Last year, executives of Teva Pharmaceutical Industries ($TEVA) said the company's manufacturing network would shift east over time as it looked for new opportunities and lower-cost locations from which to produce drugs. The company, which is cutting back production elsewhere, now intends to invest more than $200 million in capacity in Japan to tap that country's growing hunger for generic drugs.
It all is part of a big buildup for Teva in Japan. In May, the Japanese newspaper Nikkei reported that Teva would pay ¥40 billion, or about $490 million, to buy Japan's third-largest generics producer, Taiyo. That followed the 2009 investment in generics maker Taisho Pharmaceutical through a joint venture with Japan's KOWA. According to Nikkei, Teva appears to be planning to use Taiyo as a production hub, with Teva-KOWA focusing on sales. Citing Nikkei, Reuters reported that Teva now intends to invest ¥20 billion yen ($203 million) to double its production capacity in Japan. The newspaper reports that Teva will see capacity grow to 9 billion pills a year by 2018.
That added capacity will help Teva tap Japan's shift from using mostly branded drugs as the government looks for ways to cut healthcare costs. Nikkei reported that Japan's generic-drug market is expected to expand by about 8% a year and reach ¥1.3 trillion yen ($13.2 billion) in 2017.
The ramp-up in Japan is in line with Teva CEO Jeremy Levin's plan to build sales and cut costs. Last year, he laid out a 5-year plan to cut about $2 billion in costs, much of it through changes to its manufacturing network and sourcing strategy. Teva's president of global operations, Carlo De Notaristefani, told investors late last year to expect production to shift to the East as part of that strategy. "Over time, you will see an evolution of the network from West to East. So the center of gravity of our product supply will be moving. We will be supplying more and more of our products from the most cost-effective locations in our network," Notaristefani said.
- read the Reuters story