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

Good morning, everybody. I'm Chris Schott at JPMorgan. I'm very pleased to be hosting a fireside chat with Teva this morning. We have the Teva management team with us, and we're going to start with some opening comments from Teva's CEO, Kare Schultz, and we'll go into the Q&A. So first of all, Kare and Eli, first, thanks for joining us, and happy new year to everybody.

I just was -- thinking back to, I think, Kare, this is your third year presenting at the JPMorgan conference as CEO of Teva. I was really thinking back, and you've made a lot of progress repositioning the company during that time. So as we turn to 2021, hopefully, a more normalized year for everybody, would love to just hear your thoughts in terms of how you see Teva positioned today and your key priorities for the organization as we think about the company going forward.

Well, thanks a lot, Chris, and have a new year to you, too. So I think Teva's positioned very strongly now. We have been through, as you said, the restructuring over the last 3 years, and we now have a basic footprint which is aligned to our business. And we are sort of turning into a more growth-oriented strategy now, where we have, of course, a strong focus on the key top line growth drivers. And you could say, we really have sort of 3 major elements there. The biggest one is our specialty products, where, as you know, we have AUSTEDO that's doing very, very well in the U.S. and that's also been launched in China. And we see a very, very big volume possibility for AUSTEDO in tardive dyskinesia, where we are still only scratching the surface of the patient population in the U.S. and continued strong growth of that product. We see AJOVY catching on very nicely in Europe and starting to regain share in the United States based on the launch of the oral injector. And we see exciting new things coming in the specialty area. We are waiting to see how it will work out with fasinumab and the filing of that sometime this year. We are waiting to see the filing of risperidone LAI that we just got results on. A really good improvement in therapy for schizophrenia now that this product can be dosed subcutaneously. We just got the Phase III results, which are very, very strong. So we see a lot of good things happening in that space. And of course, that will be driving sales of new products. Already now, sales of these products combined are more than $1 billion, and it will continue to grow in the coming years. So that's very positive. Then we have a new segment, you could say, which is getting bigger as we speak, and that's the biosimilars segment. And you could say we are now seeing strong track record already for a year with TRUXIMA, which is validating the idea if you have a strong business-to-business presence in the marketplace, then you are well positioned to market biosimilars and gain meaningful market shares with reasonable good margins. So that's very exciting for us going forward. And also based on the big portfolio, we have more than 10 biosimilars now, both in-house projects and partner projects with Celtra and Alvotech. So specialty is one driver, biosimilars is the second driver, and then the third driver is really the broad-based generics, OTC, generic API, Medis, TAPI that whole big segment, where we see single-digit growth in Europe and the rest of the world, and we see a stable situation in the U.S., potentially low single-digit growth and improved profitability because we continue to modernize, to make more efficient our manufacturing, to consolidate our manufacturing. So we are, I would say, in a growth and optimization phase right now, which is a nice change from the sort of quite radical restructuring we had to do in order to stabilize our cash flow and our earnings. And I'm happy to say that the debt has come down now, as you know, $10 billion. Basically from around $34 billion to around $24 billion, just below $24 billion, and we'll continue to take it down. And there's no change in our capital allocation strategy. We pay down debt until we are below 3x debt to -- net debt to EBITDA. So a firm unchanged strategy, but as a consequence of the progression, more focused on growth now. So that's very positive.

Great. Great. Can you just elaborate maybe on that -- first on the top line growth, a lot of different areas to dig into there? But when I think about the business, it seems like you're still absorbing some lingering headwinds. You've got your U.S. generic business. It's still a reasonable chunk of revenue and pretty anemic growth there. So just help me like when I look at really nice opportunities like AUSTEDO and AJOVY balanced against some of those other franchises, what's a reasonable growth kind of target to think about for Teva as a whole?

