teva final - nyupages.stern.nyu.edu/~iag/presentations/2008-2009/teva.pdftitle microsoft powerpoint...
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Brought to you by:H l WHelen WuKar Seng YeeKen ChenMeghana Reddyg yNicu‐Mihai Achihaei
What are Generics?
Macro Trends in the Industry
What are Generics?
Overview of TEVA
Risks
Valuation
Branded Medicines are Expensive
• Brand‐name Pharma (PFE GSK) apply forBrand name Pharma (PFE, GSK) apply for patents to be sole distributors of their productsproducts
• Branded drugs sell for very high margins• Branded drugs sell for very high margins– Prozac, Paxil, Advil, Tylenol
Generics: Cheaper Drugs for Everyone!
Hatch-Waxman Encourages Generics
• 180 day exclusivity period for the first generics180 day exclusivity period for the first generics producer to challenge a patent– TEVA is particularly adept and has taken– TEVA is particularly adept and has taken advantage of this in the past
• Also allows for patent owners to put a 30• Also allows for patent owners to put a 30‐month “stay” on generics companies by litigatinglitigating– Congress placed restrictions in July 08.
What are Generics?
Macro Trends in the Industry
What are Generics?
Overview of TEVA
Risks
Valuation
Catalysts
• Global acceptance of generics as qualityGlobal acceptance of generics as quality products
• Push to lower healthcare costs• Push to lower healthcare costs– Aging population
• Many blockbuster drugs coming off patent in 2009– TEVA is positioned to capitalize
• Expansion into overseas markets
Generic Drugs in the U.S.
• Generic drugs currently dominate over 65% ofGeneric drugs currently dominate over 65% of prescriptions in the United States.– 20% of industry profits– 20% of industry profits
Many Blockbuster Drugs Coming off Patent in 2009
• Desloratadine ‐ ~400 million in sales 18 7 billion• Levetiracetam – 700+ million in sales• Ramipril – 700+ million in sales• Sumatriptan – 1 billion in sales• Rabeprazole 1 1 billion in sales
18.7 billioncoming off t t i• Rabeprazole – 1.1 billion in sales
• Lamotrigine – 1.1 billion in sales• Tamsulosin – 1.3 billion in sales• Valacyclovir – 1 3 billion in sales
patent in 2009 from
Valacyclovir 1.3 billion in sales• Rosiglitazone – 1.5 billion in sales• Escitalopram oxalate – 1.9 billion in sales• Lamotrigine – 2.2 billion in sales
13 drugs alone in theg
• Topiramate – 2.2 billion in sales• Lansoprazole – 3.3 billion in sales• Atorvastatin Calcium – 6 billion in sales (2010)
alone in the U.S.
Overview of TEVA:Generics (cont.)
Generics market share
Mature generics markets
Emerging i
Growth
generics markets
Growth
Growth
TEVA is Poised to Take Advantage
• 20% Market share in the U S (before Barr20% Market share in the U.S. (before Barr acquisition)
• 150+ generic drugs waiting for approval• 150+ generic drugs waiting for approval– The drugs they’re replacing are worth more than 90 billion in annual sales90 billion in annual sales
Obama’s Presidency is a Boon
Obama’s plan specifically calls for “allowing the importation of safe medicines from otherthe importation of safe medicines from other developed countries, increasing the use of generic drugs in public programs and takinggeneric drugs in public programs and taking on drug companies that block cheaper generic medicines from the market ”medicines from the market.
Many Countries Favoring Generics
• Particularly mature countries where theParticularly mature countries where the population is aging– Japan– Japan
• Governments are realizing generics are the most effective way to rein in soaringmost effective way to rein in soaring healthcare costs
TEVA i ll i i d– TEVA is well positioned
What are Generics?
Macro Trends in the Industry
What are Generics?
