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Teva Pharmaceutical Industries Ltd (NYSE:TEVA)

2013 Morgan Stanley Global Healthcare Conference

September 9, 2013 11:45 AM ET

Executives

Jon Congleton - SVP & General Manager Global CNS

Analysts

David Risinger - Morgan Stanley

David Risinger - Morgan Stanley

Good morning everyone. Thanks very much for joining this session on Teva. I just need to mention disclaimers. So please refer to www.morganstanley.com/research disclosures for legal disclaimers. It's very much my pleasure to welcome Jon Congleton, who is in charge of CNS on the branded side at Teva, which obviously includes COPAXONE and future line extensions and development programs in CNS.

Since joining Teva in 2001, he has held a number of positions including director of COPAXONE marketing and General Manager of the U.S. and Canadian Neuroscience divisions and so it's very much my pleasure to welcome him. And I think what we're going to do is, I'm going to basically start it off, kick off with some questions, feel free to ask questions from the audience as well.

And so maybe Jon, a key question, just at a higher level so looking even beyond the strategy that you have in CNS as the company’s NTE strategy, and I was hoping that you could frame for the audience how investors should think about the development of NTEs in terms of commercialization, IP protection, et cetera?

Jon Congleton

I’d be happy to do so. When Jeremy and then he brought on Michael as head of R&D, they kind of did their inventory of Teva, so a really unique capability to execute an industrialized NTE strategy, so the NTE strategy in and of itself is not entirely new I think the ability to take it to a certain scale is; what makes Teva unique in that capability is basically the number of assets we have, the formulation capabilities we have, our medical insight and R&D execution standpoint and then our commercial platform related global standpoint.

When people ask me how do you commercialize the NTE my answer is always we're doing that right now we have certain assets in the marketplace I'll use our leading short-acting beta agonist ProAir that is in essence an NTE it’s a molecule that’s been around for a period of time that has an improved delivery device and that’s relevant because we know when asthma compliance is a significant issue, about 40% non-compliant patients are a toll on the healthcare system.

So you really need to look no further than our existing assets that are in the marketplace to see that alright this is a viable strategy from a commercial standpoint. The question really becomes what kind of value-add are we bringing as we identify these unmet needs and it’s really an order of magnitude if we can improve upon efficacy within a subset by modifying either the delivery, the molecule, fixed dose, some kind of combination of technology and drug, if we can improve efficacy then that’s the higher scale from a value add standpoint that gives us probably a higher level of profitability. If we then go down the scale safety, tolerability and just pure convenience there may still be opportunities but the value proposition may not be as great and if the value proposition isn’t as great we're going to see probably a less profitable NTE.

But it still could be worthwhile bringing it in the marketplace and that’s where for me the strategy makes sense at an industrialized level if we're targeting 10 to 15 NTEs per year over the next two to three years, we're then beginning to get into the market in 2016 we have the ability to have a level of attrition but from an R&D standpoint as well as a level of attrition from a commercial standpoint but we enough heads that are therapeutically aligned with what we are doing, we have the infrastructure to commercialize that. So if it needs access we have the payer expertise, if it needs demand creation we have the sales force capabilities. If we need some kind of patient support we have leading class patient support within the call center, and we can leverage all of those commercial tools that then fit the kind of value proposition that the NTE asset may possess.

David Risinger - Morgan Stanley

Got it, and so just for those of you, who don’t know what NTE stands for, it’s New Therapeutic Entity. And just following on that, is the best value proposition for Teva something that includes the new device that isn’t easily copied or has long patent life or how should one think about IP protection given that you are going to be leveraging generic molecules to form the basis for these NTEs?

Jon Congleton

I mean it's a really good questions and that’s one that we've look at, it’s right, we can find the unmet need, we can probably improve the experience to bring value and then question becomes that is the shelf life for that, what is the commercial life for that product? Is it going to be three years, or is it going to be 10 years? And I tell you part of our mental calculus going in the NTEs is that it's going to be little bit of all of it. We know some of these assets may just have one year exclusively, but there may be some commercial barriers to it.

We know that for some of the assets that may require some clinical data, we'll get three years exclusivity; there may be some additional time beyond that, so anywhere from three to five years.

