Teva Pharma Q1'16 Earnings Conference Call: Full Transcript

Operator:

Ladies and gentlemen thank you for standing by and welcome to the <b>Teva Pharmaceutical Industries Ltd (ADR)</b> TEVA Reports First Quarter 2016 Financial Results Conference Call. I would now like to turn the conference over to the Head of Investor Relations, Kevin Mannix. Please go ahead.

Kevin C. Mannix:Vice President, Head of Investor Relations:

Thank you, Operator. Good morning and good afternoon everyone. Thank you for joining us today to discuss Teva’s first quarter 2016 financial results. On the call with me today our Erez Vigodman, Chief Executive Officer; Eyal Desheh, Chief Financial Officer; Siggi Olafsson, President and CEO Global Generic Medicines, Dr. Rob Koremans, President and CEO Global Specialty Medicines, Dr. Michael Hayden, Head of R&D Chief Scientific Officer; Dr. Carlo de Notaristefani, President and CEO Global Operations; and David Stark, our Senior Vice President and Deputy General Counsel.

We will start the call with presentations from Erez, Siggi, and Eyal, before opening the call for questions and answers. A copy of the slides as well as this morning’s earnings press release can be found on our website, tevapharm.com under the Investor Relations section as well as on the Teva Investor Relations App.

During this call we will be making forward-looking statements which are predictions, projections or other statements about future events. These estimates reflect Management’s current expectations to Teva’s performance. Actual result may vary whether as a result of exchange rate differences, market conditions or other factors. In addition, the non-GAAP figures exclude the amortization of purchased intangible assets , costs related to certain regulatory actions, inventory step-up, legal settlements and reserves, impairments, and related tax effects. The non-GAAP data presented by Teva are the results used by Teva’s Management and Board of Directors to evaluate the operational performance of the company to compare against the company’s work plans and budgets, and ultimately to evaluate the performance of Management. Teva provides such non-GAAP data to investors as supplemental data and not in substitution or replacement for GAAP results because Management believes such data provides useful information to investors.

And with that I will now turn the call over to our CEO, Erez Vigodman. Erez?

Erez Vigodman:President and Chief Executive Officer:

Thank you, Kevin. Good morning, good afternoon, and thank you for joining us today. Our results for the first quarter of 2016 manifest a good start to the year on all the parameters despite a tough comparable quarter in Q1 2015 with a then launch of Generic NEXIUM and the exclusivity we had on Generic --.

EPS for Q1 2016 is $1.20 at the top end of our quarterly guidance. We have improved our profitability, gross margin by 144 basis points and operating margin by 101 basis points. Cash flow from operations in the quarter was a robust $1.38 billion. Our solid performance was driven by continual improvement of our core business with a strong focus on profitability, cost control and portfolio optimization.

Additionally our performance was driven by our operational network transformations which created value by driving efficiencies further and through the assimilation of new technologies including --. Finally we have enhanced performance of all our business units including -- our global generic business and respiratory in our global specialty business.

Copaxone 40 mg continue to gain market share leading the MS market with 24.5% TRx share at the end of March versus 20.3% at the end of March 2015, and 82% share of the overall Copaxone family TRx. We also launched the Bendeka at the end of January and have achieved a patient adoption rate of 71% as of May 5, 2016. Our global generic business generated 26.9% operating margin in the quarter without major new launches in the US and other key markets. We also sae significant progress in our global respiratory business, net revenue and operating profit and 21% higher operating profit of our global specialty business quarter-over-quarter .

During Q1, we continue to strengthen our specialty business to the launch of CINQAIR we also achieved successful results in three important Phase 3 trials including RespiClick FS and FP which utilize our cold breath actuated multi-dose dry powder in -- . Additionally we are on track with our TEV-48125 Phase 3 trial and both episodic and chronic migraine. We also achieved significant milestone on the deals we announced in 2015. We closed the acquisition of Rimsa.

On April 12 we closed the business venture with Takeda in Japan and we have made significant progress towards closing the Actavis generics deal and we are on track for a June 2016 close.

Siggi will provide an additional update on this shortly.

Everything we are doing in 2016 will enable us to fundamentally change the company and complete the creation of a new Teva. Before the end of 2016 which is a transitional year fpor us Teva will be an even stronger company with a solidified foundation, a significantly enhanced financial profile, more diversified revenue sources and streams, strong product development engines in both generics and specialty, and position to continue the transformation of our business model.

First the Actavis genetics acquisition Teva would save approximately 250 million people every day and have the world’s largest medicine cabinet with more than 1000 molecules. We’ll have one of the most competitive fully integrated operational platforms in the industry that cover the full spectrum of products from volume generics to complex generics and all the way to specialty medicine and biologics. Both the US and global generic markets present huge opportunities in the coming years. The platform we are creating is ideally positioned to enter an evolving generic pricing landscape by leveraging our global infrastructure and deployment, go to market platforms, leading product portfolio and industry leading pipeline and R&D capabilities.

By the same time, we are well positioned to realize the opportunities that global and US generics markets offer especially given the challenges and the changes we are witnessing in the value of competitive landscapes for the benefit of patients, healthcare systems. We will address that with more details later on.

And last but not least, the company’s strong combine free cash flow would allow for rapid deleveraging and as we have previously stated, give us the ability to create a position of attractive brands and assets as well as one that would expand our portfolio in key growth markets. The platform will be linked offer top and bottom line growth opportunities even if we were to face generic competition to Copaxone 40 mg also driven by the expected launches of our major specialty products in 2017, 2018 and beyond.

All of us at Teva are fully aligned around our key priorities for 2016 which are a combination of maintaining business continuity fully achieving our short term operational and financial goals and moving ahead on the longer term strategic moves that ultimately create the new Teva.

To sum it up, we are focused on — Copaxone and Bendeka on the continued transformation of our operational network and on cost control efficiency measures and 2016 operational and financial targets. We also continue to focus on our integration and synergies. We commend the integration of Rimsa and the new business venture in Japan. We are prepared for the Actavis generic integration and we are working out to close the deals.

2016 is another important year for our specialty pipeline with important pending approvals and key clinical milestones. We are waiting FDA approval for our abuse-deterrent --. Our abuse-deterrent technologies is the platform for us and we are focusing our efforts in this field on the development and growth of a responsible pain killer franchise to help address the challenges of opoid abuse and misuse.

TEV-46763 is the immediately release abuse-deterrent — which is generated from our novel abuse-deterrent technology Phase 3.

