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Teva CFO eyes small US acquisitions

Eyal Desheh: There are many small US companies developing complex generic products.

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Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) is eying small acquisitions of drug development companies in the US said CFO Eyal Desheh at the 35th Annual Goldman Sachs Healthcare Conference in Chicago on Tuesday. Last week, Teva announced a new corporate structure that includes the creation of a Global Generics Medicine Group to consolidate all of the company’s activities in this sector, alongside a Global Specialty Medicines Group. “There are many small companies in the US, which are developing a portfolio of complex generic products with unique capabilities that most large companies don’t have. With the right focus, some of these companies can be acquired.”

Asked if the new structure portended a breakup of Teva, Desheh said, “We knew somebody’s going to ask us if this is the preparation for breakup? It’s not, absolutely not. Teva has been managing its generic business with four generic regional leaders reporting to the CEO, which makes the CEO practically a head of generic. That’s a wrong structure. And the decision we’ve made – two decisions made. One, to combine the generic group under one leadership that will be able to determine the right agenda, the right set of priorities, how do we grow the business, and how to we benefit from being a generic – the world generic leader, and not managers in four different heads of a single master that don’t always talk to each other or collaborate with each other. So that’s what – to change organization, to have this as one group – although it was always one business, but make it one group.

“So this is not a preparation for a split up. Teva’s businesses are connected and this connection very, very strong. We have one production, one supply chain, one R&D group that developed the products. Our NTE (new therapeutic entities) program sits in between the generic and the specialty business and you have to have the knowledge of both in order to really create a program and not just a product here in a program and a product there. And this is what we’re doing. Our sales in most geographies are combined other than in the US.”

Asked where Teva was going in the long term, Desheh said, “I think that’s probably the most important question, which really consumes us today and we’ll be spending a lot of time in small group on strategic design and where we want to go. Don’t expect revolution. We have a generic arm which is now going to be much more focused and much more integrated and combined and we have a specialty arm and we have demonstrated just last week that we’re committed to building our specialty arm and focus on areas of expertise and one of them is pain, with the acquisition of Labrys.Biologics.

“So over the past couple of weeks we’ve done two moves, which are important to strike both the specialty arm and the generic arm, and we’ll continue to do so. I believe that Teva has a unique future in the generic business. This is the core. This the heart of the company. We’re going to strengthen the generic. We’re going to expand our generic business. We’re going to continue to lead the generic industry and there is plenty of room to grow.

“There is room to grow in established markets and there is room to grow in emerging market. We are ready to make the investment and do the right acquisition in order to grow and improve our most top line, but mostly it’s about bottom line management, ” said Desheh, adding, In the specialty arm, which is the second big arm that we have, we’re committed to CNS (central nervous system) and CNS is pain. It’s autoimmune diseases and its psychiatry. We’re committed to respiratory and we’re also committed to selective other opportunities including oncology where we do have an interesting pipeline.”

Teva’s willingness to make acquisitions has grown lately. “There are emerging markets that we’re targeting. Brazil is one that we’ve been targeted for years. Prices were high, currency was strong, ” said Desheh. He mentioned other markets, including Mexico, Eastern Europe, and Asia, which “is not just China and India. It’s Thailand and Vietnam and Singapore and Hong Kong and Japan, where we see a lot of opportunity to our businesses.”

Asked if Teva was willing to accept a bond rating downgrade to make a big acquisition, Desheh said, “The A-minus rating is important to us.” He added, “That said, opportunities to create value could lead to some higher leverage… We’ll try to make sure that acquisitions that we’ll make in the future will enable us to maintain the A minus rating, but it’s not something I can promise.”

As for Teva’s streamlining plan to save $2 billion a year, Desheh said that Teva was reviewing a more efficient use of the money that would be saved, and that profits might fall by over $500 million.

Published by Globes [online], Israel business news – 



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