FIN 302, MGT 303, MKT 304
T E A M 3 : V i n c e M e o , V i n n i e O l s e n , L a u r e n H a y e s , K i e r r a W r i g h t
Fall
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Executive Summary
Situation Analysis
Company
What is Teva Known For?
What Makes Teva Different?
Teva SWOT Analysis
Organizational Structure
Customers
Who are Teva’s Customers?
What Products are Customers Purchasing from Teva?
Order Qualifying Products
Order Winning Products
Context
Industry
Economic
Technological
Social
Competitors
Pfizer SWOT Analysis
Financial Strengths and Weaknesses
Competitive Advantage
Novartis SWOT Analysis
Financial Strengths and Weaknesses
Competitive Advantage
Watson SWOT Analysis
Financial Strengths and Weaknesses
Competitive Advantage
Financial Ratio Analysis
Collaborators
Who does Teva Collaborate With?
Why Are They Relevant?
Growth Strategy
Goals
Potential Growth Strategy Options
Objectives
MediVend Details
MediVend Challenges
Segmentation
Positioning
Targeting
Strategy Execution
Product
Goals
Product Description
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Conclusion
Description of Manufacturing Process
Outsourced Components of the MediVend
Product Life Cycle:
Complementary Services
Warranties
Place (Distribution)
Level of Market Exposure
Channel Description
Supply Chain System Description
Promotion
Goals
Promotional Blend
Price
Pricing Goals
Value Proposition
Customer Price Sensitivity
Pricing Strategy
Breakeven Analysis
PRODUCT COST ANALYSIS
PRO FORMA PROJECT CASH FLOWS
CAPITAL BUDGETING ANALYSIS
PRO FORMA INCOME STATEMENT
PRO FORMA BALANCE SHEET
Estimates/Forecasts & Implementation
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Teva Pharmaceutical Industries Ltd. has been a leader in the biopharmaceutical manufacturing industry for more than 100 years. They have been involved in the mass distribution of drugs worldwide, containing industrialized plants in over 60 countries. Teva strives off quality throughout the manufacturing process, through the sale, and into the shelf life of their products, while simultaneously perusing standardized safety measures to further ensure not only the safety of the initial customer, but the safety of their employees involved throughout the entire process; from the manufacturing plant to the pharmacist dealing with their products.
In order for Teva to correctly implement a growth strategy in their ongoing operation they must consider the difficulties behind getting bigger than they already are.
Teva currently holds rank as the number one generic pharmaceutical drug manufacturer in the United States. However, as difficult as it may seem their position can ultimately be manipulated to work to their advantage. The first thing Teva must do to implement an effective new-product growth strategy is brainstorm potential growth strategies by incorporating the use of idea generation through their marketing department. Three strategies were created 1.) a fitness-based nutrition line; 2.) a vaporized medicine application device; and 3.) a medication dispensing machine. Next, they must screen these ideas to sift out any imperfections or inferior strategies. This phase will be brief, and could potentially frustrate some of the team members due to their contradictory points of view.
Teva ruled out the fitness-based nutrition line considering it was vague in description, and would use too many marketing resources. The vaporized medicine application device was
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also ruled out due to similar circumstances. Teva was then left to choose the medication dispenser idea as their potential growth strategy option. They named this device the Teva
MediVend.
Upon finalization of potential idea screening, the MediVend would be turned over to the finance department to see if it is a plausible growth strategy. They do this by providing a solid business analysis of probable costs, potential profits, and an estimate on the return on investment the growth strategy would yield. This analysis is conducted to check for inefficiencies in the execution of this endeavor; it will include a value proposition, pro-forma forecast, breakeven analysis, and overall pricing strategy. The finance department may also use this analysis to define any outsourced components that the
MediVend may need to endure. Once the finance department clears the growth strategy, a prototype of the MediVend will be developed to check for any mechanical malfunctioning.
This stage will also tell Teva details about the product life cycle, and allow them to determine terms of a warranty. When the software bugs and engineering kinks are worked out the marketing department will define the segmentation, target market, and positioning of the product to imply an effective test market to the growth strategy. Teva’s marketing department can also distinguish the proper level of market exposure, the channel description outline, and amount of previously prospected manufacturing facilities to acquire for this growth strategy.
If the MediVend is proven successful by the market it is tested in it will be commercialized for public use, and the factors will be manipulated according to
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geodemographic segmentation to ensure maximum profitability in all areas of the market in which the growth strategy is implemented. This will be done through various forms of advertisements, personal selling efforts aimed at integrating the MediVend into pharmacies, and the use of public relations to ensure customer satisfaction and registration.
From here the MediVend is fully developed and marketed accordingly. Revenues produced from these efforts can now be accounted for, sales estimates can now be checked for validity, and a sensitivity analysis can now be conducted to further refine the positioning, if needed. Also, potential return on equity, net present value, and internal rate of return values pertaining to this growth strategy can now be evaluated with respect to previously recorded pro-forma statements.
Teva Pharmaceutical Industries Ltd.
Haim Salomon founded a pharmaceutical supply company in Netanya, Israel during
1901. This company was named Salomon, Levin, and Elstein Ltd., after its founder and his partners. Salomon, Levin, and Elstein was a company that allocated imported medicines for wholesale prices to Israel and neighboring countries through the use of camels, mules, and other forms of livestock. This company is still around today. They are now a subsidiary of
Teva Pharmaceutical Industries, which considers them the primary distributor of Teva
Pharmaceutical products. However, even though they claim to be the founders of Teva
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Pharmaceutical Industies Ltd., on their website and many other online publications, the truth is they are not.
Teva Pharmaceutical Industries Ltd., was initially founded by Dr. Gunter Friedlander; sought to be a stubborn man, whom originally derived from Silesia, a city previously located in East Germany, but now positioned in Poland. Friedlander was an ambitious young pharmacist. In 1922, he had left Germany with the idea to found a pharmaceutical manufacturing company. Twelve years later, in 1934, Friedlander established a firm in
Jerusalem, Israel that did just that. He named his company Teva; which means “nature” in
Hebrew. The first pharmaceutical produced by Friedlander’s newly established pharmaceutical company was a pain-killing medicine by the name of Optalgin , an analgesic that still remains popular today (Segev). As advances in medicine and technology increased, Teva began to manufacture different products in attempt to cover certain market niches and sustain a competitive advantage over competing companies. This led Teva to the manufacturing of antibiotics, which they began to distribute to countries abroad.
Due to the stubbornness of Friedlander, and the dictatorial decisions he implemented in his business strategy had caused his business partner, Alfred
Feuchtwanger, a banker from Germany much frustration; ultimately leading him to terminate his partnership with Friedlander. When Friedlander heard this he initially wanted to buy out the shares of Feuchtwanger. However, he could not afford the debt; which was then picked up by Assia-Zori, another Israeli pharmaceutical manufacturer. The owners of
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Assia-Zori included many members of the Salomon family. A few years later, Friedlander suffered a fatal stroke. Assia-Zori saw this as a business opportunity and picked up the remaining shares that Friedlander had left behind. Assia-Zori decided to keep the name
Teva, and use the goodwill established by Friedlander to obtain revenue for their company.
The company then named Haim Salomon the founder of Teva Pharmaceutical Industries
Ltd., intentionally leaving Friedlander’s name behind to be forgotten. (Segev).
What is Teva Known For?
Teva Pharmaceutical Industries Ltd. is a company that develops, manufactures, distributes, and sells pharmaceutical drugs in 60 countries across the world. Teva is headquartered in Israel, and employs more than 46,000 experienced workers in their dayto-day operations. Teva focuses their business strategy on pharmaceuticals that treat and help cure diseases dealing with the central nervous system, women’s health issues, respiratory disorders, pain or discomfort, and oncology (the diagnoses of cancer in patients). Today, Teva is primarily known in the United States as the largest distributor of generic alternatives for brand name pharmaceutical drugs; in fact, Teva supplies over 20% of the market share. This means that 1 out of every 6 generic prescriptions filled in the
United States are Teva products.
Teva is known for making high-quality products accessible to their patients worldwide, every day for over 100 years. Some of the pharmaceuticals Teva is primarily known for manufacturing are central nervous system (CNS) products, such as Provigil,
Gabitril, and Axilect; respitory products, such as QVAR; products pertaining strictly to
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women’s health issues including Plan B, Seasonique, and Paragard; products to help manage pain, such as Amrix, Actiq, and Fentora; and Oncology-related products that help deal with cancer diagnosis, including Treanda, Trisenox, and Tevagrastim. (“Our products”, 2010).
Our products . (2010). Retrieved from http://www.tevapharm.com/Products/Pages/default.aspx
What Makes Teva Different?
Teva’s Mission:
“Quality and safety are our first priority. At the vary heart of Teva’s mission is our commitment to develop and manufacture high quality, safe products that promote global good health and well-being. Teva does not stop at quality assurance. We believe in creating a culture of quality by raising individual awareness to the importance of quality, in every single action, every single day.”
This mission statement is appropriate because sums up the importance product quality, consumer and employee safety, and social responsibility have in Teva’s business strategy. In fact, it tells us exactly why Teva tends to stick out from its competition. A widespread majority knows Teva as a company that strives off several non-financial core values including quality-manufactured products, pinnacle safety standards, and overall concern for the social responsibility they bestow upon their customers.
Competitive Advantage
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Quality is one goal Teva strives to achieve in its mission statement; it is expected from their customers; therefore, Teva tends to expect it from their suppliers. They back this up by making sure that quality is implemented at every phase of the product lifecycle; the clinical stage, where the facilities carefully record documentation of business processes and study the general conduct of their safety methods; the manufacturing stage, where medical equipment is verified, materials from suppliers are additionally checked for quality by
Teva’s trained professionals, and a ‘state of the art’ manufacturing plant; and post production, where Teva maintains the quality of its product by observing its shelf life even after the product is bought to ensure they stick by their mission.
Another goal Teva tries to implement in their business process is the safety of their consumer. Safety is a core value depicted in their mission statement. They implement safety by training their professionals to take a vigorous role in monitoring the safety of medicine in clinical studies. Professionals are required to enroll in a pharmacovigilance training course. Which, in turn, this gives them the experience they need to maintain an “advanced evidence database” allowing them to broaden their scope of drug examination throughout Teva’s manufacturing process. They do this through the use of specialized techniques, advanced computer analytics, and their own professional judgment. This allows them to effectively assess risks involved with their products; ultimately, these observational studies allow them to take active measures when focusing on the safety of their consumers. These active measures include the periodic review of previously released products, a process Teva’s coined as signal detection , which allows their trained healthcare teams to lucratively identify possible risks or threats their
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consumers might come in contact with. Teva follows up their mission by delivering safety to their consumers; not just telling patients what they want to hear in attempts to assure their customer loyalty, but to imply active measures to genuinely assure them with a safe product, backed by promises of indisputable quality. Teva announced in June 2010 that they would discontinue its production of Propofol, a major sedative that is used in about
75% of all US anesthetic procedures (Rosenstock).
Social responsibility is another factor that allows Teva to gain an advantage over its competition. This is due to the amount of goodwill generated by these acts of social responsibility. Their website states, “We are committed to safeguarding the environment and contributing to social progress in all of our global operations. We strive to achieve full compliance with all environment-related rules and regulations.”
There are several ways Teva acts on safeguarding the environment. They do this more than one way; one involves safeguarding the work environment. This is done through
Good Biological Practices (GBP), which is the ongoing implementation of decontamination and sterilization of manufacturing equipment, the use of personal protective equipment for employees, and the proper training for their staff. Safeguarding the geographical environment is another way Teva acts on social responsibility; ultimately creating goodwill with its customers, and allowing them as a company to stick out from their competition.
Some ways they execute these ‘green’ actions include developing wastewater treatment systems and conserving the amount of water used in their operations, investing in alternative energy sources for their manufacturing facilities to help limit the amount of
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energy their operations consume, manage the amount of pollution they emit into the atmosphere; also, properly handling waste, and developing recycling techniques for any scraps that can possibly be reused (“Environmental responsibility,” 2012). All of which are very important to not only Teva’s public appearance and managing their operation cost, but also to the world as a whole; which is why the goodwill it creates through its environmental endeavors is important to everyone.
Quality, safety, and environmental responsibility are all ways Teva tries to gain a competitive advantage in the eyes of the community. However, Teva also sponsors community programs such as disaster relief efforts, non-profit organizations, and the
Philadelphia Eagles football team to better ensure that this competitive advantage is sustained in their favor (Rosenstock).
Strategic Advantage
Teva’s strategic advantage is fairly simple. It involves manufacturing the cheapest generic alternative pharmaceuticals for their consumers in 60 countries across the globe.
They obtained this by gaining an early edge in the pharmaceutical market over 100 years ago. In turn, this sense of strategic advantage allows them to buy out smaller pharmaceutical manufacturing companies (such as Cephalon), and promote its quality, and safety standards through the brand names they acquire in the process. They use several techniques to imply strategic goals in the pharmaceutical industry.
Teva SWOT Analysis
Strengths
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Teva is a very strong company, with great brand recognition. Teva has been around since 1901 and has built lasting customer relationships. It has helped more patients than any other generic pharmaceutical company. One of the ways Teva can stay on top is their price of their products. Customers are interested in finding drugs that are cost efficient as well as quality medication. Teva is a multi-national drug company. They are based out of
Israel and have locations all over the world. This has allowed them to grow as a company and enter into many diverse markets. Teva could be considered as a Niche market leader.
They have a good brand name and a very stable company that can allow them to acquire new businesses. Teva is a very diverse company that continues to be a strong competitor in the prescription drug market.
Weaknesses
The patents that are on name brand drugs make it difficult to compete. Patents can last for many years causing Teva to miss out on potential customers. Teva also has this problem when it comes to their branded drugs. They spend a lot of time on research and development of a new drug and expect to get a good profit. If the drug does not perform as well as it hoped, or it is off patent before it makes enough money than Teva looses. They have to be confident a drug will make them enough money before they invest in it.
Opportunities
Teva is a large company with a lot of opportunities. They baby boomer generation is getting older, and is going to need more medication in the future. Teva will have the potential to gain a significant number of new customers. Teva also has the opportunity to
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acquire new companies, which will bring them more profits. Teva has bought many companies in the past ten year and has the chance to continue to grow by buying more companies.
Threats
The threat that any pharmaceutical company has is the threat of competitors. The majority of customers are concerned with the price of their prescription. If a different pharmaceutical company is able to lower their prices than the customer is more likely going to switch to them. Teva is a large company, which helps keep their prices low, but they still have the threat of another competitor being able to out price them. Another threat is risk of their drugs not being as effective as the branded one, or another generic drug. This will cause customers to stop purchasing Teva’s drug and choosing a different drug that more adequately fits their needs. The final threat is political risk. Teva does a lot of business in different countries that have different laws about prescription drugs. If they had a good customer base in a country and all of the sudden the laws change, they will have to adjust the way they do business. This could cause them to loose a lot of customers and potential profits.
Organizational Structure
Teva’s organizational structure is considered to be the backbone of their primary business strategy. Which emphasize the role they play in the manufacturing and distribution of biopharmaceutical products throughout the world. This is backed by their
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anticipated strategies to inflate their business ventures even further through their elite systematic drug development, as well as the technology they innovate to do so.
Teva Pharmaceutical Industries Ltd. Structure
President & Chief Executive Officer (CEO) – Dr. Jeremy M. Levin
Executive Vice President, HR & Chief Integration Officer – Issac Abravanel
Chief Financial Officer (CFO) – Eyal Desheh
Chief Legal Officer – Richard S. Egosi
Corporate Quality – Frances M. Zipp
Institutional & Community Affairs – Arik Yaari
Due to the size of Teva Pharmaceutical Industries Ltd. and the geographical widespread of its products, it is safe to assume that Teva places CEO’s in different market sections across the globe; CEO’s that answer directly to Dr. Levin, in order for him to keep track of business operations more accurately in places he can not physically get to. A list of these corporate executives is as follows:
President & CEO of Teva Americas – William S. Marth
President & CEO of Teva Europe – Dr. Robert Koremans
President & CEO of Teva EMIA and Asia Pacific – Judith Vardi
President & CEO of Japan and South Korea – Professor Itzhak Krinsky
President & CEO of Global Operations – Dr. Carlo De Notaristefani
President of Global R&D and Chief Scientific Officer – Dr. Michael Hayden
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According to Teva’s website, their organizational structure looks something like this:
Who are Teva’s Customers?
Customer Demographics
Teva’s customer demographics are the same as most generic drug companies. The baby boomer generation is growing rapidly and in need of medication. This is causing a shift in their demographics of patients 65 and older needing more medication (Martin).
Much of the medication should also be geared toward Oncology and Cardiovascular
(Martin). These are the two fastest growing illnesses and are going to be the future customers of Teva. Teva caters to both men and women and all different races (Martin).
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Customer Psychographics
Customer psychographics of Teva are a wide range of people. Some of the customers buy from Teva because of poor lifestyle choices. Failure to exercise or eat right can all be factors into a person’s health. If a person fails to keep up a healthy lifestyle they will be put on medication. Obesity is a root cause for many other illnesses, many of which we have medication for. Some of our customers continue to buy from us because they have an illness. This could be cancer or heart disease, but it was not because of a poor lifestyle choice.
Consumer Buying Behavior
Consumer buying behavior has changed recently in the Pharmaceutical industry.
Customers are now not as focused on price and more focused on whether or not the product will fit their need (Rossi). Consumers want their prescription to be fit to their specific illness. They are focused on their individual need; they want to be treated special (Rossi).
Health and well-being has been a crucial topic in the media lately. People are conscious about their health and want to do everything they can to preserve and improve it (Rossi).
This has caused consumers to become weary on choosing generic drugs. They do not have as much trust as they do in the brand name products (Rossi). In order for generic pharmaceutical companies to become more known they have to get their name out there and let the customer know that they are a healthy choice. Customers want to see that their opinion is heard, so it is important to listen to what the customer wants (Rossi).
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What Products are Customers Purchasing from Teva?
Teva Pharmaceutical Products
Customers are purchasing medication from Teva. Teva has five main categories of generic medication. They include products pertaining to diseases in the Central Nervous
System, Women’s Health, Respiratory problems, Pain, and Oncology. Their top selling products are Pravastatin Sodium, Simvastatin, Azithromycin, and Venlafaxine HCI (Teva).
Generic medication contains the same ingredients, and performs the same effects as brand medication, but is sold at significantly lower prices. Teva also produces branded products.
They have the same five categories, Central Nervous System, Women’s health,
Respiratory, Pain, and Oncology. Some of their top selling products are Plan B,
Seasonique, Fentora, Qvar and Azilect (Teva).
Teva Pharmaceutical Services
Teva’s is committed to providing excellent customer service to all the pharmacies and customers they provide products. They listen to customer feedback and are constantly improving on how they perform business. They also take into account the side affects and any other negative feedback from their medication (Teva).
Order Qualifying Products
An order qualifier is a characteristic of a product that is required for the customer to even consider purchasing it. For Teva the order qualifying products are going to be the most common types of generic medication. Teva has the main medications for the central nervous system, women’s health, respiratory, pain, and oncology. Gabitril is their main
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medication for the central nervous system. It can treat partial seizures in epileptic patients, which is a very common disease. For women’s health they have an oral contraceptive called Seasonique. This is a basic medication that many women use. In oncology the drug called Treanda is an order-qualifying product. Treanda is a drug used for treatment of patients with leukemia. It is less expensive than the traditional treatment but just as effective.
Order Winning Products
The order winning products include some of our branded drugs, as well as our generic drugs. Our main drug that sets us apart form our competitors is our Plan B One-
Step. This drug is not well known and we are one of the only companies who sell this drug.
Another one is Nuvigil this is a drug that improves wakefulness in patients with narcolepsy.
This again is a newer drug that does not have a lot of condition compared the their other products.
Industry
Teva Pharmaceutical Industries Limited is a worldwide owned pharmaceutical company that is based in Petah Tikva, Israel. Teva is the leading generic manufacturer and one of the top 15 pharmaceutical companies within the world. It is currently operating in over 60 countries with its two biggest markets being located in the United States and
Europe. Teva’s specialty is selling generic and branded products and has an employment average of about 25,000 workers worldwide.
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The pharmaceutical industry is a constantly evolving industry that has definitely helped shape today’s society. Although the pharmaceutical industry faces constant challenges such as patent expirations, attaining constant regulatory approval, developing and targeting new markets, and discovering new drug processes the industry is continuously growing while adapting to the changes. Although these constant challenges are foregoing the industry has been a great advocate within the medical field by helping with the innovation and production of many new drugs. Just like most pharmaceutical industries Teva’s innovative products all rely on their patent. When the patent expires the product expires. Over the next 5 years $142 billion of Teva’s branded products will lose their patent protection and up to $250 billion are in patent risks. Some of the world’s top selling prescriptions lost their patent in 2011 and accounted for $25.2 billion in dollars.
Despite this loss, the global market industry expanded to 3% in 2010 and has increased since then. During the year 2011 to 2015 the global market is supposed to expand from 3% to 6% despite the ongoing challenges the industry faces. The total global sales totaled up to the numbers as follows: North America – 39%, Europe – 29%, Asia, Africa, and Australia – 15%, Japan – 11% and Latin America – 6%.
As the global markets are expanding Teva’s emerging markets that are composed of
17 countries will be Teva’s largest revenue driver over the next 5 years. Worldwide those
17 countries will have sales count for at least 20%. Teva has done nothing but experienced
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growth from these emerging markets. With Teva’s cheap affordable price and emerging market strength Teva Pharmaceuticals can’t expect anything but great things to come.
Economic
When considering economic factors we found the most important factors that affected Teva were consumer price index, interest rate, demographics, unemployment and health care reform. Consumer Price Index is the measure of change in price over time for goods and services by consumers. In the U.S, Medical care is one of the main factors within CPI but the two main factors that CPI is fueled by are oil and food prices. As the years have progressed there has been a continuous inflation rate and although health care is affected slightly this slight change will decline Teva’s profit margin.
The second economic factor that affects Teva is interest rates. Interest rates are an economic issue in the U.S because it affects companies due to the change in the cost of capital. As Teva’s debt develops, it faces severe consequences of interest rate risk. In the year 2011, Teva acquired $5 billion in corporate bonds to help pay down the debt it acquired with Cephalon, company Teva merged with to diversify its portfolio, but this acquirement faces unpredictable interest rates.
Another economic factor that came into play when analyzing Teva was demographics. Demographics play a main factor within Teva because it pertains to their target market. Demographics helps Teva by allowing them to pull data such as the percentage of male and female buyers and their age group to better sell their products. This
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factor has swayed Teva to mainly focus their products and services to tailor senior citizens, usually 65 and up, and their needs.
The fourth economic factor is unemployment. Unemployment plays a huge role on
Teva right now. As of now there are approximately 14 million Americans that are unemployed and with so many consumers unemployed Teva’s consumption of products will decline because consumers won’t be able to afford it.
The last factor we found to affect Teva was the health care reform. In 2014, the
Affordable Care Act also known as the Health care reform will be put into effect. With this act in effect the health care reform will give every American insurance at an affordable price. It will allow approximately 30 more millions to receive insurance and is expected to increase spending by .1%. Therefore, there will be a substantial increase in spending in
2014. On the down side, Medicare and Medicaid fees and rebates will be increased and prescription spending will be increased by 10.7%. Spending on pharmaceutical drugs will account for 11% of national health spending within the U.S. Although Teva’s customers will increase its profit margins will be cut due to the increased costs from the reform.
Technological
Teva is determined to develop products that can be used for innovative purposes.
Any acquisitions they have made have always been in the effort to diversify its portfolio and present specialty products for consumers. Teva’s commitment has caused them to furthermore push toward developing pharmaceutical products through in-licensing pre-
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clinical and clinical stage compounds. It has also pushed Teva to furthermore seek medical advancements in unmet areas such as chemotherapy, metabolic disorders, enzyme replacement therapy, metabolic disorders and autoimmune disorders. Through Teva’s flexibility, extensive research, and success Teva has introduced some of the greatest products at affordable prices we now use today.
In 2011, Teva signed a contract with Cephalon, a US biotechnology company. This agreement was expected to increase sales, help with patent expirations and remove the negative effects of two of the main products Teva offered: Azilect and Copaxone. With the help of Cephalon Teva had come up with a development that included 2 phases. In the first and second phase there would be 12 compounds and 6 within the preclinical development phase. This was set to boost and diversify Teva’s portfolio. It added products for oncology and the central nervous system.
Another technological development Teva has been blessed to coexist with is
Albumin fusion technology. This technological advancement will be used by Teva to assist in the medical progress of finding treatments for diseases and serious medical conditions.
Albumin is a carrier molecule that is found in the bloodstream in high levels. It has a normal half-life of 20 days and is very effective in transporting molecules within the body.
With this knowledge pharmaceutical companies have incorporated albumin into their products. Albumin fusion has opened many doors within the pharmaceutical industry and has aided in the development of new drugs and has helped in the improvement of old drugs and treatments. With albumin fusions inexpensive cost, easy to use method, and simpler
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alternative to other techniques it has given pharmaceutical industries the power to form drugs/treatments that has offered less required dosage usage, less side effects, more stable blood levels, less medical administration and increased efficiency.
Two products that Teva is currently incorporating with Albumin Fusion technology to improve the older drugs are Neugranin and Albuferon Beta. Neugranin is a protein that has been combined with albumin to be used as a treatment for febrile neutropenia which is correlated with chemotherapy. It is currently in it late clinical development stage.
Albuferon Beta is a product that has been combined with albumin to help treat multiple sclerosis also known as MS. It is currently under clinical investigation. Albumin Fusion is said to be the stepping stone to greater advancements within the Pharmaceutical Industry.
Social
Teva uses demographics to better sell their products. The data that has been collected regarding demographics includes information regarding the percentage of male and female buyers and their age group. Teva’s products mainly focus on senior citizens, usually ages 65 and up.
Legal/Regulatory
Legally, Teva is and has always faced lawsuits from brand manufacturers Brand manufacturers file a claim stating and documenting patent infringement in turn are stopping Teva from producing sales. These lawsuits have been very detrimental within
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Teva simply because the process is costly. Not only do legal fees come into play but production time is effected too.
Teva is currently under investigation with the Securities Exchange Commission
(SEC) due to suspicious activity that may have gone against a U.S anti-bribery law. In July of 2011, Teva states that it was served a subpoena from the SEC requesting documents acquiring about Teva’s operations in Latin America. In Teva’s second quarter of revenue its Latin American operations earned them approximately $221 million. Teva is just one of many other companies that have been recently deemed under investigation due to going against the Foreign Corrupt Practices Act (FCPA). This act bans companies from dishing out bribes to overseas administrators to buy new businesses and according to the
Department of Justice and the SEC doctors and workers of foreign government owned hospitals are considered foreign officials. Teva has appointed an outside advisor to help in the matter.
Another legality Teva is facing occurred this past February where colonoscopy patients in Las Vegas reported developing the liver condition Hepatitis C from Teva’s product Propofol. The allegations Teva were against was the company intentionally distributed the drug in huge doses to doctors so that it could be assessed by a lot of colonoscopy patients in turn spreading the risk of the incurable disease. Teva has agreed to pay more than $250 million to settle the 80 lawsuits it faced.
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Description
Pfizer is a company committed to finding lasting solutions to some of the most deadly diseases of our time. They want to help improve the wellbeing of all their customers throughout their whole life. Pfizer is focused on research as well as development and manufacturing. They also work with governments around the world to provide health care for underprivileged communities. Pfizer is a business-to-business company. They don’t work directly with their clients; they work with pharmacies in order to sell their products
(Corporate Author).
Pfizer SWOT Analysis
Strengths
Pfizer is a very large company that has been around since 1849. This allows them to have great brand recognition and loyal customers. They continue to have returning customers because of their quality. Pfizer has acquired many companies over the years.
This has allowed them to grow as a company and caused them to have a very high level of cash flow (Orelli). They are able to invest and work with other companies very easily because of this. It also allows them to budget the prices of their products very competitively. The low price of their product is a foundation for returning customers
(Orelli).
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Weaknesses
Pfizer is known as a research and development company. This can be very risky for a company because of the amount of cash it requires. Each new drug costs about $1 million to produce (Zacks). With no guaranteed success of the drug, the company is forced to take risks. This is considered a weakness because of the lack of cash it can produce.
Occasionally, Pfizer may be researching a new drug for a year and it may not sell a substantial amount of their pre-existing drugs. This will cause them to have a low level of cash flow and could put their company at risk for running out of money (Zacks). Another weakness Pfizer has is their patents. Pfizer spends time and money developing a new drug that will hopefully make them enough money before their patent runs out. Pfizer is again taking a risk that the demand for the drug will be high enough for them to make a profit that was lost in the years it took to research (Orelli).
Opportunities
Pfizer is a company with many future opportunities. They have the potential to expand into countries all over the world. Pfizer, for the most part, is waiting until the countries have the necessary funds to pay for the medication in full. They are such a large company that their prices are pretty low to begin with. As soon as a country is able to afford Pfizer drugs they will begin to market to them (Orelli).
Threats
Pfizer has the threat of competitors like any other business. The pharmaceutical industry is different than most. It is necessary that companies continue their quality and pricing. Customers are less likely to be brand loyal because they are more focused on
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having quality affordable medicine that will improve their health. This makes it much easier for a competitor to take over Pfizer’s customers. Another threat is the generic drugs.
After Pfizer’s patent runs out generic drug companies begin making the drugs more affordable. Even though Pfizer makes generic drugs, they loose a lot of money they could have made by selling the brand name product. This cuts into Pfizer’s potential profit and is a huge threat to the company (Orelli).
Financial Strengths and Weaknesses
Pfizer has been very consistent financially over the past ten years. They have a good research and development team that allows them to return the investments and continue to make a profit. Their current ratio is 1.9 indicating that they have a strong financial position.
