Good day, and thank you for standing by. Welcome to the Teva Pharmaceutical Industries third quarter 2021 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question-and-answer session. To ask a question during the session, you will need to press star and one on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance over the phone, please press star zero. I would now like to hand the conference over to our first speaker today, Kevin Mannix, Senior Vice President of Investor Relations. Please go ahead. Thank you, Nadia, and thank you everyone for joining us today to discuss Teva's third quarter 2021 financial results. Joining me on today's call is Kåre Schultz, Teva's Chief Executive Officer, Eli Kalif, Chief Financial Officer, and Dr. Sven Dethlefs, Teva's Head of North America Commercial. We hope you've had an opportunity to review our press release, which was issued about an hour ago. A copy of the release and the slides being presented on this call can be found on our website at www.tevapharm.com. Please note that the discussion on today's call includes certain non-GAAP measures as defined by the SEC. Management uses both GAAP financial measures and the disclosed non-GAAP financial measures internally to evaluate and manage the company's operations in order to better understand its business. Further, management believes the inclusion of non-GAAP financial measures provides meaningful supplementary information and facilitates analysis by investors in evaluating the company's financial performance, results of operations, and trends. A reconciliation of GAAP to non-GAAP measures is available in our earnings release and in today's presentation. Please note that today's call will run approximately one hour. With that, I'll now turn the call over to Teva's Chief Executive Officer, Kåre Schultz. Kåre, if you would, please. Thanks, Kevin. Welcome everyone, and thanks for your interest in Teva. Our Q3 2021 financial highlights will start focusing on our revenues. The revenues came in stable compared to last year, but with a lot of underlying dynamics, which I'll be reviewing in the following slides. Our adjusted EBITDA came in at $1.2 billion, also very stable compared to a year ago. GAAP EPS came in at $0.26. Non-GAAP EPS came in at $0.59, also very close to last year. Free cash flow came in strongly at $795 million. We continue to see debt reduction and net debt has now been reduced to $21.7 billion. Today, we also announced a $4 billion refinancing. It's a debt neutral refinancing and it's issuing sustainability linked bonds which are linked to environmental KPIs and to access KPIs. Of course, we believe that by being the leading generic company in the world, we have a special, you could say, ability to support low and middle income countries with essential medicines, and we believe that's a very strong commitment we're showing with this bond offering. If we move to the next slide, and here you can see some of the dynamics on the revenue side. I'll just highlight a few of them. If you look at North America, you can see that North American revenue is a little bit below what it was a year ago. It's basically driven by the usual suspects you could say, which is that Copaxone is declining, and we have AJOVY and AUSTEDO increasing. I'll be commenting on the increase of AJOVY and AUSTEDO in the coming slides. If you look at Europe, and you can see that Europe is up compared to a year ago, we have seen some fluctuation, as you know, in Europe due to the COVID-19 pandemic. We saw lower volumes in the first and second quarter of this year. We're seeing volumes starting to pick up again here in the third quarter, and we expect volumes to continue to increase in the fourth quarter. In international markets, we're basically more or less unchanged, and that really means that the key drivers here, as I said, COPAXONE, AJOVY and AUSTEDO. Let's move to the next slide. Here you can see the development for AUSTEDO in the U.S. As you can see, we have seen nice strong growth in the last three quarters, but you can also see that there was a COVID related slowdown in the growth and that was really because less patients were going to their psychiatrist. More psychiatrist offices were closed during the lockdowns and therefore we saw this slowdown that you see in the revenues here in the first and the second quarter. We are back on a strong growth track now. You can see that both that on the total scripts to the left, and you can see it also on the revenue numbers. This is a development that we expect will continue, and of course, we are also focusing very much on patient activation and our DTC campaign to ensure that more people with tardive dyskinesia can get on therapy. We still estimate that there's around 500,000 people suffering from tardive dyskinesia in the U.S. and only a very small fraction of this patient population is currently being treated. We are very optimistic about the future growth of AUSTEDO. If we move to the next slide. As you know, AJOVY is launched now in most of the European countries and has been launched in the U.S. for several years. With regards to AUSTEDO, we see a continued nice development in the U.S. in terms of our total scripts growing quarter-over-quarter. We also see a very nice development on AJOVY in Europe with volumes growing steadily also quarter-over-quarter. We had an initial ambition of 25% market share in U.S. and Europe for AJOVY. We increased that ambition, I think one or two quarters ago to a third of the market, and we still believe it's very likely that we can reach a third of the market. That's basically due to the very superior long-acting profile of the drug, which means that it can be dosed both monthly and quarterly, and the very good safety profile that we have. Strong development with AJOVY. Also, as you'll note in the total sales numbers, we had a milestone in Japan, which is very positive because that's related to the actual launch of AJOVY in Japan, and that means that in the coming quarters, we will have revenues both from North America, Europe, and Japan in the AJOVY numbers. Let's move on to the next slide. Here we're showing you our specialty in biosimilar R&D pipeline, product pipeline. We're very happy with it. I won't go through it all. That would take too long. Let me just mention two interesting projects. One is risperidone LAI, long-acting risperidone, which has been accepted by FDA. Our file has been accepted for review. We hope to have it approved next year. This is a major new benefit for people suffering from schizophrenia in the form of a subcutaneous injectable long-acting Risperidone. We look forward to bringing that to the market to the benefit of people suffering from schizophrenia. We also have a new interesting license arrangement. It's shown here in phase I, anle138b. If we move to the next slide, then I'll just tell you a little bit about that. We have