Teva Pharmaceutical Industries Ltd (TEVA) 2008 Q2 法說會逐字稿

Greetings and welcome to the Teva Pharmaceutical Industries Limited second quarter 2008 results conference call.

At this time, all participants are in a listen-only mode.

A question-and-answer session will follow the formal presentation.

(OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ms.

Elana Holzman.

Thank you, Miss Holzman, you may begin.

Thank you, Diego.

Good morning and good afternoon, everyone.

Welcome to Teva's second quarter 2008 earnings call.

We hope you all had a chance to review our press release, which we issued earlier this morning.

A copy of the press release is available on our website at www.tevapharm.com.

Additionally, we are conducting a live webcast of this call that is also available on our website.

Today we are joined by Shlomo Yanai, President and CEO, Eyal Desheh, Chief Financial Officer, Bill Marth, President and CEO Teva North America, and Moshe Manor, Group Vice President, Global Innovative Resources.

Shlomo and Eyal, will begin by providing an overview of our results.

We will then open the call for question and answer period.

Before we proceed with the call, I would like to remind everyone that the Safe Harbor language contained in today's press release also pertains to this conference call and webcast.

Shlomo.

Thank you, Elana.

Welcome, everyone, and thank you for joining us today as we review Teva's results for the second quarter of 2008.

I'm very pleased to report that Q2 was another excellent quarter for Teva, both financially and strategically.

Teva's net sales in Q2 reached a record breaking $2.8 billion, with gross margins of 53.3%.

Our operating profit was $638 million, with net profit of $539 million.

And all of this ultimately brought us to diluted EPS of $0.65.

Strong contributions from Teva's many businesses and geographies drove our results in Q2.

It was an excellent quarter for Teva USA.

We launched nine products in Q2 and have launched 18 thus far in 2008.

And we have expanded our leading market share in the US among all pharmaceutical companies, both generic and brand, to 12.6% of total prescriptions.

North American sales were driven by our major launches of Risperidone and Bupropion XL 150.

In addition, we continue to enjoy strong sales of our recently launched Amlodipine/benazepril capsules and [alenlamate sodu] and our sales of base products grew by more than 7% year-over-year.

Outside the US in Europe, sales were up 25% over Q2 '07.

It was an especially strong quarter in Hungary and in France, where Teva increased its customer base and market share in a growing generics market.

Clearly, although we benefited from exchange rate in the European markets, our growth was still positive, even in the face of short-term issues in the UK and the Netherlands.

Our international business had a record breaking quarter with sales up 38% over Q2 '07, supported by especially strong results in Russia, Latin America and Israel.

Our international business is composed of many high growth markets and we are very enthusiastic about opportunities that lie ahead of us in these regions.

Turning now to our global respiratory business, sales were down slightly year-over-year.

However, we are very optimistic about growth in this business this year.

The EPA, in concert with the FDA, has clearly communicated that no CFC based inhalers may be sold or dispensed after December 31st.

Healthcare providers are taking appropriate steps to ensure that approximately 40% of patients still using CFC based inhalers make the switch.

We expect our ProAir to remain the market leader and are preparing for the anticipated increase in the in demand as CFC based products go off the market entirely.

This was an outstanding quarter for Teva's innovative business, with record breaking in-market sales of Copaxone growing 29% over the second quarter of 2007.

In the US, in-market sales increased by 17%, outside the US in-market sales increased by an extraordinary 53%.

This is the first quarter in which Copaxone led the market in US net sales, where it also leads in terms of both new and total prescriptions and the second quarter in which it leads in global sales.

Copaxone continues to outpace the market's growth and we expect it to remain the leading therapy for MS and continue to grow.

This was also an outstanding quarter for Teva's second innovative product,Azilect, sales of which rose 50% over Q2 '07.

Last month, we announced the successful completion of ADAGIO.

The Phase III clinical trial designed to test Azilect's efficacy in slowing the progression of Parkinson's disease, one of the most clinical unmet needs in the treatment of Parkinson's patients.

Azilect met all the study's three primary end points and the study also confirmed Azilect's safety and tolerability.

The results of this study will be presented at the 12th Congress of the European Federation of Neurological Societies on August 26th in Madrid and the American Neurology Association Congress in Salt Lake City on September 21st.

We believe that the promising results of this trial may lead to a significant increase in Azilect's market potential, leading it to become another major Teva drug for neurological disorders.