They have enough money on hand to withdraw cash and make purchases. Pfizer also has a relatively low debt to equity. They are at .49, which is less then 1 and in a good position for anyone looking to invest their money. Pfizer has a good return on equity in comparison to the other companies. It is not as high as Novartis, but it is still good enough for people to invest their money in. Their P/E ratio is in a good place for the pharmaceutical industry.
Pfizer’s financial weakness has been most recently. Pfizer’s stock has been dropping since October when their financial statements came out. Investors are less likely to invest their money at a time when the rate of return is very low. With Pfizer focusing on research and development of new drugs, it makes it hard for them to have a high profit margin (Vuru website).
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Competitive Advantage
Pfizer’s competitive advantage is their brand name. Pfizer is so well known for being a reliable source of prescription medication. It has brand that is recognizable, and has been around for many years. Pfizer is also in a very good position financially. They have good ratios and it looks like they are going to continue to make good profits. Pfizer is also able to set the prices of their prescriptions pretty low, compared to the other companies.
They are such a large company and are able to cut the cost of their product, which gives them more of a profit in the long run.
Description
Sandoz was established in 1886 and has been growing ever since. Sandoz joined with Ciba-Geigy in 1996, together they formed Novartis (Novartis). Sandoz remained a division of Novartis and continued to focus on quality medicine at an affordable price.
“They develop and produce approximately 1,000 compounds across all major therapeutic areas, as well as biopharmaceuticals, active substances and intermediates” (Novartis).
Sandoz also produces anti-infectives and oncology medications (Novartis).
Novartis SWOT Analysis
Strengths
One of Sandoz’s strengths is that it is a part of Novartis. Novartis is a large global company that develops and produces many pharmaceutical drugs. Novartis has a research and development team that allows Sandoz to be one of the first companies to sell their
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drugs generic (Novartis). This puts them at an advantage to other companies that only produce generic drugs. Many of the other drug companies are not doing any research and development on new prescriptions. This makes their chances of being the first to provide a generic drug very low.
Weaknesses
However, Sandoz’s main weakness is also that they are part of Novartis. They are able to get the inside on when their drug can be produced generically, but they also have a reputation based off of Novartis. All of the investors who want to invest in Sandoz have to invest through Novartis. This can become a problem if the company as a whole is not doing to well. If it is a year where there was a lot of research and development than their income statement is going to be low. Even if Sandoz had a great year financially it is only reflected to Novartis’ income statement.
Opportunities
Sandoz was the first company to develop and market biopharmaceuticals (Sandoz).
Working with biopharmaceuticals will allow healthcare costs around the world to be lowered. If Sandoz continues to work with biopharmaceuticals they have the opportunity to create a monopoly over prescription medication. People will want the medication that works the best as well as saves them the most money. This is the perfect way for Sandoz to expand their business (Sandoz).
Threats
Sandoz main threat is competitors. Like any industry the pharmaceutical industry is very competitive. Most of the generic drugs contain the same ingredients so it falls back
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onto price. With Sandoz not being the largest distributor of generic prescriptions it can be hard for them to price their medication competitively (Sandoz).
Financial Strengths and Weaknesses
Novartis ‘Sandoz’ has a very low debt to equity. It is at .24, the lowest compared to the three other companies. This is a great aspect to have as strength for their company.
Novartis’ current ratio is not necessarily a weakness, but it is not as high compared to the other companies. Novartis is a large company and all of their divisions in their company are doing well, which makes them look very financially stable.
Competitive Advantage
Novartis’ division of Sandoz has a competitive advantage because they only produce generic prescriptions. They can focus all of their research on only developing generics. The other companies have branded products as well, which could cause them to loose focus on the generics. They also have an advantage because they are a leader in biopharmaceuticals. They are able to work with customers and patients that other companies cannot.
Description
Watson Corporation is the third largest generic pharmaceutical company in the world. It has been around since 1993 (Watson). Watson recently acquired Actavis Group, another pharmaceutical company. Watson is in more than sixty countries and potentially
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provides medication for 5 billion people (Watson). Watson’s international headquarters are in Zug, Switzerland and its U.S. headquarters are in Parsippany, New Jersey (Watson).
Watson SWOT Analysis
Strengths
Watson has great company morale. They make sure working at Watson will be enjoyable and comfortable place to work. They want to insure that all of their employees are committed to help improve the lives of the people they help. This is a great strength for a company to have. It cuts cost when it comes to hiring new employees. If people enjoy going to work they are going to keep their job. It also improves the work ethic of the employees. They will be more willing to go above and beyond if they know their work is valued and given credit to (Watson).
Weaknesses
One major weakness Watson has is not having a lot of original products. They produce generic medication, which also have brand name with the same ingredients produced by another company. This can be difficult for the company to convince their customers that their product is a better choice compared to the other generic companies
(Watson).
Opportunities
Watson is a company growing exponentially. They have acquired many other drug companies recently, which allow them to increase their customer base as well as their products. Watson is in a great position financially to continue to grow and improve their company.
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Threats
Watson’s major threat is its competitors. It is only the third largest generic producer in the world. This allows other competitors to out sell and potentially harm their company.
Another one of Watson’s threats is acquiring a bad company. They are actively seeking partners and suppliers and looking into buying out companies. When buying companies there is always a fear of choosing one that will harm your company more than help it
(Watson).
Financial Strengths and Weaknesses
One of Watson’s financial strengths is their current ratio. They have a current ratio of 1.6 indicating they are pretty stable financially. Watson has a very low debt to equity ratio at .26. This means they are able to pay off their debts and pay back their investors.
Their return on equity is low. This means that they are not as likely to make a good profit for their investors. This weakness could cause them to loose potential shareholders.
Competitive Advantage
Watson’s competitive advantage includes they way they run their business. They make sure their researchers and their salesman are informed and ready to do business. They are able to work on a more personal level with their customers and create a good lasting relationship.
Financial Ratio Analysis
Teva
Current Ratio 1.4
Debt to equity .60
Pfizer
1.9
.49
Novartis
‘Sandoz’
1.2
.24
Watson
1.6
.28
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Return on equity
P/E ratio
11.4%
16.4
11.3%
18.7
16.7%
17
7.6%
13.9
The company with the best current ratio is Pfizer. This puts them at an advantage over the other companies because they are able to have more cash on hand to make purchases. Watson and Teva aren’t too far behind, but they are still put at a disadvantage.
All of the companies have a reasonable debt to equity ratio. For an investor anything under
2 is a good ratio, the lower the better. Teva, compared to the other companies has a high debt to equity. Novartis and Watson use very little debt to finance their company. However, just because Teva has a high debt to equity ratio it does not mean they are not as financially stable. Teva could have started a new project and needed to take out a loan to finance the project. In a couple years the profits could pay off their debt, and they could be in a better financial position. Novartis has the best return on equity. A company that is in the double digits and increase indicates that the management is doing a good job and their investors are likely to see a return. Teva and Pfizer are in good positions as well, and continuing to grow. This will cause more investors to take interest in their stock. Watson is not in a very good position, meaning they are less likely to have people invest in their company. All of the P/E ratios are in the same range. Watosn is a little lower, but that is normal because they are a smaller company. I think they all have a good financial standing.
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Who does Teva Collaborate With?
In May of 2011, Teva Pharmaceutical merged with Taiyo Pharmaceuticals, which is a private owned company. The acquisition was put into effect to place Teva as the number one leading company in the fast paced growing market of Japan. The agreement was set for
Teva to attain 57% of Taiyo Pharmaceutical shares by paying $460 million to Taiyo’s private stockholders. Teva also has reached out and even offered to buy Taiyo’s outstanding shares. This exchange will give Taiyo $1.3 billion. Taiyo is the third largest generic pharmaceutical company within Japan. With Taiyo’s impeccable strength in the pharmaceutical company along with large product line combined with Teva’s global scale and success Taiyo hopes that this acquisition of such powerful strength will enable them to offer a much broader variety of products at an affordable price to markets in Japan. Japan is the second largest pharmaceutical market with the world. The agreement is expected to go through within the third quarter.
Teva Pharmaceutical Industries Ltd. partnered with Procter & Gamble in an effort to manufacture and market over-the-counter medications in many foreign countries. The deal engaged the two companies in a joint venture, dubbed “PGT Healthcare”, that allowed both companies’ over-the-counter businesses to capitalize collaboratively on markets outside North America. PGT Healthcare is headquartered in Geneva, Switzerland. These markets amounted to sales of over $1 billion during 2010. This partnership joins two of the most successful businesses in the pharmaceutical industry with the mission of providing over-the-counter medications to citizens all around the world. The resources that both of
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these companies possess is sure to lead to a uniquely successful partnership between the two of them.
In December of 2010, Cephalon Inc. (now owned by Teva Pharmaceutical
Industries) entered into a strategic partnership with Mesoblast Ltd. The alliance has a mission of developing stem cell technologies for use in combatting degenerative problems related to the cardiovascular and central nervous systems. Teva is funding much of the clinical research and development costs, as well as much of the sales and marketing costs.
Teva benefits greatly from this partnership because they are given the ability to purchase finished products at prices that are compliant with transfer pricing policy.
It was announced in September 2008 that a 50-50 joint venture was being arranged between Teva Pharmaceutical Industries and Kowa Company Ltd. The venture was arranged with the purpose of leveraging the vast resources of both companies to build a large supplier of generic pharmaceuticals for the Japanese market. The company, which will began operations in 2009 as Teva-Kowa Pharma, had the goal of reaching $1 billion in sales in 2015. This alliance is extremely important to both companies due to the vast amount of profit that can be capitalized on with Japan’s growing market. Japan’s pharmaceutical market is valued at about $80 billion, placing it as the second largest pharmaceutical market in the world. Only 5.7% of this value is generated from generics however, which gives the generic pharmaceutical market a great deal of room to grow.
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Why Are They Relevant?
While Teva derives great value from these strategic alliances that they have formed, they have limited reliance on the companies they have partnered with. This is because Teva
Pharmaceutical Industries portfolio of companies is vast and provides them with many of the resources that they need to do business. Teva API, for instance, provides the enterprise with the chemical and biological raw materials needed for pharmaceutical research & development as well as production.
In order to obtain an effective growth strategy Teva must first look at the external environment in which their company operates to see which strategies might further their company in ongoing ventures. Teva considers their size and output among competing companies within the market. Once all factors are taken into consideration it is apparent that the most beneficial growth strategies encompass characteristics of product development, the selling of new products to existing customers; and diversification, the selling of new products to new customers. These seemed like the best fit for a growth strategy due to the geographical widespread of Teva products. Teva positions 46,000 employees operating in 60 countries across the globe. The large size of this company allows its potential growth strategies to obtain a substantial market share in the pharmaceutical industry. However, strong competition within the industry plays an almost equal role in how those growth strategies would be executed; there are almost as many pros
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as there are cons pertaining to the development of a potential growth strategy within this industry. It is hard for Teva to generate an innovative growth strategy because of the previously existing range of pharmaceuticals contained already offered in their product line. On the other hand, Teva’s broad reach into the markets of various companies allow them access, and exploit multiple demographics in their favor; ultimately benefitting them, as a company, to generate large profits fairly quickly and establish brand-value amongst their clientele through the implementation of a successful growth strategy.
Potential Growth Strategy Options
The next step in developing a growth strategy involves identifying a few possible ideas, which serve as a basis and can later be modified to fit their business strategy. Teva identified three potential strategies for the future growth of their company. The first strategy involves implementing a nutrition-based fitness line where a variety of supplements and healthy organic foods are incorporated to correspond to an overall fitness work program; which, in turn would escalate to the sales of not only nutritional products, but fitness-oriented equipment and apparel as well.
Their second strategy involves the creation of a new medication device that promotes the trouble-free application of a given medication by a consumer. This process will use vaporization of medicine to create an easier, purer consumption of medication by patients. It eliminates the need for people to swallow pills by creating simple, convenient disposable cartridges organized in an array of different doses that can be congested by patients’ daily, and then disposed of prior to its use. They also planned to expand this idea
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by redesigning the format of several Teva-manufactured medications for special utilization of this device.
The third, and final growth strategy Teva saw as a potential idea involves the development and allocation of a medication dispensing device that allows registered patients to submit a prescription into the machine, and have their prescription filled in the matter of minutes; no pharmacist needed, at least on the service side of the transaction.
Considering that pharmacists are the only people licensed and legally qualified to distribute pharmaceutical drugs, a pharmacist would still need to be there periodically to stock the machine and program the location of the drugs offered in the machine.
Upon examining the three possible growth strategies Teva decided to adopt the medication dispenser for further analysis. First, Teva must ask what exactly is it that pharmacists do for their customers? A pharmacist is the middleman between the prescriptions written by a doctor and the pharmaceutical products received by their patients, according to the contents of the prescription. They collect prescriptions from patients upon entry to the pharmacy. Once the patient has forfeited this prescription, the pharmacist checks the criteria of the prescription for any faulty information; this usually involves showing some sort of picture identification, and most of the time requires the patients name, date of birth, social security number, and insurance agency. Once this criterion is met and the pharmacist is certain of the patient’s identity, they then enter the prescription number into the insurance company’s information system to check for validity.
If insurance is authenticated through the system the pharmacist returns to the customer and
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lets them know how long they must wait for their prescription to get filled, which on average takes lasts about 25 minutes; this amount of time is defined by how many customers who may have arrived before the patient, how many pills must be accounted for in the prescription, and how long it takes the pharmacist to locate, account for stock, and fill that prescription. After these steps have been accomplished the pharmacist can now complete the sale.
This leads Teva to believe that the need for a the tasks performed by a pharmacist are mostly inefficient within the industry due to the technological advances that allow machines to perform similar tasks at a reduced cost at a more convenient speed for the customer. It is because of this Teva decided to imply the medication dispenser growth strategy opposed to the other two potential growth strategy options.
Objectives
The first thing Teva must do is coin a name for this machine. Several names were thrown around the marketing department, but MediVend was sought out to be the best fit for this product.
Teva hopes to allow registered patients to submit a prescription into the MediVend, and have their prescription filled in the matter of minutes; no pharmacist needed, at least on the service side of the transaction. A pharmacist would still need to be there periodically to stock the machine and program the location of the drugs offered in the machine. This is
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necessary because pharmacists are the only people licensed and legally qualified to distribute the various drugs offered by the pharmacy.
The MediVend is somewhat akin to being the “RedBox of pharmaceutical sales”.
Its intended purpose is to automate the prescription filling process and streamline it; making it easy and fast for customers to receive their medication in the dosage prescribed by their doctor. The machine will not only dispense, but also arrange prescriptions by dosage size and amount of refills, as specified on the prescription. Complex software will automate the sorting of pills as well as determine the type of medication requested and whether the patient would like to receive generic or brand name medications (if available).
Teva will run a test period, where this machine will be tested in a few pharmacies and institutions with a select few of our products to determine an estimated success rate.
Once they determine that this is a profitable endeavor. Teva will plan to expand into global markets distributing their dispensing device to pharmacies worldwide. The development of the MediVend will be contracted through various engineers and collaborated to finalize the product.
MediVend Details
Three things must be considered, doctors, who prescribe the pharmaceuticals to the patient; pharmacies, who recognize the prescription and confirm patients identity, before distributing their inventory to them; and the patient, or customer themselves who create the need for pharmaceutical drug distribution by the pharmacy.
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To put this growth strategy into effect should establish a database for their
MediVend endeavor. The MediVend Database (MVD) will serve as the backbone to all future MediVend input transactions. The MVD will consist of three parts; the Certified
Doctor Database (CDD), where all the information of doctors who are certified by Teva to use the MVD in their practice will be stored; the Active Pharmacy Interface (API), that accounts for pharmacies that are registered users of the MediVend device; and the
Registered Patient Database (RPD), where all patient information is stored and accessed upon request and approval through the MVD.
Patients must also register themselves to use the MediVend; this will occur through their pharmacy or doctors office. Any information
The MediVend process starts with doctor registration. Once a doctor has requested approval to use MediVend, Teva will conduct a background check to see if the doctor is ethical in their practices. Upon approval of this request the doctor is given an identification number that is registered in the MVD. Teva then sends the newly registered doctor BarGen, a software program that allows them to generate, and print unique barcodes on their patients’ prescriptions; barcodes that the patient can then scan on the MediVend to fulfill the pharmacy transaction. These barcodes can be printed optionally at doctors will; depending on which of their patients are registered into the RPD. BarGen is linked to the
MVD; it will compare patient criteria found in the RPD to their doctors in the CDD. Once the doctor/patient match has been verified by MVD, it creates a customized transaction number, or a DocPat Number, to be match with local pharmacies registered in the API (this
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is how machines will recognize patients). When the API confirms the MVD inquiry, the data it received is saved to all pharmacies registered on the API. MVD approves the
BarGen request sent by the doctor and provides them with a unique barcode depicting a specific patient of a specific doctor, based on that DocPat Number allocated to all available
MediVend machines based on registered pharmacies in the API, which that doctor can then print on the prescription and give to their patient.
MediVend Challenges
There are many challenges Teva may encounter if pursuing such a cutting-edge idea. Teva will initially face design and engineering challenges, where proper hardware has to be identified and proper software has to be written. This growth strategy deals with a product that demands advanced security precautions. One of Teva’s largest challenges will be creating a device that isn’t susceptible to being hacked. It is also important to integrate a reliable, secure sensor for reading and identifying patient identity. One of their other large challenges is going to be convincing institutions such as pharmacies to adopt this new machine versus using the traditional methods of dispensing medication and filling prescriptions. We will have to develop this machine to have profitability advantages as well as timesaving advantages.
Another challenge Teva faces with this growth strategy is finding a way to motivate doctors to register for the MediVend service. In other words, it implies that patient convenience is currently serving as the doctor’s preliminary incentive to register for
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certification in using this product. Teva should offer a reward for doctors based on the amount of patients they recommend to MediVend, followed by the amount of activity a patient uses. This doctor reward should be based on some monetary dividend, or item giveaway of some kind.
Teva should consider several security measures to ensure safe operation of their dispensing machine. They should consider possibly adding a 3 or 4 step authentication process where different types of information would have to be provided. These factors can consist of multiple criteria when they register for the MediVend such as an id number, driver’s license, social security number, insurance company, etc. They should also consider using biometric technologies to further secure the MediVend for the patients using this service. These biometric technologies may include facial recognition software as well as fingerprint scanning software to apply sufficient security to their growth strategy. It is important for Teva to take whatever measures are necessary in accomplishing reliable patient security. The worst thing in the world for this growth strategy, and Teva as a whole, would be to lose large amounts of customer, and brand loyalty due to hackers stealing
MediVend information.
Teva sees these dispensing devices as an innovative, industry-changing development that can greatly enhance their profitability if proven successful. Although, they face the initial challenge of persuading pharmacy chains to adopt this new form of dispensing medication to patients, mainly due to the amount of careers that may be compromised in the process. This technology has the potential to revolutionize the way that
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patients acquire medication and could lead to huge profits if it becomes an industry standard; like RedBox with movies. Society is moving more and more toward the automation of processes in order to acquire more efficient daily task management. With this in mind, automating the prescription process using a new medication dispensing technology can be a crucial step toward creating a product that is used by every pharmacy worldwide, and ultimately making the entire process easier for the consumer.
Segmentation allows Teva’s marketing department to identify what groups of customers have similar needs pertaining to the characteristics of the MediVend, and what buying behavior would most likely to promote the use of this product. This information allows marketers to design a marketing mix specifically matched with the characteristics of more than one segment. Identifying the correct MediVend segment is important for Teva’s marketing concept of satisfying their customers wants and their organization’s objectives simultaneously. For Teva to implement this into their growth strategy effectively they must be sure to include substantiality in there market segmentation, identify and measure factors of the market, it should be accessible to the members being targeted within that market, and also be separated logically to ensure the highest amount of responsiveness from that segment.
It is important for Teva’s marketing department to segment markets correctly because if they imply a tasteless segmentation strategy it can lead to missed profit opportunities, lost sales, and ultimately, a failed growth strategy. Upon considering this,
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Teva must use a single variable segmentation to correctly promote the MediVend; though, multi-variable segmentation is more effective in product promotion it limits the amount of potential customers the MediVend could attain in the long run. Teva must consider providing the MediVend to a smaller market segment; preferably, pharmacies based on geographical location; too many in one place could be inefficient. This works because the substantiality of a segmented market does not necessarily have to have many potential customers, but only enough to maintain a profitable, specialized marketing mix. This idea coincides with the integration of the MediVend into different pharmacies because even though the number of customers is not very big, specialized integration of this machine into the pharmaceutical industry can prove to be beneficial.
Initially, the segment will not be an exact size, so it is important for Teva to introduce the MediVend to smaller areas that contain many characteristics of the overall market they hope to segment. However, considering the effects the MediVend could have in the health care industry, mainly the customer convenience it can bring to patients, this market segment is very vague in nature; large enough to play an important role within
Teva's market, but it must start small to begin with.
Next, Teva must identify factors of the market. This may include how many potential customers a pharmacy buying the MediVend may have daily. Therefore, it is important for them to analyze data within geographical boundaries, but also consider demographic factors such as age or gender, and how they correlation to these geographical boundaries. For example, people living in Michigan, a state where climates fluctuate
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constantly throughout the year, could probably lead to more people being sick, and in turn, more people needing a MediVend in a smaller geographical area than California, a state with a mildly fluctuating climate; or say, a pharmacy in Florida, where more elderly consumers live, is probably more likely to deal with more business in one day within a smaller geographical area than a pharmacy located northern parts of Nebraska. Regardless, this difference is subtle because all over the world consumers still need their medication allocated through pharmacies. It is safe to say that Teva should allocate the MediVend to pharmacies based on geodemographic segmentation of their customers, or the combination of geographic, demographic, and lifestyle segmentation of the patients that would be using these machines.
Teva has unique market segmentation. They are focused on getting quality medicine, and healthcare to everyone. They want to expand their business into every market in need of medication and make receiving medication easier for everyone. The main segmentations they use are the ability to pay for medication. They believe that quality is extremely important; they have strict standards that do not allow them to sell a lesser quality to a lower paying market. However they are not going to market an expensive preventative drug to a community, or market, that cannot afford it. They also use segmentation for age. There are certain drugs that are marketed for the aging population, such as high blood pressure, cholesterol pills, and diabetes. Another segmentation is gender. There are certain drugs that are gender specific such and are only marketed to that group.
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The geographic segmentation that Teva uses is still very broad, and may be contemplated as a hard segmentation to access. Particularly due to the fact that age segmentation, and geographic segmentation contain so many other factors that limit patient accessibility. For example, when considering age segmentation, Teva must look at the possible ailments senior citizens participating in the MediVend service.
The Age segment within Teva’s American market is 13.5% seeing that is was just 13% in
2010 and the world market should be around 12% to 13% seeing that it was just 11% in
2010.
The Gender segment plays hand in hand with the age segment. According to the CIA
World Factbook the age structure from ages 0 to 65 and over compared to male/female ratio in the U.S is as follows:
0-14 years: 20% (male 32,050,686/ female 30,719,945)
15-64 years: 66.5% (male 104,156,828/ female 104,442,302)
65 years and over: 13.5% (male 18,424,785/ female 24,052,919) (2012 est.)
In the World:
0-14 years: 26.3% (male 944,987,919/female 884,268,378)
15-64 years: 65.9% (male 2,234,860,865/female 2,187,838,153)
65 years and over: 7.9% (male 227,164,176/female 289,048,221) (2012 est.)
Positioning is a process that influences any potential customer’s overall perception of a brand, organization, or in this case a product line. In order for Teva to correctly identify a potential positioning strategy they must first be familiar with the fact that they are among the 15 top pharmaceutical drug manufacturers in the world, and number 1 generic distributor in the United States; it is safe to say that they are a leader in the market
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of pharmaceutical drugs. Therefore, they must look at how they can position their product to influence positive customer opinions.
Teva should position their growth strategy to attract the eyes of the consumers buying from pharmacies because even though pharmacies are the primary focus of the
MediVend, it is the customers of those pharmacies that will determine if the MediVend is positioned correctly. No other pharmaceutical company has created a device like the
MediVend. It will be positioned in attempt to create the image of convenience, 24-hour availability, security, efficiency, and cost-savings for pharmacies that choose to install it in their stores. This would allow Teva not only to be a leader in pharmaceutical drugs, but a leader in drug systems that that may in turn bring down the cost of health care for everyone, including consumers. The proper positioning of the MediVend could establish
Teva with a huge competitive advantage over other pharmaceutical companies through the eyes of consumers. This could be revolutionary to the entire pharmaceutical industry.
A product of this positioning can almost be sought out to incorporate product development considering that the MediVend is a new product sold to a market that has already been established. However, in a sense it almost establishes product diversification in because no other company has created a machine like the MediVend; this new product could create a new market as well, if it gains the success in which Teva thinks it will strive.
In other words, it will start as product development, but could in turn promote product diversification through a new market where businesses that do not have pharmacies can use the MediVend to their advantage.
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Teva Pharmaceutical Industries Limited is a manufacturer and marketer of generic and brand name biopharmaceuticals, and active pharmaceutical ingredients in North
America, Europe, Latin America, Asia, and Israel. The specific segments Teva should consider targeting should be based on the way they originally target their segments; primarily age, gender, and affordability.
Targeting age segments play a big role in Teva’s marketing strategy. Since Teva is a pharmaceutical company their main target are senior citizens; considering the vast array of ailments they periodically acquire. With the baby boomers getting older, the world's population according to researchers at University of Iowa is becoming heavily populated in older age segments. By 2030, it is expected for the U.S population over age 65 to reach
20% compared to 13% in 2010. Similarly, the world population age segment over 60 will increase from 11% to 21.8% by 2030. With this increase it is almost guaranteed that
Teva’s revenue will increase since their target market is focused around senior citizens.
When promoting the MediVend targeting gender segments will also play a large part of Teva’s marketing strategy. This is because medications that are tailored for male users are not usually fit for female usage. For instance, Viagra is a medication that is used by the male gender, and not associated with female usage. Another example is includes
Finasteride, an over-the-counter medication used to work against male pattern baldness, specifically describes how it is product that should only be used by men on the bottle. On
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the contrary, birth control is a substance that depicts strict female usage due to the amount of estrogen contained within the product.
Affordability plays the ultimate role in developing a target market. Without the ability to pay for the MediVend service, consumers won't be able to get the medications they so eagerly desire. Seeing that medication is a necessity to almost everyone in a given society, many programs are designed by institutions to help people who cannot afford them, do so. Which makes manufacturing pharmaceutical drugs a very prosperous endeavor, and targeting the mass majority of people who can afford these drugs to use the
MediVend to speed up the prescription process can be deemed as nothing but beneficial to the growth strategy, and Teva as a whole.
However, even though customers using the MediVend play an important role in how this product should be positioned, Teva must remember that their actual targeted segment derives from the pharmacies themselves, but it is directly based off the customers using the MediVend. This is because Teva’s customers for this growth strategy are not the patients themselves, but the pharmacies that have installed the MediVend for their use. The pharmacies that act as targeted segments pertain to the positioning of the MediVend based on geodemographic segmentation, and even more so on age segmentation when evaluating the allocation of these machines geographically.
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Goals
Quality Characteristic Goals
The MediVend will allow pharmacies to save money and run more efficiently.
Through installation of this device, pharmacies will have the ability to staff less pharmacists, cashiers and other support employees. This will cut costs for the pharmacy as well as providing a convenient and beneficial service for pharmacy customers. The devices will have the ability to dispense prescription medications as well as over-the-counter medications, which will greatly expand the scope of its usability for pharmacies.
Pharmacies will be able to use these dispensing devices to automate a great deal of their pharmaceutical sales and provide a convenient alternative to the traditional front-counter pharmaceutical sale. This will also provide the opportunity for pharmacies to close earlier since they will still have many medications available for purchase at their dispensing device after the store pharmacy is closed. Combining a decreased need for over-staffed pharmacies with convenient, available, timely alternatives for customers seeking to acquiring medication, our medicine-dispensing device will become a highly sought-after device that improves the function and business potential of pharmacies all around the world.
At the roots of the MediVend growth strategy lie the core values of Teva
Pharmaceutical Industries. It will first and foremost reflect Teva’s primary attention to quality and safety; it will be assembled and engineered with concern for and attention to the highest level of detail, and will be thoroughly tested by professionals until perfection is
52

