Monday, November 21, 2011

Stocks DD Cites: Recent docket filings in MNTA/Sandoz v Teva Copaxone Trial


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 - The post-trial docket filings are now in pacer. There is ton of info, testimony, arguments,counter-arguments to digest, and it is mind-numbing.  Inequitable conduct, Non-infringement, Enablement, and Indefiniteness arguments all there. Sandoz's lack of enablement defense ("appropriate calibration of sec standards to measure molecular weight of copolymer") and to lesser extent non-infringement arguments seem strong. Also, separately Mylan submitted a major amendment to their ANDA in April 2011 (this aligns with my earlier blog posting on valuation of generic copaxone).  Also, the language in the filing makes it appear that MNTA's ANDA is closer to approvable state(For eg: "post-approval product to be marketed by Sandoz will contain a different molar ratio as described in Sandoz’s Findings of Fact and Conclusions of Law". This is just one example). For  filings 326(MNTA), 327 & 328 (both TEVA's) also needs to be read before you get the full picture.
I am inclined to say that judgement will not be rendered anytime soon(at least 2 months) as the judge may need time to see these final trial briefs.
Here are some key points(i'll cover the enablement defense in another blog post):
Non-infringement - MNTA's generic copaxone does not conform to molar fraction ratio as in Teva's patent. They also say they have 30% more tyrosine. Importantly, MNTA's generic copaxone also does not conform to molecular weight limitations (5-9kda) in Teva's patent(Note: this was the "unexpected finding" or novelty over the 550 patent). Infact, the specific range of molecular weight of MNTA's copaxone is concealed. But it does appear to be <22kda (the point where in-vivo tests -where some mouse died at 22kda). It is not clear to me how these differences will affect FDA approval and the generic's equivalence label. Process of making copaxone, MNTA definitely appears not to use Teva's process including "Test reaction".
Teva's response in 327 :
Test Reaction; "Even if the Court were to determine that Sandoz’s process does not literally meet the
“test reaction” limitation, then Sandoz’s process is equivalent to that limitation. See Boehringer
Ingelheim Vetmedica, Inc. v. Schering-Plough Corp., 320 F.3d 1339, 1351 (Fed. Cir. 2003)
(“Under the doctrine of equivalents, a claim limitation not literally met may be satisfied by an
element of the accused product if the differences between the two are ‘insubstantial’ to one of
ordinary skill in the art.”). The purpose of predetermining the time and temperature by test
reaction in the asserted claims is to ensure that the reaction provides copolymer-1 of a
predetermined molecular weight. Sandoz simply uses viscosity as a surrogate for time in o
rder

to ensure that it achieves the predetermined 7,300 daltons average molecular weight."
Molar ratio: No technical expert testimony provided on Molar ratio. Also, the older lot of Sandoz's copaxone had the same molar ratio. The new "briefing book" lot does not have it.
"If  Sandoz did not have a non-infringement argument based on the four lots in the
then a fortiori, it could not have a non-infringement argument with respect
to the Briefing Book lot. The existence of the Briefing Book therefore can only be viewed as a
pretext for Sandoz’s attempt to make a new non-infringement argument at the eleventh hour.
 
In any event, Sandoz’s new non-infringement argument, presented without any expert " 

Molecular weight: The evidence presented by Plaintiffs at trial was directed to the issue
of whether Sandoz’s product infringed the claims as construed by the court. Sandoz does not
dispute in its FOF/COL that its product meets the “average molecular weight” limitations under
the Court’s construction. Since the Court rejected Sandoz’s supplemental claim construction before trial, the weight average molecular weight (“Mw”) of Sandoz’s product is irrelevant to the infringement inquiry, and Plaintiffs were not required to offer any proof as to the Mw of Sandoz’s product in order to prove infringement

 For the reasons stated above, the Court should deny Sandoz’s attempt to reargue claim
construction and should not restrict the construction of “average molecular weight” to
copolymer-1 with Mw less than 10 kDa.


