Teva Pharmaceutical Industries Ltd (TEVA) 2002 Q2 法說會逐字稿

Good morning.

My name is Summer, and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the Teva pharmaceuticals quarter two earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer period.

If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad.

If you could like to withdraw your question, press the pound key.

Thank you.

Ms. Meltzer, you may begin your conference.

Thank you, operator.

Good afternoon to all of our guests.

We hope you all have had a chance to review our release, and thank you for joining us to discuss several second quarter financial results.

Our hope today is the president and CEO -- Bill Fletcher, President and CEO of North America and Moshe Manor who will hopefully join us shortly.

He's caught up in a traffic jam.

He was recently appointed Copaxone or [INAUDIBLE] Is also with us on the call today.

I would like to remind our friends in North America that we will hold the quarterly luncheon tomorrow, Tuesday, July 30.

For those of you who haven't received our invitation or have not yet confirmed, please call us in New York at 212-807-5063, or in Israel at 972-3-9267-281.

Before I turn the call over to, I would like to remind everyone the Safe Harbor language contained in today's press release also pertains to this call and the web casting.

Would you like to begin, please?

Thank you, Dorit.

Welcome to Teva Pharmaceuticals quarter two conference call.

In the second quarter, we continue to demonstrate strong, profitable organic growth, we improve results across most of our major businesses and markets.

In particular, we achieved strong performances in the U.S. and European genetic markets and, of course with Copaxone.

Copaxone had an eventful quarter.

In the U.S. and Canadian markets, we successfully launched our series and have already achieved over 80% conversion in the U.S..

This quarter, we continue to launch Copaxone in additional European markets of Italy, Spain, Portugal, Greece, and Belgium.

Copaxone sales in Europe are substantially outpacing our focus.

I know that some of you may be curious regarding the effect of the U.S. launch on Copaxone sales.

As we anticipated, the impact has been marginal.

Moreover, for the first time in many quarters, global Copaxone sales have exceeded those -- The recent agreement between Pfizer and [INAUDIBLE]would definitely increase the sales and marketing efforts of only [INAUDIBLE] contenders which may require some modifications and perhaps intensification of outlets.

Ultimately, we believe we will benefit from the additional marketing efforts aimed at the MS population leading to more patients being treated overall market expansion and enhanced Copaxone sales.

This quarter, Teva achieved strong performance in the U.S. generic market and we continue to substantiate our leadership with the breadth of our product portfolio, the depth of our product pipeline and the magnitude of the operational capacity which enable us to better meet customer needs.

Our unique customer relationships with large chains and wholesalers have already enabled us to achieve 37% market share in our product universe.

One of our key performance measurements is the development of our pipeline and its' continued growth.

Our pipeline has continued to increase in spite of our rapid approval rates and as of the results of our large and ambitious generic R&D program.

In Europe, generic sales grew this quarter by a robust 20%, aided by the devaluation of the Euro.

Teva sales were up in every European country, with particularly sharp increase in Hungary.

I anticipate that recent legislative developments in Europe favoring the generic industry will continue to accelerate the growth of this market. Our new generic platform in France and our growing European pipeline will take advantage of these trends.

This quarter, API achieved record internal sales which amounted to 49% of their total. The strategic debts the API provides for our genetic business is reflected in the fact that out of 62 products, pending and tentatively approved with the FDA, 21 of them we utilize Tevas' API. This vertical integration enables us to capture considerable additional value and may also hint at furthering internal and external growth of our API business.

This was another solid quarter resulting in continued improvement in gross margin.

While product mix and currency fluctuations contributed to this role, our global synergies from ongoing rationalization and efficiency programs continually drive this increase the gross margin.

This quarter, we are successfully completed the acquisition of Biogeneric business in France and acquisition of Honeywell's API in Italy. We are actively pursuing additional acquisition opportunities. Let me end by saying that all indications point towards continued success for the remainder of 2002. Our third quarter work then, should insure that we equal this quarters' profit with potential for substantial upside if we receive approvals from material new products. If and when this happens, we will update our guidance for the remainder of the year. I now hand the call over to Don who will review the figures with you.

