Israel’s Teva Pharmaceutical Industries Ltd., the world’s largest generic drug maker, announced plans to pay $460 million for a majority stake in Japanese generics powerhouse Taiyo Pharmaceutical Industry Co. Teva said it expects annual sales in Japan to reach $1 billion in the next few years. The 57 percent stake in Taiyo is intended to help them reach their goal.
Taiyo boasted revenue of $530 million in 2010 on its arsenal of 550 products. Leveraging itself on Taiyo’s significant presence in Japan, Teva believes it will reach its goal of $1 billion in Japanese revenue ahead of schedule. After establishing a joint venture with Kowa Co. in Japan four years ago, Teva announced that it expected to make $1 billion in revenue by 2015. Teva believes the acquisition of Taiyo, valued at $1.3 billion, will contribute to its profits within a year of closing.
The company has been laboring expand its business through M&A, especially in the last year. The Taiyo deal comes on the coattails of the company’s decision to purchase Provigil drug-maker Cephalon Inc. for $6.8 billion. That deal, priced at $6.8 billion is expected to close later this year. In August, Teva also purchased Ratiopharm of Germany for $5 billion. While the expensive acquisitions may weigh down share prices and earnings in quarters directly ahead, if all goes to plan, the deals, which are helping them expand and strengthen their global presence could be potentially fruitful.
Amgen (NASDAQ: AMGN)
Amgen made history last month when it announced its intention to begin paying dividends later this year, a move that sets it apart from any other large-cap biotech company. Some saw it coming, with the large cash reserves and sagging share prices, it was bound to happen. The real news with this company is more related to its weak valuation. Amgen, somewhere around 11 times forward earnings, is among the most affordable biotech stocks on the S&P, but it’s not inexpensive because it’s hopeless. The company, despite weak share prices, nearly 30 percent 2005 lows, Amgen is expected to make a comeback and increase profitability by 2015.
In addition to having room to cut costs, the world’s largest biotech company, has roughly over 30 human studies on new compounds in progress. Among the current studies, treatments for pancreatic cancer, osteoporosis and ovarian cancer, with the potential to generate as much as $3.5 billion in sales. Additionally, Amgen has denosumab, sales of which they anticipate will reach $4 billion by 2015. Shares of Amgen never fell on structural difficulties and they have a good history of cash returns., making their potential for a comeback more probable than many investors are willing to believe at its current performance level.
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