The biggest Little Pharma in the world
NEW YORK —With exception to those companies that are the first to win Food and Drug Administration approval for knockoffs of blockbuster drugs, generic drug companies rarely rake in the kinds of massive profits that their brand counterparts do. But one company is showing that focusing on generics doesn’t have to mean playing Two Buck Chuck to brand drug makers’ Bordeaux.
In January, Teva Pharmaceutical Industries became the first generics company to get an “A” rating on its credit from Moody’s Investors Services.
Top pharmaceutical companies by U.S. sales*| 2008 | 2007 | ||
| 1 | Pfizer | $20.5 | $23.6 |
| 2 | GlaxoSmithKline | 18.4 | 20.7 |
| 3 | AstraZeneca | 16.3 | 15.5 |
| 4 | Johnson & Johnson | 16.0 | 16.3 |
| 5 | Merck | 15.5 | 17.6 |
| 6 | Amgen | 13.4 | 14.3 |
| 7 | Hoffman-LaRoche (incl. Genentech) | 13.1 | 12.4 |
| 8 | Novartis | 12.4 | 13.9 |
| 9 | Eli Lilly | 11.4 | 10.3 |
| 10 | Sanofi Aventis | 11.0 | 10.9 |
| 11 | Abbott | 10.0 | 9.7 |
| 12 | Teva Pharm USA | 9.2 | 7.9 |
| 13 | Bristol-Myers Squibb | 8.0 | 6.9 |
| 14 | Takeda | 8.0 | 7.7 |
| 15 | Wyeth | 7.6 | 8.6 |
| $291.5 | $287.6 | ||
“The upgrade of Teva reflects a favorable growth outlook, clearly articulated financial targets and the expectation that mergers and acquisitions can be financed with debt levels appropriate for an A3 rating,” Moody’s SVP Michael Levesque said. Teva’s acquisition of Montvale, N.J.-based Barr Labs and the increasing popularity of generic drugs contributed to the upgrade as well. Already the world’s largest drug maker, Teva recently announced plans to earn more than $30 billion in global revenues by 2015.
Overall, the upgrade alone doesn’t mean that much for the generics industry as a whole, Levesque told Drug Store News. Teva is likely to remain alone among generics companies in its single-A credit rating for some time. But Teva’s enormous growth in recent years points to something bigger for generic drug companies, namely that the lines between Big Pharma and Little Pharma are blurring, and generic drug makers could start to play a much larger role in the industry despite the heavy commoditization of the generics market.
Brand drug makers have started dabbling in generics themselves. Novartis owns the world’s second-largest generic drug maker and a major player in the fledgling biosimilars industry, Sandoz, and reports recently surfaced in the German media that Pfizer was Teva’s main competitor in its bid to acquire a German generics manufacturer. Such brand companies as Pfizer and Merck also have expressed interest in getting involved in follow-on biologics, should Congress create a regulatory approval pathway. It works both ways. In addition to its generics business, Teva also makes branded drugs, such as the multiple sclerosis treatment Copaxone (glatiramer acetate), and Watson has a sizeable branded drug business as well.