| Snowflake Score | |
|---|---|
| Valuation | 6/6 |
| Future Growth | 4/6 |
| Past Performance | 0/6 |
| Financial Health | 3/6 |
| Dividends | 0/6 |
TEVA Stock Overview
Teva Pharmaceutical Industries Limited, a pharmaceutical company, develops, manufactures, markets, and distributes generic medicines, specialty medicines, and biopharmaceutical products in North America, Europe, and internationally.
Rewards
Analysts in good agreement that stock price will rise by 32.6%
Risk Analysis
No risks detected for TEVA from our risk checks.
Teva Pharmaceutical Industries Limited Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$7.96 |
| 52 Week High | US$11.34 |
| 52 Week Low | US$6.78 |
| Beta | 1.27 |
| 1 Month Change | -15.32% |
| 3 Month Change | 5.85% |
| 1 Year Change | -20.16% |
| 3 Year Change | 14.04% |
| 5 Year Change | -50.50% |
| Change since IPO | 961.33% |
Recent News & Updates
Teva Pharmaceutical: Slow And Steady Road To A Higher Share Price
Summary Teva is a solid company which faces/faced headwinds from their high debt load and opioid crisis settlement uncertainty. But with most of the settlement uncertainty behind them and their efforts to significantly lower their debt, their current valuation doesn't make sense. As a result, I believe a 25% to 35% averaged annual return is possible through 2025 to 2026, leading to an increasingly bullish stance on Teva's long-term prospects. Healthcare stocks are tricky when it comes to a long term investment in this day and age. Sure, the need for drugs and other biopharmaceuticals is going nowhere but up, but companies which operate any significant portion of their business in the United States are likely going to see prices and profits reduced over the longer run as they move towards the rest of the world when it comes to healthcare costs and treatments. Right now, Americans pay as much as 4x for the same medications than elsewhere in the world and public opinion has shifted in favor of some common sense legislation in recent months. Back in 2009, when one political party controlled the coveted 60-seats in the United States Senate, the government negotiating prescription drug prices was a fantasy. But recently, with the same party back in control with just a bare 50-seat majority, that became a reality. Over the next few years, I expect this move to cause the price of prescription drugs to come down significantly, which is great news for Americans but may not be good for biopharmaceutical companies bottom line. That's why finding the right companies to invest in is so tricky now. That's where I believe Teva Pharmaceutical (TEVA) comes in. Generics Vs. Exclusivity Teva is in the generics business for starters, this means that once a patented, exclusive medication loses its exclusivity after any given amount of years, the company reverse engineers it and can sell it for a fraction of the price. This means that in it of itself the company has a much lower price point than the patented exclusive drugs, so there's much less of the way to come down in regards to price with open negotiations. This is the main difference with the company moving forward, where they won't have to be subject to decreases of 50% to 70% like others to match the sales price in other nations but rather a more modest 10% to 15%, I believe. This leads me to believe that the company's long term prospects will ultimately be superior to other biopharmaceutical companies and it's worth evaluating why exactly the company's shares are trading at such low multiples. The reasons for that, according to the company's CEOs recent remarks, is the company's debt load and the uncertainty around the opioid crisis settlement, which was finalized over the past few weeks to the tune of $4.25 billion over the course of 13 years. Let's dissect those. The Debt Load The company's debt load is certainly an issue, as they pay high interest expense in a rising rate environment. But they've been diligent at paying down that debt with cash and equity offerings over the past few years after the big generics acquisition back in 2016. After their debt surged to over $32 billion after the acquisition, they've reduced the total long term debt load to just over $20 billion as of their most recent report, and they expect to continue and retire about $1 billion to $2 billion of this debt every year. This leads me to calculate that the company will be holding anywhere from $10 billion to $15 billion of debt by 2026, which I think should help bring their valuation multiples to a more realistic range. Beyond deleveraging their balance sheet, reducing their debt load means that they'll be paying less interest expense, which will allow them to conserve cash to more adequately pay their opioid crisis settlements as well as funding operations and potentially in the future - reinstate their dividend payments. The company reduction in debt load resulted in interest expense falling from $920 million each year in 2018 to about $875 million as of their most recent reporting year. Although the increase in interest rates resulted in quarterly interest expense rising from $180 million to around $225 million in the most recent quarter. I believe that the company's debt reduction will result in them paying about $700 million annually in the next 