Financial Data and Key Metrics Changes - Sales for Q2 2025 reached $877 million, a 12% increase year-over-year, driven by strong organic growth of 9% [5][6] - Operating income increased by 20% year-over-year, leading to a 130 basis points expansion in overall operating margin [5][6] - Diluted earnings per share rose by 21% year-over-year, slightly exceeding expectations [6] - Free cash flow was $117 million, reflecting a 17% year-over-year improvement and nearly 100% cash conversion [6][9] - The company raised its full-year sales growth guidance to 9% to 10% and expects diluted EPS growth of 16% to 19% [9][25] Business Line Data and Key Metrics Changes - **Aerospace and Industrial**: Sales increased by 3%, with solid OEM sales growth in commercial aerospace and modest increases in defense markets [10][11] - **Defense Electronics**: Sales grew by 11%, driven by increased sales of embedded computing equipment and tactical communications revenues [12] - **Naval and Power**: Sales surged by 19%, primarily due to higher naval defense revenues, particularly from the Columbia Class submarine program [13][14] Market Data and Key Metrics Changes - The overall backlog increased by 12% year-to-date, reaching a record of over $3.8 billion [7] - Book-to-bill ratio across Aerospace and Defense markets was 1.2 times, indicating strong demand [6] - Direct foreign military sales are expected to grow by approximately 20% in 2025, reflecting increased demand from NATO and allied countries [29] Company Strategy and Development Direction - The company is focused on a "pivot to growth" strategy, emphasizing operational excellence and collaboration on R&D projects [4] - Key growth areas identified include defense and commercial nuclear sectors, with expectations for significant long-term opportunities [27][36] - The company plans to leverage advancements in AI and machine learning to enhance its defense applications [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strong financial performance in 2025, supported by a robust order book and favorable market conditions [9][37] - The company anticipates continued growth in defense spending and a strategic shift towards nuclear power, driven by global energy demands [27][31] - Management highlighted the importance of maintaining a disciplined capital allocation strategy while pursuing growth opportunities [37] Other Important Information - The Board approved a $400 million increase in share repurchase authorization and a 14% increase in the quarterly dividend, marking nine consecutive years of dividend growth [8] - The company expects to generate free cash flow in the range of $520 million to $535 million, reflecting an improved conversion rate of approximately 108% [25] Q&A Session Summary Question: What is driving growth acceleration in commercial aerospace? - Management noted a conservative position entering the year, with mixed signals from customers but overall positive trends expected in the second half [40][42] Question: What applications are the new GPU chips finding use cases for? - The company highlighted applications in defensive systems and command and control, emphasizing the importance of quick decision-making in modern warfare [44][46] Question: How sustainable is the margin performance in Defense Electronics? - Management indicated ongoing restructuring and operational excellence initiatives are driving margin improvements, with further opportunities for growth [50][52] Question: What is the outlook for the M&A pipeline? - The company is actively looking for acquisition opportunities but remains disciplined in its approach, prioritizing strategic fits [64][66] Question: How much of the Defense Electronics decline in Q3 is visible based on backlog? - Management reported a book-to-bill ratio of 0.9 in Defense Electronics, with expectations for a strong finish in Q4 as backlog issues are resolved [69][72]

