Teva Pharmaceutical Industries Limited (TEVA) Earnings Call Transcript & Summary

Good morning, everybody. I'm Chris Schott from JPMorgan, and it's my pleasure to be introducing Teva today. From the company, we have Kåre Schultz, the company's President and CEO. After Chorus presentation, we're going to go to a breakout session, which is in the Olympic Room around the corner. And with that, I'll turn it over to Kåre.

Good morning, everybody. It's a pleasure to be here. We will be talking about the future. And in that connection, I will recommend you to take a look at this. I won't go through it. So we'll move to the next slide. Now it's a real pleasure to be here. It's -- 2 years ago that I was here for the first time as CEO of Teva, and I can see a few of you that were there. And back then, we had a pretty dramatic situation. We had a debt of $34 billion. We had CoPaxone that have gone off-patent and had generic competition in the U.S., and we had dramatic declining pricing in the U.S. generic space. We were basically facing a situation where we would lose roughly $5 billion in earnings over a 2-year period, and that was the same as we were making in earnings. So that left, kind of, not very much to take care of the $34 billion in debt. So for that reason, 2 years ago, I announced that we were changing our strategy. And one of the key elements was a big restructuring, where we were going to reduce the cost base significantly. At the same time, we were going to manage our debt and of course, we are going to secure future growth, but that would come after the first restructuring period. Now today, given the timing, of course, not going to talk about the actual results for last year, I can't do that now, you can come by on the call February 12 and hear more about that. But I'm going to give you an update on the broader picture, an update on where we are with 3 elements of the strategy: so the restructuring, the debt and the financing and the future growth drivers. And what I hope to achieve is that all of you will see and realize that we've actually done the restructuring, that we have the debt and the refinancing in very good shape. And that we have a good prospect for future growth. But we can check that at the end to see whether my presentation worked. Now the restructuring, as I said, the main purpose was to secure the earnings and with the drop of $5 billion, we basically concluded, if we could take out $3 billion of the yearly spend base, then that would result in securing earnings of $3 billion, basically. That was the simple math behind it. Now doing it, of course, was somewhat more complex. And you can see here some of the numbers that in the last 2 years, we've closed or divested 13 manufacturing sites completely. We're in the process of doing it for 10 sites, so they are being wound down or being up for sale. So that's an ongoing process. We've also closed a lot of labs and offices, about 40 labs and offices all over the world. In this connection, of course, we also had to say goodbye to a lot of good people, more than 12,000 people have left the company now. Some more will be leaving in connection with the last 10 manufacturing sites that we are winding down. Now for restructuring like this to work, you, of course, need to maintain your operational capabilities. Because if you don't maintain that, then you are selling out the future, you won't have the growth in sales going forward that you need. Now I'm happy to say that we've been able to do this major restructuring while maintaining, you could say, full operational capacity on all our different product lines. This is not because we should talk about the specifics of where these more than 60 sites that have been closed down are. But this is just to show that Teva is a very global organization. It has grown through acquisition of more than 20 companies over 20 years. And that, of course, has resulted in a very diverse geographical footprint with too many manufacturing sites, too many offices and too many R&D locations. Now we have optimized that a lot over the last 2 years. All these red crosses are either factories, offices or labs that have been closed in that period. We are through most of it. It doesn't mean that we have completed it. We will continue optimizing the manufacturing footprint. Again, in connection with the full year earnings in February, we will give you a more precise picture of what the plans will be for the coming years in order to optimize the gross margin and the manufacturing setup. So more about that later. With regard to the debt situation, then, as I said, the debt was around $34 billion. And just a very brief recap for those of you who might not know, the reason for the debt was the acquisition of Actavis, a major generic player, major player in the U.S. generic space, that was acquired by Teva, and for a price tag of roughly $40 billion, of which most of the money was borrowed in the bond market in the form of corporate bonds. Some of you might remember that about 2 years ago -- a little less than 2 years ago, we did a refinancing that took out all the bond -- sorry, all the bank term loans and ensured that 100% of our debt was in corporate bonds. Now what we've had to do over the last 2 years is, of course, to reduce the debt by we have had some asset sales, and we've had strong operational cash flow. And you can see that the debt is now approaching $25 billion, and our strategy is to continue to reduce debt. Basically, it's ironic that I'm standing here because I don't like debt. I don't think companies in the pharmaceutical space should have a high leverage. I think that you should sort of probably be down to around 2x net debt to EBITDA. We are right now above 5x. There has, however, been one very good development. And that is because we've been stabilizing revenues. We've been stabilizing earnings, the last 4 quarters. You will see that in the third quarter, for the first time, the net debt-to-EBITDA ratio has started to decline. And this will, of course, continue over the next many years as we use all our operational cash flow, free cash flow to pay down debt and continue to do