met. Teva Pharmaceutical Industries will accept nothing less than a functioning, safe, secure, and convenient dispensing machine that operates quickly and efficiently, without error.
Performance Measure Goals
Convenience will be portrayed through the simplicity behind filling and maintaining the machine; this will make the operation of filling prescriptions much easier for both employees of the pharmacy and customers as well, especially since the availability of its prescription services can be accessed at any time of day. The MediVend will also provide security in protecting customer identify using tamper-proof hardware and software; security measures that will serve as an impenetrable obstacle to thieves, and an comprehensive identification security system that will be able to photograph and identify thieves that are attempting to break into the device. These features illustrate quality, efficiency, security, and cost savings to our customers while giving off the image of convenience, availability, user-friendliness, and timeliness to consumers.
Product Description
Product Line Description
Teva’s current product line consists of many different types of medication. They have branded medication as well as generic. Their most common types are generic prescriptions; over 1.5 million generic Teva prescriptions are written in the U.S. everyday
(Teva). Teva has a medication for almost any disease, and wants to make it easier for their customers to access their products. This is why they decided to create a new product
53

MediVend. The MediVend will be sold and distributed to pharmacies. From the pharmacy the customers will be able to get their prescriptions directly without having to deal with the pharmacist or any of the long lines or waiting time. The MediVend is an innovative new product that has the potential to change the way medication is distributed.
Service Description
Teva has always been a company focused on their products, and not too worried about offering services. With the MediVend they will be able to move into the service industry and change the way they do business. The MediVend will be an easy way for customers to quickly fill their prescription. This will cause customers to request Teva medication instead of a different generic, because of the convenience. Teva has always operated with a business-to-business relationship, however with their new product they will have more of a direct link to the customers. The pharmacies have to buy the machine to be placed in the store, but we are providing the supply of the medication. We are able to directly sell to the customers after the pharmacy purchases our MediVend. We will be able to operate more on a business-to-customer relationship.
Description of Manufacturing Process
Process Map:
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Constraint Identification
For Teva the main constraints in the manufacturing process are policy and physical.
With Teva outsourcing their manufacturing they are going to run into problems with company procedures. They are going to have to work harder to train the workers to follow regulations. They physical constraints Teva is going to face could be equipment or material shortage. They are working in a new environment with new equipment and complications can always happen. The MediVend is made with mostly with steel, which is a resource that is easily found. There are however some aspects of the MediVend that are made with scarce materials. This is where Teva might run into some constraints.
Lean Applications
There are many ways Teva can improve the efficiency of their manufacturing. One way would be having a representative from Teva go down to Mexico the first day of production and go over the company procedures. If they do proper planning they will be able to improve efficiency and ultimately lower the price of the product causing a higher
55

