Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) president and CEO Dr. Jeremy Levin has dedicated a substantial part of his time in his first few months in his new job examining the company's product pipeline. In several weeks, on December 11, investors will be able to learn what conclusions he has drawn. That is when he will present his new strategy and detail which areas Teva will be focusing on and what drugs, currently under development, will be dropped.
Teva's third quarter report provides us with an early peep of what is to come. As part of the pipeline examination, we can see that Teva has reached the conclusion that the book value of three of the drugs that it received as part of the acquisition of Cephalon are higher than their "real" value. That is the background to the substantial fall in value of $481 million that led to Teva's GAPP profit loss.
Teva is putting its pipeline in order and en route is cleaning out its balance sheet. The reason for the fall in value is accounting while the timing can be convenient for Teva. In any case, investors' eyes are focused on December when the new strategy awaits, so that the third quarter reports won't have a significant influence on the share price.
Nevertheless, the fall in value does make one wonder if Teva paid too high a price for Cephalon, which it acquired last year for about $6.5 billion. Cephalon's Nuvigil for the treatment of bi-polar disorders has encountered generic competition sooner than expected. At the same time, Cephalon's basket of products for treating cancer has so far yielded mixed results. While Synribo has been approved for marketing Obatoclax was "rejected" for a clinical trial and has gone back to the pre-clinical stage moving further away from the market. And sales of Treanda won't be increased by expanding its indications because the US Food and Drugs Agency (FDA) has demanded additional data. It will be interesting to discover in December what Levin has decided regarding the pipeline that has come from Cephalon.
Published by Globes [online], Israel business news - www.globes-online.com - on November 1, 2012
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