Teva Pharmaceutical Industries Ltd (TEVA) 2014 Q1 法說會逐字稿

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  • Operator

  • Ladies and gentlemen, thank you all for standing by.

  • Welcome to the Teva Pharmaceutical Q1 earnings conference call.

  • My name is Amy and I will be the operator for today's call.

  • (Operator Instructions)

  • Please note that this conference is being recorded.

  • There is webcast available on Teva's website ir.tevapharm.com.

  • If you cannot connect to the webcast, copy of the slide deck is also available on the website.

  • I will turn the call over to Kevin Mannix, Vice President, Head of Global Investor Relations.

  • Kevin, you may now begin.

  • - VP, Head of Global IR

  • Thank you.

  • Good morning and good afternoon everyone.

  • Thank you for joining us for our call to discuss Teva's first-quarter 2014 financial results.

  • I'm joined today by our President and CEO, Erez Vigodman; our Chief Financial Officer, Eyal Desheh; and additional members of the Teva Executive Committee.

  • Erez will start with some brief opening remark, followed by Eyal, who will provide an overview of the highlights from the quarter.

  • Then Erez will spend some time discussing his perspectives on the business and immediate priorities for Teva.

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

  • Before we start, I'd like to remind you that our discussion during this conference call will include forward-looking statements.

  • Actual results could differ materially from those projected in the forward-looking statements.

  • Factors that could cause actual results to differ are discussed in Teva's report on Form 20-F and Form 6-K.

  • Also, we are presenting non-GAAP data, which excludes the amortization of purchased intangible assets, costs related to certain regulatory actions, inventory step-up, legal settlements, reserves, and impairment, and related tax effects.

  • These are amounts that we cannot predict at this point.

  • We present these non-GAAP figures to show you how the Management team and our Board of Directors look at our financial data.

  • With that, I will now turn the call over to Erez.

  • Erez, if you would, please.

  • - President & CEO

  • Thank you Kevin.

  • Good morning and good afternoon.

  • I am delighted to be here today as the CEO of Teva.

  • I could give you the [status] speech about what I am doing as a new CEO in developing a deeper understanding of the Company and how I will unveil a new strategy in the not-so-distant future.

  • Instead, I am going to share with you my key areas of focus in the short-term that will fix the foundation of Teva's core business, reorient our strategic direction, and ultimately solidify our position in the industry and return Teva to being a premier investment opportunity.

  • Before I do that, Eyal will review the quarter performance and touch briefly on our 2014 outlook, which we reaffirmed earlier this morning.

  • After Eyal is concluded, I will review with you how we plan to unlock additional value in our Business.

  • - CFO

  • Thank you, Erez.

  • Good morning and afternoon everyone.

  • I'm happy to provide a detailed business and financial review for the quarter.

  • As always, we are presenting most of our results on a non-GAAP basis, while our GAAP results appear in our quarterly press release as well as in the 6-K, which will be filed later today.

  • When we look at the highlights of the quarter, you can see that this was a solid quarter and a very good start for the entire year.

  • Most notable is the increase in net income and earnings per share of 8% and 9%, respectively, compared to last year.

  • We also had good cash flow generation this quarter, with a strong focus of cash.

  • The 2014 results do not include a $200 million payment following last year's settlement with Pfizer, as appear on this slide.

  • Moving on to slide number 6, regarding our guidance.

  • We are reaffirming our 2014 guidance.

  • Just as a reminder, we have two scenarios for 2014, depending on the outcome of Copaxone generic introduction.

  • Both scenarios are reaffirmed today.

  • Let's look at our revenue and revenue bridging.

  • The improvement of our sales this quarter was nicely split between the generic and the specialty businesses.

  • In generics, we experienced significant growth in the United States market, with 17% year-over-year growth to a total of $1 billion, with a number of new product launches.

  • However, part of the growth was offset by weaker sales in Eastern Europe due to an exceptionally warm winter and political instability in Russia and Ukraine; Japan, due to a weak yen and continued quality issues, which we are handling; and our API business, which suffered from production issue.

  • We believe that the second half of 2014 will show improved performance of these parts of our Business.

  • The specialty business continued to grow with Copaxone, which delivered another good quarter, even without a tender in Russia, which we believe will materialize in Q2.

  • We also see increase in sales of other CNS and oncology product, as you can see in the details in our press release.

  • The decline in OTC, the first since the formation of PGT [to] PGT joint venture was also impacted by the warm winter with very small cough and cold sales, as well as the conditions in Russia.

  • Let's look at profit by business segment on slide number 8. The profitability of our major business segment was driven by global generic, with 31% improvement resulting from the strong performance in the US market and higher profitability in Europe.

  • Profitability was affected by $51 million decline in Copaxone profit, despite a small increase in sales, as we invested a lot in the successful launch of the 40-milligram product.

  • While we look at our overall non-GAAP income data, our non-GAAP P&L demonstrates a healthy gross margin.

  • We increased R&D expenses as we continued to invest in the development of generic and specialty pipeline.

  • This is resulting in the growing number of launches this year.

  • Our effective tax rate is up to 18.7%, mostly due to the expiration last year of tax incentives in Israel and an increase in the local tax rate.

  • Our fully diluted share count for the quarter benefited from share buyback conducted early last year, which was partially offset by an increase resulting from higher share price during the quarter, which cause many stock option to enter the money and become part of [said] fully diluted share count.

  • When I will look at slide number 10, the non-GAAP reconciliation, what you can see that our GAAP earning per share at the bottom of this slide was $0.87 and grew by 18% from Q1 last year.

  • Please look at the list of non-GAAP adjustments consisting mostly of amortization expenses.

  • In the next slide, you can view the GAAP income statement, and on slide number 12, we are looking at the impact of foreign exchange.

  • Exchange rates continue to make an impact on top and bottom line, reducing sales by $30 million and operating profit by $27 million, compared to last year.

  • The good results are despite these negative impacts.

  • On slide 13, we look at the revenue breakdown by business segment.

  • While our revenue mix remained in line with last year, as you can see from the percentages, the profitability picture on slide 14 reflects a different view.

  • 31% improvement in the profit of the global generic business, driven by the performance of the US market, improved the total generic share to 30% of total profit.

  • Copaxone profits were down, as I mentioned before, by 6%, and are now 46% of our total profit, due to the cost of launching our 40-milligram product.

  • Copaxone, however, continues to maintain its leadership position, as the US -- in the US and globally.

  • Erez will discuss Copaxone in more detail a bit later.

  • When we look at cash flow on slide number 15, this was a good quarter for cash flow generation.

  • The dotted parts on this slide represent settlement payment made during the last three quarters.

  • We will continue to emphasize the importance of cash generation with a number of initiatives to convert working capital and non-core assets into cash that can be redeployed by creating more value.

