TEVA PHARMACEUTICALS

P. Balakrishna Pawan Malik Poorimitla Brahmaiah Prateek Gupta Rahul Duggar

“

”

We LEAD THE WAY. We are committed to EXCELLENCE We are prepared for CHANGE We are

ACCESSIBLE We value

SIMPLICITY

We are ONE TEVA

Agenda

Industry Introduction

About Teva

Mergers and Acquisitions

Options for growth

Geography wise analysis of Teva

Strategic Analysis

Financial Analysis

Conclusion

Introduction

Overview of the Pharmaceutical Industry

Worldwide pharmaceutical industry – $ 600B

Total companies – 600

Industry capitalization – 1.5 T

Growth rate over the last 5 years – 12%

ROE – 20% (highest of any industry).

Topics/terms to be covered

New drug product development by innovators

Generic drug product development

Para IV challenge and its impact

Bio-similars

Niche markets

Compulsory licensing

New Drug Product development Process - INNOVATORS

New Drug Product development Process - GENERICS

Para IV Challenge

Issues facing pharmaceutical industry

Innovators

Pharmaceutical research is a high risk activity

Strong regulatory framework – market entry barrier

Sales and marketing sales are huge

Drugs are losing patent protection

Life cycle of the drugs are facing competition from the generics.

Growth rate is slowing down

Few molecules are being approved

Generics

Fierce competition

Lack of expertise to develop niche and biosimilar products

Lack of capital

About Us

History

Birth of company in Jerusalem in 1901

Distributed imported medications.

Raised capital through an initial public offering on the Tel Aviv Stock Exchange in 1951

Merger of 3 biggest local companies to form Teva Pharmaceutical Industries Ltd in 1976

Entered the US market in the 1980s

Competitors

Sandoz – Generics arm of Novatris

Pfizer

Merck

Low cost players from emerging markets ( Ranbaxy, Dr. Reddy’s , Pliva, Aegis etc.)

Mergers and Aquisitions

Criteria for acquisitions

Acquisitions by Teva

Teva is global – political risk is thus diversified.

establishing a stronger, more competitive company with increased scale and

an expanded geographic footprint with significant potential for growth

Ivax Corporation, Dynamic company – No 1 Generic player

Sicor, enhance and expand the combined company's product offerings (biogenerics capabilities)

Novopharm Ltd, second largest generic drug company with operations in the United States and Hungary

WR Grace Ltd, – Increase in US market share

IkaPharm, –FDA approved plant, entry to US

Teva Acquisitions from 1985-2005 (Exhibit 3)

Acquisition till date

Options for Growth

Where to grow

Grow in the generics market

Gradually turn into more specialized generics or innovative firm

Focus on all the three areas – Generics, Innovative and Biosimilars

How to grow

Growth through market leadership

External environment

Core strengths and competitive advantage

value proposition

Product portfolios.

Go- to- market initiatives

Customer centric business model

Entering into emerging economies

Identity in Developed economies

Balanced business model.

Geography wise analysis

Geographies

United States

Western/ Eastern Europe

Japan

Latin America

Asia

Teva Revenues By Region (2004)

64%

26%

6%

4%

North AmericaEuropeIsraelRest of the World

Teva Revenues By Region (2008)

5825

4

13

North AmericaEuropeIsraelRest of the World

Strategic Analysis

TOWS Analysis

EXTERNAL

INTERNAL

Opportunities1. Demographic Trends2. Health care reforms3. Emerging Markets

Threats1. Political situation in the parent

country2. Threat of new entrants3. New drugs more competitive

than Teva products

Strengths1. Largest generic drug

maker in the world2. Good with M & A3. Flexible4. Less R & D costs as

compared to competitors5. Low cost supply chain6. APIs

ADVANCEMENT

Further expand into global branded generics market

AVOID THREATS

Turn into a more specialized generics or innovative firm

Weaknesses1. Drugs coming off patents2. Weak in physician driven

markets like Germany & Japan

3. High Debts

OVERCOME WEAKNESS

Focus on generic, biosimilars and innovative drug markets

AVOID AND OVERCOME

Focus more on the domestic markets

Value Chain Analysis

Primary Activities

Operations

Direct operations in over 50 markets in Americas, Israel, Europe and Asia

36 pharmaceuticals manufacturing sites, 16 API sites, 17 generic R&D centers

Operates in two segments: pharmaceuticals and active pharmaceuticals ingredients(API)

Outbound Logistics

Operates through its international product division in other countries

Sales are through direct exports from Israel and other manufacturing sites.

Ivax has subsidiaries in South and Latin American countries where they sells branded non-proprietary products.

Service

Leading non-governmental supplier of health care products and services in Israel.

Markets generic pharma, OTC, consumer health care products, hospital supplies, etc.

