Teva Pharmaceutical Industries

TEVA Pharmaceutical Industries,Ltd Problem statement After m each age of successful harvest-feast in the Generic Pharmaceutical intentness, competing against the biggest western Pharmaceutical companies, TEVA Pharmaceutical Industries, Ltd the major and biggest role player in this competitive indus get wind, has reached a point where after acquiring many different pharmaceutical companies and achieving his 1 billion dollar theory goal, seem to fork over lost focus and found themselves in desire of wadting a new goal that will give them, future vision and will swear out them avoid being scattered all around the commercialise and dispersing their confine budget ?On iodin hand is the global market for generics, where many new get-go- exist players atomic number 18 growing using Tevas exact uniform successful formula to capture market sh are and existent gigantic mod players are pass awaying to incur, making of this specific industry a very challenging wiz with fast(a ) disceptation, collapsed prices and very low profits. On the opposite hand, the advanced(a) drug market, an unknown market for Teva, where the capital enthronement is accounted in billions in expenses in R&D, and growth is evaluate to slow down, the possibilities for laid-back r level(p)ues are greater than Teva fucking imagine. External Analysis Industry The Pharmaceutical industry, a 600 billion industry, has been growing at an rough 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 put on the line out-of-pocket to the high capital investment in R&D, the low probability of having an approved information hence the opportunity to engender revenues exceeding the invested R&D and bes, has currently negative expectations regarding the future principally beca usage of slow growth p redictions, the end of a sheer protection period of up to 70 drugs with no innovative products in the line of products to replace them.Its counterpart, The Generic Pharmaceuticals a 52 billion sector, although pendant on the innovative drugs patents to be take a shitd, is expected to waste a growth of up to 16% in major world markets and It has 3 categories ? Commodity generics Requires the lowest capital investment and a alike is the largest segment of generics, reason why many competitors were attracted to it. ? recess 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 adaptation of the so called Biotech, which actives compounds were highly complex, by far harder to duplicate than traditional pharmaceuticals. Has high expectative of growth, and margins customary Factors per country of the gener ic market United States The world largest generic pharmacist-driven market, offered benefits for generic drugs such as the ANDA care for which shortened the approval of generic drugs and the paragraph IV which allowed generic companies to challenge innovative drugs long out front patent expiration. The competition in the US is stiff due to a large amount of competitors submission the market which is negatively affecting the pricing and consequently the profits. Europe The UK and Netherlands, the most competitive markets in the locality resembled the US (pharmacist-driven, prices were regulated by the market, with a high shrewdness 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, maculation prices were regulated by the government.Also, these markets were accoun ted as part of the biggest globally and had lower acuteness rates, 12% for France and 41% for Germany, while having high growth potential. Also they both accounted for only 12% of Tevas revenues in Europe. ? Rest of the world Japan is a highly regulated market with generic penetration of 10%, specially because of the patients perception of generics as of lower quality, only expected to growth in a the long term.Other markets like Latin America, Eastern Europe, Russia, China, and India were expected to grow in the generic market although due to limited dispos subject income the patients demanded low price generics. Five forces Analysis ( put on appendix 1) ? Rivalry (High) ? Power of supplier (Low) ? Power of buyers (high) ? Substitute products (Medium) ? Threat of new entrants (high) Opportunities There are 70 innovative drugs in the US about to loose their patents in 2010, which are potential new generics developments for Teva.There are salve almost unsaturated markets such as France, Germany, Latin America and Asia where Teva stack make an strategic move. There is still the street corner generic and Biosimilar Markets where barriers of entrance can be created to prevent new competitor entrance, and finally, there are still not many competitors and high growth expectations specially in Biosimilar products in the US. Threats ANDA and Paragraph IV are slowing due to fierce competition and entrance of new competitors, while innovative companies started also to innovate the commodity generic market.The industry is highly fragmented which makes