made a license agreement with MODAG, a German company, and it's regarding two compounds that are in the development for treatment of MSA and Parkinson's disease. We're very excited about this. As you know, we have a long history in Parkinson's. We think these projects are very, very interesting and hopefully long-term, if they turn out to work, then they could also have a potential in treatment of Alzheimer's. That's a really exciting addition to our portfolio. Let's move to the next slide. As you know, we have a long-term target for our operating margin of 28%. During our restructuring with the loss of Copaxone, of course, we saw operating margin decline, and then we turned around in 2019, and now we're growing the margin. I'm happy to report that we're growing the margin in line with our expectations. You can see here, year-to-date Q3, it's 26.8%. If you take the midpoint of our guidance, it's 27.5%, and we're still committed to the target at the end of 2023 of 28%. Going to the next slide. It's actually today very close to exactly four years since I joined Teva, and I'm very happy to report that in those four years, we've reduced the debt by some close to $13 billion, $12 billion-$13 billion. We've actually also paid $4 billion in interest in those four years altogether. Something like close to $16 billion-$17 billion have been returned to the bondholders. We'll continue to do that because as you can see on the next slide, we have our unchanged long-term financial targets. We want to take the net debt to EBITDA below 3x at the end of 2023. In order to do so, we need cash earnings to be strong above 80%, and we need the operating income margin, as I said before, to be at 28% so that we generate the cash needed to basically keep on reducing the debt. We have committed to use the cash flow for debt reduction, and we have no plans of raising equity. On that note, I'll hand over to Eli Kalif. Thank you, Kåre, and good morning and afternoon to everyone. I will begin my review of the third quarter of 2021 financial results on slide 14, starting with our GAAP performance. Revenue in the third quarter of 2021 were $3,887,000,000, a decrease of 2% or 3% in local currency terms compared to the third quarter of 2020. This decrease was mainly due to a lower revenue in our North America segment, mainly due to Copaxone and generic products, partially offset by higher revenues from generics and OTC products in our Europe segment, AJOVY and AUSTEDO. Our revenue continued to be affected by the ongoing impact of COVID-19 pandemic on markets and on customer stocking and purchasing patterns. For the sake of year-over-year comparison, I would like to note that Q3 2020 includes generic product sales in Japan, totaling $62 million and approximately $240 million for the full year 2020. As we have previously communicated, these products were divested as of February 1st, 2021, along with a manufacturing site in Japan. Foreign exchange rate movements during the third quarter of 2021, including hedging effects, positively impacted revenue by $42 million compared to the third quarter of 2020. Operating income was $623 million in Q3 2021 compared to a loss of $4.3 billion in Q3 2020. Net income was $292 million in Q3 2021 compared to a net loss of $4.3 billion in Q3 2020. Turning to slide 15. You can see that net non-GAAP adjustments in the third quarter of 2021 were $360 million versus approximately $5 billion in Q3 2020. You will recall that the operating loss and net loss in Q3 2020 were mainly due to a goodwill impairment charge and higher intangible asset impairment, which were related to our North American reporting unit. Non-GAAP net income and non-GAAP earnings per share for the third quarter of 2021 were adjusted to exclude these items, with the largest being amortization of purchased intangible assets totaling $199 million, the majority of which is included in cost of goods sold. Now moving to slide 16. For the review of our non-GAAP performance, Kåre and I have already reviewed the third quarter revenues, which totaled approximately $3.9 billion. Let's move down the P&L and look at the margins. Year-over-year total non-GAAP gross profit was flat and our gross profit margin improved by 63.6% compared to 52.4% in Q3 2020. The year-over-year increase in non-GAAP gross profit margin, both for the third quarter and year-to-date, were mainly driven by improved profitability due to our ongoing efforts to optimize our cost of goods sold, improved profitability from generic products resulting from the change in our product portfolio mix, mainly in our North America segment, and higher sales of AUSTEDO and AJOVY, partially offset by lower sales of Copaxone and lower profitability from ANDA. Our non-GAAP operating margin was 26.8% versus 25.8% a year ago. The increase was driven by higher gross profit margin mentioned above. We ended the quarter with a non-GAAP earnings per share of $0.59 compared to $0.58 in Q3 2020, mostly due to a lower spend base. Turning to our spend base on slide 17. We see that our quarterly spend base declined by approximately $108 million or $128 million net of FX. Looking at the year-to-date comparison, our spend base declined by $333 million or $540 million net of FX. Based on the first nine months of 2021, and according to our current estimation, we believe our spend base will come in at approximately $12 billion for 2021. Now, turning to free cash flow on slide 18. Teva's free cash flow in the third quarter of 2021 was $795 million, extending the sequential rebound we saw in Q2 and Q1, which generated $625 million and $59 million respectively. Please recall our 2021 free cash flow guidance, which we first provided in February, reaffirmed in April and July, and are reaffirming today. 2021 free cash flow is expected to be in the range of $2 billion-$2.3 billion. We expect free cash flow to pick up through the end of 2021 as we keep driving optimization of our working capital with a high focus on inventory improvements. Turning to slide 19. I'd like to talk about our debt management. This morning, we announced the launch of $4 billion offering of a senior note, the proceeds of which we are expected to be used for refinancing existing debt by way of tender offer that was also announced today. This is a really debt neutral transaction, and as you know, Teva has been very clear and consistent with its long-term financial strategy, which includes commitment to deleverage. We have executed on this commitment and reduced our net debt by more than $12 billion during the last four years, with the majority of cash generated by our operations directed to debt repayment. Today's announcement reflects our proactive efforts to refinance our debt ahead of significant maturities, just as we did in Q1 2018 and Q4 2019. With this transaction, our main goal is to align our debt maturity profile for the coming years with our core