Yes. If I take the broader answer first, and then I'll give you a couple of details, then I would say a reasonable growth to expect for the whole revenue is single-digit, low to mid-single-digit, that's what's reasonable. And then you've got to combine that with a margin expansion because as you know, we have a end of '23 target of the 28% in operating margin, and we are firmly on track for that. So that's really -- those 2 levers are what will drive the improvement in EPS going forward. And if we then look at what is really changing since then we can drive revenue growth now after having dramatic decline in revenue over the last 4 years, it's really a couple of things. The 2 main things that have changed is that there's no longer a decline in U.S. generics. And so we're seeing a stable situation. We're having good launches. We're having reasonably good pricing. And that collapse, we saw from, let's say, 2015 to 2019 has completely stopped, and we have a stable situation. So that drag has gone. And the other drag, which is getting much, much less is the big drag we have from COPAXONE. That drag has also come down to a low low number already in 2020. You can see it's a low number. It will, of course, continue, but at a very low rate. So the fact that we had 2 major drags that had stopped, and then we have the growth coming from, like you said, AJOVY, AUSTEDO, and hopefully, fasinumab and biosimilars, that means that we get back into a situation with stable growth, not at very high double-digit numbers, but at single-digit numbers.

Great. Maybe just jumping into the branded specialty products in a little more detail. First, on AJOVY, can you talk about the launch of the auto-injector and where you stand today in terms of your market share and relative to some of the targets that you were hoping to achieve there?

Yes. So as you're probably very much aware, we had a good launch based on the good clinical profile. Then we fell back a bit because it's a 3-player market, and we did not have an auto-injector. And that really hurt us in the marketplace. And our -- some of the indirects share fell from like 30% down to I think it bottomed out at around 11%. And then we finally launched the oral injector last year in April, May. And with that, we saw then a returning to the marketplace in a good way. And the capture rate then went back up, the NBRx went back up to something like 25%, and it's still climbing. So I think we're back in the race now. We're capturing again nicely. And I always had the ambition that we should be at least 25% share long term, simply based on the fact that it's a 3-player market, but we have unsurpassed efficacy and unsurpassed safety. When I -- what I mean with that, what I mean is that we have one competitor that has a safety issue with constipation. That's not very popular with patients. We don't have that. And then we have a longer duration of action than any of the 2 competitors. And the longer duration of the action is the reason why we can dose once a month or once every 3 months. And we had phenomenal data come out showing that when you dose once every 3 months, you maintain completely the same efficacy. There's no drop or anything, that's all due to the long duration of action. So I think we have a clinical profile which is very competitive. Our auto-injector is also very competitive. So we're seeing good return to increased market share in the U.S., and we are seeing very strong performance in Europe. And that's a twist to AJOVY, which I think most people are probably not aware, that is that the pricing is actually the same, if not even better, in Europe than in the U.S. because in the U.S., we had the unfortunate situation that the 3-player situation, and one of the players being quite aggressive in the contracting, that led to a higher rebate level than normal, which took down the net pricing. Now it doesn't work that way in Europe, of course. In Europe, you negotiate with each government to get reimbursement. And once you have that, that's a pretty static situation. So we've actually ended up with pricing in Europe, which is competitive to the U.S. pricing for once. So that means that we are foreseeing a good situation for AJOVY in Europe, and we see very nice market shares being at the 25-plus level in several countries. So our strong overall commercial footprint in Europe will most likely be to a very strong position for AJOVY and long term, generate substantial sales in Europe for AJOVY. So we're very happy about the development right now.

Yes. And can you talk about the broader CGRP market? It seems like one of the categories that did have some impact from COVID dynamics we saw in 2020. Just what's the state of the overall volume of the category? And how do you see that as we go through '21 and hopefully, the world normalizes a bit as we go through this year?

Yes. Thanks for that question. I think it's a good time you address a little bit about the way we see the COVID dynamics or COVID-19 related dynamics in the marketplace. One dynamic which is pretty clear is that new innovative products have had a lower volume growth in the total market, not specifically Teva at all, but all new therapies have been growing slower simply due to the fact that less people have been going to the doctor due to lockdowns and so on everywhere. And that basically means that the volume growth we had anticipated for the CGRP market in 2020 has been slightly less, and that goes for basically all categories of new innovative drugs. So that's one dynamic. I think there's no change in the general population needs for new medications or in the preference or anything like that. And the moment things normalize, which they hopefully will some 6 to 12 months from now, then we'll see a normalization of the volumes, of course, because it's not that less people have migraine or anything like that, it's not that less people have cancer and so on, right? But in all those areas, you see lower volumes for the whole market, both in U.S. and Europe. Now that we expect to normalize in the first half of this year or probably in the second half of this year. And then, of course, we also have the COVID-19 effects on OTC products and generics. And there, the effect was a little different. In the beginning, we had -- first quarter, as you know, we had some patient-level hoarding of medicines. And then we had, in the second quarter, some level of destocking and reduced the number of people going to the doctors, which reduced volume in generics as well. Then in third quarter, it normalized. And if you look at the broad like IQVIA data in Europe and U.S., you'll see that the fourth quarter is probably down 3% to 5% in total volume for all pharmaceuticals in total. Now here, I would expect that in Europe and U.S., you will see the market still being slightly down the first half of this year, and then it will catch up in the second half once we get through with the vaccination programs and people start to go to the doctor at the same level as they did before.

