Teva Pharmaceutical Industries Ltd (TEVA) 2003 Q3 法說會逐字稿

Good day.

All sites are now on the conference line in a listen only mode.

I would like to turn the program over to your host, Dorit Meltzer, Director of Investor Relations.

Thank you, operator.

Good morning and good afternoon to all of our guests.

Here we are with the Teva conference call with several management.

We hope you all have had a chance to review our press release and thank you for joining us again after only two days to discuss another exciting topic, Teva's third-quarter of 2003 financial results.

Your host today will be Israel Makov, President and CEO;

Dan Suesskind, CFO;

Bill Fletcher, President and COO of Teva North America;

George Barrett, President and CEO of Teva USA; and Moshe Manor, Corporate Vice President Global Product Division.

I would like to remind our friends in North America that we will host a luncheon on Wednesday, November 5, and for those of you who haven't received our invitation or have not (indiscernible) please call us in Teva USA at 215-591-8912 or in Israel at 972-3-9267-281.

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

Israel, would you like to begin please?

Good morning and good day to everyone and welcome.

The most exciting and significant news of the last two days was the announcement of our signing a merger agreement for the acquisition of Sicor which we discussed at length in our Friday conference call.

While I'm sure the high level of curiosity regarding this transaction has not subsided, I want to focus today's conference call on our quarterly financial results which as you have seen are exciting as well.

We achieved a number of all-time records this quarter.

On the top line we closed the $800 million mark to reach $830 million in sales.

In April (ph) we crossed the $150 million mark to reach $157 million, and our net income margin crossed the 90 percent mark.

All of this stems from continued strong performance across our major markets and for our products.

Teva USA Pharmaceutical sales continue to demonstrate their strength with gross up 28 percent over the comparable quarter of last year.

This increase was due to the combination of 40 new products launched in the last twelve (indiscernible) month period, together with a strong performance of our base product line.

This was also the first quarter in which we included Purinethol, the product we received in settlement from GlaxoSmithKline.

Looking toward the future, we have 68 pending product applications in our pipeline with total annual U.S. branded sales of over $55 billion, yet another record, 18 of which we believe are first (indiscernible) with annual U.S. brand sales of over $13 billion.

Additionally in 90 percent of our generic products in the U.S. market, we are first or second in market share, a level of leadership we have maintained throughout the year.

Recently we won the court case regarding Fosinopril and we lost the appeal of Fosamax.

Because we have by far the largest pipeline in the industry, we are able to use risk adjustment with (indiscernible) in preparing our internal (indiscernible) to reflect the potential successes, delays or failures resulting from the third product introduction pending such verdicts.

Therefore, while a positive ruling on Fosamax might have had a significant upside, this ruling against us had no affect on our plans for next quarter or next year.

European Pharmaceutical sales were $180 million this quarter, an increase of approximately 36 percent over the comparable quarter in 2002.

The continued penetration of Copaxone in Europe, the expanded sales of generic products and the euro revaluation were the main contributors to this significant increase in our European sales.

It is worthwhile noting that in spite of the erosion in Simvastatin pricing which we launched in Q2 2003, it was still a major contributor to our UK sales.

Our API division, another major growth engine this quarter, achieved 33 percent growth in external sales over last year.

During the quarter, we completed the acquisition of (indiscernible) Limited, an API manufacturing facility outside of New Delhi, India for a purchase price of approximately $8 million.

This facility is primarily intended to produce intermediates for the production of our own API and will allow us even further integration in our API operations.

Statistically this acquisition can be considered our API pilot entry into India which is an important source of our intermediates.

In Israel, we also had a successful quarter with sales increasing 20 percent over the comparable quarter in 2002.

This increase is due to a successful winter product sales (indiscernible) campaign, increased sales of third party products and a devaluation of the Israel shekel.

This was another solid quarter whose sales enhanced this quarter's results.

Global in-market sales reached $180 million, a 25 percent increase over the comparable quarter in 2002, $123 million of which was in the U.S.

Copaxone's performance reflects growth higher than the growth of the U.S. market in terms of product prescriptions.

