Teva Pharmaceuticals Stock: Unlock Value in This Generic Drug Gem

Key Points

• Teva Pharmaceuticals is the world’s largest generic drug manufacturer with over 500 drugs and is experiencing robust growth in all geographies.
• Growth in Q1 2024 was led by its generics business and leading branded drug, AUSTEDO, which had 61% YoY revenue growth.
• Teva shares trade at just 7.25x forward earnings and will launch a generic version of Stelara in February 2025.

Drug prices continue to rise, driving up healthcare costs. Pharmaceutical companies usually hike drug prices at the beginning of each year. In January 2024, the average price hike was 5.4% on over 700 brand drugs. Their generic versions are alternatives to brand drugs, which come at a significant discount. This is why insurers, payers, and federal health insurance plans prefer generics and biosimilar drugs.

Teva Pharmaceuticals Industries Ltd. NYSE: TEVA is a leader in the generic drug industry. While it sells over 500 generic drugs at a discount (to the brands), its stock is also selling at a discount. It trades at just 7.25x forward earnings. Value investors may want to scoop up shares while they are still cheap. 

Teva Pharmaceutical operates in the medical sector, competing with Sandoz Group AG OTCMKTS: SDZNY, AbbVie Inc. NYSE: ABBV, Merck & Co. Inc. NYSE: MRK and  Dr. Reddy’s Laboratories Ltd. NYSE: RDY.

Teva’s Has the Largest Portfolio of Generic Medicines

Teva is the world's largest generic drug company. Its portfolio extends to over 500 generic drugs, most as essential. The company is diligent with its first-to-file and first-to-market strategy. It has built a vast distribution network, expanding its global reach to numerous countries worldwide, reaching 200 million people who use their drugs every day. They also have the capacity for high-volume production of generic and brand drugs. In late May 2024, Teva and Alvotech NASDAQ: ALVO launched Simlandi, a generic version of Humira. Humira is the blockbuster arthritis medication produced by AbbVie. 

The company has announced its intent to sell its active pharmaceutical ingredients (API) business called TAPI as part of its Pivot to Growth initiative, which has the company refocused on its core business. No actual buyers or prices have been mentioned, but it's estimated that the business could be worth up to $2 billion.

Teva Also Develops Its Own Branded Drugs

While best known for its library of generics, Teva also develops and produces its own brand drugs. AUSTEDO is one of its primary branded drugs. It is used to treat chorea associated with Huntington’s disease. AJOVY is an adult migraine medication.

TEVA Stock is in a Descending Triangle Pattern

The daily candlestick chart on TEVA illustrates a descending triangle pattern. The descending trendline formed at the $17.69 swing high on June 12, 2024, acting as an upper trendline resistance down to the flat-bottom lower trendline support at $16.16. The daily relative strength index (RSI) has turned back down and fallen to the 47-band. Pullback support levels are at $16.16, $15.62, $15.00, and $14.54.

Teva’s Revenue Growth Driven by Generics and AUSTEDO in Q1 2024

On May 8, 2024, Teva Pharmaceuticals reported Q1 2024 EPS of 48 cents, missing consensus estimates by 3 cents. Revenues rose 4.3% YoY to $3.82 billion, beating consensus estimates for $3.73 billion. Growth was led by its generics business and AUSTEDO. Generics saw growth across all regions, rising 9% in local currency terms. AUSTEDO experienced 67% YoY growth in the U.S. as the company reaffirmed 2024 revenue forecasts of $1.5 billion. AJOVY revenues rose 18% YoY to $113 million. The company received FDA approvals for generics SIMLANDI and SELARSDI, which are generic versions of Humira and Stelara, respectively.

For the full year of 2024, Teva Pharmaceuticals reaffirmed its revenue forecast of $15.7 billion to $16.3 billion. Adjusted EBITDA is expected to be between $4.5 billion and $5 billion. Non-GAAP diluted EPS is expected to be between $2.20 and 2.50. Free cash flow is expected to be between $1.7 billion and $2 billion.

Upbeat CEO Comments on 1st Anniversary of Teva's Pivot to Growth Strategy

TEVA CEO Richard Francis stated that the company is off to a great start, driven by growth in its generics business across all geographies and robust sales of its branded drugs AUSTEDO and AJOVY. The company has made significant strides in its Pivot to Growth Strategy. Phase 3 efficacy results for olanzapine once-monthly LAI met its primary endpoint, indicating it to be a well-tolerated treatment option for schizophrenia. The Pivot to Growth Strategy focuses on accelerating growth engines, which are AUSTEDO, AJOVY, and UZEDY branded drugs and late-stage pipeline generics.

CEO Francis commented, “We're excited to be in a position in quarter two to be launching our biosimilar Humira and SIMLANDI, and we're getting good interest from the payers, the PBMs and the channel with regard to this. Also pleased with the fact that our biosimilar Stelara is also approved, and we'll be launching that in February of 2025.” 

Teva Pharmaceuticals analyst ratings and price targets are at MarketBeat.