Fitch Ratings has upgraded Teva Pharmaceutical Industries' credit rating from BB- to BB, raising the rating of the company’s unsecured bonds to the same level. Additionally, the agency set a positive outlook for Teva, suggesting that the next change in its credit rating is likely to be another upgrade.
Fitch attributed the upgrade to Teva's significant progress in reducing its financial debt and its return to growth, alongside improvements in operational efficiency. The rating agency expects that Teva will continue to decrease its debt, grow its revenue base, and lower legal costs associated with ongoing lawsuits.
Teva is recognized as one of the world’s leading manufacturers of generic drugs, and Fitch highlighted the company’s strong control over various production technologies, a growing stock of biosimilar drugs, and a broad patent portfolio. These factors position Teva well to benefit from the increasing demand for generic and biosimilar drugs over the medium to long term.
Projected Debt Reduction and Future Growth
Fitch forecasts that Teva will continue reducing its debt at an annual rate of $1.7 billion to $2 billion, supported by revenue growth and stable profitability. This outlook remains valid even without using the proceeds from the potential sale of its active pharmaceutical ingredients (API) division, TAPI. The sale of TAPI, expected in 2025, could further reduce debt by $1.2 billion, with an additional $1.9 billion allocated to bond repayment, improving Teva’s financial flexibility.
Debt Leverage to Improve by 2025
Fitch anticipates that Teva’s net debt to adjusted EBITDA ratio will reach 4.5 to 5 by the end of 2024, with further reductions expected as debt decreases and operating income rises. If a significant portion of the TAPI sale proceeds is used to pay down debt, this ratio could fall below 4 by the end of 2025, further enhancing the company’s credit profile.
Key Drivers of Future Growth
Fitch also highlighted Teva’s portfolio of original drugs, including Ajovy (for migraine prevention and treatment), Austedo (for motor disorders associated with antipsychotic drug use), and Uzedy (for schizophrenia treatment), as the main growth drivers. In addition, the launch of biosimilar drugs currently in advanced stages of development is expected to provide another key growth engine, either through organic growth or partnerships with other companies. Revenues from compounded generics and biosimilars are expected to accelerate in 2026-2027, further strengthening Teva’s financial position.
Fitch noted that while rising operating profits are contributing positively to Teva’s outlook, this effect is somewhat offset by the company’s increasing reliance on securitization of customer debt. Nevertheless, successful launches of new drugs could further bolster Teva's credit profile.