Top line results are expected in Q2 and our application submission is 2016. We are awaiting FDA approval for our SD-809 in Huntington’s Disease and expect results in 2016 from Phase 3 of our SD-809 in tardive dyskinesia and from Phase 2 of Pridopidine in Huntington. In addition, we are focused on strengthening our biologics capabilities and targeting potential partners with an advanced — 4 gm in order to bolster our biosimilar portfolio. We are active and identifying specific specialty branded deals that complement and enhance our -- and deals that expand our footprint in key growth market.

And finally we continue to gradually transform our business model in a way that inhibits us to benefit from the ongoing changes in the pharmaceutical industry and the global space. That’s the way we see our business outlook during the next few months in the context of the upcoming Actavis Generics deal close. We continue to expect and work towards the June closing with Actavis Generics and in August as part of our Q2 earnings, we will provide the combined outlook for 2016. Then in September we will provide you with our business and financial outlook for full year 2017 and full year 2018.

With that, I would like to thank you again and turn the call over to Siggi.

Sigurdur (Siggi) Olafsson: President and Chief Executive Officer, Global Generic Medicines Group:

Thanks Erez. Good morning and good afternoon everyone. The global generic drug market has no shortage of manufacturers, supplying vital medicines to patients in the US and around the world. As a result, there is endless commentary on interpretation of the operating conditions that we as an industry are operating under. This can make it extremely difficult to identify and understand the specific opportunities and risks for each company in the sector and for the industry as a whole.

As you know, in February during the fourth quarter reporting season, several industry participants, referenced a tougher pricing environment than what they have experienced in previous years as a reason for the softness in the respective generics businesses. Now we fast forward to April and May, to a new reporting season and we find the number of companies citing a tougher pricing environment or price deflation seems to have grown at an almost incredible rate. They are referencing of generic drug price deflation has not been limited to the manufacturers but is also being cited by those on the purchasing and distributions side, leaving many to wonder about what is the real opportunity in generics. As always, I will to my best to provide you with as much color as possible on what Teva is experiencing in regards to pricing on volume and more importantly where we are headed.

On the ongoing debate this year about the level of generic price erosion in the United States, Teva has been very consistent and clear with investors. Teva has not seen any fundamental change or worsening in the pricing environment, something we have been consistent about telling investors all year. Teva experienced approximately 4% price erosion in the United States last year and our guidance for this year as stated will remain the same.

In fact Allergan and Mylan, two other companies with broad and diversified portfolio and high quality products have also reported similar trends.

From where I sit today, there is nothing that changes my mind about that. Nothing has happened in the last two quarters that has changed the pricing environment.

What this polls down to is each individual company’s business model and I will explain that further in few minutes. Additionally we have heard from many of the companies in this sector that consolidation of the customers is having an impact on the pricing environment. Of course this consolidation creates pressure on generic manufacturers with there has been no meaningful change in the last two quarters. We believe we have already reached the new status quo with the big customers that fees and charges resulting from the customer consolidations are more or less already built into the pricing of the product when most of the consolidation took effect 24 months ago.

Overall, Teva generic business in first quarter 2016 performed extremely well. The operating profit compared to last quarter improved by 140 basis points from 25.5% in fourth quarter 2015 and 26.9% in first quarter 2016. When compared to first quarter 2015, the operating profit declined by 360 basis points fully explained by the exclusive launch of generic NEXIUM as Omiprazole in first quarter 2015. Excluding the exclusivity period of esomeprazole in first quarter, the profit margin of the generic segment was 24.4%.

So why is Teva different? Why is our performance better than most generic companies? Why are all the companies continuing to say there is a pricing pressure greater than what we at Teva see?

I see three reasons. First; the companies with all the portfolio, seem to complaint much more loudly. What I mean by that is that if you look carefully at some companies with all the portfolios, they will tell you that the pricing environment is worsening. But this is not an environment.

This is purely a reflection of their portfolios some of which are concentrated in one a very few therapeutic classes that are experiencing normal competition. This takes me to the second factor; new product launches. When companies don’t have new product launches and the business is declining, they tend to talk about the market more than anything else. This is not a reflection of the environment but rather again a reflection on a company’s portfolio.

The third factor is companies that are trying to grow their market share. Some companies are aggressive in going up to market share but a variety of reasons including in to utilize access capacity with relatively cheap volume. But in order to do that you have to drive down price. Buying your market sharing in price will cost you on the bottom-line.

We on the other hand are seeing our volumes go down, deliberately, net-net approximately 1% a year because we think that is better for our business and we would rather reduce capacity than fill it with less profitable products.

So if you look at this slide you will see that over the past few years, we discontinued 70 products, at the same time we introduced 68 new ones in the US. So how does the growth formula work?

Our simplified business model formula is as follows. Approximately 10% growth from new products, minus approximately 5% erosion which includes price erosions of approximately 3% to 4% and volume decline of approximately 1% to 2%. This includes mid-single digit or 5% growth in Teva generic business. It could be 7% in a specific year and 4% in another year but this is the basic formula in trying to understand our business.

The business model may seem simple but not easy to duplicate. Teva needs to grow by 10% every year with new product launches and this is the key. This is the basis of any good generic business model. How do you that? It comes down to the right portfolio selection and smart investments.

Teva and Actavis generics are the leaders in this field. Each company invests approximately $475 million in generic R&D and regulatory tests. While we won’t maintain an annual generic R&D budget of $850 million after combining the two companies, the spend level will still be both significant and industry leading enabling us to achieve 10% growth a year. We intend to maintain the leadership position here.

At the end of the day, the key to growth in generics has been and always will be new product launches. …which are the only true life-source for successful companies. Teva had approximately 450 global launches in 2015. For 2016, on a full year proforma basis with Actavis Generics, we see over 1,000 new product launches growing to approximately 1,500 new launches in 2017.

Both Allergan and Teva are performing well since announcement of the transaction in July of last year. The pipeline was estimated to be 310 NDAs as announcement in July has grown to 326 ANDAs after taking into account divestiture of approximately 20 pipeline products. The number of combined first to file has grown from 110 to 123 until the first quarter 2016 combined the two companies has over 200 new product launches. This alone has a tremendous impact on our future portfolio and product mix as well as our long-term growth.

So what do we have to do to close the Actavis Generics transaction? Well, as you know we have received regulatory clearance in Europe and other international territories. We have close to finalizing the divestiture list with the SEC and the green on the remedies. We have identified the buyers for the majority of the product and we remain on track for closing in June. And rather than making you wait to the Q1 day sections, I’ll re-confirm our commitment to achieve cross synergies and tax savings of approximately $1.4 billion annually lastly achievable by the third anniversary of the closing of the transaction. .

