Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) currently has specialized biogeneric R&D centers in Lithuania, Mexico and China, as well as a recently established development team in Israel. Most of these centers are fully owned, including branches of US company Sicor, acquired by Teva last year.
The story with Teva's Chinese biogenerics development center is different. Teva owns only 45% of Tianjin Hualida Biotechnology Pharmaceutical Co. Ltd., while one of China's largest pharmaceutical companies, Tianjin Pharmaceutical Holdings Ltd., owns the other 55%. Tianjin Hualida Biotechnology conducts research, development and production of biopharmaceuticals. Teva acquired its stake in the company through its acquisition of Sicor, and plans to soon acquire full ownership.
Teva CFO Dan Suesskind said, "I hope that next time I show you the slide of our biogenerics activity, Tianjin Hualida Biotechnology will already be under our full control." He made the comment at a CIBC Capital Markets conference.
When asked how much Teva would invest in the acquisition, Suesskind said, "Nothing that Teva can't afford."
The investment is estimated at a few million dollars. The Chinese press has already mentioned Teva's acquisition plans.
China's pharmaceutical market is estimated at $10 billion a year, and is considered an attracted target by international companies. Tianjin Hualida Biotechnology has an estimated company value of $20 million. It is considered a leader in production of the active pharmaceutical ingredient (API) interferon alpha type b2, used for treatment of acute hepatitis C, in order to prevent it from becoming chronic. Tianjin Hualida Biotechnology also has a number of generic drugs on the market.
The capital market has been waiting tensely for months for a major announcement from Teva: not about an acquisition in China for a few million dollars, but one for several hundred million dollars, in line with Teva's policy of the past 25 years of making an average of one acquisition a year.
Teva has $1.6 billion in cash, and Seusskind says that the company's shareholders' equity is $5.3 billion and its liabilities are $2.2 billion, indicating that Teva's leverage index (liabilities/liabilities plus capital) is 0.3. "This is a very low level for us. We've been there before, and risen to 0.5. A 0.3 leverage means that we can still raise millions of dollars, mainly for future acquisitions, without jeopardizing our rating by S&P," said Seusskind.
Teva's market cap on Nasdaq is $20.6 billion.
Published by Globes [online], Israel business news - www.globes.co.il - on May 16, 2005