Teva’s Copaxone Conversion Effort Convincing Analysts

Teva Pharmaceutical Industries Ltd.’s early progress in shifting daily Copaxone takers to a new formulation of the multiple sclerosis drug with longer patent protection has convinced some analysts the drugmaker may succeed in converting as many as half of its U.S. patients.

Teva converted 8.7 percent of 20-milligram Copaxone prescriptions to its 40-milligram version in the week ended Feb. 28, according to Bloomberg Industries. Leerink Partners and Cowen & Co. analysts said the results mean the world’s largest maker of generics may deliver on its plan to get 30 percent to 50 percent of patients on the three-times-weekly injection.

Moving patients to the new version is key because the remaining U.S. patent on the $4 billion-drug expires at the end of May, while the new version will be protected from generic competition until 2030. Teva’s next hurdle will be persuading insurers in the U.S. to continue paying for the branded, three-times-a-week shot once a cheaper copycat of the daily version becomes available.

“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.”

Acquisition Power

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

Teva closed little changed at 172 shekels in Tel Aviv. The stock has gained 24 percent this year in anticipation of takeovers.

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, 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.

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. Chief Executive Heather Bresch said Feb. 27 that the generic-drug maker may make a large acquisition this year.

2014 Guidance

Momenta Pharmaceuticals Inc. and Novartis AG’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. Mylan and partner Natco Pharma Ltd. are also preparing a generic version. 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, an 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.

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