This assumes approximately $1.1 billion of net global revenue divested which while higher than anticipated, as you can see, has no impact on our commitment to delivering on our promise. We have taken significant steps to transform our generics business, solidify our foundation, increase our profitability, and to better position us to generate sustainable long-term growth. These many steps have included portfolio optimization, strengthening our capabilities in R&D and manufacturing of complex products, regaining a leading position in submission on first to files, enhancing our go to market and sales force capabilities, and much-much more. These are the very capabilities that companies must possess in order to drive at our global level.

We have created the unique and differentiated platform positioned to extract significant value in the global growing generics space.

Now I turn the call over to Eyal.

Eyal Deshe:Group Executive Vice President and Chief Financial Officer:

Thank you very Siggy and hello everyone. I am pleased to review the financial section of the Q1 2016 results.

As you can see from the highlights presented here this was another strong quarter for Teva. Sales declined by 3% mostly due to exchange rate impact. However operating income, our EBITDA, net income and earnings per share were at the same level of last year due to improved efficiency and profitability and Q1 last year was a very strong quarter as well. There is one notable exception here.

We will continue to increase our investment in R&D both in generics and specialty. Total R&D spend was $375 million for the quarter, 14% higher than last year.

So let’s talk about exchange rates. Exchange rates has a negative influence of $107 million on revenues but only $20 million on operating income which was 2% up in real term. We continued to generate a lot of cash this quarter with cash flow from operations at $1.4 billion and free cash-flow at $1.2 billion. Our total debt was $10 billion at the end of March and financial leverage as well as debt to EBITDA ratio were down year-over-year and we are well positioned to raise the debt for the final seeing of the Allergan Generic business.

And also we continued the trend of strong EBITDA as $1.6 billion to $1.7 billion per quarter.

The sales increase in the United States as you can see from the geographical mix was driven by the generic segment mostly due to the loss of exclusivity of esomeprazole and budesonide and Siggi referred to that before, partially offset by increase in specialty medicine mostly Copaxone and respiratory products. Net of FX, revenues were down by 1% as the loss of exclusivity of the US generic products was almost fully compensated by the strong performance of our specialty and OTC business and the growth in our other generic business.

Generic sales accounted for 45% of total sales as a result of the loss of exclusivities in the US . Copaxone sales were 21% of total, 1% higher than in full year 2015.

The specialty business without Copaxone was 24% of sales, an improvement compared to the 2015 average improvement of 2% of the total.

Global Generics accounted for 32% of our operating profit this compared with 37% in 2015 full year. The reason is loss of exclusivity as we mentioned before with few new launches this quarter. Copaxone contributed 44% of total profit compared to 42% for the whole year of 2015.

Speaking about Copaxone, when we looked at the results quarter-over-quarter total scripts were at the same level as last year with an increased proportion of 40 milligram which contributes to our profit with the small increasing units sold as well as the positive price effects leading to 9% sale growth mainly in the United States.

So this concludes the financial review and now let’s look at the dividend distribution. As you can see our Board approved a dividend payment in line with the $0.34 per share distributed in the 2015 quarter’s total payout increased as a result of the equity offering last year so we continue with the $0.34 per share dividend.

So now let me take you through our guidance. Some background; pending the closing of the Actavis Generic acquisition, we are providing revenue and non-GAAP earnings per share guidance for the second quarter of 2016 only. This includes the results of the Rimsa acquisition and the Takeda business venture but not the Actavis generics acquisition. We continue to work towards satisfying all conditions for the closing and based on our estimate of the timing to obtain clearance from the US FTC we currently expect to close in June 2016.

Assuming a June closing as you are already heard from Erez, we expect to provide additional guidance as follows. Full year 2016 guidance including Actavis generics during the Q2 2016 earnings call in August and 2017 and 2018 business and financial outlook in September 2016 after Labor Day. So our guidance for the second quarter is $4.7 billion to $4.9 billion for revenues and $1.16 to $1.20 for earnings per share.

Thank you all for listening to us this morning and I would now like to open the call for questions.

Question & Answer

Operator:

Your first question comes from David Risinger. Please go ahead.

David Risinger: Morgan Stanley:

Thank you for all of the detailed prepared remarks including Siggi’s commentary and the pricing outlook. I have a couple of questions. First of all, Siggi, could you please comment on your expectations for longer-term pricing, obviously you just re-iterated that you expect mid single-digit US price declines in 2016 but I was hoping that you could comment potentially longer term and then second you mentioned $1.1 billion in net global revenue to be divested which is above expectations.

Could you discuss the impact of that on the expected accretion from the Allergan Generics acquisition longer term?Thank you very much.

Sigurdur (Siggi) Olafsson:

Yes. Thanks David. First of all on long term pricing, it’s difficult to comment on the long-term pricing but maybe we can think about what are the factors that play into pricing. So it’s obviously, it has to do with competition in the market.

We know if you look at the US markets, there is 230 generic companies competing so the competition is fierce. Secondly, it’s impacted by the new approvals by the FDA. The FDA has been approving more products and its impacted obviously by consolidation of the customers. I think overall the consolidation of customers hasn’t changed that much in the last 24 months as I said in my prepared remarks.

The change in the competition hasn’t been that much. So, at this point in time, I don’t foresee any big changes in the pricing environment in the US or globally. There’s nothing on the horizon that changes my mind.

Over the last 10 years I have been operating a US generic business now for 10 years in a row. The cycle has been from has been from approximately minus 1% deflation to maybe minus 7%/. It goes and limp it back and forth cycling process but we are at approximately mid single-digit price erosion and there is nothing that we see now that changes that at least in the medium terms but very difficult to talk about the long-term view on pricing.

With regards to the $1.1 billion divestiture, you have to keep in mind this is the global revenue impact. Where we were above expectations just so we are clear was in the UK. We highlighted that there was a large divestiture in UK that we expected but as we highlighted also, we are committing fully to our net synergy number of $1.4 billion in cost and tax synergies as before. So, there is no impact on the accretion of the deal due to the divestiture we are talking about and on the timing of the synergies is as before, we estimate that we get most of the synergies in the first 36 months after closing.

David Risinger:

Thank you.

Operator:

Our next question comes from Tim Chiang. Please go ahead.

Timothy Chiang: BTIG:

Hi. Thanks. You know Siggi you know there has certainly been a lot to tap in the generic space over the last 9 to 12 months and certainly one thing that’s happened is reselling evaluations. Now I know that you guys announced this still steel back in July last year, what can you comment about in terms of the price you are putting on the table for Allergan.