Overview of TEVA
Risks
Valuation
Why TEVA is a great company
• World’s largest player in the generics industryWorld s largest player in the generics industry
• Vertically integrated
i bi d l• Big‐to‐big model– Skilled at incorporating strategic acquisitions
– Expertise in research and development
• Diversified– Products
– International exposurep
Overview of TEVA: An Introduction
• Headquartered in Petah Tikva IsraelHeadquartered in Petah Tikva, Israel
• Revenue of 9.4 billion USD in 2007
i 60 i• Presence in over 60 nations
Overview of TEVA:Company Strategy
• Product/geographic diversityProduct/geographic diversity
• Vertical integration
i h h h &• Increase organic growth through R&D
• Intellectual property
• Strategic acquisitions
Overview of TEVA: Revenue Breakdown (by region)
TEVA’s Sales in 2007 (by Region)Israel4% Others
10%
TEVA s Sales in 2007 (by Region)
10%
North America58%
Europe28%
Overview of TEVA:Revenue Breakdown (by segment)
TEVA’s Revenue in 2007 (by Segment)
API, 6%*
TEVA s Revenue in 2007 (by Segment)
Innovative Pharma, 19%
Generics, 75%
*most API sales are internal; this revenue reflects only external sales
Overview of TEVA:Company Strategy (cont.)
TEVA has been steadily increasing their R&D expenditure to spur organic growth
R&D Expenditure (millions of USD)
R&D Expenditure as % of Revenue
495
581
500
600
700
)
7.10% 7.00%
5.90% 6.20%6 00%
7.00%
8.00%
338 369
300
400
500
3 00%
4.00%
5.00%
6.00%
0
100
200
0 00%
1.00%
2.00%
3.00%
0
2004 2005 2006 20070.00%
2004 2005 2006 2007
Overview of TEVA:Company Strategy (cont.)
• Intellectual propertyIntellectual property– More than 90% of all submitted patents are granted
Number of Granted Patents (TEVA)
1200
1400
1600
Number of Granted Patents (TEVA)
800
1000
1200
200
400
600
0
2000 2001 2002 2003 2004 2005 2006 2007
Overview of TEVA:Company Strategy (cont.)
• Strategic AcquisitionsStrategic Acquisitions– IVAX in January 2006
• Added huge respiratory drugs portfolioAdded huge respiratory drugs portfolio
• IVAX previously had problems with costs as competition increased and generic drug prices decreased
– TEVA’s vertically integrated model solved this problem
– Barr Pharmaceuticals in December 2008 – tap into US k t th h B d th C t l/E tUS market through Barr and the Central/East European market through its subsidiary Pliva
• Barr 2007 revenue: 2 5 billion• Barr 2007 revenue: 2.5 billion
Overview of TEVA:Company Strategy (cont.)
Strategic acquisitions provide TEVA with moreStrategic acquisitions provide TEVA with more diverse products, forward vertical integration
and local expertiseand local expertise
Overview of TEVA:Big to Big Model
Big player getting bigger
Faster organicFaster organicgrowthgrowth
Better atBetter atM&AM&A
Overview of TEVA:Generics
90%100%
Others
International Market Share Breakdown in 1997 and 2007
60%70%80%90% Others
Sandoz
WatsonPharma
M l65%
45%
30%40%50%60% Mylan
TEVA
7%
10%
11%13% Barr had 6% of
0%10%20%30% 7%
8%12%8%
13%
21%
Barr had 6% ofinternational marketshare in 2007. Thiswas not included in
1997 2007Consolidation of generic industry evident: top 4 players currently hold 55% (or 61% if you consider TEVA’s acquisition of Barr) of the
TEVA’s figure.
hold 55% (or 61% if you consider TEVA s acquisition of Barr) of the market share compared to just 35% a decade ago.
Overview of TEVA:Generics (cont.)
TEVA is the world’s largest producer and distributor of generic pharmaceuticalsg p
Overview of TEVA:Innovative Pharmaceuticals
• CopaxoneCopa o e– First innovative drug developed in Israel to receive FDA approval
– Proven to reduce relapses and new lesions in Multiple Sclerosis (MS) patients
– Only injected therapy not associated with flu‐like– Only injected therapy not associated with flu‐like symptoms, increase in MS‐related fatigue or depressive symptoms
– Approved for marketing in 47 nations– Number 1 MS drug worldwide, $562 million in sales in Q3 2008Q3 2008
Overview of TEVA:Innovative Pharmaceuticals (cont.)
• AzilectAzilect– Leading drug for treatment of Parkinson’s disease
Drug in tablet form– Drug in tablet form
– Proven to slow the progression of Parkinson’s• Most other drugs are aimed only at symptomatic relief• Most other drugs are aimed only at symptomatic relief
– Proven to work during every stage of Parkinson’s
Approved for marketing in 32 nations– Approved for marketing in 32 nations
Overview of TEVA:Innovative Pharmaceuticals (cont.)
