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

Good morning, everyone. My name is Nathan Rich. I cover the generic and specialty pharma space for Goldman Sachs. We're very pleased to have Teva here with us this morning. Richard Francis, President and CEO, thanks very much for being with us and joining us today.

Richard, I wanted to start at a high level. I think kind of one of the biggest changes since you launched Pivot to Growth was really in the innovative product to the forefront of the messaging for the company, and I think you're starting to get more credit for that. I guess maybe how would you evaluate maybe the progress that you've made on Pivot to Growth so far in the first year. And I guess, how have you changed -- how capital and resources internally are deployed as you kind of build buy into this strategy?

Yes. Well, firstly, thank you for having me. I appreciate it and great to be here in Miami, a lot better weather I thought than England, but...

Not today, so far. But I...

I have been the -- I opened the blind this morning and it's exactly the same. So Pivot to Growth has been a really important part of Teva's transition. As much as it's a bit of a tagline, there's a huge amount of detail below it, and we have 4 pillars, which I often talk about. And those 4 pillars all about allocating capital. So you talked about innovation. Innovation is a key part of the growth of the company going forward, and we've outlined that from '23 to '30. And we've really clearly identified how we're going to grow the business over that period of time. And when we think about capital allocation, the 4 pillars: To deliver on our growth engine, step up innovation, create sustainable generics warehouse and focus the business. The last part of that is allocating capital. And so we've been pretty ruthless to allocating capital. And to do that and to keep our operating expenses at the right level, we've had to just stop doing stuff. And so if you think about the first one, deliver on our growth engines, we've obviously shown we can grow AUSTEDO significantly, AJOVY and now you UZEDY. And we've done that by building capability because some of it's about capability and some of it's about allocating resources. And we've driven a step-up innovation TL1A. Olanzapine is obviously will probably talk about the results, but that study was completed in the clinic 9 months ahead of schedule. We've launched ICS/SABA. We've moved TL1A through the clinic a lot quicker than people thought. And now in the clinic with IL-15. That's a capability build and a resource capital allocation, and so how do we find the money? The third pillar, which is generics sustainable powerhouse was -- Teva has everything to be excellent generics, but we haven't been excellent. So we have a great pipeline, we have good manufacturing, and we have a good commercial footprint across the world. What we realized is that we were basically covering every molecule that lost its patent, and so recovering 85% to 90%. And obviously, if you look at those from a value creation point of view, they're all very different. And there's a tail on that, which creates a lot of work but a lot less value than some of the others. So we've reduced our pipeline around down to 65%. That throws up a significant amount of resources, capital that we've allocated to the innovative pipeline. And then in some of our businesses, we've just taken sales and marketing away from certain older elements of our business and reallocated it to the AUSTEDOs, AJOVYs and UZEDYs. So we've been ruthless, and there's not a little trim here, trim there. It's -- we're not doing that. We're doing this. Now that's good because it allows us to allocate capital, to make prioritization. What it does do, though, is that means the company has to perform because when you place a lot more bets, then you may not end up with the returns, but you probably don't end up with maybe the downside. So I think what I've been most pleased about in the year is we've been that clarity of focus on capital allocation capability build. What we measure has driven performance. And so I think people are realizing Teva can sell innovative products really well, it can move innovative products through the clinic really well, and it can do some good partnerships. And at the same time, it seems to be creating a more focused generics business, which delivers good returns and more consistency than we've seen in a long time. So I think, yes, we -- you had to make some choices and we made them and we've -- and that focus has helped us, I think, deliver performance, which is maybe a surprise to a few people.

I think there's also been a fair amount of investment, like you said, along the lines that you just talked about. You have the long-term targets out there, returning to revenue growth, 30% margins by 2027. I guess how are you thinking about that path? Because if you look at the P&L, sales and marketing as a percent of revenue up a little bit, R&D as a percent of revenue up a little bit, suggest that you're investing. When do you kind of see that start to be leveraging, see that path to 30% operating margin?

