Shares of Israeli Pharma Giant Teva Drop to Lowest Point in Decade After Court Defeat

Court rules Israeli pharmaceutical giant's patents for multiple sclerosis drug Copaxone no longer valid; cash flow could dip by 19%.

Teva Pharmaceutical's Copaxone drug, used for treating multiple sclerosis.
Teva Pharmaceutical's Copaxone drug, used for treating multiple sclerosis. Ofer Vaknin

Teva Pharmaceuticals shares plunged to their lowest in a decade Tuesday after a United States court ruled that four of the company’s patents for its best-selling multiple sclerosis drug Copaxone in its 40-milligram dosage are no longer valid in the U.S.

The decision handed down by the U.S. District Court for the District of Delaware late on Monday marks the latest and perhaps most serious blow for Israel’s largest company (see story below), threatening to cut deeply into its sales and profits. 

“We intend to move forward with an immediate appeal,” Teva CEO Erez Vigodman said after the ruling. “We will continue to vigorously protect our Copaxone franchise against further challenges and through the duration of this process.”

Nevertheless, the ruling immediately sent Teva shares tumbling 8.9% in New York Stock Exchange trading and they continued lower yesterday, down 3.3% to $33.37 in mid-afternoon local time. In Tel Aviv Teva shares closed down a more mild 5.3% to 123.40 shekels ($32.72). 

Since it was launched in 1996, Copaxone has been Teva’s biggest generator of income and source of profits even as the company has tried repeated and unsuccessfully to find other drugs to supplement and eventually take its place when its patents expire.

Copaxone sales

In January Teva estimated that the launching this month of two generic versions of Copaxone in a 40mg dosage would reduce revenues by between $1 billion and 1.2 billion, and cut its profits by $650 million to $800 million this year.

At the same time, Teva had asserted that if no generic versions of 40mg Copaxone were launched, revenues from the drug in the U.S. would total $3.8 billion to $3.9 billion in 2017, with revenues affected by the court decision accounting for as much as $3.2 billion of that.

“They depend on just a few drugs, not only Copaxone, but also on the generic side. They need to become more diversified,” said Joshua Schachter, portfolio manager at Pennsylvania-based Snow Capital, which as of September 30 had a $44 million stake in Teva.

Analysts covering the company were mixed about the outlook. Derek Archila of Oppenheimer said yesterday it was only a matter of time before generic competition entered the Copaxone market. Credit Suisse analyst Vamil Divan agreed Teva faces a threat, but left his price target at $41 and maintained an Outperform rating on Teva. 

Teva’s four patents were designed to protect the drug in its 40mg version, which was launched in January 2015, from generic competition until 2030. But the Delaware court invalidated all of them. 

In addition to saying it would appeal the ruling, Teva revealed that last month it filed a lawsuit for patent violations against six companies that submitted a request to approve a generic version of 40mg Copaxone.

The timing of the legal decision is problematic, as Teva carries a huge debt of $35.8 billion, following its $37 billion acquisition of Actavis Generics last year. Monday’s court decision will reduce Teva’s cash flow from ongoing activity this year by an estimated 19%.

Teva originally launched Copaxone in a 20mg dosage administered via a subcutaneous injection once a day. That version of the drug lost its patent protection in May 2014, and Novartis AG together with Momenta Pharmaceuticals launched a generic version of it that reduced prescriptions for 20mg Copaxone by 25%.

To protect its key drug from the generic competition, Teva launched a new version of Copaxone in a 40mg dosage, which need only be administered three times a week and was covered by patents protecting it from generic competition until 2030. Teva convinced 82% of Copaxone users to convert to the new version, but six generic companies filed applications with U.S. regulators to produce generic 40mg version of the drug, asserting that the patents for the new version were trivial and contained no true innovations.

In a parallel legal procedure, the generic companies were able last September to convince the U.S. Patent and Trademark Office to rescind Teva’s four patents on 40mg Copaxone, claiming that they are based on an earlier patent request and also feature no innovations.

With reporting by Reuters.