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 this conference is being recorded today on Thursday, 31 July, 2014. I'd now like to hand the call over to your speaker for today, Mr. Kevin Mannix. Please go ahead, sir.

Thank you. Good morning and good afternoon everyone. Thank you for joining us for this call to discuss Teva’s second quarter 2014 financial results. I’m joined today by our President and CEO, Erez Vigodman; our Chief Financial Officer, Eyal Desheh; Dr. Michael Hayden, President of Global R&D and Chief Scientific Officer; Siggi Olafsson, President and Chief Executive Officer, Global Generic Medicines Group; Rich Egosi, Group Executive Vice President, Chief Legal Officer and Company Secretary; Larry Downey, President, North American Specialty Medicines; and Jon Congleton, Senior Vice President and Head of Global CNS. Eyal will start by providing a review of our financial results from the quarter. Then Erez will spend some time discussing his perspectives on the business and outlook. We will then open the call for questions. Before we start, I’d like to remind you that our discussion during this conference call will include forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ are discussed in Teva’s report on Form 20-F and Form 6-K. Also we are presenting non-GAAP data which excludes the amortization of purchased intangible assets, costs related to certain regulatory actions, inventory step-up, legal settlements, reserves and impairment, and related tax effects. These are amounts that we cannot predict at this point. We present these non-GAAP figures to show you how the management team and our Board of Directors look at our financial data. With that, I will now turn the call over to Erez. Erez, if you would please?

Eyal?

This is Eyal Desheh. Good morning and good afternoon everyone. I will start with the financial review and it will be followed by Erez with his view of our business and division. So I am happy to provide the details on the business and financial results for the second quarter of 2014. As always, we are presenting most of our results on a non-GAAP basis while our GAAP results appear in our quarterly press release as well as in the 6-K which we will file later today. I hope you can all view the slides which are accompanying this presentation. So, as you can see from the results highlights, this was another good quarter which followed a solid Q1. We delivered 2% increase in revenues which drove an 8% year-over-year improvement in our operating profit, 4% increase in net income and 3% increase in earnings per share. Cash flow generation for the quarter was also very strong. As you know, we have two possible scenarios for profits and earnings per share this year depending on the outcome of generic competition to Copaxone. We are improving our guidance for both scenarios today. For the non-generic Copaxone scenario, we see revenues at a range of $19.8 billion to $20.8 billion and earnings per share at a range of $4.90 to $5.10. This represent an improvement of $0.05 to the midpoint of our guidance. For the generic Copaxone scenario, we are updating the EPS model to $4.50 to $4.80, assuming a generic introduction in August this year. Please note that this is model only and it does not represent any prediction for near-term generic launch. When we look at the year compared to our original plan, we anticipate an improvement in sale of Copaxone which will be offset by higher R&D expenses, weakness…

Thank you, Eyal. Good morning, good afternoon. We make progress on all our 'Must Wins' for 2014, getting first our house in order, solidifying the foundation of Teva, retaining our Copaxone franchise, implementing organic growth initiatives and by the same time exercising the effort which are required for differentiating Teva and for the introduction of new advantages to the industry. We are committed and on track to deliver gross savings of $1 billion by the end of 2014 and $2 billion by the end of 2017 with a revised target of $800 million flowing to our bottom line by 2017. The additional net savings emanate from being more efficient and effective in leveraging our resources and focusing efforts and investments on TA, R&D, sales and marketing. During the quarter, we have reconfigured our organizational structure. This slide manifests the previous organizational structure with five business units, three core processes and seven enabling processes. This is the new organizational structure. As of July 1, we are implementing our new lean, simplified and more effective organizational structure separated by two fully integrated business units, the Global Specialty Medicine Group headed by Dr. Rob Koremans and the Global Generics Medicine Group headed by Siggi Olafsson. The global integration of all our generic businesses under one roof with clear directions, set of targets, priorities and under the right leadership will enable us to cement our global leadership position and to unlock the significant value that stem from such a position. Maintaining the Copaxone franchise; Copaxone 40mg has exceeded our goals and expectations, TRx conversion rate at 51%, NRx conversion rate at 52%. Copaxone 40mg TRx share of the U.S. MS market is 16.9%. Copaxone Family U.S. TRx trend stabilizing post 40mg launch. Copaxone still outsells the #2 RRMS therapy 2to-1 in the U.S. One slide tells the entire story. This is the competitive landscape without Copaxone and Tecfidera. The very impressive uptake of Tecfidera since its launch in 2013 has made it the second leading therapy in this space. Its emergence came at the expense of most of the other therapies, including Copaxone that went down from 40% market share to 30% market share until the launch of 40mg which has gained in five months 16.9% market share and has been stabilizing the entire Copaxone family around therapy plus market share at this stage. I would like to ask Rich Egosi to provide us with a very short focus status on the legal front.

