Thank you for standing by ladies and gentlemen, and welcome the Teva Pharmaceutical Industries Limited 2016 to 2019 preliminary financial outlook. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session [Operator Instructions]. I must advise you that today’s session is being recorded on Wednesday the 07/13/2016. I will now hand the session over to your speaker today, Mr. Kevin Mannix, Senior Vice President, Head of Investor Relation. Please go ahead.

Thank you operator. Good morning and good afternoon everyone, thank you for joining us today to discuss Teva’s 2016 through 2019 Preliminary Financial Outlook. On the call with me today are Erez Vigodman, Chief Executive Officer; Eyal Desheh, Chief Financial Officer; Siggi Olafsson, President and CEO, Global Generic Medicines; and David Stark, Deputy General Counsel. We will start the call with presentations from Erez and Eyal before opening the call up for questions and answers. A copy of the slides can be found on our website, tevapharm.com under the Investor Relations section as well 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 for Teva’s performance. Actual results 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 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. With that, I will now turn the call over to our CEO, Erez Vigodman. Erez.

Thank you, Kevin. Good morning, good afternoon and thank you for joining us today. We are pleased to host the call this morning. We expect the closing of the Actavis Generics deal at any time now, given our merger file is pending final approval by the commissioners of the U.S. FTC. Other than the FTC approval, we are not aware of anything that would be expected to prevent the closing of this transaction. In parallel, we are closely monitoring the corporate [ph] bond market and given the very attractive terms currently prevailing there, we are considering accelerating our planned debt offering. With this in mind and despite the fact that we do not yet have full visibility into the Actavis Generics numbers and in particular certain pipeline information, we have decided to pull value today with our best estimate of the financial outlook for Teva in 2016 to 2019 following the close of the deal. But before we dive into the numbers, I would like to recap the progress we have made as a company since the beginning of the 2014 leading to this point in time. In 2014 and 2015, we solidified the foundation of Teva. We put the Company on solid footing and announced a series of strategically compelling business development deals. The combination of this move continues to transform Teva’s business in both generics and specialty. 2016 is a transition year for us. We are focused on fully delivering on our short-term operational and financial goals, and at the same time moving ahead with our longer term strategic move. We have been preparing the integration of the Actavis Generics business. We closed the JV with Takeda in Japan and the acquisition of Rimsa in Mexico, and we continue to strengthen our specialty business. We delivered a solid…

Thank you very much, Erez. Good morning everyone and thank you for joining us. Before I review the combined financial results of Actavis. I would like to provide an update to our Q2 outlook. We believe that results for the second quarter of 2016 will be better than our original guidance. Revenues are expected to be between $4.9 billion to $5 billion and non-GAAP earnings per share is expected to be between $1.19 to $1.22. For the entire 2016 and here we assume five months of consolidation of Actavis Generics business, revenues are expected to be between $22 billion to $22.5 billion. Earnings per share are expected to be between $5.20 to $5.40. We assume an average share count of 1,021 million shares in total arriving at these results. We model our current outlook from 2016 to 2019 and the outcome is presented in here, this outlook is organic only and does not include any business development initiatives and it assumes no generic competition to Copaxone 40 milligrams as we have said before. As we already demonstrated on this call, our operational and financial results moved by one-year forward compared to original assumption and create strong results for 2017, 2018 and 2019. In 2019, our non-GAAP EBITDA is expected to range between $10.7 billion to $11.5 billion. Earnings per share is expected to range between $6.9 to $7.4 per share and cash flow from operation is expected to be between $8 billion to $8.8 billion. In addition to cash flow operation, we expect to generate $2.9 billion from divestiture of asset in 2016 reflected in the free cash flow line. The specialty business net EBITDA for 2018 and 2019 included here is expected to be $500 and $400 million lower from our original expectation for these respected years, due to the removal of the security for the forecast and a number of product delays, which were already announced. Altogether, the new Teva demonstrates strong financial performance. Thank you all, I would now like to return the call to Erez for his closing remark.

Thank you Eyal. Post the Actavis Generics acquisition, Teva will serve approximately 250 million people every day and as the world’s largest medicine cabinet with more than 1000 molecules. We will 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 medicines and biologics. The Company’s compelling economics and significant free cash flow generation will allow for rapid deleveraging, and as we have previously stated, give us the ability to pursue acquisition of attractive blend and pipeline assets about similar products as well as deals that would expand our footprint in key growth market. The unparalleled platform we will create is ideally positioned to realize opportunities that global and U.S. generics markets offer, especially, given the challenges and changes, we are witnessing in various competitive landscape. We will be able to drive in an evolving generic landscape by leveraging our global infrastructure, go-to-market platform and leading portfolio and pipelines for the benefit of patients’ healthcare systems and in investors around the world. Thank you for your time and we will now open the call to take your questions.

[Operator Instructions] Your first question comes from the line of Ken Cacciatore (Cowen & Co. LLC). Please ask your question.