The market grew by 9.2 percent and we grew by 11.4 percent.

It is worth noting that in-market sales are impacted by adjustment of inventories at the wholesale level.

These adjustments are customary and are made from time to time by wholesalers for various reasons.

This quarter the level of Copaxone inventories were adjusted downward, naturally this adjustment moderated our U.S. quarterly in-market sales.

Outside the U.S., the growth rate for Copaxone was almost double that of the market measured in monetary terms.

The market grew by 34 percent and we grew by 64 percent.

We are also excited and encouraged by Copaxone's (indiscernible) in the French market towards the end of this quarter.

There have been some significant publications regarding Copaxone this quarter, among them a tenuous steady, the largest and the longest follow-up study ever in MS, again demonstrates a Copaxone strength in treating relapsing and remitting multiple sclerosis patients, both in terms of reduced relapse rate and neurological stability.

It is worth mentioning again that we have completed our submission of rasagiline for the treatment of Parkinson's disease to the FDA, EMEA and Canadian Health Authorities.

This quarter we continue to generate substantial cash flow and we further enhanced our existing solid financial position.

In conclusion, the consistently strong results and this quarter's overall performance yet again demonstrates Teva'a ability to generate sustainable profitable growth.

Let me translate this statement into guidance for the fourth quarter of 2003.

Although Q3 was at the high-end of our estimates, Q4 may be even stronger as we indicated at the beginning of the year, and we (indiscernible) our EPS estimate for the year from between $2.00 to $2.05 to between $2.05 and $2.09.

I will now hand the call over to Dan who will guide you through the financials.

Thank you, Israel, and good morning to all of our friends wherever you are.

At this time we have our conference call earlier than usual to accommodate our listeners so they can listen to it before the market opens.

It is a sort of anticlimax to talk on a topic like quarterly results after Friday's news.

As a numbers guy I can just tell you that since Friday with only 30 minutes advance notice, we had well over 300 participants on the conference call.

One more figure, before I disconnect myself from the Sicor deal, with a total (indiscernible) value of $3.4 billion the Sicor transaction is about 11 times the size of our largest previous deal, the acquisition of Novapharm in 2000.

And now to the quarter.

This quarter will be recorded as one of those rare quarters where we can compare apples to apples, but as you see with the forthcoming acquisition of Sicor this won't hold for long.

Our last acquisition, Bayer Classics in France, which was renamed Teva Classics in (indiscernible) in Italy we are consolidated for the first time in the comparable quarter Q3 of '02.

There also no extraordinary items this quarter so the comparison is straightforward.

As Israel has already mentioned, we had an all-time high results measured both in top and bottom line.

The more than 800 million top line is up 29 percent from the comparable quarter and the $157 million bottom line is also our best ever.

Earnings per share reached 43 cents, up 47 percent, again an all-time high but grew at a lower pace than net income due to the first time diluted effects of 2 to 3 cents of our two outstanding convertible bonds which have a contingent conversion feature which kicked for the first time in this quarter.

On a trailing 12 (ph) months basis with the quarter ended September '03, we exceeded for the first time the $3 billion mark in sales and the $2.00 per share in earnings per share.

Now I will walk you through our quarter and P&L.

First the consolidated (indiscernible).

These increased by 29 percent for a delta of $181 million over the comparable quarter.

About 85 percent of this growth is organic and currency neutral with the remaining 15 percent being the positive effects of the strengthening of the European, Canadian and Israel currencies relative to the U.S. dollar.

In connection with the currency's impact it should be noted that we are trying to neutralize such impact on our bottom line.

As a result in spite of the impact on our top line the effect of the currency movement on our bottom line is rather minimal with hedging transactions, the outcome of which is recorded in the financial expense line item offsetting the impact of currencies on our operating income line item.

Hence (indiscernible) expenses dropped (indiscernible) from quarter to quarter and (indiscernible).

North American sales in this quarter accounted for 62 percent of consolidated solid sales, European sales accounted for 26 percent, and the rest of the world of which (indiscernible) and Israel represent the lion's share accounted for the remainder of 12 percent.