that. Now when the $40 billion acquisition of Actavis was financed in the corporate bond market, the expectations for earnings were a lot higher than they are today. As I said, we are making roughly $3 billion, $2 billion roughly in cash flow. And the debt stack, the maturities were aligned with an expectation of maybe earning twice as much. That means that in some -- and it's not very sort of smooth, so in some years, the debt stacks that we repay are around the $2 billion, so that's not a problem. In some years, they're higher. And we had a debt stack in '21, that was about $4 billion. So we did a refinancing exercise just recently, fourth quarter last year, where we refinanced about $2 billion, basically moving the maturity from $21 million out to $25 million. And including that refinancing, we now have liquidity and we have operational cash flow expectations. That means for the next 3 years, we won't have the need to do that. So next 3 years, we're just reducing net debt every year on a steady basis. Then 3 years from now, there's another debt stack of around EUR 4 billion. So we'll need to do another refinancing of around $2 billion. Hopefully, by then, the credit rating has improved, and we can borrow it even cheaper than what we managed to do this fourth quarter, where we still had a very good reception in the credit market. It was heavily overprescribed, and we had no problem with the refinancing that we had to do. And of course, it will help that the net debt-to-EBITDA ratio will continue to decline. But of course, it's not enough for us to get the situation under control. If you want to think about it conceptually, then the last 2 years, we've spent getting things under control in the sense that we got the cost base under control. We did the crude optimization of manufacturing. We're going to optimize more, but it's more sophisticated now. It's not just shutting down things, it's optimizing what we do. But all that doesn't help anything if you're not getting back to growth on your revenues, of course. And there's been 2 dramatic drags on growth: one is COPAXONE, that used to be a $4 billion-plus product. Now it's down to around $1 billion-plus product. And it's still declining, but a lot less, of course, in absolute terms. And then there was the problem I mentioned before that U.S. generics basically imploded and the value of U.S. generics came down to basically half of what it used to be. Now there's an irony in this because the irony is that we and the whole business, whether it's specialty pharmaceuticals or generics are, of course, being accused in all the media of too high pricing and taking advantage of patients with too high prices. Now the hard facts of the generic industry in the U.S. is that it's actually the opposite that's taking place. The annual savings from generics and biosimilars in the U.S. is around USD 300 billion. Teva alone supplies products with an annual saving of around $43 billion. So the idea that generics are not sort of helping make pharmaceuticals and medicines affordable is basically false and not correct. You can see here some of the products, some of them have been a little bit in the media. You know that generic EpiPen has been big story. Also related to pricing of EpiPen, we are very happy to say that we are now providing generic EpiPen and EpiPen Jr to anybody who needs it at an affordable price. It's also very interesting that we are now getting more into the biosimilar space. You can see here a label called TRUXIMA, that's biosimilar product to Rituxan, which we launched in November. And I've said many times that biosimilars in the U.S. So far have underpenetrated, most likely due to lack of understanding of the whole commercial setup and what it takes to penetrate in the U.S. marketplace due to the complexity of rebating and contracting and so on. We believe being the biggest volume supplier of pharmaceuticals in the U.S. that we know basically everybody that we need to know. We know how to do with contracting, the rebating. And we can see now with the launch of Truxima, that we know how to obtain a good share in biosimilars. I said at the previous third quarter announcement that we were aiming for double-digit share in this marketplace and sustainable profitability. So we are not trying to take over everything, but we wanted the fair share of the market at a reasonable profitability. And I think that's exactly what we're going to prove with Truxima and future biosimilar launches. So all that being said, there's a strong future, the way I see it, for both traditional generics and biosimilars in the U.S. marketplace, and the pricing has now stabilized this death spiral to the bottom, which got ignited by FDA approving more ANDAs and by Indian and Chinese players getting into the marketplace. That has all stabilized, so now we have a stable supply/demand situation, working to the benefit of patients and the manufacturers. Now in Europe, the situation has been more calm. We haven't discussed it so much, but it's interesting to conclude that the percentage of pharmaceuticals in Europe that are generics is increasing, and that there's low single digit growth in European generics and also in the OTC space. So we have a very stable, solid business, and we are still churning out hundreds of launches every year. In the U.S. alone, more than 40 new generics were launched from us last year. In Europe, it's more than that. So it's a very stable and steady business. And actually, I've said many times that with the reduction in our cost, Teva Europe has never made as much money as it did in '19, and we'll make even more money in 2020. So that looks really nice for the future. Then a country we haven't talked too much about is China. And I once had a colleague who said that Teva -- I rephrase, "Teva has successfully retained an opportunity in China by basically never doing anything." So that means, since this is the second largest pharma market in the world, it makes a lot of sense to do something. Now it's no secret that I'm not a strong believer in joint ventures in these kind of markets. So we've decided to do it organically. And we've had