Great, good morning guys, just a couple of questions. First, what if anything do you and Allergan need to do to get the transaction closed. It sounded like from the prepared remarks, everything is complete, but just wanted to make sure there is nothing in this amendment that the FTC needs to review or would cause any more of a delay? And then a clarification, I believe I heard you say that the guidance for the next few years does not include a generic 40 mg of Copaxone. Just wondering why you wouldn’t factor that in? And then also there is going to be a little bit more room from the lack of debt that you need to issue. Just wondering if that would be redeployed, may be even more faster into branded business development? Thank you.

Thanks for the question Ken. Hi, it’s David. So, on your first question, under the agreement there is up to 10 business days between clearance and closing. As Erez said, there is nothing else that we know of that would be standing in the way of getting the deal closed other than the FTC clearance, which could come at anytime. The amendments are obviously public and get filed with the FTC in normal course and we don’t see any issues there.

Okay. And our first priority now is to use the very strong cash flow that the combined company would generate to deliver a job quickly and also to direct resources in order to target highly attractive, complementary BD [ph] be the target.

And on Copaxone?

On Copaxone. First of all Ken, hi thanks for the question. So, just to put things into a frame. We estimate about $4 billion in sales for 2016 and an erosion of between $200 million to $300 million every year from this level until 2019, and we assume no generics as we have communicated in the past in our focus.

Thank you.

Your next question comes from the line of Umer Raffat (Evercore ISI Group). Please ask your question.

Thank you so much. I guess my first question is, what do you think is really driving the slight delay in deal close? I know the timelines were end of June. Is there a formal FTC Commissioner vote scheduled yet? I think that’s the first one. Secondly, working capital change, as part of the amendment, like I just wanted to understand, did Allergan invest more in working capital, or is there like a Crestor launch you guys didn’t realize? I just want to understand the key impetus behind that. And finally, Eyal, maybe this one is for you, so when I look at the guidance provided today versus the guidance provided last year, and I focus in specifically on 2018, it seems like revenues are lowered by about $1.65 billion, but EBITDA lowered by about $1.2 billion. So, I just want to understand what is driving that, because the margin impact to EBITDA sounds like it is being driven by branded, but I just wanted to be clear. Thank you.

Thanks Umer, this is David. On the first question. There is no formal FTC vote scheduled nor will there be a formal FTC vote scheduled. I’m glad you raised it, because we’ve had questions about that from time-to-time, it’s a much more informal process between the front office of the FTC and the commissioners.

Umer on the working capital adjustment. So, due to the closing delay, I mean delay in closing, Allergan has agreed to change the working capital mechanism we had in the original agreement and provide Teva with approximately $800 million additional working capital adjustments. This amount as you saw in Erez’s slide before effectively reduces the cost of the deal.

And may be Umer if I take the 2018 question, it’s Siggi here. So, as you highlighted in 2018 versus the July 2015 guidance, the difference is $1.2 billion in EBITDA. As both Erez and Eyal highlighted, we have moved it one-year forward, but how you divide the $1.2 billion is, approximately $500 million is due to the delay in the specialty pipeline and approximately $700 million is due to the additional divestiture that you have seen and the delay in closing the deal. So that’s why we catch up fully in the 2019 timeframe, where we catch up on the divestiture and we get the full net synergies of $1.4 billion. So, that’s how the math works on the EBITDA for 2018.

Got it. And just to be… sorry go ahead.

Yes. No, please go ahead.

I was just going to say, just to clarify. I just want to be super clear. So the last minute delay, is there a new product that needs to be divested? And also Eyal, I’m sorry, I couldn’t follow the working capital part fully. Sorry about that.

No, so if I take the first part, basically what we highlight is, in our original assumption as you see on this slide, we assume the divestiture of EBITDA of roughly 300 million versus what we are seeing today based on the commitment we have made to regulatory authorities around the world of 600 million. That obviously impacts the net synergies, we are still going to get the net synergies of $1.4 billion by the end of 2019. So the eight months delay in getting the synergies and then the net debt synergies which obviously hit us in day one and we will capture up until the end of 2019, affects the net EBITDA impact in 2018. Probably, one of the slides explains it better where you see the gap between the two lines of the original synergy capture versus the new synergy capture.

And maybe just to put in other way Umer. Basically contribution of the Actavis deal to our EBITDA in net income, the adjusted time difference between 2018 and 2019 during the next three-years, adjusted time difference and on basically the level of revenues and profits from our treasury pipeline debt, also a time difference between 2018 and 2019 to the extent net profit is impacted. And I underscored that point in my opening remarks. On the working capital, basically again I don’t know I was not clear about what really matters in here. The agreement between us and Allergan enable us to reduce the net cost of the transaction, that’s what matters at the end if you translate it into lower financing needs and that’s what matters.

Next question please.

Your next question comes from the line of Liav Abraham (Citigroup Global Markets, Inc.). Please ask your question.

Good morning. A couple of questions. Firstly, can you just give some additional color as to what the assumptions are for the variance between the low-end and the high-end of the guidance ranges that you provided? My understanding is that this is not Copaxone, or is it based on Copaxone and that’s my first question. Secondly, can you comment on the generics pricing assumptions that you have baked into your forecast? And then following on that, Siggi, maybe you could just comment on the generics pricing environment more broadly that you are currently seeing in the marketplace. Thank you.