The North American generic pharmaceutical business, (indiscernible) accounted for slightly over two fifths of the growth in consolidated sales.

As a matter of fact, our North American sales include our small brand of products (indiscernible) Teva USA which in this quarter included for the first time sales of Purinethol, the product we received from GSK as a settlement arrangement.

We sold in this quarter the U.S. 14 products which were not sold in the comparable quarter.

The major contributors to the sales increase were Augmentin, or the generic version of Augmentin and Purinethol with Mirtazapine facing strong competition due to the expiry of our exclusivity toward the end of Q2.

In certain European countries we continue selling Simvastatin in this quarter, a product which is vertically integrated based on our own API.

Copaxone market sales grew 25 percent of the comparable quarter.

Sales increased 64 percent outside the U.S. and 13 percent in the increasingly competitive U.S. market.

We continue to increase market share.

Out of a total growth in U.S. prescription, meaning the delta over the comparable number, the term used in Teva is the share in the total opportunity, Copaxone captured 34 percent.

And when prepared to the previous quarter Q2 of '03, we actually captured 38 percent of the opportunity.

The U.S. market accounted for 68 of total in-market Copaxone sales and the non-U.S. were 32.

API sales to third parties reached 95 million, an increase of 33 percent over the comparable quarter.

This represents about 60 percent of the total API business outputs, the balance represents intercompany sales.

This continuing integration between our API and pharma business is a major contributor to our gross profit margin from sales to gross income.

The gross margin reached 46.4 percent this quarter, second only to our previous quarter.

As I mentioned in our conference call three months ago, and I quote, "while we are no doubt on a new level of gross margin within this higher level we expect quarterly margins to move slightly in both directions", and here you saw one movement.

Gross R&D of $62 million represents an increase of 33 percent.

Most of the incremental expenses devoted to generic R&D.

Net R&D, at $55 million, was also a record high.

Net R&D after participation from others grew at a rate of 35 percent.

Third party participations included mainly Lundbeck and Eisai, our new strategic partners.

As to SG&A, we see our normal level at 16 to 17 percent on sales but with swings around it.

The 15.4 percent of this quarter are on the low side.

As to financial expenses, the exceptionally low expense in this quarter of just over $1 million should be seen together with a high expense, $9 million recorded in Q2 of this year.

Financial expenses in the two quarters combined amounted to $10 million which would be seen as the order of magnitude for two quarters.

The fluctuation reflects mainly the timing differences in recording income and expenses on currency hedging and interest swap, (indiscernible) 133.

Obviously, the hedging effects shows up more significantly in the relatively small line item financial expenses and goes unnoticeable in other line items where it is compensated for.

As for the provision for taxes on income, we have indicated previously that we had expected this rate to increase from '02 to '03 due to the partial expiration of tax (indiscernible) we enjoy.

As we progress within any given year, we adjust the rate to always reflect the last (indiscernible) estimate of the annual tax rate.

In this connection the Q3 rate of 20 percent approximates the expected annual rate for '03.

Starting in '04 we expect to greatly be getting back part of the tax (indiscernible) from the incremental Copaxone output arising from our new manufacturing plant in the Southern part of Israel, in which we should contribute to a lower tax rate as of '04.

All of this led to a net income for the quarter of roughly $167 million or 53 cents per share.

The net income represents 90 percent on sales and 20 percent annualized return on average equity.

Cash from operations amounted to $138 million.

This compared to $93 million in the comparable quarter or $354 million for the whole of '02.

We further increased the level of our inventories.

This continuous increase from December of finished goods reflects both increased volume of sales and expansion of our product offering but also our strategy of (indiscernible) high level of consumer services and the changing situation and conditions.

However in terms of inventory days, we show a slight improvement.

We spent $58 million on CAPEX, also an all-time high, mainly due to increased investments in our API facilities, and the investment in the new state-of-the-art North American API system.

We approved a $20 million dividend, this dividend which will be paid on December 2, will be paid also on the shares resulting from the conversion of the first sales of our convert earlier this month.

Subsequent to the quarter, on October 15th, this first sales of our convert were converted into 12.8 million (indiscernible) of Teva.

This increased our equity and cut our outstanding debt by $550 million.

This improved substantially our financial ratios and reduced our leverage to an equity to debt ratio of 2 to 1.

This, together with 1.5 billion of cash and other liquid investments is a good -- in our books is a good starting point for the funding will have to do in connection with the Sicor transaction.

As a result of this conversion, S&P (indiscernible) our rating to triple B. We were very happy when we were notified Friday that S&P reaffirmed the triple B subsequent to the news on the Sicor deal.

With this, I would like to end my formal presentation, and we are now open to questions.

Thank you very much.

(OPERATOR INSTRUCTIONS) Rich Silver of Lehman Brothers.

Good morning.

Just a couple of questions on the guidance going forward.

Can you give us a sense of SG&A levels?

I know that, Dan, you had said -- this is obviously a quarter where you were sort of well below the targets that you've guided to before, the 16 to 17 percent level.

Can you give us a sense of where the SG&A is going to be going for and then the drivers of that, as well as the Purinethol in the quarter, can give us some sense of how much of a contributor that was?

And then lastly, just on the inventory issue with Copaxone, what can we expect in the fourth quarter?

Would we be seeing that returning or rebounding from the depressed level that we saw in the September quarter?

To your first question regarding SG&A, I mentioned that this quarter was relatively low.

The 16 to 17 percent is a general guidance as we give and I don't see any reason why next quarter should not fall in this range.

But as I said, it shifts from quarter to quarter and it is very difficult to give an exact estimate for any specific quarter.

Can you cite any particular reason why it was below that level this quarter?

I don't see any specific reason.

We include -- in the SG&A we include for example the cost of our legal expenses, which we record as they come.

You have quarters with higher expenses, you have quarters with lower expenses, and (indiscernible) from quarter to quarter.

This is a complex business and there are many many components in the SG&A and it may (indiscernible) from quarter to quarter.

There is no mathematical formula for this.

Actually Richard as you know, it is one to relate it to sales and one way to look at absolute figures.

If you look at one (indiscernible) in all the quarters you see that actually Q2 wasn't exceptionally high. (indiscernible) if one goes a little bit higher, one goes a little lower and as I said (indiscernible) our bills are coming in, it is not an indication of anything.

The other question regarding Copaxone.

You can't just take what we record as in market sales because what we record are our sales to Aventis.

But what happened in this quarter was that the inventory came down by about a week from the end of the second quarter to the end of the third quarter.

Okay, thank you.

David Maris with Bank of America.

Actually a few questions.

Dan, I don't know if you mentioned it and I missed it, but you mentioned the funding for the Sicor deal.

What type of financing are you planning and what dollar amounts?

Secondly, on the Bayer Classics business, can you tell us a little bit more about the progress of that acquisition, for example what year-over-year unit sales growth has been?

Have you seen any dropoff or pick up since you acquired that business?

And then lastly on Augmentin, any sort of recent market share gains, any prediction on how you look going into the winter for that product?

Could you please repeat the first question which I think was referred to me, Dan.

I think you said something about a good start -- your current cash balance is a good start for funding the Sicor deal.

Are you contemplating the financing and what type and what dollar amount?

No, I said that the cash we have vastly improves the leverage that we have, is a good start.

Obviously the only cash we have on hand we will have to fund it with outside money which will be probably initially a British (ph) financing and then we'll see.

Augmentin and the Bayer Classic?

We do Augmentin first.

On -- (indiscernible) share, we're about 44 percent of the share at this point.

Going forward, we are not going to predict going forward, but coming into the season we like that position.

I believe that was George Barrett.

Bayer Classics.

In France we have actually rebuilt the company and we have I believe maybe the stronger company in France to cap on the opportunity -- to capture the opportunity there.

Today the company maintains its number three, the number three to number four position in the market.

We expect it continue to grow.

Thank you very much.

Greg Gilbert of Merrill Lynch.

The financial expense level is more like 5 million a quarter on a normalized basis?

Yes.

