Teva Pharmaceutical Industries Ltd. (TEVA) Earnings & Analysis

Latest quarter

Teva reported third-quarter revenue of $4.4 billion, compared with $4.5 billion a year earlier. Its filing attributed the decline mainly to lower U.S. generic sales, particularly lenalidomide, partly offset by growth in AUSTEDO, AJOVY and UZEDY.

The filing shows U.S. segment revenue fell 11% to $1,870 million, while Europe revenue rose 7% to $1,319 million. Teva said increased generic competition reduced U.S. lenalidomide sales, while European growth included higher generic and over-the-counter sales.

Gross margin rose to 55.5% from 51.4%, which Teva attributed mainly to its product mix and higher innovative-product revenue. Diluted earnings per share fell to $0.20 from $0.37; the filing attributed lower operating income partly to higher asset impairments and legal expenses.

Teva reported $241 million in operating cash flow, down from $369 million a year earlier, mainly because of the timing of sales and collections. The company’s defined free cash flow was $495 million, compared with $515 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Richard Francis said AUSTEDO, AJOVY and UZEDY contributed to growth in Teva’s innovative portfolio, while global generics revenue fell 16%, largely because of a lower contribution from generic Revlimid. For AUSTEDO, Francis said U.S. prescriptions grew 18% and milligrams dispensed grew 23% in the quarter.

Asked about AUSTEDO dosing, Francis said the availability of a titration pack and the once-daily XR formulation had made it simpler to reach an appropriate dose. He said physicians, rather than a company-led conversion effort, decide whether patients move to XR.

CFO Eli Kalif said the shift toward innovative medicines helped lift non-GAAP gross margin to 58.7% in the quarter. Kalif said Teva’s path to its 2027 operating-margin target also depends on transformation savings, productivity and a more favorable product mix, while offsetting erosion in generics.

On competition, Francis said Teva plans for biosimilar litigation across its portfolio and considers intellectual property, launch timing, competition and price erosion. He said the company had strengthened its Samsung partnership with two FDA-approved biosimilars.

Francis said Teva discontinued its phase II emrusolmin study after an interim futility analysis and added, “there were no safety concerns.” Kalif said Teva had closed its acquisition of BXCL501, with an upfront payment and potential contingent payments tied to approval timing and sales milestones.

For the quarter ahead, Kalif said he expects AUSTEDO revenue to fall year over year because of purchasing and pricing changes ahead of January’s IRA implementation. He expects initial WELTRUZA volume to consist largely of samples or vouchers while Teva establishes payer coverage. In response to a launch question, Francis said Medicaid access is a constraint and that WELTRUZA revenue would come in the latter half of the following year.

Guidance

Kalif said Teva raised its FY2026 revenue outlook to $16.7 billion–$17 billion and its free-cash-flow outlook to $2.1 billion–$2.4 billion. The company also updated its outlook for non-GAAP diluted EPS to $1.92–$2.11 and adjusted EBITDA to $4.23 billion–$4.43 billion.

Teva raised its annual sales outlook for AUSTEDO to $2.55 billion–$2.65 billion, AJOVY to $930 million–$960 million and UZEDY to $290 million–$310 million. Kalif said the company expects operating income of $3.8 billion–$3.9 billion.