IBI healthcare analyst Natali Gotlieb says that investor concerns over oral Multiple Sclerosis medications and the effect on Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) provides a buying opportunity for Teva shares.
Last week, Novartis oral MS medication Gilenya received final US Food and Drug Administration (FDA) approval, as expected, but with an easier than expected patient follow-up plan. Merck KgaA's Cladribine received a negative assessment from European regulators.
Gotlieb believes that the MS healthcare market is entering a new phase of oral drugs. Gilenya's approval essentially provides an answer to a medical need, but Cladribine's negative recommendation shows that regulators will not be so quick to authorize additional oral drugs.
Teva is expected to reach the market with its oral MS drug in two years, with a better safety profile. In two years, the market will be more "mature", with much more knowledge that will be acquired over the period.
Gilenya is considered a first line treatment, so it will compete with all existing MS drugs, including Teva's Copaxone. (It will not really compete with Tysabri, considered a second line drug).
Gotlieb does not see an immediate rush to change from current therapies, saying, "We believe that while the approval is real news for MS patients, both in terms of easier use (pill instead of injection) and in term of clinical results, new drugs in general face some skepticism from the medical community, and so will be adopted at a relatively slow rate by patients.
"We assume that in the short term, the patients who use Gilenya will be those who have not responded well to existing first line drugs, and by patients who fear needles. We do not think that there will be a massive move from injected drugs to the oral product."
According to Gotlieb, this means that in the short term, the oral drugs will add new users, and will not really cut into sales of existing drug, including Teva's Copaxone. She adds that in the long term, the rich pipeline of MS drugs will increase the supply of products on the market, cutting into existing drugs such as Copaxone, a factor already taken into account in her model.
Altogether, says Gotlieb, "We believe that worries about oral drugs create an investment opportunity in Teva share, and we maintain our "Buy" rating."
Teva shares closed on Friday at $54.78, giving a market cap of $49.19 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on September 27, 2010
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