Teva Pharmaceutical Industries Ltd (ADR) Is Under Siege; How Will Rising Competition Play Out in 2018?

BTIG's Tim Chiang cautions that Momenta's generic 40mg Copaxone is not the only rival coming for Teva.


Tuesday morning’s reveal may have struck some fear into the hearts of Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) investors: Momenta’s generic 40 mg Copaxone is even more of an imminent threat now. Momenta indicated two days ago that the FDA has revised its status for its McPherson facility to voluntary action indicated (VAI), which could make a short-term approval possible for one more 40 mg generic version of Copaxone.

BTIG analyst Tim Chiang warns, “Momenta’s generic 40mg Copaxone gets one step closer to the finish line.”

“Currently, Mylan […] is the only Co. with an approved generic version of 40mg Copaxone, which we estimate to have ~18% of new and ~13% of total prescriptions. While we already forecast CY18 Copaxone sales to fall by 37% YOY to ~$2,260M, with US Copaxone sales dropping by ~41% to $1,675M, additional generic entrants (i.e. Momenta / Sandoz (division of Novartis, […]) could lead to us having to lower our sales estimates further,” Chiang writes.

Though the analyst anticipates Copaxone will take a hit this year in sales, he still deems it a significant asset for the company as far as cash is concerned: “While we already estimate Copaxone sales to decline in CY18 to $2,260M, from $3,580M in CY17, it remains a key product for Teva especially from a cash generation perspective. We estimate Copaxone to generate ~20 to 25% of the Co’s forecasted EBITDA in CY18.”

Investors will likely continue to keep their eyes peeled to new Danish CEO Kare Schultz’s restructuring initiative that remains in its “early” days. Chiang finds the “swiftness” of the cost cut news encouraging along with the endeavors to reorganize the company, but is neutral on the challenges of executing this plan; especially with “price erosion” running amiss on the domestic generics front. Though Copaxone is a cash cow for Teva, Chiang anticipates the giant must turn to different key branded assets moving ahead to bring cash to the table. Chiang is mixed as far as the forthcoming approval for migraine drug fremanezumab. On one hand, this could be a “future blockbuster” for the company. Yet, on the other hand, fremanezumab will be entering a “crowded” market, considering Eli Lilly and Amgen in a collaborative effort with Novartis are all poised to hit the market this year.

On a final note, apprehensive that Moody’s recent credit rating downgrade on the company could translate to more costly debt refinancings down the line, Chiang concludes: “While believe that Teva will be able to meet its debt obligations this year, we think a significant portion of its debt maturities in CY19 – CY21 will need to be refinanced.”

Finding shares “fairly valued” and believing the stock’s multiple “bakes in part of the recovery story,” the analyst reiterates a Neutral rating on TEVA stock without listing a price target. (To watch Chiang’s track record, click here)

TipRanks suggests a tone of caution on Wall Street regarding the Israeli pharma giant’s recovery and market opportunity. Out of 21 analysts polled in the last 3 months, 4 are bullish on Teva stock, but a majority of 13 remain sidelined, with 4 bears running for the hills. The 12-month average price target stands at $18.64, suggesting nearly 9% in downside potential.