This article first appeared on GuruFocus.

Release Date: November 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Teva Pharmaceutical Industries Ltd (NYSE:TEVA) reported its 11th consecutive quarter of growth, with a 3% increase in revenue to $4.5 billion.

The company's innovative products showed strong performance, with Estero growing 38% and Ajovi up 19%.

Teva's net debt to EBITDA ratio is now below 3 times for the first time since 2016, indicating improved financial health.

The company is on track to achieve its 2027 revenue target of $2.5 billion for Estero, with peak sales expected to exceed $3 billion.

Teva's transformation program is progressing well, with $70 million in savings achieved in 2025 and a target of $700 million by 2027.

Teva's global generics revenue is expected to be flat in local currency compared to 2024, due to tough year-over-year comparisons and market softness.

The company's free cash flow decreased significantly to $15 million in Q3 2025 from $922 million in Q3 2024, mainly due to timing of sales and higher legal settlement payments.

Teva's European generics business declined by 5%, impacted by tough comparisons from the prior year.

The sale process for Teva's Tapi unit did not result in a transaction, and the company is now exploring alternative options.

There is uncertainty around potential US tariffs on pharmaceuticals, which could impact Teva's financial outlook.

Warning! GuruFocus has detected 2 Warning Signs with TEVA.

Is TEVA fairly valued? Test your thesis with our free DCF calculator.

Q: Can you provide more details on the IRA negotiations for Austero and how the negotiated price compares to the current Medicare net price? A: Richard Francis, CEO: The outcome of the IRA negotiations was in line with our expectations set in May 2023. We anticipated being on the list and negotiating with CMS, which is why we remain confident in achieving our $2.5 billion revenue target. However, we won't comment on the specific net price for competitive reasons. It's important to note that tardive dyskinesia remains underdiagnosed and undertreated, with 85% of patients not on therapy, presenting a significant growth opportunity for Austero.

Q: How does the FDA's new guidance on biosimilars, which reduces the need for comparative efficacy studies, impact Teva's long-term biosimilar strategy? A: Richard Francis, CEO: The FDA's decision to remove phase studies is a positive development and aligns with our strategy. It doesn't change our approach but reinforces it. Our strategy focuses on having a large biosimilar portfolio through partnerships, allowing efficient capital allocation. While the cost of developing biosimilars remains high, our strategy is to maintain a broad portfolio and leverage our go-to-market capabilities.

Q: Can you provide an update on the progress of the Duvaquiook phase 3 IBD studies and any plans for indication expansion? A: Eric Hughes, Head of R&D and Chief Medical Officer: The phase 3 IBD studies are progressing well, with a design focused on maximizing enrollment and patient convenience. We are executing efficiently with our partner Sanofi. Regarding indication expansion, we have plans for additional phase 2 programs, but we'll announce those when appropriate. The focus is on executing the current studies effectively.

Q: What are Teva's capital allocation priorities for 2026, and how do you plan to achieve the free cash flow inflection by 2027? A: Eli Khalieff, CFO: Our capital allocation will focus on strategic business development opportunities, reducing debt, and potentially returning capital to shareholders. The free cash flow inflection is driven by a mix of innovative portfolio growth, cost savings, and debt reduction. We expect to convert high free cash flow by optimizing our cost structure and leveraging our innovative product mix.

Q: How do you view the EU generics market dynamics, and why restart the TAPI sale process instead of keeping the asset? A: Richard Francis, CEO: The EU generics market is expected to grow at a 2% CAGR due to its scale. Recent growth was driven by launches and competitor supply issues. Regarding TAPI, we decided not to proceed with the initial buyer due to strategic considerations and market conditions. We see TAPI as a valuable asset and are exploring alternative options to maximize value.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.