Teva Stock Is at Its Highest Level in Nearly a Decade. Here's Why It Could Soar Even More.

It's no longer a secret that the Teva Pharmaceutical Industries (NYSE: TEVA) of the past is no more. The Israel-based company is no longer strictly a generic-drug maker, burdened by heavy debt and legal liabilities related to the opioid crisis.

While generic drugs remain a large portion of Teva's overall business, they made up just over 50% of overall sales in the last quarter. Branded drug products could soon account for the majority of the company's annual revenue.

In recent years, Teva has also reduced outstanding debt by over $5 billion, and has settled its past opioid-related legal issues. Wall Street has taken notice of the transformed Teva, as evidenced by the stock's strong performance, particularly its more than doubling over the past 12 months.

However, Teva still has plenty of room to run and appears poised to take off in a big way over the next few years, as this turnaround company has the potential to become a promising growth stock.

Teva and its ongoing transformation

As seen in Teva's first-quarter earnings report, its branded drug portfolio currently serves as the company's main growth driver. Although overall sales declined by 1% last quarter to $4 billion, this was due to a 13% drop in the company's generic drug sales. Among branded products, Teva knocked it out of the park.

For example, Austedo, a treatment for Huntington's disease-related involuntary movement disorders, generated $578 million in revenue, a 41% increase from a year ago. Another branded drug, migraine prevention therapy Ajovy, reported $196 million in sales, a 35% year-over-year increase, while schizophrenia treatment Uzedy reported $63 million in sales, a 62% increase.

At the same time, Teva's generic drug unit continues to shift toward biosimilars, or FDA-approved versions of existing drugs. The segment is expected to deliver $800 million in revenue by 2027. Over time, this could help stabilize and grow the company's legacy business unit.

These small improvements notwithstanding, what has investors bidding up Teva shares is the potential of the company's drug pipeline. Over the next decade, this pipeline could add a litany of new blockbuster drugs to the company's portfolio.

Why things are still just getting started

The situation may be improving incrementally with Teva, but again, that's not the reason investors are getting excited about this stock. Between 2026 and 2030 alone, the company could bring a schizophrenia treatment, an asthma treatment, and an ulcerative colitis treatment to market.

In the aggregate, these therapies could add as much as $7 billion to annual sales. Teva is also adding promising drug candidates to its portfolio via acquisition, such as a recently announced deal to acquire privately held Emalex Biosciences, for $700 million in cash plus $200 million in potential earn-out payments.

Emalex's main asset is a Tourette's treatment known as ecopipam. While ecopipam is still in late-stage clinical trials, this candidate is another potential blockbuster drug in the making. As analysts at Jefferies recently argued, this drug could eventually reach $1 billion in peak annual sales. With this in mind, Teva appears well positioned to meet forecasts calling for 30% earnings growth in 2027.

Similarly strong results could become possible in 2028 and beyond. Trading at 13 times forward earnings, Teva's valuation is in the mid-range among pharmaceutical stocks. At this reasonable valuation, shares could rise in line with earnings growth. Given these promising prospects, consider Teva a solid long-term buy among healthcare stocks.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.