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SNY 3Q - Worldwide Lovenox Sales Down 26%($210MM USD)
Worldwide Lovenox Sales Down 26% to 589 Million Euro's
(Mpower Note: Lovenox sales down - from $1.02 billion USD to $810 million USD -- i.e. lovenox sales down ~$210 million USD)
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Thursday October 28, 2010 12:35:06 PM GMT
By Caroline Jacobs
PARIS, Oct 28 (Reuters) - Sanofi-Aventis reiterated its hostile $18.5 billion offer for Genzyme presented good value as better than expected quarterly earnings allowed the French drugmaker to lift its target for the year.
Genzyme executives last week began a quest to show the U.S. biotech group is worth more than the $69 a share Sanofi has offered, saying based on their new 2011 earnings forecast its value could be as much as $89 a share.
But Sanofi-Aventis Chief Executive Chris Viehbacher said on Thursday he didn't buy into what he called Genzyme's "rosy" forecasts, saying Sanofi would stay "patient and disciplined", would keep all options open and still preferred to sit down with Genzyme to discuss its value.
"Some of it (the Genzyme presentations) confirmed our assumptions ... and some of it seems quite unrealistic. The bottom line is, we didn't hear anything of substance that would cause us to change our $69 per share offer," Viehbacher said.
"While it is encouraging to see the company is making progress on some fronts, as expected, we ... think some of Genzyme's financial targets ignore the realities of the market and the company's current situation," he told a conference call.
He referred to Genzyme's recovery from a manufacturing crisis that had led to the shortage of two key drugs and earlier this year dogged its shares, but also said the company had a track record of missing its financial forecasts.
Genzyme's rare diseases expertise would add a new growth area for Sanofi, accelerate the rebuilding of its development pipeline, boost its U.S. presence and steer it through to 2013 when several patents on key drugs expire.
NEW GOAL
Still, tight cost control and a good performance by growth platforms allowed Sanofi to raise its guidance for the year. It now expects earnings per share (excluding amortisation and certain one-off items) to grow 0 to 2 percent at constant exchange rates this year, instead of its earlier forecast of a drop of as much as 4 percent.
The new goal takes into account generic competition in the United States for sleeping pill Ambien CR, as well as the possible launch of cheaper copies of cancer drug Taxotere and further erosion of sales of bloodthinner Lovenox, Sanofi said.
Third-quarter earnings beat Reuters consensus on all fronts, helped by an increasing contribution from its growth platforms including emerging markets, vaccines and diabetes, as well as a favourable exchange rate.
Net income excluding amortization and one-offs rose 8.9 percent to 2.47 billion euros ($3.4 billion), but fell 2.2 percent at constant exchange rates, compared with an average outcome of a Reuters poll for 2.31 billion.
Sales rose 5.7 percent to 7.82 billion euros against a forecast 7.63 billion, despite rising generic competition.
Lovenox, Sanofi's second-biggest selling drug last year, became the latest to face generics. Bloodthinner Plavix and cancer drug Eloxatin already face limited generic rivalry.
Lovenox sales fell 26 percent at constant currencies to 589 million euros after Sandoz's and Momenta's cheaper biosimilars exceeded expectations in the third quarter.
Next in line facing copycats is Taxotere, which targets several cancer forms like lung and prostate cancer. Hospira expects to launch an injectable generic this year. In all, copycat drugs will erode about a third of Sanofi's 2008 sales base until 2013. Adapting to that, Sanofi has steered to growth areas like emerging markets, diabetes and vaccines, has announced 1,700 U.S. job cuts and set its sights on Genzyme.
Sanofi expected cost savings this year to exceed 1.2 billion euros at constant exchange rates from its 2008 cost base.
Analysts and Genzyme investors polled in August showed expectations for a deal to be done at an average $78 a share. (Editing by Lincoln Feast and David Holmes) ($1=.7261 Euro)
Correction - It's spelled "Lupenox" which is even closer to "Lovenox" ... :)
Trademark Infringement - Likelihood of Confusion Factors
* the similarity in the overall impression created by the two marks (including the marks' look, phonetic similarities, and underlying meanings);
* the similarities of the goods and services involved (including an examination of the marketing channels for the goods);
* the strength of the plaintiff's mark;
* any evidence of actual confusion by consumers;
* the intent of the defendant in adopting its mark;
* the physical proximity of the goods in the retail marketplace;
* the degree of care likely to be exercised by the consumer; and
* the likelihood of expansion of the product lines.