Also, the slightly lower gross margin in the third quarter versus (technical difficulty), is that a mix issue, is it pricing?

Is there anything to point to there or just normal fluctuation?

It's normal fluctuation, but much of the fluctuation comes obviously from mix.

George or Bill, I was hoping you can give an update on Purinethol (technical difficulty) and when you expect to launch that and also whether or not you expect to launch any significant products in the U.S. between now and year end to hedge your guidance?

Greg, I think the answer on Purinethol at this point is that we are still waiting for FDA to turn around that approval.

I think at this point we probably leave it at that comment, which is we are waiting for FDA to respond to the court resolution and we hope that will happen relatively quickly.

How does that work, George?

It is an administrative process.

You notify as quickly as you can, you notify the agencies that a court position has been taken and then it goes into the FDA's administrative processes.

It's hard to know how long that takes.

Theoretically you would think it would take very little time, but it is (indiscernible) if it takes more time than expected, often a couple of weeks.

With respect to the new products obviously we've included them in our guidance.

If there is anything exceptional of course we will come back and revisit at the time.

George, one last question, characterize this or how the market for Copaxone is growing versus your expectations, is it coming along as expected, U.S.?

Yes it actually is, in fact I just got the IMS results for the latest week and we have increased our total market share again, which is very satisfactory for us.

We continue to gain market shares.

Elliott Wilbur of CIBC World Markets.

Thanks.

Dan, if you mentioned this during your comments I apologize, I missed it.

I was curious if you could share topline growth in the quarter between organic and the impact of the two recent acquisitions?

There is no impact on recent acquisitions because in the -- they were first consolidated in the comparable quarter.

Okay, were fully consolidated in 3Q.

As I said, at about 15 percent, one five of the growth, has actually a currency effect from the different currencies, exchange rate differences compared to the dollar.

A follow-up question for Bill or George on Fosamax.

Given that you have a split decision from the appellate court panel, was it reasonable to assume that you would go ahead and ask for a rehearing before the full panels?

Is it just too early to tell at this point?

It is certainly a consideration.

We are still evaluating that with all council.

But certainly a consideration, it was a two one split, and we will take a good hard look.

We agreed with the dissenting position.

One final question on Amox/Clav.

Am I correct in assuming that you still have an ANDA pending for the oral suspension form of that product?

That is correct.

Obviously predicting timing of the approval, difficult, but is it reasonable to assume that as we head into the strong period seasonally, you'll be in the market competing on that dosage form?

(indiscernible) (indiscernible) this side of the (indiscernible).

I don't think we should necessarily assume timing.

It may be, it may not.

Again, if it happens after the season we'll prepare for the following season.

So it's hard to predict at this point.

We would not give a forecast on timing.

I think Elliott even if it did happen it wouldn't have a significant impact.

The pipeline is full, people (indiscernible) for the winter.

It would be a relatively moderate ramp up over time.

Thanks Bill.

I have no further questions.

David Moskowitz of Friedman, Billings, Ramsey.

Congratulations on a great quarter.

Just dovetailing into that last question, Augmentin, my question was could you see significant stocking on Augmentin in the third quarter?

Bill you just mentioned that the pipeline is full, so that is question one.

Question two, can you talk about the rest of the world trend?

It looks like that was up pretty significantly over last year.

Is that just simply a currency effect or are we seeing some volume improvement?

And I'll ask a couple of more, if you want to take those two first.

David, on the stocking we saw the absolute traditional stocking that you see in antibiotic season, so nothing extraordinary.

This is what we normally see as we get into September/October, (indiscernible) the first part of the antibiotic season for purchasing.

And the rest of the world trend?

The rest of the world actually, as you know, looking from the U.S. the rest of the world also includes Israel which is the lion's share obviously of this and most, if not all of the growth, comes actually from Israel which is both a subcurrency effect an also we had a very successful winter for the (indiscernible) this year which boosted sales by a few million dollars.

By the way, if I was not fully understood before, the 15 percent currency impact is 15 percent of the growth between the two quarters.

Thanks.

Dan, can give us clarification on the interest add-back next quarter?