And now before I turn the call over to Eyal for a more detailed financial review, I would like to briefly update you on the progress that we have already made in implementing Teva's strategy plan to double our business by 2012.

Among other things, we have significantly increased our production capacity, which is now up to an annual run rate of 47 billion tablets and is expected to reach a run rate of 53 billion tablets by year-end, allowing us to meet the growing demand from our largest customers and provide them with even better service.

We have increased our R&D investment, from 5.7% to 7% of total sales, which has already allowed us to substantially increase the number of products under development and on their way to the pipeline.

We have set ambitious goals for R&D output and are well on our way to reaching them.

We have acquired CoGenesys, as part of our long-term commitment to becoming a leader in biologics and we acquired Bentley, which provide us with a strong platform in the fast-growing generics market of Spain, a deal which closed a week ago.

We are extremely pleased with the progress we have made in the short time since we launched our strategic plan and there is tremendous enthusiasm inside of Teva to keep the momentum going strong as we head towards the next phases of the plan.

And of course, this is all without the addition of Barr, an acquisition which I discussed with you last week, that will provide us with great strategic and economic benefits and allow us to exceed our 2020 targets.

Based on our strong performance during the first half of the year and our positive outlook for the second half of 2008, we now expect EPS in the range of $2.69 to $2.75 versus the previously announced range of $2.60 to $2.75.

It should be noted, though, that due to the uncertain timing of several key product launches over the next two quarters, our revenue stream may not be linear and it is likely that the strength of the second half will be most visible in the first quarter.

Thank you very much and now I will turn the call over to Eyal.

Thank you, Shlomo, and good day to everyone.

I hope you have had an opportunity to review the press release we issued earlier today.

This was another excellent quarter for Teva.

I would like to review with you the results in detail.

As Shlomo mentioned, we had record revenues in the second quarter of more than $2.8 billion, an increase of 18% or approximately $437 million compared to Q2 last year.

About one-third of the sale growth was due to currency appreciation against the US dollar, primarily the Euro, Israeli shekel and Canadian dollar with $11.5 million adverse impacts to operating income.

Another third was due to the assumption by Teva of the distribution activities of Copaxone from Sanofi Aventis in North America.

With a [value] growth accounting for the balance.

Pharmaceutical sales in North America grew 12% quarter-over-quarter to $1.5 billion.

Generic sales in the US were slightly down from Q2 '07 levels, which as you remember, benefited from particularly large new product launches.

Pharmaceutical sales in Europe grew 25% to $762 million and represented 29% of total pharmaceutical sales for the Company.

European generics in dollar terms grew approximately 16%, while in local currencies growth was a modest 3%.

International pharmaceutical sales totaled $400 million, growing 37% quarter-over-quarter.

This growth rate is significantly higher than the group average, mainly due to the acceleration of sales in Teva main international geographies, including Russia, across all of Latin America and our business in Israel and Turkey.

11% of the international growth was attributable to foreign currency effects.

Moving to innovative business, Copaxone had another record quarter with global market sales of $563 million.

This is a 29% increase over the comparable quarter, with very, very nice growth in the international markets.

Just to remind everyone, on April 1, 2008 Teva took over the distribution responsibilities of Copaxone in the US and Canada from Sanofi-Aventis.

According to the agreement, we'll record as of this quarter full in-market sales of Copaxone in North America as compared to booking the sale at a transfer price at Sanofi-Aventis prior to that date.

Also, for the next two years, until Q1 2010 inclusive, we will book under SG&A a 25% payment on total sales in North America payable to Sanofi-Aventis.

In addition, Sanofi-Aventis no longer participates in our Copaxone sales and marketing expenses in North America that were credited against our SG&A in previous quarters.

These changes have a positive contribution to Teva net sales, gross profit and gross profit margin.

However, the increase in net sales is offset by the increase in SG&A expenses, resulting in a negative negligible effect to operating income and the negative 1.5% impact on operating margin.

Our global respiratory business, which is included in the North America and European and international sales figures, the total of which I've already mentioned, had sales of $168 million compared with $181 million in Q2 '07, but was flat compared to Q1 2008.

Our gross profit margin reached 53.3% in the reported quarter, higher than the 52.1% in the comparable quarter in 2007.

This quarter's gross margin was positively affected by the termination of the agreement with Sanofi-Aventis North America.

Net R&D expenses increased quarter-over-quarter by 45% to a record of $198 million or 7% of sales.

