Teva Pharmaceutical Industries Ltd (TEVA) 2010 Q1 法說會逐字稿

Greetings and welcome to the Teva Pharmaceutical Industries Limited first quarter 2010 results conference call.

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

The 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, Ms.

Holtzman, you may begin.

Thank you, Diego.

Good morning and good afternoon, everyone.

Welcome to Teva's first quarter 2010 earnings call.

We hope you've 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 of Teva North America, Moshe Manor, Group Vice President Global Branded Products, and Gerard Van Odijk, President and CEO of Teva Europe.

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

Please note that Shlomo will be referring in his prepared comments to non-GAAP gross margin, operating profit, net income and EPS.

Eyal will provide additional detail on the items excluded from our non-GAAP results.

We will then open the call for a 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 first quarter of 2010.

I'm pleased to report that the year is off to a great start for Teva.

Net sales in Q1 reached $3.7 billion with gross margins of 58.4%.

And I'd like to point out that this 16% growth over the first quarter of 2009 represents pure organic growth.

Once again, we past the $1 billion mark in quarterly operating profit at 21% increase over Q1 '09.

Our quarterly cash flow from operations was $886 million with net income in the quarter reaching $830 million, a 31% increase over Q1 '09.

And all of this ultimately brought us to EPS of $0.91.

Teva gross in the first quarter in both the top and bottom-line was driven by contributions from across our diverse businesses and geographies, demonstrating once again the great value we derive from our balanced business model.

In North America, we had an excellent quarter with record sales of $2.3 billion, up 20% over the first quarter of 2009.

We had a record breaking sales of more than $1.3 billion in U.S.

generics, up 28% over the first quarter of 2009, and strong sales of our blended products.

We achieved these results with only one major launch during the quarter, that of generic Mirapex.

We are pleased with the excellent performance of our base portfolio, which not only grew very nicely but also improved its profitability.

In Canada, sales of generics grew 32% over Q1 '09 on the strength of two first to market launches.

2010 is also off to a solid start for our European business, where sales reached $812 million, representing 10% growth over the first quarter of '09.

Despite increased competition we have maintained or improved our market share.

Sales were especially strong in Italy, in Poland and in the central and eastern countries where we are now enjoying the full benefits of the successful integration of PLIVA into Teva.

Of course, the major event in Europe this past quarter was our agreement to acquire ratiopharm, which will make Teva the leading generic pharmaceutical Company in Europe, a subject I will elaborate on a bit more later.

Q1 was a very good quarter for Teva's international business.

Sales reached $532 million, up 10% over Q1 '09.

We enjoyed especially strong sales in Russia, one of the fastest growing markets where we continue to strengthen our market position, as well as in Israel, Chile and Argentina.

Teva's innovative business continued to grow in Q1, once again achieving record breaking sales of Copaxone, the world's leading therapy for the treatment of multiple sclerosis.

Copaxone global market share reached 30% in revenue terms.

Global in-market sales of Copaxone grew by 28% over the first quarter of 2009 to reach $796 million.

Outside the U.S.

sales of Copaxone hit a new high of $283 million.

In the U.S.

in-market sales for the first time crossed the $0.5 billion mark and IMS reported that Copaxone (inaudible) reached a record of 39.2% in March.

With over 1 million patient years of experience, Copaxone track record for safety and efficacy is unmatched and we are continuously researching new ways to enhancing the experience of patients of Copaxone.

Just as we bought prefilled syringes and the 29 gauge needle to market, we have now developed a lower volume 0.5-milligram injection of Copaxone at the currently approved dose.

And now I would like to share with you great news.

Based on the positive results of the SONG study to evaluate this new combination, we submitted an SMDA, which was yesterday was accepted for filing by the FDA.

I am also pleased to report that patient enrollment for GALA, our 40-milligram reduced frequency trial begins next month.

And, of course, we are also very enthusiastic about Laquinimod, now in phase III trials with results due in 2011.

Let's turn now to Azilect, which had an excellent first quarter.

Global in-market sales grew 40% over Q1 '09, led by strong sales in major European markets and the U.S.

In the U.S.

Azilect has benefited from newly revised prescribing information, reinforcing its selectivity.

This mean that there are fewer food and medication restrictions, which was previously a barrier to some for prescribing.

Turning now to our global respiratory business where we have another piece of a great news.

I am pleased to report that we have successfully completed our phase III study of betamethasone dipropionate HFA for the treatment of seasonal and allergic rhinitis, the most common allergic disease both in the U.S.

and globally.

We will be initiating the remaining phase III trial by Perineal allergic rhinitis in the second quarter.

We are on track to submit our MDA in early 2011 and anticipate having the product on the market in 2012.

By the way, this is a $1.9 billion market.

During Q1, sales of respiratory products reached $193 million, up 4% over Q1 '09.

The increase was driven primarily by sales of ProAir and Qvar in the U.

S.

ProAir HFA remains the leading short acting beta agonist with over 50% share of the market.

And Qvar continues to grow because now the solid number two in the inhaled steroid segment, with 19% market shared in NRx.

Turning to our women health business, sales during the first quarter was $79 million, down 19% over Q1 '09.

This is largely due to weak sales of Plan B One-Step.

However, I'm pleased to report that the measures we put in place at the end of 2009 to recapture our share of the emergency contraceptive market have begun to bear fruit and we look forward to continued improvement and growth in 2010.

Turning to other women health products, we continue to experience double-digit growth in key franchises during the first quarter, led by the Seasonique franchise, which grew by 10% over Q1 2009 and ParaGard, which grew by 17% over Q1 '09.

Seasonique continues to reach all time highs in weekly prescriptions and we are pleased with the Nevada's courts ruling which found our Seasonique patent to be valid and enforceable.

