Teva Pharmaceutical Industries Ltd (TEVA) 2010 Q3 法說會逐字稿

Greetings and welcome to the Teva Pharmaceutical Industries Ltd.

third-quarter 2010 results conference call.

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

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

(Operator Instructions).

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Elana Holzman, Senior Director of Investor Relations.

Thank you, Ms.

Holzman, you may begin.

Thank you, Diego.

Good morning and good afternoon, everyone.

Welcome to Teva's third-quarter 2010 earnings conference 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 Americas; 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 details 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, Elena.

Welcome, everyone, and thank you for joining us today as we review Teva's results for the third quarter of 2010.

This was an outstanding quarter for Teva, a quarter of record-breaking sales across all of our geographies and major businesses moving to record-breaking financial results across the board.

Net sales for quarter reached $4.3 billion representing 20% growth over Q3 2009.

Quarterly operating profit reached $1.4 billion, a 44% increase over the third quarter of 2009.

Net income in the quarter reached $1.2 billion, a 47% increase over Q3 2009.

And all of this brought us to non-GAAP EPS of $1.30.

We also had record cash generation during the quarter with $1.2 billion of operating cash flow, an increase of 16% over Q3 2009, and $866 million in free cash flow, an increase of 23% over Q3 2009.

The most important strategic achievement of the quarter was the closing of our acquisition of ratiopharm on August 10.

And as you know, last week we signed an agreement to acquire Theramex.

I will elaborate on both of these a bit later.

It was an exceptional quarter for Teva in North America; gross sales reached $2.7 billion, up 22% over the third quarter of 2009.

US generic sales reached approximately $1.6 billion, up 34% over Q3 2009 on the strength of our launch of Venlafaxine ER our generic version of Effexor XR, as well as strong sales of budesonide and mixed amphetamine salts, our generic version of Pulmicort Respules and Adderall XR.

It has been an especially great year so far for Teva in the US where we have introduced 17 new generic products since January.

While we are on the topic of US generic, I would like to provide a quick update on the status of our pending generic Lovenox application.

We recently met with representatives from the FDA to discuss the status of our ANDA.

During the meeting we confirmed that our version of generic Lovenox meets the FDA's criteria to demonstrate chemical sameness, and accordingly that data related to immunogenicity are currently under review at the Office of Biological Products.

This was also an outstanding quarter for Teva in Canada where our ability to capture market share in a competitive landscape and our closing of the ratiopharm acquisition has made us the number one player in the Canadian generic market based on the dollar share of the market.

Let's go now to Europe where following the closing of our acquisition of ratiopharm, sales crossed the $1 billion mark, up 21% over Q3 2009 or 33% in local currency terms.

Sales were up in all major European markets on the strength both of the ratiopharm business and excellent growth of Teva's revenues in key markets like Italy, Spain, Poland, Portugal and Hungary.

In several other markets, including Germany and France, we experienced pricing pressure during the quarter.

In Germany, our largest market, certain reforms impacted our prices.

Nevertheless, we are pleased to see continued growth of our Teva portfolio in Germany on top of the growth we experienced from the addition of ratiopharm's business.

The combination of the two businesses resulted in net growth in market share over Q3 2009.

Immediately upon our closing of ratiopharm on August 10, our integration teams were hard at work and I'm pleased to report that the integration is right on track.

The more deeply we get to know ratiopharm the more excited we are about what our combined company can accomplish.

In addition to our leadership in Europe and all its key markets, we are very well positioned to compete in every important business segment from retail generics to OTC to hospital, to specialty and innovative niche areas and biosimilars.

We are confident that we will be able to achieve our objective of $400 million in synergies.

In fact, we are already realizing synergies.

Some of you joined me last month on a visit to ratiopharm's headquarters and I think that the experience of meeting the outstanding ratiopharm team, seeing the efficiency of the operations, and understanding the strength of ratiopharm's market position and brand into Europe makes it clear why we are so enthusiastic about the possibilities that lie ahead for us for our Company.

Turning back now to our results, Q3 was another excellent quarter for our international business where sales reached $525 million, up 13% in local currencies over Q3 2009, driven by especially strong sales in Latin America, Israel and Russia.

In Latin America every one of our local business units, including Argentina, Mexico and Chile, grew faster than the market contributing to a 20% increase in sales in local currencies.

Once again it was a record-breaking quarter for Teva's innovative business.

Global in-market sales of Copaxone, the world's leading therapy for the treatment of multiple sclerosis, grew to over $800 million.

We enjoyed good unit growth in Europe and in the US Copaxone sales grew by 9%.

According to IMS data Copaxone continued to grow its leading market position in the US with a record share of TRx of 40.3% and a 39.1% market share of NRx.

Clearly Copaxone's efficacy, its superior safety and tolerability profile and the fact that it is the only MS therapy on the market with compelling long-term data continue to make it the first choice of physicians.

The MS community values Copaxone and the many product innovations and services we regularly provide as the category leader.

Teva is committed to continuously improving the patient treatment experience and continuously strengthening Copaxone's leadership position through ongoing clinical research.

As you know, we -- as you all are aware, our [sole] trial examined a lower volume 0.5 milliliter injection of Copaxone for which Teva submitted an [FMNDA].

We have had recent communication with the FDA on this lower volume product and conclude that clinical data to establish similar efficacy of this new concentration and the currently marketed product will be required for approval.

To support the approval of our FMNDA we have supplemented clinical trial data from our fourth study which was designed to assess the efficacy, safety and tolerability of glatiramer acetate in the same concentration.

And I'm pleased to update you that recently we received a notice of allowance on our patent related to our 0.5 ml product.

