Good day, and thank you for standing by. Welcome to the Teva Pharmaceuticals Third Quarter 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speakers presentation, there will be the question and answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] 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 thanks everyone for joining us today to discuss Teva's third quarter 2021 financial results. Joining me on today's call is Kare 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 got an opportunity to review our press release, which was issued about an hour ago. 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. And with that, I'll now turn the call over to Teva's Chief Executive Officer, Kare Schultz. Kare, if you would please.

Thanks, Kevin. Welcome everyone, and thanks for your interest in Teva. Our Q3 2021 financial highlights, we’ll start focusing on our revenues. 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 diluted EPS came in at $0.26, non-GAAP diluted 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] (ph) KPIs. And of course, we believe that by being the leading generic company in the world, we had 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 fund offering. If we move to the next slide. And here you can see some other 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. And 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…

Thank you, Kare. And good morning and afternoon to everyone. I will begin my review of the third quarter of 2021 financial results on Slide 14 with our GAAP performance. Revenue in the third quarter of 2021 were $3.887 billion, a decrease of 2% or 3% in local currency terms compared to the third quarter of 2020. This decrease was mainly due to lower revenue in our North America segment, mainly due to COPAXONE and generic products, partially offset by higher revenue from generic and OTC products in our Europe segment AJOVY, and AUSTEDO. Revenue continued to be affected by the ongoing impact of COVID-19 pandemic on markets and on customer's talking and purchasing partners. For the sake of year-over-year comparison, I would like to note that Q3 2020 included a generic product sales in Japan totaling 62 million and approximately 240 million for the full year 2020. As we have previously communicated, this 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 adjustment 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 assets impairment which were related to our North American reporting unit. Non-GAAP net income and non-GAAP earnings…

Thank you. Dear participants, we will now begin the question and answer session. [Operator Instructions] We will kindly ask you to limit your questions to a maximum of two. [Operator Instructions] The first question comes from the line of Umer Raffat from Evercore. Please ask your question.

Hi, guys. Thanks so much for taking my questions. Kare, have the expectations for the private attorneys who seem to have been the hold-up 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, and are they actually at the negotiating table now or not quite? And then 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 [at a track] (ph) slightly behind versus consensus. But what it really means is in 4Q, it would have to track at like a 50% jump versus 3Q to get to the guidance out. If you could just clarify that. And then 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, Head of North America will take the AUSTEDO question. So 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 re-basing or change in, you could say the discussions. But 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, 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're optimistic that we can still reach a settlement within the next 12 months. We're in active dialogue, and we hope to see that come to fruition over the next 12 months. Then on the AUSTEDO question, I'll hand it over to Sven.

Thanks Umer for the question. So the AUSTEDO plan for 2021 is based on 2 assumptions. 1 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. So for that reason we expect in Q4 to have an acceleration of sales and to end the year strong with AUSTEDO.

Thanks, Sven. And with regard to the bonds, Umer you're right. There's something called green bonds, which are linked to, you would say, purpose of the bond being investments in initiatives to improve the environmental impact of your activities. That's not we're doing -- what we're doing. We're doing sustainability-linked bonds. And that's really linked, you would say, to the UN goal for sustainable development. And it's where you do something where you help the world in a way that you are able to. And 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 and that's what we're committing to. And at the same time, we also committing to improving our environmental footprint, reducing emissions of greenhouse gases. So 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 to our portfolio of these products. We are the Company in the world that has the most of essential medicines on the WHO list of essential medicine. We're 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. And of course, we are committed to them and expect to meet them in line with the commitment we're showing today. So thanks for the question, Umer.

Thank you. The next question comes from line of Elliot Wilbur from Raymond James. Please ask your question.

