"...Copaxone has 30% of the US market for multiple sclerosis treatment, and Teva's emphasizes that it accounted for half of new prescriptions in the past year, indicating that sales of Copaxone will continue to grow and that its market share will continue to rise.

"We have three competitors trying to dwarf Copaxone, but it's a different drug from the others, and its sales are growing in line with the growth of the market," said Makov. "There's an ostensible threat from Biogen Idec and Elan Corp., which are planning to launch a new drug (Antegren), but we believe that Copaxone is the best product on the market, and will continue to increase its market share. Figures published the other day indicated that Copaxone is taking market share and closing the gap with the market leader. Copaxone increased its US market share to 30.8%, while Biogen's Avonex had 33.7%."

While Copaxone's market share is growing, Teva is also developing an oral treatment for multiple sclerosis. Two months ago, it reached an agreement with Sweden's Active Biotech to develop and market laquinimod, an oral treatment for multiple sclerosis.

Active Biotech successfully completed Phase II clinical trials for laquinimod, which is well tolerated and effective in suppressing development of active brain MRI lesions in relapsing multiple sclerosis. Teva intends to complete the clinical development program and will conduct Phase III studies, expected toward the end of the decade."

Click "read more" for the full Copaxone quarterly report...

Full Article Text

Teva marches on

Makov: Consolidation in the generics industry is an opportunity for us.

Avishay Ovadia 4 Aug 04 13:35

Thousands of shareholders across Israel and around the world presumably heaved a sigh of relief on Teva Pharmaceutical Industries' (Nasdaq:TEVA; TASE:TEVA) results for the second quarter of 2004. The most popular stock in Israel has suffered lately from the pressure on all generic drug makers, causing investors to ponder the growth potential of the world's largest generic drug company. The poor results of other generic drug makers, such as Israel's Taro Pharmaceutical Industries (Nasdaq:TARO), heightened the tension in the run-up to the publication of Teva's financial report. But Teva again laughed at doubters and rebuffed the fears about any problem in the generic drug industry. "The generic drug market cannot be stopped," said Teva president and CEO Israel Makov yesterday. "Expenditure on health is rising, and while spending on ethical drugs isn’t the largest item in health budgets, it's an item that can be controlled. There's a worldwide effort to encourage and foster generic drug makers, which provide cheaper drugs to the market. This is what ensures the industry's growth."

The increase in Teva's sales in the second quarter of 2004 and in the first half in general, can be attributed both to its acquisition of Sicor and to in-house expansion. Second quarter sales were 54% higher than in the corresponding quarter of last year, amounting to $412 million. Teva says half the increase was due to the acquisition of Sicor, and the rest was from the sale of new generic products in Europe and the US, which were not on the market in the corresponding quarter of last year. In addition to the rise in sales of generic drugs, sales of Copaxone, Teva's ethical drug for the treatment of multiple sclerosis, achieved a 30% share of the US market.

In other words, Sicor contributed about $200 million to Teva's revenue for the second quarter, proving the ability of Teva's managers to quickly and efficiently leverage acquisitions. Sicor's quarterly revenue before the acquisition was $150 million. This was expected to rise to $160-170 million per quarter this year. Teva, it turns out, has done better more than expected, thanks to sales synergy.

There is also synergy in expenses, and Teva says that the acquisition of Sicor is already contributing to its earnings per share. In addition to Sicor and organic growth, Teva benefited from the weakness of the dollar against other currencies. Exchange rate fluctuations added 5%, or almost $40 million, to Teva's sales.

"We had an excellent quarter and marvelous first half," said Makov. "We reached new heights in net profit - $230 million profit on the bottom line - almost 20% of sales - and we generated a record amount of cash - almost $250 million. We did this in all of our businesses: generic drugs, active pharmaceutical ingredients, and Copaxone. In fact, we've been growing since the beginning of the year. Our quarterly sales have exceeded $1 billion and our profit $200 million. Our profit in shekels exceeded the NIS 1 billion mark in the second quarter."

Teva's main target market is still North America, especially the US. The acquisition of Sicor, which is mainly active in this market, boosted the proportion of North American sales from 60% of Teva's total sales in the second quarter of 2003 to 64% in the second quarter of 2004. Pharmaceuticals sales in the US totaled $676 million in the second quarter of 2004, compared with $594 million in the preceding quarter and $405 million in the corresponding quarter of last year.

Europe accounted for 26% of Teva's revenue in the second quarter of 2004, compared with 29% in the corresponding quarter of last year. Pharmaceuticals sales in Europe totaled $274 million in the second quarter, compared with $241 million in the preceding quarter and $193 million in the corresponding quarter of last year. The increase was due to the launch of new products and high sales of Copaxone, partly thanks to the launch of Copaxone in pre-filled syringes.

