A sign bearing the logo of Teva Pharmaceutical Industries is seen in its Jerusalem oral solid dosage plant (OSD) December 21, 2011

Teva Pharmaceutical Industries shares slid five percent on Sunday after U.S. regulators approved a generic version of its top-selling multiple sclerosis drug and amid reports it was mulling a bid for rival Mylan.

Teva's Tel Aviv shares fell to 249.80 shekels ($64) late on Sunday, the first day of trading since both news hit the market on Thursday after Israel's market closed for the weekend. Teva's New York-listed shares fell 3.8 percent on Thursday but gained 2.2 percent on Friday, ending the week at $64.91.

In a potentially major blow for Teva, the U.S. Food and Drug Administration approved the first generic version of multiple sclerosis drug Copaxone, which accounts for about half the company's profit.

The 20 mg generic drug Glatopa was developed by Sandoz, a unit of Swiss drugmaker Novartis AG, and Momenta Pharmaceuticals Inc, for treating patients with relapsing forms of the neurodegenerative disease.

Trying to minimize the damage to its own drug, Teva - the world's biggest generic drugmaker - has been shifting MS patients from a daily 20 mg dose to a three times a week 40 mg formulation. Though the patent of the higher dose expires in 2030, investors fear it will be challenged in court and possibly nullified as early as 2017.

"That is what the market is worried about. It's the fear of losing Copaxone and the realization that Teva is now under pressure to do something quick," said Excellence Nessuah analyst Gilad Alper.

He said Teva might have to abandon long-term plans of making small deals and developing its own drugs in favor of a major acquisition. Several news outlets reported on Friday that Teva was considering a bid for Mylan.

A Teva spokesman did not comment on the market speculation.

Mylan, a generic drugmaker that has moved its headquarters from the United States to the Netherlands to take advantage of lower taxes, made its own $29 billion offer to buy Perrigo 10 days ago, and its chief executive said a merger with Teva would be a bad fit.

Some shareholders of Teva echoed this view.

"Mylan would give Teva severe indigestion," said activist shareholder Benny Landa, noting Mylan was a cultural mismatch for Teva. "Teva should not be making $30 billion acquisitions, even if they promise to be accretive in the short term. Teva should be focusing on multiple sub-$10 billion ... acquisitions that will infuse the company with complementary technologies and products."

David Munno, head of research at the Sphera Global Healthcare Fund, which owns shares in Teva and Mylan, said however that Teva could afford to buy Mylan with a combination of cash, debt and equity.

"If an opportunity like Mylan were to come up ... the synergies between Teva and Mylan or Teva and another generic combination would be difficult to ignore and we would expect Teva to look at that seriously," he said.