Teva Falls on Negative CHMP Opinion

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Teva Pharmaceutical Industries Limited (TEVA) and Active Biotech announced that their oral multiple sclerosis (MS) candidate, Nerventra, received a negative opinion from the European Medicines Agency’s (:EMA) Committee for Medicinal Products for Human Use (CHMP). The companies are looking to get the candidate approved for the treatment of relapsing-remitting multiple sclerosis (RRMS).

The CHMP rendered a negative opinion as it believes that the potential risks associated with Nerventra outweigh the benefits based on currently available data. Data found in animal studies - a higher occurrence of cancer after long-term exposure to Nerventra - and chances of an adverse effect on the unborn baby when taken by pregnant women, led to the CHMP opinion. Teva and Active Biotech are planning to request a re-examination of the CHMP opinion. Teva’s shares fell 2.45% on the news.

Our Take

We are disappointed with CHMP’s opinion on Nerventra. The successful development and launch of Nerventra would help strengthen Teva’s multiple sclerosis drug portfolio. Teva already has a multiple sclerosis product in its portfolio – Copaxone.

However, Copaxone could start facing generics this year. Last month, Teva provided guidance for 2014 based on two scenarios related to Copaxone – Copaxone remaining exclusive and Copaxone going generic. The entry of Copaxone generics this year could cut total revenues by about $500 million and earnings by 60 cents.

We note that several oral multiple sclerosis therapies are currently available including Novartis’ (NVS) Gilenya and Biogen Idec’s (BIIB) Tecfidera among others. Competition in the oral multiple sclerosis market is intense and Nerventra needs to demonstrate superior efficacy and safety to gain share in this market.

Teva carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks include Actavis (ACT) carrying a Zacks Rank #2 (Buy).

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