Teva Pharmaceutical Industries (TASE:TEVA) Q3 2022 Earnings Call

0:00 Good day and thank you for standing by. Welcome to the Tevis Third Quarter 2022 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand over to our first speaker today, Ren Meyer, Senior Vice President, Head of Investor Relations. Thank you, Nadia. Thank you, everyone, for joining us today to discuss Teva's third quarter 2022 financial results.

0:45 We hope you have added an opportunity to review our earnings press release, which was issued earlier this morning. A copy of this press release, as well as a copy of the slides being presented on this call, can be found on our website at tevafarm.com. Please review our forward-looking statements on slide number two. Additional information regarding these statements and our non-GAAP financial measures is available on our earning release and in our SEC forms 10-K and 10-Q. To begin today's call, Coach Schultz, Teva CEO, will provide an overview of the first quarter performance, recent events, and priorities going forward. Our CFO, Eli Kalif, will follow up by reviewing the financial results in more detail, including our 2022 financial outlook.

1:33 Joining Cor and Eli on the call today is Sven Ditleps, Teva's head of North America business, who will be available during the question and answer session that will follow the presentation. Please know that today's call will run approximately one hour. And with that, I will now turn the call over to Cor. Cor, if you would, please. Thank you, Ryan. and welcome to all of you. Let's take a look at the highlights for the third quarter. We came in with revenue of $3.6 billion and our adjusted EBITDA came in at $1.1 billion. The GAAP diluted earnings per share were 5 cents and the non-GAAP diluted earnings per share were 59 cents. We did see significant headwinds on the revenues in Q3 On itself, we had a net impact of $215 million.

2:23 And yesterday, we've seen an impact of $510 million. That's, of course, compared to 2021. And just to give you an idea about how you can think about it, we have an estimated guidance on the revenue of, let's make it simple, $15 billion. Half of that is U.S. dollar sales in the U.S., more or less, and half of it is non-U.S. dollar sales. and the dollar has been strengthening against nearly every currency. So if you imagine we have half the revenues, seven and a half billion, and there's a strengthening, let's say 1%, then that means that our revenues go down by 75 million US dollars. So each percent increase of the US dollar is a 75 million reduction on our revenue.

3:13 And of course, then when you get to operating profit, it's less of an effect, there's some offsetting elements, So it's roughly 20 million reduction in U.S. dollar operating profit for each percent that the dollar strengthens, just so you get an idea about it. The free cash flow came in nicely at 685 million, and we continue to reduce our debt in accordance with our strategic aim, and we are now down to 19 billion, first time in many years that we are below 20, which is really nice to see. Now, the revenues are still affected by the strengthening of the dollar, and the dollar remains strong here in the beginning of the fourth quarter. So we've adjusted our guidance on revenues, but we have been able through a lot of measures to keep our guidance on the adjusted EBITDA, adjusted EPS, and free cash flow. So we're reaffirming that guidance, and Eli will talk more about that later.

4:07 Both Osteto and Adjovi are doing very fine. We'll take a look at that in a couple of minutes. and in Europe we've seen a good development of the business. So net of the exchange effect I just talked about, we've seen 5% growth in our generic and OTC revenue in Europe and that's of course reflecting our strong position there and also some good new product launches. We have also seen substantial progress on the nationwide opioid settlement and in just a few minutes I'll give you some more details on that. And then on the US generic drug antitrust litigation, We have made some more settlements. You know, these are of a lower size, so roughly around a billion per 1% of a million, sorry, 1 million US dollars per 1% of the US population. And lately we have settled in Georgia and Arkansas, and we expect to see more of that in the coming months.

5:06 So let's move on to the opioid litigation updates. So as you remember, we have reached an agreement in principle some months ago, and we've accrued for that in our half-year earnings. So that's really unchanged. We still have that accrual, and we've been having a lot of progress on that. So in the coming period, we expect to initiate the actual process of having the opt-ins and opt-outs and so on, on both the state level and on the subdivision level. We have also completed the details of our agreement with Allergan, and that was already part of the overall accrual that we did at the half year. But that's now sort of been done in details, crossing the T's and dotting the I's.

