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The biggest Little Pharma in the world

BY Alaric DeArment

NEW YORK —With exception to those companies that are the first to win Food and Drug Administration approval for knockoffs of blockbuster drugs, generic drug companies rarely rake in the kinds of massive profits that their brand counterparts do. But one company is showing that focusing on generics doesn’t have to mean playing Two Buck Chuck to brand drug makers’ Bordeaux.

In January, Teva Pharmaceutical Industries became the first generics company to get an “A” rating on its credit from Moody’s Investors Services.

Top pharmaceutical companies by U.S. sales*

RankTOTAL*In billionsSource: IMS National Sales Perspectives
2008 2007
1 Pfizer $20.5 $23.6
2 GlaxoSmithKline 18.4 20.7
3 AstraZeneca 16.3 15.5
4 Johnson & Johnson 16.0 16.3
5 Merck 15.5 17.6
6 Amgen 13.4 14.3
7 Hoffman-LaRoche (incl. Genentech) 13.1 12.4
8 Novartis 12.4 13.9
9 Eli Lilly 11.4 10.3
10 Sanofi Aventis 11.0 10.9
11 Abbott 10.0 9.7
12 Teva Pharm USA 9.2 7.9
13 Bristol-Myers Squibb 8.0 6.9
14 Takeda 8.0 7.7
15 Wyeth 7.6 8.6
$291.5 $287.6

“The upgrade of Teva reflects a favorable growth outlook, clearly articulated financial targets and the expectation that mergers and acquisitions can be financed with debt levels appropriate for an A3 rating,” Moody’s SVP Michael Levesque said. Teva’s acquisition of Montvale, N.J.-based Barr Labs and the increasing popularity of generic drugs contributed to the upgrade as well. Already the world’s largest drug maker, Teva recently announced plans to earn more than $30 billion in global revenues by 2015.

Overall, the upgrade alone doesn’t mean that much for the generics industry as a whole, Levesque told Drug Store News. Teva is likely to remain alone among generics companies in its single-A credit rating for some time. But Teva’s enormous growth in recent years points to something bigger for generic drug companies, namely that the lines between Big Pharma and Little Pharma are blurring, and generic drug makers could start to play a much larger role in the industry despite the heavy commoditization of the generics market.

Brand drug makers have started dabbling in generics themselves. Novartis owns the world’s second-largest generic drug maker and a major player in the fledgling biosimilars industry, Sandoz, and reports recently surfaced in the German media that Pfizer was Teva’s main competitor in its bid to acquire a German generics manufacturer. Such brand companies as Pfizer and Merck also have expressed interest in getting involved in follow-on biologics, should Congress create a regulatory approval pathway. It works both ways. In addition to its generics business, Teva also makes branded drugs, such as the multiple sclerosis treatment Copaxone (glatiramer acetate), and Watson has a sizeable branded drug business as well.

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Bashas’ rejects Albertsons’ buyout bid

BY Alaric DeArment

NEW YORK Bashas’ has turned down a nearly $300 million buyout offer from Albertsons, according to published reports.

According to an American City Business Journals article, the Chandler, Ariz.-based Bashas’ was uninterested in a buyout offer of $290 million for the chain.

Bashas’ filed for Chapter 11 bankruptcy protection in July, announcing the following month that it would close 14 stores. Still, the published reports quoted an attorney representing the company as saying that the reorganization plan would ensure Bashas’ remained in the hands of the Bashas family, which has owned it since 1932.

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Shoppers’ new initiatives sets chain up to become retail giant

BY Michael Johnsen

WHAT IT MEANS AND WHY IT’S IMPORTANT While the decision to move in this direction may have been made before Chong Bang crossed the border, there is no questioning that industry watchers will be focused on what SDM’s new top merchant will do to further improve the stores.

(THE NEWS: Shoppers Drug Mart takes a page out of CCR playbook. For the full story, click here)

That has a lot to do with Bang’s pedigree — he’s directed a significant merchandising program at Walgreens, one of the leading pureplay pharmacies in the United States. And now he’s at Shoppers, the leading drug store retailer north of the border.

Bang will be armed at Shoppers with the sales data generated by 9.7 million members of the pharmacy’s Optimum loyalty program, 80% of whom are women. When you consider that there are only 34 million Canadians, that means that almost 1-in-3 Canadians are members of Shoppers’ loyalty program, and almost 1-in-2 Canadian women.

Presently, Shoppers plans to grow its square footage at a clip of 8% to 9% with a new distribution center slated to open in 2010 to help support that growth. And that’s really going to be Bang’s merchandising challenge — finding a way to slip one more item into that Shoppers marketbasket in a saturated marketplace. Bang certainly can’t build front-end sales by attracting new customers. There just aren’t that many Canadians who don’t already shop at Shoppers.

For Bang, it’ll be a question of optimizing categorical synergies and in doing so help drive impulse purchases. Similar to Walgreens, Shoppers is on a mission to make a good shopping experience better, and Bang’s expected to help realize that goal.

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