Total-VASI 5-plus only if they had failed a topical steroid or it was active disease. And I think you just touched on it, Eric, where some patients were stable, some were active because then they were stable, the JAK study enrolled 10-plus Total-VASI.

So could you remind us what percentage of patients were 10-plus just so that we're looking at apples-to-apples when doing some of the comparisons, number one. Secondly, on dosing, from your experience so far, how are you thinking about whether it's serum IL-15 inhibition, which is a key driver, or whether NK reduction is a key driver? And I ask because if it's IL-15, presumably you can get to deeper efficacy with monthly dosing, whereas if it's NK, which I suspect it may be, theoretically, the PD last 6 months, it doesn't have to be quarterly. So I'm just trying to understand quarterly because it seems to me like either it's monthly or it's every 6 months. So I'd love to get your take on that.

Yes, Umer, thank you. Great question. So the first one was who had greater than 10-plus on the percentage? Is that what you're asking in the study?

[Indiscernible]

I'm sorry, you broke up there, Umer. Can you just repeat that again?

Yes. I'm sorry. I was just wondering, is the vast majority of patients that were 10-plus?

There was 66% of the patients had greater than 10% of their body. So it was a majority. And from when I look at the literature, that's usually what many of the Phase II and Phase III studies had enrolled before. So very similar to what we should see in the future. Your second question is actually super interesting. I think it's a great one to speculate a little bit with you on. When I look at the data and I look at NK cell reduction, which you're correct, the NK cell reduction goes down and it takes a number of weeks to months to recover back to baseline.

The IL-15 is more rapid. And the IL-15 actually drives those effects on NK cells. Now when it comes to thinking about dose duration for vitiligo, remember, it's not necessarily the NK cells that are driving the pathology. It's the T-cells, the resident memory T-cells in the skin. So I feel like I have to stick with determining a dosing based on the free IL-15 suppression, not the NK cell reduction because I think the kinetics of the NK cell reduction may be true, but unrelated to what the effects are on the T-cells. So I have to go by the target engagement of the IL-15 that I measure -- we measure in the serum.

So that's how I differentiate it. I mean if you were to make a link between NK cells and actual vitiligo, you could potentially go longer. But I don't think that that's the way we're going to go forward now. We're going to base it on the 3-month suppression of free IL-15. I hope that answers your question.

So maybe just [Audio Gap] more on a multi-dose basis, perhaps on a more frequent monthly or so, should we expect deeper efficacy if free IL-15 is the driver here?

I certainly believe there's a potential that this is a disease-modifying treatment. Remember, this is not just a drug stopping an inflammatory process. It's stopping the signal that brings the T-cells to the epidermis. So if you're getting rid of the cell that's actually causing the disease, that could be a prolonged effect over time. And if that's persistent, that would potentially have a greater and greater effect over time. We have to show this, but it's basically a completely different way of treating it in many ways.

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

So thank you, everybody, for your interest today and calling in. Once again, I just want to reiterate, we're excited about the progress we're making not only with anti-IL-15 in vitiligo, but the progress we're making on transforming Teva into a world-leading biopharma company. And as I pointed out at the start, this is just the second of 8 milestones this year.

So a lot more to come on this journey, very exciting times. And once again, we appreciate your interest, the inquiry, but there's a lot more to come. So I think, keep your diaries free because there'll be more calls like this coming up. Thank you.

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

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?