A glance at Israel’s three leading generic pharmaceutical companies: Teva (Nasdaq: TEVA), Taro Pharmaceutical Industries (Nasdaq: TARO), and Tel Aviv Stock Exchange-listed Agis Industries is sufficient to realize which one is in the worst state. Teva and Taro appear in very good, even excellent shape, while Agis lags behind, failing to replicate the other two’s success.
A comparison of Taro with Agis highlights investors’ opinions of the two companies. Taro’s first quarter sales amounted to $28.3 million, only 60% of Agis’s sales, and its profit was $2.7 million, 25% less than Agis'. In market value, however, Taro far exceeds Agis. Taro is traded at a $626 million company value, while Agis is traded at a company value of $237 million. This does not mean that Agis’s share is cheap. It may be that Taro is expensive, but the pricing of the two companies clearly indicates the investors’ attitude.
Agis published its first quarter reports today, which account for the difference between its market value and that of Taro. The difference is that Taro has already been growing for three years in succession, while Agis is still in search of direction. While its financial reports were not as bad as the fourth quarter of last year, they show the company has not managed to escape its plight. Agis’s revenue totaled NIS 297 million, up 7.7% from the previous quarter.
Sales of Agis’s drugs rose 5.9%. This growth, partially offset by a fall in sales of drugs manufactured and marketed in Israel, is mostly due to sales of products made by the company's subsidiary, Clay Park Labs, and sales of imported drugs and diagnostic products marketed in Israel.
The growth in sales of Agis’s consumer goods is more impressive. Sales in this sector amounted to NIS 77.5 million, a 13.2% rise. The growth in sales is due to distribution of other companies’ products, among other things.
Agis’s operating profit deteriorated significantly, falling 26% to NIS 19.6 million, compared with the corresponding quarter in 2000. The fall in its operating profit also affected Agis’s net profit, which plummeted 35% to NIS 15.5 million. Incidentally, the company lost NIS 3.3 million in the previous quarter. Even when the results are bad, everything is relative.
Agis management explains the lower profits by citing a rise in R&D expenses, which rose 56% over the corresponding quarter last year and reached NIS 21.6 million.
In its directors’ report, Agis also said the US Food and Drug Administration (FDA) is conducting another audit of its Clay Park Labs plant for the third quarter. The company predicts the audit will pave the way for FDA approval of its new generic products. At the same time, Agis notes that its failure to pass the audit will delay approval of Clay Park Lab’s new generic drugs and thereby disrupt the company’s growth plan.
Published by Israel's Business Arena on May 21, 2001