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

So just continuing on the third and final day of our Citi Global Healthcare Conference. I'm Traver Davis, health care sector specialist at Citi, and we're delighted to have Teva with us. From the company, we have Richard Francis, President and CEO. Thanks for joining us. Maybe to start, just hand the floor to you for a few minutes, high-level overview, current state of affairs, where you are in the growth journey. Any highlights from the third quarter that you reported about a month ago? And we'll jump into questions from there.

Great. Well, thank you for having me. Pleasure to be here. So obviously, we started on the pivot to growth strategy 3 years ago at Teva. The strategy was designed to move us from a leading generics company to a biopharma -- a world-leading biopharma company. I think we've made tremendous progress on that journey. I think there was a bit of skepticism at the start whether that was possible. But I think in 3 years, we've shown that we've fundamentally changed the setup of the business, the financials of the business and the future financials of the business. We took a product like AUSTEDO, which had -- analysts had peak sales at about $1.4 billion. It's going to do over $2 billion this year, and it's going to do peak sales of $3 billion, or over $3 billion. We've launched UZEDY, a long-acting schizophrenia product, into the market. We've driven continued growth of AJOVY, our migraine product. So I think on our -- deliver on our growth engines, which is the first pillar, we've done tremendous progress, and I think, shown we can really sell innovative products. And then on our second pillar, which is step up innovation, we've transformed our pipeline and the speed we've moved it through. So obviously, we had a Phase III data readout on olanzapine, a long-acting product for schizophrenia that will be launched next year. We have now duvakitug, our TL1A in UC and CD, partnered with Sanofi in Phase III that started this quarter. We have DARI, our dual-action rescue inhaler, which will complete its Phase III recruitment this year, and we'll read out next year. And we have data readouts next year on duvakitug in maintenance, anti-IL-15 in vitiligo and celiac, a futility analysis for emrusolmin in treatment for multiple system atrophy, the data readout for DARI for the asthma study, and oncology product, PD-1-IL2 data readout. So if anybody questioned our ability to develop innovative products, I think next year will be a defining moment for us. And at the same time, we have a global generics business, and we have done more than stabilize that. We've actually grown that in the last 3 years. And we've done all that while focusing our capital and making sure we can grow our EBITDA and we grow EPS and return -- and we've created value for the company and shareholders. So I think this pivot to growth is pivot to a biopharma company, I think it's gone from what was described as a story of fiction to nonfiction as every quarter goes on. And obviously, there were some catalysts for people to get even more excited about Teva and one of those was the IRA and we'll probably talk about that. But I think we've shown our ability to not only forecast but negotiate well to have a good outcome for -- or acceptable outcome for the IRA.

Great. Maybe start with, you sort of outlined the journey and where you've come from. Maybe let's talk about 2026. I know you're not going to provide guidance or anything like that. But so -- how should we think about next year in terms of pushes and pulls? Obviously, there's a lot of innovation going on, but you also have a base business as well. So maybe sort of lay out how we can think about '26 from start to finish, catalysts and any sort of things to be aware of financially?

Yes. So '26 is an important year for Teva. We lose -- obviously, we've had the benefit in our generics business or generic Revlimid, and that's over $1 billion, and that will go next year. We've committed to grow our EBITDA next year. So to lose over $1 billion of sales and grow your EBITDA, I think, can only be done if you're on this transformation journey. And that requires us to continue to grow our innovative business, AUSTEDO, UZEDY and AJOVY, launch olanzapine. Those are very high-margin products compared to the rest of the business. So if we do that, that helps grow our EBITDA, but also on top of that, some of the organizational effectiveness, cost programs we put in place will have -- which we said we will save $700 million by '27, we'll save $500 million by the end of '26. So that contributes to growing the EBITDA. And then obviously, the rest of our business, excluding Revlimid, OTC, biosimilars, with a lot of biosimilars launching and multiple launches of generics. That allows us to grow EBITDA. On the top line, people ask me that, that is flat to slight decline. You don't lose $1 billion in any company without having some impacts, but in Teva definitely. But I think the commitment we've made is to the EBITDA. And I think that's really important. So I say that's the catalyst. We have a lot of data readouts next year, as I mentioned, but we'll have olanzapine launch around about end of Q3, Q4 next year, which to add to our already successful launch of UZEDY.