Wow. Very interesting. This really changes the dynamics of the situation. 8 million shares short with the expectation that a Indian Lovenox knock-off will be approved any-day now. Whoops .... Can't wait to see Tim Anderson (Sanford Bernstein) with some major pie in his face.
Note: Might I suggest that Sanofi file a lawsuit against Italfarmaco for Trademark Infringement. ("Lovenox" vs. "Luponex" ... likelihood of confusion if you ask me).
SI levels are getting pretty crazy. 8 million shares short. They are shorting an additional million shares @ 14$... crazy.
Normally, I would agree with you, but in light of NVS earnings (publicly available and with stellar mL sales #'s), i believe something else is going on. I'm not a conspiracy theorist, but something doesn't add up.
Not sure what significance, if any, was subscribed by the market to the COO leaving. If anything, it could signal a belief by key managers that the co. will soon be acquired. (that should make the stock move higher, not lower). Interesting...
MNTA weakness today -- strange. Gets stranger and stranger everyday.
Biomaven a good example of why money is not always the only factor in developing a technology or meeting an end-point is all around us. Look at the example of R&D $'s Microsoft pumped into search technology before Google. They must have outspent Google (who was at one time a puny start-up) immensely, but were unable (and are still unable) to deliver a similarly effective product. There are many examples of this (Myspace vs. Facebook), etc...
Money is usually necessary, but not necessarily sufficient... Wheeler even alluded to this (cautiously) on the recent CC when he came out and said he "hopes" that the technology differentiation will give MNTA the sole generic "for many years to come" (he of course can't give a 100% guarantee, but he did seem awfully confident)
Biomaven,
If that were true Watson Labs and their partner Amphastar would have invested the funds to obtain approval. Technology differentiation is not always about $'s, it's also about talent and innovation. (money can help recruit talent, but innovation ....). TEVA may not be able to get there without significantly more time, or they may decide they have a major technological gap and no idea how to proceed to overcome the gap.
Great post. The situation is very odd.
Ironically, 3-5 years ago, the analysts couldn't get enough of MNTA. It traded in the 30's on the mere "prospect" of mL approval.
Now that we have approval (and the co. is printing money), the stock is trading below pre-approval levels. Strange...
Irrespective of the potential margin (45% - 70%), one thing is for sure. Earnings are going to blow away the current analyst EPS targets. Range of (+50 cents - +75 cents EPS - by my calculation) vs. expectations of a 5 cent per share loss.
Zipjets numbers are very much in-line with my own.
By my calculation (extrapolating from NVS quarterly earnings)MNTA will pay NVS ~$44 million in Q3 development reimbursement. Our best guess is that the total MNTA owes to NVS is ~$70 million reimbursement, that leaves ~$26 million that will need to be paid by MNTA to NVS in Q4. That being said....
Q3 2010
Total MNTA/NVS Lovenox Revenue = 292 million
COGS (40%) = ~$116 million
Net Combined Income = $176 million
MNTA share = ~$88 million
Reimbursement to NVS (Capped @ 50% of income) = $44 million
Revenue = $44 million (mL Revenue) + 5 million (Milestone Payment)
Net Income to MNTA = $49 million - 18 million (burn) = $31 million
EPS Q3 = ~.65 cents per share.
Q4 - 2010
Total MNTA/NVS Lovenox Revenue = 220 million*
COGS (40%) = ~$88 million
Net Combined Income = $132 million
MNTA share = ~$66 million
Reimbursement to NVS (Final Payoff) = $26 million
Net Income to MNTA = $40 million - 15 million (burn)** = $25 million
EPS Q4 2010 = ~.52 cents per share.
