Teva Pharmaceutical Industries' CEO Hosts 2012 Investor Meeting (Transcript)

| About: Teva Pharmaceutical (TEVA)

Teva Pharmaceutical Industries Limited (NYSE:TEVA)

2012 Investor Meeting

December 11, 2012 12:00 pm ET


Kevin Mannix - Vice President of Corporate Investor Relations

Phillip Gamma Frost - Chairman of Teva Pharmaceutical Industries Ltd

Jeremy Levin - Chief Executive Officer and President

Michael R. Hayden - Chief Scientific Officer and President of Global Research & Development

Jon Congleton

Allan Oberman - Chief Executive Officer of Teva Americas Generics and President of Teva Americas Generics

Robert Koremans - Chief Executive Officer of Teva Europe and President of Teva Europe

Carlo De Notaristefani - Chief Executive Officer of Global Operations and President of Global Operations

Eyal Desheh - Chief Financial Officer and Group Executive Vice President

Dennis Chetverikov


Douglas D. Tsao - Barclays Capital, Research Division

Ken Cacciatore - Cowen and Company, LLC, Research Division

Randall Stanicky - Canaccord Genuity, Research Division

Jami Rubin - Goldman Sachs Group Inc., Research Division

Christopher T. Schott - JP Morgan Chase & Co, Research Division

Jason M. Gerberry - Leerink Swann LLC, Research Division

David Risinger - Morgan Stanley, Research Division

Shibani Malhotra - RBC Capital Markets, LLC, Research Division

Kevin Mannix

Good afternoon, everyone. On behalf of Teva's Board of Directors and executive officers, I'd like to welcome all of you to the Sentry Center here in New York to Teva's Investor Day 2012. For those of you joining on the webcast, I'd like to welcome you as well.

I'm Kevin Mannix, Head of Investor Relations for Teva. We have a very exciting day planned and we've got a lot of ground to cover, so we should run for approximately 3.5 hours. I'd like to take a quick minute to review today's agenda. The agenda is divided into essentially 2 sections. After each one, there'll be a 15-minute Q&A session. And again, we should end at approximately 3:30.

The first section is focused on our strategic plan, R&D and our global brands. The second section we review our global generics business, manufacturing quality and finance. There's a lot to cover today and in the interest of time, there will not be any formal breaks. So for those in the audience, please feel free to take a break whenever you feel necessary.

Before we move forward, I'd like to take a minute to review our forward-looking statement. Today, Teva will be making forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent on future events or developments. These matters are subjects to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in Teva's Form 20-F.

These statements reflect management's view as of today, and we undertake no obligation to update these statements. Definitions in reconciling information for any non-GAAP financial measures, as well as an audio replay of today's meeting can be found on the Investor Relations page of Teva's website,

So with that, let's start today's meeting -- program and turn the podium over to Teva's Chairman, Dr. Phillip Frost for his opening remarks. Dr. Frost?

Phillip Gamma Frost

I want to extend a very warm welcome to all of you. I see here in the audience many people with whom I've interacted over many, many years. It's great to see everyone looking in such great form.

This is an important day for all of us at Teva. It represents the first time that Jeremy Levin, our CEO, will have the opportunity to officially introduce part of the senior staff and to explain our strategy and plans for the company for the next few years, in the context of what Teva has been, how it's been perceived, and where it's going. How it has evolved from a dynamic generic drug company, under the leadership of a brilliant Chairman, Eli Hurwitz, to a diversified international pharmaceutical company that strives to do the right thing for its investors, employees and above all for the millions of patients around the world who require the medicines that we make.

Last week, the company presented its guidance for the financial results for 2013. The theme of the presentation was intended to be credibility through transparency. We will continue to emphasize this theme as we go forward. The theme for today, from my point of view, is stability and growth through entrepreneurship, opportunism and execution.

We will hear about a broad outline with some detail of a plan to take Teva to another level of achievement. We have a plan; we have a plan that's reasonable and achievable. But I know, in fact I hope and as you might imagine, there will be opportunities along the way that we can't conceive of today. These may take us in new directions. These are exciting times for Teva. We're ready.

And with that, I'll introduce our CEO, Jeremy Levin.

Jeremy Levin

Ladies and gentlemen, members of the Board of Directors, friends, colleagues and all of you who are today around the world listening to this, thank you very much for coming. This is a tremendously exciting day for me. Many of you who know that when I became CEO of Teva on May 9, 2012, you know how excited I was. And you know how much potential I felt there was in this company.

Today, I really want to take you through how I believe we will accomplish that potential, the opportunities that we can seize and indeed, introduce you to many of the team members who are here. I brought them from all around the world. They're here. You'll see them. If there are questions for them, they'll answer them directly. And I think at the end of the day you will, I hope at the end of the day you will share the excitement, enthusiasm and belief that I have in Teva, its opportunities, the company, its people and the future.

And we'll see whether this works. Okay. Today's objectives are broad. What I really want to do with you is to take you down a journey. I want to show you our vision, I want to lay out for you our strategy and show you how we believe firmly shareholder value can be created and will be created. We're going to show you how we're going to reshape Teva to meet a very exciting future. I want to demonstrate to you growth platforms that perhaps some of you have never even looked at, you should look at and in the future, you will look at. I want to execute a series of dialogues with you around business development, a core leg of this company's future. And then as I said to you, I really want you to engage with the team that will execute, and will execute in a way that I think few can.

Our vision is built in reality. Teva will be the most indispensable medicines company in the world. We intend to accomplish this, we intend to provide the best medicines to patients, work with our customers in a way that is superior to anybody else and in executing on those obligations, we'll derive significant shareholder value.

As I look at Teva today, I want you to be as grounded as I am in this company, this remarkable company, a great company. It started over 111 years ago in a small, little place in Jerusalem and another little space in Petach Tikva. From there, we're talking in a very brief period of time accelerated over the last 20 years, we are today in 60 countries. We're generating significant revenues and profits. We have an unparalleled portfolio, and we have an engaged and powerful workforce, an industrial capability, a thinking, a company that few have to build on.

As I look at our company, in order to build on this, we must understand the future. We must understand the needs, where the industry will be, how it will be, what is its shape, what kind of needs will we as a company be able uniquely to address.

Let me take you on a journey for a moment. I ask you to stretch your minds outside of the bounds of the United States. I ask you to look at the medical needs of the future across the world, because that's Teva's landscape. As you look at this landscape, there are broadly 3 changes that are occurring. You know them. Many of them you've seen, but you need to feel them. Every country we're in tells us a story. We know what these needs are.

On the medical needs, both primary care and specialty medicines are changing across the globe. As the economies change, as medical needs change, as patient education changes, so we see changes in the United States, Europe, Asia and South America, Africa. Each one of these key areas has its own particular need, whether it be primary care, whether it be specialty.

As we look at the United States, many of you have seen, for example, the demise of the thousands of feet-on-the-ground selling primary care. You're also beginning to see the rise of a tremendous intersection between patient engagement through Internet, social networking and the IT and capabilities of today. Changes like this are apparent all around the world. Patients want different things in different parts of the world. Some patient needs something here, they believe in something else there. We understand that.

On the societal needs, they too are changing. Economies are burgeoning in parts of the world that haven't burgeoned. And in the past, where Teva came from, and built was in those strong economies, Europe, America, beginning in South America. Now you see in front of us the rise of great nations all around the world, nations whose economy are expanding, societies which need different kinds of treatment, different kinds of approach to their patients. Each of these economy, each of these societal changes leads to an important understanding of that industrial social complex of a company like Teva.

To be successful, you must understand those needs. You must understand fundamentally what is going on. And what is going on is change. What is going on is opportunity. I want us to think very carefully about this because as you think about that, you also need to understand that the economies have driven needs and consumers. Consumers today are educated. The United States, people understand medicines in a way they have not understood in the past. Europe, this is also the case. They get huge volumes of information. They understand about these medicines. They want them, they have the money to buy them and we need to appreciate this. Similarly, we're seeing this elsewhere.

Now as we look at Teva, in order to seize those opportunities, in order to create value for our shareholders, in order to build this company that will last into the future, we are looking to reshape the company in a way that few can, few will and frankly, we can do it. That reshaping is designed to renew how we look at the world, how we can seize those opportunities, how we can execute on what we're doing to provide the medicines that will allow us to fulfill our mission.

And in doing so, we are firmly confident, let me repeat, firmly confident that we will reward our shareholders, we will meet the needs of our patients, we will meet the needs of our employees and in fact, fulfill that social industrial complex need that is so vital for the company of the future.

Well how do we get there? This is not theoretical. This is very practical. We know the market, we know where it's going, we know what we have to do internally and how we're going to do it. Today I'll convey a deeper sense of that and you'll hear it in the other presentations.

There are 5 list pillars to this. The pillars are very straightforward. From our perspective, execution is everything. We are going to accelerate our growth platforms and we'll show you those. We're going to extend our global presence, and we'll talk about that as well. We're going to take a highly strategic approach to business development, and I'll explain how we're going to do that.

Importantly, we have terrific franchises, terrific franchises, great medicines. And we're going to focus on them, we're going to protect them and we are going to expand them. As we do this, as we modernize our company, we're going to reduce our cost base. We've talked a little bit about this. These changes are fundamental to what we're going to be doing over the next 3 to 5 years.

Now as we look at the outside world and we understand Teva, what we see is that key parts of our company align extraordinarily well with the needs. On the medical side, we have specialty franchises. In CNS, respiratory, really important medical areas, areas where we know tremendous amounts about what patients need, what payers will provide across the globe, what different types of customer, what different types of patients require. We understand them. In our specialty business, we're there.

And as you look at the great strengths of our fundamental strengths within the company, what you see is we have something completely new. We'll talk about it, Michael Hayden will talk about it. And these are the NTEs, a platform that is able to deliver on an industrial scale a pipeline of medicines which are reasonably priced, high value and well attuned to the types of skills and capabilities that we can deliver. And from a societal perspective, we address the needs fundamentally across all parameters by delivering these NTEs, and we are the first company ever to have done this.

As we look at our generics and OTC, we have again aligned with the market needs not just in the United States, but abroad. In our generics, both our large-volume generics and also branded generics, we meet needs that address both societal needs and also consumer needs because within this, we understand the consumer in all these different marketplaces. And as you look at the other end, we took the brave step a year ago to enter the OTC market. Now we have been successful and we're building on that. We can address the consumers, the consumers in a way that few other companies can.

From my perspective, what we have now ahead of us is a company that is aligned with the marketplace today, tomorrow and into the future. That's not enough. We need to understand what it is that we have that makes us unique. What are the strengths within Teva, within Teva uniquely, that provides this and makes us a company that few can emulate, and that we can execute upon in a way that few others can do? Well in the specialty areas, I'll touch on a few and similarly in generics and OTC. But let me just outline for you a couple of points here.

Number 1 we have, in the specialty area, the scientific and commercial expertise. You'll hear from the team today, Michael Hayden will follow me and Jon Congleton will follow after that. We have a pipeline. We'll show you that. We have a pipeline which can be built and can be built on in a way that few can think about how we will build on it. We'll show you that as well today when we discuss our business development.

In the NTEs, Teva is unique. Teva has a leading position, the scale and the breadth of portfolio to make this a differentiating factor from all others. Again, extremely difficult for others to replicate, and for us, something that is intrinsic to our DNA.

In the generics and OTC, we have a remarkable track record. I'd like to discuss that with you in a minute and show you just how strong that is and where we're going to go with it. The company grew in this area. We created or helped to create an industry. All the different companies are joined in making Teva today, have made Teva the strongest in this area and we will be stronger still.

We have a winning alliance with Procter & Gamble, an alliance that allows us to create a joint venture, PGT, which indeed is a remarkable alliance. It is growing. It is vibrant and powerful. And when you look at this, our ability to partner, our track record of new market entry and the other attributes I've laid out for you, what you see is that Teva has a unique competitive advantage in the areas that we've chosen to focus.

Most importantly, as we look at this focus, our intent over the next 5 years is to grow our top line organically and to do so profitably, despite the loss of patent exclusivities that we will face. And for those of you who know this industry, you know exactly what I'm talking about, how difficult this is, but we can do it and we will do it.

As we do it, we will certainly realize cost saving opportunities of approximately $1.5 billion to $2 billion, and this will allow for a stable and robust operating profit. And as we do that, we will generate a strong cash flow. Eyal will talk a lot about these figures as we go through the presentation. This allows us the opportunity to invest in inorganic growth, and we'll do that in a very disciplined fashion. At the same time, as I go back to our mission, we will reward our shareholders.

So let me take a step back now. This is not blue sky. I want to talk to you about Teva today, a remarkable company. I want to talk to you about its strengths. What do we see in it? How do we see it? And what are we going to do with it?

Well, our foundation is clear. I had the opportunity when I joined the company, thanks to the Board of Directors, to have a few months quietly walking around the company, really understanding it. Somebody once described it to me, and they said, "That's unpacking." Yes, I unpacked it and then packed it back up again. What I appreciated and learned to appreciate, and I think many of you in this audience do appreciate, we have a substantial, profound foundation. That foundation is anchored in passionate employees.

Just for an example, for those of you who've been in the pharmaceutical industry, you know when you send a survey, you're lucky if you get 50%, 60% response. When we send a survey, we get over 70% to 80%, sometimes tough to hear. But when you have 47,000 people working for you, getting that kind of response allows you to say engaged, passionate, involved.

We have an unparalleled global footprint. And indeed as you go through today, you'll hear a few accents, mine included, which perhaps will represent to you and show you how different and diverse and strong that footprint has allowed us to be, by bringing together different cultures, different thinking.

We have solid fundamentals. You've seen them, you can see them and we will have them in the future. Our portfolio is unparalleled. It's comprehensive, strong, robust and will continue to be so into the future. And then we take great pride in being able to help patients with multiple sclerosis. This is something that Teva, an area that Teva led the way in, and continues to this day to be a leader in. And then our thinking is simple: Help the patient. Have a great medicine to help the patient. These are foundations which are remarkable.

Yes, we have challenges. Which company doesn't? Which company that has grown through acquisitions doesn't have challenges? We do. We've grown through multiple, large acquisitions, leading to complexity. We developed, over time, an unfocused pipeline. We have a very complex business. However, as you look at this, as you look at this, this represents marvelous opportunity, great opportunities to build, to enhance, to create value.

It's my belief that there are many things that you understand. You read about it, I read about it, increasing competition in multiple sclerosis, specialty products losing exclusivity. Nothing unusual. Nothing that isn't being dealt with and can be dealt with and will be dealt with. We have the ability. We know what the challenges are, and we know exactly how to deal with it.

And as I look amongst all of the companies, we do face other things that others face, things that are not peculiar to Teva. As you look at the foundations of the generic industry, the foundations of the generic industry was often the opportunity in the United States for Paragraph IV exclusivity. Many of these large opportunities are changing. There are less there. That doesn't mean we can't find opportunity. We were the originators of this area. We know what to do here. We know how to circumvent those challenges. We know how to get value out of what still remains a very good core business.

As we face increasing competition, later today you will hear about some of how we're dealing with that. Competition in generics, nontrivial, not simple but a company such as ours with a management team and a plan such as ours is one well attuned to dealing with it.

Health care systems around the world are under pressure. Again, a company which has learned to live within them, grown up within them, multiple, different environments. We know how to deal with them.

Product innovation. This is an important area because it leads to a real determination of how your pipeline and how your future needs to be. There is a bar and there should be, for innovation. Innovation needs to bring differentiation to patients. Look-alike medicines, high-priced cannot be successful, shouldn't be successful and in Teva, won't be part of our future. Where we can make a difference looking for fundamental, novel medicines, areas where we can make a real difference to patients is where we feel we can create a lot of value and get paid for the value we bring.

It's a complicated global environment. Others face it, we have faced it and indeed the very structure of Teva, the very global structure, the way it grew up, the way and from where it came, allows us to deal more easily than companies that are in fact locked in a certain area, a certain geography, built in that geography, now trying to export their business to other countries. We grew up in the other countries.

As I look now to our strengths. Well, I had a lot of time to look at this, and I appreciate your patience in waiting until today to allowing me to lay this out for you. It's been a few, good few months, had some fantastic experiences while I did this. I've traveled the country -- the company, all over the world, had the chance to see all the different functions in the company.

And let me convey to you that the company has great strengths, and we're going to build on those great strengths. They are clear. We are sitting at the table of all the major global health care systems. We are a powerhouse in generics. We have a fundamental strength in specialty and OTC. An important component that few understand, but should understand for a global company. We have phenomenal business managers in different countries. They are local entrepreneurs. They know those countries. They know what to do there, and they are backed now by a global-scale company. This means we have nimbleness and we have, at the same time, power.

When I talk about patient engagement, you'll probably wrinkle your brow and say, "Well, what does he mean?" Well as Jon Congleton will lay out to you, we built our capabilities in multiple sclerosis about understanding patients. If you go to Kansas and you see our Shared Solutions program, you will understand what I mean. We were able to help those patients get reimbursement, get their medicines; in a way solve their problems, an engagement which is scalable and has been scaled. It's been scaled from Kansas to Europe and will further be scaled in South America and other areas where we become part of that patient's life. We understand this.

We've integrated in a unique fashion generics and R&D from branded products. This specialty type R&D and generics are completely separate in other companies who might have them. Some don't even have any generics research. Well, the majority don't. The fact of the matter is, Teva saw the opportunity there and Michael Hayden today will show you how, when welded together, this turns Teva into something unique. We have created an enormous strength here in being able to generate a pipeline by doing this.

Our customer understanding and relationships in the United States, in Europe, South America, Asia and all the nations of East Europe, this is unparalleled. We understand what they need, and we have deep engagement and we have great partnering experience. These are strengths that one could build on.

