Teva Pharmaceutical's (TEVA) Management Presents at Jefferies Global Healthcare Conference (Transcript)

|
 |  About: Teva Pharmaceutical Industries Limited (TEVA)
by: SA Transcripts

Teva Pharmaceutical Industries Ltd (NYSE:TEVA)

Jefferies Global Healthcare Conference Call

June 03, 2014 09:00 AM ET

Executives

Jon Congleton - Head of MS and Neurology Unit

Kevin Mannix - Head of Investor Relations

Analysts

Dave Steinberg - Jefferies

[No formal presentation for this event]

Question-and-Answer Session

Dave Steinberg - Jefferies

Good morning, everyone. We are delighted to have with us the preeminent generic drug company in the world and also the company with the largest multiple sclerosis franchise. My name is Dave Steinberg, specialty pharmacy analyst here at Jefferies.

With us today is the perfect person at the perfect time Jon Congleton has been at Teva almost 20 years, he is Head of the MS and Neurology Unit. He is responsible for launching Copaxone many years ago and was the master mind of one of the more successful switches we've seen in last 10 years, the recent switch from once daily Copaxone to three times weekly. So what we'll do is we'll have a [clinical] fireside chat and I'll ask Jon a series of questions and at the end at this time I'll open it up.

Jon thanks for being here. So the Copaxone switch as I said is one of the best conversions we have seen in some time. It’s been far better than anyone than Wall Street had expected. Perhaps you could give us a little color on to I know Kevin was very optimistic all the way along what made the switch so successful and such a short period of time.

Jon Congleton

David, thank you and I appreciate the chance to be here and I appreciate all the nice words. I won’t give myself full credit from mastermind or launching this. A long great success story with Copaxone for Teva in the multiple sclerosis space, a lot of people involved in that.

Why we were so successful in introducing the 40 milligram really is underpinned on a couple of things. One, the product itself. I mean it had gotten the market leadership on the basis of the clinical profile and really a perfect blend of efficacy, safety and tolerability. When you can then take that market leading asset and reduce injections by 60% going from daily to three times a week that’s a huge benefit for patients. For 16 years that was the biggest issue with Copaxone frankly was the fact you have to inject from the daily basis. So, the TIW was the real nice choice for patients in that regard.

Then you take the experience that we have within this space. From market access to demand creation to patient support and you see what we’re able to basically to do with an asset within basically four months roughly 40%, 30,000 patients move from the daily to the TIW. So I mean I think it really comes down to that profile of the molecule itself coupled with the expertise that Teva has in United States within the MS space.

Dave Steinberg - Jefferies

Okay. So the launch was very robust like any great launch they tend to slow. And in the past month or so nRxs or new prescriptions have been somewhat ranged down a little, total prescriptions I think are close to 40%. Do you think this switch is largely played out, converted most people that you will convert, is this just a pause? And what do you expect assuming there no generics to Copaxone for the rest of the year what would be a reasonable conversion rate by year-end 2014?

Jon Congleton

So, usually a 13, 15 weeks into a launch you see things begin to stabilize but I don’t know that we’ve seen a pause but I think it has stabilized. There has obviously been a big [bolus] of patients that have come through, but we’re continuing to see more and more patients come forward to the 40 milligram TIW. We're also seeing with no generic introduction although we past this late May date that there is more opportunities for access. Access continues to open up for patients as good as it was, there were still some areas where we did not have access; we're getting that for patients right now. So, we're going to continue to see growth.

What we've given as far as guidance was 30,000 patients by the end of May, 40,000 patients by the end of the year. Because of the unknown variable with regard to generic entry, we're not really changing that guidance at this point. But even in the presence of a generic, a 40,000 patient target we put at the end of the year assume the generic. So, even though a generic does come in, we still know that the TIW will continue to bring new patients in simply because of the benefit of three times a week, versus daily in the services that we can wrap around it.