As previously indicated, this increased investment is a direct reflection of the increased efforts in generic and biogeneric R&D and is consistent with our strategic goal to double R&D spending by 2012.

SG&A, which reached $669 million in the quarter, represented 24% of sales compared to 20% in Q2 2007.

The higher SG&A is in line with our plan and as already mentioned, resulted primarily from the termination of our agreement with Sanofi-Aventis regarding Copaxone in North America and to a lesser extent of the weakening of the US dollar.

Operating profit this quarter amounted to $638 million, similar to the comparable quarter in 2007.

As percentage of sales, operating profit margin were 22.6%, 12.1% lower than the comparable quarter in fiscal 2007.

Here are the main factors contributing to the percentage change and here they are.

The end of the agreement with Sanofi-Aventis had a 1.5% negative impact on our margin.

Foreign currency impact had 1.6% impact on our operating margin and last, but not least, our increased R&D investment, which reduced our operating margin by 1.3%.

Let's not forget, though, that R&D investments are expected to contribute to our future growth.

We recorded $28 million of financial expenses in Q2 2008 compared with $8 million recorded for the comparable quarter of 2007.

Finance expenses this quarter include a charge against our portfolio of auction rate securities amounting to $25 million before tax.

While we did not adjust this charge in a non-GAAP report, this amount represents approximately $0.03 per share.

As in the past two quarters, this charge was calculated based on an internally developed model which evaluated every single security in the portfolio.

The principal amount of our auction rate security portfolio remained $445 million, whereas the net amount of this portfolio as of June 30, 2008, stands at $274 million compared to $334 million at the end of March.

The June 30 balance is after giving effect to cumulative total of $77 million P&L charges and cumulative total of $94 million provided in our balance sheet under other comprehensive income.

Provision for income tax this quarter amounted to $68 million or 11% of pretax income.

This provision is based on our best current estimate for our expected annual tax rate for the whole of fiscal 2008, which now stands at 13% on an adjusted pretax income.

The reduction in effective tax rate from 17% in 2007 to 13% in 2008 reflects mainly the already executed, as well as expected launches in the US during the year, which to a large extent were developed and will be produced in Israel.

However, as we have previously indicated, we're not in a position at this point to assure you that this rate is sustainable for future years.

All this leads to a net income of $539 million in total, up 5% from last year.

Earnings per share, based on this income, works out to $0.65 per share, up 3% from the comparable quarter last year.

Now let's have a look at our cash flow.

You have already heard from Shlomo.

We had record high cash generated from operations amounting to $806 million, while our free cash flow after capital expenditure net of $132 million in dividends of approximately $106 million amounted to $568 million.

Free cash flow was used primarily to reduce short term bank debt obligations by more than $500 million.

The record cash flow from operation resulted from very strong collection of previous launches, mainly in the US.

DSO, days sales outstanding, amounted to 54 days this quarter, down from 62 days in Q1 2008.

The decrease resulted mainly from strong cash collection this quarter, as well as the termination of the agreement with Sanofi-Aventis which had a small impact.

Inventory days remained essentially flat, down to 192 days from 193 days in March.

We increased inventory levels earlier this year in order to improve service levels to our customers.

We have calculated a DSO, as we always do, after netting out from the receivables the sales reserve and allowances, the so-called SR&A.

To remind you, we record receivables on a gross basis and record the SR&A under current liabilities.

But in order to facilitate a more meaningful comparison with some of our peers who record receivables net of these reserves, we have used the net figure.

Total SR&A at June 30, 2008, amounted to $2.1 billion, an increase of $140 million from March 2008.

About 91% of total reserves are from the US, up $137 million from March 2008.

Most notably, due to provisions for chargebacks for new products.

Gross capital expenditure reached $202 million this quarter, $68 million higher than in Q1 2008.

We expect CapEx to continue to accelerate as the year evolve, exceeding $700 million for the full year, mainly reflecting the recently announced planned capacity expansion to support our strategic growth plan.

As for our debt, $3.3 billion, or 70% of the total interest bearing debt at June 30 is long-term debt, of which $1.4 billion is in our converts and $1.9 billion in a straight fixed or floating interest debt.

Our leverage, measured as debt-to-debt plus equity, as of June 30, 2008, stood at 0.24, compared to 0.27 at the end of March.

Shareholders' equity at June 30 reached $15.1 billion.