Let's turn now to Azilect, sales of which grew 28% over Q3 2009 to reach a record $81 million.

Sales were especially strong in the US where Azilect is the number one branded Parkinson disease therapy on the market.

Q3 was a great quarter for Teva's women's health franchise which grew 13% over Q3 2009 driven primarily by exceptional growth of our SEASONIQUE and ParaGard brands.

We also had strong sales of Plan B One-Step up 55% over the second quarter.

Last week we were excited to announce another report in addition to our global women's health business.

Our acquisition of Theramex with its diversified product portfolio, seasoned sales force and promising pipeline will accelerate the exception of our global -- expansion, sorry, of our global women's health franchise and provide a strong platform for cross-selling of our existing product in key growth markets in Europe and the rest of the world.

Theramex's main markets are France and Italy, two core markets in Teva's European strategy.

And as part of the agreement we will be taking over Theramex sales in a number of countries including Spain and Brazil which are also key markets in our long-term growth strategy.

By combining Theramex's products and pipeline with existing products and our strong R&D capabilities we will be creating a powerful new global women's health division and we are very excited about the prospects for this business.

Our global respiratory sales reached $207 million, a decline of 15% compared to the third quarter of 2009.

It is important to recall that in Q3 2009 we benefited from earlier and greater sales due to the severity of H1N1 and seasonal flu viruses.

[Teva] continues to maintain its market leadership position with 49% market share and Qvar ended the quarter with a 20% share of new prescriptions in the inhaled steroid corticosteroid market, a new high solidifying our number two position in that category.

We are excited about the future of our respiratory franchise and we are looking forward to sharing with you more details about our respiratory portfolio and R&D at our investor meeting this Thursday.

Before I pass the call over to Eyal I would like to provide you with an updated outlook for 2010 sales to reflect the inclusion of ratiopharm.

We now project 2010 revenues to be approximately $16.4 billion.

We continue to expect that our 2010 EPS will be in a range of $4.50 to $4.60, which includes approximately $0.03 dilution from the ratiopharm acquisition.

The acquisition will become accretive on a non-GAAP basis in the first quarter of 2011.

We are now developing our (inaudible) for 2011 and beyond and we are extremely enthusiastic about the many opportunities that lie ahead for Teva as we look forward to another year of continuous profitable growth.

Thank you for your attention and now let's turn the call over to Eyal for a more detailed financial update.

Eyal?

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

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

As you can see, we reported another excellent quarter with all-time highs in sales as well as gross profit, operating profit, net income and earnings per share on a GAAP and non-GAAP basis, completing a very strong first nine months and heading to an excellent 2010.

We also reported record cash flow from operations of $1.2 billion and free cash flow of $866 million, both representing impressive record results.

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 quarters -- amortization of purchased intangible assets amounting to $144 million; amortization of ratiopharm intangibles will commence in Q1 2011; and we are -- we adjusted for an inventory step up of $54 million relating to the ratiopharm acquisition; non-cash impairment of long-lived assets and intangible assets of $27 million; restructuring and acquisition costs of $27 million related mainly to the ratiopharm acquisition.

These expenses were offset primarily by financial income of $45 million related to hedging activities in connection with the acquisition of ratiopharm.

And in addition, the related tax benefit of all of those items of $74 million in total.

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

Please review our press release and related tables for reconciliation to our GAAP numbers and more 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.

Second, foreign currency continued to play a significant role in our results with different impact on P&L and the balance sheet as I will detail below.

In the third-quarter foreign currency differences had a negative impact of approximately $122 million on sales as compared to Q3 2009.

The impact from sales resulted primarily from the strength of the US dollar relative to most European currencies which was partially offset by a decline in the value of the US dollar relative to other currencies.

Nonetheless, the impact on operating profit continued to be negligible with a negative contribution of $6 million.

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

Before I review the P&L in more detail, one more comment on the impact foreign exchange had on our balance sheet, namely on our equity which was a positive one.

The weakness of the US dollar at September 30 primarily relative to the European currency increased our equity by approximately $1.5 billion compared to June 30 due to the impact of translation differences on long-term assets such as goodwill and other intangible assets as well as cash balances (inaudible).

We expect that translation differences will continue to cause fluctuation in our equity as we have significant assets, mainly goodwill and intangible assets, in non-US currencies.

Looking at our consolidated results for Q3, sales totaled $4.3 billion, an increase of 20% compared to Q3 last year.

In local currencies we delivered even a higher growth of 23%.

About 55% of our growth was organic while the rest resulted from the first-time consolidation of ratiopharm.

North America, which grew 22%, delivered record generic product sales and strong profitability.

Europe grew by 21% in US dollars and by 33% in local currency terms due substantially to the first-time consolidation of ratiopharm results.

Sales in the international markets grew by 7% in US dollars and by 13% in local currency terms.

Non-GAAP operating income reached $1.4 billion, up 44% compared to Q3 2009 benefiting from strong gross margin, tight expense control and the take back of the Copaxone royalties on North America sales from sanofi-aventis.

Non-GAAP net income reached $1.2 billion, up 47% compared to Q3 2009.

Non-GAAP fully diluted earnings per share were $1.3 per share, up 46% compared to Q3 2009.

A few housekeeping points related to earnings per share calculations.

The weighted average share count 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 purchased intangible assets, was 62.5% in the reported quarter compared to 58.2% in the quarter last year due primarily to favorable product mix.

Gross margin continues to benefit from contribution from new and recently launched generic product in the US, solid gross margin of the US generic base business and a contribution to sales of our innovative and branded franchises.

Gross margins also benefited from our continued effort to improve efficiencies.

Please note that this quarter's high gross margin is an exception to our long-term gross margin range of 57% to 60%.

