Teva Pharma Drops On Worries Of Generic Copaxone Threat
NEW YORK (Dow Jones)--Shares of Teva Pharmaceutical Industries Ltd. (TEVA.TV, TEVA) hit a year low as investors worry that the Food and Drug Administration's approval of a generic version of Sanofi-Aventis SA's (SAN.FR, SNY) blood thinner Lovenox signals that Teva's multiple sclerosis drug Copaxone could face similar competition.
Copaxone is important to the Israeli drug giant's business, and it has argued that the complexity of the drug should preclude the FDA from approving any generics, which is similar to the arguments that Sanofi made against generic Lovenox. The agency provided a detailed rebuttal to those arguments in approving the copycat version of Lovenox, developed by Momenta Pharmaceuticals Inc. (MNTA) and Novartis AG's (NOVN.VX, NVS) generic drug unit Sandoz.
Notably, Momenta and Mylan Inc. (MYL) have both filed to produce generic versions of Copaxone, a process that is likely to span years. The drug, one of the world's best-selling MS treatments, was approved in 1996 and had sales of $2.8 billion last year.
Teva has sued both companies. That triggered an automatic 30-month stay on FDA approval, which is required by a generics-related law, meaning no generic version of Copaxone can enter the U.S. market until early 2011. Teva has U.S. patents on Copaxone that stretch to 2014, which will also be an obstacle for a generic.
Regardless, American depositary shares of Teva recently fell 9.4% to $48.95 on more than five times regular daily volume.
"Today's approval does confirm the FDA's willingness to approve generic versions of complex molecules," J.P. Morgan's Chris Schott said in a note to clients. Regardless, he added that the approval of generic Lovenox was a very complex and multiyear process, and that each situation is unique.
UBS analyst Marc Goodman called the decline of Teva's stock "excessive." He says that Copaxone should provide about a third of Teva's profit in 2011, but that the complete removal of the drug from Teva's business results in a stock valuation of about $46.
"Hence, we think this response in the stock is practically going to the worst-case scenario, which makes no sense to us," he wrote in a note to clients.
The Copaxone battle is notable because it pits the world's largest generics company, which has benefited from challenging the patents of other pharmaceutical companies, against generic competitors to protect the exclusivity of its own brand.
Teva has argued that generic drug makers can't show their drug is a precise copy of Copaxone and that current analytical methods aren't capable of characterizing Copaxone's make-up and reverse engineering won't create an identical product.
Teva, which is also trying to gain approval of its own version of generic Lovenox, reasserted those contentions in a statement Friday, calling for full-scale clinical trials of a generic Copaxone in order to ensure the effectiveness and safety of such a drug. given the nature of MS, such studies would likely take years. There is no cure for the disease, and current treatments work by reducing its attacks.
The FDA, in rejecting a Teva citizens petition on the issue, asserted in May that it has "broad discretion" in determining whether the submitted information is enough to conclude that the generic product is the same as the original.
Momenta has argued that it can provide adequate proof for the equivalence of its generic. On a conference call, Chief Executive Craig Wheeler said the Lovenox approval "validates its scientific approach to the characterization of complex drugs" and provides evidence that it can obtain approval of generic Copaxone.
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