Good day to all our friends, wherever you are.

I'm sure most of you had the chance to read our results which were -- which we released while most of you were asleep.

What I would like to do in the next few minutes is to walk you through these figures and shed some more color on them.

Q2 adds another quarter to a long series of quarters which fall under the definition another record quarter.

This is true for the top line, the bottom line and cash flow generated from operations.

The highlights include we achieved net income of $92 million, which works out to 68 cents fully diluted, 43% above the comparable quarter in 2001.

This quarter, net income will present an analyzed return on equity of 24%, again a record high.

While EPS grew 45%, sales grew 11% to $572 million, a run rate of $2.3 billion.

In 2001, we ranked 31st among all global pharmaceutical companies and we expect to climb up the steep ladder even further in 2002.

This quarter, except for the application of FAS-142, I'll refer to that later, the P&L data on an apples to apples basis was a comparable quarter, but for the time being, this is it.

As you know, we closed two acquisitions in France and Italy at the end of the quarter.

These will be fully consolidated as of Q3 with relatively modest impact in the first year.

This quarter, Q2, they were only included in our balance sheet and the cash flow.

In our major U.S. generics market, we grew by 12%.

This reflects a continued quality environment, strong based business and introduction of ten new products since the beginning of 2002.

Seven of these actually were launched during the first six months, including two exclusive -- [ unintelligible ] In Europe, generic sales increased 13% in Euro terms. As a matter of fact, sales increased in every one of our European markets with most of the gains in the U.K. and Hungary.

In Hungary, part of the increased sales, mainly a human trait, with the slow trading margins, were in view of the expected price increases in Hungary.

If you add to this about 7% represent the strengthening of the European currencies, you get a 20% increase in dollar terms in our European sales.

Copaxone in market sales increased 43% to $130 million, or a run rate exceeding $500 million.

According to our estimates, we captured about 40% of the gross in the U.S. MS market, quarter over quarter, while our market share is in the order of magnitude of 26% to 28%.

The U.S. alone was up 38% in Copaxone, in spite of all of the fears stemming from the so-called saturated market and introduction of a false product.

Outside the U.S., we grew by 60% with a main driver being Europe

Here, the comparison to last year would be almost irrelevant as we started to benefit gradually from our EU approval only in the last quarter of 2001.

Sequentially, our European Copaxone sales were up by about one-third.

In Germany, the only market where we had meaningful sales, even before the approval, we have more than doubled our sales since the approval and had reached, according to our estimated market share of 16.5%.

In Austria, obviously much smaller, we reached 26% market share.

It is interesting to note that one of our competitors cited Copaxone's introduction into Europe as negatively impacting their sales.

As to API, I told you output increased by some 10% to $101 million, third-party sales were down $3 million, and intercompany sales were up by about one-third.

This increase includes situations for a number of expected approvals in the coming months. The rest of world sales decreased by 9%. In Israel, which accounts for most of rest of world sales.

In spite of the 17% devaluation between the comparable quarters, we lost only 3% in sales.

We adopted an even more conservative approach towards our sales through the more risky markets in South America and the ex-Soviet Republics.

In terms of global spread, our sales in North America remained at 62% of global sales, but increased Europe to almost 25% at the expense of the rest of the world, which is down to 13%.

Israel, which is included, as I said, in rest of the world, accounted for 10% of global sales.

In this quarter, we again reached a very respectable gross margin of 43.2%.

In the comparable quarter, we had 39.9%.

As you probably remember, three months ago, when I reviewed Q1 with its 43.8 gross margin, I indicated that Q1 record high margin shouldn't be seen as a sustainable one.

Which I will see that what I said at that time closer to 42% than 44%.

This quarter, margin will reflect the continuation of the benign pricing environment in the U.S., coupled with the ongoing flow of new products launched, increased sales of Copaxone, corporation synergies and improved margins in Europe.

