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. Reddys , 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)

6%

4%

North America 26% 64% Europe Israel Rest of the World

Teva Revenues By Region (2008)

13 4 North America Europe 25 Israel 58 Rest of the World

Strategic Analysis

TOWS Analysis
EXTERNAL
1. 2. 3. Demographic Trends Health care reforms Emerging Markets

Opportunities

1. 2. 3.

Political situation in the parent country Threat of new entrants New drugs more competitive than Teva products

Threats

INTERNAL
1. 2. 3. 4. 5. 6. Largest generic drug maker in the world Good with M & A Flexible Less R & D costs as compared to competitors Low cost supply chain APIs

Strengths

ADVANCEMENT
Further expand into global branded generics market

AVOID THREATS
Turn into a more specialized generics or innovative firm

1. 2. 3.

Drugs coming off patents Weak in physician driven markets like Germany & Japan High Debts

Weaknesses

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 ingredients(API) pharmaceuticals and active

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. Tevas 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 Tevas API division with additional 30 APIs and access to new technologies.

PESTLE Analysis
Issue
Political Growing political focus and pressure healthcare Governments looking for healthcare savings Harmonization of healthcare across Europe Economic Global economic crisis Reluctance of consumers to spend on Reduction in individual disposable income healthcare Increasing pressure on pricing by different buying Need to introduce value adding processes groups Increased pressure from shareholders Reduction in pharmaceutical growth Increased pressure on pricing on More pressure on pricing and cut backs Reference pricing, exposing price across borders

Impact On Business

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 Direct to patient communication was much hype about the possibilities for genetic More responsive service facilities required research in pharmaceuticals Customized treatment

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 Snapshot

2010 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 75%

96

23%

45

68%

22

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 75%

96

23%

45

68%

22

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

75%

96

23%

45

68%

22

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

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

All Biologics

Patents expired 2009 or earlier

Patents expiring 2010-2015

Patents expiring 2016-2020

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

Develop Innovative drugs market

Great success with Copaxone. Its 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