Greetings ladies and gentlemen and welcome to the Teva Pharmaceutical Industries Ltd. Second Quarter 2006 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press * and 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Kevin Mannick, North American Director of Investor Relations of Teva Pharmaceuticals Industries. Thank you, you may begin Mr. Mannick.

Thanks a lot Dan. Good morning and good afternoon everyone. Welcome to Teva’s Second Quarter 2006 Earnings Conference Call. We hope you’ve all had a chance to review our press release which we issued earlier this morning. A copy of the press release is available on our website at www.tevapharm.com. Additionally, we are conducting a live webcast of this call which is also available on our website. Today, we are joined by Israel Mackoff, President and CEO; Dan Suesskind, Chief Financial Officer; George Barrett, President and CEO of Teva North America; Bill Marth, President & CEO of Teva USA; and Moshe Manor, Vice President, Global Innovative Resources. Israel, George, and Dan will begin by providing an overview of our results. We will then open up the call for a question and answer period. I’d also like to remind all of you that we will host a special quarterly luncheon tomorrow in New York. For those of you who haven’t received our invitation or have not RSVP’d yet, please call 215-591-8726, and if you’re unable to join us we are conducting a live webcast of the event, which will also be available on our website. Before we proceed with the call, I’d like to remind everyone that the Safe Harbor language contained in today’s press release also pertains to the this conference call and the webcast. I would now like to turn the call over to Israel Mackoff, our President and CEO, Israel?

Thank you, Kevin, and thank you all for joining us today as we announced Teva’s results for the second quarter of 2006. From every possible angle and thanks to contribution from all of our business units second quarter 2006 was Teva’s best quarter ever; one, because of financial results, major strategic accomplishment, and tremendous operational achievements. For the first time in our history, we crossed the $2 billion mark in quarterly sales. We reached $2.172 billion. This mark is a milestone for Teva. This quarter also gave us an opportunity to drive significant benefits in our bottom line as our adjusted net income for the quarter exceeded $0.5 billion to reach $541 million, another first to Teva, and we broke records in all our profit margins with an adjusted gross profit margin of 55%, adjusted operating profit margin of 33%, and adjusted net income margin of 25%. Given such numbers, it will come as no surprise to you that we achieved record breaking quarterly sales in all our geographies; North American, Europe, and International. Of course the highlight of the quarter was our unprecedented launch of simvastatin, the generic version of Zocor. This was the largest product launched in the history of the generics history both in volume and in dollar terms. The tremendous success of this launch demonstrated the capabilities that Teva has developed over many years beginning with a swift integration of the product from IVAX into Teva, the legal strategies we employed to ensure our exclusivity, to the preparation we made in a very short time frame for what would become the largest ever generic launch to satisfying our customers huge demand for the product on the very first day of its launch. You can imagine what kind of logistical operation this entailed. Several dozen truck loads…

Thanks, Israel. This was an extraordinary quarter for our U.S. generic business in many ways. This was the first full quarter that IVAX commercially integrated into Teva U.S.A. running as one business under Bill Marth’s leadership. We saw a continued increase in prescription demands for our products and it was a quarter which saw the introduction of some key new products culminating with a fantastic launch of simvastatin in the last day of the quarter. Teva U.S.A. organization and the entire global support system from our APIs through manufacturing helped us accomplish a successful launch, the largest in our history and frankly in the industry at large. All of this was accomplished in the face of some meaningful challenges. Israel mentioned our commitment to keeping our facility rationalization program on track and the challenge of doing so while launching some of the largest products in our history all without having our new Jerusalem plant available to us. To add to the challenge, we also had to compensate for a significant reduction in supplies from the Puerto Rico facility acquired as part of the IVAX transaction. Due to longstanding issues at this plant we conclude that we needed to significantly reduce complexity at that facility and to minimize any dependence we had at that site. We have already moved over 20 products from…other manufacturing sites in the Teva network. In addition, we made the decision to temporarily discontinue several older products in order to alleviate pressure from the supply chain. We felt that this was a small price to pay in order to maximize the potential of our new launches and the planned launch of our generic Zoloft, which will occur this quarter. The success of the U.S. launches were particularly important as we had to absorb price declines on some…