operational performance as we continue to focus on delivering our business objective and long-term financial targets. The bond offering we announced today represents Teva's first-ever sustainability-linked bond. We intend to offer euro and US dollar denominated sustainability-linked senior notes. For the last several years, Teva has evolved its approach to corporate responsibility, strategically integrating ESG aspects in its core business operations. For Teva, ESG means advancing health and equity through our medicines and across our business, optimizing the footprint of our operations on the planet, and dedicating ourselves to quality, ethics, and transparency. As part of our sustainability-linked bond offering, we have set ambitious KPIs to measure our contribution to social metrics through access to medicine in low- to middle-income countries by expanding regulatory submissions and product volumes, and environmental metrics regarding absolute greenhouse gas emissions reduction. Our intention is to set a direct link between our corporate responsibility commitment and our funding strategy. The bond proceeds will be used for general corporate purposes, which we will dedicate to refinancing of existing debt maturities expected in the coming years. On slide 20, you can see that our net debt at the end of Q3 2021 was $21.7 billion, compared to $22.7 billion at the end of Q2 2021. This decrease was mainly due to our free cash flow generation during the quarter, as well as exchange rate fluctuations. Upcoming maturities include $1.2 billion next month. Our net debt to EBITDA continues to decline, coming in 4.51x for Q3 2021, as we continue to make progress towards our 2023 targets to be under 3x by the end of that year. I would like to end my presentation by touching on our financials outlook for 2021, which you can see here on slide 21. Throughout the year, our revenue has continued to be negatively impacted by the ongoing COVID-19 pandemic. We have seen its impact on our market and on customers' stocking and purchasing patterns. Certainly, some geographic regions, product launches, and mix of products have struggled more than others to return to their pre-COVID patterns. Nor has this been more apparent than in the US market for AUSTEDO. The decrease in physician visits by patients and physician interactions by our sales personnel due to COVID-19 has resulted in fewer doctors diagnosing and prescribing treatments for a patient population suffering from tardive dyskinesia, which is very under-penetrated. In July, we reduced our guidance by $100 million to $850 million for 2021. While sales were a bit lighter in Q3 than we expected, we are still pleased with what we are seeing and expect an acceleration to occur in Q4. Therefore, we are reaffirming our guidance for AUSTEDO at $850 million. The same can be said for all other components of our 2021 outlook, which include total annual revenue of $60 billion-$60.4 billion, non-GAAP operating income of $4.3 billion-$4.6 billion, non-GAAP EBITDA of $4.8-$5.1 billion, earnings per share in the range of $2.50-$2.70, and a free cash flow of $2 billion-$2.3 billion. This concludes my review of several results of the third quarter of 2021. We will now open the call for questions and answers. Operator, will you please open the call for questions? Thank you. Dear participants, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad and wait for a name to be announced. We will kindly ask you to limit your questions to a maximum of two. Once again, if you wish to ask the question, please press star and one. If you wish to cancel your request, please press the hash key. The first question comes from line of Umer Raffat from Evercore. Please ask your question. Hi, guys. Thanks so much for taking my questions. Kåre, have the expectations for the private attorneys who seem to have been the holdup for many companies that are trying to settle, have their expectations rebased after they got the big money settlement they wanted from the bigger companies? Are they actually at the negotiating table now or not quite? Secondly, I'm somewhat confused about the commentary on AUSTEDO I'm hearing. Volumes were up 8% quarter-over-quarter. Sales are up 15%, and yet it tracked slightly behind versus consensus. What it really means is in Q4, it would have to track at, like, a 50% jump versus Q3 to get to the guidance out. If you could just clarify that. Finally, on the sustainability bond, one of the questions I had was, isn't sustainability bond proceeds supposed to be specific to sustainability projects? Or could they also be used towards refinancing upcoming debt? Thank you very much. Thank you, Umer. I will take the first and the last question, and then Sven, the head of North America, will take the AUSTEDO question. With regards to the opioid settlement discussions, we are in active discussions with the state AGs and with the plaintiff lawyers. I don't think there's been any rebasing or change in, you could say, the discussions. You are right that it is, of course, very complex. There's a lot of involved parties, and we haven't reached a settlement yet, as you will have seen, apart from one state, which we're happy about, but that's, of course, only a small fraction of the whole opioid complex. We are optimistic that we can still reach a settlement within the next 12 months. We're in active dialogue, and we hope to see that coming to fruition over the next 12 months. On the AUSTEDO question, I'll hand that over to Sven. Yeah. Thanks, Umer, for the question. The AUSTEDO plan for 2021 is based on two assumptions. One is on psychiatrists returning to office to diagnose patients in person, and the second one is based on the effect of the DTC campaign, which we started in May, accelerating new patient starts towards the second half of the year. What we've seen in our new patient starts going out of Q3 and now going into Q4 is a significant separation from the baseline trends. For that reason, we expect in Q4 to have an acceleration of sales and to end the year strong with AUSTEDO. Thanks, Sven. With regards to the bonds, well, you're right. There's something called green bonds, which are linked to. You could say purpose of the bond being investments in initiatives to improve the environmental impact of your activities. That's not what we're doing. We're doing sustainability linked bonds, and that's really linked, you could say, to the UN goals for sustainable development. It's where you do something where you help the world in a way that you are able to do. Because we are the leading generic company in the world, we are able to provide high quality essential medicines to low and middle income countries. That's what we are committing to. At the same time, we're also committing to improving our environmental footprint by reducing emissions of greenhouse gases. We think that's a really strong signal to