Non-GAAP operating margin reached 33.9%, up 5.8% from 28.1% in Q3 2009, mainly contributing to the exceptional operating margin where high gross margin and the termination of payments made to sanofi-aventis over the past two years of 25% of Copaxone's in-market sales in the US and Canada.

Net R&D expenses were up 23% compared to Q3 2009, reaching a record of $239 million or 5.6% of sales.

Gross R&D before reimbursement from third parties for certain R&D expenses and R&D investment in our partnership with (inaudible) and Lonza was $248 million or close to 6% of our sales.

The gross and net R&D expenses over the comparable quarter last year is attributed to both our branded and generic R&D activities.

The increase and the branded R&D expenditure effects progress mainly in laquinimod related activities as well as biosimilars and respiratory projects.

We now expect that for the full year net R&D expenses will be approximately 6% of our net sales.

Selling and marketing expenses, excluding amortization of purchased intangible assets, totaled $742 million this quarter or 17.5% of sales compared with 18.6% of sales in Q3 2009.

As already mentioned, the decline in selling and marketing expenses as a percentage of sales resulted primarily from the termination of payments to sanofi-aventis which were recorded as sales and marketing expenses.

It was partially offset by a higher royalty payment in connection with new and recently launched generic products in the US.

Total G&A expenses this quarter were $236 million or 5.5% of sales compared with 6% of sales in Q3 last year.

The synergies from the Barr acquisition and tight expense control to continue to contribute to the decline in G&A expenses as a percentage of sales.

We recorded $48 million of net financial expenses on a non-GAAP basis and Q3 compared with $52 million of non-GAAP financial expenses in the comparable quarter of 2009.

The lower financial expenses resulted from lower interest rates on our outstanding debt offset by higher levels of debt in the reported quarter following the acquisition of ratiopharm.

You should note that we excluded from our non-GAAP financial expenses in the quarter a gain of $45 million realized in connection with hedging the ratiopharm acquisition.

Tax expense provided for the third quarter was $207 million on pretax non-GAAP income of $1.4 billion.

Our current estimate of the non-GAAP annual rate for tax for 2010 on a whole is 15% compared to 16% for all of 2009.

The estimated tax rate for 2010 on a GAAP basis is 12%.

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

Cash generated from operations this quarter totaled $1.2 billion, up 16% compared to Q3 2009.

Our free cash flow, excluding gross capital expenditure of $175 million and cash dividend of $167 million, partially offset by profit from the sale of certain assets of $14 million, amounted to a total of $866 million or 23% above Q3 2009.

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

On September 30 cash and marketable securities totaled $1.2 billion, down approximately $4 billion from June 30 as we used more of the cash on hand to pay for ratiopharm.

Our total outstanding loans, bonds of convertible debentures stood at $7.1 billion, only slightly up from $7 billion as of the end of June.

Our debt remains essentially unchanged as we incurred additional debt in connection with the acquisition of ratiopharm, but we paid off the debt incurred in connection with the acquisition of Barr completely as well as other bank debts.

The debt incurred in connection with our acquisition of Barr is now fully paid.

Our financial leverage as of September 30, 2010 was just under 25%, down from 27% at June 30.

DSO, days sales outstanding amounted to an exceptional 42 days this quarter as a result of very strong end of quarter collection compared to 50 days in the previous quarter.

We calculated the DSO after netting out from the receivables our sales reserve and allowances and we always do this.

Inventory days stood at 178 days compared with 172 days in the previous quarter or 195 days in Q3 2009.

Net capital expenditures reached $161 million this quarter compared to $90 million in Q2 2010.

To remind you, in Q2 2010 net CapEx included proceeds of $46 million from servicers and assets versus $14 million which are included in the current quarter.

And now for dividends.

Yesterday Teva's Board approved a quarterly net dividend amounting to approximately $173 million on a per share basis or dividend which was declared in Israeli shekels is 0.7 shekels per share.

Mentioned on yesterday's rate of exchange of the shekel to the US dollar, this translates into approximately $0.193 per share.

Thank you all for your time and attention today and now we'll be glad to take your questions.

Operator, please.

(Operator Instructions).

Randall Stanicky, Goldman Sachs.

Great.

Hi, guys, thanks for the question.

Just a quick one for Eyal and then a follow-up.

Eyal I know we can all do the math, but can you just -- for the 4Q implied EPS, that's $1.21 to $1.31 and that reflects the $0.03 of dilution from ratiopharm, is that correct?

Yes.

That was true for the first five months.

Of course it's improving every month and, as Shlomo mentioned, Q1 2011 will already be accretive.

Okay, good.

And then, Gerard, can you just help us a little bit more with Europe.

Maybe just spell out a little more clearly what was the constant currency growth?

I know you talked about a 5% constant currency back half outlook and how are we tracking there?

And then maybe which are the countries where you're seeing the most weakness versus where some of the offsets are coming from in terms of potential growth?

Thanks.

Gerard?

Thank you, Randall.

I think what we've seen in the overall growth in Europe, we've seen no surprises, as I said before; we've seen some movement in some markets that were -- as well Shlomo mentioned it.

I think we saw in Germany and other markets a bit of pressure kicking in in August.

But all in all, I think if you go Southern Europe, it has shown what we expected it to be, the market that showed positive dynamics.

It has been turbulent, but we believe that for us it's been quite relatively well done.

I think if I look at ratiopharm itself, it's only two months after we just closed a deal and it's a bit early days to expect any positive sales synergies.

But it's clear that, as Shlomo said, everything we see we like.

And Germany reforms announced early this year started as expected in August, as I said.

And despite that our Teva German business, core business developed well.