5:55 We have also, as you might have seen, concluded a settlement with New York, which ends the litigation in New York. And it's done in the way that New York basically signs onto the national agreement, which has a certain value. And then they also get what you call a trial bump because they have a verdict against us. They get some extra money. And what's important for us is, of course, that the national agreement is what we already had accrued for. We had also accrued for the premium for New York, most of it. And we now have an arrangement where the extra money, they get it over 18 years, which is good for us because it means that it's very manageable in relation to our cash flow and our debt situation. So we are quite satisfied with that outcome.

6:41 And then as I said, we are looking into that in the coming period at some point in time we'll have to go through the normal process of the states opting in and then the subdivisions opting in to the nationwide agreement. And we're quite optimistic that we'll get a very, very high number of states and subdivisions joining. And in that way we will put the majority of opioid litigation behind us to the benefit, hopefully, of the US people and also good for us as a company so that we can focus on the future. Now, talking about the future, let's look at the current situation on revenue and how it's been developing. And I'd like to just point to the latest chart here, the latest bar here. You can see that it's roughly 3.6 billion, as we just talked about.

7:32 and if you add the 215 that we lost on exchange rates, you see it sort of gets to the 3.8 range, which is very similar to where it's been sort of a bit up and down over the last many quarters. So the main change here is really that we have seen this appreciation of the US dollar, other than that we have very stable business in all the different areas of our business. But let me just comment on our two key products. So you will see here that Osteto grew 30% versus last year to 260 million and we see a very strong development continue on Osteto with nice increase in both revenues and in prescriptions and also in patients and number of doctors writing the product.

8:21 So all in all it's looking very positive and we are on track to reach around 1 billion US dollars in sales in 2022. So that's very positive. and, of course, very nice to see more and more people being treated also for tardive dyskinesia with this nice drug. If we move to Adobe, then we also here have a very nice positive development. You can see the scripts in the U.S. The TRX keep on growing. You can see here how the market share in Europe is nearly 33%. In U.S., it's around 25%. And as you know, we recently launched with a partner in Japan, and they're already up to 28%. So as I've said before, we have a target here that we want to get at least to a third of the market, 33%.

9:07 And I think it's fair to tell you that I've already told Europe that that's getting too easy now. So they have a new target of 50%, which is exciting, of course, for them and me. Now, if we go on to cost management, then, of course, there's a lot of discussions about inflationary pressure and so on these days. and of course we also have some inflationary pressures on things like energy and other elements of our manufacturing cost base. We are trying to compensate by being more efficient and as you know we've had a strong efficiency drive for the last five years. We're continuing that and that is to some extent you could say The net debt continues to decline Just a little fun fact here. Over the last five years, we have paid $20 billion of cash to the bondholders. The $15 billion, that's the reduction in the debt. And the $5 billion is, of course, roughly a billion in interest rate every year. So $20 billion out of the accounts from us to them.

10:30 And we will continue to do that until we get the debt down and we get the interest rate payments down in parallel, of course. So on the pipeline, if we take a look at that, then I think I'll only comment on one key event, and that is that we've just refiled Risperidone LAI for schizophrenia, and we are very optimistic about it. We did a complete quality check of all our clinical data. It looked good, and we refiled it with FDA and hope to be able to launch this product sometime during the first half of next year. If we look at another element of our business, our ESG ratings, then, of course, you all know that a lot of elements go into this environmental, social, and governance ratings.

11:15 And all the ratings are a little different. And we've been able to improve all of these, which we're very happy about. It goes well hand in hand with the sustainability-linked bonds where we did the $5 billion refinancing a year ago. So we're happy to see this continued improvement. Some of the scales are where you want to have a high number, others you want to have a low number. But I can tell you that all of these five important ESG ratings have been improved during the last 12 months. To reiterate our long-term financial targets that we communicated a quarter ago, we have four targets. One is the operating income margin. We want to keep on driving it up and get to 30% in 2027.

12:02 We need, of course, to keep on driving debt down. You just saw that. It's also on a steady track there. We need to get to around two times net debt to EBITDA in 2027, and we'll do that. The cash earnings, of course, have to stay around 80% in order to be able to get the debt down. And then we are committed to revenue growth, and that basically means that we will do it in a combination of organic revenue growth and selected project or product in licensing to secure revenue. that we see revenues growing forward. We are committed to utilizing the cash flow to pay down debt, and we do not plan to raise equity. So with that, I'll hand over to Eli Kalif. Thank you, Kaur, and good morning and good afternoon to everyone.