You think that’s llergan, you think that’s still a fair price in today’s environment?

Erez Vigodman:

I think the answer is absolutely yes. The strategic value of the deal is at least the one that was when went out the deal. The opportunities in the US generic markets and in the global generic space are huge and we strongly believe that with everything that we are witnessing now opportunities for Teva are even bigger compared to basically where we were when we announced the deal. So for us, what we are creating is a are very unique platform with at least the same strategic value that we alluded to when we announced the deal and at the end of the day it is also about the economics and from all the messages that we are conveying in here, we strongly believe that we will able to generate the economics that we want.

Operator:

Your next question comes from Jami Rubin. Please go ahead.

Jami Rubin:Goldman Sachs:

Thank you. I just have a question. Siggi, again I appreciate your explanation but I think part of confusion too is that we are hearing about worsening generic drug price inflation not just from other generic drug makers like Endo and Perrigo but also from of other distributors and in fact I am not sure said last week that they were citing a worsening deflationary market worse than they expected and they expected it to that to grow to high single-digits by the end of 2016 and today they are in that range for the entire 2017 so do think this explained the interrelationship between the manufacturers and distributors, why are the distributors citing something different and citing something worse? What needs to happen out there for your guidance of sort of minus 4% of sale price deflation go to minus 6, minus 7, minus 8, give me some confidence that we are not going down this slippery slope and then Erez clearly you are doubling down on a sector that has faced major headwinds or clearly has been reset in terms of valuation. Can you will remind us all what is the investment pieces, what is the attractive investment pieces for being the largest generic drug company in the world and then just lastly you have cited your interest in continuing to do specialty pharma deals ones the Allergan deal is done but different where your valuation is and given where your stock is sitting and your confidence in the generics drug business, how do you balance the desire to do deals with a significant stock buyback program that I think investors would really appreciate in this environment.

Thanks very much.

Sigurdur (Siggi) Olafsson:

So, thanks Jami. This clearly is the hot topic no question about it and that’s why I went in some details in my prepared remarks around the pricing. So first of all I think what I laid out in my prepared remarks was why we are seeing the 4%. It’s basically due to our portfolio because we are not operating we have approximately 375 products on the US market we have a good understanding we also walk away when the competition is too fierce on a product we are not trying to grow our market share -- that 4% market share.

I can’t obviously comment on why ABC is seeing a high single-digit price erosion when we are talking about 4% but I remind you that -- are seeing similar numbers that we are quoting, that Mylan is talking about and also what Allergan is talking about. So it’s not… all bad, that’s number one. Number two, in terms of the not all companies are created equal and one investor asked me is, are you the good house in a really bad neighborhood. I don’t think that’s it because I think the other houses are blaming the neighborhood for the maintaince issue.

They are working with the leaking houses and it has to, this renewal of the portfolio of lack of investments in generic R&D, that keeps you growing the business because that is the key at the end of the day. So I don’t think you can look at companies, different companies and say, if company A is experiencing 7% price erosion that should be the market norm, you have to look at it differently for a company that has a big portfolio, that has a strong new product launches, that has differentiated portfolio and the high quality portfolio.

Erez Vigodman:

Hi Jami. Thank you for the questions and I will try to address all of them one by one. So first in general, you know, what we do in here, we have been a diversified world class balanced platform of durable products that offer topline and bottom line performance and that’s something which is important in general to understand and now to address the additional questions and it is important to just to put the context here which is imperative. Now I believe that Teva has demonstrated an ability to allocate capital in a disciplined and strategic manner and will continue to do that, to support our strategy first and foremost which we believe ultimately reward our shareholders.

We will continue to see very attractive opportunities to grow our business through business development and continue to explore them. Till them more the combined company of Teva and Allergan Generics will generate significant amounts of cash. We mentioned numbers like $20 billion to $25 billion during the first three years following the closing. Today we believe that the best use of our capital will be to rapidly deliver in the coming years to 2 to 2.5 debt to EBITDA as well as invest in business development to secure additional visional growth opportunities around the globe and in our different businesses.

Of course in any event our company is not a stranger to share repurchases. Over the years we have shown willingness to employ in an effort to further reward shareholder. We will continue to take a balance approach to capital allocation.

Number three we are — the generic industry, global generic industry, is a $1 trillion industry which is very profitable. At the end of the day when you look at this very profitable industry, and there are no two many industries out there like the global generics space, we think that when we look at the global competitive landscape and what we believe it’s a very very unique set up. We believe global space that possesses huge opportunities and we believe that the challenges that the folks face nowadays just reinforces even further the opportunities for Teva given the changes we have been undergoing, given the way we have been transforming the business and given what we are building in here. So for us the challenges around us just even reinforce further the opportunities that we see and last but not least we did not plan to use equity in acquisitions that we might entertain in the course of 2016 so in any event basically we are steady said this and reiterated it, we plan to use the $3 billion to $5 billion capacity that we have modeled in entertaining potential deals in the course of 2016.

Operator:

Question comes from Louise Chen. Please go ahead.

Louise Chen:Guggenheim Securities:

Hi thanks for taking my questions. First question I had here with on your CGRP program. I was wondering if could give us an update on how enrollment for this trial is progressing and when is the earliest we could see data here and can you remind us also your $11.6 billion this is I know it’s an number, on EBITDA an 18, does that include CGRP or not and the second thing here is just on your guidance, post closure your generics deal, just curious in the past you have talked about potential upside your synergy guidance from sourcing, is that still on the table? Thanks.

TEV

Thank you Louise for that question on CGRP I am pleased to say that both the chronic and episodic migraine trials have begun. We’re primarily recruiting in the US. Recruitment is going exceedingly well and of course this talks through the tremendous need for novel therapies in this particular space. We are looking forward to getting top-line results by the end of ‘17 with full exposure to results in ‘18 and launching by early 2019.

But we will keep obviously the street informed. We are delighted our recruitment is ahead of schedule and we are making a terrific progress associated with this. Also just to mention and reiterate is that we will be starting our trial in cluster headache in the second half of this year, a very important unmet need, the suicidal headache for which CGRP may offer significant hope and benefit.

Sigurdur (Siggi) Olafsson:

On the lowest, maybe quickly on the synergies, as we said, we reconfirmed the $1.4 billion number taking into account the new number in terms of the divestiture of $1.1 billion. That is our statement now but we obviously will give a full guidance on the combined company in August.

Erez Vigodman:

And Louise on your question about 2018 EBITDA and does it include CGRP, the answer is probably nothing as the product even if launched sometimes in 2018 is not expected to generate any profit during the first year.