Dave Steinberg - Jefferies

Okay. Thanks. Wanted to get your thoughts on a possible settlement which would create more certainty for everyone. So, for the generic companies as they launch at risk so to speak, they could face significant damages at the Supreme Court, so we’re expecting initial legal decision. And for you it gave you a certainty around how many more weeks you could switch the products. Could you comment on a hypothetical settlement with Mylan and with Sandoz as a possibility?

Jon Congleton

So, I'd probably be shorter on this answer than I was on my other answers. It's an option that we can consider but I wouldn't say that it's top of mind right now, but it's certainly an option that we're entertaining as we look at the entire arc of the Copaxone story right now.

Dave Steinberg - Jefferies

And then last week, there was a decision coming out of Europe on the Copaxone patent, it looks like a positive for Teva. Could you elaborate a little bit on that? And would it actually in reality slow down or delay the launch of generics in Europe?

Jon Congleton

So, we're glad the patents were upheld. As to what it will do relative to generics and are they infringing or not, it’s hard to tell at this point. We don’t have any visibility to filings within the European space. We do know that in Europe there has been from a regulatory standpoint, pretty clear guidance on the need for some level of clinical data, probably I’d now assume you know what our position is on the need for clinical data two years relapse rate. We don’t have visibility to that within Europe, but we do know they want clinical data. So couple of the -- the patent situation that we’re pleased that was upheld coupled with the regulatory component. We’re comfortable with our position in Europe. We are within our forecast presuming the generic potentially sometime next year but there are a lot of hurdles for that and we will defend our position there appropriately.

Dave Steinberg - Jefferies

Okay. And Jon, you’ve mentioned that even if generics come out, you expect this switch to continue in the three times a week to keep growing. Could you give us a little more color on that why do you think that’s the case, why were insures and managed care not focused on the generic first and limit reimbursement for your products?

Jon Congleton

So, in a situation where there is a generic, there could be a lot of alternatives. I mean we could see where they would be [a step] that’s potentially between the 40 milligram TIW and daily generic that could happen. The reality and the more nuanced payers understand that there is some physicians and some patients that are just adamant against a generic Copaxone absent any kind of clinical data because of the complexity of the molecule. And the payers understand the risk that if they force patients into a generic Copaxone, there is a high likelihood they will just switch over to another disease modifying therapy that frankly could cause more, could be in a worse rebate position for them. So, it’s a little bit of a conundrum if you will for the payers because if they forced us and as we have seen in a market research, physicians and patients required adamant about wanting to have absolute clarity that the generic truly is, going to provide them the safety, efficacy and tolerability that they’ve grown in with Copaxone. You may just force them into a different category because they’re going to want to be treated and frankly it’s going to not be in a good position for payers. So we believe that that complexity coupled with how we’ve been working with the payers is still going to create space. We do know some payers will get it for the generic and we factored that into our forecast but given all that complexity we still believe there is space really open for the 40 milligram TIW and even in the step out at phase if a patient has to go on for a month, three months to a generic daily, again 60% reduction in injections is attractive and it’s difficult for a payer to completely block that.

Dave Steinberg - Jefferies

Okay. Last year we saw one of the most successful launches ever with a new oral MS drug certainly taking share away from all of the products including yours. Could you talk about how you have managed to do that and what your message to the physicians is and how we should think about continued erosion going forward?

Jon Congleton

The main message has been with texidera as it was with Gilenya as it was with rebuff and Tysabri is the profile and the predictability the patients give with Copaxone. And really no other agent has been studied as long as Copaxone has 20 plus years. And if you think about the population of MS patients, predominantly female, predominantly 25 to 45 (inaudible) life and the one thing they want is a level of predictability both in the efficacy and the safety of the compound. A lot of new agents are coming in, that’s great, alternatives are important, Copaxone is not a [pendency], it won’t be for everyone. But that said, patients have grown to know and trust that they can get us a level of predictability with Copaxone and now we have it, TIW. So you have a even more convenient way to do. And it’s basically been that story that has built and driven Copaxone the leadership and frankly is still there from a TRx standpoint 2 to 1 over the next closest competitor. And to me it speaks to the more new ones patient, the physicians who value since stability and what they know and frankly safety and tolerability which are key elements of that. And other agents that have come out either have one or the other issue of safety or tolerability.

