Teva Pharmaceutical Indus Q3 2026 Earnings Call Transcript

Teva Pharmaceutical Indus (NYSE:TEVA) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Teva Pharmaceutical Indus reported a 2% decline in revenues for Q3 2026 but highlighted a 33% growth in its innovative portfolio, raising full-year guidance for these products.

The company achieved investment grade status from all major rating agencies and refinanced $4.9 billion of senior notes, enhancing its financial flexibility.

Teva’s biosimilars business is a significant growth driver, with 15 products on the market and plans to expand further, contributing to a projected $800 million in sales by 2026.

The company launched Waltruza for schizophrenia, emphasizing its potential to improve patient compliance and achieve peak sales of $1.5 to $2 billion.

Teva raised its full-year revenue guidance to $16.7 billion to $17 billion and expects its innovative portfolio to continue strong performance, with Austedo, Ajovy, and Uzedy all showing significant growth.

Management expressed confidence in achieving a 30% operating margin by 2027 through a favorable product mix and ongoing cost-saving initiatives.

The company is transitioning to a biopharma focus, with a robust pipeline expected to deliver over $10 billion in sales, including new acquisitions like BXCL501.

Teva plans to list ordinary shares on the New York Stock Exchange, improving investor access.

Despite challenges in generics, the company is optimistic about long-term growth, driven by biosimilars and innovative products.

Full Transcript

Elliot (Moderator)

Hello everybody and welcome to the Q3 2026 Teva Pharmaceutical Indus Earnings Conference call. My name is Elliot and I’ll be coordinating your call today. If you would like to ask a question during today’s event, please press star followed by one on your telephone keypad. Today we ask you to limit yourself to one question and one follow up. If you have additional questions, please rejoin the queue. I would now like to hand over to Christopher Stevo, Head of Investor Relations.

Please go ahead.

Christopher Stevo (Head of Investor Relations)

Thank you, Elliot. Good morning and good afternoon everyone. Thank you for joining us for our third quarter earnings call. As usual, our materials are posted to our website this morning, so please feel free to see them there. Before I turn the call over to our CEO, Richard Francis, I’d like to remind everyone that we’ll be making forward-looking statements on this call. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described in our earnings press release and our most recent Forms 10-Q and 10-K filed with the SEC.

Any statements that we make are only as of today and we undertake no obligation to update those statements subsequently. However, I will now undertake the obligation to give you our CEO, Richard Francis.

Richard Francis (Chief Executive Officer)

Thank you, Chris. Good morning. Good afternoon, everybody. Thank you for joining the call. With me today on this call would be Dr. Eric Hughes, Head of Global R&D and Chief Medical Officer, and Eli Kalif, CFO. Now moving on to the next slide, as I always do, I start with the Pivot to Growth strategy and the four pillars. We launched this in 2023, and I’m going to give you an update in Q3 as to the progress we made against this strategy, starting with deliver on our growth engines. You’ll see that the innovative portfolio continues to perform well, all delivering strong Q3 performance. And our innovative portfolio is up 33%, and we’re raising full-year guidance across all of these products.

Now the importance of these products can be seen in our financials, and you’ll see that our revenue is stronger, our margins and our free cash flow also become stronger. Now looking to the second pillar, step up innovation. You see that we have eight major milestone readouts this year, but also we’ve seen some good progress, and the approval of Waltruza was a significant moment for Teva Pharmaceutical Indus as well as for patients suffering from schizophrenia. We also have good progress in Ecopipam, and we have FDA Fast Track designation for an anti-IL-15 candidate for celiac disease. So looking ahead, we have four additional potential submissions over the next five years.

With regard to an announcement we made earlier in the week, Emma Solman, after an independent data monitoring committee met on a pre-specified interim futility analysis, we have discontinued the Phase 2 study. It’s worth pointing out there were no safety concerns. Now while this outcome was not what I hoped for and I’m deeply disappointed for the patients we were hoping to serve and the physicians who helped us on this journey, I’m particularly proud of the teams and the effort we put into this program.

What we have learned we will take forward with even more determination now. Another change to our pipeline that happened before the earnings was with regard to BioXcel and the acquisition of BXCL501. This is an asset we think is going to further strengthen our neuroscience franchise and our psychiatric portfolio. There’s a big unmet medical need, we believe, in treating agitation at home, and we think this in the hands of Teva Pharmaceutical Indus could really help these patients with this unmet need.

Now moving on to Sustained Generics Powerhouse: biosimilars. You’ll see throughout the presentation, becoming a significant growth driver now at Teva Pharmaceutical Indus in our generics business. We have 15 products on the market and 16 more in our pipeline and more opportunities to expand this. And actually earlier today you may have seen a press release that showed we have further strengthened our partnership with Samsung with two FDA-approved TNF-alpha biosimilars.

On the final pillar on capital allocation. With the latest S&P upgrade, Teva Pharmaceutical Indus has now achieved investment grade status across all three major rating agencies, reflecting the continued strength of our financial profile. We also in this last quarter refinanced $4.9 billion of senior notes. So please take that on that. And then, with regard to ADS conversions to ordinary shares in the New York Stock Exchange, we’ve now opened up the opportunity for broader investor access to Teva Pharmaceutical Indus.

Now, starting with what I think was the highlight of Q3 for us, which was the launch of Waltruza. The approval of Waltruza. Now this was a milestone for Teva Pharmaceutical Indus, but more importantly a milestone and an advancement of treatment for patients living with schizophrenia. Let’s be clear, it starts with the patient. Schizophrenia is a devastating disease, and every relapse can have a significant impact on patients and their families. Waltruza brings a proven olanzapine efficacy in a once-monthly subcutaneous injectable with the opportunity to help patients stay on treatment and reduce relapses.

