Teva (TEVA) Q3 2026 earnings review
Teva's branded drugs lift profit, while US generic sales fall
Teva's newer patented medicines are lifting its profit margins even as its older generic pill business shrinks. Total revenue slipped 2% from a year ago as generic competition in the United States cut copycat drug sales, but the three main branded drugs grew 33% and pushed gross margin excluding one-offs to a ten-year high of 58.7%. Chief executive Richard Francis raised the full-year sales outlook for all three branded drugs and lifted the total revenue plan by $175 million at the middle of the range.
| Revenue | $4,395M -2% from a year ago |
|---|---|
| Three main branded drugs | $1,105M +33% from a year ago (25% of sales) |
| Gross margin, excluding one-offs | 58.7% +3.45 percentage points from a year ago |
| Full-year revenue outlook | Raised $175M middle of the range: $16.85B (+0.5% ex-milestone) |
⚖️ Verdict: 🟢 Bullish
The story got better because the shift toward patented drugs is now lifting gross margin faster than generic erosion can drag it down, and the FDA approval of schizophrenia injection Weltruza adds a fourth branded medicine on schedule. One caution: by our math, the raised Austedo outlook still leaves fourth-quarter sales of the drug falling about 22% from a year ago just before its January 2027 Medicare price cut.
The question now is whether Austedo can keep growing in 2027 when the lower Medicare price takes effect and US generic volumes keep contracting. One view is that untreated patients and the new Weltruza launch will outweigh the price cut; the other is that the repricing caps the margin gains just as the fourth-quarter slowdown arrives. The initial 2027 outlook in early 2027 will settle it.
🐂 Bull Case
Branded Drugs Lifted Gross Margin to a Decade High
"Our strong third-quarter performance is another clear demonstration of Pivot to Growth in action and how far Teva has come," chief executive Richard Francis said. Teva is shifting from low-margin generic pills toward patented medicines for movement disorders, migraines and schizophrenia. Those three branded drugs grew 33% from a year ago to $1.11 billion, reaching 25.1% of total revenue.
- Gross margin, excluding one-offs: 58.7%, up 3.45 percentage points from a year ago
- Austedo, its movement-disorder drug: $751 million, up 21%
- Ajovy, its migraine injection: $269 million, up 61% on volume and "a reduction in sales allowance"
- Uzedy, its long-acting schizophrenia injection: $85 million, up 96%
The product shift matters because patented drugs cost far less to make per dollar of sales than generics. Cost of making the products, excluding one-offs, dropped 3.45 percentage points of revenue, lifting operating margin excluding one-offs by 2.8 percentage points to 31.7% even as selling and marketing costs rose 1.5 percentage points to back the brands.
What to watch: fourth-quarter gross margin excluding one-offs. A reading near 58% would show the margin gain holds even when Austedo makes up a smaller share of sales.
FDA Approval of Weltruza Expands the Pipeline
Francis aims to launch at least five patented medicines over five years to replace shrinking older products. In October, the US Food and Drug Administration approved Weltruza, a once-monthly olanzapine injection for adults with schizophrenia that joins Uzedy in the same clinics. The drugmaker still targets $1.5 billion to $2.0 billion in combined peak sales for the two schizophrenia injections.
Three other pipeline steps offset a clinical setback this quarter. US regulators accepted the review application for ecopipam, a Tourette syndrome drug for children, with a decision due in the first quarter of 2027, and a mid-stage trial of anti-IL-15 in celiac disease succeeded. Teva also bought BXCL-501, an oral film under regulatory review for "potential at-home use for the acute treatment agitation associated with schizophrenia or bipolar I or II disorder in adults", while stopping a mid-stage trial of emrusolmin in Multiple System Atrophy for lack of efficacy.
What to watch: the US regulatory decision on ecopipam in the first quarter of 2027. Approval would give the group a second new neurological launch within six months.
Biosimilars Beat Their 2027 Goal and Credit Agencies Upgraded Teva
Two multi-year repair goals arrived early this quarter. Teva makes biosimilars, which are lower-cost versions of complex biologic drugs, and it signed a deal with Samsung Bioepis to sell two more in Remicade and Enbrel copies. The Israeli company now expects biosimilar sales to top $800 million in 2026, "achieving our original 2027 revenue objective one year ahead of plan".
Credit rating agencies Moody's and S&P also lifted the business back to investment grade, joining Fitch's earlier move. That allowed the group to refinance about $4.9 billion of debt and lengthen its average debt maturity from 5.6 years at year-end to 6.3 years, while moving its shares to a direct New York Stock Exchange listing.
What to watch: the ratio of net debt to full-year cash operating profit at year-end 2026. Moving closer to the 2.0 times 2027 target would reduce interest expenses further.
