Analysis
After a threefold rally, Teva faces its next test
Innovative drugs surge, but 2026 forecasts revive investor doubts.
Teva’s stock has tripled since Richard Francis took over as CEO in January 2023, and it is once again competing head-to-head with Bank Leumi for the title of the largest Israeli company on the Tel Aviv Stock Exchange by market capitalization. In his three years at the helm, Francis has led a significant transformation: Teva has shifted from being primarily a generic-drug manufacturer to a branded pharmaceutical company, or, as he defines it, a “biopharma” company.
The strategy of returning the company to a growth trajectory is beginning to bear fruit, and the fourth quarter of 2025, the results of which were published on Wednesday, provides a clear illustration. Still, the fading legacy of the generics business continues to cloud the overall picture. In 2025, Teva reported modest growth of just 3%, with revenues totaling $17.3 billion. This came despite high double-digit growth of 35% in its innovative segment, and despite total annual revenues from its three leading originator drugs - Austedo, for involuntary movements; Ajovy, for migraine; and Uzedy, for schizophrenia - surpassing the $3 billion mark for the first time. In the fourth quarter alone, these three drugs generated more than $1 billion in revenue, helping lift total quarterly revenues to $4.7 billion.
The shift in the company’s product mix is also improving profitability. Teva closed 2025 with an operating profit of $2.15 billion, a 13% increase compared with 2024. By contrast, the generics business, which still accounts for the majority of the company’s revenue, posted no growth at all. This pattern is expected to persist in 2026, with a significant caveat: the loss of $1.1 billion in revenue from the blood cancer drug Revlimid, due to the terms of the agreement under which Teva marketed the drug. Factoring in this decline, Teva’s remaining activities will need to make up a revenue gap of roughly $1 billion.
Even so, Teva’s forward-looking guidance was received coolly by the capital markets. The stock initially fell by about 6% at the start of trading, though the decline moderated to roughly 0.7% after investors examined the details more closely. By the close of trading in Tel Aviv, Teva, with a market capitalization of approximately NIS 113 billion, had once again become Israel’s largest publicly traded company. Teva forecasts revenues of $16.4-16.8 billion in 2026, implying another year of stagnation, even as its trio of branded drugs is expected to continue growing rapidly.
Analysts, who had been encouraged by a series of positive developments at Teva and by the optimism conveyed at the J.P. Morgan healthcare conference just a week earlier, were disappointed by the outlook, not only on revenues, but also on profitability. Teva expects earnings per share of $2.57-2.77 in 2026, down from $2.93 in 2025. This forecast was particularly discouraging given the efficiency plan the company has been implementing in recent months, aimed at cutting $700 million in operating costs by the end of 2027. As part of the plan, Teva has laid off about 8% of its workforce.
With the publication of the financial results, Francis sought to shift attention to Teva’s longer-term prospects, particularly its development pipeline, which he says could generate peak annual revenues of around $10 billion. Based on the scope and potential of its pipeline, Teva is currently considered undervalued relative to its peers, both in terms of revenue multiples and earnings multiples. The persistent discount reflects continued market concerns about the company’s large generics portfolio and the heavy debt it accumulated during its crisis years, largely as a result of the failed acquisition of Actavis.
On the debt front, Teva made further progress in 2025. Net debt now stands at $13 billion, nearly one-third of the level recorded in 2016, allowing the company to significantly reduce its financing costs.
The year 2026 is expected to be particularly active for Teva’s R&D division. The most anticipated milestone is the release of key clinical trial results for Duvakitug, the company’s most promising pipeline drug, which targets autoimmune gastrointestinal diseases and carries potential annual revenues of $2-5 billion. In a previous trial, Teva reported results that outperformed competing treatments, prompting an earlier-than-expected $500 million payment from Sanofi, which joined the project as a development partner.
Teva recently announced a similar agreement with Royalty Pharma, which will pay the company $500 million in exchange for a partnership in developing a drug for the skin disease vitiligo. Trial results for that drug are expected in the first half of 2026. In the second half of the year, Teva anticipates receiving FDA approval for olanzapine, a schizophrenia treatment with estimated annual sales potential of about $1 billion.
