"The cloud hanging over Copaxone affects everything we do at the company," Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) CEO Erez Vigodman said yesterday at the annual Goldman Sachs health conference in the US. This is the first appearance at the conference, considered one of the most important in the industry, for Vigodman, who has been managing Teva for about a year. He presented what he regards as the opportunities and challenges facing Teva in 2015 and afterwards.
"In 2015, we are committed to continuing our cost cutting program; improving our generic profit margin, while launching new generic products; and moving our portfolio in the direction of complex products," Vigodman promised. "The main challenges this year include factors over which we have no control, such as the currency rates of exchange, which are not in our favor, and perhaps the appearance of a generic Copaxone in 2015, although that is by no means certain." Teva's share price soared 47% in 2014 (after performing poorly in 2013), but Vigodman was asked about the fact that the share has been stuck in a specific price range, unable to rise above it, in view of the continuing concern about competition from a generic Copaxone. Vigodman says, "The share price rose nicely in 2014, and I believe that there is further upside potential. We're not working merely on strengthening Teva's base, preserving Copaxone, and creating organic growth. We're also creating a new future for Teva."
One of the questions that Teva is asked again and again is what is going on with acquisitions, especially given the mergers craze in the pharma industry, in which Teva has not taken an active part.
"We can 'release' a lot of value just from organic growth in generics, without any need for acquisitions, with the switch to complex generic drugs and penetration of growing markets," Vigodman said, adding, "Yes, acquisitions offer more upside potential in the long term." According to him, in the unique drugs segment, the type of acquisitions that Teva is likely to make includes companies that suit its strategy and generate value, including a contribution to profit per share, mainly in 2015-2017, when Teva is committed to a floor price of $5 a share. At the same time, he did not rule out acquiring a company that does not immediately contribute to profit, provided that "We can persuade the shareholders that it is an important strategic step, and that the acquisition will generate value in the long term."
Asked what guarantees that Teva's share price will remain above $5 if its most significant growth engine, Capoxone, is eliminated, Vigodman cited four factors. The first in the improvement in the generic division, the second is $1.35 billion in cumulative cost cutting in 2014-2016 (cost cutting totaled $650 million in 2014), the third is extending the life of the important unique products (such as moving Copaxone patients to the patent-protected 40-mg version), and the fourth is the existing potential in Teva's pipeline. Two other items Vigodman was asked about are linked to Teva's business in the biosimilars field (generic versions of biological drugs) and over the counter (OTC).
In the biosimilars field, Teva had a venture that was called off, and it appeared that the field was being neglected. "To the extent that biology becomes more important in the industry, we have to develop more capabilities in the segment - not just biosimilars but in biology in general. We have to position ourselves better to in advance of the next wave of biosimilar drugs," Vigodman says.
"Weak in biological products"
"We have good enough capabilities in R&D and clinical trials, but we're weak in making biological products, and we have to improve our reliability in the go-to-market field. We don't rule out a partnership that will complement us in the areas in which we're weak. Given the fact that in the past, we were unable to achieve performance to match the promises, we'll have to be more careful in our messages. But this is an important field, and Teva is committed to developing biological capabilities."
Where OTC is involved, in which Teva has a successful venture with Procter & Gamble, Vigodman said, "This is an important area, and the venture is in a good position to grab the existing opportunities. We're focusing on 7-10 important markets outside the US, with strong brands and the ability to generate value." Vigodman did not rule out acquisitions in this segment. He was also asked whether Teva intended to enter the OTC private brand field - producing drugs under the brand name of the retail chain (entering this area will mean head-to-head competition with Perrigo Company (NYSE:PRGO; TASE:PRGO)). "A higher priority is company brands, but I don’t want to rule out the possibility of such development," he answered.
Published by Globes [online], Israel business news - www.globes-online.com - on January 7, 2015
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