Of the increase from the end of Q1 of $679 million, $146 million or 22% represented the increase in our global net assets due to the depreciation of the US dollar.

For the convenience of our audience, I would again like to mention three figures relating to our share count so that we are all on the same page.

For the second quarter of 2008, our average share count for the purpose of calculating fully diluted earnings per share were 866 -- 836 million shares.

The share count at the end of the quarter for the purpose of calculating fully diluted EPS going forward, is the same, approximately 836 million shares.

While the share count for calculating our market cap, it is approximately 779 million shares.

Dividend.

Yesterday, the Teva Board approved a second quarter dividend amounting to approximately $106 million.

On per share basis, our dividend, which is declared in Israeli shekels, remains 0.45 shekels per share.

Based on the rate of exchange on July 28, 2008 of the shekel to the US dollar, this translates into approximately $0.13 per share.

Thank you all for your time and attention today.

Now we will be glad to take your questions.

Operator.

Thank you.

(OPERATOR INSTRUCTIONS) .

Our first question comes from Randall Stanicky with Goldman Sachs.

Please state

Great, thanks for the questions.

Eyal, just initially on the update to outlook, I assume it's fair to say that absorbs the $0.08 in year-to-date auction rate security write-offs and the lower tax outlook, but can you also maybe help us with how you're thinking about Risperdal and the exclusivity [wankst] in that updated guidance.

Bill would you like to start with the Risperdal and then we'll pass to Eyal for the rest.

Yeah, Randall, just to be clear on the Risperdal, we have oral arguments scheduled right now for September 12th and we would anticipate a decision sometime after that and we've fully contemplated this so far in our guidance as it is.

In terms of -- ?

Let me try to take the auction rate security question.

I hope I understood it well.

We continue to write-off additional $25 million, which is what our model shows us that we have to reduce to our P&L.

In addition, we continue to reduce the value, to adjust the value to our balance sheet.

We have no idea whether this is going to continue in this quarter.

Depends on market condition.

I want to remind, to reiterate, that this is a kind of $0.03 per share which is not related to our current business and that this is, in total from the beginning of the year, almost $0.08 per share that could have improved our bottom-line.

So Bill, just on the Risperdal, it's fair to assume there's something less than six months right now factored in.

Yes.

As we think about the stocking, obviously you had I think it was like less than half a day on the June 30 launch, how do we think about the, let me phrase it this way, the normality of the launch as it falls into 2Q versus 3Q going forward?

Yeah, that's -- I don't -- we don't get into specific guidance, Randall, on individual products.

I guess the way you would want to think about that is we had a good launch for Risperidone, but obviously only to a lesser extent did it get in the quarter.

Okay, that's helpful.

Just last one related to this.

As you think about the split between 3Q and 4Q from an EPS perspective on the new range, which I think is it implied at 140 to 146, how do we think about 3Q versus 4Q?

Well, as I said, because of the uncertainty of some of the expected launches, I think that we're going to see more materialize in Q4, but again, this is still on ahead of us and I want better numbers on three or four.

As we see it now, probably the first quarter is going to be stronger.

Okay.

That's great.

Thanks a lot.

Our next question comes from Gregg Gilbert with Merrill Lynch.

Please state your question.

Thank you.

Eyal, so what tax rate are you using for the remainder of 2008?

Well, the tax rate is 13%.

As I mentioned before, we measure our tax rate and provide the tax rate for the whole year based on our best available forecast of business and product mix and currently 13% is the rate.

Can you discuss some of the challenges that you saw in Western Europe in the first quarter and update us on how those issues played out in the second quarter, please?

Western Europe in the first compared to the second.

I recall issues in the UK and one other market.

UK and then another.

First of all, I'm very pleased with what we are achieving in the European region, which is a very promising region for the future of our business.

Due to the European very interesting different kind of markets, there is a very common thing that every year there is another player with a different kind of business structure or transferring the local market to a different kind of ideas or whatever.

So this time is about the Netherlands where they are started to switch to a certain degree, I won't say that the whole market has been switched yet, to the tender system which took the prices of those products which were on tender to a very lower prices.

We face, by the way, a very similar situation last year in Hungary, but we managed to turn the short-term problem to a long-term success as we see now this year when our Hungarian market share is growing and we believe that we will overcome the Dutch or the Netherlands as well.

In UK, it's a (inaudible),I believe it's a (inaudible) issue when we have some retail slowing down their purchasing, but this is, again, a temporary issues and we believe that all in all the European business is in good shape.

Thank you and lastly, Bill, can you update us on the status of your generic Lovenox application and where you stand on the immunogenicity issues that Momentis said they would answer in the third quarter relative to their application?

Thanks.

I would say that we are similarly situated.

Thank you.

Our next question comes from Ricky Goldwasser with UBS.

Please state your question.

Good morning.

Can you give us an update on the German AOK tender, when is it coming up next for bidding and do you expect to bid for it with Barr or separately.

And then on the pricing, if you can just give us an update on the base business and also the pricing for Lamictal, is it being set according to your initial expectations, because our channel checks point to discounts that are greater than 50%.

Thank you.

Ricky, I'm sorry, I couldn't hear the second part of your question but let me take the first one on Germany.

In Germany we expect the tender system to start again somewhere around September, maybe October.

This is by the court decision that the previous tenders should be terminated and they should go back to square one.

We are preparing ourself.

As you know, we did very well in the previous tenders.

Unfortunately the court dismissed these tenders, but we believe that we will find a way how to manage it in the second tenders as well.

It is going to happen probably before we close the deal with Barr, so I don't think that we could benefit from the additional Barr product in the German market.

If you be so kind to ask your second question again I'll try to answer.

The second question was around pricing, specifically for the base business, i.e.

the older generics and also for Lamictal, what are you seeing in terms of pricing, is it meeting your initial expectations.

Bill, would you like to take this one?

Yes.

Ricky, it's Bill Marth.

Good morning.

On the first question you're asking about the base business.

Our base business, we've had no notable change on the rate of price erosion for the last couple of years, so we feel pretty good about that at this point in time, although I can't make any predictions moving forward.

With respect to your question on Lamotrigine.

Lamotrigine is launching exactly as we had expected and the pricing is coming in where we had it planned for.

Thank you.

(OPERATOR INSTRUCTIONS).

Our next question comes from Marc Goodman with Credit Suisse.

Please state your question.

Yeah, first of all, the tax rate that you were talking about, is that 13% what we should be thinking about when we blend the two companies together for '09?

You mentioned on the call something about base business being up 7%.

Can you go back and just make sure I got that number right, maybe just elaborate on what are you referring to as the base business that was up 7% if that is the right number.

And then third on Copaxone coming back on the income statement with 100%, can you give us an idea of how much that impacted SG&A in the quarter?

Let me first answer the first one because I think that we have to clarify what Eyal said about the tax rate.

The 7% is Teva standalone and 2009 that is a different ballgame because we believe that at that time it will be after the closing with Barr.

As you well know, Barr takes numbers, totally different numbers, so definitely is not relating to a '09 tax level and you should not assume that this is going to be the tax level after '09, which is a different game and a different situation.

But if you were not buying Barr would the tax rate be that low or should we be assuming a higher tax rate for Teva alone.

Let me answer that.

The Barr, obviously, Barr tax rate is higher than Teva's.

I want to repeat the 13%.

The 13% is our provision for tax rate for the first half of 2007 -- 2008 and this is what we expect to show also for the second half of the year, best of our -- based on our base knowledge of the business mix.

When you add Barr, Barr has a basically higher tax rate.

It's a smaller company with less profit so the blend should have a few points higher than what Teva is showing today.

Definitely above the 13%.

I would be careful to give a number at this point.

We'll analyze this and I will discuss this later.

I understand that part.

What I'm trying to understand is should we have been thinking 17%, 18% before you just announced the -- ?

Again, on Teva going forward we believe that our long-term tax rate is higher than the 13%.

Okay.

You should factor it with a long-term something between 15% to 17% and again, it's highly dependent on mix.

That's what I was looking for.

Thank you.

All right.

Our next question comes from Ken Cacciatore with Cowen & Company.

Please state your question.

Hi, just had a quick question from Eyal on the debt paydown schedule.

Very aggressive this quarter.

Just trying to get a sense if you're going to continue to use free cash flow this aggressively on the debt paydown.

And then for Bill, Bill, can you give us a sense on the ADAGIO study and any conversations you've been having with managed care about moving this product from tier three, primarily down to tier two, if that's under way already and what the status is from some of those conversations?

All right.

Regarding free cash flow, we'll be using it to reduce short-term and long-term rates in the future as necessary.