Financial Data and Key Metrics Changes - Revenues increased to $4.2 billion, up 1%, marking the tenth consecutive quarter of growth [8][10] - Adjusted EBITDA rose by 7%, and non-GAAP EPS increased by 10% [9] - Net debt to EBITDA ratio is just over 3 times [9][46] Business Line Data and Key Metrics Changes - AUSTEDO revenue reached approximately $495 million, up 22% [13] - ECETI revenue surged by 120% to $54 million [12] - AJOVY revenue grew by 31% to $155 million [12] - Global Generics business declined by 2%, reflecting strong prior year comparisons [21] - TAPI revenue decreased by 11%, attributed to seasonality and timing of shipments [12] Market Data and Key Metrics Changes - U.S. generics business showed a decline due to tough prior year comparisons and timing of shipments [22][24] - EU generics business grew by 8% in the prior year, but growth has slowed due to product launches and competitive stockouts [24] Company Strategy and Development Direction - The company is focused on a "pivot to growth" strategy initiated in 2023, emphasizing innovative products and generics stability [6][27] - A target of $700 million in net savings by 2027 has been set, with 20% of this already achieved [27][40] - The company aims to achieve a 30% operating margin by 2027 [40][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2025 guidance despite uncertainties around U.S. tariffs on pharmaceuticals [41][52] - The innovative portfolio is expected to over-deliver, with raised guidance for AUSTEDO, YEUSEDI, and AJOVY [30][51] - The company anticipates a flat to low single-digit growth in generics for the full year [25][52] Other Important Information - The company has divested its Japanese business, which is consistent with its strategy to focus on profitable growth [42] - Free cash flow grew by 47% to $476 million, driven by higher net income and working capital improvements [45] Q&A Session Summary Question: Insights on AUSTEDO and IRA negotiations - Management refrained from commenting on IRA negotiations due to ongoing discussions with CMS [63][64] Question: Impact of tariffs announced in Europe - Management is assessing the details of the tariffs and believes they have mitigated potential impacts on the business [65][66] Question: AUSTEDO BID to XR conversion timeline - Management indicated that while new patients are converting to XR, it will take time for the majority of patients to transition [72][75] Question: Clarification on tariff impacts and exclusions - Management acknowledged uncertainty regarding the specifics of tariff exclusions and is awaiting further clarity [81][84] Question: Updates on DUVAKITU and Phase II data - Management confirmed that Phase III studies for DUVAKITU are on track and Phase II data will be presented in 2026 [90][91] Question: Revenue guidance related to generic Revlimid - Management clarified that revenue guidance is influenced by the performance of generic Revlimid, particularly in Q4 [103]

Financial Performance - Teva's Q2 2025 revenues remained flat at $4176 million compared to Q2 2024, but excluding Japan BV, revenues increased by 2%[87] - Non-GAAP EPS increased by 10% to $066 in Q2 2025 compared to $061 in Q2 2024[87] - Free cash flow increased significantly by 47% to $476 million in Q2 2025 from $324 million in Q2 2024[87] - The company is on track to achieve a 30% operating profit margin (OPM) by 2027 through its transformation program[85, 91] Product Performance - AUSTEDO U S revenues grew by 22% year-over-year to $495 million in Q2 2025[26] - UZEDY revenues increased significantly by 120% year-over-year to $54 million in Q2 2025[22, 31] - AJOVY global revenues increased by 31% year-over-year to $155 million in Q2 2025[22, 34] - Global generics revenues declined by 2%[22], and in local currency, global generics revenues decreased 5% vs Q2'24 including Japan BV[23] Pipeline and Strategy - The company expects to submit olanzapine LAI for U S NDA in Q4 2025[36, 55, 62] - Teva is targeting peak sales of $15-2 billion for the LAI franchise (UZEDY and olanzapine LAI)[102] - The company anticipates the start of Phase 3 trials for duvakitug in ulcerative colitis (UC) and Crohn's disease (CD) by Sanofi in Q4 2025[68] - Teva transformation in '25 well on track to deliver annualized ~20% of total $700 million savings[105]

Core Insights - Teva Pharmaceutical Industries Limited has entered the acceleration phase of its "Pivot to Growth" strategy after successfully completing the initial phase, which has led to nine consecutive quarters of growth [3]. Group 1: Company Strategy - The acceleration phase represents a continuation and intensification of the strategy to transition Teva from a pure-play generics company to a biopharma company [3]. - The first two years of the strategy focused on returning the company to growth after several years of decline, which has now been achieved [3]. Group 2: Future Focus - The company is now focused on execution over the next 12 to 18 months, emphasizing key aspects of the acceleration phase [2].