Thank you, Erez, and hello everybody. Just a brief update. The Supreme Court hearing in our appeal has now been set for Wednesday, October 15 and we expect a decision later this fall or early next year. We are pleased that the court agreed to hear our case and we are confident in our position. We believe that the correct legal standard is deference to the District Court in claims construction cases and I'll remind you that the Chief Justice specifically noted that we have shown a fair prospect of success on the merits. In addition, our position has received significant support from third parties that have filed amicus briefs to date with the court. I'd also like to remind everyone that any company that chooses to launch a purported generic of Copaxone at this point assuming regulatory approval, with the Supreme Court decision still pending, would be doing so at risk and could potentially subject to trouble damages in billions of dollars. I'm also pleased that the court in India has agreed to consider our request for preliminary injunction of the NATCO product which would prevent export from India. The hearing is scheduled for August 6 or 7 and we believe that the NATCO Mylan process infringes our Indian patent and we are pleased the court will finally hear our case on the merits. Finally, I will mention that we are expecting a response from the FDA by the deadline of December 1 on our most recent Citizen Petition which include our gene expression data, and Mike will provide further comments on the importance of that data.

Thank you, Richard. At the request of the FDA on July 2, we submitted another Citizen Petition which contain significant new data that represents the analysis of the entire genome, 45,000 genes, and looked at the expression relative to Copaxone and other purported generics in mouse, human and patient cells. The analysis was undertaken using validated and very expanded but stringent robust methodologies with high numbers of replicates, conditions and time points. And the end result was that the expression analysis revealed that none of the purported generics that we analyzed, including that from NATCO in India, showed similarity to all aspects of the gene expression patent with Copaxone. Furthermore, we were able to analyze one purported generic, Probioglat, which is on the market in Mexico, which also showed significant changes including up-regulation of genes that would increase inflammation and down-regulation of genes that would prevent inflammation. This was supplemented by clinical data that since the introduction of Probioglat in Mexico has indicated a 3x increase in adverse events following the administration of Probioglat and a 6x increase in relapse rate compared to Copaxone. So the importance of this data talks to the necessity, very clear biological understanding, pathways, markers, and in light of this the FDA has welcomed this new discussion and has actually put forward a new funding opportunity, a new approach for people outside companies and academic groups to provide funding for the characterization and development of new models for characterization of complex molecules. Thank you.

Thank you, Michael. Thank you, Rich. Driving organic growth; it is clear to us that we shall start shifting the focus from conversion to switch and from maintenance to organic growth. This is why driving organic growth is an important focus area for us going forward. I would like now to ask Siggi Olafsson to share with you the way he sees our opportunities in the generic space.

Thanks Erez. First of all, I'm really pleased to be on this call today. I have to say for a brief moment this fall I thought I would take a break from earnings call for this summer but life wouldn't be the same without speaking to all of you and have these calls. Driving organic growth and improving our operation margins in the generic business are the key focus areas for me in the next few years. As many of you have heard before, bottom line is the best measure of generic business performance, and we focus on profitable growth. As an example, we are and will be more selective in participating [indiscernible] in Europe. We will be more selective in what are the key markets we invest in the future. We have a very strong pipeline, both in U.S. and internationally to grow our business. Patent challenges are part of our business model and Teva is very good at it. We can further use our scale and size. Remember Teva is top three position in 21 out of the 36 markets in Europe and Teva is top three in 30 out of the 62 markets we are operating in today. We have the largest product offering of any generic company. We are offering over 1,000 different products globally, and with that, we need to capture pricing opportunities around the world. The right R&D pipeline is key to our growth going forward. We select and prioritize the generic development pipelines through global portfolio management, identifying the right opportunities for the right markets with the right returns for the business. We have great opportunities in complex generics. Remember Teva already has a significant pipeline in complex injectables, mortified release formulations and respiratory products, and then many more opportunities, we already have the expertise and the infrastructure to count to. Biosimilars are key for portfolio in five plus years and we need to make the right investment. Remember, estimated about 50 products will be valued at more than 500 million annually in the year 2018 and no company can develop a full pipeline due to the cost of development, that's why global portfolio selection is the key to our decision. Teva has a significant growth potential in the emerging market, we have the ideal business model offering both specialty medicines and branded generics, having portfolio, pipeline and manufacturing infrastructure to serve these markets well. I have to say I'm joining Teva at a really, really good time based on the good results that generic business showed this second quarter and I'm excited to take the Company forward. With that, I hand it back over to Erez.

