Image source: Teva Pharmaceuticals.

The FDA approval of Novartis (NVS 2.27%) and Momenta Pharmaceuticals (MNTA) Glatopa in April led many to believe that Teva Pharmaceuticals (TEVA 1.01%) revenue may suffer significantly; however, despite facing off against a lower-cost generic for the first time, sales of Teva's Copaxone barely flinched year over year in the third quarter.

Targeting a top seller
Teva's Copaxone is a daily injection therapy for the treatment of multiple sclerosis, and since winning FDA approval in 1996, Copaxone has become the most widely prescribed therapy for this indication, with a total market share of roughly 30% last year.

As a result, despite Teva Pharmaceuticals racking up billions of dollars in sales from its generic drugs, Copaxone's market share and roughly $6,000 per month price tag led to it accounting for more than 20% of Teva Pharmaceuticals' $20.3 billion in sales last year.

With more than $4 billion in annual sales at stake, and more people being diagnosed with MS every year, it's little wonder that Novartis, via its Sandoz unit, and Momenta Pharmaceuticals developed Glatopa so they could steal revenue from Teva Pharmaceuticals when Copaxone's patent expired this year.

Maintaining market share
The threat of losing so much of its total revenue to a generic version of Copaxone led to a series of legal challenges by Teva Pharmaceuticals designed to delay Glatopa's launch, and although those legal challenges ultimately failed to prevent Glatopa's approval, they did buy Teva Pharmaceuticals valuable time that it used to develop and commercialize a higher-dosage and longer-lasting variation of Copaxone that it's been aggressively marketing to patients.

That 40 mg variation of the drug can be taken three times weekly, rather than daily, an advantage that has been resonating with patients given that, despite only launching last year, the 40 mg variation has grown to represent 76% of Copaxone's total sales exiting Q3, up from 67% in Q2.

Thanks to that conversion strategy, combined sales of Teva Pharmaceuticals 20 mg and 40 mg Copaxone fell by just 2% year over year to $1.08 billion in the third quarter, and importantly, the company's total MS market share only declined by 2.2% in the past year.

Remaining threats
Although Teva Pharmaceuticals investors are cheering management's ability to convert so many Copaxone patients to the new formulation, Teva Pharmaceuticals isn't out of the woods -- at least not yet.

While the majority of patients are on the longer-lasting 40 mg version, the 20 mg variation still accounts for roughly $250 million in quarterly sales, some of which are bound to defect to Glatopa, which is priced at a 15% to 18% discount to Copaxone.

Additionally, generic manufacturers are challenging the validity of key patents protecting the 40 mg variation, and if those challenges succeed, a generic alternative to 40 mg Copaxone could hit the market in the next couple of years.

According to Teva Pharmaceuticals, if generic alternatives to the 40 mg formulation are approved, it could end up reducing its sales and earnings per share by $1.2 billion and $0.65 in 2017, respectively.

Looking forward
Teva Pharmaceuticals isn't about to sit back and give up its 40 mg sales easily, and that means we're likely to hear more on the legal front in the coming year, but Teva isn't relying solely on its lawyers to hold off the inevitable shift to generics.

Earlier this year, the company acquired Allergan's generic business in a deal valued at $40.5 billion, and with billions of dollars in annual cash flow, there's still plenty of money to fund the company's generic drug and specialty drug pipelines.

That's good news, especially since it's unlikely that Novartis, Momenta, and other lower-cost generic drugmakers will fail to capture a larger share of Copaxone sales next year than they do today, or that they'll give up on rolling out a generic 40 mg Copaxone anytime soon.