Thank you very much, George, and good day to all our friends around the world. I hope you have had a chance to review the excellent figures we released this morning. If you have, I believe you have found that they are significantly better than most of us expected. This quarter we have recorded acquisition and other related charges amounting to $65 million pre-tax and $53 million after tax. After deducting these expenses, net income amounted to $488 million and fully diluted earnings per share to $0.59. I will refer in the following analysis only to the adjusted figures as we believe that the adjusted results provide better indications of Teva’s operations and trends. Excluding these charges, our adjusted net income reached $541 million, representing 25% of sales with EPS of $0.66. Let me give you a synopsis of our figures. As compared to the second quarter of last year, sales are up 77%, net income is up 124%, and EPS is up 83%. For the first time we exceeded quarterly sales of $2 billion, gross profit of $1 billion, and net income of $0.5 billion. The run-offs included $31 million which was less over from the first quarter of ’06 where we recorded another $64 million of step-up inventory resulting from the IVAX acquisition. Please note a consideration of the reported GAAP net income and EPS for these adjusted numbers in Appendix 1 of our press release, which is available on our website. And with that I will take through the adjusted results line by line beginning with sales. As I have mentioned, sales reached $2.272 billion, an increase of $945 million year over year with a negligible currency effect. The most significant impact on global sales in the second quarter was made by our major product launches in…

Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you would like to ask a question, please press * and 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. Your may press * and 2 if you would like to remove your question from the queue. In the interest of time, we do request that you limit yourself to one question. Our first question today is coming from Robert Bonte-Friedheim of Citigroup Investment Research; please proceed with your question.

Hello everyone and congratulations for an outstanding quarter. Just a very quick question, Dan, we spoke in the past, could you just confirm to us that there’s nothing working in the charge back that we should be concerned about as we go forward?

It’s confirmed.

Okay, and the second question, Dan, as we go forward as we look into the rest of the year, what kind of provisions have you made for the self-buck adjustment on the big launches in the quarter on pravastatin and simvastatin?

We usually do not give out those details, but as I mentioned in my prepared remarks usually launches have a very high bearing on the increase in the SR&A. I gave the figure of the increase and we are consistently following the same formulas for the providing for the different line items of SR&A, and we did the same also this time.

Last question, did you get any synergies from the IVAX acquisition in the cost of goods sold in this quarter?

I would say that if at all it was it was very limited on the cost of goods sold and predominantly we had, as we usually have initially in new acquisitions, it’s more on the SG&A and R&D; although in this case, simvastatin was an exclusive of IVAX and their recreated synergies with Teva.

Let me just add, Robert, there were major synergies this quarter with the API component of Teva in the simvastatin.

Thank you, Israel.

Our next question is coming from Rick Silver of Lehman Brothers; please proceed with your question.

Just a couple, can you give us an update on the launch plans for generic Zoloft?

George…

Hi, Rick, good morning. What we can provide is really what we said which is that we do expect a launch in the third quarter. We had anticipated that we might regret at this point we are not quite ready, but we still look forward to that launch.

Dan, you provided an idea of guidance on SG&A, can you do the same of R&D?

I would say that R&D should be in the range of 6% to 7%.

Okay, thank you.

This is obviously generally speaking when you have exceptional allowances like that they distort some of the picture, but if we talk on an average that should be the rate.

And when you talk about the accretion from IVAX, are you looking at this including generic Zocor?

Yes.

And if you excluded that would it be accretive?

Probably not at that stage.

Okay, thank you.

Our next question is coming from David Woodburne of Prudential Equity Group; please proceed with your question.

Thanks and again congratulations on a great quarter. George, in terms of the Zoloft, can I ask, is the delay due to capacity allocation or does it have anything to do with utilizing Teva’s API on that? Then, I’ll assume there’s a fair amount of Zocor in the second quarter, if you ignore the outcome of the legal appeal, what’s the best way to allocate the remainder of the exclusivity period for us?

David, I can’t provide more color on the Zoloft launch other than to say that we are not quite ready. I think that’s as much as I can share at this point. The second question was about the allocation, I’m not sure exactly what you’re asking?

Well, obviously it’s a six-month exclusivity period, you sold a ton in the second quarter even though there were only basically seven days of that exclusivity period in the second quarter, so does it mean that you have another solid third quarter and almost none in the fourth quarter, or how should we think about the third quarter and fourth quarter?

I won’t want give complete clarity quarter by quarter except that we had an effective and strong launch. We’ll continue to hold our exclusivity through the third quarter and at some point at the end of the year, of course, that exclusivity will expire.

Okay.

Our next question is coming from Elliott Wilbur of CIBC World Markets; please proceed with your question.