Thank you, Siggi. On the specialty front, we'll exercise all the efforts which are required in order to defend all potential LOEs going forward. We'll successfully execute all our near term launches. And just referring to 2014, beginning of 2015 only, we're talking about DuoResp, Spiromax, Adasuve, Zecuity, Lonquex, Copaxone 40mg, Granix, Vantrela and Plan B One-Step, these are specialty launches that are planned for 2014, beginning of 2015, all launches that were carried out already. We'll deliver on the promise in our pipeline, with 15 products in Phase 3 through approval, with nine products in Phase 2 and with 18 NTEs approved for development. We will complete until the end of the year and will share it with you by year-end or in the course of first quarter 2015 a comprehensive review of all our TAs in a quest to take decisions on where to compete and to craft our unique patient centric strategy for each one of our future focus areas. This process has already enabled us to identify more net savings going forward. We are not yet in a position to share with you the final complete outcome of this process, but we have decided to share relevant insights that pertain to two TAs in a way of manifestation of how we plan to grow organically and allot value in our specialty business and how we have been shaping our strategic direction as we move along. Within our strategic CNS franchise, I would like to focus today on pain. Our goal here is to become a global leader in pain by 2020, to go from four products in 2014 to 10 plus products in 2020, to increase our annual net sales from $0.5 billion in 2014 to more than $2 billion in 2020, to shift our geographic…

Operator, we'll take questions now.

(Operator Instructions) Your first question today comes from the line of David Maris from BMO Capital Markets. Please go ahead.

My question is for Siggi. Siggi, obviously most of the institutional investors know that your track record is fantastic. I'm interested in your perspective on what do you think as the new head of Teva's most important business that you need to do to get the edge back? And what I mean by that is that a lot of investors think that Teva has lost a little bit of its edge or leadership in generics at the margin, and first, do you think that characterization is wrong, and what do you think you need to do to get that back, and what do you need from the CEO in order to achieve that if anything?

First of all, Teva is a very exciting company. Teva basically throughout my career, I've been in the generic industry for about 20 years, Teva has been the winner the whole time. Teva was the Yankees, the Manchester United of the sports world, they have the most first of health, and recently the focus shifted a little bit to the specialty business, but the infrastructure, the knowledge, the enthusiasm and the culture is in the Company. I really was impressed when I joined the Company, what we want to do and I'm working very closely with my colleagues to build up more of a first-to-file pipeline. We do launches at risk in the international market better than anyone else. We want to get the edge again on the U.S. side. We also I think what we want to do is to identify what are our key markets going forward. We are operating today in between 60 and 70 markets around the world and some of our markets don't have the opportunity for growth, significant growth, but in other markets we grow significantly. I mentioned before we are top three in 30 markets out of the 62. And that really gives us an edge which I want to take more advantage on. Working with Erez, he basically put on me to grow the business organically, also to look at the margin, how can we get to the same or similar margin as our competitors. It's a lipid unfair comparison because our competitors in the industry, some of them count biosimilars as part of generics, other count respiratory as part of generics and we count that within the specialty line. But overall I really feel there's a right investment and a right focus, we have the infrastructure to be the winning team again.

David, we see a significant economic and strategic value in global leadership position in generics. So we'll do everything in our power in order to assume the basically global leadership position by a large margin, and at the same time we'll do everything which is fully in line with the way I have outlined the processes going forward in terms of value creation from the generic business as well as from the specialty business before starting to catch our synergies and pursue more integration between the two.

Your next question comes from the line of Gregg Gilbert from Deutsche Bank. Please go ahead.

First for Erez, you suggested that you would announce which therapeutic areas are going to stay versus go, if I could stay that, late this year or early next year, but are there other large initiatives or corporate actions you're considering that would also be announced along those lines? And as part of that, Erez, I think investors assume that Teva would not consider re-domiciling the Company for tax reasons even if it could create significant shareholder value. Do you agree with that? And for Siggi, are there any technical capabilities you feel the need to bolster or even add at Teva on the generic side?

I'm not sure that I understand. The question was basically on our tax level?

The first part of my question is, do you plan to announce which therapeutic areas are core and non-core late this year and early next year, and as part of that announcement, are there any other announcements about corporate structure or anything else, that's the first part of the question? The second part is, would Teva consider re-domiciling for tax purposes? I think investors assume you would not but I would like some opinions from you on that subject. Thank you.

So basically we'll announce, and maybe Michael can shed more light on it, we'll announce main focus area in terms of TAs going forward. It is important because it is very strongly associated with the strategic direction of Teva going forward which will be also shared with the street early next year. By the way, internally we have exhausted the course but we are running now all the relevant pieces in order to be fully equipped before we share it to the market. And also the notion is that there is a lot of value that we can unlock from solidifying the foundation in the generic business and specialty business. So there is no wash in there. But the full conjunction of key elements that converge before the end of the year and early next year in terms of strategic direction, and one of them is TA focus, but there are others in order to create a business model which is different from the one that you'll see today. So that process we'll share it with you early next year. TA discussion and decisions are important but there are other elements which will become part of the equation. On the tax question, I would like to refer it to Eyal.

