The deal that signals Teva is back
A calculated biotech acquisition and strong earnings revive confidence in the pharma giant.
For a decade, Teva could not afford to make acquisitions. For a company whose expansion through acquisitions was its main growth engine, and over time had become something of an art, this was highly unusual and a reflection of a deep crisis. Throughout its history, Teva acquired more than 30 companies. In the first decade of the century, it routinely executed billion-dollar deals every two years, until 2016, when it struck a final, jarring chord with its $40 billion acquisition of Allergan’s generics business.
That deal, which proved to be a serious mistake, plunged the Israeli pharmaceutical giant into a prolonged crisis.
Teva, then the world’s largest generics company with a market value approaching $80 billion and regarded as a master of acquisitions, was exposed by this failure and nearly collapsed under the roughly $35 billion in debt it took on to finance the deal. That debt burden and the broader business crisis prevented the company from making acquisitions for nearly a decade.
Against this backdrop, the acquisition of Emalex Biosciences for up to $900 million, announced on Wednesday, marks a significant turning point. It is the clearest signal yet that management believes the crisis is behind it, and that the company is financially stable enough to resume strategic expansion.
The acquisition, alongside the first mention of a potential share buyback program and better-than-expected financial results, triggered a sharp rally in the stock. Shares rose 9.7% by the close of trading on the Tel Aviv Stock Exchange, restoring Teva’s position as Israel’s largest company by market value (excluding Palo Alto Networks). Teva is now valued at NIS 121 billion, or close to $40 billion. While still below its peak, the company is no longer viewed as a takeover target, as it was not long ago.
The Emalex Acquisition: A Calculated Gamble
Teva still carries debt of just over $16 billion, but it also holds $3.7 billion in cash and generates stable annual operating cash flow of roughly $2–2.4 billion. This financial position allows it not only to remain defensive but also to pursue the kind of strategic moves that once defined the company.
Eli Kalif, Teva’s chief financial officer, said the company has not yet had the final word on acquisitions and may pursue one or two additional deals worth hundreds of millions of dollars in the near future. He also noted that the board has instructed management to explore a share buyback program, years after the company halted dividend payments. The scope of the program has not yet been determined.
Emalex represents the type of acquisition that historically worked well for Teva: not overly large, but a calculated bet on a drug that has already passed most development hurdles and is approaching regulatory approval. The company operates in neurological diseases, a field where Teva has longstanding expertise and strong ties with the medical community.
Teva will pay $700 million upfront for Emalex, which is developing an innovative treatment for Tourette syndrome in children. The drug is currently in Phase III clinical trials and is expected to receive approval from the U.S. Food and Drug Administration by 2027. If approved and commercialized, Teva will pay an additional $200 million to shareholders under pre-agreed milestones.
A key advantage of the drug is its designation as an orphan drug, meaning it targets a rare condition with limited treatment options. This designation simplifies and accelerates the regulatory process and, if approved, would grant Teva seven years of market exclusivity along with extended patent protection.
Teva has not yet provided revenue forecasts for the drug, instead outlining the potential patient base: approximately 100,000 children suffer from Tourette syndrome, but only 66% are diagnosed and roughly half receive treatment. Current therapies rely largely on psychiatric drugs with severe side effects, resulting in only about 30% of patients continuing treatment.
Teva plans to submit the drug for FDA approval as early as May or June. Under the orphan drug pathway, approval could take approximately six months. If successful, the company expects to launch the drug in the second half of 2027, with meaningful revenue contributions beginning in 2028.
Teva is already benefiting from a similar acquisition: Austedo, originally acquired through the purchase of Auspex Pharmaceuticals for $3.5 billion while still in development. Like Emalex’s drug, it had orphan designation and was acquired in late-stage trials. Today, it is Teva’s largest product, with expected peak sales of $3 billion.
Austedo was a major growth driver in the first quarter of 2026, rising 41% to $578 million and helping Teva beat revenue expectations despite a 16% decline in its generics division. Total revenue reached $4 billion, a 2% increase year-on-year, exceeding expectations of $3.8 billion.
This performance came despite the loss of exclusivity on Revlimid, which generated about $1 billion annually, and the sale of Teva’s Japan operations, which contributed roughly $300 million in yearly revenue.
Alongside Austedo, Uzedy posted strong growth, with revenue rising 62% to $63 million, albeit from a smaller base. Ajovy also delivered solid growth of 35%, reaching $196 million in quarterly revenue.
Teva reiterated its annual forecasts: Austedo is expected to generate $2.4-2.55 billion in 2026, Ajovy $750-790 million, and Uzedy $250-280 million. Together, innovative drugs are expected to account for about 20% of total revenue, up from less than 10% in 2022.
The shift reflects the strategy laid out by CEO Richard Francis, who has aimed to transform Teva into a company driven by innovative drugs rather than generics. By 2030, the company expects nearly half of its revenue to come from original medicines.
A central pillar of this strategy is a drug tentatively named Duvakitug, targeting autoimmune intestinal diseases. Teva is developing the drug in partnership with Sanofi, in a race against major pharmaceutical competitors to reach the market first.
If successful, the drug could generate annual revenue of $2-5 billion. It is currently nearing the end of Phase II trials, with promising results so far, though Phase III trials and regulatory approval still lie ahead.
The shift away from generics is also improving profitability. In the first quarter, Teva reported earnings of 53 cents per share, beating expectations of 46 cents. Operating profit rose to $652 million from $519 million a year earlier, lifting operating margin to 16.4% from 13.3%.
Francis said much of the company’s restructuring is complete, including an 8% workforce reduction. Teva is targeting a 30% operating margin by 2027 and aims to increase gross margin from 55% today to 60% by 2030.
The company also provided its first outlook for biosimilars, complex generic versions of biologic drugs, forecasting $800 million in revenue from this segment by 2027. Its biosimilar portfolio has grown by 50% over three years and now includes 11 products, with more in development.
For 2026, Teva reaffirmed its revenue guidance of $16.4-16.8 billion, reflecting modest growth. Reported operating profit is expected to be $3.4-3.8 billion, including expenses related to intellectual property acquisitions and the Emalex deal. Excluding these, operating profit is projected at $4.55-4.8 billion, with cash flow of $2-2.4 billion.
Kalif added that Teva has not been materially affected by the war with Iran and does not expect significant impact, citing its operations in 60 countries and resilient supply chains.