Inequitable conduct - Teva, apparently did not disclose "April 1994 data table" in-vivo data b/w molecular weight 9kda & 22kda to the PTO when they filed for the patent in May 1994. This data was actually non-toxic in the in-vivo mouse test.Instead they provided to PTO "inaccurate/unreliable" RBL test & an arbitrary cut-off(30% and 50% can yield different correlation to toxicity) which made to show the PTO that there was toxicity beyond 9kda. Teva had internally discussed the problems with using RBL test as measure for toxicity for years. The patents in suit would not have been issued (due to prior art, patent 550 talks molecular weight up to 22kda) if the examiner had the data that showed the 9kda-22kda was not toxic.This data was withheld from the PTO.
Teva's response in 327 : No technical expert testimony provided to indicate if the above was material to patentabality
Doc.
No.
Dates Description
327
Filed & Entered:  11/16/2011
Response
Docket Text: RESPONSE in Opposition to Defendants' Proposed Findings of Fact and Conclusions of Law (Redacted). Document filed by Teva Neuroscience, Inc., Teva Pharmaceutical Industries Ltd., Teva Pharmaceuticals USA, Inc., Yeda Research and Development Co. Ltd.. (Hashmall, David)
328
Filed & Entered:  11/16/2011
Reply
Docket Text: REPLY to Defendants' Proposed Findings of Fact and Conclusions of Law (Redacted). Document filed by Teva Neuroscience, Inc., Teva Pharmaceutical Industries Ltd., Teva Pharmaceuticals USA, Inc., Yeda Research and Development Co. Ltd.. (Hashmall, David)
324
Filed & Entered:  11/15/2011
Proposed Findings of Fact
Docket Text: PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW. Document filed by Momenta Pharmaceuticals, Inc., Sandoz Inc..Associated Cases: 1:08-cv-07611-BSJ -AJP, 1:09-cv-08824-BSJ(Doyle, David)
325
Filed & Entered:  11/15/2011
Response
Docket Text: RESPONSE to Plaintiffs' Proposed Findings of Fact and Conclusions of Law (redacted). Document filed by Momenta Pharmaceuticals, Inc., Sandoz, Inc.. Filed In Associated Cases: 1:08-cv-07611-BSJ -AJP, 1:09-cv-08824-BSJ(Doyle, David)
326
Filed & Entered:  11/15/2011
Reply
Docket Text: REPLY to Plaintiffs' Opposition to Sandoz, Inc. and Momenta Pharmaceuticals, Inc.'s Proposed Findings of Fact and Conclusions of Law (redacted). Document filed by Momenta Pharmaceuticals, Inc., Sandoz, Inc.. Filed In Associated Cases: 1:08-cv-07611-BSJ -AJP, 1:09-cv-08824-BSJ(Doyle, David)
322
Filed & Entered:  11/14/2011
Response
Docket Text: RESPONSE to Plaintiffs' Proposed Findings of Fact and Conclusions of Law (redacted). Document filed by Mylan Inc., Mylan Pharmaceuticals Inc., Natco Pharma Ltd.. Filed In Associated Cases: 1:08-cv-07611-BSJ -AJP, 1:09-cv-08824-BSJ(Solano, Ricardo)
323
Filed & Entered:  11/14/2011
Reply
Docket Text: REPLY in Support of Post-Trial Findings of Facts and Conclusion

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Saturday, November 19, 2011

AMRN - IP on Pure EPA in CV/other area

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Amarin
Granted patents(listed under Laxdale which Amarin acquired)  Link
Pending patent applications Link

Mochida
Granted patents Link
Pending patent applications (note some are amendments to granted patents) Link

Misc owners
Aoki et al - Claims combo therapy with statin for additional TG reduction. Important IP (Nissan Chemical ) Link

