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Teva looks set for a new round of M&A deals

Posted on 15 February 2012

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Teva Pharmaceutical Industries aims to reduce its reliance on its key multiple sclerosis drug and expand in markets beyond the United States after a rise in profits due partly to growing sales of Copaxone. 

The world's biggest generic drug maker faces increasing competition to its own brand Copaxone, whose sales are expected to peak in 2012. It also faces a big challenge in the U.S. market, where sales for its generics fell last year.

The Israel-based company said on Wednesday Copaxone would be profitable for many years, but would eventually be replaced as a treatment for the neurological condition. It accounted for around one sixth of Teva revenue in the last quarter of 2011.

"Our answer is not just in developing drugs but in reducing our dependence on this product," President and Chief Executive Shlomo Yanai told a news conference.

Teva sees the answer being partly through its $6.5 billion acquisition of U.S. speciality drugmaker Cephalon, which closed in October and was a big factor in Teva's 28 percent rise in sales to $5.7 billion in the fourth quarter.

Teva also bought Japan's Taiyo and set up a joint venture with Procter & Gamble for over-the-counter medicines last year as part of efforts to diversify.

Yanai would not comment on specific acquisition plans but said Teva was examining opportunities in line with its strategy. Teva has been tipped as a possible buyer of Shire, an Anglo-American specialist in hyperactivity and rare genetic diseases.

In a sign of Teva's commitment to building a strong branded business alongside its generics, Yanai will hand over as CEO in May to former Bristol-Myers Squibb executive Jeremy Levin.



The U.S. generics market, long a mainstay, has become a big challenge for Teva.

Despite two major launches in the last quarter -- generic versions of schizophrenia treatment Zyprexa and cholesterol lowering drug Lipitor with Ranbaxy -- U.S. generic sales fell 5 percent in the quarter to $1.2 billion.

That was still better than the 32 percent drop for the year as a whole and Chief Financial Officer Eyal Desheh said the company believes the trend in the U.S. generic market started to improve in the last quarter.

"The existing U.S. generics business continues to be impacted by many competitive pressures and the main growth engine for Teva in 2012 will be conditioned on big new launches," Leader Capital Markets analyst Sabina Podval said.

Podval said a European slowdown could also weigh on future generic sales there, but they were up 3 percent in the quarter and Teva CEO Yanai said the economic hardship could be a chance to increase sales of generics over more expensive branded drugs.

Teva posted quarterly earnings per share excluding one-off items of $1.59 per diluted share compared with $1.25 a year ago.. Sales rose 28 percent to $5.7 billion.

Teva was forecast to earn $1.58 per share ex-items on revenue of $5.63 billion, according to Thomson Reuters I/B/E/S.

Teva shares were up 3 percent to $4.83 in early Nasdaq trade.

Teva reaffirmed its 2012 sales forecast of $22 billion, up from $18.3 billion in 2011 with sales of its branded drugs at $8.2 billion compared with $6.5 billion in 2011.

Sales of Copaxone rose eight percent to $1 billion in the last quarter. The injected drug faces competition from a variety of oral multiple sclerosis treatments that are available or are expected to hit the market in coming years.

Yanai said Teva was in advanced talks with the U.S. Food and Drug Administration to conduct a new trial on its own MS pill laquinimod, which missed its main goal in a late-stage trial, a major setback for the drug.

"I am optimistic it will reach the market," Yanai said.

Teva raised its quarterly dividend by 25 percent to 1 shekel (26.8 cents) a share.


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