Teva boosted as FDA delays generic Copaxone

Copaxone

IBI analyst Steven Tepper: Every month of delay means $150-200 million more for Teva.

Momenta, a partner of Pfizer (the manufacturer) and Sandoz (the distributor) in the development of a generic version of 40-mg Copaxone, Teva Pharmaceutical Industries Ltd.'s (NYSE: TEVA; TASE: TEVA) flagship product, announced at the end of last week that the US Food and Drug Administration (FDA) was liable to delay approval of the product, due to certain malfunctions detected at its plant.

Trading in Momenta's share was halted on Friday. The company is holding a conference call today to discuss this event, among other things, which may shed additional light on what happened. The Teva share price was down 0.6% in Tel Aviv Stock Exchange (TASE) trading today, after rising over 3% on Sunday and Monday, putting the company's market cap at $35.2 billion. This is the second week of rises in the share price, following a long downtrend. Last week's rises followed Teva's confirmation of its 2017 forecasts.

Analysts continued to respond today to the news about Momenta. Most of them predict some delay in competition for Teva's product. Competition for multiple sclerosis treatment Copaxone will cost Teva $1-1.3 billion a year in revenue according to the company's estimates. Any delay in competition, even a short one, is therefore considered good news for the company, which needs all the cash flow it can get in order to repay its debt, which climbed following its acquisition of generics company Actavis.

"A Hanukah miracle"

UBS investment bank analyst Marc Goodman notes that malfunctions in a plant can delay approval of the product for a year or more. The Credit Suisse investment bank, which, like most of the market, previously predicted that Momenta would be the first to enter the market in competition with Teva's 40-mg Copaxone, now says that a generic competition for Copaxone (not necessarily from Momenta) will first appear in the third quarter of 2017, not in the first quarter, as it Credit Suisse believed up until now. The change led the bank to raise its target price for the Teva share from $41 to $42, a 20% premium on the current market price.

Analysts Aaron (Ronny) Gal from Sanford C. Bernstein and Umer Raffat from Evercore Investment Banking hold the same opinion. Gal calls the news a Hanukah miracle for Copaxone, the drug whose exclusivity refuses to end. Gal predicts the delay will last for six months.

What about other competitors? UBS, Credit Suisse, and Sanford C. Bernstein believe that even if Momenta is delayed for a longer time, another competitor can still emerge this year, perhaps even in the coming months.

Raffat, on the other hand, says that Momenta is the only company to date to have received FDA approval for 20-mg Copaxone. In other words, it is the only company definitely able to produce the active ingredient. Judging by past cases, Raffat predicts that Momenta's approval will take 13-17 months, and guesses that the process will take no less than five months in any case.

IBI Investment House analyst Steven Tepper has been asserting for many months that obtaining approval for generic 40-mg Copaxone will not be easy in either law or regulation (i.e. FDA approval). He predicts that approval will arrive only in 2018, not in 2017 (as Teva itself said, in contrast to the opinion of most other analysts). Tepper notes that the Momenta-Sandoz-Pfizer group was the strongest and most advanced of the potential competitors, and that it is not known whether the FDA has visited the other potential competitors' plants at all. Tepper also believes that the fact that Teva's other competitors, including Mylan N.V. (Nasdaq: MYL; TASE: MYL), did not receive approval for their generic 20-mg Copaxone might indicate that there are also difficulties in the 40-mg version.

Tepper sums up by saying that each delay of one month in approval of 40-mg generic Copaxone means $150-200 million more in in Teva's sales. Teva's gross profit margin on Copaxone is over 80%

Published by Globes [online], Israel Business News - www.globes-online.com - on February 21, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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