Thanks. Good morning. Good afternoon. Questions for Kare and Sven. Just specifically [Indiscernible] North America and generics. Maybe just give us some perspective in terms of the primary contributing factors behind the sequential decline and the break below the $900 million mark, which obviously has been stable for some time. Just curious as to whether it's, you would call it very product specific. Is it more just accelerate erosion across the base, the absence of approval, just some color there would be helpful? And then for Kare, maybe just 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 to 700 million, a little over 8% of sales. I'm assuming roughly half of that is probably pegged towards generic R&D spend. And it just seems like a very high level, considering that would be cumulatively about a billion dollars over the last 3 years, and just not generating any real noticeable return. I'm just wondering about your thinking about the need to recalibrate or rethink investments in -- tied to the U.S. generic business. Thanks.

Thanks for those questions. Sven will address the first one and then I'll address the second one.

Thanks, Elliot. For the U.S. generics, just as a reminder, we report North America generics, combination of Canada biosimilars and the U.S. generics business. And there are 3 factors that influence the current sales trends. One is the price erosion. For our portfolio, I can say that we have a relatively stable price erosion scenario. 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. So here we also expect, say, a stable environment going forward. And 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 not on plan, and that is one of the factors that influences the performance for this year.

Thanks, Sven. And with regards to the overall question on generic R&D and the generic segment in the U.S. We're fully committed to being leaders worldwide in generics. Also, being leaders in generics in the U.S. and our R&D spend is showing a very good return on a longer basis. We are basically aiming at a 80% target up what goes off patent, whether it's biologics or [Indiscernible] and we are doing our R&D to manage that. As you know, we have more than a thousand R&D projects combined between biosimilars and generics. And majority of course being in generics, and 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 generic 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 -- some years ago, we had EpiPen launch than we had the TRUXIMA launch, then we have the Truvada and Atripla launch, and we're having some launches that are waiting for regulatory approval. We are optimistic that we'll see them in the coming quarters. So we're very committed to the U.S. generics 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 [Indiscernible] stays unchanged, very high. So we think this is 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 question.

Thank you. The next question comes from line of Ronny Gal from Bernstein. Please ask the question.

Good morning. Want to stay for a little bit on the scene of that generic business. Looking at the increase of Rituximab for the -- 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 that Rituxan erosion is -- 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 you may launch in 2022 that will offset that erosion? Otherwise, it's just tough to see the -- that generic business reaching that $4 billion in 2022. You can talk a little bit about the ups and downs of that business. And second, the debt that you are being offering here, can -- Eli can you discuss roughly what should be the range of interest rates that you will have in 2022 versus 2021, assuming you're able to do ring financing. I know it's a projection at this point, but just give us a feel for where it's going.

Thank you for those questions, Ronny. Sven will answer the first one and then Eli will answer the second one.

Yeah. Ronny, for 2022, we have foresight of round about 30 to 40 generic product launches already lined up. Every product that we did not get approved or we don't get approved this year in the U.S. generics business, naturally rolls over into 2022. And these are the complex generics that we talked about earlier this year. For the biosimilar space, we don't expect the product launch in 2022. And you're right, TRUXIMA now in a situation where we have three competitors, Teva, Pfizer and -- since January, also Amgen that of course, changes the pricing environment and we move now the strategy for TRUXIMA to value maximization for 2022.

Over to Eli and the total finance cost that we're expecting next year.

So I would say, Ronny, if you follow the 2021 and also what we see in '22 accordingly to our mission, we're going to keep the 1 billion in terms of [Indiscernible] consensus, so we don't see that one changing.

Let's move to the next questions.

Thank you. The next question comes from line of David Amsellem from Piper Sandler. Please ask your question.