Operator:

The next question comes from the line of Ronny Gal. Please ask your question.

Ronny Gal: Sanford Bernstein:

Hi. Good morning everybody and thank you for taking the questions. First, Siggi could you state how to understand the launches during the year. It seems that you are now sitting in a point where these are very few revenue generating or high margin products right now in your portfolio.

Can you take us through how this would change during the year and could you also comment on your cost position core conversion cost overall amount that you are looking at your combined business with Actavis. Where would you be in terms of cost structure? And last and this is more for the branded side, the conversion to the second generation seems to be going a bit sluggishly, can you help us a little bit think about this franchise going forward and how much you think we can keep or Teva can at the time for generic entry and is there any way you can accelerate this conversion?

Sigurdur (Siggi) Olafsson:

So, let me start Ronny. So first of all, we have been very clear on that in the guidance for 2016. There is no -- in the Teva portfolio, there is no significant that we have pointed out there are quite a five smaller launches that we have in 2016 none of those but we have been talking about in the public domain but obviously for the combined companies the picture looked better for sure. Just to highlight and I’m not here to talk about the Actavis Generics business I think they will have their results tomorrow but to highlight for them is in as far as last week they have launched 13 new products in the US as of this year so I think overall ‘16 has a fewer launches than before straightaway in ‘17 we are going to show you that when we get together after closing off the deal what to look for in the pipeline but I don’t want to point out any in the Teva portfolio for the remaining of the year.

These are relatively small launches that we are doing for the remaining of the year.

With regards to the conversion cost of the combined company, that will be part portfolio or the guidance when we get together in August. We also don’t think it’s the right time to talk about the conversion cost guidance of a combined company where we haven’t closed the deal.

TEV

Yes Ronnie with the conversion, ProAir HFA is doing extremely well. If I look at ProAir in terms of volume, where more or less its 5% of the HFA whereas in RespiClick it is about 5% of the overall ProAir and the last part of it that really comes from new patients and if we compare to the conversions or the change to new inhalers also from GSK, we actually outperformed them but you are absolutely right that in terms of really moving the entire ProAir franchise towards the RespiClick, we need to further accelerate and the we are very committed to that. Going forward for the entire Respi franchise, we just launched SincAir -- and we just also achieved very positive as Erez said data on the FS RespiClick and the FP RespiClick. So we’re strengthening the entire risk RespiClick franchise there and having one and fairly unique advantage in two of its inhaler available for patients with multiple fixed combination products would be really an advantage and they continue to drive that’s forward and in the same time defend our HFA as good as we can.

Operator:

Next question comes from the line of David Amsellem. Please ask your question.

David Amsellem: Piper Jaffray:

Thanks. I joined late so probably I missed this but, assuming that there are generics on the products, and it is worth the product not having a J-code, can you talk about how it is viable if you do go to multi source and talk about your latest thoughts on where your share would go in that kind of scenario assuming that the case doesn’t go away? Thanks.

Erez Vigodman:

Hi David, I will start -- so I think that the next important milestone and the inflection point is the, basically our decision on the under phase. So that’s what we need to expect and that’s an inflection point in the market. And I think all of us need to wait and see basically what is coming down in the course of the few weeks and just then comment on potentials and Rob would you like to add something?

Dr. Rob Koremans: President and CEO, Global Specialty Medicines:

No Erez. I think you are fully right and then also on the J-codes there is a preliminary decision by the CMS there still is a will with our support so find to debt and try to address this in a public hearing later this month and the final decision’s out in November of this year. So even if the initial decision wasn’t positive, beside on the J-code itself is also not over.

Clearly it’s a and I think we need to really wait for these reasons. It’s the J-code would not they would be generics for the life lash products then we really are facing a difficult situation where we believe that Bendeka will become a relatively small product going forward but we still have many options to try and intervene and prevent that.

Operator:

Your next question comes from the line of Ken Cacciatore. Please ask you question.

Ken Cacciatore: Cowen and Company:

Hi good morning. Just wondering on that $1.1 billion of revenue. Just can you gives us a sense may be in advance of the value that you are going to be capturing as we assign that and then may be discuss how that value may have some impact on your ability to either increase the size of your business development that you are looking at and then in terms of business development, can you talk about the environment asset values have come down to a certain extent but can you discuss may be the other side of the fence, the folks you may be negotiating with their reasonability in terms where valuations are now? Thank you.

Erez Vigodman:

I can -- first I think that some of -- again to just to underscore a notion that the 1.1, implication of 1.1 are being embedded into the $1.4 billion of net synergies. That’s something I think that message is a very important message and so when we say that are committed to generate $1.4 billion of net synergies, it means that it includes the basically higher divestitures versus initial expectations and that’s basically a clear important messages that we are conveying here. So that’s number one. Number two; yes, we will get higher value.

It might increase the optionality on potential -- but we prefer to discuss details when we close the deal.

Operator:

Next question comes from a line of Chris Schott. Please ask your question.

Chris Schott:JPMorgan:

Great. Thanks very much for the questions. Just coming back to the competitive landscaper on the generics side. Clearly it seems like some of your competitors are having some challenges here.

I guess a two part question here, A; what do you see happening to these smaller players given this challenging market dynamics and B; are you concerned that these companies become increasingly less rational competitors as they try to defend their business and that could have spill-over effect into Teva’s business.

The second question I had is on that $1.1 billion divestiture, what was the expectation? So how much more are you offsetting with synergy in the business to keep that kind of net number the same and then finally on generic gross margins some very healthy trends year-over-year how much more opportunity is there to improve margins on the current standalone business as we think about the next year or so before Allergan coming into the mix. Thanks so much.

Sigurdur (Siggi) Olafsson:

Thanks Chris. First of all on the competitive environment and on the you are right. The smaller companies are probably having a tougher time and it goes back to what I mentioned that’s the first reasoning why they are seeing a tougher price erosion is there was I think a market where it was good for the business to be niche environment where you had one or two product where you could take price increases and that’s allowed your overall market to grow. I think in the I think in the current environment maybe there isn’t the same opportunity for that.

You basically benefit from having a much larger portfolio where some of the portfolio is clearly under threat but other parts of the portfolio you can grow with new product launches.

Am I concerned that they might tale irrational behavior, I don’t know. I have said to you Chris many times before. We are only as good as our most stupid competitor in the market so we have to see but so far I think there is no sign of that in the market per say. What was the original number I am not going to go down to that because we never gave that in our guidance but that’s highlighted around the $1.1 billion where we ended up with a higher divestiture was around the UK.