Yes. No, it's a really good question I get asked a lot. The growth is good because we returned to growth last year after 5 or 6 years of declining growth. So that was quite a pivotal moment, right? And -- but then the worry is, I can understand is are you going to just spend all the money generating revenue and use it in expenses and not drop anything to the bottom line. So what I've been telling people is we'll get to 30%, but it will not be linear because the reason it won't be is we have so much opportunity right in front of us. We have AUSTEDO, AJOVY, UZEDY. We have a pipeline that is in Phase III that we want to get to the market as quick as possible to drive growth. So we have to be really mindful about investing and executing. Because when they happen, when -- obviously, olanzapine, we hope to get to the market in the start of '26. UZEDY is getting good momentum. AUSTEDO continues to perform. With those investments, you get a return. So that's what we're doing. We're investing. We're still improving our bottom line, but it's not that linear. It will be more of a slower growth and then an acceleration towards '27 because that lines up with as we launch our innovative products, it lines up with as we start to get our generics business in the U.S. performing more consistently. So I think all the reasons to believe are there and because we execute -- and we keep executing, I think people are starting to understand that and understand that if we don't invest, then we're leaving, I think, future mid- to long-term growth -- possible growth on the table.

Yes. And I guess one more high-level one and then getting into some of the specific products. But you talked about having a pretty robust pipeline in Phase III right now. I guess how do you think about the future? You obviously have other assets in the pipeline. How do you think about either trying to accelerate those or maybe adding additional assets into the pipeline and that being a source of investment or allocation of resources.

Yes. So look, I mean, when I came to Teva, I mean, I did quite a bit of due diligence from the outside. And -- but I didn't see all the pipeline because we didn't really talk about it much. And when I came, I was pretty surprised at -- okay, it's a -- it's low in quantity, but high in quality. And when you think about olanzapine, ICS/SABA, which now people are talking about a lot because obviously, AstraZeneca have launched their TL1A, we can talk a lot about that; IL-15; the PD-1 IL-2; MSA. So we've got a lot in there that I think has a high probability of succeeding and we can talk about why I think that. But then we want to do, we want to supplement that with -- and we're looking -- continuously, we have been looking for a year at opportunities to in-license and we did a biologic design till end of last year or maybe start of this year, I can't remember, to bring an antibody for multiple indications, and we'll keep doing that. We probably want to build in-license in more late stage because we want to drive revenue top and bottom line and -- but we are also starting to look at build-out the pipeline where we think we understand the opportunity that's there, but it won't be excessive. The way I think about our innovative business, it's -- I'm really excited about it because it is -- the business is growing very fast with products which have the potential to, I think, continue that growth. It will be supplemented by new ones being launched in the short term. So '26 of olanzapine; '26, '27 with ICS/SABA; and you got the TL1A; then the IL-15. So there's reason to be to not be a patent cliff anywhere on the horizon. And because of our size of our innovative business, as we add these products to it, they can drive significant growth because maybe our weaknesses is our strength. We don't have a huge base business of innovation -- innovative business. So when you put in AUSTEDO, UZEDY and AJOVY on top of that and you grow it, it really accelerates the top line, which, by the way, from a gross margin point of view, falls down really nicely.

And you've talked about the kind of foundation that the company has in CNS. Is that sort of where you would look to kind of further bolster the pipeline? And -- or are there other areas where you feel like it could be complementary to some of the assets that you currently have?

Yes. So on the whole, we've got a very clear BD strategy, what we're going after, which is mainly CNS and immunology because then we can leverage the infrastructure we have, both the capability in research and development and the capability in our go-to-market model. So obviously, with AUSTEDO and UZEDY and AJOVY, there's a lot of synergies there, and we can still have capacity to put more products into that. So that's the sweet spot. And obviously, the same is true to be with immunology because with TL1A, we'll have IL-15 behind it. That's not about it. But we don't want to be so restricted to that. We have a lot of capability in Teva that is sort of, I would say, a bit agnostic. Our supply chain of our managed markets, I mean we are a huge supply of medicine. So we can really leverage that. And so -- because of that, I think that gives us a slight bit of freedom. Obviously, in CNS and immunology, we have a huge opportunity with so many diseases. I'd like to think we can build on that. But we'll always be a bit speculative outside that as well.