the luck that the Chinese government have realized that certain products have never been launched in China. So the government has made a list, it's publicly available, of pharmaceuticals that they would like to have in the Chinese market where nobody ever wanted to spend the money doing the Phase III trials and the whole very, very long regulatory process in China. It turns out that because we do so many products, we do some of these products as well. So we've just launched TREANDA in China. We have AUSTEDO, that has been filed. And the benefit here is, we can do that without doing any trials in China because the Chinese authorities have realized they would like to have these products in the marketplace to the benefit of patients. So we've just filed AUSTEDO, and we think we'll get that approval within this year. So that means that we're slowly building up. These are not big numbers today, but these are 100% controlled numbers from our side. We don't have a partner that's controlling things, and we will be growing very big in terms of percentages, but from a small base, but it will be profitable the whole way through. And in 5, 10 years, China, hopefully, will be a significant part of our business. Now the key drag on the specialty side has, of course, been the patent expiry of Copaxone, with a drag of some -- by now, maybe $3 billion. And in the coming years, a lot less, some hundreds of millions reduced sales. In order to get the whole business growing, then you could say very simplistically speaking, the drag from Copaxone has to be less than the growth from new specialty products, assuming that the overall generic business is growing low single digit. And the way to do that is, of course, to grow the 2 new products we have in our portfolio, which are AUSTEDO, which is used for in Huntington's disease for movement disorder there, and in tardive dyskinesia, which is these very severe, I would say, ticks that people get, which are debilitating from them, they can't work well in the workplace, they can't function well socially because of tardive dyskinesia. Now AUSTEDO is the first product together with one competitor ever approved to treat tardive dyskinesia. Right now, we see very strong growth for the second year in a row for AUSTEDO. We are starting to launch it in other markets, I just told you about China. And we expect to see this product continue to grow for a long period. The reason is very simple: it's targeting tardive dyskinesia, Huntington's. The penetration in tardive dyskinesia is very, very low due to the fact that there was never any effective therapy. There's probably around 500,000 Americans suffering from tardive dyskinesia. Today, we have around 10,000 patients in total on both Huntington's disease and tardive dyskinesia. So a huge potential for this product. The guidance we gave for this year was $350 million -- or for last year, sorry, was $350 million, and we will surely surpass that, as we have also indicated early on. So a very strong growth driver for the coming years will be AUSTEDO. The other strong growth driver is the new class of drugs, where AJOVY is 1 out of 3, which is a phenomenal new therapy for migraine. There's been no real new therapy for migraine for more than 20 years. This therapy, which is a biologic monoclonal antibody improves migraine for chronic -- for people with chronic migraine dramatically. On average, it takes your number of migraine days down by 50%, but some people even lose the migraine completely. Our clinical profile is second to none. It is as good as competition. We don't have any safety problems whatsoever, one competitive product has a slight problem, and we see very strong penetration in this class. We have a little short-term issue that we are up against 2 competitors who have auto injectors. We have a really, really nice auto injector, which has been approved in Europe, but we're still waiting for the FDA approval, should be here any day. But to be fully competitive in this space, we, of course, also need a nice auto-injector. Because this is a product you inject yourself once a month, or in our case, you can also do it once a quarter. We firmly believe that the product profile we have will make us very competitive, and we estimate that we can get around 25% share of this market, long term. Right now, we are slightly below 20% share of the market due to the lack of competitiveness on our device. But within the next coming months, we expect to level that playing field and be very competitive also in the migraine space. In Europe, the launches are coming along nicely. You know that it's a country-by-country thing in Europe. We've launched in 5, 6 countries by now, and we'll continue to do so in the coming years. So all in all, I'm predicting then the growth from AUSTEDO and AJOVY combined will now, in the coming years, be higher than the decline from Copaxone, all leading to good future growth prospects for our top line. So what I think I have proven to you is that we've done the restructuring, we've done exactly what we promised to do. We promised to reduce the spend base with $3 billion, everything included, it was $16.3 billion in '17. It has to be less than $13.3 billion in '19, and I can promise you that's the case. We've also handled the debt nicely, taking it down more than $8 billion over 2 years, and we'll continue to do so. And that means, of course, our ratios on the debt side will continue to improve over the coming years. And we also now have a situation where the drag versus the growth is looking positive. So we're expecting to see low revenue growth in 2020. And then, of course, higher once we get into the future, simply because of the fact that the drag from Copaxone disappears, more or less, while we still see AUSTEDO and AJOVY growing. And while we see the combination of U.S. generics and biosimilars, also having a very stable to positive outlook. So ladies and gentlemen, I would like to thank you all for listening. It was a pleasure to present to you. And if you're interested in asking questions, then we will now move to the Olympic Room, where we will be taking questions. Thank you for coming.

