The Zacks Analyst Blog Highlights: Teva Pharmaceuticals, Mylan, Watson Pharma, Dr. Reddy's and Novartis

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Dec 30, 2011, 09:30 ET

CHICAGO, Dec. 30, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Teva Pharmaceuticals (Nasdaq: TEVA), Mylan, Inc. (Nasdaq: MYL), Watson Pharma (NYSE: WPI), Dr. Reddy's (NYSE: RDY) and Novartis (NYSE: NVS).

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Here are highlights from Thursday's Analyst Blog:

Ring in Generics in 2012 and Beyond

The New Year is expected to be a happy beginning for generic companies like Teva Pharmaceuticals (Nasdaq: TEVA), Mylan, Inc. (Nasdaq: MYL), Watson Pharma (NYSE: WPI), Dr. Reddy's (NYSE: RDY) and Sandoz, the generic arm of Novartis (NYSE: NVS). A large number of high-value branded pharmaceuticals have begun to go off-patent, and many more will lose patent exclusivity in the next few years.

Major revenue generating blockbuster medicines have lost patent exclusivity in 2011, and many more will in 2012. While Teva and Dr. Reddy's have launched their generic version of Zyprexa, India's largest generic maker Ranbaxy Laboratories Ltd. has launched a generic of Lipitor in partnership with Teva. Watson has launched the authorized generic version of Lipitor.

Generics Coming Home to Roost

The generic makers with a robust pipeline are sure to exploit the patent cliff overhanging the pharma industry, especially with so many blockbuster branded medicines slated to lose patent protection in 2012, the year stands out as a beacon for these companies with a slew of product launches already lined up.

Important 2012 US generic launches for Mylan include Provigil, Diovan, Zyprexa, Plavix, Actos/Actoplus, Viramune, Clarinex, Singulair and Avapro. Teva, another force in the generic space, has drugs like Avandia, Avandamet, and Avandaryl, Actos/Actoplus and Entocort EC ready for 2012 launch while Watson has Xopenex.

Further, the industry stands to gain from an increasing awareness of generic products. Given the uncertain economic outlook, various government agencies as well as privately managed care organizations are taking initiatives to promote generics in place of costlier branded treatments.

These factors, together with an aging population and a corresponding increase in healthcare costs, should lead to continued expansion of the generics marketplace. Besides, US healthcare reform that works at bringing more people under the purview of prescription drug benefit would catalyze generics uptake.

Data from IMS Health substantiate that the growth rate of generics is twice that of branded drugs the world over. In Europe, too, generics make up almost half of total volume sales.

Beyond the Bubble

With success guaranteed until 2017-2018, the question for investors is what lies beyond. With most large branded drugs due to lose patent exclusivity within 2017-2018, we have little visibility into the growth prospects for generic companies beyond that timeframe.

Moreover, large pharmaceutical players are not willing to take the blows lying down. These well-capitalized companies are continuously launching new products, entering into in-licensing deals and indulging in tuck-in acquisitions.

These companies are also undertaking measures like work force reduction and share repurchases to shore up the bottom line. The last laugh may well be theirs. Meanwhile, generic players are geared up to make the best use of the current favorable market conditions.

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