Teva Is Benefiting From Rationalized Portfolio, Optimized Pipeline, and New Branded Drug Launches

We are setting a fair value estimate of $10.50 per share for Teva Pharmaceutical TEVA, and we don’t believe Teva has an established an economic moat. Our ten-year forecast lies on a low-single digit top line growth with a slight improvement in margin until 2029 when we start to expect difficult landscapes for its branded drugs.

By our estimate, roughly 70% of Teva’s total sales are derived from generics and off-patented branded drugs, and it continues to suffer low- to mid-single-digit erosion year over year in developed markets like North America and the majority of Europe. Because price and margin headwinds exist predominantly in small-molecule oral tablets that are easy to produce, Teva has been rationalizing its portfolio and focusing more on higher-margin items like complex injectables and biosimilars. Complex generics are more difficult to manufacture, limiting competition and paving an opportunistic road for Teva. But other players in the industry are employing a similar strategy, so success in this area relies on Teva’s ability to seek out profitable drugs and to efficiently launch them to market.

Teva has a number of branded drugs that it recently brought to market that will provide nice tailwinds over the next ten years. The most notable product launches include Ajovy (injection for treatment of migraine), Austedo (oral tablet for treatment of tardive dyskinesia and chorea associated with Huntington’s disease), and Uzedy (injection for treatment of schizophrenia). Ajovy, launched in 2018, is expected to face generics in 2030 at the earliest, but the other two drugs are to be patent-protected over the next 10 years. We expect them to greatly fuel Teva’s business, especially as the company tries to get Austedo and Uzedy approved in Europe and Asia. These three drugs made up roughly 9% of the company’s total sales during 2022, but we expect strong future growth and project the drugs to represent more than 20% of total sales by 2027.