Teva Earnings: Robust Gains From Austedo and Ajovy Fuel Sales Growth and Boost Margin

No-moat Teva TEVA reported second-quarter earnings that were slightly ahead of our expectations. Total sales were up 2.4% year over year, driven by strong performance from Teva’s key innovative medicines. We are raising our fair value estimate to $11 from $10.50 after baking in impacts from our raised near-term outlook as well as time value of money.

North America sales were up 4.6% thanks to strong performance from Austedo (oral tablet for treatment of tardive dyskinesia and chorea associated with Huntington’s disease) and Ajovy (injection for treatment of migraine), up 51% and 16% respectively, offset by lower contributions from Copaxone and generic drugs. Teva launched Austedo XR, a once-daily extended release version of Austedo, during the quarter, so all new Austedo patients will be on the XR version and current patients will have the option to switch over. Austedo is tracking well to reach its full-year sales guidance of $1.2 billion and management reaffirmed Austedo’s 2027 sales goal of $2.5 billion, driven by two factors: targeting unmet needs (from 800,000 patients suffering from tardive dyskinesia, only 50,000 are treated) and geographic expansion. While we see this as ambitious, we believe it is still reachable given the drug’s resilient growth since its launch and no threat from generic entry until after 2030.

Another notable achievement during the quarter was the launch of Uzedy, a long-acting injectable for the treatment of schizophrenia. The $4 billion long-acting schizophrenia market is competitive with drugs from Johnson & Johnson and Otsuka, but Uzedy has shown a high level of satisfaction from patients and healthcare professionals in recent feedback, and we believe Teva will be able to carve out its own share in the space. Teva is targeting a 10%-20% market share, and we forecast its peak sales of $700 million in 2030.