Okay. I think we are live here. So we're going to kick off the Teva breakout session here. I'm Chris Schott. I might just kick off with a few questions for Kåre and the team, and then we can open up to the audience. I know you mentioned in the presentation, I think it was 2 years ago, you were at the conference talking about the restructuring and kind of repositioning of Teva. Just reflecting on those 2 years, maybe just talk through what were some of the bigger surprises as you went through that, both positive and negative, as you kind of repositioned the business, took down the expenses, et cetera?

Yes. So one of the interesting elements over the last 2 years is that if you look at the operational restructuring process, then we've actually had very few surprises. So the assumption from the beginning was that we had ended up in an unfortunate financial situation, taking on too much debt compared to the value of the acquisition of Actavis. But that the company and its employees had all the needed competencies to be successful, both, you could say, in the R&D side, both in generics and specialty, in the commercialization, manufacturing, reach and so on. And getting started on the restructuring and working with the Board and with management, it was very clear that both facts were correct. The debt was definitely too big, given the strategic outlook for the company. And the organization definitely had the right competencies to manage the situation, which is also why it's been possible to have more than 12,000 people leave, shutting down 20 factories and still have, you could say, the complete operational capacity to do very sophisticated things, both in specialty and in generics. So if you then want to say what has been surprising? Then I would say the only thing that's been surprising has been -- which I'm sure people will ask about today as well, has been the legal environment in the U.S. That's the only real surprise, I would say, in those 2 years. And that's not even on the ordinary legal front such as normal cases on patents and [ pair of good ] forces and so on. It's basically the opioid political situation that has been a surprise.

Yes, yes. And on that point, I know it's kind of out of your controls, but maybe just update relative to, I think, the last time we heard from you was in the third quarter. What's happening in terms of negotiations in the background, et cetera? Just an update of how you're feeling with regards to the framework you put together and the ability to get that to goal line?

