Standard & Poor (S&P)'s has revised its outlook on generic drug maker Teva Pharmaceutical Industries to negative from stable. At the same time, S&P's affirmed its BBB corporate credit and senior unsecured debt ratings on the Israeli firm.
The actions are in response to Teva's announcement of its intention to acquire US-based Sicor, a pharmaceutical company that specializes in generic drugs, injectable pharmaceuticals, and generic biopharmaceuticals, in a $3.4 billion transaction to be financed with debt and stock.
"The investment-grade ratings on Teva continue to reflect the company's expected continued solid operating performance, based on its strong position in the growing generic drug market," said S&P's credit analyst Michael Kaplan.
"With the Sicor acquisition, Standard & Poor's believes that Teva will have used much of its financial capacity within the constraints of the current rating, and that further major expansion will be limited until the company demonstrates its success in the expansion of its market presence.”
Teva is one of the largest generic drug makers in the world in terms of 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 Israel and the rest of the world.
Earnings 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 filed and awaiting FDA approval.
S&P's expects that the company will continue to pursue new targets to increase its presence in the North American and Western European generic drug markets. Teva has also entered discussions to acquire Savient Pharmaceuticals for roughly $365 million. Savient would add several branded drugs to Teva's portfolio, as well as further enhance the company's biogenerics development program. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
