Teva Just Delivered More Good News on Its Biggest Growth Driver. Is the Stock Still a Bargain?

Teva Pharmaceuticals (NYSE: TEVA) is morphing from a generic drug maker into one that develops more innovative -- and profitable -- drugs. The stock is up more than 10% this year, and more than 95% over the past year.

On June 8, the company released data regarding its therapies, Austedo and Austedo XR (extended relief), at the Psych Congress Elevate. The three-year study showed that while more than 50% of tardive dyskinesia patients saw symptom improvement in controlling involuntary movements within 15 weeks, an additional 23% achieved success with long-term treatment.

This means that Austedo XR may be able to expand beyond its approved use to treat the involuntary movements (chorea) of Huntington's disease. The company also released a study on June 5 showing that 60% to 71% of Huntington's disease chorea patients experienced improvement with Austedo or Austedo XR.

This data provides doctors with strong therapeutic justification to prescribe Austedo or Austedo XR over competitors, securing market share for years to come. Here's one more reason to buy Teva stock, and one reason not to.

Image source: Getty Images.

The company's pivot is becoming more profitable

In the first quarter of 2026, the company reported revenue of $4 billion, up 2% year over year. Its innovative brands, Austedo, migraine med Ajovy, and long-acting schizophrenia therapy Uzedy, together grew revenue by 41% over the same period last year. Earnings per share (EPS) rose 72% year over year, to $0.31. The key point is that the company's new drugs are offsetting its declining generic sales.

Meanwhile, the company's application for a long-acting version of olanzapine for once-monthly treatment of schizophrenia is currently under review by the Food and Drug Administration (FDA).

This structural pivot expanded Teva's non-GAAP gross profit margin to 52.9% in Q1. The company is generating healthy free cash flow, estimated at $2 billion to $2.4 billion this year, which is being actively used to pay down its heavy debt load.

In April, the Israeli pharma struck a deal to acquire Emalex Biosciences for $700 million upfront. This included ecopipam, a dopamine D1 receptor antagonist that's en route to an FDA submission for Tourette syndrome this year. The drug has already received FDA fast-track and orphan drug designations.

Disappointing guidance, supply issues

Teva's overall full-year 2026 financial guidance disappointed Wall Street. The company projected total 2026 revenue of $16.4 billion to $16.8 billion -- representing flat to slightly negative growth compared to 2025. That helps explain why the stock has fallen more than 3% since Teva released its Q1 earnings on April 29.

This stagnation is primarily due to intense generic competition eating into other parts of the portfolio (such as the generic version of the cancer drug Revlimid) and a drop-off in one-time milestone payments from partnerships (such as Sanofi). Because Austedo XR is carrying so much weight on its shoulders, any future slowdown in its adoption could leave Teva with very few places to hide, capping the stock's near-term upside until its next-generation immunology pipeline begins to commercialize in 2027.

The other concern is that ongoing conflicts in the Middle East and the blockade of the Strait of Hormuz have disrupted the movement of active pharmaceutical ingredients, and rising energy costs make it more expensive to ship drugs.

It's still a company headed in the right direction

The company's move to pursue growth is obviously paying off, and its innovative drugs target conditions with unmet needs, giving them less competition.

Teva received FDA approval in March for biosimilar Ponlimsi to treat osteoporosis and bone loss. The company's pipeline includes six additional biosimilars that are expected to receive regulatory decisions this year. One of the most promising is omalizumab, a biosimilar to Xolair, made by Novartis (NYSE: NVS) and Roche (OTC: RHHBY) to treat chronic hives.

The stock is trading at less than 15 times forward earnings, and considering its potential catalysts this year, that still seems like a bargain.

James Halley has no position in any of the stocks mentioned. The Motley Fool recommends Roche Holding AG. The Motley Fool has a disclosure policy.