Teva (TEVA) recently signed an agreement for the establishment of a business venture in South Korea. Under the agreement with Handok Pharmaceuticals Co., Ltd., Teva will hold a controlling stake in the business venture.
While Teva will bring its worldwide resources to the venture, Handok will be responsible for selling, marketing, distribution and regulatory activities. Financial details were not provided by the companies.
With this deal, Teva will enter the lucrative South Korean pharma market which is currently worth $14 billion. The deal is in line with Teva’s intention to expand its global presence. The Teva-Handok business venture should start functioning in the next few months, once regulatory approvals are obtained.
This is the first time that Teva has struck a deal in East Asia, apart from Japan, where Teva already has a strong presence. Teva is one of the top three generic pharma companies in Japan, which is the second largest pharma market in the world.
Teva is currently going through a transition period. The company recently provided guidance for 2013 which was below expectations. Headwinds include EU pricing pressure, potential new competition for branded products (especially Copaxone) and fewer generic product launches compared to 2012.
However, with the company not including the impact of its cost-savings plan in its guidance, we believe Teva is leaving some room for delivering above expectations. Share buybacks also leave some room for upside.
We currently have a Neutral recommendation on Teva, which carries a Zacks #3 Rank (Hold). Another generic company, Mylan (MYL) currently carries a Zacks #2 Rank (Buy).
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