• Total Revenue: $16.5 billion, up 9%.
• Adjusted EBITDA: $4.8 billion, up 9%.
• Non-GAAP EPS: $2.49, up 10%.
• Free Cash Flow: $2.1 billion, up 10%.
• Net Debt to EBITDA Ratio: Close to 3 times.
• AUSTEDO Revenue: $1.7 billion, up 36%.
• AJOVY Revenue: Over $0.5 billion, up 18%.
• UZEDY Revenue: $117 million.
• Generics Business Revenue: Close to $9.5 billion, up 11%.
• API Business Growth: 3%.
• Q4 Revenue: $4.2 billion, excluding Sanofi payment, up 7%.
• Q4 GAAP Operating Loss: $29 million.
• Q4 Non-GAAP EPS: $0.71.
• Non-GAAP Gross Profit Margin: 54.8%.
• Non-GAAP Operating Margin: 27.6%.
• 2025 Revenue Guidance: $16.8 billion to $17.4 billion.
• 2025 Non-GAAP EPS Guidance: $2.35 to $2.65.
• 2025 Free Cash Flow Guidance: $1.6 billion to $1.9 billion.

• Warning! GuruFocus has detected 2 Warning Signs with TEVA.

Release Date: January 29, 2025

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

Positive Points

• Teva Pharmaceutical Industries Ltd (NYSE:TEVA) reported a 9% increase in revenue for 2024, reaching $16.5 billion, driven by strong performance across its innovative, generics, and API businesses.
• AUSTEDO sales grew by 34%, reaching $1.7 billion, with strong TRx growth and a significant contribution from international markets.
• AJOVY sales increased by 18%, surpassing $0.5 billion, with market share gains across all regions.
• The company achieved eight consecutive quarters of growth, demonstrating consistent performance and progress in its Pivot to Growth strategy.
• Teva's credit ratings improved, with all major agencies upgrading their outlook, reflecting enhanced growth prospects and a stronger balance sheet.

Negative Points

• Teva Pharmaceutical Industries Ltd (NYSE:TEVA) reported a GAAP operating loss of $29 million in Q4 2024, primarily due to a goodwill impairment charge related to its API business.
• The company's non-GAAP gross profit margin decreased to 54.8% in Q4 2024, impacted by foreign exchange headwinds and higher operating expenses.
• Teva's free cash flow guidance for 2025 is lower than 2024, primarily due to higher legal settlement outflows and adjustments in accounts receivable securitization.
• The company faces potential headwinds from the Inflation Reduction Act in the US, which could impact its innovative product portfolio.
• Teva's operating margin guidance for 2025 indicates a compression, raising concerns about achieving its long-term target of 30% by 2027.

Q & A Highlights

Q: Can you provide insights into the EBITDA trajectory considering investments in the TL1A program and AUSTEDO headwinds from the IRA? A: Richard Francis, CEO, explained that the partnership with Sanofi involves a 50-50 cost share for the duvakitug program. The focus is on capital allocation to ensure investments yield good returns, as seen with AUSTEDO, AJOVY, and UZEDY. The aim is to grow EBITDA while investing in opportunities that accelerate business growth beyond 2027.

Q: What are the expectations for the API business given the goodwill and intangible impairments? A: Eliyahu Kalif, CFO, stated that the API business is classified as held for sale, which includes R&D, manufacturing, and commercial elements. The valuation process respects the ongoing sale process, and there are no changes in the trajectory or process of selling the API business.

Q: Why is there no operating leverage despite sales growth, particularly with AUSTEDO? A: Richard Francis, CEO, noted that the Medicare Part D redesign impacts UZEDY and AUSTEDO, affecting operating leverage. Additionally, legacy innovative products are declining, and there are FX headwinds. Investments are being made to capitalize on growth opportunities, which impacts short-term operating leverage.

Q: How will Teva address the impact of Revlimid erosion in 2026? A: Richard Francis, CEO, highlighted that Teva plans to manage the Revlimid cliff with 16 complex generic launches and several biosimilars in 2025 and 2026. The innovative portfolio, including AUSTEDO, UZEDY, and AJOVY, will continue to drive growth, supported by new product launches like olanzapine and ICS/SABA.

Q: What is the rationale behind the operating margin guidance given the 2027 target of 30%? A: Richard Francis, CEO, expressed confidence in achieving the 30% margin target by 2027, driven by an improved portfolio mix with a focus on innovative products. The company is also implementing a value acceleration program to enhance efficiency and reduce costs, contributing to margin expansion.

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