Teva’s Patent Loss Marks Second Blow in Weeks as New Year Begins

  • Novartis, Momenta could enter market this year, analyst says
  • Two Copaxone copies could erase up to $1.2 billion in sales

The new year is less than a month old, but already the bad news is piling up for investors in Teva Pharmaceutical Industries Ltd.

The latest blow is a U.S. court ruling invalidating four patents on its top seller, the multiple sclerosis drug Copaxone. The ruling, issued late on Monday, may open the door to generic competition for a drug that generates a fifth of Teva’s $20 billion in annual sales. Shares of Teva, Israel’s largest company, dropped in New York trading on Tuesday, extending an almost 50 percent rout in the stock since the end of 2015.

A precipitous drop in Copaxone sales would crimp the company’s ability to pay down $35 billion of debt, a large part of which was accumulated during its $40.5 billion purchase of Allergan Plc’s generics business. Earlier this month, Teva said new products stemming from that asset would be unexpectedly delayed, while prices of its copycat medicines are likely to remain under pressure in the U.S., prompting a cut to its 2017 profit forecast.

Two weeks before that, Teva agreed to pay $519 million to U.S. authorities after admitting to paying bribes in some countries to boost sales. That settlement didn’t resolve all of the legal woes for the world’s biggest maker of generic drugs: In the U.S., it’s among more than a dozen companies in the industry under criminal investigation by the Justice Department for allegedly conspiring to raise prices. And earlier in December, the company was sued by 20 states over its alleged pricing conduct.

American depository receipts of Teva, each representing one ordinary share, dropped 3.6 percent to $33.27 in New York trading on Tuesday.

The introduction of two Copaxone copycats in the U.S. could wipe out as much as $1.2 billion of revenue this year, according to the company’s own estimates. Teva on Tuesday asked a Delaware court to urgently bar sales of generic versions, even as it contends with reviews of the patents from the U.S. Patent and Trademark Office.

Complicating the matter further, the company has filed suits over two other patents for Copaxone, including one that’s similar to the four invalidated Monday. Teva claims the generic versions of the medicine would infringe those patents, and wants a court to block the competition until they expire.

Meanwhile, the generic-drug makers are still awaiting regulatory approval for their copies of Copaxone, leaving room for speculation on exactly how soon Teva will see the competition.

Novartis AG and partner Momenta Pharmaceuticals Inc. could enter the market in the second quarter, said Thomas Shrader, an analyst at Stifel Nicolaus & Co., while Jason Gerberry of Leerink Partners LLC suggested a copy could come as early as February. It’s “still unclear” if they’ll take the risk that an appeals court will agree with the judge who said the patents didn’t contain anything new, Randall Stanicky, an analyst at RBC Capital Markets, wrote to clients.

It can be an expensive bet. If Teva ultimately wins on appeal -- or wins cases involving two other patents -- the generic-drug makers could be ordered to compensate Teva for any lost profits. It’s a strategy Teva used to build its business, and not always successfully. In 2013, it was forced to pay $1.3 billion to Pfizer Inc. over unauthorized sales of the heartburn drug Protonix.

Momenta, whose shares soared more than 20 percent on the news, said only that the ruling “bolsters our confidence in the potential for us to offer multiple sclerosis patients a more
affordable generic version of Copaxone 40 mg following regulatory approval.”

Mylan NV also is developing a generic of the thrice-weekly version of Copaxone, which awaits U.S. regulatory approval. Shares of Mylan’s partner, Indian generic drugmaker Natco Pharma Ltd., rose 4.4 percent in Mumbai.

The original version of Copaxone, consisting of 20 milligrams taken every day, already has generic-drug competition, but Teva has succeeded in switching many patients to the newer version.

The case is In Re Copaxone 40 MG Consolidated Cases, 14-1171, U.S. District Court, District of Delaware (Wilmington).

— With assistance by Caroline Chen, Cristin Flanagan, Jeremy R Cooke, and Todd Shields

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