Shares of Teva Pharmaceutical (TEVA) are sliding after a judge invalidated four patents for its Copaxone drug, an immunosuppressant for the treatment of relapsing-remitting multiple sclerosis. After the news, Bank of America Merrill Lynch analyst Sumant Kulkarni upgraded the stock to Buy saying the ruling was not surprising and Teva's risk/reward is more favorable now with it out of the way. Meanwhile, several other Wall Street analysts commented on the news, noting that the patents loss is another step toward generic competition.

COPAXONE PATENT LOSS: In a research note this morning, Bank of America Merrill Lynch's Kulkarni upgraded Teva to Buy from Neutral, while maintaining his $42 price target on the shares, as he sees its risk/reward being more favorable now. Noting that a lower court ruled against the company, the analyst told investors that the outcome is not a positive as it could mean generics could enter the market if approved, but pointed out it is not a surprise as his model already reflected a first quarter generic entry. Moreover, Kulkarni believes patient investors could be rewarded over time as Teva has an industry-leading generic pipeline and an underappreciated brand pipeline. Less bullish on the stock, Barclays analyst Douglas Tsao lowered his price target on Teva to $38 from $46, saying he now sees an increased likelihood of Momenta (MNTA) and Sandoz launching a generic version of the company's Copaxone 40mg in the near-term. Teva will likely seek an injunction to block an at-risk launch, but it is unlikely that will be granted, he contended. Tsao reiterated an Equal Weight rating on Teva's shares.

GENERIC COMPETITION: In a research note of his own, Stifel analyst Thomas Shrader raised his price target on Momenta to $30 from $20 following the patent news as he sees the ruling as a "big step" in giving the company and Sandoz full access to the $4B branded Copaxone market. While the analyst acknowledged he expects Teva to appeal the court decision and previous IPR court decision, the common points in the two rulings should be strong enough for the rulings to stand, he argued. Furthermore, Shrader believes the news will encourage Sandoz to launch a generic Copaxone at-risk. He reiterated a Buy rating on Momenta's shares. His peer at Credit Suisse voiced a similar opinion. Analyst Vamil Divan pointed out that the long-awaited decision on four Orange Book listed patents for the 40mg/mL dose of Copaxone represents another step toward the entry of generic versions into the U.S. market. The analyst told investors he expects Novartis (NVS), Momenta and potentially one other competitor to launch later this year and lead to pricing pressure on the brand, while the volume impact may take a little longer. Meanwhile, Leerink analyst Jason Gerberry said this morning that among the litigants in the Copaxone 40mg litigation, he believes Momenta is "best positioned" to secure generic approval as its was the only entity to demonstrate bioequivalence to Copaxone's active ingredient.

PRICE ACTION: In morning trading, shares of Teva have dropped about 5% to $32.83, while Momenta's stock has jumped about 20% to $18.15 per share.