12:47 I will begin my review of the third quarter of 2022 financial results on slide 15, starting with our gap performance. Revenues in the third quarter of 2022 were $3.6 billion, representing a decrease of 8% or 2% in local currency terms compared to the third quarter of 2021. The decrease in revenues was mainly driven by foreign exchange headwinds in both of our European and international market businesses. In North America, a strong uplift of Oceto partially compensated a decrease in revenues in our generics business, Copaxone, and Vendeka and Trianda. In Q3 2022, we recorded a gap operating income of $419 million compared to $623 million in Q3 2021, gap net income of $56 million compared to $292 million in Q3 2021, and a gap earning per share of $0.05 compared to $0.26 in the same period a year ago.

13:54 The year-over-year decline of a gap operating income net income and Earning Per Share was mainly driven by higher legal settlements and loss contingencies as well as lower gross profit and was partially offset by lower operating expenses. In recent months, the global economy has been impacted by fluctuating foreign exchange rates. Approximately 47% of our revenues are denominated in currencies other than U.S. dollars. The strengthening of the U.S. dollars versus other currencies in which we operated negatively impacted our revenues, results of operation, profit, and cash flows. As Core discussed earlier, the continued strengthening of the U.S. dollars versus other currencies during the third quarter of 2022 net hedging effects negatively impacted revenues and gap operating income by $215 million and $53 million, respectively.

14:54 Thank you very much. turning to slide 16. You can see that net non-gap adjustment in the third quarter of 2022 were 602 million versus 360 million in Q3 2021.

15:39 We recorded a legal settlement and a loss contingencies of 195 million. This was mainly related to an update of the estimated settlement provision recorded in connection with the remaining opioid cases as well as an estimated provision recorded for the claims brought by attorneys generals representing states and territories throughout the U.S. in the generic drug antitrust litigation. Additional notable NANGAP adjustments include amortization of purchased intangible assets totaling $165 million, the majority of which is included in the cost of goods sold. Moving to slide 17. For review of our NANGAP performance, I have already discussed our third quarter revenues, which totaled approximately 3.6 billion. Now let's move down the P&L and look at the margins.

16:32 Our Nangap gross profit margin was 53% compared to 53.6% in Q3 2021. The decrease in Nangap gross profit margin was mainly driven by macroeconomic headwinds affecting our operation costs, as well as low revenue from Copaxone, partially offset by higher revenue from Mostedo, and a fervent mix of generic products in our Europe segments. Our NAND gap operating margin improved to 27.2% versus 26.8% in Q3 2021. This increase was driven mainly by lower spend base, which I will discuss in the next slide. We ended the quarter with a NAND gap earning per share of 59 cents flat compared to Q3 2021.

17:22 Now, let's take a look at our spend base on slide 18. As you can see, our quarterly spend base declined by 227 million or by 70 million net of ethics impact. Looking at our total spend base on a year-to-date basis, it declined by 594 million or 212 million net of ethics. We continue with our ongoing efforts to transform our global operational network and ongoing activities management of operating expenses. We continue to face a threatening of the US dollar versus other currencies, as well as spending increases due to inflationary pressures as we keep focusing our efforts on reducing and optimizing our cost of goods sold. We expect the overall annual spend base to decrease to 11 billion in 2022.

18:15 As I have mentioned in previous quarters, these ongoing efforts are expected are expected to continue to help us partially mitigate the global macroeconomics headwinds, including inflation and higher cost of labor, and eventually lead to a stabilizing operating margin at the level of 28% in 2023, with an ultimate goal of 30% operating margin by end of 2027. Turning to free cash flow on slide 19. Our free cash flow in the third quarter of 2022 Thank you for joining us. primarily a low reduction in our inventories level compared to the third quarter of 2021.

19:26 Today, we are reaffirming our 2022 free cash flow guidance, which we initially provided in February. Our 2022 free cash flow is expected to be in the range of $1.9 billion to $2.2 billion. We expect the free cash flow generation will pick up during the fourth quarter as we continue to drive working capital improvements. who remain on track to achieve our objective of 80% or greater free cash flow conversion by the end of 2023 as part of our ongoing long-term financial targets. Turning to slide 20, our net debt at the end of Q3 2022 was 19 billion compared to 20.9 billion at the end of 2021.

