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

Get going with our next company presenter at the BofA Healthcare Conference here in London. Pleased to be introducing Teva Pharmaceuticals and CEO, Richard Francis. My name is Jason Gerberry. I'm one of the SMID-cap biotech and spec pharma analyst here at BofA.

So Richard, thanks for joining us. It's been an interesting year and some interesting events over the next 12 to 18 months, which we'll get into. But maybe just to kick things off, if you can just talk a little bit about capital allocation, right? It's kind of central to what Teva's doing. Net debt paydown is obviously very important but you also have a very interesting innovative new product story. And so how do you keep feeding that new product story? Do you feel like you have enough in-house to kind of feed the beast, so to speak, or how you kind of juggle that balance, right, of finding assets that maybe a back loaded dollar that you can put into your engine and keep feeding the engine and that new product flow?

So great question. firstly to Jason. Thank you for inviting us here. What a great opening question. If I had asked you to pick one, I would pick that one to ask me because it sums up everything that is going on in Teva. The fact that your first question is about how do you feed the innovative piece from when we spoke 2 years ago, it shows you the progress we've made in Teva. And so I think the last 12 months, we've shown that the innovative part of our portfolio is now getting to a critical [indiscernible] where it's making a meaningful difference. And I think I highlight to people that in Q2, our generics business declined 2%. I can talk about the fact there's prior year comparisons and stuff, but despite that, we grew our innovative business 27%, and that grew our gross margin, grew our EBITDA, grew our operating margin and grew our EPS. And I think when the math starts to play like that, you know that the innovative business now is starting to get to a size that it is meaningfully different and is driving this transition. Now the good thing is we have so much more to come, and we've got some more -- obviously, we think AUSTEDO is going to go at $3 billion peak. We think our schizophrenia franchise is going to be $1.5 billion to $2 billion. We've got [indiscernible] . So we have a lot of products coming through in the short term, which will keep driving that growth. So when it comes to capital allocation, we are really, really thoughtful about that. And part of that is how do we feed the beast, as you say. Part of that is about making sure we've always streamlined our business from capital allocation to our generics business. And so we reduced our pipeline from covering every drug that comes on patent to 65% of drugs that come off patent. Now that basically covers the majority of value anyway. So it's all diminishing returns. So the extra 35% doesn't really give a return, and it compromises the ability to execute on the products you want to launch in generics. So I think we reduced the investment there in R&D. We've allocated that to innovation. And then we have this operational efficiency drive modernization of Teva, where we're taking a significant amount of cost out of the business, $700 million, and that is to help keep driving the right allocation to innovation. The second thing is as we grow the top line, which we're doing, as we grow the in business, although we're keeping our investments relatively flat from a percentage of revenue because our revenue is growing, we can actually still increase our absolute dollars. And then the final point is BD. And so we think about capital allocation, and we do want to do BD because we think we're really good at selling innovative products. So we want more. But to your point, we want them to be thoughtful and allocated capital. So they need to be derisked and they need to be able to be synergistic to our infrastructure. So that way, we can get margin improvement and keep on our margin improvement journey. So those things we're doing, I think we've been really disciplined in how we do that. And I think there's a lot more to come in the next, I'd say, 12, 24, 36 months because of the olanzapine launch next year, the momentum we have in UZEDY, the momentum we have in AUSTEDO, the renewed momentum we have in AJOVY. So yes, I think it's an exciting time. I think we've moved from maybe nonbelievers. Now we're moving into the people who believe that Teva is going to transition to a biopharma company. And I think soon enough, we'll be there.

What's going on in China right now with the biotech scene, an opportunity for Teva because there is an opportunity to get assets that are more derisked, right, that perhaps we were seeing structured deals or lower upfronts versus buying a public U.S. biotech company that's further along but more expensive. And so I just wonder with kind of how you try to balance your capital allocation objectives, are you looking in China? Do you feel like that's an opportunity to perhaps bolster the pipeline externally?