We don't believe that Teva needs to re-domicile in order to improve its tax structure or tax rate. The tax rate in Israel despite the fact that it has increased at the beginning of this year, our tax rate today is around 9% to 10% here in Israel where most of our business is driven from, and it's still one of the best tax rates in the world today. So re-domiciling or doing an inversion would not create the advantage that you see most U.S. companies looking for today, not for Teva.

Gregg, on the technical capabilities in Teva, I have to say I'm pleased to see the technical capabilities that the R&D function has. This has been the benefit of combining the specialty and generic R&D. Where I want to see probably more investment is in the biosimilar area. I think we have investments going on, we have a great knowledge in house, I think we need to decide what we want to do especially for the third wave of products, we have an active program good going. With regard to like past technology, the Company really has built up a capability in R&D and I was very pleased to see that and hopefully that will deliver opportunities going forward. The only two I think therapeutic areas or dosage forms which we don't cover which has a value in it would be ophthalmology and dermatology. These are therapeutic areas where we work with partners instead of doing it in-house. I think looking at the portfolio going forward and the return on the investment, that decision will be taken if we want to invest further on in these therapeutic areas. But overall I think that technical capability within Teva is strong based on the close cooperation between specialty and generic development.

Your next question comes from the line of Ken Cacciatore from Cowen And Company. Please go ahead.

Just had a question on Copaxone. Clearly you all are doing a great job from a scientific perspective and a legal perspective but I'm just wondering as you stare the conversion rate here, it looks like it's flattened out and that the folks that are going to move to the three times weekly have done that and now we're at folks that probably are comfortable with the daily. So just wondering what level of urgency you have internally understanding the good defenses but why wouldn't you or what would possibly move these patients that haven't moved and why wouldn't you seek now to do a hard conversion to what is potentially a better medication given the convenience benefits?

I'll address it and then I'll ask also Jon to shed more light on that. Basically on our switch, it is a delicate dance, patient [indiscernible] FDA given also the uncertainty around the 2015 patent validity. So with the revised conversion rate target of 65% by year-end, we continue to evaluate carefully when the magic moment is, and that supposes that we have been undergoing and in the course of 2014 beginning of 2015. Jon, you'd like to add something to that?

Yes, I'll just add a little bit. Erez having spoke very well to it, we're obviously very pleased with the conversion today. I know you've seen the recent numbers now approaching 51% of the Copaxone family being fulfilled by the 40mg. Obviously we are thrilled with how the patients and physicians have had a great experience with the 40mg. I mean the ability to take the best characterized market-leading asset like Copaxone and provide it in three times a week, 60% less injections, 50% less adverse events, has been received extremely well by the market. As you would expect at this point in the launch, about 22 weeks post-launch, the rate of conversion is slowing but it continues to grow. As Erez said, we're targeting roughly 65% by the end of this year. Right now just because of the disruption it would represent for patients, the hard switch is not something that we're looking to do immediately but there will come a point in time where there will be enough of a conversion over that we'll certainly entertain that just from a logistic and simplicity standpoint.

Your next question comes from the line of Douglas Tsao from Barclays. Please ask your question.

Perhaps Siggi, I just wanted to hear your perspectives in terms of how you see Teva positioned today given the consolidation we've seen in terms of your key customers in the generic segment on the purchaser side both through M&A as well as alliances, and sort of the differences from some of your prior companies as well in terms of how the Company might be positioned sort of to capitalize on sort of opportunity as well as some of the risks?

I think Teva is in a different position. What I mean by that is, overall we are such a large supplier and the large customers are looking for strategic partners and Teva is a really strategic partner. We touch them at all their points of location. Overall if you think about, we supply the market close to 70 billion tablets annually. These are significant numbers. And with the pipeline we have in place, we have managed and we will manage going forward with these strong customers to build a strategic partnership which in the end will be a win-win. The difficulties in the markets are companies that only are local in one market or have a limited exposure in the international markets. Teva clearly being top three in 21 markets in Europe, we are really top three in all the markets where [indiscernible] are operating more or less, also the same with [indiscernible]. So we can manage the customer relationship to the best of our ability with a product offering. Also over the last two years the service level of Teva has increased significantly. We are coming with new products in the market. So I feel that we are in the IPL position to build a win-win relationship with these customers and we are positive on this, on how this has moved forward over the last two years because the market needs strong customers and strong companies to serve it.

Okay great. And then just one follow-up on Copaxone, perhaps I think Jon can chime in here. I know that you have gained since the launch some improvement in terms of the managed care coverage for the 40mg formulation. Just curious in terms of sort of an update in terms of where you are and how you can see that plan out in the course of the year, do you see some further gains?

Doug, actually I've got Larry Downey here who heads up our North American Specialty Business, so I'll let him address that.

We have made great progress early on with payers in terms of our access in managed markets and we're now in the second round of discussions with those payers that have not put 40mg on the formulary, and I think that's going to be a real key for us going forward in terms of our continued growth and conversion, and if we are successful in these discussions then I think the fact that a generic has not come on the market for the 20mg, that that's going to put pressure on these payers to come to the 40mg, put it on their formularies.

