Generics makers approach a cliff of their own
Goldman's healthcare team, led by Jami Rubin, writes that 2012 will be a “banner year” for generics companies, with big patent expirations feeding strong double-digit earnings growth (18%, on average, for large-cap generics firms). However, the US business is “rapidly maturing” due to fewer first-to-file and small molecule opportunities ahead, as indicated by Teva's downcast 2012 guidance.
In other words, as goes branded pharma, so goes generics a few years later.
“Visibility post-2013 remains an overhang on the sector,” says Goldman, and “potential future drivers for this sector are the ones that are more nebulous: Branded drugs, biosimilars, (extra-US) generics.”
The banking giant saluted Teva's expansion into branded pharma, including its recent hiring of BMS veteran Jeremy Levin as CEO, as well as Watson's biosimilars partnership with Amgen. Watson remains Goldman's favorite pick among the generics giants thanks to muscular earnings-per-share growth potential, despite an FDA advisory panel's thumbs-down on Prochieve.