U.S. court upturns Teva's patents on cash-cow Copaxone

Teva Pharmaceutical Industries ($TEVA) has been counting on Copaxone to keep the cash coming until its new-and-improved version of the multiple sclerosis treatment could make it to market. But a U.S. appeals court has a different idea. It invalidated a patent protecting Copaxone till 2015--and that means Teva could face generic competition for its biggest drug next May.

Teva CEO Jeremy Levin

And that, in turn, would put CEO Jeremy Levin's turnaround plans into disarray. Copaxone isn't just Teva's biggest drug. It's the linchpin of Teva's income statement. Copaxone accounts for one-fifth of its revenues; for the first quarter alone, it brought in $1.1 billion. What's more, it kicks a lot of that cash to the bottom line, contributing 40% of Teva's profits.

No wonder, then, that Teva's stock went into a tailspin when the U.S. Court of Appeals in Washington nixed patent claims that would have protected Copaxone until September 2015. The court also struck aside four patent claims that expire in May 2014, but Teva has other claims that still apply till then.

The winners in this case? A couple of partnerships aiming to sell their versions of the MS treatment. Novartis' ($NVS) generics unit Sandoz and Momenta Pharmaceuticals on one side, and Mylan ($MYL) and India's Natco Pharma on the other. In a release, Mylan proclaimed its readiness for a May 25, 2014, launch.

Market-watchers have worried about Copaxone's coming demise for years. It was top-of-mind when Levin took the reins last year, and it's one big reason he has been cutting costs, laying off employees and streamlining Teva's manufacturing and supply chain. By saving up to $2 billion, Levin can gain the wiggle room to scout for deals that might help counteract generic competition for other Teva brands, as well as for Copaxone.

Meanwhile, he's continuing to tout the company's progress toward that new longer-acting version of its flagship drug. The idea is to launch the new formula and switch patients to it before the original Copaxone goes off patent.

A year ago, when a district judge upheld that 2015 patent, it looked as if Teva might have plenty of time to do just that. Analysts figured that, with more than a year, or even two, to convert patients, Teva could move 30% of them to the new drug. Now, the Copaxone follow-up is still waiting to take off, and with a May 2014 deadline, the runway for its successful lift-off just got a lot shorter.

The ruling "not only moves up the potential generic Copaxone launch into 2014 but it also doesn't give Teva much time to convert patients," UBS analyst Marc Goodman told Bloomberg. He's changed his conversion forecast to 15% of current Copaxone patients from 30%. Sphera Fund Management partner Ori Hershkovitz went a bit further: In light of the ruling, he called switching a "significant portion" of patients to the new dose "de facto impossible."

Teva says it's skeptical the FDA would be able to approve Copaxone copies by next May. Indeed, the company has been lobbying the agency to require the generics makers to run full clinical trials. The success of that effort is questionable. Meanwhile, Teva will appeal the appeals court's decision; as Bloomberg notes, the company could ask the court to convene en banc to reconsider the case or take its appeal to the U.S. Supreme Court.

- get the Teva statement
- see the Mylan release
- read the story from Bloomberg

Special Reports: Copaxone - Top 20 Orphan Drugs by 2018 | Teva - Pharma Stocks 2012: 5 Biggest Winners, 5 Biggest Losers

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