Teva Pharmaceutical Industries (TEVA -1.16%) and Viatris (VTRS -2.13%) are two of the top makers of generic pharmaceuticals, but both healthcare companies are having to look beyond their generic and branded drugs to find a way to grow sales.

While Teva's 2022 revenue was down compared to 2021, the company is forecasting revenue growth in 2023, due in part to increased sales of anti-spasm drug Austedo, as well as a likely launch of a Humira biosimilar. Viatris' revenue was also down in 2022, but its net income was up and it is expecting more than $500 million in revenue from new launches this year. Which is the better long-term buy? Let's see.

The case for Teva

Teva is the world's largest maker of generic pharmaceuticals, with around 3,600 products. The Israeli company has seen its shares climb by more than 8% so far this year and more than 27% over the past 12 months.

Teva reported 2022 full-year revenue of $14.9 billion, down 6%, and an annual earnings per share (EPS) loss of $2.12, compared to an EPS loss of $1.10 in 2021. 

Teva said it expects 2023 revenue to fall between $14.8 billion and $15.4 billion, representing a climb of 2% at the midpoint.

Despite the somewhat tepid guidance, there are reasons for long-term optimism. Teva is seeing a strong uptake in sales for its lead therapy, Austedo, used to treat uncontrolled movements in people experiencing Huntington's disease chorea or tardive dyskinesia. Austedo had sales of $963 million in 2022, up 20%, and in the fourth quarter, it had sales of $344 million, up 22% year over year. 

Those numbers should continue to rise, as the U.S. Food and Drug Administration (FDA) just approved extended-release tablets of Austedo in 6-milligram, 12-milligram and 24-milligram doses. This means the former twice-a-day therapy can be used as a once-a-day therapy for certain patients. Teva said it expects $1.2 billion in sales from the drug this year.

Ajovy, the company's injectable migraine therapy, is also seeing increased revenue. It brought in $377 million in 2022, despite the headwinds of a stronger dollar's effect on international sales. The company said it expects that amount to increase to $400 million this year.

Teva is also banking on its Humira (adalimumab) biosimilar, Alvotech (AVT-02), to help sales, though the therapy is still awaiting approval by the FDA and there are eight other Humira biosimilars that have already been approved. The company's biologics license application is scheduled to be done April 13, and the company has said it plans to launch by July 1. Though it would be starting behind other adalimumab biosimilars, one edge for Alvotech is that it has the potential to be the first high-concentration interchangeable adalimumab in the United States.

Teva is moving closer to profitability by paying down its debt by $2.5 billion over the past four quarters. 

The case for Viatris

Viatris' shares are up more than 2% so far this year and more than 12% over the past 12 months. The company, formed by the 2020 merger of Mylan and the Upjohn division of Pfizer, reported revenue of $3.86 billion in the fourth quarter, down 11% year over year, and net income of $1.01 billion, up from a loss of $263.8 million in the same period a year ago.

For the year, the company had revenue of $16.2 billion, down 9%, but thanks to cost-cutting measures, it had net income of $2.8 billion, compared to a loss of $664 million in 2021. The company's 2023 guidance is more negative than Teva's. While it didn't predict net income, it sees 2023 revenue sliding to between $15.5 billion and $16 billion.

The guidance makes sense as most of the company's key products are seeing declining sales, thanks to biosimilar competition. On top of that, the company sold off its own biosimilar portfolio to Biocon Biologics for $2 billion and a 12.9% share of the company.

But the company is working on improvements. It appointed Scott A. Smith to take over as CEO on April 1. Smith is expected to oversee the company's long-term plan of developing new therapies from its pipeline to replace the declining revenues from its legacy products. Viatris reported $483 million in revenue from new therapies in 2022, and it expects $500 million more in new product revenue in 2023. It says that 98% of its new therapies have already been launched, are approved, or are pending approval.

Viatris' biggest edge over Teva in this investor-focused matchup is its generous dividend. The company raised its quarterly dividend by 9% last year to $0.12 per share, representing a yield of around 4% at the current stock price.

Viatris has also trimmed its debt more than Teva, paying off $3.3 billion in debt last year and $5.4 billion since 2021.

Not an easy choice

Both companies may be seen as underpriced, with price-to-sales ratios below 1. 

Teva expects improved revenue this year, while Viatris doesn't see annual revenue rising until 2024. However, I see Viatris as a better choice for long-term investors because it's already profitable and is following a plan to make it more so. In the meantime, its dividend will allow investors to be patient until its new products make up for declining sales.