Teva CEO Details Biopharma Pivot, $700M Savings Plan and Growth Pipeline

Key Points

• Teva is accelerating its shift toward biopharmaceuticals while stabilizing generics, with innovative sales now at roughly $1 billion per quarter and marketed growth products posting double-digit gains.
• The company targets a 30% operating margin by 2027 and expects a cost-efficiency program to deliver $700 million in savings, while balancing margin expansion with continued investment in its pipeline.
• Teva expects regular product launches supported by growth brands including AUSTEDO and AJOVY, pipeline candidates such as duvakitug and ecopipam, and a biosimilars portfolio of 15 marketed products plus 14 in development.

Teva Pharmaceutical Industries NYSE: TEVA Chief Executive Officer Richard Francis said the company has shifted from being viewed primarily as a generics manufacturer toward a biopharmaceutical company with a growing innovative medicines portfolio, while maintaining and expanding its generics operations.

Speaking with J.P. Morgan analyst Chris Schott, Francis said Teva’s “Pivot to Growth” strategy has centered on accelerating innovative products, stabilizing the generics business, advancing research and development, and maintaining discipline in capital allocation. He said the company’s innovative business grew 40% in the second quarter, while all of its marketed growth products delivered double-digit growth.

Francis said Teva’s innovative sales totaled about $1.2 billion at the end of 2022 and are now running at approximately $1 billion per quarter. He said the company expects to continue growing at a mid-single-digit rate after 2026, while the growing contribution from higher-margin innovative products could support gains in gross margin, operating income, earnings per share and cash flow.

Margins and Cost Savings

Francis said Teva’s gross margin has risen from 48% when he became CEO to about 55%. He described further gross-margin improvement as an important component of the company’s value-creation strategy, particularly as innovative products account for a larger share of sales.

Teva has targeted a 30% operating margin by 2027, despite the anticipated loss of generic REVLIMID sales. Francis said the company is “well on track” to achieve that target, citing a changing portfolio mix and a cost-efficiency program expected to generate $700 million in savings after investment by the end of 2027.

While Francis said operating margin should rise beyond 2027, he did not provide a longer-term target. He said management is weighing whether to establish goals for 2030 or later, while balancing margin expansion against investment in the company’s product pipeline.

“Do not sacrifice the pipeline for short-term operating margin” is a message Francis said he has heard from investors. He said Teva intends to allocate capital only to projects expected to generate returns, rather than maintaining fixed R&D budgets or pursuing “pet projects.”

Pipeline and Portfolio

Francis highlighted Teva’s pipeline of innovative medicines, including duvakitug, an anti-TL1A antibody being studied in inflammatory conditions; anti-IL-15 programs; long-acting olanzapine; ecopipam for Tourette syndrome; and UZEDY. He said Teva expects to have a product launch each year for the next five years, followed by launches approximately every 18 months thereafter.

He credited Teva’s internal antibody-engineering capabilities, including work conducted at its research facility in Sydney, for the company’s pipeline. Francis said the company is advancing a TSLP/IL-13 program into the clinic in the first quarter and expects data on its PD-1/IL-2 program by year-end.

On duvakitug, Francis said Teva believes its TL1A antibody has advantages in potency, specificity and low neutralizing antibodies compared with competing products. He said the company believes TL1A therapies could be used earlier in the treatment of inflammatory bowel disease because of their safety and tolerability profiles, though he cautioned that combination approaches and other treatment modalities will take time to develop.

Growth Brands and Upcoming Launches

Francis said AUSTEDO continues to have substantial growth potential in tardive dyskinesia, where he estimated that 85% of patients remain untreated. Teva is seeking to improve patient titration, adherence and compliance, which he said can help patients reach more effective doses and remain on therapy. He reiterated confidence in a goal of more than $3 billion in peak annual sales for AUSTEDO.

He noted that AUSTEDO’s reported sales comparisons may be affected by inventory dynamics. Channel inventory built in the fourth quarter of the prior year is being drawn down, and wholesalers may further reduce inventory ahead of an Inflation Reduction Act-related discount. Francis said fourth-quarter sales could be down year over year, while prescription trends and milligram growth remain competitive.

Francis also pointed to AJOVY’s performance, saying the migraine treatment has been reinvigorated through more focused execution rather than significantly higher spending. He said AJOVY has been growing faster than its market and gaining share across regions, adding that management sees it as a potential billion-dollar brand.

For Teva’s long-acting olanzapine treatment, Francis said the opportunity stems from the large number of schizophrenia patients using oral olanzapine and the need for better treatment adherence. He said Teva estimates a $1.5 billion to $2 billion franchise opportunity for UZEDY and long-acting olanzapine, based partly on historical migration to long-acting treatments in related markets.

Francis said Teva expects modest revenue from the olanzapine launch initially, with revenue expected to begin building in the second half of the following year as Medicaid coverage expands. He said the company is prioritizing sustainable value and payer access rather than accepting discounts that it believes do not reflect a product’s value.

He also expressed optimism about ecopipam, Teva’s planned treatment for Tourette syndrome. Francis said approximately 100,000 children have Tourette syndrome, with roughly 50,000 receiving therapy, and said persistence on existing treatments is low. He said Teva expects to apply its commercial experience in neurology and central nervous system diseases to support the planned launch.

Generics and Capital Allocation

Francis said Teva’s generics business, which had been declining before 2023, has returned to growth through improved product launches, manufacturing, supply chain execution and commercial discipline. He said the company has historically projected 1% to 2% annual growth for the business, but believes biosimilars could improve portfolio stability and margins over time.

Teva now has 15 biosimilars on the market and another 14 in its pipeline, Francis said.

On capital deployment, Francis said Teva has reached investment-grade ratings from all three major rating agencies a year earlier than expected. With debt reduction no longer the company’s first priority, he said Teva plans to continue investing in launches, pipeline development and business development opportunities. He said the company does not view a dividend as the best current use of capital and would consider share repurchases when management believes buying stock offers an attractive return.

About Teva Pharmaceutical Industries (NYSE:TEVA)

Teva Pharmaceutical Industries Ltd. is a global pharmaceutical company headquartered in Tel Aviv, Israel. The company develops, manufactures and markets generic medicines, innovative specialty medicines, biosimilars, over-the-counter products and active pharmaceutical ingredients. Its portfolio serves a broad range of therapeutic areas, including central nervous system disorders, respiratory conditions, migraine, oncology and movement disorders.

Teva's specialty medicines include treatments for conditions such as multiple sclerosis, migraine and tardive dyskinesia, while its generic medicines business supplies products across numerous therapeutic categories and dosage forms.

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