Right now, close to the end of the year, we believe we're going to have a pretty large payment for the acquisition of Barr, so you should not expect to see this in the second half of the year.

But later on in '09 and beyond, yeah, we'll borrow money, we'll use cash flow to reduce it.

Bill?

Yeah, Ken, it's Bill.

Hey, listen, on the ADAGIO, or with respect to ADAGIO right now, as you may know, for the month of June Azilect became the most widely prescribed MAO-B inhibitor on both TRX and NRX volume.

But your question, I think, was more around formulary access.

At this point in time, formulary access at tier two is very, very good and we haven't had any change at this moment and there's nothing to update yet.

Thank you.

Our next question comes from Tim Chiang with FTN Midwest Securities.

Please state your question.

Hi, thanks.

Bill, could you comment a little bit about your expectations for pricing in the respiratory side of the business in the second half of the year?

Seems like the conversion is moving along but is price coming down in that market?

Tim, with respect to the pricing on the respiratory side, the pricing has been stable and we expect it to be stable and what you're seeing, it's just been the use -- CFC flowing out of the system.

I think as providers realize how -- that regulators were going to be very, very tough on CFC usage after the first of the year, it's very logical that they would get as much of the CFC out of the system as possible and that's what they've done.

So that's why you've seen the effects that we have seen so far.

But again, we're already beginning to see some spot shortages pop up just in the recent weeks, so we expect things to go pretty much as we planned, albeit a little bit later.

Just one follow-up.

Shlomo, you've had incredible growth in Europe.

I mean, is there something particularly in the second quarter that you can sort of attribute this type of growth to?

Is it new product launches or is it really grabbing more share geographically?

It's a mixture because Europe, as you well know, not like United States, is a very [animagenous] region.

Each country is a different story.

So it's a combination, or if you wish, a mix of product that we start to ramp up our numbers in different countries, part of our major effort to register many more products in different European countries, leveraging our portfolio in the European region and with intensive effort to increase our market share in key countries and I would point here for example, France, when we are doing very well and we manage to ramp up our market share and actually we're now having the first place or the first position in this very big and promising country.

Thanks, Shlomo.

Just one last question for you.

Given how fast Copaxone is growing, is it pretty much a given that you're going to buy back the international rights that you don't own on Copaxone in around 2010?

Moshe, maybe you can take that

Buy back the international rights in that we have a contract with Sanofi-Aventis and commencing in 2009 and mainly 2012 we've got the responsibility where we transfer to Teva in the European and international market.

In (inaudible) international market we already have the responsibility, so it's mainly about Europe and Australia.

So you are saying that it's highly likely you would buy the European rights that you don't own back?

Yeah, it's not a matter of buying, this is what the agreement says.

It is actual fulfilling the agreement.

There is no additional investment, if that's what you are thinking in this regard.

Thank you.

Our next question comes from David Buck with Buckingham Research Group.

Please state your question.

Yes.

Thanks.

First one is on the Copaxone ex-US you talked about the second quarter, some of the extraordinary growth rate you're seeing.

Can you give a little sense of what countries specifically have been adding to the growth rate and for 2009 where you may see an anniversarying or a lapping of the launches in some of those countries.

Eyal, can you talk a little bit on the financial income.

You called out the auction rate securities charges for the first half of the year.

What's been the trend in currency gains or losses or are there any other items in there that have been positive the last couple quarters?

Thanks.

This is Moshe.

We'll start with Copaxone.

Actually, if you look at the sales in the Europe and international, we see the growth actually across the board.

Let me give you some example.

In Canada, there's significant growth, while we move to the number one position.

In France we are moving to the number two position.

We have a growth, significant growth in Germany.

And actually, in all countries we see a significant growth in units, when Copaxone in every market is improving its position based on the [loan] to date in every market.

So all in all, I think we expect this market to continue to grow.

As well as other international market, we are growing our business in Russia and in Latin America as well.

Regarding the question on the impact of foreign exchange on our financed income, it's not very high and nothing unusual compared to what we've seen in recent quarters.

Major impact is in our operating line, but our balance sheet is fully hedged and the impact is negligible.

So there's no financial gain that you're getting in terms of FX gains?

Yes, nothing meaningful.

Okay.

Thanks.

Our next question comes from Ronny Gal with Bernstein.

Please state your question.

Good afternoon and thank you for taking my question.

First, quickly on the issue of biogenerics, could you just update us on where the new biogenerics submission is in Europe.