Waltruza is the first and only long-acting injectable with no loading dose, no oral supplementation, or post-injection monitoring. And because of this we believe Waltruza can make a real difference for patients suffering from schizophrenia. So where’s the opportunity? Well on the next slide you can see it’s significant. With 2.2 million people who are diagnosed with schizophrenia in the US, approximately 1.7 million are treated, and approximately 20% of the prescriptions are for oral olanzapine. We all know that olanzapine has a well-established efficacy and safety profile, and that is going to prove the strong foundation for Waltruza. But also I hope we all agree that our commercial organization is very well positioned to succeed with Waltruza, building on the great work that has been done over the last three years with Uzedy.

I’ll go into that in more detail later. But when you combine these two products, we have a portfolio designed to address a broad spectrum of unmet needs with Uzedy and highly differentiated and yet complementary, they anchor in the two proven molecules of risperidone and olanzapine. And because of this we have confidence in achieving the peak sales of $1.5 to $2 billion. But now let’s move on to the financials. Now Q3 2026 reflects Teva Pharmaceutical Indus’ transition to a biopharma company. And the facts are in the numbers here. So let me walk you through that. So revenues declined 2% but our gross margin grew to 58.7%. That’s up 345 basis points. Our EBITDA grew 7% and our non-GAAP EPS was up 10%. Now I remember way back in 2023 when I presented the first quarter as CEO and our gross margin was approximately 48%.

So this really shows the substantial progress we’ve made in transitioning this company from a pure generics to a biopharma company. Now this isn’t a one-quarter effect. It reflects deliberate choices we have made to transition the business. We set out in 2023 to become a biopharma company and these results show the transformation happening. And what I’d highlight is there is more to come. Now these results include IPR&D impact, and Eli will present and explain in a few minutes. Now moving on to the next slide. Our total revenues are $4.4 billion. Innovative was up 33% year on year as I mentioned. Austedo was up 21% globally at $751 million. Uzedy was up 96% at $85 million, and Ajovy was up 61% at $269 million. Generics were down 16%. And this was largely due to the lower contribution of generic revenue. But now let me go into a bit more detail.

So onto Austedo. Austedo reaches its $2.5 billion target one year ahead of schedule. Really, really proud of this and congratulations to the team for making this happen. So revenues in the US are up to $727 million, up 21%, and the fundamentals remain strong. US TRx grew 18% and milligrams dispensed grew 23%. Now given this strong momentum, we increased our outlook by $75 million at the midpoint. So it will now be $2.55 billion to $2.65 billion. So congratulations to the team on that.

I would like to highlight that the opportunity for Austedo remains strong. You see that the market growth taking the new patients with 85% of patients not treated. We see a strong opportunity to keep growing this product to greater than $2 billion of peak sales as we previously communicated. Now moving on to Uzedy. Uzedy is the fastest growing LAI for schizophrenia. Revenues grew 96% to $85 million in Q3 and the underlying demand remains strong with TRx and MIt up 62% year over year. The excellent commercial execution is expanding the market with Uzedy nearly doubling risperidone LAI share from 5% to 10% and capturing approximately 83% of risperidone LAI. It is worth noting that if you remember back to 2025 Q3 and Q4 we did have some one-off negative impact.

So it’s worth keeping that in mind when you plan forward. That said, we’re increasing our outlook on Uzedy by $20 million at the midpoint. Now the range is $290 million to $310 million. It probably doesn’t need pointing out but I will that this continued excellent execution gives us a solid foundation from which to launch Waltruza. Now moving on to Ajovy. Ajovy continues to extend its global leadership in migraine, continuing to outperform the injectable market and leading many markets where we’ve launched. Global revenue reached $269 million, up 61% year over year, with strong momentum across many markets. In the US, revenue grew 89% while ex-US momentum remains strong, supported by volume growth as well as market share gain. Because of this strong momentum, we will increase our outlook by $85 million at the midpoint, so raising it to $930 million to $960 million.

Now I’d like to point out this doesn’t happen by chance. And if you remember, when we started on this journey in 2023, nobody was talking about Ajovy, but we reinvigorated it. I think this reflects something broader about Teva Pharmaceutical Indus. We do things with intent and we execute with intensity. And that’s why, looking beyond 2026, we see a path to greater than $1 billion of peak sales for Ajovy. Now moving on to a couple of new products in our pipeline that I’ve touched upon earlier. Firstly, Ecopipam. This is a first-in-class opportunity for Tourette’s syndrome, combining compelling efficacy and favorable tolerability in a serious pediatric neurological disorder with limited treatment options. There are 100,000 pediatric patients who live with Tourette syndrome. For the year, 50,000 are treated, but unfortunately only 20% to 30% remain on therapy after one year.

We hope to help that and hope to help these patients and these children. Our next key milestone is obtaining regulatory approval, which we anticipate in Q1 2027. Now moving on to the latest addition to our innovative pipeline is the asset that we acquired from BioXcel, which is BXCL501. This is expected to address another clear unmet need for patients experiencing acute agitation at home, extending our patient focus in neuroscience and bringing potential benefits to nearly 7 million patients. BXCL501 could be the first at-home treatment for acute agitation, and in regulatory approval, adding another differentiation opportunity and significant value to our neuroscience portfolio.

This also highlights another example of disciplined capital allocation, finding differentiated assets where Teva Pharmaceutical Indus can add real value. Now my colleagues will go into more detail on Ecopipam and BXCL501 next week at our R&D day. Now moving on to the next slide. When we talk about growth and we talk about the impressive growth in Q3, it’s worth pointing out that we have a decade-long runway of growth catalysts, and as you can see here, we have a maturing pipeline that I will talk about in more detail next week. But as you look at 2030 and beyond, it really does get quite congested, this slide, and that’s a very exciting opportunity for Teva Pharmaceutical Indus and for potential investors.

