Shares of generic player Teva Pharmaceuticals, Inc. (TEVA) were down approximately 2% on news regarding the acceptance of an abbreviated new drug application (ANDA) for its multiple sclerosis drug, Copaxone. The ANDA, filed by generic company Mylan, Inc. (MYL) was accepted for review on September 14, 2009.

The filing and acceptance of Mylan’s ANDA does not come as a surprise. Last year, Mylan had declared its plans to sell a generic version of Copaxone and had entered into a license and supply agreement with Indian company, NATCO Pharma Ltd., for exclusive distribution rights to pre-filled syringes of Copaxone in the U.S. and all major markets in Europe, Australia, New Zealand, Japan and Canada.

We note that Teva is already facing a generic challenge for Copaxone from Momenta Pharmaceutical and Novartis’ (NVS) Sandoz. The partners filed for approval in July 2008. Teva filed a patent infringement lawsuit against Sandoz and Momenta in August 2008. The initiation of a patent infringement lawsuit has triggered a 30-month stay period during which a generic version of Copaxone cannot be approved unless the generic challengers receive a favorable court ruling.

Teva has also filed a citizen petition [CP] with the FDA to prevent any generic manufacturer from launching a generic version of Copaxone without conducting full clinical studies in humans. The FDA responded in March 2009 to Teva and declined to review the CP.

Copaxone is Teva’s lead branded product. Copaxone sales came in at $2.3 billion in 2008, accounting for approximately 20.4% of total revenues. As such, the entry of generic versions of Copaxone would have an adverse impact on the company’s operating results. We expect Teva to initiate a patent infringement lawsuit in response to Mylan’s ANDA.

Given the complexity of Copaxone’s formulation and the strict regulatory environment, we believe the FDA might require the generic companies to conduct additional studies before granting approval. This could delay the launch of generic Copaxone to beyond May 2014 when the product is slated to lose patent protection.

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