Yes. Absolutely. And then maybe one final one on AJOVY. You mentioned U.S. pricing dynamics a bit more competitive than any of us expected. What's your outlook going forward? Do you think we've now hit a point where this is relatively -- a relatively stable price and access dynamic? Or should we still think about there being some price competition as the market continues to evolve?

It seems that it has very much stabilized. I won't speculate on exactly how this has happened. But you could think that the fact that there was very heavy contracting and deep discounts in the beginning in order to better positioning in market share. But the 3-player dynamic has remained intact, and we are gaining share again. So it's very much a 3-way split of the market. It might have cooled people on believing that they can get even further share by contracting even more aggressively. And that means the financial calculation will naturally be that once you have a relatively stable share, if you contract more aggressively, you lose a lot of value on your existing market share. So it doesn't really make sense to be more aggressive. So from my perspective, it seems to have stabilized very much, and I don't expect any major developments on the contracting and access side on the U.S. market. In Europe, it's government by government. And we have launched by now in, I would say, 80% of the European markets. And in the large markets, we expect to launch this year.

Great. So it sounds like European dynamic is pretty healthy overall. Just give us a sense, when I think about this product at peak, how much of this business is a U.S.-centric business versus how much is international? And that I kind of think historically migraine being more U.S.-centric, but it sounds like this one -- this might be a little different dynamics for the CGRPs.

Yes. Actually, if you talk about patient volumes, the frequency of migraine and diagnosed migraine is similar in Europe and the U.S. But of course, if you go back and look at different therapies, different oral therapies for migraine, then pricing traditionally in the U.S. has been significantly higher than Europe. So if you look at value numbers going back and look at the migraine market, you will see U.S. as the dominant piece. But if you look into volume, patient volumes, it's quite similar. So that means now that we have a new situation where we have an injectable marketplace where the pricing is similar in Europe and U.S., then I would say the potential of the 2 markets is similar. And that, of course, goes for all 3 competitors because the price levels are also in Europe similar between the 3 competitors. So it's a new dynamic where Europe will take a bigger share of this market going forward. Of course, everybody launched later in Europe about a year or 2 leaders later. So it'll take a bit -- and Europe traditionally has slow launches because you need to go through this whole reimbursement negotiation with each government. But since we're getting close now to everybody having reimbursement in most markets, we are seeing the volumes starting to pick up. And with a, I would say, a 2-year delay, you should probably expect the European market to grow to the same size as the U.S. market.

Okay. Interesting. Switching over to AUSTEDO. The product's obviously been growing very nicely here. Can you just elaborate on the traction you're seeing with the 2 core indications? And how do you think about the growth of the franchise going forward?

Yes. First of all, of course, AUSTEDO has a really nice position in Korea with Huntington's disease and it's doing very well there. That patient population is of a limited size. It's a relatively rare disease, fortunately, you could say. And so we have a good position there, a stable market share, a high market share. But where the growth is really coming from is tardive dyskinesia. Tardive dyskinesia was always, you could say, basically untreated. There was no drug indicated for tardive dyskinesia until AUSTEDO and the one competing product came along. And tardive dyskinesia is a quite widespread condition, estimated at around 500,000 patients in the U.S. And so far, it's a fraction of those patients that are being treated. And it's, of course, a disease where when it's untreated, it's socially debilitating. It can prevent you from working, prevent you from having normal social interactions and so on. So there's a huge benefit from the treatment. And then we see a steady volume growth in that segment, and we expect that to continue for several years or many years into the future. So very well positioned. Helps the patients a lot, and you could say the limited price competition also means that financially, it's very attractive for us.

