Teva Pharmaceutical Industries Ltd (TEVA) 2011 Q1 法說會逐字稿

Greetings, and welcome to the Teva Pharmaceutical Industries Limited first-quarter 2011 results conference call.

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

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

(Operator Instructions).

As a reminder, this conference is being recorded.

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

Thank you.

You may begin.

Thank you, Diego.

Good morning and good afternoon, everyone.

Welcome to Teva's first-quarter 2011 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 release is available on our website at www.TevaPharma.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; Dr.

Gerard Van Odijk, President and CEO of Teva Europe; and Professor Yitzhak Peterburg, Group Vice President, Global Branded Products.

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 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 2011.

During the first quarter, we enjoyed double-digit growth across the major financial parameters.

Net sales reached $4.1 billion, representing 12% growth over the first quarter of 2010.

Quarterly operating profit was $1.1 billion, with net income of $936 million.

This brought us to EPS of $1.04.

As you can see, these results are in line with the guidance we shared with you in February, that 2011 would build gradually.

We continue to expect that growth will accelerate in the second half of the year.

I would like to share with you the highlights of the first quarter, a quarter which I believe provides a good demonstration of the power of our balanced business model, our global presence and the successful initiative we took to expand our presence in high-growth markets.

Contributions from our branded and European businesses, as well as from Eastern Europe, Latin America and Asia, play exciting role in our long-term strategy.

In the US, generic sales totaled $952 million.

As you know, the comparable quarter, Q1 2010, was a particularly strong quarter where we benefited from new launches in sales of key products, such as the generic equivalents of Mirapex, Eloxatin, Protonix, Adderall XR and Lotrel, which were absent or diminished in the first quarter of 2011.

As expected, we had no major launches in the US during this first quarter.

In addition, quality issues in Irvine and Jerusalem led to a loss of approximately $100 million of sales versus 2010.

To be clear, we do not view the challenges we face in the US during the quarter as representing a trend, and in fact, we anticipate an improving trend for the balance of the year.

As you know, last month, we resumed production in Irvine, and I am very pleased to announce that on Monday, we released our first lot of Vincasar, which will be followed shortly by Zanosar.

These steps, along with others we are working on with the FDA Drug Shortage, will ultimately improve availability of Teva products for the US injectable market.

This is the beginning of a process which will take the remainder of the year to complete.

Furthermore, we submitted a complete response to the FDA's warning letter related to our all-solid-dose facility in Jerusalem, after we completed the required corrective actions.

We have requested that the FDA reinspect this facility.

Quality in Teva is Teva's number-one priority.

As CEO, it is my own top priority, and it is Teva's responsibility and it is our privilege to provide patients around the world with access to high-quality medications.

As you know, growing our generics business in Europe and high-growth generics market is a key element of our long-term strategy, and during the first quarter, our efforts in these regions bore fruit.

In fact, during the quarter, half of our generic sales came from these regions.

In Europe, the acquisition and successful integration of ratiopharm and our [other] leadership position enabled us to grow our sales by 66%.

We grow organically in every key European market outside of Germany, with especially high double-digit growth in Spain, the UK and Italy.

Teva is the number one player in all of these markets, and poised for continued growth.

We also experienced very nice growth in France and Poland.

In Germany, sales declined in low teens on the back of price reforms that occurred in the second half of 2010.

Despite these anticipated reforms, Teva's performance was markedly stronger than the competition.

In terms of value, we narrowed the gap between Teva and the nearest competitor by six marketshare points, and we became the number one player in Germany by volume.

In addition, according to the preliminary results of the most recent AOK tender, Teva won 20% of the tender value, representing significant improvement over last year.

Given these results and our current momentum, we are optimistic about the second half of 2011 in Germany.

I would like to point out that excluding Germany, Teva achieved organic growth of 7% in Europe, and we believe that we are very well-positioned for growth in our European business in the second half of this year.

During the first quarter, we also made good progress in our Eastern European business.

For example, in Russia, we enjoyed record sales of generics, which increased by 52% over the first quarter of 2010.

Organic generic growth was 25%.

We also had a very good quarter in Latin America, another high-growth region where Teva has established a strong position.

We achieved organic growth of 16% over the first quarter of 2010.

In Mexico, we grew by 20%, and in Argentina by 29%.

Now, for the first time, I would like to discuss the progress we are making in Asia.

In Japan, the world's second-largest pharmaceutical market, we enjoyed 29% growth in local currency, or 43% in US dollars.

As you know, we regard Japan as a key growth driver, and we will continue to invest in building this important business.

To conclude my review of the highlights of our generics business, TAPI, Teva's API business, grew third-party sales by 32% over the first quarter of 2010.

As you can see, Teva's global generics platform is enjoying growth in the high double digit, and we believe that in line with our long-term strategy growth, we will continue to see strong growth in these markets.

Turning now to our branded business, let's start with our respiratory franchise, which grew by 19% globally.

In the US, our respiratory brands performed very well, with ProAir and Qvar solidifying their number one and number two positions in their respective markets.

ProAir crossed the 50% mark in [PRx] marketshare, an increase of two share points in the first quarter.

Qvar reached 22% [PRx] marketshare during the quarter, up more than three share points over Q1 2010.

In addition, we are on track to file our nasal BDP HFA, formerly known as Qnaze, with the FDA this quarter.

Sales of our respiratory products were especially strong in Europe, growing by 46% over the first quarter of 2010 and driven by strong sales of Qvar.

Let's turn now to Azilect, in-market sales of which grew by 16% over the first quarter of 2010.

Total prescriptions of Azilect grew by more than 22%, and Azilect now is the leading branded product to treat Parkinson's disease in the US market.

