Mylan's (MYL) Surprise Copaxone Generic Approval 'Quite Negative' for Teva Pharma (TEVA) - Mizuho

Mizuho analyst Irina Koffler weighed in on Mylan's (NASDAQ: MYL) surprise approval for generic Copaxone after downplaying the possibility of a September approval and taking Copaxone out of its 2017 estimates. Koffler sees the news as "quite negative" Teva Pharma (NYSE: TEVA).

On Mylan, Koffler notes, "Importantly, Copaxone is AP rated (or therapeutically equivalent and substitutable), which makes it easier to switch existing Copaxone patients to the generic. Also, Mylan may be eligible for 180-day exclusivity of this product, though the FDA did not indicate other entrants (namely Momenta/Sandoz) would not be able to also enter the market." She expects Mylan to rally because Copaxone approval has eluded it for years, and the news validates the company's ability to execute on complex generic. They think Advair is next.

On Teva, Koffler commented, "In contrast to Mylan, Teva guided to no impact from Copaxone generics in 2017 but now has additional downside to guidance. FactSet consensus does not appear to reflect generic competition, and our last estimate for 2017 U.S. Copaxone sales was $3.24B. Teva previously indicated that 1-2 generic competitors could lead to $1.0-$1.3B in annual revenue downside and a ~$1.00 hit to EPS. Under a very conservative case, revenue guidance may decline to $22.5-$22.9B (assuming a $300M impact to 4Q:17), with a $200M impact to its EBITDA guidance range of $7.2-$7.4B (70-80% of Copaxone rev drops to the bottom line), and ~($0.25) dilution to non-GAAP EPS. Teva previously guided to slow Copaxone deterioration due to the stickiness of its patient support program, which could play out initially. However, Mylan announced a robust program that includes nurse support, a mobile app, in-home injection training, co-pay assistance, and 24-7 phone support." The analyst sees TEVA giving back recent gains and trading toward their $16 price target.

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