Teva Pharmaceutical Industries (TEVA) chief Shlomo Yanai predicts that his generics company can more than double its annual sales to $31 billion by 2015, making it eligible to be one of the top 10 “Big Pharma” companies. Wall Street analysts are mostly bullish on the stock and Moody’s last week boosted the company’s credit rating. Zacks recently raised Teva to Outperform from Neutral with a price target of $65 in a report available for complimentary download.
Highlights:
Teva reported earnings of $0.89 in the third quarter of 2009, up 16% from the year-ago period and a cent above the Zacks Consensus Estimate. Net sales increased 25% to $3.55 billion. Strong sales of Copaxone and the respiratory business helped drive earnings in the reported quarter.
We are impressed with Teva’s strong performance in the first nine months of 2009. We expect Teva to continue posting strong revenues and earnings going forward thanks to new product launches, both generic and branded.
- We are also pleased to see Teva’s progress with its branded and biogenerics pipeline. Biogenerics should help drive growth in the long-term.
- Meanwhile, the acquisition of Barr should help Teva strengthen its position in the U.S. and expand its presence in Europe.
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Europe’s recession-resistant pharmaceutical companies are likely to keep expanding their sales in 2010, Standard & Poor’s Ratings Services says in its latest Industry Report Card European Pharmaceuticals Have The Right Formula To Keep Growing In 2010. However, Europe’s pharma companies face a longer term negative impact from patent expirations.
European pharmaceutical companies’ efficient research and development (R&D) is translating into a promising list of newly approved drugs, S&p said. Rated pharmaceutical companies have received approval for about 19 new drugs over the past two to three years.
“Standard & Poor’s further estimates that eight rated European pharmaceutical firms have about 80 new molecular entities in Phase III, the last–stage of the pipeline before being granted regulatory approval. We believe this has been supported by strong R&D spending. Over the past three years, Merck (MRK) , Roche Holding AG (RO), and Novartis AG (NOVN) have all exceeded the 18% average R&D spending by global pharmaceuticals.”
In third-quarter 2009, the swine-flu pandemic also boosted sales for companies that produce vaccines–mainly sanofi-aventis S.A. (SAN) and AstraZeneca PLC. (AZN). We believe their sales, as well as those of GlaxoSmithKline PLC (GSK) and Novartis will continue to benefit from flu vaccine sales over the next two quarters, S&P said.
European companies are also benefiting from a recovery in the U.S. pharmaceutical market, its most important export destination, in third-quarter 2009, the report states. This follows a slower growth phase in the U.S. during 2008, caused by an unprecedented wave of patent expirations on blockbuster drugs (meaning those with annual sales of more than $1 billion), price
increases in early 2009, and a more-pronounced-than-expected restocking of inventory levels at pharmacy and wholesale levels.
Among the top European pharmaceutical companies, S&P notes there are at least 13 blockbuster drugs scheduled for patent expiration over the next three years either in Europe, the U.S. or both regions.
The total sales impact on individual companies could be up to $4.2 billion for AstraZeneca, which will experience expirations on three large drugs in 2009 and 2011, S&P says.
“Our total sales-loss estimates are, however, worst-case scenarios, assuming complete loss of a drug’s revenue after patent expiry. The actual impact on sales would, however, depend on many factors, such as the number of new contenders to produce generic versions of the off-patent drug, the drug’s size, the country of patent expiry, as well as the drug’s complexity.”
Technorati Tags: (AZN), (BAYN), (MRK), (NOVN), (PFE), (RO), (SAN), AstraZeneca plc, Bayer AG, drug pipeline, drug-approvals, Inc., Merck, Novartis AG, Pfizer Inc., pharma, Pharmaceuticals, Roche Holding Ltd., Sanofi-Aventis S.A.
Fitch Ratings says U.S. Food & Drug Administration (FDA) approvals of pharmaceuticals and vaccines have ramped up throughout the year, bringing the year’s total on par with that for all of 2008. FDA drug approvals are on pace to exceed the 2008 total, a second consecutive year of increasing marketing clearances.
During the third quarter of 2009, the FDA approved 10 new pharmaceuticals and vaccines while the EMEA cleared six new therapies, compared to eight FDA approvals in the second quarter. After the increase of marketing authorization over the past two quarters, drug developers may receive around a dozen more regulatory approvals through the end of the first quarter of 2010.