We know some of the insights that we may have either would be a combination with technology or device or fixed dose combinations or change in delivery via extended release or longer term delivery may have some insight, may have some IP that we can put around that.

And so again as I look at the NTEs, the key to it is not just having a one or two, which we've seen other companies do but to really scale it so that we have an opportunity to really find a right mix and the value proposition, we have the opportunity to the find the right mix of market exclusivity so that then we can reap the value back from that.

As selfishly as the head of CNS, I get comfortable with having that mix knowing that some of these assets we may bring in to the CNS global franchise may have a three to four year period of exclusivity. I have got an infrastructure that exist that makes them an efficient commercial model again whether it needs payer access, patient support or demand creation, I don't have to entirely create that infrastructure and have that drug burdened by that cost. I have that, I can spread it. So there's an efficiency from a promotional standpoint.

There are also some assets where we may come out only have three to four years exclusivity, but there may be continuing kind of next steps of evolution for that asset. The opioids are a case in point, we have the TD hydrocodone that is we had a Phase 3 trial that unfortunately didn't test out, we've analyzed the study, we have re-initiated the second Phase 3 we're looking to introduce that in 2015, to me that's a classic NTE and it's really looking at what is the need in the marketplace in the U.S, abuse, tampering with opiods is a big issue, can we bring technology out to interfere with that.

We think we have that with the CIMA technology that we acquired from the Cephalon acquisition. And so that's an NTE that fits within the pain franchise we currently have in the United States, we think there's great value there for the system, that can generate great value for TEVA and the shareholders.

David Risinger - Morgan Stanley

Great. And maybe you could talk about the outlook for the Copaxone franchise and specifically how you see 2014 playing out?

Jon Congleton

Still active in 2013, but I'll try to give you a little bit of ‘13 and how it may play out in ‘14. I am very excited about obviously the market leading MS treatment, both in United States and globally. It really breaks down into kind of two separate dialogs, related but separate. One is, new entrance in the [VMS] [ph] category, new therapeutic alternatives for physicians to choose from and patients to utilize and then obviously the potential generic in May of 2014.

So let's maybe talk about the first one because it has a little bit of relevance still on ‘13 and reach through to ‘14. We've seen a lot of activity with new therapeutics with Gilenya late 2011, with Aubagio last year, with Tecfidera this year, very dynamic time in the market place. We've seen Tecfidera have a relatively quick uptake but it's been interesting to see as this has played out over the months, COPAXONE holding very firm from a TRx volume standpoint.

Now we know the share on TRx has come down a bit for COPAXONE, but the volume is relatively stable, so a little bit of a market growth. These new agents have brought more patients in which is good. At the end of the day, we know patients are better off treating their MS than not. But that said COPAXONE and its unique really unsurpassed clinical, safety, tolerability profile is still resonating in the market place.

In fact, I always caution on the weekly data because there is some volatility but as you string together the weekly data, you see COPAXONE’s TRx figures going up. You see our new RX figures going up, and so where there was a prediction that COPAXONE along with the other original immunomodulators would not have a place in the market I think that’s actually beginning to be challenged by the fact that patients and physicians still value the profile that COPAXONE has, still keeping it as the market leader and I think that will be true for foreseeable future.

So that’s kind of the dynamic within the market place right now, and if we look to the next key aspects that is the potential for generic, you know where our position is on the generic, but clearly our view is from a regulatory standpoint our molecule is complex, difficult to characterize and really not entirely sure of its mode of action in MS. Any follow-on to that would and should require clinical trials.

There is no bioequivalence; we have seen in some of the analytics that we’ve done with [Montreal][ph] that we can get out in the market place right now from follow-ons that their analytics are different than our COPAXONE. The gene expression data is different than our COPAXONE, and the question is how does that read out, what does that mean for a patient if there is different expression of genes between COPAXONE and a follow-on, what does that mean short term, what does that mean long term, this is a chronic disease, there are different elements of the human system being affected by these follow-ons than with COPAXONE.

We just simply think that it is prudent to put those through clinical trials and answer the question. Does the different in expression matter? Are you seeing a different cause from an efficacy standpoint? Are you seeing something different with safety and tolerability?

