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Teva Pharmaceutical Industries Limited (NYSE:TEVA)

Q4 2010 Earnings Call

February 8, 2011 8:30 AM ET

Executives

Elana Holzman – Senior Director, Investor Relations

Shlomo Yanai – President and CEO

Eyal Desheh – Chief Financial Officer

Bill Marth – President and CEO, Teva Americas

Dr. Gerard Van Odijk – President and CEO, Teva Europe

Professor Yitzhak Peterburg – Group Vice President, Global Branded Products

Analysts

Gregg Gilbert – Bank of America Corporation

Randall Stanicky – Goldman Sachs

Chris Schott – J.P. Morgan Chase & Company

Rich Silver – Barclays Capital

Ronny Gal – Bernstein

Ken Cacciatore – Cowen and Company

Tim Chiang – CRT Capital

Marc Goodman – UBS

Elliot Wilbur – Needham & Company

David Risinger – Morgan Stanley

David Maris – Credit Agricole

Shibani Malhotra – RBC Capital Markets

Operator

Greetings. And welcome to the Teva Pharmaceutical Industries Limited Fourth Quarter and Full Year 2010 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow a formal presentation. (Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Elana Holzman, Senior Director of Investor Relations. Thank you. You may begin.

Elana Holzman

Thank you, [Diego]. Good morning, and good afternoon, everyone. Welcome to Teva’s fourth quarter and full year 2010 earnings conference call. We hope you had a chance to review our press release, which we issued earlier this morning. A copy of the press release is available on our website at www.tevapharm.com. Additionally, we are conducting a live webcast of this call that is also available on our website.

Today, we’re joined by Shlomo Yanai, President and CEO; Eyal Desheh, Chief Financial Officer; Bill Marth, President and CEO of Teva Americas; Dr. Gerard Van Odijk, President and CEO of Teva Europe; and Professor Yitzhak Peterburg, Group Vice President, Global Branded Products.

Shlomo and Eyal will begin by providing an overview of our results. Please note that Shlomo will be referring in his prepared comments to non-GAAP gross margin, operating profit, net income and EPS. Eyal will provide additional details on the items excluded on our non-GAAP results. We will then open the call for a question-and-answer period.

Before we proceed with the call, I would like to remind everyone that the Safe Harbor language contained in today’s press release also pertains to this conference call and webcast. Shlomo?

Shlomo Yanai

Thank you, Elana. Welcome everyone, and thank you for joining us today as we review Teva’s results for the fourth quarter and full year 2010. 2010 was a great year for Teva, a year of record breaking financial results, including record sales across our company. It was also a very important year for Teva strategically, since it was the first year of the long-term strategic plan that we announced last January.

As you know, we have charted an ambitious course of Teva’s growth, and today after publishing our results, I’m pleased to tell you that all of us at Teva are more confident than ever in our ability to reach revenues of $31 billion with net income of $6.8 billion by 2015.

I would like to discuss our results in 2010 in light of these goals and consider what our performance during the year says about the progress we are making in reaching them. In order to do so, I will read out somewhat from my customary review of the details of all our major businesses, but Eyal will provide you all the facts and figures as usual.

Let me first briefly review the highlights of our financial results. Teva said 2010 was the year of record breaking sales across the board. Sales for the year reached a record $16.1 billion, which reflects 16% growth year-over-year.

Our net income reached $4.1 billion up 36% over 2009. All of these led us to record EPS for the year of $4.54, up 35% over 2009. We also had very strong record cash flow from operations of $4.1 billion and free cash flow of $2.8 billion.

Our results in Q4 provided a solid end to an excellent year. Net sales reached a record $4.4 billion with gross margins of 59.6%. Quarterly operating profit was $1.29 billion with net income of $1.14 billion. This brought us to EPS of $1.25 and cash flow from operations during the quarter was strong reaching $1.10 billion with free cash flow of $722 million.

During 2010 we built a larger, stronger and even more agile organization. Teva’s 2010 results provide us with an exceptionally strong basis for continuous profitable growth in the years to come and I can say with great confidence that we are taking the right strategic and operational measures and making the right investments to continue to keep us right on track towards our strategic goals.

At the heart of Teva’s growth strategy is our commitment to generics and in 2010, we made significant progress in expanding our presence as the global generics leader. In Europe, a region that we had identified as a key pillar for growth, we took the right step in building our generics business both organically and through acquisition. And we are now the number one player in Europe overall, as well as in many strategically important European countries, including Spain, Italy and the U.K.

Our integration of ratiopharm is proceeding very smoothly and quickly, and only five months after closing the commercial side of the integration is now complete enabling us to present one phase to the market. Thanks to the expertise of our integration teams, we will be able to hit the ground running terms of maximizing our new scale and seizing the opportunities for further growth that our leadership position brings us.

And we believe that in the long-term these opportunities for growth in Europe where many countries have low rate of generic penetration and where there is a large and aging population will be very significant, and Teva is uniquely well-positioned to capture them.

During 2010, we made great progress in key emerging generic markets where generics penetration is low and the potential for growth and profitability are high. In Russia, our growth strategy resulted in sales of over $380 million, an increase of more than 35% over 2009.

In Japan, the world’s second largest pharmaceutical market, we completed the acquisition of Taisho and have fully integrated its operation with Teva-Kowa, our Japanese JV. This is an important milestone in realizing Teva’s strategic objectives of becoming a leading player in Japan.

Already in 2010 our Japanese JV reached over $200 million in sales. And we have taken the first step in implementing our strategy for growth in Latin America with our acquisition just two weeks ago of Infarmasa, making Teva the number two pharmaceutical company there.

All of the measures we took in 2010 to expand our generic leadership, also further strengthening our balanced business model, and I believe that 2010 provides a clear demonstration of the power of that model, the great flexibility it provide us and the ways in which it enable us to deliver continuous profitable growth even when we face challenges in some areas of our businesses.

Of course, Teva’s branded products also play a critical role in our growth strategy and 2010 provided a powerful demonstration of the strength of our innovative business. Copaxone further solidifies its position as the global leader among MS therapy and its efficacy and its superior safety and tolerability profile continue to make it the first choice of physicians.

In market sales of Copaxone grew 17% over 2009, significantly outpacing the market growth to reach a record breaking $3.3 billion. During 2010, Copaxone global market share grew to 30%, further widening the gap with its nearest competitor. In the U.S., we finished the year with over 40% TRx and we fully expect Copaxone to continue to enjoy healthy growth in 2011.

The Copaxone franchise remained secure and I’m sure that those of you who have been closely following events on both the legal and the regulatory front share with us the conviction that any so-called generic Copaxone is, at the very earliest, years away.

