Teva’s sunny forecast for crucial migraine drug Ajovy raises eyebrows on Wall Street

Teva's Ajovy was the second of three CGRP inhibitors to treat migraines that hit the market this year. (Teva)

About 20 minutes into the question-and-answer session during Teva’s third-quarter earnings conference call, CEO Kåre Schultz got fed up with analysts asking about discounts and rebates offered to insurers for Ajovy, its new migraine drug, and how they would affect sales.

At issue was “gross-to-net,” a term Wall Street types use to describe the percentage difference between gross sales and actual sales, which subtract the financial incentives given to payers.

Brendan O’Brady, Teva’s North American commercial chief, said early negotiations with payers have produced an estimated gross-to-net on Ajovy of 25%—not bad, considering two competing products also hit the market this year, Amgen’s Aimovig and Eli Lilly’s Emgality. Usually, the more competitors there are, the higher the gross-to-net, because everyone piles on rebates and discounts as they angle for good formulary placement.

But during the earnings call, analysts questioned that 25% figure, and one said she'd heard payer contracts for the two rival products resulted in gross-to-nets of 40% to 50%. And that's when Schultz lost his patience.

Schultz insisted that Ajovy's quarterly dosing option would prove an advantage over its rivals, which are dosed more often. “I think there’s really a need among patients for this kind of simplified therapy,” Schultz said. As for questions about discounting, he said the company is still in negotiations with payers—and shut down questions on the topic.

It’s no surprise Ajovy dominated the conversation after Teva’s third-quarter earnings report. The company, which is in the midst of a major restructuring effort, actually beat earnings estimates—reporting earnings per share of 68 cents, well above the consensus estimate of 55 cents. And that's in spite of disappointing revenues of $4.5 billion.

But its multiple sclerosis blockbuster Copaxone is losing ground to generic competitors, which makes it all that more pressing for Teva to prove it can replace those lost sales with potential blockbusters like Ajovy.

RELATED: Amgen, Lilly migraine drugs nab Express Scripts backing, but Teva's shut out

Teva launched Ajovy in late September, making it second to market in the new class of medicines known as CGRP inhibitors. But Lilly was only about a week behind Teva, and both lagged behind Amgen, which had already introduced Aimovig at a lower-than-expected list price of $6,900 a year. Not surprisingly, Lilly and Teva matched that sticker.

Still, leading pharmacy benefits manager Express Scripts handed Teva a major loss earlier this month when it agreed to cover the other two CGRP drugs but not Ajovy. The PBM’s negotiated prices with Lilly and Amgen were confidential, but clearly Teva was unable to talk its way onto the formulary—a setback that likely fueled much of the talk about Ajovy during the earnings call.

Both Schultz and O’Brady said they aren’t worried. “We have an enormous unmet need, a huge patient pool and a very good early launch,” Schultz said.

RELATED: Teva's patent failure gives long-acting Copaxone generics free rein

Perhaps, but Ajovy worries are only compounded by sales declines for both Copaxone and Teva’s flagship generics business. Despite Teva’s efforts to protect Copaxone, the short-acting version is facing generic competition from Mylan and Novartis. Teva rolled out a long-acting version as a 40mg dose ahead of those copycats and persuaded many patients to switch. But the U.S. Court of Appeals for the Federal Circuit just handed the company a major patent loss, giving Mylan and Novartis free rein to market their versions without the threat of damages to Teva.

Third-quarter sales of Copaxone fell 43% year over year to $463 million. That sales figure was actually higher than Leerink’s estimate by $97 million, the company’s analysts said in a note to investors, “although this was offset by lower-than-expected generics revenue across all three geographic regions,” they wrote. Teva’s total generics sales of $2.3 billion missed consensus estimates by $90 million.

During the earnings call, Schultz said the generics business—once Teva’s bread and butter—is stabilizing in the U.S., but he stopped short of guaranteeing that the unit would play much of a role in bringing Teva out of the “trough year” that the company has warned investors 2019 would be.

Teva “had one very severe negative driver over the last three years, which has been the U.S. generics,” Schultz said. The market is still “extremely attractive from a volume point of view,” he added, but pricing has suffered for a variety of reasons, including an increase in generics approvals by the FDA. “That has all changed the dynamics on generics,” he said.