profit margin. Having a good manager is one of the best ways to improve a company’s success. If Teva hires a good plant manager they will minimize error and maximize profit.
Outsourced Components of the MediVend
Financially, product component outsourcing is the best option for Teva. Teva plans to have engineers on their team design the MediVend, but all of the production and manufacturing are going to be outsourced. Teva does not have the required equipment, or materials for manufacturing. Without having the hassle of finding creating a team to manufacture their product Teva will be able to focus on matters more essentials to their profitability. The company we plan to do business with is The Offshore Group in Saltillo,
Coahuila. The manufacturing plant that we plan to do business with is in Saltillo, Coahuila.
This company has manufactured for General Motors, Chrysler and Delphi. It is familiar with producing medical equipment and complex parts for cars. This is perfect for our
MediVend. They have the highest skilled and educated workers in Mexico. They have the knowledge and equipment to work with Teva’s engineers and designers to make the perfect product. This company will provide all of our raw materials Teva needs for the MediVend.
Product Life Cycle:
In the introduction stage Teva does not expect to have high sales. They are more focused on distributing the MediVends to the pharmacies. This is where Teva will fix any of the problems associated with a new product. They will be able to adjust their strategies and be ready for the growth stage. In the growth stage Teva plans to expand the MediVend to cities all over the United States. If all goes as planned they would also like to expand
56