I guess in terms of -- you talked about the innovative portfolio and sort of the mix moving to higher-margin products. So we have that for next year. But if we go out, say, 3 to 5 years, how should we think about Teva from a margin perspective as new innovative products come to the portfolio, higher margins and some of the lower-margin products sort of fall to the back?

Yes. That's a really, really important question, one that I think is so unique to Teva. So let me explain, when I started in Q1 2023, we had a margin of -- for that quarter, I think, 48%, around 48%, maybe just a bit above. This -- we'll end the year around about 54%, maybe a bit above. The journey we're on, on gross margin, which makes it so unique at Teva is that gross margin will grow next year. It will grow in '27. In '27, we already said we're going to be 57% to 58%. It'll grow in '28, '29, '30, '31, '32. There's not a biopharma company that can keep growing gross margin because normally, you're trying to defend gross margin, but we keep growing. And the reason why we keep growing it because our innovative portfolio that I mentioned is growing. It grew at 33% in Q3. It's over $800 million now a quarter. But we're going to add to that next year olanzapine. We're going to add that the year after DARI, our dual-action rescue inhaler. We're going to add to that the next year with emrusolmin, the treatment for MSA. We're going to add to that the year after with duvakitug. So we just keep adding that keeps growing the top line, but it keeps growing in innovative and that innovative has a different gross margin. So the exciting thing is we're on a growth journey, we're on an innovative growth journey and because that we're transforming our gross margin, and if we -- not if, we will show our discipline on OpEx, which means the EBITDA will grow, which means the EPS will grow, which means the cash flow will grow. And that's in a big company. So I think that is really, really exciting. And I think that's probably been a bit missed by some people.

Maybe just zooming in on some key products. So AUSTEDO, you recently had news there with the IRA-negotiated pricing being announced. I think investors have broadly perceived this to be a positive outcome. I guess it's funny to sort of celebrate a price reduction, and a significant one, to be fair. But maybe you can just kind of walk us through the dynamics there, your feelings on the outcome and what impact you can sort of expect or we can expect in the marketplace.

Yes. So let me just sort of also -- I think because I'd like Teva to take a bit of recognition for the fact in 2023, we forecast that Teva was going to do $2.5 billion in '27. Nobody believed us. They said peak sales of $1.5 billion. And we said because it's $2.5 billion, internally, we forecast that we would be in the IRA and we'd have to have a bit of discount in that. So not only -- and I think that shows good strategic and mature thinking and being sensible. Now obviously, as I said, it started to do really well, people started to say, "Oh my goodness, if you're in IRA, you'll be impacted, will you hit $2.5 billion?" And I kept saying, we forecast the IRA hit, and [ we still ] hit it. But -- so there's some long-term strategic, sensible, adult thinking in that, I'd tell you that. But then it came to the negotiations. And obviously, we leaned heavily into that. And you're right, it's very strange that we get recognized for having a good price decrease. That seems very hard to sometimes understand. But what that means for us going forward is we have certainty on $2.5 billion in '27, and we have certainty in our minds on $3 billion, peak sales of over $3 billion going forward. What does it mean for next year? I think it means we've got to keep on growing the product. We've got to keep making sure we get patients who are untreated into the physician's office, get them diagnosed and get them treated with AUSTEDO and do all the programs we've got around compliance, adherence and titration. And then that allows us to get into '27. And then in '27, I think we're going to have a better idea of how it's going to impact the product when we look at what happens in '26 with the first wave of IRA drugs, and whether there -- is neutral? Is there a volume upside? All these things that people talk about, which we'll be able to get a better angle on.

So I know a majority of the business is Medicare, right? So -- but there's also some commercial exposure. So how should we sort of think about the impacts to commercial, maybe as '26, '27 and just kind of maybe thinking even longer term?

