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Teva Pharma
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TEVA PHARMACEUTICALS
P. Balakrishna Pawan Malik Poorimitla Brahmaiah Prateek Gupta Rahul Duggar
“
”
We LEAD THE WAY. We are committed to EXCELLENCE We are prepared for CHANGE We are
ACCESSIBLE We value
SIMPLICITY
We are ONE TEVA
Agenda
Industry Introduction
About Teva
Mergers and Acquisitions
Options for growth
Geography wise analysis of Teva
Strategic Analysis
Financial Analysis
Conclusion
Introduction
Overview of the Pharmaceutical Industry
Worldwide pharmaceutical industry – $ 600B
Total companies – 600
Industry capitalization – 1.5 T
Growth rate over the last 5 years – 12%
ROE – 20% (highest of any industry).
Topics/terms to be covered
New drug product development by innovators
Generic drug product development
Para IV challenge and its impact
Bio-similars
Niche markets
Compulsory licensing
New Drug Product development Process - INNOVATORS
New Drug Product development Process - GENERICS
Para IV Challenge
Issues facing pharmaceutical industry
Innovators
Pharmaceutical research is a high risk activity
Strong regulatory framework – market entry barrier
Sales and marketing sales are huge
Drugs are losing patent protection
Life cycle of the drugs are facing competition from the generics.
Growth rate is slowing down
Few molecules are being approved
Generics
Fierce competition
Lack of expertise to develop niche and biosimilar products
Lack of capital
About Us
History
Birth of company in Jerusalem in 1901
Distributed imported medications.
Raised capital through an initial public offering on the Tel Aviv Stock Exchange in 1951
Merger of 3 biggest local companies to form Teva Pharmaceutical Industries Ltd in 1976
Entered the US market in the 1980s
Competitors
Sandoz – Generics arm of Novatris
Pfizer
Merck
Low cost players from emerging markets ( Ranbaxy, Dr. Reddy’s , Pliva, Aegis etc.)
Mergers and Aquisitions
Criteria for acquisitions
Acquisitions by Teva
Teva is global – political risk is thus diversified.
establishing a stronger, more competitive company with increased scale and
an expanded geographic footprint with significant potential for growth
Ivax Corporation, Dynamic company – No 1 Generic player
Sicor, enhance and expand the combined company's product offerings (biogenerics capabilities)
Novopharm Ltd, second largest generic drug company with operations in the United States and Hungary
WR Grace Ltd, – Increase in US market share
IkaPharm, –FDA approved plant, entry to US
Teva Acquisitions from 1985-2005 (Exhibit 3)
Acquisition till date
Options for Growth
Where to grow
Grow in the generics market
Gradually turn into more specialized generics or innovative firm
Focus on all the three areas – Generics, Innovative and Biosimilars
How to grow
Growth through market leadership
External environment
Core strengths and competitive advantage
value proposition
Product portfolios.
Go- to- market initiatives
Customer centric business model
Entering into emerging economies
Identity in Developed economies
Balanced business model.
Geography wise analysis
Geographies
United States
Western/ Eastern Europe
Japan
Latin America
Asia
Teva Revenues By Region (2004)
64%
26%
6%
4%
North AmericaEuropeIsraelRest of the World
Teva Revenues By Region (2008)
5825
4
13
North AmericaEuropeIsraelRest of the World
Strategic Analysis
TOWS Analysis
EXTERNAL
INTERNAL
Opportunities1. Demographic Trends2. Health care reforms3. Emerging Markets
Threats1. Political situation in the parent
country2. Threat of new entrants3. New drugs more competitive
than Teva products
Strengths1. Largest generic drug
maker in the world2. Good with M & A3. Flexible4. Less R & D costs as
compared to competitors5. Low cost supply chain6. APIs
ADVANCEMENT
Further expand into global branded generics market
AVOID THREATS
Turn into a more specialized generics or innovative firm
Weaknesses1. Drugs coming off patents2. Weak in physician driven
markets like Germany & Japan
3. High Debts
OVERCOME WEAKNESS
Focus on generic, biosimilars and innovative drug markets
AVOID AND OVERCOME
Focus more on the domestic markets
Value Chain Analysis
Primary Activities
Operations
Direct operations in over 50 markets in Americas, Israel, Europe and Asia
36 pharmaceuticals manufacturing sites, 16 API sites, 17 generic R&D centers
Operates in two segments: pharmaceuticals and active pharmaceuticals ingredients(API)
Outbound Logistics
Operates through its international product division in other countries
Sales are through direct exports from Israel and other manufacturing sites.
Ivax has subsidiaries in South and Latin American countries where they sells branded non-proprietary products.
Service
Leading non-governmental supplier of health care products and services in Israel.
Markets generic pharma, OTC, consumer health care products, hospital supplies, etc.
