Teva Pharmaceutical is a victim of its own success, Chief Executive Richard Francis said Wednesday as Teva stock plummeted on its light earnings outlook.
For the year, the pharma behemoth expects to earn an adjusted $2.35 to $2.65 per share. Teva's outlook completely missed Wall Street's consensus forecast for $2.78 a share.
But Francis says Teva is investing deeper in its research and development. Ultimately, he expects those investments to pay off with strong returns for Austedo, which treats movement disorders, and an experimental treatment for inflammatory bowel disease.
The company is coming off eight consecutive quarters of growth. Teva beat or matched expectations in all of them, he said.
"We're still growing and, by the way, we're growing off a higher base," Francis told Investor's Business Daily. "Sometimes I think we're the victims of our own success. When we started talking years ago, there were no expectations. Now, we've got to knock it out of the park all the time."
Still, in midday trades, Teva stock tumbled 14% to 18.52. Shares undercut their 50-day moving average, according to MarketSurge.
Teva Stock: Earnings Dive, Sales Take Sanofi Hit
Fourth-quarter metrics, though, were relatively in line with expectations. Teva earned an adjusted 71 cents per share on $4.23 billion in sales. Earnings met forecasts, while sales beat analysts' call for $4.15 billion.
But earnings fell almost 41% year over year, while sales slipped 5%. The sales decline was due to an up-front $500 million payment to Sanofi in 2023. Sanofi is Teva's partner, helping develop duvakitug, its treatment for inflammatory bowel disease. Excluding that, sales rose 7%, Francis said.
Investing In Immunologic Drug
Though the earnings outlook was light, Teva's sales guidance topped forecasts. The company expects $16.8 billion to $17.4 billion in sales this year. Teva stock analysts called for $16.45 billion. At the midpoint of Teva's forecast, sales would grow almost 4%.
Francis says Teva is investing deeply in further developing duvakitug. Duvakitug faces steep competition. It blocks TL1A, a protein that shows up in immunologic diseases. Merck and Roche are also developing TL1A blockers. Both companies acquired their drugs, spending a respective $10.8 billion and $7.1 billion.
Teva Stock Rockets On Midstage Test
On Dec. 17, Teva stock rocketed 26.5% on positive study results for duvakitug.
Francis says Teva and Sanofi will move duvakitug into Phase 3 testing this year. The companies are also planning to test the TL1A-blocking drug in other disease areas, though they haven't shed light on that approach yet.
"We might not announce the specifics, we might just announce the number" of diseases to be targeted, Francis said, noting how competitive the TL1A space has become. He expects the drug to work in three to six additional disease areas.
"That would be transformative to Teva," he said.
Follow Allison Gatlin on X/Twitter at @IBD_AGatlin.
