Teva Pharmaceutical Industries Just Pulled Off One of Pharma's Most Impressive Comebacks

Consider Teva Pharmaceutical Industries (NYSE: TEVA) the "comeback kid" among pharmaceutical stocks. As recently as a few years ago, the Israel-based company was not just facing headwinds with its legacy generic drug business, but also contending with high debt and massive opioid-related litigation liabilities.

Now Teva strengthened its balance sheet and put litigation issues into the rearview mirror, while transforming from a low-margin generic drug maker into a developer of higher-margin branded pharmaceuticals.

Better yet, the pivot remains in motion. Around 50% of Teva's overall sales are in generics, but this figure continues to change. Don't assume that the stock's 100% jump over the past year is a one-and-done event. As the transformation continues, shares may be in for further earnings growth and price appreciation.

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Teva and its spectacular comeback

In 2024, when generic drugs made up over 57% of Teva's overall sales, the company reported $16.5 billion in sales; adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $4.8 billion; and non-GAAP (adjusted) earnings of $2.49 per share. A year later, generic drugs accounted for just half of Teva's overall sales, and the further increase in branded drug sales led to solid improvements in profitability.

While overall sales increased by just 5%, to $17.3 billion, adjusted EBITDA and non-GAAP earnings per share (EPS) increased by 12% and 19%, respectively, during 2025. Furthermore, Teva reported strong sales figures for its flagship branded drug, Austedo, a treatment for certain Huntington's disease symptoms, as well as for its two up-and-coming branded drug products, Uzedy, a treatment for schizophrenia, and Ajovy, a therapy for migraine prevention. Last year, their sales were up 34%, 63%, and 30%, respectively.

In its latest earnings report, Teva reported sales growth for Austedo, Uzedy, and Ajovy of 41%, 62%, and 35%, respectively, as well as reiterated revenue outlook for each of the three branded drugs. The company also continued to use its cash flow to pay down debt. Over the past four years, net debt has decreased by over $5.5 billion, from $18.4 billion as of Dec. 31, 2022, to $12.9 billion as of March 31, 2026.

Why this hot pharma stock may have more room to run

Don't expect things to slow down from here. If anything, Teva's transformation is gaining momentum. Analyst forecasts call for EPS to grow by around 30.8% during 2027. Earnings growth could stay elevated, even if Austedo, Ajovy, and Uzedy sales start to peak. Progress in bringing more of its pipeline candidates to market could help sustain organic growth.

Outside of organic growth, Teva has other avenues to improve earnings. A recent deal to acquire Emalex Biosciences for $700 million adds yet another potential blockbuster drug, ecopipam, to Teva's portfolio. Ecopipam is a Tourette syndrome treatment, and is close to the regulatory finishing line. Other efforts, such as further debt reduction, could also move the needle on Teva's continued high earnings growth.

Even if the stock merely maintains its current valuation of 14.7 times forward earnings, and shares rise in line with earnings growth, this could produce another strong run. As shares sit just a few dollars below multiyear highs, consider Teva one of the best pharmaceutical stocks to buy and hold.

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.