  • Our financial leverage is improving.

  • We continue to pay down debt during the quarter and strengthen our balance sheet.

  • Debt-to-EBITDA ratio improved from 2.18 into Q1 2013, to 2.16 by the end of last year, to 2.04 in Q1 2014.

  • Last, but not least, dividends on slide number 17, our Board of Directors approved a dividend of NIS1.21 per share for Q1 2014.

  • In today's exchange rate, this is approximately $0.35 per share.

  • I would like to thank you all for your attention and now I will turn the call over to Erez to discuss his views of our business opportunities.

  • Erez, please.

  • - President & CEO

  • Thank you, Eyal.

  • These are 2014 must wins for Teva: fixing the foundation, maintaining Copaxone franchise, solidifying the [edging] that will drive organic growth for us and position Teva for long-term value creation.

  • There is a lot of value we can unlock from getting our house in order, by delivering on our cost reduction program, by accelerating operational network transformation and integration, and by strengthen our global generic leadership, while improving profitability.

  • We are fully committed and on track to deliver $1 billion reduction in gross expenses by the end of the year, $2 billion reduction in gross expenses by 2017, from which $500 million are falling to net profits by 2017.

  • I strongly believe that we can be more ambitious on net savings.

  • Therefore, we have been assessing all the operational aspects of our Business in order to identify the relevant opportunities that will enable us to increase the net savings that will impact our net profits by 2017.

  • We have been working out the details of these forces and later this year, once we [exhaust] the [cause] and once we are able to see the details of our next five-year plan, we will come back to you and update you on the revised targets.

  • Teva shall transform its operation network.

  • [Our] plan to close or divest 11 plants and this plan is already underway.

  • 16 additional plants are under evaluation.

  • We are in the process of reassigning significant capacity to low-cost facilities in our network.

  • We have launched operational excellence plan in a quest to dramatically increase the competitiveness of our plants and fully integrate them into the network.

  • We are discovering and exploring all the consequences from Teva API business situation and [weet a] plan that is already in place in order to return to sustainable, solid growth in the course of the second half of the year.

  • We have been assessing markets and products, in order to terminate products and markets, which will not meet a minimum threshold of profitability.

  • I strongly believe that there is significant strategic and economic value in global generics leadership.

  • Teva must regain focus on its generic business, with strong emphasis on portfolio selection and management, on R&D and innovation, on markets and product profitability, with the target to improve our profitability by the end of 2017 by at least 600 basis points.

  • At the same time, we'll direct all the resources which are required in order to create a leading position in complex generics.

  • We are fully aware of the opportunities and the importance of biosimilars in our industry as we go along.

  • We [were] fairly in a good position to tap the opportunities in wave one of biosimilars.

  • We have missed wave two of biosimilars.

  • We will be accelerating the processes that will enable us to gain a leading position in wave three of biosimilars and by the same time, will be considering inorganic opportunities in order to be positioned better, also in wave two.

  • You will see us in the course of the next two years start moving in emerging markets, in order to expand our footprint in key emerging markets.

  • Copaxone 40 milligram enables Teva to compete for the future.

  • It is not a battle over the past; it is a fight to build the future for Copaxone.

  • Copaxone 40 milligram offers a unique set of clinical, medical, and convenience benefits to patients.

  • Together, with Teva's world-class Shared Solution patient service center and wide traction achieved with payers, over 90% of commercial lives, we were able to generate a very strong and rapid uptake since the launch of the product three months ago.

  • In three months on the market, there are 25 (sic -- see slides "25,000") patients on Copaxone 40 milligram.

  • This slide manifests the position of Copaxone 40 milligrams in relation to the family on NRx basis, today, on [bayern] NRx, Copaxone 40 milligrams accounts for more than 50%.

  • The next one tells us the story of the build-up of a new franchise from scratch, which is fully protected by IP until 2030, but the story is in the best manner by slides 27 and 28.

  • These are the slides that look at that the comparative landscape.

  • On slide 27, we can see that during the last three months, Copaxone 40 milligrams was able to reach a leading position on NRx basis and today, it is the leading therapy in the MS space on NRx basis.

  • The next slide shows that during these three months, Copaxone 40 milligrams was able to reach a leading position among the leading therapies in the MS space and by the same time, to contribute to the stabilization(inaudible) of the entire family.

  • Building a new future for Copaxone also means for us investing in lifecycle management initiatives, including the first personalized medicines in the MS space.

  • By the same time, Teva will do everything in its power to protect our intellectual property.

  • US Supreme Court will hear appeal on Copaxone patent in fall 2014.

  • If generic filer is approved and decides to launch, such sales will be made at risk.

  • We will aggressively defend our IP and seek all available damages.

  • This includes damages to both the 20-milligram and 40-milligram product for the full life of those products.

  • We have patent protection on the 40-milligram product until 2030.

  • Any company launching at risk faces significant potential exposure in the billions of dollars before trebling.

  • By the same time, Teva strongly believes that in order to defend patient safety, the FDA should require clinical trials from generic versions of Copaxone.

  • In addition to everything I have shared with you that pertains to the processes we have been accommodating and with our generic business, including our initiatives that will drive organic growth in our generic business going forward, I am putting now here the focus on our specialty pipeline, which manifests an opportunity and potential that I strongly believe is not fully acknowledged by the market.

  • With 15 products in Phase 3 through approval, four product in Phase 2, and18 NTEs currently in development, from which in the course of 2014, if I take only three products, the DuoResp, the Zecurity, and the Adasuve, together with combined estimated peak sales of more than $1 billion, [just as] a manifestation for the potential that our specialty pipeline possesses, Teva will continue to direct the resources which are required in order to enhance the engines that will be generating for us organic growth going forward in the generic business and in the specialty business.

  • We understand that we need to create a single, powerful, and differentiated narrative with a clear direction for Teva.

  • What we see in the industry is a revolution.

  • It is the age of revolution.

  • It is not a single shift.

  • It is a string of discontinuities and movement of continents in a quest to modify the direction in a way that builds on our unique strength.

  • We have initiated a process that will take us to reorient the business model as we go along.

  • Over time, and in the course of 2014, we will be able to share with you the way we see the reorientation of our business model in a quest to capitalize on the full investigation of the relevant discontinuities and the relevance of these discontinuities to Teva, alongside with all the measure that are designated to solidify the foundation of Teva and in a way which builds on Teva's unique strengths.

  • I strongly believe that in this industry, with the huge changes that we have been undergoing, there is a huge opportunity for Teva to claim for a space which is unique and differentiated, a space that will enable us to generate value in the long term for our shareholders.

  • I cannot conclude my remarks today without addressing, also, the M&A front.

  • While the focus remains on fixing the foundation and driving organic growth, we are aware of the opportunities around us, including potential larger transactions, as long as they meet clear criteria and we might engage in such a transaction once conditions are met.