And in addition, I would say that the combined market share of two companies we gained a little bit versus last year.

Italy, Spain, but also Eastern Europe in markets like Hungary and Poland are growing quite well and we did very well in there.

And I think so if you add all of these things together, for us this was a solid quarter.

It was not like Q2, but it's a very solid quarter and we're very happy to see the first very positive signs of having the ratiopharm business in there.

But, are you still tracking consistently with that sort of mid single digit constant currency growth rate going forward that you highlighted last quarter, is that fair to say?

I think we haven't seen big movement versus that.

If you look at the market in total without Germany it's in the low single digit.

If you include Germany -- or if you take, I'm sorry, if you take the market with Germany included it's in the low single digits.

If you take excluding Germany it's in the higher single digits and that's still tracking very well.

If you look at our current performance year to date it's been quite well, it's in the double digit numbers, in the middle double digit numbers.

And you can perhaps do the math yourselves as well if you do the strategic plan outlook for us in 2015.

We need to deliver roundabout -- after ratiopharm about 10% CAGR over the years and we're well on track of delivering that.

So we're outperforming the market, the market is more or less in line with what we do.

Every quarter is different.

In one quarter you have tenders kicking in, in another quarter you've got a price measurement kicking in, in other quarters we -- like you merge with another company.

So there are a lot of moving parts in this quarter-on-quarter comparison, but the underlying current -- the underlying trend is exactly in line as I declared before.

Okay, great, that's helpful.

Thanks a lot, guys.

Rich Silver, Barclays Capital.

Yes, first question is on the low volume Copaxone.

Can you just tell us what the timetable is for approval?

Whether this data submission, which you said the data has been submitted, changes the PDUFA date?

And then you have a notice of allowance on this patent.

Assuming that it issues and it's listed in the orange book, what might that mean or not mean in terms of P4 filings 30 months, days, etc.?

The follow-up question is on the gross margin.

Eyal, when would you expect the gross margin to be back in that 57% to 60% range?

Could it be as early as the fourth quarter or is it more likely sometime in the first part of next year?

Thanks.

Okay, Bill, will you take that Copaxone question and then Eyal will follow on the gross margins?

Sure.

Rich, thanks for the question.

There's a lot to talk about on the Copaxone 0.5 sNDA.

I think a lot came out of our interaction.

Several points are mutually agreed upon, that being the unknown method of action and the lack of PK measurement.

And what we've concluded basically is there are no known shortcuts with glatiramer acetate.

So I think that's very, very important.

And I think when you think about this broadly, a clinical requirement for even a change of concentration has broad implications for any type of follow-on product or generic product.

So, I think that's an important point to make.

And then, the fact that we're supplementing the file with clinical data from FORTE with over 1,100 patients, if accepted significantly improves the treatment experience of over 100,000 MS patients in the form of an enhanced product with the requisite three-year exclusivity would be likely.

So I think that those are all very positive things as we think about this sNDA.

Your question on the notice, it generally takes a couple of months for the patent to be issued.

And I would remind that in a case on the 0.5 we could eventually use all the patents in litigation as well as the 0.5 ml patent.

But what about the PDUFA date and the timeframe for approval, Bill?

Well, there's really no change at this point, Rich.

I'm sorry (multiple speakers).

So additional data doesn't mean that the action that we would expect on January 1 would be any different than we'd expect -- we would have expected without that supplemental data?

No, no, good question.

What we did is we've supplemented with this data, now the agency will look at this data, the completeness of this data, decide what they want with this data and they may reset that PDUFA clock, but they may not.

So we'll have to wait and see; that's a dynamic we can't really do anything about.

But hopefully this is -- this is a much better situation for us, we're very pleased with it.

Okay, thank you.

And the gross margin?

Rich, regarding gross margin, gross margin in Q4 is expected to be back below 60%.

As you took Shlomo's focus for the year and extracted what we have done in the first three quarters you have a number for Q4.

So sales are higher, but there is more ratiopharm in it which comes with a lower average gross margin debt than what we have delivered in a component inside between generic, (inaudible) generic launches and other products is a little different than in Q3.

But by and large we've got to be below 60, which is where our natural area is.

Ken Cacciatore, Cowen and Company.

Thanks, guys.

Bill, I don't want to dwell too much on your comments on Copaxone, but I guess maybe just circling back a little bit.

Can you just describe the low dose formulation and maybe a little bit more on your interactions with the agency?

What level of nuance did you get into?

I mean, were their discussions about the potential for doing biological assays, biochemical assays on your low dose?

Were there discussions about doing PK specifically, inability to do the PK studies?

I think you hit on it, but maybe just even a little bit more about that interaction so we have a better sense in thinking about a generic to Copaxone.

And then also -- well, why don't I let you answer that and then I'll have a follow-up?

Thanks.

Thanks, Ken, good morning.

I think I pretty well said it, but I would just reiterate -- there are many points of discussion.

We can't talk about all the discussion with the agency.

But the conclusion, again, remains that we're similarly situated with unknown method of action.

There again -- there's a lack of PK measurement.

And so we can't conclude that there -- well, we can conclude that there are no known shortcuts for glatiramer and I think that's really -- with no known markers there's no other way to go other than a clinical requirement.

Okay, maybe on the litigation front, can you just give us an update of what's happening there following the summary motion in your favor.

Can you talk about steps forward that you can take or are planning on taking?

Thank you.

Yes, Ken, I think it would probably be helpful to kind of walk you through the process because I think there are maybe some misunderstandings out there.

Because we have an excellent understanding of the litigation process and thus far we are really pleased at where this litigation process is going.

Mylan and Momenta have been essentially consolidated for all purposes and trial.