Yes. Absolutely. Is there an opportunity to put even more resource behind the drug given what seems like a very significant opportunity with tardive dyskinesia? So how do you think about [indiscernible]?

Yes. You could say, of course, it's always -- if your patient population expands, then typically, you also get a modest expansion in the doctors that are prescribing at a level where it makes sense to be promoting to them directly. And we have been expanding our commercial footprint, targeting AUSTEDO during 2020. And I won't rule out that we'll see marginal increases in our promotional activity on AUSTEDO also in this year.

Okay. Other growth driver, I'm thinking about here, is in biosimilars, and you've had a really nice launch with TRUXIMA so far. Can you just talk a little bit about the dynamics you're seeing with that product? And then from there, kind of broader comments on the biosimilar opportunity, I guess?

Yes. Chris, I'm sure you can remember that before we launched, then I told everybody that I was hoping that my theory on our commercial position would hold up because my theory is that if you know the marketplace and you have a lot of business-to-business contacts and activity and volume, and of course, we have more than anybody else because we are the biggest volume supplier in the U.S. of pharmaceuticals, then you can leverage that with biosimilars because you simply have all the contacts, you know how the contracting work and so on. Now that we had to prove with TRUXIMA. And I think a year -- a bit more than a year ago, I said that we can prove that by getting a double-digit market share. And now the proof is in the pudding, we have to show it. to report that we now are around 20% volume share and very happy about that and hope that we can grow that further. And of course, it is with biosimilars, like with any, you could say, generics biosimilar products, it helps to be first and it helps to have a good commercial footprint. So -- and of course, once you get more competition, there will be some price pressures. But there's a dynamic with biosimilars, which is that each player that comes into the market has invested more. It costs more to do a biosimilar than do a generic. That means you have more of an investment you have to recoup. And that means that you can't just go super low on the pricing because then you will make no money. And the manufacturing is more complex, costs more. So the pricing is affected by those dynamics and also by the fact that you do have competitors in the biosimilar space, but you have less competitors than you do in typical classical generics. So I'm very happy about the situation we see in the biosimilar space. And we are making a big push here because we got -- as I told you before, we have more than 10 projects. We just in-licensed 5 from Alvotech. We have more than 5 internal projects. And we don't comment on the details for competitive reasons, but I would say we cover the big majority of what's going off-patent over the next 10 years in terms of biopharmaceuticals.

And should we think about there being more near-term launches? Or are these more kind of mid-decade, I guess, in terms of the time horizon of this?

They're kind of spread out over the next many years. So we have some that are for patent reasons and so on, they are years into the future, and we have some that are quite close. So it's a mix.

Okay. And in terms of the therapeutic areas, are you staying more kind of oncology-centric? Or do you see that the biosimilar kind of trends we're seeing can -- I kind of think about a hospital prescribed product maybe very different than a TNF or something like that. So how are you thinking about market selection as you look at that portfolio?

Yes. We do believe that, like you said, the hospital products are probably the ones where it's easiest to be very competitive and keep a good margin because the business-to-business relations there helps. So the majority of the products we have are either for clinics, hospitals and not for retail pharmacy distribution.

Okay. And maybe a final one on this. Do you feel you can launch a lot of these through existing infrastructure? Or should we think about there needing to be more infrastructure going in place as you go from 1 product to a portfolio of 8 or 10 products over time?

So we think that it's going to work pretty much like generics. You could say that we have an infrastructure already that covers these areas. We cover all hospitals, clinics, basically due to our big and broad portfolio. So we don't see any significant -- or we don't see any increase in infrastructure cost due to more biosimilars coming into our portfolio, just like we don't see it when we add specialty generics or generics because we are covering all customers basically already.

Sure. Sure. And again, you think of these as products that you have a launch, then maybe some competition coming in, but there's a pretty significant tail associated with many of these assets. Is that a reasonable way to think about it?

