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Big Pharma, Teva maybe ready for an acquisition

Posted on 28 November 2013

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Turmoil continues at big pharma, Teva Pharmaceutical Industries, which this week tried to dispel a report of company expectations of a dramatic decline in profit for its best-selling drug, and last week was suggested to be a possible takeover target by other drugmakers.

On Oct. 30, chief executive officer Jeremy Levin resigned after a dispute with the board of directors, which didn't seem to mind his departure.

"In a low-interest-rate environment, Teva is now sitting in a very attractive position for an acquirer," Bernstein Research analyst Ronny Gal wrote in a recent note to clients. "It does not have a CEO, cost-cut plans are in place, and value can be readily realized through a merger. This is a nice optionality for holders of the stock.

"Further, we would argue that the longer Teva stock continues to underperform, the more likely it is an offer would materialize."

Gal suggested that such a deal might require a combination offer from one or more smaller generic companies, such as Pittsburgh-based Mylan Inc. or Montreal-based Valeant Pharmaceuticals.

Teva is the big pharma based in Israel, and there is debate about how it is treated at home. Critics say it has unfairly benefited from tax and regulatory advantages. Analysts, Gal among them, wonder whether Teva is stymied by home-country demands to avoid job cuts.

Teva, which has several facilities in Philadelphia's suburbs, plays on both sides of the pharmaceutical industry. It sells more generic medicine than any other company, and it has its own brand-name medicine. But generic rivals are gaining on Teva, and its top-selling drug, Copaxone, which is used to treat forms of multiple sclerosis, will face generic competition next year in the United States.

Levin, before departing, said Teva would accelerate its plans for annual cost-cutting of $1.5 billion to $2 billion, at least partly because of recent negative events related to Copaxone.

The drug generated $3.996 billion in sales in 2012, which was almost 20 percent of Teva's total revenue of $20.32 billion. In the first two quarters of 2013, Copaxone was 21.7 percent of revenue. However, Copaxone sales declined slightly from the second quarter to the third quarter.

On Nov. 13, the U.S. Supreme Court denied Teva's request to put on hold a decision of the U.S. Court of Appeals for the Federal Circuit, which had ruled that a key patent for Copaxone was invalid. The Supreme Court is still deciding whether to hear Teva's case. But the appeals court decision allows Mylan and Momenta Pharmaceuticals Inc. to proceed with plans to have their generic versions ready for May.

On Monday, the Israeli publication the Marker reported that a long-range planning document produced by Teva included a forecast of Copaxone profit's falling 42 percent next year. Teva issued a statement that said the document was out of date, but it did not directly dispute the 42 percent figure.

Meanwhile, though it is a small slice of Teva's revenue, its morning-after contraceptive pill, Plan B One-Step, might get more attention from the FDA after French drugmaker HRA Pharma said its version of the pill didn't work for women weighing more than 176 pounds. The Associated Press reported that HRA Pharma's Frederique Welgryn said company would change its label because of the concerns. AP also said an FDA spokeswoman indicated that the U.S. agency would review the matter. Teva's Plan B One-Step has the same active ingredient, raising the question of whether it will work for those women.

View the article at Philly Business News



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