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AMR101 Exclusivity

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NCE Exclusivity period
 I would like to clarify on exclusivity period, if AMR101 gets NCE status(here was an informative article looking at the NCE status->Link). While NCE status guarantees 5 year exclusivity, the 30 month stay on Para iv ANDA's (most certainly, in my opinion, Amarin will list some Orange book patents) and an additional 6 month Pediatric exclusivity will take the exclusivity period to 8 years. Generally, the implied market exclusivity for NCE is 8 years(read comments section under) much greater than 5 years. So if one believes in AMR101 getting NCE status, the base valuation for AMR101 should be for a exclusive revenue period of 8 years, although in most cases the patents stretch this further out.  Patents are generally successful in extending exclusivity. Case in point is Abbott's Fibrate drugs. Abbott has managed to retain exclusivity on Fibrates for decades:  Link

Other notes on exclusivity:
1. Amarin has 7 patent applications that can be seen on USPTO site. However in a recent conf call it was mentioned only around half of the applications filed are actually published on the USPTO site. It is true that some of claims being prosecuted in marine patent are not even visible in USPTO site

2. Mochida has some interesting patent applications in the CV space on pure EPA, most of them related to findings in the large scale JELIS CV outcomes study. Note Amarin is well aware of Mochida's IP. In fact it turns out, Amarin out-licensed it's patents in CNS area for same EPA drug to Mochida some 5+ years back. So I wouldn't rule out some collaboration on the IP front here.

3. Marine indication(TG ≥500 mg/dL) - Even after reading the 2 rejection letters and the company's arguments, I continue to believe the company's arguments on LDL neutrality finding is strong and that specific claim has a fair chance of being granted. So if that claim is granted, that should serve to block generic entry until 2030 for this indication. I agree with the management that until a final decision by USPTO any arguments by the company in the public domain would be inappropriate and only serve to be counter-productive.

4. Anchor indication(TG ≥200 and <500mg/dL who are on statin) - Treating Triglycerides in this indication has prior art(Katayama et al).So it is unlikely that company would get that claim. Moreover treating EPA on top of Statin also has prior art (Aoki, et al - link). But lets look at other findings from Anchor trial: LDL-C (6.2%), apo B (9.3%), Lp-PLA2 (19%) and high-sensitivity C-reactive protein (hsCRP )(22%) above and beyond statin treatment . Some of these including LDL reduction seem new and non-obvious findings(Aoki patent also does not have any claim on LDL/apo B reduction above & beyond statin. I am not aware of other prior art?). There is a fair chance that LDL reduction & Apo B reduction would find it's way in the FDA label and would be blocking for generic competition seeking to obtain therapeutic equivalence rating. The other 2 emerging lipid markers hsCRP & lp-PLA2 are generally not seen in the label unless CV outcomes studies confirms its evidence.

My next write up would be on market value of AMR101 considering its launch in 2nd half of 2012 , the patent expiry for Lovaza, Lipitor, the recently published failed CV studies on Fibrates and Niaspan combo-therapy with Statin. This is one of the main reasons I continue to hold this stock.

And finally what was all the call option activity on Friday on March 12 $10 strike price (360K shares), and Jan 13 $10 strike price (157K shares)  Link

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Thursday, November 17, 2011

Hall of Fame or Shame - We'll know soon

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List of analysts that have been bullish recently on $AMRN. Of course lot of these are probably sell side research analysts and likely have some IB business with Amarin.

Jon LeCroy @ Hapoalim Securities
Thomas Wei @ Jeffries
Joseph Schwartz @ Leerink
Ritu Baral @ Canaccord Genuity
David Kestenbaum @ Morgan Joseph TriArtisan

David Kestenbaum @ Morgan Joseph TriArtisan  08/22/2011
he called a "blockbuster opportunity" and said will benefit from demand for triglyceride-lowering drugs. "We wouldn't be surprised if this company gets taken out by one of the larger pharma companies, and it's been proven to be pretty safe so far," Kestenbaum said.