Involved in marketing, sales and distribution of a range of healthcare products and services for generic market.
Marketing & Sales
Well organized and effective marketing channels. Sales in US were made through drug store chains (45%), drug wholesalers (27%), generic distributors (5%), managed care organizations (14%), hospitals and affiliated organizations (9%).
A critical window exists between when a proprietary product loses its patent and generic manufacturer gets their product approved. Knowledgeable sales forces, strong relationship with physicians as well as integrated marketing communications are necessary to grab and maintain a strong position.
Teva’s network of hospitals and institutional channels for generic intravenous products.
Support Activities
Procurement and Technological Development
Involved in innovation research and development for over two decades. Progress in Central nervous system and auto immune diseases. Copaxone and Azilect were products out of this research.
Acquisition of companies like Sicor strengthened its expertise in chemistry of steroids and high-potency production. Ivax provided Teva’s API division with additional 30 APIs and access to new technologies.
PESTLE Analysis
Issue Impact On BusinessPolitical
Growing political focus and pressure on healthcare
Governments looking for healthcare savings Harmonization of healthcare across Europe
More pressure on pricing and cut backs Reference pricing, exposing price across
borders
Economic
Global economic crisis Reduction in individual disposable income Increasing pressure on pricing by different
buying groups Reduction in pharmaceutical growth
Reluctance of consumers to spend on healthcare
Need to introduce value adding processes Increased pressure from shareholders Increased pressure on pricing
PESTLE Analysis (Contd…)Social/Cultural
Patient awareness, changing expectations Increasing age of population Patient/public activism
More pressure on customer service Better intelligence gathering required. Market growth with increasing health
concerns
Technological
After the mapping of the human genome there was much hype about the possibilities for genetic research in pharmaceuticals
Customized treatment
Direct to patient communication More responsive service facilities required
PESTLE Analysis (Contd…)
Legislation
Changes in advertising laws Increased litigations Global inconsistencies
Need to focus on education Quality becomes key
Environmental
Growing environmental agenda and awareness
Identify eco opportunities to market
Financial Analysis
Financial Interpretation of TEVA
Revenue
Research & Development Expenses
Cash & Other Receivables
Patents & Other Intangibles
Goodwill
Current Liabilities
Equity Stock
Excerpts from 2005 Annual Report
Excerpts from 2005 Annual Report
A Future Financial Snapshot2010 2009 2008 2007 2006
NET SALES 16 121 13 899 11 085 9 408 8 408
GROSS PROFIT 9 065 7 367 5 968 4 877 4 259
OPERATING INCOME 3 871 2 405 1 145 2 395 796
RESEARCH AND DEVELOPMENT 933 802 786 581 495
Case writer estimates
Case writer estimates
Credit ratings
A - A3
Conclusion
Market wise
In USA
Market Size $bn;2010 Generics Penetration % ( Volume )
312
96
45
22
75%
23%
68%
63%
Generics market in US
Accounts for maximum share of sales in generic drugs
Good at filing ANDA in USA and Paragraph IV exclusivity period provides higher margins
Debt crisis in Europe has made Europe an unattractive market
People in US looking to cut costs and Teva specializes in low cost drugs
In Europe
Market Size $bn;2010 Generics Penetration % ( Volume )
312
96
45
22
75%
23%
68%
63%
Biosimilars and Niche markets in Europe
Less competitive in generics
Higher entry barriers
Price erosion with generic markets in the US
Important to get in the European market before competitors
In Japan
Market Size $bn;2010 Generics Penetration % ( Volume )
312
96
45
22
75%
23%
68%
63%
Parternships / JVs
High growth generic market
Physician driven markets
Lack of experience in this market
Take it slow and start with partnership / joint ventures with generic drug manufacturers
Product Wise
Develop Generics Market
Increased opportunities in emerging generic markets
People living longer and consuming more drugs
Helathcare reforms and cost saving initiatives
$150 bn of brands going off patent in the next years
Develop Biosimilars Market
http://www.dvfa.de/files/die_dvfa/kommissionen/life_science/application/pdf/6_Frank_Pieters_Teva.pdf
90% of the Biotechnology drugs to go off patent till 2020
All Biologics
Patents expiring 2016-2020
Patents expiring 2010-2015
Patents expired 2009 or earlier
Develop Innovative drugs market
Great success with Copaxone. It’s a blockbuster drug
R & D costs are much lower than competitors
Strong competetion from low cost players from the emerging markets. For eg Ranbaxy from India
Innovative drug companies entering generic drug market
Large opportunity in this sector in the future.
Recommendations
Healthcare industry is changing and Teva needs to adapt and grow accordingly
Needs to follow a balanced business strategy
Expand leadership in key markets like Japan and other emerging markets