  • Thank you.

  • - VP, Head of Global IR

  • Operator, we will now open the call for question-and-answer.

  • Operator

  • (Operator Instructions)

  • Liav Abraham, Citibank.

  • - Analyst

  • Good morning and good morning, Erez, great to have you on the call.

  • A couple of questions, please.

  • Firstly, regarding Copaxone, your 2014 guidance assumes a loss of 15,000 Copaxone patients to oral agents.

  • Yet as you've shown in the script data, this is not what we are seeing in the script data.

  • We are not seeing such an aggressive decline, and in terms of market share, we are actually seeing a stabilization of Copaxone market share over recent months.

  • Can you comment on the upside to net income and EPS if the trends remains stable and if -- particularly if the deceleration to oral remains stable?

  • That's my first question.

  • My second question is on the differentiation of Copaxone 20 milligrams versus 40 milligrams.

  • Can you comment on any conversations that you've had with payers regarding the continued reimbursement of 40 milligrams following the entry of a generic?

  • And Michael, perhaps you can comment on the differentiation of 40 milligrams versus 20 milligrams over and above just the convenience factor.

  • Then just lastly, and plants and supply chain rationalization, you put out some interesting numbers in terms of a larger number of plants that you plan to close or divest over time.

  • Can you comment on the potential net savings per each plant that you plan on shutting down or divesting?

  • Thanks very much.

  • - President & CEO

  • On the third one, we are consolidating the holding sites from the investigation process we have been undergoing.

  • We will come back to you and it is not confined just to the operation network transformation.

  • It goes also to other aspects in our operational -- in our operations which are under scrutiny now.

  • The target is to increase the net effect on bottom line.

  • This is the target.

  • But I want at this stage to be careful.

  • I took over 2.5 months ago.

  • We are is still in the process of investigation.

  • The quest is to increase the target and to be more ambitious and it then -- it encompasses a number of measures which are not confined only to the transformation of the operation network.

  • So we will come back to you.

  • It will include, also, of course, reference to what might be extracted from the operation network transformation.

  • On the first question, at this stage, three months only after the launch of 40 milligram, we want to be more careful before spelling out any message that pertains to potential IR guidance.

  • And also, that's set with -- [outside] -- the potential scenario that pertains to Copaxone in the course of 2014.

  • So we prefer at this stage to maintain the guidance.

  • If we see in the course of the year that there is a strong reason to change the guidance, we will come back to you.

  • And on the -- basic on Copaxone, let me just say first that, with the GLACIER study that was conducted with findings that were published yesterday, we have a very good, strong now background to come up to you and to the external world with very strong, I would say, inspiring findings that supports strongly the benefits that are provided by Copaxone 40 milligram -- clinical, medical, and convenience.

  • And I will ask Michael to address it.

  • - President of Global R&D & Chief Scientific Officer

  • Thank you, Erez, and thank you, Liav.

  • We presented yesterday top-line results of the GLACIER study at 2014 American Academy of Neurology in Philadelphia.

  • The GLACIER was a Phase 3 study, open label, randomized, multi-center study to assess the safety and tolerability and patient experience of Copaxone 40 milligrams three times a week to 20 milligrams.

  • The results were extremely interesting and provocative.

  • What we were able to show is a significant, a 50% reduction in injection-related adverse events on the 40 milligram, less pain, less redness, swelling, bruising, and warmth compared to Copaxone 20 milligrams that actually is a very safe drug in the first place.

  • But the actual benefits, in terms of side effects were highly significant, mostly injection site reactions and overall reactions to 40 milligrams were significantly improved.

  • This is important because this suggests that this is really like a new molecule.

  • It also suggests that it will be very important to keep patients on 40 milligrams, not switch them back to any other drugs, because there is significant medical benefit associated with it objectively assessed.

  • Also patients regarded this as certainly much more convenient in terms of quality of their lives.

  • So we believe that this will add to the stickiness and also talks about the differentiation of Copaxone 40 milligram three times a week compared to Copaxone 20, which is already a very safe and effective drug.

  • This information will add to the stickiness and the importance of staying on Copaxone 40 milligrams.

  • That will be apparent to the patients, the physicians, and the payers.

  • - President & CEO

  • Maybe, Rob, if you can add to it insights that are [exactly] from patients, physicians, and payers.

  • - President & CEO, Global Specialty Medicines

  • Erez, a pleasure.

  • Liav, as you have seen, the uptake by both patients and physicians is really, really good with 25,000 patients currently on Copaxone 40.

  • We've seen, actually, the same sort of response from the payers.

  • 90%, or close to 90% of insured lives in the US have access to Copaxone 40 milligrams and it's already 60% of the payers where actually Copaxone 40 has become the preferred MS therapy.

  • So far -- I am not going to go into the future expectations in discussion with payers that we will have for tomorrow, but the uptake is really, really good and this is in an environment where both products are available.

  • It's all three stakeholders really see the benefit of our Monday, Wednesday, Friday injections of Copaxone 40 and we are really very pleased with the uptake.

  • - President & CEO

  • Maybe just to conclude, again, 25,000 patients, which account for more than 50% on NRx basis -- as something in the neighborhood of 31% by TRx -- and we are on track to achieve the targets that were set for the end of May and the end of the year.

  • We, by the same time, and again, it is for us to fight for the future.

  • We are [compete here] for the future.

  • We are building a new IP-protected until 2030 franchise.

  • - Analyst

  • Thanks very much.

  • Operator

  • Ken Cacciatore, Cowen and Company.

  • - Analyst

  • Just a couple questions.

  • First on the cost savings.

  • Erez, just wanted some clarification.

  • It sounds as if a net cost savings by 2017 you said was $500 million.

  • Just want to understand as I look at your current operating structure, it looks like about 8% of operating cost.

  • So just wanted to understand why we can't deliver more on the bottom line or is it already such a lead Organization?

  • Then also on M&A, there's clearly a whole lot of different assets out there, some could be near-term accretive, whereas others could be business development.

  • Clearly, your neurology division is performing exceedingly well.

  • There's a ton of business development assets there that look interesting.

  • Just want to understand, would you look at late stage assets versus just unmarketed products?

  • ¶ Then, finally, maybe there could be a comment, with such good data, on the 40 versus the 20, about potentially removing the 20 from the marketplace?

  • Thank you.

  • - President & CEO

  • Maybe before Eyal takes it over, I am sticking to the guidance that was provided to TheStreet during 2013 and the number suggested, $2 billion until the end of 2017, $1billion until the end of 2014, and by the end of 2017, $500 million falls to the bottom line.

  • This was the guidance.

  • My message today was we, and I, strongly believe that we can raise this guidance, but in order to do it, we have been now exploring all the operational aspects of the Business and will come back to.

