Teva Pharmaceutical Industries (TEVA) recently entered into an agreement with AstraZeneca (AZN) to settle their litigation regarding the former’s generic version of AstraZeneca’s Entocort EC (budesonide) capsules. Merck (MRK), which has a partnership with AstraZeneca in the US, is also part of the settlement. Teva was looking to launch its generic version of the product in the US.
Under the terms of the settlement, AstraZeneca granted Teva an exclusive license to enter the US with its generic version on February 15, 2012, subject to regulatory approval. Teva could enter the market earlier in certain circumstances. The companies did not disclose other terms of their agreement.
According to IMS sales data, Entocort EC capsules recorded annual sales of approximately $265 million in the US. This drug is used for the treatment of Crohn’s disease also known as granulomatous and colitis.
Teva has been very active in entering into settlement agreements. Some of the important cases settled by the company include the Effexor dispute (it gained the right to launch its generic version in the US no later than July 2010); the Avandia, Avandamet, and Avandaryl dispute (it can launch in the first quarter of 2012); the TriCor case (it can launch in late March 2011); and the Nexium dispute (it can launch in 2014).
We believe Teva’s generic business offers solid growth opportunities, thanks to many products going off-patent in the next few years; several of which the company has filed abbreviated new drug applications (ANDAs). It has a robust portfolio of generic products and, as of April 26, 2010, the company had about 210 ANDAs pending approval, representing more than $113 billion in branded sales. About 133 of these ANDAs are paragraph IV filings, most of which are expected be resolved in the next few years.
We are currently Neutral on Teva. While we expect the company to continue performing well due to new product launches, both generic and branded, we remain concerned about the intensity of competition and pricing pressure in the generics market. Moreover, the Copaxone patent challenge remains a matter of concern. With Copaxone contributing over 20% to Teva’s revenue in 2009, the entry of generic versions may adversely affect the company’s performance.
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