Good morning, good afternoon, thank you for taking the questions. I’ll throw in my obligatory congratulations on a very strong quarter as well I wanted to ask a line of question around your revised EPS guidance. It looks like you’ve effectively taken up about $0.10 relative to what you had talked about in terms of the incremental contribution from generic Zocor exclusivity in connection with first quarter numbers, yet sales guidance actually kind of moved towards the low end of the range. Originally you talked about $250 million to $300 million top line impact and now we’re talking about $8.5 billion in total sales. So, I’m just wondering if you could reconcile that, maybe give us some clarity as to where things are not performing as well as you had previously suspected. It sounds like there are some pockets of weakness maybe in the IVAX business, maybe related to some production issues in the line, but if you could maybe just talk about why that sales guidance seems to be moving towards the lower end of the range that you had briefly talked about? Thank you.

George, you want to start?

I have a couple of quick observations about the U.S. market, some of which we spoke to the new launches are going very well, we described a little bit about the base erosion. There are a couple of products, Elliot, that we’ve mentioned are particularly in their more competitive stage and some issues that come out of the supply chain issues described. By and large the direction of our U.S. generic business looks good, the prescription data looks good, but we had absorbed some issues which will affect us a little bit as we go through the year.

I would say that our new guidance is a proper guidance. We didn’t circulate simvastatin from the rest of the business, we just calculated what we are going to do from now till the end of the year, and it includes all the parts of the business. I would say that I don’t think that we have weakness, but I think we have increased the bottom line. The top line is on the high side of our last guidance and it might be increased, but this is the way that we see it right now and I don’t think that we have any weak spot except you have to remember that in the U.S. on the one hand we have major launches and on the other hand we have major erosion of products that lost their exclusivity that fexofenadine, azithromycin, and propofol, which lost it earlier but has more competition right now, and a few other products. So, there is a balance here, but it’s not that we add 10% to simvastatin; it’s just that we add to our total range between 13% to 10%.

If I may add, I don’t think that anyone can imagine the effort in such launches as we had this quarter and if anybody thinks that such launches can go without any sacrifice or something else he is mistaken. So, it’s not a question of weakness but more sacrificing one thing for a major other thing.

Our next question is coming from Andrew Foreman of WRH; please proceed with your question.

George, following on the questions about Zoloft, can you remind us the exclusivity and how that might relate to other competitors coming in after exclusivity, is it fair to say that if you launch around September 1st then you’ll get most of the first quarter ’07 exclusivity? And then could you also give us a little more update, a big picture George, on the size of the U.S. generic industry in terms of market share? From your comments from Medicare Part D, what do you see happening in terms of total prescription share volume in terms of expansion, I guess it was around 54% to 55%, going into ’06? What are your observations if any about the impact of the doughnut hole effectively being used up by the $23 million, are you seeing any increase in demand for generics overall, and what is Teva’s market share currently in the U.S. generic business? Thanks.

Good morning, Andrew. I’ll touch base on the first question. It’s very early I would say to show a truly predictive sort of systemic effect for Medicare Part D, although again we’re seeing all the good early signs. It looks like generic penetration has moved up probably into the high 50s. We really do see it moving past 60, I can’t give you a timing sense for that, but again we’re seeing some extraordinary movement throughout the system. I think Bill is probably the right person to give a quick comment on the sort of doughnut hole aspect of the Medicare program.

Hi, Andrew. With respect to the doughnut hole, it’s certainly an issue for the patients that run into it. We see it as an unfortunate part of the plan, but for us it’s helpful for generics because as some people enter into this space and they’re looking to fill prescriptions in a most cost-effective manner, and generics are certainly the choice for that.

George, you’re saying is that we’re in the high 50s in terms of share and going past 60, what is Teva’s market share run rate, because you indicated that you have an expanding market share relative to the base business?

I would say right now…again, this data can move very quickly particularly on the eve of a launch which just occurred, but probably at this point over 20 in prescription share.

So, 20% of all U.S. generics prescriptions are coming out of Teva?

Yeah, roughly.

Dan, quickly on the IVAX integration, you had previous guidance which you said you might modify, any comments on that on the cost side please?

I don’t think we can change it every quarter. As we said, there were a lot of synergies created through the introduction of simvastatin. I think when we get to the end of the year we may update our expectations on synergies.

Thanks, great quarter guys.

Our next question is coming from Ron Miguel of Sanford Bernstein; please proceed with your question.

Hi, good morning folks. Two quick questions that I just need to clarify; you mentioned, Israel, that in ’07 you expect a suppressed sales for ’06, does the same go for EPS? Second, you mentioned the mid-teens range for Teva, does that include acquisition or do you see that as organic growth?

