Teva Pharmaceuticals Reports Strong Q3 Results - Raises Revenue and profit Forecast

Teva Pharmaceutical Industries Ltd. has posted strong third-quarter results, marking a second consecutive quarter of double-digit growth and raising its full-year forecasts. The company exceeded expectations, reporting revenues of $4.3 billion for Q3, up 13% from the same period in 2023. This performance was significantly higher than the $4.1 billion analysts had forecasted. Teva also surpassed profit expectations, with a net profit of 69 cents per share, beating the anticipated 65 cents per share.

Teva’s performance was bolstered by growth across several key areas. The generics division, which accounts for just over half of the company’s revenues, emerged as a major driver of the quarter’s success, with global generic sales increasing by 17%, including a 30% rise in the U.S. market. This marked the seventh consecutive quarter of growth for the generics business, which had previously faced challenges.

Teva’s branded drugs also performed well. Sales of Estado, an original drug for tardive dyskinesia, reached $435 million, marking a 28% increase compared to the previous year, though growth slowed slightly from the prior quarter. Ajovi, Teva’s migraine treatment, saw revenue rise by 21%, contributing $137 million. Teva also reported solid progress with its newest drug, UZEDY, for treating schizophrenia, generating $100 million in revenue, exceeding expectations.

Legal Challenges and Write-Offs Impact Bottom Line

Despite the strong revenue growth, Teva’s bottom line faced setbacks due to ongoing legal issues and write-offs. The company recorded provisions of $1.2 billion in the third quarter, including $450 million related to a fine imposed by the European Commission. The fine stems from the Commission’s decision to penalize Teva for allegedly attempting to delay the entry of generic competitors into the multiple sclerosis drug market to protect Copaxone, Teva’s flagship drug, which now faces generic competition. Teva plans to appeal the fine, but CEO Richard Francis warned that the legal process could take years.

Additionally, Teva wrote off $600 million in the third quarter related to its TAPI division, which manufactures active pharmaceutical ingredients (APIs). This follows a $400 million write-off in the previous quarter. The company is negotiating to sell TAPI and expects the deal to close in the first half of 2025. The division, which generates around $1 billion in annual revenue, has faced stagnation, and Teva has decided that selling it is the best course of action.

Raising Full-Year Forecasts Despite Challenges

Teva’s strong Q3 performance and continued growth in its key divisions have led the company to raise its full-year guidance. The company now expects revenues to range between $16.1 billion and $16.5 billion, up from previous estimates. This revision is largely driven by the better-than-expected performance of UZEDY, which is now projected to generate $100 million in revenue for the year, surpassing prior forecasts of $80 million.

Teva also raised its earnings per share (EPS) forecast to between $2.40 and $2.50, up from a previous range of $2.30 to $2.50. Operating profit is expected to range between $4.2 billion and $4.5 billion.

Strong Financial Position Amid Legal  Setbacks

Despite the legal fines and challenges, Teva’s market value has surged, reaching a six-year high of $21 billion, exceeding the company’s debt of $15.7 billion at the end of the third quarter. This marks the first time in years that Teva’s market value has surpassed its debt load. The company also reported a strong cash flow, with operational cash flow reaching $1.2 billion for the year, and expectations to hit $2 billion by year-end.

Teva has been able to manage its debt effectively, with Fitch upgrading its credit rating to BB for the first time in a decade. Although Moody’s and S&P did not change their ratings, both raised their outlooks on the company’s debt.

Looking Ahead

As Teva moves forward, it continues to face the challenge of managing its legal risks while driving growth across its generics and branded pharmaceutical divisions. The company remains committed to its strategy of focusing on high-growth areas such as its innovative drug portfolio while addressing its legal and reputational issues.

The strong financial performance, coupled with the company's plans for TAPI’s sale and continued focus on innovation, suggests a positive outlook for Teva, though its legal battles are likely to remain a key challenge in the coming months.