Am I correct in assuming that there is no interest add-back next quarter and also could you give us the average level of shares that you expect for the next quarter for our model?

The number of shares next quarter will be around 306 million.

The add-back, I don't remember offhand.

Okay.

I can give you that off-line.

Also in terms of the gross margin, given that you're going to -- or we expect you to get Monopril in the quarter, Augmentin volumes increasing again, would we expect the gross margin to be up over the third quarter?

We said something about gross margin I assume, I quote myself again with a quote I said today which comes from last quarter.

We see ourselves at the higher level but to tell you if it will be half a percentage point or one percent, or four percentage points higher or lower is very difficult to predict.

One product like that has so many moving parts (indiscernible) that you can't measure it only by this one add on.

Okay, and what is the range?

I believe it is -- is it 45 to 46 or 45 to 47 percent?

It is 45 and up.

Just on Sicor, could you one more time, go over the overlap on the API business?

I mean this is an area where you expect to get most of your synergies from, from the acquisition.

And also could you talk about the power platin or the Carboplatin opportunity?

It's 800 million in sales according to our estimates.

That seems like a major driver of the merger, could you confirm that?

We have hardly any overlapping of the API.

Actually their API, the product that they produce are going to be added to our portfolio and there is no overlapping there which we see as a plus not as a minus.

What was the other part of the question?

Carboplatin.

We can't give you indication about (indiscernible) product but this cannot be one product, not being the reason for a merger of design.

Clearly David we are looking for synergies from Sicor's strong position in the oncology market.

I think as we said on the conference call we feel that that not only applies to the North American market but also to Europe, where there product line and our product line make us a major force in the generic oncology market.

Thank you very much.

Ching Chang (ph) of (indiscernible).

I think you answered it earlier, but what were the Purinethol sales in the quarter?

I don't think we did answer that.

Oh, you didn't answer, okay.

I was also wondering could you give us status on Wellbutrin.

I mean is there anything new that you can divulge or is it the same as last month?

I would say there is actually nothing new at this stage.

We are again waiting for regulatory approval and that really is essentially where we were last time we spoke.

Thanks.

Steve Valiquette of UBS.

The Sicor merger, can you just discuss for a moment what their marketing partner, Baxter, brings to the table that the newly combined company couldn't do on its own?

I was just curious to hear more about that.

Don't forget there is a legal contract in place that obviously we have to honor.

Sicor, for sometime, has been building up its business outside of the Baxter relationship through its own sales force.

But I think that in terms of just the pure hospital market, Baxter obviously is the preeminent player in that market.

I think we are very happy with their strength and we feel obviously if you're going to partner with anybody in hospitals, it better be Baxter.

And we collaborated with Baxter in other places outside of the U.S.

Also just on Copaxone and the wholesale inventory issue, not really issue, but I'm just curious what you think is the proper inventory level for that product?

The drug industry average is around one month.

I'm curious for that product, what you think the appropriate level should be in the wholesaler channel?

I don't want to overemphasize this issue because we are talking about the difference between three weeks and two weeks.

Copaxone inventory is practically always below a month.

At the end of this last quarter it was down to two weeks.

You're right.

It sounds like it is not an issue at all.

Thanks and congratulations.

Henry Coomb (ph) of Thames River.

I've got a few questions, the first again relating Copaxone.

You said the one-week inventory adjustment translates your approximately $15 million of in-market sales?

And the second question on Copaxone, as you mentioned in your 6K second-quarter the price increases announced for Copaxone in the U.S. would be impacting the third quarter.

So does not mean the actual unit price for volumes has actually declined in the third quarter?

The next one is just on the net debt position of Sicor as of the end of 2002, and also just a bit more on rasagiline, on target sales and when we might expect a launch, how far that is?

Thank you.

I'll start with the last bit because that the easiest bit.

At least in the U.S., obviously we hope that FDA will be in a position to give us an approvable status within a year.

That's the regulation and hopefully we see no reason why that timetable shouldn't be kept, and so there is a possibility that we may launch the product Q4 of next year or shortly after the beginning of the new year.