Now let me take a step. I've shown you for a moment how we see the world will shape. I've shown you why I believe that we have unique abilities, and I've shown you, in addition to that, how I am convinced that we have the strengths to do this. Let me talk a little bit about Teva of tomorrow. The new Teva will have less of some things and more of others. From the perspective of the less, let me just say our focus is to reduce complexity, to optimize our cost position, to become much more efficient, consolidate, understand and deal with our network footprint in a way that is sensible and matches the kind of business we are in. Remember, generics is often a local business. Sometimes it requires different kinds of footprints to other types of pharmaceutical companies. But we're going optimize our network. And as you look at us and consider how we are thinking, also think about the fact that we have less commodity. Where we can't make a difference, we will not try to make a difference.

As we reshape Teva, what are we trying to accomplish? Well, there's some things that I think it's important for you to focus on. Reshaping means reshaping to seize an opportunity. Reshaping means building on strength and understanding where we can take value from what's within the company already and enhance that value.

A couple of things are very clear to us: number one, we can become much more effective as an organization, generally. Our management is very clear about doing this. That management effectiveness and our organization will improve, can be enhanced and is very, very clearly something we're focused on. Interestingly, as we looked at the way that we procure from the thousands and thousands of vendors who sell to us, we know that there's substantial value to be garnered by optimizing our procurement. Again, Eyal will deal with this. We want to move from high-cost areas to low-cost areas, and we want to reduce excess capacity while improving our efficiency. These steps in reshaping are not just theoretical. We've appointed one person to do this. We have an exceptionally clear plan for doing it. It's run by a man called Erez Israeli, who's lived and grown up in this company. He knows it clearly, superb manager and has dealt with this by working previously and running our billion-dollar business in API around the world, a highly competent manager, reporting now directly to me. And we will derive significant cost savings out of this. These cost savings will be primarily achieved over the next 3 years.

But it's not about less. Teva is about more. Teva is about growth, it's about an exciting future, it's about seizing opportunities. And how do we do that? Well, as you think about us, think about us becoming more globalized; a valuable, sustainable pipeline; a set of products that won't just be replicable by others but are sustainable through the years to come, either protected by IP or protected by brand; a deep, fundamental patient and customer focus, customer and patient at the center of everything we do; and balanced profits, not dependent upon one product for generating significant portions of our product -- of our portfolio profits but, in fact, balanced. And as you think about this, all of this, all of this is designed to build a sustainable company, not just for today, not just for tomorrow, for next year, next 5 years, next decades to come, and in doing so, driving shareholder value.

At our core, as we think about this, how we drive value, as we are shaping ourselves, I want to take you now on a journey through our generics, then through our OTC, our branded and then business development, so you see and can get a sense of how we're thinking in this area. Our core is strong, not just strong, very strong. We have -- we touch the lives of millions of patients every day and billions of patients every year. We are extraordinarily important to their lives. They are very important to us. We have a fundamental set pipeline. This pipeline is an engine. Yes it can be improved but in actual fact, it's excellent. I'm -- probably not clear to many of you, but now clear to us is that Teva has over $2 billion in branded generics. All of this is focused in growing economies. All of this is an area which is growing rapidly. All of this is an area which is sustainable. And then coupled with that is our R&D capability.

So how do we take that core? How do we drive value here? How do we create something completely sustainable? Again, I come back to 2 areas: first of all, we do have high-value products; and we have high-volume products. As we look at these products and as we look at how we think about them we're looking at, first of all, focusing on the customer. What does the customer need? When do they need it? Our quality is and will be unsurpassed.

We want to increase our high-value products. We plan to do this. We're going to accelerate our global growth in this. And our profitability, it's hard work, it's nontrivial and we can do it. We know exactly what needs to be done there. And as we look at this core, as we look at our changes that we're developing there, we will be developing strategic alliances with our customers, with our clients, with governments and others throughout the world.

So if I ask myself a question, what is the future of our generics? It's a great future. It's a future which is remarkable, it's a future which I think few can accomplish but we intend to and we will. We will have a global impact. We will have sustainable high barrier to entry products. We are looking to grow this business. I know others say this is tough. We're already seeing that growth. My colleagues will talk to you about this, Rob and Allan, I think you'll get a sense of it. And we're looking to dramatically enhance our R&D through the capabilities that we have already established by fusing together the R&D, generics and specialty medicines.

Let me turn to OTC. We are proud to have a winning partnership with Procter & Gamble, an outstanding company, a company that knows about the branded area, knows about branding, knows about how we deal with consumers all around the world, a company that we are in an alliance with, that we are deeply, deeply proud of. It started approximately a year ago. It's an alliance that is, right now, one which is taking off. It has great capability. It has already penetrated 20 different countries and indeed, we are seeing very significant growth there. We will build much more on this, and we are very, very delighted to be in this.

There's lots of growth available in this. Not only that, there is lots of synergy between the 2 companies and the way we work together. I think you should think a little bit about the outside world. Again, I ask you to take yourself out of the boundaries of the United States for a moment, look at the countries that are the growing economies. In each of those countries, branded generics, OTC are sold nearly identically. Very difficult for somebody in the United States to understand this, but that is the case. The future of selling medicines allows us to be able to say that medicines in those economies certainly have huge synergies. OTC, generics, branded generics.

And as we realize the potential out of this, we are going to learn. It's not just about x U.S. In the United States, we have a portfolio of generics. Many of these are going to go OTC. We've only begun to scratch the surface of that potential and there's lots there. So as we look at the emerging markets, as we look at the markets we're already in, this is an alliance that we will strengthen, this is an alliance that we will build on and between the 2 companies, we have an opportunity that is unique. But not only that, we will learn how to strengthen and expand company brands; a future which we believe is very, very rich.

Let me turn now to specialty medicines. It's important as you look at specialty medicines to focus. Being diverse does not work. You need to understand the patient, the payer, the medicine, all aspects of the value chain in order to be successful. Teva is going to focus, and we will build leadership in those areas that we don't have leadership in. We will be leaders.

We are leaders in MS. We intend to protect and expand our multiple sclerosis franchise. And for those who said, "Gee, well, your patents are coming off in that area," just remember, the patents -- our patent exclusivity for the 14-milligram, 3x a week dosage extends to 2030, an issued U.S. patent, 2030.

In addition to which, we're going to build products in this area. Today, Michael Hayden will talk to you a little bit about some of the new products that we have started to bring into the company. CNS will be a focus.

Respiratory. Over 1 million people in China die every year from respiratory diseases. We haven't scratched the surface of how to get into this in those parts of the world. United States and Europe, we have great products. We're going to show them to you. In fact, we have one of our experts here, Tushar, who is available for questions on that if you'd like to know about it. But we believe we're going to invest in that capability, we're going to develop that pipeline and we will be a commercial leader in that area.

We will also uniquely focus on our platform of NTEs. I'm very pleased about this, actually. This is something that when you often come to a company, you ask yourself a question, "What is unique to that company? What is the DNA of that company? What can you do in that company that nobody else can do?" NTEs. You will see this today, and I hope that as you walk out of the room, you'll have the same enthusiasm, the same belief that I do that this is a sustainable capability to produce medicines that few others can do in the world, in the breadth and capabilities that we have.

As we look to other areas, we can't do everything. We will certainly selectively invest in certain key areas of oncology, the growing area long-term in women's health and in our biologics capability. And Michael will talk about all of these areas. These areas where selective, targeted, focused investment, there's enormous fruit carefully thought out.

Now when we came here, we had a pipeline. It was relatively unfocused. And what Michael -- I asked Michael to work with me to help understand what that pipeline had, what it didn't have, where we could add value. Remember, a focused company is a successful company where we could add value. For me, this was just a tremendously exciting time. What we were able to do is to prune selectively 12 programs. We will continue that process. That process has not stopped. It will continue.

But at the same time it's not about less, it's about more. We wanted to balance that by bringing in a robust, sustainable pipeline of new products. We know where the gaps are, we know what needs to be filled but nevertheless, we do need to enhance some areas that previously had not been enhanced and we did. So 18 new programs were carefully, thoughtfully reintroduced. Today, this is what our pipeline looks like. It's terrific, it's one that will be enhanced and Michael will go into it.

Business development is part of that. Business development will affect many parts of the company. As you know, some companies look at this as a side issue. I don't. I've had a little bit of experience in this. From my perspective, business development is a core capability of any company. A company that doesn't do this neglects its ability to grow. We're not going to do that. But to be effective, to be fundamentally effective and to have an impact on a global scale, you must first of all look at your business development as a global process and secondly, interlock it completely with global strategy. We have a remarkable ability. We are a very large company. We have the resources of a large global company. At the same time we have the flexibility, the entrepreneurship of a biotech company. So we can seize opportunities if they fit into the strategy. Linking business development to the strategy, to the operations of the company holds a potential for it to be in concert with all the other operations of the company, a major growth driver. Not serendipity, operational, strategic, effective. And we have a track record. We know how to do this. Indeed, we also have the resources for doing this, $10 billion over the next 5 years.

What is the strategy specifically? We're going to focus. I want to tell you I was thrilled to see so many requests from so many colleagues in the industry that was sent to me. I apologize, we simply cannot deal with them all. We are going to focus. We will not miss major opportunities. But to be effective, we're going to drive into areas where we know we can make a difference. We're going to make a difference. We're going to make a difference in CNS. We're going to make a difference in respiratory, OTC. And on rare occasions, we'll look at other areas, rare occasions, but we will. We're going to look for strategic alliances with key partners, pharmaceutical companies. I know it sounds an interesting thing, but frankly, a company such as ours is a natural partner for a pharmaceutical company. It is a natural partner for many of our customers. Those strategic alliances are crucial to us and will be executed on.

We'll look selectively in geographies where we're not to understand how we can invest there. And while Teva was built on a phenomenal set of large acquisitions, as I look at our strategy, our strategy will be built on mid-size to small transactions. The nature of that transaction could be licensing, could be M&A, could be strategic alliance, could be joint venture. What's material is what they accomplish. What's not material is how we get there, except that we can ensure that we balance growth with a return to investors. Very important to us. And we could have accretive transactions or growth transactions. Again, it's all about balancing investment with return to our investors.

Now we are going to divest non-core assets. We've started that process. This is something that you should expect to see. This could be pipeline assets. It could simply be, as we've done before, areas that we're not involved in or don't think we can make a difference, like animal health. This will continue.

The approach we're adopting here is unique to Teva. We are going to build constellations of transactions. As you think about transactions, everybody in different companies has a way of doing this. I know that a few of you are chuckling. I see it. Let me convey to you a philosophy that I believe, a business model for transactions which is essential and that Teva will follow.

Every transaction must be linked to another. Every time you see us do a transaction, understand that that's just the beginning -- the opening stroke of another one. We are going to paint a picture. We're going to create constellations of transactions. When one transaction is done, you may not understand why it was done, but another one's coming. And as the picture emerges, I'll show you one now, you'll start to see that in CNS we started to create the constellation for patients that I think is going to be quite unique.

Today we announced the transaction with Xenon. The CEO is here with us, Simon Pimstone. We are very proud to have done that. We believe that as we assemble this constellation of CNS, this is the first constellation. You will see others: women's health, respiratory, certain geographic areas, certain other areas. Teva's constellation strategy is one that will help drive value.

I want to now turn out of the areas of business into the area of people. I feel that it's very important to convey to you that while you might have a good strategy, while you might have good plans, while you might have excellent intentions and while your focus is on building a company, you cannot do that without people. It is people and culture upon which strategy and implementation is dependent. And Teva has the people. They are engaged fundamentally. I described to you how many respond to questionnaires. It's a bit troublesome to me. At times, I really get some -- a lot of notes. I run a blog and I get thousands of responses. These responses tell me at a stroke, our people and our company are engaged and delightfully so. They drive the company.

They have the quality and customer focus. They really understand the nature of organizational effectiveness. They're multinational. And as I -- as you listen to each one of us today talking to you, listen carefully to the accents, we have 30 different languages in the country -- company. We have 15 primary languages. I speak reasonably 4, maybe 5 and trust me, this is a multinational company. This is a company that is built and is created on understanding other cultures, knowing where opportunities are. We have the ability, few other companies have this.

And then something very, very special: entrepreneurship. Each one of our managers, and there's several here, the manager of Russia, the manager of the South American region, both of whom are here. These are terrific entrepreneurs. People, great managers who know how to seize opportunities.

Several of the people will be speaking today: Michael, Robert, and Carlo. Actually, I don't think he's ever been called Robert, it's Rob. In addition, many others are not here, but I want to say they are welded with a superb existing management in Teva, a management that has grown up within the company, a management that is skilled, deeply entrepreneurial and has a great capability. And when you weld these new recruits, Jon Isaacsohn, a superb clinician, somebody who knows how to do clinical trials; Jill Desimone, a specialist in building specialty businesses from BMS; Guy Hadari from IBM, a man who understands IT; Dawn Sherman from Medco. Each one of these people bringing expertise, welding it to the already existing expertise within the company, welding it to the cultural entrepreneurism that exists within the company.

And oh, in case you think it was just business development opportunities that were coming our way, not at all. We have been flooded by résumés of people who've begun to understand the opportunity that we present to them. We have a great series of talent that we could develop from within the company or recruit from external, a pipeline of talent that I think is unsurpassed and that I, personally, in 25 years have never seen, internal and external.

But it's not just about having great people. It's not just about building a culture of execution, excellence and driving to success entrepreneurism. It's also about linking them to you, aligning their interests with you, the shareholder, so that the shareholders understand fundamentally and the management team understand fundamentally that Teva is a company where the team is incented and aligned with you, the shareholder, and they are. We've built our compensation structure specifically with that in mind so that while we have a median base salary, we incent people with a bonus which is much higher than most other companies do. And furthermore, the senior managers sitting here today are incented effectively, largely by corporate performance, not necessarily avoiding the fact that they must perform in their own areas but a careful balance. For us, this is intrinsic. This is part of the DNA of this management team.

Well, if you look at us and you ask the question, "How will we, the investors, know that you're executing on what we are doing?" I want you to understand that we have embarked, as Phil described earlier on, on being transparent and highly credible. We're tracking our progress. I want you to track our progress. I invite you to look at us. I invite you to understand that we are going to be transparent and accountable.

As you look to this year, what should you be looking for? How are we sustaining Copaxone? How are we maintaining and hopefully growing our top line? What is the first impact of this ambitious program to reshape the company? Practical, real, fundamental measures.

How are we enhancing our team? Are these the kinds of people that you believe are the kinds of people that can really drive this company? Believe you me, we'll be looking for the best of the best internally and externally.

How do we affect a disciplined, focused business development approach, something that few others do, something that brings value to the company and that follows the constellation approach that I've described, something that you will be able to measure.

And lastly, what are the high-value strategic alliances that we bring to the table that actually drive the business and create value for us?

It's not just about 2013. I want you to understand that we firmly believe, on a global basis, we have fundamental growth drivers. These growth drivers differ. As I said to you at the outset, think of us as we look at the globe, listen to our managers, understand that these growth drivers represent tremendous opportunity for Teva not only to be successful as it has been in the past, but to surpass that enormously. Each of the different areas around the world has slightly different flavors. We have the portfolio. We have the capability to do that.

And it's not just that. As you look at our opportunities globally, we have begun to scratch the surface in some of the largest economies of the world. Teva is uniquely positioned to take advantage of that. Our portfolio in specialty, generics and OTC addresses the needs in these economies, in these growth economies and allows us, with a lot of confidence to say that we have great growth drivers aside -- and in our front, aside from our existing business, growing on that. We have tremendous opportunities as we penetrate these areas.

What I'd like to do now is just leave you with a thought that in 2017, as you look at Teva, Teva will be a company reshaped. Reshaped to address a future set of needs: medical, social, consumer needs around the globe. We'll have sustainable, profitable growth. We are aiming for sector leadership in all areas. We will be present in all major markets, and we're focused deeply on consistent shareholder value. Our alliances will be exemplary.

And as I think about the future beyond that, it's not just 2017. Teva will be a sustainable company, a growing company, a strong company because we will have created a rich pipeline, a great operating company and a superb, superb set of transactions to the future and visibility on what will be an era of great opportunity in the future. As such, I am confident that we will execute on our mission to become the most indispensable medicines company the world. And in doing so, in doing so, to you, our investors, you can be assured we will bring you value. Thank you.

I'd like to now pass the baton over to Dr. Michael Hayden, who'll describe to you our R&D engine. Michael?

Michael R. Hayden

Thank you, Jeremy. Well I'm thrilled to be here, and I'm thrilled to share with you our -- the beginnings of our roadmap for R&D. And this morning, I'm going to share with you the first steps in the refinement of our pipeline and the transformation of our R&D organization.

So there have been many of you who've asked me, why did I join Teva? What was it about Teva that really persuaded me to make that leap? When I thought about it, I recognized that in a way, everything I've done in the past had prepared me for this great mission. My years and experience in science and medicine, biotech, relationship with farmers and also -- not farmers, agricultural, pharmaceutical companies and my involvement essentially in business, have really prepared me for this particular task.

And what excited me in particular, this career in science and medicine, what excited me was the opportunity to take the resources of pharma, as Jeremy described, combine this with the flexibility, the creativity and the innovation of biotech to impact millions around the world, a compelling opportunity that I'm thrilled to be part of.

Well, it's now 100 years -- 100 days since I've been -- not 100 years. It may look that way, but it's not. It's 100 days since I've been in this job. In fact, today's the 100th day. And I want to share with you some of the details since what I've learned and where we after the first 100 days. During these 100 days, I've spent a lot of time getting to know the R&D organization, traveling throughout to visit the scientists, reviewing the programs and I've conferred deeply and widely throughout the company.

