Mylan And Teva And Copaxone, Explained

Mylan N.V. MYL announced Tuesday that the FDA has approved its Abbreviated New Drug Application for the first generic for Copaxone. Mylan shares were up 19 percent to $38.75.

Wells Fargo raised Mylan's price target from $30 to $32, and maintained the rating at Market Perform.

Copaxone – Potential & Prospects

Copaxone is Teva Pharmaceutical Industries Ltd (ADR) TEVA drug for treating patients with relapsing forms of multiple sclerosis, a chronic inflammatory disease of the central nervous system.

Given that Mylan was one of the first applicants to submit a substantially complete ANDA for the 40 mg/ml dose, containing a Paragraph IV certification, it along with the other filers could avail 180 days of generic drug exclusivity.

Following the announcement, Wells Fargo said it had expected a generic Copaxone in 2019, which may have caught Teva investors off guard.

The firm sees this as a big win for Mylan, as Copaxone is a $3.4 billion brand in the U.S., with sales in the second quarter totaling $843 million. Giving the break-up between the two strengths of Copaxone, the firm said 40 mg/ml three-times-a-week strength accounted for $717 million and the remaining $126 million came from the already generic 20 mg strength.

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Copaxone Generic – Copious Problem For Teva

Assuming a very pessimistic case, analyst David Maris said Mylan should be able to gain 40 percent share at a 40 percent discount to Teva's price in the fourth quarter of 2017 and in 2018. The deduction also considers additional competition slightly eroding Mylan's share in the second half of 2018 and beyond.

Maris expects Teva's new 2018 guidance to fall well below $3, assuming that one or more generic Copaxone versions could impact earnings per share by 25 cents per quarter and that generic market trends would continue. The analyst also noted Teva recently divested its Women's healthcare assets, which hasn't yet been factored in the company's guidance as well as the estimates.

Accordingly, the firm lowered its 2017 earnings per share estimate for Teva from $4.30 to $4.03 and that for 2018 from $4.35 to $3.45.

Wells Fargo maintained its Market Perform rating on Teva, as it does not yet see stabilization in the core generics business, and the uncertainty around generic Copaxone may have further negative implications. At the same time, it lowered the price target from $21.50 to $20, reflecting the changed estimates.

Mylan's Windfall With Early Generic Approval

For Mylan, Wells Fargo expects a 13-cent per share earnings contribution from generic Copaxone. The firm wondered whether the market converts to a new player, or like in the case of the 20 mg strength, Teva will be able to maintain a good share of the market.

Due to the approval assuming $170 million in sales for two quarters for Mylan, courtesy the 180-day period exclusivity, the firm raised its sales and earnings per share estimates for Mylan. The earnings per share estimate for 2017 was increased from $4.61 to $4.70, that for 2018 was hiked from $4.94 to $5.13 and that for 2019 was lifted from $4.92 to $5.04.

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

What Approval For Generic Copaxone Means For Mylan