20:13 The decrease in our gross debt is related to the bond maturities paid in Q3 2022, as well as the positive effect of exchange rate fluctuations. Our net debt to EBITDA ratio decreased coming at four times for Q3 2022. We expect it to further decline as we continue to make progress towards our long-term targets. Debt reduction continues to be our primary focus and main use of cash. upcoming maturities including approximately $0.7 billion in the remainder of 2022. So now turning to our non-GAAP financial outlook for 2022 on slide 21.

20:59 I described earlier how the strengthening of the US dollar versus other currencies in which we operated negatively impact our revenue, earnings, and cash flow. Additionally, high levels of inflation have recently resulted in significant economic volatility and monetary tightening by central banks. We have implemented certain measures in response to such macroeconomic pressures and are continually considering various initiatives to allow us to mitigate and offset the impact of these macroeconomic factors. The higher costs we have experienced during the recent period have already impacted our operations and will likely continue to have an effect on our financial results. At current rate, we still expected fluctuation related to the strengthening of the U.S.

21:46 dollars versus other currencies to have an unfavorable impact on revenues. And therefore, consistent with what we had communicated in July, at this time it's prudent to adjust our guidance range for full revenue from the previous range of $15 billion to $15.6 billion to the new range of $14.8 billion to $15.4 billion. This lowers the midpoint of our range by $200 million. We are reaffirming our full-year 2022 guidance range for operating income, EBITDA, earnings per share, and free cash flow. Although we were able to absorb some of the inflationary pressure this year and partly mitigate certain spend categories, we may still face volatile environment, and as such, we are keeping the broader outlook range for these items.

22:38 This Conclude my review of several results for the third quarter of 2022. And now, we will open the line for Q&A. Operator, if you would please. Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To ensure everyone has the opportunity to ask a question today, Please limit yourself to just two questions. We will now take the first question. It comes from the line of Elliott Wilbur from Raymond James.

23:23 Please go ahead. Your line is open. Thanks. Good morning. Just first question on free cash flow and maybe just thinking a little bit about longer term dynamics there. Just trying to incorporate the pending opioid litigation settlements and sort of think about, you know, what could potentially be a new floor on that number. We've kind of, I guess, sort of put a, I've been thinking about a floor in terms of free cash flow around 2 billion and obviously expecting somewhere north of 350 million to be paid out annually in connection with the settlements. But, you know, in thinking about sort of, you know, what could be the new floor over the next couple of years, I mean, is it reasonable to Subtract that from sort of the lower end of the baseline number that we've been talking about for the last couple of years, 1.9 to 2.2, or do you still think that it's reasonable to assume that that $2 billion floor is defensible going forward, even with the litigation settlements? And then if I could just ask you to provide some more granularity or color into performance trends within the North American segment.

24:35 specifically thinking about biosimilar trends and then obviously what's happening with respect to U.S. generics because certainly the number was quite a bit below expectations. We're just trying to get a little bit more insight into the dynamics there. Thanks. Thanks, Elliot. So I'll give you a quick answer on the pre-cash flow and then Sven will give you some more details on North America and the biosimilar generics. The free cash flow that we're expecting in the coming years is at that level that you're talking about, so at the level of $2 billion. And that is taking into account what you also mentioned quite correctly, some place close to $350 cash outlay per year. And we don't see any dramatic changes to that. The whole nationwide agreement is based, as you know, on a 13-year payment schedule with equal installments. and actually the New York settlement that we just did is partly the nationwide and partly an even longer payment schedule of the trial bump you can call, which is over 18 years.

25:44 So that's not putting additional pressure on our cash flow. But I can also just ask Elifo if you have a quick comment and then we'll move on to Sven. Thanks, Gore. Yes, Elio, thanks for the question. And I think that, you know, part of our Plans to reach the 80% cash conversion is also management of working capital. So you can say that that level that Cor mentioned, around $2 billion, it's a kind of a combination of our efforts to generate more cash on working capital improvements as well from the business. So I would say that we are safely there. Thanks. And then Sven, if you comment on North America sales. Yes. Hi, Elliot. So for North America sales, the sales came in below our run rate, our target run rate of $1 million.

