Published On: Mon, May 26th, 2014

In Spite Of Recent Gains Goldman Gives Teva A Sell Order After Copaxone Patent Expired Sunday

Teva investors are concerned about competition to the company’s Copaxone medication now that its patent has expired.

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Due to its failed attempt recently to block the marketing of a generic version of its Copaxone, investors are cautious about Teva Pharmaceuticals‘ future. Goldman Sachs has issued a recommendation to buy put options on its stock. It expects Teva stock to drop by as much as 10%.

The put options have a $49 a share strike price expiring on June 21. If Teva’s stock drops 5.4% before the deadline then the options will be profitable.

Based in Petah Tikva Israel, Teva is the world’s largest generic drug manufacturer. Its stock has risen 29% so far this year to a high of $51.77.

Copaxone is a drug developed by Teva for the treatment of multiple-sclerosis. The medication currently represents 21% of Teva’s revenues. Its patent on Copaxone officially ended on May 24th. The company has shifted its patents to a longer acting version of the medicine which will last until 2030.

While Teva’s competitors have not, as of yet introduced a Copaxone copy, Mylan Inc., according to Goldman, might do so on May 27. But the company is facing delays in getting FDA approval, so Mylan might wait until this year’s third quarter. Goldman does say that if no competitor to Copaxone is marketed this year then Teva may break $60 a share.

Barclays is not as concerned as Goldman Sachs, however. It sees a maximum drop of 1% to 2%i n Teva’s stock. It also thinks that Teva will recover any losses because the pace at which the generic drugs are marketed will be modest.

Teva currently trades at 11 times its annual revenue as opposed to 18.2 times among its peers. The company’s forward price-to-earnings ratio has averaged 9.3 over the past five years.

On Teva’s competition, its president and CEO Erez Vigodman recently said at the Israel Marketing Association’s innovation conference: “The world is changing and the pace is quickening. What does this mean in the business world? We live in a world in which competition is more global and growing stronger, and the differences between the winners and losers are narrowing. We’re travelling on a winding road. If you miss one curve, at best you’ll lag behind the leaders; at worst, you’re off the road. It doesn’t matter what car you’re driving.”

“For example, Nokia took the lead position for five years in one of the world’s biggest industries – mobile phones. Motorola invented, but missed one turn – GSM. Nokia missed one turn – the smartphone. Another example is Kodak, which no longer exists. It missed one turn.”

“Our strengths combine generics and specialty medicine. One of the dogmas that we’re attacking is the dogma that you can be either generic or innovative. This is a model that makes us unique in this industry. You start by improving what already exists. Keep Copaxone, create organic growth – this is product innovation. To build a new future for Teva, you need long-term value. This is done by strengthening infrastructures, fulfilling the potential of existing products, the ability to identify discontinuities and attack dogma and find unmet needs all over the world. This will let us define space that will make us unique in the industry, and create differentiation for us. We believe that we have a great opportunity to realize.”

Based in Petah Tikva Israel, Teva Pharmaceutical Industries Ltd is an international company which specializes in generic and proprietary pharmaceuticals and active pharmaceutical ingredients. It is the largest generic drug manufacturer in the world and one of the 15 largest pharmaceutical companies in the world.

Teva has factories in four continents and is traded on both the NYSE and the Tel Aviv Stock Exchange. Teva means nature in Hebrew.

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