Tel Aviv stocks ended Thursday after a volatile session marked by tremendous activity in weighty blue chip Teva Pharmaceuticals (Nasdaq:TEVA).

The Maof-25 index fell 1.8% to 368 points and the Tel Aviv-100 index dropped 1.7% to 355.6 points. Tech stocks, which are deeply affected by doings on Nasdaq, lost 1.7%. Total turnover was double the usual at NIS 352.5 million, of which more than half was due to one company -

Teva Pharmaceuticals

(Nasdaq, TASE:TEVA).

The Israeli drugmaker dropped 8.2% on eye-popping turnover of NIS 180.4 million, which is about the usual total of action in all TASE stocks during these slumberous summer days.

Teva sank on the double whammy of the SEC probe into Bristol-Myers Squibb (NYSE:BMY), and the alliance between Pfizer (NYSE:PFE) and Europe's Serono (SEOZ.VX) to market multiple sclerosis drug Rebif in the key U.S. market.

Rebif will compete with Teva's multiple-sclerosis treatment Copaxone, which has been a major profit-maker for the Israeli drugmaker. The American MS market is estimated to be worth about $1.3 billion a year.

Rebif had $379.6 million in sales outside the U.S. market last year, giving it 38% of the non-U.S. market, Serono said. Rebif had four percent of overall U.S. prescriptions for MS at the end of June.

Teva chief executive Israel Makov shrugged, telling TheMarker that first of all, Teva's books are crystal-clear transparent, and secondly, that the PfizerSerono alliance could indirectly benefit Teva by boosting MS drug sales across the board.

But drug companies have seen their stocks fall by about 40% this year, says Leader DS analyst Ori Hershkovitz. During that time, Teva shares rose 15%, making the company relatively expensive compared with its peers. IBI analyst Elah Alkalay concurs, saying Teva's multiples far exceed those of peer generic drug companies.

In any case, Teva's fall on Wall Street last night led it to open a 4.7% arbitrage gap with Tel Aviv, although it has overshot that mark by some margin.

As for the other Tel Aviv stocks, they have proved relatively resilient in recent days, as stock markets sagged around the world. But DBM Investment House manager Rami Dror attributes the local might to an absence of sellers, not to intrinsic strength. Most of the action these days is by institutional investors, led by insurance companies, he says, which are behaving very selectively. The institutionals have been buying up shares listed on the TA-75 index, he says, indicating long-term intentions, not speculative flings.

Bank Discount has been in the headlines thanks to the brewing brouhaha over its New York subsidiary. Discount itself eased down by 0.1% on turnover of NIS 2.4 million, while one contender, Bank Hapoalim, dropped 0.7% even though the regulator bowed, and said Hapoalim could buy the New York bank if it wants. Another contender, Bank Leumi, list 1.7%. Meanwhile the Safra banking brothers have also thrown their hat into the ring, reportedly, though no concrete offers are known to have been made yet.

The Bezeq phone company dropped 2.4% despite news that a government panel, discussing opening the communications market to competition, opposes forcing the company to lease its infrastructure to rivals. Bezeq, which is controlled by the state, has a long-standing monopoly over domestic communications.

Action was unusually animated in Matav Cable Systems (Nasdaq:MATV), which rose 5.1% yesterday on highly unusual turnover of NIS 10 million. Market sources surmise that the Dankner family is not the buyer. Institutional investors are probably responsible, they say, based on Matav's low price. Matav ended down 1.4% on tremendous turnover, for it, of NIS 19 million.

IDB group stocks sank, with IDB Holding Corporation losing 2.4% and sister company IDB Development Corporation sagging by 0.7%. Clal Industries lost 1% and Discount Investment Corporation gained half a percent.