Teva asks ICG to help its control “indirect spend”
ICG’s remit, which includes managing some spending decisions, covers the provision of sources for Teva’s logistics, travel, lab supplies and equipment, packaging, IT and marketing needs.
The Israeli non-branded drug giant explained that “gaining greater insight and control over its indirect spend provides an opportunity to achieve significant savings and contribute to financial performance,” adding that it had selected ICG to help with this activity while it concentrates on core competencies.
Carl Guarino, ICG’s CEO, said that: "We look forward to helping Teva achieve its savings objectives while maintaining its focus on anticipating and responding to economic and industry dynamics." The contract is scheduled to run for a period of five years and, according to ICG, is worth several million dollars.
Generics a better solution, says Teva CEO
Teva’s commitment to cost cutting is by no means unique in the pharmaceutical industry. However, unlike its branded pharma cousins, the Israeli firm’s desire to lower spending may be more of strategic decision than a business necessity.
While big branded pharma scrambles to bolster pipelines with acquisitions, as evidenced by Pfizer’s recent swoop for Wyeth, the generics firms are positioning for the anticipated surge in demand for non-branded products. At present the market for generic drugs is growing at around 7 per cent a year, according to the US Generic Pharmaceutical Association.
Most observers expect that growth of pharmerging markets such as India, China and South America, coupled with loss of blockbuster patent protection for key drugs in the US and Europe, will accelerate the expansion of the non-branded drug industry and that this will be positive for Teva.
This buoyancy is reflecting in the company’s most recent set of financials. Excluding costs associated with the $7.5bn (€5.8bn) acquisition of US generic rival Barr, Teva’s profit for Q4 2008 increased some 11 per cent to $634m, ahead of analysts’ estimates.
Further good news came from Teva’s expectation that Barr will be accretive to earnings in the third quarter, three months earlier than it predicted. The firm also said that it will not move for Iceland’s Actavis or Germany’s Ratiopharm as its main focus will be on completing the Barr integration.
Teva’s share price rose 4 per cent the day after its results were announced, with most observers attributing the gains to its Q4 performance, particularly in markets such as Spain, Italy and Hungary
Teva CEO Shlomo Yanai was very upbeat about the company’s prospects this year. He commented that: "The generic-drug industry is known to be stronger and may provide a better solution during these times," describing how the current economic climate could increase the firm’s market share.