As you know, 2010 was also off to an exciting start for Teva strategically.

In January, we presented our long-term strategic plan to reach revenues of $31 billion and net project of $6.8 billion by 2015.

Two months later we took the first major step in delivering on this ambitious plan with the announcement of our agreement to acquire ratiopharm.

This acquisition would enabled Teva to extend our global leadership to Europe, providing us a leading presence in all key European markets.

It will also provide us with significant additional capabilities in biosimilars and in both in future growth engine for us.

Teva has a long track record of successfully integrating companies, something we saw once again in the integration of Barr and in our ability to deliver significantly more synergies from the acquisitions than we had originally anticipated.

We are very much looking forward to working together with the ratiopharm team to implement the integration process as soon as the deal closes and I'm confident that the integration process will be a smooth and a successful one.

I'd like to take a moment to provide you with an update on Pantoprazole.

As you know on April 23rd following a jury trial in the patent case, the jury upheld the Pantoprazole patent as valid.

However, we still strongly believe in the merits of our arguments and on May 6 we will meet with the court to discuss the post-trial briefing schedule on the many issues that we believe remain for the judge to decide.

Because appropriate that this called at risk launches, as there is obviously always some risk involved, but we have developed highly effective tools and capabilities to analyze and mitigate the risk before we bring any product to market.

This is integral part of our business model and we will continue to launch new products based on an analysis of all relevant factors, including the strength of our patent challenge.

Before I turn the call over to Eyal, I want to reiterate our guidance for the year of approximately $16 billion in sales and non-GAAP EPS of $4.40 to $4.60.

We had an excellent start to the year.

And I would like to remind everyone that we expect the second half of the year, which will be kicking off on July 1st with our exclusive launch of generic Effexor, to be significantly stronger than the first half.

I would like to clarify that when we provided guidance to 2010 this past February, we had already anticipated and factored in the impact of healthcare legislation in the U.S., both for our generic and branded business.

So the impact, which included $20 million in the first quarter, has no bearing on our 2010 guidance.

Looking ahead we believe that the benefits of this complex multifaceted legislation will far out weight its cost for Teva and we expect the legislation to have a positive impact for us.

However, we have not factored this positive impact into our numbers, as much of the implementation and timing of the healthcare plan is yet to be determined.

And one last clarification, our 2010 guidance does not include ratiopharm, as we expect the closing to occur towards the end of the year.

In the event that the transaction should close earlier, we will of course provide you with unload update guidance.

As you have heard, 2010 is off to a great start.

And when I think about the strength of our generic business, continued growth in Copaxone, the good news about low dose, coupled with strong (inaudible) franchise, growing women health business and the addition of the ratiopharm to our family, I believe we are uniquely position to achieve our 2010 growth, as well as laying the foundation for our $31 billion sales target for 2015.

And now let's turn the call over to Eyal for more detailed financial update.

Eyal.

Thank you very much, Shlomo, and good day to everyone.

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

As you can see, we reported this morning a good first quarter and a strong beginning for 2010.

It is important to note that we reported record GAAP results this quarter in terms of operating profit, net income and earning per share.

As Shlomo already discussed, our strongest performance for the quarter were in the U.S., particularly for the U.S.

generics business, as well as in Canada, Russia, Israel and Poland.

We had record Copaxone sales with very strong sales outside the U.S.

and record sales for Azilect.

Cash flow from operations and free cash flow delivered strong growth compared to Q1 last year.

Before we delve into the numbers I would like to touch on two technical topics.

First, I would like to remind everyone that we are presenting GAAP and non-GAAP results.

In our non-GAAP presentation we have excluded the following items this quarter -- amortization of purchase and tangible assets amounting to $130 million, of which $122 million are included in COGS and the remaining $8 million in sales and marketing expenses; legal settlements of $17 million; acquisition and restructuring expenses of $17 million related primarily to the acquisition of ratiopharm, as we now have to expense it through our P&L; $4 million purchase of R&D in process; and, in addition, the related tax benefit of $51 million.

You should note that the items excluded in arriving to our non-GAAP results for the first quarter of 2009 are not identical to those in the current quarter.

Most notably, Q1 2009 included an inventory step-up in connection with the Barr acquisition and low amortization of purchased intangible assets.

Please review our press release and related tables for the complete information.

As indicated in the past, we present non-GAAP figures to show you how we, the management team and our board, look at our financial results.

Foreign currency continued to play a significant role in our results.

As you all know, the U.S.

dollar has been strengthening against other currencies for (inaudible) Euro and the British pound during the course of the last six months.

Nevertheless, when comparing first quarter average rates in 2010 versus 2009, the U.S.

dollar declined in value.

Therefore, in the first quarter foreign currency differences contributed approximately $98 million to sales as compared to Q1 2009.

The impact on sales resulted primarily from the decline in the value of the U.S.

dollar relative to certain other currencies, primarily the Euro, the Canadian dollar, the Hungarian forint and the Russian ruble, the Polish zolty and the British pound.

However, the continued strengthening of the U.S.

dollar from Q4 2009 to Q1 2010 had a negative impact on sales of $69 million in Q1 compared to Q4 last year.

Nonetheless, the impact on operating profit was insignificant.

Teva's diverse geographical presence continues to provide us with a good natural hedge that mitigates much of the risk involved in currency fluctuation and minimizes the impact on our bottom-line.

Looking at consolidated results for Q1, sales totaled $3.7 billion, an increase of 16% compared to Q1 last year.

North America, which grew 20%, experienced growth in its major businesses, generics, Copaxone, Azilect and respiratories.

Europe grew 10% in U.S.

dollars and 1% in local currency terms.

Sales in the international markets grew 10% in U.S.

dollars and 7% in local currency terms.