our commitment to these two areas, and we think we're in a unique position to improve access to essential medicines in low and middle income countries through our portfolio of these products. We are the company in the world that has the most of the essential medicines on the WHO list of essential medicines. We are very happy and proud about this, and we hope that the bond issuance will be very successful, and that we will, of course, be reporting on an ongoing basis how we're meeting the targets we're setting for ourselves. Of course, we are committed to them and expect to meet them in line with the commitment we're showing today. Thanks for the question, Umer. Let's have the next question. Thank you. Thank you. you. The next question comes from the line of Elliot Wilbur from Raymond James. Please ask your question. Thanks. Good morning. Good afternoon. Questions for Kåre and Sven, just specifically with respect to trends in North American generics. Maybe just give us some perspective in terms of the primary contributing factors behind the sequential decline and sort of the break below the $900 million mark, which obviously has been stable for some time. Just curious as to you know whether it's you would call it very product specific. Is it more just accelerated erosion across the base, the absence of approvals? Just some color there would be helpful. Then for Kåre, maybe just you know bigger picture question in terms of thinking about the U.S. generics business as a whole. Just looking at R&D spend in the North American segment, it's annualizing somewhere around $600 million-$700 million, a little over 8% of sales. I'm assuming roughly half of that is probably pegged towards generic R&D spend. It just seems like a very high level, considering that would be cumulatively about $1 billion over the last three years, and it's just not generating any real noticeable return. I'm just wondering about your thinking about the need to sort of, you know, recalibrate or rethink investments in tied to the US generic business. Thanks. Yeah. Thanks for those questions. Sven will address the first one, and then I'll address the second one. Yeah. Thanks, Elliot. For the US generics, just as a reminder, we report North America Generics as a combination of Canadian biosimilars and the US generics business. There are three factors that influence the current sales trend. One is the price erosion. For our portfolio, I can say that we have a relatively stable price erosion scenario. It's of course influenced by Truvada and Atripla facing more generic competition, but we have remarkable resilience in the complex generic portfolio. For that reason, overall, our pricing environment is relatively stable. The second factor is volume. We're coming now to the end of our volume consolidation and network restructuring that led to basically a planned volume reduction due to portfolio consolidation. Here we also expect, let's say, a stable environment going forward. The most important factor, of course, for us this year is the number of product launches. Here we see for us, but also for the industry overall, the number of FDA approvals that we got were not on plan, and that is one of the factors that influences the performance for this year. Thanks, Sven. With regards to the overall question on generic R&D and the generic segment in the U.S., we are fully committed to being leaders worldwide in generics, also being leaders in generics in the U.S. Our R&D spend is showing a very good return on a longer basis. We are basically aiming at a 80% target of what goes off patent, whether it's biologics or chemical entities, and we are doing our R&D to match that. As you know, we have more than 1,000 R&D projects combined between biosimilars and generics, the majority of course being in generics. We think we have a good return on it. We are still committed to the $4 billion generics revenue on average over the coming years in the North American generics and biosimilar space. We think we can meet that. It's correct that this quarter we haven't seen any major launches and therefore we have a slightly weaker quarter. It's not really due to price erosion accelerating in our case, but it is due to the fact that as you've noticed over the last years, we've had, like for instance, some years ago we had EpiPen launch, then we had the TRUXIMA launch, then we had the Truvada and Atripla launch. We are having some launches that are waiting for regulatory approval. We are optimistic that we'll see them in the coming quarters. We are very committed to the US generic segment, and we don't see a structural weakening of that in the years to come. The amount that's up for grabs, so to speak, the amount of revenue that goes off patent stays unchanged, very high. We think this is a good business, and we'll keep on doing all the necessary research to support it. Thanks for the questions. Let's move to the next questions. Thank you. The next question comes from the line of Ronny Gal from Bernstein. Please ask the question. Good morning. Kinda wanna stay on for a little bit on the theme of the generic business. You know, I'm kinda looking at the increase of rituximab over the last few months, and obviously it's been a big driver for you for 2021 over 2020. You don't have another biosimilar launch in 2022, and it seems the rituximab erosion, in terms of price, is large enough to impact the growth of the overall North America generic line. Can you talk about some other products that you may launch in 2022 that will offset that erosion? Otherwise, it's just tough to see that generic business reaching that $4 billion in 2022. Can you talk a little bit about the ups and downs of that business? Second, the debt that you're offering here, Eli, can you just tell us roughly what should be the range of interest rates that you'll have in 2022 versus 2021, assuming you're able to do the refinancing? I know it's a projection at this point, but just give us a feel for where it's going. Thanks for those questions, Ronny. Sven will answer the first one, and Eli will answer the second one. Yeah. Ronny, so for 2022, we of course have some roundabout 30-40 generic product launches already lined up. Every product that we did not get approved or will not get approved this year in the US generics business naturally rolls forward into 2022, and these are the complex generics that we talked about earlier this year. For the biosimilar space, we don't expect a product launch in 2022. You're right, rituximab is now in a situation where we have three competitors, Teva, Pfizer, and since January, also Amgen. That of course changes the pricing environment. We now move to the strategy for rituximab to value maximization for 2022. Over to Eli, and the total finance cost that we're expecting next year. Yes. Yeah. I would say, Ronny, you know, if you follow the 2021 and also what we see in 2022 according to our