This improved margin was achieved in spite of lower margins in Israel due to the devaluation of the Israeli Shekel which was partially compensated by our hedging activities and recorded under finance costs and the higher than -- and the higher than usual stage of our wholesale trading business in Hungary.

It should be noted, however, that the bottom line effect of the devaluation of the NAF is [INAUDIBLE] Our [INAUDIBLE] increased as measured by gross R&D expenses, plus 13% to almost $45 million.

This reflects both generic R&D as well as innovative R&D spending.

The delay in the Copaxone trial through next year is the main reason for the lower third-party participations and our agreements with our strategic partners.

Net R&D, the figure which burdens our P&L, increased 36% to about $37 million.

SG&A at $99 million is lower this quarter when measured as a percentage of sales,17.3% compared with 17.7% in the comparable quarter.

However, in 2001, we still amortize goodwill, which we don't do this year as per FAS-142.

By the way, we have completed the transitional impairment review of goodwill, required under the FAS-142 as of January 1st, 2002, and determined there's no indication of impairment with respect to goodwill.

Coming back to SG&A, we are reviewing the level of our market activity in the revolving global MS market.

SG&A is the line item which could change direction if we decide that we have to devote more resources to capture and increase share in the more comparative MS market, which seems to expand with every new entrant.

Our financial expenses for the quarter were very low at $4 million.

Our interest expenses are decreasing slowly, deflecting the increasing generation of cash flow.

As we are hedging our activities in dollar terms, both income and expenses recorded, as I mentioned earlier, recorded under financial expenses, partially offset in various other line items, both sales and expenses.

The provision for taxes this quarter at 15.9% is lower than the average of 2001 and even lower than the 17.6% provided for in Q1 of this year.

This deduction reflects our best estimate as this point of time of our expected annual tax rate with the reservation that our income -- that our income -- that our various income sources are taxed a very different rates and the sales mix could deviate from our expectations.

However, the upside here seems more likely than the downside.

The net income, amounted to $92 million and fully diluted EPS reached 68 cents. And here, I want to pre-empt some questions I'm sure we will get, as we have received in all the quarters since we made our [INAUDIBLE] offering. The calculation of diluted EPS. In calculating fully diluted EPS on one side we increase the share base for the calculation to 140.2 million shares to cover the options and upon potential conversion of the converts, and on the other hand, we add back to income interest amortization of expenses, net of tax, related to the converse 2005, the famous $550 million offering.

Net income increased this quarter due to that for the calculation purposes by $4.1 million.

Return in equity in this quarter will present an annualized 24%.

This quarter was a record one, also in terms of cash generated from operations.

In this quarter alone, we generated $130 million.

This equals almost -- this equals almost half of the cash generated in all of fiscal 2001.

In this quarter, we spent over $150 million on acquisition of two companies, invested in CAPEX more than ever before and increased our inventories as part of our strategic decision to move our supply chain closer to our customers in order to improve customer service.

In addition, to be well prepared for upcoming new products launches.

Share of equity exceeded $1.5 billion for the first time and will present a debt to equity ratio of 09 to 1. This also includes $54 million in Q2 of representing differences from nondollar currency, financial statements of subsidiaries due to the changes in currencies.

This went directly into equity.

To sum up, what can you take away from this analysis on the next quarter or perhaps fiscal 2002?

Further to what Israel said, as we see today, we expect the current quarter EPS to reach a least 68% , the current concensus stands at 64%, but as Israel indicated, we have good chances for substantial upside to that base.

If we get approval for at least one or two major products awaiting decisions by FDA and by court.

We also feel comfortable with the 73 cents of Q4 and our upside, just mentioned, will be, also, on top of this figure.

Thank you very much for your patience, and we are now open for questions.

At this time, I would like to remind everyone, in order to ask a question, please press star one on your telephone keypad.

Your first question comes from Paul Woodhouse of Merrill Lynch.

Good afternoon.