26:35 I think we said in the last quarter that we had a strong first half with the launch of a generic rev limit resulting in sales above this run rate. In the second half of 2022, we do not have any significant additional launches. for that reason the generic sales run rate is below this one billion US dollars. This will only improve in 2023 when we anticipate more launches into the US generics business. Other than this, our biosimilar sales were quite stable in Q3. We have a stable volume market share in the US business that has stabilized over the last month. And on the generic price erosion level, I think also here we see some improved rates as compared to what we've seen a year ago.

27:21 It is an incremental stabilization across various product categories. We always analyze it by different product categories and we expect this to continue in 2023. So we have on the price erosion side, I think a stable outlook. And on the sales side, as I said, it will improve with more product launches coming into our generics business. Thank you Sven. Let's have the next question. Thank you. We will now take the next question. It comes from the line of Glenn Santangelo from Jefferies. Please go ahead. Your line is open. Thanks and good morning. Thanks for taking the question. I just want to talk and go back to some of your long-term targets.

28:09 I think what investors are really focused on here is trying to understand Thank you so much for joining us. And so I was wondering if you could maybe give us a little bit more detailed thoughts around that growth algorithm and what it will take to sort of inflect the revenues back into positive territory. And if you have any early thoughts on 2023, not that you want to give guidance or anything, but how we should think about that sort of revenue transition, taking into consideration the continued headwinds from Capaxone and the generics in North America. Thanks.

29:11 Yeah, thanks, Glenn. Good question. So let me give you a bit more details. And some of it is, of course, a repeat of what I explained already a quarter ago. So if you look at the generic piece of the revenues, then first of all, we have a stable business outside the U.S., which will have single digit positive growth. So that's Europe, that's international markets. As you know, the pricing there is quite stable. We are, you know, in the top three in all the European markets and also doing well in international markets. so that piece is sort of growing you could say low single digit and that's very stable then we have the US marketplace where we will in the coming years have a substantial number of biosimilar launches next year we can just mention as you said biosimilar Humira potentially biosimilar Stellara and of course you never know exactly how it plays out you never know exactly how big a share you get but we think we're the If not the best, then one of the best to manage the whole commercial part of a biosimilar launch. We think we've proved that with Truxima has done substantially more than a billion dollar in sales already.

30:24 So we think we know how to do it and we got the products coming in. We also have quite a number of complex generics. Some we've been waiting for a while to get the FDA approvals, others are just coming on now. And we are quite optimistic about getting some of those approvals So that, of course, on the generic side adds to a positive, also single-digit growth on generics. And then the last piece is on the innovative products where you're absolutely right that Copaxone will continue to decline. But as you've also just seen today, Osteto and Adjovi will continue to increase. And just a little fun fact, last year the Copaxone that's declining was was roughly equal to Osteto and Adjoe that's increasing combined. So I think Copaxone did a billion dollars.

31:17 The other two together did 1.1 billion, something like that. This year, as you've just seen in the guidance, Copaxone will be around 700. The two others combined will be about 1.4 billion. So that shows you that now we're getting to the point where it's like instead of Copaxone being the biggest one and then getting to be the same, now it's half. of what Osteto and Adjovi is doing, which basically means that in the coming years, that dynamic year by year will get better. This year, it's close to break even. You could say the loss on compaction is the same as the gain, but in the coming years, the gains on Osteto and Adjovi will be bigger than the losses on compaction. Again, that will contribute to growth in the innovative medicines. And then, of course, Respiradone LAI, assuming that we get that launched, which I'm very optimistic about in the first half of next year, that will also contribute to growth.

32:08 So all in all, all these different elements are pointing in the right direction towards what we mentioned, which is single-digit growth in 2027 on the revenue line. Thank you for the question. Thanks for the details. Thank you. As a reminder, if you wish to ask a question, please press star 1 and 1 on your telephone. We will now take the next question. It comes from the line of Umair Rafat from Evercore. Please go ahead. Your line is open. Good morning, guys. Thanks for taking my question. I wanted to focus on biosimilar Humira. Do you think you need an inspection to get the approval on the upcoming basufa, or do you think you can get an approval without a new FDA inspection?