During 2010, we made excellent progress in growing our MS franchise and we are – and we were very pleased to announce in December the result of their ALLEGRO, a Phase III study of oral laquinimod. This represents a major milestone in our development of laquinimod, a therapy that can potentially improve quality of life for many MS patients and continuing the Copaxone legacy, do so safely.

We made great progress in growing our branded pipeline in other important therapeutic areas as well. We continue to execute the respiratory product growth strategy that we shared with you in November.

In December, we received FDA approval for an enhancement of QVAR by increasing the days of therapy for inhaler from 25 to 30, the same as other inhaled corticosteroids of the U.S. market – on the U.S. market. Our launch of this product is underway.

In addition, we successfully completed the Phase III trials with positive result for the second indication of QNAZE for the treatment of perennial allergic rhinitis and we are on track for a May 2011 filing in the U.S. As we told you in our Respiratory Strategy Day, we are aiming for four new products filing in the respiratory area during 2011.

I would like now to turn – I would like to turn now to Teva’s women’s health franchise, which is poised to grow into a global business. Our acquisition of Théramex with its diverse portfolio of women’s health products and its strong presence in important markets including France and Italy provide us with an outstanding platform to expand this franchise. We are awaiting approval in Europe on NOMAC/E2, a third-generation natural estrogen oral contraceptive.

In our core market, the U.S., I’m pleased to report that we have filed for over-the-counter status for Plan B One-Step, an important milestone in the growth of these key products. I think it’s worth mentioning that during 2010, sales of Plan B One-Step grew very nicely since its introduction in the fall of 2009. Instead during the fourth quarter of our women’s health product grew by 25% over 2009.

I’m pleased to say that during the year we made real progress in achieving our strategic goals of building a true, multi-platform branded business, which does not rely on one product, but rather on a range of strong products cross several key therapeutic areas, as well as a robust pipeline. By building more diversity into our branded business model, we added even more diversity to our balanced business model overall.

As we look ahead, we expect that 2011 is going to be another great year for Teva, with sales in the range of $18.5 to $19 billion, which represent 17% growth year-over-year, an EPS in the range of $4.90 to $5.20.

We believe that just like in 2010, our results in 2011 along with the strategic measures we will continue to take during the year, will provide us with an excellent springboard for further growth in the year to follow and keep us right on track towards our long-term strategic goals.

As you have heard me saying many times before, I believe that the best value driver is growth. For Teva this growth will be generated by our sustainable balanced business model and model characterized by high profitability and financial strength.

As a CEO, I can tell you that Teva is stronger today than we have ever been before and throughout our company, there is a tremendous excitement about the future, an unwavering commitment to reach our long-term targets.

Thank you very much for your attention. And now, let us turn the call over to Eyal for a detailed description of the quarter and the year. Eyal?

Eyal Desheh

Thank you, Shlomo, and good day to everyone. I hope you’ve had an opportunity to review the press release we issued earlier today. As you can see, the fourth quarter completed an excellent year for Teva and we are reporting today a record year by any measure.

2010 was our best year ever, as we delivered record in sales, GAAP and non-GAAP gross margin, operating income, net income, earnings per share, operating cash flow and free cash flow. We had record sales in each of our major geographies, North America, Europe and international markets.

Copaxone, Azilect and women’s health also had record sales. These results were driven by generic launches in the U.S., the successful acquisition of ratiopharm, continued growth in market share gains of Copaxone, good product mix and tight expense control.

Before we delve into the numbers, I would like to touch on two issues. First, I would like to remind everyone that we are presenting GAAP and non-GAAP results. In our non-GAAP presentation, we have excluded the following items this quarter. Acquisition, restructuring and other expenses of $229 million related primarily to the ratiopharm integration. As you may remember, the new accounting rules require to include integration costs in the P&L and not in the purchase price allocation as in the past.

Amortization of purchase intangible assets totaling $123 million, of which $118 million were included is costs and the remaining $5 million in selling marketing expenses. To remind you, amortization of ratiopharm intangibles will commence in Q1 2011.

Impairment of intangible assets of $94 million related primarily to the (inaudible) plant, in those step up of $53 million in the connection with acquisition of ratiopharm, legal settlements and purchase of R&D and process of $9 million each and a gain of $7 million from sale of option rate securities, which were previously impaired and in addition, related tax benefits of $140 million.

You should note that items included are in arriving to our non-GAAP results for the fourth quarter of 2009, are not identical to those in the current quarter. Also, the items included from our full year non-GAAP results are not identical to those of the fourth quarter of this year.

Please review our press release and related tables, for complete information, including reconciliation to the GAAP figures. As indicated in the past, we present non-GAAP figures to show you how we, the management team and our Board look at our financial results.

Foreign currency continue to play a significant role in our results. In the fourth quarter, foreign currency differences had a negative impact of approximately $140 million in sales. This resulted primarily from the strength of the U.S. dollar relative to the European currency, which was partially offset by the decline in the value of the dollar relative to other currencies. These currency effects negatively impacted our operating profit this quarter by approximately $51 million.

For the full year 2010, exchange rate differences negatively impacted sales by $216 million and reduced operating income by $50 million. When compared to our work plans, in our guidance for 2010, exchange rate differences negatively impact sales by almost $500 million.

Looking at consolidated results for Q4, sales totaled $4.4 billion, an increase of 16%, compared to Q4 last year. In local currency terms, we delivered even higher growth of 20%. We have $16 billion sale, there are many moving parts and not everything was perfect in 2010.

We achieved our results despite the impact of foreign exchange differences on sales and operating profits and despite the voluntary production suspension at the Irvine plant. The remediation of quality issue had an adverse effect of approximately $230 million on sales for the year and approximately $170 million on non-GAAP operating profits for the year. The Irvine sales were mixing from our U.S. generic results. We hope to resume partial production in the plant later this quarter and reach full production by the year end of the year.

In addition, as you know, we did not get all the approval for products we hoped for in 2010 and particularly in Q4. In addition, for the full year, sales reached $16.1 billion, an increase of 16% from $32,000 in 2009. Non-GAAP operating income totaled $1.3 billion up 23%, compared to Q4 2009, benefiting from strong gross margin and tight expense results. Full year, non-GAAP operating income was $4.9 billion, representing 28% gross compared to 2009.

Non-GAAP net income for the quarter was strong at $1.1 billion, up 35% compared to Q4 2009. Non-GAAP income for the full year was $4.1 billion, up 36%. Non-GAAP fully diluted earnings per share for the quarter was $1.25 up 33% compared to Q4 2009 and for the full year non-GAAP diluted EPS was $4.54 per share, 35% increase from 2009.

Few housekeeping points related to earnings per share calculation. You will find share count details in the press release we issued today and the add-back for the non-GAAP EPS calculation is $44 million for the year and $11 million for the quarter.