A couple questions if I might, can you give us a little more insight into how much you're making about the SG&A and Copaxone, and, also, on the Copaxone front, was there much in the way of a U.S. inventory build associated with the prefilled syringe?

Could you repeat the question?

First off, was there a U.S. inventory effect with the prefilled syringe launch?

I think the answer to that is no.

We've checked the wholesale pipeline, and there may be an extra day out there, but that's the level of it.

Okay.

And the other question, just related to --

You were cut off.

Operator?

The question has been withdrawn.

Your next question comes from Rich Silver of Lehman Brothers.

Hello?

Can you hear me?

Good morning, Rich.

Okay.

We can hear you.

Yes.

Just wanted some clarification.

Did you say that your expectation is for 68 cents a share in the third quarter, or was it without taking into consideration any major new approvals?

That's right.

We said 68 cents with --

or did you say -- [ overlapping speakers ]

-- but does not include a very potential upside that we will have if we get one of two of the major approvals we expect.

Okay.

Secondly, and I guess this is the same question, and it's Paul's second question, which I think this was going to be his question, regarding decisions around SG&A spending in response to Pfizer now -- as of September going to be co-promoting RIBUS.

Can you give us a little bit more flavor on that in terms of what will go into that decision, how -- you know, how much incremental spend?

Because my assumption was that you're pretty comfortable with sales force size, I assume this is not necessarily related to sales force increases, but just more promotion spending?

Maybe a couple points here, first of all, to the best of our information, Pfizer people will step in sometime toward the very end of this quarter or maybe early next quarter, and we'll certainly stand up to the challenge in the sense that our promotional efforts, generally speaking, will obviously take that into account.

However, I don't think considering the fact that we are getting close to the end of the year, I don't think this will have a profound effect on expenses.

Okay.

So at this point, SG&A guidance for the year, Dan, will be where?

I would say it will be somewhere in the neighborhood of the level of the percentage level that we experienced in this quarter.

Mm-hmm.

And how about R&D and coming back, also, to the gross margin, if you could just repeat where we are in terms of gross margins, since earlier you said it was going to be coming closer to 42, then 44?

Regarding R&D, I think that the net R&D figure is a good indication for the next few quarters, with some possible upside, not much.

And as you remember, we usually don't measure R&D in percentage of sales, but rather in absolute amounts.

Mm-hmm.

As to the -- as to the gross margin, I certainly have this quarter more confidence in the higher margin than we experienced this year, and I will say that I'm more comfortable with a 43 level of margin rather than what I said last quarter, it should be closer to 42.

Okay.

Again, can you also on the API, you mentioned that out of the 62 ANDA's filed, 21 were utilized Teva's API. Can you put that into perspective, you know, sort of an historic basis, whether that's an increase as a percentage of filings, about the same of -- about the -- put it in historical perspective?

I think it's -- this is Israel.

I think it's a measure increase in terms of numbers, considered that five years ago, we didn't have 21 product in our API portfolio, it's a market increase, I don't have here the statistics we need, but it's a market increase.

And lastly, can you elaborate on the legislative changes in Europe, specifically that you think will be helping your business there?

Well, I think that we are -- we are experiencing new legislations in Germany, which would open for us an opportunity. We have increased modification to the legislation with France encouraging doctors to prescribe generics, and we are seeing a developing legislation in Spain, so in all these countries, we have potential influence, all of the actual business activity, and we will benefit from that.

And what is it in Germany specifically?

In Germany, there's a new legislation which came in force on July 1st which allowed for the first time a substitution of the level of the pharmacy, brand-name products for generics.

It's a cumbersome system, very, very complicated system, but it was under the enforce there.

I expect they will modify the system to make it a little bit more workable in the coming quarters, but it is the first time in Germany we have a substitution. This is actually a huge market of branded generics.

Okay, thanks very much.

Thanks, Rich.

You have a follow-up question from Paul Woodhouse of Merrill Lynch.

Hi.

