Teva Pharmaceutical Industries Limited’s TEVA stock has risen 72.5% so far this year compared with an increase of 17.9% for the industry. The stock has also outperformed the sector and the S&P 500, as seen in the chart below.
TEVA Stock Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
The stock has also been consistently trading above 200-day moving averages since mid-November 2023. In fact, Teva’s stock price is showing improvement after years of remaining suppressed.
Teva is the world’s largest generic drug company in terms of both total and new prescriptions. The company also markets some branded drugs. Its revenues suffered significantly since it lost exclusivity for key multiple sclerosis medicine, Copaxone, in 2015. Teva also faces competitive pressure for some of its key branded drugs. Teva also has a high debt load and faces some price-fixing charges. However, the company expects its newer drugs, Austedo and Ajovy, as well as a stable generics business, to help revive top-line growth in future quarters.
Let's discuss the aspects in detail to understand how to play TEVA stock.
TEVA’s New Branded Drugs Can Drive Growth
The company is seeing continued market share growth of its two newest drugs, Austedo and Ajovy. Though Teva is seeing slower growth of Ajovy in the U.S. market, it expects sales to benefit from continued patient growth and launches in additional countries in Europe and international markets. In 2024, Teva expects Ajovy sales of approximately $500 million.
For Austedo, Teva expects to achieve annual revenues of more than $2.5 billion by 2027. The Austedo franchise got a boost from the launch of Austedo XR, a new once-daily formulation of Austedo, which was launched in May 2023. Teva expects to launch Austedo in European markets in 2026. In 2024, Teva expects Austedo sales of approximately $1.6 billion.
Uzedy (risperidone) extended-release injectable suspension, a long-acting subcutaneous atypical antipsychotic injection for the treatment of schizophrenia in adults, was launched in May 2023 in the United States. Uzedy has shown up to 80% reduction in the risk of schizophrenia relapse versus placebo in a phase III study. In 2024, Teva expects Uzedy sales of approximately $80 million.
Teva has also made decent progress with its branded pipeline. In May, it announced positive data from a phase III study called SOLARIS on its key pipeline candidate, olanzapine, a long-acting subcutaneous injectable (LAI) for treating schizophrenia. The study met its primary and secondary endpoints in all dose groups versus placebo. At present, there is no effective long-term treatment for schizophrenia, resulting in a significant unmet medical need. Teva has also signed a funding agreement with Royalty Pharma to accelerate the development of olanzapine LAI.
Another important pipeline candidate is TEV-48574, its anti-TL1A therapy in mid-stage development for inflammatory bowel diseases (“IBD”), ulcerative colitis and Crohn’s disease. Teva has partnered with Sanofi SNY for its TEV-4857 to maximize the value of the asset. Teva and Sanofi will equally share the development costs globally.
Teva Strengthening Generics and Biosimilar Pipeline
Teva regularly seeks first-to-file (FTF) and first-to-market opportunities as well as approval for complex generics, which are likely to face less competition. Teva saw limited new complex generic approvals in the 2021-2023 period. However, in the first half of 2024, it launched several complex generic products and expects to launch some more in the second half and in 2025. This should help the company maintain its strong position in the global generics market.
Teva markets biosimilar versions of Roche’s cancer drugs Rituxan (Truxima) and Herceptin (Herzuma). Teva launched the first biosimilar version of Bristol-Myers Revlimid in the United States in March 2022, which has been improving its generic revenues. Teva has a decent pipeline of biosimilars, with some being developed in partnership with Alvotech. A biosimilar version of AbbVie’s ABBV Humira called Simlandi was approved in February 2024 and launched in May. Selarsdi, a biosimilar version of J&J’s JNJ Stelara, was approved in April 2024, and per a settlement with J&J, Teva will launch the biosimilar in February 2025. Ranivisio (ranibizumab), a biosimilar to Lucentis, was granted marketing authorization in Europe in August 2022. Biosimilars of Prolia, Eylea, Simponi, Xgeva and Xolair are in late-stage development. Teva expects to launch six biosimilars by 2027.
TEVA’s Attractive Stock Valuation & Earnings Estimate
TEVA’s stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, the company shares currently trade at 6.79 on a forward 12-month basis, lower than 10.03 for the industry.
TEVA Stock Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for earnings has remained stable at $2.42 per share for 2024 and at $2.75 per share for 2025 over the past 30 days.
Image Source: Zacks Investment Research
Stay Invested in Teva’s Stock
Teva faces challenges like competitive pressure on some key branded drugs and a high debt load. However, its newer drugs, Austedo and Ajovy, as well as a stable generics business are reviving top-line growth. With the nationwide settlement for the costly opioid litigations, new product launches, stability of the generics segment with contribution from biosimilars and a robust biosimilar and branded pipeline, the path for Teva’s long-term growth is becoming clearer. Teva is saving costs and improving margins through the optimization of operations for efficiency while also lowering the debt on its balance sheet.
Teva’s reasonable valuation, an improving pipeline and the prospect of growth in sales and profits are good enough reasons for those who own this Zacks Rank #3 (Hold) stock to stay invested. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Buying TEVA stock at the current attractive valuation can prove prudent for long-term investors.
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