Yes. Well, I think that's something which we believe, to your point, the majority of business is -- more the minority is in commercial. So I think it has less of an impact on the direction of travel of the product. So I think as people sort of debate what this means and how commercial plans will use this, I think we'll see how that plays out. I think one -- you have to understand this is a debilitating disease that's treated by specialists, very few patients have it and they're in a terrible situation. So I think the physician involvement, the patient involvement and the experience and the efficacy and the safety of the product will play a significant part in this still. And by the way, we've seen that in -- as we launched UZEDY into a crowded market, how those components are really important about which drug gets chosen. So I think we've taken all of those things into account and the puts and takes, and I think that makes us confident that we can hit the $3 billion.

Got you. So you have a competitor in this category, they recently highlighted they're going to take a more aggressive approach, I think that's even their words, in terms of access. So how should we be thinking about that as it relates to AUSTEDO and how you might react to that?

So look, I think what we -- we're a very, very disciplined company, and we're always thinking about the long term about where we're driving value. And so we think about access and value together. And just to show you how disciplined we are in that, when we launched UZEDY into a crowded market with two huge brands that have been there a long time, other launched brands and a genericized long-acting market, we didn't succumb to seeking access over value. And we held the line. And we -- in fact, we didn't get listed, and we still haven't been listed for a lot of areas when it comes to Medicare. What we realized is the quality of the product, the quality of the interactions meant that the physicians use this, and if -- you've seen the performance of UZEDY. And so I think for us, it's about always value and access, access and value. You have to do those if you can create long-term value and sustainability. So that's the approach we take.

Got you. And that 2027 guidance for the $2.5 billion or at least $2.5 billion, can you just talk about the underlying drivers there in that growth, and sort of how you'll get there from start to finish?

So I think obviously, unfortunately, it's a hugely untreated market. So there's still 85% of the market that goes untreated. So that creates a huge opportunity. Now to realize that opportunity, we've obviously done quite a bit of DC, direct-to-consumer advertising, both the patients who have the condition and the caregivers who may be able to identify it. We also spend a lot of time and effort educating physicians and nurse practitioners, who often see the patients, to ask the right questions, to understand and to diagnose. But when you think about it, so part of it is about bringing patients into the channel, getting them treated on to drug. But then for us, as Teva, to keep growing this business. It's about making sure they could convert from script to on-drug, which -- there's a leak there, they get on the titration pack, which means they titrate to the optimum dose. They then get involved in our adherence and compliance programs. And if you do all of those, then you have the ability to continue to grow the brand. But it's really important that -- we spend a lot of time on that at Teva because as much as it's about bringing patients in, that's one of it. But the opportunities for there to be leakage on this patient journey is huge. And so the value creation that we can have by getting patients to be more compliant, to be on the more optimal therapy, to be supported is significant. And obviously, the other part of driving AUSTEDO is as we move -- as patients are prescribed more and more than once a day, that has led to patients being on a more optimal dose. So that also creates a value opportunity. So those are the things. It's multidimensional. There is not one sort of area we're particularly focused on. But that also gives me confidence that this $3 billion will happen because it's not just about driving patients in, it's about all the other aspects of it.

And you talked about still relatively low rates of penetration of the VMAT2 inhibitors and or lower rate of diagnosis too, but about just the overall TD population and sort of how that factors into your growth expectations? I know when you guys launched or -- and your competitor launched, the sort of the view of the market size was certainly smaller than it is today, but can we even see this grow even further?

Well, I don't know about -- I mean, the opportunity, as I said, is unfortunately significant because there's just so many patients who aren't treated. But I think this goes back to -- don't [indiscernible] when Teva started out [indiscernible] ever speak about Teva. We weren't set up from a capability point of view like we are now. So we understand how do you -- a lot of my past has been in biopharma and biotech. It's about how do you create awareness, how do you educate, how do you get early treatment, how do you get patients moved on to treatment, how do you keep them compliant. But we didn't put those programs in place. So I don't think we necessarily stimulated the market as much as you'd normally see at the start of this journey, but we're investing heavily in that now. So whether the market could grow bigger than it is, I think it's less relevant and less needed. It's about how do we make sure patients who aren't treated, are treated. And there's another dynamic within this. There are new patients who are naive to treatment who we need to get on and they need to be diagnosed and got on. But there's also patients who have gone on to therapy and then quit therapy. And how do we get those patients back, and we call them returning quitters. So there's a lot of opportunities to keep helping patients to have a high quality of life and to also growing the brand. So for me, that's why I think this -- AUSTEDO has a significant future ahead of it. And we've said over $3 billion of sales. And I would highlight for Teva, that is significant financially. That is a significant driver of our gross margin improvements, of improvements to our profitability and our ability to grow EPS.