I wanted to ask about olanzapine, maybe go through some of the key products now. So I guess what do you kind of feel like will help move the market to long-acting injectables? I mean -- because it feels like there's kind of broad acknowledgment that it should help compliance, and that's very beneficial to patients. But the market has been a little bit slow to move. I don't know if you kind of have a sense of what the current kind of hesitation is from providers, whether it's saving it for, maybe the more severe patients. I'd be just curious to get your perspective there. Because I think if you look at some other markets in Europe, penetration of long-acting injectables is a lot higher, like 40%, 50%. Do you think the U.S. can never kind of get towards that?

I don't know. It's where we use Europe as an example. The way I sort of -- I think about it, I think it can move in that direction. The question is, does it -- does it need to, from our perspective? I always think about what you can change and what you can control. And look, so firstly, I think with olanzapine, the great thing is there is no long-acting olanzapine that's used. So there's nothing. So if olanzapine is used or long-acting in the same way that the long-acting of the other antipsychotics are used. So that market is pretty big for one product. And so for me, if it gets to the Europe, that's amazing. If it doesn't, then this is still a very meaningful product for us to drive growth. And because its profile is so attractive -- potentially attractive, we have to wait until a full safety database gets locked, but so far, we haven't seen any PDSS. But I think that itself can be a significant driver for us. But what is interesting, is UZEDY, which we launched last year, which in a way is -- people thought you've moved UZEDY, a long-acting risperidone, to a market that has long-acting risperidone. So how are you going to really differentiate. And the 2 things which we thought were important, which are -- because we use this technology [indiscernible] technology. When you inject it subcu for one and it aggregates straight away, and it allows you to get to therapeutic dose within 6 to 24 hours. We thought that was an important attribute, but it's only when we spoke to physicians that we realized that a lot of these physicians are dealing with people have breakthrough episodes. And so when they see them, they need to get them under control pretty quickly. If they don't, they have to hospitalize them or they're trying to juggle an oral supplement of other medications to -- they're using more the other long-acting and then they see them every day or every few days to see, do I get it right? That's a concern. And what we've realized is the fact that we can get therapeutic within 24 hours means they can -- 6 to 24 hours, they can inject it and they either keep them throughout the day or they can allow the patient to go home really quickly for them from a -- just being able to manage their practice. That's a huge advantage. So I think that's why we've seen UZEDY gaining some good momentum. So I think it just shows, maybe the products that are on offer in the past weren't meeting all the needs of the physicians and the patients. So with these 2 products, maybe we could grow the long-acting. The way we think about it at Teva, and you'll hear this a lot from me, is we don't look to revolutionize things that we don't control too much because otherwise, the question you'll ask me is, why do you think you can move the long-acting to the level of Europe. And I'll have to come up with some idea and you'll go "Well, okay, it sounds good, but no one's ever done it. So why would you do it?" So I think what we're trying to be is, can we achieve our '27 goals and beyond by not fundamentally changing the dynamics of some of the markets we're in. And we talk about generics. I do not believe pricing will -- we're not planning for pricing to get better in generics for it to allow us to hit our numbers. Pricing will do whatever it does, and we'll still hit our numbers. So I think the same way with the long acting. But I think it's really exciting, and I think it's interesting to go back to your opening remarks. I thought olanzapine was exciting in May 2023. And it was only when we announced the Phase III data that people decided to believe, maybe more. Maybe that was because they just didn't believe Teva could develop an innovative product. And that's the sort of skepticism we're having to overcome, which is fine, and we'll overcome it.

Yes. TL1A, I think there's another one where there's been a lot of kind of debate on sort of what the future opportunity is. I think you kind of talked about potentially being best-in-class with potency and selectivity of your drug versus others that are out there. I guess, maybe how do you see your drug positioned relative to the competition? And you guys have kind of taken this like all-comers approach? Why do you think that was sort of the right way to go about development?

