The legal decision does not solve any of Teva Pharmaceutical Industries Ltd's (NYSE: TEVA; TASE: TEVA) strategic problems. The eventual expiration of Copaxone's patents will still cause a huge hole in Teva's revenue and profits, as it has not been able to find new products that will generate comparable revenue in Copaxone's stead.
However, while the US court ruling to not alleviate Teva's future worries, it buys Teva's new president and CEO Jeremy Levin three important things: time to present his own strategy and get it started; more cash to implement his strategy, possibly including another big acquisition, despite the company's debt from the Cephalon acquisition in 2010; and a share with a reasonable price that makes share-based deals possible.
Above and beyond this the decision satisfies investors and gives Teva's management some peace of mind as they work on future measures. Levin has previously announced that he will present his future strategy for the company towards the end of 2012.
The question hovering above Teva now concerns what its strategy should actually be and what are the chances of implementing it. Should Teva become an innovative branded drug company rather than a generics company? And if so what will be the main source of its new products, and what fields will the company focus on?
Ori Hershkovitz, a partner at Mori Arkin's Sphera Funds Management Ltd., said, "I'm really optimistic regarding Teva at its present share price, but it's a shame they reached their current price. If they had bought good companies on time, the share would be worth $90 today. Now too they need to buy good companies it doesn't matter if they are big or small."
In Hershkovitz's opinion Teva should, "Focus on oncology and auto-immune diseases where the company already has an advantage with its current products and an additional area of advantage is the hot topic of biosimilars (copies of biological drugs). Teva has invested much capital so far in biosimilars but it doesn't have enough sales strength in these areas, so it must acquire companies."
Hershkovitz believes that in 5-10 years Teva should be a branded drug company with generic activities and not vice-versa.
Is Jeremy Levin the man to transform Teva from a generics to a branded drug company? Hershkovitz says, "Absolutely. Jeremy has restarted them."
Published by Globes [online], Israel business news - www.globes-online.com - on June 24, 2012
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