Mylan's Generic Copaxone Arrives, Teva Sales To Take A Hit

The FDA dealt yet another blow to struggling Teva Pharmaceutical Industries Ltd (ADR) TEVA investors by approving rival Mylan N.V. MYL’s generic version of Teva’s Copaxone multiple sclerosis drug. Analysts say generic competition was not factored into Teva’s guidance and the new drug will weigh on Teva’s sales.

On Wednesday, Oppenheimer analyst Derek Archila said the generic approval wasn’t a huge surprise and Teva’s 14 percent sell-off is an overreaction.

“We believe a ~5% move to the downside is an appropriate move for the stock based on the news,” Archila wrote. Teva management previously said that generic competition could cut into full-year EPS guidance by as much as 25 cents. Archila said Oppenheimer was already modeling significant erosion in Copaxone sales in the years ahead. The firm is anticipating roughly a 30 percent decline in sales in 2018 as more generic competition enters the market.

Jefferies analyst David Steinberg said the timing may have been the most bearish part of the news.

“This approval is somewhat earlier than expected and consensus estimates suggest that there is a mix of sell-side forecasts with and without generic Copaxone 40mg competition,” Steinberg wrote.

Steinberg said Teva management did all they could do to stay ahead of competitors and extend the multi-decade lifespan of Copaxone by switching to a 40 mg formulation.

Teva stock tanked back in August after the company reported a huge earnings miss and cut its dividend by 75 percent. Following Wednesday’s sell-off, Teva shares are now down 55.3 percent in 2017.

Oppenheimer maintains a Perform rating on Teva stock.

Related Link: Teva Runs Out Of Buyers After Changes In C-Suite