Yes. So I just wanted to zero-in on that. So you spoke to next year expecting to grow EBITDA. And I'm sure AUSTEDO is a big part of that. So maybe just take it out a few more years. I mean, how much contribution from the product do we expect to drive that EBITDA profitability? And then we can touch on other products that I'm sure will contribute to that as well.

Well, actually, last. I think the Teva story right now is about moving to biopharma, and the star of that show is AUSTEDO and quite rightly, but it's going to be joined on stage by a lot of other products. I mean UZEDY starting to create a stir; olanzapine, everybody is getting excited about because the unmet medical need there; DARI, our dual-action rescue inhaler, there are 10 million Americans that should be on a dual-action rescue inhaler, and there's only other one in the market, so that's a significant growth driver; and then we have emrusolmin which could launch in '28 because we powered that study to be a registrational study and then duvakitug in '29. So if you think about it, as each one of those is launched, our -- the emphasis of AUSTEDO on our P&L gets diluted. It's something we'll still maximize, but it's -- in my career, I've rarely been in a position where there are so many opportunities to launch products every year into a business which has a fundamentally lower gross margin than the products you're launching. And from a financial point of view, the ability to create value and create a more valuable company, that is -- I've never seen it because we launched olanzapine, we launched DARI, we launched emrusolmin, duvakitug, anti-IL-15, we are just going to keep growing the top line, and we're going to keep dragging up the gross margin. If we stay diligent on our operating expenses, we grow EBITDA, we're going to grow EPS and cash flow, and that's exciting. So AUSTEDO is important, but it gets less important.

Right, right. Maybe just hopping over to another opportunity, I know you guys are excited about the long-acting olanzapine. So maybe just walk us through what you view as the opportunity there.

Yes. So for the opportunity for olanzapine, I think is significant. And it's based on the fact that olanzapine as a molecule is the most prescribed molecule in schizophrenia, so 20%. And it's used for moderate to severe, so it's seen as the most efficacious. Now in moderate to severe, in any schizophrenia patient, you want a long-acting because it improves compliance and adherence, which is critical in this condition. But in severe patients, you really want to be compliant. And there is no long-acting that's used in the market right now. And so the data we've got on olanzapine to show that it's safe, efficacious and effective and has no PDSS is really significant. And so when we look at what we've achieved with UZEDY in a very congested market, we've built a real capability and muscle there from our sales force, from a managed markets, from a hospital care, from an MSL, from a patient support, we just put olanzapine in that. But olanzapine doesn't have a competitive market to walk into. It will be the only long-acting. And we already know there's significant excitement around it. So for me, this is a big growth driver. It will be launched at the end of Q3, Q4 next year. And so I think this will be a growth driver for us in '27, '28, '29. That's why we've said $1.5 billion to $2 billion for our schizophrenia franchise, which I'll remind you, that's material for Teva on a significant level. You've got AUSTEDO, $3 billion, you've got a schizophrenia franchise at $1.5 billion to $2 billion, that's exciting.

All right. So with UZEDY doing quite well, I think you took up the guidance for that product earlier this year. You talked about it being a competitive market. So maybe just walk us through the sort of the commercial dynamics as they stand today and into the future.

