PharmExec Blog

With Cephalon Buy, Teva Bets on Brand Drugs and More In-House Innovation

If commodity generics and in-licensing deals are all the rage, then Teva just strapped on a fanny pack with its $6.8 billion acquisition of Cephalon.

The deal is expected to skyrocket Teva’s brand drug portfolio to $7 billion in annual sales, making Teva “not only the world’s largest generics company, but also one of the world’s largest specialty pharma companies,” said Shlomo Yanai, Teva’s CEO, on a conference call yesterday. Post-acquisition, the combined entity boasts “more than 30 products in the late stage, and three awaiting filing,” said Yanai.

Trimming in-house R&D to escape the rigors and expenses of bringing a drug to market – investors are less willing to put their money on a horse that takes over a decade to reach the finish line – has become a strategy du jour for some pharma companies. It’s better to let the smaller, scrappier companies assume the risks associated with early stage development; once a compound proves itself in clinical trials and with regulators, then big pharma can pounce on it, the thinking goes. That was earlier suitor Valeant’s rationale for its own abortive bid for Cephalon.

Teva is bucking that trend with its acquisition of Cephalon, trumpeting the latter’s success in “doing what we call search and development: identifying pipeline products in an early stage, and taking them all the way through to commercial success,” said Yanai on the call. Teva has two primary brand drugs on the market, Copaxatone (for MS) and Azilect (for Parkinson’s). Copaxatone (glatiramer acetate) earned $938 million in 2010, representing 18% of the company’s total net sales in 2010, according to an SEC filing. Azilect had sales of $89 million in 2010. Cephalon’s best-selling product, Provigil (indicated for excessive sleepiness associated with narcolepsy), comprised 41% of Cephalon’s consolidated net sales in 2010, but is expected to meet generic competition in April 2012, according to an SEC filing. The combined company will have 20 branded products on the market, according to a statement.

Cephalon will bring new therapeutic classes to Teva, specifically pain management and oncology, and will also extend the company’s footprint in Europe, Asia and Latin America, Yanai said on the call. The deal will also create marketing and sales “synergies,” but Denise Bradley, a US-based spokesperson for Teva, said in an email that it’s too early to elaborate on what those synergies might entail. Cephalon’s own generics business, Mepha, earned $400 million last year.

Last March, Teva forged a deal with packaged goods giant Procter & Gamble, to leverage both companies’ selling networks for their combined portfolio of over-the-counter (OTC) drugs. The partnership covers all markets outside of the US, and is worth an estimated $1 billion, according to a Teva release.

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3 Comments

  1. Karin
    Posted May 5, 2011 at 8:34 am | Permalink

    Could you explain what you mean by the phrase “strapped on a fanny pack”? To me that only people who wear fanny packs are clueless tourists. Are you suggesting that Teva are dabblers?

  2. Sofia Waden
    Posted May 7, 2011 at 5:02 am | Permalink

    Finally the drama over Cephalon is finished. Teva acquiring Cephalon, will allow the generic producer to create important synergies in their operations and product portfolio. Both companies together will have a strong branded product portfolio. Not only that but they will have one of the strongest pipeline in the industry, considering they will have around 30 late stage molecules. Through the merge Teva will be accessing for the first time niche Therapeutic areas in CNS, Oncology, pain management. On the other hand if considering Cephalon alone, their pipeline is weak, only with early stage molecules, that could be considered as a big risk for Teva. In the same way, some job cuts should be expected as a result from this synergy worth USD 500 millions.

  3. Edmundo Serrano
    Posted May 11, 2011 at 7:43 am | Permalink

    I am interested to know more about the products of Teva, Cephalon and Teva’s OTC products.
    We represent a pharmaceutical company and we would like to explore the possibility of
    marketing their products in the Philippines.

    May I ask the name/s of Teva’s contact person/s for Exports.

    Thank you.

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