Absolutely. I think you've hit the nail on the head. I mean, firstly, the good thing about Teva becoming a innovative company is we don't have deep traditions, the ways of doing things. So our R&D approach is, firstly, we have a small arm, not bigger. We have a small big D. And we're agnostic as to where the quality of the science of the products come from. And so we're not -- it has to be all in-house. And so to China, absolutely. And I think you saw the deal we did with Fosun on our PD-1 IL-2 where we parted with the to do the early stage clinical development, which means we get data really fast. It doesn't cost us anything, and we could utilize that data to either refine our own clinical programs in the West or we partner that asset. So that's just a clever way we do it, which, by the way, no one else does because maybe people have too big internally themselves, they want to use that. But yes, I mean, my head of R&D and my BD guys were over in China in August, exactly doing that because for us, it's about what you've said is what is the right asset at the right price, the right capital allocation? And maybe that's the West Coast, maybe that's the East Coast, maybe that's in Europe, maybe that's in China. And right now, China looks to be high quality, good value, but it has to be good value over because we're very mindful about capital.

Okay. I can't leave the capital allocation discussion without asking the TAPI question. I mean people would want me to ask the question, right? So I ask the question, 3Q go, no-go? So anything you can offer on that topic.

Covered it really well. The one thing on capital allocation, I would say, by the way, is paying down debt because it's I need to ask it. I'm going to be a bit of a politician and give you an answer you didn't ask for. So we're really good at paying down our debt, right? And we're going to be investment grade, we think, second half of next year. But as we pay down debt, we're going to free up $400 million of cash by 2027, just a matter, we just don't pay interest on. So $400 million more cash in 2027. There's little things in Teva that if you look in the detail, you realize that's going to happen, that's going to happen. And I think it as an investor said to me, $400 million of cash in '27 is like having an asset which generates $1.5 billion sales. So those are just interesting dynamics. But not to deflect on the Tapi, the time lines are the same, and we'll have.

And second half, IG is feasible without Tapi, correct? Okay. And so a big piece of that...

It's important to understand we do not need Tapi for the journey we're on.

So another big piece of this is keeping that EBITDA up slightly or flat, right, in 2026, and you've talked a lot about this and the Revlimid dynamics coming off and how you phrase some of that. And some of that is on the cost of goods side, right, improvement of cost of goods and your cost efficiency plan, and I think it's $400 or so plus improvement in cost of goods that would flow through. Can you maybe share a little more detail how you improve your cost of goods in that short period of time? Is it coming more on the people side? Is it more on the procurement side? Maybe if you can help people because I think that's the thing I think investors struggle with is it's maybe a little bit more straightforward on the SG&A side, but on COGS, it's a little murkier.

Yes, it is. So firstly, we committed to save $700 million by 2027, 2/3 of that will come end of 2026. We're on track to do that. We will do that. But to your point, some of that is COGS and some of that is the COGS takes longer, so we'll have some COGS come through next year, the majority of COGS come through in '27. That's a 3-year program. And my last company, I did a COGS improvement plan. So I know what it looks like and how long it takes. And so what we've done at Teva, it goes back to the opportunity we have. We have -- after the Actavis acquisition, we had about 90 sites. We're down to 54. We spent all the time closing sites, selling sites, but we didn't make the sites more efficient. And now we're driving an efficiency program. So the opportunity there is significant. And so we look at what we need to do. My comfort level around the COGS improvement we're going to have is high because one I've done those before. And two, I've normally done them in organizations which have always had COGS improvement. We haven't reduced our COGS in the years I've been in. So going forward, we will start to. So it will be the things driving operational efficiency, running our sites with less people. And all those plans are already in place. And so improving the efficiency of formulations of MS&T, all the things that is the standard operational excellence, Six Sigma that we haven't applied, we're applying those. Now by the way, we've done 6 programs already. We've increased that to 14 programs. It's called TLMS drive more efficiency site, which line they are see the productivity improvements. So I can see that coming through now. The majority of that's in '27, we get some second half of '26. So I think that is something I feel comfortable about. One thing we haven't though factored in is as you reduce COGS, theoretically, you stay more competitive in certain molecules than contracts you'd otherwise get out of. And so we don't factor that into our forward-looking forecast. We just say we have a COGS improvement that improves our gross margin. That's it. Once again, there's an argument for tenders we get involved in some of those tenders we don't necessarily bid for because of the lack of COGS improvement. So I think there's a lot more to come there. By the way, it doesn't end in '27. Our COGS improvement program goes on every year for. We just didn't have it for the last 7 years.

