As 2009 draws to a close, Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) made two interesting moves in less than a week. It acquisition of the controlling interest in generic drug maker Taisho Pharmaceutical Industries Ltd. comes just three days after investing in US-Canadian firm OncoGenex Pharmaceuticals Inc. (Nasdaq: OGXI) that is developing a cancer drug.
These are deals in two different directions: on one hand Teva is deepening its branded drugs activity, and on the other hand expanding its generic drug business by expanding its geographical reach. The common denominator is that both deals are part of Teva's strategic plan presented in 2008, and both deals are intended to ensure the company's future growth, mainly by reducing Teva's heavy dependence on Copaxone for profit.
Why specifically Japan? Japan has a rapidly aging population of 128 million, and therefore a large drug market, which is second in size only to the US. Rising health costs led the Japanese government to encourage generics, which have little presence in the market.
Teva identified Japan's potential and teamed up with Kowa Company Ltd., and their joint venture, Teva-Kowa Pharma Co. Ltd., is now acquiring Taisho. Japan has few pharmaceutical companies that are up for sale, and Teva seized the opportunity presented by Taisho.
As for the next step, Teva has marked two types of markets for expansion. The first, like Japan, is a market with few generic drugs, and trends that support them. The second is a growing market in places with rising personal wealth, where patients demand better quality products. Examples include Brazil and Mexico, and Teva's next move could be in Latin America.
Teva is reportedly still a player in the acquisition tender for Germany's Ratiopharm GmbH. Teva's position in Germany is much stronger than it was two years ago, following its acquisition of Barr Pharmaceuticals and winning part of a large tender for active ingredients by healthcare provider Allgemeinen Ortskrankenkassen (AOK), but there is room to grow since Teva is still not one of the top three companies in German generic drug market.
Published by Globes [online], Israel business news - www.globes-online.com - on December 24, 2009
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