12 to 18 months, which means another $150 million saved. Opioid Crisis Settlement The company agreed to a settlement of $4.25 billion over the course of 13 years, which comes out to about $327 million each year in payments. With the aforementioned savings and their $1 billion annually generated from operations, these payment can be done efficiently and on time to correct the grave errors the company made in the past. While judges the world over may still revisit these cases and order more settlements, the company is, for now, out of the woods from the big price tag one which should relieve some of the uncertainty. This means that there probably isn't a potential $10 billion to $15 billion payment out there just waiting to cripple the company's balance sheet, even if it's justified for the harm it caused. This, I believe, means that the company can move forward without the uncertainty and need to make decisions on cash conservation in order to fund any future settlement. With over $2 billion in cash and equivalents and over $4 billion in inventory - the company is well positioned to handle this settlement and move on to manufacturing more generics as other exclusivities expire. What's The Value Here? The value here is quite simple, if the company makes good on their debt reduction plan to lower interest expense by another $100 million to $200 million annually - they are currently trading at ridiculously low multiples, especially considering the rate at which they're expected to grow their EPS. 2022 2023 2024 2025 2026 EPS $2.54 $2.56 $2.65 $2.84 $3.18 Growth -1.48% +0.60% +3.82% +7.13% +11.8% This growth is derived from 2 things, the first of which is by growing revenues.
Teva Pharmaceutical: Past Behind And A Promising 2023
Summary Teva Pharmaceutical's divestments have been many in recent years, and the company presents a different set-up than in the past. In about 5 years Teva Pharmaceutical has reduced its net debt by $14 billion, a remarkable sum for a company with a market cap of only $10 billion. Teva appears to be ahead of its competitors regarding the commercialization of the biosimilar of Humira®. Prescription and sales of AUSTEDO® achieved a double-digit increase over Q2 2021. According to my assumptions, Teva Pharmaceutical's fair value is $14.28 per share, so the company is undervalued. Far from its all-time high, with a tumultuous past now behind it and a promising pipeline for 2023, Teva Pharmaceutical Industries Limited (TEVA) is a company to watch at only $8.97 per share. Focus on corporate strategy Teva's business strategy is what makes me confident in a long-term view toward this company. After the countless difficulties faced from 2015 onward, it seems that to date something is changing, and expectations for 2023 look bright. In the latest quarterly report, Teva's focus was mainly on four main themes, each of which will be covered in this article. Teva Q2 2022 Optimize business Business optimization means simplifying production processes and disinvesting in business branches that are now unproductive and irrelevant to improving synergy. Eventually, targeted new acquisitions can also bring synergy improvements. During the last earnings call, CEO Kåre Schultz discussed this topic at length: With regards to divestments, what we've done in the last five years is we've really analyzed the entire value chain, the entire business, and we have sold off those elements that we thought had no strategic synergy with the rest of the business and we've kept all the elements that indeed gives us a strong synergist effect. So, we have no plans of divesting any parts of our business. We basically had the plan to integrate and optimize the business we have elected to keep, because we believe it all fits very well together. Teva's divestments have been many in recent years, and the company presents a different set-up than in the past. According to the CEO, all divestments have been focused on improving the company's core business by removing business units that are unrelated to the company's vision. Here are some of them: Sale of the portfolio in the global women's health business for $703 million cash to CVC Capital Partners Sale of its emergency contraception brands to Foundation Consumer Healthcare for $675 million Sale of Paragard for a unit of Cooper Companies Inc. for $1.1 billion In the past 4 years, production sites have decreased from 80 to 53. To date, at least as far as divestments are concerned, it seems that Teva has completed its process of simplifying the various business divisions, leaving only those in which it believes most. I do not rule out the possibility that there may be new acquisitions in the future aimed at improving corporate synergy, but I think it unlikely that these will be very costly purchases since the company's focus is also currently on debt reduction. If Teva has carried out a divestment strategy in recent years, it has also been to improve its financial condition. Reduce debt Debt reduction is a constant theme in Teva's financial reports, in fact for management this is a major focus. After the acquisition of Actavis for $40.50 billion in August 2016, Teva's net debt suffered a major setback that still has not been fully disposed of. TIKR Terminal The burden of interest on