Now moving on to the next slide, a slide which we’ve talked about the last couple of years, but now we start to see some of these products actually come to the market. Obviously we’ve spoken about Waltruza, we’ve spoken about the near-term opportunity in Q1 for Ecopipam. Now we’ve added BXCL501. So we have a pipeline here that we are confident can deliver over $10 billion of sales to Teva Pharmaceutical Indus going forward. But we’ll give more detail on this at our R&D day next week.

Now moving on to the generics business. Now, Generic Powerhouse we’re going to have is resilient beyond Revlimid, which is exciting. And let me show the fundamentals that drove this. If you take away generic Revlimid, our global generics business grew 1% with the US down 3% and EU up 7%, and emerging markets down 4%. Now we expect our generics business to be flat to slightly up in 2026. But we continue to be positive about the long-term growth trajectory of this business, 1% to 2% over the long term.

Now, I remain very optimistic about the future of our generics business. The main reason is the growth rate is really around our rapidly expanding biosimilar portfolio pipeline. So now if I move on to this, you see this clearly. It’s one of the fastest growing biosimilar businesses we have there. We set out to achieve $800 million of sales by 2027. Well, and I’m in a position to tell you today that we’re going to do that in 2026, a year ahead of schedule. And at the same time, we’re expanding our portfolio from nine assets in 2024 to 15 today and potentially 18 in 2027. But it’s worth noting this is not simply about adding assets.

We are deliberately shifting our portfolio towards biosimilars, an increasingly important growth driver for our generics business. And what’s important, it’s not just about the portfolio, it’s how we execute it. And as you can see, three out of the five US biosimilars are ranked number one, while in Europe we are building leading positions across several important markets. If you go on to the next slide, we’re going to continue on this journey, expanding our portfolio and bringing these biosimilars to markets in both the US and Europe. As you can see here, we have the potential to be 31 already. But I’ve also realized that this slide is already out of date because of the deal we announced today with Samsung. So it should be 32. So apologies for that, but it does really reflect the speed we move at Teva Pharmaceutical Indus.

So based on this solid foundation of innovation and the portfolio transition of our generics business with biosimilars, I can move on to the next slide and say we are firmly on track to achieve our 2027 targets that we laid out back in 2023. And with that, I’m going to hand over to Eric.

Eric Hughes (Head of Global R&D and Chief Medical Officer)

Thank you, Richard. If I could add my first slide, I just want to review really quickly the progression of our innovative growth drivers. This is led by a trio of neuroscience products with the approval of Welltruzone and now the hopeful approval in 2027 of ecopipam for Tourette’s disease. And then finally our new drug dexmedetomidine that is being used for the treatment of agitation. We’re looking for a PDUFA date in Q4 of this year. So really a great spearhead leading with our neuroscience portfolio.

But following on to that is our burgeoning innovative pipeline in immunology, leading off with Dari, which will be ending our phase three study soon with our last exacerbation hopefully around the end of this year. We’re also progressing Juva Ketod. It’s obviously in phase three at this point with ulcerative colitis and Crohn’s disease. We’ll also be initiating a hidradenitis suppurativa and fibrostenotic Crohn’s disease with our partner Sanofi. And then finally our IL‑15 program.

We had exciting new data this year in our proof‑of‑concept study in vitiligo and celiac disease. So a real engine of growth for innovative drivers. On the next slide though, the real bell of the ball today is Welltruza. This is a fantastic product for patients with schizophrenia, building upon the known efficacy of olanzapine. But we really delivered on the label with no loading dose, no oral supplementation and no post‑injection monitoring. I just have to give a shout out to the R&D team for doing such a great job in its development. And I appreciate that our data set was so well received by the FDA to give a label that really gives something that patients can use in the future.

So kudos to the team. But you know, on the next slide I just want to really go over. There’s been a lot of momentum just since the last earnings call in Q2. Since then we have the announcement of the priority review of ecopipam. We’ve had the submission of the IND to the hidradenitis suppurativa study. And for Duplate, we announced and shared some top‑line data that showed clinically significant changes in our gluten challenge for celiac disease. We had presented our vitiligo data at the EADV conference in September.

We achieved the futility analysis for Emmer Solman. Unfortunately, that didn’t turn out the way we wanted. But the team did a great job in execution of the study and we’ll review the loads of data that we produced to see how we’ll bring that program forward in the future. But really the Welltruza was a big announcement on October 8th and then finally we presented at UEGW at Dubaketog data on the maintenance data, how we started the entire year, bringing it full circle and presenting that great data for Duba Ticot.

So lots of momentum just in the last quarter. So we’re very proud of that work. If I go to the next slide so you can see we’re marching down the catalysts that we had outlined at the very beginning of the year. Duvaketog, ecopipam, anti‑IL‑15, Dari, Ammer Solman — now we’re adding Welltruza and we’ll be talking about PD‑1, IL‑2 and dexmedetomidine in the future R&D meeting next week. And finally, I’m just going to end with the fact that I was going to be quick today because we’ll be talking a lot more about the deep dives into our pipeline, some new programs and new data that we’ll present next week on November 11th at our R&D Day.

I hope people can call in and listen to the webcast. If you need more details just visit our website or write to us. And with that I’m going to pass off to Eli Kalif.

Eli Kalif (Executive Vice President and Chief Financial Officer)

Thank you, Eric, and good morning and good afternoon to everyone. I would like to start my review of Q3.26 results with The following key messages. First, sustaining innovative growth momentum. We expect to continue to deliver strong product mix growth supported by disciplined commercial execution and focused investment while transforming to a higher-margin profile. Second, continue to maintain a credible path to 30% operating margin by 2027. Capture the full benefit of the transformation program including structural cost saving, productivity improvement and operating leverage from a more favorable growth and product mix while actively mitigating generics revenue erosion, and lastly, execute a disciplined capital allocation strategy, preserve financial flexibility while prioritizing debt reduction and sustained execution on our financial policy resulting in an investment grade profile, targeted business development investment with acceleration of innovative R&D, and focus on shareholder returns.