Dave Steinberg - Jefferies

Fair enough. So lastly for the most anticipated days came along with no news, no generic Copaxone. It seems to me that after six years on file the FDA would have approved if there are going to and so perhaps or may not be one for sometime. What are your thoughts on timing for generic Copaxone, do you think the FDA has more hurdles, has more hurdles for some of the generic players, you think it's eminent or do you think it may never be approved?

Jon Congleton

It's a black box. I really don't -- I won’t even pretend to know what the FDA is thinking what their timing is. I do believe as we communicated and a series of citizens’ petitions that there is a complexity with Copaxone that is potentially more robust than even a biologic. The non-biologic complex drugs are very difficult to characterize, you don't have pharmacodynamics, you don't have PK data, there are no assays to basically show what you have. We've seen the complexity with the gene expression data that's come out.

So where the FDA is with all that, I won’t even opine to. I just know that this is a highly complex drug, with a highly complex immunologic base, neurologic disease that patients want to know that what they're taking, what they're putting in there is going to provide what they anticipate and what they've gotten from Copaxone in the past. So again very complex, I don't end with the FDA, but they have a lot of workout of them.

Dave Steinberg - Jefferies

That was my seventh Copaxone question I can't figure anymore. So given that you’re an expert in multiple sclerosis let’s turn to laquinimod. For several years the Street had high hopes on the clinical trials is disappointing, companies remained particularly optimistic. Could you walk us through where you are with laquinimod and share with us your optimism about that product reaching the United States markets?

Jon Congleton

Very optimistic about it. Teva continues to invest in that. We have our CONCERTO trial which is in relapsing-remitting MS. It should read out and I believe it’s late ‘16 we have an additional dose within that. The ALLEGRO and BRAVO trials looked at 0.6, this trial has 0.6 and 1.2. The challenge with laquinimod is frankly the challenge you have often when you develop compounds as you go into a Phase III program thinking you have a certain profile and then what is revealed in very robust clinical trials is a different profile.

And frankly the profile that we have with the laquinimod at the end of the day is an excellent profile; safe, tolerable, but it seems to affect the neurodegenerative aspect of the disease absent this robust affect on inflammatory side. There is an effect on the inflammatory side, there is an effect on relapse rate but not to the degree that you’re seeing with more of the immunosuppressive type drugs, but you’re seeing in the range of 40% to 50% reduction in disability the number one attribute in MS at three and six months.

So we believe we’ve got a very unique profile, would I’ve liked to have had it about two years ago in the marketplace, absolutely. But the BRAVO trial was empowered to show the effect that we’re seeing CONCERTO as that is the primary endpoint disability. We’re going to begin studying laquinimod in progressive forms of MS very shortly. So to me that’s a further commitment for a highly unmet need segment of the MS population and we think we’ll be able to bring and oral product that has an absolutely unique profile into the MS space sometime in 2018.

Dave Steinberg - Jefferies

Okay. I'll ask my eighth Copaxone question. So the European markets fairly significant, could you share with us plans for a three times a week and do you think we'll see similar switch rates in Europe that we've seen in United States?

Jon Congleton

So, in Europe Copaxone continues to do exceptionally well. We had a new team coming in about two years ago, we put in more of a Pan European structure and we've seen volume growth, I think for about five consecutive quarters within the European space.

So, Copaxone is doing exceptionally well in the European area. Right now the 40 milligram is under review by the NHRA. So we're in dialogues with them and we're hoping to introduce that early next year. Would I anticipate similar choice of the 40 milligram within European marketplace as we have seen here in the United States, I think access will certainly do something that will not be an issue in Europe for the 40 milligram. So, we're very excited to introduce that to Europe as well as other markets in the world.

Dave Steinberg - Jefferies

Okay. Let's talk about generics in general. On the first call that your new CEO participated in, he talked about regaining focus in generics. What does the company need to do? Do you need to revamp your portfolio? Company has been talking about complex generics for a while here at the same time the dollar value of pre-enterprise going up, patents is going to plummet significantly over the next few years. Do you actually think you can grow your U.S. generics business going forward?