32:59 And can you confirm for us that the interchangeable version is the one that has the basufa coming up, not the one that had the CRL? and secondly, this 749 schizophrenia molecule that's now in Phase 3. Can you tell us a little more about what the molecule is and what you've seen in Phase 1? Because it was not on ClinTrials. Thank you very much. Thank you very much, Umar. I will have Swin answer you on Humira and interchangeability and inspections and so on, and then I'll tell you about the antipsychotic that's going into Phase 3. The second question was on the interchangeability action date. Yes, the action date that is coming up in December is on the interchangeability DLA.

33:46 And the other question was whether there is a site reinspection necessary. So just as a reminder, the file and the FDA interactions are managed by Alvotek, not by us. And I believe Alvotek already published that they are in discussions with the FDA about the site reinspection. and how it will be conducted. Thank you, Sven. And on the 44749, that is a long acting version of olanzapine. And it's very promising. As you know, it's the same prolongation methodology that's being used for Risperidone LAI. And I'm sure you've seen the phase three data there, which are excellent both for once monthly and once every second month therapy and as we all know there's a big need for better long-acting therapies for schizophrenia simply due to the fact that that's a way to secure adherence and any relapse in schizophrenia has a potential damaging effect on the cognitive capabilities of the patients and with olanzapine there's been a warning for a you could say drowsiness syndrome you basically fall asleep and that's because if you take a long-acting olanzapine Thank you very much.

35:34 Thank you for the questions. Next questions, please. Thank you. We will now take the next question. One moment, please. And the next question comes from the line of Jason Cherbury from Bank of America Securities. Please go ahead. Your line is open. Oh, hey, guys. Thanks for taking my questions. Just a follow up on the biosimilar Humira situation. As we think specifically about 2023, if approval does get pushed into maybe the second quarter or middle of next year, is there a risk that from a contracting perspective, you're unable to participate in the market specifically in 2023?

36:21 Or do you see that as a dynamic process that'll kind of reopen for bidding every quarter? and then just a follow-up on the rising European energy cost dynamic, how that impacts your business. Could you give us a sense, I assume that most of that's going to be in your COGS line and what proportion of your business is more exposed to these inflationary pressures, just trying to get a sense of how to put in context your commentary about increasing efficiency to sort of mitigate those headwinds. Thanks. Thanks. Again, Swinton, I'll give you a Our look on biosimilar Humira and then I'll talk to you about the energy cost. Hi, Jason. So on the biosimilar Humira, we are in talks with our customers, the three large PBMs and all other customers for the commercial side of the business to contract for 2023.

37:14 All these preparations run according to plan. We are also preparing according to plan our marketing and sales and supply chain strategies. So that's all on track and we are working closely with Alvotek to make everything work to be launch ready by July 1st. So in the contracting itself, of course, you only contract once you launch in July. This is how the settlement agreements with Appli have been structured. And then I don't expect that we will see in biosimilars a quarterly renewal of bids or businesses like you see on the generic size. because the customer is different. It's PBMs and not the big co-selling groups that you contract with. And secondly, the supply chain and how the supplies work are too, I would say, complicated to allow fast switchovers between different biosimilars.

38:06 So once you are in the business, you should be, let's say, enjoying the business for a longer period as compared to generics bidding that we see in the U.S. generics markets. Thank you, Sven. On the energy cost, and that's, as you said, specifically in Europe, that's an issue. Then let me first of all make it very clear that all our factories have taken precautions and done modifications to energy systems and so on so that we can continue operating uninterrupted despite the changes in the European energy markets. Thank you for joining us. Thank you for joining us.

39:37 and as I said, from an operational point of view, we are completely safe and from a cost point of view, we're doing our best to reduce the total impact of these increases in energy prices. Thanks for the question. Next question, please. Thank you. We will now take the next question. It comes from the line of Kari Nackmann from BMO Capital. Please go ahead. Your line is open. Hi, good morning. This is Dennis Resnick on for Gary Nachman. Thank you for taking our questions. Just in regards to business development, can you talk about the characteristics of potential assets you're looking at and kind of where and how they fit into the overall pipeline? And then if you can just kind of quantify and classify the current BD landscape in general, are there many interesting assets out there at work in licensing?