Thomas Wei @ Jeffries 11/16/2011
 The release of additional study results "contained no significant surprises," Jefferies analyst Thomas Wei said in a research note. He added that he remains bullish on the drug's changes for regulatory approval, and a decision is expected by next year's third quarter.
http://www.businessweek.com/ap/financialnews/D9R1SF5O0.htm

Ritu Baral @ Canaccord Genuity 11/16/2011
"Reiterate rating and price target on commercial, partnership potential of AMR101. AMR101 is Amarin’s 96% EPA omega-3 drug for very high triglycerides (TG). AMRN submitted AMR101’s NDA for high TG in Q3/11. We think AMR101 will be approved mid-2012. We expect significant progress in IP and business development in H2/12." "Unclear how higher bioavailability will translate into TG/non--HDL--C reduction. While Epanova bioavailability data is compelling, experts noted they are still uncertain if it translates to greater triglyceride/non-HDL-C reduction."
http://www.streetinsider.com/Analyst+Comments/Canaccord+Genuity+Reiterates+a+Buy+on+Amarin+Corp+%28AMRN%29%3B+Epanova+Data+at+AHA+Supports+Higher+Bioavailability,+but+Benefit+to+Lipids+Still+Unclear/6950157.html

Joseph Schwartz @ Leerink, 04/18/2011, 11/14/2011
Leerink Swann, which places its peak sales estimates for the drug at $3.2 billion by 2021, believes that the efforts of a pharma partner could drive sales even higher than that estimate.
”Amarin represents an attractive takeover target for multiple large pharmaceutical companies facing a patent cliff,” Schwartz says. Amarin’s drug “has unique qualities that may result in a better product profile than other blockbuster drugs used to lower triglycerides,” Schwartz says in a recent note.

Amarin weakness today a buying opportunity, says LeerinkLeerink believes the non-final patent rejection posted on the USPTO website is part of the normal patent process and recommends using today's pullback in Amarin shares as a buying opportunity. Leerink thinks the website post could even be viewed positively since the communication came quickly, possibly suggesting the remaining issues are minor. The firm reiterates an Outperform rating on the stock. :theflyonthewall.
 
Amarin reiterated Outperform after call with patent specialists at Leerink
 Morgan Joseph TriArtisan 09/07/2011,11/08/2011
09:27 EDT Amarin AMR101 data positive, says Morgan Joseph
After data was presented for Amarin's treatment for very high triglycerides, Morgan Joseph believes the results added to confidence that the treatment can positively impact cardiac outcomes. The firm thinks competitive concerns surrounding the drug are overblown and it reiterates a Buy rating on Amarin. (AMRN)
Morgan Joseph believes that concerns about Amarin's patent for AMR101 have been "unwarranted and overblown." The firm continues to expect the NDA filing for AMR101 in the hypertriglyceridemia indication to be accepted in coming weeks and it maintains a Buy rating. :
http://beta.theflyonthewall.com/permalinks/entry.php/AMRNid1488985/AMRN-Amarin-AMR-data-positive--says-Morgan-Joseph 
http://www.theflyonthewall.com/permalinks/entry.php/AMRNid1521678/AMRN-Amarin-weakness-today-a-buying-opportunity-says-Leerink

Jon LeCroy @ Hapoalim Securities , 01/18/2011
LeCroy thinks AMR101, Amarin’s lead product, could have peak annual sales of $1 billion and values a potential acquisition of them at around $4 billion. By the way, they have Amarin rated as a ‘Buy’ with a $12 price target. 
(This is before Anchor results)
http://beta.theflyonthewall.com/permalinks/entry.php/AMRNid1488985/AMRN-Amarin-AMR-data-positive--says-Morgan-Joseph

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Sunday, November 13, 2011

Stocks DD Opines: Generic Copaxone valuation from MNTA - v1.0

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US Sales of Copaxone is currently running at $3 billion /year. With the entry of MNTA's copaxone there could be a pricing impact of 10%
 Assume,  MNTA garners market share of 50% just like they did in Lovenox
= 3 * 90% / 2 = $1.35 billion in Sandoz sales
Assume 0.68 is contractual operating profit - same as Lovenox
= $ 0.92 billion in contractual/partnership profit
= 50% of Contractual profit goes to Momenta = $460 million

After tax (35% rate) Earnings = $300m
with 60m outstanding shares

Assume it takes Mylan another 2 years  to re-adjust their ANDA and get FDA approval(It took Amphastar
1 year 3 months after MNTA's approval and keep in mind Amphastar had filed a good 2+ years before MNTA).