estimations, we are going to keep the $1 billion in terms of finance expenses, so we don't see that one changing. Thanks. Thanks for the questions, Ronny. Let's move to the next questions. Thank you. The next question comes from the line of David Amsellem from Piper Sandler. Please ask your question. Thanks. Regarding business development, in the wake of the MODAG license agreement, I guess the question here is, you know, given the capital structure and given the specter of liabilities, particularly on opioids, you know, what can you do in terms of in-licensing and acquisitions, in terms of size, in terms of stage of assets or even acquiring a commercial-ready or commercial-stage asset? How aggressive can you be there? That's number one. Just stepping back on biosimilars, obviously a question is what kind of footprint you'll have over time. Can you just talk philosophically about what you think pricing erosion is going to look like in some of these markets? Do you think they'll mirror what we see for complex generics, or do you think that pricing will, and margins will remain even more robust over time? What are you seeing, and what do you think ultimately will happen? Thanks. David, thanks for those two questions. With regards to BE then what we can offer is basically our expertise, our know-how, our capabilities in development and our commercial capabilities. We cannot offer big upfronts, big cash payments, as you correctly note. It turns out that there's actually quite a lot of companies and research groups that are not just interested in sort of cashing out and getting a lot of the cash now, but some of them are really interested in keeping, you could say, some upside by staying in the project in the sense that they have future revenues coming in in the form of license fees. Because we have a strong track record in areas like what we just discussed with MODAG, we have had one of the best Parkinson's blocks ever in the form of Azilect, and we have a really solid CNS knowledge base and commercial footprint. That makes us attractive. Some of the big pharma guys, they sometimes prefer to pay a big upfront and take nearly all the rights and very low royalties if it succeeds. We can offer the opposite, you could say, low up-fronts, lots of expertise, strong commercial footprint, and then of course we'll be paying some royalties if it succeeds. That's the same thing that goes for a lot of the generic in-licensing that we're doing and for that matter, for the biosimilar in-licensings that we're doing. If you look at the Alvotech in-licensing, same idea. Small up-fronts, we take part in commercialization, or we do the whole commercialization, and that gives value to the company that's out-licensing to us. We are optimistic that we can keep on doing that. We are not gonna do any deals where we put a lot of money on the table. We are totally committed to debt reduction, and we'll stay that way, at least until we reach the end of 2023 target of net debt to EBITDA being below 3x. I can share with you personally, I'm really thinking that we should go even lower towards 2x before we could contemplate any significant cash in relationship to business development. When it comes to biosimilars, then I'll give you my take on it, and Sven can add some U.S. perspective to it. Biosimilars are more complex and more expensive to develop. The regulatory hurdles, the scientific hurdles are higher. In that sense, they are, like you said, more like complex generics rather than simple generics. And as a consequence of that, what we've seen so far is a pricing development that is, I would say, a mix between what you could expect from an old-fashioned simple generic and what you would expect from a, specialty product getting more competition. What you see is that, biosimilars will start out with a lower discount than traditional generics, and then they will be dropping in price as more competitors enter. Classically, less competitors will enter, and therefore, the competitive pressure will be somewhat less. Of course, the trend line is the same, the price will go down as more competition occurs, but the absolute levels are more attractive. The initial launch price has a lower discount than it has for a normal simple generic, and the price erosion is slower. In that sense, I think you're right, it's more like complex generics. If we look at some of those, then we can see that our situation, for instance, on EpiPen as an example of a complex generic situation that is more attractive than it is for a, let's say, simple generic such as Truvada, just to give an example, right? I think it's absolutely correct that the pricing development for biosimilars is more attractive. I don't know, Sven, if you would like to add some more details. Yeah. I think you already summarized it nicely. We think in two categories when we model our business cases for biosimilars. The main driver for value creation is the launch sequence. Are we first, second or third or fourth to market is actually the most important factor for generating value. You see this in the difference between HERZUMA or TRUXIMA, for example, in our case, where we are first to market or fourth to market. In terms of price decline, we model it in analogy to what we see over the last years already in Europe because the European biosimilar market is more established than the US market, but it behaves, as Kåre said, more like a complex generic market. You have a stronger value creation upfront because the price decline is lower, and then basically it trickles down as new competitors come into the market. Overall, we believe the tail-end value of these drugs are much more significant than for normal generics. Thanks, Sven. Thanks, David, for the questions. Let's move to the next questions. Thank you. The next question comes from the line of Balaji Prasad from Barclays. Please ask your question. Hi. Good morning, everyone, and thanks for the questions. Two from me. Just to follow up on the biosimilar front, with last week's interchangeable designation for Boehringer's Cyltezo, how does this influence your thoughts on the commercial landscape for Humira? And also with AVT02, what are the current roadblocks that you're going to research to getting it out to the market? Secondly, on the free cash flow guide for 2021, you have a variation of around $300 million, range of $500 million-$800 million for full year. Are there any material variables which can have a $300 million impact, with just two months left for the business? Thanks. Balaji, for those two questions, Sven will handle the first question. I'll give a top line on the cash flow, but I'm sure Eli will also comment on this. Yes, on the first question, I think it was about the prospect for Humira biosimilars based on the fact that Boehringer got an interchangeability designation. That's right. For their biosimilar. Yes. We know, of course, Amgen