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Teva’s Generic Zoloft Launch, And New Jerusalem Plant, Remain Idle

Executive Summary

Teva's supply chain challenges appear to have caught up with the company in the form of further delays of its launch of Zoloft generics

Teva's supply chain challenges appear to have caught up with the company in the form of further delays of its launch of Zoloft generics.

Teva - which holds 180-day marketing exclusivity on the 25 mg, 50 mg, and 100 mg doses of the blockbuster antidepressant - received final approval for sertraline generics June 30 and planned to launch in July. The company is now aiming for a third quarter launch because it is "still making preparations."

"We hoped to launch and have all the product prepared for the kind of launch that we wanted at the end of July, and we're simply not there," North America CEO George Barrett said during the company's second quarter earnings call Aug. 8.

"We are not quite ready, and it was better for us to wait until we were ready for the optimal launch rather than to move prematurely," he said.

Teva CEO Israel Makov emphasized that "when we are ready, we go....We never delay a launch just because we want to have better cosmetics to our results."

Barrett explained some of the manufacturing "challenges" the company is now facing relate specifically to its Cidra, Puerto Rico facility, which it inherited through its acquisition of Ivax.

"Due to longstanding issues at this plant, we concluded that we needed to significantly reduce complexity at the facility and to minimize any dependence we had on the site," Barrett said.

In an effort to do this, the company has shifted about 20 products from the plant to one of the other 40 sites in the Teva network. Globally, the company has shifted approximately 160 products.

"In addition, we made the decision to temporarily discontinue several older products in order to alleviate pressure from the supply chain," he said.

"We thought that this was a small price to pay to maximize the potential of our new launches and the planned launch of generic Zoloft," he said.

"The success of the U.S. launch is what is particularly important as a way to absorb price declines on some relatively newer key products including fexofenadine[Sanofi-Aventis' Allegra ], azithromycin [Pfizer's Zithromax ], and Pravachol which have reached a more competitive stage of their lifecycle" (see 1 (Also see "Generic Mobic, Celexa Launches Are Not Indicative Of Price Erosion – Teva" - Pink Sheet, 14 Aug, 2006.)).

The company had also hoped that the opening of its new Jerusalem plant, scheduled to be fully operational earlier this year, would improve supply chain performance.

Barrett highlighted the fact that Teva accomplished the large launch of generic Zocor during the second quarter "despite the fact that our new state of the art plant in still idle, awaiting FDA inspection." According to Teva, there is no date scheduled for the inspection.

This was the first full quarter for Teva to include Ivax sales since it completed the acquisition in January.

"The bottom line is that with the acquisition of Ivax, we have created a supply chain of efficiency, scale and geographical spread unprecedented in our industry," Barrett said.

According to Teva, its acquisition of Ivax would allow it to offer at least 300 products in the U.S., with a pipeline three times larger than that of its nearest competitor (2 (Also see "Teva/Ivax Merger Will Create Significant Pricing Flexibility In Generics" - Pink Sheet, 1 Aug, 2005.), p. 19).

Barrett also attributed the delayed launch of Zoloft to some "late stage labeling" issues. Teva said it received the final labeling for the product a day or two before its approval and the "black box" warning required for the antidepressant class needed alterations.

Text adjustment was required due to a new statement specifying that the product is not approved for pediatric major depressive disorder, Teva said.

Pfizer's labeling changes also included the addition of a protected indication that required a complicated carve-out procedure, according to the generics company.

Pfizer has reaped the benefit of Teva's delayed launch. Based on Zoloft's 2005 U.S. sales, the company has made about $280 mil. on the product since the generic was approved. Pfizer has said that it will launch an authorized generic "if and when Zoloft becomes subject to generic competition."

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