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It seemed that a dark cloud hung around Teva Pharmaceuticals (NYSE:TEVA) in 2013 as investors and analysts feared the worst from losing patent protection of its key drug Copaxone. The company has taken steps needed to survive past this event and with several new projects in the works, Teva now appears ready to break out in 2014.

Last week, Teva announced the FDA had approved a 40mg dose of Copaxone for three times weekly use. The MS drug from Teva had previously only been available as a once daily treatment option. This is a huge win for Teva as the once daily treatment option loses patent protection in May of this year. The new three times a week option will have a patent through 2030 and may be more appealing to patients as it is taken less frequently. Teva plans on converting around 57% of the current patient base to the new dosage by the end of the year. This shift would help minimize the impact of a possible generic Copaxone later in 2014.

Prior to the new dosing FDA approval, Teva had issued guidance for fiscal 2014 with and without generic Copaxone. Based on generic Copaxone hitting the market on June 1, 2014, Teva believes fiscal 2014 revenue will hit $19.3 to $20.3 billion. Earnings per share will hit a range of $4.20 to $4.50 with generic Copaxone. Without a generic launch of Capaxone in fiscal 2014, Teva sees revenue hitting $19.8 to $20.8 billion. Earnings per share without the generic competition were guided in a range of $4.80 to $5.10. In fact, Teva breaks down the actual impact of a generic Copaxone as $78 million per month. Each month a generic competitor doesn't hit the market, Teva adds $78 million in revenue and $0.08 in earnings per share.

For fiscal 2014, Teva estimated generic sales would hit $9.8 to $10.5 billion, while specialty drugs would bring in $7.3 to $7.7 billion in revenue. However, with the new dosage of Copaxone, I believe Teva will be able to easily pass this updated guidance and also beat analysts' targets. Analysts on Yahoo Finance see fiscal 2014 revenue hitting $19.8 billion, which is the mid-range of Teva's guidance. Earnings per share are expected to hit $4.59, which tops Teva's generic affected range, but is well below the higher projected non-impacted guidance.

If Teva can successfully transition the 57% of patients it is estimating to the new dosage, it should see a very minimal impact of the patent loss on one daily Copaxone. I have always thought that investors were being too harsh on Teva and the potential loss of Copaxone and now the impact will likely prove investors acted too harshly in 2013.

On January 21st, Teva announced it was acquiring NuPathe (PATH) Inc. Teva will pay $3.65 per share of NuPathe, with a possible additional $3.15 in payout per share for sales milestones. This deal was deemed greater than what Endo Health (EDHP) was offering NuPathe shareholders in a potential acquisition. Teva will pay $2.15 per share if NuPathe's ZECUITY patch hits sales of $100 million in four consecutive quarters. NuPathe shareholders will earn an additional $1.00 per share if ZECUITY sales hit $300 million in four consecutive quarters.

The acquisition of NuPathe was a smart one for Teva in my opinion. NuPathe has the only prescription migraine patch approved by the FDA. NuPathe also has patches in the works to treat symptoms of Parkinson's Disease and Schizophrenia/Bipolar. Wedbush was recently bullish on shares of NuPathe citing potential peak sales of ZECUITY at $300 million. I believe with Teva's extensive sales reach, this patch could see peak sales of $500 million. I also expect Teva to aggressively push NuPathe technology through other diseases and symptoms that it can control with patches.

Teva also launched a generic version of Detrol in January. The drug has annual sales of $572 million for Pfizer, so Teva could see this generic version produce a couple hundred million dollars in annual revenue. Teva will also take on another Pfizer drug, with the launch of a generic Viagra in 2017 or earlier. Teva will pay Pfizer a royalty on the drug as the Viagra patent goes through April of 2020.

Perhaps one of the biggest stories for Teva in 2014 is the hiring of Ere Vigodman as the new chief executive officer. Vigodman is what is known as a "turnaround specialist" who will likely come in and cut costs and control spending to get Teva through this tougher revenue producing period. Vigodman helped turn around MA Industries and also worked for Strauss Group.

Shares of Teva were up only 8% in 2013, despite a rather bullish market for biotechnology and pharmaceutical companies. Shares of the company have started to see further gains, with an 11% move already in 2014. However, shares of Teva continue to trade at ten times analysts' forecasted earnings in fiscal 2014. If the company can transition part of its customer base to the new Copaxone dosing or no generic launch of Copaxone takes place in 2014, earnings will rise dramatically and shares will have to rise to hit reasonable valuations. The company's acquisition of NuPathe Inc. and other potential drug launches could also provide further bullish moves later on in the year. Buy shares of Teva before it's too late.

Source: Teva Pharmaceutical Shares Ready To Break Out In 2014