We basically we have to divest it’s in the public domain from the European Commission. We have to divest more than 50% of the Actavis UK business and we haven’t assumed that but that is the key difference in the divestiture but also we have to keep in mind that it is approximately $1.1 billion we are talking about because we haven’t had the sign of the final sign out from the FDC. So it’s not right at this point in time to talk about the final number but although we feel that we have agreed the products that needs to be divested and with regards to how we would look standalone and that’s a little like a fairy tale. I said that when we talked out last year where we were at last year that I thought we could do about 200 basis points more if we would be a standalone.

I think, we still can do that. We went halfway in this quarter. There is still an opportunity. I think, I am optimistic about the business.

We are really running a good business even in the US business where we experienced that year-over-year comparison is difficult due to the exclusivity of esomeprazole a year-ago really the underlying business is doing well on that I have say that our European business is performing better than ever before. So I am optimistic but there is a limit how much you can improve the operating profit of a business and I stand by my previous statement of around 200 basis points from last year.

Operator:

The next question comes from line of Gregg Gilbert. Please ask your question.

Gregg Gilbert:Bank of America/ Merrill Lynch:

Yes hi. Good morning and good afternoon. -- covered this I don’t think you did but does the EBITDA contribution from Allergan in 2016 the same that you already projected other than the change in the closing timing and Siggi what time or info are you getting from Allergan and how frequently do you get it and then my follow up is on 809 perhaps you could talk about commercial readiness and how interactions with the FDA are going so far. Thanks.

Erez Vigodman:

So maybe I’ll start with the EBITDA, coming from the Allergan generic piece. They are moving pieces we in their original model we assumed the full year now as is becoming a happy year of course synergies are not linear and in six months you can achieve less but as you heard from Siggi, our three years from closing progress remains very well on target and in place so proportionately it could be a little less but keep in mind it is a six-month period and not full year period so look at 2016 as a transition year and the real year to measure would be 2017 that’s why we will provide some outlook earlier than what we normally do.

Sigurdur (Siggi) Olafsson:

Greg around the information we get from Allergan, first of all we are have competitors in the market. We have to be very careful. We cannot exchange any information. We are competing very fully in the market does until closing so for example we have no access to financial information that we have in the quarter that they haven’t reported but the information that we have is what’s in the public domain.

So we know how many first to files they have had, we know what number of launches they are doing in the market because we are competing with them in the market and all the indicators that we are seeing and most of them all of them are in the public domain, they are running a very good business.

With regards to the integration we are doing well. We have announced the first four layers of the organization obviously pending closing of the deal and all we had 31 integration team in place which are now prepared to launch what they want. So we are ready whenever we get the final approval from the Federal Trade Commission and we concludes this transactions.

Dr. Michael Hayden: President of Global R&D and Chief Scientific Officer:

Greg on the question on SD809, the NDA is under review and we are working very closely with the agency to address the final questions that have arisen during the review process. I must say there is tremendous enthusiasm in the community, the Huntington community about this particular product. Of course it’s been only one product ever approved for Huntington’s disease in the United States since 2008 and this product has improved efficacy and in particular improved safety profile and Rob is you just wanted to talk about the preparation for lunch.

Dr. Rob Koremans:

It’s great Michael with pleasure. the commercial message in is in great shape. We are taking a very patient and also caregiver type of approach where this is really really important like Michael said, the excitement is big not only in the Huntington’s community but also for us internally heading the opportunity to bring a real meaningful improvement of people that’s so badly needed is really exciting in terms of medical commercial and also payer preparation.

Everything is in place and we are ready to do this and bring this product to patients as soon as the FDA will approve it.

Operator:

The next question comes from the line of Liav Abraham. Please ask your question.

Liav Abraham: CITI:

Good morning. Siggi, you spoke about 10% volume growth from the combined product pipeline over the next few years. What visibility do you have for this growth and what makes you confident that you can maintain this volume growth over a period of time, beyond the next couple of years? And then secondly, can you comment on the increased pace of ANDA approvals by the FDA? One could argue that this will increase the competitive environment for generic companies including the combined Teva Allergan generics business. I will be interested in your thoughts on this dynamics and the potential net impact on Teva if any.

Thank you.

Sigurdur (Siggi) Olafsson:

Thanks Liav. So in terms of the formula I talked about four things. The 10% growth, we are talking about obviously value growth, revenue and profit growth. It doesn’t mean that -- this is the volume growth because usually the new product launches have a smaller volume than old portfolios.

So but we have an amazing network obviously we have in the combined network we have plenty of capacity for complex generics that we will be introducing. But overall we are very confident that we have current network, we still have plenty of opportunity to grow going forward. In terms of how long we can maintain this I feel we have that for the long run. What I know now is what is pending at the FDA in the combined pipeline of Actavis generics and Teva I see that I am very confident over the next two to three years because that has already been filed so that gives me that’s the beauty of the generic business the risk around approval is much less than otherwise and the second reason is why I think it’s long term is that our current commitment to further invest in the generic R&D as I mentioned before yes we are not going to invest $850 million with just a combined generic R&D budget but this it’s will be very significant investment we want to do also to be NA plus to maintain the growth we are talking about with.

With regards to be increase pace or the FDA approval, you are right. They are picking up the pace and I think partly that has to do I think want to meet the GDUFA statistical guidelines where they need to be because we have already started to negotiate GDUFA 2. But also you have to keep in mind that for every approval that the generics get we get approximately two complete response letters. So yes there is a lot of movement they are having a targeted action day but the ratio is currently for one approval there is two complete response letters.

The good thing is that FDA’s moving forward but when you think about it the combined portfolio of 300 and nearly 30 ANDAs is that if the FDA starts to accelerate for the whole industry, the combined company of Actavis Generic and Teva will have approximately 10 post of all ANDA pending at the close of this transaction. And we will also benefit from the acceleration. So, it’s not only negative on the pricing, I think this is net-net positive for the combined company going forward.

So, I am excited about it. I only see that as a good thing if the FDA accelerates approval of generics.

Operator:

The next question comes from the line of Elliot Wilbur. Please ask your question.

Elliot Wilbur: Raymond James:

Thank you. Good morning. I also wanted to touch on the subject of pricing but actually my question is directed at Rob with respect to the specialty business. Specifically in the press release you talked about Copaxone having a net positive impact in terms of year-over-year growth driven by positive pricing dynamics.

