Pharmaceutical companies that make generic drugs were once a niche market. Today generic drug companies are set to bypass the makers of brand name drugs in sales value and volume according to About Money.
Just a few years ago generic drug makers owned just a small slice of the pharmaceutical drug market. Today generics are a formidable segment of the industry and are on track to surpass branded drugs in sales value as well as sales volume within a few years, according to industry analysts.
In the United States – where about 80 percent of all scripts written are for generics — and traditional markets in Europe, multinational branded firms feeling losses from the patent cliff, health care reform legislation and austerity, are forming partnerships with their generic competitors to tap the expansion in generic sales.
The top worldwide generic drug stocks and their 2012 generic drug sales are the following:
- Teva, $10.4 billion
- Mylan, $5.8 billion
- Hospira, $4.1 billion
- Sanofi, €1.8 billion
- Ranbaxy Laboratories Ltd., $2.3 billion
- Aspen Pharmacare Holding Ltd., 15.3 billion rand
- STADA Arzneimittel AG, €1.2 billion
Teva is the clear leader and Teva wants to take over Mylan.
Teva to Acquire Mylan
The New York Times reports that two generic drug stocks may become one as Teva seeks to acquire its rival Mylan.
The deal making reached a fevered pitch on Tuesday when Teva, an Israeli maker of generic drugs, made an unsolicited $40 billion offer for Mylan, a rival based in the Netherlands.
Getting bigger gives you better pricing and better leverage and also gets you into more markets.”
This is especially true for generic drug makers, which rely less on research and development and more on maximizing profits from increasingly large global operations.
Teva makes the case that by taking over Mylan they will add to their lead among generic drug stocks and increase annual revenue to around $30 billion as well as realize about $2 billion in cost savings.
What Are Generic Drug Stocks?
The Food and Drug Administration defines generic drugs.
A generic drug (generic drugs, short: generics) is a drug defined as “a drug product that is comparable to a brand/reference listed drug product in dosage form, strength, quality and performance characteristics, and intended use.”
And generic drugs are cheaper than brand name drugs. This is because generic drug companies do not have the same research and development costs that big pharmaceutical companies have. They simply wait for the patent to expire on new blockbuster medications and make an identical medication for much less money. There are all sort of new miracle drugs in the world and they are simply too expensive for the vast majority of people who take them. Generic drug stocks prosper because they provide necessary medications for the likes of the aging of populations in North America, Europe and Japan which increase their prescribed drug consumption every year.
Should You Invest in Generic Drug Stocks?
No matter how attractive generic drug stocks may seem fundamental stock analysis will tell you if a stock or a pending deal has good intrinsic value or not. There are pitfalls that Teva could fall into and not succeed in acquiring Mylan. These are antitrust concerns and a Mylan poison pill. If you are interested in generic drug stocks do your homework first.