Saturday, July 27, 2013

Stocks DD Opines on MNTA: MNTA/Mylan wins Copaxone patent suit but we're not impressed with MNTA's value proposition

Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

This friday Momenta/Mylan won the generic Copaxone patent litigation suit, effectively allowing them to launch copaxone in May 2014, assuming FDA approval of their ANDA's -> Link

While we think this is positive for Momenta considering that Copaxone profit sharing agreement with Sandoz stays at 50% despite new generic competition(unlike Lovenox sharing), investors should weigh in the following facts. 

  1. The declining market share of Copaxone due to newer, more efficacious products including Tecfidera. We think the decline could be precipitous in the coming years as the new orals take foothold.  "The medical community considers Tecfidera effective and safe, on the basis of the clinical trials conducted in the past few years. It reduces attacks by 49 percent (compared with 20-30 percent for Copaxone), and its side effects are not severe."
  2. Prospect of generic competition including Mylan. Please remember it was shocking to see Momenta's characterization patents did NOT hold in the lovenox case and Amphastar launched its product. Momenta went all the way to the supreme court  in this case.  The safe harbor provisions allowed Amphastar to copy processes in Momenta's lovenox characterization even during commercial manufacturing. This judgment , in our opinion, was pivotal to Momenta's valuation and quashed Momenta's perceived competitive advantage as a generic maker of complex products with IP to block further generic competition. While momenta spends years and millions of R&D dollars to get its 2 minutes of fame as being the First generic by making remarkable strides in characterization for complex molecules, in some sense, shareholders of Momenta are subsidizing the approval path for the  future generic competitors that piggyback on MNTA's characterization technology/process (thanks to the supreme court verdict) that is largely put on public domain by FDA and get FDA approval subsequently in a few months/years. So we are inclined to speculate, that at best, Mylan could be a year or two away behind Momenta in its ANDA approval and Momenta could enjoy sole generic status for this very short period.
  3. Momenta for 2013 projected that its net cash usage will average approximately $20 to $24m/quarter. As of March 31st, 2013 had $324m in cash.
  4. Momenta's market cap is already $880m
  5. The 1st drug in the Biologics program is at least 5-7 years away from FDA approval. At this point we assign no meaningful value to this program.
So while we hail Momenta's pioneering characterization technology for complex generics, we believe it has so far not proven  a big competitive advantage, except to put Momenta ahead of generic competition by a few months/years. Hence, given that Momenta trades at $880m market cap, we are inclined to believe there is no significant upside to MNTA stock price.

No comments:

Post a Comment