their market into Europe. This will allow for a larger customer base and more potential profits. As they continue to expand Teva would like to distribute the MediVend to all the countries they provide services. After this happens they will be entering the maturity stage.
Teva hopes to continue improving the technology, and security of the MediVend through out the years. This will allow them to keep the MediVend in the maturity stage for a long time before entering into decline.
Complementary Services
Teva’s constant dedication is always devoted to customer satisfaction For the
MediVend Teva Pharmaceuticals has decided to go with two different ideas for complementary services. To ensure the stability of the MediVend Teva has decided to go with a 24-hour maintenance hotline to be on alert at all times to furthermore ensure customer retention. Teva Pharmaceuticals has also decided to complement the MediVend by offering a mobile app/notification device that can be found on an android or any mobile device. The app will allow you to send in your prescription and also will notify the customer as to when their prescription is filled.
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Warranties
Level of Market Exposure
Teva’s first approach to their level of distributing the MediVend will fall within a selective level of distribution range. Teva’s selective distribution approach will be seen as much more of a trial period. The machine will be tested within a few pharmacies and institutions with a select few of their leading products. Teva will begin targeting pharmacies located in small states such as Utah, Idaho and Kansas where there is an equal amount of females/males and the numbers of different age groups are somewhat equal among each other. Teva has decided to target states with such requirements simply because
58

most of Teva’s products are tailored toward senior citizens of both genders and with the fast developing innovational product younger generations will both be more accustomed and comfortable utilizing the device.
Teva’s high expectation of the products success has given them the motivation to further visualize the products direction in the future. As the product becomes a success and begins to become more popular in other states Teva’s level of distribution will then increase to a more intense level by reaching the extensive level of distribution. Teva’s expectations have made them look forward to the MediVend becoming a success and later being distributed across the U.S and then later worldwide. Teva’s goal for the MediVend is to become a success among the pharmaceutical industry so that not only will Teva utilize this product but other pharmaceutical companies can then buy the dispensing device from
Teva and utilize it as well. In the process of buying the MediVend Teva will still a significant profit from what the other companies make within issuing our device.
Channel Description
For our channel distribution we have decided to go with an Indirect Channel
Method. Instead of selling directly to consumers we will go through a retailer channel to reach consumers. Retailers that we will go through are retailers such as Walgreens, CVS,
Rite Aid and other local Drugstores. As Teva’s product develops more within the product life cycle and becomes much more successful there is a possibility Teva’s channel will then change.
59

Supply Chain System Description
Teva Pharmaceuticals supply chain system involves a few main components.
Teva’s plan consists of a constructing the MediVend and then testing it through one of our many research and development sites. After proper construction and testing Teva will then begin the manufacturing process. Teva will manufacture the product a select few pharmacies in a few selected states for the beginning stage of the of the MediVend’s life cycle. The transportation mode that Teva has chosen to transport the product to the selected pharmacies is by road. Once the product has reached the selected retailers final consumption will begin.
Proposed Facilities
Teva currently has 56 pharmaceutical production sites and 34 generic and innovative Research and Developmental sites. Upon deciding to commercialize MediVend usage, Teva should propose manufacturing the MediVend with The Offshore Group located in Saltillo, Coahuila. The Offshore Group has experience with devising such a complex product and will be a perfect company to manufacture the MediVend.
Suppliers
As you may know the MediVend contains within itself a lot of different smaller parts and products. For our many different components we have quite a few different suppliers. The many suppliers consist of Apex, Spectra, Shengzhen Maya Electronics,
Waysion, Drytech Corp., Shenzhen, Luoyang Safe Equipment Corp., Nikon and Aeon Star
Technology Corp. Our suppliers have gained reputations as the most reliable and best within the industry. For the components that have not been covered we are still in the process of securing the supplier.
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Transportation Modes
In order for our product to reach selected pharmacies we have decided to go with an efficient transportation mode. The cheapest and most flexible transportation mode we've found was road. Although it has its disadvantages we have deemed this mode of transportation the best method for our product. The average length of a semi-trailer truck is
70 to 80 ft. in length that can equate to about 20 MediVend machines at one time. This transportation mode correlates with our selective distribution channel as we progress in the
MediVend’s future we will then decide what transportation mode to go with.
Goals
The main goal for Teva’s promotion plan is to get customers to try the MediVend.
The MediVend is a new product, and many customers may not trust the quality of the service. Teva wants their customers to become dependent on the MediVend to fill their prescriptions. They want to show customers how easy it is to use, and how it will improve their life.
Promotional Blend
Advertising
Teva plans to advertise mainly to the potential customers of the MediVend. They want customers to get excited about the new service offered to them. One way Teva plans to save money on advertising is to advertise within our industry. The marketing department will be in charge of creating, and allocating promotional posters that will explain the
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benefits of the MediVend to customers of the pharmacy. This promotion will include a QR code associated with a link to Teva’s website. It will also show instructions for patients interested in the MediVend service. Teva plans to put these posters around in doctors’ offices and pharmacies.
Check out Tevapharm.com for more information, or scan the QR Code to be instantly directed to the website. Click the third tab on the menu labeled ‘MediVend’ for more information.
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Personal Selling
Personal selling is going to be crucial for Teva. Teva is planning on using personal selling to the pharmacies where the MediVend is going to be located. They will have an experienced sales team that will persuade the owners of the pharmacy to purchase the
MediVend. The sales team plans on explaining the potential savings, and the future profits for their company.
Public Relations
Teva’s public relations team needs to incorporate a press release that is going to reach the target market. They will want to put ads in medical journals and health magazines. It also might be a good idea to have an article in some of the local papers in the cities where the first MediVend installations are being pursued. The public relations team has to create an image of the MediVend that is going to stand out. If the MediVend has a good image and reputation our sales will increase drastically.
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Pricing Goals
The number one goal of Teva Pharmaceutical Industries is to provide a functional, fast, convenient dispensing machine for their customers to use in their daily operations with the goal of streamlining and optimizing their processes and decreasing their operational costs. At the same time, the machine will also be of great convenience and provide 24-7 availability to the final customers (of pharmaceutical products). With this being said, Teva must find a compromise between the relatively low price that they’d like to offer their product at and the cost of producing such a machine. Pricing Teva’s dispensing machine will require them to determine an accurate estimate of their input costs.
These costs will include hardware costs, software costs (machine software and integrated dashboard monitoring system application), manufacturing costs, design costs, distribution costs, marketing costs, and promotional costs. Teva has determined that the approximate cost of building each unit will likely be between $9,054 and
$12,859 with a median cost of $10,956.
Value Proposition
Teva believes that, due to the unique and groundbreaking nature of this product, it will need to provide great value to customers through its dispensing
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machine. Nothing like this product has been built or utilized so naturally, businesses will be reluctant to integrate this product into their operations. With this being said,
Teva’s value propositions will consist of innovation, efficiency, automation, security, convenience, and above all, cost savings for pharmacies. Regardless of the risks of purchasing an innovative product, Teva will be able to provide assurance to customers that the medicine-dispensing machine is extremely well designed, functional, efficient, secure, and user-friendly. In addition, the state of the MediVend machine as well as its security status can be monitored through Teva’s integrated software with database link. This software will provide the ability to monitor product levels as well as sales, cash available, security sensor status, customer general info, and other key values.
Customer Price Sensitivity
Customers will be relatively sensitive to price initially. Teva will need to target a low price point for the dispensing machine to spur early interest in testing the product. Teva will offer special discount deals to early-adopting customers who are willing to test the medicine-dispensing machine in their pharmacies. Teva believes that, although customers will exhibit price-sensitivity initially, if the medicinedispensing machine can be popularized as somewhat of an industry standard then the project could become a great success. It is also worth consideration that many of our potential customers absolutely have money that they will invest in a product that will cut their costs and increase efficiency in the long run. This can absolutely be done if
65

the product is manufactured to a high level of quality and is designed to be userfriendly and secure.
As Teva has no competitors with any type of similar product, there will be no direct price comparison to another company’s product. Teva’s MediVend dispensing device will be a top-of-the-line machine; exhibiting security, convenience, costsavings, and 24-7 accessibility to final consumers. With that being said, there is also no real comparison that can be drawn between Teva’s MediVend dispensing device and any of their other products. The uniqueness of the MediVend machine will act as a great asset to Teva because competition with other businesses on the grounds of a product similar to MediVend will be nonexistent for some time.
Pricing Strategy
With this being considered, Teva will be selecting three possible price points.
The price of a MediVend machine will be set as either $59500 per unit, $57000 per unit, or $56500 per unit. Teva hopes that these potential prices will allow the
MediVend dispensing machine to establish a firm demand while allowing them to cover costs and remain profitable. With pharmacists making a median salary of
$111,570 per year, the MediVend dispensing machine is still an incredibly cost-saving device that will pay itself off in under a year (if not quicker). Considering the speed and efficiency with which the MediVend machine works, the value put out by a standard pharmacist with regard to the standard process for filling prescriptions is
66

miniscule. The MediVend can easily automate the work of one, if not several, pharmacy employees.
Breakeven Analysis
Teva has one other large consideration with this project, which is the size of their potential market. The medicine-dispensing machine is a groundbreaking product that will take time to grow in popularity. Teva has made educated estimates based on analysis of the largest pharmacy chains in the world and has decided what to project sales as having the potential to be.
BREAKEVEN ANALYSIS (UNITS)
Price: $56,500
Price: $57,000
Price: $59,000
12/30/12
58
58
55
12/30/13
52
52
50
12/30/14
81
80
76
12/30/15
85
84
80
12/30/16
93
92
89
12/30/17
98
97
93
12/30/18
102
101
97
12/30/19
105
104
99
12/30/20
105
104
99
12/30/21
107
106
101
Based on Teva’s analysis of MediVend projected cash flows, they have decided to use $57,000 as a final price per MediVend unit. Teva has calculated that this price will provide an expected net present value of $7,264,111.54, a best case net present value of $12,606,186.49, and a worst case net present value of $54,738; providing
Teva with the overall value of the project in todays dollar values. In addition, this decision will produce an expected payback period of 4.95 years, a best case payback
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period of 1.2 years, and a worst case payback period of 8.45 years. In addition, the project will produce an expected internal rate of return of 30.75%, a best case internal rate of return of 79.77%, and a worst case internal rate of return of 1.61%.
PRODUCT COST ANALYSIS
CPU (Processing Unit)
Motherboard & RAM
PIN Pad
Internal Chip Card Reader
LCD Monitor
Receipt Printer
Control Panel (Front Bezel)
Speakers
Vault
Door
Housing
Dispensing Tray
Cash-Dispensing Mechanism
Deposit Mechanism
Drug-Sorting, Packaging & Dispensing Mechanism
Security Sensors
Locks & Physical Security
Guide Mechanisms
Power Supply Assembly
Misc. (Cables, Structure, Connectors)
TOTAL PER-UNIT HARDWARE COST
Teva Pharmaceutical Industries
MediVend HARDWARE Per Unit Cost Sheet
Low Cost
$170
$130
$180
$40
$130
$200
$150
$15
$1,200
$15
$700
$190
$4,500
$400
$390
$60
$350
$225
$9,045
Median Cost
$220
$155
$230
$95
$145
$250
$198
$25
$0
$0
$1,400
$23
$1,050
$300
$4,850
$550
$575
$70
$475
$338
$10,948
$1,600
$30
$1,400
$410
$5,200
$700
$760
$80
$600
$450
$12,850
High Cost
$270
$180
$280
$150
$160
$300
$245
$35
Estimated Cost
$220
$155
$230
$95
$145
$250
$198
$32
$680
$337
$1,400
$23
$1,050
$300
$4,850
$550
$575
$70
$475
$338
$11,971
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Teva Pharmaceutical Industries
MediVend R&D and SOFTWARE Cost Sheet

