Teva axes Ivax' Puerto Rico facility

By Gregory Roumeliotis

- Last updated on GMT

Related tags Teva Puerto rico Simvastatin

Looking for $45m (€35m) in savings, Teva has decided to abandon its
drug manufacturing plant in Cidra, Puerto Rico, as it scrambles to
adjust capacity seven months after its acquisition of Ivax.

The world's biggest manufacturer of generic drugs said it has already transferred the production of the majority of the products made in Cidra to other manufacturing facilities around the world, attributing the move to its global "rationalisation strategy."

"This is designed to further improve efficiencies, supply chain management and competitive positioning following the acquisition of Ivax in January 2006,"​ Teva announced in a statement.

Asked by why the Cidra site was specifically chosen for closure, the Israeli drugmaker refused to comment, still the facility appears to be the casualty of Teva's arms race with Novartis for global domination of the generics market, which is expected to grow to $100bn in sales by 2010 according to market research firm Datamonitor.

In its quest for economies of scale, Teva acquired Ivax for $7.4bn not just to stay ahead of Novartis, that through its Sandoz unit has been snapping up companies like Hexal and Eon Laboratories, but also to add a respiratory line of products to its portfolio, as the company expects respiratory drugs to make up about $400m of its 2006 revenue, growing to $1bn by 2010.

However, such acquisitions often result in overcapacity and duplication; a case in point is Pfizer that has divested several plants, including in Puerto Rico, following its merger with Warner Lambert in 2000 and the acquisition of Pharmacia in 2003.

Although Teva has introduced seven drugs in the US this year, including the largest launch ever in the generic industry with the generic version of Merck's cholesterol medication Zocor (simvastatin), its large portfolio meant that adjustments had to be made.

The Ivax facility at Cidra has approximately 550 employees and originally manufactured 50 products.

Teva said it will will work closely with employees and local authorities to ensure as seamless a transition as possible and to offer financial and placement assistance to those staff affected by the closure.

As a result of the closure the company expects $45m in cost savings in 2007, stressing its active pharmaceutical ingredient (API) manufacturing facility in Puerto Rico is not affected by the closure.

The fact that Teva has 148 more applications for generic drugs pending with the US Food and Drug Administration (FDA) - their brand-name equivalents represent $84bn in US sales - means that's the drugmaker will have to consider how its plans its capacity carefully.

In a conference call with financial analysts earlier this month, the company's CEO Israel Makov said another acquisition for Teva might be possible in an area such as biogenerics, which is currently a regulatory minefield in the US.

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