Yes. So let me start on the question two and three. So, first of all, on the generic pricing assumption for the plan, as Eyal and Erez highlighted this is obviously a high level plan, because we haven’t got access to the Actavis information, we don’t have the details behind the pipeline. We need to obviously to understand the opportunities on the pipeline and IP situation, but our assumption and what we assume is basically approximately 5% organic growth that we see year-on-year and that matters with the formula I gave you at the earnings call earlier this year. Are we assuming the same pricing of minus 4% or is it minus 5%. It really doesn’t matter, what we say is net-net when we have the new launches minus the price erosion minus any volume decline, we are seeing approximately 5% growth year-on-year. In terms of the generic pricing in the second quarter, we saw no change in the pricing, we saw a stable environment as we talked about from first quarter into second quarter. But obviously in second quarter as we have highlighted to investors there was no significant new launches that we saw in [Teva] (Ph), which obviously impact the overall generic numbers, but the pricing has remained stable.

Siggi, do you see that environment changing in the back half of the year once the deal closes, as two of the largest players in the market come together?

No, so our assumption for the rest of the year is basically assuming the same pricing erosion. It’s difficult to say, but that’s as I’m sitting here today with the information I have in hand, we are assuming now a focus for the guidance for the remaining of the year with same pricing assumption as we have had for the first half of the year.

High-end, low-end. Good morning Liav. Basically the range - we are not doing this for the first time, we are providing ranges to all our forecasts, there are so many parameters in it, including but not limited to exchange rate ability to focus. As Siggi mentioned, our lack of very detailed knowledge of the Actavis pipeline, we will get that excess so that is only once we close the transaction. So these are our best estimates, which should accommodate different demand to product launch timing and all the risk factors and opportunities that are included in forecasting going forward.

Just to be clear, the low-end of the range still assumes Copaxone exclusivity over the period?

Yes. The low-end of the range is up floor. That’s how we see it and we are very committed to it.

Okay. Thanks.

Your next question comes from the line of Jami Rubin (Goldman Sachs & Co.). Please ask your question.

Thank you very much. Just some clarification questions. Maybe for you Siggi. Can you clarify your modeled assumptions for Allergan’s revenue contribution? I’m just looking at Slide 14, and I’m confused by it. Just, when the deal was announced back in July, not a lot has changed, but our understanding was that Allergan’s revenues were about $6.5 billion, its EBITDA was $2.4 billion. As we move forward, obviously the delay of the deal, the divestitures, et cetera, et cetera. But can you break out for us what you are assuming Allergan contributes to the business in terms of its top-line and EBITDA out to 2019 and It seems that the business has weakened from our perspective, but how you are thinking about the growth in the contribution from that business? Secondly, Eyal you had skipped over the cash flow guidance in the second quarter of 2016. It seems like that’s coming down by a couple hundred million. Why is that? And then, thirdly, you gave ROIC of 9.3% by 2019. Can you put that into perspective, what is ROIC today before the deal and how do you see that ROIC changing? Where is the contribution, the shareholder value contribution? What is that actual number? Thanks very much.

So thanks Jami. So with regards to the Actavis modeling, obviously, it’s a high level modeling, we don’t have access to the pipeline again. But if you think about Slide 14 again, what we are showing here is in a way of the starting point. So the EBITDA starting point of the first full-year of operation is $2.6 billion, which basically is inline. You mentioned the $2.4 billion, so there has been a significant growth in the business. Obviously, it has to do a lot with new product launches and you see that in our numbers and the same applies to the Actavis numbers, but we feel comfortable around this $2.6 billion. We are not going to break it out in the years, because in a way our modeling is done in the way that we don’t have access to the full pipeline to allow us to do it at the high level. But we feel that with the pipeline, as saw in this slide 326 ANDAs pending, more than 110 first-to-files, we have modeled 5% growth in the new combined company of the generic business, which we are very committed to and feel comfortable around. But really what Slide 14 is showing you is the first full-year of operation. And what you need to do, if you want to see the overall value of the first full-year of operation is add the $1.4 billion of net synergies to the $2.6 billion to see what the synergies plus EBITDA is of the acquired business.

Jami, two to your question. One, the cash flow in Q2 was influence by one that’s a significant milestone payment on behalf of reslizumab, the product that we have launched. We were focusing this a quarter later, so it was triggered and the payment was made that’s the major difference. Regarding ROIC, we calculate ROIC from this transaction three and four-years out. Basically, the net income contribution from the transaction, on the FX, costs of the deal and the qualitative measure I think that over 9% is very significant for our industry, measured this about against the Teva weighted average cost of capital, which was calculated to be 5.5% and gives us the economics of the deal which are very significant.