What I found, in fact, were some remarkable things. Something really, truly exceptional and unique. I discovered a sets of strengths in the area of generic R&D that was profound. Strengths in formulation and analytical, an array of special technologies from extended-release to drug device combinations, an amazingly agile and generic regulatory team, an IP group that could find a path to market in areas covered by hundreds of patents and the largest product portfolio in the industry.

Now that was very exciting. But alongside this particular set of generic R&D capabilities, I became aware in a different silo, a strong set of branded R&D capabilities that Teva has developed over the years: Understanding medical needs; the skill in developing and executing on clinical development; deep and profound regulatory expertise; and of course, Teva is so well known, highly sophisticated in creating patent protection for new assets. In addition to that, a strong presence in several therapeutic areas, in particular, in the CNS and regulatory.

But when I step back from that and conferred with Jeremy and the others, and I saw the incredible strengths of generic and branded R&D, it dawned on me; Teva had a truly unique opportunity to become the first pharmaceutical company that encompasses both generic and branded R&D within a single organization. When these 2 sets of skill sets are integrated, we can create new products in a way that is uniquely Teva's.

Examples of such products are going to be the NTEs, these new therapeutic entities, that are known molecules that are formulated, delivered or used in a novel way to address specific patient needs. I'm going to tell you a little bit more about them throughout this presentation.

Our mission in R&D is to develop the most competitive and focused pipeline in the industry, to address unmet patient needs in a highly differentiated way, and this will be one of the major drivers for the growth of Teva. This future of R&D is in 3 particular areas: the high-value generics I'm going to tell you about; these NTEs; and a focused, highly strengthened specialty portfolio.

Well, the essential elements in this R&D organization are really a few. Firstly, we need to understand deeply the patient's needs. What are the needs of this patient on their journey through illness from early on this, even preventative therapies all the way to terminal care? How do we define the needs on the patient's journey? Prioritization in terms of focus. And I'm going to share a lot with you about that. We are going to be differentiated. We are going to build where Teva has a competitive advantage, based and levered on the unique strengths of Teva. We're going to integrate in ways that have never happened before in this organization, the generic and specialty capabilities.

We're going to look in times when we need this to fill our pipeline in specific areas, we will access external innovation, and we're going to nurture a science culture bar none. This is a going to be a culture that celebrates scientific accomplishments and its ability to be translated into products for patients.

So our areas of focus. As we said, we want to establish leadership in high-value generics. What do I mean by that? We will continue to be first to market and continue to be competitive in the generic business of first to market filings. But we will place renewed and special emphasis in the area of complex generics.

When I say complex generics, we're firstly going to think about the issues the patient needs, more improving compliance, improving convenience, improving efficacy and safety. We will use complex technologies to develop those particular generic products and actually deliver them to patients and society at an affordable price. Our focus for the complex generic technology will be sustaining our areas where we already are quite strong. In oral delivery, modified release combinations, we also have significant strengths in liposomal and long-acting release products, but we will further grow these capabilities, particularly in the areas of injectables, nasal, patches and devices. We will significantly strengthen our ability to deliver complex generic technologies.

Let me tell you the story about this patient. Here is Gabriella. Gabriella, diabetic patient on metformin. She's -- her weight loss and her diabetes is still not under control. Her doctor wanted to add liraglutide, but in fact the insurance denied coverage. And there is no generic for Gabriella for liraglutide. The reasons are it's a complex API, it needs a drug and a device. It's a complex formulation and actually, a complex IP landscape that has to be navigated through.

So we think that at Teva, we are uniquely poised to address the problems of generic liraglutide as we could within many, many other examples. Firstly, with regard to access to complex API, we'll use API sorting and actually, Teva API will help us to overcome that particular challenge. In terms of the characterization of complex API, we'll use the specialty R&D that has profound strengths in the analysis and the ability to characterize these particular complexes. Drug device combination where we have some strength in generic R&D to provide guidance, support and development for the device that's needed. In terms of formulation changes -- challenges that are needed we will use, again, the Teva generic R&D organization to help us with their special expertise. And in terms of the complex IP landscape and getting through the patent landscape and developing the patent strategy, we really will use both Teva specialty and generic IP expertise. What you can see here for this generic complex product, we will use many aspects of Teva's R&D organization, providing benefit and value in the development of this and many other products.

In terms of the NTEs, I've told you a little bit about them. Let me share more with you. As we've said, these are new therapeutic entities, known molecules that are formulated, delivered, used in novel ways, sometimes combined to address specific patient needs. So we would look at the unmet need, think about known molecules many, for example, in our branded or in our generic pipeline that we're using, and then think about novel approaches, novel indications, novel delivery, novel formulations or combinations and this represents the fundamental basis for the development of NTEs.

There is a strong rationale for NTEs at Teva. This is an initiative that's capitalizing on these profound strengths in generics that I've told you about. It will also work and capitalize on the strengths in our Specialty Pharma, and these teams will now work together in profound ways where the net effect will be greater than the sum of the individual parts. This will be profound synergy. And these are teams already that are working together and that have been inspired to think creatively and filled with great curiosity.

And for the patients, they have profound benefits. For example, if trying to increase convenience and adherence for patients, we can reduce the dosing frequency. Or if you want to make this a more long-term acting drug, we can modify the PK profile or we can look at fixed-dose combination in an effort to improve the pharmaceutical properties.

We also have to think about novel ways to deal with new populations of patients, the burgeoning elderly population, children that need novel routes of delivery and also need these drugs to be combined in ways that make them acceptable, convenient and enhance adherence. And we're going to look at novel indications.

Now the reasons these are so important and why we've chosen to focus on this is that just remember, we are focusing in some very low-risk areas for drug development. Validated targets. These are drugs that have some efficacy. There's a low development and regulatory risk associated with shorter time lines and lower costs. But as a result of this particular approach, these also can generate very significant value.

NTEs represent a distinct space for the pharma industry, and Teva will lead the way. These will provide higher returns, but in fact at lower risk. Lower risk yet lower return for the generics, high risk but high return. The NTEs fulfill a unique and distinct space that we will exploit because of the specific qualities and capabilities of Teva.

We are not the first person to develop NTEs. They are out in the market already in -- these are examples, Duragesic. And you can see here they're generating significant annual growth and annual revenues. But just as we were first to scale up and industrialize Paragraph IV in the United States, so we will scale up and industrialize NTEs. We are committed to that.

We have a process already in place. We use the resources and the aspects and the qualities of generic R&D developing the product. We have the unmet need coming primarily from our branded organization. When needed, we can access external products to bring in an effort to fulfill some particular need and early on, we're talking with the customers and payers in an effort to make sure that there's going to be appropriate need and reimbursement for this. We create this idea bank, we evaluate and then we'll go to approval.

In 2013, we will approve 10 to 15 NTEs for development. This is a rigorous process. It happens because we start up with a medical rationale, look early on at commercial and technical feasibility, develop the business case, develop the decision and then approve for development. We have already approved 4, thus far, for development in 2013.

Let me tell you the story of Gary. Gary is the example -- an example of a person who, diagnosed with HIV 12 years ago. He has to take 90 tablets a month, 3 times a day. The problem for Gary is sometimes he leaves his medication at home, sometimes he's not there and the end result is nonadherence that increases his risk of recurrence and resistance to that particular infection. Very significant.

Nonadherence is common in the industry. In fact, 50% of patients are nonadherent to the drug they are prescribed and in the United States, the cost for payers is as very significant, $300 billion. This is a massive problem.

Our idea here is rather straightforward. Here's -- Gary takes 90 pills a day. Well, we will combine these into 30 pills a day that he can take just before he goes to work everyday in the morning. This will improve his convenience, adherence and improve efficacy, and this will be an example of the kind of opportunities that we will exploit to enhance the likelihood of uptake and convenience of these drugs.

Let's look at Ellen. Ellen has schizophrenia. She takes olanzapine. But as with many patients with schizophrenia and depression, she has a very significant weight gain that is causing her great concern. Our idea here is potentially to combine an antipsychotic with a weight loss drug. Here it's not about efficacy, but it's about safety. NTEs can also address another approach, which is improving safety, thinking about the combination and Teva's unique skills can make this happen.

And here's another example of an NTE that I personally was involved with before I joined Teva, and that's CellCept. This was the gold standard in transplantation. But we had the idea because this modified pathways that appeared to be really crucial for the development of lupus that with appropriate dosing, we could have impact really on lupus. And in fact, this idea of CellCept for lupus led to the creation of a company, there was a new indication, a new population that in the Phase III clinical trials were proven to be better than the standard of care.

So at Teva, you have firstly the expertise in terms of the specialty, in terms of generic. You have leadership that's actually been in this area before, and we are going to become the leaders in this particular space going forward.

It's important to understand that these -- this combination provides us with unique opportunities of IP protection, 20 years from filing, potential coverage for new formulations, new indications, new combinations, changes in pharmacokinetics, novel clinical endpoints, and we will pursue the approach to provide appropriate patent protection aggressively in an effort to derive value for our shareholders in this regard. We are uniquely positioned to become the best NTE company in the world and turn it into a major growth engine for Teva.

With regard to our work in the CNS, I think everybody knows that we have an important CNS franchise and I'm going to tell you about it. We're going to expand this into neurodegenerative diseases. We're going to explore other disorders, and we're going to enhance our presence in pain.

With regard to sustaining the important and critical MS franchise, it's important to become aware of the changes and the paradigm changes that are occurring in the treatment of multiple sclerosis. We see this as a tremendous opportunity. Firstly, the endpoints of relapse rate are now being reconsidered and what's being added to is disability progression and impact on brain structure and brain atrophy. That really plays to some of the strengths of Teva.

In addition, when you look at relapse and remitting, another important medical need is progressive MS, for which there is no therapy. And also as, of course well known for cancer, where combination therapy is most effective to change the course of the illness, we also are considering going from monotherapy to unique combinations of therapies.

Now with regard to Copaxone, a unique and differentiated asset, Copaxone decreases inflammation. It's -- as a primary factor. It's important to understand these mechanisms of action. This unique differentiation also is coupled with an incredible safety record, 1.3 million patient year since the drug was available in 1996. A proven efficacy track record and an established safety profile. This is based on real-life experience.

Now let's look at Copaxone for a moment and just look at the unique network here of neurons and particular astrocytes in blue within the brain. In multiple sclerosis, what happens as part of this inflammatory pathway is you get influx of particular cells here, seen in red. This Th1, Th17 cells, these are the bad guys. And they excrete -- they actually secrete these proinflammatory cytokines, and these have impact on the astrocytes. These astrocytes grow and proliferate in profound ways and are activated, and these have impact then by secreting other toxic components, other toxic factors. They then, together, provide the neuronal damage that leads to the clinical endpoints of multiple sclerosis.

Now let me show, with you having understood that briefly, what Copaxone does. Copaxone has its major effect in providing anti-inflammation. So firstly, it reduces the Th1, Th17 cells but importantly, it brings in these good guys, the Th2 cells, and they secrete anti-inflammatory cytokines remarkably. And they counteract the Th1, Th17 cells' effect. As a result of this, the astrocytes have less activation and they secrete less toxic factors, and the end result is reduced neuronal damage. The primary effect of Copaxone is moderating the inflammatory pathways.

And the impact of this has just recently been reported, actually in a meeting from an independent NIH-funded study. Teva had nothing to do with this study except provide the drugs. This is the CombiRx study led by Fred Lublin at Mt. Sinai here in New York. And the first thing that I found quite remarkable is that after 3 years, Copaxone was still being taken by 90% of patients. The adherence was really remarkable. And it was above beta interferon for which it was being compared. So this is remarkable as improving adherence.

In addition and remarkably, the relapse rate was dramatically reduced. 0.1 for Copaxone here in green. That means 1 relapse every 10 years. Remarkable decrease in this controlled study, and better than interferon. In this particular study, combination therapy didn't show any benefit over Copaxone in that example.

We are fortunate in that we have also a new way to enhance the value of Copaxone beyond its patent expiry by using less frequent doses of Copaxone, essentially making it more convenient for patients. And this is the 40-milligram, 3 times a week, and this has been -- it will be submitted in the first quarter of 2013. But remarkably with this, we already have a patent that will cover this novel formulation of Copaxone until 2030 issued in the United States. So there's lots of room for both patent protection and novel approaches to therapy for patients with this incredibly safe and highly efficacious drug.

As we think about generics, Copaxone is a very complicated molecule to produce and manufacture. In fact, it's very, very difficult. This is a polypeptide that's very difficult to replicate. And one way to look at replicating -- at other, for example generic formulations, is to see what genes they all have effect on. And you can look at an array of the human genome and look at those genes and see the effects. Just look here. So here's the Copaxone drug product, and for example, red are the up regulator genes. This is the same, essentially, chips, so you're seeing this. And interestingly when you look at what's up regulated here, those are anti-inflammatory genes. Genes that provide protection.

Well surprisingly, and with this purported generic, in fact, there's down regulation of those good genes that provide protection. And if you keep on going and you look further and you look for up regulation, this is down regulation here. This is down regulation for the anti-inflammatory way -- sorry, down regulation of the pro-inflammatory genes, so these are providing protection. But what you can see are the purported generic. These are in fact up regulated.

So even though a drug may have some similarity to the patented, supported Copaxone, in fact, the importance here is that there may be significant differences that have big impact on genes that significantly they influence the course of the illness. Clearly, clinical trials are necessary because these purported generics may, in fact, in this particular instance, this would not be a particular good effect if you were up regulating genes that in fact were pro-inflammatory and down regulating genes that were anti-inflammatory.

The point I'm making is caution is really very needed. And as we talk about caution, in the recent Wall Street Journal with regard to the new drugs that are coming on these MS pills debuting, this is an article that came from that particular journal. And what they are saying, of course, is that these could have serious side effects, and so doctors are saying shifting to pills may not be worth it. I think the message is that in fact, the long-term safety record of Copaxone for patients who are going to have to take these drugs long term is a profound advantage that really will have to be considered deeply when considering any other medication.

So what about other assets in MS, laquinimod, another asset that's pretty interesting. Laquinimod, separate to Copaxone, actually protects neurons. So it has a unique mechanism of action. And if you look here, there's a direct effect. Impacts on central pathways in neurodegeneration. It can prevent neuronal damage in some preclinical models, and also in clinical trials has major effect on decreasing the progression of disability.

Let's have a look at what laquinimod does. So laquinimod protects these astrocytes in quite a remarkable way. There's also some decrease in Th1, Th17 cells, but the astrocytes themselves are protected from these pro-inflammatory cytokines. There's less astrocytic activation and so generally, there's less progression. And so this can also reverse some of the astrocytic activation and as a result, neuronal damage is and may be reduced.

Now when you look at the brain of an MS patient, not a lot of people recognize that MS is also a neurodegenerative disease, just like many of the others. And so if you look here, for example here's the brain of a patient with MS at the onset of the disease. And one way to look at neurodegeneration is look here at the holes, the lateral ventricles. They expand when the brain atrophies. Look at the brain of the same patient 2 years later. Look at those lateral ventricles. These are expanded. Just look at this to this; significant, and this is because there's has been cortical and subcortical atrophy inducing associated with the MS phenotype and the MS clinical approach. So MS is both inflammatory and neurodegenerative. And in fact, laquinimod's already been shown to have some power and efficacy in reducing brain atrophy. Here's, for example, compared here to Avonex in terms of the ability to -- compared to placebo, brain volume was increased relative to no drug. Laquinimod is unique in having a mechanism action of neuroprotection.

But importantly also, neuroprotection is one thing but for MS, the impacts on the quality of life is what matters to patients. It's a debilitating disease. And this is just looking, for example, the impact of laquinimod not only on the brain structure but also on the quality of life, the issues of fatigue, the issues of fatigue and listlessness that disrupts and destroys so many aspects of everyday life. And what you can see here, again, general health on laquinimod is actually increased compared to placebo and compared to placebo, generally improves significantly in many, many parameters that impact on the quality of life. Laquinimod has the ability not only to reverse or reduce some of the brain atrophy, but to have impact on the functional status. And so in 2012, we have now an EU submission with regard to MS, but we are doing additional trials in Q -- 2013, additional Phase III trial looking at different doses, 0.6 and 1.2, and a trial in primary progressive multiple sclerosis, a tremendous unmet medical need in this field.

We've also recognized that with COPAXONE having mainly an anti-inflammatory effect and laquinimod having a neuroprotective effect, there may be an opportunity for adjunctive or combination therapy in this way. And that combination may have impact on the 2 primary pathways in MS. Just imagine if we were to treat what we'd expect. So laquinimod firstly would provide protection. There would also be more Th2 cells, reduced Th1 cells. Generally, you'd expect to see a much reduced, both inflammatory and a neuroprotected profile conferring benefit to the patients. So COPAXONE would reduce the inflammation here. What laquinimod would do, it actually provide neuroprotection and in the end, this would be expected to have significant impact on the course of the illness in patients.

Laquinimod will also be a background for combination of other therapies, and we are seeking and looking and doing discussion what other drugs we would combine with laquinimod in an effort to derive the best benefit for patients. We will initiate these combination studies in 2013. But of course as I've shown you, its impact on neuroprotection encourage us to consider other opportunities as well, and in particular for the neurodegenerative disorders, not multiple sclerosis but these major ones for which there are very few therapies to alter the course of the illness. And we're expanding it to neurodegeneration primarily because we believe we have a medication that could provide some benefit, a unique opportunity for Teva medicines. And of course, there's increasing prevalence. The sad news for all of us at the moment is that 1 of 2 of us, by the time we get to 80, will suffer from Alzheimer's disease. And the opportunity to have any impact on any neurodegenerative disorder is really very profound. The increasing prevalence is dramatic and its prevalence for all neurodegenerative disorders because these are disorders of late life, and we're all living longer. And as we live longer, the perils of a longer life are, in fact, getting some of these neurodegenerative disorders.

