After many years of successful growth in the Generic Pharmaceutical industry, competing against the biggest western Pharmaceutical companies, TEVA Pharmaceutical Industries, Ltd the major and biggest player in this competitive industry, has reached a point where after acquiring many other pharmaceutical companies and achieving his 1 billion dollar theory goal, seem to have lost focus and found themselves in need of setting a new goal that will give them, future vision and will help them avoid being scattered all around the market and dispersing their limited budget ➢ On one hand is the global market for generics, where many new low-cost players are growing using Teva’s exact same successful formula to capture market share and existent gigantic innovative players are starting to incur, making of this specific industry a very challenging one with stiff competition, collapsed prices and very low profits. ➢ On the other hand, the innovative drug market, an unknown market for Teva, where the capital investment is accounted in billions in expenses in R&D, and growth is expected to slow down, the possibilities for high revenues are greater than Teva can imagine. External Analysis
Industry: The Pharmaceutical industry, a 600 billion industry, has been growing at an approximate rate of 12% over the last five years, with a typical ROE of 20%, among the highest of any industry. It has 2 main sectors, namely Innovative Pharmaceuticals and Generic Pharmaceuticals. The Innovative Pharmaceutical, considered a sector of high risk due to the high capital investment in R&D, the low probability of having an approved development hence the opportunity to generate revenues exceeding the invested R&D and costs, has currently negative expectations regarding the future mainly because of slow growth predictions, the end of a patent protection period of up to 70 drugs with no innovative products in the pipeline to replace them. It’s counterpart, The Generic Pharmaceuticals a 52 billion sector, although dependent on the innovative drug’s patents to be produced, is expected to have a growth of up to 16% in major world markets and It has 3 categories: ➢ Commodity generics: Requires the lowest capital investment and also is the largest segment of generics, reason why many competitors were attracted to it. ➢ Niche generics: Have to be prescribed by physicians even in pharmacist-driven markets. Although requires higher capital investment than commodity the gross margins were higher. ➢ Biosimilars: Refers to the undeveloped segment of the generic version of the so called “Biotech”, which active’s compounds were highly complex, by far harder to duplicate than traditional pharmaceuticals. Has high expectative of growth, and margins General Factors per country of the generic market
➢ United States: The world largest generic pharmacist-driven market, offered benefits for generic drugs such as the ANDA process which shortened the approval of generic drugs and the “paragraph IV” which allowed generic companies to challenge innovative drugs long before patent expiration. The competition in the US is stiff due to a large amount of competitors entering the market which is negatively affecting the pricing and consequently the profits. ➢ Europe: The UK and Netherlands, the most competitive markets in the region resembled the US (pharmacist-driven, prices were regulated by the market, with a high penetration of generics, 49%, which makes the competition high). France and Germany on the other hand, were physician-driven for which generics have to market and brand their drugs like innovative companies, hence incurring in the same marketing expenses as innovative companies, while prices were regulated by the government. Also, these markets were accounted as part of the biggest globally and had lower penetration rates, 12% for France and 41% for Germany, while having high growth potential. Also...