Multiple market structures
The European Union is comprised of 28 countries, each with different market dynamics for generic pharmaceutical players. Teva Pharmaceutical (TEVA) currently operates in three types of markets in the European Union. The company has developed its commercial strategy in order to ensure high profitability in each of these market categories.
The success of this commercial strategy is expected to raise Teva Pharmaceutical’s share prices as well as those of the SPDR S&P World ex-US ETF (GWL). Teva Pharmaceutical makes up about 0.31% of GWL’s total portfolio holdings.
The above diagram shows Teva Pharmaceutical’s exposure to each of the market categories, based on distribution of net sales. Based on its targeted commercial strategy in the European Union, Teva Pharmaceutical could be strong competition for other generic players such as Mylan (MYL), Pfizer (PFE), and Novartis (NVS).
The INN (international nonproprietary name) market includes countries such as the United Kingdom, Sweden, the Netherlands, Norway, and Denmark. In those countries, the physician writes the prescription for particular drug molecules. However, in the pharmacy, the actual product is selected based on the price and supply reliability of the products. Teva Pharmaceutical earns about 22% of its net sales in the European Union from the INN market.
Pharmacy-driven markets include countries such as Ireland, Portugal, France, Spain, and Italy. Similar to INN markets, the prescription in pharmacy-driven markets is for the required drug molecules. However, pharmacies have the power to choose and dispense brands that contain those molecules.
As part of its commercial strategy, Teva Pharmaceutical has developed sales forces in these countries that actively attempt to create loyalty among pharmacies for the product portfolio. The company currently earns about 22% of its net sales in the European Union from pharmacy-driven markets.
Physician-driven markets include countries such as Poland, the Czech Republic, Croatia, and the Baltic region. There, physicians write the prescriptions for the drugs, including the brand name. Since there’s limited substitutions possible for written prescriptions, Teva Pharmaceutical focuses on creating an awareness among the physician communities in these countries. The company earns about 38% of its net sales in the European Union from physician-driven markets.
Hybrid markets display characteristics of INN, pharmacy-driven, and physician-driven markets. Germany falls under the category of a hybrid market. Teva Pharmaceutical earns about 18% of its net sales in the European Union from hybrid markets.
In the next part, we’ll take a more detailed look at Teva Pharmaceutical’s performance in the European Union market.