  • Maybe against this, Eyal can take over.

  • - CFO

  • Yes.

  • I can.

  • The answer is very simple.

  • We will reduce all the costs which are necessary to build the Business and to support the Business and to support high service levels and high level of quality in our product.

  • Right now, the plan is that our total spending base will go down by $500 million by 2017, of course, assuming no transformational event to Teva, the current business model.

  • But as Erez said, we will explore every possibility to take more of that cost saving and efficiency into the bottom line by additional efficiency measures in our production network, by becoming more and more active and aggressive on procurement, by reducing the level of headcount where people are not necessary, but we do have plans to build the Company.

  • We are investing in R&D; we're investing in selling and marketing; we're taking a new product to market, generic and specialty; we have an ambitious program of NTEs.

  • So the balance of this [addition] looks at least $500 million positive.

  • We will explore every possibility to do more.

  • - President & CEO

  • I'm not ruling out to -- looking again at that the resources of invested.

  • It's part of the equation.

  • But, in this context, I urge you to look deeply into the pipeline, in the context of what we are doing now in 2014, and it was just an illustration what I shared with you, there are other launches in the course of 2014.

  • These launches are coming in the pipeline, which again, I'm saying again, is not appreciated enough.

  • Against that, of course, we are directing resources in order to even bolster further the innovation in the Company and R&D that will enable us to produce more new products.

  • All in all, there are two sides of this equation.

  • We need to reconsider the resources that are redirected, this is one thing, but by the same time, we need to be able to explain and sell to the market the value of our pipelines, at least the way it is started to be manifested in the course of 2014.

  • On the third question, Michael, you'd like to take over?

  • Michael?

  • Late stage assets.

  • - President of Global R&D & Chief Scientific Officer

  • Just to say that this year, we are looking at six submissions and everybody may have read or heard recently of our outstanding results with ER hydrocodone.

  • This is abuse potential abuse deterrent ER hydrocodone that really does fill a very important need.

  • It's going to be administered twice daily and we had outstanding results.

  • There are highly significant analgesic properties associated with this.

  • This will be, essentially, submitted before the end of the year.

  • If you look at 2014, in total, we're looking at a total of about eight to nine submissions.

  • We are also looking at four approvals.

  • Importantly, Copaxone 40 milligrams; DuoResp, we just had approval from the US -- from Europe this week and we're looking at other approvals, some of the other potential approvals later.

  • If you look at the whole pipeline and you look at how this is merging and leading to new submissions, too, this is going to be increasing over time.

  • We are expecting to have 12 submissions in 2015 and by 2018, we expect to have 17 submissions, which is going to be greater than we had in 2011, 2012, and 2013 combined.

  • This talks a very robust pipeline that probably hasn't been fully appreciated, a pipeline that has impact both in our CNS and our [respi] franchise, as well as on the NTE front, we -- ER hydrocodone provides further benefits and further demonstration of the nature of the technology and also the strength and depth of our NTE program.

  • - President & CEO

  • On the late stage, I'll address it -- on the late stage versus other potential BD initiatives, we are considering a number of late stage acquisitions.

  • In general, CNS is certainly one of the most attractive areas for us.

  • In this respect, we strongly believe that we can use the capabilities and the assets we have in CNS in order to solidify further this TA.

  • We look also on potential acquisitions of the relevant technologies in the generic space and in the specialty space.

  • As I said before, we are not ruling out us being engaged in another transaction.

  • There is a list of possibilities that we are considering and you might see us executing transactions on each one of these potential forms.

  • And on pulling off Copaxone 20-milligram, this is a question I would like to pose to Rob.

  • - President & CEO, Global Specialty Medicines

  • Thank you again, Erez.

  • It's clear that what we are seeing -- the patients have been expressing a preference for Copaxone 40 with the fantastic feedback that we are getting from those patients that have transitioned and they are really overwhelmingly positive.

  • We continue to be committed to meeting the needs of our customers and will make decisions that hold the patient safety and welfare at the center, but at this moment -- and we will respond to market evolution -- at this moment, it's just not opportune to make that decision and I don't think I would want to make any statements going ahead, but we continue to really look at the welfare of patients and monitor very carefully what's happening.

  • - VP, Head of Global IR

  • Amy?

  • Next question, please.

  • Operator

  • (Operator Instructions)

  • Jami Rubin, Goldman Sachs.

  • - Analyst

  • Erez, I'm looking forward to meeting you in person.

  • You emphasize the importance of regaining global generic leadership for Teva.

  • I'm struggling to understand how you do that without pursuing a major transaction in the generic space.

  • In the earlier question, you rattled off a whole bunch of different companies, both in brands and generics.

  • Are you happy with the mix of business is now or, it seems that what I'm hearing you say, is that you think Teva will probably move to emphasize or get bigger in generics versus brands, but I might be wrong about that.

  • If you can clarify that, please?

  • Then secondly, do you see opportunities to divest assets such as API or slimming down R&D in areas that may not fit strategically, such as woman's health?

  • Is there an opportunity to actually break up the Business, so have a separate brands business from the generic business?

  • What are some of the possibilities that are on the table now that weren't with the previous Management team?

  • Thanks very much.

  • - President & CEO

  • Thanks, Jami.

  • I also look forward to touching base with you.

  • On the scenario of breaking up the businesses, this scenario is not on the table.

  • We strongly believe that weaving together the assets, capabilities, expertise from the two forms will enable Teva to possess a business model which is unique in this industry.

  • Yes, we need to reorient the business model as we go along.

  • I'll share it with you in the course of 2014 and before the end of the year, the way we believe we shall reorient the business model, but with the moving of continent in this industry and with all the discontinuities that we see, which are relevant for us, we see a huge opportunity in integrating much further the various components of our Business in a way that will generate a lot of value for Teva, a value that goes far beyond the value that can be generated for each one of the different parts.

  • On the question of potential divestitures, the answer is yes.

  • We consider it and it is part of the reevaluation that we have been accommodating.

  • On question number one, I strongly believe that we need two very strong legs -- one generic, another in specialty -- in order to be able to capture the benefits, to extract the benefits from the unique capabilities Teva possesses.

  • Yes, it [entails us] put it before or a reorientation of the business model and another of changes that shall be entertained, but the two legs are important for what we will doing in the future.

  • Teva today is the largest global generic company.

  • Yes, we need that to regain the focus; yes, we need to transform the operation in a number of aspects; yes, we need to face reality of where the gaps in a number of aspects of our operation and also a number of geographies.

  • So, we need to face reality and we need to act in a very aggressive manner in order to close the gaps that exist, but I still believe that what we have today and with the measure that will be conducted, we can, then, I would say, regain the leadership position, also not only by scale.

  • If we need acquisitions in order to make it happen, we are considering every possible scenario.

  • We are not ruling out any possibility.