And in a normal brain, most of us will have brains like this where there's minimal astrocytic activation. I told you these are the astrocytes. But just look what we see. Here's MS, as you saw before, astrocytic. But it's the same for Alzheimer's and Huntington's and Parkinson's. They have the same morphology, the same cardinal, early neurodegenerative features contributing to the disease. In animal models, as I've shown you in the figure, look what laquinimod does do this. This is really decreasing some of the astrocytic activation, recently published work. And this could have impact not only on MS, but on other disorders.

We have 4 medicines that we have now potential to treat neurodegenerative disorders in-house, and we consider others. Laquinimod, potentially the combination of COPAXONE-laquinimod; Azilect, as you well know a leading therapy in Parkinson's and as you know our first license was to Huntexil, a drug that has impact on Phase III and will be in Phase III studies for treatment -- for symptomatic treatment of Huntington disease. And in Huntington disease besides Huntexil, we are going to take laquinimod into Huntington disease and initiate a Phase II clinical trial in 2013 because this is a tractable disease, well identified. You got markers of progression in 1 year to impact on the course of the illness.

Now what about pain? We see pain is very much part of our CNS franchise. Just remember as you all know, pain is the #1 complaint, bringing patients to their doctor's office in the U.S. 50 million working days per year are lost in the U.S. due to pain. And as we think about pain, we, of course, have particular presence in the opioid assets. The opioids are the best-selling class, about 7 billion in the U.S. alone, so very significant. But I think as we all know, the use is significantly limited by the serious side effects of opioids. And patients and payers are not just looking for new opioid assets, but also looking for non-opioid alternatives that have 0 potential for addiction and abuse. I'm going to tell you about that in a moment.

So these are opioid assets, and we do have a Phase III extended release for hydrocodone that will offer convenience to patients. This is in Phase III and this will be continued. These are some of our marketed products. But in addition, we are also very interested in novel approaches. And I think all of you would have read and seen this, the story of Ashlyn in The New York Times Magazine, the cover about 2 weeks ago, just under 2 weeks ago and the story of Ashlyn, who discovered that she felt no pain when she put her hand into a cup of -- a pot of boiling water to take out a hard-boiled egg. She put her hand in and realized she felt no pain. And there are people like that who feel no pain. The opportunity from this is to recognize what is it that's conferring the absence of pain and is there a way to develop a drug to replicate what Ashlyn had.

Well, the unique opportunity came our way. This is a disorder. Nav1.7 has been shown to be the gene that confers that -- confers the pathways for pain. If you have mutations in that gene that knock it out, you actually feel no pain. And one proof of that is if you have other mutations in the gene that causes a gain of function, you feel too much pain. And so we're very interested in this particular gene as a way to exploit non-opioid assets for development of pain. And I'm delighted and Jeremy mentioned, but I'm delighted to again announce today as was announced early this morning that Teva has taken an exclusive license to probably the most advanced Nav1.7 antagonist in the industry in an effort to really develop this as a non-opioid inhibitor for pain. There are 2 products, oral and topical. We're looking at multiple indications. And in particular, the orphan designation of erythromelalgia or a gain of function has -- a gain of function in this gene for which the treatment to be most effective has already been provided.

Just let me show you what this drug does so that you understand. Here's a patient who's never taken a hot shower in their life because heat makes the pain worse. Here's the activity reduced by 88% compared to placebo, green being the line for pain, red being the placebo effect, dramatic reduction in pain. This is using the oral form. And then when you go, this is post-herpetic neuralgia, a significant improvement in response with the topical form, with a significant number of patients having greater than 50% response, so unique opportunity, and we're excited to exploit this.

In addition to the CNS, we're going to be further developing and achieving a leading presence in respiratory. We're going to optimize our life cycle current products. We're going to develop existing molecules on the unique device that Teva has in-house, the Spiromax that we've developed. And let me share with you a little bit about that.

So with regard to asthma, a major issue throughout the developing world, a major issue in the developed world, 300 million people globally, estimated to increase to 400 million in the next 10 to 12 years. It's a lifelong condition. Children get it. They have maintained themselves on therapy and will need therapy often throughout their life. Well the therapies involved, the inhaled therapies that we're looking at, corticosteroid and SABA and LABA and LAMA. But importantly, we have an innovative platform that I'll share with you in a moment. And we are exploring novel biologics for asthma in terms of reslizumab.

Asthma often runs in family. Here we have 1 family, 3 asthma patients. And when you look at what they're taking, you can see that some -- these are -- each of these children and a parent, they're each on different medications. They actually have different devices, and this is very complex for the family. It's complex. They have multiple technologies. This results in dosing variability. Hand-breath coordination is difficult and requires significant training with different devices. The end result is poor asthma control because the end result is dosing variability, often incorrect use. Sometimes the drug is taken too often and there's rescue medication that's an issue and this is a big problem. And at Teva, we recognize there's got to be a smarter way to try and deal with this. And we recognized the key limitation was having a device that was truly useful and interesting.

And so here, we have the Spiromax. This can be used for both maintenance and rescue. It's a simple open, inhale, close, the same dose every time for the patient. It's easy to use. It's one device for all the molecules that the patients may need, and it's the correct dose every time. Spiromax is now is a validated platform. This year, just recently, we've shown using our most advanced Spiromax product and BF that is completed clinical development. This will be submitted in the EU in 2013. And importantly, this has shown bioequivalence to the originated brand, Symbicort in all parameters. So this represents an important growth platform. But importantly, the platform is validated. We can add all kinds of other medications to that platform in an effort to enhance the likelihood of efficacy and convenience for patients.

With reslizumab, this is a validated target for asthma, a monoclonal antibody against IL-5. It's novel, validated. It's in Phase III at Teva. And we are now, in addition to our IV formulation, have a subcu formulation that we're developing in parallel because we know that, that may have greater patient acceptability. We're developing both of those aggressively and moving those forward.

We also recognize COPD is another major unmet need, #1 cause of death in rural China, large numbers of patients around the world and various classes of drugs that can be used for this. We are going to our first steps into COPD in the next year, as we think about key Spiromax products with different medications and also a LAMA product in a novel proprietary device, which is in development at Teva.

So I've summarized for you our 4 main areas: high-value generics, the NTEs, the special area and focus in the CNS, and we are committed to achieving a leading presence in respiratory. With regard to the engines to enrich our pipeline, we also recognize that firstly, we need to look internally. And we are focusing again on discovery internally in limited focus and differentiated ways. These are highly differentiated programs, and these are particularly in areas of small molecules and biologics against validated targets that we can believe in. And in terms of our biologics program, we have a very well-developed strategy in biologics, novel biologics using, for example, novel antibody-arming technologies against validated targets. We have biobetters that allow us to think about ways to deliver the drug with half-life extension and then are taking a selective and focused and committed approach to the development of biosimilars. In a sense, this looks very much like we have in our branded portfolio against novel validated targets. There we have -- there we have generic, and this would be almost like NTEs in a conceptual sense to what we have.

We've had significant progress. Our biobetters, our glycopegylated G-CSF is submitted in the U.S. and the EU. Albumin-fused G-CSF is ready for submission. We just completed Phase I with long-acting human growth hormone. And in biosimilars, we already have 3 approved drugs in the U.S. or in U.S. and EU, and another one recently submitted in EU. We have an ongoing interest in selectively investing in biosimilar development.

In addition to that, however, we recognize and we are not going to be developing our pipeline -- our full pipeline in-house. We are going to rather take advantage of some unique opportunities. We happen to be in Israel where the corporate headquarters are. And within Israel, there are some unique opportunities. Israel is world leading in the world in R&D investment as a percentage of GDP, 4.9%. And as it happens, here's for example the U.S., 2.8%. Canada is actually below that. When you look at it, however, and you see where Israel is in terms of neuroscience, #5 in the world in terms of its productivity in neuroscience, what a remarkable opportunity for us.

And this morning, I now announced a national center of excellence, a national network of excellence in neuroscience in Israel, essentially expanding our discovery pipeline to the whole country, taking into account every single major institution, every major health center and also looking at potential select biotech involvement, also external collaborators. And we are really going to be developing their approach to this. Important to remember, in fact COPAXONE came out of the tech -- came out of the Weizmann; and in fact Azilect came out of the Technion. We're going to looking to foster discovery, foster innovation and to looking towards development of the next drugs to fulfill that portfolio.

Today I'm also pleased to announce that we have a memorandum of understanding with the Gates Foundation. Teva and the Gates Foundation is again a remarkable story. It's a story developed on Teva's strengths and the remarkable and impressive strengths, of course, of the Gates Foundation, well known. But Teva is going to take our approach to NTEs and think about ways that we are working in conjunction with Gates to develop this for the developing countries and also having a focus in women's health, making family planning a major issue and developing an approach to that. And as I spoke to you about drugs like HIV and approach, we're also going to be doing this in infectious diseases in ways to enhance convenience, adherence with regard to patients and children throughout the developing world. Important to note that our use of products in -- other markets, in fact, is going to be totally part of that agreement. And we will be able to create value with these products in the Rest of the World, while we do what's the right thing to do for the developing world and enhance the brand of Teva around the world.

We have recruited global leaders. You've heard about Jon Isaacsohn, a world-renowned expert in clinical development. And I'm very pleased to announce today -- he actually joined us yesterday -- is that Volker Knappertz, a world expert in MS, particularly in the refinement of clinical development, joined us and is taking the lead in our clinical development for MS, another important recruit as we look at some of our key areas.

Our pipeline, when I arrived for the first phase to look at the pipeline, there were 59 programs, 26 in Phase II and Phase III. What's happened by September essentially or by now by -- from September to December, 12 programs have been discontinued. Here are some of them, 4 of them in Phase III, 1 Phase II, some Phase I, some preclinical. And even something later is also something that we're not continuing, and that was also announced today. Many were not in our strategic area.

If you look at the Phase II and III programs that have been discontinued, they've been discontinued because either a, they're not in our strategic area; b, there may be another way to actually develop things differently; c, the results in, for example, a Phase II study were not as likely to be successful in Phase III, so we've called that. Obatoclax, which is an interesting drug which was going into Phase III, did not have the level of success in Phase II that we wished. That program will no longer be continued. And the same thing goes for the drug for sciatica, where we did not get the appropriate an anti-NGF antibody, which did not get the appropriate efficacy signal and this is also being discontinued.

But we have now added significant programs, and I want to share with you. These are in all ranges: Phase III, Phase II, Phase I and also preclinical. The result of this, if you look when I arrived at Teva, this was the research portfolio. You can see it scattered throughout many areas: about 30% in CNS and respiratory. Well now we stand -- we're in fact going into 2013, we're at 50%. This is more focused and to that has been added the NTEs for clinical development. These are some of the programs, particularly in the CNS and respiratory, and you have them in your handout, that we have really brought into the program. And in particularly, these are some of the new ones marked in green, laquinimod high-dose progressive, pridopidine Huntexil, Xen402 for both oral and topical pain, laquinimod for HD and combination for multiple sclerosis. These are some of the drugs and the programs that we really are taking forward in the area of CNS and respiratory, an example of the kind of new programs that we're developing.

So I think by now you are getting some clear understanding and transparency of the roadmap, how R&D can serve as an amazing growth engine for Teva. This includes the high-value generics, the industrialized NTEs, the focused and reshaped pipeline, a CNS constellation as we move towards enhancing our CNS portfolio and novel partnerships. The R&D organization feels a sense of urgency. We recognize this is a time of incredible and exponential change. Jeremy spoke to how we talk in 30 languages but in fact, have a common voice. The languages may be different. The voice and the commitment is the same. The commitment to have impact on patients lives around the world generate value for our stakeholders that includes you but patients everywhere. We are united by passion and commitment. We've tapped into and enlisted and recruited the heads but also the hearts of our R&D organization and their desire to contribute to the positive change. We will seize and capture these opportunities at a pace and intensity and with creativity that ensures that Teva will flourish for years to come. We've just begun. Thank you.

I’ll just ask my colleague, Jon Congleton, the Head of the Global Medicines Group, to tell you more about the branded portfolio.

Jon Congleton

Thank you, Michael. Good afternoon. Good afternoon. My name is Jon Congleton, and as Michael said, I am the Head of the Global Medicines Group, which for your information is our global strategic marketing group and our global medical affairs team. I've been in the pharmaceutical industry for 26 years. I've held a variety of sales management, product management and general management roles. I am -- I first said I was one of the oldest. I'm not one of the oldest. I'm one of the longest tenured within Teva. I joined in 1996. I had the good pleasure of joining at the time of the launch of COPAXONE. At that time and since, I've seen the MS market evolve as a Product Manager, Product Director, the General Manager for our Canadian business and for a time, General Manager of our U.S. business. So I can tell you probably a lot more about MS than you care to know, and I will do a short bit of that a little bit later.

But I have also seen in my 16 years the evolution of Teva's branded business. It really went from a single-product focus of COPAXONE to a multi-therapeutic global footprint and nearing $8 billion branded business. And it's with a great deal of pleasure that I get to tell you about that today in present form as well as some of our future plans.

I'm going to try to be quick but not hurry on 4 key points I want get across today, and that is I want of talk about our commercial success and capabilities with brands in the United States, in Europe and the Rest of the World. I also want to talk to you about some of our key branded assets, COPAXONE, Azilect, Nuvigil, ProAir and Treanda. I want to speak a little bit about the pipeline that Michael referred to, specifically in the launch sequence timing standpoint. And then I want to talk about how it's our belief that we can maintain flat revenue to 2017 based on that existing pipeline coupled with our existing market of assets.

Let me start with the United States. If we look at the success we've had, historically, people think of Teva from a leadership standpoint with generics and I think as of late, COPAXONE and MS. Clearly, COPAXONE is the #1 prescribed agent globally but in the U.S., significantly #1, 40% market share. But that's not the only success and leadership that we have within our branded products. If you look, say, in CNS, Azilect is the #1 branded product for the treatment and management of Parkinson's disease. Nuvigil is the leading asset in the shift work disorder management. If you look in respiratory, we have the #1 short-acting beta agonist in ProAir. We have the #2 and fastest-growing mono-ICS in Qvar. If you look at oncology, we have a leading asset with Treanda for the treatment of CLL and second-line indolent NHL. And if you look at our women's health history, we have a long history of leadership in very segmented and targeted contraceptive and hormone replacement therapy, so a very nice legacy of leadership with our branded assets in the United States.

This is predicated on outstanding products. But it's also predicated on a very unique commercial model that has evolved over time. So if you can imagine going back to 1996 -- and I was there -- when you're starting a branded company within a very generic organization, there's a certain mindset that comes to play. And there are a lot of challenges to what I would call big pharma dogma on how much you spend, how you target and how your resource. And so let's just say that there was a leaner organization that came out of the Teva brands based on that generic mindset. It was a mindset of doing more with less. And the best example I can give to you about that is if you think about our ProAir business, this is for our short acting beta agonist. Our sales force in the United States is approximately 400 sales representatives competing against sales forces of 1,000. And yet in spite of that implied disadvantage, we have gotten to the #1 position with that product in the treatment of asthma. So it's not just a matter of saying that we're lean and agile. It's not a matter of saying we do more with less. We've actually done that.

But that's also given us the pressure to make sure that we really target and focus in on our markets and meeting the needs of our customers, we have to. With that lean model, we have to have the keen insights. We have to make disciplined choices in where we go and where we compete. We couple that with the expertise that we have from a retail channel standpoint with the expertise we have in the payer space, and you see a very nimble organization that generates the kind of results you see right there.

I also talked about keen insights and really listening to the markets. You heard Jeremy speak to this just a moment ago. Shared Solutions is just this kind of outcome of listening to your customers. Dating back in 1995 when we began to try to understand the MS marketplace in preparation for the introduction of COPAXONE. We talked to physicians. We talked of patients. We talked to families to try to understand what would people need to be successful in managing their multiple sclerosis. Through those dialogues, what we found is, yes, they need a therapy. Let me go back to 1995. There was one therapy at that time approved. So therapies were necessary, but that was not enough. There were social, economic, emotional, psychological issues that came to bear that if were not resolved or addressed or helped to adjust, would become barriers to a patient's success with the therapy.

So based on that understanding, we have the insight to say, "All right, we need to give people access to a service to help address those issues. We can't cover all of them, but we could help try to direct them to resources." And that's why we started Shared Solutions in 1995, actually a year before we launched COPAXONE. And at that time, it was a small nurse call center, was very novel for the time. But I can tell you what it was in 1996 when I personally managed it and what it is now is light years away because we've spent the past 16 years continuing to listen, continuing to modify, continuing to meet the needs of our patients. You can look here at the services we offer. The nurses continue to be a core of that, the access that we provide for patients 24/7, the benefits investigation support, the injection training at home, the online educational tools. The connectivity patient to patient was another insight we had. Patients wanted to talk to somebody else that were dealing with the same issues. We've enabled that connection.

We now have the #1 rated MS patient support program in the United States, thanks to the team in Kansas City that Jeremy spoke of, that actively listened and then act on those insights. Interestingly enough, you may ask, "All right. That's a nice benefit. What does that do for your patients?" Well, what we have seen is with patients who engaged our Shared Solutions program, their adherence and compliance for once-a-day injectable COPAXONE is equivalent to taking a pill, the oral once-a-day Gilenya. Just want to reinforce that point, a daily injectable having equal compliance and adherence a once-a-day oral pill. That's the power of a product like COPAXONE coupled with a service like this. And so if we look at our success in the United States, it's really predicated on great products obviously but also keen insight, a lean disciplined model and then a real sharp focus on the patient.

