Earnings Call Insights: Teva Pharmaceutical Industries Limited (TEVA) Q3 2025
Management View
- CEO Richard Francis highlighted the company’s continued “pivot to growth strategy” founded on four pillars: driving growth engines (AUSTEDO, UZEDY, and AJOVY), stepping up innovation, sustaining the generics business, and focusing the company through transformation and cost savings. Francis stated, “This is our 11th quarter of consecutive growth, up 3% in revenue to $4.5 billion, and adjusted EBITDA up 6% and our non-GAAP EPS up 14%.” He emphasized that innovative products exceeded $800 million for the quarter, growing 33% year-on-year, with AUSTEDO up 38% to $618 million, UZEDY up 24% to $43 million, and AJOVY up 19% to $168 million. Global generics revenue increased 2%, while TAPI declined 4%. Francis confirmed the 2027 revenue target for AUSTEDO at $2.5 billion and a peak sales target of over $3 billion, stating, “We can confirm with confidence our 2027 revenue target of $2.5 billion and our peak sales target of over $3 billion.” The AUSTEDO full-year revenue outlook was raised to $2.05 billion to $2.15 billion. Francis also reiterated peak sales targets for UZEDY’s franchise at $1.5 billion to $2 billion. He described significant pipeline progress and confirmed the $700 million cost savings program is on track, with net debt to EBITDA now below 3x for the first time since 2016.
- CFO Eliyahu Kalif stated, “Q3 results were above solid, driven once again by our fast-growing innovative portfolio… we continue to strengthen our balance sheet and specifically reduced our net debt to below $15 billion and expanded our EBITDA, leading to the net debt-to-EBITDA of below 3x for the first time since Q3 2016.” Kalif detailed progress on transformation programs and reiterated conviction in achieving the $2.5 billion AUSTEDO revenue target for 2027 and more than $3 billion at peak.
- Executive VP Eric Hughes described the pipeline’s late-stage assets, including olanzapine LAI on track for FDA submission, DARI, duvakitug, and emrusolmin, citing potential peak sales of over $11 billion for listed indications.
Outlook
- Management tightened full-year 2025 revenue guidance to $16.8 billion to $17 billion. The AUSTEDO outlook was increased to $2.05 billion to $2.15 billion, reflecting full-year growth of 21% to 27%. Non-GAAP gross margin is now expected at the higher end of 53% to 54%. Operating expenses are projected at 27% to 28% of revenue. Free cash flow guidance remains $1.6 billion to $1.9 billion. Kalif noted the guidance excludes development milestone revenue related to duvakitug Phase III, with $250 million expected in Q4 2025 subject to timing.
- Francis stated, “We estimate that 2025 will end the year with a 3% to 4% growth range, consistent with our ’23 to ’27 mid-single-digit average growth.”
Financial Results
- Q3 2025 revenue was approximately $4.5 billion, growing 5% in U.S. dollars or 3% in local currency. GAAP net income and EPS were $433 million and $0.37. Non-GAAP gross margin increased by 120 basis points year-over-year to 55.3%. Non-GAAP operating margin rose to 28.9%. Non-GAAP EPS was $0.78, up $0.10 or 14% year-over-year. Free cash flow in Q3 was $515 million. Transformation programs have achieved about half of the planned $70 million savings for 2025 by Q3.
- The company reported $190 million in restructuring costs year-to-date, with an expected overall cash outflow of $70 million to $100 million in 2025.
Q&A
- Yuchen Ding, Jefferies, asked about AUSTEDO and the IRA negotiation’s impact on revenue targets. Francis replied the agreement “was in line with what we had forecast when we set the forecast back in May 2023” and reiterated confidence in reaching revenue targets.
- David Amsellem, Piper Sandler, inquired about AUSTEDO XR pricing structure and access. Francis said, “AUSTEDO’s growth is much more about treating this underserved market… and our ability as a team to constantly execute,” emphasizing market opportunity with 85% of patients not on therapy.
- Jason Gerberry, BofA, asked about OpEx trends and AUSTEDO XR’s inclusion in IRA. Kalif responded the majority of the $700 million savings will impact OpEx by end of 2026, and Francis confirmed AUSTEDO XR was included in IRA negotiations.
- Christopher Schott, JPMorgan, sought clarity on EU generics and TAPI divestiture. Francis described past growth as influenced by launches and tender wins, with future growth expected at a 2% CAGR. Kalif explained the TAPI process is being restarted due to deal terms and market conditions.
- Ashwani Verma, UBS, asked about 2026 EBITDA/revenue growth and AUSTEDO Q3 demand. Francis emphasized confidence in EBITDA growth driven by innovative portfolio and transformation savings, noting Q3 AUSTEDO strength was mostly due to underlying demand.
- Leszek Sulewski, Truist, questioned the impact of FDA biosimilar guidance. Francis said the change “reinforces the quality of the strategy we set out for biosimilars in 2023,” and Hughes described it as aligning with Teva’s portfolio approach.
- Umer Raffat, Evercore, probed CMS pricing assumptions and volume gains. Francis declined to specify a number but reiterated modeling confidence. Hughes confirmed olanzapine LAI FDA submission was on track.
- Matthew Dellatorre, Goldman Sachs, asked about duvakitug Phase III timelines and capital allocation. Hughes highlighted the rapid transition and execution focus, while Kalif detailed free cash flow inflection and capital allocation priorities, including debt reduction and business development.
Sentiment Analysis
- Analysts’ questions demonstrated a mix of curiosity and skepticism, pressing for details on pricing, access, savings realization, and market dynamics, with a slightly positive tone as consensus focused on sustainability and execution of strategic goals.
- Management maintained a confident and consistent tone, frequently reiterating guidance and expressing certainty in achieving targets, as shown by phrases like “we remain very confident” and “we feel highly confident about” key financial goals.
- Compared to the previous quarter, the tone from both analysts and management reflected increased confidence around the innovative portfolio and cost savings execution, with less uncertainty about IRA outcomes.
Quarter-over-Quarter Comparison
- The current quarter saw tightened and slightly raised guidance for core products and overall revenue, compared to last quarter’s reaffirmed ranges. The innovative portfolio’s growth rate accelerated from 27% in Q2 to 33% in Q3. AUSTEDO received an increased full-year revenue outlook. Free cash flow was slightly lower quarter-over-quarter, attributed to timing and legal settlements. Transformation savings and operating margins progressed according to plan.
- Analysts’ focus shifted more heavily toward execution on savings, product-specific demand, and clarity on the TAPI divestiture, compared to prior emphasis on tariff impacts and generic business volatility. Management’s confidence increased, supported by concrete results and finalized IRA negotiations.
Risks and Concerns
- Management highlighted potential risks from U.S. pharmaceutical tariffs and ongoing investigation outcomes but noted that current guidance already incorporates confirmed tariffs. The TAPI divestiture remains unresolved, with the process being relaunched due to deal terms and market conditions. European generics softness and seasonality in certain businesses were also mentioned, but mitigation strategies and business diversification were emphasized.
Final Takeaway
Teva’s leadership underscored consistent growth and a robust outlook, driven by the momentum of its innovative portfolio and disciplined execution of cost transformation. The company reiterated its confidence in achieving ambitious 2027 financial targets, particularly for AUSTEDO and overall operating margin, while continuing to invest in pipeline assets and maintain a strong balance sheet. Management emphasized that the strong Q3 results and updated guidance reflect the effectiveness of their pivot to growth strategy and set the stage for further expansion in the years ahead.