The major question surrounding Teva (TEVA) is how much Mylan’s (MYL) generic Copaxone will impact Copaxone sales. The answer to that question began to materialize after Mylan offered 25% – 30% discounts on generic Copaxone:
Just how much Mylan’s generic of 40-mg multiple sclerosis blockbuster Copaxone ends up hurting Teva depends on the knockoff’s pricing, and on Monday one analyst offered a window into how things are playing out so far.
Mylan is serving up 25% to 30% discounts versus the “prevailing price” on the original med, Bernstein’s Ronny Gal wrote to clients, cautioning that “it is not quite done.”
According to Bernstein’s Ronny Gal Teva is countering Mylan’s discounts. That could portend near-term pressure for Teva’s earnings and share price.
The Situation
Last week Mylan shocked financial markets when it announced it had received approval for a generic version of Copaxone, Teva’s blockbuster multiple (“MS”) sclerosis treatment. The risk of a loss of exclusivity for Copaxone had been known for a while. However, analysts did not expect generic competition until some time next year. Runaway drug costs have vexed consumers and politicians. In particular, the average annual cost for an MS therapy increased from $16,000 to $60,000 from 2004 to 2015; that equated to a 13% compound annual growth rate (“CAGR”).
New FDA commissioner Scott Gottlieb has made it a point of emphasis to bring more competition to the drug market. One way is to accelerate the approval of generic competition. Mr. Gottlieb delivered with the approval of generic Copaxone and now it looks like the high-priced treatment will become more affordable. That said, I am surprised Mylan was able to launch its new product so soon. I assumed it would be unable to make a large enough batch of generic Copaxone to have any impact on the marketplace this year. According to Gal clients are making large up-front orders with Mylan at discounted prices. Fears exist that a patent dispute with Teva could result in an injunction forcing Mylan to halt sales for a period of time.