MS is, well it’s a manageable disease, it is a chronic progressive debilitating disease, and it’s a matter of one relapse can cause the patient the deficit they will never recover from and so give it the rigor of a clinical trial.

That’s our position. I know there are different positions out there. So that been said, if a generic does come into the market in late May of 2014, I think we are well positioned to address that from a competitive standpoint. We have built that into our plans, and what we communicated before was presuming a September 2015 lawsuit patent, it’s now moved to May of ’14. I think later this year in December we will give guidance specifically on what that means for ’14.

But it doesn’t really change our executional plans in the marketplace. We are still looking to bring the three times a week COPAXONE into the marketplace, we have had good dialogs with the agency, we feel very positive about that filed, the PDUFA date is January 29 of 2014. We are building the capabilities from a supply standpoint to take all of the 20 milligram daily patients to three times a week if that’s their preference in dialog with their physician will obviously actively promote the benefits of the three times a week.

In 17 years as COPAXONE has grown from this little daily molecule to the market leader globally, a lot of positives come out from the efficacy, the safety, the tolerability. The one area that patients have asked and asked and asked is make it more convenient for me to take. And so this is really with a three times a week addressing the one kind of remaining thing that patient wanted, short of putting this in a pill. But that profile of COPAXONE now in three times a week going from seven injections a week to three times a week I think is going to be real boon in the marketplace.

We have said that we are modeling right now anywhere from 30% to 50% of that patient population is going to be interested in going over to the three times a week, might it be higher, might it be lower. I doubt if it’s going to be lower, the numbers are consistently growing to where we’ve kind of moved it from that 30% to 35% to possibly a 50% conversion. There are some indicators that it maybe a little bit higher than that.

Clearly we will have the product available to satisfy the entire market if it choses to go over. The nice thing is the patients are going to have the alternative, they’ll have the daily, they’ll have three times a week and they will have that proven clinical profile that is safe and tolerable.

David Risinger - Morgan Stanley

And with respect to that products label, I believe that you tested it versus placebo.

Jon Congleton

Correct

David Risinger - Morgan Stanley

So will it have the same label and all the backing of the COPAXONE label or a different label or how should we think about leveraging the COPAXONE history?

Jon Congleton

That’s going to be a part of the labeling dialogues that we have with agency. Just how much of the clinical data can we carry over to the three times a week, certainly with relapsing remitting [indiscernible] [ph] build the reference all of it. The question on clinically isolated syndrome we will have with the agency. What we’ll promote obviously will be within the three times a week label, but I think the market has had the benefit of over 17 years exposure to this molecule, they’ve seen the data, I think there’s a fairly high level of confidence based on the FDA approval that what they saw with 20 milligram will translate pretty tightly to the 40 milligrams three times a week.

Question-and-Answer Session

David Risinger - Morgan Stanley

Got it, and then let me pause actually for a minute to see if there are any questions from the audience? Okay, feel free to interrupt if you do have a question.

Then thinking about payer positioning, we saw that recently express scripts chose to essentially force patients to take the twice daily BYETTA instead of the once daily Victoza. So I personally was surprised that Express Scripts essentially has removed Victoza from its National Formulary starting January 1st even though the patient experience is less pleasant on twice daily BYETTA. I don't know if you can comment on that in the context with COPAXONE, and obviously the COPAXONE injections are more painful. But maybe you could speak to that to some degree and also comment on positioning and how and when you'll be getting the three times a week on to formularies.

Jon Congleton

So those dialogs are going on right now, and it's obviously a big component to COPAXONE'S 2014 strategy in total (inaudible) three times a week. But we're having dialogs right now with big [bears] like ESI, about the MS space, about 20 milligram, about 40 milligram and about the potential of a generic. I'm happy to say have very good working relationships with the payor space like (Inaudible), like (Inaudible) Medco and that's been built overtime, because they have seen what we do with our share solutions program, how out floats a lot of the cost for them and for their physicians as far as helping them to manage the success with their patients and managing their MS. So those dialogs are going on right now.

