Biotech Values

[DewDiligence]

MNTA’s Valuation in the Single-Generic Lovenox Scenarios

[Updated for the share-count increase from the latest financing.
My bottom-line figure is a range of $55-87/sh, as detailed below.]


There’s a wide array of short-term and medium-term outcomes vis-à-vis MNTA’s generic-Lovenox program as shown in the table in #msg-41414776. Moreover, the single-generic outcome (where Teva and Amphastar do not obtain FDA approval for their respective ANDA’s) comprises an array of subordinate outcomes that depend on:

• Pricing of the branded and generic products.

• Market share of the branded and generic products.

• Whether Sanofi launches an authorized generic. (The subcase with an AG launch must be analyzed as part of the “single generic” case, although there would technically be two generic products in the market. The reason is that the NVS-MNTA Lovenox partnership is considerably more lucrative to MNTA when the only other generic in the market is an AG than it is when there are non-AG generics.)

The difficulty of handicapping all these variables makes it problematic to be precise about MNTA’s value stemming from Lovenox in the single-generic case. Therefore, rather than arguing for a specific outcome, my approach to assessing the economics of the single-generic case is to ascertain the upper and lower bounds of the range of outcomes in terms of the net present value (NPV) to MNTA.

The calculation of the upper bound is given in paragraphs 1-11 of #msg-37875396, which yields a Lovenox NPV of $4B. Based on 49.1M diluted shares for valuation purposes (#msg-42163809), the $4B NPV translates into a per-share NPV of 4B/49.1M, about $81. This is the upper bound of the valuation range for the Lovenox component of MNTA’s value in the single-generic case.

Now, let’s address the lower bound of the valuation range for the Lovenox component of MNTA’s value in the single-generic case. Considering the array of possible outcomes with respect to pricing, market share, and whether Sanofi launches an AG (the three bulleted items above), I estimate that the worst-case single-generic scenario would incur a 40% NPV haircut relative to the best-case scenario (#msg-33892399). To my knowledge, no one on this board has argued for an even larger discount than 40% relative to the best-case scenario, so I presume that the 40% figure is not out of line. Notably, using a different method based on different assumptions, dewophile arrived at almost exactly the same result (#msg-37877823, #msg-37882121).

A 40% discount relative to the $4B Lovenox NPV in the best-case scenario gives an NPV of $2.4B; dividing this by 49.1M shares gives a per-share NPV of about $49, which is the lower bound of the valuation range for the Lovenox component of MNTA’s value in the single-generic case.

Thus, the per-share NPV range for the Lovenox component of MNTA’s value in the single-generic case is $49-81.*

Now we need to add in the components of MNTA’s value that are not attributable to the Lovenox program. In paragraph 13 of #msg-37875396, I conservatively valued the sum of the M118, Copaxone, M402, and FoB programs, and all of the attendant IP at $200M. (This is perhaps unduly conservative!) Adding in the $108M of cash on hand after the latest financing (#msg-41810407) and dividing by 49.1M diluted shares gives a per-share NPV of about $6 for the non-Lovenox components of MNTA’s value.

Combining the Lovenox and non-Lovenox components of MNTA’s value calculated above yields a per-share NPV range of $55-87. In summary, $55-87 is my estimate for MNTA’s fair value if the FDA approves the generic-Lovenox application from MNTA/NVS and does not approve the applications from Teva or Amphastar.

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*Assigning probabilities to the various outcomes within this range is a whole other exercise, and such an exercise would likely produce wide differences of opinion among the readers of this board.