🐻 Bear Case
The Raised Outlook Still Points to a Fourth-Quarter Austedo Drop
Francis said third-quarter results gave him confidence to raise the 2026 revenue outlook for all three branded drugs. For Austedo, the company's biggest patented medicine at 17% of sales, Teva lifted the full-year plan by $75 million at the middle of the range to $2.55 billion–$2.65 billion.
The arithmetic of that raise cuts against the upbeat framing. Austedo has already brought in $2.03 billion in the first nine months of 2026. By our math, the new full-year outlook leaves $524 million to $624 million for the fourth quarter, or $574 million at the middle of the range — a 22% drop from $734 million in the fourth quarter of 2025, and down 24% from this quarter's $751 million.
That fourth-quarter step-down comes just before a negotiated US Medicare price cut for Austedo takes effect on January 1, 2027. Because the release gives no figure for wholesaler inventory or the 2027 price cut, the outlook leaves open how much of the drop is channel destocking and how much is pre-cut pricing pressure.
What to watch: the initial 2027 revenue outlook for Austedo, due with fourth-quarter results in early 2027. A range below $2.5 billion would mean the Medicare price cut outweighs patient growth.
US Copycat Drug Volumes Keep Shrinking
Teva's generic drug business supplies the cash that funds its new branded medicines, and the company calls it a foundation of its strategy. In the third quarter, global generic sales fell 16% from a year ago to $2.16 billion by our math, pulling total company revenue down 2%.
- US generic revenue: $718 million, down 39% from a year ago
- US generic prescriptions over twelve months: 227 million, down 13% from 261 million a year ago
- Share of total US generic prescriptions: 5.8%, down from 6.7% a year ago and 6.1% last quarter
The company blamed the US revenue drop on rival copies of lenalidomide, a generic cancer pill derived from Revlimid. But the prescription count shows the shrinkage goes beyond one cancer drug: Teva's total US prescription volume has fallen every quarter this year. Because generic volume is shrinking, the branded portfolio has to grow over 30% just to keep total company sales flat.
What to watch: US generic revenue in the fourth quarter, when the toughest Revlimid comparison is behind it. Another double-digit drop would show the broader generic base is eroding.
Legal Bills, Plant Write-Downs and Deal Costs Cut Into Profit
While profit excluding one-offs rose 11% to $1.01 billion, reported net income fell 46% from a year ago to $233 million. Three recurring charges and a debt refinancing charge ate up most of the operating gain: $201 million for legal settlements (including $133 million for an antitrust case and $35 million for opioid cases), $228 million in asset write-downs ($140 million for European factories and $49 million on the drug-ingredient unit up for sale), and a $224 million loss from paying off old bonds early.
Deal costs also kept the full-year profit outlook from rising with drug sales. Buying BXCL-501 added $100 million of upfront research charges to 2026, bringing total deal research charges to $870 million and trimming the top end of the operating income outlook by $100 million. By our math, excluding those deal charges leaves the 2026 operating margin at 28.0%, still two percentage points short of the 30% goal for 2027.
What to watch: full-year 2027 operating margin outlook in early 2027. Reaching 30% requires capturing the rest of the planned $700 million in cost savings without new upfront deal charges.
Risks this quarter didn't answer
Five standing issues from prior quarters received no new figures in the third-quarter earnings release.
- Austedo wholesaler inventory and prescription growth: no prescription, milligram or channel-inventory numbers appeared in the release; the call transcript will show whether excess inventory has cleared.
- Austedo 2027 Medicare price cut: the negotiated discount takes effect January 1, 2027, and the release still does not state the price impact.
- Sale of the active pharmaceutical ingredient (API) unit: still described only as an ongoing sales process with no buyer, price or closing date after two years on the block.
- Share buybacks: the release made no mention of the share repurchase plan the board asked management to prepare in the first quarter, and diluted shares rose 1.6% from a year ago.
- US pharmaceutical tariffs: listed among forward-looking risk factors alongside Middle East hostilities, with no cost estimate.
👓 Other Themes
Teva Signed a US Government Pricing Deal for Future Drugs
In October 2026, Teva finalized a Most-Favored-Nation agreement with the US Administration following executive orders aimed at lowering prescription drug prices. The agreement includes a "prospective pricing commitment with respect to certain future innovative product launches". The company gave no financial terms and noted in its risk disclosures that the pact, alongside the July 2025 US healthcare law, could affect future drug pricing and coverage.
💲 Other KPIs
Free cash flow dipped 4% from a year ago, as cash from operations fell 35% to $241 million due to slower customer collections and a $128 million rise in accounts receivable since year-end. Proceeds of $47 million from selling a European property and other assets cushioned the drop, alongside $327 million collected from securitized receivables.