Thanks, Rich, for asking the question, but there are a couple of other issues in North America.

We still can't hear you, Paul.

Speak up, please.

I don't know what's going on.

Can you hear me any better?

Yes, better.

Right.

Follow-ups with regard to North America.

Can you give us any sense of the pricing, the initial penetration rates from Geneva's Augmentin launch, and also where you stand currently, any other questions being asked by the FDA, or is there any update you can give us there, and then, also, can you give us an update on what's happening with the Canadian generics?

Let me go -- I'll answer the last question first, an easier one to answer.

Our Canadian generics business is stable.

It is still negative, of course, in comparison to previous last year, and it probably will be through most of the year, but the business is very stable at the moment.

In terms of Augmentin, I've got George with me.

George, you want to address that?

Sure.

Good morning, Paul.

You asked about Geneva's launch.

Yeah.

Can you hear me?

Yeah, can I hear you.

Yeah.

And it's difficult to comment on share, as you probably have heard.

It has been something of a limited launch, and at the moment, the market is looking for product, and there's only a limited amount going into it.

So I think getting any kind of reasonable share assessment at this point would be virtually impossible.

I think there is a -- clearly some product in the market and a great demand for product at the moment, the demand considerably exceeds the generic supply.

As it relates to pricing, again, a little bit difficult to comment, and it's really something I would do cautiously, except to say that as you can imagine they are pricing as a single market player, and most folks who model those do so relatively accurately, but, again, giving exact pricing is probably something I can't do.

But it's certainly -- it's pricing as you would expect, roughly a single player market and significant shortage of supply in the market right now.

Oh, and your own situation?

We are eagerly waiting for a final approval on the film-coated tablet.

I wish I could give you an exact date.

Of course, I cannot.

We're sort of that last late-stage black hole, awaiting FDA approval.

We continue to build our production, and we're eager to hear good news and make decisions at that point.

Okay, thanks.

You have a follow-up question from Rich Silver of Lehman Brothers.

Yeah, a follow-up for George in terms of the reviewing of the judges' opinion in the Augmentin case, that's something that has taken place, and if not, when would you expect to do so?

That's on the '02 patents?

We've just received, as you know, those opinions, and legally, we're looking at that right now.

We don't want to make any further comment at this time.

Okay.

Thanks.

Your next question comes from Harry Cobb of Schwitter.

Hi there.

I know you mentioned it, the tax rates, what your expectations are for the full year, whether you'll be able to sustain these low tax rates and which countries you're getting the tax advantages from.

It's hard to hear you, but I'll answer what I heard.

Okay.

The way we see today, the way we provided for in Q2 is the top of what could be provided for for the whole year.

Relating to where our tax concessions come from, they are mainly in Hungary where we have zero tax for ten years starting this year, and some of our plants in Israel, which have also a zero tax, and that is -- some of the lapse already, and some of it is falling into place, you know, next year, but much of that is zero tax, and these are our major concessions, but on the other hand, we go up to 40% in some of our European -- in our European income.

Did you ask anything further?

Just perhaps an indication of what you expect the average tax rate to be perhaps the next year and going forward, what will be a good number for you?

We have already indicated in the past that next year, our tax rate will probably increase, and that is mainly based on our Copaxone tax concession, which we are starting to build up again as of next year.

It's a complicated explanation, but what I can tell you is, through our best estimates, next year tax rate, average tax rate will be formally -- will formally be in the low 20s, going back to the low 20s, and that will be a peak year after which the tax rate will again decrease gradually to below the 20% mark.

Okay, thank you.

Thank you.

Your next question comes from Ella Alkali of IBI.

[ unaudible ]

We can't hear you.

[ inaudible ]

We can't hear anything.

Hello?

Ellla your line is open.

Can you hear me?

Barely.

Speak a little louder, Ella.

Operator, can we go to the next question?

Your next question comes from Robert Friedman of Solomon Smith.

Hi.

Just a quick question on the current year exposure to currency.