Now let’s discuss profit margin and operating expenses. Non-GAAP gross profit margin for the quarter, which exclude amortization of intangible assets and inventory step up charges was 59.6% in the reported quarter, compared to 58.6% in the comparable quarter of 2009.

The improvement in gross profit margin resulted from higher contribution in the quarter from recent product launches in the U.S., and our branded and innovative franchises. For the full year non-GAAP gross profit margin was 60%, compared to 58.4% in 2009.

Non-GAAP operating margin for the quarter reached 29.2%, up from 27.6% in the comparable quarter last year, driven primarily from strong gross margin, as well as the termination of obligation to make payments to Sanofi-Aventis of 25% of Copaxone in market sales in North America.

This was partially offset by higher royalty payments for generic products in the U.S., which are reflected in sales and marketing expenses, and by the ratiopharm business, which is characterized by higher selling and marketing expenses. For the full year non-GAAP operating margin reached 30.6%, compared to 27.7% in 2009.

Net R&D expenses this quarter reached $270 million or 6.1% of sales. Gross R&D in the fourth quarter of 2010 before reimbursement for third parties for certain R&D expenses totaled $299 million or 6.8% of sales. For the full year of 2010, net R&D expenditures totaled $933 million or 5.8% of sales, while gross R&D was $1 billion or 6.2% of sales.

Spending on generic R&D accounted for slightly more than 50% of our R&D expenses in 2010. We continue to have the broadest pipeline in the U.S. to support our future growth and at the same time, we are stepping up efforts in other markets, in Europe as well as key markets such as Japan, Russia and Latin America.

Our focus in generic R&D is on value, high volume and how to make products. In the branded R&D, most of the increase is attributable to increased spending on branded products primarily biosimilars and respiratory.

Selling and marketing expenses for the quarter, excluding amortization of intangible assets totaled $816 million or 18.5% of sales, compared to $742 million or 19.5% of sales in Q4 2009. This higher selling and marketing expenses are the result of two main factors, which I already mentioned, contribution of ratiopharm business, which is characterized by higher selling and marketing expenses and the higher royalty payment on generic products in the U.S. In 2010, we paid a total of approximately $690 million in royalty, primarily on the euro generics.

For the full year, selling and marketing expenses totaled $2.9 billion or 18.2% of sales compared to 19% in 2009. The decline in selling and marketing expenses for the year resulted from the termination on April 1st of our obligation to make payments to Sanofi-Aventis of 25% of Copaxone e-market sales in North America, which was offset by higher royalty payment on euro generics and ratiopharm sales and marketing expenses.

Total G&A expenses this quarter were $258 million or 5.8% of sales compared with 5.7% of sales in Q4 last year. For the full year, G&A expenses totaled $865 million or 5.4% of sales compared with 5.9% of sales in 2009.

We reported $54 million of financial expenses on a non-GAAP basis in Q4 compared with $34 million of non-GAAP financial expenses in the comparable quarter in 2009. The increase resulted primarily from additional debt used for the ratiopharm acquisition partially offset by a lower interest rates on our debt.

The non-GAAP tax rates for the full year of 2010 was 13%, compared to the rate of 16% in 2009. The decrease in tax rates from 2009 to 2010 resulted primarily from a change in product mix and higher sales of vertically integrated products.

The decline in our expectation for an annual tax rate in 2010 from the third quarter to the fourth quarter resulted primarily from higher relative contribution from vertically integrated products in the quarter, such as Copaxone, Azilect and Venlafaxine.

Ratiopharm business, which is generally associated with higher tax rates than the Teva’s average, did not have a notable impact on 2010 pre-tax profit due to integration-related expenses. The tax rates for 2010 GAAP results were 8% similar to GAAP tax rate in 2009.

Now let’s have a look at our cash flow. Cash generated from operations in this quarter totaled $1.1 billion, an increase of 15%. Our free cash flow, excluding net capital expenditure of $208 million and cash dividend $172 million amounted to $720 million, an increase of 13% over last year.

The strong cash flow was driven primarily by good collection during the quarter. For the full year, cash flow from operation reached a record $4.1 billion and free cash flow for the year totaled $2.8 billion also a record.

During the quarter, we bought back approximately 1.9 million shares at an average price of $51.05 per share for a total of $99 million. We didn’t buy shares during Teva’s blackout period, which started December 22nd and ends tomorrow, the day after we release our earnings.

On December 31st, our cash and marketable securities were $1.5 billion, up $339 million from September 30. Our total outstanding loans, bonds and convertible debentures stood at $6.9 billion, down from $7.1 billion as of the end of September.

From December 2009, our debt has increased by $1.3 billion, primarily reflecting issuance of bonds to finance the acquisition of ratiopharm, as well as bridge financing incurred to finance the acquisition, offset by repayment of the more expensive Barr debt.

Our financial leverage as of December 31, 2010, was 24%, down for 34% after we completed the Barr acquisition and down for 29%, which was immediately after the ratiopharm acquisition.

DSO, days sales outstanding, amounted to 41 days this quarter, compared to 42 days in Q3 2009 and 48 days in Q4 last year. We calculate DSO after netting out from receivables, the sales reserve and allowances. Inventory days were 180 days in Q4, slightly higher than 178 days in Q3 and slightly lower than 182 days in Q4 2009.

Capital expenditures reached $208 million this quarter, compared to 179 in Q4 and $161 million in the previous quarter. The increase resulted from investment in different facilities worldwide, most notably in new logistic center in Israel and the expansion of our manufacturing facility in Hungary, including the Teva facility.

Dividends. Yesterday, Teva’s Board approved an increase in our quarterly dividend from 7.70 Shekels per share to 0.80 Shekels per share. This is a 14% increase in our cash dividend and completes more than 33% increase in dividend payment per share in Shekels over the past two years. Based on the rate of exchange on February 7, 2011, of the Shekel to the U.S. dollar, this translates into approximately $21.8 per share or a quarterly dividend amounting to a total of approximately $195 million.

Before opening the call to your questions, let me repeat the guidance for 2011 and provide a few more data points regarding 2011. We expect sales between $18.5 to $19 billion, a 17% increase compared to 2010. As Shlomo indicated, this number is sensitive to future exchange rate volatility. We expect non-GAAP EPS to be between $4.90 and $5.20 for the year.

As in the past few years, the quarterly development is not expected to be linear and the year will be backend loaded. The second half of 2011 is expected to be stronger than the first half and the second quarter, as in last year, is expected to be stronger than the first quarter. We anticipate sequential improvement as the year progresses.

Now let me provide some specific guidance as to expenses and margin. Our non-GAAP gross profit margin is expected to average between 57.5% to 59.5%. As we have indicated before, our 2010 gross margin was exceptionally high due to the contribution of significant generic launches in the U.S. In addition, our 2011 plan includes higher cost for quality. The 2011 gross profit does not include amortization of approximately $600 million.