Yes. Exactly. Yes. And of course, as I mentioned here, which is very tricky, which is why we're not commenting on it, and that's the legal dimension. So there's a legal dimension which links to the patent situation for each product, which is different from each product and all those aspects. And they play a role in the, you could say, your launch sequence and how early can you launch? And are you making a settlement? Are you not making a settlement? Are you launching at risk? Are you not launching at risk? All those elements, of course, are very important in order to optimize the value of the assets you have, the value of the biosimilar. And we believe that we have strong capabilities in that whole, you could say, legal space because some of those dynamics are, of course, similar to the dynamics you see on generics.

Absolutely. Maybe a final topic on the products. I think you mentioned a couple of launch opportunities with nerve growth factor, et cetera. Maybe just help me first on nerve growth factor. Just how do you think about a product like this in terms of its positioning? On one hand, we've got, obviously, an opioid crisis. We need better pain medications. On the other hand, the category, I think, has some other safety concerns kind of lingering around it. So just help me -- your level of excitement around that opportunity? And how do you think about that playing out in the longer-term Teva story?

Yes. So first of all, I think there's a significant need in the marketplace for a safe pain medication. And as such, there's a big need for these kinds of products, and there's also a need for products that are nonaddictive in the marketplace. So no doubt about that there's a big need. You're absolutely right at this point, the 2, of course, our product and the other one is that it's a [indiscernible] product. And they have been developed for, I don't know, 20 years or something like that, a long time. And the primary reason why it's taken so long is, of course, the safety concerns that's been in connection with the effect they could have on joints. And in some cases, with higher doses, we've seen negative effects on joints. And therefore, development programs and our development program together with Regeneron has been changed over time to use lower dosing, which has then shown to have less safe concerns. But there's still this question about the joint safety. Now to me, the data looks like it should have a good risk-benefit or a cost-benefit, whatever you want to call it, for patients. And given the fact that there's a real need here, then I think it looks attractive. But of course, we still have to see the final long-term safety data. And it's also going to be interesting because Pfizer-Lilly, they are a bit ahead of us. So they will have their advisory committee if it goes ahead on time. You never know with COVID-19. But if it goes ahead of time, they're going to have this in the first half of this year, and we'll see what comes out of that. And personally, I think there's a good chance that this product category could move ahead and get approved. And if that happens, then I think there'll be a real market for it. But of course, I mean, you never know. It's up to a clinical, very specific evaluation of the pros and cons of a product that is very efficacious in treating pain and that has a low level of risk to joints in a low fraction of patients.

Sure. Sure. Do you see that given that dynamic as more of a kind of niche category? Or do you think if these are approved, this actually could become a very significant category as a whole?

So that, again, depends on the evaluation by FDA and EMA, how they're going to look at it. And you can, of course, imagine all kinds of scenarios where it gets approved with a very relatively broad label, gets approved with a very narrow segmentation or it doesn't get approved at all. I mean it's really too early for me to say. And I'm not pretending to be the clinical total expert on this, I can just see from the data that it's possible to see a positive risk-benefit from the product.

Okay. Great. And then just a question on R&D budget. I know this is a question we've asked in the past, but -- and I know you've talked about not -- the absolute numbers don't matter as much. It's more efficient spending. But as you're rebuilding the company, as you start to think about some of these growth opportunities, whether it's biosimilars, whether it's more novel products coming forward with, do you feel that the R&D budget is adequate, I guess, for the opportunities? Or should we think about as maybe, as gross margins improve as top line starts growing, that, that frees up resource to start either in-licensing or maybe accelerating some of the R&D spend for the organization?

So we were spending roughly $1 billion a year on R&D, and I believe that's an appropriate amount for the size of business we have. And we've done a lot of modeling analysis, and it's an appropriate amount to keep the business growing going forward. Of course, if we see strong growth in our top line and in our operating margin, freeing up more cash generation, then we might spend a little more. But you should not expect us to increase, you could say, the R&D ratio and the R&D percentage. So if we grow the top line 10%, we might spend 5% to 10% more in R&D. But there's no sort of plans to accelerate the R&D spend, and there's no plans to start spending any significant amount on acquiring assets right now. We have our '23 ambition, which is to get net debt-to-EBITDA below 3, and that's really the key financial driver. And the deals we've done have been quite modest. The Alvotech deal we've done, it's a quite modest deal in terms of cash outlay. And we don't have any plans to do any major acquisitions of neither assets, nor companies in the coming years.