With only one month remaining in the year, the Fitch-rated pharmaceutical developers listed in the report are still expecting to register six new drug entities and a vaccine to government drug authorities in 2009. Fitch says the industry conducted more business development in the third quarter in order to supplement late-stage R&D.
Additionally, overall industry sales for the global pharmaceutical sector are trending positively through the year from the low point in the first quarter.
Most of the large pharmaceutical companies covered in the report continued positive sales trends into the third quarter as many countries are emerging from a macroeconomic malaise.
The positive momentum is aided by a reversal of foreign exchange fluctuations that served to dampen revenues in the first two quarters of the year. Nevertheless, Fitch maintains a Negative rating outlook for the sector for 2010.
For details see Global Pharmaceutical R&D Pipeline – Third Quarter 2009
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Increasing exposure to patent expiries and downward trends in pipeline quality continue to underpin Moody’s negative outlook for the industry, though the outlook for generics is more positive.
Excerpts from Moody’s latest Global Pharmaceuticals Firms Industry Outlook:
- Companies have taken measures to alleviate these pressures – mainly through acquisitions; M&A strategies are expected to remain a key feature of the industry, albeit to a lesser extent than in the past 12 months.
- Although the implications of US healthcare reform are still in flux, we currently do not believe reform measures will be extremely onerous for the industry.
- Vaccines for swine flu will provide a boost to 2009 earnings for some companies; however, future revenue and earnings from pandemic flu vacinnes are unpredicatble and are not part of our base forecats.
- Despite recent M&A activity, liquidity has remained strong for most pharmaceutical companies, which have benefited from eay access to capital markets.
- Our outlook for generics-focused companies is more positive; despite ongoing pricing pressure, generics companies will benefit from a significant number of new generics in the coming years.
At June 2009, Moody’s had already factored in the expiry of some of the largest-selling drugs in the industry, including Pfizer’s ( PFE) Lipitor (LTM to September 2009 sales of US$11.4 billion), BMS/sanofi-aventis’s Plavix (US$10.0 billion) and AstraZeneca’s Seroquel (US$4.8 billion).
The revenues to be lost by the industry are expected to only be partially offset by drugs currently in late-stage development or in the approval process.
In addition, Moody’s pipeline assessment has recently tended to move downward due to higher hurdles to develop blockbuster drugs, such as increasing competition in a number of therapeutic categories and the US Food and Drug Administration’s (FDA) more cautious approval stance. Moody’s pipeline assessment of a peer group of large pharmaceutical companies has eroded to 16% at June 2009 from 20% in 2006.”
More positively, Moody’s notes that several interesting drugs have been approved since its June 2009 Industry Outlook was published, both in the US and Europe. These include Onglyza (saxagliptin), a DPP-IV inhibitor for the treatment of Type II diabetes co-developed by Bristol-Myers Squibb (BMY) and AstraZeneca (AZY) (as of 30 September 2009, Moody’s peak sales estimate for Onglyza is US$2 billion) and Effient (prasugrel), a blood-thinning drug for the prevention of heart attack and stroke co-developed by Eli Lilly (LLY) and Daiichi Sankyo (US$2 billion peak sales estimate).
Technorati Tags: (AZY), (BMY), (LLY), (PFE), Abbott Laboratories, AstraZeneca, big pharma, Bristol-Meyers Squibb, Daiichi Sankyo, drug patents, drug pipeline, eli-lilly, GlaxoSmithKline, Johnson&Johnson, Merck, Novartis, Pfizer Inc., Pharmaceuticals, Roche Holding
In a new paper NERA’s Dr. Timothy Daniel takes a look at how antitrust policy might change under the Obama administration.
He notes that both FTC Assistant Attorney General Christine Varney and Deputy Assistant AG Carl Shapiro have hinted that they might have challenged the Whirlpool/Maytag and XM/Sirius mergers that were cleared by the Bush Antitrust Division.
Excerpts from Whither Merger Review? Looking Forward While Looking Back
The installation of President Obama’s antitrust team promises to bring change to antitrust enforcement in the merger area, particularly at the Antitrust Division. AAG Varney has criticized the Antitrust Division’s recent merger enforcement record; one commentator noted that during her confirmation hearings AAG Varney stated that the Bush Administration’s reliance on the Chicago School approach to merger enforcement “had created a reluctance for the government to go forward and attempt to block mergers in the marketplace.”