So I think probably the best way to do it would be to take you through the anticipated flow, right.

So Mylan's claims construction hearing will be on January 12, after which some period of time Judge Jones would issue the claims construction.

We will then proceed to summary judgment.

Now a summary judgment is an undefined period, but it could be a substantial period of time of due course to go through summary judgment motions.

After the summary judgments are ruled on it's about a 30-day process, Judge Jones will bring us in for pretrial conferences.

After that pretrial conference she'll set a trial date, after the trial -- we will begin the trial, we expect it to be about a two-week trial and then Judge Jones will render a decision at the appropriate time.

So I mean, that's pretty much the course.

But we feel really good about where we're at right now.

Great, thank you very much.

Chris Schott, JPMorgan.

Great, just another follow-up on the low-dose Copaxone data.

I think you mentioned 1,100 patients.

Can you just also remind us how long a duration of therapy we saw with that data set?

And then the second question on Copaxone, can you just talk about your expectations for the growth of this product with the introduction of [Galinia]?

And as you discuss that then, do you just think Copaxone will remain at a price discount to Galinia over time?

Thanks.

Good morning, Chris.

Yes, thank you.

Chris, with respect to the data, the FORTE data is a one-year study.

And again, it's about 1,100 patients dosed on various of the 20 ml and 40 ml.

And the second question was?

The growth dynamics for Copaxone with the new competition in the market and just thoughts around the price discount we see for Copaxone versus Galinia at this point?

Well, we still anticipate revenue growth for Copaxone in 2011.

As far as the pricing flexibility on Copaxone because Galinia has come out with a relatively high price we really can't comment at this point in time.

We are much lower priced, we don't like to be too low.

I've always said that being what I consider the standard of care in the MS market should not put us in third or fourth place on pricing.

So, we'll have to just wait and see how that works.

Great, thanks very much.

David Amsellem, Piper Jaffray.

Thanks, just coming back to the Copaxone litigation, just so I'm clear.

Is it your expectation that the trial date will be some time in 2012?

And then as you review that, given the [retracted] process, is it your view that the FDA wouldn't necessarily have any sense of urgency in terms of reviewing the filings from Momenta and Mylan?

Good morning, David.

Yes, I think to say that the trial, 2012, that is not unreasonable at all, that would be fine.

With respect to how fast the FDA moves on approving their product or processing their file, that's very difficult really to say, that's something that happens within the FDA.

But we know from our experience with enoxaparin that it took a very, very long time and the FDA didn't get tremendously motivated until litigation was done.

Okay, that's helpful.

And then just one more question.

Can you just comment on your appetite for further presence in Brazil?

It's a hot market these days, it's attractive, a lot of interest in the space.

Can you talk about your thoughts on this market, how you're looking to further build your business there?

Yes, this is Shlomo speaking.

As you know, we are active in generic and in branded as well.

And as we said -- as I said when we presented our long-term strategy plan, we mentioned and I pointed out some key countries or key countries for our expanding or expansion for generics.

And Brazil was on that list as well.

So, Brazil definitely presents an opportunity, but there are others and some other countries are key generic markets that we are also excited of the opportunities that lay ahead for us.

And as you know, in M&A activity it's a very opportunistic arena, so I cannot refer anything more specific on any given market or target.

Okay, thanks.

Marc Goodman, UBS.

Yes, can you talk about this rest of world line a little bit -- Russia, Eastern Europe, Japan -- inputs that go into this line item and give us a sense of just what's the normalized growth rates there?

We didn't have any acquisitions that impacted the number, so I would think this is all Teva.

So give us a sense what's going on there please.

And then, there was a comment that there was pricing pressure specifically in France and Germany.

I understand the German tender.

Can you just talk about France and what kind pricing pressure you saw there and what we should expect there?

Thanks.

Let me first take the question on the -- let's call it the international arena or the rest of the world, if you skip North America and Europe.

I think that we are doing very well in that part of our business and I just said that roughly speaking this area is going by growing by 13% quarter over quarter.

But I think if you did dive into the countries, then you may see or I may comment that Russia is doing very well for us.

On generics and OTC we have double-digit growth there and we're expecting continuous growth for the next years in this very important markets.

As for Japan, this is an accounting issue, this is a JV and therefore we are not recognizing sales, but we are doing there very well.

Actually we are in a run rate of more than $200 million per year of sales.

And if you add it to our international activities, then actually we are roughly speaking on the 16% growth, which is aligned with our long-term strategy expectation.

And of course this attractive part of our business, indefinitely (inaudible) are going to provide us growth, is in line with what we plan for the coming year.

And your second question please?

Oh, it was France.

Germany --.

Pricing in France, Germany.

Yes, would you like to add to that, Gerard?

Yes, pleasure, thank you.

Thank you very much, Mark.

I think I'll start with Germany and then I'll hop over to France.

So first of all, we talk about Germany, we need to distinguish with you what's happening in the innovative part of the market in Germany versus the off-patent market.

The German government has increased mandatory rebates for innovative products from 6% to 16%, and they also have installed a price freeze at a level of Q3 prices last year, August last year, for all -- and for the off-patent market we've seen an adjustment of maximum reimbursement prices in the marketplace, which is sort of a recalculation they used to do every couple of years and they've done this year twice.

So that's all.

So, but despite all of that, the German growth generic market has grown 4% this year in any case.

In terms of net sales, and I think that's what you sometimes pick up when you listen to other people talking about the German market, it's very difficult to calculate the impact of all of that for each individual player in the market because rebates and portfolio diversity is very difficult to look at it.

In our case, as I said, we've done reasonably well, we gained a bit of share in that.