Yes. So I'm sure most of you are aware that we reached a first actual [indiscernible]. Fortunately, after this will work its way through in a positive way. There's kind of a deadline coming up because it would be advantageous for everybody to get the actual settlement done before the next state trial, which is a trial in New York, mid-March. So like I said, I'm cautiously optimistic that we'll find a way to get the actual signing done before then. But it remains to be seen.

Okay. Talk a little bit, in terms of the ability to get -- it seems like there's different objectives of different parties, what do you see as kind of the rate-limiting factor in terms of it? Is it going to be the counties and the cities that are going to be the best challenge? Or is the other AGs? Or...

No. I think the way you should think about it is that the framework is a deal between the 3 big distributors, Johnson & Johnson and Teva, which has a lot of components that are very positive for the states in the sense that there's a cash payment over many years, which is substantial. And there's a product donation, which is very substantial from us, which will help wean people off opioids. So I think there's a lot of political momentum behind this because it's actually doing something really to try and improve the situation, despite the fact that I think both we, J&J and the 3 distributors, do not actually feel that we did anything wrong or that we actually contributed negatively to this situation. But we would all like to help improve the situation, and we'd like to not spend the next 20 years litigating this. Now the framework is, like I said, with the state AGs being optimistic in assuming that works, then there might be some residual litigation with some counties, some cities who decide not to go into it. But because this is a political situation, much more than a legal situation. Then the fact that the AGs are either Republicans or Democrats, if they all come together, and we make this framework into a real settlement, then I think there's going to be a lot of political pressure on the cities and the counties to get on with improving life and reducing the risk of drug abuse rather than fighting to get the extra $1 million for the year for the attorneys.

And again, on the timing, you think kind of washing around this kind of New York case is probably a good place to...

At least that's a natural occasion for wrapping things up because otherwise, you need to go through one more trial similar to the one we had in Cleveland.

Yes. Pivoting a little bit just on the CGRP side of things, just an update as we head into this year, maybe timing of the auto-injector and just in general how you seen market dynamics shaking out, now that we've had a little bit of time with everyone kind of feeling each other out in the space?

Yes. So it -- the dynamics right now are that, as you know, Amgen launched first. And they had a good launch in terms of volume, but they had declining -- they've had declining shares since. Lilly and I launched about the same time, both had good launches. Lilly have kept the momentum, they have a -- an auto injector, which is a fine product. We have a really nice auto injector as well. Unfortunately, due to some very minor technical discussions. We've had a delay of that approval. We still hope to get it within the next few months. And then we think the competitive situation will be leveling. And what I was referring to on the clinical profile is basically that our product is having excellent efficacy result, also in the extended Phase III trials. Actually, we had an extension of a Phase III trial where we saw even better efficacy, more than 50% reduction in migraine in this extension. And normally, when you extend Phase III trials, you get lower efficacy in the extension phase. So we're very optimistic about the clinical profile. We don't have any safety concerns. One of the competitors have an issue with constipation that's gone into the label. So we think we are well positioned. Our aim is to have around 25% share longer term. Also in Europe, and we are moving nicely with launches in Europe. So we're very optimistic about the class going forward. Unfortunate, compared to our original assumptions, 3, 4 years ago, the pricing has moved lower. It was initiated by Amgen, who went for pricing below specialty, so not the $10,000-plus, but more like $7,000. And then the contracting dynamics with 3 players, led to slightly higher rebates than you would normally see. And that basically means that the value per patient is probably maybe half of what we thought it would be in that 3, 4 years ago. But on the other hand, the volume is significantly higher. So in today's environment, I think that's maybe not a bad place to be in. So we don't have this threat, you could say that other specialty products that are very high priced at...

Okay. And as we think about the dynamics kind of -- it's hard to think longer-term but 2020, should we expect another kind of step down in price? Or was that kind of 2019 where that gross to net dynamics played out?