Net R&D expenses, without joint ventures and other investments will be approximately 6% of net sales, gross R&D of course, will be higher.

Selling and marketing expenses will be in the range of 18% to 19% of sales. Selling and marketing expenses for 2011 include royalties totaling $900 to $950 million. As an example, the (inaudible) royalties, as we already reported to you, significantly increased on January 1, 2011.

General and administrative expenses in 2011 are expected to be approximately 5% of sales. Finance expenses are expected to be approximately $40 to $50 million per quarter and tax on our non-GAAP numbers is expected to be similar to 2011 rates at approximately 13%. In 2011, we expect to record share in losses of associate companies of approximately $40 to $45 million, primarily in our JV [we’re doing] and mostly related to R&D expenses.

We believe that the fully diluted number of shares in 2011 should be between 900 to 910 million shares. Please keep in mind that these guidelines are indications only and actual results may vary as a result of foreign exchange differences and business environments.

Thank you all for your time and attention. And now, we will be glad to take your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Gregg Gilbert with Bank of America Corporation. Please state your question.

Gregg Gilbert – Bank of America Corporation

Hi. Good morning. My first question is, I believe for Shlomo, how the [Jerusalem] facility warning letter affect you as a company and specifically for your guidance this year? And can you make us confident that you’ll be able to close this issue out in some reasonable timeframe? Any color on that would be great?

And I’ll just ask my second question up front, about laquinimod, what do you think the appropriate expectations for investors are on the clinical profile at this point given that we haven’t seen the full data yet? I believe the company’s characterized the relapse response is similar to certain other MS products with disabilities of course that are compelling versus most other MS products. So please help us your expectations on laquinimod? Thanks a lot.

Shlomo Yanai

Good morning, Gregg. First of all, let me state that quality for us is the first priority and we took it very seriously and we are going to do everything and I think everything that we should do in order to make sure that we will be on the highest standard of quality in our industry.

As for Jerusalem, we’re working with the FDA and I’d like to believe we’re going to clear it very soon. I don’t see anything that, at that point of time that should impact our commercial results and therefore, I don’t think any, there’s nothing to do with the guidance for next year. What was your second part?

Eyal Desheh

Second question?

Gregg Gilbert – Bank of America Corporation

Can you help us understand what our expectations for laquinimod should be once we see all the data? The company in certain settings have characterized the relapse rate or response as being similar to certain other products with the disability score that’s better than other products?

But can you just put on the record what you actually believe at this point? I recognize you’re not going to share the whole data set before the AN meeting? But what would be appropriate expectations be as of now, given the importance of this product to Teva’s future? Thanks.

Shlomo Yanai

First of all, we are very happy with the results that we had when we open because of the first phase or first phase of clinical trial of laquinimod. We’re going to share the key or the most important piece of information on that in the coming, I think, it’s in April, correct me if I’m wrong.

Eyal Desheh

Yeah. You are right. In April.

Shlomo Yanai

Yeah. In April, and I prefer that point of time to leave most of the discussion for that event where we would put it in a more professional and [more complex].

Gregg Gilbert – Bank of America Corporation

Okay. Thanks. I’ll jump back in queue.

Operator

Our next question comes from Randall Stanicky with Goldman Sachs. Please state your question.

Randall Stanicky – Goldman Sachs

Great. Thanks, guys. Just a couple questions. The first one on Copaxone, can you just give us some more color on what drove the strength, I guess globally what you’re seeing in terms of oral competition? And really the question is, how sustainable is the growth that you put up this quarter as we think about the 2011 guidance and I have a follow up?

Shlomo Yanai

First, as I said, I think that Copaxone now is safe more than ever based on what we understood for the last month when we dealt with the regulatory and the legal element of Copaxone. I think those of you that are, as I said, closely following the Copaxone would join me in this understanding or in this conviction.

I believe that Copaxone is here to stay for many years to go and we provided in one of our previous calls when we discussed the strategy that by 2016 we believe Copaxone is going to be at a $2 billion range, maybe we were too cautious and too conservative based on what we now – on what we know now, but I think that Copaxone is going to provide in the next years growth and definitely profitable gross.

Eyal Desheh

Maybe I’ll take the second half of the question regarding the strength of Copaxone sales in Q4 and how sustainable it is. First I’ll start with, read your numbers, does this number include our tender in Russia? The tender doesn’t happen every quarter and it has a tendency to impact the churn for one quarter to another, and there will probably be no tender next quarter.

So we don’t expect these numbers to continue to grow and grow for that level. Q4 was a little bit on the high side. Maybe it’s important to add that about half of the growth in Q4 was volume related and about half was value related worldwide.

Randall Stanicky – Goldman Sachs

Okay. That’s helpful. And then, I know, Gerard is there, but can you guys help us parse out what’s going on in Europe? Obviously there’s an FX impact. This is the first full quarter of ratiopharm sales in the European number, obviously some very strong Copaxone sales. So how do we think about the core European generic trend that we saw both in the fourth quarter and then what you’re expecting for 2011?

Eyal Desheh

Gerard, will you take that, please?

Gerard Van Odijk

Yeah. Thank you. Thank you, Randall. First of all, as you know and we’ve been speaking about this several times. 2010 has been quite turbulent in terms of pricing, competitiveness and then I believe within that environment we did quite much better than our main competitors which gives us basically a lot of confidence as we go into 2011 there because if you look more specifically at 2011, we are quite optimistic.

We expect the markets to have a net sales growth within the low single digits, but we believe we can do a double-digit growth next year in the European markets. You ask yourself why do we believe that? First of all, we have been very, very effectively working on closing the ratiopharm integration.

And if you look at our commercial facing into the marketplace in all the key markets, we’ve closed that work and we’re full speed ahead on that. And therefore, we have been able very quickly after closing to focus ourselves and all the ratiopharm people back on the business and nothing else. And we see some very, very encouraging signs that makes us so confident.

First of all, we became number one in volume in Germany as a group. Secondly, we just, hot from the needle yesterday, I saw in the latest IMS data and it shows us that the ratiopharm label in Germany is again number one in value, which is very, very good and encouraging news. If I go to another country, we can see that we had an excellent year in 2010 in Spain. We have been able to exit the year of the combined company on organic growth with growth in the mid-20s. So very strong signals that we are on the right track and we’re doing the right things to make 2011 a memorable year.

And also you should know that 2011 is a year in Europe in which we expect quite a few important products to be launched. Some of them late launches of last year because of delayed opportunities in some markets and some of the new molecules going [off pattern] and therefore, that is another source of growth for which we will build and will fuel our growth expectations for 2011.

So all in all, if you take this, the portfolio strength, you should take our geographic presence. If you take the signal, I talked about, we believe that we should be able to take more than our fair share of the opportunities that are there in Europe in 2011.

