The earnings warning from Europe's No. 1 biotechnology company, Serono (NYSE:SRA), is ultimately good news for Teva Pharmaceuticals (Nasdaq:TEVA)

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, says Tel Aviv investment house Nessuah Zannex.

Serono's growth estimates are based to a large degree on the performance of Rebif, its interferon-based treatment for multiple sclerosis. Rebif has not been selling as expected, while sales of Teva's competing treatment, non-interferon Copaxone, have been growing, explains Nessuah Zannex chief analyst Haim Israel.

Serono lowered its 2002 sales guidance, saying it sees profits for 2002 growing by 10% instead of the previously projected 15% to 17%. The Geneva-based company also reported an 8.6% dip in profits for the second quarter, and slower-than-expected sales of Rebif.

Serono said second-quarter Rebif sales were $122.6 million, of which $12.2 million was contributed by the United States market. The company lowered U.S. sales expectations of Rebif for the year to $58-60 million, from $60-70 million, a forecast dating from May.

In an interview with Bloomberg, Serono CEO Jacques Theurillat admitted that second-quarter Rebif sales had been hurt by Copaxone's penetration of the European market. Yet Serono said on Wednesday that it expects its distribution deal with Pfizer to nab it 30% of the U.S. market by 2005. In previous estimates the company spoke of a 25% market share by then.

Upon Rebif's launch in the U.S., Teva stockholders had fretted that sales of Copaxone, a key moneymaker for the Israeli drugmaker, would be hurt.

But reports from Serono today and Biogen beforehand indicate that the interferon-based MS medications are warring it out between themselves, leaving non-interferon Copaxone gaining ground at their expense, says Israel.

Israel estimates that Copaxone's market share, which stood at 22% at year-end 2001, will grow to 24.5% by the end of this year. Even the Pfizer-Serono alliance won't impair Copaxone's climb to 28% of the market, where it will stabilize, Israel estimates.

Those estimates do not cover the oral version of Copaxone.

In Europe, Israel predicts Copaxone sales of $16 million in the second quarter, and $78 million for the year 2002 - more than Rebif sales in the U.S. for that time. In 2003, he estimates, Copaxone sales in Europe could reach $117 million.

In the long run, Israel sees Teva's MS drug reaching the same market share in Europe as in the United States.

On Teva's surging stock since April and its consequent high multiples relative to its peers, Israel says its financial statements to be published on Monday will prove that it is different from the other drugmakers. While its rivals have been reporting weakening results, Teva is expected to beat the forecasts, he said.