Okay. Excellent. On the 2023 kind of targets and maybe specifically, the 28% operating margin target, can you just give us an update on some of the restructuring and efficiency programs that you're working on that enable that expansion over the next few years?

Yes. So we have a very comprehensive gross margin improvement program that we are running in our whole manufacturing organization. It's, of course, well organized. It's got a lot of different tracks, subprojects and so on. And it includes all the traditional things. So it includes a further consolidation of our sites. You just saw we just sold a site in Serbia. We just sold a site in Russia. So we keep on consolidating, closing smaller sites, consolidating into bigger sites. And that will continue for the next couple of years, and that does drive improvement in gross margin. We're also consolidating our procurement. We are streamlining our product portfolio to streamline, build materials so that the same API goes into all the different products in a category. So we're doing a lot of different things. It's all classical optimization, and it's very detailed. And we are very confident that we will be reaching our ambition of the 28% operating profit by end of '23. We're not seeing any major reductions in the commercial spend. So sales and promotion spend will remain at the same level in percent of sales. That's not where we're seeing the big benefits come from. But we do see continued optimization on the profitability per product. So continued margin pruning, active margin and price management, combined with further consolidation and improvements in manufacturing. So we're very confident about the 28% that we will reach that.

And I guess, a question, it seems like when I look at the expansion here, it's a lot of different initiatives. It's not just kind of big head count reduction or a handful of very large plants closing. So how should investors track how the progress you're making against those initiatives? Is this just going to be kind of quarter in and quarter out, seeing the margin expansion? Or are there other metrics we can think about that you could share with us to help us get a sense of how far along the process you are as you go through this next few years?

Yes. I think the -- it's not really something that you can track in any other way than through the quarterly numbers, the yearly numbers. And then the fact that you sort of have to trust me when I explain this is how we do it, and I've done it many times before, and it's always worked, and it's not rocket science to optimize manufacturing. So when we say that we will improve the operating margin by some 50 to 100 basis points per year, then that's what we're going to do, and you can track it, of course. You can have blips on a quarterly basis because you have a really good launch and then your revenue goes up and your margin goes up in that quarter and then it goes down in the next quarter. But if you track like on an MAT basis, then, of course, you should expect that on an MAT basis, you can see that it's climbing all the time, and that it's tracking towards that 28% at the end of '23.

So it sounds like you're describing that, from a risk perspective, you don't see a lot of -- this is kind of blocking and tackling. You've done this before. You've got very clear objectives you're going after. So from a risk perspective, you don't see a lot of risk in terms of hitting that target. Is that fair to say?

That's fair to say, yes.

Yes. Excellent. Can I -- just pivoting a little bit, liabilities in the balance sheet has been a big topic of the story. Maybe just talk about opioid litigation. It's been an overhanging the story as you talked in the past. But just any thoughts in terms of where we are in terms of resolving this issue if you think about where we are today versus a year ago? Just update a little bit of the -- are we making progress towards getting to go line on putting this behind the company?

