Teva's profit prospects hurt by appeals court decision on Copaxone

Teva Pharmaceutical Industries, Ltd., was hurt Friday when the U.S. Court of Appeals for the Federal Circuit ruled in favor of generic companies in a patent dispute over Teva's top-selling drug, Copaxone.

Copaxone is injected by patients to treat multiple sclerosis. If the court decision stands and the U.S. Food and Drug Administration approves generic versions, cheaper medicine might be on the market as early as May 25, 2014 instead of 2015. That might help patients, but it will likely hurt Teva's profits.

Teva's stock closed Friday at $40.73, down 53 cents or 1.28 percent.

Copaxone generates about 20 percent of Teva's annual revenue of approximately $20 billion, and, according to Teva's last annual report, accounted for "a very significant contribution to our profits and cash flow from operations in 2012." A link to the SEC file that has the 2012 annual report is here.

Teva is based in Israel, but has its Americas headquarters in the Philadelphia suburb of North Wales, Montgomery County. Teva previously said it was looking for ways to cut $1.5 billion to $2 billion from its budget. To help achieve that goal, Teva said it would close its plant in Sellersville, Bucks County in 2017.

Teva said in a statement it was "disappointed" with the decision and would appeal, which could be to the full appeals court or right to the Supreme Court.

Teva argues that a generic version of a complex injectable drug such as Copaxone should face the same the testing requirements that the FDA requires of the original version.

"Given the complexity of Copaxone, Teva believes unpredictable differences between a proposed generic product and Copaxone," could lead to adverse immune response in patients, Teva said in its statement.

However, the FDA has been moving the other way, according to Bernstein Research analyst Ronny Gal, who follows Teva and the generic competitors involved in the litigation. That group includes Momenta Pharmaceuticals, Inc., Sandoz Inc., Canonsburg-based Mylan Laboratories Inc., and Natco Pharmaceuticals.

"Over the past two years FDA appears to have shifted its approach to complex generics," Gal wrote in a recent note to clients. "The agency approved most pending complex products (Concerta, Vancocin, Lovenox, Lidoderm, Zovirax and Doxil). It has also provided guidance alleviating clinical requirements for several other drugs previously considered 'undoable' (Asacol, Lialda, Restasis)."

Copaxone generated $3.996 billion in sales for Teva in 2012. Teva's second highest revenue producing drug in 2012 was the cancer drug Treanda, which had $608 million in sales. Copaxone sales were $1.064 billion in the first quarter of 2013, was $4.901 billion.

“We are very pleased with today’s ruling and we expect that it will allow Mylan to launch its generic version of Copaxone on May 25, 2014 upon expiration of Teva's Orange Book patents, subject to Mylan’s final regulatory approval,” Mylan CEO Heather Bresch said in a statement.