Shares of Teva Pharmaceutical (TEVA) are sliding following a news report saying Express Scripts (ESRX) has decided to cover new migraine drugs from Amgen (AMGN) and Eli Lilly (LLY), but is excluding another medication made by Teva. Commenting on the decision, Wells Fargo analyst David Maris told investors that he views it as a “clear negative” for Teva as its new migraine drug is the company’s highest profile growth driver.
TEVA MIGRAINE THERAPY EXCLUDED: Prescription benefits manger Express Scripts will cover Amgen and Eli Lilly migraine therapies Aimovig and Emgality, but will exclude Ajovy, a rival drug from Teva, after price negotiations with the three manufacturers, Reuters reported. Teva, in the middle of a companywide restructuring, had looked to capture a major stake of the multibillion-dollar migraine market, according to the report.
‘CLEAR NEGATIVE’ FOR TEVA: In a research note to investors, Wells Fargo’s Maris argued that Express Scripts’ decision to not cover Teva’s new migraine drug Ajoyy is a “clear negative” for the company as it is Teva’s highest growth driver and was hoped to be a “bright spot” for the company as it already faces a challenging generic drug market and a cost cutting program. Further, the analyst pointed out that this coverage decision also makes Teva’s future negotiations with other payors more likely to be challenging as it shows Novartis (NVS) and Eli Lilly are “playing and discounting to win.” Without good news on Ajoyy, or U.S. generics, Maris sees little prospect that third quarter results will have “any bright spots,” as any earnings beat will likely be Copaxone or cost cutting driven, both items with short durations. Overall, the analyst told investors he sees potential downside to estimates if this type of coverage decision on Ajoyy is repeated with other major payors. He reiterated a Market Perform rating on Teva’s shares.
PRICE ACTION: In afternoon trading, shares of Teva have dropped almost 6% to $21.
Teva
-1.115 (-5.01%)
Eli Lilly
+1.72 (+1.55%)
Acquired by Cigna
+0.07 (+0.07%)
Amgen
-1.28 (-0.63%)
Novartis
-0.4 (-0.47%)