Randall Stanicky – Goldman Sachs

Okay. Great. Thanks, guys.

Operator

Your next question comes from Chris Schott with J.P. Morgan Chase & Company. Please state your question.

Chris Schott – J.P. Morgan Chase & Company

Great. Thanks, guys. First question was just on the factors that are leading to the second half results to be stronger than the first half results, given the generic Effexor, [Dynamax]. I don’t want to focus too much on one single product. And I know royalties are up on the product relative to the second half of 2010. It seems like that should still be a major contributor in the first half of the year and just interested in any comments you might have on that. And I just have one follow up after that.

Eyal Desheh

Yeah. I’ll take that. It’s Eyal and maybe Bill can help me out from the [eurogeneric] perspective. Of course, the major event in Q3 and then also if it has an impact in Q4, was the Venlafaxine launch or Effexor. The plan is to for 2011 is a different plan. Lots of launches, all of them, of course, smaller than this one. Many of them in the third quarter and the fourth quarter growth in Europe, both of the launches of new products in Europe that Gerard just referred to A lot of that is happening in the second half.

So we do see in front of us and our (inaudible) but this is not -- exception in our business, is never linear. We promised you the same thing in 2010 and we delivered. So we are going to deliver similar trends in 2011. Bill, maybe you want to add something on the generic parts in the U.S., which is a bigger piece?

Bill Marth

Yeah. Chris, thanks for the question. You know, in 2011, we’ve got about 40 potential launches with about $20 billion worth of innovator value. And we had pretty similar numbers for 2010 but when you really see what we launched, it was about 18 products, worth about $10 billion worth of value.

So we got a nice portfolio for 2011 but the fact of the matter is, there’s many smaller products and more competition. The big driver, as I think Eyal alluded to was olanzapine and that’s in the back half of the year. And when you start looking at the others, that will launch for our products like levofloxacin and others, they’re all pretty much back end loaded in 2011. So I hope that gives you some clarity.

Chris Schott – J.P. Morgan Chase & Company

Yeah. I appreciate that. Just my follow-up question was coming back to the European market and just your thoughts on the potential for further consolidation in Europe and how that impacts -- you know, Teva is the only attractiveness of the European market. May be, you not answer if you could maybe prioritize what your opportunities you see for further business development in Europe. And is that more on the branded side at this point or do you still see opportunities to expand your generic footprints specifically in Europe? Thanks.

Shlomo Yanai

Gerard?

Gerard Van Odijk

Yeah. Maybe I can take that. Well first of all, I think what you can see in the European markets is a brittle situation among some companies. I can’t, you should talk to them if you want to find out where they are. I do believe in the marketplace, in some countries, you still see a fragmented business. But given our size, I think we have a footprint from our perspective, which in basically all major markets gives us a very strong position to take advantage of that particular side.

So it’s not like we believe we should be sitting on the top from the tip of our toes to look at these dynamics. I think it’s others perhaps that should do that. We have all the size and infrastructural elements in place today to take advantage of what needs to be done in Europe and to take advantage of the opportunity.

But as I -- as you’ve seen in Théramex, we’ll not sitting on our hands. Théramex was a good opportunity for us to roll out our branded opportunity in women’s healthcare and we will take that as a platform to roll that out across Europe and maybe if some other things may cross our path, we will look at that. But only if it fits our strategy and it supports our objectives of growing the business as we have been planning to do in Europe.

Chris Schott – J.P. Morgan Chase & Company

Thanks very much.

Operator

Thank you. Ladies and gentlemen, if you’re asking a question, please limit yourself to one question and one follow-up question. Thank you. Our next question comes from Rich Silver with Barclays Capital. Please state your question.

Rich Silver – Barclays Capital

My first question is for Eyal. On the 2012 plan, can you comment on that? And whether you’d be willing to reiterate the numbers that you provided a year ago, particularly given the EPS range was 5.30 to 5.86, whether will there be any tightening there?

Eyal Desheh

Although there is no reason to change the long-term guidance that we provided for 2010. This is a rarity. You have 2012, sorry, for 2012. You had 2012 even before you have the chance to look at 2011. But, yeah, where we stand now, we definitely stand behind these numbers. We actually -- our guidance and our plan for 2011 is closer to the 2012 numbers than what we had in our original strategic plan. Just to keep that in mind. So, yeah, these are not specific guidance for 2012. We are not providing them at this point, but the numbers that we give in the strategic plan, is an indication.

Rich Silver – Barclays Capital

Okay. And then one of the reasons, I’m asking, obviously you have the accretion from ratiopharm, which was not a factor in January 2010. So is it safe to assume that the low end of that range that you provided in 12 is perhaps overly conservative at this point?

Eyal Desheh

That was a little too sophisticated for me but when we provided the strategic plan last year, it was exactly a year ago. We already had in mind the ratiopharm acquisition. We knew that we got a large acquisition in Europe and it was in our plan. It was a little bit diluted in 2010 as we told you right after the acquisition. It will become accretive as of Q1, 2011.

Rich Silver – Barclays Capital

Okay.

Shlomo Yanai

Rich, let me -- Shlomo speaking. Let me take your question one step further, because I think that you’re aiming to be the long-term or the long perspective, which I believe it’s a very important question. In 2010, we made great strides towards achieving our strategic goals and definitely the 2015 target. And if you look on the line, 2010, which was the first year of our strategic fifth-year plan is above the line.

If you take the guidance, that I just provided for 2011, this is also above the line. So we have the full confidence, based on these two years, based on what we understand now, regarding our future and the measures that we took in order to build what I call the springboard for the next year that we are going to be on the line and cautiously optimistic, I would say even above the line. So your question about 2012, 2013, 2014 and 2015, simply answer you, yeah.

Rich Silver – Barclays Capital

Okay. And the follow-up question, historically you have not included laquinimod in your ‘15 plan, even though the product was in Phase III when you unveiled the ‘15 plan. Now that you’re saying you’re expecting it to be launched in 2012, is that now a contributor to the ‘15 plan?

Shlomo Yanai

Well, yeah but would you be so kind and give us breathing space and allow us not to change our strategic plan at this point in time? You’re correct, your memory is correct. We did not include laquinimod. It was an upside to the 2015 plan. It wasn’t included. We’re now much more confident about it but we will wait and see towards the second half of next year and make sure that we have the approval in hand before we make any changes to our long-term plan.

Bill Marth

Absolutely. We’d like to be on the safe side, by the way, for both MS products. In laquinimod, which Eyal just explained it, which is still an upside in our long-term plan, and the same goes for our focus for the Copaxone erosion, so to speak, during the year. In both cases, I think that we rightly so took a cautious approach, but you, based on the progress that has been done in both the products, can definitely make your own conclusion.