Q1 - 2011
Total MNTA/NVS Lovenox Revenue = 220 million
COGS (40%) = ~$88 million
Net Combined Income = $132 million
MNTA share = ~$66 million
Net Income to MNTA = $66 million - 15 million (burn) = $51 million
EPS Q1 2011 = 1.06 per share
Notes
* I derive 220M as the quarterly lovenox sales revenue based on the channel stocking being offset by the 69 days of sales in the quarter
** I've adjusted the quarterly cash burn for Q42010/Q12011 a conservative best estimate. Slightly less than in Q32010, assuming operations will be further streamlined post-launch
Dew, why play this game... it is rumored in many circles that Lonza Group LTD (Basel, Switzerland) is the TEVA partner.
LOL.. shorts are working overtime today... they shall lose their group soon.
Mnta: great action. Big battle here.
Certainly does not remove the TEVA overhang, but it is a catalyst that may allow the stock to "shake off" the threat. It should also be noted that we are quickly approaching November without TEVA approval. TEVA had asserted an expectation that they would receive fda approval for tL by the end of August -- we are ~3 months and counting, with no teva news. At some point, market sentiment will turn in favor of MNTA and against TEVA. (Question is when)
The earnings estimates are way off. Average analyst estimates were that mnta would lose 5 cent per share this quarter, high estimate that mnta would earn 5 cent per share. Based on our discussions here, I estimate 66 cents - 1.20 cents in earnings this quarter.
MNTA: It will be interesting to see how the market reacts to this news vis-a-vis MNTA. In light of the signifcantly erroneous analyst estimates, I expect some decent move higher. If the stock fails to move at this point, boy ...
To what extent does the "channel stuffing" account for some of the revenue recognition? In other words, can we expect subsequent quarterly sales for mL to correct to the downside?
Thank you for breaking it out. Analyst estimates (on average) were that MNTA would lose 5 cents per share this quarter (interestingly, the high estimate had MNTA making 5 cents per share this quarter).
Clearly the analysts had this all wrong.
That being said, there is some disparity between your profit expectations and that of Dew. Assuming MNTA's share of Lovenox sales = $40 million and that they receive the one time $5 million in royalty payments, and continue to burn 13 million in burn, quarterly profit would be closer to $32 million (66 cents per share). (40+5-13 = 32) Very hefty! Using your PE multiplier of 15, you'd get closer to $40 per share. Add copaxone and m118 in there, and you do get pretty close to $70.
Interesting. Any thoughts on the likely range for pre-tax operating profit for Lovenox? To what extent, is it likely, this will exceed 60%?
Holy smokes. That blows analyst #'s out of the water. MNTA revenues should be quite high as a result.
MNTA has broken out of its 200dma of 14.52 ... lets see if she can move up tomorrow on strong volume through the 50dma. if she can, we might get a decent run.
Ranbaxy?
Weizmann is not properly 'tooled' to assist. The "technology" required for the level of complex molecule characterization is far more sophisticated than anything Weizmann can provide.
MNTA: Something big must be going on...
MNTA is up 10 cents (0.70%) on low volume. Wow. Haven't seen this kind of bullish action in the stock in a long time.
The puts are owned by the TEVA "Locust" short fund :) .... or maybe the Novartis "Buy-her-on-the-cheap" short fund. Or could it be the Sanofi "vengeful" fund. HAHA.
Indeed. It has been 3 months+ since approval, TEVA has been caught explicitly changing their story on the "imminent" approval delay
(FIRSTS excuse - we submitted our immunogenecity data 1 month after MNTA, so we expect a commensurate 1 month approval delay, SECOND excuse - we are confident we met all of the FDA's requirements as outlined in their response to the citizen petition and think its just a matter of time before the FDA acts, THIRD excuse - we haven't heard anything from the FDA on anything that needs to be done on our end, so we expect approval very soon, FOURTH excuse - we won't comment on the timeline for approval beyond what we have said previously).
You know the story in early 2011, right? TEVA will just keep saying they expect approval imminently, and without strong leadership from MNTA management -- stressing the edge they have over competitors, the market will keep believing TEVA.
All of the above!
