Israel-headquartered Teva has announced plans to halt the development of oncology and women's health products and instead focus on CNS and respiratory medicines. The company anticipates that cost savings of USD550 million may be realised through the strategic shift.
IHS Life Sciences perspective | |
Significance | Teva has outlined plans to drop R&D activities in oncology and women's health segments and instead focus on the development of respiratory and central nervous system medicines. |
Implications | The move is expected to realise cost savings of USD550 million over the next three years. Meanwhile, the company's pipeline is to shrink from more than 30 products to about 20 candidate treatments. |
Outlook | The plan will likely allow Teva to concentrate on these smaller areas, allowing cost savings to be realized. This does, however, increase risks should the company face a R&D set back in one of these therapy areas. |
Teva Pharmaceuticals (Israel) has announced the findings from a company-led review of its research and development (R&D) strategy. Teva has suggested that the review took into account matters including profitability, barriers to market access, and the competitive landscape. A copy of Teva's press release detailing the review can be accessed here.
Looking ahead, Teva plans to focus more closely on two of its existing therapy areas: central nervous system (CNS) and respiratory. These therapy areas will include indications across multiple sclerosis, neurodegenerative diseases, pain, asthma, and chronic obstructive pulmonary disease. Development of new products in other current key therapies areas, including oncology and women's health, is to be halted, but the company has suggested that it will progress with close-to-market candidates and will examine "opportunities for commercially-orientated activities and collaborations" in these areas.
The move will bring about the discontinuation and/or divestment of 14 candidates currently in Teva's pipeline. This, the company suggests, will result in cost savings of USD150 million in 2015 and a combined USD400 million in 2016 and 2017. Furthermore, Teva suggests it may launch some 20 products in CNS and respiratory therapy areas by 2019, with potential revenues of USD4 billion from these products. Cost savings realised through the move are to be channelled towards the two key research areas and the company's "efficiency objective".
Outlook and implications
Teva's business is primarily focused on two business areas: generics and speciality medicines, which includes a specialism in CNS, oncology, respiratory, and women's health. Indeed, second-quarter revenues from the oncology and women's health segment amounted to USD412 million of Teva's total speciality revenues of USD2.1 billion in the same period (see Israel: 1 August 2014: Teva's Q2 financial results show 2% y/y revenue growth). The move to stop R&D in these fields therefore represents a serious change in strategic focus for the company. It should be noted however that sales of products already in the market and close to market in these therapy areas will continue, meaning that revenues will not disappear, but instead their importance will decline as CNS and respiratory become more prominent on the back of product launches.
As highlighted, substantial cost savings may be realised across both R&D and sales functions. In implementing these cost-saving measures, Teva may be attempting to offset the risk to the company's sales should a generic version of its flagship Copaxone (glatiramer acetate) product enter international markets. This risk has already prompted the firm to implement a USD2-billion package of cost savings, which has included 5,000 job losses, the reportedly planned closure of up to 38 manufacturing plants, and a growing focus on the development of cheap-to-develop new chemical entities. Aside from the cost savings, Teva has also sought to shift patients across to a new thrice-weekly dose of Copaxone in an effort to shore up market share.
Despite the cost savings, the company's pipeline portfolio is set to shrink from more than 30 products to some 20 products, potentially exacerbating the risk should one of these candidates fail to enter the market. Furthermore, Teva has historically faced a backlash in attempting to implement cost savings in Israel, increasing the risk that the firm may fall out of favour in its home country should the latest cost savings affect jobs there.
Related articles
- Israel: 13 June 2014: Teva may consider closing up to 38 manufacturing plants
- United States: 29 January 2014: US FDA approves thrice-weekly Copaxone
- Israel: 5 December 2013: Teva highlights new therapeutic entities pipeline
- World - Israel: 11 October 2013: Teva cuts 5,000 jobs in USD2-bil. cost-saving drive