Should You Forget Teva Pharmaceutical and Buy These Unstoppable Stocks Instead?

By Reuben Gregg Brewer – Dec 14, 2025 at 3:27PM ESTKey PointsShares of Teva -- a generic-drug maker with a history of losses and high leverage -- have rallied strongly.Pfizer and Merck, which make branded drugs, are financially strong and are rebuilding their drug pipelines.These 10 Stocks Could Mint the Next Wave of Millionaires ›NYSE: TEVATeva Pharmaceutical IndustriesMarket Cap$34BToday's Changeangle-down(-1.29%) $0.39Current Price$29.79Price as of December 12, 2025 at 4:00 PM ETTeva Pharmaceutical is a leader in generic drugs, but these struggling makers of branded drugs may be a better choice.Shares of Teva Pharmaceutical Industries (TEVA 1.29%) rallied after it reported earnings on Nov. 5. The stock is now higher by a whopping 45% in roughly a month. The company reported strong results, and it appears that the business is well positioned. However, after such a large price advance, you may be better off looking at two still-struggling makers of branded drugs instead. Here's why. Teva Pharmaceutical has moved very far, very fast Teva's big business is selling generic drugs. Essentially, it's the competition for makers of branded drugs once their patented medications lose patent protection. Teva and its peers are what cause the patent cliffs that branded-drug companies are constantly trying to manage around. Image source: Getty Images. It's not a bad business to be in, and Teva is a leader in the industry. In addition to its generic drugs, the company has been developing its own branded products. It has also been focusing on more-complex-to-produce generics as a means of differentiating itself from its generic peers. When it reported third-quarter earnings, Teva beat Wall Street expectations on both the top and bottom lines of its income statement. The stock's 45% rally following the earnings release shows that investors are excited about Teva's future. However, it also prices in a lot of good news in a very short period of time. There are still some concerns to address, including the company's substantial debt load, a history of operating losses, and the fact that it hasn't paid a dividend in years.Advertisement TEVA Debt to Equity Ratio data by YCharts. Some drugmaker alternatives may be more attractive While Teva produces what are essentially knockoffs, Pfizer (PFE +0.19%) and Merck (MRK +1.36%) manufacture originals. They both have long histories of success in this area, despite the intense competition and highly technical nature of the pharmaceutical industry. They are both facing patent cliffs in the coming years, which makes investors worry about their future prospects. However, both are financially strong companies, with materially less leverage than Teva, as the chart above highlights. Moreover, both have consistently been profitable, while Teva has a history of losses, as the chart below shows: TEVA EPS Diluted (Annual) data by YCharts. The strong profits that Pfizer and Merck enjoy enable them to invest in new drugs to replace those that are losing patent protection. Pfizer has been working aggressively to get its drug pipeline back on track after its own weight-loss drug failed. It acquired a company with a promising GLP-1 candidate, and has partnered with another to market a GLP-1 drug (assuming it proves effective). Pfizer is proving that even a drug setback isn't enough to stop the company. ExpandNYSE: PFEPfizerToday's Change(0.19%) $0.05Current Price$25.85Key Data PointsMarket Cap$147BDay's Range$25.72 - $26.0452wk Range$20.91 - $27.69Volume52MAvg Vol68MGross Margin69.12%Dividend Yield6.65% Merck, meanwhile, recently made its own acquisition, agreeing to buy Cidara Therapeutics. The purpose of the deal was to get access to Cidara's influenza drug candidate. Like Pfizer, Merck is demonstrating that it can effectively manage the challenges of patent expirations. For investors who think in decades, not days, the lagging performance of Merck and Pfizer presents a buying opportunity. Dividend lovers will likely prefer Merck and its current 3.5% yield, because its dividend payout ratio is a very reasonable 45% or so. Pfizer's 6.7% yield is now much higher, but it comes along with a worrying payout ratio of 100%. ExpandNYSE: MRKMerckToday's Change(1.36%) $1.35Current Price$100.36Key Data PointsMarket Cap$249BDay's Range$98.48 - $100.6652wk Range$73.31 - $105.84Volume523KAvg Vol13MGross Margin75.81%Dividend Yield3.23% Teva looks expensive after a big rally There's no reason that Teva's stock price couldn't keep running higher, but long-term investors should keep its valuation in mind. The price-to-earnings ratio is currently sitting just shy of 50, indicating exactly how much good news investors have priced into the shares. Pfizer's P/E ratio is 15 and Merck's is 13. You can buy the market darling with the mediocre history, or get a bargain price on two well-respected industry leaders as they continue to successfully navigate the drug industry's normal ups and downs. Most long-term investors should probably go with the still-out-of-favor Pfizer or Merck.About the AuthorReuben Gregg Brewer is a contributing Motley Fool stock market analyst covering energy, utilities, REITs, and consumer staples. He is the former director of research at Value Line Publishing, where he rose from mutual fund analyst to equity analyst before leading all research operations. Reuben holds a bachelor’s degree in psychology from SUNY Purchase, a master’s in social work from Columbia University, and an MBA from Regis University. He has been featured as a financial expert on CNBC and in the Financial Times, Barron’s, and InvestmentNews.TMFReubenGBrewerRead NextNov 30, 2025 •By Bram Berkowitz30% of Billionaire Stanley Druckenmiller's Portfolio Is Invested in These 3 Biotech StocksNov 5, 2025 •By Eric VolkmanWhy Teva Pharmaceutical Stock Rocked the Market TodayOct 13, 2025 •By Bram BerkowitzBillionaire Stanley Druckenmiller Is Selling Nvidia and Palantir and Piling Into One of Wall Street's Hottest Drug Stocks Ahead of 2026May 12, 2025 •By Eric VolkmanWhy Teva Pharmaceuticals Stock Blasted 6% Higher TodayMay 7, 2025 •By Johnny RiceWhy Teva Pharmaceutical Stock Is Soaring TodayJan 29, 2025 •By Johnny RiceWhy Teva Pharmaceutical Stock Is Sinking Today