Leaner, more agile Teva has brighter days ahead

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) has cleared the decks and the company signals full force ahead.

This was the message that analysts were given during the company’s earnings announcement at the end of the year on February 12. A multi-year restructuring of the Israeli company will save approximately $ 3 billion in annual expenses. That’s the bottom line after Teva fired around 13,000 employees, closed 13 manufacturing plants – 10 more are still left – and closed 40 offices and laboratories.

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

During the call for profits, CEO Kare Schultz emphasized that the drug pair is part of a dual strategy that, according to an article in FiercePharma, aims to increase sales of its branded drugs and improve the company’s operating margin.

To achieve his goal, Austedo and Ajovy’s sales must go far beyond analyst estimates. Teva expects Austedo and Ajovy to sell $ 650 million and $ 250 million, respectively, this year. In 2019, Ajovy’s sales were only $ 96 million and Austedo’s $ 412 million. The company will need the medication to achieve its goals if the company wants to overcome an 8% drop in sales in 2019. This is largely due to the drop in sales at Copaxone, the company’s injured multiple sclerosis treatment by generic competition.

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Ajovy is ready to overcome a major obstacle to its use after Teva has received the OK from the Food and Drug Administration to package the drug in an auto-injector. So far, the drug has been administered with the more intimidating and complex syringe. Now Ajovy will have a delivery system that equates to the emgality of Amim Inc. (NASDAQ: AMGN) Aimovig and Eli Lilly and Co. (NYSE: LLY).

“We believe that now that we have approved the auto-injector, we will have an offer that is truly unmatched in the CGRP market (a type of migraine treatment),” said Teva North American trade manager Brendan O’Grady to analysts , “We are quite optimistic about Ajovy’s further growth and our competitive position in the market.”

Investors hope that Teva has put the ship back in order. About five years ago, the stock was trading near $ 70, far from its current price of nearly $ 13. Over the past 52 weeks, stocks have hit a low of around $ 6.

In 2019, Teva’s sales were around $ 17 billion, while adjusted profit declined about 18% to $ 2.40 per share. In 2020, the company expects sales of between $ 16.6 and $ 17 billion. Earnings are expected to be between $ 2.30 and $ 2.55 per share.

The current consensus of 22 analysts is to hold Teva. Those who offer 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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