Now starting with our Q3 GAAP performance on slide 30. Before I discuss our Q3 results, let me briefly explain why we also reflected the IPR&D impact. IPR&D can result in significant upfront and milestone expenses related to investments in externally acquired or licensed pipeline assets. Given the transaction-driven nature of these expenses, starting with Q3 2026, we present the impact of these transactions on our results to provide a clearer and more comparable view of our underlying operating performance.

Q3 revenues were approximately $4.4 billion, down 2% in U.S. dollars and in local currency compared to Q3 2025. This decrease was largely driven by lower generics products, mainly generics revenue, and was largely offset by continued strong growth of our key innovative products Austedo, Ajovy and Uzedy. GAAP net profit and profit per share were $233 million and $0.20, respectively. Turning now to our non-GAAP performance, our non-GAAP gross margin in Q3 2026 was 58.7%, an increase of 345 basis points reflecting a favorable mix of products with strong growth in our key innovative products, partially offset by lower revenue from generics products, mainly generics revenue, and GAAP operating margin was 31.7%, or 182 basis points above Q3 last year. This increase in operating margin was mainly due to a higher gross margin partially offset by higher planned investment in sales and marketing to support our innovative growth and launch preparation for Viltrusa, as well as by capital gains from the sale of property in Europe.

Overall, we ended the quarter with a non-GAAP EPS of $0.86, 10% higher compared to Q3 2025. Our free cash flow in Q3 was in line with our expectations at $495 million, slightly below last year. In October 2026, we repaid approximately $1.8 billion of our debt maturity. As of today, no amounts are outstanding under our revolving credit facility. To provide you with some additional color, our Q3 2025 year-to-date results included approximately $1 billion revenue and $730 million EBITDA contributions from our generics revenue. Our Q3 2025 result included $430 million revenue and $300 million EBITDA contribution from generics revenue. Excluding these, our financial results year to date and for this quarter reflect a strong underlying performance. Moving to the next slide. As a reminder, our operating margin expansion to 30% is driven by two structural elements.

The first is the portfolio shift towards higher growth, higher margin innovative products, and second are the Teva Transformation Program. We continue to make solid progress with our year-to-date operating margin reaching 28% on our updated 2026 guidance of 27.8% to 28.2%, all excluding IP R&D expenses. Looking ahead to 2027, we expect a further 180 to 220 basis points of improvement driven by the full expected impact of our transformation program and continued innovative growth, while compensating for generics revenue erosion.

This is the core of our financial transformation, moving from a company historically driven by generics to a … Moving to slide 32. Focused financial management has been an important source of cash creation for us and, importantly, it has allowed us to redirect capital towards higher return opportunities. From 2022 through 2026, improvements in net working capital generated approximately $1.3 billion of incremental cash with an additional approximately $160 million from lower interest expenses. Together that represents roughly $1.5 billion of cash generation that we have been able to redeploy into the business, including accelerating our innovative pipeline and investing in our broader priorities.

Looking forward, we see the opportunity to continue these dynamics. Between 2027 to 2030 we expect to generate an additional approximately $500 to $900 million from net working capital together with approximately $1.4 to $1.6 billion from interest expense savings, bringing the accumulated opportunity to approximately $3.4 to $4 billion. By the end of 2030, we expect to reach negative net working capital as a percentage of revenue and, importantly, as the business grows, this becomes increasingly powerful.

We are freeing up capital and reinvesting it in higher rates of return while continuing to grow and create further capacity for investment. At the same time, we remain focused on maintaining the right balance sheet. We have repaid approximately $12 billion of debt since 2019 and remain on a clear path for the net debt-to-EBITDA of 2x by the end of 2027, with approximately $2.7 billion expected free cash flow in 2027 compared with less than $1 billion of annual maturities from 2028 through 2030 and approximately $2.5 billion of free cash flow expected in 2030. We believe we have significant financial flexibility to continue investing in our growth while maintaining appropriate leverage.

So this is really a reinforcing cycle. Disciplined financial management generates cash; that cash is reinvested into high-return growth opportunities; and as the business grows, we create even greater capacity to invest. Now turning to 2026 outlook on slide 33. Based on our strong performance year to date and the visibility into the remainder of the year, we are raising our full-year revenue guidance range to $16.7 billion to $17 billion, which is an increase of $175 million to our midpoint. We’re also updating our outlook range for operating profit, adjusted EBITDA, EPS and free cash flow. As Richard mentioned earlier, the acquisition of BXCL501 from BioXcel is now closed.

Here is a reminder of the deal terms: the agreement provides for $57.5 million upfront payments as well as up to $67.5 million in potential contingent payment linked to the timing of expected FDA approval and certain sales milestones. Let me provide some color on our guidance assumptions starting with the revenue first. Our innovative portfolio continued to perform strongly across all three products, Austedo, Ajovy and Uzedy. We are increasing the full-year guidance for all three products with Austedo now expected at $2.55 billion to $2.65 billion, Ajovy at $930 million to $960 million and Uzedy at $290 to $310 million. We expect our global generics revenue full year to be flat to slightly up in local currency compared to 2025 excluding the impact of generic … and the divested Japan business. We continue to expect 2026 non-GAAP gross margin to be in the range of 54.5% to 55.5%. We now expect 2026 operating income to be in the range of $3.8 billion to $2.9 billion with an operating margin of 22.6% to 23.1%. Excluding IP R&D, this range will be between 27.8% to 28.2%.

Our operating expenses continue to reflect the deliberate investment we are making to support our growing innovative portfolio and biosimilars. Our guidance for operating income and adjusted EBITDA reflect continued growth investment in opex, with adjusted EBITDA now expected to be in the range of $4.23 billion to $4.43 billion. Excluding IP R&D, this range will be between $5.1 billion to $5.3 billion. We continue to expect finance expenses to be approximately $800 million and a tax rate in the range of 20% to 23%.