• Looking to the futureLooking to the future– Department looking into oncology
Tight relationship with the Israeli academic– Tight relationship with the Israeli academic community
• Early access to potential projectsEarly access to potential projects
– Focus on products with meaningful differentiation from existing onesg
• Clinical attributes
• Expected economic value/benefit to patients
Overview of TEVA:Active Pharmaceutical Ingredients
• Portfolio of over 250 compoundsPortfolio of over 250 compounds
• 18 production facilities worldwide
89% f l i l• 89% of API sales are internal
• External sales more prevalent in China, India and Australasia– Provides outsourced solution to achieving efficient pharmaceutical manufacturing
– Provides custom synthesis services
Overview of TEVA:API (cont.)
TEVA API provides TEVA Pharmaceuticals withTEVA API provides TEVA Pharmaceuticals with backward vertical integration, allowing TEVA
to build on its big to big modelto build on its big to big model
Overview of TEVA:Company Outlook
• Management guidance: EPS range of $2 79 toManagement guidance: EPS range of $2.79 to $2.85, above analyst predictions of $2.74– Increased from previous forecast of $2 69 to $2 75– Increased from previous forecast of $2.69 to $2.75
• 145 products awaiting FDA approval41 i l– 41 tentative approvals
– Branded products generated annual US sales of 96 billi i t t lbillion in total
Overview of TEVA:Company Outlook
TEVA’s 20/20 aim (by 2012)/ ( y )
REACH
$20$20EXCEED
2020%%$20$20billion
2020%%net incomebillion
salesnet incomemargin
What are Generics?
Macro Trends in the Industry
What are Generics?
Overview of TEVA
Risks
Valuation
Risks:Increased Competition
• Generic marketGeneric market– Price reaching AC after 8 entrants
• Innovative Drugs Market• Innovative Drugs Market– 6/2008, Mylan Inc‐Copaxone alternative
• From Brand‐Name Manufacturers
• From Retailers That are Building Up to Manipulate Prices
Risks:Modification in Regulation
• Hatch‐Waxman ActHatch Waxman Act – 2008‐ 180 day exclusivity for ProAir HFA (AlbuterolInhaler) PantoprazoleInhaler), Pantoprazole
– 2007 Zocor, Zoloft, Wellbutrin XL and Pravachol
• Medicaid/Medicare• Medicaid/Medicare – Deficit Reduction Act of 2005‐“average manufacturer price” benchmark for prescriptionmanufacturer price benchmark for prescription drug reimbursement instead of “average wholesale price”p
Risks:Failure to Win Patent Litigations
• TEVA producing drugs before litigation ended2008 d d All ® N ti ® L t l® d– 2008 produced Allegra®, Neurontin®, Lotrel® and Protonix®
January 2008 sued for Protonix®– January 2008 sued for Protonix®
Risks:Forex, M&A
• ForexForex
• M&A
– Ex. Mylan acquiring Merck division
Risks:Political
Military conflictMilitary conflict
Risks:Political (cont.)
Why TEVA is a good buy
• Global acceptance of generics as quality productsGlobal acceptance of generics as quality products– TEVA is the largest player in the generics industry
• Most nations trying to lower healthcare costs• Most nations trying to lower healthcare costs
• Many blockbuster drugs coming off patentTEVA is positioned to capitalize– TEVA is positioned to capitalize
• TEVA’s vertically integrated business model
• Strategic acquisitions
• TEVA’s international exposure
Q&A
What are Generics?
Macro Trends in the Industry
What are Generics?
Overview of TEVA
Risks
Valuation
Relative Valuation
TEVA WatsonPharma MylanNovartis (Sandoz)
Op Margins(TTM)
20.51% 13.17% ‐19.74% 19.29%
Net Income Margins (TTM)
17.58% 8.75% ‐30.38% 17.89%Margins (TTM)
ROA (TTM) 8.01 6.30 ‐19.95 9.55
ROI (TTM) 10.22 7.10 ‐24.07 12.49
ROE (TTM) 13.64 11.43 ‐68.41 15.07
Current Ratio (last quarter)
2.20 3.32 1.88 1.17
% of Revenuefrom Generics
75% 57.04% 86.98% 18.33%
Revenue from 2131.5 433.6 1,441.1 1,918Generics (Lt Q)