And is it your sort of experience that given the sort of passage of time that they are increasingly sort of accepting that they're going to have to ultimately probably put this on?

Yes, that's our position.

Okay, great. Thank you.

Your next question comes from the line of Liav Abraham from Citi. Please ask your question.

A couple of questions. Firstly, Erez, you mentioned a Copaxone conversion target and updated target of 65%. Can you provide some additional commentary on how you plan to get there, and currently around 50%, what mechanisms are in place to accelerate the switch outside of a hot switch, is it data from the recent Citizen Petition, is it reimbursement tactics, if you can provide some additional color there? The second question is on cost savings. You indicated increased net cost savings. I was wondering whether you're still evaluating incremental gross cost savings over and above those that have already been identified. The last time you addressed the street, you mentioned that you're evaluating incremental rationalization of Teva's supply network and the potential shutdown of manufacturing plants. Where are you in this process and when can we expect an update? And then thirdly for Siggi, I'd be interested in your thoughts on Teva's positioning in the biosimilar space and your strategy for augmenting your presence there, particularly inorganically?

First on gross cost savings, we will provide more insight before year-end. We are still evaluating all the operational aspects and dimensions and we'll provide more insight by year-end. On Copaxone, with 1.2 to 1.6 conversion run rate today, we basically have been exercising all commercial efforts looking at basically commercial opportunities, and by the same time of course sharing with payers and physicians all the relevant insight from our GLACIER study. So we believe that with all these elements, we'll be able to hit the target by 31st of December 2014, and we also will do everything in our power in order to deliver more than that. That's basically – at this stage, that's the most realistic assumption and it's based on all these valid measures.

Liav, maybe if I take the biosimilar question. I think overall two of the acquisitions Teva did in the past, we are participating in wave one. We have a company knowledge of the biosimilar development, we have a team in Germany, we have a team in Israel, that really knows this space quite well, but there has been limited focus. We don't have a large pipeline to any means but we have products, obviously wave one products, we already wave two, we have been very selective what products we are developing, and then obviously we need to look at the third wave of biologic products that are out there. I think in terms of inorganic growth, we are open to all kinds of relationship. It could be a joint venture, it could be a co-development venture, it could be an acquisition. I think what Teva offers is a very strong scientific base, both based on the biosimilars and biologics knowledge we have in the similar space but also in terms of the specialty development and all the expertise that has been built within the Company around the Copaxone franchise and other things like that. So I think we want to invest wisely. This is something important to us, especially for the long-term growth of the Company. I have said and quoted previously to say I wouldn't like to be a general manager in the year 2020 for any generic company if there would be no biosimilars available in my pipeline. So we need to get this right. We are working very diligently but we are open to all kinds of business model to make this a reality.

Liav, the 1.2, 1.6 conversion run rate that I mentioned before pertains to basically our weekly run rate, that's clear?

Yes.

Your next question comes from the line of Sumant Kulkani from Merrill Lynch. Please ask your question.

The first one is a clarification on Copaxone, the 65% switch rate target by year-end, is that sustained for both the exclusive Copaxone scenario and the generic Copaxone scenario? And there's been a lot of talk on established products divisions being either divested or potentially divested by major pharma companies. Would that be something that Teva is interested in or does your scale makes that unnecessary?

Basically the 65% conversion rate by year-end is applied on both scenarios.

Maybe if I take the established product. I think this is a little bit opportunistic. We would for example, overall if it would be established products only in Europe or only in U.S., I think that wouldn't appeal to us as much because of our relative strength. But overall I think this is not a bad business, this is a slow declining business, we have to keep that in mind, so it needs to be managed in the right way, but it's the opportunity especially in the branded generic markets where we have a sales force in place, this would be something we would look at for sure. But overall in the non-branded generic market, it's not the most appealing thing to look at, at this point in time.

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

First I just want to say that I'm hoping that you, Erez, and the members of the management team and Teva employees are safe and your loved ones are safe and hoping that the conflict ends quickly, but Erez, just have a couple of questions for you on the issue of cost savings, and I know that you will provide more granularity on that later in the year, but you did say that you expect an additional $300 million net to the bottom line, I think it was $500 million now you expect $800 million, can you just where is that coming from, is that R&D expenses that you are going to cut now or just give us a sense from where that's coming from? And just generally on the $2 billion cost-cutting program, is that $2 billion being applied evenly across the organization, are you targeting lower growth areas, are you targeting lower performance employees, just generally speaking how are you going about this? And then secondly on the issue of corporate governance which is obviously a great concern to investors, we've seen some improvement which is great, the Board size reduced from 15 to 13, just wondering what other corporate governance changes are being contemplated, and related to Dr. Frost retirement from the Board by the end of the year, what candidates are you considering for his replacement, are you looking externally as well as internally, and just asking the question because press reports are saying that the current Vice Chairman, Amir Elstein, has been selected for that role? Thanks very much.