So look, I think the reason why people ask us a lot about -- so first, let me go back. So we developed our first TL1A about 12 years ago internally, and this is our third TL1A. So I think it's important because it goes to show that we kept improving it, and we understand this target very well. Because of that, we kept improving it to make sure it had more specificity, selectivity and neutralizing antibodies because we thought those were important from dose-dose frequency and patient population. Neutralized antibodies, I think, is a very important part, which people don't talk about. Because I know from other diseases I've operated in, physicians will use something with a low level of neutralizing antibodies because if it doesn't work, they want to be able to move on to another therapy. They want to give that optionality to the patient. So I think -- and the other reason why it's been talked about is because people said, we are way behind everybody. And I always answer that in the same way, which is, it doesn't matter where you are in the race, it's where you are at the end of the race that's important. And we're trying to predict the end of the race a long time away. And I'll say, look, are they ahead, maybe they are ahead? I don't know. I mean, it's not of those where you're watching the scoreboard and you see the distance between the Grand Prix cars. But to me, I thought I'd mention that from my own Grand Prix. I think [indiscernible] by an English person as well. But -- so for me, it's about are we executing that study really fast? And we are. And we've done full agreement. We have the interim analysis. Second part of this year, we'll move into Phase III with the FDA approval first half of next year. I don't think that's going to put us that far behind. And because we've designed our study on the basis that I think we are capturing UC and CD, we are taking all comers that will give us potentially an advantage on time going forward. But if it all doesn't and we do end up being coming to market third, then, one is how far behind you? And if it's 6 months, a year, in my experience, 30 years, that makes no difference. And if you come to the market and you're differentiated, then I think it doesn't make much difference. I mean -- and I do remind because I'm sure we will talk about HUMIRA. HUMIRA, I think, was going to the market by quite a long way. And I'm not saying we can emulate HUMIRA. So don't forecast that in your models, please. But I think it just goes to show, and I was -- back in the day launched TECFIDERA, which was late to the market there, I think from an [indiscernible] point of view, but it's how you put the market together, how you prepare yourself and the segmentation and the positioning. So I feel very confident about it. Look, firstly, we look at the efficacy data, we've got to improve that profile. And once we do, I think we've got a great partner in Sanofi that allows us to go to the market with a real intent. This is not -- we'll try and do our best. By then, I think they'll want to see some revenue growth as well because of their portfolio aging a bit.

And when you say end of the race, that's FDA approval as end of the race? Or you just kind of need to be around that finish line at the same time. It's really what happens after that?

Yes. I think that's what I think for that. And then, look, I would say -- the other thing I'd say is, who's first and the third indication, and the fourth indication and the fifth indication. So...

Yes, makes sense. ICS/SABA hasn't been talked about a lot previously. We'll take it -- we will it take to kind of make it that gem that's not hidden anymore. I kind of feel like you kind of talked about this as a new standard of care. AstraZeneca as a product, relatively small so far. It kind of remains to be seen, but we started to see a pickup in scripts for their product. Do you kind of feel like you're starting to see that momentum?

