Teva Pharmaceutical Industries Limited (TEVA): A Bull Case Theory

A close-up changeable of assorted types of medicines connected a table, illustrating the specialty and generic products offered by the pharmaceutical company.

After years of underperformance and litigation overhang, Teva appears to beryllium entering a caller epoch of structural betterment and operational discipline. Despite its cardinal progress, the marketplace continues to terms the banal arsenic if it's successful terminal decline—trading astatine conscionable 5.8x 2025 EPS and 4.4x 2029 EPS. This disconnect presents a compelling accidental for investors. The institution is proactively addressing its astir important near-term challenge: the expected nonaccomplishment of exclusivity for Revlimid successful 2026, which could trim gross by $1 cardinal and EBITDA by $750 cardinal by 2027. To antagonistic this, Teva plans to unveil a $750 cardinal outgo optimization programme during its Q1 2025 net call, which could assistance EBIT margins by implicit 4 percent points to 30% by 2027. The gross margin, presently stabilizing astatine 54–55%, is supported by a favorable merchandise premix displacement toward high-margin branded drugs similar Austedo, which has a gross borderline of 96%. Meanwhile, Teva’s CNS-focused branded portfolio, including Austedo, Ajovy, and Uzedy, is showing robust maturation and upside potential, peculiarly with Austedo expected to make $2.5 cardinal by 2027. Additional top-line stableness comes from a favorable FX situation successful planetary markets.

Financially, Teva reported $16.5 cardinal successful gross for 2024 and is projected to turn this to $17.3 cardinal successful 2025, with EBITDA of $5.2 cardinal and margins astatine 30%. Looking retired to 2029, EBIT margins are expected to ascent to 31.4%, with nett net rising from $3 cardinal to $4.2 billion, implying a CAGR of 8.7%. Free currency travel output is forecast to emergence sharply—from 3.3% successful 2025 to 16.7% by 2029—while nett indebtedness is acceptable to autumn beneath 2.0x EBITDA by 2027. The valuation remains undemanding, and nary of this borderline oregon net enlargement appears priced in.

Teva's semipermanent upside is besides supported by pipeline catalysts. Duvakitug, a promising anti-TL1A immunology plus developed with Sanofi, has shown best-in-class Phase 2b information and could look arsenic a cardinal subordinate successful the $20B+ inflammatory bowel illness market. Meanwhile, the institution expects six biosimilar launches done 2027, including Humira and Stelara biosimilars, adding further extent to the maturation profile. Importantly, litigation hazard is present mostly resolved pursuing the $4.25 cardinal nationwide opioid settlement, removing a cardinal overhang and allowing absorption to absorption connected execution. With outgo discipline, branded cause growth, and a affluent pipeline, Teva looks poised for a re-rating. Based connected a DCF model, the intrinsic worth is estimated astatine $36.51, suggesting a important upside from existent levels.