Teva Announces At-Risk Settlement and Positive Phase II Data for Lupus


Teva Pharmaceuticals announced a settlement with Pfizer PFE for its at-risk launch of Protonix in 2008. The $1.6 billion settlement is not surprising, considering Teva’s launch of its generic version before Protonix’s patent expiration in 2011. Analysts consider this Teva’s largest and most controversial at-risk launch, so they don’t expect other settlements of this magnitude.

Since it reserved a $670 million charge in 2012, Teva will recognize the remaining $930 million charge during its second-quarter earnings results. Cash payments will be equally split between 2013 and 2014, and management still contends insurance proceeds may cover a large portion of the liability.

In unrelated news, Teva announced positive Phase IIa trial results for laquinimod in treating renal complications of lupus. Management expects to move the drug to Phase III trials, which would lead us to increase our probability of approval for this indication. Although we’re encouraged by the news and Teva’s ability to expand the pipeline in advance of competitive pressure on Copaxone, we don’t see a major shift in our fair value estimate at this time because of this announcement. In a multicenter, double-blind, placebo-controlled study of 46 patients, laquinimod produced a renal response in almost 63% of patients compared with 33% for placebo. Consistent with complications reported in laquinimod’s previous clinical trials, side effects from the drug appear minimal.


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