40:28 Thank you. So thanks for that question. So in the BD area, What we are really looking for is we're looking for individual products or individual projects that will fit nicely with the portfolio we have. Both our R&D portfolio, which is focused on neuroscience and immunology, and our commercial portfolio, which is quite broad. So we are not looking to buy companies. We don't have the money for it. We don't have the appetite for it. But we are looking to find products that will fit nicely with our commercial footprint already. and we've done quite a number of deals. If you might have noticed, we have done deals in the biosimilar area. We just talked about the Alvetech deal. We've also done deals in Europe on biosimilar licenses recently.

41:16 We've done deals with a different research group on earlier projects such as MODAC where we're looking into neuroscience and other exciting deals. So that's really what you should think about that we're looking for project or product specific Deals that can strengthen our portfolio either in the marketplace to drive revenues shorter term or in our R&D portfolio. Thank you for the question. Next question, please. Thank you. We will now take the next question. And it comes from the line of Ash Verma from UBS. Please go ahead. Your line is open. Hi, good morning. Thanks for taking our questions.

42:02 So I had two. One is just this Alvotech partnered biosimilar products like Stellara and Idea. Are they coming from the same facility? And is that something that needs to be resolved as well? That's first. And then the second one on Estero. So I wanted to check on the DTC since it's a very promotion sensitive market. I know you launched a campaign in mid 2021. Has that been renewed or do you intend to continue DTC? Because this is an important drug in your portfolio and I think your competitor is making a lot of investment on the DTC front. Thank you for those two questions. Sven will handle both of them. Yes, so the Alvotec facility or the products that you mentioned, Stellara, Eliyahu and Yumira and the others that we contracted, The drug substance is manufactured in the same facility that is also now subject to this FDA discussion on Umira.

43:01 The drug product itself, the manufacturing is in several locations and with several subcontractors set up in Europe. We reviewed the setup. I think it's adequate to suppliers. And we are also confident that the FDA discussion will turn out positive in the end. So that's on track. On the question on Osteto, So we did not continue our TB campaign. We had a very effective TB campaign, but in Q3, we did not continue it. We analyzed that our targets of patient activation and an expansion of our prescriber base have been achieved, and our analysis suggests that we can generate the best return of our marketing investments now downstream, moving from patient activation to the area of Salesforce effectiveness, Salesforce deployment, the patient titration and adherence management and that does not exclude of course that we would return to TV but at the moment we believe you get the highest return on marketing spend in downstream activities.

44:05 Thank you for the question. Next question please. Thank you. We will now take the next question. It comes from the line of David Anselen from Piper Sandler. Please go ahead. Your line is open. Thanks. So I just wanted to drill down on product concentration in the North American generic business. What portion of the business comes from the EpiPen generic and also Truxima? And I guess where I'm going with this is, I'm trying to get a better read into the relative importance of those two products for the business.

44:50 How are you thinking about the competitive landscape for Truxema going forward? And then same question on EpiPen, bearing in mind that there are some companies developing some non-injectable alternative dosage forms of epinephrine. How are you thinking about that as well? Thank you. Thank you for that question. I'll pass it on to Sven. Thank you for the question. So Truxima and EpiPen are of course core anchors in our generics portfolio. I would say we have another, if you do an ABC analysis about the sales and the gross margin that we generate in generics out of the roundabout 300 products that we have in North America. And then of course we have the Canadian business as well. We have, I believe, a healthy and very classic concentration of anchor products like Truxima and EpiPen.

45:41 We have a couple of inhaler products, so asthma products that are anchor products as well, and patches and complex injectables. So that's quite good, I would say, and healthy portfolio distribution. And they are very stable and resilient. And that is also one of the reasons why Teva in its pipeline for North America is committed. through the development of complex generics, among them, many of them that we already discussed here, Forteo, Restasis, and so forth, because we believe that over time you can drive a very stable and resilient generics business with these type of complex products. And the second question was, just on the competition, is anything expected on Epi and Tosima?

46:28 On EpiPen, I don't think that we will get a generic Thank you very much. For that reason, we don't see a dramatic shift in market share distribution in this category. Yeah, and then on Truxima, we can just say, as Sven has already alluded to, we have a stable market share. We're very happy about the performance there, and we don't expect any major upheavals in that market. So thank you for the questions.

47:18 Next question, please. There are no further questions on the phone at this time. Please continue. Thank you very much. Thank you, everyone, for listening in. and Herman ISD. That does conclude our conference for today. Thank you for participating. You may all disconnect.