CHMP Still Negative on Teva/Active Biotech's Nerventra - Analyst Blog

Teva Pharmaceutical Industries Limited TEVA and partner, Active Biotech, announced that the Committee for Medicinal Products for Human Use (CHMP) maintained its Jan 23 opinion of recommending against the approval of Nerventra in the EU for the treatment of relapsing-remitting multiple sclerosis RRMS. The companies intend to evaluate the CHMP opinion to decide on the future path of the candidate in the RRMS indication.

The CHMP, while issuing the negative opinion in January, stated that the potential risks associated with Nerventra outweighed the benefits based on the data available. Data from animal studies revealed a higher occurrence of cancer after long-term exposure to Nerventra. Further, chances of an adverse effect on the unborn baby when taken by pregnant women led to the CHMP opinion.

We are disappointed with CHMP's second negative opinion on Nerventra. The successful development and launch of Nerventra would have strengthened Teva's multiple sclerosis drug portfolio. Teva already has a multiple sclerosis product in its portfolio – Copaxone.

However, Copaxone could start facing generics from mid 2014. During its first quarter 2014 earnings call, Teva provided guidance for both scenarios - Copaxone remaining exclusive and Copaxone going generic. Teva expects total revenues of $19.8−$20.8 billion this year. However, this range would go down by $500 million if Copaxone generics enter the market. The company expects to deliver earnings of $4.80−$5.10 per ADS assuming Copaxone remains exclusive. But if generics enter the market, earnings will go down by about 60 cents. According to Teva, each month of delay in the entry of generic versions of Copaxone will add $78 million to revenues and 8 cents to earnings.

We note that several oral multiple sclerosis therapies are currently available including Novartis' NVS Gilenya and Biogen Idec's BIIB Tecfidera among others. Competition in the oral multiple sclerosis market is intense and Nerventra, if approved, needs to demonstrate superior efficacy and safety to gain share in this market.

Teva currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the health care sector is Mallinckrodt MNK. The stock carries a Zacks Rank #1 (Strong Buy).