Shares of Teva Pharmaceuticals (TEVA) are trending up as the company reported its fourth-quarter earnings, beating Wall Street expectations on both its top and bottom line. On Wednesday, the company confirmed it will sell its active pharmaceutical ingredients business as part of CEO Richard Francis' “pivot to growth” strategy.
Teva CEO Richard Francis joins Yahoo Finance Live alongside Health Reporter Anjalee Khemlani to discuss the latest quarterly earnings report and plans for the company moving forward.
Francis comments on his pivot to growth strategy:
"When I came in and we did the pivot-to-growth strategy, we looked across all the businesses at Teva. We understood, where did we want to grow? We clearly want to grow our innovative business and our generics business... The API business, TAPI, its the second largest API manufacturer in the world, it is world class. But two things we saw and analyzed it, which is, one, it's constrained being part of Teva. The global API market is an $85 billion market..."
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Editor's note: This article was written by Nicholas Jacobino
Video Transcript
ANJALEE KHEMLANI: Richard, Anjalee here. I know that the company is having somewhat of a comeback, if you will. There was a lot of excitement even at JPM over the presentation for the company. Talk to me about that and sort of what you see as the true growth strategy and path for the company.
RICHARD FRANCIS: Well thank you and thank you for recognizing that. I think, obviously, there's been some challenges in the past for Teva, but when I came in, I saw some fundamentals, which when you look at them, could really allow us to drive a successful company, drive the top line and the bottom line. And when we looked at it, there were a few things this company had, which I think were underappreciated. One is that portfolio I've just mentioned, austedo and AJOVY which we've invested more resources in, and because of that, we've grown the revenue significantly.
The second thing is our pipeline. We've actually accelerated that through the clinic and we'll be having some readouts later this year on olanzapine our long acting treatment for schizophrenia. We accelerated that six months. So that'll be coming earlier for a readout, and that's exciting because if that hits its target product profile, then that could be quite transformational for patients who want a long-acting form of olanzapine.
So we've moved the innovative pipeline through. And then on the generics business, we actually looked at the fundamentals and thought we have some good stuff here, we just need to execute it better. And quarter on quarter, we started to execute better. So when you ask me about what the short and long term is from a growth, we've returned to growth, we will accelerate that growth in '25 to '27 and then we will maintain it going forward, and we have clear plans to do that.
So I think we've been rewarded for giving a clear plan and then executing on that plan. And our job is to keep executing on it. And I think that will build more credibility and more support for the company.
ANJALEE KHEMLANI: I hear you on that growth and I can see it. I know there's the moves that you've been making. I know you're coming back and pulling the company back from the opioid saga as well as price fixing concerns. So with that in the rear view and with that in mind, we did get JPM analysts saying, quote, "sentiment has clearly become more positive on shares. However with a relative lack of growth in the portfolio, in the near term, we do not see a compelling risk reward in shares from here."
What would you say to that. Considering all the stuff that you're focused on and what you have to contend with, there's really looking for, sort of, clearly an anchor, sort of, a blockbuster in the near term.
RICHARD FRANCIS: Yeah look I think what I would say is I think you can get some sentiment like that because of the past still. And I think you said it's in our rearview mirror, and I think it actually is but I think that probably lingers in some people's minds.
What I would say the anchor for growth. So I talked about austedo. Austedo did $1.2 billion in '23. We've given guidance for $1.5 billion in '24 and we've said it's going to do 2.5 billion by '27. So we're very clear about what products are going to achieve what. So I do think we have clarity on where the revenue is coming from and where the profitability will come from as well.
I think what's probably at the back of the odd person's mind is can they keep doing it? And in a way, I understand that. Our recent past has been a bit challenging. So we've had a good '23 what we need to do is make sure we execute on a '24. And then I think some of that reticent will turn to positivity and people will see the fundamentals of this strategy are good, the fundamentals of our innovative portfolio are good.
And as we keep posting improvements in the profitability, improvements in the top line, then I think that's where we'll garner even more support. But it is down to us to execute and to continue to execute. So I think that's the way I read it.
ANJALEE KHEMLANI: How much of an overhang is the opioid settlements for you right now? And also pivoting away from the API business in a world where we see pressures from IRA, from the FTC, explain that logic to me.
RICHARD FRANCIS: Yes no. Look think when I came in, and we did the pivot to growth strategy, we looked across all of the businesses at Teva and understood where do we want to grow. And we clearly want to grow our innovative business and our generics business. And as we think about other areas of our business, which are world class and very good and the API business Tape API is the second largest manufacturer in the world. It is world class.
But two things we did-- we saw when we analyzed it, which is one it's constrained being part of Teva. The global API market is an $85 billion market, and that business was set up to serve predominantly us as Teva, a vertically integrated part and less to serve the external market. We think for Tepe to really flourish, it should be out there addressing the external demand and the external market of $85 billion.
For us in Teva, as we think about this strategy, it comes down to capital allocation. And for us, it's about being really focused on capital allocation. Because of that in releasing Tepe to grow externally, we also free up capital to invest in the business, to ensure that we can grow our innovative business, being our innovative pipeline forward and grow our generics business, which we believe will top-- grow top and bottom line with that singular focus.