Rich Silver – Barclays Capital

And for ‘11, you provided the growth outlook for Europe. Can you do the same thing with some detail on assumptions for rest of world than more specifically international?

Shlomo Yanai

Well, I would, for the time being, wait in that part of the world, this is where we’re doing our different kinds of efforts in order to grow the business and it deserve little bit more time before I can give you more details on that.

Bill Marth

Yeah. But maybe I can add, I think the key areas or countries in our international, are Japan. First of all and for most of it, we believe that there was other benefits from accelerated growth and growth in Japan. 2010 was a year of establishment, 2011, we’re starting to push the accelerator over there. Russia, which is very, very well positioned and grows very, very nicely for us and Latin America that continues to deliver very, very decent growth in all the countries.

Rich Silver – Barclays Capital

Okay. Thanks.

Operator

Thank you. Our next question comes from Ronny Gal with Bernstein. Please state your question.

Ronny Gal – Bernstein

Good morning and thank you for taking my question. Two quick ones, first can you tell us a little bit about the Copaxone trend in 2011, more on the issue of price realization, I know that you’ve taken a 15% [price rise] in January, I guess the question is how much of it do you expect to be realized in the -- here just to help us kind of gauge that impact. And second, you notice the hit to the injectable business from the Irvine a problem. How do you see that trend changing over the year? Are we simply starting 2011 in the low point because injectable -- low point injectable business that will improve over the year. Is that something that you just expect to remediate on an ongoing basis or do you see something here that we should just take as they are based on injectables and move forward?

Shlomo Yanai

Bill, will you take the both?

Bill Marth

Sure, Shlomo. Good morning, Ronny. With respect to the Copaxone, as you said we took a 15% price increase in January and whether we’ll do something again the rest of the year is really unclear at this point in time. The issue is on our price increases, we only realized about 50% of that price increase. Another portion of that generally goes back to various types of co-pay assistance, patience assistance in one way or another.

So we only realize about 50% of that benefit. That’s number one. And you know, as we project, Copaxone will grow, we will have good growth in 2011 but we, you know, our share, our boxes shipped for the year should be flattish where we were up about 3% in the U.S. for 2010.

With respect to Irvine, we’re going to be bringing that plant back online starting in March but it is a slower process. We will bring up first, our line six, seven and then eight and then one and two. But it’s pretty much one product at a time and it’s going to take us a good part of the year, most of the year to get that plant up and running. So again, the portion that we missed in 2010, a big portion of that will also be missed in 2011.

Ronny Gal – Bernstein

Great. Thank you. So should I understand that most of the hits that we’ve seen in the generic business towards our expectation for this quarter came primarily from the injectable business?

Bill Marth

Well, the way to think about that is, we had a great quarter for our generic sales, when you think about the fact that we didn’t have oxaliplatin, we didn’t have pantoprazole, we didn’t have the amount of mixed amphetamine salts we wanted. There were a lot of products we didn’t have and we didn’t, of course, have Irvine. It was an excellent quarter. And so we’re tracking and we’re doing very well. But it’s not all attributable just to Irvine, there’s a lot of moving parts to the generic business.

Ronny Gal – Bernstein

Fine. Thank you very much.

Operator

Thank you. Our next question comes from Ken Cacciatore with Cowen and Company. Please state your question.

Ken Cacciatore – Cowen and Company

Great. I’m not looking to harp on the same topic, Ronny just was asking, but just want to clarify the exact numbers. I think Eyal said $230 million was due to manufacturing remediation and so what was that -- was that all Irvine or was it partially out of Jerusalem? And then Bill, maybe a little more clarification on the expectations for a snap-back in North America. Was there some -- you went through some of the issues as there are some product delays or what should be expecting as we answer Q1.

And then finally, if we could get any commentary about ALLEGRO versus BRAVO understanding that one was placebo and one is going to be comparison with Avonex. But can you talk about any potential inclusion criteria? Any differences in patient population anything that would give us any color to help us shape our expectations as we await for, not only ALLEGRO, but BRAVO later in the year? Thank you.

Eyal Desheh

I’ll take the Irvine numbers question. So here it is again, where we’re missing $230 million in sales for the year as a result of the Irvine shutdown. And we were missing $170 million in operating profits as a result of that, which included of course loss of profits on the business not executed and cost of remediation, because you have more costs in fixing the thing. And as Bill mentioned, we will not resume full production and full benefit in 2011. It will be gradually and we hope to complete all that by the end of the year. That, that clarifies?

Ken Cacciatore – Cowen and Company

It does, yeah.

Eyal Desheh

Yeah.

Shlomo Yanai

Okay. Hey, Ken. Good morning. Could you just clarify a little bit for me on your question? Are you looking for more data around 2010 or 2011?

Ken Cacciatore – Cowen and Company

I’m looking to understand it -- understanding that you classified it as still a relatively good quarter and understanding that there’s a lot of moving parts and any three months shouldn’t be the perfect snapshot. But it seemed down versus at least my expectations. I’m trying to understand how quickly the recovery in North America occurs?

Eyal Desheh

Again, it was -- again from our perspective, it was a great quarter and a great year. When you do about $5.8 million in generics, I think it’s an excellent year. The quarter as I’m describing it, Ken, really is just the things that go on in the generic business. Unfortunately again, we didn’t get all the mixed amphetamine salts we wanted.

And you could see that in the IMS shares. The gemcitabine didn’t launch and of course now gemcitabine moves into 2011, but now it’s shared with a partner. And (inaudible) of course, didn’t launch and we hope to be able to launch that sometime in 2011, but we’re not really going to comment too much on that at this point in time.

When you think about the oxaliplatin missing and the pantoprazole missing, all those are just the normal moving parts of the generic business of all the ins and outs. And in 2011, we’ll be looking at that potential 40 launches that we have and expecting to realize maybe 50% of that.

Ken Cacciatore – Cowen and Company

Okay. Thank you.

Operator

Thank you. Our next question comes from Tim Chiang with CRT Capital. Please state your question.

Tim Chiang – CRT Capital

Hi. Thanks. Shlomo, can you talk a little bit about the pricing dynamics that you expect in 2011 for the U.S. generic business, as well as outside the U.S.? I mean, is it a relatively stable pricing environment that you’ve seen in 2011?

Shlomo Yanai

Well, I think that first of all, pricing or price erosion is an imminent part of the generics business all over the world and you sometimes find, you may see here and there some price erosion that does not fit to the general mode -- to the general, let’s call it habit space or model, depends how you measure it. But to be more specific, I would say that I believe that we should not expect a major price erosion in the European region in 2011, after a very, let’s call it, highly prized erosion pressure during 2010.