Thanks Jami basically for your opening note and we appreciate it. Just on governance, I'm not still at a position to nominate the Chatman, it takes all of the Board. But maybe just after the General Assembly yesterday, there is a message that I would like to spell out. Although the Board prevailed in the proxy fight, the message the Board has received from shareholders is clear, which means that the Board is committed to continue and accelerate its efforts to address matters important to our shareholders and to improve corporate governance, and you'll see before the next General Assembly other measures that the Board will be accommodating. That's on governance. On cost savings, a vast majority of cost savings is built into our generic business, a vast majority. On the $300 million of additional net savings, I mentioned it but maybe to put it in another way, it is something that pertains to the strategic direction process that we have been entertaining, and it is clear to us that we shall put much more focus on less TAs in a way that will enable us to generate strategy that will differentiate Teva on the one hand and by the same time will enable us to exhaust the capabilities we have in the generic space, in the specialty space, in a way that fits future TAs. And that process has enabled us to come to conclusion that we are able to leverage much better resources that are directed to the R&D, sales and marketing, and there are few other forms, and that's the foremost trigger for the additional $300 million net savings.

Your next question comes from Michael Faerm from Wells Fargo. Please ask your question.

Could you provide any color on how you think about capital allocation broadly, and what I mean by that is how you think about the relative place in your strategy of M&A, share repurchase, potential dividend increases and so on?

Eyal will start, I'll then go for few more insights.

When we look at capital allocation, first of all the good news, we're beginning to generate more cash which we have as you've seen recently used to reduce our debt level or make room for additional borrowing if need be. We have solidified our dividend policy, we're looking at it, our Board is looking at our dividend policy every quarter. The end of last year we increased dividend faster than the growth in net income. In fact, we've been doing this for the past few years. So we believe that Teva currently has a solid dividend policy which will continue to be evaluated also in the second half of this year. We have right now suspended our buyback program. The stock price has appreciated nicely. Erez talked in his opening comments about the role of M&A. We do believe that substantial value can be created in business development activities, whether this is by acquiring the next big box or our footprint in markets or expanding our generic business. So we will probably look at these possibilities as well together with our current dividend policy.

And just to really maybe underscore the notion that pertains to M&A, we are basically actively assessing today relevant opportunities in all the dimension and forms that we have shared with you, on portfolio and pipeline assets and again the robust acquisition manifest the way we look at the potential relevant, interesting, attractive pipeline assets for us. Technology also, there are a number of potential candidates that we have been assessing, I called those that was conducted, is another manifestation of the notion in the way it reinforces the strategic direction that I have started to outline with you. We need to take the time in order to exhaust the discussion with you but that's just a manifestation of the notion. We are creating a full constellation between generic products, novel products, devices, services with technologies that might be acquired, [medical doses] (ph) is an example, and we have been looking actively on a number of other targets. Geographic expansion, basically something that is a priority for us. There are major uncertainty, we shall be careful here, but we look at opportunities also here. And as we said in the past, we might engage in a larger acquisition as well.

Your next question comes from the line of Randall Stanicky from RBC Capital Markets. Please ask your question.

I just have two follow-ups to that last comment. Erez, would you be open to pipeline deals if they weren't necessarily immediately accretive, because I know with the hurdle rates that you've thrown out there is that M&A that you would pursue would be accretive to non-GAAP earnings, so is that an option for you, and then I have one quick follow-up?

I believe I think addressed that question. The answer is, yes, and Labrys is a demonstration of it.

Okay good. And then maybe for Eyal, as you look at acquisition targets, how can we think about the tax rate of some of those targets? Most of your peers are now foreign companies or domiciled overseas with low tax footprints. As you pursue M&A and particularly large-scale M&A, is there an opportunity for you to reduce the tax rate of some of those targets based on either your Israel footprint or your broader tax structure?

First of all I think we got the question earlier and I said that, just to take care of tax rate in our effective tax rate, right now it's just under 20% and our Israeli tax rate is between 9% to 10%, just for that we would not pursue a transaction. It is a motivation for many companies in our industry today, this is not the motivation of Teva. However as we did in the past, we will try to make any deal that we look at the most tax efficient as possible in terms of where the assets are held, where the transaction is conducted, but to be frank the major driver is how we can create maximum value from a deal and not what is the tax structure of the deal.

I understood. My question was more specific to, if you're acquiring a U.S. company with a 30 plus percent tax rate, do you have an opportunity to take that tax rate down based on your current structure over time, in other words is there an opportunity based on either your current footprint or tax planning strategies that can make you more competitive on a relative basis?