Yes. So look, I think this speaks to just understanding the unmet medical need. So UZEDY entered a very congested market. So how has it done so well? It's done so well because we've created a very relevant product profile, I'll come back to that, and we have great execution. We've got great execution in AUSTEDO. We can talk about AJOVY. But everything we do commercially, we're very, very good at by design. But on UZEDY, it's a subcutaneous, only subcutaneous. It's in a pre-filled syringe. And very importantly, it gets the therapeutic doses within 8 to 24 hours. So if you think about that from a physician's point of view, most patients, but particularly schizophrenia patients do not like an IM injection. They don't want to have to remove their trousers to have that done. The fact that it is prefilled, great simplicity. And the fact that it's a therapeutic dose, this is so important because when you have a patient having an episode, you need to control them as quickly as possible, and get their symptoms managed. No other long-acting risperidone can do it in 24 hours. So you have to give them oral supplementation to try and balance that. And then you got to work out how you balance it. You may have to keep them in hospital for a period of a few days just to see if you managed it. So the simplicity for both the patient and the physician is extraordinary. So that hence -- and so what's the proof of the quality of that profile? Okay, the TRx is up 119% in Q3. But what's important is we haven't actually got the access, the broad access, which means physicians have to phone up and say, I want this, and they obviously get it because we've got good growth in TRx. But that shows the physician is motivated to ask for something, and it also shows that the physician is listened to. And the rationale, by the way, we've shown some data that shows the cost effectiveness of using UZEDY because you don't stay in a hospital. So you get prescribed, you can leave. So I think we've got a great product profile. We have the same with olanzapine, but in a far bigger unmet need. And don't forget, we know these people. We know the physicians. We know the people on the D&T committees in the hospital. We know the payers. We know the nurse practitioners. We know everybody. They know us. We've shown them we're credible. Our product is credible. And so when we come to the market with olanzapine, we leverage all those things I said about UZEDY, but it's in a patient population that really does need a long-acting.

So with UZEDY, you've talked about maintaining sort of price discipline. So kind of where you are? Where are you with that in that process?

Well, I mean, we are still -- it's improving, but we haven't discounted to get access at scale because we think we have a valuable product. And I think the market's shown we have a valuable product because physicians see a need for it. And I think that's improving all the time. But I think it just shows that holding the line on what you believe is value is really important because it pays dividends. Now as that -- as we lean into a launch in olanzapine, where one could argue there's a far bigger unmet medical need, I think -- I'd like to think what we've done in the last 2 years helps to create a clearer conversation with the payers to -- that they'll know what our expectations and our willingness to hold the line. Because to create a $1.5 billion to $2 billion franchise is about getting the right value with the right access, and it's that order in schizophrenia because what we've shown is the unmet need means you will get value, and you'll get access because the physician will drive it. We want to have easier access, but we want to do that at a price that satisfies both needs.

And how about the label expansion into bipolar? So can you sort of just frame the potential impact of that label expansion for that franchise?

Yes. Look, I think it's -- it has sort of a halo effect in that it makes the brand feel more complete and okay, now it has bipolar, this sort of helps the physicians from the totality of the data. Is it significantly material to where the product can go from peak sales? No. Does it have some benefit? Yes. But I think the trajectory we're on UZEDY now is a really good trajectory. And what we see now is we obviously, are the #1 prescribed LAI in risperidone, but now we're moving into the paliperidone market. And because of those attributes, we're seeing a good uptake there.

Maybe shifting gears to TL1A, just walk us through where you are in development. I know you're progressing to Phase III. How are you thinking about this opportunity from the perspective of the indication set that you could go after?

Yes, I'm super excited about duvakitug. The Phase II data that we presented last year in December, was super exciting, I think, best-in-class in our minds, no question. We've entered Phase III now this quarter 4. That's going very well. It's -- there's a lot of enthusiasm to get patients into that. So that's encouraging and probably based on the Phase II results. Just to let you know, it's an important data readout, we'll have the maintenance data in Q2 of next year, which I think will be important because in Crohn's and UC, having good induction data is good, but ultimately, you want the maintenance. So how that plays out will be important. We will also in first half of next year, go into two new indications with Sanofi for duvakitug. We're not going to announce those necessarily. We'll see whether we communicate them, but the idea is to start them in H2, we've chosen those already. And so when we think about the ability for UC and CD, we've said this is a $3 billion to $5 billion product. I have a reason to -- I have a lot of belief in this product and how it's been engineered that it could actually be bigger than that based on the fact that it could compete against other modalities. But then we'll have two more indications in Phase II, [ if things go ] well and move into Phase III. So duvakitug could keep on giving as a growth driver for us on scale because, again, this is $3 billion to $5 billion, we get 50% of that. That's material again for Teva. That's relatively near term, that's '29. So I get pretty excited about duvakitug.