Teva Pharmaceutical Industries
MediVend R&D and SOFTWARE Cost Sheet
Low Cost
Initial Costs
Linux Configuration
Software Development & Design
Software Programming
$32,886
$33,946
$37,271
Drug-Sorting, Packaging & Dispensing Mechanism $184,821
Initial Product Testing $249,627
TOTAL INITIAL R&D AND SOFTWARE COST $538,550
Recurring Costs (Monthly)
Operating System Maintenance & Improvement
Software Maintenance & Improvement
Hardware & Structural R & D
Recurring Product Testing
TOTAL RECURRING R&D AND SOFTWARE COSTs
TOTAL R&D AND SOFTWARE COST
$8,770
$7,673
$14,250
$20,890
$30,693
$569,243
Median Cost
$48,233
$48,960
$53,166
$206,147
$154,163
$510,668
$10,962
$9,866
$23,513
$23,501
$44,340
$555,009
High Cost Estimated Cost
$63,580
$63,974
$69,061
$227,472
$58,699
$482,786
$48,233
$48,960
$53,166
$206,147
$154,163
$510,668
$13,154
$12,058
$32,775
$26,112
$57,988
$540,774
$10,962
$9,866
$23,513
$23,501
$44,340
$555,009
Teva Pharmaceutical Industries
MediVend MANUFACTURING Monthly Cost Sheet
Monthly Labor Cost
Monthly Equipment & Manufacturing Facility Cost
TOTAL MONTHLY MANUFACTURING COST
Low Cost
$3,552
$3,000
$6,552
Median Cost
$3,552
$4,000
$7,552
High Cost
$3,552
$5,000
$8,552
Estimated Cost
$3,552
$4,000
$7,552
Cost of Sales Managers' Salaries
Cost of Salespeoples' Salaries
TOTAL SALES COST PER YEAR
Teva Pharmaceutical Industries
MediVend SALES Per Year Cost Sheet
Low Cost
$295,590
$615,264
$910,854
Median Cost
$394,120
$820,352
$1,214,472
High Cost Estimated Cost
$492,650 $394,120
$1,025,440
$1,518,090
$820,352
$1,214,472
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Distribution (Transport) Cost
TOTAL DISTRIBUTION COST PER UNIT
Estimated Cost
$9
$9
Product Analysis
Total Cost Per Unit
Total Cost of Project
Units
Single Unit
1
Low Cost
$9,054
$1,495,694
Med. Cost
$10,956
$1,795,532
Outlay (Startup) Costs
Manufacturing Costs (ANNUAL)
Research & Development Costs (YEARLY)
Sales Cost ( Per Year )
Low Cost
$538,550
$78,624
$368,316
$910,854
Med. Cost
$510,668
$90,624
$532,084
$1,214,472
High Cost
$482,786
$102,624
$695,851
$1,518,090
R&D and Software Employee Requirements Outlook
Initial Costs
Linux Configuration (Programmer)
Software Development & Design (Software Developer)
Software Programming (Programmer)
Sort, Package & Dispense Mechanism (Mechanical Engineer)
Initial Product Testing (Software Developer)
Initial Product Testing (Quality inspector)
Initial Product Testing (Mechanical Engineer)
Recurring Costs (Monthly)
Operating System Maintenance & Improvement (Programmer)
Software Maintenance & Improvement (Programmer)
Hardware & Structural R & D (Computer Hardware Engineer)
Recurring Product Testing (Software Developer)
Recurring Product Testing (Quality inspector)
Recurring Product Testing (Mechanical Engineer)
$ / Hour
$37
$44
$37
$47
$44
$16
$47
$37
$37
$48
$44
$16
$47
Min Hours
150
130
170
650
115
365
650
40
35
50
80
120
165
Sales Employee Requirements Outlook
Med. Hours
50
45
82.5
90
135
222.5
220
187.5
242.5
725
175
515
725
Sales Manager
Salespeople
Employee Position
Yearly
Salary
$98,530
$20,509
Distribution Employee Requirements Outlook
Min #
Employed
3
30
Max #
Employed
5
50
Employee Position
Distribution Truck Driver (Assume 10 hour avg. round trip time)
Dollars /
Shipment
Delivered
$175
# of
MediVends
Delivered
20
Estimated Cost
Per Unit
$9
High Cost
$12,859
$2,088,818
Est. Cost
$11,980
$1,796,556
Est. Cost
$510,668
$90,624
$532,084
$1,214,472
Max Hours Est. Hours
290
245
315
800
235
665
800
220
187.5
242.5
725
175
515
725
60
55
115
100
150
280
50
45
82.5
90
135
222.5
Estimated #
Employed Estimated Cost
4
40
$394,120
$820,352
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For the implementation of the MediVend project, Teva has established an array of different costs that they will have to incur. These costs are split up into hardware costs, software development and R&D costs, manufacturing costs, sales costs, and distribution costs. Hardware costs consist of such items as the CPU, Motherboard,
RAM, housing, security sensors, LCD display, keypad, vault and other physical components. The software and R&D costs are traced back to the employment of software developers, programmers, mechanical engineers, and quality inspectors. The sales costs are related to the salaries of sales managers and salespeople. Finally, the distribution costs are related to transportation and the payment of truck drivers for their services (transporting MediVend machines to customers).
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PRO FORMA PROJECT CASH FLOWS
Teva Pharmaceutical Industries
Pro Forma MediVend Cash Flows (Expected)
For the Period Ending …
1
Net Sales from MediVend
Cost of MediVend Units Sold
MediVend Gross Margin
Initial Outlay Expense (Startup)
MediVend R&D Expenses
S, G & A Expenses
Non-Recurring Expenses
Other Expenses
Operating Income
Total Other Income / Expenses Net
Income Before Tax
Income Tax Expense
Net Income
12/30/12
$1,026,000
($215,635)
$810,365
($510,668)
($555,943)
($1,461,559)
($50,482)
$0
($1,768,287)
($8,572)
($1,776,860)
$0
($1,776,860)
2
12/30/13
$1,710,000
($359,392)
$1,350,608
$0
($600,252)
($1,626,284)
($84,137)
$0
($960,065)
($14,287)
($974,352)
$0
($974,352)
3
12/30/14
$5,700,000
($1,197,974)
$4,502,026
$0
($702,505)
($2,587,178)
($280,455)
$0
$931,887
($47,625)
$884,263
($37,991)
$846,272
4
12/30/15
$5,700,000
5
12/30/16
$6,840,000
6
12/30/17
$7,410,000
($1,197,974) ($1,437,569) ($1,557,366)
$4,502,026 $5,402,431 $5,852,634
$0 $0 $0
($872,926) ($941,094) ($975,178)
($2,587,178) ($2,861,720) ($2,998,990)
($280,455) ($336,547) ($364,592)
$0
$761,466
($47,625)
$0
$1,263,071
($57,149)
$0
$1,513,873
($61,912)
$713,842
($30,669)
$683,173
$1,205,921
($51,811)
$1,154,111
$1,451,961
($62,381)
$1,389,580
Return on Equity (ROE) -6.97% -3.33%
12/30/18
$7,980,000
12/30/19
$8,265,000
12/30/20
$8,265,000
12/30/21
$8,550,000
($1,677,164) ($1,737,063) ($1,737,063) ($1,796,961)
$6,302,836 $6,527,937 $6,527,937 $6,753,039
$0 $0 $0 $0
($1,009,262) ($1,026,305) ($1,026,305) ($1,043,347)
($3,136,261) ($3,204,896) ($3,204,896) ($3,273,532)
($392,638)
$0
$1,764,675
($66,674)
$1,698,001
($72,952)
$1,625,049
($406,660)
$0
$1,890,076
($69,056)
$1,821,021
($78,237)
$1,742,783
($406,660)
$0
$1,890,076
($69,056)
$1,821,021
($78,237)
$1,742,783
($420,683)
$0
$2,015,477
($71,437)
$1,944,040
($83,523)
$1,860,518
2.79% 2.60% 2.27% 2.11%
2.52%
TOTALS
$61,446,000
($12,914,162)
$48,531,838
($510,668)
($8,753,116)
($26,942,495)
($3,023,310)
$0
$9,302,249
($513,392)
$8,788,857
($495,801)
$8,293,056
1.62%
1.77% 2.61% 2.74%
Avg. % Of Sales Avg. % OF TOTAL SALES
38.116%
21.017%
78.983%
0.831%
14.245%
43.847%
4.920%
0.000%
15.139%
0.836%
14.303%
0.807%
13.496%
<< Est. 10-Year Weighted Avg. ROE
72

Teva Pharmaceutical Industries
Pro Forma MediVend Cash Flows (Best Case)
For the Period Ending …
1
Net Sales from MediVend
Cost of MediVend Units Sold
MediVend Gross Margin
Initial Outlay Expense (Startup)
MediVend R&D Expenses
S, G & A Expenses
Non-Recurring Expenses
Other Expenses
Operating Income
Total Other Income / Expenses Net
Income Before Tax
Income Tax Expense
Net Income
12/30/12
$1,368,000
($287,514)
$1,080,486
($538,550)
($392,175)
($1,157,941)
($50,482)
$0
($1,058,662)
($8,572)
($1,067,235)
$0
($1,067,235)
2
12/30/13
$2,394,000
($503,149)
$1,890,851
$0
($436,484)
($1,322,666)
($84,137)
$0
$47,564
($14,287)
$33,277
($1,430)
$31,847
3
12/30/14
$5,700,000
($1,197,974)
$4,502,026
$0
($538,737)
($2,283,560)
($280,455)
$0
$1,399,273
($47,625)
$1,351,648
($58,071)
$1,293,577
4 5 6
12/30/15 12/30/16 12/30/17
$6,270,000 $6,840,000 $7,410,000
($1,317,772) ($1,437,569) ($1,557,366)
$4,952,228
$0
$5,402,431
$0
$5,852,634
$0
($709,158) ($777,326) ($811,411)
($2,283,560) ($2,558,102) ($2,695,372)
($280,455) ($336,547) ($364,592)
$0
$1,679,054
($47,625)
$0
$1,730,456
($57,149)
$0
$1,981,258
($61,912)
$1,631,430
($70,092)
$1,561,338
$1,673,307
($71,891)
$1,601,416
$1,919,347
($82,462)
$1,836,885
Return on Equity (ROE) -4.19% 0.11%
12/30/18 12/30/19 12/30/20 12/30/21
$7,980,000 $8,265,000 $8,265,000 $8,550,000
($1,677,164) ($1,737,063) ($1,737,063) ($1,796,961)
$6,302,836
$0
($845,495)
$6,527,937
$0
($862,537)
$6,527,937
$0
($862,537)
$6,753,039
$0
($879,579)
($2,832,643) ($2,901,278) ($2,901,278) ($2,969,914)
($392,638) ($406,660) ($406,660) ($420,683)
$0
$2,232,061
($66,674)
$2,165,386
($93,032)
$2,072,354
$0
$2,357,462
($69,056)
$2,288,406
($98,318)
$2,190,088
$0
$2,357,462
($69,056)
$2,288,406
($98,318)
$2,190,088
$0
$2,482,863
($71,437)
$2,411,426
($103,603)
$2,307,823
3.85%
TOTALS
$63,042,000
($13,249,595)
$49,792,405
($538,550)
($7,115,440)
($23,906,315)
($3,023,310)
$0
$15,208,790
($513,392)
$14,695,398
($677,217)
$14,018,181
4.05% 3.62% 3.62%
Avg. % Of Sales Avg. % OF TOTAL SALES
28.359%
21.017%
78.983%
0.854%
11.287%
37.921%
4.796%
0.000%
24.125%
0.814%
23.310%
1.074%
22.236%
3.56% 3.27% 2.85% 2.62% 2.74% << Est. 10-Year Weighted Avg. ROE
73