$300m/year for the 1st 2 years or $10 per share.

After Mylan launch say profit reduces by 1/3rd (conservative) due to market share loss and price erosion(Note: TEVA will likely launch AG with entry of 2nd generic). And say 6 years is reasonable period where earnings can sustain before tapering off (oral MS drugs like BG-12,Gilenya, more generic copaxone competition-there are currently only 2 known ANDAs:MNTA & Mylan)

6 * $100m = that's another $600m over next 6 years

Note: Unlike lovenox profit sharing agreement where partnership share changes with entry of new competition, copaxone agreement calls for 50% profit share irrespective of other generic competition.

In the above analysis , I have factored ZERO value for Momenta's patents blocking Mylan. I believe there is a high likelihood that Mylan's copaxone may need to be readjusted to get FDA approval(I see no characterization patents from Mylan or Nacto). I also believe that likelihood of Mylan finding another proxy signature for copaxone is low. Keep in mind if Mylan changes their ANDA and uses MNTA's patented proxy signature for quality control of Copaxone, they will be blocked by MNTA's patents. So IMHO the above is a conservative valuation of generic Copaxone from MNTA.

NPV of generic copaxone using above analysis assuming 10% discount rate 



Discount rate10%


# of Shares60m
years
earnings copaxone after tax EPS       NPV
20131300m5.005.00
20142300m5.004.55
20153100m1.671.38
20164100m1.671.25
20175100m1.671.14
20186100m1.671.03
20197100m1.670.94
20208100m1.670.86








Total$16.14 per share

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Saturday, November 12, 2011

Stocks DD Legal Disclaimer

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Tuesday, November 8, 2011

Stocks DD resources


Read,understand and consent to the blog's disclaimer here before proceeding

Below are some of the core resources I use for doing DD.

1. www.google.com (also other google tools like google scholar, etc)
2. news.google.com (recent developments on whatever relevant)
3. www.sec.gov, www.nasdaq.com (all/at least 2-3 years sec filings - of particular interest are the 10q,10k,13D/G,4, IR presentation)
4. pacer.gov for all court documents(unsealed), Bankruptcy court documents->http://www.kccllc.net/, http://www.distressed-debt-investing.com/p/bankruptcy-dockets.html, http://thediligentinvestor.blogspot.com/
5. uspto.gov (Patents), IP.com, www.patentdocs.org,http://www.fdalawblog.com/,http://www.fdalawyersblog.com/ - Patents & patent litigation 
6. fda.gov (Orange book patent listing, Labels/Indications, Approvals, NDA review docs, etc), clinicaltrials.gov
7. http://www.ots.treas.gov/ -> banks/thrift filings
8. www.wikipedia.org
9. Company's IR to get any information in public domain.
10. Follow company's last 2-3 years conference calls/Webcasts
11. Read other institutional analyst research reports I can access or any opinions on twitter, seeking alpha

12. Following public thesis on stock picks of institutional investors like Ackman, other concentrated funds, investor clubs, etc
13. Short ideas: www.sharesleuth.com, www.citronresearch.com, www.thestreetsweeper.org


my group to discuss/share stocks/dd ->
https://groups.google.com/group/value_stocks_picks?hl=en

my scribd account for document upload -> http://www.scribd.com/imhobutdydd

my twitter account -> https://twitter.com/#!/IMHO_DoYourDD

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