Of course, you never know. But the way I look at it, it probably has settled pretty much by now, the way I look at it. So -- and of course, we don't expect to see any major turbulence in the market. Of course, there might be plans to switch from one to another, but we've not seen this -- typically, at the beginning of the year is where you see big changes. We've not seen any big changes. We've slightly improved our coverage, but nothing dramatic. We're happy with the coverage we have. So I think it's probably a situation that has stabilized. We know from the PBMs, they're pretty happy about this situation as well. So we think it's a relatively stable situation.

Okay. And maybe just last one for me. As I think about the auto injector approval and kind of bridging to that 25% share target, help us get our hands around how quickly you think you can improve the share position once you have that product on the market?

So the way it would normally work is that once you get to the market with the auto injector, you sort of launch that specific product into the marketplace, and then you see your capture rate -- weekly capture rate of new scripts move up in that level of 25%. And then, of course, it takes probably 12, 18 months before that works all the way through to your TRx -- so your total scripts.

Okay, okay, okay. So a little bit of time, we should be there. We'll open it up here if you have some questions. But...

Yes. Just in terms of the opioid litigation, just going back to some of your comments, just 2 questions. The number that people have talked about is a global settlement in the $50 billion to $75 billion range, is that consistent with your thinking? And then the reports are that you will provide a lot of your payment in the form of product as opposed to having actual cash payments. Is that the right way to look at it?

So the question -- I'm repeating the question just for the case of the people who are listening in. So the question is about the opioid framework settlement in the U.S., what are the components? And that, how does it look? So it's a pretty firm thing. So it's not what we think about it, it is what it is. It's an agreement between, like I said, the 3 distributors, J&J and Teva and the state AGs. And it has basically $18 billion in cash from the distributors, $3 billion in value of distribution, $4 billion in cash from J&J and $250 million from us over a 10-year period. In total, $250 million and $23 billion worth of product, Suboxone, which is used to wean people off opioids. And that $23 billion is at the list price. And as you know, that's the only official price in the U.S., and that's the only price nobody ever pays for a product. So the actual pricing is probably around half of that. So the actual street value, you could say or Medicaid/Medicare value of it is probably around $11.5 billion. And then, of course, there's been a lot of debate for those who follow this in detail what is our manufacturing cost of that and so on. We don't comment on that. But we have made an accrual in the accounts for 9 months of just shy of $1 billion for the framework settlement, inclusive of all the uncertainties that we have right now.

So will you update that at the end of the year? Or...

So there's a follow-on question here. Will that be updated? Yes. It works this way from an accounting point of view that with these kind of ongoing litigations, in every quarter, you will update with what you think is the most likely. If you don't have a fixed point exactly, then you have a range and then you report the lowest number in the range of what's likely.

Sorry, just a follow-up on that. So the settlement is with the state AGs, obviously, there's still tens of thousands of [indiscernible] in the cities. But if I understood your comments correctly, that settlement it's not so much a legal enforcement for those but more the political pressure that those entities would be under to then work with the state AGs...

So the question is, how will it work if the framework with the state AGs gets signed and gets done, how does it then work for counties and cities? And that's, you could say, is very much, like I said, a political thing in the sense that, imagine you're a mayor in the city in Wyoming and some years ago, a lawyer visited you and said, if you sign here, I might get you some money. And you sign and then you are a part of this litigation. And then this overall settlement is done, and money is also allocated to cities and counties and so on. And then your lawyer come and say, well, you shouldn't accept this settlement. They don't do it, we'll do a trial on our own. And let's say you are a Republican mayor in that town and the Republican state AG for Wyoming is part of this state AG big framework settlement. Then my take on it is, the likelihood that this Mayor will say, "Okay. I'll fight it alone to make some more money for also the plaintiff lawyer that's doing this specific case." That likelihood, I think, is very low because they'll -- the whole country will have decided to settle this issue. And you have to think about the whole reason for doing this is to make life better for people who misuse drugs and who have a miserable life and a miserable situation. So deciding to stay out of it just because you think you can get a bit more money out of it? I think, politically, that will not be a very good way to go for most people.