And there is a lot of dynamic that are going to play out that feed into those dialogs. Not the least of which is we can get the May of 2014 and the FDA can say we require clinical trials, at which point any generic drug goes completely away and then it becomes we have 20 and 40 milligram. There could be a generic out there and we know in talking to physicians and even payors we are beginning to get visibility to this. There is a large body of support from a physician standpoint that a generic-2 COPAXONE without clinical data to support that is going to cause great questions for them and they may actually shift the patients to a different therapeutic, be it an Interferon, be it (inaudible) and so where the payor may have seen an opportunity to move the market to generic, the market actually may have just said, we're going to switch it over to a brand that’s tested from a clinical standpoint, and so the payor had to consider that dynamic as well.

So that’s where there is some incentive to sit down between us and the payors and say what we want to make sure that you are getting safe protective therapeutics for your patients. We know there are dynamics at play. Let’s talk about what is mutual creation of access in an appropriate manner for both the 20 daily and the 40 milligram TID and those are the dialogues that are going on now, will continue to go untill the end of the year, with our intent being one and always has been. The physician and patients choose COPAXONE either daily or three times a week, that we're able to make access for that possible through payor relationships as well as the systems program.

David Risinger - Morgan Stanley

Got it. And then could you speak to Laquinimod and the data flow that we're going to be seeing over the next couple of years?

Jon Congleton

So really there is two main stories with Laquinimod right now is ongoing dialogue with the European agency with the existing data sets, the ALLEGRO, BRAVO data. We began to have dialogues. The European agencies were intrigued by the combination of efficacy and safety. We know BRAVO just missed significance but pull the cohort. It's just very interesting data from a disability standpoint. So those dialogues are going on with the agency. We should have visibility to a decision at the very end of this year, early next year as it relates to Laquinimod in Europe right now. We know from a U.S. FDA standpoint, there was an [ASPARA III] trial, that trial is underway, it’s progressing as planned. We should be looking at Laquinimod being able to enter the U.S. market late 2017, early ‘18.

David Risinger - Morgan Stanley

And for some of the other indications, beyond the MS?

Jon Congleton

Right, so what I just articulated was for the MS and finish thought with that real quick Dave and then I will talk about Lupus and Crohn’s. The question is, is there going to be a place for Laquinimod in 2017 and ’18? And I will tell you my belief is there will be. And it’s based on two things, one that third trial is going to be focused on visibility. We know for all the different metrics that are measured in MS, the bottom line one is slow the progression of this disease. We saw in the first two cohorts, the ALLEGRO and BRAVO trials that there was a mild effect on relapsed but a very robust effect on visibility that’s what matters in this disease.

(Inaudible) to be in five or 10 years as a patient can expect to be at the same place from now from ability standpoint, Laquinimod actually seems to have a very robust effect there with a nice tolerability profile. As we see some of the agents that are coming out now, there is still not the perfect mix and exchange of efficacy, intolerability and safety, Laquinimod may have the promise for that. And I think if it delivers on that promise, it will have a nice place to be utilized in the MS space even in 2017, 2018.

So that’s the MS side. We know that from our Phase II standpoint Crohn’s and Lupu,s we had interest in data that read out. We are evaluating next steps from a clinical development perspective for those two trials. We will probably have Kevin I believe in R&D day later this year, early next year, specifically given new information on next steps of Laquinimod.

We are also somewhat intrigued about the nerve degenerative aspect of Laquinimod and its utility in the Huntington’s disease. Huntington’s is a space that we are interested in based on our acquisition of the NeuroSearch product pridopidine or Huntexil as you may recall it. Pridopidine is really focused total motor score which translates basically to can I pick up a bottle, can I open a door now, can I address myself, these measures of daily living. Laquinimod may actually do something that slow the progression of the disease so it would be a nice fit with pridopidine to have Laquinimod create some positive signals within Huntington.

So those are the four areas obviously MS is the leading indication that we are pursuing with Laquinimod but obviously excited about that molecule.

David Risinger - Morgan Stanley

Thank you. Just an operational question, would you please just remind me how much or what percentage of COPAXONE is produced in Israel and the ability to move that production outside of Israel in the event of geopolitical event risk? And then if that is a case there is a large percentage produced in Israel, the frequency with which you test your ability to move that manufacturing outside of Israel?