Our diluted EPS guidance is now $1.92 to $2.11 and we are also increasing our guidance for free cash flow to be in the range of $2.1 billion to $2.4 billion for the full year. Now let me provide you some additional thoughts on Q4. For Austedo, we continue to expect revenue in Q4 2026 to be down year over year due to expected changes in the purchasing patterns and the pricing environment ahead of the IRA implementation in January. In addition, we are preparing for the Q4 launch of Virtruza. Since the initial volume is expected to be largely samples or vouchers as we establish payer coverage, we continue to expect no major revenue contribution in Q4.

Over the last several years we have consistently delivered on our commitments and made significant progress across our key financial metrics. Today we are not providing detailed 2027 guidance outlook, but looking ahead we expect this momentum to continue with a mid-single-digit growth on revenue CAGR from 2023 to 2027. We outlined on slide 69 more comprehensive information about our financial trajectory. Moving to the next slide on capital allocation. Over the last few years we have made significant progress in strengthening our balance sheet. This progress allows us the financial flexibility to invest in our innovative portfolio and pipeline, evaluating value-accretive business development opportunities along with the optionality of returning capital to shareholders through buybacks when appropriate. And lastly, I would like to briefly touch on our transition to a direct ordinary share listing on the New York Stock Exchange.

We believe this change is making Teva shares more accessible to a broader investor base who are now able to buy ordinary shares directly in a seamless manner and strengthening our position in the U.S. capital market. Together with our recent return to investment grade ratings from all three major rating agencies, this represents another important milestone in our financial transformation. We believe this transition reflects the momentum we’re building through our Pivot to Growth strategy and further enhances our ability to invest for long-term growth and create shareholder value.

With that, I will now hand it back to Richard for his closing remarks.

Richard Francis (Chief Executive Officer)

Thank you, Ali. So in summary, Teva is now a more focused, high-growth biopharma company and our Pivot to Growth strategy is delivering. The growth engine of our innovative portfolio is accelerating. Austedo, Uzedy and Ajovy are growth drivers and we’re excited by the recent FDA approval of Welltoozer. In the near future, our incremental growth will come from the next generation of innovation. And to conclude on the next slide, as we continue our journey, three themes are clear: in a pivotal year for Teva, we delivered as promised; our pipeline is advancing with speed; our disciplined capital allocation is what sets us apart. And to build on what Eric said, we are looking forward to seeing you at our R&D Day next week in New York City. With that, I’ll open the floor to questions.

OPERATOR

Thank you. If you would like to ask a question, please press.

Christopher Stevo (Head of Investor Relations)

Sorry, Ellie, before you get the queue ready, I just wanted to remind people if you could try to limit yourself to one question and one follow up, and if you have additional questions, we’re happy to have you back in the queue and we’ll answer as many as time permits. Sorry, go ahead, Elias.

OPERATOR

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. Our first question today comes from Yoon Choi with Evercore ISI.

Your line is open. Please go ahead.

Omer (Analyst)

Hi guys, sorry, thanks for taking my question. Omer here. I wanted to touch upon two things here. First, the last slide has this interesting disclosure on a possible 57 to 58% gross margin in 2027. I believe that’s a new disclosure, which is up quite nicely from the full year ’26 of about 55% gross margin. My question is this. If AUSTEDO is flattish next year because of IRA implementation, can you speak to what enables that 200 to 300 bps in gross margin expansion, which is presumably not branded-business driven?

Second, speaking of AUSTEDO more specifically, I just wanted to run some math with you first. We heard Gilead mention about a billion five in IRA impact of Biktarvy, which represents something between a quarter to a third of Biktarvy’s Medicare exposure. So considering Medicare exposure is about 1.5, is it reasonable to assume something like half a billion or so in IRA exposure for AUSTEDO into next year? Thank you.

Richard Francis (Chief Executive Officer)

Thanks, Omer. Thanks for the question, and I appreciate the fact that you looked through all of the slides, even in the appendix, so thank you for that. So I’ll hand over to Eli to talk a bit about the gross margin. But I think one thing I’d say on a high level is when we did disclose the direction of travel with our gross margin back at our capital markets day, I think what you’re seeing is the fact that the transition to a biopharma company is accelerating that because our portfolio is transitioning at speed at a scale combined with some of our efficiency drivers.

But I’ll hand that to Eli to give you a bit more context.

Eli Kalif (Executive Vice President and Chief Financial Officer)

Thank you, Omer, for the question. We did mention in the past 57 to 58%, and while keeping the 27 to 28% opex gets us to the 30% op. But that’s just kind of a high level. What I will mention is the following. If you look at just, you know, this quarter we actually are going to be above 58%. You compare it to last year, the same quarter was a bit above 55%. This is kind of a 350 basis points and mainly coming from the innovative shift that we add on our revenue mix.

What we want to see next year—to remind everybody—we have the $700 million on transformation savings. Around two-thirds of it is actually related to opex and we want to actually utilize it and recognize it this year. But the rest of the program is more kind of related to our network optimization, which is going to impact our cost. So if you think about us ending the year close to, I would say, in the high range of 55.5%, we get 200 basis points to the midpoint of the 57 to 58%—kind of 100 basis points going to manufacturing and optimization of our costs and 100 basis points going to our innovative revenue shift.