Thank you for that. Siggi, can I just follow-up? I’m just trying to understand the Allergan math for 2016. So your math implies that Allergan generic sales will be about $2.7 billion for five months. If you annualize that, that would be about $6.6 billion, plus if you added $1.1 billion of revenues divested, that implies about $7.7 billion today. Is that the right way to look at that because that sounds like a huge jump from last year. No. Okay.

No, Jami, so maybe I will stratify things there. So basically what we try to convey here is that the way we look at the business when we announced the deal and what basically formed the basis for our model then was $2.7 billion of EBITDA 2016 plus $0.5 net synergies, minus $1.2 billion of tax and finance expense. And then adjust with depreciation contributed $1.8 billion to our net profit. Looking now at 2017, which is the full calendar year around the business first one, we are basically now modeling $2.6 billion of EBITDA on the standalone basis which is generated by Actavis. Less contribution from net synergies catches up overtime and we are able to reach for the $1.4 billion just by the end of 2019. But lower tax and finance expenses that at the end of the culminates with higher net profit contribution by the deal to Teva. That’s basically what Slide number 14 spells out.

To address Jami your question about sales and how we multiple the sales into 2016, overall the revenues hasn’t changed in the Actavis business. We understand it is in good shape, we are pleased with the business as it is, obviously when we close we will have better information into it and how the sales lines comes in. Obviously, in the outer years this is modeled, but the business is in good shape as you see from the Slide 14. And Slide 14 was to highlight exactly that the underlying business of what we are acquiring is in very-very good shape and then the same shape as we were hoping when we did the transaction a year ago.

Great. Thank you very much.

Your next question comes from the line of Manoj Garg (ABR-Healthco). Please go ahead.

Thank you for taking the question. I have a few. So one on the deal. Do you have some level of blessing from the FTC that the level of divestitures that you are pointing to will be sufficient for combination?

The answer is yes.

Okay great and then second, David, maybe for you, since you are not including any generic competition to the 40 milligrams in your guidance. Was there anything that came out of the IPR hearing that gives you additional confidence there?

Well I don’t know about additional confidence, but I would say and thank you for the question that we came out of it feeling very good about things. As we’ve stated in the past and you IPR hearing itself was part of the equation there.

And we are very consistent with the way we provided basically models and guidance in the past. The outlook here is consistent with basically the way we provided you with outlook in the past in that regard and going forward when we guide for 2017, we might provide you with the Street with more views that relates to potential scenarios for 40 milligram Copaxone.

Okay great, and the last one for Siggi, while we have you. Siggi, maybe you can talk about where you are seeing pockets of strength in the near term, and maybe talk about pricing a little bit?

Yes. So I think our assumption on pricing has not changed, we have been in that and as I said to a previous question, we assume on underlying growth of 5% in the generic business, which give surprising somewhere between 3% to 6% decline year-over-year in the overall. But in second quarter, we had the stable pricing environment, there was no significant change in the pricing. I think the opportunity obviously coming into 2017, 2017 and this is what we want to speak to investors when we have closed the deal, is to give you a glimpse and a little bit a look into the combined pipeline of Teva on Actavis Generics in the new Teva. I think that will be a very exciting years of new launches both in 2017 and 2018 and that really drives the growth Manoj. So, it’s amazing and this is why it’s such an exciting opportunity to be in this company. To be in a generic company that has the opportunity over the next five-years maybe to launch 4,000 to 5,000 products in the market. That is something that is not given - and that is the engine for the growth of our business. So, really it’s the new launches, but we hope to take you through that detail when we have closed the deal few weeks after that.

Great. Thank you all.

And the next question is from the line of David Risinger (Morgan Stanley & Co. LLC). Please go ahead.

Yes, thanks very much. I have a number of questions. First, what is your best guess for the timing of the closing of the deal in the next week, in the next few weeks any color on what we should expect would be helpful. Second, could you just talk more about the pipeline, and please explain this specialty pipeline delay, and then, what specifically is in your 2019 revenue for branded pipeline revenue? The third question is, with respect to Allergan’s performance, the consensus view is that Allergan’s revenue has been worse than expected, and that pricing is worse than expected. Siggi, you are saying on the call here that Allergan has performed in the quarters that they have reported, since you announced the deal, that Allergan has reported in line, and that the pricing environment hasn’t been worse than expected. So could you just talk through that a little bit more, and help the Street understand why the Street is wrong in thinking that Allergan has been performing worse than expected, and the pricing environment has been worse and expected? Thank you.

So hi David, thank you for the questions. First I would like to underscore again we expect the closing of Actavis Generics really at any time now, any time now. On the specialty pipeline, key delays and changes are driven by the Vantrela, SD-809, Huntington disease and [indiscernible], key specialty products that are included in our pipeline, basically are going to generics revenue in 2019 already. Of course, Copaxone, Vantrela ER, hydrocodone IR, SD-809, Huntington and tardive dyskinesia, TV-84125 will start to generate revenue already in 2019. Respiratory franchise basically will generate in 2019 $1.3 billion to $1.4 billion of net revenues. And together with [indiscernible] and oncology products that will generate for us also something in the neighborhood of $1.5 billion to $2 billion, these are basically main products, it does not include everything, but really the main products that are included in the numbers in 2019.

