No Pain, No Gain: What Could Drive Teva's Valuation in 2016?
The acquisition of Auspex Pharmaceuticals has added an innovative molecule, SD-809, to Teva Pharmaceutical Industries’ (TEVA) portfolio, enabling the latter to focus on hyperkinetic movement disorders and other related rare diseases, or orphan diseases, with high unmet demand. On August 12, 2015, the FDA accepted Teva’s application for the review of SD-809 for Huntington’s disease.
The above diagram shows the results from the phase 3 clinical trials, which tested the efficacy of SD-809 for Huntington’s disease against that of a placebo. SD-809 managed to display a statistically significant improvement versus the placebo.
Currently under FDA review, SD-809 is expected to be released in the United States in 2016. According to Mayo Clinic, “Huntington’s disease is an inherited disease that causes the progressive breakdown (degeneration) of nerve cells in the brain. Huntington’s disease has a broad impact on a person’s functional abilities and usually results in movement, thinking (cognitive) and psychiatric disorders.”
Similar to Alexion’s (ALXN) Soliris, Amgen’s (AMGN) blinatumomab, and Celgene’s (CELG) GED-301, SD-809 has received an ODD (orphan drug designation) from the FDA. According to the FDA, “An orphan drug is defined in the 1984 amendments of the U.S. Orphan Drug Act (or ODA) as a drug intended to treat a condition affecting fewer than 200,000 persons in the United States, or which will not be profitable within 7 years following approval by the FDA.”
Unlike regular drugs, orphan drugs enjoy a seven-year market exclusivity in the United States and a ten-year market exclusivity in Europe. Orphan drugs can claim tax credits on research expenses, gain additional monetary assistance during their development phase, and have more pricing flexibility following their approval.
Since 90% of Huntington’s disease patients do not have access to any medication, Teva believes that there is a significant opportunity for SD-809 in this segment. The company is actively involved in training sales representatives and continues to learn more about the condition and the market opportunity from its medical science liaisons. Additionally, Teva is monitoring the competition presented by tetrabenazine and two generic versions of tetrabenazine.
If Teva manages to succeed in its strategy for Huntington’s disease, it could boost share prices of the Market Vectors Pharmaceutical ETF (PPH). Teva accounts for about 4.3% of PPH’s total holdings. In the next part of this series, we’ll explore other research programs for Teva’s innovative drug, SD-809.
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