And so as we think about '26, is it primarily continued growth of brands, cost efficiencies, and that's going to be the primary drivers to offset the loss of Revlimid? Or are there anything you'd flag in the new product pipeline that maybe investors underappreciate. We talk less and less about the generics, but nonetheless, there can be some surprise meaningful new product contributors either on the generic or biosimilar side?

Broadly speaking, I think you're right. I can talk about some things which could be interesting, but don't get we're losing a big generic product in generic Revlimid. And so how we build off that is obviously continued momentum of our innovative business. And obviously, we have the cost efficiency program. So that's the reason why we can offset all the profit loss that we get from generic Revlimid, which means why we grow our EBITDA and confident in doing that. But I do think we have -- obviously, we have olanzapine, which we will launch next year, which could be something which adds to that. The caveat I will give to that is we're very, very excited and optimistic about olanzapine when we launch it. The one area that we will not do is we will not discount Tapi to get access. We will hold the line as we did with UZEDY. That may mean that we have a lot of patients go on at the end of next year, but maybe they're not all commercial patients. But we see olanzapine as a big growth driver long term, we want to hold the right value proposition as we did with UZEDY. So I say that could be something which plays out well for us, but we won't move to have a Q4 or second half next year with olanzapine just to make next year an interesting one because you're paying for '27, '28, '29. What I do think is because we've held the line with UZEDY, with payers, and they've seen the value of that, then I think they probably know we're going to hold the line with olanzapine. I'd like to think that helps them, and we've had a better relationship now come to the table and say, okay, we need olanzapine. We need a long-acting olanzapine and so that gets to the table early, but we'll see.

Maybe shifting gears to your branded business and AUSTEDO. So last quarter, your competitor called out a big step-up in their gross to net deductions for their products to a 2-player market, right, which caused investors to wonder oh, it's just like a downward race to the bottom on net pricing. My understanding is Teva was ahead in contracting its business and your competitors have caught up in contracting. There was obviously some competitive differences in products that are now neutralized and it's seeming like a 50-50-ish kind of market that the outlook is really now on kind of category grow more broadly into an underpenetrated market. But wondering if you have a different view just on how that category is shaping up irrespective of IRA, and we can get into that. But like in terms of just sort of the current net pricing dynamics, I know you keep talking about this is more of a category growth story than anything.

So look, I think you summed it really well. I think it's a category growth story, slightly different with Teva. So I think for us, it's all about growing the category. The nuance in that, which I see is becoming a big nuance is as we've launched XR, more and more patients are going to XR. As more patients go on to XR, they end up with a more -- a higher average dose and a higher average dose that leads to a change in revenue per patient, also led to changes in compliance and adherence that's probably more efficacious. So I think that's the nuance with us. But I think yes, it's a level playing field. For us, we've consistently said this is about growing the category, making sure patients on the right dose, the right compliance programs with the right adherence. If we keep doing that, this product will go above $3 billion. Question about that.

So you talked about fewer -- it compresses scripts, right, but you get more value per script with the higher dose when you go to XR? Is that...

Yes. So on BID, when you move, if a patient is on BID and they go through titration and on to drug, if a patient goes to XR starts on XR goes titration on to drug, there's 4 -- I think 4 or 5 less scripts in that journey. So the script data stepped down significantly, the dynamics, which is why we start also to show the milligrams per patient because that gives an idea of that's growing, which shows the importance of XR, but it also shows that's helping drive revenue growth as well.

And where are we in that journey, right? Because I think XR is about 60% maybe of the total business now. So is that continues to shift. Is that dynamic, just going to muddy the analysis of growth when you look at scripts and trying to assess kind of where patients are on a milligram basis. Is there a tailwind still for mix as well?