But we also see this approach in Europe. COPAXONE has been available in Europe since about 2000 but just recently, we've completed the transition of that asset back to Teva in the European marketplace. In Europe, COPAXONE, like it is in the United States, is the #1 prescribed relapsing-remitting MS therapy. During this transition back to Teva, we have really look at tighten up our commercial expertise in support of this molecule. We're also taking Shared Solutions which existed in European marketplace, and we're modifying and improving that, thanks to the staff that Rob Koremans has brought on with real deep expertise from Medco. They can now apply that to our Shared Solutions program in Europe in support of the ever-growing needs of our COPAXONE patients but also in anticipation of our launch of laquinimod. Additionally to that, Rob and his team are really beginning to centralize some of our commercial capabilities in the European marketplace. This is allowing us to attract top-tier talent to really do excellent execution and make sure we have consistent branding of our efforts in the European marketplace.

As you can see here, we have a great many therapeutic areas that we cover within this theater. We have CNS, respiratory, oncology and women's health; and many of the countries have multiple therapeutic areas, specifically France, Germany, Spain and Italy. So Europe is truly in a position to support not only our existing assets, but it's poised to really take on our pipeline products and make them successful.

If we look at Rest of World -- and the real focus breaks down to our COPAXONE business and experiencing capabilities and really the unique nature of these markets. So first, the COPAXONE. We obviously have it in Canada, Latin America, Russia, Australia and other key countries, including Israel. I'd be remiss if I missed that one. We also have Shared Solutions in different forms available in those marketplaces to help support those COPAXONE patients. So we have that very specific CNS capability in these markets. So that as Michael pointed out, we have a pipeline of CNS products coming forward. We have the commercial capabilities in these large and critical areas to support those products.

If you think about the other business in Rest of World that are more of the generic brand generic where we have expertise and capability, those models are not terribly different from a typical branded business. They not only require supply of product, but you have to create demand with those generic brand generic in these Rest of World markets. So we have the footprint. We have the local knowledge. We have the capabilities to take our products, put them in the Rest of World and quickly have uptake and bring value to our patients. And we are doing that.

As we've integrated the Cephalon acquisition last year, we looked at several of the products that came from Cephalon that were not in these markets. And we spent 2012 beginning regulatory filings, beginning some of the clinical data generation that would be necessary for filing, and we're going to continue that in 2013. We're also actively taking these countries into consideration as we work on our clinical development programming to ensure that those are generating the kind of data that we need to submit in these large and critical markets for us going forward. So we have the footprint. We have the expertise, and we're beginning to bring the key products into these spaces.

So I hopefully have conveyed to you that we know what we're doing with brands, that we've had success not only in the U.S., not only in Europe but in Rest of World. What I'd like to do is spend a few moments and talk about some of our critical assets. Now with a clock in the back, I have to be mindful because I could talk for about 8 hours on this product, and I don't think you want me to do that. COPAXONE is near and dear to my heart. I have grown up with this product, and I have seen the value that it brings to patients. It is clearly the global market leader in the treatment of this disease. And it is based on the long-term safety and efficacy that Michael spoke about so elegantly just a moment ago.

To think about COPAXONE from a value standpoint, it really breaks that down into 2 categories: One is generic aspect; and two is the ever-changing dynamic MS market. The first, I won't spend a lot of time on because I think you're all probably fairly well grounded in it. The generic 2 -- COPAXONE breaks down to 2 paths really, the legal case and the regulatory case. The legal case, you are aware of. Our patents were upheld, validated within between both the U.S. and European courts just in the last 12 months. From a regulatory path standpoint, Michael spoke much more elegantly about the complexity of this molecule and frankly, the difficulty to show sameness because of the absence of bioequivalence. We have stated we continue to firmly believe that any follow-on COPAXONE would require clinical trials with robust end points and enough time and patients to really validate that it is a safe and effective product. So that's the generic side of the equation.

So the other side, the dynamic MS market right now, a lot of new therapies introduced, soon to be introduced in the MS marketplace. New therapies always generate great interest. They also generate a lot of questions. I can tell you in 2002 when Rebif came out, there was a lot of interest and a lot of questions. There was also a presumption it would assume and take over the market. That did not happen. When Tysabri came out in 2005 and then yet again in 2007, a lot of interest, a lot of questions and a lot of assumptions that it would take over the market. Again, it did not happen. Gilenya in 2010, the first pill, again, in assumption that it would take over the market. It did not happen. Yes, they each have had degrees of success. Yes, there are markets for new therapies to address, but to presume a single agent would come out and take over an entire market, I think has not been the example that we've seen in the past.

And you see the market, there's a great deal of satisfaction in it. Yes, there's still unmet need, but there is a great deal of satisfaction in that. And if you look at the path COPAXONE has been on through those introduction of different therapies, it has continued to grow and grow and grow. So the market share point to that is that right now based on global leadership. Will it continue to grow in the face of new therapies? I'm not promising that. I'm just saying that this molecule with its clinical profile, with the team that is behind it and the support and focus on our patients, COPAXONE will continue to be a critical and leading asset in the management of multiple sclerosis.

And we're committing to it long term. If you look at the advancements that we're doing for the product enhancements, Michael spoke about COPAXONE GALA, the new term 3TW, 3 times a week, we'll be submitting that early next year, the first quarter. We anticipate bringing that to market in Q1 of 2014, obviously excited about the patent status with the 3TW out through 2030. But that's not all. We're continuing to look at how do we take this excellent molecule and enhance the product experience with that, and we will continue to do that.

If we look at our CNS franchise we also have Azilect, which is for Parkinson's disease, early and adjunctive therapy. It is the leading branded asset in this space. We've seen significant volume growth in both U.S. and Europe, over 10%. It's kind of a unique situation. This is a highly genericized space. We're still actively promoting this asset in there. And obviously, that gives you a lot of room to move, and it gives you a lot of opportunity to get your message out to physicians, talk about the efficacy, talk about the safety, and they respond to that message with the kind of growth that we've seen. We're looking in sales of $340 million to $380 million in 2013, and we're going to continue to put strong share of voice against this, as well as continue to generate data on this asset because we feel comfortable on the IP through 2017.

Another CNS asset that we have is Nuvigil. It is the improved, long-acting, once-daily follow-on to modafinil. It is for shift work disorder, continues to have nice growth. We're targeting $280 million to $320 million in sales in 2013, continuing to work with payers and patients to ensure that if they and their physicians choose Nuvigil to manage their sleep disorder that they can have access to that.

We're also excited about the bipolar disease we announced in this past summer. The first trial was positive and very robust signal with Nuvigil in bipolar disease. We're looking forward to the second trial reading out in Q1 of 2013. Based on that trial, if it is positive, we'll have our 2 trials. We'll our make submission to the FDA, and we'll be looking to bring Nuvigil for bipolar to market the first quarter of 2014. This is an extremely exciting opportunity. We have a commercial exposure to the neuropsych space right now, and we would have a very unique first-in-class molecule to help treat bipolar disease, an extremely exciting opportunity.

If we look at our respiratory franchise, again our #1 short-acting beta agonist, ProAir, looking at sales in the range of $400 million to $440 million, continuing with that very efficient commercial footprint with 400 sales representatives. We have deep commercial knowledge in the space, and we have outstanding payer access to continue to support this product going forward.

You also heard Michael talk about the Spiromax. We're looking to put ProAir into the Spiromax device, launching that in 2015. And just this week, we are launching the ProAir dose counter, which is a counter on the back of the device that informs the patient when they're getting near being empty on their ProAir, which is a critical thing if you can imagine and you're managing asthma and you're having an exacerbation and you need a puff. So we're launching that just this week.

If you look at Treanda, this is our leading oncology asset for the treatment of CLL and the second line indolent NHL, an outstanding asset. That's really the core of our oncology franchise. We're forecasting $600 million to $700 million in sales in 2013. The nice thing about Treanda obviously is the value it brings to patients, the value, at this level, that it brings to Teva. But it also gives us a footprint in the oncology space, which will help us as we bring our G-CSF franchises forward in the coming years. We're going to continue look at improvements with that asset from a right of administration standpoint, as well as continuing to track the data for the first-line NHL submission.

Let me take a breath. So a lot of excitement with those assets, but we have an exciting pipeline to really augment that with. You've seen the expertise we have in CNS and respiratory and in select innovations. The pipeline matches that very robustly. Just this year, we have launched the ProAir does counter. We also launched Synribo, our oncology asset for CML just this past October. If you look at 2013, we're looking forward to launching short-acting G-CSF in the U.S. and the long-acting G-CSF trade name, Lonquex in Europe later in 2013.

We're also looking forward to bringing forward laquinimod in the European marketplace. We know in the United States our feedback was, "You need a third trial." In Europe, we found the regulatory authorities to be more open to the benefit they saw with laquinimod. Thus, we submitted it. We're in dialogues with the EMA at this point. But we're preparing as if we're going to get that product approved and introduce it into Europe in 2013.

In 2014, we have a couple of assets within the CNS space, the COPAXONE 3TW that I spoke about and new Nuvigil bipolar disease. I'm also excited that in Europe, we'll be introducing our first product Budesonide/Formoterol in the Spiromax device. We'll be bringing that in 2014. And then we'll be bringing a long-acting G-CSF to the United States in that same year.

2015, we have our extended-release hydrocodone. This is a very critical asset that actually brings some unique technology that was reinforced as needed by the FDA last week. If you saw the advisory meeting on the need for some level of tampered it turns [ph] to help avoid abuse in the opioid space. Our ER hydrocodone has that, so we're excited about the opportunity that it presents.

We'll also see 2 new products in the Spiromax device, the ProAir as well as fluticasone/salmeterol in Europe. And custirsen will be our next oncology product, which will be indicated for castrate-resistant prostate cancer in 2015. 2016, you heard Michael talk about pridopidine, very excited about that. We have knowledge. We have expertise. We have relationships in movement disorder. This will be a Huntington product that fits right within that. We also have additional products in the Spiromax devices as well as reslizumab, our first new chemical entity in respiratory. The NTEs will begin to roll out in 2016.

The big question I always get is, "Yes, that sounds nice. But can you get it reimbursed? Can you get it paid for?" To me, it's a very simple answer. Just like you have with a new chemical entity, does it provide value? Whether it's an NTE or an NCE, if it doesn't provide value, I'm going to have a hard time getting it paid for or I'm going to have to get significant rebates and discounts to access for my patients. So it's all predicated on the products that we choose and bring forth. And as Michael pointed out, it's around compliance, efficacy and safety. If you can solve for an unmet need, there is value there and the market will pay for it. And once we have those molecules out of Michael's R&D shop, I think I've show you that across the globe, we have the commercial tools to lever against that, whether it's against demand creation, payer space, patient support or retail channel, Teva has the ability to turn loose all of those channels against the assets that we bring forward.

So in conclusion, I have 3 final points. We know there are lots of exclusivity threats out there. We're Teva and we understand the generic side of a branded business. But I think we have managed and we're mitigating the risk of those and I hope you get a sense of that as I walk through this. We still believe there's significant value within our core therapeutic areas of focus, both with our existing products and certainly within the pipeline that we have. And we believe we have the products, the pipeline and the organization to sustain our revenue without inorganic infusion of other products, so with our pipeline and with our products through 2017.

I thank you for your time and your attention. Have a good afternoon. I'll bring Dr. Jeremy Levin back up.

Jeremy Levin

Thank you, Jon. Ladies and gentlemen, we have about 15 minutes now for Q&A. I'd like, if possible, just to remind you, please focus your questions to Michael, Jon and myself. There's a great team coming up that will talk about the generic and OTC business and finance at the end. So happy to take any questions that are coming.

Question-and-Answer Session

Unknown Analyst

I guess it's me. I was curious about the API business. It wasn't on the strength slide. And can you talk about the context of Teva as owning the largest API company in the world and how you thought about that during your review and how we should think about its importance longer term?

Jeremy Levin

Okay. We'll hear more about in the generics and I'll make a comment. But just a comment, it's a strong, growing business. We're one of the largest suppliers of great APIs. We have a vast array of them. And in fact, they caught our strategic plan. As Michael mentioned to you, NTEs depend upon having this array of internal APIs as well as being able to secure from outside. Great business, by the way.

Unknown Analyst

Jason Culver [ph] from the Maxim Group [ph]. I cover Mesoblast, and I saw that there was no mention of Mesoblast or the Revascor-proposed 1,700-person trial. Is that program still under review? Or have you made the decision to go forward in the CHF area with them?

Jeremy Levin

Thank you, Jason. Michael, perhaps you'd answer?

Michael R. Hayden

Well, thank you for that question. We have reviewed the program and we are proceeding with the Phase III clinical trial. But in fact, what we're wanting to do is get an early readout so we'll have an interim analysis after a certain number of patients have been submitted into the trial. And that trial will be ongoing over the early interim analysis Phase III starting 2013.

Unknown Analyst


Jeremy Levin

Ronnie, we can't hear you. I'm sorry.

Unknown Analyst

[indiscernible] So I was just asking if you can [indiscernible]. So the question is first, regarding some of the programs that were not mentioned, it's a few additional ones. Laquinimod in lupus, you would have finished Phase II by now. I was wondering if you can give us a read on that program, DiaPep277 and the PD-1 agonist?

Jeremy Levin

Again, Michael, would you be kind enough to answer? It's PD-1, laquinimod and DiaPep.

Michael R. Hayden

Yes. Well, let's just start out with the PD-1. So we're awaiting results of the PD-1 study which will be coming, melanoma, earlier in the new year. In addition, in the PD-1, we're doing additional studies to both validate and confirm the target, and these studies are ongoing at this time. With regard to DiaPep, as you well know, we're not a diabetes company. But the approach we've taken is to look for other partners to join with Andromeda in a partnership with regard to exploiting that particular asset going forward, and those discussions are ongoing. With regard to laquinimod in lupus, we're awaiting some data and we will be deciding on the future of Laquinimod in lupus. And just to add to that, of course, we've got some very exciting data with Crohn's disease with laquinimod. But again, small trials needing additional studies. These will be ongoing.

Douglas D. Tsao - Barclays Capital, Research Division

Doug Tsao, Barclays. Just a question in terms of oncology, which has traditionally been an area when, in recent years, Teva has done a number of deals, yet it wasn't highlighted as area of focus for you, yet you are obviously proceeding with some of the existing programs. I was just curious where that fits into your overall business development plan and sort of operational plan as we go forward in future years.

Jeremy Levin

Thanks. A couple -- I'll take a little bit of that and then I'd like you, Michael, just to take a look at this. And it also pertains to some of the partnerships I think that Ronnie asked about. The primary focus for us is where can we make a difference? Where can we, Teva, make a difference? Where are our great strengths? Where is our strategy? Where do we want to invest? Now, each area then has to deliver real data, like data that is fundamental. So with regard to oncology, oncology, as everybody in this room knows, is an area that is incredibly invested across the world. There are a huge numbers of opportunities, huge numbers of, actually, vast investment going on. My own feeling is that in order to have a medicine that really makes a difference, that really makes a difference, then you -- that's something that's tough to find. There are wonderful medicines that do, do that. We know that. You've seen them. And when you find them, they're great. So for Teva to imagine that we will be so skilled to go out and to find that magic bullet, very tough. I am going to say that our expertise in oncology is in dealing with patients certainly in the market. We have a fantastic franchise there. We really, working with Treanda, we've understood huge amounts about the patients. So there, we can make a difference. Early on in the pipeline, I'll let Michael speak to that and perhaps, Michael, you can address the question.

Michael R. Hayden

Well, we are -- and thank you, Jeremy. With regard to oncology, we are selectively investing in some early programs. These programs have to be areas we're not going to have a me-too product, but rather where we have some way to add significant benefit. And so for example, we're looking at a combination drug and early programs that have ability to have impact. And for example, BRAF and EGFR has a combined approach. We're also looking at some very interesting programs against, I think, some very novel targets and other differentiated areas like myeloma. But these are early programs. We're selecting and investing in them. We're excited by them, but they prove or are rarely be foretold in the clinic.

Ken Cacciatore - Cowen and Company, LLC, Research Division

It's Ken Cacciatore from Cowen. Just wondering, can you disclose to us which generic company, you showed that up regulation, down regulation slide on COPAXONE? And do all of the generics exhibit that same feature? Can you discuss if you've kind of subpoena-d them all?

Jeremy Levin

Michael is already popping up. So Michael, go for it.

Michael R. Hayden

We are in the midst of submitting that for publication, so it will all be there, I would think, submit it in the next 10 days for a formal review. It has to go through that, so there will be a full list of those genes involved. And just to let you know, this is a -- these were numerous batches of COPAXONE and numerous boxes of the purported generic. And these are combinations which replicated, they showed, so I think you'll just have to wait for a short while. When the manuscript is in press, we'll be happy to release it.

Unknown Analyst

So Jeremy, recently with the guidance for 2013, you gave the numbers to figure out what the percentage of profitability for COPAXONE was and we've determined it's roughly 50%. Jon, you talked about for the branded business, a goal of keeping sales flat for 2017. What's the assumption from a decline from branded competition that's embedded within that goal? And then just in terms of -- a couple for Michael, can you talk a little bit about the NTE development? Can you confirm the comments of BioCentury that you've, in fact, filed for the NTEs already? And what's the development cost per molecule of the 10 that you're developing? Is there a range of development expense we should be expecting? And then just one final follow-up, just in -- okay [indiscernible].

Jeremy Levin

Well, actually, we've got a lot of people. There's a lot of questions. Let me just -- we're going to try and answer at least one of those. But because Jon has not had an opportunity to speak, I think I'm going to ask Jon to handle it.