Net debt — total debt of $16,718 million minus $4,085 million in cash — fell by $305 million from the second quarter. The drugmaker redeemed $4,678 million of senior notes early and issued $4,837 million of new notes, leaving 24% of total debt due within one year, up from 11% at the end of 2025.
Sales outside the United States grew and offset part of the US generic drop. European revenue rose 6.8% from a year ago to $1,319 million on generic launches, product-right sales and a 28% rise in Ajovy, lifting European profit 39% to $420 million. International Markets revenue rose 6.3% to $592 million as Austedo and Ajovy grew in China.
🔮 Guidance
Raised. The middle of the range moved up $175 million to $16.85 billion, down 2.4% from reported 2025 sales or up 0.5% excluding last year's $500 million duvakitug milestone payment by our math. By our math, that leaves $4.33 billion for the fourth quarter, down 8.1% from a year ago as reported or up 2.9% excluding the milestone. Second straight raise (+$75M, +$175M).
Raised. The middle of the range rose $75 million to $2.60 billion, or 15% growth for the year. By our math, after $2.03 billion in the first nine months, the plan leaves $574 million at the middle of the range for the fourth quarter, a 22% drop from $734 million a year ago. Second raise this year (+$50M, +$75M).
Raised. The middle of the range jumped $85 million to $945 million, pointing to 40% growth for the full year. By our math, that leaves $236 million for the fourth quarter, up 12% from a year ago after 60% growth in the third quarter. Second large raise in two quarters (+$90M, +$85M).
Raised. The middle of the range moved up $20 million to $300 million, or 57% full-year growth. By our math, the plan leaves $75 million for the fourth quarter, up 36% from $55 million a year ago. Second raise this year (+$15M, +$20M).
Cut at the top end. The middle of the range fell $50 million to $3.85 billion because a new $100 million research charge for BXCL-501 outweighed a $50 million operational raise, bringing full-year deal research charges to $870 million. By our math, that leaves $1.13 billion for the fourth quarter, or a 26.0% operating margin (28.0% before remaining deal charges).
Cut at the top end. The middle of the range dropped $50 million to $4.33 billion, down 18% from 2025 because of $870 million in upfront research charges and the absence of last year's duvakitug milestone. By our math, that leaves $1.31 billion for the fourth quarter, down from $1.64 billion a year ago.
Raised at the bottom end. The middle of the range edged up half a cent to $2.015, as an $0.08 operational increase was largely offset by an extra $0.07 per share of upfront research charges (now $0.71 for the year). By our math, that leaves $0.615 per share for the fourth quarter, down from $0.96 a year ago.
Raised at the bottom end. The middle of the range rose $50 million to $2.25 billion after three quarters of holding at $2.0–$2.4 billion. By our math, after $1.31 billion in the first nine months, the plan requires $945 million of free cash flow in the fourth quarter, down from $1.30 billion in the fourth quarter of 2025.
Unchanged. The plan keeps full-year financing costs at about $800 million for a fourth straight quarter, compared with $934 million in 2025, as lower debt balances offset refinancing rates.
Unchanged. Held for a third quarter after rising from 16%–19% when the non-deductible Emalex research charge was added. With the nine-month tax rate at 22.1% and the third quarter at 16.5%, the full year sits inside the target band.
Unchanged. Held at about $500 million for a fourth consecutive quarter. Through nine months, Teva spent $393 million on property, plant and equipment, leaving about $107 million for the fourth quarter by our math.
❓ Key Questions
Why does the Austedo plan point to a Q4 drop?
By our math, the raised full-year Austedo outlook leaves $574 million at the middle of the range for the fourth quarter, down 22% from a year ago. How much of that drop is wholesaler inventory destocking versus pre-2027 Medicare price-cut ordering?
What is the 2027 Medicare price cut for Austedo?
The negotiated Medicare price for Austedo takes effect on January 1, 2027, less than two months away. What net price reduction is built into internal 2027 plans, and does the $2.5 billion 2027 sales target still hold?
What does the US Most-Favored-Nation pricing deal require?
Teva signed a pricing agreement with the US Administration in October covering certain future innovative launches. Does it apply to Weltruza, ecopipam or BXCL-501, and how does it cap US launch prices?
How much revenue did biosimilars generate this quarter?
Management expects biosimilars to top $800 million in 2026, a year ahead of the 2027 goal, but reports them inside generic sales. What was actual biosimilar revenue in the third quarter and the first nine months?
Why did Teva take another $49 million API write-down?
The drug-ingredient unit has been up for sale since 2024 and took another $49 million held-for-sale impairment this quarter ($66 million over nine months). Is a sale still active, and at what valuation?