I am just curious, how you seeing that play out or how you expect that to play out over the balance for the year. Obviously it seems like there is lot of peer pressure on specialty products and I think the expectation was that pricing dynamics could be neutral and negative of Copaxone on obviously not the case in the first quarter and then maybe just extend that question to some of the rest of the specialty portfolio specifically in the US maybe just generally comment on price, volume, dynamics there. Then a follow up question for Eyal, given the expected -- of the close of the Allergan generics business, can you maybe just talk to us a little bit about your expectations around the debt side of the balance sheet in terms of current bridge loan, how much of that needs to be refinance, what you are thinking about in terms of the term structure there and the associated interest rate with the final debt package.

Dr. Rob Koremans:

Yes, I am happy take also first that our Copaxone is really doing well like you said this year a lot of the impact also from the net price increase of 7.9% that we did for both in the beginning of the year but it is actually really a result of the fantastic underlying demand, product is keeping well. it’s the number one product new patients now and Copaxone is actually really a very good alternative and patients have access to it so in no has the price been a limitation in that sense and I think that’s the key going forward as you will always have to be able to demonstrate value to stockholders to patients to payers and overall for your products and whatever we offer it’s really important to be able to share the value of what you are doing and it’s not just about the price but it’s really an incredibly important thing to just talk about the value that you are offering.

And clearly for Copaxone we are having the right mix. The products is much appreciated, unparalleled and its track record of both efficacy and safety and desirable to just about 96% of lives in US. So pricing there I see extremely good. Going forward I think I just answered that you cannot just look at price you have to look at the value you are bringing to patients and the systems and for all our products we are very much aware of this and this is exactly the approach we are following at Teva.

Sigurdur (Siggi) Olafsson:

Okay and on the financing plan, it remains by and large the same may be proved a little. We continued to accumulate cash during the first half of 2016 so we will probably not need the entire $27 billion of bridge loan which is available to us. The plan is to close on the bridge and go to the market at September time frame or in Q4 the we see very good market environment for both. Rates remain very favorably low a bit lower than what we had in our original expectations and hopefully will stay that way and the bridge has to remind everyone is for two years from draw down so we have a lot of flexibility on selecting the time of go to market.

Operator:

The next question comes from the line of Umer Raffat. Please ask your question.

Umer Raffat: Evercore:

Hi. Thanks for taking my question. Erez may be one for you. how do you intend to approach SD809 pricing considering your initial approval’s been Huntington’s but the bigger population will be tardiv dyskinesia where your competitor might come in materially lower than pricing.

Michael just wanted to clarify two things with you. First you said CGRP Phase 3 timing is late 2017 and I suspect that might put you six to 12 months behind the competition I just want to make sure I clarified that. And the other thing you said was on SD809 Michael you said FDA has raised some final questions in review process so I wanted to confirm are we still on track for late May PDUFA. And finally for Seggi, Seggi just wanted to ask what’s your updated EBITDA number of Allergan generic standalone in 2017 given the divestitures? Thank you.

Dr. Michael Hayden:

Okay. Thank you, Umer. Just to answer on the CGHRP, of course at the present yes we have always calculated for chronic migraine that we’d be in all likelihood first to market, for episodic second but I would say that we are making great progress and will just have to see how these trials run out the all at about timing of recruitments and also the strength of the results but we believe that this particular product is has a differentiated profile thus far and the recruitment is going ahead of schedule.

So at the moment we are talking about the end of ‘17 but again as recruitment continues we will be able to update that during the course of the trial and to be able to give you latest information on that.

With regard to the FDA, at this point we don’t really comment and we do not want to comment on active discussions with the FDA this time. We are excited about SD809 and certainly we will keep everyone informed of any actions when the review is compete.

Sigurdur (Siggi) Olafsson:

Maybe Umer of course, I can’t update on the guidance on EBITDA for 2017. We are going to come out in September as you heard from both Erez and Eyal, in terms of guidance. The only thing I want to say is obviously with the six months delay or five months delay in closing, we are still commenting to the synergies of $1.4 billion within the first 36 months, majority of it within the first 36 months so they are moving out clearly in 2016 you don’t get the same synergies as you would have been getting if you get for 12 months the same year. Synergies are not linear so we need to look at it when we get the business when we close the transaction to give you an accurate number what we see the EBITDA for 2017 and as we mentioned in our presentation that would be in September.

Erez Vigodman:

And one the first one, too early to comment on pricing of SD808. I think just -- milestones on step-by-step basis growth that’s approval for SD then conduct successfully the clinical trials that relates tardiv dyskinesia under same -- we competitive landscape. And then we decide the right price in order to generate value to patients and in order to smart on the way we manage basically given molecules from the different indications from the same molecule.

Umer Raffat:

Got it but Erez just to be clear would you reprice once tardiv is approved or would you just go with one pricing for both or is it something TBD?

Erez Vigodman:

TBD.

Operator:

Our next question comes from line of Jason Gerberry. Please ask your question.

Jason Gerberry: Leerink Swann:

Hi. Thank you for taking my question. Question for Siggi just can you comment at all for the proforma entity as you look at it maybe for the last 3 to 5 years going backwards, what was the average annual new product sales contribution for the generics business? Just trying to get sense Teva used to provide this disclosure three or four years ago and I think it’s important because as we look forward to your math it implies something like $600 million to $700 million annual new generic product contribution so just wanted to have a sense of where we have been coming from to how we get to that number?

Sigurdur (Siggi) Olafsson:

Jason, thanks for that. I think on the -- side obviously it has the benefit of knowing that internally. That was achieved every year because there was a significant that was the key to the Actavis generic business model and I can confirm that in the Teva at least for last year because I know the numbers very well for 2015 we achieved more than 10% new product revenues from new product launches last year. So it can be achieved with the investment in the pipeline we are talking about for sure.

Jason Gerberry:

Great and if I can just get my follow up and so first a little bit of a discussion of CGR landscape around some of the IP that -- had and just kind of curious if there is any plans to try to enforce that IP as that my create freedom to operate issues for any other CGRP players in the market.

Erez Vigodman:

We don’t want to discuss it at this stage.

Operator:

Your next question comes from the line of Marc Goodman. Please ask your question.

Marc Goodman: UBS:

Good morning. A few things. First I just want to confirm, so previously we had divestitures that were supposed to be below a billion now they are going to be a little bit above a billion. We had a cost cutting plan before of a certain amount and now that cost cutting is going to be bigger such that the net number which is the creation to earnings from the deal or basically be about the same issue.

That’s question number as on confirmed that. Second, special we products if you just look across the before the once you disclosed of as a lake Q1, I mean they all seen to be much, what everybody was expecting. So just curious or why was there inventory build and maybe which is give us some color on some of the key countries outside the United States, what’s going on. Little more color than what was in the press release. thanks.

