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Written by Thomas Niel for The Motley Fool
Forecasts call for Teva's branded drug portfolio to bring it $3.7 billion in revenue next year.
At the same time, as it pivots toward high-margin drug products, Teva continues to reduce debt and improve its credit rating.
With management guiding toward a branded pivot that could eventually generate over $10 billion annually, there may be far more runway for Teva's turnaround rally.
Teva Pharmaceuticals (NYSE: TEVA) recently hit a new 52-week high of $40.79 per share and has surged 110% in the last year. It's the drugmaker's turnaround, fueled by a pivot from generic to branded products, driving this mega rally among pharmaceutical stocks.
To some, it still doesn't make sense that Teva surged so far, so fast, given that the company has yet to see a big jump in revenue or earnings. However, a closer look at three company metrics makes it clear why investors continue to bid shares higher.
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Teva's "Innovative Portfolio" of branded drugs so far consists of three products: Austedo, Uzedy, and Ajovy. During Q2 2026, these three products combined to generate just over $1 billion in revenue. For the full year 2026, management anticipates sales for the three totaling $3.7 billion.
This is only around 22% of Teva's estimated 2026 sales. However, management guides for further "Innovative Portfolio" growth, to the point where it has a significant impact on company-wide gross margins.
As of June 30, 2026, Teva's net outstanding debt was $12.9 billion. Compare that to the end of 2022, when Teva's net debt totaled $18.4 billion.
The company also recently received a credit rating upgrade, which raised its long-term issuer rating from BB- to BBB-. With its debt moving from "junk" to investment-grade status, Teva is now well positioned to refinance its remaining debt at lower interest rates.
Between the company's existing pipeline and the candidates gained through its recent acquisition of Emalex Biosciences, the company anticipates peak annual sales of at least $10 billion from its late-stage pipeline portfolio.
Just between 2026 and 2027, analysts expect the company's earnings to grow 40.7%, from $2.16 to $3.04 per share. Considering the prospect of even greater earnings growth in subsequent years, shares arguably appear cheap at just 12.9 times next year's forecast earnings.
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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.