Thanks. So regarding business development, in the wake of the MODAG license agreement, I guess the question here is, given the cap structure and given the specter of liabilities, particularly on the opioids, what can you do, in terms of in-licensing and acquisitions, in terms of size, in terms of the stage of assets, or even acquiring commercial ready or commercial stage assets? How aggressive can you be there? That's number 1. And then just stepping back on biosimilars, obviously, a question is, what footprint you'll have over time. Can you just talk to philosophically 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 2 questions. With regards to PE then what we can offer is basically our expertise, our know-how, our capabilities in development and our commercial capabilities. We cannot offer big up-fronts, big cash payments as you correctly note. But it turns out that there's actually quite a lot of companies and research groups that are not just interested in the cashing out and getting a lot of 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. And because we have a strong track record in areas like -- or we just discussed, we know that we have had one of the best patterns and block ever in the form of [Indiscernible] and we have a really solid CNS knowledge base and commercial footprint, that makes us attractive. And 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. But we can offer the opposite. You could say, low upfront, 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-licensing that we're doing. If you look at the [Indiscernible] take in-licensing, same idea. Small upfront. We take part in commercialization or we do the whole commercialization and that gives value to the Company that's out-licensing to us. So we are optimistic that we can keep on doing that. And we're not going to do any deals where we put a lot…

Yeah, I think you already summarized it nicely, so we think in 2 categories when we model all our business cases for biosimilars, the main drive up of value creation is to launch sequence. So 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, that 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 U.S. market. But it behaves, as Kare said, more like a complex generic market. So 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. But overall, we believe the tailored value of these drugs are much more significant than for normal generics.

Thanks, Sven. Thanks David for the questions. Let's move on to the next questions.

Thank you. Your next question comes from the line of Balaji Prasad from Barclays. Please ask your question.

Good morning, everyone, and thanks for the questions. Two from me. Just a 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 you, Kare? Also, with ATV02 due, what are the current road blocks that -- in 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 to 800 million for 4Q. Are there any material variables which can have a plan and million-dollar impact in -- with just two months left for the business? Thanks.

Thank you for those two questions. Sven will handle the first question. I'll give a top-line on this cash flow, but I'm sure Eli will also comment on it.

Yes, on the first question, I think it was about the prospect for Humira Biosimilar based on the fact that buyer -- that growing our garden interchangeability designation they are biosimilar, yes. So we know, of course, ENGEN 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. ENGEN also started interchangeability study for the high concentration products, and we don't believe that we'll favorite come on time within that changeability designation to market so in 2023. Our own product that we licensed from Alphatec will be interchangeable -- sorry. And it will be a high-concentration formulation. So 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 and as 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 had a high influence, not just you per se the quarterly earnings, because of course, the quarterly earnings don't typically have 300 million in uncertainty on them. But the free cash flow, you have your inventories, you have your accounts receivables, you have your accounts payables and so on, and 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 negative, you could say negative is maybe the wrong word, but all the movements on the widen capsule went sort of against the free cash flow, so we had a very low free cash flow. You've seen other quarters where all the movements on these working capsule items move positive to the free cash flow, so that is really the explanation overall. But I'm sure Eli can give you some more fuel for the details of how much are the effects of these working capsule elements on the actual free cash flow.

Thanks. Yes, but no. Overall, I would say that in the -- in Q3 we saw more improvement in terms of how we're running our inventories related to our demand behavior. We saw that in that area as well. We saw some variable 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 view above 70% on the conversion, year-to-date, of course then, and for the year. So 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 questions.

Good morning. Thanks for taking my questions. 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? And then on opioids, given how the New York trial is going, could we see a nationwide settlement in the first half '22, or more likely in the back half of next year? And also, can I just please ask the maturity of the new ESG bonds? Thank you.

Yes. 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 U.S. generic volume development and the outlook for the business, so let me answer this a little broader because we launched, of course, market share from 13 points to round about 8.5 points over the last 3 years since 2018. But if you analyze the volume of the underlying causes for that, that was primarily driven by management decisions to support our restructuring, and the portfolio consolidation. Going forward, volume for us is not high strategic value because our customers, I believe, from basically buying broad portfolios to buying individual molecules. So we try to optimize monetary level or the monetary value. And that's of course also driven in some occasions to volume captured. But overall, I would say, going forward, if we want to go for higher volumes in the U.S. generics business, it always needs to serve the purpose of making our network and operations more efficient, but also then of course, to capture value because I believe volume alone is not a strategic objective for us in the U.S. generics business.