  • But I strongly believe that first we need to be much more focused on the way we close the gaps before we make a big transaction here, although, don't rule it out.

  • - Analyst

  • Thank you.

  • Operator

  • David Maris, BMO Capital Markets.

  • - Analyst

  • Two questions.

  • First, Teva has a lot of experience launching at risk, so maybe you can give us some insight on how a generic Company might think about launching at risk.

  • If you are another generic company and had an FDA approval of generic Copaxone, how would you be thinking about it?

  • Obviously, most of us think that the damages would prevent someone and plus one-half the profits, but how would you think about it?

  • Then separately, you mentioned that Teva's goal is to regain the -- or reassert leadership in generics and back to basics and good execution.

  • What do think, though, of your competitors' moves into brands and attempts to move into brands in the US and EU?

  • Does that say something about the growth expectations of the generic market five years out, or no, you think it's just something -- just an anomaly?

  • Thank you.

  • - President & CEO

  • I maybe address the second one and then I will ask Rich to address the first one.

  • Very interesting question, David, and thank you for the question.

  • On the next one, let me say three things.

  • One, the generic industry is going to double by 2020.

  • If I look from, let's say, 2013 to 2020, generic industry doubles itself.

  • But the rules of the game are changing, also in the generic industry, and it is a very industry in terms of [pagafour] opportunities, in terms of [FTFs] opportunities, in terms of technologies that are required, and also the [whole] biosimilars, although there is a question if it belongs to the generic, yes or no, but let's not discuss it now.

  • It means we need to shift the mindset in terms of what is needed in order to win in this industry going forward.

  • Teva will do everything which is needed in order to win.

  • Everything that is needed in order to win.

  • We believe that we have today the assets, the capabilities, the global footprint, the operational network, the mindset, all the assets that are required, and we will be winning in the generic industry.

  • Yes, we need to look right in the eye.

  • Yes, there are gaps that we will be close and we will be closing the gaps.

  • We need to invest in complex generics, we need to take decisions, tough decisions on biosimilars.

  • We have assets, we missed second wave.

  • We will do everything which is needed in order not to miss the third wave and there are also other measures that shall be conducted in order really to, I would say, to solidify our global leadership in generics.

  • I strongly believe that, one, there are opportunities to extract a lot of value from being the global leader in generics, one.

  • Second, I believe that in anything we do, it is a very important leg, very important leg, and capabilities are very relevant and the way we will be weaving together capabilities from the generic side, the specialty side, will take us to capture the opportunities in the changes the industry has been undergoing.

  • From what I see, in the context of competitors, there are very interesting moves that are conducted by competitors.

  • At least, to some extent, these are things that we started to do, maybe a number of years ago.

  • Sometimes, maybe we didn't do it fast enough and we need to adjust to full technology and we need to accelerate the pace of the processes that we have been accommodating, but it's like maybe supporting things that we have been doing and just pushing us to run even faster, in order to extract all opportunities out there.

  • On the first question, I will ask Rich to address.

  • - Group EVP, Chief Legal Officer and Company Secretary

  • David, thanks.

  • Good question.

  • The first thing I would say is that we believe the Federal Circuit got it wrong.

  • We expect that the Supreme Court will correct this and reverse the [invalidity] decision.

  • As you know, we probably have the most extensive experience in the industry with launches at risk and this one would give us serious pause.

  • That's mainly due to the size of the possible damages and the real prospect that a jury in this case would find willful infringement.

  • The standard for willfulness is whether the act of infringement is objectively based and there are many factor here that a jury might weigh to find willfulness.

  • First off, is the Chief Justice's comments that we have shown a fair prospect of success on the merits.

  • The second is the Supreme Court's high reversal rate, particularly from Federal Circuit decisions in the patent area.

  • Also, I'd like to remind everybody the very detailed opinion that the lower court and the finding of infringement of both Sandoz and Mylan at the District Court, which was upheld on appeal.

  • They were found to infringe.

  • As a reminder, I'd also like everybody to remember that when there is case like this of willfulness, it could lead up to a tripling of the damages exposure.

  • So this is a case we would seriously pause on.

  • - Analyst

  • Great.

  • Thank you very much.

  • Operator

  • Marc Goodman, UBS.

  • - Analyst

  • Can you give us a little more color on the business overseas?

  • Can you talk about what's happening in some of your key countries?

  • Talk about, obviously, Western Europe, but also in Central Europe, Russia, some of the other key countries, just the fundamentals?

  • Then second, I just want to make sure I understand.

  • On biosimilars, now, we've decided that this is going to be a very important part of the strategy and we are going to invest in biosimilars internally, or is it really externally we need to go out and acquire the biosimilars development?

  • Thanks.

  • - President & CEO

  • I'll ask Dipankar first to address your first question.

  • - President & CEO, Generics Europe

  • Thank you very much, Erez, and thank you, Marc.

  • As far as Europe is concerned, yes -- as far as Europe is concerned, the results that we have seen in this quarter confirms the strategy that we are executing of pursuing a sustainable and profitable business.

  • We saw some underperformance in some countries like France and Germany, France due to contractions in the market, but, we also saw significant overperformance in markets like Italy, Netherlands, Switzerland, and many of our smaller markets.

  • Aligned to this, we are also seeing significant improvements in our operating profits and this confirms that the strategy that we had been pursuing is really paying off.

  • Overall, we are pleased with the results.

  • We have a geographic and a product portfolio which is really essential to succeed in Europe.

  • It gives us scale and it gives us the ability to leverage our leadership in almost all our key markets.

  • - CFO

  • Maybe I will add a few data points about Russia and the neighboring countries.

  • First of all, it was a very, very warm winter.

  • A lot of our business, both our OTC business, as well as our Rx business has suffered due to the warm weather, but, you can count on the weather to change.

  • The other thing, that everybody is of course aware of is political issues in Russia, transforming a little bit due to economic uncertainties, which is never good of business, but it wasn't terrible.

  • The combination slowed down our OTC business in this area, some of our Rx business in this area, and we expect this to recover.

  • Also, the Copaxone tender, which can move from one quarter to another, it didn't happen this quarter in Q1 in Russia.

  • We expect this to materialize in the second quarter, so the Copaxone results were without Russia, which is not an insignificant piece.

  • - President & CEO, Global Specialty Medicines

  • Maybe to complete the picture on Europe with specialty, we had a record quarter in specialty medicines.

  • Copaxone is really doing well, gaining market share.

  • Lonquex, our long-acting G-CSF is really performing as planned and we are all excited with the just recently received approval of DuoResp Spiromax, which will launch into the asthma and COPD space, which is really what we believed addressing a need for a much improved delivery device to help and address the issues that we see around adherence and compliance with those patients.

  • In Europe, specialty medicines is really doing well and had a fantastic quarter.