Involved in marketing, sales and distribution of a range of healthcare products and services for generic market.

Marketing & Sales

Well organized and effective marketing channels. Sales in US were made through drug store chains (45%), drug wholesalers (27%), generic distributors (5%), managed care organizations (14%), hospitals and affiliated organizations (9%).

A critical window exists between when a proprietary product loses its patent and generic manufacturer gets their product approved. Knowledgeable sales forces, strong relationship with physicians as well as integrated marketing communications are necessary to grab and maintain a strong position.

Teva’s network of hospitals and institutional channels for generic intravenous products.

Support Activities

Procurement and Technological Development

Involved in innovation research and development for over two decades. Progress in Central nervous system and auto immune diseases. Copaxone and Azilect were products out of this research.

Acquisition of companies like Sicor strengthened its expertise in chemistry of steroids and high-potency production. Ivax provided Teva’s API division with additional 30 APIs and access to new technologies.

PESTLE Analysis

Issue Impact On BusinessPolitical

Growing political focus and pressure on healthcare

Governments looking for healthcare savings Harmonization of healthcare across Europe

 

More pressure on pricing and cut backs Reference pricing, exposing price across

borders

Economic

Global economic crisis Reduction in individual disposable income Increasing pressure on pricing by different

buying groups Reduction in pharmaceutical growth

 

Reluctance of consumers to spend on healthcare

Need to introduce value adding processes Increased pressure from shareholders Increased pressure on pricing

PESTLE Analysis (Contd…)Social/Cultural

Patient awareness, changing expectations Increasing age of population Patient/public activism

 

More pressure on customer service Better intelligence gathering required. Market growth with increasing health

concerns

Technological

After the mapping of the human genome there was much hype about the possibilities for genetic research in pharmaceuticals

Customized treatment

 

Direct to patient communication More responsive service facilities required 

PESTLE Analysis (Contd…)

Legislation

Changes in advertising laws Increased litigations Global inconsistencies

 

Need to focus on education Quality becomes key

Environmental

Growing environmental agenda and awareness

 

Identify eco opportunities to market

Financial Analysis

Financial Interpretation of TEVA

Revenue

Research & Development Expenses

Cash & Other Receivables

Patents & Other Intangibles

Goodwill

Current Liabilities

Equity Stock

Excerpts from 2005 Annual Report

Excerpts from 2005 Annual Report

A Future Financial Snapshot2010 2009 2008 2007 2006

NET SALES 16 121 13 899 11 085 9 408 8 408

GROSS PROFIT 9 065 7 367 5 968 4 877 4 259

OPERATING INCOME 3 871 2 405 1 145 2 395 796

RESEARCH AND DEVELOPMENT 933 802 786 581 495

Case writer estimates

Case writer estimates

Credit ratings

A - A3

Conclusion

Market wise

In USA

Market Size $bn;2010 Generics Penetration % ( Volume )

312

96

45

22

75%

23%

68%

63%

Generics market in US

Accounts for maximum share of sales in generic drugs

Good at filing ANDA in USA and Paragraph IV exclusivity period provides higher margins

Debt crisis in Europe has made Europe an unattractive market

People in US looking to cut costs and Teva specializes in low cost drugs

In Europe

Market Size $bn;2010 Generics Penetration % ( Volume )

312

96

45

22

75%

23%

68%

63%

Biosimilars and Niche markets in Europe

Less competitive in generics

Higher entry barriers

Price erosion with generic markets in the US

Important to get in the European market before competitors

In Japan

Market Size $bn;2010 Generics Penetration % ( Volume )

312

96

45

22

75%

23%

68%

63%

Parternships / JVs

High growth generic market

Physician driven markets

Lack of experience in this market

Take it slow and start with partnership / joint ventures with generic drug manufacturers

Product Wise

Develop Generics Market

Increased opportunities in emerging generic markets

People living longer and consuming more drugs

Helathcare reforms and cost saving initiatives

$150 bn of brands going off patent in the next years

Develop Biosimilars Market

http://www.dvfa.de/files/die_dvfa/kommissionen/life_science/application/pdf/6_Frank_Pieters_Teva.pdf

90% of the Biotechnology drugs to go off patent till 2020

All Biologics

Patents expiring 2016-2020

Patents expiring 2010-2015

Patents expired 2009 or earlier

Develop Innovative drugs market

Great success with Copaxone. It’s a blockbuster drug

R & D costs are much lower than competitors

Strong competetion from low cost players from the emerging markets. For eg Ranbaxy from India

Innovative drug companies entering generic drug market

Large opportunity in this sector in the future.

Recommendations

Healthcare industry is changing and Teva needs to adapt and grow accordingly

Needs to follow a balanced business strategy

Expand leadership in key markets like Japan and other emerging markets