On Forteo, do you have a new time of action that could cause the delays [indiscernible]? And how would that impact the market share fragmentation and what you think opportunity [indiscernible]?

So the question is on generic Forteo, if we have a new action date. We don't have a firm data on that. So we'll just have to wait and see when we get the approval. And that also means it's too early for us to say what will the exact effect be on the value. But of course, in general terms, the more you get delayed, then often, the value goes down, but then you have the whole complexity that you never know how many competitors you will have. So we can't say anything specific on it.

There's a broader question on the U.S. generic market. It seems like we hit this kind of stability in the business. First of all, do you see 2020 -- is it seems like there could be a number of kind of interesting launches teeing up. How do you think about 2020 in the context of what we've been seeing for the business? And then maybe second question, longer term, is this kind of stability? Is that reasonable, I think, for the longer-term U.S. generic business, is that kind of a flattish business over time?

I'll give the long-term comment and Brendan, you can talk about the 2020. So when we model long term, what we have in terms of filings, what we have in terms of products going off patent, be it both biologics, where it's biosimilars and normal pharmaceuticals where it's normal generics. Then we see that there's a huge value up for grabs in the coming years. We think we are very competitive. We have, by far, the biggest portfolio of ANDAs filings. So we think that on a long-term basis, there will definitely be a very sustainable and stable combined generic and biosimilar business. More of the products in the future will be technically challenging to do, which is what we know how to, which is our benefit. So we foresee a stable positive outlook for U.S. generics and biosimilars. With regard to 2020, maybe, Brendan, you can comment on some of the products that we are hoping for.

Sure. So if you look at 2020 -- or I'll comment on 2019 first. So we had 80 potential launches in 2019, and I think we did 46 or 47 of those. So in any particular year, you have a number of products that are in there, and you're not sure from a legal technical risk and so forth, what you'll actually launch. But I think this year, we have a smaller basket, but we also have some potential high value launches. Forteo was mentioned as one, of course, NuvaRing has been out there and Restasis and some others. We just launched rituximab and we'll update again in February as to -- during the earnings as to how that is going. But we're very pleased at how that's gone so far, we'll have Herzuma later this year. So all in all, I think that when you look at 2020 from a generic business, Kåre has made the comment that the North American generic business is around a $4 billion business. And I think what you typically see is you see anywhere from -- In North America, it could be anywhere from $850 million a quarter to over $1 billion a quarter, depending upon what happens. So we do see it as around a $4 billion business in North America. We see that we'll continue to -- after it's stabilized here. We'll have some slow growth in the business, and we think it's very sustainable. And if you just kind of look at the overall -- what's happening in the market is the focus continues to be on low cost products and the demographics favor the generic market. So we're optimistic. Yes.

Good. And just 2 quick follow-ups there. And not too product-specific, just any update on where Nuvaring and how that's coming along?

So we continue to have discussions with the FDA, and we'll see. We would -- we're hoping that we'll launch it in 2019 and hopefully, sooner rather than later. But those discussions with the FDA are ongoing.

All right. And then just on the rituximab launch, how -- just infrastructure to actually launch that, was -- were you able to leverage existing Teva infrastructure? Or did you have to bring in additional costs to get that off the ground?

Yes. So if you think about Teva and you think about biosimilars, so biosimilars are really a combination between the specialty and a generic launch. And Kåre made the comment earlier that given the diversity of our portfolio, both on the generic side and on the brand side, we know those customers very well, whether they're payer, whether they're wholesaler or GPO or whatever they are. So we're able to kind of optimize that in a strategy that we think bodes well for us, not only with this biosimilar launch but with others.

Open it up to the audience.

Just a question on the -- can you talk about the generic environment and being stable. Could you say the same about operating margins and gross margins in generics? And also if you could comment on both the more traditional generics and the biosimilars in terms of operating margin.