  • - President & CEO

  • And on biosimilars, we shall do it in a way that will enable us to contain the risks and to accelerate the pace of the implementation, which means that we seek the right partner in the right areas, in order to develop capabilities that are required for wave three and beyond in biosimilar.

  • - Analyst

  • Is there a possibility to work with Lonza again?

  • - President & CEO

  • No.

  • No.

  • Michael, you would like to add something to it?

  • - President of Global R&D & Chief Scientific Officer

  • Thank you, Erez.

  • Certainly, we are, of course, looking very carefully in the biosimilar space.

  • As Erez has noted, we really have looking to, obviously, both grow organically, but also look at the inorganic growth in terms of potential partners in this space.

  • Even though those regulatory uncertainty and substitutability uncertainty, we see this as a very important area for us to be in, reflecting the hybrid integrated nature of Teva.

  • In terms of our relationship with Lonza, we -- obviously, this is a relationship we have deep respect for.

  • Lonza has been an outstanding manufacturing company and we haven't, obviously, as we go forward, we would include Lonza as well as many potential partners for engagement where we need outside help, in terms of manufacturing and operations.

  • - VP, Head of Global IR

  • Amy, next question, please.

  • Operator

  • Ronny Gal, AllianceBernstein.

  • - Analyst

  • Congratulations, Erez.

  • You are the first CEO in three whose first conference call is going through without technical problems.

  • At least, in this respect, you are starting on the right foot (laughter).

  • Don't jinx it?

  • Three questions for you.

  • The first one is, you mentioned a little bit about personalized medicine and we have talked a little bit about the future of Copaxone.

  • I wonder if you can just talk to us a little bit about the future of Copaxone beyond just maintaining the 40 milligrams?

  • How can this franchise further be develop?

  • You also -- some IP on potentially predictive markers for this product as a way to increase the benefit of patients.

  • If you can tell us a little bit about the progress of that effort?

  • Second, capital expenses still are very high.

  • You're running at $1.5 billion annualized, about three times to four times your competitors.

  • As part of the review, is there any chance we might be able to see that number coming down if you look at your development plans, what is the horizon for maintaining that kind of CapEx?

  • Last on DuoResp, I'm not too familiar with Teva's capabilities in Europe in terms of launching new branded drugs in respiratory.

  • Can you just give us a quick review of our marketing capabilities?

  • Are you present in all countries, some of them?

  • Where do think you will be able to make inroads?

  • Or with DuoResp, if you think about your two- to three-year targets, what would those be for product like this?

  • - President & CEO

  • Thank you for the questions and I'll ask Rob to start with the third one.

  • - President & CEO, Global Specialty Medicines

  • As you know, we have a -- in US, we have an extensive experience with respiratory.

  • DuoResp Spiromax is a device that is offering a lot of opportunities.

  • It's a very intuitive device to use and we believe it has the potential to really address some of the adherence and compliance issues that we are seeing and patients are experiencing with current therapies.

  • We are selling respiratory products in some markets like in the UK and the Netherlands and we've built up capability in Germany, ourselves.

  • As you know, in Europe, you are not launching in one continent all of a sudden, right?

  • It's subject to getting your price and reimbursement and the market authorization so that we can launch in sequence and also we are looking at making sure that we do it in the right way, in terms of pricing.

  • We are confident that we can launch in the key markets, we have our feet on the ground trained and ready to go, and everyone is excited about the opportunity there.

  • - Analyst

  • If we can look at the Symbicort sales in Europe, and we think about that as our target market, what percentage of that is addressable by your marketing and sales force?

  • - President & CEO, Global Specialty Medicines

  • We would like to thank all of it, but not all of it in day one, right?

  • That's the moment we go and launch.

  • Frankly, also the way we look at the market is not just exclusively on Symbicort.

  • As we note, it's quite a number of patients and doctors choose a device over the active ingredients, so we really believe that this is an interesting opportunity.

  • I'm really reluctant to give a long-term opportunity, but it's in the hundreds of millions for us, so it's really important.

  • - President & CEO

  • Thank you, Rob, and on the capital expenditures question, I will ask Eyal to address.

  • Our run rate for CapEx right now its around $1 billion -- you mentioned $1.5 billion.

  • Part of our efficiency measure, we are also looking at how much do we really need and whether by consolidating the footprint of our operation, that will open an opportunity to reduce this in the future.

  • Michael, please let the first question of Ronnie.

  • - President of Global R&D & Chief Scientific Officer

  • Thank you, Ronny, for that very interesting question.

  • Of course, Teva has now created and established an outstanding group of scientists in the area of personalized medicine and pharmacogenomics.

  • As part of our lifecycle management, or for example Copaxone, we've essentially embraced those technologies to understand more about the defining features of those who respond versus those who not respond.

  • Despite the outstanding success of Copaxone, there is a significant number of patients, maybe up to 30% who do not respond as well as the 70%, so we are able to divide the population into well-defined responders and non-responder.

  • Using whole genome and wide analysis and some clinical factors, we've been able to generate both initially discovery and then validate these particular parameters that we predict with very high certainty those people that would respond.

  • Of course, when you look at that and then you look at that subpopulation of the responders, the effect on relapse rate becomes the best in the industry, greater than 70%, greater than Tysabri, for a drug that has outstanding [acceptability] for safety and as we shown in Glacier, a highly acceptable side effect rate and convenience for patients.

  • We are using personalized medicine in all our portfolio.

  • It's very much intrinsic to drug development in addition to -- and so this is in the CNS and our early oncology program.

  • All of our early oncology programs have personalized medicine components to it, to identify particular populations that may be particularly responsive to therapy so that we are able to have early failure or early indications of success.

  • In addition, as part of our lifecycle management, for example in the CNS and four sub-Q injection, we also are working with our device group -- we have an integrated device group serving both our generic and branded portfolio -- and looking at novel devices that truly enhance compliance, adherence, and convenience for patients.

  • We see our personalized medicine and our device group all as playing a role in ensuring quality for patients work.

  • We are very committed to personalized medicine because we see ourselves as partners for the healthcare system.

  • Teva is committed to [staying] sustainability for the healthcare system and if we have a way to identify those patients who are going to be best responders and those who would not, we would embrace that to enhance the quality and improve the cost-effectiveness of our medications.

  • - Analyst

  • So the obvious question on Copaxone is what is the path from here to patient treatment?

  • - President of Global R&D & Chief Scientific Officer

  • This is a process that we are undergoing.

  • Obviously, we have a plan in place.

  • I'm not ready yet to -- this is still being fully elaborated.

  • The data, this is protected and our intellectual property is very well protected.

  • It's unique.

  • This would be the first personalized medicine in multiple sclerosis and we're working on our plan for unrolling this, but, it will be in the near future.