Non-GAAP operating income reached $1 billion, up 21% compared to Q1 2009, benefiting from strong gross margin and tight expense control.

Non-GAAP net income reached $830 million, up 31% compared to Q1 2009, and non-GAAP fully diluted earning per share were $0.91, up 28% compared to Q1 of 2009.

Two housekeeping points related to earning per share calculations.

The weighted-average share counts for the fully diluted non-GAAP EPS was 921 million shares and the add back for the non-GAAP EPS calculation was $11 million.

Now let's discuss profit margins and operating expenses.

Non-GAAP gross profit margin, which excludes amortization of purchase intangible assets, was 58.4% in the reported quarter, similar to the first quarter last year.

Gross margin continued to benefit from contributions to sales of our innovative and branded franchises, contributions from new and recently launched generic product in the U.S.

market, as well as improved gross margin of U.S.

generic based business.

Non-GAAP operating margin reached 27.4%, up from 26.2% in the comparable quarter last year.

Similar to previous quarters, the improvement in operating margin were driven primarily from strong gross margin, lower G&A and net R&D as a percentage of sales partially offset by higher royalty payment, which are reflected in sales and marketing expenses.

Net R&D expenses reached $207 million or 5.7% of sales.

Gross R&D, before reimbursement from third parties for certain R&D expenses, was $217 million or 5.9% of sales.

We remain committed to our 2010 R&D plan and the low R&D expenses in Q1 reflects timing of certain expenses.

For the full year, we expect net R&D expenses to be between 6% and 6.5% of net sales, as we guided last quarter.

Sales and marketing expenses, excluding amortization of purchase intangible assets, totaled $744 million in the quarter, or 20.4% of sales compared to 18.9% of sales in Q1 2009.

These higher sales and marketing expenses are the results of two main factors, higher royalty payment in connection with new and recently launched generic products in the U.S.

and higher payments to sanofi-aventis in connection with Copaxone higher sales in the U.S.

Let me remind you that this is the last quarter in which we paid sanofi-aventis 25% of in-market sales in the U.S.

Total G&A expenses this quarter were $182 million or 5% of sales compared with 6.2% of sales in Q1 last year.

The Barr acquisition synergies contributed to the decline in G&A expenses.

We recorded $27 million of net financial expenses on a GAAP basis in Q1 compared with $63 million of GAAP financial expenses in the comparable quarter of 2009.

The decrease in financial expenses resulted primarily from lower level of debt, which it consistently reduces the acquisition of Barr, compared to the first quarter of 2009, as well as lower interest rates and lower costs of hedging activity.

In anticipation of closing the ratiopharm acquisition later this year, we accumulated the cash generated during this quarter and didn't apply most of it towards that repayment.

Furthermore, we began to acquire the Euros required for the acquisition consideration and entered into certain hedging contracts to reduce the risk of the strengthening of the Euro.

This may result in either finance income or expenses the second quarter, which we will adjust in our non-GAAP results.

The tax rate provided for the first quarter was 14% of free tax non-GAAP income.

This represents our current estimate of the annual tax rate for 2010 compared to 16% of pretax non-GAAP income for all of 2009.

The estimated tax rate for 2010 GAAP results is 11%.

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

Cash generated from operations this quarter totaled $886 million, up 21% compared to Q1 2009.

Our free cash flow, excluding net capital expenditures of $164 million and cash dividends of $165 million, amounted to $557 million in free cash flow.

The improved cash flow was driven by strong collection in the quarter.

On March 31, cash and marketable securities totaled $3 billion, up approximately $550 million from December 31, 2009.

Our total outstanding loan, bonds and convertible debentures stood at $5.4 billion, down from $5.6 billion as of the end of December.

During the quarter we reduced our debt by approximately $175 million by repaying some debt and through the continued conversion of senior convertible debentures.

As a result, our financial leverage as of March 31, 2010, was 22%, down 1% from year-end and down 12% from March last year.

Moody's raised Teva rating to A3 in January and Standard & Poor's followed with raising our credit rating from Triple B plus to A minus minus on March 19th, immediately following the announcement on the acquisition of ratiopharm.

Moody's also affirmed its A3 rating after the ratiopharm announcement.

Moody's upgrade had a immediate positive impact on our finance expense, as the interest rates charged on the floating rate debt assumed in the Barr acquisition was cut by 25 basic points.

Days sales outstandings, the DSO, amounted to 53 days this quarter compared to 51 days in Q1 last year, because of the DSO after netting out from the receivables, our failed reserve and allowances.

Inventory days stood at 183 days, down from 191 days in Q1 2009.

Capital expenditure reached $164 million this quarter, compared to $136 million in Q1 2009.

As for dividend, yesterday Teva's board approved its quarterly dividend amounting to approximately $175 million.

On a per share basis our dividend, which is declared in Israeli shekels is 0.7 shekels per share.

Based on yesterday rate of exchange of the shekel to the U.S.

dollar, this translates into approximately $0.19 per share.

I thank you all for your time and attention today.

Now we will be glad to take your questions.

(Operator Instructions) Our first question comes from Randall Stanicky from Goldman Sachs.

Please state your question.

Great, thanks, guys.

I just wanted to follow-up on the strength of the U.S.

business and specifically your comment on the improved base business profitability.

Can you just maybe talk about what's driving that and then are you seeing some of the delays out of FDA that some of your peers have pointed to?

Bill, you want to take it.

Good morning, Randall, and thanks for the question.

A good couple of points.

As far as -- let's take the delays.

We haven't really seen a delay on first to market products.

We've been saying this for a long time, unless there is something new in the labeling or some other mitigating factors.

So we really haven't seen a delay with first to markets.

We thinking the FDA is doing an excellent, and especially ODD, doing an excellent job there.