So look, it's an interesting one. So I just previously said, that getting close to being first to market is the best thing and we want to catch up with it. And in this one, it's a bit of a strange one because AstraZeneca going ahead is probably another bad thing for us. There's a couple of reasons why like ICS/SABA is one, I think it has a high POS to get through the clinic. I think everybody would agree with that. And we have a differentiation and we are going to have a pediatric label and 25% of the patients are pediatric. 10 million -- the guidelines in America are that 10 million people should be on the combination. And so that's a market that has to be creative. So I think having AstraZeneca, who has also a very rich history in respiratory has gone out there and they're really, I think, gone at it. And so they will help, I think, create the awareness in the market and I think it will come in. I'd like us still to be closer, which is why we're trying to move it through the clinic quicker. But we are about to come to you and say, okay, put in children. We're the only one that's indicated. And I think we will have -- you speak to Eric Hughes, my head of R&D and CMO, our device is a very simple device. It's the one that kids use, and it's very easy to use because we've been making devices for 30 years. So I think there'll be also a patient population of people who maybe find the AZ one a bit more complicated. And so we'll pick up that one. So I like that because that potentially kicks into our growth around '27. Maybe even get it earlier. It's about how quickly we move it through the clinic. But it's a market that I think will become a big market because the way I communicate it is, it's million patients. If only 2 million to 3 million move on to these therapies, then it's a significant value market. Now why would only 2 to 3 million move out of 10 million, if it's guidelines? I think it will probably follow what you see in Europe, which is most people do move across pretty quickly. So I think that's exciting, and we'll talk more about that. But right now, our focus is we've got to execute the clinical trial in the clinic. These are not easy studies to do in children. We're going to move it fast, which is one of the reasons why we did the deal in partnership with Launch Therapeutics and Abingworth because: one, we want to go faster. We probably don't want to have any constraints on money and expenses which we talked about. But also Launch Therapeutics have skills and competency and experience in recruiting in ESMA study. So we want to leverage that because we want to move fast. But the thing about what's been going on at Teva in the last year is we were really focused. And so I follow the recruitment of all the Phase III studies every 2 weeks, and I speak to the team every 2 weeks. And so that creates a really galvanized company who realizes that we don't sort of put a slide up and go, yes, we're a bit behind, but this is quite normal. Well, we want to accelerate everything. So how do we -- everything is about beating the curve, beating recruitment, and that's a mentality that's starting to really live in Teva. And I think that gives me a lot of confidence about how we keep moving forward on executing this pipeline, which I think people are still skeptical that we can actually just execute it. I think we're showing. We probably executed olanzapine in schizophrenia faster than any company. I mean I don't know, I haven't looked at the data on that, but everybody is surprised because schizophrenia is really hard to improve. We've done it 9 months ahead. People said, how do you do that? We had no experience in it? So we had a bit with UZEDY, but we build capability, and we just focused on it and we just made sure it had to happen. And when you do that, it's remarkable. We don't have that luxury of having 20 things in Phase III.

Just a lot more disciplined and targeted really.

Yes.

Yes. I guess another product where I think there's been a pretty significant turnaround is AUSTEDO, too. Can you maybe just talk about what's driven the reacceleration in that growth and kind of made a ton of progress. So far $1 billion plus to go to get to your 2027 target. What's the key to kind of achieving that?

Do you think I hit the target?

We do actually.

Yes. Good. Believer. Thank you. So what we've done is it's the same thing, growth focus. We saw the opportunity. We understood quite quickly because obviously, in my background, there's a little bit of specialty in the U.S., is what's it going to take to realize that opportunity? What does that plan involve? What resources? What capability? Can we execute? And then I'm a big believer in you work back. So when I started last year, I said to the team, we're going to go for $1.2 billion. That's what we're going to go for. And they did want to do that. And I said, let's make sure we get the resources, let's build the plan, and let's just go for it. And I think so part of it's about setting targets and understanding and building plans to hit those targets. And obviously, once we hit the $1.2 billion internally, people start to believe, okay, and we build muscle, we build capability, we build belief, we build ambition, and those are really important in the company. And so now going after the target we set this year, we're very focused on that and delivering that. And the $2.5 billion is something the company absolutely believes they can do. So that's the focus. And obviously, I spend a lot of time on it. We measure a lot of things. We have a big believer in what measure gets done, but we measure, I say a lot of things on our pillars. We measure everything, every month of how we're executing, and there are not many critical things. So AUSTEDO, UZEDY and AJOVY are the critical things we measure on Pillar 1 and Pillar 2. It's our Phase III and Phase II. We measure the equivalent of those. And so that discipline on AUSTEDO, I think what we've shown is Teva does have a legacy of innovation. I mean COPAXONE, I was at Biogen a long time, and Teva were annoyingly good at selling COPAXONE, really good. So that's still in the DNA. And I think with AUSTEDO, we've pulled it out and we've sort of gone back to that, and we can be a leader in this. We can be good to apply the resources but with resources go expectation and responsibility to deliver. So it's not free money. If you get the money, you got to deliver. And so there's a performance-based culture that's really being built there now, which is -- we understand the responsibility we have, the team in the U.S. and selling AUSTEDO, and we need to deliver on it. And when you get a galvanized team focus like that, these things happen, and I think it has happened really quickly and surprised people.

And you're starting DTC advertising. What type of -- is there any way to frame like the potential lift from that just in terms of awareness and like what that could lead to down the line?

