Three weeks after Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) completed the purchase of Actavis Generics from Allergan, the stock market awaits the next event that may impact the company's share: the US Patent Office's decision on patents protecting double-dose (40mg) Copaxone treatment for multiple sclerosis.
Copaxone is Teva's most important branded drug, providing 21.8% of the company's revenue (a percent which is expected to decrease following the merger with Actavis) and $1.7 billion of its profit in the first half of the year. The US is the drug's primary market.
As part of its competition against generic rivals of the regular dose Copaxone (20 mg), launched in 2015, Teva moved most patients to the double dose version. At present, the question is when Teva will encounter generic competition for the double dose version as well.
By Thursday, August 25, the Patent Office is expected to reach a decision on the drug. A few days ago, a decision was made on one of the patents, with the office rejecting the request of Teva's competitor Mylan N.V. (Nasdaq: MYL; TASE: MYL) to reexamine the patent. The decision expected this week regards three other patents, and will not end Teva's fight for exclusivity - since the legal proceedings against generic drug firms, expected to begin next month, might be even more significant.
Assuming the trial will take a few months, Teva still has time until it encounters competition; after the court's decision, appeals are still to be expected, whether filed by Teva or by the generic drug companies. However, if the court rules in favor of the generic companies, they could launch an at risk version of the drug. That is, they could launch a generic version before the completion of legal proceedings, taking the risk of eventually losing the trial and paying a large compensation to the branded drug manufacturer.
How will Teva's share be affected by the Patent Office's decision? Goldman Sachs has recently estimated that the trade in the shares of Teva - as well as Mylan and Momenta - involved in the process, will be characterized by volatility. "If positive, we believe Teva could be up 6-8%, and if negative down 10%, skewing risk to the downside," analyst Jami Rubin has written. "We believe that the legal proceedings will play a significant part in the next few years, and that an at-risk launch of the drug before the second half of 2018 is unlikely."
Deutsche Bank, on the contrary, has integrated the risk of a generic Copaxone (40 mg) launch in 2017 into its investment model, leading to forecasted 50% erosion in sales in 2017, but admits that the estimate might be over-conservative.
Published by Globes [online], Israel business news - www.globes-online.com - on August 21, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016