Yes. So compared to a year ago, we have made progress, but not nearly as much as I hoped for. So what we hoped for a year ago was that the trial in New York that was scheduled to -- for the first quarter that, that would push people together to do the final settlement and get things done. Now we all know what happened instead of that trial was that we got COVID-19, and every single trial scheduled got delayed, and they're still being delayed. So we've then been spending the time working with the state AGs on, you could say, all the wording, making sure that -- there's a lot of legal stuff that you needing settlement like this, all kind of conditions and details. And we've been working hard with our sort of partners from the ATS on this and made a lot of progress on that. But the issue here is that we have 5 companies involved, and we have 1,500 plaintiffs, of course, organized in some plaintiff groups, 50 states. And everybody has to come together to do something that makes sense for the U.S. public, it makes sense for all the involved partners. And the framework really does make sense, I think, for everybody and does help people who have problems with substance abuse in the United States. Now unfortunately, when you have hundreds of lawyers who need to get together and eventually sign on the dotted line, if you don't have some kind of timing pressure, it really doesn't happen. I mean you don't get to that -- you don't get across the final line. Now right now, we, of course, have a trial sometime in the coming months, potentially, in California. We have potentially one in West Virginia. We potentially have one in New York. But the problem is they keep on being postponed. And I still believe -- like I said a year ago, actually, I do still believe we need a scheduled trial date to really push everybody to get across the finishing line and sign. I think we are relatively closer now than we were a year ago, but it's, of course, a big disappointment that we've had all these delays. But nobody can control the fact that we got COVID-19, and that has been slowing down the whole ecosystem for good reasons, which is very understandable. So my hope is for us as a company, for the state AGs, for U.S. society that we can complete this settlement, then we can supply COPAXONE, which is a really good product for meaning people of opioids to all states in the U.S. And there'll be a lot of cash coming in from Johnson & Johnson and 3 distributors, and this money can be spent in a good way to reduce substance abuse in the U.S. So that should be a win-win situation for everybody. And hopefully, it will be resolved sometime during the coming year. But again, it's very hard to predict given the fact that it's hard to predict the COVID-19 situation and how that will evolve over the next 12 months.

It sounds like with this situation in general, it's not that you're seeing kind of radically different requests coming in from some of the plaintiffs. This is -- it obviously is kind of tied to COVID's delayed cases and it hasn't really forced people to the table, to the extent you might have hoped, starting in 2020.

Yes, that's absolutely correct. That's how I see it. So I very much hope that when we meet again, Chris, a year from now, I hope we can discuss how we got [indiscernible]

Yes. Excellent. And then just on kind of a realized topic on debt paydown. That's been a major focus of yours. I think you've talked about the time lines that you're getting down to that 3x leverage. I guess at what point does the strategy pivot from debt pay down to, say, going on offense a little bit more as you think about development and an accelerating investment in the business a little bit? So just kind of as we go in the next few years, is there a need to kind of make that pivot as you delever? Or do you think you've got the assets within Teva as an organization that's really not the way to be thinking about the company over time?

So right now, I think I have the assets that are needed for Teva to grow nicely and to reduce the debt and get into a stronger position. Of course, once we get below 3x, so net debt-to-EBITDA below 3x, the debt paydown accelerates at a certain point in time because the net financing cost, which is around $1 billion right now. Of course, at a certain point in time, that starts to go down as well, refinancing becomes cheaper because debt ratios become better. And then you really get down into a situation that debt goes down fast. I would think once you get close to net debt in 2x EBITDA, then you get flexibility to think about do you want to pay dividends? Do you want to be more aggressive on your M&A? What do you want to do? But that's not for now. We need to hit the '23 targets first. And then once we've hit those, we'll be we'll be communicating a new strategy, long-term financial targets, but we won't to do that until we've proven that we hit the first set of targets at the end of '23.

Great. Maybe just in the last minute or 2 here, as you think about investors' perception of Teva and the story, what do you think are the most underappreciated parts of what's been happening at the company? And what do you think we should be spending more time digging into?

I think maybe it's not that people do not understand it. I think most people understand that the fundamentals have been dramatically improved, that we are making strong progress on earnings, on growth, we've stabilized. We're making progress on debt and so on. But everybody is kind of also seeing the risk factors being the opioids and the legal situations. So I would say, most investors, I think, get the basics right. So it's more a question of, do you believe that the opioid situation will be resolved and that we will then see the true value of a very, very stable and steady business model. Because it's ironic that I think generics and biosimilars is probably one of the most steady business models, as you can imagine, provided that it's a disciplined management and board advance the business because you make good margins. You have steady inflow of products every year. You can predict your next 10 years, how you're going to be doing. So if you don't do anything, you could say, to sort of upset the cart or whatever you call it, then you actually have a very steady investment that earns really good margins, really good cash flows. But I think people are still afraid about the legal situations. And therefore, they don't dare to bid on the long-term value. Even though I'm, of course, totally convinced that once these legal situations are out of the way, then people will realize it's a really good long-term business we're having.

Yes. Makes a lot of sense. Well, I appreciate all the insights today and the time, and thanks for joining us. We're about out of time but thank you.

Thanks, Chris. Nice talking to you.

Nice talking to you.

Bye-bye.

Have a good day.