For generic-drug companies, margins are ultimately everything. The business is built on volume and how efficiently a company can produce copycat drugs.
Those margins become especially important as companies expand externally; there has to be margin-increasing synergies to justify the acquisition.
So far, Teva Pharmaceutical
Recent launches of new products -- generic versions of Pfizer's
Gross Margins (Last 12 Months Reported)
Source: Capital IQ, a division of Standard & Poor's. *As of June 30.
There's more potential gross margin expansion on the way. Teva announced last week that it was acquiring Merck KGaA's women's health division, Theramex. The branded products should fit well with the women's health products Teva acquired a few years ago in the purchase of Barr Pharmaceuticals.
Everything isn't perfect with Teva's business: European governments are cutting costs, which is cutting into generic drug prices. But as long as Teva can keep launching new generics and expand sales of its branded products, the bottom line should continue to increase faster than the top line.
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