A generic-giant juggernaut called Teva Pharma

Before Israel Makov stepped down as chief executive officer of Teva Pharmaceutical in 2007, he had told investment analysts that Teva’s future pipeline of innovative products will be envied by the multinationals.

Today Teva has a market capitalisation of $54.56 billion. That easily beats US innovator giant Eli Lilly’s $40.97 billion. Eli Lilly is No. 6 pharma firm in the US by revenues.

Teva continues its vision of growing multifold in the coming six years.

At a recently concluded investor meeting in the United States, Teva said it will continue to expand into newer geographies, grow its portfolio of innovative brands led by multiple sclerosis product Copaxone, rely on acquisitions, aggressively pursue the rapidly unfolding follow-on biologics opportunity and get past $31 billion in sales by 2015.

It is rare to see a company set a target that promises to more than double its sales from the estimated $13.9 billion, more at a time when other players are struggling to maintain their top line or are scrambling for newer models that can ensure predictable revenue streams.

Shlomo Yanai, the present CEO of Teva, seems determined to carry forward the strong growth years that his predecessor had managed in the extremely critical generics market.

Teva says that by 2015, brands worth $150 billion will go off patent. It says that its growth in the US market will be near double-digits at 9.5% and may rise to $15 billion by 2015.

This will be followed by growth from EU markets where growth will be very rapid at 18.6%, resulting in a market share of $9 billion but Teva will see the fastest growth in its international business that can give it sales of $7 billion in the next six years, growing by over
23%.

This large scope will partly ride on acquisitions that make strategic sense, according to the company.

Compelling economics apart, Teva feels its deals should be earnings per share accretive within a year. The demanding parameters set by the company give a hint of its solid foundations.
In its most important market - the US, Teva hopes to consolidate its dominant share for Copaxone and says that it is a very difficult product to characterise.

Copaxone, which has been the mainstay for Teva to ride from generic to innovative products, is under threat from generic drug maker Mylan Inc but it appears that there could be significant challenges in establishing generic equivalence without large-scale clinical trials.

Not just enhancing the Copaxone brand value, also notable is the way Teva has been widening the gap between itself and Mylan, its nearest generic rival.

Data presented by Teva show that in the last two years, Teva’s market share has grown from 11.9% to 16.4%, with sales looking a handsome $6.26 billion. Teva has a large basked of 405 products in the US market against Mylan’s 200 and Sandoz’s 204.

Interestingly, Teva’s geographic scale-up has happened without too many changes in its basic business model — of investing in discovery of new drugs, buying technology driven companies, tapping newer growth regions and product segments and ramping up further in established markets.

In many ways, Indian companies have scored on similar grounds in their respective domains but many of the top league companies look vulnerable when matched with Teva’s plans.

As it stands today, Teva has managed to build a very strong entry barrier for more generic players in the table of top ten global companies.

It is very clear that Teva is aiming to make big moves in Japan. By 2012, the company says it can garner a 30% market share in that tough terrain.

Teva formed a joint venture with a Japanese company Kowa Co in 2007, bought over Taisho last month and in a veiled hint of more aggression, said there is more to come. At present, Teva is ranked fifth in the Japanese market.

Biosimilars will be another interesting area to watch out for. Within the biosimilars sphere, Teva has said $115 billion worth of products will go off-patent by 2015. It is building infrastructure for putting a number of products in the market. That includes an alliance with Lonza, Sicor and the acquisition of Cogenesys.

Clearly, Teva’s ambitions are praiseworthy. On one side when larger companies — when both innovators and generics makers — are lacking growth drive, this Israeli juggernaut is showing how the push the limits for growth.
Pillman is an executive closely linked to the global pharma industry