So look, firstly, I don't think my -- no, it doesn't -- we'll actually get to a point where the steady state as we have more and more patients go on XR, which, to your point, it's 60% that's an older data point of new patients on XR, haven't seen the latest one. So as that happens, we'll get to a steady state where the majority of are XR. And so the triangulation between TRx milligrams, the revenue will become an easier one to forecast. We're in that transition period now, which is probably where people are. But I would say, going back to -- it's going to be driven by new patients, new patients titrated on a more optimal dose having a better compliance and adherence program. One of the things I say to people, which is why I'm so confident about AUSTEDO is when we started talking 2 years ago, AUSTEDO had peak sales of $1.4 billion in everybody's forecast, and we were considered to not be very good at what we do, which is probably fair. All the things I talked about, whether it's targeting segmentation, whether it's compliance adherence programs, whether it's specialty pharmacy contracts, all the things we put those in the last 18 months. They are not. They're not like where I think they should be. So just if we keep executing regardless of what the environment does, we will keep getting better. And I see us getting better and better and better for a number of years. And don't forget, I was at Biogen for 14 years driving these programs, right? We're not at the level we can be on patient adherence, our patient services taking a script, script or on drug. Patients fall out, they get a script and then get on drug. We have so many areas of this leaky bucket, as I call it to fill that make me think this product has a huge runway. And then don't forget, when you have a patient that comes off therapy, it's not too dissimilar to my prior experience in MS. They always because you have an episode again and then you seek treatment. So there's a cycle. So I think there's a lot of opportunity here. We just got to get -- keep getting better and we keep getting better. And that's why I think the ban will keep growing.

So I think your out-year target of $3 billion, even beyond 2027, adding roughly an incremental billion of reps, and absorbing IRA along the way, right? Like is that largely -- is the battle at the psychiatrist? Because I imagine psychiatrist sees a lot of these patients who got atypical antipsychotics over their lifetime, and then the patients most likely to have these movement disorders, right? So is that -- you layer on a presence with your LAIs? Is it really about fostering that relationship with psychiatrists and getting them and treat more?

Yes, that's a big part of it. And then again, we were at the psychiatric conferences a while ago, it's amazing. We're now considered the #1 psychiatric company, which is extraordinary because I suppose we're going to have 3 products, in that meaningful product. So yes, that's a big part of it. But go back to the other big part of it is we still don't have every patient going through the titration. So that's opportunity. We still have every patient going through our patient services, that's opportunity. We don't have every patient on an adherence and compliance program. That's an opportunity. So for me, the psychiatry is definitely one, and we're educating and we're expanding our use of psychiatrists because we realize actually more patients in what we call the lower decile doctors. But all the other ones. So when I look at the patient model and the revenue model, I go through all of these statements, I say, okay, we tighten that by 1%, tighten that 5%, this goes up. And the opportunity we have is significant. Now they get harder to move compliance and adherence from here to here is super hard. But as long as you're incrementally moving that, then -- so for me, it's one of those products where you have a lot of opportunity to grow. Part of it is patients by psychiatrists, but part of it is the work we need to do. And I think we have a lot of good programs in place. And we have -- we built a talented team who are doing things that they had to do at other companies to a high level. So it's not -- we're not feeling our way. We're executing on a plan.

Okay. How are you thinking about LOE given XR, I believe, has maybe some longer-dated IP than the settlement you have on IR, which I believe is like 2032 or 2033 with some other companies. So is that a longer tail? And given that 60% plus on XR now and that will keep going up.

