Items to monitor here:
- Copaxone declines — sub 10% sales and continuing to decline (less impact over time)
- Austedo / Ajovy growth — these should replace Copaxone and then-some; next blockbuster specialty drugs
- Generics — how are generics performing? hopeful for slow revenue growth over 2021-2025 period from major patent expirys
- Debt — 4.3x leverage at 3Q21, should see this drop to 3x or less by 2023
Looking at a breakdown of revenue by product line:
- Generics (global) are 57% of sales and NA is 24% of sales alone
- There is one specialy drug off-patent with declining sales (Copaxone) and 2 new specialty drugs in growth mode (Austedo and Ajovy).
- Copaxone was $1.3bn FY20 sales and fell 25% to $1bn in FY21 (as expected) — headwinds should get smaller as it becomes smaller portion of total sales
- Ajovy/Austedo — grew 36% to $1.1bn in FY21
- NA generics were a problem in FY21 — sales down 6% and this makes up ~24% of total revenue
- 25% growth in Ajovy/Austedo specialty drugs (9% of FY22 sales) + 15% decline in Copaxone (5.4% of FY22 sales)
- Flattish EPS — $2.40-2.60 vs. $2.58 in FY21
- Flat-to-down FCF and EBITDA
Generic drug approvals by year — flat from 2010-2015 then doubled from 2015-2019 — Have increased approvals led to the massive price decline environment starting in 2016? If this were to reverse course, could pricing and sales growth improve?
Competitive landscape — competition increasing from Indian firms
Financials & Valuation
FY21 Valuation — Using the historic average 7x EBITDA multiple on $4.85bn 2022 EBITDA and an ending net debt balance of $19.1bn = $14.8bn equity value or $13.30 per share price target.
Link to TEVA model
September 2022 — 2Q22 earnings; new 2027 targets
Management set their sights on a new long-run financial objective — 2x leverage, 30% operating margins, 80% cash conversion, and mid-single-digit revenue growth.
TEVA ($TEVA) — FY21 Update