Richard Francis (Chief Executive Officer)

Thanks, Eli. And the one thing I’d say about that trajectory of gross margin upwards: it will just keep continuing. It’s just a question of by how much. But it will continue because of the transformation of our portfolio, because of the transformation of the launches we have coming up. Now, to answer your second question, Omer, generally speaking, yes, you’re right. So that’s probably the first thing to say. Without getting into guidance—consistent with our past practices, we’ll provide guidance in ’27 next year. But yes, we have a high degree of confidence that AUSTEDO will achieve 2.5 billion next year and greater than 3 billion at peak. 2027 was always a year we planned for. We have strong fundamentals offsetting the IRA impact, and so that’s what gives us the confidence in that.

I’d say, just to give you more broader context, what has really changed is the company is having a portfolio pivot, additional to established. So once again, guidance on ’27: we expect Teva Pharmaceutical Indus’ revenues to grow again. Besides AUSTEDO, we’re now adding more TRUZIMA and eco pipeline and then potentially maybe the XCL501. So our portfolio of innovation allows us to continue to grow in ’27 and beyond, and that allows us to grow our margins.

So, you know, I think it’s a good question. I appreciate your answer because it’s multi-layered, but it fundamentally comes back to the execution of the pivot-to-growth strategy, the execution of moving us to a biopharma company with a fast-growing innovative portfolio. Thanks for the question, Omer.

OPERATOR

We now turn to Douglas SA with HC Wainwright. Your line is open. Please go ahead.

Douglas SA (Analyst at HC Wainwright)

Hi. Hi, good morning. Thanks for taking the questions. Maybe two questions on AUSTEDO and AJOVY. You know, first, in terms of AUSTEDO, I noticed you’ve continued to have an acceleration in terms of the milligrams per patient, and I’m just curious. Some of that is obviously just coming from natural migration to XR, but I’m curious, within the XR franchise alone, sort of how much continued traction have you had? I know you’re not—patients are generally not getting to the 36.6 that was in the phase 3 trial.

And how much of a focus is it, you know, to sort of get patients ultimately to that level? And then just in terms of the AJOVY, where we’ve sort of had, you know, the franchise really, you know, renewed growth recently, I’m just curious, when you think about the prospects, you know, what you’re necessarily seeing in the U.S.—it looks like you’re doing better on a revenue standpoint per patient—you know, sort of how you see share shaking out. You’ve definitely taken share from Aimovig, you know, over the long term. And how much growth will come from U.S. versus ex-U.S.?

Thank you.

Richard Francis (Chief Executive Officer)

Okay, firstly, thank you, I think, is the right word for the coverage. So I appreciate that, and thank you for your question. So let me try and pick them up. Firstly, I’m going to start with AUSTEDO. So you talked about the milligrams growth there, 22% to Q3. Let me sort of—how that has happened is a couple of things. Firstly, there was the launch of XR, but then there was also the launch of the ability to get a titration pack through prescription.

Because one of the things about AUSTEDO is you need to titrate up to the optimal dose to get efficacy. So having a titration pack prescribed and then having XR once a day just makes that process simpler, and so that’s what’s really driven that. We haven’t actively gone out there to drive conversion from BID to XR. We’ve let the physician make that choice. But because of the fact that those two things are in place, we’ve seen that continuously improve, which is good for the patients because we want to have the patients on the most efficacious dose.

And one of the challenges and opportunities with AUSTEDO is that people start to feel efficacy pretty quickly, but we want to make sure they go on to something that is most optimal for them. But that’s down to a physician to use the titration pack and XR to help do that. So that’s the fundamental of that, and we see continued progression of that this year and going forward. Now onto your question around AJOVY. I think it was around about the U.S. performance and how strong that is, and then the rest-of-world performance. So let me sort of talk you through the U.S. performance first. And it goes back to what I said in my opening remarks. This is about a focused execution on delivering a strategy at a brand level. What do we want to do globally and what do we want to do locally, and what capabilities do we need to put around that?

What resources and what choices do we need to make? And I think in the U.S. we’ve seen the work of the team there, and making decisions on making sure we have the right access and the right value. And when you do that, as well as growing market share, then you have the ability to … Then with regard to the rest of the world, you have the opportunity. And as you see now, we continue to grow in Europe and international markets above market—significantly above market. And because of that, we’re growing market share. And so if you do that, we continue to see the revenue growth. I think what this highlights—because I know this is an unusual situation—but with focus, capability, and the right resources and the right ambition, expectations, you can revitalize a brand.

And I think we’ve seen that with AJOVY. And so that’s why we remain confident it’s going to exceed 1 billion in peak sales, which sounds obviously like a big number, particularly when we started our conversations nearly four years ago. Hopefully I answered your questions. Thanks very much.

OPERATOR

We now turn to Glenn Santangelo with Barclays. Your line is open. Please go ahead.

Glenn Santangelo (Analyst at Barclays)

Yeah, thanks for taking my questions, Richard. Just two things I wanted to hit on quickly. You know, when you were talking about sort of the biosimilar launch slide, you sort of commented how congested it’s becoming. But as I’m sure you’re aware, you’ve seen a bunch of incremental litigation in the space—for example, Janssen seeking a PI on Simponi and Genentech bringing a suit on Xolair—and, you know, a lot of concern around Entyvio and, you know, on the launch timing there just sort of given the IP at Takeda.

And I’m just kind of curious how Teva Pharmaceutical Indus thinks about navigating all that potential litigation, making the decision on whether to launch these products. Because on that slide, it seems like you have some incremental contribution coming in ’27 from these drugs. And then secondly, I did want to ask about ’27 related to Ecopipam and BXCL501. I’m sure you’re going to touch on this at the R&D day next week, but I’m just kind of curious at a high level, are you expecting any type of reasonable contribution from those two drugs in 2H ’27? Thanks. And I’ll stop there.

Richard Francis (Chief Executive Officer)

Glenn, thanks for the questions. So on the biosimilars one with regard to litigation, yeah, that’s pretty much the business we’re in when it comes to generics and biosimilars. You know, we want to bring these products to the market and people want to litigate it and stop us doing that. So it is not a surprise to us. Obviously we’d like that not to be in place, but we strategically plan and we financially plan with realism. So when we think about our portfolio of 32 now, we take into account the puts and takes.