In general the tender segment that is the low price segment has continued to grow, but it's not growing faster as we had forecasted before.

And it has been a bit more stable, it has been more or less stable during 2010.

We also expect it to expand during the next few years, but that's what we have modeled for anyway in all of our expectations, also when we acquired ratio.

In other segments like OTC, hospital or even the semi-branded products where ratiopharm and we are strong, we see an even much more stable market environment in Germany.

So, yes, you see price dynamics in Germany, they're moving in the same direction as we've seen it, but it's only in half of -- let's say of the market really significant to see.

If you take France, in August last year the government decided to take out a serious price cut out of two different types of products, the protein pump inhibitors, the acid reducers and the statins, the cholesterol-lowering group.

That had an impact of roundabout $100 million on the total market.

This year -- and that's now just thinking through whilst we go through the year.

What you also see is that there was an announcement in end of summer by the French government to take some quite forceful measures into the budget of the healthcare system.

But after detailed study you will find out that only about $100 million of that is currently some sort of earmark as being a price decrease on the gross prices of generic pharmaceuticals in the French healthcare system.

How that is exactly going to be implemented is currently unclear, but it's clear that it's happening as we -- that there is series talk about that and we're waiting for that to play out further.

Thanks.

If I want -- if I may comment because I understand that Europe is getting a lot of [attraction].

The price pressure, and I'm going to comment in a very overall kind of a comment.

I think that when you are a market leader in generics, price pressure is something that is part of your business environment.

I used to say that in the United States this is a constant price pressure every year and it becomes part of the business environment that you guys are not even questioning it anymore.

Price erosion in generics is part of the business environment and it goes also with something which is called more market share.

And as a market leader I believe that we know how to manage this kind of phenomenon and to increase our market share to exceed the impact of the price pressure.

And that's of course not relating to any specific quarter or market or countries, but I believe that that's one of the things that we are doing for many years and with a nice track record.

Gregg Gilbert, Bank of America-Merrill Lynch.

Thanks.

One for Bill, then one for Shlomo and/or Eyal.

First, good morning, Bill.

On gemcitabine in the US, are you confident that your tentative or go final on November 15 and are confident that your -- that FDA will be supportive of a CBE-30 approach to transfer the product and minimize the delay?

There is still a process that we've got to go through.

You can never be sure that the FDA is going to convert you in a rapid manner.

We hope to get it converted, we have time, we know that the forfeiture rules leave us until January.

So we'll do our best to make sure that we get it approved and hopefully out the door by then.

Okay.

And then I have a question for Shlomo and Eyal.

I know that the Company believes that acquisitions are still the best way to maximize shareholder value.

But I have to ask has the thinking of you and the Board shifted at all to a more balanced approach of acquisitions plus a more aggressive dividend and/or share repurchase strategy?

It seems to me that the absolute level of cash flow you're generating these days calls for at least a slightly different look at your cash deployment strategy unless of course you think you should just continue to do larger and larger acquisitions over time.

Thank you.

Well, thank you for the question, it's very broad subject and I'll try to be short because it deserves more than just a quick Q&A session time.

But [aptly] speaking, we are trying to follow our long-term strategy which we of course are reviewing every year and from time to time as we think there is a reason for that.

And we still believe that the growth is the major value driver for our shareholders.

And when it comes to the acquisition part, let me remind you that, as we said at about one-third of our growth will come from acquisition and two-thirds from organic growth.

And we are active in looking for acquisitions in generics, which is more about increasing our market share in attractive markets.

But also in the branded where we'd like to strengthen our branded part of the business and we have right now four interesting and attractive franchises.

Let me just highlight the last week announcement which is typically a branded kind of acquisition.

And as for size, I don't think the size is the issue.

As you know, in our size and with the strong cash generation of Teva, when we will need we will have the needed resources.

It's more about a strategic fit to our strategy and to our famous three criteria which one I already mentioned, strategic fit, that it should also of course be with the good -- associated with good economics and accretive within a year after the acquisition.

And that's where -- how we actually are managing this part of our business.

Maybe one more comment on that.

I think you are all seeing what we're doing with cash.

We generated cash, we use it to pay back our debt, then we take that in order to finance acquisitions.

The ROI of our acquisition, we have an excellent track record and the return on acquisition or return on investment.

And that will go around, generate more cash and pay back those debts.

So, so far I think it works very well in generating value.

And I think that you asked about dividend, we're currently at a 1.5% dividend yield.

We see ourselves as a growth company and we need to have the right balance between all the factors and how to create shareholder value and I think so far we're more or less in that balance.

Thanks.

David Buck, Buckingham Research Group.

Yes, thanks.

First a confirmation from Eyal.

I think you said that 55% of the growth was organic.

Using those numbers it looks like ratiopharm was about $315 million in contribution for the quarter.

Can you just confirm that and were there some seasonalities associated with it in the third quarter or weaker quarter?

And then for Bill, just can you give us an update on -- or some type of quantification or qualitative what the impact of Venlafaxine might have been in the quarter and a reminder of how competitive you expect that market to be after six months?

Thanks.

I did confirm the numbers, 55% of the growth was organic and ratiopharm contributed 45%.

Remember it was only a couple of months or a little short of a couple of months in the third quarter which seasonally is a low quarter.

So when we compared it to what we had in our plan it was right on the money and we're happy with the result.

Okay.

Hi, David.

On the Venlafaxine, I guess the public record would suggest that there are likely to be not as many players in the first part of 2011.

But it's hard for us to really have visibility to the players that haven't settled.

So, that leaves it a bit unclear for us.

Other than that, we had an excellent quarter with Venlafaxine, it's just the conversion rate was tremendous.