Jon Congleton

This [does relate] to the gentlemen to right of me.

Dave Steinberg - Jefferies

Okay.

Jon Congleton

Because I am CNS and paying focus guys, I'll let Kevin address that one.

Dave Steinberg - Jefferies

Kevin Mannix Head of Investor Relations.

Kevin Mannix

Hi, good morning. The things that Erez laid out on the earnings call talks a big focus about generics in general, globally speaking. And despite the patent cliff if you will for generics that our competitors and we've even highlighted, there is significant opportunity in generics and in the U.S. and Europe in particular.

For Teva specifically, we talked about fixing the foundation and lot of that applies specifically to our generic business. So it's a greater emphasis on what we choose to put in our portfolio, the pipeline that we are building, the geographic expansion and especially on the cost reduction side. We've talked about a $2 billion gross reduction in expenses, $500 million in net savings by 2017 and 75% of those cost reduction is coming from the generic business.

When we look at the brand value that is yet to be genericized that if you look out over the next decade, a lot of it is in the complex generic space, so you think injectables, inhalation, patch technology, ophthalmology and even the greater amount in biosimilars if you will. So we intend to be very focused on those two areas. We have a lot of work to do on the biosimilars side, as you said. You talked about the three different waves, the first wave being the GCSF which is where we are today, the second wave seem to have passed us about the monoclonal antibodies, definitely would have to do some business development there. And on the third wave, we’re looking to see how we can build that up. We have -- just going back to the complex generic side; we have multiple platforms that we have developed internally and we have also acquired, as you know, we have been very acquisitive over the last decade. So I think we are in a good position there. Another thing I would highlight to is the convergence of the R&D within Teva. We are probably one of the first, if not the first company to actually combine generic R&D and spec pharma R&D under one roof to leverage both sides in terms of knowledge, technologies and opportunities.

When we look at the United States, clearly for us the Paragraph IV opportunities kind of really fueled the machine for a good decade and slowed significantly as we saw more players coming in on the exclusivities. The size of the opportunities declined as well, but there is still tremendous opportunity in terms of whether it'd be the -- it's really those complex generics if you will. So, on the profitability side, they present a real contributor, a potential contributor if you will.

In Europe, again it's 500 million in evidence. We have leading positions in almost all of the European markets. We believe that a diversified presence in all those geographies despite what some of our competitors have done in terms of removing themselves from specific markets is the way for us to go. Again, when we look at the U.S. and we look at Europe in particular, again the opportunity is there with the increased focus also on profitability, maybe not necessarily going entirely for a market share the way we used but focusing more on the profitability. And then I also would add Japan were the third largest player there, it’s about a $700 million business for us there. Again you’re seeing significant increase in generic penetration, and I think we're well positioned there too.

Dave Steinberg - Jefferies

Okay. Thanks. So at Teva it’s Copaxone 24x7 but for the rest of specialty pharma, it’s mergers and acquisitions 24x7. So, I thought I’d have to ask at least one question about merger. So one reason Teva got to be where it was, was a series of outstanding acquisitions from Barr Labs to Ivax, to [C-core] and that's helped make Teva the number one player in the world in generics. But the company really hasn't made any significant size acquisitions in sometime, maybe three years or four years. Cephalon probably was an acquisition you’d like to take back and would actually have far made sense but it was just the wrong time.

On the recent call, Erez discussed M&A as a priority. Could you talk about perhaps what we might see over the next year; are we going to think about tuck-ins, divestitures, sort of what appetite do you have for the large transaction? Could you just give us some color on M&A and also what particular areas the company might be focused on?