I think cautiously that in the United States, what we expect is still of course, price erosion, but the pace of the price erosion is slightly going down. So you may see there’s a positive in that respect and we may add to that. So it’s roughly speaking, right now, at the five-ish level price erosion and that’s basically the picture that we see for 2011 in the two major markets that we are managing in Teva.

Bill Marth

Yeah. Tim, this is Bill Marth. I just found -- Shlomo’s right, the mid-single-digits, it’s much better than we’ve had in the last couple of years and there have been price increases, which we’ve talked a bit about. And so it’s been a pretty good trend and we’re pretty happy with it.

Tim Chiang – CRT Capital

Okay. Thanks. Just one follow-up, just going back to this warning letter at the Jerusalem facility, I mean, are there specific sizable products that you are hoping to get approval on in the first half of this year that might be impacted by the warning letter at this point?

Shlomo Yanai

I would say regarding Jerusalem plant that we are doing everything and when I’m saying everything, is everything in order to make sure that we will be back on the highest quality level. The Jerusalem plant is there and we are working hand in hand with the FDA. So I don’t want to speculate on other possibilities because this is where we are heading and this is our first priority and I believe that, that would bring Jerusalem or will continue -- that Jerusalem will continue to perform as they did before.

Tim Chiang – CRT Capital

Okay. Great. Thanks, Shlomo.

Operator

Thank you. Your next question comes from Marc Goodman with UBS. Please state your question.

Marc Goodman – UBS

Yeah. I just wanted to make sure I heard something correctly, which was that there is a $170 million operating profit hit from Irvine being down and that this -- a big portion of this would also come back in 2011. Is that true?

Shlomo Yanai

Your first comment is true, $170 million in operating profit, which were in our plan and did not happen before because of the Irvine situation and it will come back during the year, not as if we have fixed the plan from day one but it will happen during the year. And hopefully by the end of the year, meaning the year of 2012, we’ll be back at where we were or hopefully even better with more product.

Eyal Desheh

And on top of this you should take into consideration or into account that out of the product that we are producing or used to produce in Irvine is now produced in other Teva’s injectable facilities around the world. So the picture is more complicated in that respect and I would not take it as a one-to-one conclusion.

Marc Goodman – UBS

Okay. And then as far as relative to what you were thinking for the revenues for the full year, was the weakness mostly in the U.S. in the fourth quarter?

Shlomo Yanai

From Irvine?

Marc Goodman – UBS

Well, no, I mean in general. I mean, we had guidance for revenues for the full year. They came in a few hundred million light. I was just wondering, is this a U.S. -- relative to your expectations from three months ago, whatever it was, was it U.S. or was it any other parts of the world that came in a little lighter than expected?

Shlomo Yanai

I think we mentioned that before. It was Irvine, which is mostly U.S. that didn’t happen in Q4 and a couple of important generic approval that you all know about that moved to 2011 that were scheduled to get in Q4 and didn’t happen. Rest of the world, things have done well and according to -- and of course, of course one missing piece was foreign exchange, which had $140 million impact on our sales.

Marc Goodman – UBS

Just trying to remember, correct me if I’m wrong, but didn’t we know that Irvine was a problem three months ago already?

Shlomo Yanai

I think we knew that and we communicated that Irvine had a problem nine months ago.

Marc Goodman – UBS

Right. So I’m just curious why that wouldn’t -- when you were setting your guidance for revenues three months ago, why that would have been a surprise?

Shlomo Yanai

Because moving back to production is something that we hope to achieve every month and it took longer than what we expected.

Marc Goodman – UBS

I see. Got it. Okay. And then as far as the U.S., if products were supposed to be approved in the fourth quarter and have gotten pushed out to 2011, you’re basically saying, well, it’s really back half of the year loaded so this is more of an issue of those products we expected in the fourth quarter of ‘10 are really now probably going to be more second half of the ‘11 as far as the meaningfulness of products? So you’re basically giving yourself an extra six months as far as when you expect those approvals to come?

Shlomo Yanai

Yeah. Product in generic, our ability to focus exactly and Bill said before, we have 40 launches planned for 2011 on schedule. We assume we’ll make half of that and we can’t always predict but that’s why we have a big number to give a risk adjustment. But sometimes, there are moving parts and products move from one quarter to another.

Marc Goodman – UBS

One last question and that is on Latin America. Can you just give us a flavor of how Latin America is doing and how you’re thinking about building out Latin America through acquisition as well in addition to obviously the one you just did? Thanks.

Shlomo Yanai

Bill, do you want to take this part of Latin America?

Bill Marth

Yeah, yeah. Yeah, Marc, appreciate the question. Latin America is doing really well. We’re pretty excited with the business. As you saw it was a small acquisition in Peru, in [Formasa]. But the idea there is it makes us the number two player in that market and we’re the number one player in Chile. We’re a leading player in Argentina. The whole idea here is really going back to putting together these companies with small acquisitions here and there to build up our base.

We’ve got an excellent base there. We’re still just south of $1 billion in the Latin American region but it’s a great business. It’s really growing. It’s a business we really like a lot, a mixture of branded generic and generic. It’s a great business. But rather than paying some of these ridiculous multiples that we see in some of these markets, we think it’s much better for us to look at smaller players and be able to integrate them much when you think about it the way we built the U.S. business many years ago.

Marc Goodman – UBS

Thanks.

Operator

Our next question comes from Elliot Wilbur with Needham & Company. Please state your question.

Elliot Wilbur – Needham & Company

Thank you. Just a couple of follow-ups to some of the earlier commentary. First for Gerard, with respect to your commentary that you expect to essentially double the low single-digit growth rate in Teva’s European franchise in 2011 and more. Can you just confirm that is on a organic basis and sort of not counting for the happier effect of (inaudible) that is my assumption. And then maybe just talk to us a little bit about now with that business fully integrated, obviously you guys did a great job in outlying some of the cost synergy associated with that but maybe talk to us given still relatively early stage, what you’re seeing or what you’re thinking about in terms of revenue synergy.

And then a follow up for Shlomo, with respect to your commentary on Copaxone and being too conservative about $2 billion by ‘15, obviously we’re going to be at much higher levels. But I think the commentary originally last year was that it would peak at roughly $3 billion -- probably go with $3 billion in 2012 and decline to around $2 billion in 2015. And granted levels may be higher but should we still be thinking about a similar rate of descent or is it your expectation now that the rate of descent, if any, will be much lower?

Shlomo Yanai

Gerard, would you take the first one and then I’ll go back to the Copaxone. Gerard?

Gerard Van Odijk

Yeah. Can you hear me? Hello?

Shlomo Yanai

We hear you.

Gerard Van Odijk

Okay.

