Teva Industries emerged in the early 2010s as a fast-growing challenger to the old guard of traditional drug companies, but more recently hit something of a brick wall. Its core business is in off-patent generic pharmaceuticals - it is the global leader in that segment, filling almost 1.6m prescriptions every day in the US alone as well as a similar amount elsewhere around the world. It has also built up a collection of its own branded drugs, led by MS therapy Copaxone, which currently accounts for almost half its proprietary drug sales. However, Copaxone now faces a steady decline following loss of patent. Revenues peaked in 2016 at $4.2bn but are tumbling fast. The figure for 2018 was $2.4bn, and an even steeper decline is forecast for 2019. Other key products include cancer drugs Treanda and Bendeka (combined sales of $642m in 2018) and ProAir inhalers ($397m), but they too are in decline. Teva has added to the portfolio through key acquisitions, including US developer Auspex for $3.2bn. Growth products include Huntingdon's treatment Austedo and migraine remedy Ajovy. However the most significant deal by far was an agreement to purchase Allergan's generics business for a mammoth $41bn in cash and shares. After a long delay, that deal finally completed in 2016. Until recently, a third pillar of the business was provided by PGT Healthcare, a $1.5bn joint venture with Procter & Gamble launched in 2011, which assumed control of all the latter's OTC healthcare products outside North America, including Vicks, Metamucil and Pepto-Bismol. However that partnership was dissolved in 2018, with both companies taking back control of their own products. The best-known of Teva's own OTC brands is antiseptic cream Sudocrem. The PGT dissolution was a further blow to a company already struggling to counter a steep decline in its generics division, especially in the US. The slowdown had already prompted the sudden departure of CEO Erez Vigodman in early 2017, eventually replaced by Kare Schultz. Sales slumped 16% in 2018 to $18.9bn. A massive goodwill write-off in 2017 resulted in a net loss of $16.5bn; losses for 2018 rediced to $2.4bn. The group also has huge debts of $29bn. It has taken several steps to reduce that figure, including the sale of several non-core products. A decision to cut around a quarter of its global workforce prompted violent protests in Israel from disgruntled workers. The company traces its roots back to a small Jerusalem-based drug wholesaler established in 1901, but the modern company was formed in 1976 from the merger of that wholesaler's successor company with two other manufacturers, one of which, formed in 1935, was already named Teva.
Capsule checked 14th February 2019
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Adbrands Daily Update 14th May 2019: More bad news for hard-pressed Teva Pharmaceutical. In a further escalation of a long-running legal investigation in price fixing by manufacturers of generic drugs, Attorneys General from 44 US states launched a massive joint lawsuit against multiple manufacturers. The complaint alleges that, over a period of several years, the companies coordinated their respective operations to divvy up different markets for one another and jointly agree pricing for as many as 100 different drugs. That number could rise to as many as 300 products. The suit claims that 20 companies including Novartis-owned Sandoz, Pfizer and Mylan, "willingly participated" and "reaped substantial monetary rewards", but singles out Teva as the principal instigator and main coordinator of the cartel. Some 15 former or current employees of Teva and other companies are also individually named in the suit. All the manufacturers named denied wrongdoing. The case is being led by Connecticut's Attorney General William Tong, who called this "the largest cartel case in the history of the United States". He is understood to be preparing for a full-blown trial. The penalties and damages could be material.
Adbrands Weekly Update 26th Apr 2018: In something of a surprise development, Procter & Gamble jumped back into global healthcare with two major developments. In its biggest purchase since Gillette more than a decade ago, P&G agreed to acquire the consumer healthcare division of German drug company Merck Group for €3.4bn, just under four times annual revenues. Merck had announced a strategic review of that division earlier this year, but buyers have been hard to find, not least because Pfizer's OTC division was also up for sale. Brands include Bion, Femibion and Neurobion mineral supplements, Seven Seas vitamins, Nasivin decongestants and Kytta pain relief gel. That deal accompanied an announcement from P&G that it will dissolve its partnership with troubled Israeli drug developer Teva, which has been largely responsible for marketing P&G's OTC portfolio outside North America since 2011. The two companies will take back control of their own brands from July this year. There is no significant financial impact for either company from the termination. Investors were generally unimpressed by both developments. "Perhaps the best thing that could be said about the Merck acquisition is that P&G didn't do a bigger, more distracting deal like one for the consumer health care unit that Pfizer has been trying to sell," said the WSJ. "P&G still needs to come up with a compelling response to fundamental challenges in its home US market."
Adbrands Weekly Update 30th Jul 2015: Israeli pharma company Teva Industries abandoned its months-long pursuit of reluctant partner Mylan to seal a separate deal with Allergan (previously known as Actavis). Subject to regulatory approval, Teva will acquire Allergan's generic drugs division, currently the global #3, for $40.5bn. That combination will boost Teva's revenues from past-patent drugs to almost $16bn, around twice the sales of its closest rival, Novartis-owned Sandoz. Total sales will top $26bn, putting Teva among the top 10 drugmakers globally. Allergan will instead focus on its collection of in-patent products - the best-known is cosmetic enhancer Botox. It has already announced plans to use some of the cash from the deal to acquire biotech developer Naurex, which is developing a fast-acting antidepressant, for $560m. Other acquisitions are expected to follow, unless Allergan itself becomes a target, perhaps for Pfizer.
Adbrands Weekly Update 30th Apr 2015: There was deadlock in the three-way wrestling match between drug companies Teva, Mylan and Perrigo. Perrigo rejected not one but two increased offers from Mylan; Mylan in turn rejected Teva's existing bid, which it said "grossly undervalued" the company. Mylan's executive chairman Robert Coury went even further in an outspoken 3,000-word public letter in which he described Teva as a "poorly performing troubled company" with a "dysfunctional culture" that has "churned through" three different CEOs since 2007. He rejected the idea of payment at any level in Teva's own "low quality and high risk" shares, and suggested that only a cash offer in the region of $50bn - $10bn higher than Teva's current all-share bid - would be considered by the Mylan board.
Adbrands Weekly Update 23rd Apr 2015: Merger fever in the pharmaceutical industry reached new levels this week. Israeli group Teva Industries, the world leader in generic drugs, unveiled a $40bn unsolicited bid for smaller rival Mylan, potentially derailing that company's attempts to acquire Irish company Perrigo. Combined revenues for Teva-Mylan would be around $30bn, pushing the business into the top eight drug manufacturers ahead of AstraZeneca and Bayer. Like Teva, Mylan is a major player in generics but also has a sizeable collection of more profitable proprietary drugs. One of its best-known is the anti-allergic injection device EpiPen. The combined group would generate around 40% of revenues from non-generic products. However the deal is unlikely to come off unless Teva can win over the Mylan board - which has so far frowned on any such arrangement - and would also involve close scrutiny from competition regulators.
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