Teva Eyes New Growth Phase After Securing Investment-Grade Ratings

Key Points

• Teva achieved investment-grade ratings from all three major credit agencies roughly a year ahead of schedule, supported by debt reduction and expectations for future EBITDA growth. Refinancing is expected to lower financing expenses by approximately $400 million next year, giving the company more flexibility to invest and return capital.
• Teva plans to direct most business-development spending toward innovative medicines in neurology, immunology and rare diseases, while continuing to expand its generics and biosimilars portfolio. The company aims to launch about five innovative products over the next five years.
• The company remains focused on pipeline programs including duvakitug, anti-IL-15 and celiac and vitiligo treatments, while anticipating launches such as long-acting olanzapine and ecopipam. Teva also expects its U.S. generics business to be flat to slightly up this year, reversing its earlier outlook for a modest decline.

Teva Pharmaceutical Industries NYSE: TEVA is planning for greater financial flexibility after receiving investment-grade ratings from all three major credit rating agencies, President and CEO Richard Francis said at the BofA Global Healthcare Conference.

Francis said the company achieved the milestone about a year earlier than its prior target of the end of 2027. He said the upgrades reflected not only debt reduction, but also rating agencies’ expectations for future EBITDA growth.

“It’s not that we paid down the debt and now what?” Francis said. “It’s the future of the company looks a lot better.”

Teva’s previous capital-allocation priorities included reducing debt, investing in commercial growth drivers and product launches, advancing its pipeline and business development efforts, and returning capital to shareholders. With debt reduction becoming less of a primary focus, Francis said Teva is assessing how to deploy cash toward the remaining priorities.

Business Development Focuses on Innovative Assets

Francis said Teva remains active in business development but will maintain a disciplined approach to pricing and investment returns. The company has completed one transaction involving Amylyx and is also evaluating potential opportunities related to Biohaven, which is in bankruptcy, he said.

Teva expects the majority of business-development spending to be directed toward innovative medicines, particularly in central nervous system and neurology areas such as psychiatry and movement disorders. The company may also pursue immunology opportunities and rare diseases, Francis said. Rare disease opportunities could be evaluated across therapeutic areas because they can leverage Teva’s commercial, supply-chain and pricing capabilities.

The company will continue to invest in its generics business as well, particularly biosimilars. Francis said Teva has 15 biosimilars on the market and another 14 in its pipeline.

Francis also said Teva expects its debt refinancing to reduce financing expenses by approximately $400 million next year, providing additional cash-flow flexibility.

Pipeline Strategy Emphasizes Probability of Success

Teva’s research strategy focuses on validated biological targets rather than discovering entirely new targets or mechanisms of action, according to Francis. He described the company’s approach as “little R, capital D,” emphasizing development capabilities, including antibody engineering, over early discovery.

Francis cited Teva’s TL1A program, duvakitug, its anti-IL-15 antibody program and a TSLP/IL-13 program as examples of assets where the company believes antibody optimization can improve efficacy, tolerability and safety. Teva expects data from its anti-PD-1/IL-2 program by the end of the year, he added.

For central nervous system programs, Teva is willing to partner externally when scientific evidence has helped validate a target or pathway. Francis said the company has monitored potential opportunities globally, including in China, and is not “precious” about whether pipeline assets originate internally or externally.

He said duvakitug and the anti-IL-15 asset could each support multiple indications. Duvakitug is currently being evaluated in four indications, with Teva potentially adding several more, while the anti-IL-15 program is being developed in vitiligo and celiac disease, with alopecia planned to follow.

Teva expects to launch roughly five innovative products during the next five years and potentially introduce another product every 12 to 18 months thereafter, Francis said, contingent on clinical and regulatory outcomes.

Celiac, Vitiligo and Duvakitug Development

Francis acknowledged that Teva’s previously discussed $1 billion peak-sales potential for individual pipeline assets may prove conservative for celiac disease and vitiligo. However, he said the company had used the figure to illustrate that its pipeline represents more than $13 billion in potential sales even under a methodical framework.

Teva is discussing the development path for celiac disease with the Food and Drug Administration, Francis said. While the company intends to move quickly, he said it must first align with the FDA on endpoints and other regulatory expectations because no drug has previously been developed for celiac disease.

For duvakitug in inflammatory bowel disease, Francis said Teva sees potential for differentiated efficacy but stressed that phase 3 results will be required. He said safety and tolerability could be important differentiators in chronic conditions where other treatments may carry black-box warnings or monitoring requirements.

2027 Launches and Generics Outlook

Francis said Teva’s long-acting olanzapine program remains on its expected regulatory-review timeline. If approved, he expects the product to have a stronger launch than UZEDY, though revenue could build more meaningfully in the second half of the following year due to the need for state-by-state Medicaid formulary access.

The company expects to have about 86% Medicaid coverage after 12 months, he said. Teva plans to emphasize sampling, physician adoption, hospital formulary inclusion and prescription growth while it works through reimbursement access.

Francis also expressed optimism about the planned first-quarter launch of ecopipam for Tourette’s syndrome. Teva is still evaluating pricing and access strategy for the product, which is aimed at a market where he said many patients are dissatisfied with current treatment options.

Finally, Francis said Teva’s U.S. generics business appears more stable. He said the company’s generics operations have moved from years of decline to a three-year growth CAGR, aided by manufacturing, supply-chain and product-launch improvements. Teva now expects the U.S. generics business to be flat to slightly up this year, compared with an earlier expectation for flat to slightly down performance, supported by biosimilars and newer product launches.

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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