Shlomo Yanai

Very clearly

Gerard Van Odijk

Very good. Thank you, Elliot. Thank you, Shlomo. First of all, if you look at the synergistic elements of the integration as I just said, we have been able to put together the two commercial organizations quite swiftly and fast. And I mentioned to you a couple of examples of early successes that are giving us a lot of encouragement that we’re on the right track.

So for that reason, we believe that we should be able to have a much more effective representation in the marketplace with all the launches coming up and all the existing portfolios that we have available. I’ll give you an example. We are now the company with the largest portfolio in France, which is a very important feature there. We have a very strong presence in every single province in Italy, which is very important because local healthcare managers are taking a lot of local decisions. So there are a few of these examples and that is certainly going to give us leverage.

If you would ask me exactly to say how much of that is going to be translated into synergistic extra top-line sales? And how much of that is related to the heritage company? That’s a very difficult technical question to answer. Also through the year, you see that we have been going through some other changing dynamics, tenders and product launches, et cetera. So making a real like-for-like comparison is not an easy task with so many moving variables.

All in all, as I said before, we believe we can really out pace the market growth and there is no doubt in my mind that it will be fueled by the thing I just mentioned and by the strong built for size and the presence in all the markets but also the fact that we have this ability to be taking more advantage of the large launches that we see coming ahead in the European market.

Shlomo Yanai

For the next -- for the second part of your question, I would like to say first that we have to be very cautious when we’re dealing with focusing for the very long-term. And because if you will know better than me, there are more than one open questions regarding therapeutic subject that are still to be answer and only time will tell.

So I would say the following, first of all, our focus is still intact. My comment on that was based on what we know, which is -- and let me restate again, the Copaxone is safer than ever before from our perspective now. We may see even an upside and I’ll call it an upside to our focus in our strategic plan regarding the 2014, 2015 numbers. But for the time being, because we still have a lot of open questions to answer in the coming years, I would keep my or our focus intact and you may of course, get to your own conclusion of that. I prefer to put it on the upside part of the planning and not to change right now the Copaxone focus for the coming year, even though that I’m more confident as I said that Copaxone is safe.

Elliot Wilbur – Needham & Company

Thank you.

Operator

Our next question comes from David Risinger with Morgan Stanley. Please state your question.

David Risinger – Morgan Stanley

Yeah. Thanks very much. I was hoping that you could provide some color on Lovenox. If you could just walk us through the issues and the timeline, that would be very helpful.

Shlomo Yanai

Hi, David. How are you?

David Risinger – Morgan Stanley

Good. Thanks.

Shlomo Yanai

Good, good. Thanks for the question. Well, as we updated last month, we received a minor deficiency letter with a short list of questions and we intend to answer it in the near-future and I really can’t say any more than that. I mean, we don’t really plan on updating Lovenox until we launch now.

David Risinger – Morgan Stanley

And just as my follow up, in terms of launch, can you characterize when in 2011 you’re expecting to launch?

Shlomo Yanai

As soon as I get approval.

David Risinger – Morgan Stanley

Thank you.

Operator

Our next question comes from David Maris with Credit Agricole. Please state your question

David Maris – Credit Agricole

Good morning. Bill, what are the key legislative initiatives for Teva in 2011? What are you supporting? Will there be any concrete progress on any of the hot topic items in 2011? And what legislative items worry you?

Bill Marth

Thanks. Thanks for the question, David. Right now in 2011, I think the biggest issue for us, as a generic player in U.S. is to get user fees taken care of. And I think, to get the right generic resources is so important for us and we think the right -- we need the right formula to do that. So for us, that is absolutely a huge initiative.

Obviously, we are very concerned always about patent settlements because we think the FTC has gotten it wrong and doesn’t quite convey our feelings with respect to patent settlements so that’s -- again, continues to be an issue. Those are probably the biggest topics for us right now and of course, there’s always concern with what will happen with the health care legislation that we have currently out there.

I mean, Obama Care, as it’s called, we support the fact that it’ll bring in additional patients and we support the fact that it fills the donut hole and we just want to make sure that nothing gets tinkered with respect to the Health Care, their work to derail those positive parts that are going to be implemented.

David Maris – Credit Agricole

Thank you very much.

Operator

Thank you. Our final question comes from Shibani Malhotra with RBC Capital Markets. Please state your question.

Shibani Malhotra – RBC Capital Markets

Hi, guys. Thanks for taking the question. I’ve got just two and one is a clarification on an earlier question on ratiopharm and synergies. So you have mentioned that it’s hard to give the revenue synergies, but I just wanted to see if you had an update on the timing and extent of the cost synergies. I believe you guided to $400 million by 2013, three years from the date of the acquisition. Is that still what you’re looking at? And anything you can give us in terms of how we should be timing those?

And then second, just a quick one on Adderall XR and share and how you expect that to play out this year? Clearly, Impax is pursuing Shire for more share and just wondering how you see that and whether you think that might come from you or whether Shire is going to have to do something on that front?

Shlomo Yanai

Thank you, Shibani. I’ll take the ratiopharm cost synergy and then Bill can talk about Adderall. First of course, we said that the ratiopharm integration is by and large completed and when we say that we mean that our face to the customer, the commercial organization, the management ranks are all in place and the two companies are operating as one in all the major countries, including Canada, by the way, in Russia. It’s not just Europe. It’s also outside of Europe.

In terms of the cost synergies, of course that takes time. We believe that we are accelerating and the time element is important in cost synergies. The numbers that we’ve guided, which are 300 million euros, that’s approximately $400 million in three years or by 2013, are definitely valid. We might be able to achieve it sooner but we have to understand that the hardcore of cost saving is in production and in back integration and that is the part that is taking the longest.

Of course, the work is already started and we believe that it’s going on extremely well with a lot of collaboration on both sides and on both teams. And I think we’re very happy with what we’re seeing from ratiopharm, with that respect and with many others. Bill, do you want to take the other question?

Bill Marth

Sure. Thanks for the questions, Shibani. Shibani, I think, this is where I think a lot of people may get the fourth quarter wrong. When you look at mix amphetamine salts or the Adderall for the fourth quarter, the number was about $28 million, down from about $100 million. And you can see it in the share. Our share was at peak 60, 65 and now our share is sub 50. And it goes up and down based on the supply. So the share moves between Shire, ourselves and impact. And that’s what happens based on supply and it has always aggravated at the end of the year when you have the quota issues.

Shibani Malhotra – RBC Capital Markets

Okay.

Operator

Thank you. I will now turn the conference back over to Shlomo Yanai to conclude. Thank you.

Shlomo Yanai

Thank you. And thank you all very much for joining us today. As you have heard, we had a great year in 2010. And we are very confident about 2011 and the years ahead. I’m looking forward to seeing you tomorrow afternoon in New York for more discussion. Thank you and have a good day.

Operator

Thank you. This concludes today’s conference. All parties may disconnect now.

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