How Mylan Is Turning the Table on Teva

Ask big pharma executives what keeps them up at night and they'll sneer "generics." Spending billions on research, development, and commercialization stings when generic competitors copy and under-price you years later.  As one of the biggest generic-drug makers, it's usually Teva Pharmaceutical  (NYSE: TEVA  ) causing the sleeplessness.

Just last year, Teva launched 450 generic products, and the company produces 73 billion tablets a year -- filling 2.7 million prescriptions a day in Europe and another 1.5 million prescriptions a day in the United States.  

But in a twist of fate, Teva will be on the losing side next year as Mylan (NASDAQ: MYL  ) prepares to launch a generic version of Teva's $4 billion a year blockbuster Copaxone in May.

Impacting Copaxone's dominance
In multiple sclerosis, or MS, Copaxone is the market share leader, accounting for 40.4% of MS prescriptions last year. Its dominance in treating relapses translates into $4 billion a year in sales worldwide.

But Teva's stranglehold on the market is about to come to an end as Copaxone, initially approved by the FDA in 1996, loses patent protection next May. Teva is already losing market share as doctor's shift to newer treatments like Novartis' (NYSE: NVS  ) Gilenya and Sanofi's Aubagio. In August, Copaxone's market share had fallen to 35.7% of all MS scripts, according to research conducted by investment bank UBS.

Novartis' Gilenya has been one of the biggest beneficiaries of Copaxone's market share slide. Gilenya, introduced in 2010, was the first oral MS treatment approved in the United States. The drug saw sales climb 63% to $518 million in the third quarter from a year ago. Another big reason for fewer Copaxone scripts has been Biogen's (NASDAQ: BIIB  ) next-generation therapy, Tecfidera. Biogen won approval for that drug in the first quarter, and sales reached $286 million in the third quarter, well above the $200 million forecast by some analysts. Tecfidera joins Avonex and Tysabri as members of Biogen's MS franchise, positioning Biogen's as the top seller of MS treatments once Copaxone loses patent protection.

Battling for approval
Mylan has been among the most aggressive in preparing for Copaxone's demise. The company inked a deal with NATCO back in 2008 to commercialize NATCO's version of Copaxone, which is already being sold in India.

Mylan has attempted to accelerate patent expiration for Copaxone in Europe too. Copaxone has protection there until May 2015. But efforts to invalidate Teva's protection came to a standstill in November when Teva and Mylan agreed to settle the dispute prior to it reaching EU courts.

Teva's been less successful in protecting its Copaxone patent in America. This past summer, lower courts decided Mylan and Novartis' generic unit Sandoz AG didn't violate Teva's patents, clearing the way for Mylan to begin marketing the drug next May rather than waiting until September 2015. Mylan's generic version cleared another hurdle by winning FDA approval in September.

Foolish final thoughts
There's little question that Teva should see sales drop significantly in the wake of generic launches from Mylan and continuing script migration to Novartis and Biogen's new therapies. That's why Teva is embarking on an aggressive cost restructuring designed to save it $2 billion in expenses.

How successful Mylan and Novartis's Sandoz are at winning their fair share of the generic space remains to be seen. Teva is working on a more potent version of Copaxone with less frequent dosing, which could reduce some of the generics appeal.Teva may also blunt some of the hit in lost sales with its own generics. After a brief respite, the patent cliff returns in force in 2014 and 2015, giving the company plenty of new opportunities to keep big pharma up at night. While those launches won't be enough to offset all the risk to Copaxone, it's a start.

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  • Report this Comment On December 02, 2013, at 9:24 PM, ethanspapa wrote:

    People learn the hard way that generics are not as good as the brand name. Sometimes they have no choicem as insurance company's and not the patient that suffers decides on whats best Generics only need to have 80% of the active ingredient, plus they have to come up with their own binders and compounds that are not as efficient. Ask any Nurse or Neurologist that prescribes generic Dilantin for seizure activity. The poor patient winds up going through several seizures and drug adjustments with crap generics made in third world country's, If you think the FDA is watching out for you good luck.

    Ask Mrs.omney what drug company and drugs she gets them from . All from Biogen Idec and her Husband will pay the extra cost.

  • Report this Comment On December 04, 2013, at 4:07 PM, arubalover wrote:

    I am afraid ethanspapa is completely misinformed in relation to the quality aspects of generic drugs. While I cannot speak for those medications being illegally sold on the Internet or the black market I can speak highly on the quality of all prescription medications being manufactured in the USA and EU. Generic drugs are not like a can of generic green beans, they must pass the exact same stringent quality standards established for the innovators. Whomever told someone that a generic drug only has to have 80% of the active ingredient knows absolutely nothing about the state of the pharmaceutical industry. All drugs, regardless if they are branded or generic are to be manufactured with a potency of 100% of the required active ingredient - period. Any product containing only four fifths of this would not have the intended efficacy within the body. The statement that generic companies have to come up with their own binders and compounds that are not as efficient is also an urban legend. The same companies that sell their inactive ingredients to the innovator companies sell the exact same ingredients to the generic industry. Generic drugs must mimic the innovator in the route of administration (tablet, capsule, liquid, etc) and must work within the body in relation to how long it takes to diffuse through the system and for the condition it is being taken for. The big difference between branded and generic is how the innovator came to be. Most blockbuster drugs take upwards of ten years to get to market and has the capability of costing hundreds of millions of dollars to come to fruition. Once approved for use the money just doesn't roll in, there are extreme marketing fees (direct to consumer advertising on TV, magazines, etc) and sales reps to pay to get the information and drugs out to the market. Doctors are provided millions of dollars worth of free samples of the new drug long before the first prescription is ever written. That explains the enormous cost of the branded bringing in the reason for the lower cost generics. The active ingredient has already been proven to be effective for whatever it is being taken for and the safety (long term studies) have already been proven, the generics now only have to prove that it absorbs in the body and trails out comparative to the innovator, a system that costs only millions and takes much less time to prove. Generics do not advertise nor do they provide free samples, therefore the price is managed. When there is only one product on the market the price can stay high, bring in ten to fifteen competitors and the price erodes. So, please do not believe that generics are inferior to branded products, they cost less but the quality is mandated from the various regulatory agencies.

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