WEBVTT - Teva CEO Richard Francis Talks Tariffs, Generic Drugs Market

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio, news.

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<v Speaker 2>Business, Bloomberg Markets. I'm Scarlett Food. It's time now for

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<v Speaker 2>the stock of the hour, and we're focused on Teva Pharmaceuticals.

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<v Speaker 2>Those shares are rising after the drug maker reaffirmed its

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<v Speaker 2>full year revenue guidance, even after sales missed estimates for

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<v Speaker 2>the second quarter. For the quarter that ended, Teva is

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<v Speaker 2>gearing up to launch new products in the second half

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<v Speaker 2>of the year and looking at spinning off its active

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<v Speaker 2>ingredient business, which it hopes will work as catalysts. So

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<v Speaker 2>joining us live, I'm pleased to say, is the Teva CEO,

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<v Speaker 2>Richard Francis, and of course Bloomberg Open Interest co hosts

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<v Speaker 2>Katie Greifeld here with us as well. Richard, thank you

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<v Speaker 2>so much for speaking with us. I want to start

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<v Speaker 2>with the backdrop that you are operating against, which is tariffs,

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<v Speaker 2>and how that affects you the US and you kicked

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<v Speaker 2>off this week agreeing to fifteen percent tariffs on pharmaceuticals.

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<v Speaker 2>How does that affect your business, particularly here.

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<v Speaker 3>In the US.

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<v Speaker 4>Well, firstly, thank you Scott Kate for having me. I

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<v Speaker 4>do appreciate the time. So when it comes to tariffs, yes,

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<v Speaker 4>that is hot, hot topic and how it impacts us.

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<v Speaker 4>A couple of things I'd say is, firstly, we're not

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<v Speaker 4>super clear on exactly the detail of what's happened in

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<v Speaker 4>Europe and whether generics are included or whether they're not.

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<v Speaker 3>I would like to say the exposure to China.

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<v Speaker 4>We don't have an exposure to China, and we are

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<v Speaker 4>very limited exposure to India because obviously you saw the

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<v Speaker 4>tariff's beIN announced this morning.

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<v Speaker 3>But I think the reason why I.

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<v Speaker 4>Thought in a good position is our supply chain and

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<v Speaker 4>how it sets up. So we have eight manufacturing sites

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<v Speaker 4>in the US already, and our major product, which I'm

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<v Speaker 4>sure we'll talk about, oesteto, which grow twenty two percent

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<v Speaker 4>of the US, is manufactured in Florida. So I think

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<v Speaker 4>from a point of view a supply chain, we're in

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<v Speaker 4>a good position. But what we do need to have

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<v Speaker 4>is clarity on what these tariffs mean in Europe and

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<v Speaker 4>what they mean in other parts of the world, and

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<v Speaker 4>the detail of that, because there has been some rumors

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<v Speaker 4>that generics.

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<v Speaker 3>May be excluded or not until we'll have to wait

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<v Speaker 3>and see.

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<v Speaker 2>Yeah, no, you're working in a fog of uncertainty. Get that,

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<v Speaker 2>and I'm just curious whether you've had conversations with the

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<v Speaker 2>White House or surroguits of the White House on these

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<v Speaker 2>specific issues.

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<v Speaker 3>Well, we've been.

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<v Speaker 4>Working with them on two three two and make it,

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<v Speaker 4>helping them sort of work through what is the complexity

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<v Speaker 4>of the pharmaceutical market, the supply change as well as

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<v Speaker 4>on the innovative side and on the generic side.

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<v Speaker 3>But with regard to these tariffs that.

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<v Speaker 4>Have just recently announced, we don't have any clarity yet

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<v Speaker 4>on the detail.

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<v Speaker 3>What I would say is because of.

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<v Speaker 4>What I said about our supply chain and our footprint

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<v Speaker 4>in the US as well as we've been working the

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<v Speaker 4>last few months on mitigating plans.

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<v Speaker 3>As to whatever may happen. Now let's see the detail.

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<v Speaker 4>But it's something where I think we already would have

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<v Speaker 4>plans in place to at least mitigate some of this.

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<v Speaker 1>I hear what you're saying, Richard, that there's a lot

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<v Speaker 1>of details that we would all like to have, especially

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<v Speaker 1>you where you're sitting as the CEO of a pharmaceutical business.

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<v Speaker 1>But you said in May that you would have to

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<v Speaker 1>raise drug prices if President Trump imposed those pharma tariffs.

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<v Speaker 1>So now that we have at least some details. When

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<v Speaker 1>it comes to the US and the EU, is that

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<v Speaker 1>still the plan? Is that a lever that you planned

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<v Speaker 1>a pull?

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<v Speaker 4>Well, I g when you think about the two businesses

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<v Speaker 4>we have, we have the innovative business and we have

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<v Speaker 4>the generics. On the innovative business, we won't increased prices

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<v Speaker 4>because the way the system set up, we can't.

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<v Speaker 3>So that's just the fact.

