A District Court's Ruling Against Teva Pharma Opens The Door For Generics

Oppenheimer analysts have issued an intraday note responding to a district court's ruling Teva Pharmaceutical Industries Ltd (ADR) TEVA Copaxone 40mg patents “invalid based on obviousness.” The court ruling likely paves the way for generics to enter the market for the multiple sclerosis drug. Shares of Teva were down nearly 5 percent on Tuesday.

“We believe the sell-off has priced in a worst-case scenario when there is a possibility we may see only one generic 40mg approval,” said Oppenheimer.

Analysts believe that Novartis AG (ADR) NVS's Sandoz division/Momenta Pharmaceuticals, Inc. MNTA as the most likely generic to receive approval, as the only pharmaceutical company to successfully develop a Copaxone 20mg generic, expected to be approved in mid-2017. Shares of Momenta were up over 25 percent on Tuesday.

“We expect investors to focus on how TEVA plans to mitigate the loss in EPS due to the high likelihood of a generic Copaxone 40mg launch.” Analysts are expecting an approximate 10 percent reduction in EPS due to the court ruling.

Oppenheimer expects shares to remain volatile in the near term but still likes TEVA for the long term and maintain an Outperform rating.