Growth Strategy - Teva aims to achieve a ~30% innovative franchise CAGR, targeting >$2.3 billion, and return generics powerhouse to +5% p a growth[22] - The company projects AUSTEDO sales to exceed $2.5 billion by 2027[52], and peak sales of >$3 billion[47] - Teva anticipates peak sales of $1.5-2 billion from its LAI (Long Acting Injectables) franchise, including UZEDY and olanzapine LAI[52] Financial Performance & Targets - The company is targeting a mid-single digit percentage revenue growth (CAGR '22 – '27)[44] and an operating income margin of 30%[44] - Teva aims to reduce net leverage to 20x[22,44] and increase free cash flow to >$27 billion by 2027[22,235] - The company plans to achieve ~$700 million in net savings by 2027 through transformation programs[220,225] Pipeline & Innovation - Olanzapine LAI is projected to have peak sales potential of >$15 – 20 billion, with targeted submission in H2 2025[38] - Duvakitug has a peak sales potential of ~$2-5 billion, with a targeted submission around 2029+[38] - Emrusolmin is projected to have peak sales potential of >$2 billion, with a targeted submission around 2031[38]

Core Viewpoint - Teva Pharmaceuticals has received a corporate credit rating upgrade from Fitch Ratings Agency to BB+ with a stable outlook, reflecting the company's improved financial discipline and growth strategy [1][2][3] Financial Performance - Fitch's report highlights Teva's progress in reducing debt and enhancing financial flexibility, which is expected to support continuous revenue growth from products like AUSTEDO and AJOVY, as well as from its biosimilar pipeline [2] - The company's focus on optimizing external spending and resource allocation is anticipated to lead to higher operating margins [2] Strategic Initiatives - Teva's "Pivot to Growth" strategy is recognized as a key factor in the recent credit rating upgrades, indicating confidence in the company's future performance [3] - The company has been actively modernizing its organization to better address market demands and improve operational efficiency [2][3] Company Overview - Teva Pharmaceutical Industries Ltd. operates globally, focusing on both innovative and generic medicines, with a commitment to advancing health for over 120 years [4] - The company employs approximately 37,000 individuals across 57 markets, emphasizing its extensive capabilities in the biopharmaceutical sector [4]

Core Viewpoint - Teva Pharmaceuticals has received a credit rating upgrade from Moody's, reflecting the company's strong performance and strategic focus on growth and debt reduction [1][2][3]. Group 1: Credit Rating Upgrade - Moody's has raised Teva's corporate credit rating to Ba1 with a stable outlook, up from Ba2 with a positive outlook [1]. - The upgrade is attributed to Teva's significant global scale, growth in branded franchises, stabilization of the generics business, and focus on debt reduction [2]. Group 2: Company Strategy and Performance - The upgrade is seen as a validation of Teva's "Pivot to Growth" strategy, which aims to enhance the company's financial health and investor access [3]. - Teva has a global workforce of 37,000 employees operating in 57 markets, focusing on both innovative medicines and generics [3].

Core Viewpoint - Teva Pharmaceutical Industries Ltd. has published its 2024 Healthy Future Report, highlighting its achievements in sustainability and access to medicines, which are integral to its long-term growth strategy [1][5]. Healthy People - Teva launched two new access to medicines programs, bringing the total to nine, exceeding its target of eight by 2025. The company donated approximately 18 million doses of medicine valued at $23 million and provided 2.2 million doses at low cost, benefiting 187,000 patients. Additionally, five programs focused on strengthening health systems and capacity building, aiding around 56,000 individuals [2]. Healthy Planet - Teva achieved a 29% reduction in absolute scope 1 and 2 greenhouse gas emissions from 2019 levels, surpassing its 25% target by 2025 ahead of schedule. Furthermore, 73% of applicable Teva sites met safe discharge levels for antibiotics, reducing environmental pollution. A pilot program in Germany educated over 65,000 healthcare professionals, resulting in approximately 389,000 patient interactions regarding appropriate antibiotic use [3][8]. Healthy Business - Teva emphasized integrity in operations, with over 99% of employees retrained on compliance and ethics, meeting its annual target. Additionally, 41% of significant suppliers were evaluated for sustainability performance, and all high-risk third-party partners underwent evaluation through Teva's Third-Party Due Diligence tool, promoting responsible sourcing practices [4][8]. Recognition and Impact - Teva received improved sustainability scores from organizations such as Sustainalytics, MSCI, and EcoVadis, along with awards for its programs and progress. The company's generic medicines contributed to $39.7 billion in savings for healthcare systems across 22 countries [5][8].

