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Oct 23, 2024

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

We came across a bullish thesis on Teva Pharmaceutical Industries Limited (TEVA) on Kontra Investment Xchange’s Substack by Kontra. In this article, we will summarize the bulls’ thesis on TEVA. Teva

We came across a bullish thesis on Teva Pharmaceutical Industries Limited (TEVA) on Kontra Investment Xchange’s Substack by Kontra. In this article, we will summarize the bulls’ thesis on TEVA. Teva Pharmaceutical Industries Limited's share was trading at $17.95 as of Oct 18th. TEVA’s trailing and forward P/E were 872 and 6.78 respectively according to Yahoo Finance.

A close-up shot of various types of medicines on a table, illustrating the specialty and generic products offered by the pharmaceutical company.

Teva Pharmaceuticals, a global leader in generics, has navigated significant challenges in recent years, including legal issues, pricing pressures, and regulatory difficulties. Despite these setbacks, there remains cautious optimism for its long-term growth. Management has shown resilience by focusing on its 2027 goals, particularly expanding its portfolio of branded products. Teva's branded drug pipeline has positively surprised, with Austedo, a treatment for tardive dyskinesia, expected to reach $2.5 billion in sales by 2027. Austedo’s once-daily format has improved patient compliance, helping the company compete more effectively in this space.

Teva's venture into long-acting injectables (LAIs), including Uzedy and olanzapine LAI, represents a promising opportunity. The company’s ability to cater to various patient populations and maintain pricing discipline underscores its potential to capture new revenue streams. Additionally, Teva's pipeline in immunology and inflammation (I&I) remains underestimated by the market, as partnerships, such as the one with Sanofi for TL1a, offer an edge in reaching new markets. Similarly, its work in respiratory treatments, particularly in asthma, positions Teva for success, bolstered by its innovative dry powder device, which offers a competitive advantage over traditional delivery methods.

Teva’s generics business remains stable, especially outside the U.S., where margins are less pressured. The generics segment plays a crucial role in Teva’s debt reduction strategy, contributing steady cash flow that will aid in deleveraging and allow for reinvestment into its branded portfolio and pipeline. The company's financial discipline provides confidence in its ability to emerge stronger over the long term.

However, risks persist, including litigation related to the opioid crisis, and potential setbacks in its pipeline. Regulatory uncertainties, particularly in the U.S., could also affect Teva’s ability to meet financial targets. Yet, management’s proactive approach to these challenges offers reassurance.

Overall, while challenges remain, Teva’s focus on branded products like Austedo, long-acting injectables, and its promising pipeline provide strong growth potential. With a stable generics business supporting financial stability, Teva is poised to achieve its long-term goals by 2027 and beyond. An intrinsic value of $88.35 offers a path to significant upside, though risks must be carefully weighed.

Teva Pharmaceutical Industries Limited is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 68 hedge fund portfolios held TEVA at the end of the second quarter which was 58 in the previous quarter. While we acknowledge the risk and potential of TEVA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TEVA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.