Monday, July 25, 2005


Back to the salt mines!

Alright, the weekend is over, no more Tattoed pigs or Dukes of Hazzard or Out of work search engine butlers. Let's get back to some biotech news! First to bat for the week - Teva buys Ivax for $7.4 billion. This will give the crown back to Teva as the largest manufacturer of generic drugs. Teva has been on a growth spurt lately. Nature Biotechnology reported in its July 2005 issue that Teva will acquire a Chinese generic biologics manufaturer. This last play is a pretty interesting one. There has been a bit of controversy in the U.S. recently about the approval process for generic biologics. Basically, the question arises as to whether the generic product is equivalent (both structurally and in activity) to the product coming off-patent. This manufacturing plant in China will give Teva the opportunity to hone their manufacturing procedures for generic biologics in an environment that is less restrictive so that when the U.S. comes up with an acceptable set of guidelines for the approval of generic biologics, Teva will have the upper hand. This may be the end of the growth for Teva for a while. After this last acquisition, they will be $3.5 billion in debt and S&P will be reviewing their credit. Is a generic drug manufacturer such as Teva a good investment? After all, there is no doubt that there will be an exceptional amount of growth in the generic drug market as more and more blockbuster drugs come off patent. James Cramer of CNBC's mad money doesn't think so. His reasoning stems from the Able Labs blowup. When a generic manufacturer runs into troubles with the FDA, they have no other IP to fall back on. When a biotech or pharmaceutical company runs into trouble with the FDA, it usually only concerns one drug. Case in point, Biogen-IDEC and Tysabri. Biogen is going to bounce back, Able has a longer road to travel.

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