We consider the acquisition as part of our business, but of course if it doesn’t include any huge acquisition like IVAX we will change totally the scale of Teva, but in every year growth plan we will have both…or other companies that will give us added value in terms of product lines. So, this includes acquisitions which later on become part of our organic growth. Then, with regard to 2007 to 2006, we can definitely calculate that we’re going through different scenarios and we can increase the top line and we cannot give at this stage anything about the bottom line.

Thanks, I appreciate it.

Our next question is coming from Greg Gilbert of Merrill Lynch; please proceed with your question.

Thanks, I have a couple. Thanks for the additional color on today’s call. First for Dan, are you willing to provide us what simvastatin sales were in the quarter in the U.S. and the approximate margin of that?

We have never done that in the past and I don’t want to create a precedent today. We usually don’t detail data on individual products.

Let me ask it in a different way, if you can speak to gross margin perhaps excluding simvastatin were you above your historical 45% to 48% range, and is there something structurally different about that?

I suspect we would be in this range without simvastatin.

Thanks for that. George, the Zoloft deal between IVAX and Pfizer, I guess now Teva and Pfizer preclude Greenstone from launching during your exclusivity or should we assume that this is a pretty typical situation?

I think you should assume that it’s a pretty typical situation.

And lastly for Israel, a two-part question, one do you think it’s more important for Teva to take a hard look at proprietary company acquisitions longer term in addition to the typical sourcing of molecules in Israel? And secondly can you comment on the significance of setting up the office of the CEO earlier this year? Thanks.

All right, let me first just make an advanced response to your question about the gross profit. Remember that we had a very successful launch of Zocor, but we had additional successful launches, not only in the U.S. but outside of the U.S. Although we did not really calculate what the range would be, we are not using these exercises to see what would be the gross margin with or without the Zocor, but the other launches also contributed to the high level of gross margin; it’s not only Zocor. This is number one. Number two, in terms of taking a hard look at proprietary companies, first I must tell you that we are very satisfied with our business model. We are not a generic company that is trying to become a proprietary company or an innovative company, and I don’t think that there is something we should be looking to imitate. I think that the proprietary business within Teva is increasing. We now have the respiratory business, we have a very rich pipeline of innovative products which we are going to present to analysts in September in New York, and we have a lot of work in biogenetics which is also a branded business, and I’m not precluding an acquisition that will support in the future one of these business lines, but we are not looking at an acquisition that will change Teva from a generic company to a totally branded company. Does that answer your question?

Yes thanks, and can you comment on the office of the CEO and the significance of that for the company?

The office of the CEO is an important office in our organization. As you may appreciate, the complexity of our business is enormous. I think that there are very few companies in the pharmaceutical industry with a level of complexity that we have, and the complexity actually creates value for a potential opportunity. Now, in order to manage this complexity, we need to have the right organization, and I think that this office of the CEO is more to help me in running the business than to highlight candidates for a future CEO, although it doesn’t preclude this opportunity.

Okay, thanks a lot.

Our next question is coming from Norman Fidel of Alliance; please proceed with your question.

Thank you, and George I’m not going to let you off the hook so easily on the Zoloft question. When the final approval was announced for circulating the Zoloft I think the expected launch time was late July. So it does seem that it is delayed beyond that, are the issues exclusively supply related or is this also related to just trying to manage the growth since your period of six-month exclusivity is not jeopardized by a delay and it extends your rapid growth into he future if you delay that launch? Thanks.

Hi, Norman, and I’ll give a try and see if I can do it again here. We had as I said hoped to launch and have all of the products prepared for the kind of launch that we wanted by the end of July and we’re simply not there. So, as you know we had an enormous amount of product to put through the system, we had some late stage labeling issues that we needed to deal with, so we had a lot of work to do to pull this launch together and it’s very important when you launch with particular interest of satisfying customers to make sure you have an effective launch. We’re not quite ready and it was better for us to wait till we were ready for the optimal launch rather than to move prematurely.

I would like to add one sentence, George, and as a method of policy we never delay launch of a product just because we want to have a better distribution of sales or profits in quarters. It’s not that. When we are ready we go. Therefore, because you asked this question, we never delay a launch just because we want to have better cosmetics to our results.

Okay, thanks.

Our next question is coming from Ken Cacciatore of Cowen & Co; please proceed with your question.

