JD Durkin: Say hello to our next guest, appropriately so. Richard Francis, CEO of Teva, one of the world’s largest generic drug manufacturers, here for R&D Day at the New York Stock Exchange. We’re looking forward to our chat. Good to see you here today.
Richard Francis: Thanks for having me.
JD Durkin: Richard, you’re about three and a half years into the company’s so-called pivot to growth strategy. I’d imagine partnerships, M&A activity, all a part of that strategy. Walk me through how it’s gone. What has changed most in the company?
Richard Francis: Well, firstly, we actually launched the pivot to growth strategy here at the New York Stock Exchange three and a half years ago, so it’s good to be back. The strategy was actually to move from a pure-play generics company to a world-class biopharma company. And I’d say we’ve done that. We’ve arrived, and we’re now a world-class biopharma company. That was epitomized today by the fact that we had an R&D Day where we told all our investors and the analysts about our pipeline. So, to answer your question specifically, what we’ve done is we’ve created an innovative branded business almost out of nothing. This year it’s going to be close to 4 billion, and by 2030 it should be close to 6 or 7 billion.
JD Durkin: And today you laid out plans for one new innovative medicine a year for the next five years. Do you need to speed up development, and if so, what more do you need to do for that very ambitious goal?
Richard Francis: Well, it’s interesting, because once again, when we started this journey, we realized we had some pretty good assets in our pipeline, but they were languishing there. They weren’t really invested in. We weren’t prioritizing them. So I spoke to Dr. Eric Hughes, the head of R&D, who had just arrived, and said, look, these are great. How much money do you need? What capabilities do we need? Let’s move fast like a biotech. And we have. We’ve gone from a very fragmented pipeline to now one where we have over 12 assets. That’s why we’re going to have a launch a year for the next five years, and then probably a launch every 18 months after that, which is pretty remarkable.
JD Durkin: Are there particular treatments in this environment that most excite you? And talk to me a bit about the biggest needs that you think are still unmet.
Richard Francis: Well, actually, we’re in two big therapeutic areas, neuroscience and immunology, and both of those are underserved. In neuroscience, we’ve just launched a treatment for schizophrenia. We’re about to launch a [unclear: “term”] for Tourette syndrome for children, so that’s a big unmet need. There’s never been a drug launched specifically for Tourette’s. And then as we move forward, [unclear: “it’s signed to launch”] some drugs into asthma, into celiac disease, vitiligo, alopecia, which is more immuno-related. All of those are underserved. We’re very excited that we can actually bring treatments to patients who otherwise haven’t had very efficacious treatments.
JD Durkin: That’s incredible. Really great. I’m very grateful that you’re willing to share all that information with us. As if all of that weren’t enough, you recently returned to investment grade. So let me ask you a little bit about the debt situation. You improved the debt picture significantly here. What does that allow you to do now that maybe you could not do before?
Richard Francis: Well, it frees up a lot of capital for us, because obviously we’ve been spending a lot of money financing that debt, paying it off and then just financing interest on it. What I’m excited about, and I think is a testament to what we’ve done, is we hoped to get investment grade by the end of ‘27. We’ve done it in ‘26. We did it a year early. The way you get investment grade is you pay down your debt and you start to grow your EBITDA. We did both, and that’s why we got it a year early. With that extra capital, we’re maybe doing more BD, doing some specific M&A, or just investing in this pipeline that I’ve just spoken about.
JD Durkin: I’ve got about a minute left. You’re targeting more than $3.5 billion free cash flow. We love the free cash flow conversation. By the year 2030, what should investors be looking for to gauge as that process continues to move forward?
Richard Francis: Well, what I would say is, if you look at just the fundamentals of Teva right now, I’d say focus on the gross margin. Our gross margin is going to go up every year significantly. That’s going to drive our EBITDA up every year. That’s going to drive our free cash flow up every year and our EPS up every year. And I’m not a great investor, or I don’t know as much about it, but I think if you touch those four things really well, you’re going to create shareholder value.
JD Durkin: Richard Francis is the CEO of Teva, here for R&D Day, back at the New York Stock Exchange where it all started for you. Welcome back. It’s good to see you here.
Richard Francis: Thanks, JD. Thanks for having me.
JD Durkin: We’ll do it again soon. Congratulations on all the growth. We’ll talk again soon. Thank you.