And just maybe remind us of the economics of the partnership. You mentioned having half of it, but in terms of the share of development and also once it becomes commercial?

Yes. So when we chose a partner, Sanofi, there's a reason why we like the partnership with Sanofi. One is -- because a lot of people wanted to partner. But one is they're good in immunology, they're good in developing assets with multiple indications as they've done with DUPIXENT, they have a good clinical trial development team and regulatory team. And to be crude, they need it because DUPIXENT's patent expiry is on the horizon. So they wanted a multi-indication asset. But for us, what was really important is we wanted a big -- we wanted 50% of the economics. And so when it comes to the profitability, we get 50% of it. When it comes to the expenses, we pay 50% of the R&D costs. So I think this is something which is a significant point for Teva and allows us to really think about the future in a sustainable way. So we get to do multiple indications, we get to have a partner who's good at developing that, thinking through indications because they've done a lot of work on that, move through the clinic, have a share -- a cost share scheme there, but then from a profitability, we get 50%.

It's great and certainly encouraging that at this point, Teva gets to talk a lot about pipeline, right? Anything underappreciated in the pipeline, you think that investors don't spend enough time on?

All of it. I mean, I say -- no, I say that jokingly because none of it is valued in our current models, none of it. So -- which is sort of absurd. But I used to be a bit frustrated by that. I'm okay with it now. If people have to see the data to appreciate it, then I can wait. We're in this in Teva for the long haul. And so I think TL1A is the best, no question. I think the data will continue to show that. I think our anti-IL-15 in vitiligo and celiac disease, we'll have a data readout in Q2, I think that's going to show people about how good we are at antibody engineering. So I think that's going to be super exciting. And the vitiligo could be here in 2031. And then our PD1-IL2 at the end of the year is going to show in oncology. We're not going to go into oncology, we'll partner that. But that's another one where I think we'll be able to show our capability, but none of that's valued. DARI, even though we're going to have a data readout on our asthma study next year, that's not valued. And olanzapine is not valued, and we're going to launch that next year. So it's all underappreciated, but I think that is -- you introduced Teva, I think, appropriately. We're transitioning from a world-leading generics company to a biopharma company. And we're really now picking up pace on that. And as I meet more and more investors, people realize that. But it has been a fast change and caught people a bit unaware. But I think one of the things that I love about our pipeline is I believe it has a lot less risk. It's late stage and there's a lot less risk than most pipelines in biopharma and really good targets with really good revenue-generating opportunities. So I think it sounds like a father talking about the children like they're all great, but they -- here's the thing that I think is super exciting. We will launch olanzapine next year; the year after, we will launch DARI; the year after that, we may launch emrusolmin in multiple system atrophy; the year after that, we'll launch duvakitug. Then we may have a little pause just to gather our breadth. And then the year after that, we launch anti-IL-15. And so while we're still growing AUSTEDO, while we're still growing UZEDY, so that is -- I think maybe people are starting to realize that sounds like quite a unique story. In a world of LOEs, where our first significant LOE is 2040, that's a lot of growth to get through.

I want to get your thoughts on biosimilars. We had Commissioner Makary here on Tuesday morning. We also had Alex Azar here yesterday. And the topic got some airtime, right? So we know that the agency is pushing to simplify clinical trial requirements, right? But we also know there's another side of it, too, in terms of the payers and the rebate wall and all that kind of thing. So I mean, certainly, you're in this business, and it sort of sounds like a positive that the FDA wants to push to simplify clinical trial requirements, tailwind, headwind in some ways?

No, I think it's a tailwind. I think it's great. I mean we've been lobbying both in Europe and the U.S. to take away Phase III trial design. I don't think it was ever needed. I think it was put in place by the innovative companies to try and slow down and increase cost, just to be controversial. So I think it's great. By the way, just to let you know, it doesn't create an influx of people developing biosimilars.

