Qué bien te vás...TEVA.

Musings on Commando Teva: Besting Big Pharma?

In recent investor forums, Teva executives have sounded like Big Pharma of the old days-- strong and bullish--while Big Pharma execs now sound more like old-time generics companies-- vulnerable and rather defensive. The contrast was glaring when top Teva execs at their annual investor meeting earlier this month formed a wall of unremitting optimism, embracing both the vast opportunities before them and extolling what they see as their company’s equally vibrant ability to exploit them. The commandos appeared uncharacteristically giddy – using words like "unbelievable," "fantastic," and "flawless" to describe their numbers.

• Teva's gross margins hover in the high 50s percentile (forecasts have them climbing, however), while Big Pharmas are in the 70s and low 80s.
• Its operating margins hover between 25 percent and 30 percent—within the lower range of normal for Big Pharma. And that range has been trending up, even as analysts expect most Big Pharmas' generally to stay flat (Glaxo, Pfizer) or decline (Sanofi, Lilly, AstraZeneca, and it's a toss-up for Bristol-Myers).
• Teva's net margins, however, currently exceed those of Bristol and Roche and are comparable with Lilly (although they trail Pfizer and Merck), points out Standard & Poor's healthcare analyst Herman Saftlas.

Despite all the challenges facing Big Pharma, its business model still has tremendous advantages over most generics companies—higher gross margins, stronger cash flow, and stronger balance sheets, as Moody's pharma analyst Michael Levesque points out.


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