  • We will be more public and transparent on exactly how we are going to unroll this and how we are going to bring this to enhance the benefits for patients.

  • - Analyst

  • Thank you very much.

  • - President & CEO

  • Just capitalizing on it, and against -- in the context of questions that were posed to before, Copaxone is a good manifestation of the huge benefits that stand from fully integrated business model that weaves together all the capabilities we have in all the fronts.

  • Also, very strong, I would say, capabilities and benefits that stand from innovation around the molecule and not necessarily in the new chemical entities.

  • So when you look at the way we have been running the model now, it is -- it gives us some [foot photo] for what we might do as we go along in the reorientation of our business model.

  • - Analyst

  • Thank you.

  • Operator

  • (Operator Instructions)

  • Sumant Kulkarni, Bank of America.

  • - Analyst

  • The first one is, has anything changed in your thinking on the number of players that you expect that could be in a position to launch at risk on patent expiry in May?

  • A second for Erez, it's been us couple of months since you took over and, clearly, it must be an exciting time for you to build a new Teva going forward, but is there any opportunity to for you to look more like the old Teva on the tax side?

  • - President & CEO

  • Thank you for the question.

  • It's now 2.5 months, to be accurate.

  • I will ask Eyal maybe to address it -- we are -- we look at any possible potential opportunity to generate value.

  • What I promise is to do everything in our power, everything, in order to -- not just [eating] the targets [free shape], but to do everything which is (inaudible) in order to carry out the efficiency measures, which will take us to really generate value and I'm not ruling out any measure.

  • Tax is under scrutiny, also.

  • If we find opportunities in reducing our tax expenditures, we will of course accommodate it.

  • Maybe Eyal will take another step forward.

  • - CFO

  • Yes.

  • We are sharpening the pencil.

  • We used to be the lowest taxpayer in the industry.

  • This is not the case following a few inversions, things have changed when we look around.

  • What happened in 2014 is very clear.

  • It's something we have discussed and disclosed in many details before.

  • We were riding on increased profit of Copaxone at zero tax for the past 10 years.

  • That benefit expired December 31, 2013.

  • Today, our tax rate here in Israel is around 9%.

  • So that is a negative impact on the average tax rate.

  • However, we are not done.

  • We are looking at every possibility to become more efficient on tax rate.

  • Everything, of course, within all the legal measures and the world of tax planning is wide and broad.

  • We will see our tax rates decline in future years as some of our new product will be launched at more friendly tax rate environment.

  • So the 20% that we have guided for 2014, we started the year a little lower than that.

  • I hope to be able to maintain it below 20%, but again, a lot of thinking is around this right now, because it does represent a lot of value.

  • - President & CEO

  • And a number of competitors, with your permission, it is the only question that we will not be addressing today.

  • With everything we said on Copaxone, we have exhausted all remarks.

  • The message is very clear on our end.

  • Very clear on our end.

  • So I don't want now to speculate who is going to take this risk.

  • - Analyst

  • Thanks.

  • Operator

  • Tim Chiang, CRT Capital.

  • - Analyst

  • Erez, when you look at the personnel base at Teva, do you think that you have the right people in place to grow in the future?

  • Do you need to bring in new people?

  • Do you think you have the right senior Management at this time?

  • - President & CEO

  • This is a question, maybe, not the only one, but it's just let alone -- this question is a question my answer should be you need to see what I do and not what I say.

  • I'm not going to say anything before I do.

  • - Analyst

  • Okay.

  • Great.

  • Thanks.

  • Operator

  • Louise Chen, Guggenheim.

  • - Analyst

  • Under new leadership, I'm curious how your M&A strategy has changed.

  • Then also, how you think about prioritizing uses of cash for M&A, R&D repurchases, et cetera.

  • How does it differ from the old Teva?

  • And then lastly, just how durable do you believe the switch to 3TW will be when generics enter the market.

  • Thanks.

  • - President & CEO

  • Use of cash, Eyal?

  • - CFO

  • Okay.

  • I will start with the cash allocation.

  • You probably noticed, we stopped -- or not stopped -- we suspended our buyback program.

  • It's still open.

  • It is available for us in case we will see the opportunities, but we prefer to use the cash over the past few quarters, one on, increasing dividends, definitely in dollar terms and also in absolute shekel terms, our dividend coming up.

  • We'll reduce our financial leverage and our debt in order to create more capacity for additional.

  • We talked about M&A and potential acquisitions are looking to expand our portfolio and pipeline both of specialty and also biosimilar, also by external purchasing or acquisition of molecules so I'm not going to add on that.

  • But right now, all the options are open.

  • We will consider every quarter and I believe that we are looking at a balanced cash allocation.

  • - President & CEO

  • Yes.

  • On the second sale question, it's clear for me that [we felt] shall unlock the valued that can emanate from all the measures that are designed to solidify -- to fix the foundation.

  • It's clear that, that's first priority for me.

  • But again, and I want to reiterate what I said before, while the focus remains on fixing the foundation and driving organic growth, we are aware of the opportunities around us.

  • We cannot ignore what is going on in the industry nowadays.

  • We cannot ignore it.

  • We are fully aware the opportunities around us and there are opportunities for Teva.

  • So with I would say the right conditions, we might go to a transaction which is beyond the scope of just transactions that were conducted during the last 2 to 2.5 years.

  • - President of Global R&D & Chief Scientific Officer

  • 20 milligrams switch?

  • - President & CEO

  • Rob, can you address the 40 milligrams switch?

  • - President & CEO, Global Specialty Medicines

  • What we see is a very, very good response from patients on the 40.

  • You also heard from Michael the clinical benefits being demonstrated in the Glacier.

  • What we also know, is that when you ask patients and doctors alike, would they want to use a product that has never been really tested in man and has no safety and efficacy data, in other words, a so-called generic, there's a huge reluctance from them.

  • What I pick up from payers, as well, is they start to understand this, and there is a real threat that instead of saving money by forcing people to lower-priced generics, patients will opt out and switch, not only to 40, but it could also happen to other products, right?

  • Payers start to understand that they should not just think about forcing people, at least from some of the payers I picked that up.

  • All in all, what we see with the benefits of Copaxone 40, clinically relevant and proven safety and efficacy of Copaxone.

  • In general, patients reluctant to switch, per se, when they are doing well and many of those patients are really doing well, we feel confident that Copaxone 40 is going to hold.

  • But you also heard from Rich that clearly there is price pressure in the American market and there will be some impacts on the 40 and that's something that, not immediate short-term, but more long-term, is a factor that we are aware of.

  • - VP, Head of Global IR

  • Amy?

  • Operator

  • David Risinger, Morgan Stanley.

  • - Analyst

  • Congrats on the 40 milligram success to date.

  • With respect to my questions, I will keep it to two, as you asked.