The answer to that of course is yes but it takes time, and as you're moving the IP, the intellectual property assets which is where most of the tax should be accumulated, to lower tax rate jurisdictions, and Teva has a number of them in our universe including Israel, including Europe and other places, but as usual these things take time. If you do it all at once right on start, it usually drives a huge tax event, and it's so specific deal by deal, company by company that I can only be very high level in general of that, but the answer is that generally, yes, but it takes time.

Your next question comes from the line of David Buck from Buckingham Research. Please ask your question.

Three quick ones. First for Siggi, can you talk a little bit about in your brief tenure in the Teva generics business, talk a little bit about the role of pricing that you saw globally and in the U.S. and your view on sustainability of that? Secondly, can you talk about whether there are any markets that you might look to exit particularly in Western Europe, that's been obviously a strategy in your former company as you look to improve profitability? And then finally for Erez, since about 64% of profitability is still coming from MS and other specialty, should we be expecting capital allocation for M&A to be more protecting that branded business and why wouldn't we want to strengthen that branded footprint particularly with Copaxone competition and your opening other geographies going forward?

Yes, first of all on roll-on pricing, I think as I mentioned in my introduction, pricing is very important today. Maybe five, six, seven years ago there was never a pricing crisis, especially in the U.S. in the industry, and I think the company due to the consolidation and due to the environment, company take pricing actions whenever they can. The same applies a little bit outside now. We have taken the decision that in some of our markets we look at the portfolio and we take a pricing decision and see if we stay for this molecule or not. So I think the size of Teva helps us in this. This is very important part of the commercial execution going forward to keep this in mind. There has to be a balance in the whole thing, but be being the largest company, being probably [indiscernible] of the overall generic business, this is a very important tool today to maximize the value of the business. And on top of that, there obviously is we need to have the same service level, good quality, he right pipeline to be able to take these actions, but clearly it's important and Teva is probably in back to position than any other company to explore this possibility. With regard to market exit, I think in my previous company I think the reason was that exit from the market was the weakness in the market. The company wasn't big enough to operate profitably in the markets chosen. On the other hand for Teva, I think Teva is top three in all those markets that my previous company exited previously. So as I see that now, that my theory to be profitable and have a good business, you have to be top three in those markets, is coming through based on what I see within Teva. So overall, Western European markets are in strong position. We grow the markets for bottom line, it's difficult in many of these markets to grow the top line but bottom line growth is our focus. I mentioned the 10% Germany, shoots impact on top line, but sometimes when you walk out of these tens, you can grow the bottom line. With regards to all the markets I mentioned previously, we want to have key focus on markets. It doesn't mean that I will have an open ended commitment to all the markets around the world and we wouldn't consider moving away from a single market or two, but overall there's no change in the strategy to invest in Europe, I think we have a very good business and our strength, size and scale in these markets helps us enormously to have a profitable business.

On my end, with the right opportunity we might pursue branded business or assets acquisition, that's one. Number two, I think we need to work out process with the street in order to I would say to unlock the value that we see in our pipeline today and to get the recognition which it deserves. Yes, we still have a number of gaps where we want to basically to look for potential acquisitions, but we believe that the opportunities that we have already and the value that is embedded in our specialty pipeline is something that shall be much better recognized. And just in this respect, it's maybe the right context to why I shared with you today two TAs, so it is not of course the complete picture, complete picture will be shared with you early next when we will discuss the strategic direction going forward with you, but just look at the two TAs that I have shared with you and that's I believe a good manifestation of the notion. And number three, in everything that we will be doing going forward, the foremost driver is to create and unlock value for our shareholders. Michael?

I'll just add just to give you a flavor of the strength of the pipeline, in the first seven months of this year we've had six approvals, five submissions and the approvals have been for some very important products including Copaxone of course 40mg three times a week but in Europe the DuoResp Spiromax, that essentially was approved, marketing authorization received in April. And then in terms of our submissions, again when you look at Albuterol which is using the same technology now called [indiscernible] in the United States where this is going to be very significant, NDA submitted in May, accepted for filing for treatment of asthma and exercise induced bronchospasm. So, tremendous strength in both CNS and respiratory franchises in the way that Erez has outlined. And then of course some of the really exciting data in terms of clinical results. Our ER hydrocodone Phase 3 results looks very good, we are on track to file this year. This will be first demonstration of our abuse-deterrent in terms of hydrocodone and there will be many more products to follow using this technology.

The next question comes from David Risinger from Morgan Stanley. Please ask your question.

