The shares of Teva Pharmaceutical Industries Ltd. plunged in Tel Aviv on Sunday after competitors got approvals last week from US and European regulators to market cheaper versions of its flagship Copaxone drug for multiple sclerosis, which Teva was not anticipating this year.
The launch of the competing products will result in “significant declines” in Teva’s largest product effective this year, Moody’s Investors service said in a note.
“We model Mylan capturing 40 percent of the market at 40% price discount,” wrote Bernstein analyst Ronny Gal in an October 3 note. Bernstein is represented in Israel by Excellence Nessuah Brokerage Services.
Competitor pharmaceutical firm Mylan said on October 3 that it received approval from the US Food and Drug Administration for the marketing of generic versions of Teva’s Copaxone (glatiramer acetate) in 40mg and 20mg dosages. The US firm said it would start shipping immediately, and the news sent US shares of Teva tumbling 15 percent last week, to a 15-year low.
Just two days after the Mylan news, Alvogen, a privately owned pharmaceutical company, said it had received, together with partner Synthon, a nod from European regulators to market the 40mg dose of generic Copaxone in Europe. Alvogen has already been selling the 20mg dose of the drug in Europe.
Teva shares dropped 14 percent in Tel Aviv, following last week’s declines in its US traded shares. The Tel Aviv Stock Exchange was closed part of last week due to the Jewish festival of Sukkot. Mylan shares, also traded in Tel Aviv, were up 19% following gains in the US last week.
The implications for Teva include a “downside” to both revenue and profit estimates for 2018, Citi’s Liav Abraham wrote in an October 3 note. The news will also renew concerns “surrounding the company’s investment grade credit rating, given the importance of Teva’s Copaxone franchise to cash flow generation.”
Launched in 1996 by Teva as its first major brand-name drug, Copaxone is still the leading medication for multiple sclerosis patients.
The drug’s patents are now expiring and in 2015 competitors started marketing a generic version of this drug. While the classic dosage consists of 20 milligrams to be injected daily, Teva had managed to stave off some of the competition by developing a 40 milligram, three-times-a-week injection of Copaxone, which most patients have now switched to.
Copaxone 40mg accounted for over 85% of total Copaxone prescriptions in the US, and over 75% of European Copaxone prescriptions are now filled with the 40mg version, Teva said in its second quarter financial results report. Global revenues for the drug, in its 20mg and 40mg versions, were $1 billion in the second quarter, 10% lower than in the same quarter a year earlier, the Israeli drug-maker said.
Copaxone is the most prescribed treatment for multiple sclerosis in the US, with sales for the branded version of the 20mg dose of approximately $700 million, and of some $3.64 billion for the 40mg dose for the 12 months ending July 31, 2017, Mylan said in its statement last week, reporting the FDA approval. Some 400,000 people in the US are afflicted with MS, Mylan said.
“Teva has said that the entrance of two generic competitors to Copaxone will lower its annual revenue by $1 billion to 1.2 billion,” said Jonathan Kreizman, an analyst at the Bank of Jerusalem said by phone. “The earlier-than-expected competition, by 9 to 12 months, is a surprising and negative development for Teva. Even so, it will not have a significant impact on top of the market’s already low expectations for Teva’s longer-term prospects. In the short term, Teva is expected to meet its debt repayments. The event, in my opinion, mainly increases the risk of Teva’s bonds being downgraded to junk bonds.”
Teva has been laying off some 7,000 workers, selling assets, closing down plants and slashing dividend payments in a bid to cut costs to lower its $35.1 billion debt it accrued following expensive acquisitions.
Last month, Teva appointed Kåre Schultz the company’s president and chief executive officer. He will be tasked with setting out the Israeli firm’s strategy as it struggles to find direction amid withering investor confidence. Teva’s New York traded shares have declined 63 percent in the 12 months to Friday.
In June, Teva revised its earnings per share forecast for 2017 to $4.30–$4.50, from a previous outlook of $4.90–$5.30 a share. The revenue outlook for 2017 was also lowered to $22.8–$23.2 billion, from a previously expected range of $23.8–$24.5 billion. The revised guidance ranges assumed no generic competition for Copaxone, in the 40mg dosage in the US in 2017, the company said.
If there were to be such generic competition for the Copaxone 40 mg., for a full quarter in 2017, it “would result in a $0.20 to $0.25 reduction of earnings per share,” Michael McClellan forecast in an August 3 call with analysts.
“The launch of Mylan’s generics will result in significant declines in Teva’s largest product beginning in the fourth quarter 2017,” Moody’s Investors service said in a note after the approval of Mylan’s generic version of Copaxone.
Commenting on Mylan’s announcement, Teva said last week that there is ongoing patent litigation regarding Copaxone, and the launch of Mylan’s new product should be considered “at risk” as the competitor could be subject to “significant damages” as a result.
“We have planned for the eventual introduction of a generic competitor to glatiramer acetate,” said Yitzhak Peterburg, Teva’s interim president and CEO said in a statement. “We remain confident in patient and physician loyalty to Teva’s Copaxone due to its recognized efficacy, safety and tolerability profile, and we will continue to promote and support the product. As we are closing the third quarter, it is too soon to officially comment on any change to our full year business outlook.”