And I think when I started on this journey, I said to people who asked me which is going to be the most successful biosimilar? I said I don’t know because there’s too many variables: IP mitigation, launch timing, run of competitors, price erosion, etc. When you have a portfolio, you allow yourself to manage those risks in a more thoughtful way that allow you to continue to grow. And because of that, I feel very confident of the direction we’re on with our biosimilar business.

And I think what’s important noting now, we are reaching a certain momentum and scale that this is going to fundamentally change the portfolio of our generics business. And I think that’s something for people to maybe double-click on and recognize. So I think that’s why the other thing I turn on biosimilar business is to some degree it doesn’t follow all the traditional rules. As I said, three out of five of our biosimilars in the US are number one.

We were not number one to the market. So that just shows you it’s not as straightforward as people think. And I like that. And the same in Europe. We come to Europe late in many instances, but we’re also showing that we can be number one in those markets because of the capabilities, infrastructure we have in place. So I think biosimilars, you’ll hear us talking more about it, but we’re going to keep expanding that portfolio and litigation will come and we’ll deal with that as and when it comes, but it won’t derail us.

Now, on the pipeline, MPC XL501. Look, I’ve got to ensure you turn up next week, so I can’t tell you anything. All I’ll say is a good question and the right question and we’ll start to give you some insight into why we’re excited about these two products. Whether we’ll give you any guidance on that, you have to wait and see. But I’m glad you’re starting to focus on those because I think in our hands, as we’ve shown, we can really drive value. We just had that conversation on Ajovy, but I think when you look at Ecopipam with a significant unmet need and you look at the PCXL501 with a significant unmet need in agitation, I think we’re very excited about what we could do with those. So apologies, but I’ll see you in New York next week.

Glenn Santangelo (Analyst at Barclays)

No worries. Thanks. We’ll see you next week.

OPERATOR

Our next question comes from David Amsalam with Piper Sandler. Your line is open. Please go ahead.

David Amsalam (Analyst at Piper Sandler)

Thanks. So actually have a couple of Ecopipam questions, more longer-term focused. So you didn’t provide peak sales potential for the product in your slide, unlike other products in the pipeline or recently approved. So maybe just a question on how you’re thinking qualitatively about how impactful this product could be. How are you thinking about access dynamics, mix of Medicaid versus commercial, and how long do you think it’s going to take to get good access?

Any pricing analogs that you can help us with in terms of how to think about that? And then do you think this is a product that could slot in ahead of the approved antipsychotics that are commonly used? I know that’s a bunch, but it’s obviously an important driver going forward. Thanks.

Richard Francis (Chief Executive Officer)

Thanks, David. Thanks for the question. No, it’s a really good question and I’ll give Eric a heads up. We’ll talk about that third line moving ahead of antipsychotics. But I think we’ve touched upon all the variables there that we’re thinking about. So first off, there is the fact that we’ve got to think about what is the appropriate price for such an innovative product that’s going to bring compelling efficacy and good tolerability and safety. And we’re doing a lot of work on that now because obviously that is a very important factor in this equation.

And so that’s another reason why we don’t want to start talking about sales and peak sales, because you want to get that work done and we want to make sure that it’s as thorough as it can be. But as we’ve said in the past, the pricing will reflect something of a rare-orphan nature where there’s a significant unmet need in the pediatric population. The second thing that comes down to then is access, and how do we want to approach access? And as you know, we are very thoughtful about access and we think about the long-term value of a product and how you have to be thoughtful in what you do with regard to access around that. And so we’re working through that with regards to Medicaid and commercial. You know, the mix is a bit different here. So I think we’re looking at more commercial plans on this product, which, as I stated in the past, is a change for us because we’ve spent a lot of our time dealing in Medicaid and Medicare.

So I think that’s how I would think about it. But I’ll hand over to Eric. What I would say is, when I get to speak to physicians and when I actually speak to patients—and I’ve actually even come across some people who suffer from Tourette’s—then there is a clear opportunity for an efficacious and safe and well-tolerated product to move ahead of an antipsychotic. But maybe I’ll hand that to the doctor in the room.

Eric Hughes (Head of Global R&D and Chief Medical Officer)

Thank you, Richard. So I think that the value of Ecopipam comes down to the data sets that we’ve generated to date. There are two well-controlled studies, both in phase two and phase three now—one with a 30% reduction in the tic experience for the patients and a 50% reduction in the relapse rate. So it’s great data. But more importantly, the side-effect profile was favorable, where you saw very good tolerability, no metabolic effects, good activity for their tics, and no abnormal movement disorders.

So when I think about how physicians might use this in the future, sure, they might step through what they do today with alpha-adrenergic receptor agonists, which is off-label. Then they might go on antipsychotics. But I think when they get used to what the profile is of Ecopipam and get to understand both the efficacy and the safety profile, it will move up in that list of possibilities out there. I think that long-term efficacy—remember, only about the mid-20% of people stay on their therapies today.

In our long-term follow-up, 66% of patients stay on the drug for up to a year. So I think the profile, once physicians get used to it, will move up in that armamentarium. Thanks, Eric. Thanks for that answer and thanks for the question, David.

OPERATOR

Our next question comes from Jason Gerberry with Bank of America. Your line is open. Please go ahead.

Jason Gerberry (Analyst at Bank of America)

Morning. Thank you for taking my questions. So one question for Eric: what does the timeline look like for Teva’s efforts to advance a TL1A bispecific into the clinic? I know you guys have some efforts that had been ongoing preclinically. So anything you can update there in terms of timeline? And then my follow-up question is: does the US Government agreement exclude Teva from some of the generic tariff headline proposals—or I don’t know what to call it exactly—but does the agreement provide exemption from any generic tariff risk? Thanks.