Yes. I mean, look, so XR is 2041. BD is 2033. If you look at the natural progression of how we just do with new patients on XR, 8 years, and I think the majority of patients will be on XR without us doing any programs to help facilitate that direction of travel is there. So I think that's really key. And by the way, that feeds into a comment I have to make is when you look at Teva going forward, we don't have any meaningful LOE and we just have new products we're launching. So it's -- we're in this space that I've never been in my career where we're just constantly launching products, which are meaningful to this company, like massively meaningful on our gross margin. And our LOEs on the horizon is in a time frame that if we keep launching and Duvakitug comes to the market and another indication of Duvakitug, other indication 15 comes to the market in 1 of the 3 or 4 indications, LOEs can be absorbed. And because we won't have a mega -- I mean, I'd love the KEYTRUDA or DUPIXENT, but don't get me wrong. But because we don't have any of those, and I'm already planning out 20, 40, 45. We're long-term plan, okay? So that's what revenue, how do we keep that going? And as we lose products, well, those are the ones we can absorb because we have these coming through. So we're, as I said, a very unique company that I think is not being maybe seen as I see, which is understandable because I look at it every day. But the periods of 30 to 40, just so exciting. I mean, period now to 30 is a game changer. But where we will be in the 30s and how long we'll be there is quite extraordinary.

Okay. And IRA timing is November 1 through November 30. We don't know when within that time frame. It will hopefully it becomes your 3Q call, would be my that would be helpful. It would be helpful. What I wonder is what you'll disclose once it's out I think the last CMS press release just gave us discounts relative to WAC against 2023 levels, right? So it's for that year-over-year, it's relative to 2024 levels. I just wonder how we'll interpret that, how investors will interpret that. So do you plan on offering any sort of additional commentary to interpretability of this? Or is it just, hey, 2027 targets are good? Nothing else to see here, on.

Well, look, we work really hard with yourself and investors to help them understand that their need is build the model, it's about the forecast. And so we want to -- we understand that we want to help that. So we're committed to doing that. At the same time, we don't want to give away a competitive situation in the net price. So we're -- I suppose we're committed to help. So we're going to try and not be crude and say, hey, '25 is done, '27, we're going to hit it or whatever. We'll try and actually help you do that within the confines of I don't want to expose ourselves on a net pricing. So very committed to do that. I heard that a lot. I want to help because one of the things I've realized in this journey on Teva is clearly, I believe in where we're going and other people have lagged that. But I think that's been fair enough because people said, well, how can I -- I can't see in the numbers, how do I model this? How do I model that? And so we've listened and constantly we try and help people do that, and we'll do that in this situation. Just to manage expectation, I just want to thread that needle and not give away something that it is a competitive information that could be detrimental to the company long term.

Yes. Okay. With maybe shifting to the LAIs. Here, you had an update earlier in the week, you've shot through 100% of the target number of injections, I think you have 4,000 or so around versus 3,500 was maybe the FDA number. So was that intentional to overshoot just to give yourself a little added cushion from a regulatory standpoint. Sometimes FDA can default to class labeling, even despite agreements or whatever, and I guess that's like the FDA clear of the FT that we have to sort of live within our business, right? So I'm just kind of curious as you thought about it and the need to maybe have additional safety data to put your best foot forward in that filing?

No. Look, I mean, we -- there's things that happen that didn't always play out. We get more centers involved. We have patients, we have less dropouts and things happen. I think we've ended up with I don't think we intentionally go too far over because obviously, there's a cost base, there's capital. I want to be mindful of how much clinical trial costs. By the way, we think that the FDA thinks that statistically we needed 3,600 to show, we got more. That's helpful. And also we had a previous study, which we also some of that data to show that. So no, it wasn't that. Although that said, if you speak to Eric, [indiscernible] , we're recruiting so fast on that. We're probably going to overrecruit on that. That's not a bad thing because we get exacerbations happen, then we get more exacerbations, we get the data readout quicker. Oman, MSA, over recruiting, but recruiting so fast it probably comes to a point where we probably will end up over recruiting because you don't want to stop patients with that disease coming into a study where they've been lined up to do it. But we try to be quite precise. And we do what the FDA said, we'll have more data, maybe that's more helpful for them, but I think it's quite classic already.

Yes. What do you think the launch of olanzapine LAI looks like, given that you've got UZEDY out there, right? You've had a chance to sort of be in the field with a product that's call it, overlapping, right? Does that give you a leg up? Do you feel like -- I know you've talked a little bit about maybe the UZEDY launch could have been better, but for being more prepared right into that launch. And so now that imagine you're fully prepared for the olanzapine launch, and do you think that, that's an even more robust launch? UZEDY has that done pretty well.