Teva Pharmaceutical Industries
Pro Forma MediVend Cash Flows (Worst Case)
For the Period Ending …
1 2
Net Sales from MediVend
Cost of MediVend Units Sold
MediVend Gross Margin
Initial Outlay Expense (Startup)
MediVend R&D Expenses
S, G & A Expenses
Non-Recurring Expenses
Other Expenses
Operating Income
Total Other Income / Expenses Net
Income Before Tax
Income Tax Expense
Net Income
12/30/12
$399,000
($83,858)
$315,142
($482,786)
($719,710)
($1,765,177)
($50,482)
$0
($2,703,013)
($8,572)
($2,711,586)
$0
($2,711,586)
12/30/13
$1,140,000
($239,595)
$900,405
$0
($764,020)
($1,929,902)
($84,137)
$0
($1,877,653)
($14,287)
($1,891,940)
$0
($1,891,940)
3
12/30/14
$2,850,000
($598,987)
$2,251,013
$0
($866,272)
($2,890,796)
($280,455)
$0
($1,786,511)
($47,625)
($1,834,136)
$0
($1,834,136)
4 5 6
12/30/15 12/30/16 12/30/17
$5,700,000 $6,840,000 $7,410,000
($1,197,974) ($1,437,569) ($1,557,366)
$4,502,026
$0
$5,402,431
$0
$5,852,634
$0
($1,036,693) ($1,104,862) ($1,138,946)
($2,890,796) ($3,165,338) ($3,302,608)
($280,455) ($336,547) ($364,592)
$0
$294,081
($47,625)
$0
$795,685
($57,149)
$0
$1,046,487
($61,912)
$246,456
($10,589)
$235,868
$738,536
($31,730)
$706,806
$984,575
($42,301)
$942,275
Return on Equity (ROE) -10.64% -6.47%
12/30/18 12/30/19 12/30/20 12/30/21
$7,980,000 $8,265,000 $8,265,000 $8,550,000
($1,677,164) ($1,737,063) ($1,737,063) ($1,796,961)
$6,302,836 $6,527,937 $6,527,937 $6,753,039
$0 $0 $0 $0
($1,173,030) ($1,190,072) ($1,190,072) ($1,207,114)
($3,439,879) ($3,508,514) ($3,508,514) ($3,577,150)
($392,638)
$0
$1,297,289
($406,660)
$0
$1,422,691
($406,660)
$0
$1,422,691
($420,683)
$0
$1,548,092
($66,674)
$1,230,615
($52,871)
$1,177,744
($69,056)
$1,353,635
($58,157)
$1,295,478
($69,056)
$1,353,635
($58,157)
$1,295,478
($71,437)
$1,476,655
($63,442)
$1,413,213
2.02% 1.94% 1.69% 1.60%
-5.46%
TOTALS
$57,399,000
($12,063,600)
$45,335,400
($482,786)
($10,390,792)
($29,978,675)
($3,023,310)
$0
$1,459,837
($513,392)
$946,445
($317,247)
$629,198
0.12%
0.61% 1.60% 1.86%
Avg. % Of Sales Avg. % OF TOTAL SALES
53.196%
21.017%
78.983%
0.841%
18.103%
52.229%
5.267%
0.000%
2.543%
0.894%
1.649%
0.553%
1.096%
<< Est. 10-Year Weighted Avg. ROE
74

CAPITAL BUDGETING ANALYSIS
CAPITAL BUDGETING ANALYSIS
Weighted Avg. Cost of Capital (WACC) 1.46%
Expected Payback Period (Years)
Payback Period (Years)
Worst Case Payback Period (Years)
Expected Return on Equity (ROE)
Return on Equity (ROE)
Worst Case Return on Equity (ROE)
Expected Net Present Value (NPV)
Net Present Value (NPV)
Worst Case Net Present Value (NPV)
Expected Internal Rate of Return (IRR)
Internal Rate of Return (IRR)
Worst Case Internal Rate of Return (IRR)
Profitability Index (Expected)
Profitability Index
Profitability Index (Worst Case)
Accept Project (IRR > WACC)?
4.951
1.200
8.445
1.62%
2.74%
0.12%
$7,264,112
$12,606,186
$54,738
30.75%
79.77%
1.61%
14.2247
23.4076
0.1134
75
Weighted Avg. Cost of Capital

E/V 44.26%
WACC
Re
D/V
Rd
( 1 - tc )
2.51%
55.74%
0.66%
95.00%
1.46%
E/V 44.26%
WACC
Re
D/V
Rd
( 1 - tc ) g
2.51%
55.74%
0.66%
95.00%
5.46%
6.92%
Payback 4.951
Best Case Payback
Worst Case Payback
1.200
8.445
Best Case
Worst Case
1.62%
2.74%
0.12%
Worst Case
$7,264,112
$12,606,186
$54,738
IRR 30.75%
Best Case IRR
Worst Case IRR
79.77%
1.61%
$7,264,112
$510,668
PI 14.2247
$12,606,186
$538,550
PI 23.4076
(Worst Case)
$54,738
$482,786
PI 0.1134
2.51%
76

Running Total of Yearly Incomes
Check If Paid
Payback Period Calc. ( Years )
Payback Period & NPV Calculation (Expected)
12/30/12 12/30/13 12/30/14 12/30/15 12/30/16
($1,776,859.65) ($2,751,211.83) ($1,904,940.03) ($1,221,767.39) ($67,656.71)
NOT PAID
N/A
NOT PAID
N/A
NOT PAID
N/A
NOT PAID
N/A
NOT PAID
N/A
Present Value Interest Factor 0.98562
0.97144
0.95746
0.94369
Net Income Present Value
12/30/17
($1,751,300)
12/30/18
($946,522)
12/30/19
$810,274
12/30/20
$644,703
12/30/21
$1,321,922.99
$2,946,971.70
$4,689,754.92
$6,432,538.14
$8,293,055.86
PAID PAID PAID PAID PAID
4.951
0.91674
$1,273,878
0.90355
$1,468,311
0.89055
$1,552,038
0.87774
$1,529,712
Payback Period & NPV Calculation (Best Case)
0.86511
$1,609,561
0.93012
$1,073,456
Payback Per. (Years)
4.951
$7,264,112
Running Total of Yearly Incomes
Check If Paid
Payback Period Calc. ( Years )
12/30/12
($1,067,235)
NOT PAID
N/A
Present Value Interest Factor
Net Income Present Value
12/30/17
$5,257,828
PAID
0.98562
($1,051,883)
12/30/18
$7,330,181
PAID
12/30/13
($1,035,388)
NOT PAID
N/A
12/30/14
$258,189
PAID
1.200
12/30/15
$1,819,527
PAID
0.97144
$30,937
0.95746
$1,238,552
0.94369
$1,473,420
12/30/19 12/30/20 12/30/21
$9,520,270 $11,710,358 $14,018,181
PAID PAID PAID
12/30/16
$3,420,943
PAID
0.93012
$1,489,502
Payback Per. (Years)
1.200
0.91674
$1,683,938
0.90355
$1,872,473
0.89055
$1,950,386
0.87774
$1,922,330
0.86511
$1,996,532
Payback Period & NPV Calculation (Worst Case)
$12,606,186
Running Total of Yearly Incomes
Check If Paid
Payback Period Calc. ( Years )
12/30/12
($2,711,586)
NOT PAID
N/A
12/30/13
($4,603,526)
NOT PAID
N/A
Present Value Interest Factor 0.98562
0.97144
Net Income Present Value
12/30/17
($2,672,580)
12/30/18
($1,837,901)
12/30/19
($4,552,714) ($3,374,971) ($2,079,492)
NOT PAID
N/A
NOT PAID
N/A
NOT PAID
N/A
12/30/14
($6,437,662)
NOT PAID
N/A
0.95746
($1,756,118)
12/30/20
($784,014)
NOT PAID
N/A
12/30/15 12/30/16
($6,201,794) ($5,494,989)
NOT PAID NOT PAID
N/A
0.94369
$222,586
12/30/21
$629,198
PAID
8.445
N/A
0.93012
$657,411
Payback Per. (Years)
8.445
0.91674
$863,817
0.90355
$1,064,149
0.89055
$1,153,690
0.87774
$1,137,094
0.86511
$1,222,591 $54,738

After analyzing the MediVend capital budgeting information, it is easy to see that the project is an advantageous investment. Teva is showing a weighted average cost of capital of 1.46% as well as a growth rate-incorporated weighted average cost of capital of 6.92%. These cost of capital calculations will be major factor in determining what is contributing to Teva’s solid net present value.
The MediVend project boasts an expected net present value of $7,264,112, a best-case net present value of $12,606,186, and a worst-case net present value of
$54,738. Considering a worst-case NPV that is greater than 0 in addition to expected and best-case NPVs that well exceed 0, the MediVend project proves to be very profitable based on an analysis of the projects NPV. In addition, Teva’s weighted average cost of capital doesn’t exceed the MediVend project expected internal rate of return (30.75%), best-case internal rate of return (79.77%), or the worst-case internal rate of return (1.61%). Further supporting the MediVend project are relatively solid payback period estimates at 4.951 years expected, best-case of 1.2 years, and a worst-case payback period of 8.445 years. As a final supporting factor, the expected, best-case, and worst-case return on equity (ROE) values are all positive.
78

PRO FORMA INCOME STATEMENT
Teva Pharmaceutical Industries
Pro Forma Income Statement (Without MediVend Product)
For the Period Ending …
Net Sales
Cost of Sales
Gross Margin
Research & Development Exp.
S, G & A Expenses
12/30/12
$21,020,136.95
($1,256,938.07)
($5,062,188.95)
12/30/13
$24,128,776.62
($1,442,824.95)
($5,810,829.23)
12/30/14
$27,697,148.82
($1,656,202.38)
($6,670,184.92)
12/30/15
$31,793,242.76
($1,901,135.91)
($7,656,629.56)
12/30/16
$36,495,102.50
($2,182,292.33)
12/30/17
$41,892,313.93
($10,097,976.45) ($11,591,352.55) ($13,305,582.03) ($15,273,326.59) ($17,532,078.24) ($20,124,873.61)
$10,922,160.50
$12,537,424.07
$14,391,566.79
$16,519,916.17
$18,963,024.26
$21,767,440.31
($2,505,028.60)
($8,788,958.17) ($10,088,745.33)
Non-Recurring Expenses
Other Expenses
($1,034,247.67) ($1,187,201.17) ($1,362,774.74) ($1,564,313.66) ($1,795,657.89) ($2,061,215.31)
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Operating Income $3,568,785.81
Total Other Income / Expenses Net ($175,626.96)
$4,096,568.73
($201,600.20)
$4,702,404.74
($231,414.58)
$5,397,837.03
($265,638.17)
$6,196,115.86
($304,923.04)
$7,112,451.07
($350,017.69)
Earnings Before Interest and Taxes $3,393,158.85
Interest Expense $0.00
Income Before Tax
Income Tax Expense
$3,393,158.85
($145,781.86)
Minority Interest
Net Income
($10,331.00)
$3,237,045.99
$3,894,968.53
$0.00
$3,894,968.53
($167,341.34)
($11,858.84)
$3,715,768.35
$4,470,990.17
$0.00
$4,470,990.17
($192,089.23)
($13,612.62)
$4,265,288.32
$5,132,198.86
$0.00
$5,132,198.86
($220,497.04)
($15,625.77)
$4,896,076.05
$5,891,192.82
$0.00
$5,891,192.82
($253,106.05)
($17,936.65)
$5,620,150.12
$6,762,433.38
$0.00
$6,762,433.38
($290,537.56)
($20,589.28)
$6,451,306.54
12/30/18 12/30/19 12/30/20 12/30/21
$48,087,711.67
$55,199,338.41
$63,362,694.03
$72,733,317.29
($23,101,114.00) ($26,517,506.55) ($30,439,144.79) ($34,940,748.81)
$24,986,597.67
$28,681,831.86
$32,923,549.24
$37,792,568.48
($2,875,493.90) ($3,300,746.81) ($3,788,889.80) ($4,349,223.59)
($11,580,756.25) ($13,293,418.65) ($15,259,364.39) ($17,516,051.18)
($2,366,045.66) ($2,715,956.96) ($3,117,616.17) ($3,578,676.22)
$0.00
$0.00
$0.00
$0.00
$8,164,301.86
$9,371,709.43
$10,757,678.89
$12,348,617.49
($401,781.34) ($461,200.24) ($529,406.52) ($607,699.73)
$7,762,520.52
$8,910,509.19
$10,228,272.37
$11,740,917.75
$0.00
$0.00
$0.00
$0.00
$7,762,520.52
$8,910,509.19
$10,228,272.37
$11,740,917.75
($333,504.77) ($382,826.34) ($439,442.01) ($504,430.50)
($23,634.20) ($27,129.43) ($31,141.56) ($35,747.04)
$7,405,381.55
$8,500,553.43
$9,757,688.79
$11,200,740.21
TOTALS
$422,409,782.98
($202,923,703.63)
$219,486,079.35
($25,258,776.34)
($101,727,126.64)
($20,783,705.46)
$0.00
$71,716,470.91
($3,529,308.48)
$68,187,162.43
$0.00
$68,187,162.43
($2,929,556.71)
($207,606.38)
$65,049,999.34
Avg. % Of Sales Avg. % CHANGE IN SALES
14.789%
48.040%
51.960%
5.980%
24.083%
4.920%
0.000%
16.978%
0.836%
16.142%
0.000%
16.142%
0.694%
0.049%
15.400%
79

PRO FORMA BALANCE SHEET
Assets
Cash and Cash Equivalents
Short Term Investments
Net Receivables
Inventory
Other Current Assets
Total Current Assets
Long Term Investments
Property, Plant, and Equipment
Goodwill
Intangible Assets
Accumulated Amoritization
Other Assets
Deferred Long-Term Asset Changes
Total Assets
12/30/17
$2,507,316
$0
$19,090,834
$11,465,939
$0
$33,064,090
$2,267,108
$13,604,936
$41,848,848
$23,599,886
$0
$0
$324,853
$114,709,721
12/30/18
$2,878,120
$0
$21,914,152
$13,161,621
$0
$37,953,893
$2,602,388
$15,616,952
$48,037,817
$27,090,041
$0
$0
$372,895
$131,673,986
12/30/12
$1,258,086
$0
$9,579,131
$5,753,218
$0
$16,590,435
$1,137,558
$6,826,494
$20,998,327
$11,841,619
$0
$0
$163,000
$57,557,433
12/30/19
$3,303,761
$0
$25,155,007
$15,108,076
$0
$43,566,843
$2,987,251
$17,926,522
$55,142,065
$31,096,351
$0
$0
$428,042
$151,147,074
12/30/13
$1,444,143
$0
$10,995,775
$6,604,054
$0
$19,043,972
$1,305,790
$7,836,055
$24,103,741
$13,592,860
$0
$0
$187,106
$66,069,524
12/30/20
$3,792,350
$0
$28,875,146
$17,342,389
$0
$50,009,885
$3,429,032
$20,577,651
$63,296,951
$35,695,148
$0
$0
$491,345
$173,500,011
12/30/14
$1,657,715
$0
$12,621,926
$7,580,718
$0
$21,860,359
$1,498,901
$8,994,918
$27,668,411
$15,603,090
$0
$0
$214,777
$75,840,456
12/30/15
$1,902,872
$0
$14,488,565
$8,701,820
$0
$25,093,258
$1,720,571
$10,325,165
$31,760,255
$17,910,610
$0
$0
$246,540
$87,056,399
12/30/21
$4,353,195
$0
$33,145,453
$19,907,131
$0
$57,405,780
$3,936,147
$23,620,852
$72,657,851
$40,974,055
$0
$0
$564,009
$199,158,694
12/30/16
$2,184,285
$0
$16,631,260
$9,988,721
$0
$28,804,266
$1,975,024
$11,852,139
$36,457,236
$20,559,386
$0
$0
$283,000
$99,931,052
Avg. % CHANGE
14.789%
0.000%
14.789%
14.789%
0.000%
14.789%
14.789%
14.789%
14.789%
14.789%
0.000%
0.000%
14.789%
14.789%
80