competition fierce and some global markets have government regulated prices and compulsory licensing making competition on price difficult. Finally, the US Market is acquire saturated of competitors which is reducing profitability. Internal Analysis Corporate dodge Tevas Corporate strategy is to diversify into related businesses that through a well managed chain value (Localized management and marketing, and cent ralized R&D, manufacturing and APIs) has given up them greater scale benefits than any of its competitors, and a reputation as the company not to compete on price with.Tevas business strategy and Competitive advantage Tevas business strategy is comprise leadership based in keeping R&D low, an efficient management of its supply chain, backswept integration into pharmaceutical ingredients (API), rigorous execution including filing ANDA applications faster than competitors (which gave them a large pipeline of paragraph IV challenges and a broad portfolio of commodity generics), and finally a reputable, successful acquisition team. See Appendix 3) Value chain (see appendix 2) Teva has maintained its low cost culture during the years, and thanks to his careful growth into new markets through acquisitions has achieved greater benefits of scale than any other competitor. Its R&D, which usually adds for a high percentage in the industry (14% of net gross sales), was only of 7% for Teva thanks to the strong collaboration with the scientific institute in Israel such as Weizmann institute, Hebrew university of Jerusalem and the Technion.Additionally, Teva has entered new markets where they have successfully been able to push their products by influencing market players namely Pharmacists-driven markets. Key success ciphers Within the main success factor we can recognize former CEO Hurvitz , who fostered a culture of goal settings and low prices, acknowledging the commodity-like nature of the industry and whose vision took the company to reach and pass the Billion Dollar theory. His legal team, who is in nominate of filing ANDA, is famous for being faster than any competitor.His acquisitions team who has a great reputation in the industry for the systematic approach and successful outcomes in integrating acquired companies. Strengths Teva is the largest commodity generic producer in the world by having an amazingly well managed cost structure and by setting economi es of scale to produce at a lower cost than its competitors, hence being able to compete with low prices. Its message to influence key market players within its markets (pharmacists). An acquisition team that has lead to successful buys and integrations.Also, Teva has a non bureaucratic structure that is aligned with the low cost structure. Weaknesses The limited knowledge of Physician-driven markets, is for instance, the cause for Tevas low forepart in France and Germany that together accounted for only 12. 5% of the revenues of Teva in Europe. Limited research budget and limited follow out in innovative pharmaceuticals market. High focus in the US market, reason for which any possible downturn, like the regulatory impasse, has a high possibility of affecting negatively the results of the company.Alternatives 1. Teva has successfully introduced 2 blockbuster innovative drugs into the market, Copaxone in partnership with Sanofi-Aventis, and Azilect, which proved that Copaxone was not a one-off. This can lead us to think that Teva can keep on going down the road of innovative drugs and in other therapeutic areas with sales estimates of up to $6 billion dollars. We cant forget though, that Teva has limited research budget and limited eff in this market where giant companies like Merck, Novartis and Sanofi-Aventis compete.Additionally CEO Hurvitz qualified this move as zip fastener else than supreme self-confidence. 2. Move into Niche and Biosimilar markets which are relatively new or completely unknown markets for Teva, particularly for the type of relationship with the Physician-driven markets notwithstanding that can give advantages and possibilities to create entry barriers to new competitors and that would by all odds set a solid base for Tevas continuous growth. 3.Enter new geographical markets continue with its low cost strategy and enter new geographical markets, such as Germany and France, this strategy is aligned with the move into Niche and Bio similar market mainly directed to physician-driven markets. 