Teva Pharmaceutical Industries, Ltd
Table of ContentsTable of ContentsIssues...............................................................................................................................................1Financial Analysis.......................................................................................................................1-2Porters 5 Forces..........................................................................................................................2-4Alternatives Identification.............................................................................................................4Evaluation of Alternatives..........................................................................................................4-5Recommendation............................................................................................................................6
IssuesSince becoming a global giant, Teva is now forced to compete with a low-cost prices for innovative drugs by other emerging pharmaceutical companies. Teva must also compete with research and development from other larger pharmaceutical companies while developing their own innovative drugs. The question of expanding their scope or expanding geographically becomes an essential issue. The main issues surrounding this case can be ultimately broken downinto four issue; emerging markets, valuation, political risks, and debt ratings. Like any good company should, Teva must assess the risk involved in an emerging market and build strategies to counter these threats. Differentiation will also be a challenge and a necessity in order for Tevato deliver value added product. Political risks are always present in any foreign investments and Teva must assess risks associated with its own foreign investments. In an industry dependent on good debt, Teva must consider their debt rating in an emerging market.Teva Financial AnalysisTeva is a fast growing company that has doubled its sales in the past six years while maintain a good debt to capital ratio. Teva has sustained an average ROA of 7% a year over the past five years and 64% of its revenues come from North America. Teva’s Return on Equity has averaged 15.5% over the last five years doubling the ROA of their investors. In addition, Teva has experienced great profit increase from their brand name drug for multiple sclerosis, Copaxone. In 2005, Copaxone’s sales reached $1.2 billion and Teva received an estimated 55% ($647 million) of these sales through their affiliation with Sanofi-Aventis. According to the 90-95% estimated gross margins, 10% is deducted for cost of goods sold. Research and development expenses are estimated at 14% and the Administrative, General, & Selling (AGS) 1
Costs are estimated at 10%. The AGS may be lower due to Sanofi-Aventis having a large share of these expenses. In the table below, is an estimate of Teva’s operating margin from Copaxone