Eric Hughes (Head of Global R&D and Chief Medical Officer)

So I can start answering the question on the TL1A bispecifics. I’ll disappoint you right off the bat: I’m not going to tell you much because we have an R&D day next week, and we may be talking about bispecific programs with our TL1A. I would mention that we are one of the first in the TL1A space. We have a very potent, high-dose selective drug with low anti-drug antibodies in phase three. I think that our scientists are the experts in TL1A, and we’ll hear more about that next week.

Richard Francis (Chief Executive Officer)

Jason, with regard to your question on generics and any agreement with the US Government, as they laid out some time ago, it’s a two-year time frame they’ve been put in place to come to some sort of agreement, and so there’s nothing that’s being concluded there. But as you can imagine, a company like Teva Pharmaceutical Indus is always at the table. And so as and when we get more information, we’ll let you know.

OPERATOR

We now turn to Louise Chan with Scotiabank. Your line is open. Please go ahead.

Louise Chan (Analyst at Scotiabank)

Hi. Thanks for taking the questions and congratulations on the quarter. I wanted to ask you first what’s your latest thinking on M&A and business development, and then secondly if you could talk about your R&D philosophy a little bit more and the efficiency at which you move products through your pipeline. Thank you.

Richard Francis (Chief Executive Officer)

Hi, Louise, thanks for the question. So M&A. What we think about is efficient deployment of capital all the time. And obviously we’re thinking about that a lot, and we have been thinking about that a lot in the last few years, despite people thinking today wasn’t going to come. And what I mean by today is an ever-improving balance sheet, investment grade, and, as Eli’s pointed out, an opportunity for the company to really generate some free cash.

And so obviously we know our balance sheet is going to start to improve significantly because of that. We were always planning for this day—hopefully that’s something that people start to realize. We do plan long term for Teva Pharmaceutical Indus, and so we start to think about what can be around the corner. And so yes, we do think about more business development deals, we think about potential M&A, but it has to be one that we feel is good value, drives the long-term value of the company, and puts us on a sustainable footing to become a world-class biopharma company.

And I think, hopefully you’ve seen with the deals we’ve done, we’re very thoughtful about how we deploy capital externally and making sure we do things that we know will drive good accretion short term as well as long term. And so that’s our philosophy. The balance sheet gives us a bit more flexibility, but our discipline will not change. Now, on the R&D philosophy, are you going to tell them anything or are you going to make the resources? Give them a headline. How’s that?

Eric Hughes (Head of Global R&D and Chief Medical Officer)

So, yeah, thanks for the question. I think it’s a pretty simple strategy and philosophy we have—we’ll talk about it more next week. But it’s really about using known science to increase your POS, speed and execution at true leather, not AI. And it’s disciplined capital and using partnerships where you can increase your bandwidth and your funding. So it’s straight-up simple, but you have to execute it.

Richard Francis (Chief Executive Officer)

Thanks, Harry. Thanks, Lisa. Thank you for the question. Next question.

OPERATOR

We now turn to Dennis Ding with Jefferies. Your line is open. Please go ahead.

Dennis Ding (Analyst at Jefferies)

Hey guys. Good morning. Two questions if I may. One on Voltuza: so you framed the market as 2 million in the US diagnosed and 20% on oral olanzapine, so you’re essentially implying the TAM is around 400,000. But how does the TAM change given many patients don’t tolerate olanzapine because of weight gain and then they eventually discontinue, and Welltruza likely will have a similar side effect profile? So where do you see Welltruza being realistically used?

And I guess in a way, I’m asking if you have an estimate for how many patients have shown efficacy on olanzapine, tolerate the weight gain, but are also showing evidence of non-compliance. So that’s question number one. And then question number two for biosimilars, can you

Dan (Analyst)

Please clarify again and confirm on slide 20 that you’re looking to launch a biosimilar Symphony in the US in 2027. And I’m just wondering because, you know, how are you thinking about the litigation aspect here as a barrier for a US launch. And the reason we ask is because the four-day bench trial that J&J has against Bio-Thera starts March 2028, and I’m assuming your partner’s bench trial will be scheduled around the same time frame. So just help me reconcile the timing differences here.

And if what you’re implying is that you’ll be aggressive in pursuing a settlement to ensure a 2027 US biosimilar Symphony launch. Thanks so much.

Richard Francis (Chief Executive Officer)

Okay, thanks, Dan. Thanks for the question. So I will tag-team the first one with Eric. But the way that we think about it is the reason why olanzapine commands such a large portion of the market in schizophrenia is because it is very efficacious, and it’s seen as the gold standard when it comes to efficacy. So while you’ve identified some of the metabolic challenges it has when it comes to managing schizophrenia, when patients have severe schizophrenia, efficacy is the number one priority.

And that’s why olanzapine has maintained that segment of the market. So obviously, when it comes to severe schizophrenia, compliance becomes key. And that’s where we think mortuza comes in. So in a way, we’re not dealing with those side effects; they’re already known. And people are picking olanzapine because of the efficacy, both the physician and the patient. But I’ll let Eric give more context to that.

Eric Hughes (Head of Global R&D and Chief Medical Officer)

Its known safety profile. So as a physician, you’re using something but bringing something new to it with the LAI. So 20% of the market approximately already uses olanzapine. That’s how well known it is and how used they are to using it. So bringing that convenience and that, hopefully, added benefit of lower relapses and better adherence with an LAI is really the value proposition here. I think that really defines it very easily for a physician to choose who should get it.

And I’d add that we’ve done the same thing with UZEDY in a space of risperidones. Here we’re launching into a market for LAIs that really has no viable alternative at this point.

Richard Francis (Chief Executive Officer)

Thank you, Eric. And then when you go on to the question you had on the biosimilar Symphony, you know, when