Hi, thanks, just pulling back to Israel’s guidance on the mid-teens growth, you indicated that some of it was going to be inorganic, can you help us out a little bit to understand what percentage would be inorganic? Also, does this include the Copaxone U.S. take back right? Then a question for George on Zoloft, I understood that you maybe had to make payments to Pfizer via the previous IVAX agreement, if they launch and authorize generics, do you continue to have to make that payment to Pfizer, profit payments? Thanks.

Let me answer your question. George, can you take over just a moment, answer the second part of the question and I’ll come back?

Ken, can you just repeat the Zoloft question?

Sure, on Zoloft it was our understanding that IVAX was previously going to have to make a profit sharing payment to Pfizer because of the original agreement, I was wondering if they are allowed to launch and authorize generics, do you have to continue to make that payment if there is a payment?

I can’t provide data or details on the agreement other than stated that IVAX and Pfizer had entered into a license agreement as part of a settlement of that litigation and we abide by all of our agreements.

I apologize for pushing the question, George, but I add to attend to something here, but let me come back to your first question. Our forecast is based on a combination of many scenarios. It’s not one scenario of growth; it’s many scenarios of growth and we combine all of them into one forecast, and therefore it may include a few optional acquisitions, it includes the Copaxone, it includes everything. Our business is one business and we have many companies in our business and we have many scenarios of growth, and when we give a forecast it’s a combination of all of these scenarios. So, I can’t give you percentages and I can’t tell you right now the exact components of these forecasts.

Okay, thank you.

Our next question is coming from Randall Fenicki of Goldman Sachs; please proceed with your question.

Great, thanks, just quickly. Given the recent settlement, is Biaxin XL now in your forecast? And then separately, is the 45% to 48% gross margin range or band a range that we should be thinking about over multiple years given the consolidated company now? Thanks.

Can you repeat the second half of the question?

Sure, the 45% to 48% range, is that a multi-year longer term target that we should be thinking about the consolidated company now?

I will say that we are using that for the time being. I think it’s inclusive of IVAX, although as we said there maybe fluctuations around that; usually in the past we have seen only fluctuations going one way and that is north and not downwards. But as we said, it depends a lot on the product mix, the portfolio mix, the launch mix, etc., but I will say that if one should take a band this will be the band.

And in recent years we’ve been mostly on the top end of the band, so you have to take it also into consideration, and next year we might consider it in our guidance regarding this band and be come up with something else.

As it relates to Biaxin for erythromycin, what we can share with you is that we did enter into an agreement with Abbot which allowed us to keep the products in the market and also allows us to reenter the market under certain conditions. I should say at this point it’s not that large a product and we would expect that there will be more than one player. So, in terms of expectations, I guess that’s the way to think about it.

Okay, great, thanks a lot.

Due to time constraints our last question this morning will be coming from David Buck of Buckingham Research; please proceed with your question.

Thanks for taking the questions. First on gross margins with Dan, with the Jerusalem plant not yet on line and with the PAPI level of vertical integration higher for this quarter or presumably going higher, why wouldn’t there be an increase in the gross margin range? For Israel, can you give us some sense of what the overall branded sales of the company were in the quarter? You referenced the $400 million respiratory business, but why not give us a sense of overall what the branded sales actually were for the quarter? Thanks.

As to your first question, as I had mentioned, with all the moving parts one of the moving parts is also something which you know we are awaiting already for quite a few months and did not get any approval for that yet, not even a revisit. So, as I said, once we are more settled on those moving parts, we’ll revisit again is the question and if we find out that the band moves somewhat, we will certainly give an indication. I don’t assume that it will be before the end of this year and maybe even later.

On the branded side of the business?

David, in my presentation I told you that our respiratory business in 2006 is going to be a $400 million business.

Okay, fair enough, since you didn’t want to give it for the quarter, can I ask one more? Copaxone, can you give us some sense of when we’ll find out more about the buyout terms for 2008?

Yes, when we closer to the year, we’re talking about 2008, we still have a long time to go.

Okay, fair enough, thanks.

I would like to thank everybody for joining us on the call today. As always, we’ll be happy to take additional questions offline if you have any. We also hope you will join us in person tomorrow at our luncheon or listen into the webcast. Dan, if you could please provide the replay information I would greatly appreciate it. Thank you.

If you would like to listen to a replay of this conference, you may dial 877-660-6853 domestically or 201-612-7415 internationally. The account number is 3055 and the call ID number is 209542. This concludes today’s conference call. Thank you for your participation.