4. Status Quo Teva should focus solely in the commodity generic market in which the company is currently the strongest player, but risking to loose market share with competitors such as Sandoz, Ranbaxy and Barr. See appendix 4 for Analysis of Alternatives RecommendationIn the light of the alternative analysis (see appendix 5), the best move for Teva is to start entering the Niche and Biosimilar markets while also expanding geographically into Physician-driven markets such as Germany and France where it is wise to consolidate and try to get a bigger market share using Ivax and Sicors know-how in these areas. Ivax has already given Teva the leading presence in Latin America where must of the countries were physician-driven markets, proving that Ivax has experience in this type of market.Teva can give leverage to Ivax in order to be able to produce at low costs, while Ivax with its independent type of operation can give Teva access to global markets. For this purpose, Teva must successfully combine Ivax into Tevas culture while hold backing its independent operation and providing marketing budget, which will definitely generate high revenues due the nature of Ivaxs niche generic products. Also, Ivax strength in first-to-file paragraph IV pipeline in the USA can positively affect Tevas operation within its headmaster market and generate a solid ground so that Teva can later on support its new operations in the new markets.On the other hand, Teva has already started developing Innovative drugs, and has had 2 blockbusters, but getting deeper in this market can be dangerous and the probabilities of failure are very high. Instead, Teva should use its previous experience in handling the innovative division, and handle Sicor experience in the Biosimilar in the same way. Tevas experience in rolling out a product lunch will definitely become useful in order to support Sicors operation that can generate entry barriers to the Biosimilar market and higher revenues within the US in the injectables business.Also it is possible to use a low cost approach, and his economies of scale to be more prices efficient than the possible competitors. Implementation plan. Since 70 innovative drugs are loosing their patent protection by 2010 in the US, Teva should start developing the generic version of this drugs and can use Ivax experience in the first-filer paragraph IV in order to take advantage and make its position in the US market stronger. Teva should also start slowly moving away from the Innovative market.In order to do this, Teva should finish the development of the innovative drugs and they already have in the pipeline, and lunch them. After this, most of these resources are going to be transported into the production of Biosimilars leaded by Sicor. With the intention of moving into Germany and France, Teva must start creating a solid marketing team in conjunction with Ivax, this capital inves tment should generate enough revenues to dominate the cost knowing that Niche products have higher gross margins.With Sicor, Teva should start developing Biosimilars within the US, originally Barr with Pliva and Sandoz move into the US market that is supposed to support only 3 competitors. We know that Sandoz has already lunched one Biosimilar in Australia and Europe. Although the regulation pathway for Biosimilar in the US was still unknown this will give some lead-time for Sicor to develop and then have approved Biosimilar products in the US and hopefully start generating entry barriers for biotech and other Biosimilar competitors.Biosimilar product has margins close to those of the innovative drugs and with lesser risk of competing against the giants who dont play in this market. Finally, Ivax gave Teva the leading position in Latin America, and although it accounts for only 39. 3 billions or 7% of the industry revenue, this revenue is expected to growth at a 9. 2% CAGR with me dium-low competition. It is a great opportunity for Teva to establish himself as the market leader in this growing market. Appendix 1 Porters 5 forces. pic Appendix 2 Value image pic Appendix 3 Sustainability of competitive advantage. Valuable Rare INNOVATIVE High revenues if successful. Slow growth and stiff competition against giant 2 successful innovative drugs already launched companies. Has some innovative drugs in the pipeline Huge capital investment required. projected to generate revenues of $6 billions Inexperience of Teva in this market. Goes against advantage of Teva of producing with low costs NICHE AND BIOSIMILAR AND GEOGRAPHICAL EXPANSIONHigh revenues and market growth expected Teva does not have experience in this area of THROUGH ACQUISITIONS Possibility to generate entry barriers to new production competitors Teva has no experience and know how in Has already bought Sicor (Biosimilar), Ivax physician-driven markets however it can (Niche) and has a lready set up a separate integrate Ivax and Sicor know-how. division to focus on Niche market and Physician-driven markets Aligned with focused strategy and efficient chain value for low costs Experience in acquisitions and integration STATUS QUO unanimous consolidated position in the US Saturated market Know-how and experience in pharmacist-driven Stiff competition with new competitors and market giant companies entering commodity generic Experience in ANDA filing market. Prices intemperate and with them profits Teva Pharmaceutical Industries, Ltd Final Report Professor