Mylan generic Copaxone price cut puzzles industry

Copaxone
Copaxone

Mylan is changing its strategy after failing to take market share away from Teva.

Late last year, Mylan Pharmaceutical obtained approval to market the generic version it developed of Copaxone, Teva Pharmaceutical Industries Ltd.'s (NYSE: TEVA; TASE: TEVA) original drug for treatment of multiple sclerosis. In the subsequent months, Mylan has failed to take any significant share of the Copaxone market away from Teva and is now changing its strategy by sharply cutting the price of its drug. A survey by Bernstein Research analyst Dr. Ronny Gal found that Mylan had slashed the catalogue price for its generic Copaxone by 62%, from $5,000 to $1,900. Gal notes that the original Copaxone is sold for $5,800 and struggles to find a logical reason for Mylan's drastic step.

"The classic strategy for moderate competition GRx is to set the WAC close to the innovator and provide discounts.," Gal writes. He says this was Mylan's initial strategy when it set a price of $5,000. "Mylan got only moderate share using this strategy with Copaxone (15%-20%), due to a mixture of reasons," Gal adds, citing competition by Teva and the discounts and distribution of Copaxone through pharmacy benefit manager (PBM) distribution channels. Beyond the measures taken by Teva, Gal believes that Mylan's lack of success in taking a larger market share away from Teva was due, among other things, to the insurers' worries about the availability of support for patients using generic Copaxone and the tendency among patients and doctors to prefer the original drug to the generic version.

Gal writes that he checked among many players in the industry in order to try to understand Mylan's price cut. "We were told that under the current system, this change makes no commercial sense," he writes, because the original Copaxone is in effect being given free of charge to the US government Medicaid program. Gal proposes two possible reasons for the price cut. The first is that Mylan did it in response to government pressure: "The speculation was that Mylan traded the discount in exchange for benefit elsewhere - e.g. on biosimilars, Advair or Epipen investigation." Another reason cited by Gal is Mylan's wish to hit Teva's profits: "Mylan sees itself as competing with Teva for investor money and as signaling to future innovators in complex markets (Advair, Neulasta) it is willing to erode market prices, if they do not cede fair share," he sums up. Despite Mylan's move, Gal is not changing his recommendation for Teva or his target price; he still recommends "Market perform" with a target price of $26, 7% higher than the current market price.

New launch for Teva in US: A drug for colitis

Teva, managed by CEO Kare Schultz, has a current market cap of $24.7 billion after a 117% rise in its share price since it bottomed out in November 2017, but this is still 21% below the company's share price a year ago. Teva yesterday reported the launch of a new generic drug in the US, Useris (budesonide), for treatment of moderate-to-medium stomach colitis. The drug comes in nine-milligram dosage delayed release tablets manufactured by Valeant. Its annual US sales total $196 million.

"The launching of delayed release budesonide tablets is an important addition to Teva's generic portfolio," says Teva EVP and North American commercial head Brendan O'Grady. "We're continuing our focus on brining affordable generic treatments for our patients, including those living with lifelong chronic symptoms, such as stomach colitis."

Published by Globes [online], Israel business news - www.globes-online.com - on July 11, 2018

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