Jon Congleton

So I am going to repeat question, that was kind of what percent of COPAXONE is made in Israel and what’s our ability to cover the supply ex-Israel?

David Risinger - Morgan Stanley

And how often that is tested, yes?

Jon Congleton

Say that last one again, I am sorry you really breaking up.

David Risinger - Morgan Stanley

And how often that has tested your ability to move it?

Jon Congleton

So about 25% is made within Israel, we have capabilities outside of Israel, UK, United States as a case in point. We have for the 17 years, I have involved the COPAXONE have had issues arise where there is concern about hospitality and events maybe in the Mideast. I know we all hope that nothing does transparent in that regard, but we have obviously not like for COPAXONE but for all of our key assets and products look that our supply chain and how do we manage untoward events that may transpire.

As far as the testing events supply chain and we are constantly moving material, we are constantly make a running about a six months safety stock at any given time, we will be doing the same thing with the 40 milligram making sure that as we anticipate that launch, we have the strong safety stock of the 20 milligram in support of the 40 milligram.

So from a supply chain integrity standpoint, I feel very confident for our patients and customers.

David Risinger - Morgan Stanley

And then Jon maybe you could just talk about the support for your MS franchise globally, what the infrastructure is and how that will change next year and whether spending will be similar next year to 2013 for the MS franchise or lower, higher?

Jon Congleton

So that what do we have with COPAXONE probably our broadest global asset from United States obviously the deep infrastructure we have Europe and Latin America and Australia, Russia, central and Eastern Europe, it is truly a global brand, truly a global leader in that regard. If you look at the infrastructure that supports that it really breaks down into the access piece into the demand creation components, the medical scientific aspect, and lastly the patient support.

Again not getting into guidance for next year, but we did talk December of last year and the R&D data Germany had it by 2017, we still think this will be $1.5 billion to $1.7 billion asset. It's not going to stay that size of an asset, if we don't continue to support the patients and our customers and getting access to and staying on COPAXONE.

So, obviously as we look at, we are in the midst of planning for 2014 finalizing and as we look at the plans and what we forecast, we will look at the cost basis against that. But I would not anticipate very significant changes in the cost basis of that, because again, in my mind as I were launching a new product with the 40 milligram. We are continuing to do significant support for what is 2014 still the market leading them as therapeutic and we are going to continue to depend and communicate and support that brand COPAXONE in the United States as well as ex-U.S, Europe, Latin America, everywhere else.

David Risinger - Morgan Stanley

And what is the rough number of sales reps in the U.S and ex-U.S for COPAXONE?

Jon Congleton

In the United States, we have roughly 200 sales representatives, in Europe, in the ballpark of 400 representatives to cover our CNS franchise is across the European marketplace. But I think it's important to note that it's not just the sales teams, I mean it's our call center nurses, it's our field based nurses, it's our medical science lays on, I mean this is a very complex disease, with a complex therapeutic that you've got to build a system around, which frankly is another layer of installation from a competitive standpoint. And it what's been behind COPAXONE's leadership position.

David Risinger - Morgan Stanley

And with respect to the three times a week, that will just be a U.S. only product or are there opportunities ex-U.S.?

Jon Congleton

There are some opportunities ex-U.S. Clearly the driving force is in the United States. We're looking at some markets in Europe from a pricing standpoint, a few in the markets may have challenges, but we know there are other markets will be open. So as we begin to roll out the launch plans, we will communicate what other markets beyond the United States, but the U.S. is our main focus right now.

David Risinger - Morgan Stanley

And have you filed with anywhere ex-U.S.?

Jon Congleton

Yes, we've filed it in Canada, in Europe, in Latin American markets, as well as Russia.

David Risinger - Morgan Stanley

Got it, already. Well, I think we're out of time. Thanks so much for spending time with us today, Jon. I appreciate it.

Jon Congleton

Thank you very much.

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Source: Teva Pharmaceutical's Management Presents at 2013 Morgan Stanley Global Healthcare Conference (Transcript)

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