Biotech Values

[DewDiligence]

TEVA MNTA – This is a repost of genisi’s post on the TEVA board with
some annotations added by me. Merrill Lynch’s analysis here ought not
to be taken literally, IMO.

http://www.globes.co.il/serveen/globes/docview.asp?did=1000442206&fid=942

›Merrill Lynch: Copaxone Will Keep Teva Volatile

By Yossi Nissan
13-Apr-2009

Merrill Lynch today published an updated review for Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA) against the backdrop of investors' rising concern about threats to the company's flagship product, Copaxone, for the treatment of multiple sclerosis. Merrill Lynch it reiterated its "Buy" recommendation for the share with a target price of $51, a 10% premium over Friday's closing price of $46.42.

Merrill Lynch analysts Gregg Gilbert, Haim Israel, and Sumant Kulkarni analyzed scenarios for Copaxone, which could adversely affect Teva's share, as well as scenarios that could create an upside move in the share.

The base scenario generic competition in the US in 2014. In this scenario, Copaxone represents $13/share of potential value for Teva, as the consensus now holds.

The downside case is a generic competitor in 2011 [the automatic stay on FDA approval of the ANDA submitted by NVS/MNTA expires in Feb 2011], which would create a $4 downside risk. In the upside case, there is no generic competition through 2020 [the 2020 date seems arbitrary insofar as all of the Orange Book patents for Copaxone expire in 2014: http://www.accessdata.fda.gov/scripts/cder/ob/docs/patexclnew.cfm?Appl_No=020622&Product_No=001&table1=OB_Rx ], which would create $9 of upside potential.

Merrill Lynch believes that Teva's share will continue to be volatile on news flow related to Copaxone. The analysts cite the challenge to Copaxone's patents filed in July 2008 by Momenta Pharmaceuticals Inc. (Nasdaq: MNTA) and Novartis AG (NYSE: NVS) generics unit Sandoz, which is in the early stages of litigation. They also cite the intention of Mylan Laboratories Inc. (NYSE: MYL) and India's Natco Pharma Ltd. (BSE: 524816) to shortly jointly file an abbreviated new drug applications (ANDA) for generic Copaxone, and add that other applications are possible. [Teva’s executives have stated that they do not consider Natco’s drug, which is currently sold in India, to be the same as Copaxone.]

Gilbert and Israel estimated Copaxone’s revenue and earning per share (EPS) contribution relative to Merill Lynch's revenue and EPS estimates for Teva in 2009-13. In the base and upside cases, Copaxone will contribute 15% to Teva's revenue and 35% to its EPS in 2009. The contribution will rise to 21% of revenue and 51% of EPS in 2013. In the downside case, Copaxone's contribution will fall to 14% of Teva's revenue and 32% of its EPS in 2013.‹