Teva Stock Falls as Novartis Brings Another Copaxone Generic

Shares of Teva Pharmaceutical Industries Limited TEVA were down around 4% on Tuesday, as another generic version of its blockbuster multiple sclerosis injection, Copaxone was launched earlier than expected.

Sandoz - Novartis’ NVS generic arm – announced the FDA approval and launch of Glatopa 40 mg/ml, its generic version of 40 mg formulation of Copaxone. This will be the second generic version of the 40 mg formulation of Copaxone. The launch came much earlier-than-expected. Teva, on its fourth quarter conference call held last week, had said that the second generic version of the 40 mg formulation was likely to be launched in April this year.

The first generic version of Copaxone 40 mg was launched by Mylan MYL in October last year, also much earlier than expected, which dealt a major blow to Teva. Also at the same time, Mylan launched the second biosimilar version of the 20 mg formulation. Please note that the first generic version of Copaxone 20 mg has been marketed by Momenta MNTA and Sandoz since 2015.

With the entry of the generic version of the 40 mg formulation and the entry of a second generic version of the 20 mg formulation, Copaxone sales witnessed rapid erosion.

Now, with the launch of the second generic version of the 40 mg formulation, sales are expected to decline further.

In 2017, Copaxone sales totaled $3.8 billion, down almost 10% from 2016 levels. For 2018, Teva estimates Copaxone sales to fall to $1.8 billion as the Copaxone franchise continues to erode. In fact, Teva issued a weak outlook for 2018 wherein it expects sales and profits to decline further this year.

The Israel-based generic drugmaker had a tough 2017 as it faced significant challenges in the form of accelerated generic competition for Copaxone, new competition for branded products, pricing erosion in the U.S. generics business, lower-than-expected contribution from generic launches and a massive debt load of more than $32 billion. Mylan’s earlier-than-expected launch of the first generic version of the 40-mg strength of Copaxone was a major setback for Teva.

Teva divested some non-core assets, mainly in the Women’s Health business, to cut its significant debt load. The company also has a new organizational structure in place, is closing plants, cutting down its generics portfolio, eliminating low-value R&D projects, and aims to cut its global workforce by more than 25% over the next two years as part of a restructuring plan it revealed in December. Though the company expects to save almost $3 billion by the end of 2019from these restructuring initiatives, a clear path to growth is not visible.

These efforts might not be enough to revive the company’s fortunes during this challenging period, especially as it faces erosion of its largest product, Copaxone. Other than that, divestures and pricing pressure in the U.S. generic business will continue to hurt the top line in 2018.

Teva’s shares have slumped 49.7% in the past year compared with the industry’sdecline of 36.1%.

Teva carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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