Serono (NYSE:SRA; SWX:SEO) believes Teva (Nasdaq: TEVA) will be hurt by the launch of Serono’s Rebif (interferon beta-1a) for the treatment of relapsing-remitting multiple sclerosis. Yesterday, Teva VP global product marketing Dr. Aaron Schwartz offered three scenarios to chill investor enthusiasm for Serono.
“The most pessimistic scenario from our perspective is that Rebif will take a chunk of the market share, and all competitors will be affected proportionally,” says Schwartz. “I estimate Serono will need 4-5 years to achieve a quarter of the market. In this scenario, the other players in the market will be affected proportionally.”
“The neutral scenario is that we won’t be affected because competition will be between established interferon-based treatments. The optimistic scenario is that we will actually benefit, because people will prefer non-interferon based treatments, and will opt for Copaxone, which is a chemical drug. The question is what are the chances of each scenario, and that is unknown.”
Schwartz claims that the preliminary US Food and Drug Administration (FDA) approval for Rebif was unsurprising. When Serono published the initial results of Rebif's FDA clinical trials last June, Schwartz estimated that Serono could bring Rebif’s US launch forward by no more than six months. He said at the time, “Even if Serono’s Rebif enters the US market sooner, it will take at least a year. Without any clinical trials, they can launch it in mid-2003. Assuming that Rebif is preferential to Avonex [Biogen’s (Nasdaq:BGEN) interferon beta-1a treatment], they will still not be able to enter the market a year earlier. They may bring the US debut forward by 3-6 months, because it will take the FDA nine months to approve the drug. Biogen will also do whatever it can to delay the US launch of Serono’s product. There is going to be a very unfriendly war between them.”
However, when Serono published the results of expanded FDA trials in September, Schwartz was convinced that Serono had a good chance to bring the US launch forward.
“The [FDA] approval was expected,” Schwartz now says. “We have already entered the parameters into our working assumptions. There were two possibilities. The first was that Serono would receive approval in mid-2003, and the second that if their trials succeeded, the treatment would be launched in the first half of 2002. Since our working assumptions are cautious, we assumed it would happen this year.”
“Globes”: How will Rebif’s US entry affect the market?
Schwartz: “We assumed that the entry of a new competitor would expand the market beyond the existing forecast of a market with three competitors. In 2001, the market grew by almost 25% to $1.2 billion. We assumed that if Rebif was not launched, the market would grow by 12-13% in 2002. We estimate that Rebif’s entry will cause a 17-18% market growth. On this basis, we developed our quantitative forecast and marketing expenses. It should be remembered that we said more than once that we expect our growth rate to be double that of the market.”
Serono claims that Teva will be hurt as much as the other competitors in the market by Rebif’s entry. You assert that because Copaxone is a chemical-based drug, while the other drugs are interferon-based, the preference for interferon treatments puts Teva at a disadvantage. Copaxone is used only after interferon treatments fail.
“That thesis has long since been disproved. It is irrelevant. We have not been a second-choice medication for a long time now. It is simply untrue.”
Serono believes that in addition to patients who do not yet use the treatment, they will also see patients transferring from existing treatments. What do you think?
“Serono will not have an easy time. Patients tend to stick with their current treatments, unless their situation deteriorates or there are severe side-effects. However, to be accurate, Rebif had good results in its last clinical trials and Serono will do their utmost to penetrate the drug to the market.”
Will there be a price war?
“I don’t anticipate a price war in the market.”
What is the sales target for Copaxone in the US?
“We still estimate we will grow at twice the market rate. Our target is to reach 35% of the market in the coming years, compared with 28% in 2001.”
You entered the European market in the second half of 2001. Are you satisfied with your progress?
“Absolutely. We do very well everywhere we enter, and we are already in most places in Europe. Our European revenue is becoming increasingly important, and we hope to reach 35% of the European market share, although it will take longer than in the US.”
Have you abandoned oral Copaxone for good?
“As we’ve already announced, the early clinical trial results were not statistically significant. We therefore have to conduct a thorough analysis of the results, which will take four to six weeks, after which we will decide. We may abandon the drug altogether, or, knowing what doesn’t work, we’ll resume clinical trials. The third possibility is to conduct specific trials and then decide, which I think is the most prudent option.”
Published by Israel's Business Arena on 11 March 2002