Finally, Copaxone.

Copaxone continues to be the global leader among MS therapies, as its thick efficacy and its proven safety and tolerability profile continue to make it the first choice of physicians.

Copaxone global market share increased to 31%.

In-market sales of Copaxone grew 14% over the first quarter of 2010 to reach $907 million, outpacing the market growth of 9%.

Copaxone's share of [Pox] in the US was over 40%.

The first quarter of 2011 has been an active one for Teva in terms of business development.

Last month, we announced a joint venture with Procter & Gamble that we expect will make us the leader in consumer health care.

This unique alliance will enable Teva to participate in all three categories of pharmaceuticals care -- branded, generics and OTC.

And of course, our planned acquisition of Cephalon will confirm our branded business and will enable us to fulfill the second pillar of our long-term strategy, to expand our branded business into a diverse Specialty Pharmacy business and become a leading player in this area.

Before I turn the call over to Eyal, I would like to reiterate our guidance for 2011, which of course does not take into account Cephalon or any other acquisitions.

We continue to forecast sales to be in the range of $18.5 billion to $19 billion, and EPS in the range of $4.90 to $5.20.

We had a solid start to the year, and I would like to remind everyone that we continue to expect the second half of 2011 to be significantly stronger than the first half.

Thank you very much for your attention, and now let's turn the call over to Eyal for a deeper financial review of the quarter.

Eyal.

Thank you, Shlomo, and good day to everyone.

I hope you have had the opportunity to review the press release, which we issued earlier this morning.

We reported a solid first quarter for the year.

Results for the most part, both the positive and negative, were in line with our expectations.

Despite the many challenges of the quarter, including the lack of significant new generic launches in the US, we delivered double-digit growth in sales, non-GAAP operating profit, net income and earnings per share.

We continued to generate strong cash flow, with cash flow from operations of $900 million and free cash flow of $513 million.

Before I 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 purchased intangible assets amounting to $158 million, of which $151 million are included in COGS, cost of goods sold, and the remaining $7 million in selling and marketing expenses.

I would like to remind you that we started recording amortization of ratiopharm intangibles this quarter.

An inventory stepup of $10 million relating to the acquisition of Theramex and Infarmasa.

Costs related to regulatory action taken in [facilities] of $50 million, related primarily to the remediation of quality issues in Irvine.

Restructuring and acquisition expense of $22 million, related primarily to the acquisition of ratiopharm.

Impairment of assets of $11 million, mostly intangible assets related to the acquisition of Barr.

These expenses were offset by income of $4 million in connection from a provision for legal settlement and a related tax effect of $72 million.

You should note that the items excluded in arriving at our non-GAAP results for the first quarter of 2010 are not identical to those in the current quarter.

Please review our press release and related tables for a reconciliation of our GAAP numbers and more complete information.

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

Second, foreign currencies, which played a minor role in our profit and loss result this quarter, with a greater influence on our balance sheet.

In the first quarter, foreign currency differences had a small positive impact of approximately $27 million on sales and $7 million on operating income as compared to Q1 2010.

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

Foreign currencies also had a positive impact on our equity.

The weakness of the US dollar on March 31, primarily relative to the euro, increased our equity by approximately $940 million compared to December 31, 2010.

Looking at our consolidated results for Q1, sales totaled $4.1 billion, an increase of 12% compared to Q1 last year.

Sales in North America declined 11% due to weaker generic sales in the US.

US generics had a particularly soft quarter, primarily because several products that were major contributors to sales in the comparable quarter in 2010 had little or no sales this quarter, and this was one of those quarters in which we had no major launches to offset this.

But as we said when we gave our guidance last quarter, we expect US generics to grow above this level in each of the next three quarters.

Europe grew 66%, mainly due to consolidation of ratiopharm's results.

But it is important to note that we saw real organic growth in Europe on an organic basis as well; in other words, calculated as if ratiopharm and Theramex as being part of Teva already in Q1 2010.

This is pro forma calculation.

Total sales in Europe grew organically by 3%, while sales excluding Germany grew 7%.

Given the price reforms in Germany in the second half of 2010, our performance was markedly stronger than the competition.

We reduced the market share gap with the number one player on a pro forma basis from almost 10% in Q1 2010 to just over 4% in this quarter, and we believe that Germany will resume its contribution to European growth in the second half of this year.

Europe is a tough and dynamic market which provides great opportunities as our market leadership and our competence at managing complexity give us a real competitive advantage in Europe.

Sales in our emerging markets, Eastern Europe, Middle East and Africa, Latin America and Asia, grew by 26%, with significant growth in key markets such as Russia, with 25% organic growth for generic sales, Mexico 20%, and Japan 29% growth, all in local currencies.

As a result, our sales are now significantly more diversified geographically, with North America accounting for 51% of sales, Europe for 33% and Eastern Europe, Middle East, Africa, Latin America and Asia combined for 16% of sales.

Non-GAAP operating income reached $1.1 billion, up 11% compared to Q1 2010, and benefited from strong gross margin, tight expense control and the takeback of Copaxone royalty on North America sales from sanofi.

Non-GAAP net income reached $936 million, up 13% compared to Q1 2010.

Non-GAAP fully-diluted earnings per share were at $1.04, up 14% compared to Q1 2010.

The weighted average share count for the fully-diluted non-GAAP earnings per share was 902 million shares.

As a result of the early redemption of the 1.75% convertible debentures, we had no addback this quarter, and this also reduced our share count by an additional 15 million shares.

Now let's discuss profit margins and operating expenses.

