Standard & Poor's (S&P)’s raised its corporate credit and senior unsecured debt ratings on Israeli generic drug maker Teva Pharmaceutical Industries, and removed them from CreditWatch, stated a press release.
The rating action follows Teva's conversion to equity of virtually all of its $550 million in outstanding 1.5 percent convertible senior debentures due 2005. The debentures were held by subsidiary Teva Pharmaceutical Finance.
The ratings were originally placed on CreditWatch on Sept. 29, 2003, to reflect the possibility that such a significant portion of outstanding debt would be retired with stock in the near future. The outlook on the Israel-based company is stable.
"The investment-grade ratings on Teva reflect the company's expected continued solid operating performance and its strong position in the growing generic drug market," said S&P's credit analyst Arthur Wong. "The company is also expected to maintain a moderate finance profile, and S&P's has increasing confidence in the company's ability to cope with financial uncertainties. These factors are partially offset by the company's aggressive efforts to expand its market presence."
Teva is one of the largest generic drug makers in the world based on sales and number of prescriptions. The company is also one of the most geographically diverse generic drug makers, deriving 62 percent of sales from North America, 23 percent from Europe, and 15 percent from the rest of the world, with Israel itself accounting for 10 percent.
Earning prospects for generic drug makers are favorable, given the increasing focus on controlling growth in drug spending. In addition, drugs representing $44 billion in 2002 sales will lose US patent protection in the next five years.
While the generic drug industry remains highly competitive, Teva, as one of the largest producers, is well positioned to benefit. The company has one of the broadest drug pipelines, with 60 abbreviated new drug applications (ANDAs) filed and awaiting FDA approval. More important, Teva estimates that it is the first to file for 15 of these products, which means that it may benefit from 180-day generic market exclusivity.
Teva's large size and broad product offering also help it obtain supply contracts, as drug sellers like to deal with fewer suppliers. In addition, Teva's generic portfolio is diverse, with no one product accounting for a significant portion of total annual sales. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
