Teva’s Copaxone Conversion Effort Persuading Analysts of Target

Teva Pharmaceutical Industries Ltd.’s (TEVA) early progress in shifting daily Copaxone takers to a new formulation has persuaded some analysts the drugmaker may succeed in converting as many as half of its multiple sclerosis patients.

Teva converted 8.7 percent of total 20-milligram Copaxone prescriptions to its 40-milligram injections for the week ending Feb. 28, according to Bloomberg Industries. Leerink Swann & Co. and Cowen & Co. analysts said the results mean the world’s largest maker of generic drugs may deliver on its plan to bring round 30 percent to 50 percent of patients to the three-times-weekly version.

“It does appear that we and the street may have failed to understand just how comprehensive” Teva’s patient outreach system has been, Ken Cacciatore, an analyst at Cowen who has the equivalent of a buy rating on the shares, said in a report. “Given the initial clinician and management feedback, it now appears that these targets will prove accurate.”

Investors had been skeptical Teva was left enough conversion time after a U.S. court ruling last year allowed generic competition to the $4 billion-drug this May. Holding on to its market share of Copaxone, which last year accounted for more than 50 percent of total profits, will prove crucial as Teva seeks power for acquisitions.

The extra cash-flow from Copaxone, “should provide additional dry powder for management to get aggressive on the M&A front while honoring the dividend,” Jason Gerberry, a Boston-based analyst at Leerink Swann wrote in a note last week, raising Teva’s rating to outperform from market perform. Gerberry estimated 33 percent of Copaxone patients will be converted by the end of the year.

Industry Consolidation

Chief Financial Officer Eyal Desheh said last week Petach Tikva, Israel-based Teva is open for deals as the pace of industry consolidation quickens. Actavis Plc agreed to purchase Forest Laboratories Inc. last month, and Mylan Inc. CEO Heather Bresch said Feb 27 that the generic-drug maker may make a large acquisition this year.

Momenta Pharmaceuticals Inc. (MNTA) and Novartis AG (NOVN)’s Sandoz unit are working together on a generic Copaxone version and plan to start selling the drug when its patent expires, CEO Craig Wheeler said in February. For Teva, the more patients it converts ahead of generic approvals, the higher the probability insurers won’t force those customers to switch back to daily shots once generics become available, according to Cacciatore.

Desheh said last week that close to 90 percent of payers are reimbursing Teva’s new Copaxone formulation and he doesn’t expect them to stop when generics become available.

Ronny Gal, a New York-based analyst at Sanford C. Bernstein & Co. who has a buy rating on Teva’s stock, said the conversion rate thus far, plus the marketing of two generic drugs Xeloda and Evista this month, may help the company reach the higher part of its guidance range in 2014.

“The question is how much market share Teva can retain once generics appear,” he said.

To contact the reporter on this story: David Wainer in Tel Aviv at dwainer3@bloomberg.net

To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net Kim McLaughlin, Marthe Fourcade

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.