Sigurdur (Siggi) Olafsson:

Yes there is one, maybe I think one on three. So you are correct on the first question, we are about 1 billion on very confidential achieved the same net number asked before. So your assumption is fully correct. If regard to you, the international market we have the good performance in the international.

We were under pressure they are increased pricing pressure in UK, we have seen that on the same in France but we also have a good performance we saw a better performance on we expected, in Italy, Germany in Spain where the environment has changed, there is a new guy in terms of discount something is like that. So we are sitting at the same table at the local produces in the Spain. es in Spain which means a lot. I think our business in Russia has been performing extremely well both on the generic side but also on both the brand and the OTC side obviously still a challenging currency the ruble but doing well. And obviously from first of April the environment for Japan changed completely with the joint venture with Takeda in Japan, changes the business model.

We are going to talk about that in more detail in the second quarter results in August explain a little bit of the impact of the joint venture on how that is going.

So overall I was very pleased with the international. We are still under some pressure due to FX. But overall there is a net growth in the business we see both in the growth markets but also in Europe.

Erez Vigodman:

And not the specialty just to may be start we guide the market by January 14 and now we going to see the next real in terms of our existing specialty portfolio with strong focus on how we manage lifecycle and that we are just delivering on the promise. In respiratory firstly and foremostly the new business that we are going and that’s the intention to continue doing in the future, that the strategy by and to put that strong focus basically on improving their compliance of patients and growing new business basically and at least will be able to at least offset consequences of our loss of exclusivity that why we respiratory on, basically we just again guide the market that we plan to to launch the product in a key international market and to at the end of the day to be able to protect something and enable 50% of the franchise going forward so we are just delivering on that on a step by step basis and Copaxone I think may be Rob you’d like to comment on Copaxone.

Dr. Rob Koremans:

So in straight answer to the question, no, there is no inventory built in the -- of specialty in this quarter and I think we addressed Copaxone before. The demand continues to be strong. We are number one in new patients in US also number one Copaxone with the 20 mg that is in the US and Copaxone is a number in new patients in Germany.

We see incredibly strong conversion to the 40 mg which is a very nice and competitive product and future -- is really looking really good as patients and doctors continue to really appreciate the product and appreciate it so much at this the first choice in the two key countries and overall performance of specialty had been good and as I said already absolutely not driven by inventory growth.

Erez Vigodman:

So may be just deal to a may be to a let you look at a the fact that end of 2014, ‘15 inventory level that related to Copaxone very very very low today we are at normal basically inventory level by the end of our Q1 ‘15 -- Q1’16

Operator:

Next question comes from David Myers. Please ask your question.

David Myers:

Good morning Erez and Siggi. Today you mentioned biosimilars that you are looking to expand the pipeline with some biosimilar further biosimilar exposures so given that Teva rarely says that they are looking to do something and then doesn’t so it so maybe you could describe what you are looking for and then just remind us what the state of the current Teva biosimilar pipelines is? Thank you.

Erez Vigodman:

So may I start. You know we promised that during 16’ we will basically be able to address a wave two and clear direction for wave three at ensuring potential collaborations and partnerships. We today its make a -- innovated the -- bulls of how biosimilar pipeline we are basically we are — that’s the intention and we plan to deliver on that platform during 2016.

Sigurdur (Siggi) Olafsson:

David where we are currently is that we have one product in late stage development we have a biosimilar of -- in the public domain and then we have our three wave 3 biosimilars in development in relatively early development but we have the infrastructure basically to develop our own biosimilars. We have an outstanding biologic group around the world, we have the regulatory affairs and the IP knowledge to do this and really the reason why we are looking for a positive here especially around wave two because we have gap in our pipeline around wave two and may be some of the earlier wave three products where we simply don’t have the time to catch up. In terms of where we are in the market today we have a revenue of the wave one biosimilars of approximately $300 million to $400 million on the yearly basis, as this are the old versions of costs -- doing well but we also have the infrastructure to sell these products and I see think may be at the last point here is we recognize that to sell biosimilars today and going forward you need to be both a specialty company and a generic company because that’s the key to be able to market these products going forward. I think we have the ideal partner in this way but as Erez mentioned focus on the partnership is on wave two and may be early wave three but we looking for ourselves for developments of the wave three products.

David Myers:

Just as a follow up though based on their commentary should we expect or is it your goal to have something or a start of that augmentation power free strategy put in place by the end of this year?

Erez Vigodman:

The answer is yes.

David Myers:

Great. Thank you very much.

Operator:

The next question comes from the line of Sumant Kulkarni. Please ask your question.

Sumant S. Kulkarni: Bank of America Merrill Lynch:

Hi. Thanks for taking my questions. Siggi, actually both for you, on generic pricing erosion we have heard a lot but specifically on alternate dosage forms like topical, are those as attractive products as they used to be you know everything that’s going in the market place and second what are your latest thoughts on your potential to get an AB rating for your generic --.

Dr. Rob Koremans:

Thanks Suman. I’m pleased we didn’t have a call without this question. I think first on pricing on different dosage forms, it depends on a little of the situation in the market you probably remember Suman that in the year 2009 nobody wanted to be in injectables and then we obviously have that full TSU in the injectable space and then two years later everybody wanted to be in injectables so on topicals now I think there is some pricing pressure you have seen that may be in the companies that are more exposed to topical to some extent they have been talking about more pricing pressure and we have been talking about or Mylan or Allergan.

So that could be a reason. Overall in topicals there the competition is a little less we are talking about usually maybe three to five competitors in the market where you have commoditise maybe 18, 19 as to 18, 19 competitors but currently we are not that exposed to topicals ourselves. We have some products we also have very interesting pipeline on topical going forward where we are when we combine with Actavis generics we will have a first to file opportunities on topical.

But regarding the Ephipen as we mentioned before we got the complete response letter from the FDA. We were seeking advice from the FDA, the FDA offered us to get the further advise on the letter we are getting that now we are building a strategy we are still fully committed to this development. There will be a delay obviously due to the complete response letter we have not finalized our strategy we are working with our partner on the final strategy for this product but I want to reemphasize we still pulling committed this product but we don’t know how much the delay will be until we can introduce an --.

Operator:

That does concludes the question and answer session. I will now hand the call back to Erez Vigodman, President and CEO for final comments.

Erez Vigodman:

So thank you everyone for participating this morning at the outset of a new week and a great week.

Operator:

That does conclude the conference for today. Thank you for participating you for participating and you may now disconnect.