when he returns Teva Pharmaceutical Industries Limited (New York Stock Exchange: teva; level: teva) was recovering from its disastrous $40 billion acquisition of Allergan’s Actifis, then-new CEO Kar Schultz announced that the Israeli company would focus on generics at the expense of innovative ones. Schultz’s restructuring plan included massive cuts and even the sale of some of Teva’s innovative products, which succeeded in reducing the company’s huge debt, which was the main goal he pursued during his presidency.
But what about Teva’s growth drivers? Research analyst at Oppenheimer Omri Efroni recalls that growth was supposed to come mainly from biosimilars, generic products in the field of biological drugs, but this approach did not prove itself mainly due to repeated delays in launching the promising biosimilar product Humira, which was It is supposed to be the company’s next blockbuster.
And so in the fourth quarter of 2022, the last quarter under Schultz, revenue was $3.88 billion, down 31% from the third quarter of 2017, when Schultz took office. That was expected. The loss of the patent on its flagship drug Copaxone along with the need to reduce activity to deal with debt saw a contract in revenue.
Now Teva is hoping to change direction. The company’s new CEO, Richard Francis, laid out Teva’s strategic plan: the engine of growth will be innovative products, not generics and not biosimilars, not even improved generics.
The persistent identity problem
Since Copaxone’s birth, Teva has constantly had an image problem about who it is and whether it is a generic or an innovative/branded drug company. Previous CEOs have had different ideas about the right mix of the two types of drugs.
Uri Hershkowitz, an outside advisor to brokerage firm Cantor, said, “Teva hasn’t really developed its own medicines in a structured way. It’s hard to be an innovative pharmaceutical company and you need to invest a lot of money in a lot of new products, knowing that most of them will fail, and they do it over and over again.” As time went on Copaxone gave the company the money to do it but there was hesitation which brought us to the current situation.”
At the beginning of Schultz’s tenure as CEO, Teva bore a bitter taste of failure to develop branded drugs with the development of NGF for pain medication, which was developed with Regeneron and which certainly affected the company’s desire to continue. Schultz sold more innovative assets than bought them to service debt. Hershkowitz insists that “today Teva must do this and it must strengthen its innovative side in order to survive and justify its existence.”
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The new CEO believes that Teva is innovative and that this is a possible scenario and has arrived with experience in this field. In his most recent position, although he was CEO of the generic drug company Sandoz, before that he had a large role at innovative drug development company Biogen. If Teva moves in this direction, it will compete with huge companies with thousands of employees in drug development and clinical trials as well as large drug marketing networks in various fields. Teva has already succeeded in doing this with Copaxone and currently has a pipeline with many interesting branded products on the market. The question is whether he can turn the occasional successes around with a more systemic approach.
The enormous potential in schizophrenia
After Francis’ strategic change, Teva’s global R&D department is expected to receive a boost. Dr. Eric Hughes has been selected to lead the department. A highly respected scientist in the field of infectious disease and immunology, he was most recently Senior Vice President of Clinical Development and Translational Medicine at Vertex Pharmaceuticals and prior to that was Head of the Global Development Unit for Immunology, Hepatology and Dermatology at Novartis. He told Globes he was excited about Teva’s existing assets and development team, especially in Israel and Australia.
In Hughes’ view, Teva’s initial weapons are products already in the drug pipeline. The main product in the US market currently is Ostedo for the treatment of involuntary movements (chorea) for Huntington’s disease which will record sales of nearly $1 billion in the US in 2022. Teva hopes to reach annual revenue of $2.5 billion for Ostedo by expanding sales to Europe And other countries and its use in other involuntary movements, although this will require clinical trials. Analysts told Globes they see this as an ambitious but achievable goal for the product.
Efroni said: “Ostedo is entirely the market for Teva. Its entry into Europe is expected to contribute to revenue and profits, and in Europe Teva is getting stronger commercially.
Hughes himself is particularly excited about the approval obtained a few months ago and the upcoming launch of the delayed drug Uzedi for the treatment of schizophrenia patients. This is a drug that Teva is developing with MedinCell, and it’s a version of risperidone, which is a drug commonly used to treat schizophrenia. The drug is given by injection once a month or two, a regimen that greatly facilitates the treatment of patients and significantly reduces the risk of recurrent attacks. Late-release versions of risperidone are already on the market, and Teva is entering a market that in 2022 was about $4 billion. It is difficult to convince patients to change an effective injection regimen, so Teva will mainly target patients who have not yet used long-term injections. It is expected to record initial annual revenues of several hundred million dollars, possibly more, depending on the quality of its marketing.
Analysts are actually more enthusiastic about Teva’s version of olanzapine being given to schizophrenia patients that risperidone can’t help. Hughes explains its advantage. “When using delayed-release Olanzapine, there is concern that the substance could accidentally enter a vein and cause serious side effects. Our product is injected under the skin and does not cause this phenomenon, so it is very competitive in the category. We aim to achieve clinical results in 2025 When a clinical trial recruits patients quickly, that’s often a good sign, and that’s what we’re seeing with this product.”
Evercore analyst Umer Raffat, who has been following Teva for years, sees this product as a great opportunity for the Israeli pharmaceutical company. He cautions that there is still some uncertainty, but if it proves to be free of side effects, Teva will be ready to break into the market within a few years.
The product that might boost Teva’s value
Another Teva product that has sparked market interest is Anti TL1 A. The3 is currently testing its effectiveness in treating inflammatory bowel diseases such as colitis and Crohn’s disease. Merck of America bought a similar product from Prometheus for $11 billion, and if Teva’s product is valued in a similar way, it should boost Teva’s value by about 50%, Hershkowitz says. Hershkowitz explains, “This product works using a different mechanism than other products on the market. That means it can work better, the same or less well. It all depends on the results.”
Hershkovitz and Raffat both claim that if the product is successful, Teva will face a dilemma: sell it and thus significantly reduce debt, or continue with Phase III trials, which would mean investing another $200-300 million before adding marketing costs. Today, Teva has marketing capabilities focused on neuroscience, and if it wants to market this product itself, it will have to build a new marketing network for inflammatory diseases. “I’m sure the lights stay on in Teva’s management offices for many hours, when they discuss the question of what to do with this product, if of course it works,” says Hershkowitz.
Another product, in early stage trials, is an antibody designed to prevent the negative effects of gluten in celiac patients. Teva, very confident about this, will invite celiac patients to a “trial challenge,” in which they will eat gluten and be treated with the drug, hoping it will actually do the trick.
“We’re testing the drug both with patients who today maintain their balance when they avoid gluten, and also with those who cannot maintain their balance,” says Hughes. “Our ambitious goal is for those who use the drug to be able to take whatever they want.”
Published by Globes, Israel business news – en.globes.co.il – on July 4, 2023.
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