Can you tell us what the effect would be of a weakening dollar, a further weakening dollar against the Euro on your profitability, say, you know, weakened by, say, another 5% for the rest of the year, what that would do?

And, also, how much of that you will have hedged or how far forward you hedge your currency exposure?

We are hedging in terms of a few quarters, going forward.

The net effect of every 1% of an advancement in the Euro rate of exchange will have a bearing of about $250,000 on our bottom line.

Thank you.

Your next question comes from Elliott of CIB World Markets.

Thanks, and good morning, good afternoon.

Thanks for taking my questions here.

I have a couple questions first for Bill, and then a follow-up question for Dan.

Bill, can you give us just a sense of, you know, how -- how the Ultram launch went and whether or not the pipeline field continued into the third quarter? And, also, on Augmentin can you update us on the raw material availability for that product? I don't remember if you're fully integrated on that active, or if you have some of the key intermediates there being produced internally.

And also on the entire ADA pipeline, I think last quarter you had about thirtysix paragraph fours, eighteen first to file. I know there's been a little activity, but if you could just update that element in the pipeline.

Good morning, Elliott.

The Ultram launch, I think has been quite successful.

George, you want to say anything?

Yeah, Elliott, I can't give you exact share numbers again, because it's still playing out, but I would say we did very well in that launch.

We were able to mobilize quickly.

As you know, there was a bit after logjam on some legal and regulatory issues that the FDA was struggling with, and so, as that broke loose, companies had to move quickly.

I think we were able to do so, and we had a very, very good launch.

So it will be an interesting product.

We may see more players at the beginning, only a few players really were able to get out quickly, and then a few weeks later, some other companies begin to launch, so it was a good launch.

By the way, Elliott, on a similar thing, before, you asked me the question, Linisopril for us, is a Q3 event not a Q2 event, so there's no Linisopril in our figures.

Okay, but how about the pipeline fill on Ultram? I think you got approval on the 20th.

Did some of the fill carry over in the third quarter or did you take care of the initial stocking, at least in the second quarter?

We were able to do a pretty good job in the late quarter, getting it out.

This is a product that is a very large volume product, so there has been some continuing demand to fill the pipeline probably into Q3, but we had -- I'd say a fairly good job of taking care of most of it, but again the market, it's a huge product.

There's a lot of demand, and very few companies were able to respond that quickly, because FDA was making last-minute labeling adjustments.

Oh, thanks, George.

Bill, on Augmentin and the raw material situation there?

We are vertically integrated, of course, on the Amoxicillin component, and we have a partnership with a manufacturer for the CLAVLANIC acid, and you also asked about first to files, did you?

Correct.

I have 19 first to files at the moment, representing $6 billion.

Okay.

And on Augmentin, I understand that you -- whatever you have incorporated your numbers here, it's probably pretty conservative, but at least internally, would you be willing to tell us whether or not you are assuming a third-quarter, fourth-quarter launch?

We're not assuming either at the moment.

Okay.

So you have nothing in your numbers to balance the year for Augmentin?

I think Dan said that we were comfortable with this quarter going forward without a significant new introduction.

I think that would qualify.

All right.

Thank you.

One follow-up question here for Dan, or I guess for all of you guys.

Schering recently announced it was going to add Copaxone to the BION trial, and I'm wondering, you know, how you view that, if that might spur you guys to also conduct some additional or head-to-head trials of interferons of Copaxone.

Actually, we are extremely pleased to note that we are becoming the gold standard of the industry, which is a very nice situation to be in.

I think that if everybody's trying to do head-to-head trials with us, we don't have to do anything, because we know the results anyway.

Okay, thank you, guys.

Your next question comes from Dan Schraeger of Galeon.

Hi, guys, and thanks, and a great quarter.

My understanding is that Copaxone prefilled syringes are distributed in lots of 30 doses while the last lives of Copaxone was distributed in 32, and that equates to about a 7% price differential between the two products.

I was just curious if this is a strategy you guys will use in the future for increasing the price of Copaxone?