There are complex products that cannot appear and there are a different story, but that you understand.

So we are not seeing that.

With maybe the tenth product, the tenth or the 15th, the ten will all, obviously, those are slowed.

But we think the FDA is doing a good job at least pacing themselves with -- versus they have, we would love to see them have more resource.

With respect to our base business, we've got a variety of lifecycle management initiatives going on.

Lifecycle management initiatives aren't only for branded products.

We do -- we are doing things to lower our costs, lower our A.P.I.

costs.

Various ways that we look to sell more of the products with better margins.

Eliminate products, prune from products from our portfolio such as Sertraline, and a few other where you've seen some prescription loss.

We saw a prescription gain this quarter, but not as much as we've had in the past and that was due to very purposeful pruning of our portfolio around profitability.

And then, Bill, I think you kind of alluded to it, but I know we've been talking a lot about generic Lovenox and the timing and you obviously had, you guys have had some discussions with FDA.

Is there anything that we should be thinking about differently in terms of that product and can we still expect that to come out this year in terms of the way you are viewing it.

Yes, our view hasn't changed.

We are still very hopeful for something yet this year and we are prepared for it.

So let's hope for the best.

Great, thanks, guys.

Thank you.

Our next question comes from Gregg Gilbert with Bank of America/ Merrill Lynch.

Please state your question.

Thank you.

First for Bill, should we continue, expect continued shipments of Pantoprazole as normal and on the new Copaxone, what's the action date for that and can you provide any color on the commercial strategy there and whether we should view that as a switch or a transition?

Good morning, Greg, the Pantoprazole at this point in time we are not shipping further product in an abundance of caution.

The second part was.

The action date on the new Copaxone and any commercial color you can plan, switch versus transition or anything else you could offer on that strategy, it's not so far away any more.

Well, on the new Copaxone our action date would now be out till December, so we would be looking for in-market hopefully with all the right caveats for caution.

We would hope to be in the market in the first quarter early 2011.

And can you share anything strategically about whether it will replace Copaxone in its entirety.

No.

We can not, we won't share.

Okay.

Thank you.

So a question for Gerard, in conjunction with the ratiopharm deal, you indicated that the tender portion of the market in Germany is about 25% and you said at the time you thought that would shrink rather than grow and I think some other companies have been seeing other things.

So can you just update us on your thinking with that.

And lastly for Shlomo, any update on the Irvine quality issues and are you confident that that's behind you as a Company?

Thank you.

This is Gerard.

Thanks, Greg, good morning.

Well, first of all let me say that what we see the German market is, of course, still subject to what the government is currently contemplating.

But what we've seen so far we don't expect our views to change dramatically.

First of all, as you know the pure tender one product wins all kind of the marketplace.

It is only a quarter of the total market in terms of value and I think it won't move far away from that.

More importantly, that the other part of the market is about 75%, is quite a complex bit of business.

You see, on one hand you see the hospital business, you see OTC products and new generic launches that are not subject to that.

They will become subject maybe in the future, but they are not today and there are no clear plans to do so.

Two, we see that a lot of the insurers don't like the one product takes all kind of tend to business.

They have portfolio agreements or they have three, four, five players who win the business, which is a total different concept and there you see different price developments as well.

And therefore that business is also not as dramatic as the pure tender business.

And thirdly, we see that pharmacist and doctor still have a substitution freedom.

They claim it or they get it and doctors can take a box on the prescription by which they basically prevent any substitution to happen.

And on top of that you have private insurer that still have a large chunk of the business in Germany that are not tendering at all.

So you see that besides the tender business of about 25%, you see 75% is sort of a mixture of different types of policies and the problem there is that it won't be easy for anybody in the German market to attack that chunk of business with one measure.

You will have to have all sorts of different policy changes to take them one by one.

So that's why we are quite confident that the marketplace in Germany will be having much more profile of a branded generics type of a market than a pure generic generics market.

Thank you.

What was your last question, again.

The FDA issues in the Irvine facility?

Have they been addressed.

Are you confident that those issues are behind the Company.

Well, first of all let me say in a more bolder scope that quality for Teva is the first priority.

And that we are seeing the raising the bar by the FDA is for Teva (inaudible) is something which is good, not only for patients but also for Teva as well.

Having said that, we are working with the FDA to fix the problems that we have in Irvine and I believe that we will be over with that hopefully very soon.

Right now I cannot give you a specific date for that, but I can assure you that we are doing utmost effort to get it done as soon as we can and to raise the bar for quality in Teva as much we can.

Thank you.

Bill, you wanted to add to that.

Greg and if I could just add to that.

I just wanted to let you know that we responded to the warning letter in January, as was appropriate, and the FDA right now is performing a follow-up inspection at the facility.

So until they close out we really can't comment any further on that.

But as Shlomo said, quality is an absolute concern.

We are working with the agency and we support the agency completely on their efforts in order to make sure that all facilities are in compliance.

Thank you, gentlemen.

Our next question comes from Richard Silver with Barclays Capital, please state your question.

A couple, first for Gerard.

Well, actually Gerard and anyone else on Europe and international, so year-over-year growth in the quarter was approximately 10% for both Europe and international.

And at least relative to our estimate seemed a little bit lower than we would have expected.

Can you comment on how we should think about growth going forward, whether this is a reasonable run rate or whether you think that there were things maybe in the quarter that might have led to a sort of below average growth rate.

And just a little bit more detail than what you provided in the prepared remarks on the drivers and the outlook aside from your commentary on Germany.

And I do have a follow-up.

Thank you.

Gerard, you take Europe and I will follow with international.

Very good, thank you very much, Richard, good morning.

Good morning.

Well, Europe is not one market, it's a heterogenous bunch of geographies.