will come first, and then we have a whole range of competitors lined up for July launch. As I said before, I believe the launch sequence here will be the main value driver. Amgen also started interchangeability study for the high concentration products. We don't believe that they will come on time with the interchangeability designation to market, so in 2023. Our own product that we licensed from Alvotech will be interchangeable, sorry, and it will be a high concentration formulation. We should be in a pretty good space for this product launch. Thanks, Sven. With regards to free cash flow, you raised the question, how can you vary, let's say, $300 million. There's actually a very simplistic answer to it, which is reflected if you go back historically and look at our cash flows, that in the cash flow you have elements of working capital that have a high influence, not just, you could say, the quarterly earnings, because, of course, the quarterly earnings don't typically have $300 million in uncertainty on them. The free cash flow, you have your inventories, you have your accounts receivables, you have, like, your accounts payables and so on. Just small swings on those can actually, if they all swing in the same way, have a big impact on the cash flow. You saw it in the first quarter where we just had, you know, negative, you could say negative is maybe the wrong word, but all the movements on the working capital went sort of against the free cash flow. We had a very low free cash flow. You've seen other quarters where all the movements on these working capital items moved positive to the free cash flow. That is really the explanation, overall, but I'm sure Eli can give you some more, you know, feel for the details of how much are the effects of these working capital elements on the actual free cash flow. Eli? Yes, Balaji. Overall, I would say that in Q3 we saw more improvements in terms of how we are running our inventory related to our demand behavior. We saw that in that area. As well, we saw some favorable collections that actually moved according to the mix of the revenue and the shipping patterns. All in all, it went nicely. We still see our about 70% on the conversion year to date, of course, and for the year. That's on track. Thanks, Eli. Thanks for the questions. Let's move to the next questions. Thank you. The next question comes from the line of Navann Ty from Citi. Please ask your question. Hi, good morning. Thanks for taking my question. I have two follow-ups on generics and opioids. If you could discuss further the U.S. generics outlook. You previously saw no material change in market conditions and volumes coming back in June. Did that change at all after the Q3 performance? On opioids, given how the New York trial is going, could we see a nationwide settlement in the first half 2022 or more likely in the back half of next year? Can I just please ask the maturity of the new ESG bond? Thank you. Thanks for those questions, Navann. I think Sven will take the first one, I'll take the second one, and Eli will take the third one. Yes, thanks, Navann. I think the question was about US generic volume development and the outlook for the business. Let me answer this a little broader because we lost, of course, market share from 13 points to around 8.5 points over the last three years since 2018. If you analyze the volume or the underlying causes for that, it was primarily driven by management decisions to support our restructuring and the portfolio consolidation. Going forward, volume for us is not as high strategic value because our customers have moved from basically buying broad portfolios to buying individual molecules. We try to optimize molecule level or the molecule value, and that's of course also driven, in some occasions to volume captures. Overall, I would say, going forward, if we want to go for higher volumes in the US generics business, it always needs to serve the purpose of making our network and operations more efficient. Also then, of course, to capture value, because I believe, volume alone is not a strategic objective for us in the US generics business. Thanks, Sven. With regard to the opioid settlement discussions and the New York trial, it's correct, we have an ongoing trial in New York, a jury trial, and that's proceeding, but it won't end in the near future. It will end some time in the coming months. A trial can always be a trigger for a settlement. Of course you never know. The New York trial could be the trigger for a settlement once we get close to the actual verdict. We are very positive towards reaching a settlement. We are in constant dialogue with the state AGs and with the plaintiffs. So we are optimistic that we can reach a nationwide settlement. I cannot tell you that it will happen in, you know, the next month. I think it's realistic that it can happen within the next 12 months, but I can't be more specific on the timing. I think the last question, Eli, is about the bond offering, what the maturities, currencies, and so on. Yeah. Thanks for the question, Navann. I think that in terms of what we are looking for to do, of course, we were going to look to do both euro and USD. For the euro, five years and eight years tenure, and for the USD, five years and seven-year tenure. Actually, the way that we see it, we are going to make sure that we, in the coming years, be able to use our current free cash flow to support our maturities, and that will create kind of for the new issuance to get into a slot in between the years of 2027 to 2030. With that one, we are actually creating more modest, I would say, portfolio on our maturity to allow us to be able to pay according to our free cash flow generation. Thanks, Eli, and thanks, Navann, for the questions. Let's move to the next questions. Thank you. The next question comes from the line of Nathan Roth from Goldman Sachs. Please ask your question. Thank you and good morning. I have a few questions. First, maybe a follow-up for Sven on generic pricing in the U.S. It sounds like generally generic pricing trends haven't changed, maybe excluding the dynamics with Truvada and Atripla that you mentioned. Could you maybe just kind of talk about what you saw play out in the third quarter? Then, as we think about the fourth quarter, you know, I know it's a seasonally stronger quarter, but it does seem like the guidance implies a bigger step up in sales than what you typically see. Eli, I don't know if you could maybe just help us think about the cadence between 3Q and 4Q this year. Just lastly, if you could comment on what you've seen with respect to input cost trends, either API or labor costs, and how that's factored into your outlook. Thank you. Thanks, Nathan. I think Sven will take the first one, and Eli will take the second one. Okay, Nathan. Thank you for the question. Of course, we track pricing in the industry in US generics and