Yes. I mean, look, give me the opportunity to hand I'm not going to -- Yes, olanzapine should be a really good launch. UZEDY has been a good launch and a good recovery. We should have to recover, but we didn't have in place at that time. We just come together as a team. But yes, I mean, it's the same physicians, the same players, the same hospitals, the same hospital D&T committees. We know the landscape. They know who we are. We have credibility with that community. And so we're going in now with an offering where we say 75% of your patients with schizophrenia, we can help you with [indiscernible] RAI. So I think my expectations are we've been planning for this now for olanzapine launch. So 2 years of planning before we launch. That's how it should be study. It's about 2 weeks. But it shows good recovery by the team shows a good product profile, but we want to do that. So look, I think olanzapine, I don't know I'm sticking my neck out but I say it's going to be an excellent product, excellent launch. The caveat I always have is we will not give access at a discount we don't think is fair. And so we'll hold the line if that means we have a slower uptake from a revenue point of view versus a patient point of view, so be it. But physician -- if you do any KOL market research, the physician excitement is high because they know this product. This product is super efficacious. They know UZEDY, they know our technology, so they trust our technology from a long-acting. They know who we are. And we do a lot of studies at clinical sites in the U.S. So I'm definitely leaning into this what it sounds. As I hear myself talk, any management expectations because I think we should be good and we're prepared to be good. So I see no reason why we won't.

A lot of us modeling LAIs tend to just some percentage of the oral volume. But on the recent call, you talked a little bit about how patients may be on a paliperidone injectable maybe are not getting sufficiently under control and could even be switch candidates. Is that an upside as you kind of look at the opportunity commercially for that? Or is that a base case in your view that you can get olanzapine oral volume, but also get some paliperidone injectable switches?

Yes. Look, I think what I think is it's hard to quantify, but if you bring a very good long-acting olanzapine to the market, how does that change the dynamic of patient flow? Do patients flow quick on to olanzapine because the physicians know they are long-acting? Do they cycle from long-acting to long-acting olanzapine quicker? Business opportunity. I think it's going to become more dynamic. I think long-acting could create more opportunity there if we have long-acting olanzapine, absolutely. And I use sort of the analog of Europe, Europe, long-acting is a bigger market share than the U.S. And so I think -- and the long-acting olanzapine market, I think has more potential. How that will play out? And once again, our $1.5 billion to $2 billion, we tried to give a bit of a range there to sort of say there's different ways this could play out. once again, $1.5 billion, it's a game changer for Teva. If you put that there with AUSTEDO at $3 billion, you put there for AJOVY still growing, you put there for d, that portfolio of innovative drugs from a gross margin point of view is a game changer. So our whole P&L changes, our ability to drive EPS growth changes. So I think for me, I was at a conference yesterday when people were saying, what drives company value? Is it your multiple or is your ability to drive EPS. And there's a big debate that's okay because we're going to do both. We are going to change our multiple because we're not going to be generics company, and we are going to change our EPS because financially, we're just going to keep driving our EPS up. So there's -- that's an interesting thing. I think we're one of the few companies that could say that.

Okay. And DARI seems like it will be an asset that maybe gets more spotlight next year, right? I think looking at the AZ product, I think they are about 0.5 million units or scripts already, which is a pretty impressive volume which is good for you as you come to market, there's 10 million units total. I'm just kind of curious what are the goalposts for success here as you kind of like look at your data? Is it just, hey, let's get our product out there, let's match it on efficacy because these component parts maybe work the same, but we'll compete on device, we'll have a broader label, and that's going to be our angles to competitively differentiate.