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<v Speaker 4>But as I said, our major products actually made in

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<v Speaker 4>the United States, so tariffs are not actually relevant to that,

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<v Speaker 4>which is good for US. I think when it comes

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<v Speaker 4>to Generics, is a very competitive market and you can

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<v Speaker 4>you can only raise prices when you have a new contract,

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<v Speaker 4>and in that position, we would instill a free market.

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<v Speaker 4>So it depends what our competitors do. So I think

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<v Speaker 4>the ability for prices to change will depend on the

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<v Speaker 4>competitive environment and how some of our competitors move. So

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<v Speaker 4>I think will they go up? I think we'll have

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<v Speaker 4>to wait and see. There is the potential that they could.

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<v Speaker 4>But I would argue that you know, in the United States,

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<v Speaker 4>one in fifteen scripts is a tap a script. So

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<v Speaker 4>we are a major supplier of the healthcare system in

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<v Speaker 4>the United States, and we've been community into the administration

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<v Speaker 4>who are very aware of this, and I would say sympathetic.

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<v Speaker 4>They want to make sure there is a good supply

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<v Speaker 4>of medicines to the United States, and so I think

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<v Speaker 4>as that all plays together, we'll understand actually how tarifs

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<v Speaker 4>do fall on the generics and or if they do

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<v Speaker 4>or if they don't. But I think that's how it's

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<v Speaker 4>separated up is we have the innovative where we can't

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<v Speaker 4>raise prices. Theoretically you can in generics, right, but it

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<v Speaker 4>is a competitive environment.

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<v Speaker 1>I appreciate the context there. I want to talk about

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<v Speaker 1>another issue that we are also searching for details on,

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<v Speaker 1>and that is Most Favored Nation drug pricing. That is

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<v Speaker 1>a proposal that President Trump has floated. We've been talking

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<v Speaker 1>about your generics business, but when it comes to your

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<v Speaker 1>branded franchise, how might MFN affect that and are you

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<v Speaker 1>putting any plans in place there?

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<v Speaker 4>Well, actually, we're in a really unique position here, Katie.

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<v Speaker 3>So I don't think most people are sit in my

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<v Speaker 3>seat will.

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<v Speaker 4>Answer it this way. Is because our innovative portfolio is

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<v Speaker 4>so young. I mean, it's twenty seven cent growth and

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<v Speaker 4>is closing on two point nine billion dollars of revenue.

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<v Speaker 4>And this is a Stato a jovi and you said it,

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<v Speaker 4>but apart from a Jovi, these are basically sold in

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<v Speaker 4>the United States. We haven't gone global yet and so

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<v Speaker 4>because of that, the most favored nation pricing I think one,

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<v Speaker 4>we need to see what it says and when it's

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<v Speaker 4>going to be.

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<v Speaker 3>Put in place.

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<v Speaker 4>But we're not a mature by a farmer company yet

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<v Speaker 4>where we have that geographical footprint of our innovative business.

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<v Speaker 4>So that gives us, I think, time to think about

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<v Speaker 4>what we do, to think about where we launch our products,

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<v Speaker 4>and to think about the pricing. But right now, Oestio

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<v Speaker 4>and your studia are pretty much sold in the United States.

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<v Speaker 4>A Jovi is sped across Europe and international markets, so

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<v Speaker 4>that's a very limited footprint compared to many other biofarmer companies.

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<v Speaker 4>What I would say is it's important to understand what

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<v Speaker 4>the most favored nation look like. Because another thing I'd

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<v Speaker 4>say is when you look at the actual net price

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<v Speaker 4>of products in the United States, on many cases, because

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<v Speaker 4>of what has happened with the PBMs over time, the

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<v Speaker 4>net price versus the price in Europe, there's not as

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<v Speaker 4>big a differentiation that's differential as you'd imagine on many.

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<v Speaker 3>Drugs, so let's wait and see how it plays up.

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<v Speaker 4>But I think we're in a strong position as TeV

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<v Speaker 4>and that's important because our innovative portfolio is growing so

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<v Speaker 4>well at twenty seven percent.

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<v Speaker 1>And Richard, we have less than a minute left here.

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<v Speaker 1>But Scarlett alluded to this in the intro that there's

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<v Speaker 1>a lot of interest in the Tappy business over at Teva.

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<v Speaker 1>Have you found a buyer yet?

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<v Speaker 4>So we've been in active discussions and we are in

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<v Speaker 4>active discussions, which is why I'll probably keep this quite

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<v Speaker 4>short and we'll have an announcement on this at the

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<v Speaker 4>end of Q three. What we are doing is taking

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<v Speaker 4>the time to make sure whatever we do, we really

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<v Speaker 4>bring value to our shelders, which is the prime responsibility

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<v Speaker 4>I have is to make sure we create a long term,

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<v Speaker 4>sustainable company that creates shelder value.

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<v Speaker 2>Richard Francis, you've just earned yourself an invitation to come

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<v Speaker 2>back by the end of the third quarter with that announcement.

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<v Speaker 2>Thank you so much for joining us today, Pharmaceutical CEO,

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<v Speaker 2>Richard Francis, And of course Katie where I fell at

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<v Speaker 2>Bloomberg Open Interests co host