There are 400 million people with the same demand for high quality healthcare and therefore growth for generics, but there are months that one market is doing better than the other.

Overall one could say that the market that had been slightly less attractive over the last quarter has been the UK.

We've seen that the impact on pricing and competition has been quite aggressive and, as you know, we are a leader in the UK market.

We are almost twice as big as number two and then you have got a long time nothing and then you have got the few other players.

Therefore, it means that we focused on the leadership rather than and our profitability of that.

So we didn't go and bid for all sorts of deals that were not worthwhile going after and that meant that -- and that one of the reasons, by the way, was that the sterling has been as it has been therefore our cost of goods had been influenced a bit.

So, you bend it a little like that and continue to keep your market leadership on a profitable base than differently.

So that's on the UK.

So all in all, with that policy, despite us holding back we grew our share a little bit in the UK over that period.

So, yes, it's not a great number but that explains it.

If you would take out the UK from our retail business, our overall growth in Europe would have been 10%.

If you would look at our hospital specialty business it would be over 20%.

So I think beyond the line occurrence of our business in Europe is very healthy.

We did excellent business in Italy and Poland.

And central Eastern Europe we benefited also a lot from the PLIVA integration and we are really reaping the benefits of that.

And we are also very enthusiastic about the deal that was signed in Germany because it will give us an even more balanced business across Europe.

So all in all I think the indicators are good.

We had a bit of an issue in one market, but that is basically telling the story for Europe.

Good morning, Richard.

Good morning.

As per the international business, I would like to say first of all that no doubt that this is not a trend.

The international business for Teva is a growth driver and I believe it will be so in the coming quarters and the coming years as well.

Actually if you take the results, which is a 10% growth on the first quarter, from pharma sales point of view it's 14%, 1 4%.

The reason that it's 10% is due to the weak sales of API that we are allocating into the international (inaudible) is allocated in the international which is mainly the weak sales for third-parties of APIs and it's too early to the say whether it's a trend or not regarding the API.

So to make it short, this is not a trend and international sales of Teva will be going in the coming years and a seven quarters win.

So just to recap both of your comments, are you saying that the growth rate we saw in Europe and the growth rate international is expected to accelerate on a year-over-year basis in the coming quarters.

Can you say that?

I can say so for the international, as per Europe I would like to be, to take a more cautious approach as we first have to better understand the impact of the current economic trouble into Europe.

I don't think it would be a -- make a big difference, but just to be on the safe side let's just see during the coming quarter what is the impact there and -- but as Gerard well stated it, Richard, at the end of the day you have to understand that these are the great region of a great potential growth for Teva, as there are 400 million inhabitants that exactly as Gerard said, they are wealthy, they are looking for healthcare and they are suffering from looming healthcare budget.

So whether it will take a few more quarters, nevertheless I'm sure that Europe is a great potential source for growth.

And just one for Eyal on the R&D spending.

Appreciate there's a, as you pointed out, a timing issue.

That said, going from 5% of sales, which on a sales number that's supposed to be lower than the sales in the coming quarters and then still coming out with an average of 6% to 6.5% is a pretty sharp step up.

Can you provide some detail as to what it is that's going to drive that number or do you think that maybe it's actually at the lower end of that range of 6% to 6.5%.

If you can give us a little bit more color there?

Thank you.

Thanks, Richard.

I will start from the end.

No, we are not targeting the lower end of that range.

We are targeting the range and it depends on a lot of our R&D activity that sometimes are impacted by timing issues.

I mean, things have to be right for the next phases and sometime you move into that and spend a lot of money in one quarter.

So, when we look at our plan and our overall budget for the year was approximately $1 billion and we have all the plans in place to spend that money and we believe that we will do it in a timely manner.

We also looked at and analyzed that not just the expenses but the activities of R&D this quarter and believe that all our plans are in place for submissions and other R&D fruits that result from all these activities.

So, yes, the number will grow up and you know that in R&D all the non-people based (inaudible) at almost a half can be very, very quickly accelerated when the time comes.

And just one last one on load volume Copaxone, even though you are not sharing your strategy, can you just perhaps reiterate or add to comments before on disclosure of that data?

I think before you said it would be likely or might be possible in a peer-reviewed publication as opposed to a maybe a medical meeting but then maybe more recently you said there was a possibility of the data being disclosed at a medical meeting before the end of the year.

So, can you give us some sense of when we might actually see that data in a public forum other than just a press release?

Would you like to take this one?

Yes, thank you.

Richard, we are going to publish the data actually in May or June timeframe in the MS Congress.

As you know, the data study was about looking at the low volume versus the product in the market (inaudible) looking at the pain and pain associated with the injection and we are very pleased with the data and we are going to share the data and has been mentioned by the end of the year we are getting the (inaudible) from the FDA and if everything goes as we planned we plan something that in the beginning of 2011.

And what was the said, you said an MF Congress.

Yes.

When is that again.

In May -- in June.

That's June, the MS Conference in June.

We are going to publish the data.

Okay.

Thank you.

(Operator Instructions) Thank you.

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

Please state your question,.

Thanks, good morning, guys.

Bill, I was wondering if you could help us and maybe if you won't speak specific to Protonix speak a bit hypothetically about how you all do manage risk at a at-risk launch in terms of maybe pricing, your kind of tactics you take in terms of shipping an amount and maybe you could speak to is there insurance on a per product basis or is this general portfolio of products or do you actually go per product in terms of how you get insurance and then I have a follow-up question on Lovenox as well as.

Ken, thanks for the question and good morning to you.

First of all I think it's a bit premature to be speaking about insurance as we think that there's quite a ways for us to go yet on protonic.

As I'd said earlier, we are not shipping at this point in time in abundance of caution.

But that's where we have to leave that right now.

