With no last minute creative moves forthcoming from Pfizer Inc. (NYSE: PFE; LSE: PFZ), Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) announced yesterday that it began marketing of its generic version of the antidepressant drug Zoloft.
Teva obtained approval from the US Food and Drug Administration (FDA) for the sale and marketing of its generic version, Sertraline, more than two weeks ago, but only launched the product yesterday. In contrast, Teva’s largest launch in its history, the generic version of Merck (NYSE: MRK)’s cholesterol drug, Zocor, was made on the day the final approval was granted.
Leader Capital Markets analyst Uri Hershkovitz says he believes there were three reasons why the launch of generic Zoloft was delayed. “First there was the labeling. There was probably a small issue to cleared up about this, and this is the official reason. Secondly, there was the issue of the approved generics. Pfizer subsidiary Greenstone Limited is also going to launch this version and Teva wanted to surprise it.
"If Greenstone doesn’t know exactly when Teva will launch its version, it can’t make adequate preparations for intense competition on the first day. So Teva dispatches dozens of trucks containing a quantity large enough to last two months, and wins a share that is almost 100% of the market. Greenstone will only be able to enter later on. The third reason, which I also think was not the main one, was the shifting of profit from the second to the third quarter. This factor hovers in the background to a certain extent.”
Hershkovitz expects the generic version of Zoloft to contribute $200 million to Teva’s revenue during the exclusivity period, with earnings per share of $0.10-0.12, or profit of $83.5-100 million. “Obviously, the drug is profitable but at a lower rate than that of Zocor,” he explains. “This is because Teva got Zoloft as a result of its acquisition of Ivax. It came together with an agreement on active pharmaceutical ingredient (API) production with Indian pharmaceutical firm Cipla, so Teva will not benefit from the profitability inherent in the vertical integration that it usually has with its own API division. Additionally, it should be remembered that the Zoloft launch was also the outcome of a compromise between Ivax and Pfizer, so Pfizer will receive royalties on the sales of the drug.”
Published by Globes [online], Israel business news - www.globes.co.il - on August 15, 2006
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