On Friday, the FDA approved Momenta Pharmaceutical's generic biologic alternative to Sanofi-Aventis' Lovenox. Many have hailed this as a sign that the FDA is now more willing to consider "generic competitors" in the biologics space.
Teva is looking to compete in the biosimilar space as well - so why the worry? This analysis in Seeking Alpha explains. First off, the FDA decision may signal that the agency is willing to consider approval of a competitor to Teva's multiple scelrosis drug, Copaxone. Copaxone is a major cog in Teva's growth as the drug's sales totaled more than $2.8 B in 2009 out of the company's $13.9 B in sales. Copaxone represents about 30% market share of the global MS market.
A market challenger to a drug that represents 20% of Teva's revenues is serious. The remainder of Teva's portfolio is made up mainly of revenues from generics. Teva maximizes these products' profits by using a first mover strategy to gain 6 months exclusivity in marketing the generic form of the drug.
However, if the generic and biosimilar market is going to grow at a time when many ethical drug producers are facing the patent cliff - one could expect more of these producers to enter with their own generics taking profit out of this segment of the market. And this movement could occur at precisely the time Teva's Copaxone could be challenged with competition.
As of October 2009, Teva had 210 product applications at the FDA, including 40 tentative approvals. Branded products covered by these applications totaled $113 B in US sales. Among the 210, Teva filed 136 challenges to branded patents. It was the first to file on 83 of the 136 applications. Products associated with these applications had US sales of $54 B.
If the Teva business strategy is threatened by changing market conditions, then one can see the rationale for investor fears that led to an 8% drop in the Teva stock price based on the Momenta news on Friday. It remains to be seen whether this will occur or not and whether this will present a serious challenge to the Teva business model of "first mover". Never a dull moment.
Posted by Bruce Lehr July 26th 2010.
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