  • First, with respect to biosimilars, could you just frame for us how you define the three waves and then once again reiterate Teva's positioning for the three waves?

  • Then, second, with respect to personalized Copaxone, could you just frame for us what percentage of multiple sclerosis patients would likely be better candidates for Copaxone if there is a diagnostic test available?

  • Then also, any comments on how that might cut both ways -- whether it would drive any current Copaxone patients off of therapy because the test isn't highly encouraging for them versus the opportunity to capture broader market share with a personalized medicine test?

  • Thank you.

  • - President & CEO

  • Michael, can you address the biosimilars question?

  • Also, the Copaxone question?

  • - President of Global R&D & Chief Scientific Officer

  • The way we see the waves of biosimilars, the first wave being those that are more protein-based and Teva has had a great success in that area launching various proteins that are biosimilars or equivalent to that.

  • Some of them have had long-acting so they have being submitted as BLAs.

  • But, for example G-CSF, follicle-stimulating developments in growth hormones, some of those represent the first phase and the first wave.

  • The second wave would be the development of biosimilars for drugs that are really coming off market and reaching the end of their patent life between 2015 and 2020.

  • This includes Humira, this includes a whole host of different drugs, Rituxan, and others that really are going to come to end of patent life in that phase.

  • Then the third are those that are really coming to the end of their patent life in the 2020s.

  • Teva has significant efforts for those drugs that are coming off patent life in the 2020s.

  • We are not successful in developing, although we've made some progress, but in a whole, only a small number in terms of the second wave and we have been very successful in the first wave.

  • Many of these are already on the market.

  • That's how we see.

  • It's somewhat arbitrary, defined by the, essentially, by the patent life of these drugs and that's how we really defined it.

  • Certainly in the second wave, we are looking to both do some in-house development, as well as look to partner with those who might have products that we think are appropriate for our pipeline and some of the disease areas we want to be in.

  • In terms of the diagnostic test, again, we are -- this is early data.

  • I don't want to really start speculating to which proportion of the population, but rather just to say the test is highly significant.

  • We will have a way to identify patients who are likely to respond.

  • We are still working on how we would implement this within the population.

  • But we see overall net benefit.

  • And this -- not only -- one has to think about the open market for MS, and if you know that you are going to respond to a drug, we think this would be competitive, not in terms of just Copaxone, but people who are coming into the market, this will add to Copaxone, as well as people on other therapies who are having some side effects or not doing that well.

  • But the actual commercial implications of this are really being worked out and I don't think we want to comment on this at this stage.

  • - Analyst

  • Thank you.

  • - President & CEO

  • Although the companion diagnostics is, we believe, is something which is really encouraging, the purpose at this stage was just to spell out the clear message to you, that by really building the future franchise, which is IP-protected, for many years to go, Teva will not confine itself just to the existing therapy, the existing drug, and will look for and pursue initiatives that will enable to work out the measures to take it just beyond the current state.

  • The notion is, that we will not confine ourselves to what we did in the past with Copaxone.

  • Lifecycle management initiatives, innovation around molecule, new technologies, everything will be exercised in order to [better] develop further, much further this therapy.

  • Operator

  • Randall Stanicky, RBC Capital Markets.

  • - Analyst

  • Two questions.

  • Is the opportunity for transformational M&A more on the generic side or on the brand side?

  • Then, my second question is, there's been a lot of focus on fixing the platform, going back to the divestitures question, would you consider near-term divestitures that removed some EPS, but were better for the Business from a returns perspective longer terms?

  • Thanks.

  • - President & CEO

  • At this stage, we are not in a position to address your first question.

  • We are -- we don't want to rule out any possibility.

  • - VP, Head of Global IR

  • Randall, could you repeat the second question?

  • - Analyst

  • I just wanted to go back to the platform revisit and divestitures.

  • Kevin, ultimately the question is, how significant could divestitures be as you look at some of these businesses that you are in?

  • Could we be looking at exiting some sizable businesses and how do you balance that with wanting to grow EPS in 2015?

  • - President & CEO

  • Eyal?

  • - CFO

  • I will try to answer.

  • Teva as a very well-integrated Company.

  • Our API business is producing a lot of the API used both by our generic business, but also by our specialty business.

  • Our specialty business is sold not in the US, but ex-US in many, many countries there is collaboration within the sales [theme] and the approach to regulators and payers.

  • We do believe we do believe at the broad portfolio of solutions to patients, which is very, very important to Teva.

  • So when we look at our pieces, the major pieces of our Business, we believe they are integrated.

  • There are some non-core assets, but the [well] Business, we are not going to discuss them one by one, that we are looking either to divest or even, possibly, to close, because we believe there is long-term value in it, but I believe that -- we will walk the talk and announced at each one when we do something.

  • But, again, there are pieces of the Business, but they are not at the heart of the Business.

  • - Analyst

  • At this point, Eyal, should we expect EPS in 2015 to be higher than 2014?

  • - CFO

  • Well, this is a little too early for guidance, but as we saw long-term plan, I believe, yes, we can improve.

  • But there is one open question that is still hanging above our ability to forecast and everybody's ability to forecast, which has to do with Copaxone.

  • - Analyst

  • Understood.

  • Thank you.

  • - VP, Head of Global IR

  • Amy, next question.

  • Operator

  • Douglas Tsao, Barclays.

  • - Analyst

  • Just in terms of Copaxone, you made a reference to seeking damages, both if generics do launch at risk for both the 20 milligram, as well as the 40 milligram product.

  • I was just curious, because I can obviously the rationale for that -- I was just curious if you could provide some perspectives on precedent for a case where somebody was awarded damages for a similar situation.

  • It doesn't necessarily even have to be in the biopharma industry.

  • But any perspective would be helpful?

  • - President & CEO

  • Rich, please.

  • - Group EVP, Chief Legal Officer and Company Secretary

  • There is no one specific precedent I would like to speak about today since is pretty well settled under patent damages law that we would be able to explore always that the infringing behavior would alter our market for our protected product and we would be fully compensated for the lawsuits.

  • In this case, the generic 20 milligram would most certainly have an effect on the 40 milligram by slowing or permanently affecting the transition, so we would certainly seek to be compensated for those losses, as well.

  • - Analyst

  • Okay.

  • Great.

  • Thank you very much.

  • Operator

  • Thank you.

  • I'd now like to hand the conference back to our speaker today.

  • - President & CEO

  • Thank you all for coming in and for just challenging us, asking the questions.

  • I look forward to touching base with all of you in the course of the year.

  • Operator

  • Ladies and gentlemen, that does conclude our conference call today.

  • Thank you all for your participation and many thanks to all of our speakers.

  • This conference was recorded today.

  • If you wish to review the presentation, then please dial 44-1452-550000 and quote 34735094.

  • Thank you all.

  • You may now disconnect.