Non-GAAP gross profit margin, which excludes amortization of purchased intangible assets, inventory stepup and costs related to regulatory action taken in facilities, was 58.8% in the reported quarter compared to 58.4% in the quarter last year.

Non-GAAP operating margin reached 27.3%, similar to the 27.4% recorded in Q1 2010.

Net R&D expenses were up 15% compared to Q1 2010, totaling $239 million, or 5.9% of sales.

The growth in net R&D expenses over the comparable quarter last year is attributable primarily to greater investment in our branded R&D.

Gross R&D, which excludes participation of third parties, was 265 -- sorry -- which includes participation of third parties -- was $265 million, or 6.5% of total sales.

Selling and marketing expenses, excluding amortization of purchased intangible assets, totaled $825 million this quarter, or 20.2% of sales, compared with 20.4% of sales in Q1 2010.

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

Also by a higher royalty payment in connection with certain generic products sold in the US and by the addition of ratiopharm's branded generic business.

Total G&A expenses this quarter were $221 million, or 5.4% of sales, compared with 5% of sales last year.

We recorded $38 million of net financial expenses in Q1 2010 compared with $27 million in the comparable quarter of 2010.

The increase in net financial expense resulted primarily from higher interest expenses due to the debt incurred to finance the ratiopharm acquisition and, to a lesser degree, expenses incurred in connection with [hedging] activity.

The non-GAAP tax provision for the first quarter was $121 million of pretax non-GAAP income of approximately $1.1 billion.

Our current estimate of the non-GAAP annual tax rate for 2011 is 11% compared to 13% for 2010.

The low non-GAAP tax rate for 2011 resulted from a particular mix of products that are manufactured in geographies where Teva benefits from tax incentives.

This is not a rate we currently expect in 2012 and beyond.

The estimated tax rate for 2011 GAAP results is 6%.

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

Cash generated from operations this quarter totaled $900 million, up 2% compared to Q1 2010.

Our free cash flow, excluding gross capital expenditures of $234 million and dividend payments of $203 million, partially offset by proceeds from the sale of certain assets of $50 million, amounted to $513 million.

Free cash flow was influenced by payments on account of the ratiopharm integration program accrued in previous quarter, couple by a higher dividend payment following the dividend increase we declared in February and higher capital expenses.

During the quarter, we bought back approximately 7.9 million shares at an average price of $50.41 per share for a total of $400 million.

Since we started this buyback program, which our Board approved in December, 2010, we bought 9.8 million shares for a total of $500 million, reflecting an average price of $50.54 per share.

Let me remind you that we did not buy shares during Teva's blackout period, which started on March 22 and ends tomorrow.

At March 31, cash and marketable securities totaled $1.1 billion, down approximately $500 million from December 31, as we used to cash in the quarter to pay for the acquisitions of Theramex and Infarmasa, as well as to repurchase shares and continue to pay down our debt.

Our total outstanding loan, bonds and convertible debentures stood at $6.8 billion, and financial leverage as of March 31 was 23%, slightly down from 24% at the end of December.

DSO, days sales outstanding, improved to 46 days this quarter compared to 53 days in Q1 2010.

We calculate DSO after netting out from the receivables our sales reserves and allowances.

Inventory days stood at 195 days, up from 180 days in previous quarter, or 183 in Q1 2010, due mainly to foreign exchange differences.

Net capital expenditure reached $184 million this quarter compared to $208 million in Q4 2010, as we continued to invest in production capacity.

Dividend, Teva Board approved its quarterly net dividend amounting to approximately $207 million.

On a per-share basis, our dividend, which is declared in Israeli Shekel, is 0.8 shekels per share.

Based on the rate of exchange on Monday -- on May 10, 2011 of the Shekel to the US dollar, this translates into approximately $0.232 per share.

Thank you all for your time and attention today.

And now we will be glad to take your questions.

(Operator Instructions) Louise Chen, Collins Stewart.

The first question I had was with respect to Copaxone and Lovenox.

I wanted to understand how you would weigh your options with respect to what you could do with these products.

And are there any circumstances where you would consider settling with Momenta for these drugs, just because there has been a lot of discussion about that?

Bill will take it.

Sure, sure.

Good morning, Louise.

How are you?

Just wanted to let you know on the Momenta -- I should clear this up.

There have been and there are no settlement discussions at this time.

We are really enthusiastic about our case, and we look forward to the upcoming trial.

With respect to Lovenox, our Lovenox file is alive and well, but as you know, we are not going to comment further on it until such time that we get the approval.

Okay.

And then my follow-up question is just on generic competition for Copaxone in the EU.

Can you remind us also when you are going to get rights back from sanofi in the EU and the P&L impact of that?

The take-back on generic competition --

Generic competition EU, (inaudible).

We don't have -- while in the UK, you know what is happening in the EU, we don't feel there is any immediate threat to what we do in Copaxone.

There is one company that is moving forward with this, and we think that based on comparison on the -- what they are trying to do, we don't think it is really [a case].

Randall Stanicky, Goldman Sachs.

Eyal, just on the earnings progression into 2Q, just so there is no confusion this quarter, how should we think about that trajectory going forward?

How should we think about what?

Can you repeat the question?

How should we think about 2Q EPS progression going forward.

just so that there is no confusion in terms of the progression and trajectory throughout the rest of the year?

Okay, got you.

I will just remind -- we don't provide specific quarterly guidance.

However, we said very clearly at the beginning of the year we will provide guidance for the year, and so far I think we are on track, that the first half will be slower than the second half.

I think we said approximately 40% of EPS will come in the first half, and we definitely see it this way.

Second half, we will see major improvement, and we will see that in all parts of the business.