DAAG Shapiro also has been critical of the Antitrust Division’s merger enforcement record, pointing in particular to the low level of merger enforcement during the Bush Administration measured either against other time periods or against the FTC’s merger enforcement actions during the same time period.
While some commentators have risen to the defense of the Bush Administration Antitrust Division’s merger enforcement record, the selection of these senior officials makes it virtually certain that the Obama Administration will increase the intensity of merger review.
AAG Varney and DAAG Shapiro have been understandably vague regarding what they would have done had they held their current positions during the Bush Administration, so it is unclear how the merger enforcement statistics reported above might have been different had these new officials been making the decisions. Still, both Varney and Shapiro have hinted that they might have challenged the Whirlpool/Maytag and XM/Sirius mergers that were cleared by the Antitrust Division.
Interestingly, both of these high profile mergers conform to the recent Bush Administration’s merger enforcement record in one respect—post-transaction concentration levels would have been well above the Horizontal Merger Guidelines’ thresholds under market definitions that would have supported a challenge. Where these two cleared transactions differ from those typically challenged during the final two years of the Bush Administration is their size and reach—both Whirlpool/Maytag and XM/Sirius involved sizable transactions in large, national markets.
While the ultimate merger enforcement agenda of the newly appointed antitrust officials will only become clear with time, these officials have pledged to be more aggressive than their immediate predecessors. Our review of the last two years of the Bush Administration merger enforcement record indicates that the agencies’ recent focus has been on transactions in national industries that traditionally fall to one agency or the other (pharmaceutical mergers to the FTC, “smokestack” mergers to the Antitrust Division) and on transactions where the competitive issues arise in narrow markets, from a product and/or geographic market perspective, with relatively high post-transaction share and concentration levels.
With regard to merger settlements, the extent to which share and concentration levels typically have exceeded the benchmarks contained in the Horizontal Merger Guidelines by such a wide margin is quite striking.
One possible path to reinvigorating merger enforcement would entail FTC Chairman Jon Leibowitz and Assistant Attorney General Varney instructing their merger staffs to consider challenging transactions in larger markets, even if they involve lower concentration levels.
Technorati Tags: antitrust, financial-regulation, FTC, mergers and acquisitions
Universities are becoming an increasingly important part of the R&D picture, especially during times of economic hardship, according to Oxford Analytica. Although hardly a disinterested party, OxAn makes some interesting points in a new report.
“R&D is a key industrial and economic driver, but can suffer as the economy contracts. Major companies have survival strategies in such circumstances, which may include aggressive behaviour such as mergers and acquisitions, or more defensive cost-cutting measures. One increasingly popular option is partnerships with universities, which not only provide products and efficient knowledge flow through industry investment, but also are incentivised increasingly by government to show the economic relevance of their R&D.”
Healthcare industries (pharmaceuticals and medical devices) rely especially on R&D, with particular focus on the continual need to bring new products to market.
In the current economic climate, significant internal R&D expenditure becomes increasingly risky. However, industry trends have led to changing pharmaceutical-sector strategy.
A natural result of industry trends is that larger companies are merging with or buying out smaller biotech start-ups, trading spare cash for a stronger pipeline. Such acquisitions also have led to changes in practice in existing R&D sectors of multinational companies. There has been a recent trend of larger companies splitting their R&D divisions into smaller, more focused groups, with a similar structure to a small start-up firm, in the likely belief that smaller groups work together more efficiently to develop ideas.
Therefore, acquisitions of small start-up companies and university spin-outs are an increasingly important feature of major pharmaceutical companies’ R&D strategy.
Industry and universities are the two main drivers of R&D. Publicly funded research is somewhat protected from economic fluctuations, meaning public-private partnerships are increasingly favourable:
- Since the 1960s there has been a trend of industries clustering with universities to support knowledge exchange.
- Formal studies have presented evidence of a positive impact of university R&D on firm performance.
There are also reasons why industrial R&D attracts university R&D:
- Industries doing R&D research in a region might finance university R&D.
- Universities in regions with industrial R&D might find it easier to attract R&D funds from national and international sources due to cooperation with industry.
- The UK government, academic institutions, organisations and the public in general have become more concerned about the economic impact of publicly funded research.
Technorati Tags: medical devices, Pharmaceuticals, R&D, research, universities
Audit Integrity has updated its list of companies it sees as most at risk from shareholder litigation.