And so -- but it's pretty much as you would expect it to be.

And just one follow-up also for Bill.

Any sense of timing of just when you might see Enoxaparin response?

No, I don't think we have any update from our prior comments.

But as we said, we did meet with management.

And we do know that we've established sameness and that we are with OPB, so that's very important and we're very pleased.

Okay, thank you.

Tim Chiang, CRT Capital.

Hi, thanks.

Gerard, I had a question in terms of Europe.

You've talked about market share gains, steady market share gains.

And with ratiopharm how will that accelerate your position in Germany?

I mean, if you look out a year, I mean is the goal to become the number one pharmaceutical company there?

Yes, but I'll let Gerard answer the question.

Thank you, Shlomo, for teeing this one up.

First of all, yes, definitely we have the ambition to go after the leadership position in Germany.

Actually know that we were very enthusiastic of the acquisition of ratiopharm because it would give us a critical mass and punching power in quite a few markets in Europe that would lift us up and that would allow us to fight for synergistic strength in our top-line generation.

And first of all, in Germany I believe the total consolidation of our portfolio, both of products and customers, will allow us to really take advantage of the size.

Everything we seen within ratiopharm is making us enthusiastic there.

I'm spending myself quite a lot of time in Ulm and I can tell you it's a real enthusiastic and opportunity rich field for us over there.

Bringing together the Teva global strength and the strong reputation and brand equity value in Germany that ratio brings is clearly something that is going to deliver us much more than just maintaining the dynamics as they are.

There is a lot of potential for positive synergies there.

But it's also true outside of Germany.

Take for instance markets like Italy and Spain where we will clearly separate ourselves from the pack in -- with this merger of these two companies we'll be number one in Spain, we are number one in Italy, we're not only number one on a national level but also in the different sub regions that are important in these markets.

As you know, it is sort of a default decision-making system.

And that should allow us also to take advantage of the strength and the knowledge of the different customers.

There's very little customer overlap so we can let's say take advantage of each position and enrich our position.

If I take France, by now we can claim to have the broadest portfolio that we can offer to the marketplace for all of France, which is bigger and broader than number one in France who are my American colleagues.

So that should give us also some leverage there which should translate into very positive dynamics.

So that gives you just a few elements there.

On top of all of this you know that there is some sort of consolidation at European scale going on with our major buyers, our major let's say customers, the wholesalers with their retail chains.

They prefer to work with a company that has a broad and a strong presence in each of the key markets of Europe.

We have the exact right profile for that now.

So that's also something that I have a lot of confidence in that it will bring extra value.

Just a quick follow-up to that.

I mean what role does vertical integration sort of play in this whole European market?

You guys have always been sort of viewed as the leader in being vertically integrated and I guess that should provide you some benefits longer term in terms of operating margins.

Could you comment on that?

Absolutely.

And you have touched a very important and good point.

Part of our [to's], so to speak, how to do the job in the European arena is based on our advantage as back integrated.

Many of the acquired companies have third party suppliers and then we are going to bring back home part of these products.

So it's definitely one of the best ways of how to generate more value, improving our margins by taking the advantage of this back integration.

Is it too soon to quantify what sort of benefit you can get on the operating margin side at this point?

Or do you think you'll be able to provide a little bit more color earlier next year on that?

I don't think I can share with you our numbers on that.

It's a process.

As you well know, transferring product from suppliers, it takes time.

But it's not a long time and this is part of our integration, long-term planning in Europe while we're integrating the companies.

We did it with (inaudible), now we are doing it with ratiopharm.

And that is again part of the ways of how we are going to maintain our differentiation or how to differentiate ourselves in the market versus part of our competitors.

Okay, great.

Thanks.

Elliott Wilbur, Needham & Company.

Hi, just if at all possible we could drill down a little bit more on Copaxone ex-US trends.

Was trying to get a sense of the negative impact of austerity measures versus timing of purchases and some of the other factors that were cited for the year-over-year decline.

And then secondly, maybe just for Bill, can you just give us an update on the Irvine injectable facility, kind of where you are in terms of reintroduction of products?

Okay, as for Copaxone, on the non-US, if you take out the FX impact and the fact that in part of the non-US countries we are turning our Copaxone by governmental tenders, which sometimes are not necessarily occurring in the same quarter, i.e.

there is a shift between the quarters, then actually we even grow the Copaxone market share in the non- -- sorry, the Copaxone grew in that quarter.

These two elements that I mentioned, the FX and the tender shift, is why you see actually a negative growth year over year.

And to a very small degree is also some price that are in some countries, in those countries it we mentioned a price reduction in Europe.

But that major part of that decline is FX and the tender part.

Bill, will you take the next question?

Yes.

Good morning, Elliott.

With respect to Irvine, there's probably not a lot new that I can add.

We anticipate start-up between now and the end of the year.

At some point during that start-up process the FDA will come in and do one more inspection and we've discussed that with them.

We have released a number of products, as we've talked about before, that were in cooperation with the agency, most of which are medically necessary important products for the market.

So we're proceeding along with our plan.

John Boris, Citi Investment Research.

Thanks for taking the questions and congratulations on the results.

A question for Bill on Copaxone.

Can you just comment or give a little bit better clarity on the type of intellectual property that's going to be issued?

Is there a device involved?

Is there any competitive advantage that you'll have with using a device along with the half CC?

And then, have you started to build launch quantities on the half CC formulation in whatever device that you might be using?

Second question just has to do with the dialogue you're having with the FDA on Lovenox.

Where are you in that process on Lovenox?

Has it completed and you're just waiting for a final response from the FDA?

Any kind of update there would be helpful.

Thanks.