Global Copaxone sales totaled $226 million in the second quarter, compared with $207 million in the preceding quarter and $176.5 million in the corresponding quarter of last year.

Copaxone sales in the US, its main market, totaled $150 million in the second quarter, compared with $138 million in the preceding quarter and $121 million in the corresponding quarter of last year. Copaxone has 30% of the US market for multiple sclerosis treatment, and Teva's emphasizes that it accounted for half of new prescriptions in the past year, indicating that sales of Copaxone will continue to grow and that its market share will continue to rise.

"We have three competitors trying to dwarf Copaxone, but it's a different drug from the others, and its sales are growing in line with the growth of the market," said Makov. "There's an ostensible threat from Biogen Idec (Nasdaq:BIIB) and Elan Corp. (NYSE; Dublin:ELN; LSE:ELA), which are planning to launch a new drug, but we believe that Copaxone is the best product on the market, and will continue to increase its market share. Figures published the other day indicated that Copaxone is taking market share and closing the gap with the market leader. Copaxone increased its US market share to 30.8%, while Biogen's Avonex had 33.7%."

While Copaxone's market share is growing, Teva is also developing an oral treatment for multiple sclerosis. Two months ago, it reached an agreement with Sweden's Active Biotech (SAX:ACTI) to develop and market laquinimod, an oral treatment for multiple sclerosis.

Active Biotech successfully completed Phase II clinical trials for laquinimod, which is well tolerated and effective in suppressing development of active brain MRI lesions in relapsing multiple sclerosis. Teva intends to complete the clinical development program and will conduct Phase III studies, expected toward the end of the decade.

Meanwhile, Teva is continuing to develop ethical drugs. It expects to launch Rasagiline in the US and Europe next year. Sales potential is estimated at $200-300 million within a few years. Teva is also developing a treatment for symptoms of Alzheimer's disease.

As for the second quarter of 2004, Makov says, "Our record results reflect our strength and business model." In a swipe at his competitors, he adds, "This is noteworthy, given the poor results of other generic drug makers, which attributed their results to pressure on prices for generic drugs, wholesalers' declining inventories, and the authorization ethical drug makers grant to generic drug companies during the exclusivity period. All these forces affect generic drug makers differently. The generic drug market is fundamentally competitive. The power of competition varies over the years, and when it intensifies, so does industry consolidation. A market with strong competition threatens small companies, creating acquisition opportunities for us and a chance to increase our market share."

Makov says small companies are strongly affected for better or worse by their small number of drugs, whereas Teva, thanks to its geographical diversity, broad basket of products and large pipeline, is not dependent on any single drug. "We can have a problem with a particular drug, but that is offset by the success of another." In other words, Teva's size causes it to reflect the generic drug industry trend, and that trend is one of very strong growth.

"US drug sales total $200 billion a year," adds Makov. "In quantitative terms, half the sales are of ethical and half of generic drugs, but generic drug sales are $16 billion. Without the generic drug industry, sales of ethical drugs would be much higher, and government expenditures on health would reach terrifying dimensions. That is why regulators and the authorities support the generic drug industry, and why its growth will continue. In addition, the population is aging, which means that drug use will only grow."

Teva is well positioned to exploit the industry growth. Teva and its partners have 111 generic products in the regulatory pipeline. Sales of the equivalent ethical drugs total $72 billion. "56 of these drugs have applications under the US Food and Drug Administration (FDA) Paragraph IV drug certification, which is more than the all the applications by the second largest generic drug maker," says Teva CFO Dan Suesskind. "We were the first to submit applications for 22 of these drugs, whose ethical equivalents have $19 billion in sales."

These numbers, perhaps more than Teva's financial reports, reflect the company's power, and its independence from the fortunes any particular drug. "It's hard to know when the authorities will approve the applications," says Makov. "This matter is very uncertain, and smaller companies are more sensitive to the timing of a drug approval. A postponement or delay, or an advancement for that matter, can have a strong effect on a small company. Our circumstances are different. We have a very large basket of products, the largest and most flourishing in the industry, and we have the most impressive products pipeline in the industry."

Teva also produces active pharmaceutical ingredients (APIs), which contributes to the company's profits. API sales to third parties totaled $122 million in the second quarter, and internal sales totaled $104 million. Second quarter API sales were 32% higher than in the corresponding quarter, and Makov says higher internal sales means higher profitability. Besides, this vertical integration creates a competitive edge in the timing of product launches, and makes Teva a power in the API industry as well.

Source: http://www.globes.co.il/serveen/globes/DocView.asp?did=821149&fid=980