At least one analyst is recognizing the Copaxone generic threat to Teva and that 3x weekly may not prove to be the end all.....
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Teva Pharmaceutical Industries Ltd. (TEVA ? 0.34% 23,580.00)’s stock last year posted its best performance since 2000, and the company on Tuesday won a key U.S. Supreme Court ruling. Now, one brokerage thinks it may be time to sell the shares.
Insurers will force patients to switch from Teva’s bestselling Copaxone drug for multiple sclerosis to a generic version that will probably be approved this year, according to Berenberg analysts Louis Pearson and Alistair Campbell. Shares of the Petach Tikva, Israel-based company aren’t worth holding, they told clients while initiating coverage.
Until last week, not one of 32 analysts tracked by Bloomberg recommended selling the stock.
“Around half of the group’s profit is derived from a single branded product, Copaxone,” the London-based analysts wrote in a note dated Jan. 23. “Copaxone will likely face generic competition in 2015 in its biggest market, putting earnings under significant pressure over the medium term.”
Shares of Teva gained almost 60 percent last year in Tel Aviv trading, and rose 1.2 percent to 237.70 shekels as of 11:49 a.m. today. The American depositary receipts climbed 43 percent in New York in 2014, their best performance since 2007.
A spokesman for Teva didn’t immediately reply to a request for comment.
The sell recommendation contrasts with the optimism fueled by a Supreme Court decision last week that will help forestall generic competition until September. The justices told a lower court to reconsider a ruling invalidating a patent on Copaxone. Meanwhile, Teva has shifted more than 60 percent of patients from its daily injection to a three-times-weekly injection that won’t face generic competition until 2030.
Cheaper Alternatives
While Teva’s strategy to switch patients from the daily doses has been successful, approval of a generic version will prompt insurers to force patients off the branded drug and onto a cheaper alternative, Berenberg’s Pearson and Campbell wrote.
“We think that consensus is underestimating the rate at which patients will be forced off the brand, and thereby overestimating future earnings from this franchise,” they wrote. “Payer pressure in the U.S. pharmaceuticals market has increased recently.”
While Teva has boosted profitability at its generics division, Berenberg expects the company’s growth in that area to stall as it misses a “second wave of biosimilars,” or biological drugs that will go off patent by 2021. The analysts added that the company’s branded division does not have the kind of drugs needed under development to make up for a drop in Copaxone sales.
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