Jon Congleton

Sure. I'll speak to the COPAXONE assumption, right? So what we have planned for is aggressive new therapies in the marketplace. We have planned for a generic threat, post the patent late 2015 very aggressively against ourselves. Now that's what we have planned for. What you heard me say is that it's our belief that a generic is going to require certain regulatory requirements that would theoretically push out beyond that. You heard me articulate my view of the market and just how likely these new therapies are going to have uptake. So what we have planned for, which I think is very conservatively against us, and what we are working towards are slightly different things. So we have assumed, I won't say the worst but aggressively against, but we are planning very aggressively to support this key asset. In fact, I think it's safe to say that what we're investing to support this brand inventory in 2013 is even more than it was in 2012.

Jeremy Levin

[indiscernible] rest of the assets. In fact, it's in the sponge [ph] of remnant. We are not going to give up any ground on this. That medicine is something which we believe it benefits patients immensely, and will continue to do so for many years. We have a responsibility to you to be cautious and conservative in the approach that we adopt, but deeply aggressive in the way that we support our patients, articulate the science behind it and understand it fully.

Randall Stanicky - Canaccord Genuity, Research Division

Randall Stanicky, Canaccord Genuity. Just a follow-up, just one question. With respect to the 3x weekly, I sense either a renewed or continued -- it's called enthusiasm there. You talk historically about the percent you think you can switch out of your daily. What's your latest thinking there? And then how are you thinking about the erosion from orals or call it BG-12 when it hits the market, as you think both the protection of that franchise?

Jeremy Levin

Well, let me first of all talk a little bit about oral medicines on the dock. Can I do that, Jon? And then you can talk about how the market erodes one way or another. From my perspective, you should understand in order for a medicine to be truly effective, you've got to know that it's safe, and let me repeat, safe for a chronic medicine, something that's going to be there for many years to come. Then when you put the patient on it, you're not going to suddenly have things popping up a couple years later. Two, with a medicine like ours where you have already a base of patients that understand this medicine, that are in control of their own disease, looking after them, this is a little bit like diabetes. Remember, people inject insulin every day of the week; millions of people, and often without the kind of support that we are there, with us. We support these people fundamentally. Orals need to prove that they are as safe, as effective and will not do any damage before they can really make a change, in my opinion, as somebody who's seen what COPAXONE can do. And as Michael pointed out, the recurrence rate of 0.11, 1 time in 10 years, are you going to take the risk of something happening? So now, there are many good medicines that are going to come along. I'm delighted. I am delighted that the orals are coming along. I'm delighted that we can give patients the opportunity of new potential therapies. However, they need to show that they are definitively safe and that they are definitively more effective than COPAXONE. Jon, talk a little bit about the transition, if you don't mind, as to the 3x a week? And by the way, yes is the answer to that, about the 40 milligrams, 3x a week.

Jon Congleton

Yes. So just very quickly, as I said, we're looking to submit the end of the first quarter next year, which means we could bring it to the market first quarter of 2014. We'll have both routes of administration available obviously. The daily, we're going to keep in place. The 3x a week is for patients who would like try that alternative. Clearly, as you've seen with the adherence, the compliance, patients have incorporated daily COPAXONE into their life and doing it very effectively. But we know that some patients would like to have an alternative of 3x a week. We're presuming that, that penetration within a year or 2, maybe 1/3 to 1/2 of the daily users may go to the 3x a week. Obviously if there's more uptake, we will make more and it will be available.

Jeremy Levin

There's a lot of questions. We've got 1 minute and 55 seconds. I’ve got the ladies, who's first? I wasn't watching. Wait a second. There's one there, if you don't mind. Sorry about that. We will have to try and answer you later on. Jami?

Jami Rubin - Goldman Sachs Group Inc., Research Division

Jami Rubin with Goldman Sachs. Jeremy, can you characterize your enthusiasm for biosimilars as a long-term growth driver, very enthusiastic, medium, low? And I ask because there were just one slide on biosimilars, and as per recent discussions with Lonza, the program that you've partnered with seems to be on hold. And I'm just wondering if you could discuss what you're thinking as with some of the monoclonal antibodies that are going generic in the next 5 years?

Jeremy Levin

Michael, I'd like to just say a couple and if it's okay, maybe you will catch up. First of all, it's not on hold, okay? We have a great partner, it's called Lonza, really enjoying working with them. We have a very focused program there. We're going to continue to invest with them in this program. It is focused. You -- I'm not going to characterize enthusiastic because -- and there's a very good reason why. I think the world needs to understand that biosimilars needs to start thinking about 2 different areas: Biosimilars for acute medical needs, cancer, things like that where the patient may not survive many years; and then biosimilars for protracted many years of use. Michael showed you something, which you should have really paid a lot of attention to here, it's a purported biologic copy of COPAXONE, completely different gene expression. Now when you inject a biosimilar for chronic use, what are the effects of that going to be? That's chronic biosimilar. The short-term biosimilar, those types of differences may not make a difference. So I think we really need to understand and everybody here and investors need to understand is the distinction, chronic use, acute use, fundamental gene shifts. And tiny little changes in these biological molecules could have a profound medical effect long term. This needs to be understood. And from my perspective, am I enthusiastic? For the right use, absolutely. And you've seen, we are pursuing it, but bearing in mind key medical uses. 26 seconds, Michael. No, minus 26.

Michael R. Hayden

Well, I would just say that in the biosimilar space, we still remain enthusiastic, but we're going to be smart about it. We're going to be selective. We've learned a lot. We've learned a lot about what to do and what not to do. We want to be competitive. We want to have a differentiated program, taking into account both regulatory changes that are emerging and also the competitor threats, so -- but we're certainly, as we've -- as I explained, it's part of our Biologics program, the biobetters, novel biologics. We're going to be in biosimilars in a very focused way.

Jeremy Levin

With that, I'm afraid I had to draw this to a close. The clock tells me I'm a minute over. I'd like to invite to the podium 2 colleagues, Rob Koremans and Allan Oberman, who are going to give you a discussion on our generics business and OTC.

Allan Oberman


Good afternoon, everybody.

[Technical Difficulty]

My name is Allan Oberman. I'm not top of the list here. That's Dr. Koremans to my left here. I've been with Teva for 12 years. I started shortly after the acquisition of Novopharm by Teva in Canada. I'm delighted to see Dr. Leslie Dan here, who started Novopharm 48 years ago, a tremendous asset to our business in Teva and in Canada. In 2008, I moved to Israel and I was the Chief Operating Officer of the then Teva emerging international markets group. And in 2010, I became President of Teva EMEA, which includes many of the emerging markets of Eastern Europe, Middle East and Africa.

I'm delighted today to share the stage with Dr. Koremans to take you on a journey around the Teva generics world. Rob will open with an overview of Teva's tremendous global capabilities, and then turn the microphone back to me, where we'll talk about North America, then go to Europe and then close on the rapidly growing emerging markets.

So with that, Rob?

Robert Koremans

Thank you, Allan. My name is Robert Koremans. I joined Teva in March of this year as CEO of Teva Europe. With 25 years of experience in pharmaceuticals, biotech and generics, I am well prepared for the job and excited about it. It's a fantastic thing to do. I'll talk to you about our leadership in generics and what makes us successful. Also I'll talk to you about the move to more sustainable, profitable growth in generics and continue to be leaders there, because we are clear the leaders in this field. And I think, Allan, you just took my...

Allan Oberman

Sorry about that.

Robert Koremans

Yes. With $11.5 billion in global sales and being the #1 generic company globally, we have a very, very important presence. As you'll see, North America still represents the biggest part of sales in terms of being the biggest reason -- or a region but it no longer is the largest sales. Sales out of U.S. are bigger than in North America. We're also -- very nice spread over the entire world, represented strongly in Europe with almost $4 billion and in the emerging markets with almost $2.5 billion. And our position in the emerging markets is a very good one to capture the growth that has gone to come in these emerging markets.

What makes us the leader? And I'll try to talk you the 4 things that we believe are essential: One, leading generic expertise, I'll explain a little bit more; two, diverse offerings to address specific market needs and customer needs wherever in the world where we are active; three, global scale coupled with strong local entrepreneurship; and four, an increased synergy, now with the partnership of PGT between generics and OTC. When we say synergies, not only in the portfolio, but also in the way we sell the services we offer and the impact we can have on big group of our customers.

Let me talk you a little bit about our leading generic expertise. We have 850 or over 850 molecules in the market today globally. And Michael explained to you the way we address R&D and the focus on generics. We have 400 molecules in development. They're not all additional because some energy is spent on redeveloping old molecules just to make them more cost competitive. 1/3 of the portfolio is already in the complex, high-barrier, difficult and more differentiated molecules in there, and that's an important step forward. We can do that because of the technology platform we have, the wide range of technologies that we can use that also Michael showed. With these products in development, we have a world-class regulatory capability. In fact, we are the largest partner of regulatory authorities anywhere in the world. We deal with tens of thousands of dossiers and variations every year successfully.

And with this regulatory capability, we can bring the new products to market. And I think you also know Teva relatively well for a fantastic ability to navigate entry barriers successfully. We've done that in the U.S., we're doing it in Europe and we're doing it outside of Europe and the U.S. We're doing that very, very, very well. And with this, we can bring our products to market. We have the largest portfolio, we believe, a first of our products in the U.S. And for instance in this year, in Europe, we have been outperforming our competitors in launches, which is very important going forward.

Last but not least, in this generic expertise is the field of manufacturing. And you've seen the introduction from Jeremy, we produce over 70 billion medicines every year. That's a huge amount and we do that in many, many parts of the world. And this total organization is really up to speed, so we're really able to deliver all of those products to our patients globally. But it's not just the leading generic expertise.

The second point that is extremely important in this field is the diverse offerings that we have that allows us to be able to adapt our offering market to market according to the needs of customers and the market itself. We have INNs, which is a word for pure generics without a brand. We have the company-branded or umbrella-branded generics where we sell generics as Teva generics, but not with individual brands. We have branded generics that basically are individual brands, and we have the OTC products.

Maybe it's best to explain this at the hand of an example from Russia. In Russia, we are selling the non-branded generics or the INNs through a system called DLO, government-funded and we bring that to the Russian market. It's fantastic. We have tens of molecules in that pipeline. It works. We sell it into the DLO system.

We also sell Teva Generics, both within the hospital and in the retail pharmacies. They're not individually branded, but they have a Teva brand. On top, we sell branded generics to doctors, to pharmacies. And one of the last introductions there was a product called Dynamica [ph], which is our equivalent of Viagra. And we're selling it doctor to doctor, pharmacy to pharmacy.

And last but not least, we also have the OTC products in there. About 20, the most recent launch in Russia being a product that is extremely well established here in the U.S., Vicks. It wasn't in Russia. It's off to a fantastic start and it looks to be maybe the best launch in the last 10 years in the OTC arena per se. So having that offering is not just what we have in Russia. We adapt our offering market by market, France, Germany, U.K., U.S., Brazil and that's extremely crucial in this field.

In having the global scale in sourcing, in manufacturing, in regulatory, in R&D, and having the financial strength and having the largest portfolio of anyone in this field, we have a fantastic global scale. And we couple that with local capabilities, local market expertise, local understanding of the regulators, of the authorities, of the governments and the mindset that we have which is fast, speed, agility and entrepreneurship. This combined makes us the #1 in the U.S., the #2 in Canada, the #1 in Europe, the #2 in Russia and the #3 in Japan, and Japan is a fantastic opportunity per se because it's the second largest pharma market globally, but still very underdeveloped in generics. So we are the #1 globally on this field in generics.

The other thing that is extremely important in our offering is the ability to combine generics with OTCs to drag the customers into the pharmacies with fantastic brands, to have a very close relationship with the pharmacies, who are very important customers for us in the generic field, being able to combine both the medicine capabilities of Teva and the brand-building capabilities of Procter & Gamble, giving us a portfolio of leading brands with best-in-class marketing, product development and production is fantastic. And when this joint venture started, both parents, Procter & Gamble and Teva, basically had a flat OTC business.

I'm happy to be able to report that we expect at the end of this year, so in the last quarter of 2012, we will have double-digit growth in this field and going forward, there's a lot of opportunity in the future. And we have Vicks, I already explained it. We now introduced it in Russia, but not only in Russia. We did it in Poland, Hungary, Czech Republic and so on. These are big brands in the U.S. They're not necessarily always big brands elsewhere, and we can leverage that, the underleveraged brands.

We have a fantastic -- in our own portfolio, we have Vibovit, vitamin products in the Czech Republic, fantastic range of vitamins. We look, together with Procter & Gamble, analyze, we see great opportunities to bring these products to more markets. These are the opportunities we see. The similar things are with Ratiopharm. Ratiopharm is one of the strongest brands in Germany. It has a brand impact not much less than Coca-Cola. People associate it with credibility, reliability, you can trust it, great quality at an affordable price. Fantastic to have it and it's not just in Germany. We can bring that to other regions to within -- and transform them to mega brands.

And then last but not least, company-branded OTCs, Teva ibuprofen [ph], this can be really a fantastic opportunity to build in some selected markets. So with this in this offering, now having that on top of our generic expertise, on top of the global scale and the local acting, on top of the ability to really act locally, these and our diverse offerings makes us really the strongest generic player worldwide.


Kevin Mannix

Thanks, Rob. With that opening, Teva's global capabilities, from a relative newcomer and a former competitor, we hope you have a good understanding of how robust our capabilities are in generics.

So now let's turn to North America, as Rob said, our currently largest region within our business. These are the statistics that generally are used to describe Teva as a market leader within North America and certainly within the United States. Whether it's prescription share, whether it's breadth of portfolio, these are the measures that people typically look at.

Let me you give you a couple of other statistics that are going to be important going forward as we look to advance our business. First of all, with our breadth of portfolio, we have the potential to be able to fill 2/3 of all the generic prescriptions in the United States. Interestingly in Canada, with our generic portfolio, we have the potential to fill 80% of all the generic prescriptions in Canada. So when you think of our market share today in both Canada and the U.S. and you think of the possibilities of what we can fill, just keep that in the back of your mind as we begin to think about growing our business on the back of our base business portfolio. As a $5 billion unit within Teva representing approximately 25% of Teva's 2012 or 2013 sales, we will continue to focus on maintaining market leadership.

Now the industry certainly has headwinds that all of you familiar with. Pricing pressures, the patent cliff, shared exclusivities and competition from these are things that we hear about all the time as headwinds to our business. I prefer, however, to look at the right-hand side of this chart and talk about opportunities.

Let's start with the health care reform in North America. ObamaCare, as most of us know it here in the United States, will embrace 32 million more lives who will be looking for improved health care and medicines that are generally more affordable but yet still high quality, that's generics. 2 weeks ago, the Québec government in Canada announced for the first time, after decades of an unfair policy against generics, will now prefer generics and reimburse generics in advance of brands. Everywhere in North America that you look, generics are gaining favor in health care.

Demographics. As I look around the audience, I see some that look very young to me. And I see some that are more like me, the baby boomer generation, getting close to, and the leading edge of the baby boomers have hit retirement. And as we get closer to retirement, we all know what happens. We end up taking more Medicare, more health care and we certainly take more medicines. Terrific demographics for the future of generics into the future.

And as Michael talked about, highly differentiated, highly unique, highly complex technology are certainly opportunities for the future. So I think there are tremendous opportunities for the generics business, and I can assure you that we in North America will continue to be leaders in this field.

I want to be clear, however. Our strategy going forward has changed. Historically, we have focused on prescription share and volume growth. We are focusing a strategy around value creation, value creation for all of our stakeholders, including our shareholders.

And I'd now like to talk about our 3-point plan to create value in the North American generics business. First and foremost are first to file, first to market opportunities, generally known here in the U.S. as Paragraph IVs. We have a very robust pipeline of first to file, first to market possibilities into the future. With over 400 molecules in development, we see the ability to continue to put into this funnel an equal amount of opportunities as they're coming out of the bottom as we launch those. And what's interesting is these Paragraph IV opportunities being developed for the United States provide tremendous potential for our global markets in Europe and the rest of the world that we'll talk about in a moment. So Paragraph IVs are not dead. Paragraph IVs are an important aspect of our value creation going forward and will represent approximately 1/2 of all of our effort as we look to the future.

Highly differentiated, highly unique, complex products as Michael spoke about. We will devote approximately 1/3 of our efforts in order to bring these highly complex products to market. I think Dr. Hayden did a great job of describing the benefit that we can add with a product like liraglutide to a patient like Gabriella. We see the opportunity of taking many, many more of these and expanding our franchise in complex products into the future.

But finally, let's come back to my original comment about the base business. We see tremendous value still coming from enhancing our base business portfolio. And again, we have a 3-point plan that I’d like to describe for you. First and foremost is to lead in pricing. Yes, this is a generic business with many competitors. We have this year already taken 2 dozen price increases. We have for next year planned an equal amount of price increases, and we are mining our 367 products to take advantage of increasing prices in order to still allow for value for our patients, but to increase value to us and to, ultimately, our shareholders.

Secondly, reformulating and improving processes. Those of you who have known Teva for many years might remember a product in 2006 that contributed significant value to us, a product by the name of simvastatin and Zocor. We were first to file. We reaped significant value. However, today, we find our product formulation is not the lowest cost. Patents have expired, processes have changed, APIs have changed. We are in the process of reformulating simvastatin and a whole host of other products to lower the cost of our products, to enhance our ability to go out and capture additional value.