And I think that there is no change to what we have guided originally.

Okay, so just so that we are clear -- we should be looking, by that math, at a 2Q that is similar to 1Q.

Would that be a fair statement?

That is -- on the buyback, we will probably continue with the buyback program that we have, buying when the market allows us.

But remember, the buyback -- in the current quarter, you have to average this, and you don't -- never have the full effect; the full effect would only be in the next quarter.

Okay.

And then a follow-up for Bill.

I heard you guys talk about $100 million impact from Irvine year-over-year.

But if we just look at the generic and other line in the North American number, it looks like -- if my math is right -- it was down $330 million -- sorry, $338 million sequentially.

Can you just help us understand what drove that sequential decline, understanding that you had a couple of facility issues and lack of generic launches?

But was there anything else in there that we should think about?

Yes, Randall.

Thanks for the question.

When you look at the year year-over-year, you were missing -- Mirapex, pramipexole, you're missing about $113 million.

Protonix or the [empanto], we lost about $93 million in top-line sales, Lotrel about $45 million, and the oxaliplatin or Eloxatin, about $44 million.

And then what is really beginning to be a hangover for us is the first Q1 mixed amphetamine salts, the Adderall XR, about $97 million over the year.

And of course, sequentially, in the second quarter, where we're not getting sales.

Now, we expect that to even out over the next couple of quarters, but as you know, the DEA has been having some issues with quota and that continues to be a drag.

Was there anything else, just thinking 4Q versus what you reported in 1Q, that would be driving that sequential downtick?

Or is there -- I'm just trying to think of -- it seems like a big number relative to the year-over-year impact.

Well, sure.

The fact that there is no launches.

And again, you don't -- we don't have quite the same amount of venla being shipped quarter to quarter.

We are in the latter half of the exclusivity; our customers are beginning to wind down their inventory.

So we had significantly less sales in venlafaxine.

Again, didn't pick up on our Adipex ER.

We had some of the issues with respect to Jerusalem, and about $53 million that we did not get from Irvine.

So when you add it all together, it pretty much hits your number.

Okay.

That's helpful.

Thanks, Bill.

David Amsellem, Piper Jaffray.

Just a couple.

Regarding Jerusalem, can you provide more color on the steps taken to address the FDA's issues?

And when you talk about the slowdown in that facility, can you quantify what the impact is and how that will impact the P&L as the year progresses?

With respect to Jerusalem, I think Shlomo's laid it out fairly well.

But let me say that our laboratories have been fully remediated.

We've gone through them and they have been certified, and they are back online.

It did create a slowdown for us, but we have addressed all issues and are very excited about asking the -- we have, in fact, asked the FDA to come back in, and we are looking forward to a reinspection.

So we are getting back on an even path.

What we don't know at this point in time is we've had no approvals from Jerusalem, although we've had none to have yet this year.

We would like to get that reinspection in so that we can get approvals.

We assume at that point in time, approvals from Jerusalem will continue.

Okay, and then a question on the Cephalon transaction, regarding the synergy target.

Given that Cephalon had near $1.5 billion in operating expenses, a product portfolio that is maturing on the whole, is it possible -- conceivable that the $500 million synergy target is conservative, and also that the year three timing is also conservative?

First of all, we believe it is very possible by year three.

We have mapped as much as we had at the time, and we had time to do a pretty thorough due diligence on the Cephalon expense structure.

And we can clearly see us integrating company in an efficient way and extracting synergies of $500 million at least by the third year following the acquisition.

And that is after we assume that we keep the product portfolio, without closing any major R&D projects.

It is mostly on the G&A side, we integrate two companies, and eliminating the expenses of the public company.

The generic piece in Europe, the (inaudible) part, which will be fully integrated with our European generic activities and activities outside.

Sales and marketing, combined with our sales and marketing forces both in Europe and in the US, which we have a nice sales team.

And all that leads us to believe that the 500 is a very, very reasonable assumption, even on the careful side.

Just as a quick follow-up, what is the extent to which you are going to downsize the Cephalon US sales force?

I mean, how much of that infrastructure do you think you can pare back?

David, we're not going to go into that level of detail at this point in time.

Remember, we just announced the purchase.

But we've looked at the synergies, we're pretty confident there.

And I would always remind that, I think as Shlomo has well said before, when we think about synergies, the synergies aren't necessarily just on Cephalon's side.

When you think about what we've done in Europe with Ratio and that ratiopharm largely became our back end in Europe and that Teva became the front end, the synergies can come on both sides.

So we are very confident on the synergy side.

It is a great company.

We are very excited about getting it, and we think we got it at a very reasonable price for both the Cephalon shareholders and, of course, for our shareholders.

If I may add on that, David, you should bear in mind that Teva has a very long history -- a successful history of integrating companies in a very successful way.

Usually, we are conservative when it comes to how much synergies we are going to drive out of any acquisition, and usually we are exceeding the number that we are providing in the announcement.

I know that this is a different kind of acquisition, but I would like to remind you that we have been there, we already integrated the respiratory product when we bought IVAX.

We integrated the women's health business when we integrated Barr.

And we have a $4.5 billion business in branded business.

So we know something on that as well.

So we are fully confident that we will do the integration the right way, and we will generate at least the number that we told the market on synergies.

Okay.

Thanks.

Chris Schott, JPMorgan.

The first question was just looking at sales for the remainder of 2011.

I guess if we take the low end of your top-line guidance, it looks like you need to average about $4.8 billion of quarterly revenue.

That is $700 million higher than you just put up.

Can you just elaborate a little bit more on the drivers that we should think about to see that type of sales acceleration, and just how comfortable are you with your top-line range at this point?