In terms of the Copaxone, again I repeat what I said earlier, we give in-market sales purely as an indication of what Copaxone is doing in the market.

Within our accounts we actually book what we sell to Aventis.

And so that does not necessarily correlate to what is sold into the market.

Aventis has inventory, wholesalers have inventory and so you have different levels of inventory playing at different times.

It's just an indicator of the progress.

It is when you put with the prescription data, you can get a very strong picture of Copaxone's progress.

With respect to the price increases that were meant to come through in the third quarter, why that is not really very visible in the quarter to quarter basis?

I think it is visible.

Our pricing is increasing in this quarter compared to the prior quarter.

So does that suggest that volume is actually declining then?

Again, as I just said, wholesaler inventories went down, volume was more or less the same this quarter as it was the prior quarter.

I think probably there was a little bit of stocking in at the end of Q2 and that destock slightly in Q3.

I think we will see a good rebound in Q4.

Lastly, Sicor net debt position?

What was the question again?

Net debt.

Sicor's net debt at the end of 2002?

Actually we have cash balances on the books.

How much?

I think you can see it on the site.

It is a public company, you can see it there.

Okay.

Thank you.

Alexa Promader (ph) of ING.

I was just wondering if you could repeat the size of the pipeline?

Pipeline, 68 products representing $55 billion in sales.

That's the U.S. pipeline.

How many were added this quarter?

I do know how many we added this quarter, but we are well on target for our over 30 applications during the year, and that's the U.S. pipeline.

Obviously our pipeline outside of the U.S. is increasing at a similar pace.

Okay, could you also repeat the tax rate that you spoke about, the average you expect for 2004?

We expect end of 2004 to have a small decrease in our tax rate, if everything else is being kept equal.

I mean, the Israel part will have (indiscernible) tax rate granularly with the increased production in our new Copaxone plant.

But as you know, our blended tax rate is an average of so many tax machines that it obviously doesn't mean necessarily the tax rate will be lower.

Thank you.

Robert Balki (ph) Citigroup.

Congratulations for a very strong quarter.

Three quick questions from me.

First question to Dan.

Can you tell us Dan how you accounted for the Purinethol amortization in the quarter, if you put that in SG&A, and if you can give us a rough sense of how big that was?

Second question, did you write back your provisions on Argentina that you took in the first half of last year in this quarter?

And third question is, on the share number, I sort of -- I was expecting a bit of a different share number.

I had calculated that your end quarter share number should be around the 304.5 million that you reported as an average number and hence the EPS numbers seem to me a bit funny.

I was just wondering how you arrived at that because I thought that you converted the shares from your convertible bond in mid-August or in early August 10, or around then, not -- and it seems from your average share number that you applied that number to the whole quarter?

We start backward.

As to the share count, if you could help me with our auditors, I'm with you.

I thought it would be for mid quarter but the regulations are that you have to adjust it for the full quarter.

That's the difference between 304.5 and 306.

As to the Argentine, the answer is no.

And as to Purinethol, the size of the sales were already said by Bill, but we are booking it as part of the cost of goods.

So you are booking the amortization as part of cost of goods sold?

Sorry, Dan.

I just wanted to be sure on the amortization.

You're booking amortization as part of cost of goods sold?

Yes.

Thank you very much.

David Buck of Buckingham Research.

A couple of questions.

First on Europe, can you give a sense of what additional countries you're expecting to launch Simvastatin in, either by year end or by next year, on a finished goods side?

The second question is on recycling, can you give us a sense of what the combined Teva Eisai sales force may look like in terms of number of reps?

And another U.S. question on Rebetol and generic Wellbutrin, those generics, are they expected as part of the 2003 guidance?

And I have just a tax rate question for Dan.

Let's start with Europe.

We launched Simvastatin in England and we launched it in the Netherlands and we may launch it in other countries in due time, in some of the other countries we still have patent in place.

And rasagiline we have submitted the product, the (indiscernible), to the EMEA and we expect it to go through review and hopefully to be able to get approvals in timeframes similar to the U.S. George?

You asked about ribavirin, and another product, I'm sorry?

