When Teva Pharmaceutical (NYSE:TEVA) acquired the Actavis generic drug business from Allergan (NYSE:AGN) in August 2016, the Company not only paid a big financial price ($40.5 billion using $33.75 billion cash and $6.75 billion in TEVA's stock), but it also paid a big operational price. The US Federal Trade Commission would only clear the transaction after TEVA agreed to divest one or more strengths of 79 different drugs. Most of these 79 drugs were products already in direct competition with each other, but 19 of them were drugs in development as alternatives to an existing branded product and another nine were in markets with at least one other generic competitor.
TEVA needs revenue from that generics portfolio to offset an expected decline in sales of multiple sclerosis drug Copaxone, the Company's lead product. Leading up to the Actavis generics deal, Copaxone were 20.8% of TEVA's LTM top line. In Q3'16, one year after the Actavis deal closed, Copaxone sales still accounted for 19.1% of total revenue. But the drug's FDA exclusivity period ends Thursday (January 28th) and generic copies of the now standard 40mg dose will hit the market next month. Management's strategy was to acquire significant new sources of revenue even as it sued in court to invalidate the FDA applications for generic versions of Copaxone. Management successfully executed on its acquisition strategy, but has had more mixed results with its legal maneuvers. Competitors successfully invalidated three of TEVA's patents through inter partes review. TEVA is appealing the decision.
