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Barry Cohen
Barry Cohen
Articles (172) 

Covid-19 Could Benefit Generic Drug Companies

Pricing is increasing for makers of copycat medicines

At least one analyst is predicting Covid-19 could be beneficial to generic drug companies as concerns over the supply chain ease, according to an article in FiercePharma. In fact, prices for generic drugs are increasing, meaning the coronavirus pandemic could boost profits for the makers of copycat medicines.

Early concerns that there would be shortages in the worldwide supply have diminished. In a Wednesday note to investors, Bernstein analyst Ronny Gal said the global generic drug supply is likely to come back strong and record solid growth, although “spot shortages” could still occur.

This would be a welcome development for the biggest generic company in the world, Teva Pharmaceutical Industries (NYSE:TEVA), whose shares have been halved in the past year and, at $7.61, its all-time high of $70 is just a distant memory.

The Israel-based company is donating more than 6 million doses of hydroxychloroquine sulfate tablets to U.S. hospitals to evaluate the medication as a possible treatment for Covid-19. Hydroxychloroquine sulfate is approved by the U.S. Food and Drug Administration for the treatment of malaria, lupus erythematosus and rheumatoid arthritis; it is not approved for Covid-19.

In a pre-coronavirus article on Teva, I wrote that the company was emerging from a multiyear restructuring that cut expenses and reduced staff and manufacturing facilities. It would also by relying on two of its key products to boost sales of its branded products.

Higher profits would also put a smile on the faces of Lupin Ltd.'s (NSE:LUPIN) management and shareholders. Shares of the Indian company specializing in generics have declined precipitously in the past year, dropping from $870 to about $548. The shares dropped 4% Monday after the Food and Drug Administration said the company’s Somerset, New Jersey facility may face regulatory or administrative action.

In early February, Lupin released quarterly results that disappointed analysts. Revenue fell short of expectations and earnings actually dipped. Analyst expectations for the company are a mixed bag, but as a group they are less bullish coming off a disappointing first quarter.

Market research firm IMARC paints a rosy picture for the overall generic drug market. The company’s report shows that the global market reached $367 billion in 2019, a compound growth rate of 5.7% from 2014 to 2019. The market is being driven by the growing incidence of diseases like hypertension, diabetes and obesity and the affordable alternatives generics offer.

As a result of these and other factors, the generics market is anticipated to reach a value of about $500 billion by 2025, a compound growth rate of more than 5%.

The other large generic drug companies include Mylan (NASDAQ:MYL), whose plans to merge with a Pfizer (NYSE:PFE) unit have been postponed; privately held Actavis; the Novartis (NYSE:NVS) subsidiary Sandoz; Sun Pharmaceutical Industries of India; Par Pharmaceuticals, a unit of Endo International (NASDAQ:ENDP); and another Indian company, Dr. Reddy's Laboratories Ltd. (NYSE:RDY).

Disclosure: The author holds positions in Teva and Pfizer.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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