At the end of last week, Bedford Laboratories received approval from the US Food and Drug Administration (FDA) to sell the injectable sedative propofol. The ethical version of the drug, Diprivan, is produced by AstraZeneca (NYSE: AZN).
The Since 1999, generic propofol has been sold exclusively by Sicor, the Californian company bought by Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) last year.
Sales of the original drug amounted to $500 million in 2004.
It is estimated that three of four more generic drug companies are on the verge of receiving FA approval for their own generic versions of propofol.
Since Sicor has enjoyed exclusivity in selling generic propofol for the past six years, the drug is presumed to generate high gross profit margins for Teva.
Analyst Yisca Erez of Clal Finance Batucha estimates that Bedford Laboratories' entry into the market, along with more competitors later on, will mean a fall in the price of propofol of 70-80%.
This price fall, says Erez, will happen in two stages: Bedford Laboratories' entry into the market will bring the price down by about 50%, and the advent of more competition will cause a further fall.
Erez says porpofol is a key product for Sicor, with annual sales of some $300 million. Once competitors enter the market, Sicor/Teva's sales will drop to about $50 million. In other words, Teva's sales will shrink by some $250 million, or 5%.
Teva, whose share price has risen about 14% so far in the second quarter, is now traded at a market cap of $20.5 billion, only 5% off its June 2004 peak.
The company is due to release its first quarter results on May 3. The consensus analysts' estimate is earnings per share of $0.38 on revenue of $1.3 billion.
Published by Globes [online], Israel business news - www.globes.co.il - on April 25, 2005