With respect to when we launch at-rick, I think Shlomo has said it well, that Protonix, although at this point is disappointing, we hope to turn that around.

This isn't going to effect the way Teva acts in the marketplace.

We take risks with a great deal of concern and consideration before we launch and we will continues to do that.

I don't think you will see the practices of Teva change at all.

So with respect to Protonix I really can't say a whole lot more than that.

Okay.

On Lovenox and I am going to try to link two things that are probably completely separate, but you just had a meeting, a bioequivalency meeting on what is considered probably more simple products, although the deliveries are a little bit different.

So Concerta was discussed and the agency has been chewing on this for about six years, but yet we are still optimistic about Lovenox, a much more complex product, understanding that it has a lot different issues.

Can you help us square these things?

You are continuing to say you are confident in Lovenox, it is very complex, so maybe talk about the interaction with the agency and square the agency's inability to approve what could be considered more simple products like Concerta and Adderall XR and help us try to understands why you think Lovenox could come soon or should we maybe start anticipating this is a bit of a delay.

Well, I think the first thing you have to think about here is those are much different issues and we look at Concerta where there's absolutely no action with the FDA, between us and the FDA, or between our product with the FDA.

That product actually being impacts product.

As opposed to Lovenox or an Oxyparen, where we are getting continual dialogue as the file progresses and the questions are very specific and very narrow and they are pretty minor the types of things we see with the normal review.

So those things lead us to believe that we are still down the right path with an oxyparen and I think it is extremely unlikely that after six years in the agency they are going to come back to us and ask for something as elaborate as a clinical study and I say that because that is probably your next question.

We just don't believe that that's going to happen.

Again, all the questioning we get from the FDA leads us to be fairly confident that this will come.

I will remind you, I've made no predictions on timing.

I think others have.

We are just hopeful that it comes soon and as we see the questioning it just lends us to believe that we are farther down the path.

Okay.

Thank you very much.

Our next question comes from Chris Schott with JPMorgan.

Please state your question.

Great.

Just first question is following up on the U.S.

based business.

Can you just elaborate a little bit more on what you are assuming in terms if what kind of volume and price dynamics when we see some of your competitors who are having some issues return to the market?

I guess basically what I'm asking here is do you feel the healthier environment you are currently experiencing is sustainable longer term?

And then a second question on respiratory growth in the quarter, it was a bit lower than we've seen recently.

Is this just an issue of seasonal timing or is there something else we should be watching there?

Thanks.

Chris, this is Bill Marth and I will just answer the second one first.

The issue there was respiratory.

It's just -- it's seasonal.

We've seen this before.

It's just a seasonal issue.

We are very happy with our ProAir and it's over 50 share and I would remind people, by the way, that when we launched ProAir as a brand, and it is a brand, that we had always guided to about a 45 to a 50 share and we'd achieved higher than that and, of course, we need to balance managed care pain and profitability and so match -- we are managing both our P, our price and our volume.

And so we are keeping it, we think, in the right place and we are very pleased, of course, with the growth in Qvar, which has done excellent over the last year or so.

So we are pretty enthused about the respiratory business.

The first part about your question is where -- will we see some of the competitors who may come back, I assume you allude to the Caracos of the world, or the Apotexs of the world, and we wish them well and we are sure that at some point in time they will come back to the market.

But as we wish them well we also -- we will compete and we will compete effectively with those companies, as well as we believe our partners, who we came to the rescue and helped and did many things turning our plants around in order to supply their needs in their time of need will return the favor to us with respect to keeping us in these markets.

So we don't really think we have a -- I don't think there's going to be a rush to switch to these companies as soon as they come back to the market.

We -- our conversations with our trading partners don't show that to be a very likely event.

Thanks very much.

Our next question comes from Ronnie Gal with Bernstein.

Please state your question.

Good morning and thank you for taking my questions.

I have two.

First, just (inaudible), it says it applies to all products previously approved either at NDAs or BLAs.

And I was wondering if either you, or sanofi for that purpose, are likely to raise that issue with the FDA and ask the FDA to regulate Copaxone as a biosimilar to regular Copaxone generics are essentially biosimilars.

Second question is can you just take us a little bit through the branded pipeline , what products are currently potentially could be approved by

Do you want to take this one on the Copaxone -- ?

On the Copaxone, Ron, your question is why are we essentially petitioning the FDA to call Copaxone or to put it in the same area as, in the same realm as a biosimilar.

And I just really can't comment on what may or may not be part of a future citizens petition.

So we really don't want to say much more on that at this point in time.

And second question?

Second question was around the branded pipeline.

I know you got the internasal product coming in somewhere around the end of this year, sloted for PDUFA by the end of this year.

But I was wondering what other products you think you might be able to get to the market on the branded side before year-end 2012.

Moshe

Ronny, this is Moshe.

I think as we mentioned other than the 0.5 milligram Copaxone, by the 2012 of course we expect to launch the Betadine nasal product to the market.

And (inaudible) we expect to launch Laquinimod in 2010, 2012 in the beginning of 2010 (inaudible) U.S.

and later in the year in the rest of the world.

So these are being, I would say, the major product that we expect in the relatively short-term to launch from the branded pipeline.

Ronnie, I would also follow-up, Moshe, that there is one women's health product that we have not disclosed yet that should launch prior to 2012.

That includes the TVR rings and so forth.

We can't really say any more at this time.

Thank you very much.

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

Please state your question.

Thanks, two quick ones.

First on the generic Protonix case, can you give some level of what you think the risk might be in terms of quantification of either your sales since 2007 or what you think damages may be if it gets to that point?

And one for Gerard on Europe, taking the commentary on what sales growth would have been ex the UK issue, there is still obviously currency fluctuations for the remainder of the year.

