Leaner, More Agile Teva Sees Brighter Days Ahead

Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) has cleared the decks, and the company is signaling full speed ahead.

That was the message conveyed to analysts during the company’s year-end earnings call on Feb. 12. A multiyear restructuring by the Israeli company is going to save about $3 billion in yearly expenses. That’s the tally after Teva shed about 13,000 employees, shuttered 13 manufacturing plants–with 10 more to go–and closed 40 offices and laboratories.

Now leaner and more agile, the company is banking heavily on two of its key products to drive growth, the migraine medication Ajovy and Austedo, a treatment for Huntington’s disease.

During the earnings call, CEO Kare Schultz emphasized that the pair of drugs is part of a dual strategy aimed at boosting sales for its branded medications and improving the company’s operating margin, according to an article in FiercePharma.

To achieve its goal, sales of Austedo and Ajovy are going to have to blast well past analyst estimates. Teva expects this year’s sales of Austedo and Ajovy will be $650 million and $250 million, respectively. In 2019, Ajovy sales came in at just $96 million and Austedo at $412 million. The company is going to need the drugs to hit their marks if it’s going to overcome an 8% drop in revenue in 2019, a shortfall due in great part to the erosion in sales for Copaxone, the company’s multiple sclerosis treatment that was hurt by generic competition.

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Ajovy is poised to overcome a huge obstacle to its use now that Teva got the OK from the Food and Drug Administration to package the drug in an autoinjector. Until now, the drug was administered by the more intimidating and complex syringe. Now Ajovy is going to have a delivery system that puts it on par with Amgen Inc.’s (NASDAQ:AMGN) Aimovig and Eli Lilly and Co.’s (NYSE:LLY) Emgality.

“We think now that we have the autoinjector approved, we will have an offering that is really unmatched in the CGRP (a type of migraine treatment) market,” Brendan O’Grady, Teva’s North American commercial head, told analysts on the call. “We’re quite optimistic about the continued growth of Ajovy and our competitive place in the market.”

Investors are hoping Teva has righted the ship. About five years ago, the stock traded near $70, a long way off from its current price of near $13. In the past 52 weeks, the shares hit a low of about $6.

In 2019, Teva sales were about $17 billion, while adjusted earnings declined about 18% to $2.40 per share. In 2020, the company expects sales to be in the range of $16.6 billioin to $17 billion. Earnings are forecast to be somewhere between $2.30 and $2.55 per share.

The current consensus of 22 analysts is to Hold Teva. Those offering 12-month price targets have a median of $11, with a high of $16 and a low of $6.

Disclosure: The author has a position in Teva, Amgen and Eli Lilly.

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