for our portfolio. What we've seen is the numbers Sandoz reported yesterday on the US pricing portfolio. We don't see the same trends in our portfolio because we have a different portfolio structure than Sandoz has. For us, as you also said, Truvada and Atripla were the major factor in the first two quarters of this year. In the third quarter, we had a more stable pricing environment because this effect, of course, is leveling off. The main driver for us is the ability to price and to supply complex generics because they are more resilient in the market. Going forward, what we observe in terms of pricing environment are two factors. One is the stability of suppliers in the inventory management, basically because inventory discontinued releases drive, or set off, price bidding. That's one element. The second one is the approval rates for new generics coming into segments where we already have generics, so it's basically FDA-driven. But here we don't see any acceleration of the trend. For that reason going forward, we actually calculate our business for 2022 within a stable pricing environment for US generics. Thanks, Sven. Eli, will you comment on the change in revenue from third quarter to fourth quarter? Yes, Nathan, thanks for the question. What we see is actually in the main three areas, one is the specialty portfolio, which as we mentioned, we see instead of going to accelerate, that's one element. The second element is more dynamics in our generics, which is actually including what as Sven mentioned, the Tecfidera and the biosimilars. The other stuff is in the other two regions, Europe and international markets. Those actually going to contribute to the increase from Q3 to Q4. We can also add that, as you said yourself, it is a seasonal pattern that we've seen, I think, the last 10 years, that there's always stronger demand. Just in general terms, one of the reasons for stronger demand in the fourth quarter historically is, of course, the fact that you have specialty buying by wholesalers because you have price increases typically around the first of January. That's been the tradition in the US marketplace. That also adds to this. Then, of course, the holidays and inventory builds up before the holidays, which we've also seen for many years. Yeah. Nathan, was there one more part to your question? What was the last one? Oh, just input cost, if you could just comment on what you've been seeing? I'll comment on that. We've seen a lot of industries reporting that they are dramatically affected by input costs such as energy, raw materials, transportation, and so on. Of course, we also see that, but to a lesser extent, simply given the fact that most of our inputs are related to, you could say, the cost of labor, which is relatively stable, of course, to energy is a relatively small piece of our total cost base. We do see increase in transportation costs, but again, transportation is also a relatively small piece of our cost base. We haven't seen anything dramatic. It might be that we will, going forward, see a inflation effect on cost of labor. That remains to be seen. It's really too early to predict. You can spend hours discussing that, with any economist that you pick. We'll be observing that. Of course, it's important if we get into a more inflationary environment. It is important that our whole generic portfolio, for instance, in the U.S., our whole OTC portfolio and our specialty portfolio in U.S. is subject to price flexibility because we can actually increase prices on all these products. Thanks for those questions, Nathan, and let's move on to the next. I think it might be the last. Two more. We have two left. Okay. Two more people. Let's have the next one. Thank you. The next question comes from the line of Jason Gerberry from Bank of America. Please ask your question. Hi, this is Ashish Verma on for Jason. Thanks for taking our questions. One on opioid litigation. Can you talk about the recent Louisiana opioid settlement, which has a November 2nd opt-in for the deadline for the political subdivisions? Do you have any visibility into that process? I would imagine that that would be informative in terms of what happens with the rest of the states for the subdivisions. The second question is the Risperidone LAI. How much of a benefit does the sub-Q provide here? Sorry, could you just repeat the last bit? How much, exactly what does Risperidone LAI provide? Yeah. How much of a benefit does the subcutaneous formulation provide here? As we know, like one of the other sub-Q has not done well in the market. Yeah. Thank you very much. I think I'll handle both of these. With regard to the opioids and the settlement in Louisiana, we're very happy about this settlement. It is basically a mirror of what we are offering and seeking to reach as a nationwide settlement. It's a pro rata cash amount, paid over 18 years, same way as we are discussing it, for the nationwide settlement. It includes also product Suboxone, and that is of course important because that's a product you use to wean people off opioid abuse issues. We're very happy about it. Your specific question about the subdivisions. This assumes that all the subdivisions in the state of Louisiana are included, and that's been the way we've been negotiating it with the state, and we're optimistic that this will be the case. I can't remember. There's a deadline, I think we haven't reached it yet, where we just need to get confirmation that all the subdivisions are included. That's our clear assumption that will be the case. Of course, for the nationwide settlement that we're discussing, we also need the subdivisions in there because otherwise it doesn't really make any sense. That's what we're going for. With regard to Risperidone LAI and what the benefits are compared to the other long-acting injectables that exist in the marketplace, I'll need to give you just a little bit of explanation. When you suffer from schizophrenia, it's really important that you stay on your medication. There's a risk if you only take daily tablets that you skip some tablets because you know you get a little confused, you feel very well, and then all of a sudden you get a relapse. Every time you get a really bad relapse and get psychotic, it is very harmful for your brain and your cognitive functions. Therefore, it's very important that you stay on your medication, and therefore, all the long-acting products were invented initially. They are typically given as intramuscular injections, kind of a depot effect. These injections are quite painful because it's a quite thick needle, so to speak, a long needle, and you need to get it into the muscle tissue. This is not a very nice thing to undergo, but it's very effective, of course, because it secures that you're covered for at least four months. Now, in the case of our product, it's a major improvement because it's subcutaneous, so it's