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Teva (TEVA) Stock Up 17% YTD After a Dismal 2017: Here's Why

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After declining sharply in 2017, shares of Teva Pharmaceutical Industries Limited (TEVA - Free Report) have picked up pace this year so far. The stock has risen 17% against the industry’s decline of 5.8%.

What’s Going in Teva’s Favor?

The Israel-based generic drug maker has been facing significant challenges. This includes accelerated generic competition for its blockbuster multiple sclerosis drug, Copaxone; new competition for branded products, pricing erosion in the U.S. generics business and a massive debt load of more than $30 billion. 

Mylan’s earlier-than-expected launch of the first generic version of the 40-mg strength of Copaxone in October last year was a major setback for Teva. In the same month, Mylan also launched the second generic version of the 20 mg formulation of Copaxone. The first generic version of the 20 mg formulation has been marketed by Momenta Pharmaceuticals, Inc. and Sandoz — Novartis’ (NVS - Free Report) generic arm — since 2015

With the entry of the generic version of the 40 mg formulation and the entry of a second generic version of the 20 mg formulation, there has been rapid erosion in sales of Copaxone. Moreover, a second generic version of the 40 mg formulation (Glatopa) was launched by Sandoz in February this year, much earlier than its scheduled launch in April.

However, Teva has undertaken some strategic and restructuring initiatives to revive growth.

The company divested some non-core assets last year (mainly in the Women’s Health business) to cut its significant debt load. It also has a new organizational structure in place, is closing plants, cutting down its generics portfolio, eliminating low-value R&D projects, and aims to cut its global workforce by more than 25% over the next two years as part of a restructuring plan it revealed in December. Teva is progressing well on these re-structuring activities and still expects to save almost $3 billion by the end of 2019 from these initiatives.

Its financial position also seems more stable than before as it is regularly paying down debt.

Earlier this month, Teva announced its first-quarter 2018 results, beating expectations for both earnings and sales while also raising its full-year outlook for both the metrics

The stock also got an impetus recently, after Warren Buffett's Berkshire Hathaway revealed that it has doubled its investment in the company in the first quarter. Berkshire said it owned about 40.5 million Teva American depositary receipts (ADRs) at the end of March, up from 18.9 million ADRs at the end of 2017.

Earnings estimates for 2018 and 2019 increased a respective 9.5% and 4% over the past 30 days.

Teva currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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