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Teva Pharmaceutical Industries Ltd. investors may have to brace for more profit disappointments as threats loom over its top drug.

The world’s biggest maker of generics reported fourth- quarter profit of $1.25 a share yesterday, below the average analyst estimate of $1.28, and said earnings this year will be $5.20 a share at the most, also short of the $5.29 that analysts expected. The stock had its steepest drop since July 23.

The one piece of good news from the report, surging revenue from Teva’s multiple sclerosis drug Copaxone, masks a sobering reality: that medicine’s future is in jeopardy. It’s losing patent protection and may become prey to generic copies. And as a 14-year-old injected treatment, it’s set to lose ground to a new pill.

“The salient point is, look, they’re more dependent on Copaxone,” said Ronny Gal, an analyst at Sanford C. Bernstein & Co. in New York. That raises “a big question about what’s going to happen after 2012,” he said. Gal cut his rating on Teva to “market perform” in July.

To bolster Copaxone’s revenue, Teva raised the drug’s price by about 39 percent since January 2010, which helped it report a 35 percent increase in fourth-quarter profit.

The trouble is much of the gain may now be behind as more doctors begin to recommend Novartis AG’s rival medicine Gilenya to multiple sclerosis patients, analysts said.

‘Years Away’

With its star product under pressure, Teva, which pioneered the use of the legal system to copy proprietary drugs like Prozac and sell them for a fraction of the price, may find itself in the same tight corner in which it put the likes of Eli Lilly & Co. and Pfizer Inc. a decade ago.

“Copaxone will go down,” said Ori Hershkovitz, a partner at Sphera Global Healthcare Fund in Tel Aviv. “It’s not going to be easy.”

Teva, based in the former kibbutz city of Petah Tikva, believes Copaxone is here to stay. The crux of the company’s defense is that patients may be wary of change, and the medicine will be hard to copy because of Teva’s experience with legal challenges and the drug’s complicated structure, which allows it to shuffle its four amino acids as randomly as a dealer with a deck of cards.

“Any so-called generic Copaxone is, at the very earliest, years away,” Chief Executive Officer Shlomo Yanai said on a conference call yesterday. “We are taking the right strategic and operational measures and making the right investments to keep us on track.”

Generic Threat

Chief Financial Officer Eyal Desheh said in an interview late yesterday he doesn’t believe Israel’s biggest company needs another Copaxone to meet its goal of doubling sales by 2015.

Desheh argues that Copaxone’s contribution to sales showed little change last year. Teva is ready for an acquisition the size of its 3.63 billion-euro ($4.9 billion) Ratiopharm GmbH takeover and counts on growth in women’s health, a new MS medicine and a Parkinson’s drug to fuel sales, he said.

The strategy isn’t convincing enough to prop up the stock. Teva’s American depositary receipts fell 5.4 percent yesterday in Nasdaq Stock Market composite trading. The stock has shed 20 percent since reaching a peak of $64.54 on March 23. It’s among the worst performers in the Bloomberg EMEA pharmaceutical index over the past 12 months.

Teva’s ADRs, each representing one ordinary share, declined 48 cents, or less than 1 percent, to $51.54 at 4 p.m. New York time in Nasdaq Stock Market composite trading.

Packed Pipeline

Swiss drugmaker Novartis AG and partner Momenta Pharmaceuticals Inc. have been working on a generic of Copaxone for about five years. A 30-month moratorium on the launch for their version of the drug expires in February, Momenta’s Chief Financial Officer Rick Shea said in an interview.

Momenta is “very confident” its copy of Copaxone will stand up to FDA review, Shea said in a telephone interview. “We believe in our science.” Mylan Laboratories Inc. is also trying for its own copy.

Even if a generic proves hard to make, Novartis says its Gilenya pill is gaining ground and drugmakers including Sanofi- Aventis SA, Roche Holding AG and Biogen Idec Inc. are working on experimental treatments for MS that can dent Copaxone’s sales.

“The pipeline for multiple sclerosis is packed with products from here to eternity,” saidNatali Gotlieb, an analyst at Israel Brokerage & Investments in Tel Aviv. She believes Copaxone’s sales will start falling in 2013, compared with Teva’s own estimate of 2014. “It doesn’t matter where it comes from. It will happen.”

Failed Experiment

A look back at Copaxone’s history shows how intertwined it is with Teva’s identity. Not only is Copaxone the company’s biggest product, bringing in about $3 billion in annual sales. It’s the result of a gamble by former chairman Eli Hurvitz and helped what was once an obscure drug importer to vault into the pharmaceutical industry’s top 20.

Copaxone was born out of a failed 1967 experiment in the lab of Michael Sela, an immunologist at the Weizmann Institute of Science in Tel Aviv.

Sela and his colleague Ruth Arnon were trying to use man- made compounds to induce a disease similar to multiple sclerosis in lab animals. As the disease failed to appear, they came to suspect the product might actually be blocking it, and began testing it against MS, which slowly robs patients of the ability to walk, speak and eat, Arnon said in an interview.

Polite, Uninterested

Arnon recalled traveling to the U.S. to try to convince Johnson & Johnson and Upjohn, later bought by Pfizer, to back the experimental compound. Both were polite, but uninterested in cooperating with research from someone else’s labs, she said.

Finally, in 1985, Sela invited himself over to dinner at the home of Teva’s Eli Hurvitz, a longtime friend. It took Hurvitz about five minutes to make up his mind, according to Sela. Teva focused mostly on copies after that, using Copaxone’s revenue to help build a generic-drug empire with annual sales of $16.1 billion.

“It was a courageous, almost crazy idea” Sela said in an interview. “I think afterwards Teva got scared that miracles happen once.”

Hurvitz stepped down in March as chairman of the company, which started out by distributing imported medicines on camels and donkeys. He was replaced as chief executive in March 2007 byYanai, a former tank commander who led Israel’s troops in Gaza.

“The atmosphere was different” when the Weizmann scientists approached Teva, Arnon said. “They started with a positive attitude.”

Economy Class

Teva cultivates its difference. While other drugmakers plow money into glossy headquarters and corporate jets, the company leases a warren of low-ceilinged buildings a half-mile from the original offices of Assia, one of the three local drugmakers that merged to form Teva in 1976. Board member Dan Suesskind flies economy class and took calls during an interview on an old Nokia phone held together with tape. He says he kept the same desk for 29 of his 31 years as chief financial officer.

“It was a perfect desk,” Suesskind said, lamenting that it fell apart while being moved.

Sitting in Desheh’s office last June, where the secretary now serves coffee from an espresso machine instead of the muddy Turkish brew that fuelledSuesskind in Teva’s earlier days, the two men said investors questioned from the beginning whether the company could deliver on its goals.

“When we were $100 million, people asked, ‘How will you get to $200 million?’” Suesskind said. “We have a history of meeting our targets.”