Commenting on US healthcare reform at the Oppenheimer annual conference in Tel Aviv, Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) CFO Eyal Desheh, "This substantially increases our potential business in the US. It won't be a sudden leap, but a process that will take time, and might only begin in the fourth quarter of the year." The reform includes extending health insurance to more than 30 million uninsured Americans.
Desheh cautioned, however, that the healthcare reform aims to cut prices and increase reimbursements to some insured persons. He estimates that these objectives will reduce Teva's revenue by $80-100 million a year.
Desheh said the acquisition of German generic drug company Ratiopharm GmbH should be closed by December 31, although Teva hopes to close the deal sooner. He said that synergies and savings would come from several directions, including the elimination of redundancies. He said that Teva prefers to cut as little as possible and to increase activity, but "what can you do? You need only one CEO and one CFO."
Desheh said that cutbacks would not necessarily be among Ratiopharm employees, but among Teva employees in the same countries, depending on the employees' quality. He added that Ratiopharm's efficient factory in Germany would allow the closure of several small and inefficient plants.
When the merger is completed, Germany will become Teva's second largest national market, after the US. Ratiopharm also operates in Canada, which will become Teva's third largest national market, pushing Israel to fourth place.
In response to a question whether Teva might make another acquisition in the US, in view of possible antitrust problems, Desheh said that US antitrust law is not based on company size, but on sales of each medication. Teva was mainly looking at companies that sell brand or specialty products.
A few days ago, in a move that concerned Teva investors, the US Food and Drug Administration (FDA) rejected a Citizens Petition by Teva concerning Copaxone, its original treatment for multiple sclerosis. Copaxone is starting to face generic challenges, and Teva is seeking to defend its patent. The Citizens Petition was one of these efforts.
Commenting on the FDA's decision, Desheh said, "Not everyone who follows the issue understands its significance. The importance is not that the FDA thinks that Teva is wrong, but because the FDA does not have a generic file up for approval anytime soon, otherwise it would have to respond."
Desheh said that for generic competition to Copaxone to exist, generic drug companies would have to prove that Teva's patents are invalid. Teva is seeking to extend its Copaxone patents, which are due to expire in 2014-15. Teva also believes that generic Copaxone will have to undergo clinical trials before obtaining approval.
Teva's share closed at $56.80 on Nasdaq on Friday. The share price rose 1.6% by early afternoon on the TASE today to NIS 217.
Published by Globes [online], Israel business news - www.globes-online.com - on May 17, 2010
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