Comment

Teva’s gambits are nothing short of admirable

Teva never fails to amaze. Barely a month after it struck a deal to own the US-based Barr Labs for nearly $8 billion, the company recently did one more unique collaboration that could change the landscape of the fast emerging Japanese generic industry.

Teva entered into an equal stake alliance with the 114-year-old Japanese industry conglomerate Kowa to form Teva Kowa —- a generic pharmaceutical company that hopes to reach sales of $1 billion in the next eight years.

All those who had been harbouring questions about Teva’s indifference to Japan now have a solid answer.

The company’s intentions are clear from the statement made by Shlomo Yanai, the president and CEO at Teva.

He said, “Combining Kowa’s knowledge and established reputation within the Japanese market with Teva’s global leadership and expertise in generics should enable us to maximise the opportunity available in this important growth market.”

After US, Japan is the second-largest pharmaceutical market in the world, valued at approximately $80 billion.

Generics represented only 5.7% in value or approximately $4.6 billion or 16.9% in volume in 2006, according to the IMS and the data from the Japanese Generics Manufacturing Association.

In 2007, Japan’s finance ministry announced a plan to double that generic utilisation to 30% by 2012.

Yanai goes on to establish his aggression in the Japanese market by saying, “This strategic partnership is an important milestone in executing Teva’s five year strategic plan, as it provides a robust platform for Teva to further strengthen its global leadership and establishes a strong presence in the Japanese market.”

Less is known about Kowa’s operations for analysts outside Japan but that company has an established reputation for delivery of quality goods and services across sectors.
Kowa deals in specialised and commoditised segments like textile goods, machinery, building materials and chemical products. Its arm Maker manufactures and sells innovative pharmaceutical products, OTC drugs, consumer healthcare brands, electro-optical apparatus and information and communication systems.

According to the joint release, in pharmaceutical business Kowa sales and markets innovative drugs and focuses on promoting cardiovascular drugs. It has treatment for hypercholesterolemia branded Livalo and hypertension drug Olmetec marketed through its wholly owned subsidiary.

Kowa also focuses on lifestyle diseases like arteriosclerosis, kidney disorder and diabetes as its main strategic therapeutic areas for research and development. Kowa also boasts of a slew of OTC and consumer healthcare products.

Having gobbled up 24% of the US generics market after Barr came into its fold, it was time Teva looked beyond the US shores to keep expanding its ambitions in the generics business. Japan was the best alternative.

Awareness about generics is on the rise and the big names are getting into that play. Japan’s third largest drug maker Daiichi Sankyo has the same goal to establish a strong generic footprint in its homeland. But the speed at which Teva moves is very well known.

In the next few years it may file dozens of dossiers to bombard the Japanese off-patent drugs market. Then it will bank on Kowa’s reputation and distribution reach to broad-base and gain size.

Remember, Teva chose its partner Kowa which is more known for innovative drugs and not generics. Japanese trust only Japanese brands and Teva knows that alliance is the only way to impress the Japanese consumer.

A September 15 report from Goldman Sachs, US, about global generic pharmaceuticals sees Teva as the only “consolidator” in the world generic industry.
In a comparative study of several other big generic players like Sandoz, Watson and Mylan, the report says, “Following Barr’s transaction, Teva believes it will have $1 billion in cash on its balance sheet…..We believe Teva’s financial health gives it a clear advantage over its competitors as it positions itself, in our view, as the clear global consolidator with others’ interest and means becoming increasingly less clear, in our view.”

That’s an indicator of Teva’s global objectives. With interest waning in the US generic industry significantly, especially post-2012, when pipeline drought of MNCs becomes more visible, Teva’s long term vision is getting clearer. It wants to spread out fast in the emerging generics market. Will India be the next on Teva’s radar?

Pillman is an executive closely linked to the global pharma industry.