Good Data on Teva's Laquinimod - Analyst Blog

Teva Pharmaceutical Industries Ltd. (TEVA) recently announced encouraging results on its multiple sclerosis candidate, laquinimod. Initial data on laquinimod, which is being developed with Active Biotech, indicated that patients treated with laquinimod experienced a statistically significant reduction in annualized relapse rate compared to placebo.

The candidate also achieved other endpoints like significant reduction in disability progression. Laquinimod was found to be safe and well-tolerated. The phase III randomized, double blind, placebo-controlled study (ALLEGRO) was conducted in patients suffering from relapsing-remitting multiple sclerosis.

Detailed data from the study will be presented in the first half of 2011 at a scientific meeting. Laquinimod is currently in another randomized, double-blind, parallel-group, placebo-controlled phase III study (BRAVO) with results due in the third quarter of 2011.

Positive results from the BRAVO study would allow Teva to move ahead with regulatory filings in the US and EU in late 2011. The phase III multiple sclerosis candidate received fast track designation in the US, which means that the candidate could gain approval by mid 2012, provided all goes well. Teva is also studying laquinimod for Crohn's disease and lupus nephritis.

The multiple sclerosis market represents significant commercial potential. Multiple sclerosis is the leading cause of neurological disability in young adults and it is estimated that more than 400,000 people in the US are affected by the disease. More than two million people may be affected worldwide.

The successful development and launch of laquinimod would help strengthen Teva's multiple sclerosis drug portfolio. Being an oral formulation, laquinimod could provide an advantage over therapies that require injection or infusion. Once launched, laquinimod's primary competitor will be Novartis' (NVS) Gilenya.

Teva already has a multiple sclerosis product in its portfolio – Copaxone. Copaxone is Teva's main branded product, which delivered global in-market sales of $808 million in the third quarter of 2010. However, the company is facing patent challenges from generic players like Sandoz, Momenta Pharmaceuticals (MNTA), and Mylan Labs (MYL). Therefore, the successful development of laquinimod is important for the company.

Neutral on Teva

We currently have a Neutral recommendation on Teva, which is supported by a Zacks #3 Rank (short-term Hold rating). While we expect Teva to continue performing well thanks to new product launches, both generic and branded, we remain concerned about the intense competition and pricing pressure in the generics market.

Moreover, the Copaxone patent challenge remains a matter of concern. With Copaxone contributing more than 20% to total revenues in 2009, the entry of generic versions would be a major setback for the company.

 
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