The importance of Copaxone to Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA; TASE:TEVA) is well known. The multiple sclerosis (MS) treatment is responsible for one third of the company's net profit.
But in light of anticipated changes in the MS treatment and the possibility of generic competition to Copaxone, Merrill Lynch published a comprehensive survey of Copaxone over the weekend which predicted potential upside and downsides for Teva in the coming years.
Merrill Lynch analysts Gregg Gilbert, Haim Israel, and Sumant Kulkarni believe Copaxone will continue to bring Teva significant cash returns. But they speak of positive and negative scenarios depending on developments.
Teva, managed by Shlomo Yanai, is the world's largest manufacturer of generic drugs. Even so its first branded drug, Copaxone, had sales of $2.8 billion in 2009. Analysts say that Copaxone has an impressive 39.8% of the US MS market. However, Copaxone's patent expires in 2014 and there are already attempts to challenge the patent and produce generic versions.
At the same time, Merrill Lynch, points out expected competition from Novartis's new MS treatment Gilenia that is taken orally, in contrast to Copaxone which must be injected.
Meanwhile, Teva is working on an improved version of Copaxone, and recently reported good results in clinical trials. According to Merrill Lynch, Teva could be ready to launch this improved version next year, and this could delay some of the harm to Copaxone sales.
In addition, Teva is developing Laquinimod, a new MS treatment which is taken orally and is in the final stages of clinical trials.
Merrill Lynch sees two potential scenarios for Copaxone. One scenario is only limited competition to Copaxone from 2014, which would be worth $14 per share, calculating Copaxone as 26% of Teva's value.
A more pessimistic scenario is that Copaxone will face competition from 2011 and this would have a downside of $5 per Teva share. And if Copaxone did not face generic competition until 2020 there would be an upside of $11 per share.
Merrill Lynch estimates that Teva earns a gross profit of 88% from Copaxone in North America.
Teva's share fell 0.3% on the TASE today to NIS 205.40 and closed at $53.20 on Nasdaq on Friday.
Merrill Lynch was bought by Bank of America in 2008 and is now a wholly-owned subsidiary of the bank.
Published by Globes [online], Israel business news - www.globes-online.com - on June 20, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010