Indeed! There is the rub! (precisely the point i am trying to make)
If MNTA's share price would have stayed in the mid-high twenties (after approval), i doubt folks would be jumping for joy to tender their shares. This is a serious risk to shareholders who have been following MNTA and understand the true long-term potential of the company.
Yes, but would hate to see it acquired for $30-$35, when it was trading at 26.5 on "its own" ... as Yoda would say ... dangerous scenario we have in our midst.
Please refer to my earlier post on why the price per share is a net negative for shareholders. I am accumulating, but continue to have concerns.
With respect to how well management is communicating -- practically speaking, managements communication has failed (thus far) -- the stock price is proof of that.
Lets hope so. Pretty sad that the stock has taken such a huge hit (on no meaningful news). Think about it this way ... a 100% rise in PPS, would only put us @ the ~52 week high. Scary and sad at the same time!
Controversial Topic: MNTA Management Not Doing Enough To Educate Market about Company Accomplishments?
Until today, I have refrained from bringing up this subject, but I have become increasingly concerned about Momenta's strategy (? - if one exists) in managing market perceptions about the co. post mL-approval. Simply put, the market is severely undervaluing Momenta, and management has done little (outside of participation in a few healthcare conferences) to rectify this flawed perception. In essence, i think MNTA has a strong story to tell (and FDA's validation of their technology to accompany the story), but management is unable to effectively communicate the story to the investing public. Moreover, with insiders selling massive amounts of stock post-approval (370k shares -- approximately 7.5 million dollars worth), management has not only not helped correct market perceptions -- they are actually feeding into speculative negativity.
While I believe that management should not look to the PPS (on a daily or weekly basis) to make business decisions, I do believe managements ambivalence to the recent price decline in the poses a danger to shareholders and that shareholders should express their dissatisfaction. Why?
For one, in the event that the company needs to raise money (e.g. To fund the M118 program), dilution to existing shareholders would be far more severe at current levels than at the 52-week high. Secondly, the threat of a lowball takeover increases significantly, and could compromise those of us who recognize the true long-term potential of the company. Third, it was Craig Wheeler on the post-approval conference call, celebrating the accomplishment, and thanking shareholders for sticking with the company over the last few years -- but I ask Craig, what has he done to communicate this success and have it reflected in the valuation of the company.
What an amazing scenario: MNTA trading @ 13.70 nearly four months after receiving sole generic approval for Lovenox, in the midst of a strong end-of-year market rally.
Management needs to step up and provide some leadership. One recent win for shareholders -- management stop dumping their shares on the open market in late September -- painful to watch them sell so many shares since approval in July. Have they ever considered buying a share on the open market -- that would really be the day! Without strong leadership (good communication skills) , MNTA will have a heck of a time refuting the bear case for many years to come. Lets hope that the partnership helps!
5 years is insane. Why not 2 or 3? Talk about hedging. Some board members are likely to be dead (of old age) by the time DD can collect. LOL....
The price action is fantastic to watch. Again, I refer to my earlier post - the way this market is behaving ... SQNM will soon overtake MNTA in terms of market capitalization. What a joke!
SQNM is surging. Will soon overtake MNTA in market cap. Amazing stuff!!!
No. Copaxone approval is not a limiting factor to "ink deals for other biologics." Sandoz/NVS seems to think MNTA is worth something....
"George says that partner Momenta Pharmaceuticals technical abilities in characterizing complex sugar molecules was key to getting the approval. Momenta’s technology “is highly differentiated and certainly played a significant role.”" (see http://blogs.forbes.com/sciencebiz/2010/07/26/novartis-honcho-golden-age-of-generic-biotech-drugs-is-coming/)
It's all about the terms of the partnership for M118. Wheeler has indicated that "M118 partnership discussions" pre-mL approval were "frustrating" (i was a little shocked he used that word) ...
He expected the dynamics of those partnerships discussions would significantly change now that $$$ are flowing from mL sales. The cash-flow leverage from mL sales provides MNTA the opportunity to be creative in their approach to partnering M118.
I suspect that when it gets partnered (which i do believe will happen), it will be a sweet deal for MNTA.