Exactly. Look, I mean, it's sort of a -- it's a weird sweet spot. You have AZ create the market who are really credible in respiratory. By the way, I think, a very good market, a very good price point, very good managed markets as well. We come in. We just come in and we say, okay, right now, give us pediatrics and people are struggling with their device, we missed a device. And so -- and I think from that wedge, we can just grow out because obviously, we can be used in all patient population, but we start with they can't be used in pediatrics, we can. So doctor just use us. And so that's an easy thing for a doctor to give. And my experience in commercializing the products is if the ask is reasonable for physician, they'll do it. And then as the device, our device is simpler because we make so many devices, we know. And so then I think that compliance and adherence and ease of use will start to play out. And then I think we'll get a bigger share. But if 10 million patients go on for the guidelines, this market will be massive. When we say 1 billion to DARI, we're assuming not 10 million patients who should be on [indiscernible] go on. So I think and what's interesting is the excitement and the continued positive narrative from AZ on this. It's not sexy, but it's a long-term product. They see this as long-term value. It's very hard for people to follow into this market because the devices are so difficult to make. So yes, I think that's another one that -- by the way, I think our pipeline has no value attached to it. And all obviously slightly, but DARI is one most interesting because this will work. So we know these products work. We know our device [indiscernible] . But obviously, next year, we'll have the full enrollment clinical trial this year. We may be in a position to have enough exacerbations when we get data next year and then we'll have the ability to launch in '27. So it's pretty close. And will that market we come in. And from a payer point of view, once we have access, it's like we have the list of pediatric. So dynamics, which are nice with that, but we're not competing against the big rebate is pediatric.

So what is -- what are the pushes and pulls in this sort of market, right? Is it that payers are still -- is it short acting bronchodilator as the alternative or the legacy alternative? And is there a guideline-driven push?

So it's guidelines. The guidelines 10 million Americans plasma should be on [indiscernible] . It's really key people forget. I think correct me if I'm wrong, thousands of people die every year because [indiscernible] they die, they shouldn't die. So -- and then they get hospitalized as well. So the reason why the guidelines are that, and I think the reason why the payers will be open to this is, one, there's a cost, [indiscernible] death is not costly. But hospitalization and all the things that happen which these people get hospitalized, there is a need for this and the guidelines are clearly in place. And in respiratory, people follow. It take them a bit of a while, but once they get into it, they see start to follow guidelines. And if anybody can educate on the guidelines, it's a company I think by [indiscernible] who are respecting the respiratory they know what they're doing. So once again, I think it's just another market that's a new market, but will be clearly defined by the time we come in. So I feel very optimistic.

Okay. We have like 5 minutes, so a couple of quick hitters here. So is there a reason why AZ can't get the pediatric label over time? Is it just that they underpowered, their trial for pediatric patients and they shot themselves in the foot, or they could eventually go after?

Yes, they can. I think, look, if you're first to market, the biggest part of the market children become adults.

As we sit here today, they made no effort to go after pediatric.

I think that is adolescent data potentially coming out. But it will take time. By the way, pediatric recruitment is really, really hard. We just focused on it. And I look at every month. So that will follow. But once again, we have differentiation in the device. And when that happens, I think that will be more of a steady state. So we're market leader. They need to be market leader because they have a P&L for us. If we get $1 billion, it's a game changer for us.

Okay. European tariffs, how does that affect your business at all? I guess it would be the 15% now, right? Does that affect you guys in any way?

Yes and no. So no, because AUSTEDO is made in the U.S. So we have no tariffs on that. And then obviously generic, which we're still waiting for clarity on, but it sounds like what we on generics, but... But we modeled when we said in -- I think it's Q1 earnings, we modeled 10% tariffs across our business. And we said that, that won't impact our ability to deliver our guidance this year on revenue growth and our guidance for the future years. So we feel quite -- and don't forget because we have a limited portfolio, we don't have this challenge that big pharma has is that these factories make a state in Florida we make.

Okay. And then just pushes and pulls going into 3Q, it sounds like maybe international markets, generics, tough comp, U.S. generics, tough comp, maybe some Revlimid phasing differences 3Q to 4Q that maybe are emerging or evolving real time, but you also get European FX tailwind, too, right? So is that kind of like a good synopsis?

Yes, it's a great synopsis.

