Legal Woes Piling Up for Teva Pharmaceutical Industries Ltd

Lately Teva's been having legal trouble, from Supreme Court silence, to the loss of a patent dispute with Mylan.

Mar 31, 2014 at 2:30PM

Editor's Note: Shortly after this article's publication, news outlets reported that the Supreme Court has agreed to a hearing on generic Copaxone. The article has been adjusted to reflect the updated information.

Over the past week Teva's (NYSE:TEVA) legal staff has had some mixed news. Recent issues include the loss of a patent dispute with Mylan (NASDAQ:MYL), although at least the Supreme Court has agreed to hear its appeal on the Copaxone issue. To top it off, the Israeli generic powerhouse might have "catastrophic" generic labeling issues to deal with.

Patent disappointment
Last July an appeals court upheld some, but not all, of Teva's patents concerning its multiple sclerosis drug, Copaxone. As a result, the company can expect generic competition for its largest specialty medicine to begin eating into US sales as soon as May. That's about 16 months earlier than the company was expecting before the appeals court dropped its gavel last summer.

Of course, Teva is hoping that the Supreme Court will appreciate its side of the argument. The company's legal team will have its day in court, as the Supreme Court has agreed to hear the appeal.

What's at stake
To the casual observer, 16 months of US exclusivity for one drug might not seem like much to a big company like Teva. A closer look, however, shows the company and its investors have a lot to lose. During 2013, worldwide Copaxone sales reached $4.3 billion. The company doesn't break down exactly how much of that figure came from which region, but U.S. sales comprised about 72% of specialty medicine revenue.


Generics 2013

Speciality 2013


$9.9 billion

$8.4 billion

Gross profit

$4.1 billion

$7.3 billion

R&D expenses

$0.5 billion

$0.9 billion

Sales & marketing expenses

$1.9 billion

$1.9 billion

Segment profitability

$1.7 billion

$4.6 billion

Source: Teva Form 20-F 2013

With maybe $3 billion in annual U.S. Copaxone sales, that 16 months of exclusivity is clearly a prize worth fighting for. Its loss might nibble at the company's top line, but the bottom line could be hit hard. As you can see in the table above, Teva's speciality medicines segment is far more profitable.

Teva is hoping patients and physicians will consider generic versions somehow inferior. It is also rapidly converting patients to a recently approved extended release version. Management has a great deal of confidence in its strategy. Company guidance suggests a loss of of just $0.5 billion in revenue for the year if the patents don't hold. 

The sharks
The patent case is against Novartis(NYSE:NVS) subsidiary, Sandoz and its partner Momenta (NASDAQ:MNTA), but Mylan and others are also working on low-cost generic forms of Copaxone. If you're holding shares of Teva you want to keep your eyes peeled for a Supreme Court ruling, if it hears the case.

On the same day the Supreme Court snubbed Teva, its generics arm also suffered an unfavorable ruling. A U.S. District Court upheld Mylan's Perforomist Inhalation Solution patents. Teva's application for generic Perforomist is under review at the FDA. The ruling effectively freezes that application until June 2021.

A generic catastrophe
Last November the FDA proposed amending a labeling rule that has the generic drug industry in an uproar. Currently, generic drug labels must mimic those of branded drugs they replace. Monitoring thousands of patients for long term side effects, then applying label changes is the original company's responsibility.

The FDA's proposed change would make companies marketing generic drugs responsible for updating their labels in response to the original manufacturer, plus their own observations. The cost of monitoring patients for side effects has the industry concerned, and potential legal expenses have them terrified. Ralph Neas, the president and CEO of the Generic Pharmaceutical Association said the "unintended consequences of this rule would be nothing short of catastrophic."

Neas' statement seems a bit alarmist -- although there does appear to be some possibility of additional litigation and other costs, which generic drugmakers may pass on to consumers through price hikes and other tactics.

Final thoughts
The proposed labeling changes would certainly add to the expense of selling generic drugs, but I don't think Teva shareholders should worry too much. If the law cuts across the entire industry, the extra costs will pass through to customers. Investors should be far more worried about the lack of results from Perforomist and Copaxone litigation.

Invest in the next wave of health care innovation
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And the technology  behind is poised to set off one of the most remarkable health care revolutions in decades. The Motley Fool's exclusive research presentation dives into this technology's true potential, and it's ability to make life-changing medical solutions never thought possible.  To learn how you can invest in this unbelievable new technology, click here now to see our free report.

Cory Renauer has no position in any stocks mentioned. The Motley Fool recommends Momenta Pharmaceuticals and Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.