And then finally, there are and there will be products in this business that don't generate significant margin to any of us. A good example of that is citalopram. A 100-pill bottle of citalopram costs less than a cup of grande Starbucks. Can anybody really make money on 100 pills of citalopram? Well, we're gonna to see if we can partner with many people who are interested in being in the citalopram market. You may know there are 3 dozen FDA approvals for citalopram. There are 12 competitors in the market. I'm sure we can find someone that we can partner with that can create value for citalopram going forward. However, let me be clear, if we are not able to find a partner and we are not able to generate value from citalopram, with 12 other suppliers in the market, I'm pretty sure that the market will continue to be satisfied and patient needs will be continued to be met and we will consider discontinuing products where they don't create value for our business and where patient impact will not be impacted. So we see tremendous value in the base of our portfolio.

So the 3-point plan for enhancing North American generics: First and foremost, continue to focus on Paragraph IV exclusivities; second, establish leadership in highly differentiated, highly unique, highly complex products; and finally, continue to enhance value on the base of our portfolio.

By doing this well, our patients will be well served with the affordable medicines they need. Payors will continue to say -- get the benefits the generics bring to payors, estimated by the Generic Pharmaceutical Association here in the U.S. to be over $500 million everyday. Our customers will continue to have the medicines that they need to be able to dispense to their patients when they come into the pharmacy. And finally we at Teva, you, our shareholders, will continue to extract the value that can come from this terrific North American generics business.

With that said, I'd now like to move a little further east and have Rob talk about the European business.

Robert Koremans

Thanks, Kevin. Europe isn't one market. But it's still a very, very attractive place, 500 million people expecting and deserving high-quality medicines, and not just high-quality medicine, but access to high-quality medicine, which also says something about the price they expect. We have been successful -- we are #1 in Europe because of our ability to act and drive the business locally, adapt it to every single market needs. And the needs are different between France and the U.K., Germany and Italy and all the other countries. Some are slightly more focused and driven by pharmacists, typical example is France. Others, where the doctors are still the key drivers in that market, Central, East Europe; and some that have mixed market elements, Germany is a very good example; and then you have the more high-end type markets like U.K., the Netherlands or Scandinavia. We have adapted our approach market to market and we are #1 because we do that successfully.

There is, like in the U.S., a fantastic value still to be captured because of 2 reasons. One, in the next 5 years, EUR 20 billion worth of products will go off patent and there's value to be captured.

Two, unlike the U.S., generic penetration isn't always so big. Southern Europe still has very low generic penetration. A country like Italy to date has 17%, 1-7, and compare that to typical well-established markets like Germany, where you get up to the 80% and with 75% should be feasible. This is going to happen because the economies require it and the people require the access to affordable high-quality medicines.

Then there is a trend in Europe, in some markets, to move slowly to a little bit more commoditization. This is not happening everywhere and it's not definitely not happening fast. Typically, this takes legislation changes, changes in practice of doctors, pharmacies and, and, and. And today, the incentives to that are really not in place. So the value is still there. So there is real value to be captured and with our position in Europe, we are by far the best positioned company. We are in all those countries, we're present, we know how to do it and we're doing it today.

Like in the U.S., we have also started to change our strategy. I joined in March and there's a couple of things we started to change from there onwards. One, we didn't focus exclusively only on the top line growth, but moved to more sustainable profitable growth or away from volume to value, as Allan said. We're fighting for the right and not just any business and we're competing hard.

We're doing this, for instance, by making choices in customers, segments we serve, in the products we sell and in the channels we serve. I'll give you an example of Germany, where we stopped competing for every single tender. We're still waiting for a lot of tenders. We're only the ones we want to compete in. We're doing a strong portfolio overview. We have canceled over 1,000 market authorizations this year alone in Europe. And we're really reviewing constantly our products and going in there. That will drive a more sustainable and profitable growth.

Second, we work on commercial effectiveness. Since March, we have already brought down our commercial footprint by about 5% in size, increasing efficiency, increasing effectiveness, but not giving up on the -- our commercial power. And we are outperforming our competitors with launches and we're doing a fantastic job in fighting for the right business.

And thirdly, we've started to really move to a more differentiated approach: One, like in the U.S., moving to the more high-value, more difficult to make high-barrier generics, which will represent about 30% of our sales going forward; and second, having a competitive offer, for instance, in combining PG&T [ph]. These 3 things allowed us to really drive for the profitable growth. We are #1 in Europe, and we will continue to be #1 in Europe, and we'll do that more profitably.

Allan, I'd like you to complete the session with me [indiscernible].

Allan Oberman

Sure. And as we continue to go east, we now come to our really high-growth markets, and I've spent the last 4 years in these markets. But today, I have the privilege of sharing with you our plans for the emerging markets for some of my colleagues who are here in the room and some that aren't here in the room today.

Let me start by introducing some of the colleagues that are leading the impressive growth in the emerging market markets. Judith Vardi, who's Head of the -- of Teva EMEA and Asia Pacific. Judith, maybe stand up? Dr. Itzhak Krinsky, Professor Krinsky, our Chairman of Teva Japan and Teva Korea. They are the heads of the business. But the people of really do the work are the next 2 that I'm going to introduce: Roberto Prego [ph] Pineda, the head of our rapidly growing Latin American business; and Dennis Chetverikov, head of our Russian Commonwealth of Independent States, or for many of us Westerners, the former Soviet Union countries and a rapidly growing and important piece of our business.

So now let's talk on behalf of all of these colleagues about the emerging markets. Let me simplify it. It's big. Over 85% of the world's population lives in the emerging markets. It's fast-growing. It's expected to double. Generic sales, branded and/or INN sales in the next 5 years are expected to double. And finally and most attractive to many of us, it has sustained profitability.

These are countries where brands are valued. And as Rob talked about branded generics, branded generics that bring quality to the patients are highly valued. What a great place of the world to be.

And guess what, we're already successful. In the last 2 years, Teva has more than doubled its sales in these markets. And today, emerging markets represent 12% of Teva's approximately $20 billion sales, up from 7% just a few short years ago.

So as we think of the emerging markets, the emerging markets are not homogeneous. There is no recipe for success that can win in all of the emerging markets.

So we want to talk to you today about Teva's tailored growth plan in 4 different dimensions. Let's start with our most well-developed generic businesses where we are already a top 3 player in Russia and Japan as an example. There, with the strength of the breadth of portfolio that Teva can offer, the number of new products being developed, the focus on complex generics and NTEs combined with our terrific commercial presence in these markets. You can only imagine the growth that can be ahead of us.

Then there are other markets where we are a player, we do have commercial capabilities, but we are not yet market leaders. That would be markets like Mexico and Turkey. But I would remind you, Russia and Japan, the jewels of the emerging Teva markets, were like these markets only 5 years ago. We have all of the capabilities in-house relative to portfolio, relative to products to marry with our commercial capabilities in these markets to further advance and build up our business in this niche of opportunity.

Then there are markets that are relatively early stage in, at least, our development. These would be markets like Brazil and Korea. And these markets, as was described by Jeremy in the opening, we will look to partner in order to accelerate our growth. You'll be hearing more about our progress in these areas in due course.

And then finally, 2 of the most talked about markets on the world with the biggest population, China and India. We have Teva Active Pharmaceutical Ingredients, there was a question earlier today. We are there with our Teva API business. We have been there for many years. We are there with Procter & Gamble, in our joint venture with PGT. And together with those capabilities and thinking to build further alliances in these markets, we look to further advance our business in this part of the emerging world.

So when you think of the emerging markets not being homogeneous and the requirement for a tailored plan in any different market that you can think of and you think of Teva, you can think of us having the capabilities to succeed and win in any of the emerging markets.

So in closing, as we close out this discussion on generics, I'd like to leave you, on behalf of Rob, myself and my colleagues, with 4 key thoughts. First, generics, OTC and API are still a growing business within Teva. We will grow the business through a focus on first-to-file, first-to-market in going after sole exclusivities. Secondly, we have and we will continue to build our highly differentiated, highly unique, high barrier complex products for sustained future value. Third, we will enhance our presence in the emerging markets and further accelerate our growth in these markets. And then finally, in the rest of our business, we will focus on value creation and sustained profitability.

With that, on behalf of Rob and I, I'd like to thank you for your attention.

And I'd now like to turn it over to Dr. Carlo De Notaristefani, who is -- that applause was just of being able to say the name, I believe. Dr. Carlo?

Carlo De Notaristefani

Well deserved. Thank you, Allan. So my name is Carlo De Notaristefani. I've been with Teva for 4 months now. I'm responsible for global operations with about 30 years of experience in the pharmaceutical industry. My last corporate position I was with Bristol-Myers Squibb, where I led technical operations, global procurement, information technology, the redesign of those functions, the redesign of their network and the restructuring of that network.

Now global operations includes the end-to-end supply chain, which is both starting from the supply of raw materials, the manufacturing, packaging, logistics, distribution. That's the part of the company which has to support and enable the commercial strategy you've heard until now.

It also includes the API business, the internal supply of active ingredients to the manufacturing and our external API business for which we received a question before. I will tell you more about that business, but I can tell you right now it's a business we're very excited about, which is growing at a very healthy pace, and we are committed to expand it.

It also includes global procurement, the procurement of all the activities within the company. It means it is the largest unit of the company. Over 50% of the employees of the company are part of global operations. The unit [ph] managers, the largest cost base.

It manages also most of the actual outside spend of the company. And that makes us the unit which will have to deliver the largest portion of the $1.5 billion to $2 billion program of reshaping Teva that Jeremy has talked about before. I will tell you more about how we will leverage on the strengths we have, and we will address some of the opportunities in order to enable that reshaping of our operations.

Now, we all know that Teva is the largest generics manufacturer. Our critical mass clearly constitutes a competitive advantage when it's managed properly. We have a broad product portfolio which makes us extremely important to our customers, but also bring some complexity with it and the need to manage and optimize that complexity. The volume growth that we are experiencing gives us a real opportunity to improve going forward our operations.

Over years with multiple acquisitions, Teva now has a broad geographic footprint. We have 73 manufacturing facilities. Plus, we have 2 projects right now under development: 1 in Russia as part of our drive to localize the operations there; 1 in India together with our partner, Procter & Gamble, for the OTC business.

Over time, you will see an evolution of that network from west to east. So the center of gravity of our product supply will be moving. We will be supplying more and more of our products for the most cost-effective locations in our network.

But coming from a large pharma [ph] ground, where I've spent most of my career, I found some real gems into this network. And I really want to tell you something more about those.

First of all, we have incredible capabilities in Eastern Europe, especially in 4 countries, Croatia, Hungary, Czech Republic and Poland, not only in the more conventional oral solid dosage form, but also in injectable and oncology injectable. Our critical mass there, together with our logistics platform we have, makes us competitive and comparable with India as a supply platform towards Europe.

We have great efficiencies in these sites and we have a geographical proximity to Europe, which allows much lower logistics costs, of course. In addition to this, the proximity enable a faster reaction time, which will allow good customer service and lower inventories. So again, these are existing strengths that we plan on leverage and building upon.

Just a few words on Spiromax, the inhaler technology you have seen and you've heard before. Those technology is based in our sites in Israel and in Ireland. We will invest to expand and support the future of the pipeline.

Regarding our API business, as I said before, we plan on leveraging it further, develop it. We understand what are our -- the competitive advantage in that business, excellence in quality, in customer service. We have a broad product portfolio, we have a global reach. We will invest to expand it and grow it. We will leverage our expanding presence in Japan to expand in that market which is, as you know, very challenging but also extremely rewarding.

We're also investing in biologics and in expanding our overall footprint for the network to support.

Now, I don't need to tell you that the marketplace is evolving within the operations side, is becoming more and more challenging. The expectations of the regulatory authorities in the last few years have changed, have evolved. Many companies within these industries have felt the consequence of that.

The cost pressure is here to stay. The new products are more difficult to make. We understand all of this. We clearly will apply the right prioritization in redesigning our operations.

Already, some of the suppliers to our industry, we see, are feeling this change. For instance, there are less and less suppliers available for the active ingredients to the pharmaceutical industry out of China because of the evolving environmental regulations in that country. Another example is the EU directive for safe medicines, which is clearly creating a hurdle to the supply of active ingredient and pharmaceutical products to Europe. Now Teva's vertical integration and clear quality excellence creates an opportunity to really differentiate ourself in this environment.

Now I talked about the strengths that we will build on. Let's talk how we will address the opportunities and leverage what we have into transforming it in a more effective supply chain.

As I said before, you will see a transition and an evolution in the shape of our network. We will leverage supply partnership in order to drive optimization of our supply. We will redesign the network at the macro level in order to better support the execution of that strategy.

But that's not enough, we need to move also inside the site to ensure the optimum efficiencies within the site, as I've said in the execution already of the program to drive Lean Sigma optimization within the site. We are in the process to accelerate the roll out of that program across our most strategic and larger sites. This will drive, in addition, optimization in the operations of the supply chain. And we expect to transform and translate this into working capital optimization.

But that's not where most of the savings from the program will come from. It's really from our procurement arm. That part manages a $9 billion spend for the company. It's a significant opportunity, and we will address it through some of the conventional leverage and some of less conventional leverage. And I will tell you some more in more detail.

Now, we understand some of the constraints when we talk about the redesign of the network. It is a complex proposition, few have done it well. But we believe that Teva's excellence in execution will allow us to do exactly that. Of course, it's a matter of how to prioritize and rank amongst multiple priorities. And I want to be absolutely clear, this is not something that happens in 1 year or 2 years. It's a 3 to 5 years program before you can see the impact of this.

One of, for example, the constraints we have to live with is the large number of new product launches that we have as a generic business, means that we have a number of files already submitted for our future launches, and that will be a constraint to the speed of transformations.

It's also about, at the very end, to ensure that we maintain our value proposition in terms of reliability, customer service, cost-effectiveness.

Within the site, we are raising the bar to performance. As I said before, we are rolling out this accelerated Lean Sigma program across all the sites. We are reshaping the organization in order to be leaner and more effective. We will invest selectively in automation around our network. And we will redesign the overall logistics network, especially in a business like the generics where we move large volume of products around the world, being effective where we manufacture the product, but also manufacturing and moving this product around the world can make a significant difference.

Let's talk about procurement. As I said before, $9 billion is a significant amount of money that we feel we can leverage through some of the conventional ways like the consolidation of the supplier, extended partnership. We can create value by partnering with some of our supplier for the longer term.

About $5 billion of our cost is on the indirect side, both within operations and within the largest rest of the company. We expect that we can deliver from $300 million to $400 million of savings out of that site.

On the cost-of-goods line, once we eliminate some of the royalties and other less controllable items, there are about $7 billion. And as you can see from this split, the majority of our overall cost in the supply chain is not actually from the operations of our site network, but it's in the material that we manufacture. And also their procurement and partnering with our suppliers longer term will deliver us the opportunity we are looking for.

In summary, I believe we have identified the strength that we have and that we will leverage, and we have identified some of the most attractive opportunities that we need to address through this program. It's all about maintaining the value proposition that we have as a supplier organization: reliability, quality, customer service and costs.

We'd continue to invest and to building those strengths and addressing those opportunities. We are committed to maintain compliance throughout this process of change, and we will support the company in the program to reshape its operations and deliver both on the support -- strategic support of the business, as well as leveraging the opportunities we have in front of us.

Thank you. And I will turn it back to my -- I will turn it to my colleague, Eyal Desheh.

Eyal Desheh

Great. All right. Good afternoon, everyone. I'm Eyal Desheh. I'm Teva Chief Financial Officer. You have heard many prediction, forward-looking statements today, but I can promise you only one thing: this is going to be the last presentation of the day.

So what is our financial vision? And it's also our financial mission at Teva. We're committed to transparency. We are refining our cost structure. We have very rigorous cash management program as we are very, very dedicated to collecting our cash. Funding and liquidity, important in order to fund the programs of the company that you have heard today. Balance investment and last but not least, very important, our focus on shareholder value.

And before I move into all this, let me just go back and talk about growth and profitability. To summarize everything that you heard today, we are looking at consistent top line organic growth. We believe that Teva will continue to grow, both in the generic, its branded and its OTC business based on noble ideas like NTEs, penetration of generic markets and others. And we are looking at sustainable profitability, stable margins for the business and contribution from the branded side.

So transparency, we can talk about this all day. This is exactly the right audience to talk about transparency. We are committed. We believe that educated investors and analysts that understand the company and can predict it will invest in it. And those of you who have been following us for the past few months have seen a major revolution and transparency in Teva. We're providing information about our business. We are providing information about the geographies. We are providing level of profitabilities to the different parts of the business. And we give you better tools to see how all this develops during the quarters in a given year.

Let's talk about cost structure, money, expenses, past and future. In the past, Teva was focused on acquisitions and integration. This has built a tremendous company, but the focus on integration is a very local focus. Teva in the future is building a world-class organization with global processes, not forgetting the value that is being created in our countries, in our geographies, but we are looking at creating a global process that will enable us to manage a much more efficient and effective company.

Make it simpler, we're a complex business, you've heard about that, focused, efficient and disciplined. And we believe that doing that will enable us to reduce our cost base by $1.5 billion to $2 billion. And how we are going to do that and where. So here are a few examples, please don't try to add up the numbers. They don't add up to $1.5 billion. These are just some of the large examples of where we believe we can save money today as we go forward. Power [ph] measured procurement, global procurement, both for the raw materials and for the entire expend, globalizing, leveraging on our ability to get better prices and better costs, avoid the duplication that any complex company had. The opportunity here is huge, between $400 million to $700 million.

A large and efficient production facility, you've heard about that as well, hundreds of millions of dollars of savings. It will take time. It takes time to move production from one site to another. And we'll talk about time.

Supply chain, logistic, centrally controlled, reduce the number of warehouses and manage our logistics, how we take product from the plant and bring it to the customer in a much, much more efficient way. A lot of money to be saved over there.