And David on the Actavis business, as I said, it’s in line with our expectations. I think obviously there are two things that play into it. First of all, 2015 was a very good launch year and you see the revenue and the profitability going up and down, obviously two-thirds of the Actavis business is in the U.S. and when there is lack of launches like was in first quarter. In second quarter, they have Crestor, but that was the only big launch. When you see a lack of launches, you will see a dip in revenue and that’s as per our expectation. I obviously don’t have access to the pricing of Actavis, we assume that in the pricing and what we have seen has remained minus 4%. So, this is why what we’ve seen in the after these numbers since we signed the deal has not been expected, because you always have to assume that launched drive that revenue and when you don’t launches, obviously you are hit by the price erosion. So overall, I have the same comfort in the Actavis business now as I had 12 months ago when we announced the deal.

Thank you.

The next question comes from the line of Tim Chiang (BTIG LLC). Please go ahead.

Hi. This question might have been answered already, but I just wanted to get clarification on your second-quarter outlook. Why is the revenue going up, but your operating cash flow down from the prior outlook, again?

Well first of all, thanks for the question. I will try to clarify it. There is no direct relationship of the same quarter between revenues and cash flow. In and Q2 we are collecting the revenues of Q1. So collection is always delayed, but there are many, many other moving parts like working capital, level of inventory, level of receivables, gross to net payments to our distributors and customers. So, you can’t really look at the exact tie between the quarterly results and the cash flow. But if you look at this given everything that is happening now, this is a very strong cash flow generation for Teva standalone, even before the deal closes.

Just one follow-up. The rate of debt pay down, is it the same as you had originally forecasted a year ago with the original targets for leverage by 2018, 2019?

First of all, we are borrowing less. So our base borrowing level is going to be lower, if you make debt adjustment it’s very similar to what we have predicted before.

Okay. Great, thanks.

Thank you. The next question comes from the line of Marc Goodman (UBS Securities LLC). Please go ahead.

Yes, morning. Just to clarify on the guidance, so Copaxone, there is no generic in there whatsoever, whether it is the high-end or low-end of the range and so if there happen to be a Copaxone within this time period, that guidance does not hold. I just want to confirm that. And second of all, let’s just presume that there was a generic Copaxone for a second, sometime in the next couple of years, what would you do differently in running the business, with respect to changing the expenses? And then second question is, Siggi, can you give us a flavor for how you think about the operating margin of the combined generics business now?

May be I will start and then Erez will take it over and Siggi will answer the last one. Yes, obviously if you see generic competition to 40 milligram, this is not the right outlook. in Q3 last year if you remember we provided our views on what could happen in a situation like this. We will address it in more detail in the future and as of this call, we are very confident in Copaxone, we have seen how the market took generic on plenty, but obviously numbers would be somewhat different. Erez.

Yes. So, we would provide additional scenarios that pertain to Copaxone when we provide the guidance for 2017 and then we will basically be in a position to deal with different scenarios with more visibility into the number, that’s number one. Number two, of course Teva is positioned to deal with all relevant scenarios that pertain to Copaxone let alone after we close the generic deal.

Marc on the operating margin, so Teva is currently in the high-20s in terms of operating profit. Actavis is probably in the mid-30s something like that. What I would see is that at the close of the transaction we will be somewhere around 30 may be a little bit higher, but obviously when we get the synergies through over the three-years, my best estimation for the generic business is we should be running a business with operating profit around mid-30s. So around 35% operating profit when we have realized the synergies, which would be best-in-class of the generic company of this size.

And maybe just as a follow-up here, can you give us a flavor for what is happening in Europe and how you are thinking about Europe during this period, does it return to growth?

Yes, so how we see Europe is basically we are assuming on average the price erosion of approximately 5% in Europe. Overall, the beauty now on the new pipeline is we will see in our key European market launches between 15 and 25 products per year in the new combined pipeline. Obviously, what we are getting with the Actavis acquisition is the pipeline also included in Metis, that allows us to grow bottom line, but also small growth on the top-line due to the new launches. I think the business itself, the underlying business in Europe might grow like a 1% to 2%, I think IMS is forecasting 1%, but our growth will rely very heavily on the increased pipeline that we have in Europe.

Thanks.

Thank you. The next question comes from the line of Ronny Gal (Sanford C. Bernstein & Co. LLC). Please go ahead.

This is Erica Kazlow on for Ronny. Could you provide some details on what your branded sales assumption growth rate is now, and how that would be impacted, should generic Copaxone potentially enter the market sometime in the next couple of years? Also interested in understanding how the entry of Copaxone 40 milligram generic would impact pricing and gross margin on Copaxone. I know you say you would provide some guidance later, but would your previous number of $1.2 billion on revenue and $0.65 EPS impact in 2017 still stand?

So just in general, the growth profile of our specialty products looks very appealing, let alone from the moment new key specialty products kick in 2017, 2018, 2019 and that basically accelerates the growth of our specialty business and reinforces of course the growth profile of Teva in totality. We will provide much more details when we meet you for 2017 guidance.