And you have given us already the number of generic products in your pipeline.

Could you also share with us the number of biogeneric products you're currently working on?

This is [Emil's plan].

As far as the biosimilars (inaudible) for Europe, we have retained positive response from the scientific diplomacy of the EU Commission and we are currently approaching the formal marketing authorization steps that will enable us later to actually provide launches during the end of the year and within 2009.

As far as the ability to provide through this example the understanding of the strength and the commitment of Teva in biogenerics, I think this will be one demonstrated in Europe with this product.

As far as additional products in our pipeline, we do not disclose it because this mostly deals with patent litigation, similar to what you see around (inaudible).

Until you have a complete filing situation, you will not disclose it.

It will hurt value, not improve it.

Thank you.

Thank you.

Second question, can you discuss for us a little bit your plans for marketing for ProAir and Azilect in the second half of the year.

Obviously that will be a big driver of the next few years.

Well, I think in the Azilect, as Shlomo mentioned, we are going to publish the data and hold a presentation both in the EFN in September, and also in September it is the ANA and followed with more detailed information about the -- to show the data and the finding and the result of these interesting study.

All in all, we see that there is a lot of enthusiasm and anticipation from physicians and so it will be evolving activities based in the field and with Congresses and we're going to embark on that and focus on that in the second quarter.

As once we have the publication in the peer review journal, we're going to use that in our field activities as well, of course both in a global basis and we are very optimistic with the initial reaction of neurologists to the data and the result of this study.

Should we expect an increase in the marketing and sales expenses on those two products in the second half of the year?

I don't think that there's nothing that comes in that is really significant in terms of the P&L or the overall P&L.

Basically, we will look at the way that we're going to allocate the cost and the marketing mix will be a little bit different, trying to focus on the best way to communicate the result to the neurologist community.

Thanks.

Thank you.

(OPERATOR INSTRUCTIONS).

Our next question comes from Frank Pinkerton with Banc of America Securities.

Please state your question.

Hi, guys.

It's [Elly Coburn] in for Frank Pinkerton.

Just sorry, you got approval for nicardipine injectable on the 24th of July.

I was hoping you could confirm that that was a final approval and when can we expect a launch for that product?

Thank you.

Bill?

Yeah, Elly, we did get approval on July 24th, but we're not talking about the launch plans at this point in time.

Thank you.

Our next question comes from Rich Silver with Lehman Brothers, please state your question.

Just following up on Shlomo's opening remarks about the EPS progression in the second half of the year.

When you're referring to the timing on launches, other than Lamictal, as well as the incremental contribution from Risperdal and the Wellbutrin 150, are there any other launches in the US of the same size that we're just not aware of or were you also referring to new generic launches ex US that also might be skewing the EPS progression?

Which, definitely as you know very well, I can't get into this kind of specifics, but what I would like to message and let me say it in my way, in a clear, crystal message, that we are optimistic.

We have a positive outlook toward the end of this year, for the next quarter, and we believe that we are going to make it.

Okay.

So I'm not actually looking for the actual products, just trying to get a sense of if there are any that maybe we're just not aware of, because they haven't been disclosed, that are of the same kind of magnitude, even in aggregate of the same kind of magnitude as the ones that we are aware of.

Unfortunately, I can not get into this details of these specifics.

Again, we are positive and it's -- and I'm saying it loud and clear.

One question for Bill Marth.

Bill, I know on your last conference call you mentioned the possibility of partnering with another generic company or generic companies on first to file opportunities that Teva might not have in its own pipeline.

With the acquisition of Barr, is that still a possibility or might the acquisition of Barr in fact replace that need or desire to partner with other generic companies for first to files?

Yeah, Rich, this is Bill.

Yes, that's still a possibility.

Okay.

Thanks very much.

Thank you.

There are no further questions at this time.

I'll turn the conference over to Mr.

Yanai to conclude.

Thank you.

As you have heard, this was another excellent quarter for Teva and we are very enthusiastic as we look ahead to the future and I just told Rich, answering his question, we are optimistic.

We have a positive outlook.

And we are having a very simple and crystal clear message to you guys.

This is going to be a good year, another good year for Teva and I believe that the results toward the end of the year will prove it.

And again, thank you all for joining us today.

Thank you.

Ladies and gentlemen, this does conclude today's teleconference.

You may disconnect your lines at this time.

Thank you all for your participation.