Shared service centers, that's the G&A part, part of my responsibility. We are going in finance to manage all our financial activities in 6 global shared service centers around the world. We are doing it today in 62 different countries. So it will be much more efficient. And by the way, the benefit here is not just the cost saving, it's the control and the ability to get realtime information about what's happening in the company.

Moving into low-cost location some of the very expensive activities we know. Outsourcing, offshoring, moving to low-cost location. And global processes and global system, harmonizing our system, which today are fragmented. All this, hundreds of millions of cost savings can be realized.

The time. It will take time. It doesn't happen overnight. We are not going to just slice and dice it. We are going to reshape the company, which means that the majority of this cost saving will come in year 2 and year 3 to the program with a tail for year 4 and year 5 and will continue. There will be something to do even after that. It will ramp up over time. As I said, we expect most of the impact to come in, in '14 and '15. And this cost improvement will help mitigate some of the headwinds that we see in our industry and in our business.

Price erosion, volume growth cost money to produce more product. Copaxone, changes in sales and some other factor. So we are going to take this and use some of these cost saving to mitigate part of the headwind in our business. We’re not going to use that to increase SG&A. We are going to create a profitable company.

How does this cost improvement being allocated over the line items of our P&L? So we expect about 2/3 of that to happen in the cost of goods sold between $1 billion to $1.2 billion; sales and marketing, between $200 million to $300 million. As our marketing procurement and marketing material, purchasing and organizing event would get much more global and efficient. In R&D and the way we manage our clinical trial and bio study, we expect to save between $100 million to $200 million, which will probably go back to the good hands of Michael. And in G&A, between $200 million to $300 million. And that is the total that you see. But there are additional opportunities, create better cash flow, improve our balance sheet.

I would like to talk a little bit about cash allocation, I know this is important to everybody sitting here. So we believe that over the next 5 years, we will generate organically, this is the organic view, cash flow from operation of between $4.5 billion and $5.5 billion per year. What are we going to do with this? What every company does, dedicate a pretty healthy part to business development, return cash to shareholders between $1 billion to $2 billion. I don't know if everybody realizes but in 2011 and in 2012, Teva has returned close to $2 billion per year to shareholder between our buyback program and dividend payments. And we're going to continue to do that. We will service our debt, dedicate about $1 billion to debt service, and we continue to invest in our infrastructure.

So what is going to happen? $10 billion could be available for business development over the next 5 years. As you can see, we will invest it in expanding in select geographies, mostly in emerging markets, as you have heard, and in building a pipeline of new molecules that will serve the company for many years in the future.

And shareholder return, we are paying today about 20% of our operating cash flow as dividend, and we see 20% to 25% payments over the period. And we are committed to continue to execute on our $3 billion buyback program, which was approved last year by our board. We believe that buyback is the right way to create value to shareholders and to return cash.

And the debt service, we will reduce our financial leverage. We are currently looking at EBITDA of about 2.2x. EBITDA to debt ratio, we believe that we can go into the 1.5 to 2x range on debt-to-EBITDA. We will extend the duration of our debt. We'll take advantage of the great debt markets that exist today to extend duration. And we are looking at a debt mix of interest rates of between 70% fix and 30% variable.

That creates a lot of liquidities. As I said, we will refinance some of the debt in the earlier year and throw it 10 years forward, taking advantage of the liquidity in the market and the great interest rates in environment. We have, as our liquidity cushion, a $2.5 billion revolver credit line from a group of 8 strong banks that is unused, and that's our liquidity reserve.

I want to say a word about taxes, maybe not the most important thing, but Teva has benefited for years and will continue to benefit from preferred tax rates as a result of the countries where we do business and we generate profit. But taxes are going up. They are going up because of the mix of our business and where profit is generated. And we are also looking at what's happening in the global environment, and governments are looking at some tax increases. That, by the way, opens up a whole discussion about taxation on dividend, which is a little too early to do. But we have heard that people here and in other countries are looking at higher taxes on dividend payment, which opens a question regarding how tax efficient dividend payments are. But I believe that is a little too early.

So just as a summary, we are creating sustainable shareholder value. The plan you have heard today in detail and at length will give clarity and transparency so everyone can understand our business and create a credible forecast. We use our cash in a balanced way, and we are reshaping our business and reshaping our company already as we speak.

Thank you very much for listening. I’d like to invite Jeremy for closing remarks and to manage the Q&A session. Jeremy?

Jeremy Levin

Ladies and gentlemen, it's been a long afternoon, and I really do appreciate your being here with us. I'd like to just bring us down to what we hear for today. Teva is a terrific company. It's a company built on a phenomenal past and it's a company with a phenomenal future. I hope today as you've studied and listened to us that you've gained greater visibility on the status of our business, the way we look at it and indeed, the strategy that we're going to adopt for the future starting today.

We have great, strong, fundamental growth platforms. We're going to focus on them. We have an extremely clear path forward. Each one, every one of the managers and those that sit before you ready to answer your questions and those around the world have a clear path forward. We know what we need to do, we will do it and we'll show you and you'll see it.

In addition to which, as you've seen both internally and externally, we're bringing together one of the top management teams in the world. In doing this, as we build this company, as we look at the future, we are positioned and we are positioning ourselves to be the company that can become the company not only for today, tomorrow, but well into the future. A sustainable company, one of the great companies building on a great past, looking to an even greater future and bringing significant value to you, our shareholders, to our patients and to all stakeholders in this company.

And I look to you today to hope to continue the dialogue now, tomorrow and in the future as our investors, potential investors, this is a phenomenal company and will be even more so in the future.

Thank you, ladies and gentlemen. We'd like to take questions.

Christopher T. Schott - JP Morgan Chase & Co, Research Division

It's Chris Schott at JPMorgan. 2 questions. First, can you help me just reconcile a little bit, when I look at the cost efficiencies that you're trying to drive, the procurement cost coming down with this refocused generic strategy that seems to be moving away from some of the commodity products. It's just, if anything you'd -- if these were profitable businesses before, it'd be even more profitable when this is done. At the same time, you're kind of moving away from some of those. So I'm just trying to understand that dynamic of how you're kind of thinking about those kind of cost going down but then moving out of some businesses. The second was maybe a question for Eyal, just coming back to the cost restructuring. Is there any -- can you just help us understand a little bit more of just this kind of issue of flow-through? We see $1.5 billion to $2 billion of cost savings. Shouldn't we be thinking about operating expenses kind of down by the time -- from where they are today by -- on absolute basis by kind of 2015 and 2016, or just anything you do? Just give us a little better sense of when we think about kind of profitability of the business, how that kind of translates through the P&L.

Jeremy Levin

So let me ask first of all Allan and Rob, have a chance to respond to Chris' first question. And then Eyal, why don't you deal with the second.

Allan Oberman

So thank you for the question. Let me just talk a little bit about the -- thank you for the question, let me talk a little bit about the strategy here in the U.S. You did hear me talk about moving to a more value creation strategy. And I just want to remind you, however, that the U.S. market has its ups and its downs depending on the number of Paragraph IVs, the value of those Paragraph IVs. So trying to correlate any given year and any given margin structure to the bottom line and the top line, all depends on the number of Paragraph IVs that you have. I will say the following, I've been using the example internally, that historically, the Paragraph IV business in the U.S., if you're a fan of baseball, it's been a home run hitting game. You hit 1 to 2 home runs a year, and you do extremely well in both the top line and the bottom line. There are still Paragraph IV opportunities. However, the values of those opportunities as a result of the patent cliff are certainly less than they have been in the past. So in order to succeed going forward, we have to hit a lot more singles and doubles and put together those singles and doubles in order to generate both the top line and the bottom line. So in certainly North America, which you're going to see is a relatively going stable and growing top line, as well as a relatively stable and growing bottom line. The caveat to all of that clearly depends on products that we have exclusive positions on, when we get those exclusive positions and when we lose those exclusive positions. But overall, our goal is to bring some stability to the business.

Jeremy Levin

Rob, quick comment?

Robert Koremans

Yes, thanks for the question. So we expect to be -- we expect that the European market will grow 2% to 3% and we will be double that, so there's not much of giving up on business. But I don't see and we don't see the profitability going forward in setting simvastatin at EUR 0.01 per tablet. And that's not a business we care to expand and be in. But we go for the more valuable business, and we see plenty of opportunity there. And we'll continue to be market leader.

Jeremy Levin

Eyal, you have a question over there.

Eyal Desheh

On the profitability and what does the cost restructuring. I'm going to do the profitability. As I mentioned, there are many headwinds in our business, there are many opportunities. We are not going to take these cost savings and create additional G&A or sales of marketing out of them. We'll spend some more money on R&D. We will have a lot of new products that will be launched during this period that will require some prelaunch, premarketing activities, that's where the money is going to go. We are planning to maintain our gross margin despite some turnover in products and changes that we see through the model in the U.S. So this is all a big pile of many, many moving parts. But the bottom line is that our goal is to maintain the level of profitability. We believe we have very good adequate profitability and cash generation today. And this cost reduction and cost improvement program is designed to do just that.

Jeremy Levin

Thank you, Eyal. We have a question there.

Jason M. Gerberry - Leerink Swann LLC, Research Division

Jason Gerberry, Leerink Swann. Just a couple of questions for, I guess, Allan on the complex generic front. I guess Mylan has been pretty vocal that based on their communications with the FDA, Advair could be -- they could have a clinical program in place, this communicated with the FDA for a substitutable version of Advair. And I guess in the past, you guys have talked about kind of reviewing your options and potentially even filing a new [ph] the endo track in parallel with your NDA. So I wonder if you can comment you share your competitor's enthusiasm regarding the Advair opportunity as an ANDA.

Jeremy Levin

So first of all, I rarely share my competitor's enthusiasm. I like my own enthusiasm. But with that said, we're very fortunate today to have our leading expert in respiratory with us. And I think he will be much equipped to answer this question.

Allan Oberman

Thank you. The question about a generic Advair in the U.S., I think it's one we've addressed 2 years ago when we discussed this in the respiratory presentation. We have a very clear view that the regulatory requirements of the U.S. currently are very challenging for anybody to achieve, to develop a substitutable generic. And we believe that what Mylan has communicated is strictly what the regulations are, which we've already done 2 years ago. So we know what the FDA wants. What we've always said is that we don't believe it can be done today with the approach that the FDA asked us. So for that reason, we believe the approach we're taking is to develop a better Advair type product, which we think will offer substantial value for the medical community, as well as the payer. So our focus is, because we don't believe that is going to be easy for anybody to pull that off, we have invested in a different route to go after that business in that market in respiratory in the U.S. And only time will tell as to what's going to be right in this case.

Jeremy Levin

I'm glad to hear that our competitors are saying what we said 2 years ago.

David Risinger - Morgan Stanley, Research Division

Dave Risinger from Morgan Stanley. Thank you for the detailed presentation today and all the insights. My 2 questions are first, on Treanda. The slide that you had shown after some of the other products, it indicated something different than a patent expiration date. It says 5 years exclusivity expires in 2013. I had assumed that it had patent protection through September of '15, is that correct? That's my first question. And then second, with respect to the 3 times a week Copaxone, I just wanted to understand a little bit better how you see the regulatory process. So typically with line extensions with different formulations, they're filed as sNDAs, this was filed as an NDA. And so, I'm just wondering if in this circumstance, you'll have to run a head-to-head trial versus Copaxone in order to get the same brand name or if I'm thinking about that wrong?

Jeremy Levin

Okay. I think probably best by -- although, I always direct patents to the lawyer, I think Jon you're way up on the trend, why don't you give that a crack. And then -- Michael or John is going to handle.

Jon Congleton

[indiscernible] question, and...

Jeremy Levin


Jon Congleton

All right, am I on now?

Unknown Attendee


Jon Congleton

All right. So the -- first, the Treanda question. The 5-year exclusivity runs out through September of '13, and that's the first date that an ANDA could be filed against that. Based on what we're seeing for approval of ANDAs, they're roughly 18 to 24 months. So that's where that September 15 date then becomes probably more effective date of having a follow-on to the Treanda molecule. So that's the Treanda piece. Your question on the Copaxone 3TW on a regulatory strategy, we've had meetings both with the FDA and with EMEA. They've been -- the FDA meeting was very positive. I think we feel very comfortable with the data file that we have. Again, filing the first quarter of '13, anticipate really straightforward review. We're still in dialogues on the cytoglobin sNDA. We're an NDA. We don't feel that for the U.S. file we need to generate more data or run another clinical trial of the 3TW versus 20 q.d. for U.S. In Europe, we knew that, that might be a bit more of a challenge, and so those dialogues are continuing best in the scientific advice meeting we had with EMEA just a couple of weeks ago. The absence of that direct head-to-head thus creates some challenges, but we're going to continue the dialogue with EMEA, and certainly look forward to bringing 3TW into the European market. We also have plans obviously in rest of the world, Canada, Russia, Latin America as well, with the 3TW.

Jeremy Levin

We have a question here and then we have a question at the back, has had her hand up for a while as well. Over there.

Unknown Analyst

I'm Frances Fald [ph] from Pharmacart [ph]. A couple of unconnected questions. One was about PGT. I wonder if maybe Rob could say something about how that relationship really works in practice because while I can see in theory, in Europe and certainly in emerging markets, there is a very strong connection between OTC and generics. I can only really see it working if you've got the same rep selling both or approaching the pharmacies with both, and not how it works if they're actually set up separately, so just finishing here about how it really functions on the ground. And then the other question was on the supply chain for Mr. Notaristefani. Just to ask him, he's spoken very much about the cost-cutting side, but I wonder if you could maybe say a few words about the fulfillment side and how well Teva is actually doing at to supplying the products it makes today.

Jeremy Levin

Okay. Let me suggest to you, we have a couple of people that are actually on the ground selling OTC in some of the countries. Rob, you start to that, and then maybe hand it over to one of the actual guys who are doing this.

Robert Koremans

My pleasure. Thanks for the question, Frances. So, yes, we do combine sales forces with the OTC and generics in some countries, and it works. It's really how you get to the max leverage out of that. On thought, we can leverage the ratiopharm brands, for instance, in Austria, Switzerland, Germany very strongly, where we have the opportunity to communicate that brand through OTCs which we can do in Europe through prescription based products. And you get that pull, and we become very desirable products to have for patients, and thus for pharmacies. So you get that pull into the pharmacy that helps us in general in the business. So absolutely, you're right, that works. Maybe, Dennis [indiscernible].

Jeremy Levin

Why don't we get -- Dennis, why don't you talk a little bit about your experience in Russia with OTC that have give you a real life experience on this? Does anybody have a mic?

Dennis Chetverikov

What I can say is that we are very excited about this partnership with P&G. And first of all, this is creating a lot of synergies. We all know that it's very important in the OTC business to have actually critical mass in buy and media, and we have seen all these access to P&G. We have brought us this critical mass. And we've got, I think, a significant boost in our share of voice in TV. That's one hand, let's say, which is [indiscernible] like a queen-queen. Second, for instance in Russia, we see market development organization for PGT and we are leveraging all our resources we have in the pharmacy channel and in the physician channel, for instance, launching Vicks. And we see that our OTC business has accelerated its growth within the last few months. We are consistently quarter-by-quarter growing ahead of the market. And we have [indiscernible] projections in terms of, say, growth outpacing, let's say, market growth in the future.

Jeremy Levin

We've had a number of questions, and I want to make sure that we get as many as we can. And there's 1 person at the back there who is waiting, just -- I'm not avoiding the question on supply, we're very happy to give that answer. Perhaps, Charl [ph], you can have it offline with Carlo.

Shibani Malhotra - RBC Capital Markets, LLC, Research Division

Shibani Malhotra from RBC Capital. So I just want to follow-up on David's audio question on Copaxone. I guess on the one hand, Michael showed very interesting data demonstrating the different op regulation with the generic for Copaxone. How comfortable are you that the gala data or the formulation that you have would not show a similar sort of difference versus the current Copaxone? And then, when you talk about patients shifting, like 30% to 50% of patients shifting, is that assuming a generic -- I guess, I'm trying to understand the clinical benefit of the 3 times a week dose given your compliance is already so high. So that's on Copaxone. And then just a quick question for you, hopefully quick, Jeremy. You highlighted a lot of information and data over here. But just if we go across the day, what are the 3 products or initiatives you are most excited about that you think investors should most focus on that are going to drive value to shareholders?

Jeremy Levin

Michael, why don't you go for the Copaxone.

Michael R. Hayden

Well, thank you for that question. It's an interesting question. Have we done the gala formulation on the gene expression profile? No we haven't. The reason we haven't is we've got clinical data. We actually know that it's efficacious and comparable to 20-milligram a day. So that's finally -- whatever it shows, we know that it's clinically compatible. Actually, the relapse rate has decreased from 34%, maybe even a little bit better than Copaxone, but both no significant difference. So basically, the clinical data that demonstrates efficacy, that's always saying on the generic side. We're saying that if you're going to say that this is a generic drug, make sure you get some data to prove that it's appropriately efficacious. We've done that with gala. In terms of patient acceptance, again, that's not my particular area, but I can say for patients even though there's adherence, it's still not all that convenient to take it to have a few days that you don't have to do this to patients. What I'm being told is that, that would even be more acceptable to patients.

Jeremy Levin

So we're running out of time, but just 3 things. How could you not be excited by a company that knows where it's going, a company that's got a clear strategy, has got an awesome team to work with, has got great products and indeed, is addressing a need globally that's only going to expand.

Unknown Attendee


Jeremy Levin

Ladies and gentlemen, I think we have kept you here long time. It's been a long day. I want to really, really thank you for your time.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to All other use is prohibited.


If you have any additional questions about our online transcripts, please contact us at: Thank you!