Well, it's just sort of part of the armamentarium you use, and we started that in January. The way I think about AUSTEDO, and I obviously had to convince people that the '27 target was doable because everybody said it was ridiculous. You'll never hit that and we have modeled it, and I personally have modeled it everything. Because if we put a number out there and we don't hit it, then it's not going to be good. So when you think about it, there's a huge untreated patient population of people who suffer from tardive dyskinesia. So part of it is getting those to get prescribed. But then there's so many other levers we can pull. How many of those are prescribed end up on therapy. So how many drop out before they get therapy? How many start on therapy, don't titrate to the optimal dose? They're down to suboptimal and then they drop out or they're just down suboptimal. How many titrate up, get on the optimal dose, but then don't adhere or drop out. And we put programs at every single step of which we didn't have before. So yes, DTC fills, we have more patients coming to the office and AUSTEDO is getting prescribed for more. But then as they come through, we've got to make sure they get on the right dose. They get the titration pack. They stay on it. They are part of the adherence programs. We partnered with specialty pharmacy to help on that. So we're pulling in a lot of the levers, and all of those levers, by the way, not all of them are at sort of optimum because we started them last year and sales force have increased, but that's now running, I think, at a high level. But some of the other things I've just described, we can improve those year-on-year.

Yes. maybe wanted to go over to biosimilars. I think that's been another area of surprise, being relatively late to the market with HUMIRA. But I think having that relationship with Evernorth and Cigna for the unbranded product, I guess. Can you talk about maybe just what your expectations are around kind of pace of uptake. I think that their strategy has kind of been -- their clients will tell them kind of what sort of formulary they want. So I guess what are your expectations for how many people might adopt or how many of their clients might adopt, that unbranded biosimilar in a preferred position as you think about just the general uptake of biosimilar Humira?

I don't know.

Or when do you get that visibility?

Yes, no. It is like I don't know, like I don't want to pretend I do know. Look, I think we said on the Pivot to Growth strategy. Our biosimilars strategy was bringing as many biosimilars to the market as we can, but be mindful about how much capital we invest to do that because the future looks good, but when it actually happen, we're not sure. So -- but we're very sure about some other aspects where we can allocate capital. So I think the world has changed dramatically, it seems, for biosimilars, Humira to last year to this year. But I think it's still going to play out. So I think it's a lot more positive, but it still has to play out. It has to go through, I think, the whole value chain on a larger scale. But it looks promising. And I think we have an opportunity to play in all of that despite the fact that we're late because I think we have a great product, we have interchangeability. So there's some things that still hold true. So I feel optimistic, but until we start to get some data points, then these are great conversations. We're having a huge amount of interest, but that has to be contracted and then executed. And once again, I think I'm always measured in this because I think the biosimilars strategy we have is really good for the next few years because it will pay out well. But to specifically say, for a quarter or 2, what's going to play now right at the start of this journey, I think what I'd say is it's too hard to call. And for us, it -- we're super focused on maximizing it like absolutely, but we're not reliant on it to hit our numbers. So to hit our 2027 numbers, we're expecting the market to be more measured if it does to really start to open up, and that's great for us. But we go after it as if it's our life depends on it, but we don't -- we can't control every single aspect of that.

So I guess is that something that kind of happens with these annual contracting cycles where payers make formulary decisions and just over time, over that multiyear period, you kind of just see the biosimilar adoption build and that should be...

I think it's probably more dynamic than that. Look, I think we've seen with the private label. People are trying to take control now. It's interesting what it's going to play out. My view is they've gone from this. I live off the rebate, which, by the way, I negotiate. So I can't always control. So I mean, if you're trying to plan 5 years, do you plan the same rebate -- a bigger rebate? And when the point comes, they don't give you the rebate. So I think what I've seen with biosimilars is actually we can take control and we can really manage this. And part of it is private label, part of it is using interchangeability, the pharmacy can switch. There's lots of aspect. But I think for me, it comes back to I think they want more control. And they realize this is an opportunity to drive more control, more predictability and more value. Whether they can execute it, and if they can, then I think they start to follow Europe. And Europe executes really well on this, but the margins stay really well because everybody has to be sustainable. So if the U.S. replicates Europe on this one, then I think that would be good for us, and it would be good for the health care system in the U.S., and it would be good for payers and patients and policyholders, but a long way to go.

