cs: Teva Wins Copaxone Patent Case, Removing a Major Overhang
Bottom line. Following Friday's (22nd June) ruling in favor of Teva's Copaxone patents, a major overhang on Teva shares
has been removed. Although a majority of investors expected a Teva win (and we had assigned a 70% probability), the
magnitude of the potential impact of a loss to Teva's earnings and share price kept many investors on the sidelines, and
this event will likely bring some of them into the stock. The next key catalyst, aside from earnings (which are not
inconsequential, after the new guidance provided in May), is new CEO Jeremy Levin's unveiling of his strategic plans at an
investor day, likely in late 2012.
Copaxone franchise likely protected until Sept 2015, extending the window for conversion to 3x/week formulation. Teva
prevailed on all patents, including the 7 compound and method of use patents expiring in May 2014, as well as the 2
manufacturing process patents expiring in Sept. 2015 (not Orange Book listed). Assuming a 2013 approval of Teva's
3x/week formulation of Copaxone, this patent victory could provide Teva with a two-year window (instead of less than a
year) to convert a portion of the franchise to the new formulation, thereby not only bolstering earnings during the patent life
but potentially longer-term as well.
Completeness of Teva's win and limited time for appeal virtually eliminate the chance of generic entry before May 2014;
entry before Sept 2015 is possible but not likely. As detailed in the full report, our legal expert believes that an appeal of the
ruling could exhaust most or all of the time remaining to expiry of the May 2014 patents, and Teva's resounding victory on
all claims makes an appeal victory unlikely. There is a modest chance that a generic could enter before the Sept 2015
patents, via authorized infringement, appeal, or evasion of the patents through a different process. However all have
challenges and we estimate only about a 30% chance of any of these prevailing.
Read through to Mylan should be minimal. Although Mylan management is no doubt disappointed by the ruling, we believe
that MYL's stock price discounted very little contribution for a generic launch, and thus we would not expect to see much
reaction in MYL estimates or stock price.
Read through to other MS companies. The patent decision has some incremental read through read-through to other
players for sustainability of pricing. New players include BG12 (BIIB), Aubagio (Sanofi), Campath (Sanofi). |
