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Teva Down as Mylan’s Copaxone 40 mg Generic Arrives Early


Shares of Teva Pharmaceutical Industries Limited TEVA declined almost 15% on Wednesday after Mylan N.V. MYL, after hours on Tuesday, announced the FDA approval of its generic version of a 40-mg thrice-weekly formulation of the former’s blockbuster multiple sclerosis drug, Copaxone. The FDA also approved Mylan’s generic for Copaxone 20 mg formulation (once daily).

Mylan confirmed the launch of both the 40 mg and 20 mg formulations in the United States on Wednesday. Mylan’s shares were up 16.2% on Wednesday.

Notably, this is the first generic of Copaxone, 40 mg version that has been approved. Mylan along with the other filers may be eligible to enjoy exclusivity for 180 days. A generic version of the 20 mg formulation of Copaxone, Glatopa, has been marketed since 2015 by Novartis AG’s NVS generic arm – Sandoz – and partner Momenta Pharmaceuticals, Inc. MNTA.

In response to the launch by Mylan, Teva issued a press release on Wednesday saying that any launch by Mylan before a resolution of various patent appeals will be considered an at-risk launch and could result in substantial damages for the latter.

We remind investors that in January this year, the U.S. District Court for the District of Delaware invalidated four of its five Orange Book patents for Copaxone 40 mg. Teva has appealed against the decision to the U.S. Court of Appeals for the Federal Circuit. Teva has also appealed in the same court against the December 2016 inter partes review decisions of the Patent Trial Appeal Board that found all of the claims of three Copaxone patents to be unpatentable.

The 40 mg thrice-weekly formulation of Copaxone accounted for more than 85% of total Copaxone scrips in the United States at the end of the second quarter. With Copaxone generating almost $2.0 billion in worldwide sales in the first half of 2017, the earlier-than-expected entry of the generic version of Copaxone will be a major setback for the company.

At the second quarter conference call, Teva had said that it does not expect any generic competition for Copaxone 40 mg this year. However, the company had also mentioned at that time that in case, one or more generic versions were launched for a full quarter this year, it will hurt earnings by 20 cents-25 cents per share. With the earlier-than- expected launch of Mylan’s generic version, Teva estimates a negative impact of at least 25 cents per share on fourth-quarter earnings.

In addition to Mylan, Momenta is also looking to get approval for its generic versions of the 40-mg thrice-weekly formulation of Copaxone. The FDA approval of Momenta’s generic version of Copaxone has been delayed owing to manufacturing issues. Momenta’s shares were down almost 14% on Wednesday.

As it is, Teva has been facing tough times and is a Zacks Rank #4 (Sell) stock.

Year to date (YTD), Teva has lost 55.7% of its value compared with 20% decline of its industry.

A challenging environment in the U.S. generics business and the continued deterioration in Venezuela have been hurting Teva’s sales. The U.S. generics industry is facing significant competitive and pricing pressure. These have been affecting the company’s top line performance. Higher FDA generic drug approvals and ongoing customer consolidation have increased competitive pressure in the industry. The challenges in the U.S. generics market are expected to continue this year.

Meanwhile, delay in the launch of some new generic drugs and increased competition for some others is also hurting segment sales. New competition for branded products and a high cost base and debt load are some of the other woes. In August, Teva announced a 75% cut in its dividend.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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