Yes. So the question here is about operating margins in generics and biosimilars in the U.S., how that's developing. We see a stabilization of the margins in U.S. generics. And we see biosimilars having, you could say, a slightly higher margin, but it has to be qualified due to the dynamics. So if you launch, first, with a chemical compound. You have a very good margin in the beginning and then it slows down pretty fast if you get a lot of competition. On biosimilars, you typically get less competition. Your launch margin is probably a little less than you could have on our traditional generic, but it stays longer because the pricing is much more stable due to less competition in that field. And the fact that the barriers of entry to biosimilars are a lot higher. Now looking sort of into the future. We think that the basic supply and demand in U.S. generics and biosimilars are favorable and are stable. That doesn't mean that we'll see a dramatic increase in margins. But we do believe that the plans we have for our whole manufacturing footprint will result in some improvements on the gross margin. And we will comment more specifically on that, 12th of February in connection with our full year accounts.

And in terms -- a couple of years ago, you said you were going to rationalize certain products in your business if they're not profitable and then perhaps other companies were going to do the same thing. Can you update us on what you did at [ Narova ]. Are you still in the process of doing it.

So the question is about the portfolio of generics in the U.S., where 2 years ago, we made it very clear that we were going to optimize our portfolio and get out of products that were not having a positive contribution. Now the action we took there, I think, is directly linked to the stabilization of the U.S. generic space because the competitors were in, what I call this death spiral of price decreases, where everybody wants to hang on to market share. So everybody is cutting the price more and more and more, until you start losing money on products. That kind of spiral, you can only change if the market leader, being us, goes out and say, enough is enough, we're just moving out of these segments, and we won't feel any commitment to stay there, unless the price gets back to a level where it's profitable. Now we had that discussion starting 2 years ago, with all our 3 big customers, and it was a really good constructive discussion. We made sure that the products we did phase out, we did it without harming customers or patients. And we probably looked at 10% of our portfolio as something we would potentially move out of. And we probably ended up moving out of 2/3 of that, in the last third, we got the prices up. But the most important was that this inspired other companies, of course, to do the same analysis and it's not rocket science to analyze your gross margin, right, and figure out that it's not a good business model to sell products at a loss. And that whole dynamic has been part of the stabilization of the U.S. generic business. And you can see that in total value that U.S. generics in total value have now stabilized, which was not the case 2 years ago. So I think that has been very successful.

[indiscernible] last audience call, you made some comments on the 2020 earning outlook. [ There are ] many moving parts. Can you please comment on how do you see running strategy 2020? I understand you can't give exact number, but just the latest moving parts of 2020 EBITDA.

Yes. So of course, here, again, due to the timing of this conference, I'll have to say that we'll give guidance on the 12th of February. But I've said, and I'll repeat that, that the whole strategy is based on these dynamics of COPAXONE or state of AJOVY and so on, stabilizing the business, improving the margins. And based on that, I've said from the beginning, 2019 will be the trough year in terms of earnings, which basically means that we're expecting to see improvement in earnings in 2020. Not dramatic, because we still have the drag from COPAXONE, but of course, once that gets even less in 2021, then the improvement gets even bigger because the absolute -- we sort of add in is the same roughly. And what gets subtracted was more in '19 than it is in '20 and is even less in '21. So that's why we have a positive expectation for the development in our earnings in 2020.

Can I just ask on -- you brought up the debt balance and you took some steps to address it, [indiscernible] debt issue. So I'm just curious sort of what would be the medium term because you still have a fair amount of debt to be [ paid ] over the next few years, how you think about it?

Yes. So there's a question here. Actually I need to correct you. We did not do any secured debt at all. We only have standard unsecured bonds. They're all the same and the last issue we did was the same. Straight out bonds. And we think we'll have absolutely no problems. We were heavily over-prescribe this time. And we only do it as, you could say, maturity management that we push out some maturity. So the $2 billion we borrowed, we used immediately to pay down some other debt, and we don't see any operational challenges in doing that again. We will not have to do it until -- and we will not do it probably until 3 years from now, which is when we, again, have a debt stack that's a bit too big, and that will probably be the same size, couple of billions. And it's pretty clear that we won't have any troubles with that. We are running out of time now. And I would just like to thank you all very much for coming and asking good questions. And have a nice day. Thank you.

Thank you.