debt years later is still quite high. In fact, it amounts to 5.60% of revenues for the whole of 2021. This is why Teva definitely wants to reduce it. Nevertheless, my sentiment on Teva's financial situation is positive. It is true that the net debt is very high, but the company is objectively working to reduce it. Teva Q2 2022 In about 5 years, Teva has reduced its net debt by $14 billion, a remarkable sum for a company with a market cap of only $10 billion. Teva Q2 2022 Going to analyze the structure of this debt even further, we can see that Teva is subject to covenant ratio limits that it must necessarily meet: For Q2 and Q3 of this year the net debt/EBITDA must be at a maximum of 4.50x For Q4 of this year, net debt/EBITDA must stand at a maximum of 4.25x. Currently this value is at 4.16x, so I am confident that Teva can easily meet these thresholds. On the other hand, regarding future net debt expectations, management has set two long-term targets: one for FY 2023, and another to be achieved by 2027: The FY 2023 goal is to have paid down at least $18 billion of debt including interest in the last 4 years, and to reduce net debt rapidly to below $20 billion. The goal to be achieved by 2027 is to reach a net debt/EBITDA of 2x, or about half of what it is today. Rather than by strong EBITDA growth, I expect that this goal can be met by a strong decrease in net debt. Finally, to conclude the debt issue, the company in the last report specified that it intends to achieve the 2027 results by relying only on its cash flows. An increase in equity with consequent dilution for shareholders is not expected. Legal settlements Teva Pharmaceutical in recent years has been at the center of the scandal related to the opioid epidemic, an affair that began in the late 1990s. Teva, along with other pharmaceutical companies, reassured the scientific community that opium-containing painkillers did not generate any kind of addiction in users, which led to increased prescribing of these drugs. Subsequently, this belief was disproved, and opium addiction spread rapidly within the U.S., causing a full-blown epidemic. By the time this black swan hit Teva, the most disparate hypotheses had arisen to solve this problem, many of them with disastrous outcomes for the company. The expense of resolving this litigation involving thousands and thousands of people was incalculable, and all this only destabilized the company even more. In late July of this year, however, a settlement was finally reached and Teva will have to shell out $4.20 billion plus $100 million for the tribes. This is certainly not a success for the company, but at least a situation that had lasted for years has been clarified. The debt payment will be made over 13 years, a large deferment that favors its payment. Focus on cash flow Cash flow is the most important aspect, as a company that does not generate any is doomed to fail. Teva on this theme has set two main goals: Surpass a free cash flow of $2 billion by FY 2023. Achieve by 2027 a mid-single-digit revenue CAGR on a constant currency basis, as well as an operating margin of at least 30%. What will generate this growth, according to the company, will be five main aspects: Stable and predictable generics business Strong biosimilar portfolio Focused specialty pipeline with high growth potential Reduced leverage Increased operating margin through input optimization The last two aspects have already been covered within this article, so now I focus on the first three. Stable and predictable generics business Teva is among the world's leading generic drug companies and sees this market segment as a reliable source of cash inflows. Teva Q2 2022 Expectations of this market segment are not so rosy, but after all it already generates $300 billion a year. Over the next 10 years, $400 billion worth of drugs will go off-patent, and Teva has already implemented 1,100 projects to cover more than 80% of off-patent products. In this area, it is important to monitor the situation regarding the antipsychotic drug RISPERDAL® marketed by Janssen Pharmaceuticals, a subsidiary of Johnson & Johnson (JNJ). That drug is intended to treat schizophrenia and in the full year 2021 generated revenues of $592 million. In July 2022, the FDA approved the first generic versions of this drug produced by Teva that will have the same contraindications as the branded drug. During 2022, however, there was also another important development for the generic drug portfolio. On March 7, there was the launch of lenalidomide capsules, the first generic version of Revlimid®. That drug is intended to treat multiple myeloma, smoldering myeloma, and myelodysplastic syndromes. Revenues generated in 2021 by Revlimid® were $2.30 billion. In 2023 we will be able to better understand how successful these new launches have been. Strong biosimilar portfolio The biosimilars portfolio is probably the one with the highest prospects for improvement. The company is betting heavily on this market segment as it has very attractive potential growth: from 2022 to 2027, a CAGR of 16.80% is expected. Teva Q2 2022 To date, Teva's portfolio is well positioned in this market having 16 biosimilars, but in this article I will discuss the most interesting ones from a future perspective.