First of all I wanted to just thank you for the detailed slides and more perspective on your longer-term vision. I have a number of questions. I wanted to start with cost-cutting. So with respect to the cost-cutting, the $2 billion gross remains unchanged, the net cost-cutting has been stepped up from $500 million to $800 million on more efficient reinvestment, but I'm just curious about given that the cost-cutting guidance is through 2017, whether those cost-cutting plans already reflect cost cuts associated with potential competition to ProAir, NUVIGIL and Treanda going generic or whether those cost cuts would be on top of the $800 million? The second question is, with respect to the $210 million reduction in Copaxone in the quarter, I was hoping that you could characterize that a little bit further. It says on the slide, channel inventory and launch quantities, I didn't understand the launch quantities. Also there was no generic in May, and so I would've thought that wholesalers would have restocked in June, but obviously that didn't happen. So should we expect the $210 million number to basically come into the third quarter instead, assuming that there are no generics in the third quarter? And then finally, have you filed with the FDA to stop manufacturing of the once-daily Copaxone, and if not, when you do later this year should be just assume that standard six month clock? Thank you.

David, this is Eyal. Let me try to take the first two. First of all on cost-cutting, Erez explained it before, I'll try to reiterate. Our plan for the gross cost-cutting, our cost reduction right now remains unchanged until 2017 which is about $2 billion. This is happening mostly in our manufacturing network, in procurement but also in increasing efficiency through our activities in G&A, in sales and marketing and also to a lesser extent more efficiency in R&D. So that's where the planning is coming from. When we look at our long-range plan and one of the resources that we will need to grow the business, we're taking another look and we now believe that we will need to reinvest less, meaning if we plan to reinvest $1.5 billion before, we're looking now at $1.2 billion of reinvestment in R&D and sales and marketing in order to continue and leverage capabilities and grow the business. This has nothing to do with the loss of actual [indiscernible] that are coming mostly end of 2015, 2016 and 2017 which you mentioned our other plans of course to try to minimize the impact of LOEs versus our legal side and the science side, but this is unrelated to our cost reduction plan which is in place and we are executing it. The net impact which was mentioned relates to how we see our plan going forward. Regarding Copaxone and the inventory in the channel, so the slide that I showed is just comparing Q1 and Q2 in order to try to understand, of this year, in order to try to understand the run rate. So what you see in that slide, the first thing is that there was an increase in demand and basically which resulted in an increase of course of…

And on the third one, our assumption is that pulling off 20mg is subject to six months notice and we have not yet filed with FDA to stop the 20mg manufacturing.

Your next question comes from Elliot Wilbur from Needham & Company. Please ask your question. Elliot Wilbur - Needham & Company: Just a quick question for Siggi, and I apologize if this has been asked already, but on the recent approval of Enoxaparin, can you just give us a sense of when you will be in a position to launch that product and whether or not you think that will actually be a meaningful contributor for Teva's generic business? Obviously innovators done a very good job of retaining share in the institutional marketplace and I'm just wondering if you think there's an opportunity to crack that or is it going to be more focused on retail, just what you think the potential benefit can be? And then just going back to another question on the switch dynamics between the 20mg and 40mg Copaxone formulation, given the relatively high refill rate, I am assuming at this point most patients have already cycled through and if they've run a 20mg have been prescribed the 20mg again, I'm just wondering if it's possible or if you've been able to obtain granularity on sort of why that may in fact be occurring, is it just physicians just not writing it for whatever reason or is it more tied to formulary restrictions?

I think first of all on the Enoxaparin, it's still an opportunity. This was a hard nut to crack for the FDA and Teva to get approval on this product. It's been a long time coming. We are excited about this. We are currently building us enough inventory to launch the product. We expect to launch it in the second half, so it will have some effect, I think not material to the result, but we feel good about it. I think we will not limit ourselves to the institutional or retail, we will take the opportunity as they come, we are a strong supplier to the market and we feel good that we can get our fair market share for this product. The prices are clearly lower than they were two years ago when Teva originally wanted to launch the product, but still this is a very valuable product. In fact there's only three Class IV players in the market and we feel we have a good chance to take a fair market share. But overall it will not impact the overall results of fourth quarter or third quarter. Jon?

Elliot, to your question, if I understood it right, your question is for patients around the 20mg and still on the 20mg, why is that, is it access, is it preference, and it's really a little bit of both. We've seen great response to the 40mg as I mentioned before. So the refill rate on that is exceptionally high. Very pleased with that, patients are enjoying the reduction of injections, side reactions. Some of this is market cycling. We know that some patients are a little bit slower to adopt. There's a real attachment to the Copaxone daily and the patients want to eventually get comfortable with that, they talk to their physicians, they talk to other patients that have made that change. And there is some access element to this as well. As Larry Downey had spoke to, we're continuing the dialog with payers, and because of the dynamics going on in the marketplace and the uncertainty around a follow-on Copaxone, we're going to continue to work and believe that we can create some additional access so those patients who may have been blocked to the 40mg will have access to it.

Okay, I would like to thank you all for attending our conference call today and I look forward to touching base with you. Thank you. Bye-bye.

Ladies and gentlemen, that does conclude today's conference. Thank you for participating. You may now all disconnect. For those of you wishing to review this conference, the replay facility can be accessed by dialing within the U.K. on 0845-245-5205 or alternatively on country code 00-44-1452-550000. The reservation number is 65239352.