Teva Pharmaceutical Industries (TEVA) is the largest generic-drug company in the world but it seeks a better balance between sales of knock-off pharmaceuticals and its own branded products.
Israel-based Teva collected $16.1 billion of net sales in 2010. It gets most of its business from generic equivalents of brand-name drugs, marketed mainly in the United States and Europe.
Teva's first-quarter net income rose to $765 million from $714 million in 2010. Net sales in the January-to-March period increased to $4.08 billion from $3.65 billion in the same period last year. The company said 30 percent of the first-quarter sales came from branded drugs.
Teva plans to roughly double its annual sales of higher-margin branded drugs to more than $9 billion in 2015 from $4.6 billion in 2010. To advance that plan, Teva in May agreed to pay $6.8 billion in cash to acquire Cephalon (CEPH), which gets most of its business from branded-drug sales. The acquisition is expected to close in the third quarter.
"This is transforming for Teva's branded business," Shlomo Yanai, president and chief executive officer of Teva, said in a prepared statement in the company's news release about the planned Cephalon acquisition.
Cephalon collected $2.8 billion in revenue and $417.6 million of net income in 2010. The Pennsylvania company is seeking U.S. Food and Drug Administration (FDA) approval for several drugs in late-stage development that could enhance similar efforts by Teva to treat cancer, respiratory ailments, and central nervous system disorders. Cephalon's top-selling drug is Provigil, a branded therapy for sleeplessness.
In early June, most stock analysts who followed Teva recommended buying its stock and none had less than a neutral opinion of the stock's investment potential.
Zacks Investment Research reiterated its neutral rating in a June report questioning the prospects of Teva's top-selling branded drug, Copaxone. The drug is the leading therapy for multiple sclerosis in the world but "faces intense competition" from companies capable of making generic versions, Zacks reported.
"With Copaxone contributing 20.5 percent of total revenues in 2010, the earlier than expected entry of generic versions of Copaxone would be a major setback for Teva," analysts wrote.
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