Teva Q2 2024 Earnings Report: Positive Momentum Continues

Conference call was a huge win for Teva´s Management team - link below

Aug 01, 2024

Teva has demonstrated strong performance in the second quarter of 2024, with a series of positive developments reinforcing my bullish outlook. Here’s a detailed look at the key highlights from Teva’s Q2 earnings report and the reasons why the company remains a strong and interesting investment case.

Strong Q2 Performance and Market Reaction

Teva’s stock saw a favorable response to its Q2 earnings beat, closing up by 6%. This positive reaction is underpinned by several key factors:

1. Potential for FY24 additional upside: The likelihood of another beat of estimates on FY24 projections is high.
2. API Sale Proceeds: The anticipated sale of the Active Pharmaceutical Ingredients (API) business could surpass expectations both in terms of timing and proceeds. This will also most likely help to accelerate the debt reduction.
3. Pipeline Developments: Promising Phase 2 data on TL1a expected in Q4 2024 adds to the potential upside.

Key Drivers of Growth

Austedo Sales and Inflation Reduction Act Impact

Austedo remains a critical product in Teva’s portfolio. The company has incorporated a minimum 25% price discount starting in 2027, impacting roughly 50% of the government channel volume. Despite this adjustment, Teva’s long-term sales goal for Austedo remains ambitious, aligning with the company’s $2.5 billion target for 2027.

TL1a - An Underappreciated Asset

Teva’s TL1a inhibitor, duvakitug, shows significant promise. With Phase 2 topline results expected in Q4 2024, the clinical catalyst presents a favorable risk/reward profile. Teva’s peak sales estimate for TL1a has been raised to $514 million from a previous $260 million, based on strong preclinical data suggesting it could be a best-in-class compound.

FY2024 Projections

Teva has revised its revenue and EBITDA outlook for FY24 to $16.3 billion and $4.9 billion, respectively, which exceeds consensus estimates. This optimistic forecast is driven by the company’s solid Q2 performance and continued growth across key product segments.

Product and Pipeline Highlights

Austedo

Austedo’s U.S. revenues saw a 32% increase, with prescription growth continuing robustly. Teva has raised its 2024 revenue outlook for Austedo to approximately $1.6 billion.

UZEDY

UZEDY is on track to meet its 2024 revenue outlook of $80 million, with solid prescription growth and increasing market share in the Long-Acting Injectable (LAI) market for schizophrenia.

SIMLANDI and SELARSDI

Teva launched SIMLANDI and is preparing for the launch of SELARSDI in February 2025, reflecting its commitment to expanding its innovative medicine portfolio.

Pipeline Progress

Teva’s innovative pipeline is making significant strides:

• Olanzapine LAI: 95% of target injections completed with no Post-Injection Delirium/Sedation Syndrome (PDSS) observed.
• Duvakitug (Anti-TL1A): Timeline acceleration with top-line results expected in Q4 2024.
• ICS/SABA: Phase III ongoing with a broad label expected, including pediatric indications.
• Emrusolmin: Promising preclinical and toxicology data in Multiple System Atrophy (MSA).

Financial Performance

Q2 2024 Highlights

Teva reported a revenue growth of 11% year-over-year in Q2 2024, reaching $4.2 billion. The company’s adjusted EBITDA was $1.168 billion, up from $1.125 billion in Q2 2023. Net income attributable to Teva on a non-GAAP basis was $697 million, reflecting an 11% increase.

Revised 2024 Financial Outlook

Teva has raised its 2024 financial outlook, expecting revenues of approximately $16.2 billion, adjusted EBITDA of $4.9 billion, and free cash flow of $324 million. This revised outlook underscores Teva’s confidence in its continued growth and operational efficiency.

Risk Factors

While the outlook for Teva is positive, certain risks remain:

1. Clinical Results: Failure of TL1a or Olanzapine LAI to demonstrate positive clinical results could impact future projections.
2. Product Adoption: Slower than expected adoption of Uzedy could affect sales targets.
3. Austedo Sales Growth: Any shortfall in Austedo sales growth could impact overall financial performance.

Conclusion

Teva has delivered a strong Q2 performance, bolstered by robust sales across key products and significant pipeline advancements. The company’s strategic focus on innovation and operational efficiency continues to drive growth. Despite potential risks, Teva remains well-positioned for sustained success and further share price increases. What I would like to really see is, that Teva and Viking Therapeutics explore a partnership, where Teva contributes with manufacturing and commercialisation of Viking´s potentially best-in-class obesity molecule. This would be the most transformative move in the pharmaceuticals industry in a very long time.

Here is link to conference call: https://qcast.page.link/CyP6zqndCD6VhbMX7

Links to further readings on Teva: