Teva Stock Catapults to Highest Level in Five Years as Turnaround Story Delivers Major Win

Shares of Teva rose to a five-year high on Wednesday after the company beat first-quarter expectations and unveiled promising results from its study into treating schizophrenia.

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Teva Pharmaceuticals (TEVA) is trying to develop a monthly injection for the treatment of schizophrenia. Currently, the antipsychotic drug known as olanzapine – which Teva also sells – is given as a daily pill or dissolvable tablet. But it can be difficult for patients to keep up with that schedule.

During the final phase of testing, patients who received monthly doses of Teva’s drug for eight weeks showed improvements of 9.71 points to 11.27 points over a placebo on a 49-point scale that measures symptoms. Importantly, there were no episodes of post-injection delirium/sedation syndrome or PDSS. Other attempts to develop long-acting olanzapine have failed because of this side effect.

There is a huge unmet medical need for a long-acting version of olanzapine, Teva CEO Richard Francis told Investor’s Business Daily.

“If you look at the schizophrenia market, olanzapine is the largest molecule used in oral form for the treatment of moderate to severe schizophrenia,” he said. “But there is no effective long-acting drug. There is a need for a long-acting drug in schizophrenia because it improves treatment compliance.”

During today’s afternoon stock market action, Teva shares rose more than 14% to 15.93. This move took Teva stock to its highest point since March 2019. Shares recently retook their 50-day line, Market wave analysis shows.

The next big driver for Teva Stock?

Evercore ISI analyst Umer Raffat compared Teva’s test results to Eli Lilly‘s (LLY) efforts to develop a long-acting version of the same drug. In Phase 3 testing, patients taking Lilly’s long-acting olanzapine showed an improvement of 14 to 17.8 points on the same symptom scale.

Although Lilly’s drug was more effective on the surface, it also led to cases of PDSS. But Teva’s drug appears safer.

“We are now approximately 3,000 injections plus in Teva’s long-acting olanzapine Phase 3 (study) – and there have been no PDSS events to date,” Raffat said in a report. “Remember, this was the safety issue that permanently tarnished the commercial profile of Lilly’s attempt to create long-acting injectable olanzapine.”

He says the long-acting version of olanzapine could be a $1 billion product for Teva. Teva’s presentation shows that olanzapine accounts for 19% of the U.S. oral schizophrenia drug market. There are only four long-acting injections available, accounting for 13% of the market.

“Long-acting antipsychotics are very molecule specific… and there is no clear long-acting (version of) olanzapine,” he said. “Olanzapine is one of the most commonly prescribed antipsychotics and (has) high effectiveness.”

Raffat maintained his outperform rating on Teva shares.

The first quarter is mixed

The first quarter also offered a bright spot for Teva shares.

Teva’s adjusted earnings fell short of expectations by 4 cents per share. But at 48 cents per share, profits rose 20% year over year. Teva also maintained its earnings outlook for the year at $2.20 to $2.50 per share. According to FactSet, the midpoint is slightly lower than analyst expectations of $2.39.

CEO Francis says Teva is investing aggressively in research and development, which will impact profits in the short term.

Later this year, Teva expects to reveal interim results from its research into ulcerative colitis and Crohn’s disease. The drug blocks TL1A, an inflammatory protein, and development is underway Sanofi (SNY). Teva also plans to release results from an early-stage celiac disease study in the second half of the year.

Also in the first quarter, revenue rose 4% to $3.82 billion, beating expectations for $3.74 billion.

The best growth came from Austedo, which treats movement disorders. Sales in the US shot up 67% to $282 million. But that far exceeded expectations for $342.1 million. Teva attributed the growth to the launch of the extended release version in May 2023, as well as expanded patient access and increased investments to meet demand.

Francis says there was a wide range of expectations for Austedo.

“I’m not sure we missed everyone,” he said.

Surprisingly, Teva maintained its expectations for Austedo to bring in about $1.5 billion in sales this year. The company expects Austedo to generate $2.5 billion in revenue by 2027 presentation first quarter.

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Meanwhile, sales of generic drugs worldwide rose by more than 6% to $2.29 billion. And sales of migraine prevention drug Ajovy rose nearly 20% to $113 million.

Teva also reaffirmed its full-year guidance for revenue of $15.7 billion to $16.3 billion. The midpoint of the sales guidance is above analyst expectations of $15.8 billion.

Evercore ISI’s Raffat maintained his outperform rating on Teva shares.

With “two major clinical measurements this fall on innovative agents, it’s a very different story than it was a few years ago,” he said.

Francis, the CEO, agrees. Teva has always had potential and has a history of developing important drugs such as Copaxone for multiple sclerosis. However, Copaxone is now facing generic rivals and sales have fallen significantly. In the first quarter, Copaxone’s revenue fell 33% to $99 million.

“When I came here, I saw some of Teva’s potential from a limited point of view. I just don’t think it was invested enough and focused on enough,” he said. “We are certainly world class in generics and then we will be world class in CNS and immunology. I think people are slowly starting to realize that.”

Teva stock has a near-perfect composite rating of 98. This means that shares rank in the top 2% of all stocks on fundamental and technical measures. Shares also have an IBD Digital Relative Strength Rating of 91, which measures 12-month performance on a scale of 1-99.

Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.

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