Ribavirin and (indiscernible).

I think I will give you the general answer you've heard us say before.

We do a risk adjusting methodology to all these products and particularly when they are subject to litigation and FDA approval they are heavily risk adjusted.

So in terms of going forward, we feel very comfortable with where we are.

In terms of the case, as you know, we are waiting for FDA to respond on the ribavirin (indiscernible) citizen’s petition.

The timing at that response is uncertain, as is always the case with FDA in these kinds of situations, but we hope it's not too far in the future.

And the exclusivity position --?

Is still to be determined.

With respect to the salesforce, David, by the time we launch I would expect that we will have between us somewhere close to 650 to 700 representatives in the U.S.

How many does Gate (ph) have currently, Bill?

Currently 35.

A question for Dan just on the tax rate.

I think you said for this year it should be 20 percent in line with the third quarter, and you're expecting a slight decrease before we add in Sicor, is that correct?

First of all, I didn't relate to Sicor at all.

Understood.

This year we expect it to be somewhere in the 20 to 21 percent.

Next year sales, the effect we already know is that our Israeli tax which includes the new plant of Copaxone, will decrease somewhat.

I can't tell you what the overall effect of that will be because they're so many moving parts in there.

I think you can make an assumption that it will be somewhere between the 19 to 20 percent tax, although things may work out differently based on the blend.

So excluding any change from Sicor, 19 to 20 percent for '04 Teva standalone?

Yes, I think this is a fairly safe assumption.

Can I just check that you were not, I presume, when you asked for the Teva and Eisai combined forces, you meant Teva, EuroScience (ph) and Eisai?

Yes, I did.

Ken Pasatori of SG Cowan.

Just two quick questions.

First on Purinethol, are you aware of any generics in development or any progress on that front that might -- any competitors that might enter the market?

As well, if Bill or George could speak to the Oxycon 80 mg opportunity?

One, do you believe you are first to file?

Two, Endo (ph) who I believe is a litigant here, indicates that that they're going to be doing some prelaunch manufacturing in case they get successful on the invalidly claims.

Would that clear you all to launch as well and are you thinking of doing any prelaunch manufacturing as well on that?

We will take the last one first, Ken.

You are referring to the Oxycontin?

Correct.

We have been listening carefully and watching carefully their public statements about this.

We obviously are going to have our own independent plans.

I would not yet characterize our launch plans.

I think it is premature for us to be discussing that.

But very interested in what's happening.

As you know there are multiple strengths and it is an exciting opportunity, but we are going to at this point still hold our cards close to the vest.

We do wish them the best though.

On Purinethol, are you aware of any generics in development?

We are aware that there is an ADNA out there but that is all.

It is a very difficult product to manufacture.

We feel we are in a good position at the moment.

Thanks guys.

We will take two more questions.

Richard Silver of Lehman Brothers.

Generic pricing in the quarter overall, what we have seen in the U.S?

And then also just on Copaxone, I know you said that you sort of periodically evaluate sales force size relative to what's occurring competitively.

Any update on that as we come into '04?

On the sales force Rich, when we are looking at Mirtazapine (ph) theoretically twelve months from now, and clearly we're going to be looking probably to increase the rep force between now and then.

On pricing, it was actually quite stable.

Obviously during the period we lost exclusivity on Mirtazapine, so of course that product had a dramatic swing.

But in general the market for us has been as it has been for some time period of time, relatively stable.

Thank you.

A final question comes from Michael Tong (ph) Wachovia.

Congratulations on the quarter.

Most of my questions have been answered.

Just a couple of quick ones.

Is the case for Wellbutrin just a waiting game at FDA right now?

And secondly, with respect to the potential acquisition of Sicor, do you expect that to help your situation with respect to (indiscernible) oral suspension?

I don't think should comment on the latter.

I think at this point it's probably inappropriate to do that at this stage.

The first question on Wellbutrin, yes, I would say there is actually nothing noteworthy to report.

It is just in the waiting period with the regulatory file.

I would say there is nothing dramatic to report there.

Thank you.

There are no further questions.

Thank you, everybody.

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