Financial Data and Key Metrics Changes - Revenue increased by 5% to GBP 3.9 billion, adjusted EBITDA rose by 3%, and non-GAAP EPS increased by 8% to $0.52 [6][26][30] - Non-GAAP gross margin improved by 140 basis points year over year to 52.8% [27] - Net debt to EBITDA ratio remained just above 3 times [30] Business Line Data and Key Metrics Changes - Innovative brands generated $589 million in sales, a 45% increase year over year, driven by AUSTEDO (up 39%), AJOVY (up 26%), and UZEDI (doubled to $39 million) [8][12][13] - Generics business grew by 3% year on year, with 5% growth in the U.S. [15][16] - Biosimilars launched two products in the U.S. and have five more planned for 2025 to 2027 [17][18] Market Data and Key Metrics Changes - U.S. business for AUSTEDO increased by 40%, with over 60% of new patients on AUSTEDO XR [9][10] - UZEDI gained over 60% market share in the long-acting risperidone market [12] - AJOVY confirmed guidance for $600 million in sales, with strong growth in Europe and international markets [14] Company Strategy and Development Direction - The company is focused on transforming from a generics powerhouse to a leading biopharmaceutical company, emphasizing innovative products and capital allocation [21][34] - The goal is to achieve a 30% operating margin by 2027, supported by a shift towards high-margin innovative products [23][34] - The company plans to modernize operations, reduce costs, and optimize procurement to drive growth [21][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2027 targets, driven by innovative product growth and effective cost management [19][20] - The company is navigating macroeconomic challenges, including tariffs, without significant impact on business [32][33] - Management highlighted the importance of maintaining a strong U.S. manufacturing footprint to mitigate risks [32][33] Other Important Information - The company has absorbed the impact of new U.S. tariffs in its updated guidance for 2025 [25][32] - The divestiture of the Japanese generics business has been completed, affecting revenue guidance for 2025 [37][38] Q&A Session Summary Question: Transition from generics to biopharma - Management clarified that the generics business remains a crucial part of the strategy, supporting innovation and cost discipline [60][61] Question: Future savings potential - Management indicated that the $700 million in savings is part of an ongoing journey, with continuous efforts to drive efficiencies [61] Question: Impact of Revlimid on EBITDA - Management confirmed that EBITDA will increase in absolute dollars in 2026, despite headwinds from generic Revlimid [76][78] Question: Tariff impact on pricing - Management stated that they have mitigated tariff impacts and have a strong U.S. manufacturing presence to support pricing strategies [70][72] Question: Resource allocation for investments - Management assured that cost reductions will not hinder investments in the innovative portfolio, emphasizing capital allocation efficiency [87][88]

Financial Performance & Outlook - Teva reported a 5% revenue increase in Q1 2025 compared to Q1 2024 [18] - Non-GAAP EPS increased by 8% in Q1 2025 compared to Q1 2024 [18] - Free cash flow saw a significant increase of 238% in Q1 2025 compared to Q1 2024 [18] - The company is on track to achieve a 30% operating profit margin (OPM) by 2027 [44, 93] - Teva is targeting ~$700 million in net savings by 2027 through modernization efforts [39, 95] Key Products & Growth Drivers - AUSTEDO U S revenue grew by 40% year-over-year in Q1 2025, reaching $396 million [24] - Global AUSTEDO revenue reached $411 million in Q1 2025, a 39% year-over-year increase [21, 24] - UZEDY revenues increased by 156% year-over-year in Q1 2025, reaching $39 million [21, 30] - AJOVY global revenues grew by 26% year-over-year in Q1 2025, reaching $139 million [21, 32, 33] Generics & Biosimilars - Global generics experienced a 3% growth in Q1 2025 [21, 34]