Teva, Momenta slide after Mylan gets earlier than expected MS drug nod

Shares of Mylan (MYL) are soaring after the company announced that the Food and Drug Administration had approved its generic version of Teva Pharmaceutical’s (TEVA) multiple sclerosis treatment Copaxone.

The news sent both Teva and generic competitor Momenta Pharmaceuticals (MNTA) into negative territory.

COPAXONE GENERIC APPROVAL

Mylan has announced that the FDA has approved Mylan’s Abbreviated New Drug Applications for Glatiramer Acetate Injection 40mg/mL for 3-times-a-week injection and Glatiramer Acetate Injection 20mg/mL for once-daily injection.

These are substitutable generic versions of Teva’s Copaxone 40mg/mL and Copaxone 20mg/mL, which are indicated for the treatment of patients with relapsing forms of multiple sclerosis.

Mylan will begin shipping imminently.

Commenting on the news, Teva said that any launch by Mylan of a generic version of Copaxone 40mg/mL prior to final resolution of the pending patent appeals and other patent litigation should be considered an “at-risk” launch, which could subject Mylan to significant damages among other remedies.

‘BIG WIN’ FOR MYLAN

Wells Fargo analyst David #Maris told investors that he sees this is a “big win” for Mylan, as Copaxone is an approximately $3.4B brand in the U.S., with sales last quarter of approximately $843M.

Under an optimistic case, at a 40% discount Mylan may secure 40% share of the 40mg market, Maris contended, which would mean generic Copaxone sales for Mylan could be approximately $172M per quarter from Copaxone 40mg while it is alone in the market. Further, the analyst estimates that at this level, generic Copaxone 40mg could contribute approximately 13c in earnings per share per quarter.

The analyst has a Market Perform rating and $32 price target on Mylan’s shares.

Meanwhile, his peer at BTIG told investors in a research note of his own that he believes the company gaining approval on both strengths of Copaxone not only validates Mylan’s core competency as a premier generics company, it also provides an important signal to investors that “one can simply never count out Mylan,” especially regarding complex generic products.

Analyst Timothy #Chiang estimates that Mylan could obtain up to $450M of sales from its generic version of Teva’s Copaxone in the first year in which it is marketed, and raised his price target on the shares to $45 from $42, while reiterating a Buy rating on the stock.

READ-THROUGH FOR TEVA, MOMENTA

In a research note of his own, Oppenheimer analyst Derek #Archila told investors that Mylan’s approval of its substitutable generic Copaxone 20mg and 40mg is “clearly another headwind” for Teva, but not that unexpected.

The analyst believes a 5% move to the downside is an appropriate move for the stock based on the news, and reiterated a Perform rating on Teva shares.

Meanwhile, JPMorgan analyst Chris #Schott argued the approval puts further pressure on Teva’s “already challenged” near-term earnings profile and delivering efforts.

Additionally, the analyst pointed out that the earlier than expected approval for Mylan also represents a setback for Momenta’s generic Copaxone opportunity.

Schott had assumed the company’s Glatopa would be the first generic version of Copaxone 40mg to enter the market, but he acknowledged that the product has been delayed due to manufacturing issues at a Pfizer (PFE) plant handling fill for the drug.

Nonetheless, he continues to see a “large and fairly durable” generic opportunity for Glatopa.

Schott reiterated an Overweight rating on Momenta’s shares.

PRICE ACTION

In Wednesday’s trading, shares of Mylan have gained over 18% to $38.60, while Teva and Momenta (MNTA) have dropped about 14% and 17%, respectively.

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