Fitch: Generic Copaxone Approval Could Prompt Losses At Teva

The overhanging risk of generic competition to Copaxone could prompt material top-line and profit losses at Teva Pharmaceutical Industries Ltd., according to Fitch Ratings.

While competition in the US for Teva's best-selling multiple sclerosis therapy is now likely to come somewhat sooner than our most recent forecasts, there are no changes to Teva's 'BBB+' rating. Furthermore, several factors that will materially affect the pace and severity of potential losses are yet to be established. These factors include physicians' prescribing and payers' formulary decisions with respect to the anticipated generic entrant.

The FDA Friday approved the first directly substitutable generic version of Copaxone 20mg. It will allow competitors Momenta Pharmaceuticals and Novartis unit Sandoz to sell their product, which will be marketed as Glatopa, in the US. Corresponding generic approval could allow for competition in most European markets next month (May).

Sandoz/Momenta have suggested that they plan to launch their product soon after receiving approval. But Fitch believes such a launch may be considered "at risk", as the district court's original ruling - that the Copaxone patents expiring September 2015 were not invalid - is currently in effect. Accordingly, Teva could be in a position to seek damages pending a ruling by the appellate court that upholds the September 2015 patents. This fact does not change the near-term risk. It is likely that such a case would not be resolved for many years.

Fitch expects a substantial portion of patients currently taking Copaxone 20mg will switch to Glatopa over the several months following its launch. However, this switch is not expected to be as abrupt as most traditional small-molecules, and Fitch does not expect the generic to take share from Teva's more recently launched 40mg version of Copaxone.

In anticipation of a possible generic alternative, Teva successfully backstopped a significant portion of potential losses to generic competition by switching almost two-thirds of its patients to a new three-times-weekly (40mg) version of Copaxone during 2014. Still, Fitch estimates that $800 million to $1 billion of 2014 sales could be at risk of loss to generic 20mg Copaxone.

Copaxone generated 2014 sales of $3.1 billion in the U.S., representing nearly 30% of Teva's U.S. sales and about 15% of sales overall. Global Copaxone franchise sales were $4.2 billion in 2014.

The FDA's relative progressivism has had a favorable impact of late for generic drugmakers like Teva and Sandoz, as the agency has recently approved its first biosimilar applications and is working to clear the backlog of ANDA filings.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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