Teva wins European approval for biosimilar to Roche’s eye therapy Lucentis
Teva Pharmaceutical Industries Ltd (NYSE:TEVA) announced Monday that the European Commission authorized Ranivisio (ranibizumab), a biosimilar to Roche’s (OTCQX:RHHBY) (OTCQX:RHHBF) blockbuster eye therapy Lucentis. The EU authorities have greenlighted Ranivisio for all five indications Lucentis is approved in the region for adults, including age-related macular degeneration, which affects an estimated 67M people in Europe. TEVA has partnered with Swiss company Bioeq AG to commercialize Ranivisio. The European launch of the drug is expected to start close on the heels of its U.K. launch under the brand name ONGAVIA. “The product is a welcome addition to Teva’s growing biosimilars portfolio, and delivers on our mission to improve patient access to critical therapies while delivering vital savings to healthcare systems,” Richard Daniell, TEVA’s Executive Vice President, European Commercial, noted. Lucentis added ~$1.5B in revenue for RHHBY in 2021.
Shareholder Returns
| TEVA | US Pharmaceuticals | US Market | |
|---|---|---|---|
| 7D | -3.2% | 3.7% | -2.0% |
| 1Y | -20.2% | 5.3% | -20.3% |
Return vs Industry: TEVA underperformed the US Pharmaceuticals industry which returned 4.2% over the past year.
Return vs Market: TEVA exceeded the US Market which returned -22.1% over the past year.
Price Volatility
| TEVA volatility | |
|---|---|
| TEVA Average Weekly Movement | 10.1% |
| Pharmaceuticals Industry Average Movement | 11.5% |
| Market Average Movement | 6.9% |
| 10% most volatile stocks in US Market | 15.8% |
| 10% least volatile stocks in US Market | 2.8% |
Stable Share Price: TEVA is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 10% a week.
Volatility Over Time: TEVA's weekly volatility (10%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1901 | 35,346 | Kare Schultz | https://www.tevapharm.com |
Teva Pharmaceutical Industries Limited, a pharmaceutical company, develops, manufactures, markets, and distributes generic medicines, specialty medicines, and biopharmaceutical products in North America, Europe, and internationally. The company offers sterile products, hormones, high-potency drugs, and cytotoxic substances in various dosage forms, including tablets, capsules, injectables, inhalants, liquids, transdermal patches, ointments, and creams. It also develops, manufactures, and sells active pharmaceutical ingredients.
Teva Pharmaceutical Industries Limited Fundamentals Summary
| TEVA fundamental statistics | |
|---|---|
| Market Cap | US$8.84b |
| Earnings (TTM) | -US$1.05b |
| Revenue (TTM) | US$15.43b |
0.6x
P/S Ratio-8.4x
P/E RatioIs TEVA overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| TEVA income statement (TTM) | |
|---|---|
| Revenue | US$15.43b |
| Cost of Revenue | US$8.06b |
| Gross Profit | US$7.38b |
| Other Expenses | US$8.43b |
| Earnings | -US$1.05b |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | -0.95 |
| Gross Margin | 47.80% |
| Net Profit Margin | -6.83% |
| Debt/Equity Ratio | 224.7% |
How did TEVA perform over the long term?
See historical performance and comparison