Teva Goes from Generic to Brand Name

12/13/2010 12:00 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

All it took on December 9 to pop shares of Teva Pharmaceutical Industries (Nasdaq: TEVA) was good news on the Phase III study on oral laquinimod for multiple sclerosis. The two-year study found that patients experienced a statistically significant reduction in relapse rate and a significant reduction in the progression of the disease. Additional results of the study will be released by Teva and its partner, Active Biotech (OTC: ATVBF).

Shares of Teva finished December 9 up 6.8%. Shares of Active Biotech were up almost 80% on the day.

Laquinimod received Fast Track designation from the US Food and Drug Administration in February 2009. A second Phase III trial is still in progress with results anticipated in the third quarter of 2011. The companies expect to submit the drug to regulators in the United States and the European Union shortly after that. Teva, the world’s largest maker of generic drugs, submitted a patent application for laquinimod after the test results were released.

Needless to say, the successful development of laquinimod would be a huge boost for Teva’s ambitions to become a developer of new drugs as well as the leading generic drug company. That’s especially true if laquinimod’s mechanism of action, which includes neuroprotective properties, according to Teva, works with other diseases.

The drug is also in Phase II trials for Crohn’s disease and Lupus; the companies are looking at applications for other autoimmune diseases.

Multiple sclerosis is the leading cause of neurological disability in young adults, with an estimated 400,000 people in the US and an estimated 2 million worldwide affected.

There is no known cure for multiple sclerosis. Regulators have approved five disease-modifying drugs that have effectiveness that varies from patient to patient and that can come with serious side effects. Several require injections on a frequency ranging from daily to once a week. Laquinimod is delivered orally, and the frequencies of adverse events reported in the recent Phase III trials were equivalent to those among trial participants receiving placebos.

Until Thursday’s news, Teva shares had been recently drifting around support at $50 a share. I own the shares in Jubak’s Picks. As of December 10, I’m raising my target price to $63 a share by June 2011 from a prior target price of $61 for May 2011.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this post. The fund did own shares of Teva Pharmaceutical Industries as of the end of the September quarter. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund’s portfolio here.

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