Looking at where we are from now, I think we are very comfortable where we gave the guidance, as you have read it.

It is in the press release for the first time.

And we do see the US generic business recovering from the current Q1 level with some of the launches coming in the second half of the year, as we have already said.

Continued growth in Europe, and Europe is well-positioned for nice growth in Q2.

And definitely in the second half, as Germany will also contribute to the growth in Europe.

Our emerging-market business is going on or progressing very, very nicely.

So when we look at all the parts -- and definitely, the branded business is doing well; the API, although small, is doing well.

So when we look at all the pieces, we are pretty confident at that level.

That, of course, subject -- we said that -- subject to foreign exchange.

If the euro would reverse on the rate, that could have an impact on top line, but not so much on bottom line.

But as things look now, I think that guidance looks reasonable to us.

I just wanted to remind you that we still have Zyprexa coming for the back half of the year, products like Levaquin, Aricept, Nasacort.

There is a variety of products left to launch for the balance of the year in the US market.

Okay, great.

And just as a kind of follow-up, as we are talking about guidance -- and I know you've talked a little bit about this -- but can you comment on your 2012 targets and how the Ceph deal impacts that guidance, especially top line?

I guess what I'm looking at here is adding Cephalon to your 2011 range, I mean, it basically implies not a whole lot of organic growth going on here.

So I just was trying to -- was just wanting to hear your latest thoughts about how 2012 is looking at this point.

One thing that we've done on 2012, you remember, last year we provided guidance and we believe that this [guidance is] definitely in place.

Probably will be (inaudible) to get to the 2012 summary and numbers.

At that time, we will have more details on how Cephalon really integrates within our business, and we will provide more detail.

But right now, what we have provided originally a year ago -- or a little more than a year ago -- on 2012 definitely holds, and we will reserve the right to go back to that later on this year.

Thanks.

Shibani Malhotra, RBC Capital Markets.

Thanks for taking the question.

I just wanted to follow up on Chris's question.

I know you don't want to give us details on 2012 guidance.

But qualitatively, what -- I guess which segments of Teva's business do you see organic growth coming from in 2012 or even later half of this year?

And then separately, does your guidance for 2012 assume further acquisitions, or could we pretty much get to the range with just Cephalon alone?

Thanks.

First of all, you may expect us to grow significantly all the areas that I mentioned in my part, i.e.

in Europe, where I believe that what I guided you for the long term, we may see -- and again, this is not a forecast for 2011; it is just looking for the long-range time -- an organic growth at the level of 7% to 9%.

And I believe it will be in this number this year.

I do believe that in Eastern European, Latin America, Asia, you may expect high double-digit numbers, as this quarter presented in a very nice way.

And so all in all, from the generic parts, and of course the US has been -- just jumped in (inaudible) -- just remind the audience on the coming launches in North America in the second part of the year.

So all in all, there is a -- that is what you should expect for 2012 as well.

We are not referring today for potential next-year launches, but that will be taken care in a different time.

In addition to that, definitely our latest announced acquisition, Cephalon, will bring us very significant addition to our sales.

I believe there is a potential there to grow sales in a very nice way.

You usually don't speak on sales synergies, but I believe that we have a proven track record that we know how to do that as well, and definitely this time we are going to do it in the branded part.

So all in all, I am very optimistic about 2012.

Back to your question.

Okay.

So can you confirm you are not assuming additional acquisitions in your '12 guidance?

And then just a follow-up on potential new product launches at the end of this year or early 2012.

Any of those dependent on the Jerusalem facility passing reinspection?

First of all, let me be clear -- and I think I said it -- regarding 2011, the guidance is not including any acquisitions.

As for the future, I think that I would like to leave that when we will be there, and I don't want to comment on any future potential acquisitions.

When we do the acquisition, we will of course do the necessary update or change in guidance as is necessary due to the kind of the acquisition that we are going to have in the future.

And for the second part of your question, Bill would like to take this one about future launches.

Yes, with respect to the future launches, I think the only ones we are really talking about for the US market right now are the Zyprexa, which you all know, and it should happen in the back half of the year, as well as Levaquin, donepezil, Aricept and the Nasacort HQ, to just name a few.

Okay.

Great.

Thanks.

Marc Goodman, UBS.

Could you tell us what your current expectations are for Irvine sales for the full year?

And second, can you help us understand this consolidation impact of Japan?

What was the impact in the quarter and how should we expect that to impact for the full year?

Bill, you take the first one, and then Eyal will take the Japan part.

The impact from Irvine -- or actually the future sales from Irvine are quite minimal, Marc, moving forward.

We should get to about $100 million run rate.

That is a run rate -- by the end of the year.

We just started to ship the Vincasar and the Zanosar.

We are hopefully going to be shipping sometime over the weekend.

It is product by product, working hand-in-hand with the Agency.

So I really wish I could tell you more than that, but we are shipping what the Agency Drug Shortage is asking us to ship first.

And that is why we are bringing up the lines the way we are.

It is really a hand-to-hand process with FDA.

And so it is really -- I have to be a bit vague at this point in time.

However, we should be up to that $100 million run rate by the end of the year.

Regarding Japan, the business there, we consolidate today a little over 50% of our sales, just a few tens of millions of dollars impact.

Hopefully one day, we will be able to consolidate everything, but right now it is just not possible.

And just one other question.

You had mentioned earlier that there was a slowdown in Jerusalem as you were trying to fix some of the issues.

How much sales do you think that cost you in the quarter?

Shlomo had put that in his speech; that was about $55 million that cost us for the quarter.

Thank you.

Ken Cacciatore, Cowen and Company.

