Investors in Israel's Teva Pharmaceutical Industries largely shrugged off a negative opinion from the European Medicines Agency (EMA) on multiple sclerosis (MS) drug laquinimod in the belief that it will be reformulated.
An EMA committee on Friday said it had concerns about animal studies showing a higher occurrence of cancers after long-term exposure to the medicine. A similar long-term cancer risk could not be excluded in humans, it said.
The panel's worries sent shares of Teva's partner, Sweden's Active Biotech, down 46 percent while Teva's New York shares slipped only 2.5 percent. On Sunday, Teva's Tel Aviv-listed shares were down 2.3 percent, against a 1.8 percent fall for the broader market.
"Teva was negatively affected but not significantly because the market doesn't believe laquinimod would contribute to Teva's financial results in the next few years," Leader Capital Markets analyst Sabina Levy said.
Teva, the world's largest generic drugmaker, initially had high hopes for laquinimod, which was viewed as an experimental, neuroprotective medicine with potential to address progressive as well as relapsing MS.
U.S. regulators had asked for another Phase III study before considering the drug, prmopting Teva to target the European market, where it thought it had a better chance of approval.
Teva and Active Biotech said they will continue to develop the laquinimod clinical development programme for MS and intend to ask the EMA to re-examine its opinion on the drug.
Analyst Levy said that, though the drug may have less of an ability to reduce relapses, it could decrease disability progression. Teva, whose branded MS drug Copaxone is about to start facing competition, could also consider laquinimod as part of a combination therapy, she added.
The head of a large trading desk in Tel Aviv said that laquinimod is less important to investors than a recent announcement of a new chief executive and changes to Teva's board.
Teva's shares have shed 6 percent of their value in the past three sessions in New York but are still up 7.1 percent so far in 2014. Its shares were flat between 2012 and 2013.
"When Teva was doing badly and there was good news, Teva wasn't reacting accordingly," the trader said. "Now Teva has positive sentiment, so bad news is not affecting the shares as one would expect."
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