Right. It could be a potential headwind if we see a flood of developers, right?

And the flood, just let me just give you some scale here, to develop a biosimilar without Phase III now is between $70 million to $120 million per product. So flood, I'm not sure that's going to happen. More, maybe. But our strategy is really clear. We want to have a big portfolio of biosimilars. We're going to do that through partnerships. We want to get to about 25 biosimilars and constantly have 25, so we just want to be launching lots of biosimilars all the time, both in the U.S. and Europe. And Europe is a big growth driver for us because don't forget Teva hasn't really been in biosimilars. We came to the party late. We're now starting to see the work we've done in the last 3 years, and we'll have launches in Europe, we'll have launches in the U.S., and we're shown we're very good at executing on that. So for me, what the FDA have done is really exciting, I'd like to think there should be changes to the reimbursement system in the U.S. There's a lot of money being wasted. I think that's getting a bit more focus now. But I'm not -- we're saying we're going to double our business in biosimilars by '27, put $400 million on it. I'm not expecting PBMs to go away to make that happen. We tend to predict quite conservatively like if the environment has a chance of getting worse, we'll predict it will get worse. And if it doesn't, we'll benefit. But I think in the U.S., that's a big sea change that could and should happen. In Europe, it's already straightforward. You launch, you get good conversion. And actually, what people forget is in Europe, biosimilars, you increase the volume in the market. So people get treated with biologics now earlier in their disease. So the volume of people treated with an anti-TNF, with some of these products has gone up significantly because when it's cheap, why not treat somebody's arthritis earlier, right? So I think the future looks good for biosimilars. The removal of the Phase III is -- I'm pleased by, I see it as a complete tailwind.

And you mentioned the U.S. in Europe being quite different in terms of biosimilar penetration and part of that is PBMs and the access side. What really needs to change on that front?

Well, we've got 3 minutes left. So I mean, that's -- look, I think we -- if you -- if this country managed to get its head around how reimbursement is done, have pay-in is done because there's a lot of good things there. You don't need the IRA. IRA is irrelevant. If you just allow generic entrants to be done really effectively and efficiently or biosimilar entrants, you're going to save a huge amount of money. To create something as complex and as arbitrary and as poorly designed as the IRA was not necessary. I think PBMs need to be held accountable for the fact that are they really delivering value or are they -- biosimilars should penetrate immediately in the U.S. I mean there is no legitimate argument for that not happening. If you really investigate that, there's no legitimate -- if you do that, then you save a fortune, which allows the health authority to spend more money or that money on innovation and allow access to innovation. The ecosystem, if it's looked after, can be beautiful. But I think the PBMs need to be held accountable, and they need to be looked at as to what value do they add? Because they probably add some value in negotiation, but how do they look at it in the whole ecosystem.

Right. So it sounds like what you're saying is it has to be regulator driven. Is that right?

Yes. I mean, because look, they clearly have struggled to do it the right way. And to me, it's a very simple regulatory intervention, but maybe I don't quite see it the way that others do.

One more minute left. Last question on capital allocation. Latest thoughts on Teva and how you plan to allocate your capital?

Yes. So capital allocation is a really important part of Teva. I think allocating capital to make sure you get a good return on that capital is something we talk about a lot. And we've had to talk about it a lot in the last few years because we have so many opportunities to drive growth that means we have to allocate capital. We just can't spread it thin. So we reduced the investment in our generics pipeline because it was too big. It wasn't going to get a good return on all that capital. We focused it more. We allocated that capital to our innovative pipeline. So from a capital allocation is keep investing in our pipeline and innovation, keep investing in our products in the market from innovation, making sure we drive efficient capital allocation in our manufacturing network to make sure it's optimal, has a COGS reduction in the cost of goods every year. And then making sure we think about our business and where it's set up and how it's set up to -- are all of these business aligned to the strategy of the company and increasing the value of the company and increasing the value to shareholders. And that's how we think about capital. We don't allocate resource. We allocate capital. And then because of that, people have to think about what return it gives over what period of time.

Great. We're up on time. Thank you so much for joining us.

That's our pleasure. Enjoyed it. Thank you.