A year or two ago, it would have been hard to believe that the launch of a generic version of Copaxone would have almost no effect on Teva Pharmaceutical Industries Ltd.'s (NYSE: TEVA; TASE: TEVA) share price, but that's exactly what happened at the end of last week. Wall Street investors have switched their attention to Teva's attempt to take over Mylan (MYL) and to the news from that front, while at the same time recent progress with several products in development has softened the impact of the expected fall in sales of Teva's flagship multiple sclerosis treatment.
Teva closed at $60 on Friday, representing a slight decline in the last two sessions of the week, against a background of a welter of news about the company. It started on Thursday, with two reports from Teva itself. One was about further positive findings for a migraine treatment in development (TEV-48125). This is a drug with blockbuster potential that could compensate at least partially for the decline in Copaxone sales, given that the market is in the billions.
A second report from Teva on Thursday concerned collaboration in digital medicine, including a $35 million investment by Teva, with Microchips Biotech. The companies will investigate the possibility of combining Microchips Biotech's implantable microchip with Teva's drug portfolio, to improve outcomes for patients.
Later that same day, it was reported that the US Court of Appeals had struck down Teva's patent protecting Copaxone for the second time.
Within hours, Momenta (MNTA) and Sandoz announced the launch of Glatopa, their generic version of Copaxone, which was approved for sale by the FDA two months ago. Glatopa will sell for 15% less than Copaxone. Further price erosion can be expected when Mylan's generic version reaches the market. That product has yet to be approved by the FDA, but Mylan CEO Heather Bresch nevertheless took the opportunity to needle Teva, saying, "We believe this ruling underscores concerns with Teva’s ongoing financial prospects, as Teva’s Copaxone franchise has historically been its largest and most significant revenue driver."
In 2014, sales of Copaxone totaled $4.2 billion, with Teva enjoying longer than expected exclusivity with the drug, the patent on which was originally due to expire in May 2014. An appeal by Teva postponed competition. Meanwhile, it has managed to switch most patients to a double-dose (40 mg) version, which is patent protected.
Migdal Capital Markets pharmaceuticals, biotechnology and medical devices analyst Steven Tepper points out that the price of Glatopa is not far from that of Copaxone 40 mg, which is actually likely to generate further migration of patients to the double-dose version rather than to the generic version. In his view, Glatopa will be slow to take market share, and Teva will fight it commercially.
Teva's crowded week continued with the report on Friday that it had reached a 4.6% stake in Mylan, a threshold that permits it to petition the court in the Netherlands, where Mylan is registered, with a view to changing the composition of Mylan's board of directors or in order to prevent Mylan from activating a "poison pill" to frustrate a hostile takeover of the company. Teva has so far spent $1.5 billion on purchasing Mylan stock. In a step that is apparently an attempt to allay fears of the stichting, the independent body that could exercise an option to buy new preferred shares accounting for half of Mylan's total issued shares, Teva said it had "advised Stichting Preferred Shares Mylan, that if the Mylan Extraordinary General Meeting on the Perrigo transaction is held no later than August 31, 2015, Teva will limit its aggregate shareholding in Mylan prior to the EGM to less than 5% of the outstanding shares of Mylan." As a shareholder in Mylan, Teva will be able to vote at the meeting, and it will presumably oppose Mylan's bid to take over Perrigo (PRGO). Should that bid succeed, takeover bid for Mylan will fall.
According to Tepper, beyond the legal possibilities that it opens up for Teva, reaching a 4.6% stake in Mylan also has psychological importance. "The stichting is supposed to be independent and to examine whether the deal is good for all stakeholders. It consists of four businesspeople who now realize that any decision they make will result in a legal battle. There's a psychological element here that may induce resistance to going along automatically with the arguments of the Mylan board."
Tepper points out that Teva can also put together a block with other Mylan shareholders and petition for the Mylan board to be dismissed, and thus take it over, even if Mylan's largest shareholder, Abbott Laboratories, with a 14.5% stake, objects. He says that Abbott has interests different from those of the rest of Mylan's shareholders, because it is a strategic investor in Mylan and a business partner, not a financial investor.
Mylan claims that Teva's purchases of its stock violate US antitrust law, and, according to Bloomberg, it has twice approached the US Federal Trade Commission on the matter, but has not yet obtained a response.
Last week, "Globes" reported that Mylan plans to list on the Tel Aviv Stock Exchange if it completes a takeover of Perrigo. "The feeling is that this is an attempt by Mylan to curry favor with Israeli investors," says Tepper, "In effect, it is asking for their support in the Perrigo deal and is offering them a sweetener. I can't see any other logic in Mylan being traded in Tel Aviv." Tepper believes that Mylan will fulfill its promise to list in Tel Aviv if the takeover of Perrigo goes ahead.
Published by Globes [online], Israel business news - www.globes-online.com - on June 22, 2015
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