Thanks.

And Bill, this question is not meant to annoy you in any way, so just -- I wanted to ask, on the settlement, Louise asked you a question about potential settlement.

So I just wanted to ask you, have you been approached -- and this next part of the question may be naive -- but what would be a reason why you all wouldn't just compare terms -- not reach a settlement, but just compare terms to see if anyone is on the same page with each other?

And then just lastly for my question, on BG-12, could you just describe what you all meant in your press release when you indicated that there may be different definitions of endpoints between BG-12, Laquinimod and other studies?

Thank you.

Bill, you take this first and then Dr.

Peterburg the second one on BG.

Thanks for the question, Ken, and I'm not annoyed.

But there haven't been any discussions.

So really at this point in time, there have been no discussions.

So I guess there is no way to compare notes since there have been no discussions.

So that is the simple answer.

We are enthusiastic about our case and we look forward to putting on a trial later part of the year.

So that is where we remain on that.

So I will let Dr.

Peterburg take the second part of the question.

So regarding BG-12, there isn't anything I want to reiterate.

You know that in the absence of (inaudible), it is -- and we are saying it each time -- it is very strongly advised not to compare between the clinical 12.

And so we know there are differences.

There are differences that were on the primary endpoints between what we are looking and they were looking.

There is a difference in the changing MS baseline patient population and even on the definition of EDSS.

But at the end, you know, it is coming back to the same issues that we say.

We have a wonderful product, we really believe in it, we think it will (inaudible) the four pillars that are in total for any MS oral.

And we think that based on that, we are looking forward, after opening -- you know that we need still to look into Q3 and (inaudible) the double result at that time, and we are sure that we'll have a very good product (inaudible).

Ronny Gal, Bernstein.

Good morning, and thank you for taking my question.

I actually have three of those.

First, for Yitzhak Peterburg.

Yitzhak, I am almost certain that you guys went back and recalculated the Laquinimod results using the endpoints as defined -- the primary endpoint that was defined for BG-12; that is, time to first relapse as they define it.

I was wondering if you wouldn't mind sharing that number with us.

Second, to Bill.

Bill, you guys are coming back to the market in the US or increasing your manufacturing capability.

Apotheek has just announced they can now ship back product to the United States.

There has been some stability in the market for a while, but are we really going to start facing more pricing pressure as two fairly large manufacturers come to the market?

And third, on the biogenerics, I'm not quite sure -- biosimilars, I'm not sure who is going to take it.

My understanding is there's a very nice uptick with G-CSF in Europe.

Can you confirm that and perhaps give us an idea about the run rate for the numbers there?

And can you confirm that you will be in the market by the end of 2013 on both your primary -- your first-generation G-CSF, as well as the albumin-aided competitor to Neulasta?

You know, I would love to go back and do all these calculations, but first of all, I need to understand exactly what the competitors are doing.

You know the small issue of the way (inaudible), it is [masks] everything and we cannot [announce] anything to ourselves.

So I can only say again and again, we are waiting for (inaudible); it's in another several months.

We are sure that (inaudible) we will have what we think a very good product and we are -- (inaudible) the most value will have product with a new mechanism of (inaudible) that could (inaudible).

And most probably (inaudible) the most important thing that now we are going to make.

It is -- the question of how to get patients out of the (technical difficulty), let them go into it.

So it is not enough information.

We would love to hear more information about our competitors, but most probably there is (inaudible) we don't know all the information about it.

With respect to the Apotheek question, it's an open question.

They are going to come back to the market.

It was a complete import ban, so I think they are going to probably come back to the market in some sort of orderly way.

And I think the progress will be slow.

I don't think customers will flock to them.

And they are going to come back to our product.

But I would remind that only a small part of our product was really affected.

There was a slowdown; there was not an import ban on our product.

So I think that customers will be cautious as Apotheek moves back into the market.

I don't expect that price stability is going to be immediately upset.

What was the third question regarding the G-CSF?

I had a two-part.

First on -- and idea about the run rate in Europe.

My guess is that you've taken -- at least based on the numbers I saw -- the leadership on G-CSF in Europe.

Very quickly, can you comment about the run rate and how much did that influence the European growth this year, year-over-year?

And in the United States, can you confirm you expect to be in the market at the latest by the time the composition of (inaudible) patent expires on both Neupogen and the albumin-aided G-CSF?

Gerard will take the European part and be followed by Bill on the US.

Thank you, Ronnie, for G-CSF question.

Yes, we've seen gradually increasing penetration across Europe of G-CSF.

(inaudible) slow within the classical generics, you can imagine.

We see tender business across Europe, and even in the tenders, it is taking some time to get penetrated.

Still doctors need to prescribe actively.

The business is nicely growing, and I think it is more than doubled year-on-year.

But it is still a small number.

So if you would like me to give you an indication on whether or not that has been the driver for our performance in Europe, the numbers are simply too small for our overall business to really move the dial.

So it is moving in the right direction.

It is moving slower, perhaps, in terms of penetration than one would have thought, but it's moving in the right direction across Europe, [but] a big number.

On the second part, there is -- the two G-CSFs, of course, are the regular G-CSF, which we call Neutroval, and that name will likely have to change.

That product, we have a complete response letter.

We hope to respond to that in the third quarter and be in a position to launch that in 2013.

We also hope that by the end of this year -- and hope and anticipate that we will be able to file our albumin-fused G-CSF in the US by the fourth quarter of this year, putting us in a position, potentially, if all goes well, to be in market with both products in 2013.

Great.

Thank you very much, guys.

David Maris, Credit Agricole.

You've been on the road the last couple weeks post the Cephalon deal.