a small volume. It is a very, very low level of pain. It's a very, very thin needle. It's easy to do the injection, and that's really the main benefit. Then we've done phase III clinical trials showing that both once monthly and once every second month, we have excellent efficacy, very, very strong phase III clinical data. That's really the benefit. You get the strong efficacy, but in a nicer, more convenient way. Thanks for those questions, Ash. Now to the last questions. Thanks. The last question comes from the line of Gary Nachman from BMO Capital. Please ask your question. Hi. Good morning. First, Kåre, where are you seeing most of the COVID-19 impact in different markets and with customer stocking and purchasing patterns? When should that normalize? Will that happen in Q4? Are you still confident 2021 should be a trough year, whether revenue or EBITDA? What are some of the big levers there that we should be thinking about now as we're approaching year-end? The second question, AJOVY launch in Japan, what's the opportunity there? What other markets will you be going into? What could the contribution from AUSTEDO be in China and other markets outside the U.S.? How much will ex-US markets contribute to your guidance targets for both AUSTEDO and AJOVY, this year that you set out? Thanks. Thank you, Gary. I think I'll take the first one, Sven can comment also on it, and then I'll take the second one. I'll do it overall high level because there's a lot of details to the COVID-19 impacts, of course. If you think about it high level, then of course, COVID's been with us so long now that we have to go all the way back to 2020. You remember that we had a patient hoarding of products, specifically in Europe in the first quarter of 2020. We had a destocking at patient levels in the second quarter of 2020, which took volumes down. We had the effect of, you could say, the lockdowns in both U.S. and Europe in the third and fourth quarter of last year, of 2020. We were optimistic when we made the guidance for 2021 that we were seeing all the vaccinations coming on, and we hope that after Q1, then we would see basically the markets normalizing in Q2 of this year. Now, as we all know, it didn't go that fast. We did see the initial normalization of script levels in the U.S. starting at the end of the second quarter. At that point in time, of course, we were below where we were expecting to be because we thought we would have had normal doctor visits, prescription visits, prescriptions and so on in Q2 of this year, and we didn't get that. We had the continued lockdowns, mask mandates, all this stuff happening both in Europe and U.S., high levels of infections and so on. We got lower volumes, which I showed you before, of AUSTEDO scripts, of rep visits to psychiatrists, of psychiatrists staying open and so on. All those numbers are subdued in the second quarter. In the third quarter, they've started to move up. That's why you see the AUSTEDO scripts are moving up, AUSTEDO sales are moving up. Also in Europe, the lockdowns have been more or less lifted, so we see European volume coming up. But we had hoped that European volume started picking up already in the second quarter and then accelerated in the third and fourth quarter. Now we're seeing all these things happening in the third quarter, and we are expecting in our guidance that this will continue in the fourth quarter. We have good reasons to believe that because we're not seeing any new lockdowns in Europe, we're not seeing any new lockdowns in the U.S., so we think we are aligned there in our projections for the year with the continuation of a normalization of the market. Then you can ask me, are the script levels actually back to where they ought to be? Here I would say we're getting very close to the 2019 levels. However, of course, we would be expecting a growth in, let's say, European total script volume, because that's what we normally see, a low single-digit growth. We haven't caught up with that lag of low single-digit growth in 2020, 2021, but we are sort of back to where we were in 2019. If you look at psychiatrist doctor visits in the U.S., then we were below in Q1, we were below in Q2. In Q3, we're just getting close to where it used to be, so to speak, in 2019 before COVID-19. I'm optimistic that once we get now into the fourth quarter, we'll see for the first time since COVID-19 started, that doctor visits in psychiatrist offices will be above, you know, that slowdown that we've seen. A lot of details, really it has affected us this year. It is normalizing. I would think that we would next year in Q1 continue to see the normalization. This is, of course, based on the assumption that we continue to see a strong vaccination drive and that we continue to see a relatively low level of severe cases in hospitals, which is the current trend line. Any comments, Sven, on top of that? No, I think you actually exhausted it. I would say the only risk factor I see is the cough and cold portfolio that's for U.S. generics, but also for our European OTC business, because in 2020 or 2021, we didn't have a real cough and cold season due to the social distancing, and that basically should happen or normalize also next year. Thanks, Sven. On AJOVY, Japan and AUSTEDO, China. We're very happy about the launch in Japan of AJOVY, and we'll be going, you know, for prevention of migraine. We think it has great potential. There's a big market for this in Japan. In Japan and in China, the way products penetrate is, I would say, slow and steady because first you get the approval, you get the price, which is set by the government. You don't have a lot of hassle with the pricing. You don't have pricing negotiations like that. You had that already. That's the easy part. You need to get on what's called hospital listings, both in Japan and China. Actually it's the same pattern for AJOVY and AUSTEDO. As you work through all the hospital listings, you get the product on there, and then your scripts start to take off and gradually build up. When it comes to the fourth quarter of this year, AJOVY sales in Japan, AUSTEDO sales in China will still be marginal. They will not have a major impact. In both markets, we are happy about the development and the numbers will be accelerating over the next 10 years. It's a steady build up. It's a good launch in both cases and we are very happy about the products reaching more major markets. Gary, thanks for the questions. I think with that we will end the call. Yep. Over to the operator. There are no further questions. I would like to hand the call over to our speakers for closing remarks. Thank you everybody for joining us for the call today. As always, we're happy to take any questions you have today, tomorrow, and in the coming weeks. Take care and be well. This does conclude our conference for today. Thank you for participating. You may all disconnect.