Cantor Believes Teva Pharmaceutical Industries Ltd (ADR) (TEVA) Catches a Bad Break on Copaxone

Louise Chen: The Street has not fully valued what global generics rivalry will mean for TEVA's Copaxone.


Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) is losing key patent battle ground on its blockbuster in multiple sclerosis: Copaxone. Yesterday, the Israeli pharma giant was dealt a bad hand of cards when its generics competitor Mylan revealed the United Kingdom’s High Court of Justice backed Mylan and European alliance Synthon on Teva’s patent EP ‘355 challenge circling Copaxone 40mg. The verdict? All of Teva’s claims have been thrown out as invalid “on obviousness.”

For Mylan, this marks a fourth victory over Teva in domestic patent litigation blitzes from the Israeli giant in a period of eight years that have seen eight Citizen Petitions and over 15 regulatory challenges. Considering Mylan just won an FDA green light for its generics versions of both the long acting 40 mg take on Copaxone as well as the 20 mg original, Teva could soon be skating on thin ice under generics pressure.

Cantor analyst Louise Chen acknowledges that “Mylan’s UK patent win is Teva’s loss,” warning that the Street could be underestimating what prospective generic rivalry on the MS drug across the globe could mean for the giant.

As such, the analyst reiterates a Neutral rating on TEVA stock with a $17 price target, which represents a 24% increase from where the shares last closed. (To watch Chen’s track record, click here)

Chen highlights: “Each litigation only covers the patent issues for a particular country, so there will potentially be other litigation filed in other countries where Teva has patents to enforce. Teva said it would appeal the negative court decision. Teva’s estimate of $0.20-$0.25 EPS impact per quarter from generics is only for the U.S. and does not include potential sales lost outside the U.S. Mylan also noted, in Teva’s latest filing of an infringement action against Irish subsidiary Mylan Teoranta in the High Court of Ireland alleging that Mylan’s Glatiramer Acetate 40 mg/mL injection infringes two European patents, one is the same patent that was just invalidated today and the counterpart to a U.S. patent that was previously held invalid by the U.S. District Court for the District of Delaware and the Patent Trial and Appeal Board.”

In a nutshell, Chen concludes on a note of caution: “We think potential generic competition for Copaxone outside the U.S. is not fully anticipated in consensus expectations yet.”

Wall Street sides with Chen when it comes to apprehension on the biotech giant’s opportunity at play, considering TipRanks analytics showcase TEVA as a Hold. Out of 20 analysts polled by TipRanks in the last 3 months, 3 are bullish on Teva stock, 14 remain sidelined, and 3 are bearish on the stock. With a return potential of nearly 61%, the stock’s consensus target price stands at $22.04.

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