Copaxone was the keyword at two conference calls on Thursday. In the conference call by Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) executives following the publication of its financial report for the first quarter of 2014, analysts were interested in Teva's ability to protect its brand drug against generic competition. In a conference call with Mylan Inc. (Nasdaq: MYL), analysts tried to figure out whether it was nearing a launch of generic Copaxone. The result, in this case, seems better for Teva: Mylan CEO Heather Bresch said that there was a chance that its launch of generic Copaxone might be delayed.
Copaxone, Teva's brand drug for the treatment of multiple sclerosis, had $1.1 billion in sales in the first quarter of 2014, and accuonted for half of the company's quarterly profit. Copaxone's US patent will expire on May 24, but it will appeal, and generic companies have not yet obtained US Food and Drug Administration (FDA) approval to market generic versions of the drug. If such approval is forthcoming, these generic companies may make an at-risk launch, and risk having to pay compensation of up to three times the damage to Teva if Teva wins in its legal proceedings.
Teva has added another challenge to the generic companies, stating that in such a case, it would also seek compensation for losses to its double dosage Copaxone (40 mg). Teva is investing heavily to transfer patients from the 20-mg dosage, which is administered daily, to the 40-mg dosage, which is administered three times a week. Teva says that generic versions of Copaxone 20 mg would also affect the transition of patients to the larger dosage, and it will therefore seek compensation for these losses.
New Teva president and CEO Erez Vigodman promised an update of the company's plans and guidance later this year, saying that he believes that it is possible to increase the expected savings from cost-cutting.
Teva also changed its tone on acquisitions. In the past few years, the company has not participated in the growing mergers and acquisitions in the pharmaceutical industry. "While the focus remains on fixing the foundation and driving organic growth, we are aware of the opportunities around us, including potential larger transactions as long as they meet clear criteria, and we might engage in such a transaction once conditions admit," he said. "I strongly believe that first we need to be much more focused on the way we close the gaps before we make a big transaction here although don’t rule it out."
Looking for bold moves
"We thought the new CEO said all of the right things regarding more cost cuts dropping to the bottom line and M&A being an important part of the story," says UBS analyst Marc Goodman. Despite his optimism, he advises waiting to see updates about generic Copaxone.
Goldman Sachs is also encouraged by Vigodman's remarks, but reaffirms its "Neutral" recommendation for Teva. "We look for bold moves in the face of potential generic Copaxone competition, but note it won’t likely be an easy fix," said analyst Jami Rubin, who adds that there is a 50% chance of a generic Copaxone launch this year.
Merrill Lynch analyst Sumant Kulkarni writes, "We like what we believe is Teva’s greater sense of urgency on executing on its plans," including cost-cutting and acquisitions. He reaffirms his "Buy" recommendation and target price of $57, a 14% premium on Friday's close of $49.86, after a 2.1% downard correction of Thursday's 4.3% gain on the New York Stock Exchange, giving Teva a market cap of $42.3 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on May 4, 2014
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