And when you go on the road, all of us get the questions -- do you believe they said this and what do you think of that.

So I want to turn it around a little bit and ask you, especially in light of where the stock price is, after you go on a road show like this, what are the takeaways or the concerns that you are hearing from investors?

And does it cause you to think about doing anything differently, either message-wise, management-wise, strategy-wise?

Or do you just say, well, look, we are executing on how we've always executed and the stock goes up, the stock goes down -- this just happens to be an out of sync period?

Thanks.

Let me start, and then Shlomo would like to add a few things.

First of all, if you are asking if we take it for granted, our stock movement, no, we don't.

We believe -- I don't want this to sound as a business cliche, but our major role is to create value for shareholders.

And as a public company, there is one way to measure this value.

And when we get on the road and we meet with investors, we want -- what we want to do is to make them understand the Teva business model, the short and the long.

The strategic direction that we are taking, why we are taking the steps that we are taking, what is the value and how we believe this is going to -- and these steps are going to impact the Teva share value.

We never talk about share price.

I don't think it is our role.

The audience of this call has better understanding in share prices.

We talk about the business, but we don't ignore the fact that our share is traded out there, and it is our responsibility to make sure that more of you believe that there is a great opportunity in Teva shares we do, and would buy the share to benefit from future fruits.

Shlomo, do you want to add?

Let me try to answer your very --

Sophisticated question.

-- different kind of question.

First of all, I think the first feedback we got from the market, that they think that we did the right move on with this acquisition.

Some of them -- or some of your colleagues wanted to get more understanding on the strategic background of this acquisition, and we provided -- actually, we reiterate what we shared with you last year, when we explained our strategy, that this is about diversifying our business as we grow to the future.

We took one step when we did the move in Europe, and we are doing right now the second step, which is taking care for diversifying our branded business.

As a company that believes in growth and when we look into our future when we would like to maintain our growth and even to increase the pace, that was the true concern, that we had to make sure that we are taking care for that going to the future.

And I think that as the ratiopharm, that we just proudly exclaim how well it has been integrated and how we can see the first fruits off of this move, I do believe that we're going to see the same from the Cephalon integration.

Second concern that we got was around whether we are able to generate the level of synergies at the 500, and whether we are able to integrate a different kind of a business.

Everybody understands our track record in generics.

Some of them questioning our capability or ability to do it with an innovative company.

Here, I have to tell you, first of all, that only time will tell.

But I have to share with you also that we have the full confidence that we can do it and we can do it successfully.

We did partially these kind of things in the past.

We have a long track record of doing integration in a different kind of way, and that is why we are so successful in doing integrations.

We have the skills, we have the capabilities, and we will do it together with Cephalon.

And that is the recipe for successful integration.

So we are confident and we are looking forward for another successful move in Teva.

And that is basically, as I said, what we think and how we shared it with your colleagues in our road show, as you mentioned it, last week or the weeks before.

And that basically were the major takeaways of this short road show that we have done.

All right.

Thank you very much.

David Risinger, Morgan Stanley.

Hi, this is Chris Caponetti for Dave Risinger.

I have three questions, very brief.

First, what is your conviction level in the Jerusalem facility issues being behind you very soon?

Two, do you expect Germany to return to constant currency growth in the second half due to the recent tender wins?

And finally, what should investors be assuming for the fully-diluted share count in the second quarter and later this year, given that you still have $500 million left on the buyback?

Thank you.

Okay, let me take first your first question, and then Gerard will answer the European questions, to be followed by Eyal on the last question on the shares.

To answer your question on Jerusalem in a simple way, I believe it is behind us.

We of course have to wait until the FDA officially comes to do the requested reinspection.

But to be very simple and very clear, I think we did all the corrective actions that I think we had to do and I think this is behind us.

Gerard.

Yes, thank you, Chris.

Well, I think we were very happy with the Q1 in Europe, and it was across Europe true, and there were basically no surprises as far as the German market is concerned.

You heard about our growth year-on-year.

It is very nice to also announce that our profitability went even further up; it quadrupled over the same quarter across Europe.

So we had a wonderful quarter as far as that is concerned.

Germany was no surprise for us.

We planned for that, we planned for that when we announced the ratiopharm deal, we planned for that when we announced our plans for the year.

Because we knew that on the back of price reforms last year in Germany, there would be a decline of the marketplace in the first six to seven, eight months of the year.

And that is happening as we speak.

Our decline, which is in the low teens, is about half of the decline that was reported by the number one player in the German market.

So relatively, we did very well.

We became number one by volume and we are on track to become number one by value, if you look at the current trends that we see in the market.

And as Shlomo already alluded to, we are closing the gap quickly year-on-year.

So we know where we are going and we expect the German market to really come back to growth in the second half of the year.

The second reason was -- so the market itself will recover, simply because you see an exhaustion of some of the measures that were taken in last year.

The second reason why we are optimistic is because the ingredients that we have in place, the revitalization, if I may say, of the dynamics around the ratiopharm company.

Since they were, let's say, unleashed out of the selling process, we really see a reenergized group of people that are going after the wins in the German market; that's one.

The second point is, of course, the AOK tender win that we did very well this time still needs to be implemented, but we believe it will help us tremendously in making a strategic position cemented on the shelves with every single pharmacy in Germany.

And you can build on the back of that business as well.

So, we believe it should and can happen and it will happen.

We have got all our ducks in a row to do so, so we are optimistic about Germany.

On the share count -- this is Eyal -- since this buyback is actually impacting in a weighted average, then you don't get the full impact in the quarter when you buy the shares.

