Teva's CEO on the Stock Decline, Expectations, and the Company’s Vast Potential

2024 was Teva’s year. The stock doubled, financial performance improved, and debt reduction continued. Last year, in a conversation with journalists, CEO Richard Francis declared that "Teva is no longer playing defense; it's playing offense." His tone remains just as confident this year. "People doubted that Teva could enter the innovative drug space, into schizophrenia treatments, into asthma—we’ve proven we can do it, and better than anyone else."

Despite his optimism, Teva's stock has already lost 26% this year, and some investors are skeptical about its future trajectory. However, looking at the valuation, the company's forward price-to-earnings ratio is around 7 for this year and 6 for the next—historically low levels. With leverage decreasing, debt shrinking, and Teva securing cheaper financing, it seems the market has moved past concerns over its balance sheet, following the resolution of legal risks related to the opioid crisis. In other words, Teva is now being judged on its business performance alone. The overhangs of the past have lifted, which propelled the stock last year, but now investors expect continued growth.

The stock's decline this year stemmed primarily from disappointing guidance. Teva projected earnings of $2.50 per share for 2025, while analysts had expected $2.78. The main reason is that as Teva’s revenue grows, so does its investment in R&D. Eli Kalif, Teva’s CFO, explained to Bizportal that “analysts understand the importance of investing in R&D.” Yet the stock still dropped, now trading at a forward P/E of 6. Some of this may be due to broader weakness in the pharmaceutical sector following Trump’s appointment of Robert Kennedy Jr. as Health Secretary—a known vaccine skeptic with a critical stance on the industry. It may also reflect profit-taking after last year’s rally. Either way, Teva’s management remains upbeat.

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Generics Remain Teva’s Foundation, but the Future Lies in Innovation

Generics still account for 57% of Teva’s revenue, but the company’s long-term focus is on innovative drugs. These products are more profitable and command higher valuations on Wall Street, where innovative pharmaceutical firms trade at price-to-earnings multiples of 8-9, compared to 6-7 for generic drug makers. This is why Teva's stock surged after the company released positive Phase 2 clinical trial results for Duvakitug, its jointly developed inflammatory bowel disease drug with Sanofi. While Teva will split revenue and profits 50-50 with Sanofi, the potential market for this treatment is expected to reach $31 billion by 2030. "We may only get 50% of the revenue, but it's 50% of a very big number," says Francis.

Teva is also developing Olanzapine, an injectable schizophrenia treatment, and ICS/SABA, an easy-to-use inhaler for asthma. "These will be Teva’s two main growth drivers over the next two years," Francis explains.

"We Are Ahead of Schedule, But to Accelerate Growth, We Must Keep Investing"

"What differentiates Teva today is that we're no longer just a generics company. We now have a robust innovative pipeline," Francis states. "In 2023, expectations were different. No one expected us to grow in 2023 or 2024. When I joined and started talking to investors and analysts, we faced major challenges—in generics, in innovation, and in our balance sheet. It was a tough environment. But for eight consecutive quarters, we have delivered continuous growth. We raised guidance four times—people don’t remember the last time that happened.

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Francis continues, "I believe we are ahead of schedule, and now we are in the acceleration phase. To do that, we must continue investing—not just in innovation but also in generics while improving our margins. We are succeeding because the entire organization is aligned. Amazing things happen when your employees are fully committed."

"Everyone Thought Teva Couldn’t Enter the Innovative Drug Space—We’ve Proven Them Wrong"

"In early 2023, analysts projected Austedo would generate $1.4 billion in revenue for 2024—it brought in $1.6 billion. In 2025, it will generate $2 billion, and by 2027, $2.5 billion. People underestimated Teva. They said we couldn't enter the innovative drug space, into schizophrenia, into asthma—but we did it, and we did it better than anyone, even companies that specialize in these areas. This is thanks to our team—we get things done."

Francis emphasizes that Teva’s strategy is set for 2030 and beyond. "We've achieved a lot, and we’ll keep going. The clarity this provides to the company and employees has been a key factor in our success. Previously, our revenue declined for six consecutive years. Now, we’ve delivered steady growth for the last two years. These are incredible results. In 2024, our financials were strong. Our debt-to-EBITDA ratio is now at 3, and I believe we’ll reach 2 before 2027."

"Austedo Continues to Expand, Ajovy Still Has Room to Grow"

"Austedo is growing, mainly in the U.S., but now also internationally. Ajovy, which was thought to have peaked, will generate $600 million this year, up from $507 million in 2024. TAPI, our active pharmaceutical ingredient business, is also back to growth."

Francis adds that Teva’s schizophrenia drug Uzedy is performing well in a highly competitive market, proving the company's ability to execute in tough segments.

"A Strong Pipeline is Only Valuable If You Can Bring It to Market—And We Have Proven That We Can"

Teva continues to be a global leader in generics, with 127 pending FDA applications as of the end of 2024, 65 of which have already received tentative approval. The combined sales of the products covered by these applications totaled approximately $122 billion in 2024.

"Innovative R&D is challenging, but we are succeeding. It's hard to find trial participants for schizophrenia and inflammatory bowel disease, but we’re making it happen," Francis explains. "A pipeline is only valuable if you can commercialize it—and we’ve proven we can do that. Many doubted our TL1A drug, but now we can confidently say it’s the best in its class. Duvakitug could be approved for up to 10 indications—it could be a massive product."

"Investor Expectations Are High—That’s a Big Shift from Recent Years"

"Our debt used to be a major concern, but today it’s less of an issue for analysts and investors because we’ve reduced it," Francis says. "Our priorities are to continue deleveraging, invest in our existing treatments, and develop new ones. I’m optimistic, and the rating agencies have also acknowledged our progress by upgrading our outlook."

Francis also addresses investor disappointment over Teva’s latest guidance. "In a way, this reflects how much expectations have shifted. People now expect us to grow at the high end of our guidance, and when we don’t, they are disappointed. That’s a big change from past years. I welcome the challenge, but we will continue to deliver.

We aim for 5% average annual revenue growth from 2023 to 2027, a 30% operating margin by 2027, a debt-to-EBITDA ratio of 2, and a cash conversion ratio of 80%."

Francis concludes by emphasizing Teva’s global reach. "People should see Teva as a global company with world-class generics and innovative businesses. Our growth potential is enormous, and we are positioned to capitalize on it."