Teva, with a $4.25B opioid settlement in hand, eyes return to growth by 2027

With thousands of U.S. opioid lawsuits set to enter the rearview, Teva Pharmaceutical is turning back to its bread-and-butter businesses in generics and biosimilars. The timing couldn’t be better, Teva’s CEO told investors Wednesday, as the markets for both small molecule and biologic copycats look poised to swell in the coming years.

Teva will pay up to $4.25 billion as part of a nationwide settlement to end litigation over its alleged role in the U.S. opioid crisis, the company said Wednesday in a press release about its second-quarter earnings results. The agreement in principle was struck with the working group of States’ Attorneys General, Native American Tribes and local plaintiffs.

For the settlement to go through, though, a sufficient number of plaintiffs will need to adopt the agreement, the company stated. Further, the company and AbbVie’s Allergan unit must resolve an ongoing beef over opioid liability, plus Allergan needs to forge its own nationwide settlement, Teva added.

Referring to the settlement announced today, Teva noted in its press release that “while the agreement will include no admission of wrongdoing, it remains in our best interest to put these cases behind us and continue to focus on the patients we serve every day.” 

The $4.25 billion settlement, which includes cases Teva has already resolved, will be paid out over a 13-year span, as will approximately $100 million earmarked for Native American Tribes.

Also included in that sum is up to $1.2 billion of Teva’s generic version of the overdose reversal drug, Narcan, the company explained. Under the deal, Teva will offer the Narcan copycat over 10 years or provide cash at 20% of the $1.2 billion wholesale acquisition cost “in lieu of product.”

Before any of that can happen, though, Teva and Allergan will need to sort out the opioid liability debate. Back in 2016, Teva paid roughly $40 billion for Allergan’s generics business—including its generic opioids. Allergan has claimed that that deal shifted opioid liabilities to Teva, which Teva contests. AbbVie has since snapped up Allergan.

The “assumption is they’ll make an agreement,” Teva CEO Kåre Schultz said Wednesday in response to an investor question about Allergan’s role in the settlement. He described that outcome is “by far the most likely” and “best for everyone.”

Teva’s opioid update came as the American-Israeli generics giant tallied $3.8 billion in second-quarter revenues, down 3% versus the same period in 2021. Measuring sales in local currencies, meanwhile, Teva’s revenue ticked up 1%, which the company credited to a generic sales boost in Europe and the U.S.

As for North American generics, Teva flagged positive momentum behind its Revlimid and Epipen copycats, as well as its Rituxan biosimilar, Truxima. Across the pond in Europe, generics and over-the-counter sales were up thanks to the easing of COVID-19 restrictions, plus the launch of Teva’s Lucentis biosimilar in the U.K., the company added.

On the branded front, Teva singled out strong growth for both its migraine med Ajovy—recently launched in the EU—and tardive dyskinesia drug Austedo.

Austedo’s second-quarter U.S. sales clocked in at $204 million, climbing 17% over the same period in 2021. The company dispensed roughly 48,000 prescriptions for the period, which was about 10,000 more than Teva dispensed over the same stretch in 2021.

As for Ajovy, global sales swelled 27% to $88 million. While the migraine market is highly competitive, Ajovy boasts some 24% share of prescriptions in the U.S., and it ranks as the second-leading brand in Europe, where it has a 30.3% market share, Teva said.

As for how Teva expects the rest of 2022 to shape up, it’s expecting to generate total revenues in the vicinity of $15 billion to $15.6 billion, down slightly from the company’s May outlook of up to $16 billion.

Teva also broke down its forecast across several key drugs. It expects Copaxone to reap around $700 million, while Austedo has been pegged to bring in $1 billion and Ajovy is predicted to generate around $400 million.

As Teva nears completion of its 2023 targets—a major component of which was a nationwide opioid settlement—the company is expanding its view to 2027. By that year, Teva expects to chart mid- to single-digit revenue growth, which could mean small bolt-on acquisitions of companies and products, Schultz told investors.

Moving forward, the company’s goal to is to leverage its generics muscle, build out its biosimilar stake and focus on specialty products like Ajovy and Austedo, Schultz said. 

What “feeds” the generic market is the value of products going off patent, Schultz said. Between 2017 and 2021, losses of exclusivity took a total $111 billion toll on branded drugmakers. That LOE impact is expected to increase to $188 billion between 2022 and 2026, of which small molecule drugs account for $118 billion and biologics $70 billion.

In terms of the overall value of the generics market itself, Teva expects that by 2027, the market will be worth a whopping $369 billion, Schultz said. As for biosimilars, that market could grow to $56 billion over the same time span.