Teva Pharmaceutical Industries Limited (NASDAQ:TEVA) - Executing on Pivot to Growth Strategy

Published on September 24, 2024 | Ticker: TEVA

Teva Pharmaceutical Industries Limited (NASDAQ:TEVA) is a global pharmaceutical leader with a diverse portfolio spanning generics, innovative medicines, and biosimilars. The company has been executing on its "Pivot to Growth" strategy, which is designed to return Teva to sustainable growth and profitability. In the latest quarter, the company demonstrated continued progress, reporting solid financial results and advancing its innovative pipeline.

Financial Performance

Consistent Execution

In the first quarter of 2024, Teva reported revenues of $3,819 million, an increase of 4% in U.S. dollars and 5% in local currency terms compared to the first quarter of 2023. This growth was driven by strong performance across the company's business segments, including the United States, Europe, and International Markets.

Teva's gross profit in the first quarter of 2024 was $1,771 million, an increase of 12% compared to the same period in 2023. Gross profit margin improved to 46.4% from 43.2% in the prior-year quarter, reflecting a favorable product mix and ongoing cost optimization efforts.

The company's research and development (R&D) expenses, net, were $242 million in the first quarter of 2024, up 4% year-over-year, as Teva continued to invest in its innovative pipeline. Selling and marketing (S&M) expenses increased by 11.4% to $608 million, primarily due to increased promotional activities for key growth drivers, such as AUSTEDO and the launch of UZEDY. General and administrative (G&A) expenses decreased by 6% to $278 million.

Teva reported an operating loss of $218 million in the first quarter of 2024, compared to an operating loss of $13 million in the same period last year. This was mainly due to higher impairments of tangible assets and other items, as well as increased S&M expenses, partially offset by higher gross profit, lower legal settlement and loss contingencies, and lower intangible asset impairments.

The company recognized a tax benefit of $52 million in the first quarter of 2024, on a pre-tax loss of $467 million. In the first quarter of 2023, Teva recognized a tax benefit of $19 million, on a pre-tax loss of $272 million.

For the full year of 2024, Teva continues to expect revenues to be between $15.7 billion and $16.3 billion. The company also reaffirmed its 2024 non-GAAP outlook for operating income, EBITDA, earnings per share, and free cash flow, as provided in January 2024.

Segment Performance

Broad-Based Growth

United States Segment

Revenues from Teva's United States segment in the first quarter of 2024 were $1,725 million, an increase of 3% compared to the first quarter of 2023. This was driven by higher revenues from AUSTEDO, as well as increased sales of generic products, partially offset by lower revenues from COPAXONE and Anda, the company's distribution business.

Europe Segment

Revenues from Teva's Europe segment in the first quarter of 2024 were $1,272 million, an increase of 7% in U.S. dollars and 4% in local currency terms compared to the first quarter of 2023. This growth was primarily due to higher revenues from generic products and AJOVY.

International Markets Segment

Revenues from Teva's International Markets segment in the first quarter of 2024 were $597 million, an increase of 3% in U.S. dollars and 17% in local currency terms compared to the first quarter of 2023. This was driven by higher revenues from generic products in most markets, partially offset by regulatory price reductions and generic competition in Japan.

Product Performance

Driving Growth

AUSTEDO

AUSTEDO revenues in the first quarter of 2024 were $282 million, an increase of 67% compared to the first quarter of 2023, driven by volume growth, including the launch of AUSTEDO XR, as well as expanded patient access and increased investment in promotional activities.

AJOVY

AJOVY revenues in the first quarter of 2024 were $113 million, an increase of 18% compared to the first quarter of 2023, with strong performance in both the United States and international markets.

UZEDY

UZEDY, Teva's recently launched long-acting injectable for the treatment of schizophrenia, generated revenues of $20 million in the first quarter of 2024, reflecting continued momentum since its launch.

Generics

Teva's global generics business, including biosimilars, reported revenues of $2,289 million in the first quarter of 2024, an increase of 9% compared to the same period in 2023. This was driven by strong performance across all regions, including an 8% increase in Europe and a 16% increase in International Markets.

Pipeline Advancement

Executing on Innovative Strategy

Olanzapine LAI

Teva announced positive topline results from the Phase 3 SPACE study evaluating the efficacy of olanzapine LAI (long-acting injectable) for the treatment of schizophrenia. The study met its primary endpoint, demonstrating a statistically significant superior reduction in monthly migraine days compared to placebo, with a favorable safety profile.

Anti-TL1A (Duvakitug)

Teva's anti-TL1A program, which is being developed in collaboration with Sanofi for the treatment of ulcerative colitis and Crohn's disease, continues to progress. The RELIEVE UCCD Phase 2b trial has completed enrollment ahead of schedule, and the companies now expect to have topline results for both indications in the fourth quarter of 2024.

ICS/SABA (TEV-'248)

Teva's combination rescue inhaler for the treatment of asthma, ICS/SABA (TEV-'248), is currently in Phase 3 clinical trials. The company is collaborating with Launch Therapeutics and Abingworth to accelerate the development of this program.

Biosimilars

Teva's biosimilars pipeline continues to advance, with the company expecting to launch six biosimilar products by 2027. This includes the recent approvals of SIMLANDI (adalimumab-ryvk), a biosimilar to Humira, and SELARSDI (ustekinumab-aekn), a biosimilar to Stelara.

Liquidity and Capital Structure

As of March 31, 2024, Teva had cash and cash equivalents of $2,991 million, compared to $3,226 million as of December 31, 2023. The company's net debt stood at $16,652 million, with a net debt to EBITDA ratio of 3.38x.

In April 2024, Teva repaid $956 million of its 6% senior notes at maturity. The company also recently amended its $1.8 billion revolving credit facility, updating the maximum permitted leverage ratio for certain periods.

Teva generated free cash flow of $32 million in the first quarter of 2024, compared to $41 million in the same period last year. For the full year of 2024, the company expects free cash flow to be in the range of $1.7 billion to $2.0 billion.

Risks and Challenges

Teva faces several risks and challenges, including:

Intense competition in the generics market, which could impact pricing and market share
Potential delays or setbacks in the development and commercialization of its innovative pipeline
Ongoing legal and regulatory challenges, including litigation related to opioid sales and marketing
Macroeconomic and geopolitical factors, such as currency fluctuations and supply chain disruptions
Integration and execution risks associated with any future acquisitions or divestitures

Conclusion

Teva Pharmaceutical Industries Limited is executing on its "Pivot to Growth" strategy, delivering consistent financial performance and advancing its innovative pipeline. The company's diversified portfolio, including strong growth in its key products like AUSTEDO and AJOVY, as well as progress in its biosimilars and late-stage innovative assets, positions Teva for continued success. While the company faces various risks and challenges, its focus on operational excellence, cost optimization, and strategic capital allocation should enable it to navigate the evolving pharmaceutical landscape and drive long-term shareholder value.

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