Thanks, Sven. With regard to the opioid settlement discussions and the New York trial, then it's great. We have an ongoing trial in New York, a jury trial. And that's a proceedings but it won't -- in the near future, it will in some time, in the coming month and a trial can always be a trigger for a settlement. But 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 I settlement. I cannot tell you that it will happen in 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. And then I think the last question Eli is about the bond offering, what the maturities, currencies, and so on.

Yes. Thanks for the questions Navann. [Indiscernible] look to do both Euro and USD for the Europe 5-years and 8-years tenure, and for USD the 5-years and 7-year ten years. Actually, in the way that we see it, we are going to make sure that we, in the coming years, enable to use our [Indiscernible] capital to support our maturities. That will create the new issuing to get into a floating between the years of 27 to 30. With that one, we're actually equating more modest, and I will say, portfolio on our maturity to allow us to be able to pay to our free cash flow generation.

Thanks, Eli and thanks Nathan for questions. Let's move to the next questions.

Thank you. The next question comes from the line of Nathan Rich 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. So could you maybe just talk about what you saw play out in the third quarter? And then as we think about the fourth quarter, I know it's a seasonally stronger quarter, but it does seem like the guidance implies a bigger step up in sales and what you typically see. So Eli, I don't know if you could maybe just help us think about the cadence between 3Q and 4Q this year. And then 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 U.S. generics in our portfolio. So what we've seen is -- and we've seen also the number of Sandoz, what they reported yesterday on the U.S. pricing portfolio. We don't see the same trend in our portfolio because we have a different portfolio structure than Sandoz has. Plus, 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 more stable pricing environment because this effect of course is leveling off. The main driver for us is the ability to price into 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 inventory management, basically because inventory discontinued [Indiscernible] 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 generic, so it's basically FDA driven. But here, we don't see any acceleration of the trends. So for that reason going forward, we actually can relate our business for 2022 within the stable pricing environment for U.S. generics.

Thanks, Sven. And Eli, will you comment on the change in revenue from third quarter to fourth quarter?

Yes. So Nathan, thanks for the question. And so what we see actually in the mainstream area, one of this one is the specialty portfolio, which as we mentioned, we see that they're going to accelerate. That's one element. The second element is more dynamics in our generics where -- which is actually including what, as I mentioned, the [Indiscernible] and the biosimilars. And the other stuff, in between the other two regions, Europe and international markets. Those actually, going to contribute to the increase from Q3 to Q4.

And 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. And just in general terms, one of the reason s for stronger demand in the fourth quarter historically, is of course, the fact that you have speculative buying by wholesalers because you have price increases typically around the 1st of January. That's been the tradition in the U.S. marketplace, so that also adds to this, and then of course the holidays and inventory build-up before the holidays, which we've also seen for many years. Nathan, was there one more part to your question?

Just input costs, if you could just comment on what you've been seeing.

Yes. So I'll comment on that. We've seen a lot of industries reporting that they are dramatically affected by input cost, such as energy, raw materials, transportation, and so on. And of course, we also see that but to a lesser extent, simply given the fact that most of our inputs are related to, I would say, the cost of labor, which is relatively stable of course, to energy's relatively small piece of our total cost base, reducing increase in transportation costs. But again, transportation is also a relative small piece of our cost base. So 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. And of course, it's important -- if we get into 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. So thanks for those questions, Nathan. And let's move on to the next. I think it might be the last.

We have two left.

Two more questions -- two more people. So let's head to the next one.

Thank you. The next question comes from line of Jason Gerberry from Bank of America, please ask your question.

Hi, this is Ash Verma on for Jason, thanks for taking our questions. So one on opioid litigations. So can you talk about the recent Louisiana opioids settlement which has a known by second Op-end 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 subdivision. And the 2nd question is the respiratory LEI, so how much of a benefit does subcu provide here?

Sorry. Could you just repeat the last bit? How much executive -- what does risperidone LAI provide?

Yeah. How much of a benefit does the subcutaneous formulation provide here? As you know, one of the other subcu has not done well in the market.