On the Copaxone thing, what we said earlier is when we give guidance for 2017, that would be obviously after the IPR decision in August, we will give you more detail if any impact would be on generic competition on 40 milligrams.

Next question.

Next question comes from the line of Randall Stanicky (RBC Capital Markets). Please go ahead.

Great. Just a couple of questions. First, can you clarify on Copaxone, how was that factored into the previous 2015 guidance, versus how you detailed today with the erosion? And then, secondly, if we look at the EBITDA margin for 2019 on today’s outlook, it is 38.2%. It was 41% on 2018 last year. Is it fair to assume that delta is just the change in specialty, if we hold other timing assumptions constant? And then tangential to that for Siggi, as you think about the gross margin for the Actavis and Teva business, has there been any change at all to how you are modeling or factoring that into guidance from July 2015 to today? Thanks.

So let me start Randall, I think overall on the gross margin what has changed is obviously the timing and realization of the synergies. You saw in our slide that 500 million out of the net 2 billion of synergies is coming from the cost of goods sold and that is realized overtime and it’s more towards the end, because obviously it takes a long time to close front and make purchase of synergies and things like that. So that is the only change that has happened in the gross margin assumptions is that the cost synergies are coming in approximately a year later or eight months later due to the delay in closing of the transaction. But otherwise, we are at the same gross margin as before, we are very pleased there has been a significant improvement in our gross margin over the last three-years. We know what the gross margin is in Actavis we are pleased with that but it all has to do with the synergies and the capture overtime.

And again on the Copaxone question, basically, 2016 is stronger than what was originally anticipated. By the way, that was also the case, comparing to 2015 in retrospect but we continue to model $200 million to $300 million erosion on a yearly basis. So the basis of 2016 is higher than what was anticipated originally and we continue to embed into our model at $200 million to $300 million erosion on a yearly basis. And the question on basic delta that you see in 2018, maybe I will try again to clarify the things. What basically, we are seeing in the numbers is that we are ready to catch up on all the economics that we expected to generate from the Actavis Generics deal. There is a $400 million gap in 2019, in terms of EBITDA, it is emanating from our specialty franchise. But we are basically able to compensate on that, in the bottom-line due to much lower tax and finance expenses. So bottom-line, we are able to catch-up and going forward once key specialty products kick-in, we will reverse the plan that we see in specialty during the timeframe that was provided here. And even accelerated pace and momentum of our specialty franchise.

Got it and should we still expect a September more detailed business update following the close?

So we haven’t said September. We obviously need to get our hands on the pipeline. But we hope soon after close, we want to give you more visibility into the generic business, to highlight what is in the pipeline, highlight maybe the growth, highlight also where we think each of the pipeline products could fall onto different years. I don’t think we will update the outlook at that point in time, but we want to give you more visibility into the combined pipeline of the generic part as soon as we can after close of the deal.

So if you relate to basically what was reported during our Q1 earnings call, we basically indicated August and September as the two very relevant milestones to what we are doing today basically, next time that we plan to meet the Street is during the first week of August Q2 earnings call. But basically net milestone would be 2017 guidance and that’s basically a day that should be said. Between August and 2017 guidance, we will meet the Street to provide what Siggi has just indicated.

Okay. Great. Thanks guys.

And the next question comes from the line of David Maris (Wells Fargo Securities LLC). Please go ahead.

Good morning. First of all, thank you so much for all the financial detail about the assumptions. It’s very helpful. Erez, Eyal, as you worked through the deal, and you reflect on the past year, other than the small timing issues and the divestitures that you have already covered in the call, what one thing do you think has turned out as a positive surprise, and what one thing do think is more challenging? Then separately, on an unrelated note, if you could just update us on how the Takeda deal is going? Thank you.

So, basically positive surprises is how the businesses holding under such circumstances. That’s not easy basically to run the business with such level of uncertainty almost to advance. The way the business is holding up is really impressive. That’s one important surprise. And the second one, of course is, we get more or less economics for a lower net cost of transaction and that’s something which is translated of course into financing needs. And overall, we are able in terms of bottom-line, at lease to compensate on basically time differences of EBITDA generation. So that’s the second one. I would say that beyond the fleet side maybe two things. One, basically the time it takes to be granted with approval. That’s basically a bad news. That was a bad and is a bad news for us and of course it makes 2016 a transition year where we plan basically to drive things forward full engine in 2016. It will take us basically to full engine from the beginning of 2017 in order to generate all the numbers that we have just shared with you. That’s number one and I would say that those are the two ends of the spectrum here.

Yes, maybe one additional positive and very meaningful is the financing situation. When we put together all the moving pieces, we need to raise to $4 billion less, our capitalization is better, we will raise more money on equity. On the equity, our raise back in at the beginning of December, our leverage growing immediately after closing is lower even substantially lower than what we have anticipated and market conditions for raising money is significantly better. If you remember when we announced the deal, we predicated average cost of debt of about 3.5%, we are now looking at something like 2.8 to 2.9 and that’s very meaningful, because that is long-term and overtime that accumulates to a lot of money that we are saving.