Liabilities
Accounts Payable
Short / Current Long Term Debt
Other Current Liabilities
Total Current Liabilities
Long Term Debt
Other Liabilities
Deferred Long Term Liability Changes
Minority Interest
Negative Goodwill
Total Liabilities
12/30/17
$8,562,851
$9,791,345
$13,323,549
$31,677,745
$23,416,870
$2,530,193
$5,970,890
$338,579
$0
$63,934,278
Stockholders Equity
Misc Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock
Retained Earnings
Treasury Stock
Capital Surplus
Other Stockholders Equity
Total Stockholder Equity
12/30/17
$0
$0
$0
$114,385
$25,814,377
($4,401,530)
$30,595,664
($1,347,454)
$50,775,443
Net Working Capital (NWC)
Net Working Capital
12/30/18
$9,829,200
$11,239,373
$15,293,951
$36,362,524
$26,879,959
$2,904,380
$6,853,917
$388,651
$0
$73,389,432
12/30/12
$4,296,547
$4,912,963
$6,685,303
$15,894,814
$11,749,788
$1,269,565
$2,995,989
$169,888
$0
$32,080,044
12/30/13
$4,931,958
$5,639,535
$7,673,984
$18,245,477
$13,487,449
$1,457,319
$3,439,062
$195,012
$0
$36,824,318
12/30/19
$11,282,827
$12,901,549
$17,555,753
$41,740,129
$30,855,200
$3,333,905
$7,867,533
$446,128
$0
$84,242,896
12/30/12
$0
$0
$0
$57,394
$12,952,776
($2,208,538)
$15,351,863
($676,106)
$25,477,389
12/30/18
$0
$0
$0
$131,301
$29,632,030
($5,052,466)
$35,120,416
($1,546,727)
$58,284,554
12/30/13
$0
$0
$0
$65,882
$14,868,344
($2,535,155)
$17,622,229
($776,095)
$29,245,205
12/30/19
$0
$0
$0
$150,719
$34,014,271
($5,799,668)
$40,314,327
($1,775,470)
$66,904,178
12/30/14
$0
$0
$0
$75,626
$17,067,203
($2,910,076)
$20,228,357
($890,871)
$33,570,239
12/30/20
$0
$0
$0
$173,009
$39,044,596
($6,657,373)
$46,276,358
($2,038,042)
$76,798,547
12/30/12
$695,621
12/30/17
$1,386,345
12/30/13
$798,495
12/30/18
$1,591,369
12/30/14
$916,583
12/30/19
$1,826,715
12/30/14
$5,661,338
$6,473,558
$8,808,879
$20,943,776
$15,482,089
$1,672,840
$3,947,660
$223,852
$0
$42,270,217
12/30/20
$12,951,429
$14,809,542
$20,152,049
$47,913,020
$35,418,334
$3,826,952
$9,031,052
$512,106
$0
$96,701,464
12/30/15
$0
$0
$0
$86,810
$19,591,249
($3,340,443)
$23,219,901
($1,022,620)
$38,534,896
12/30/21
$0
$0
$0
$198,595
$44,818,848
($7,641,923)
$53,120,106
($2,339,445)
$88,156,181
12/30/15
$6,498,586
$7,430,924
$10,111,612
$24,041,122
$17,771,714
$1,920,234
$4,531,475
$256,957
$0
$48,521,503
12/30/21
$14,866,798
$16,999,705
$23,132,309
$54,998,812
$40,656,304
$4,392,914
$10,366,643
$587,840
$0
$111,002,513
12/30/15
$1,052,135
12/30/20
$2,096,865
12/30/16
$0
$0
$0
$99,648
$22,488,572
($3,834,457)
$26,653,861
($1,173,854)
$44,233,770
Avg. % CHANGE
0.000%
0.000%
0.000%
14.789%
14.789%
14.789%
14.789%
14.789%
14.789%
12/30/16
$1,207,734
12/30/21
$2,406,968
12/30/16
$7,459,653
$8,529,873
$11,607,005
$27,596,531
$20,399,949
$2,204,215
$5,201,628
$294,958
$0
$55,697,282
Avg. % CHANGE
14.789%
14.789%
14.789%
14.789%
14.789%
14.789%
14.789%
14.789%
0.000%
14.789%
81

Teva has established solid sales estimates for the MediVend project. They have decided that they will begin the initial phase of the project in Utah, Idaho, &
Kansas. Teva is aiming to begin in small states in order to effectively run their test phase of introducing MediVend devices to the market. The United States is home to over 56,000 pharmacies and the NACDS claims that there are nearly 39,000 of those pharmacies operating as a part of a chain. The pharmacy market is dominated by
Walgreens & CVS in the United States, but there are still 17,000 independent pharmacies in the United States as well. These numbers don’t even include the multitude of supermarkets that Teva may eventually be able to build a market out of. There is no reason that grocery store pharmacies can’t capitalize on the same benefits that MediVend machines will offer individual pharmacies in the near future.
Based on Teva’s research, it has established forecasts for how many
MediVend units will be feasible to sell in the upcoming 10 years. To accurately determine a sales estimate for each year, Teva has incorporated sales (units sold) into its sensitivity analysis with the goal of determining the degree to which unit sales will be affected by other variables. Teva concludes that its MediVend sales will be relatively variable in the first 5 years, with sales being relatively low in the first two years due to a standard experimentation phase. Teva estimates for its
“expected” analysis of the MediVend project that it will sell 18 units in the first year,
30 units in the second year, 100 units in the third year, 100 units in the fourth year,
120 units in the fifth year, 130 units in the sixth year, 140 units in the seventh year,
145 units in the eighth year, 145 units in the ninth year, and 150 units in the tenth
82

year. For its “best case” analysis of the MediVend project, Teva estimates that it will sell 24 units in the first year, 42 units in the second year, 100 units in the third year,
110 units in the fourth year, 120 units in the fifth year, 130 units in the sixth year,
140 units in the seventh year, 145 units in the eighth year, 145 units in the ninth year, and 150 units in the tenth year. Finally, for the “worst case” scenario of the project, Teva estimates that it will sell 7 units in the first year, 20 units in the second year, 50 units in the third year, 100 units in the fourth year, 120 units in the fifth year, 130 units in the sixth year, 140 units in the seventh year, 145 units in the eighth year, 145 units in the ninth year, and 150 units in the tenth year.
As clearly shown, Teva believes that most of the fluctuation of the unit demand for MediVend will be as a result of problems with introducing a groundbreaking product into the market. Teva has analyzed a great deal of data and concluded that if the project is a success, then the long-term sales estimates will be completely stable across the sensitivity analysis. This is because, while the sales may not be exactly what they are projected to be, the sales projections are not affected by the variables that are involved in Teva’s sensitivity analysis in the long run. The variables involved in Teva’s sensitivity analysis deal more with variations in the cost of producing the machines. This is because Teva firmly believes that if these devices are produced up to par with the quality outlined in the growth strategy, then there is no reason to believe that pharmacies will neglect to purchase them. The
MediVend is an almost “no-brainer” value, being a product that can almost pay itself off twice in the first year by replacing a minimum of one pharmacist (most-likely more).
83

MULTIPLE COST OF CAPITAL ESTIMATES
Cost of Equity
6.92% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
1.00% 1.79% 2.23% 2.68% 3.12% 3.56% 4.00% 4.45% 4.89%
2.00% 2.79% 3.23% 3.68% 4.12% 4.56% 5.00% 5.45% 5.89%
3.00% 3.79% 4.23% 4.68% 5.12% 5.56% 6.00% 6.45% 6.89%
4.00% 4.79% 5.23% 5.68% 6.12% 6.56% 7.00% 7.45% 7.89%
5.00% 5.79% 6.23% 6.68% 7.12% 7.56% 8.00% 8.45% 8.89%
6.00% 6.79% 7.23% 7.68% 8.12% 8.56% 9.00% 9.45% 9.89%
7.00% 7.79% 8.23% 8.68% 9.12% 9.56% 10.00% 10.45% 10.89%
8.00% 8.79% 9.23% 9.68% 10.12% 10.56% 11.00% 11.45% 11.89%
$7,264,111.54
3.00% $6,314,400
4.00% $5,763,443
5.00% $5,258,364
6.00% $4,794,896
7.00% $4,369,212
8.00% $3,977,876
9.00% $3,617,798
TEVA EXISTING INCOME STATEMENT & BALANCE SHEET
Teva Pharmaceutical Industries
Income Statement
For the Period Ending …
Net Sales
Cost of Sales
Gross Margin
Research & Development Exp.
S, G & A Expenses
Non-Recurring Expenses
Other Expenses
Operating Income
12/30/11
$18,312,000.00
($8,797,000.00)
$9,515,000.00
12/30/10
$16,121,000.00
($1,095,000.00) ($951,000.00)
12/30/09
$13,899,000.00
($7,056,000.00) ($6,532,000.00)
$9,065,000.00
$7,367,000.00
($825,000.00)
($4,410,000.00) ($3,833,000.00) ($3,499,000.00)
($901,000.00) ($410,000.00) ($638,000.00)
$0.00
$3,109,000.00
$0.00
$3,871,000.00
$0.00
$2,405,000.00
Total Other Income / Expenses Net ($153,000.00)
Earnings Before Interest and Taxes $2,956,000.00
Interest Expense
Income Before Tax
$0.00
$2,956,000.00
($225,000.00)
$3,646,000.00
$0.00
$3,646,000.00
($202,000.00)
$2,203,000.00
$0.00
$2,203,000.00
Income Tax Expense
Minority Interest
Net Income
($127,000.00)
($9,000.00)
$2,820,000.00
($283,000.00)
($8,000.00)
($166,000.00)
($4,000.00)
$3,355,000.00
$2,033,000.00
TOTALS
$48,332,000.00
($22,385,000.00)
$25,947,000.00
($2,871,000.00)
($11,742,000.00)
($1,949,000.00)
$0.00
$9,385,000.00
($580,000.00)
$8,805,000.00
$0.00
$8,805,000.00
($576,000.00)
($21,000.00)
$8,208,000.00
2011 % Of Sales Avg. % CHANGE IN SALES
14.789%
48.040%
51.960%
5.980%
24.083%
4.920%
0.000%
16.978%
0.836%
16.142%
0.000%
16.142%
0.694%
0.049%
84

Assets
Cash and Cash Equivalents
Short Term Investments
Net Receivables
Inventory
Other Current Assets
Total Current Assets
Long Term Investments
Property, Plant, and Equipment
Goodwill
Intangible Assets
Accumulated Amoritization
Other Assets
Deferred Long-Term Asset Changes
Total Assets
Teva Pharmaceutical Industries
Balance Sheet
For the Period Ending …
12/30/11
$1,096,000
$0
$8,345,000
$5,012,000
$0
$14,453,000
$991,000
$5,947,000
$18,293,000
$10,316,000
$0
$0
$142,000
$50,142,000
12/30/10
$1,248,000
$0
$6,928,000
$3,866,000
$0
$12,042,000
$632,000
$4,357,000
$15,232,000
$5,751,000
$0
$0
$138,000
$38,152,000
12/30/09
$1,995,000
$253,000
$6,461,000
$3,332,000
$0
$12,041,000
$534,000
$3,766,000
$12,674,000
$4,053,000
$0
$0
$142,000
$33,210,000
Liabilities
Accounts Payable
Short / Current Long Term Debt
Other Current Liabilities
Total Current Liabilities
Long Term Debt
12/30/11
$3,743,000
$4,280,000
$5,824,000
$13,847,000
$10,236,000
Other Liabilities $1,106,000
Deferred Long Term Liability Changes $2,610,000
Minority Interest
Negative Goodwill
Total Liabilities
$148,000
$0
$27,947,000
Stockholders Equity
Misc Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock
Retained Earnings
Treasury Stock
Capital Surplus
Other Stockholders Equity
Total Stockholder Equity
Net Working Capital (NWC)
Net Working Capital
Net Tangible Assets
Net Tangible Assets
12/30/10
$2,467,000
$2,771,000
$4,456,000
$9,694,000
$4,110,000
$998,000
$1,348,000
$55,000
$0
$16,205,000
12/30/09
$2,349,000
$1,301,000
$3,852,000
$7,502,000
$4,311,000
$897,000
$1,241,000
$37,000
$0
$13,988,000
12/30/11
$0
$0
$0
$50,000
$11,284,000
($1,924,000)
$13,374,000
($589,000)
$22,195,000
12/30/12
$606,000
12/30/11
($6,414,000)
12/30/10
$0
$0
$0
$49,000
$9,325,000
($1,023,000)
$13,246,000
$350,000
$21,947,000
12/30/09
$0
$0
$0
$49,000
$6,662,000
($924,000)
$12,880,000
$555,000
$19,222,000
12/30/13
$2,348,000
2011 % Of Sales
0.000%
0.000%
0.000%
0.273%
61.621%
-10.507%
73.034%
-3.216%
121.205%
12/30/14
$4,539,000
12/30/10
$964,000
12/30/09
$2,495,000
2011 % Of Sales
5.985%
0.000%
45.571%
27.370%
0.000%
78.926%
5.412%
32.476%
99.896%
56.335%
0.000%
0.000%
0.775%
352.747%
2011 % Of Sales
20.440%
23.373%
31.804%
75.617%
55.898%
6.040%
14.253%
0.808%
0.000%
228.233%
85

Teva has calculated that the MediVend project is a potentially profitable project that should be invested in. From the standpoint of expected performance, the MediVend projects 1.2 year expected payback period, expected return on equity of 1.62%, expected net present value of $7,264,112, expected internal rate of return of 30.75%, and an expected profitability index of 14.23. Further analysis proves that the internal rate of return for the MediVend project is far greater than Teva’s weighted average cost of capital (WACC), with 30.75% expected IRR and only 1.46%
WACC. In addition, a quick analysis shows that the worst estimated scenario would result in an net present value of $54,738 and the best estimated scenario could lead to a very respectable net present value of $12,606,186. Either way, the MediVend project seems to be a very profitable project to invest capital in. With this being said,
Teva has decided that they will be pursuing the MediVend project since their analysis of the project has proved that it will likely be a profitable endeavor.
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If any information is missing from this document, excel finance workbook, or reference sheet, they can be found at team3teva.weebly.com or by using the following QR code.
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