So -- and we also have to make assumption of how many shares we will buy in Q2, which is not -- which is never a final decision.

(inaudible) that, I assume have seen that anywhere between 895 million to 897 million shares would be a good number on the share count.

So it's about 5 -- at least 5 million shares less than the 902 million we had at the end of Q1.

897 million will probably be a safe number.

Great.

Thanks very much.

Frank Pinkerton, SunTrust.

Thank you for taking the question, if I can ask one and then follow up later.

The first one is on multiple sclerosis, and just generally in that category, as we are seeing more and more products come to market but price increases being taken, how does Teva ultimately look at managed care in that market?

And with more products coming, should some of the older-generation products ultimately be at a discount or does managed care have any way to kind of control pricing for some of those therapies?

And then a follow-up, please.

Frank, this is Bill Marth.

You know, I think the key in the MS market right now is those patients treated versus non-treated and where the orals are having an impact here.

There is about 250,000 -- approximately 250,000 people that are treated and about 250,000 people that are, for one reason or another -- either needle phobic, in denial, have failed on other therapies -- and just aren't in treatment paradigms today.

And I think that those individuals, of course, are where the orals are likely to have an impact.

Managed care at this point in time has had very little impact with respect to treatment paradigm with Copaxone or versus with any multiple sclerosis therapy.

But over time, I think as the treatment options open up, there may be more pressure for prices to be somewhat mitigated.

So in any case, I think right now the real trend is to get more patients into the treatment paradigm.

Great.

And then just as a follow-up, with the Cephalon acquisition, assuming that closes -- kind of two parts.

Number one, would Teva go to reporting segments, say, branded versus generic or something once that acquisition closes, given the size of the brand division at that point?

And then number two, can you just make any comments related to -- from a management standpoint, given that branded will be much larger, how does Teva feel about the management in place or does there need to be a bolstering in management for the branded division?

Thank you.

Okay, on the accounting questions, this has not been determined yet.

We need to give it a close look and determine based on segment reporting.

Right now, we don't think that we have to, but we need to look at it.

And as for the management -- this is Shlomo, Frank -- I think that, first of all, as I pointed out when we announced the Cephalon acquisition, one of the major reasons that we were so attracted by the Cephalon is the Cephalon people or the Cephalon team.

We believe that they have an excellent management team, with a proven track record of bringing a product to the market.

And we definitely, as we did always, we are going to take the best in breeds and to make decisions by marriage, and I believe that that will make part of the Cephalon -- or Cephalon will definitely help us to beef up the management that we need in order to have a successful leading specialty pharma business.

So we are optimistic and confident that together with the Teva people and the Cephalon great team, we will make it a great management that will take us to where we believe we are going to be.

Elliot Wilbur, Needham & Company.

Thank you, good morning.

Just a couple of Copaxone-related questions.

First, on the O-US performance in the quarter, how much of that was related to sort of one-time bids, one-time tenders?

I know last year we saw a very strong performance of first-quarter ex-US and then it tapered off the next couple of quarters.

So I'm just trying to get a sense how much of that may be sustainable versus more of a one-time effect, this particular period?

And then, if you could, just remind us of sort of the timing of and current structure of the Copaxone ex-US royalty agreement and how that is going to impact the P&L.

And then for Bill, probably will be a couple months before we hear from you guys again, and I think in this time frame, there is an action [a] pending on your latest iteration of a citizen's petition regarding Copaxone and basically criteria for any potential ANDA applications.

And I'm wondering if just basically you think we should expect a repeat performance of what the FDA has done in the previous two occasions, which is basically to say simply can't grant you what you are asking, and move on from there.

Yes, it's Bill Marth.

How about if we start with the last first and then we will flip back to AL.

I think that -- and your question about the ex-US and the tender business.

Our Copaxone business ex-US was fairly flat this quarter, and there was very little tender action.

With respect to the citizen's petition, I think you got it about right.

It is our anticipation at this point in time that we are likely to get that citizen's petition pretty much handed back to us without any activity on it, as we do not believe there is anyone close to approval at this point in time.

And I think the last part, Eyal (multiple speakers).

(inaudible) the takeback in Europe, it is mostly European countries.

This is -- the major -- the only major country currently that we took back from sanofi is the UK.

Gerard will correct me if I am wrong.

He is nodding with his head.

And the rest of the major market between the second half of this year and 2011, I think Germany is the [fourth] quarter.

And basically, it will have a positive impact both on sales, a little less than that on profit, but (inaudible) on profit.

As you have seen in our recent filing, there is a 6% royalty associated with that, so it is not a free lunch.

But will definitely give us some backwind on the top line and a little on the bottom line also, with the takeback -- until it is completed; it will be completed by the end of 2012.

Okay, but it's a pure revenue impact?

No impact on SG&A?

Yes, there is.

It's very similar on a smaller scale to what has happened when we took it from sanofi in the US, but it is smaller.

Overall, the total impact on revenue will probably be $150 million when we complete it.

We will deliver higher gross profit as a result of that and higher sales and marketing, because we will be doing it ourselves.

Overall, to the bottom line from those numbers, maybe half will stay at the bottom line or a little less than that, after the royalties and the sales and marketing expenses that we will have to fund ourselves.

Thank you.

Ladies and gentlemen, we do not have any more time for questions.

I will now turn the conference back to Mr.

Shlomo Yanai for closing remarks.

Thank you.

Thank you, Diego, and thank you all for being with us today.

As you have heard, we took significant steps during this quarter to deliver on our long-term objectives, and we are looking forward to a significantly stronger second half of the year.

And again, thank you all for being with us today.

Thank you.

This concludes today's conference.

All parties may now disconnect.