Actually, as you probably know, we increased the price of Copaxone a couple of times without trying to hide behind any changes in the unit.

This is a very technical change that coincided with the price increase, but you still have to note that even after that last price increase, we are still probably the cheapest of the four products, so we still are giving our customers a very good solution for their money.

Another question on Copaxone. Could you just lead us through logistics on how Teva supplied the distributor wholesalers with the prefilled syringes? Specifically, has inventory draw-down of the last lives product slowed down with increasing supply on hand at the distributor level?

Or did Teva allow the distributor wholesalers to change the last lives products for the prefilled syringe?

And if you did allow that, was that captured on the P&L, and how did you do it?

Well, actually, the whole thing was preplanned in a very orderly fashion. We gave the wholesalers plenty of notice of exactly what we're going to do, and because of that, it's been mentioned before, we don't see any significant changes in the inventory levels, and I don't think that we've had any significant effect on the sales of P&L.

It went in a very smoothly fashion, and because of that, it didn't really affect in any significant way the quarter results.

And my final question is, could you give us -- Dan spoke about this a little bit -- some idea on how you plan to maintain this really incredible growth in Copaxone in what otherwise seems to a maturing U.S. market?

And will the majority of the growth be from taking market share from AvenEx, or do you see it coming, as you guys were alluding to earlier, the growing market as more products are introduced?

As you can -- as you may remember, we have indicated a couple of times that we don't see the U.S. as a truly mature market.

The growth will slow down obviously, but there's still enough new patients coming on -- do remember that the incidents rate of MS is about 10,000 to new patients per year, of which about 8,000 are eligible for the treatment -- the available treatments.

You also have to remember that hopefully some of the patients were treated for a number of years do not progress that quickly as they used to progress in the natural history of their disease.

And because of that, my guess would be that the total patients is growing, not very quickly, but is still growing.

Furthermore, I think the increased body of evidence, and the increased experience gained by the physician and patients, and I specifically mentioned the results that we have already out, and probably the ten-year results that will come quite soon now increase the confidence of both patients and physicians, and this fuels the growth, and hopefully it will continue to fuel the future of Copaxone.

Great, thank you very much.

Your next question comes from David Marrow of CSFB.

Good morning.

Congratulations on a great quarter.

Thank you, David.

A couple of questions, first on the acquisitions completed in the quarter, one was closed right before the quarter, the last day of the quarter, the other was closed the first day of the following quarter or the quarter that we're in.

What did these add, if anything, to revenues in the last quarter, what do you expect on a going-forward basis for those two acquisitions?

And then separately, on the SEC 460, the Certification of Financials, when do you anticipate filing for this, and do you anticipate filing without any historical restatement?

I didn't get your second question, but as to the first, both acquisitions were actually closed in the last week of the quarter.

Both of them were only recorded in the balance sheet and the cash-out, obviously the cash flow, not a single penny was included in our P&L.

They will be included as of July 1st.

I assume that the revenue impact will be probably on the magnitude of somewhere between 60 to $80 million on an annual basis, starting July 1st.

Okay.

My second question has to do with -- and it's just a standard question on, I think, all companies over a certain sales level have to file the certification of their financials, the SEC or the 460, when do you anticipate filing that, and as non-U.S. domiciled company, are you subject to that?

As far as I know, we are not subject to that, and I'm actually not familiar with the specific number you mentioned, but I guess the first thing we have to do after we complete the call is ask what is 640.

David, also, Nasdaq, of course, has come out with some requirements for firms that are listed on the -- on Nasdaq and, of course, we will have to comply with that.

Great, thank you very much.

Thank you, David.

Your next question comes from David Shumgar, a private investor.

Good afternoon.

Three questions.

First question, could you give us the split on sales of Copaxone between U.S. and elsewhere?

Could you repeat your question, we could not hear you.

Can you give us the split of Copaxone sales between the U.S. and elsewhere?

Yeah, $100 million in the U.S. and $30 million outside the U.S.