Thank you very much. So I think I'll handle both of these. With regard to the opioids and the settlement in Louisiana, then 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. So it's a pro rata cash amount paid over 18 years. Same whereas we're discussing it for the nationwide settlement. And it includes also products of option. That is, of course, important because that's a product you used to win people off opioid abuse or misuse. So we're very happy about it. Your specific question about the sub-divisions, This assumes that all the sub divisions in the state of Louisiana are included. Then that's been the way we've been negotiating it with the state. We are optimistic that this will be the case, Coming with a cape line. I think we haven't reached it yet, where we just need to get confirmation that all subdivisions are included. But the best assumption that, that will be the case. And of course, for the nationwide settlement that we're discussing, we also need some divisions in there because otherwise, it doesn't really make any sense. So 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 exists in the marketplace, I'll need to give you a little bit of explanation. When you start from schizophrenia, it's really important that you stay on your medication. There's a risk, if you only take daily tablets, that you skipped some tablets because you get a little confused, you feel very well, And then all of a sudden, you get a relapse, and every time you get a really bad relapse and get psychotic, it is very harmful for your brain and your cognitive functions. So 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 these intramuscular injections, kind of a Depo effect and 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. So this is not a very nice thing to undergo, but it's very effective, of course, because it secures that you're covered for instance 4 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 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. And 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, so that's really the benefit, you get the strong efficacy but in a nice and more convenient way. So thanks for those questions, Ash, and now to the last questions.

The last question comes from line of Gary Nachman from BMO Capital. Please ask the question.

Hi. Good morning. First core, where are you seeing most of the COVID-19 impact in different markets than with customer stocking and purchasing patterns, when should that normalize or that happened in 4Q? Are you still confident 2021 should be a trough year, whether revenue or EBITDA? What are some of the big levels that we should be thinking about now as we're approaching year-end? Then, the second question, AJOVY launch in Japan, what's the opportunity there? What are the markets will you be going into? What could the contribution from AUSTEDO be in China and other markets outside the US. Then how much will ex-U.S. 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. So I'll do it overall, high level because there's a lot of details to the COVID-19 impacts, of course. But if you think about it high level, then of course COVID has 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,. Then we had a destocking at patient levels in the second quarter of 2020, which took volumes down. Then we had the effect of, you would say, the lockdowns in both U.S. and Europe in the third and fourth quarter of last year, of 2020. And then we were optimistic when we made the guidance for 2021 that we were seeing all the vaccinations coming on and we hope d 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 scripts, labels in the U.S. starting at the end of the second quarter. But 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 these 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 a rep visits to a psychiatrist, of psychiatrist staying open and so on. All…

No, I think you actually exhausted it. I would say the only respect that I see is the cough and cold portfolio, that's for U.S. generics, but also for European OTC business, because in 2020 -- or 2020-2021 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. Then on AJOVY Japan and AUSTEDO China, we're very happy about the launch in Japan of AJOVY and we'll be going 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 penetrates is I would say slow and steady, because there's, first you get the approval, you get the price, which is set by the government so you don't have a lot of hassle with the pricing. You don't have pricing negotiations like that, you had that already. So that's [Indiscernible] but 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. You work through all the hospital listings, you get the product on there, and then your scripts start to take off and gradually buildup. So when it comes to the fourth quarter of this year, and Joe said in Japan or status sales in China, will still be marginal, they will not have a major impact. But in both markets, we are happy about the development and then numbers will be accelerating over the next 10 years so it's a steady buildup. It's a good launch in both cases and we're very happy about the products reaching more major markets. Gary, thanks for the questions. I think with that we will end the call 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.

That concludes our conference for today. This conference will be available for replay after 2:00 PM Eastern Time today through -- until November 26th, 2021. You may access the remote replay system at any time by dialing 0044 3333 009785, and entering the access code, 646 6787. The number again is, 0044 3333 009785, [Operator Instructions]. Thank you for participating. You may all disconnect.