Do you think this can move faster with the drug like STELARA, where you don't have this initial hesitation. They are, I think, kind of force switching or adopting these low list biosimilars. So maybe like for future biosimilars that come to market [Technical Difficulty] for over 2 years, like maybe [Technical Difficulty].

We saw in Europe, where we launched -- I've been part of launching a lot of biosimilars [Technical Difficulty] seems like I'm working out the second one. And then now, I mean, we're launching 6 before '27. So there's a lot coming. So payers and the PBMs need to get their minds to get it right because there's a huge amount here, what do you want to do. And I don't think they will be playing the same playbook as they played with Humira in '23, in '24, or '25, or '26, or '27. Yes, that's going to evolve. So absolutely, I think it will change.

Yes. And I guess one last question on this. There's pretty significant changes being made to the Part D program in Medicare that increases plan liability that [Technical Difficulty] adoption of biosimilars as payers don't have that same rebate incentive that they had in the past. And they want to slow people's progression through the Part D benefit. Do you think that, that will help kind of push biosimilar adoption further along, kind of a more step change type of...

It potentially could. I think we're still trying to understand how all of these issues play out because it's quite a dynamic situation with that on the IRA. So I think we'll see. But where we constantly look at it and model is advantages and disadvantages. Because advantage is one part of our business, so is disadvantage. But it hasn't really become super crystal how that's going to play out. So we've got to be a bit of a job.

So we've gone almost the entire time without talking about generics. So maybe just hit that.

What difference a year makes. More debt, do you want to throw in a bit of debt?

Yes. You talked about not assuming improvement in generics. Maybe what's the baseline assumption when you say that in terms of what's baked into the long-term plan.

So what we did. So firstly, on our generics business, which the world leader in generics. So we're very proud. We're number one. And outside the U.S., which is 65% of our business, we grow mid-single digit to high double digit every year, is super profitable, it's great. We had a challenge with the U.S. business, why we're talking about it. And -- but we have everything to drive that business to long-term growth because we have a great pipeline. We have good manufacturing, a good go-to-market model. We just need to get them more working well together, and that's what we're working on. Now pricing, everybody keeps asking whether the pricing is going to get better. So like a discussion on sort of inflation in the Fed, isn't it? Expecting to reduce it? What's inflation going to be? So for me, pricing is something that we did never predict as a positive. So if you look at our growth and we launched it last year, we said generics would contribute very, very small amount to our growth to '27. [Technical Difficulty] our U.S. business quickly, and we don't know what the market was going to do. Now we believe the only way to pricing is all about competition. I can't control competition. Anyway I can control pricing, as I launch new products, which have less competition. I would improve manufacturing cost of goods to offset some of the price erosion with this improvement. Those are the things we focus on. Will the world get better? I don't know if I was one of the purchasers, I would not. I would keep trying to drive down prices as much [Technical Difficulty] make more money? [Technical Difficulty] the years where a quarter is where it's better, we'll take that. But I don't think I'll ever -- I never say this actually. I think I'm always told not to say this, but I don't think I'll ever say we didn't hit our targets because the pricing in the U.S. went down so much, too much, I won't say that.

But I guess on the flip side, do you feel like there have been structural changes to the...

No.

No.

No, everybody keeps asking me that. No. The 3 buyers are still living ferociously hand to mouth and [indiscernible] the least price. Some quarters, less people come in to the market with new molecules, some quarters more come in. But to look at that in a positive way, I think for us, we think it's dangerous. We just assume it's going to be super hard every year. And if it's not, we'll take it, but if it is, we've prepared for it. And we don't make excuses internally. We say, well, we make -- we need to make our stuff cheaper every year, and we should launch better every year. If we do those, we can handle whatever comes with it.

Great. Well, that's all the time we had. Richard, thanks so much. Really appreciate it.

I really appreciate it. Thanks for your time.