Yes, John, thanks for the questions.

I guess on the patent, we can just say that it's around a formulation of delivering the 0.5 ml, and that's really all we can say about that.

And again, that will be added to the other patent estate that we have and can be used in any further litigation when we get to the 0.5.

The other question about 0.5?

Launch quantities.

Launch quantities we wouldn't comment on.

But one would assume that Teva is always prepared.

Anymore on the --?

I guess on -- so always prepared meaning you're only about 60 days away from FDA action on January 1.

So, --?

Well, again, I would remind, it was brought up earlier that we have supplemented with clinical data that -- I wouldn't be shocked if it took them more time to respond to this clinical data.

But again, you have to hedge your bets.

And although we're not saying that we've built launch quantities, we always tend to try to be prepared.

Got it.

On the enoxaparin, there isn't a whole lot more color to add to enoxaparin, other than what I think is important is we achieved chemical sameness and we're in review with OPB and meeting with management helped us feel much better about the situation.

Is it in your guidance for this year -- Lovenox?

I can't really say about the guidance whether it's in or not.

The fact of the matter is we hope -- we are still hopeful that we can see it yet this year.

In fact I'd be deeply disappointed if we didn't get the approval yet this year.

But I, again, can't be certain.

Thanks for your candor.

Corey Davis, Jefferies & Co.

Thanks.

First question, just I think today and tomorrow there's an FDA advisory panel about biosimilars and looking down the agenda of the Who's Who of biotech pharma and generic companies and Teva has some representation there.

So, any thoughts about whether or not there's anything meaningful that's going to come out of this meeting or any updates you have in general about how you're feeling the regulatory path is proceeding with the FDA and getting biosimilars approved?

Bill, will you answer the question, please?

Sure.

Good morning, Corey.

Yes, the next couple of days I think will be very revealing.

But I don't think we can make any real predictions just yet.

We do have Dr.

(inaudible) [Creightman] down there who will be presenting and we know she'll do an excellent job of portraying our position.

So it will be very interesting for us to hear the other's positions as well.

And I think this really is about a forum for the agency to be able to get all the opinions and begin to -- I'm sure they've thought deeply about their own position, but they may want to think how they might alter their position or think differently.

But I think it's a very, very good forum.

So we're pretty excited with all the stuff that we see out of it.

And one last question just on Copaxone growth in looking at this quarter.

Without asking for specific guidance, but do you think the growth around 4% worldwide this quarter is predictive of where it's going to be over the next quarter, next couple quarters, or is this more of a downside anomaly?

Well, I think Shlomo very well articulated earlier that you have bumps from quarter to quarter.

What we can say is if you look at the first nine months of the year, total boxes of Copaxone are up almost 10%.

But it moves from quarter to quarter outside the United States based on all the governmental process, bids, tenders, etc.

So you just have to look -- right now the global growth trend is good.

Fair enough.

Thanks, Bill.

Michael Tong, Wells Fargo.

Good morning.

For Eyal, as you start to think about inclusion of ratiopharm, how should we start to think about the longer-term tax rate on an adjusted EPS basis maybe into 2011?

And then secondly, the recently announced acquisition of Theramex, is there any ability for you or is there any ability for that operation to enhance your manufacturing efficiency as it relates to the US women's health business?

Thank you.

Regarding tax rate, the acquisition of ratiopharm will not have a meaningful impact on our effective tax rate, which is, as we've guided, anywhere between 14% to 16%.

I believe this is what we're going to see, at least for next year.

So we're pretty much in a stable environment despite the fact that ratiopharm was at profit next year coming from synergies bears a slightly higher tax rate than (inaudible) in Germany it's about 28%.

We will absorb that.

On Theramex, I can take the question.

Basically we're not talking about a [used] production facility, we're not going to move the products that we make for the US market to be produced over there right now.

It's designed to support its own product portfolio.

Thank you.

Frank Pinkerton, SunTrust Robinson Humphrey.

Great, thank you all.

I might have missed it, but can you please just discuss your sales for your two follow-on biologic products in the quarter and the trends there?

Thank you.

I can give you the overall number also so you'll be able to see the detail.

There's another detail you'll see it on a (inaudible) it tells of biologic with just about $30 million this quarter compared to $25 million last quarter.

So we're growing.

Ratiopharma is adding and will add next quarter another dimension on biosimilars.

But other than that we don't provide any more details on what are we selling and by product by product.

Okay, great.

And then just as they follow-up, can you talk about in 2011 -- I think the proprietary pipeline has some data points coming out in the first half.

Can you give us anything on timing or conferences and presentations?

I think laquinimod has got a couple of studies, StemEx has a study and you've also got I believe something on the perennial rhinitis for your HSA product.

Thank you.

Well, part of the answer to your question is going to be given on Thursday when we will present the respiratory franchise.

We will provide more data on our pipeline and status of some of the product that we are developing.

Part of the -- other part of your question you'll have to be patient until we will provide more guidance regarding 2011 and laquinimod, as you know, is scheduled for the beginning of 2011 when we are going to end the first -- sorry, the third phase of clinical trial.

And that will definitely be a major milestone for laquinimod.

Thank you.

Ladies and gentlemen, there is no further time for questions.

I will now turn the conference back over to Mr.

Shlomo Yanai for closing remarks.

Thank you.

Thank you and I thank you all for joining us today.

As you have heard, this was another great quarter for Teva.

And we are excited about how the rest of 2010 is shaping up.

Thank you all for joining us today and we hope you can join us again this Thursday for our respiratory opportunity meeting.

Thank you and have a good day.

Thank you.

Ladies and gentlemen, this concludes today's conference.

All parties may disconnect now.

Thank you.