Topping the list is Hartford Financial Services (NYSE: HIG), with a 6.4% chance of litigation in the next 12 months, followed by BJ’s Wholesale Club (NYSE: BJ) with a 2.7% chance. Standard & Poor’s on Jun 15 raised its Outlook for Hartford to Stable from Negative after the multi-line insurer issued $3.4 billion in senior preferred stock as part of the U.S. Treasury Department’s Capital Purchase Program.
Audit Integrity’s Litigation WatchList is based on multiple criteria. Every company must have a Litigation Model Ranking of 1 or 2, with a 1 year Litigation Probability equal to or greater than 1%. In addition to Litigation Model Ranking and Probability, companies are added to the Litigation WatchList based on a stock drop (as defined by 4 week trailing returns of ‐10% or greater) AND one or more of the five following High Risk Events:
- Insider Selling amounting to at least .1% of total assets
- Negative Earnings Surprise (including revised forecasts)
- Officer/Director change involving the CEO or CFO
- Accounting Issues
- *mended/Late Filings
The Litigation WatchList represents companies which, in our judgment, have not been recognized by the larger marketplace as having high potential for litigation.
Audit Integrity also notes that K-V Pharmaceuticals Co. (NYSE: KV.A) is in receipt of an informal inquiry by the SEC. The company is also responding to requests for information from the Office of the United States Attorney for the Eastern District of Missouri and FDA representatives working with that office. In addition, the company faces a series of putative class action shareholder lawsuits alleging violations of the federal securities laws by the Company and certain individuals, and lawsuits alleging violations under the Employee Retirement Income Security Act (ERISA). K-V is rated “Very Aggressive” in its corporate governance practices by Audit Integrity.
After the controversial departure of KV’s CEO in December 2008, Adam Greene, an analyst at Stanford Group in New York, wrote in a report that he thinks “KV’s governance situation may remain messy for a while.”
Technorati Tags: (BJ), (HIG), (KV.A), BJ;s Wholesale, Hartford-Financial-Services, KV Pharmaceuticals, litigation, shareholder-class-action
The percentage of sales from biotechnology products (bioengineered vaccines + biologics), within the world’s top 100 drugs, is set to increase from 28% in 2008 to 50% by 2014, according to a new report from EvaluatePharma. In the broader market, sales from biotechnology products are expected to capture 23% of the world pharmaceutical market by 2014, versus its current share of 17% in 2008, EvaluatePharma says in its World Preview 2014 (free with registration). The total value of biotechnology sales is set to grow 56% between 2008 and 2014 from $108bn to $169bn.
Highlights of the report:
- Worldwide Prescription Drug Sales total $707bn in 2014; 2.9% (CAGR) over 2009 – 2014
- Global Prescription Drug Sales Flat in 2009
- Over $182bn of Sales at Risk from Patent Expirations in 2011-14
- Pfizer (NYSE: PFE) Maintains Top Spot in 2014 via Wyeth Acquisition
- Novartis (NYSE: NVS) Moves up to Second Place as Merck+Schering Plough (NYSE: MRK) Drops to Third
- Biotech Products Set to Overtake Small Molecule within Top 100 Drugs by 2014
- Global Pharmaceutical R&D Spend to Grow by 2.4% (CAGR) to $142bn by 2014
- Vaccines Set to Record Highest Growth of Major Therapy Categories to 2014
- Sales Potential of 2008 New Drugs (NMEs) Down 14% vs. 2007 Cohort of NMEs
See Alacra StreetPulse for Latest Analyst Comments on Pfizer, Novartis and Merck.
Technorati Tags: Abbott Laboratories, agrochemicals, Amgen, big pharma, biotechnology, GlaxoSmithKline, Johnson & Johnson, Merck, Novartis, Novo Nordisk, Pfizer Inc., pharma, Pharmaceuticals, Sanofi-Aventis
The outlook for the global pharmaceutical industry remains negative, mainly due to looming patent expirations of top-selling drugs and weakening product pipelines, says Moody’s in a new Global Pharmaceutical Industry Outlook. Key points:
- Consolidation in the form of M&A or diversification into other health-related businesses such as consumer health will persist as companies seek ways to offset the industry’s main challenges: weaker pipelines and patent expirations of top-selling drugs.
- Although the industry is not as exposed to a recession as others, a prolonged economic downturn could result in more pricing pressure and slowdowns in revenue growth as governments seek to ease the healthcare burden, especially in the US.
