Generic Industry On Path To Recovery: 3 Hot Picks For 2019

The Medical-Generic Drugs industry recovered somewhat in 2018 after a rough 2017, gaining from stabilization in U.S. generic drug pricing. This fact was reiterated by industry leaders on their respective earnings call.

The Generic Drugs industry has declined 25.4% so far this year compared with a fall of 7.6% in the broader S&P 500.

Lower drug prices in the United States have been a constant drag on revenues of industry players. Moreover, accelerated FDA approvals to generic drugs and ongoing customer consolidation have intensified competition, putting further pressure on drug prices. Several large companies in the industry are restructuring or exploring strategic alternatives as safeguard against the macro challenges.

However, the stability in the industry sets the stage for players to get back on growth track. Several blockbuster drugs from big pharma companies have lost or are set to lose patent protection. This creates a significant opportunity for generic drugmakers with billions of dollars in sales up for grabs.

Performance of Industry Leaders

A look on the performance of the top three players in the industry shows a recovering trend.

Teva Pharmaceutical Industries Ltd. TEVA has been facing significant challenges. This includes accelerated generic competition for its blockbuster multiple sclerosis drug, Copaxone; new competition for branded products, pricing erosion in the U.S. generics business and a massive debt load of approximately $30 billion.However, Teva undertook some strategic and restructuring initiatives in 2018 to revive growth.

Teva has a new organizational structure in place, is closing plants, cutting down its generics portfolio, divesting non-core assets, eliminating low-value R&D projects, and is reducing global workforce to revive growth. Its financial position also seems more stable in 2018 than before as it is regularly paying down debt.

Its newest drugs, Austedo and Ajovy, could emerge as significant contributors to long-term sales growth.

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Craig Newman 2 years ago Member's comment

I thought $BHC didn't make generics?