Okay.

The second question --

In market sales.

Yeah, in market sales, obviously.

Yeah.

The second question relates to that.

As I understood it, the marketing costs were actually not included in Teva's P&L. These are the differences between the in-market sales and book sales, and yet you now say you may have to spend more on marketing, which will increase the marketing line in the P&L.

Could you explain this?

Yeah, I want to clarify our relations with Aventis, which is distributing and the state and the product and is detailing it in most of the European countries where we have approval.

Our arrangement with them is that we are selling to them the product at a certain price, which we never disclose, but most of them assume it's around 50%, and they are not too far from the figure.

We are recording, let's say this 50% -- [ unintelligible ] The SG&A or the marketing expenses, are split in a certain way between us and Aventis, and those who are born by us, are recorded in our account, and what is borne by them, is borne -- is included in their accounts.

So obviously, every increase in the detailing or the advertisement of promoting expenses of Copaxone will be borne by both parties and every party really recorded its share on its P&L.

Okay, thank you.

That's very clear.

And last question, can you give us the net benefit of the 15% devaluation of the Israel Shekel in the quarter against the second quarter last year?

The Israel Shekel has one bearing on our Israeli business, which is actually -- which is a negative effect on our pure Israeli business, in dollar terms.

On the other hand, since we are producing in Israel, also for exporting to other markets, we benefit there.

The net effects of every 1% devaluation, in -- is giving us about 3 to $400,000 of bottom line. But obviously, on a quarterly basis, you can only take what happened in any given quarter.

$300,000 to $400,000 -- [ inaudible ]

On the bottom line.

Okay.

$300,000 in the quarter, right?

No, on an annual basis.

Annual.

All right.

Thank you very much.

You're welcome.

We'll take one more question, please.

Your final question comes from Alec Wash of Harding Glover Management.

Good afternoon, and congratulations on a strong quarter.

Two unrelated questions.

First, in regard to the prior question, you said that on Copaxone sales, you sell to Aventis 50% approximately of the end costs, that is Copaxone sold to them.

Is the $130 million that you've recorded Copaxone sales entirely composed of that?

No, actually, we are selling relatively small amount outside of the deal with Aventis, but I dare say that most of that $30 million are coming from sales of in-market sales to Aventis.

So the bulk of the $130 million would be constituted under this arrangement with Aventis?

That's right.

Okay.

So as we take the 50% figure, that will go straight into more or less half of that into our accounts.

Good.

Okay.

Secondly, earlier in -- I think it was Israel's speech, he said that you are now 37% market share in the product universe in U.S. generics, if I heard correctly.

Right.

Could you define that?

Bill, why don't you do that?

It is, we take all of our product range that we sell in the United States and we look at the total market for those products, and then we look at the number of prescription share that we have for our products compared to what our competitors have of our products, and the significance is that when we look at our universe, we have 37% of that universe.

If we look at our competitors, any of our competitors, Milan, Geneva, Watson, their share in their universe is significantly smaller than that.

Where would the share have been a year ago, though?

It was about 33, 34 a year ago.

Okay.

In Q1, you all were able to prune your portfolio of U.S. generics in getting -- got rid of some lower margin products and were able to replace them with higher-margin products, did that trend continue in Q2?

Yes.

I mean we -- we had an exclusivity in Q2 with Torsemide.

We introduced Tramadol.

So, yes, that trend is continuing.

My final question is on REMRON. I was wondering if you could bring us up to date with where you stand at this point?

There's been no change.

The judge has the summary judgment under consideration, and we're waiting to hear from the judge.

And in terms of having product ready to go?

Where do you stand?

We're waiting to hear from the judge.

Thanks, Bill.

Okay, these complete our questions.

I just want to make one small remark.

Apparently I mentioned in my speech, so-called, that the U.S. generic grew this quarter compared to last quarter by 12%, it was actually 14%.

So if I said 12, it will be 14.

Sorry for that.

And now I want to pass it back to Dorit.

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