- Healthcare reform in the US will likely increase pricing pressure on prescription drug companies, but may benefit generic manufacturers. Challenging regulatory hurdles, including the US Food and Drug Administration’s (FDA) more cautious stance toward new-drug approvals also adds a layer of uncertainty.
- Financial performance should remain relatively solid over the near term. Companies continue to report good profits, have strong balance sheets and post good cash-flow generation. Some companies have undertaken restructuring efforts to reduce costs in an effort to help mitigate the impact of current industry challenges.
In an effort to boost their pipelines and offset some of the revenue that will likely be lost as patent exclusivity expires, some companies have picked up the pace of acquisitions, especially mega-deals. “Consolidation in the form of M&A or diversification into other health-related businesses, such as consumer health, is likely to persist as companies seek ways to offset the industry’s main challenges. However, these activities usually result in increased leverage and could, in some cases, create downward rating pressure.”
European pharmaceutical companies appear to be bucking the negative trend, according to a new Industry Report Card from Standard & Poor’s. Rated pharmaceutical firms recorded like-for-like organic sales up 5.3% on average in the first quarter of 2009 on the same period of last year.
“The sector appears to be barely scathed by the economic recession,
primarily because medicines in developed markets are mostly financed by health insurance schemes and their market prospects are swelled by growing
populations with increasingly unhealthy lifestyles.”
What’s more, the large (European) pharmaceutical companies will in our view continue to be buoyed over the next few years by their strength in emerging markets, compensating for more sluggish growth in the large U.S. market.
Manufacturers such as Bayer AG (A-/Negative/A-2), sanofi-aventis S.A. (AA-/Stable/A-1+), or AstraZeneca PLC (AA-/Stable/A-1+) have strong positions in emerging markets, explained partly by their early entry to those markets and partly by their geographic proximity. European manufacturers also benefit from promising late-stage pipelines for patented drugs.
Standard & Poor’s therefore expects their credit quality to remain stable through 2009, reflecting these strong operating trends, the report says. “Nevertheless, we see a heightened risk that companies could adopt more aggressive financial policies, which could potentially result in negative rating actions.”
Fitch Ratings recently issued its Global Pharmaceutical R&D Pipeline (First-Quarter 2009)
Latest Analyst Comments from Alacra StreetPulse on Bayer AG (BAY), sanofi-aventis SA (SAN), and AstraZeneca plc (AZN).
Technorati Tags: AstraZeneca, Bayer, European pharma, pharma, Pharmaceuticals, Sanofi-Aventis
Over the next two quarters as many as eight highly-promising new drug candidates may be successfully commercialized despite higher hurdles at government drug regulatory agencies, according to Fitch Ratings.
In its quarterly global pharmaceutical report, Fitch says the total amount of marketing clearances this year may exceed the 24 new molecular entities and biologics approved in 2008 helped by the carryover of potential drug candidates with extended review deadlines. Presently, there are almost 90 new molecular entities and vaccines from Fitch-rated drug developers in late-stage clinical testing, of which 17 may be registered with U.S. and European regulators by the end of the year.
During the first quarter, the FDA and the EMEA received regulatory dossiers for eight new molecular entities (NMEs). Half of the total drug application filings in the quarter were achieved by GlaxoSmithKline plc (NYSE: GSK), including a second round of regulatory submissions for two drug candidates.
As restructuring actions for pharmaceutical developers continued into the year, R&D programs were not immune to the cost-cutting efforts. Since the start of the year, 18 projects experienced delays to the drug approval process or were canceled outright. Advancement of 10 drug candidates ceased in either late-stage clinical trials or in registration with the U.S. Food and Drug Administration (FDA) or the European Medicines Agency (EMEA).
Despite the cutbacks, the Fitch-rated drug manufacturers succeeded in delivering 11 new medicines to the U.S. and European markets as well as seven therapies to Japan. Consistent with prior quarters, there are about a dozen new drug treatments pending approval decisions from U.S. and European drug reviewers with near-term regulatory deadlines, of which more than half are highly promising medicines.
The full report, Global Pharmaceutical R&D Pipeline – First Quarter 2009, provides details of these potentially new pharmaceuticals as well as their current status in the drug approval process and explores the latest developments in the late-stage pharmaceutical R&D programs of major brand name drug developers in both the U.S. and Europe.
Technorati Tags: (GSK), drug-approvals, GlaxoSmithKline, Pharmaceuticals