All right. And then do the [indiscernible] Phase III is sometime soon that you get this off and running. I guess, will you have 2 dose arms in the drug, every 2 weeks, every month? Like how are you thinking about dosing?

So I think we'll -- on an earnings call in Q2, we'll have the full trial design and explain it to everybody and educate because we're excited about that. One thing I will say, subcutaneous will be the production maintenance will be across all of them just in case there's any narrative there. But maybe let's leave the full disclosure of data of our Phase III clinical trial of to the just to make sure people dial in.

I think they always dial in, but how do you think about commercial, right? I think generic ENTYVIO biosimilar ENTYVIO should be available, right? Biosimilar HUMIRA will be available. So it's a new frontier in the biologics world where 2 big main states, especially in UC, right? I guess STELARA, the big one in Crohn's. So you've got biosimilar options across the board of all these biologics. How do you see that affecting kind of payer behaviors and access dynamics when you have another new innovative biologic class coming through?

So look, I can answer it 2 ways. first answer, which is slightly how it is. If you go back to the U.S., the rebates, the addiction to rebates, one could argue that the introduction bar makes no difference because they don't use that as an opportunity. They just beat up the rebates for the next product. So I can say that's sort of one school of thought. The other one is it doesn't really matter because the cycle rates through these indications is so continuous. Nobody stays on therapy because nobody has the efficacy to maintain something. And so the reason why it doesn't matter about HUMIRA matter because they'll cycle through those. I mean, I think it's in CD, 80% end up on surgery anyway. So it's a really horrific disease that there is nobody who is controlled and just go through different MOAs. So based on that, that's why TL1, I think we will do really well. I think will do really well. With either one of those scenarios, it does really well. This is a bit pessimistic to have a biosimilar portfolio. I think that's going to change. But if it does change, I think the interesting thing what you see in Europe, when biosimilars introduced, you see more treatment biologics earlier on, which would argue that you start to cycle earlier on new products. So either of those, I think, is positive.

Is there a dynamic like in oncology, right, when you get a third or fourth line patient, you just end up treating them for a shorter duration because they're pretty far gone and the newer therapies don't work as long. And so when you get an I&I disorder like you see Crohn's and you're catching them third, fourth line, right? Are you just going to get them for a much shorter duration of therapy and the value using this language, but value per patient, right, shrinks when you use later line?

Well, I'd say that maybe the opposite to happen. So if you look at the data in our Phase II, we had patients exposed to biologics, the efficacy looked high. Just interesting to see if that turns out in Phase III. But what you see if you take the oncology one, if it works in these patients, you tend to get it moved further on. And I think what happens because there's a level of dissatisfaction in C and CD, I think TL1A proved to be more efficacious. It will be more tolerable and have a better safety profile and less monitoring, less back box. So I think actually physicians start to use it earlier on. I certainly have the monitor has a black box and it's not more efficacious. And the payers can talk to you about it. But once again, these are difficult to treat diseases, they end up with surgery. So I think physicians are quite going to say, if the rebate is right, don't get reported with Sanofi who has Dupixent, they have quite a big rebate opportunity. So I think, yes, let's say we start there. I think we'll move up because one thing people are thinking about TL1, I believe it's going to end up to be at least a better point of view, but it's really safe and tolerable. You don't have that in this category across all these products. And I think it's really unique. So I think it's going to be used people think. Once again, even if it's not Teva, it's game changing because we're not a $50 billion innovative revenue company. So if you put a $2 billion to Teva, it's a game changer. And that's the thing that's always interesting when we talk about these products, they could be [indiscernible] could be a $10 billion across all indications, could be more, could be less. doesn't really matter. We'll push it to be as big as we can. And obviously, Sanofi needed to be big as they can because they got Dupixent coming off patent. But for us, if we fall at the lower end, which we said $2 billion to $5 billion in IBD, if it said $2 billion, it's still a game changer for us. And that's without the other indications we're going to have 2 indications next year. So we're in that transformational time for the next 5 years is super exciting. But then 30 to 40 just get even better.

I think we're out of time, right? Yes. All right. Well, thank you, Richard, for joining us at the conference.