Kevin Mannix

Sure. I think Erez has said that clearly his focus is to focus internally on fixing the foundation, driving organic growth, continuing to develop the pipeline assets that we have, but we clearly can’t ignore the opportunities that have been created in business development in the M&A spaces we are seeing our competitors do. What we've indicated to people is that we have a desire in three specific areas if you will. We're focused on geographic expansion, again I know it's hard to believe that with the company of our size whether it's generics or spec pharma that we still have a desire to increase our geographic presence, if you will. But there is still significant opportunity, some of is short-term, some is much longer term, but we're focused on geographic expansion. Both for generics and spec pharma, we're looking for pipeline assets again whether they'd be in spec pharama whether it's capabilities for generics and second -- third piece would be technologies to again -- that goes back to those complex generics, the NTEs as we've highlighted for people back in December with our webinar and I think that’s something we should probably talk about here as well.

Jon Congleton

To build on one of those points, obviously we're excited about an announcement we had today as far as an acquisition, the targeted acquisition focused in the specially space in CNS and in pain and that's the Labrys CGRP monoclonal antibody. We've done a lot of work with -- on that asset. Great many people involved in the organization had targeted this phase about 6 to 10 months ago to really build out our pain franchise. I mean Teva is set over the next five years to launch eight unique solutions, molecules within the pain space. We have Zecuity that we’ll be launching later this year for abortive treatment of migraine. Labrys’ for chronic and high episodic migraine, it will be later in that time range that I just talked about. We have an abuse-deterrent hydrocodone that will be coming out next year. We have four NTEs with abuse-deterrent technology and a lot of people are coming after this space. But I think we have some leading edge technology with some potential true competitive advantage within that to really address a huge issue. I mean over 16,000 patients die per year due to overdose from opioids. And opioids are an excellent way to manage pain but there are issues with them. I think we can help resolve those. We have our Nav1.7 that could be looking at osteoarthritis or peripheral neuropathies. So, I am very excited about where we’re with MS as a leader but I am equally excited about where we can be and our goal to become a leader within the pain space. I believe we have the assets. We have the commercial infrastructure to enable that. And so I think it’s going to be very exciting to have an watch over the next five years.

Dave Steinberg - Jefferies

Okay. You mentioned NTEs and you’d started discussing this new area a year or two ago. I think many people are quite skeptical including myself. Can you -- it seems like drug delivery circa 20 years ago with (inaudible). Could you shed a little more light on NTEs and why you think it’s an exciting area for you?

Jon Congleton

Yes, I’ll be happy to. You named something NTEs and so it’s a good way to define it, but when people say they don’t believe that NTEs work, I just simply point to the fact that there are countless NTEs in the marketplace right now and Teva has some. Our ProAir which is multi $100 million asset, million not B is an NTE in fact. It’s got albuterol and an improved device with a dose counter. Our previous women’s health was from all NTEs; existing oral contraceptives but put in different combinations to address specific market needs like Seasonique four periods a year.

So, the key to NTE is simply uncovered and unmet need with an existing molecule and how do you solve for that need through technology. And if you think about it, in the U.S. with about 85% of pharmaceuticals are generic at this point. And to me, it's a shame that just because something goes generic, suddenly we just walk away and say well that's as good as it’s going to get. Because I think there are opportunities to improve molecules. And there is a spectrum of what that improvement is. It may be an entirely new indication that maybe a subset and an improvement in efficacy, it could be safety tolerability and could just be convenience. And to me it's that spectrum that equates to value if you’re really coming in and covering whole new indication, a whole new space that has significant value. If you’re just coming after convenience, then you are right. It's going to form a 90 and 80 and those are marginal and the market is not going to pay much more them or you'll have to create access with the payers, but there still maybe an opportunity.

Where I think Teva can really bring something different to that space, because others continue to work within the space, but we have the scale to do it, frankly we have the integrated R&D that Kevin spoke about, where we can basically bring the capabilities from the generic and the specialty space together and really look to how do we derisk these, how do we optimize them, and how do we get them to the market rapidly and then have those therapeutically aligned so that we can introduce them in commercial interfaces that we already have in the marketplace.

Dave Steinberg - Jefferies

Okay. We're going to continue the discussion for half an hour in the Broadway room at the break. Both Jon and Kevin thank you very much.

Jon Congleton

Thank you.

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 www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

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