So I guess why should we be expecting the European business to get better.

And can you talk a little bit about the pricing actions and how they affect your view on Europe?

Thanks.

David, let me first take the one on the Protonix and the impact on our business.

As I said when I reiterate the guidance for 2010 that include all the subjects, issues, concerns, challenges and other thing that we are dealing with or we believe that we will have to deal with during this year.

And so without getting into the Protonix specifics because we are still in court, what I can say that that answer actually give you in an indirect way that we are a strong believer in our guidance, in our results for 2010.

As I said, it is going to be a strong year for Teva, another strong year for Teva.

And the second part of your question, please, again?

Sure, looking at Europe and the first quarter growth rate just being about 1% ex-currency, why should we be expecting it to get better and can you talk about how some of the other government pricing actions might impact the outlook?

Gerard, please?

Yes, well, first of all as I told you, the main explanation for the constant exchange rate related numbers is the slow down in the UK market.

And without that we would have been doing in the range of the 10% in retail and 20% in the hospital business.

So just to give you a flavor there.

And there's no reason for us to assume that that will change through the rest of the year.

However, the UK market is continuing to be an aggressive market.

There are possible, as you are rightfully asking, for interventions of governments, but there is no sign of anything concrete happening.

We see a change of government in Hungary.

We see clear -- we see a government in Germany making plans.

But basically, as I told you before, not really pushing into a direction that is making us nervous at this stage.

We seen a change of policies of government in Spain, which should basically be positive for us rather than negative.

Not per se in top-line but definitely in profitability.

We see stabilization in the French market, meaning it continues to grow but the system seems to be bedding down in a good way.

Italy we had a good quarter and we are on the right track there.

So if you look overall it's going to be like every year in Europe, a roller coastal with different solutions in different markets, but the undercurrent is giving us confidence that we should be able to close the year in a good spirit here.

Okay.

And just a follow-up, I guess one more time on Europe, I mean, is the constant currency growth rate a good indicator of what you expect for the year, low single-digits?

I think said what I said and I think the number that I mentioned should be the number looking forward.

And as I said, the sterling and the Euro are moving a lot versus the dollar to each other.

So that's a big uncertainty on which I wouldn't want to speculate.

But the underlying volume growth and value growth in local currencies without this is still at the high-end of that.

Okay, thank you.

David, this is Bill Marth, let me just follow-up on one point on the Protonix just to make sure everyone understands that on May 6th we have another meeting with the court and we believe that Teva defense is on the obviousness type double patenting.

We believe our questions have walked through the court and the court has reserved the proper legal standard for determination in these defenses and they will decide that at a later time.

We think it is quite premature to discuss damages.

Okay.

Thank you.

Our next question comes from Marc Goodman with UBS.

Please state your question.

Bill, obviously we know about the key T4 launches this year with Mirapex and Cozaar and Hyzaar, Effexor [genser], can you talk about some of the ones we are not so focused on and what you'd highlight as potential stuff over the next let's just say year, year and a half?

Well, I think, Marc, the key is for this year, we have as many as 39 launches that are potentially possible worth about $20 billion worth of innovator value and, of course, the ones that we do not launch in this year would flow into 2011 and maybe some even into 2012.

I think the big product that everybody thinks about for 2011, probably more likely 2012, of course is atorvastatin and so that's and that's an absolutely huge launch and we will have to see where we get there.

There is no shortage of products through the 2010, 2011 and 2012 period.

Thank you.

Our next question comes from John Boris with Citigroup.

Please state your question.

Hi, guys, thanks for taking the questions.

First question just has to do with Europe and in particular for Gerard in the Spanish market in particular, you have a very solid market share following the Bentley acquisition there.

I think the Spanish government has indicated that they do want to reduce its annual drug budget by a little over $2 billion with an unfair burden placed on generic companies.

How do you think about what percent of that burden is going to be allocated to your Spanish affiliates' business there?

And then I just have one follow-up question for Shlomo.

Yes, the Spanish business, as I said before when the previous question was asked we believe that the measurement that are being taken by the Spanish government could be beneficial.

Yes, the gross price that will be, let's say, paid by the insurers and by the patients will go down.

But as you also know is that in the same measurement from the Spanish government there is a limitation in the discounts that could be given to pharmacies.

So the margin between the gross sales and the net sales will decrease in top-line, but the overall discount that will be given will be limited, meaning that the pharmacists are the ones that are probably going to pay the highest chunk of that $2 billion.

So for us the way we look at that is that if you look at our net business, it could be very beneficial.

It tells us that our multi-branded strategy, which we have in place there, is even more important to have that.

So we are actually well-positioned to take advantage of the change of situation.

And after we get together with ratiopharm it make us even stronger, because as you know we will be by far the largest Company in Spain with some very strong brands in the retail and in the doctors offices and this whole change of governmental change will play to our strength rather than to our weakness.

So we are optimistic.

We need to see how it lands in reality.

In Spain, it's announced, so we need to see how the final, final version will look like.

But the way it's presented today should be seen as a positive news for us.

Okay, thanks.

And for Shlomo, I guess if we think about accumulated risk on at-risk launches like a barometer, obviously this is something that your board must look at and take issue with.

If we do look at it as a barometer and based on the amount of accumulated risk Protonix and certainly other products that you have launched at-risk on, is this leading, at least that barometer, to be at a level where you are becoming more conservative on at-risk launches or will you continue to be fairly aggressive on the at-risk launch area based on that accumulated risk?

Well, I would say, if I would understand the question and you rightly said that the broader question is whether we are going to change Teva behavior or let's call it Teva appetite for risk.

And the answer is no.

We will continued to do the same thing that we have done in the previous years going forward as well.

Launches at-risk is part of our business, part of our activities.

