Last week, Israel-based Teva Pharmaceuticals' (NYSE:TEVA) generic product portfolio received a major boost after the Food and Drug Administration approved the company's generic version of Xeloda, a cancer drug. Roche's (NASDAQOTH:RHHBY) Xeloda is an orally administered chemotherapy treatment for colorectal and breast cancers that have metastasized. Given the fact that Xeloda generated $1.6 billion in sales for Roche in 2012, Teva's generic version has significant potential.

Need for a low-cost version
According to data from the National Cancer Institute, around 142,820 people will be diagnosed with either colon or rectal cancer in 2013. In fact, in men, colorectal cancer is the fourth most common cancer after skin, prostate, and lung cancer. It is also the fourth most common cancer in women after skin, breast, and lung cancer.

Roche's Xeloda, which was approved in 1998, is used for treating colorectal and breast cancer that have metastasized, or spread to other parts of the body. The drug has been licensed in more than 90 countries globally. Additionally, the drug has been well accepted in the colorectal cancer treatment market.

According to pharmaceutical and health care research firm Decision Resources, the colorectal cancer treatment market is expected to see a decline in growth going forward. This is primarily due to generic competition. That market was worth $8.3 billion in 2011, but Decision Resources expects the market to slip to $7.8 billion in the U.S., France, Germany, Italy, Spain, the U.K., and Japan.

In the first half of 2013, Xeloda sales rose 2% to $832 million. Growth was primarily driven by an increase in sales from China and Latin America. Generic competition will have an impact on Xeloda sales going forward, however. With the approval of its generic version of Xeloda, Teva is expected to be a major beneficiary from this trend. In fact, Teva is the first generic drug company to get U.S. approval for a generic version of Xeloda.

Teva's competition
Teva will still face competition in the colorectal cancer generic market. The company's version of Xeloda is expected to compete with cytotoxic agents such as oxaliplatin, which is a generic version of French drugmaker Sanofi's (NYSE:SNY) Eloxatin/Eloxatine. In 2012, sales of Eloxatin totaled $1.3 billion. Generic competition has had a major impact on Eloxatin, however, with sales falling to $159 million in the first half of 2013.

The sharp decline in Eloxatin sales was mainly due to the relaunch of oxaliplatin by Hospira (NYSE:HSP) in August 2012. The generic version had originally been launched in August 2009 after a favorable ruling in patent litigation with Sanofi. In 2010, though, Sanofi and Hospira entered into an agreement, which led to the eventual suspension of Hospira's sales at the end of June 2010. Under the terms of the agreement, Hospira had the right to relaunch the product well in advance of patent expiration.

The decline in Eloxatin sales suggests that Xeloda sales could also see a similar trend. It should also be noted that a study has shown the efficacy of a Xeloda-Eloxatin drug combo that could effectively make the two drugs partners rather than competitors.

Conclusion
This will definitely give a boost to Teva's top line, which in the quarter ended June 30 slipped 1% due to a drop in revenue of generic medicines in the U.S. and Europe, as well as exchange rate fluctuations.

With last week's FDA decision, Teva's generic product portfolio has received a major boost. The colorectal cancer treatment market is set to see increasing generic competition, and Teva, with its generic version of Xeloda, is well positioned to benefit from this trend.

Kanak Kanti De has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.