David on Takeda deal as we mentioned before, we closed the transaction, we started the operational joint venture in April 1, so this is the first full quarter of operation, it’s going extremely well. We have hired into key position. We got the great CEO to join the team to lead the team. So obviously, it will have a nice contribution in the beginning, but it’s expected to grow overtime. I think the model we are building in Japan is something really works well with the pipeline, the strong infrastructure of the generics that comes from Teva. But also the known the localization, the distribution and the sales that comes from Takeda, I think this will proven to be a great combination, but so far so good that we have where we are in terms of Japan.

Great. Thank you very much.

The next question comes from the line of Greg Fraser (Deutsche Bank Securities, Inc.). Please go ahead.

Good morning and thank you for taking the question. This is Greg Fraser on for Gregg Gilbert. On the guidance, can you talk about your gross margin assumptions that are contemplated over 2017 to 2019 and I’m not sure if I missed this, but can you comment specifically on how much revenue you are factoring in from the Actavis business in 2017?

Yes. So as I mentioned to Jami, we haven’t given out individually what the revenue is on the Actavis business. That will be a whole business. We gave out a picture of EBITDA on Slide 14 just to explain the full-years of operation, but we have not broken out the revenue contribution in Actavis in any of the years, because it will be one on the same company hopefully when we close the deal alone the gross margin.

On gross margin, you know Teva gross margin today is between 62.5% to 63%. It includes a significant portion of specialty business, which is high margin business. Combining which has the highest gross margin in the generic industry by the way will reduce average gross margin to around 62% with synergies on operation improving this overtime. So we are between 60% to where today over the period.

Thank you.

Thank you. The next question comes from the line of Elliot Wilbur (Raymond James & Associates, Inc.). Please go ahead.

Thanks, good morning. I just wanted to ask a line follow-up questions related to Siggi’s earlier comments around margin expectations or margin evolution for the combined generics business. Specifically in thinking about the savings to arrive with the synergy realization on the COGS aspect of the total synergies target, how much of that is driven by just facility consolidation, plant rationalization, versus portfolio optimization? Teva obviously has divested a significant number of products over the last couple of years, relatively low margin assets. And just looking at the Actavis portfolio, their business is much more concentrated at the top, and they have a very long tail of sub-scale, sub $10 million assets. I’m wondering if you have really hadn’t had a chance to do a deep dive there, and think about what rationalization opportunities there, and whether or not that is fully embedded in the $500 million synergy realization target in COGS. And just quickly, with respect to, obviously their most important aspect, methylphenidate, assuming that you are embedding essentially the current status quo in the 2018 and 2019 guidance, but just wanted to confirm that.

So, Elliot it’s a good question. So, first of all on the COGS, overall the first part of the COGS synergies are around purchasing. So, you roughly can think like about half of the COGS saving about 250 is due to facility and roughly half is around the purchasing, people aspect and things like that you get earlier. So that’s how we think about it. Is there a longer term opportunity for more yes there might be. The reason why we say that it is and as [Carlo] (Ph) has mentioned on these calls before, it takes at least three-years to close a plant when a decision has been made. So, to realize synergies from closing a plant and this is a three-year timeframe we are showing you here, there might be an opportunity outside of the timeframe of what you are seeing here in terms of further synergies, but as we always talk about synergies in the first three-years or 95% within the first 36-months. That’s why we peg it like this, but the purchasing synergies, the cost of API excipients will be the first one to come and approximately 250 million will be then in the facilities, but most of this facilities have decisions that’s already been made to enable us to get that savings in the planning period. With regards to the methylphenidate. I have mentioned before, we assume competition on methylphenidate in the planning period. We assume that in fact this year so far Actavis hasn’t seen that competition. I think that is a good news for the business but we assume that there is a competition on generic Concerta in the planning period. That’s how we have planned for the outer years.

Okay, but is there any changes in assumptions around the existing relationship with J&J? I mean I guess the question, I should have been more up front. Are you assuming that in fact, you will have your own product approved in the marketplace by the end of 2017, or maintenance of the existing agreement or essentially at this point there is no difference between the two?

We assume we will have a product in 2018, let’s word it like that.

All right. Thank you.

The next question comes from the line of David Amsellem (Piper Jaffray & Co.). Please go ahead.

Thanks. So I just wanted to ask a high-level question on the clearing of the FDA generics review backlog and how is that reflected in your long-term aspirational targets that you have laid out today? Or I guess, put another way, is the clearing of the backlog something we should think of as kind of cutting both ways, in terms of potentially putting some pressure on you competitively, but at the same time, also driving more contributions from the pipeline? I just wanted to get your thoughts on how you have reflected that clearing of the backlog in those long-term aspirational targets. Thanks.