And as I said before, we are fully analyze any launch at-risk because we do believe that this is something that during the year we found that the way how to do these things including the Pantoprazole launch that was launched at-risk and we, part of it is, of course, is seeing the big picture or the overall accumulated risk.

So we think that it is manageable and we do it in a way that will continue Teva's future growth and the level of risks we are taking into account in any given launch at-risk.

Thank you.

Our next question comes from David Maris with CLSA.

Please state your question.

Good morning, sorry if I missed it.

On plan B., it seems like demand year-over-year would be the same.

What caused the big swing in Plan B.?

The other is going back to the bioequivalency changes in the FDA on a broader basis, what do you think the implications from that meeting are for the industry and for Teva?

And then lastly, on India, a lot of your peers are, U.S.

peers are moving production to India as fast as they can.

What do you think -- I don't think with your tax rate and your API cost basis it really matters, but what do you think the implications are for these kinds of moves?

Bill, take the first two and I'll take the India.

Okay.

David, good morning, it is Bill Marth.

The question about Plan B.

I think is a great question.

Unfortunately it was a timing issue.

We got off to a late start, once this product got improved.

We did not get approved as quickly and get the transition from our original Plan B.

to our Plan B.

One-Step effectively.

Just didn't get it done in the right timing.

And it was unfortunate for us and cost us share.

That said, we put together our marketing program, have done a great job and actually the volume in the last quarter it was gone up 16% in volume and grown more than 6 share points.

So we are putting that -- we are putting Plan B.

back on track and we've committed and we will have Plan B.

back on track.

We expect to have it before the end of the year with growth, with considerable growth.

So we feel pretty good about Plan B.

The second question was more about what happened with the discussions with the FDA around bioequivalence, what are the standards.

I thought we were going to get something tougher out of that.

I really thought we might get to an area where bioequivalence -- where we would have to run bios on individual strength within controlled substances and some guidances like that.

We didn't get any of that.

We did get that the agency is going to be a bit tougher on bioequivalence in general tightening the ranges.

We at Teva believe that's a good plan.

We think that anything that builds the confidence of consumers in generics is absolute a good thing.

So we are very supportive of it.

These are things that we can do and we are happy to comply with whatever changes they want to effect.

As for your question about moving production to India, I would say the following.

That there is probably a more, a longer time to answer a full answer on that, but let me try to be short.

First of all, Teva made a strategic decisions after looking at that many times that we are not going to base our production in India or we are not going to move major part of our production to India due to the cost of labor, because we think in a different way and we prefer to concentrate our production in Israel, Europe and United States of America.

We, of course, have some plants in some other parts of the world, but that's mainly where we would like to see our future major part or the significant part of our production.

And that because we believe that scale, technology and expertise matters in this respect more than the cost of a wage in a given country.

You ask about what does it takes to move, let me take you to one kind of a different argument or consideration that sometimes people are not so tuned or following it.

There is a learning curve that it's take times and a lot of resources when you are moving a production from one plant to other plant regardless to what the country in the world.

And sometimes companies are not aware that this is, could be a very significant not only cost but a risk when they are doing so.

So we prefer to strengthen our hubs and our production sites based on what I said.

The scale, better technology and the very qualified highly experienced people that are doing that and excelling that for the last 60, 50 years, which is a strong advantage or competitive advantage.

And just as a follow-up, how are you engaging with your customers about that approach and is that resonating especially with the recent disruptions.

Well I can tell you the customers first of all like it.

More and more customers more worry while producing your API and I see it as one of our great competitive advantages that we are focusing and that we are producing our API in those places that I mentioned.

Thank you very much.

Our next question comes from Elliot Wilbur with Needham and Company.

Please state your question.

Thanks.

Just back on the subject of Copaxone and various pending citizens petitions.

I believe that the six-month date for the second citizens petition you filed on Copaxone or the refiling, I guess, of the first petition is approaching.

And I'm wondering -- basically the question is, should we be surprised if the FDA just simply denies that as we saw the first time around?

That's the first question.

Then the second, I guess, is for Bill.

You specifically highlighted the performance of Accutane in the quarter as a year-over-year growth driver.

I guess looking at the numbers that's gone from being a nondescript base product to being your third or fourth largest product, at least according to IMS sales.

I'm just wondering if you could maybe shed a little light on the dynamics there, talk about how much do you think that is sustainable given part of it is due to [Grand Baxe's] issues, but also looks like Roche has, either had some issues or dropped out of the market entirely.

Thanks.

Thanks, Elliot, for the question.

With respect to the citizens petition, I guess that you're right, I believe our date is coming up in mid-May.

And you know with the FDA's policy that if there is not a product that is close or pending approval that they will likely essentially return the citizens petition to us.

So we fully hope and anticipate that they will return that citizens petition to us.

Or, in your term, deny it.

So that's pretty much -- I wouldn't be surprised if that happens.

The second question was with respect to Claravis and, I believe it was Claravis, and that has been a great product for us.

It happens in the markets and we talked a bit about this in the beginning when you look at your base, where products at some point or some times the prices fall way below the values that one would expect for them to fall to.

It's not necessarily logical and you need to correct that and bring value back.

And that's exactly what we did with Claravis.

I think that market remains pretty well divided at this point between us and Mylan.

And to my knowledge Roche is not shipping at this point in time.

Thank you.

There are no further questions at this time.

I will now turn the conference back over to Mr.

Shlomo Yanai for closing remarks.

Thank you.

Thank you all very much for joining us today.

As you have heard, we had a great quarter and we are very excited about what lies ahead for us in the rest of 2010.

Thank you very much and have a good day.

Thank you, ladies and gentlemen, this concludes today's teleconference.

You may disconnect your lines at this time.

Thank you all for your participation.