PFE/TEVA
Dew,
Personally, I do NOT see Pfizer (or any other branded company) acquiring a major stake in the generic space, whether that is Teva or any other generic company.
Generic businesses operate on a completely different business model than an innovator firm. They have different areas of focus, different core competencies, different go-to-market strategies, different customers, and from a regulatory and a legislative standpoint, conflciting interests.
About the only thing they have in common is manufacturing prescription medications, and I don't think pharma views the manufacture of tablets and capsules as a value-added core competancy they need to keep in house. Also, the advent of authorized generics has allowed pharma to particiapte to some degree in the generic space while continuing to operate their plants.
Acquiring a generic pharmaceutical company would probably be a distraction to pharma senior mangement, whose time and energy is better spent on the core business of drug research, discovery and development. It would suck up capital that could be better deployed elsewhere, and the margin structure of the business would necessarily decline by adding to their consolidated P&L revenue from generic sales, which earn much lower gross profits.
The only positive thing I can think of by acquiring a generic company is that it helps the top-line revenue growth, but if that is the only objective, pharma could go out and acquire any business in any indistry to accomplish that. Acquiring and managing a generic pharmceutical company would be as different from managing an innnovator firm as would acquiring a PBM, a CRO, or any other company that operates in the healthcare system.
All that said, I am positive there will be further consolidation in the generic space. There has to be. No ifs, ands, or buts about it. The industry is far too fragmented and is crying out for further consolidation.
Lastly, as you well know, Novartis is a very respected Company. They have a diverse portfolio, a decent pipeline, very little exposure to generic threat in the foreseeable future, and a strong management in Basel. Despite all that, I'm not sure the analysts, even to this day, really understand Vasella's moves in acquiring Hexall, Eon, and Lex as part of Sandoz. Sandoz has struggled for years to find its identity, all the way back to the Geneva days. In fact, Bernie Hemple, the former CEO of Eon, was appointed by Vasella to be the US CEO of Sandoz following its acquisition of Eon. So the jury is still very much out on Novartis' move into generics.
Anyway, those are my views for what it's worth.
Regards,
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