David it’s a good question. Our assumption is basically that it doesn’t change so much, obviously it’s difficult as we said, we don’t know the details of the Actavis Generics pipeline, so we need to look at that. That is part of the things we will review very carefully when we close this transaction. But you are absolutely right to point out it’s cutting both ways, because it is acceleration and significantly in the backlog of clearing the backlog of the FDA. Obviously there might be some price implication of that but also as the new combined company roughly have about 20% of all ANDAs pending at the FDA at the close of the transaction. We obviously would be the beneficiary of it. So, net-net it cuts both ways, if there is acceleration at the FDA, we will get the benefit and the new product launches, but obviously it could hit us a little bit on the pricing and the other way around pricing is more stable while the backlog is in place, but our assumption here is that basically it remains the same time to approval as we have seen today.

Thanks. So just to be clear, the clearing of the backlog just quantitatively in the long-term targets should be seen basically as net neutral?

Yes, more or less for the overall business net neutral, even a slightly positive, because when you have 20% of the ANDA pending it could be slightly positive for us as long as we have the right IP landscape to enable us to launch the products.

Thank you.

[Operator Instructions] Your next question comes from the line of Rohit Vanjani (Oppenheimer & Co.). Please go ahead.

Thanks for taking the question. I just had one quick one. It looks like for 2Q, it looks like Azilect, Nuvigil, ProAir, Qvar, Pulmicort, they are all down quarter-over-quarter on a prescription basis. Copaxone maybe up, but what is the strength in the quarter that is causing you to revise guidance upwards?

Well, first of all what we have seen in revenues and that’s what we monitor. We have seen a slight improvement quarter-over-quarter in all our specialty product from Copaxone to the respiratory product Azilect, Nuvigil they are all slightly ahead of last quarter and little bit above our forecast.

So, basically we will shed more light on it of course during our Q2 earnings call, but just to underscore our specialty franchise basically deliver very strong results in Q2.

And then lastly I mean have you said how many target action dates for your pipeline that the Teva business has for 2016?

No, we haven’t, but I think the FDA and the industry and some analysts have come out like approximately 50% of the pipeline has the target reduction day-to-day.

Okay, great. Thanks.

Thank you. And your final question comes from the line of Andrew Finkelstein (Susquehanna Financial Group). Please go ahead.

Good morning. Thanks very much for taking the question. If you could just clarify, as you think about cash flows over the forecast period, there are a number of factors that went into the changes from the divestitures to the interest savings. But has the cash generation of the generics business itself, the margins and cash return on sales changed at all over the last year? And given some changes on the branded side as well, have your thoughts about the attractiveness in investing capital in generics versus brands for the longer term changed at all? Thanks very much.

I think may be two things, one is more general and that’s something we need to discuss more as well. The effectiveness of the generic business in evidence and I’m talking about the global generic industry. That’s a very attractive industry by all means gold rate, cash flow generation, profitability margins and of course the return to shareholders. For that you know I’m looking at the last 10-years and I look at basically the way we see the growth profile for the next 10-years that’s a very attractive industry. And when the gold rates are compelling and the EBITDA and the margins are reached, of course the cash which is generated is very profound and that’s something which is coming into play in everything that Teva has been doing. And especially look at the huge improvement during the last two-years in cash flow and now we are able to drive out our cash flow generation, cash flow from operation and free cash flow in a way that was probably driven by the improvement of margin in generics. That’s the main driving force and basically our ability to uplift and step up the cash flow generation from the business. Now, looking forward, what we see is a very heavy plan company would generate from the - they will close the deal to the end of 2019 more than $25 billion of free cash flow and if you wish without the divestiture, so during 2017 to 2019 timeframe more than $20 billion of free cash flow. And that’s just another tactic of basically the cash flow generation capabilities that the generic business and combined company is possessing.

And in terms of the branded business and the returns you are seeing there? Has that changed at all?

No, its Siggi here. I think in terms of the branded business, we see the returns very exciting. I think what we are seeing here is in terms of the delay in the pipeline, really the branded business is - and in terms of your question around where we want to invest. Clearly our specialty business is where we want to invest next. Really I feel personally that what we have in generics today is exactly the base on the company, we need to be a leader in this field. We really have an R&D capabilities in all dosage forms, we have our own operation in 80 markets around the world, we are the top three generic company in over 40 markets. So really, I think the company going forward would invest more on the branded side versus the generic sides for sure.

And yet to build on that basically the strong leadership position that we have been basically building in here on the generic side. At the same time, the strategy that we have got or which one we follow therapeutically as on the specialty side, in the quest to target and to claim for a global leadership position in each one of the therapeutic areas that are considered today call for us. And the notion is now cementing and bolstering sales pipeline and the product portfolio complementing each one of our therapeutic areas and I said this and I’m reiterating it now that basically the focus in shifting from busy perspective upon generics to specialty and also potentially to biosimilar in order to bolster also our pipeline is biosimilar.

Thanks very much.

Thank you.

Thank you. There are no further questions. I’ll now hand the session back to CEO, Erez Vigodman. Please go ahead.

So thank you everyone for joining us this morning and have a great day.

Thank you. That does conclude today’s session. Thank you all for participating. You may now disconnect.