Biotech Values

[DewDiligence]

Re: More musings on DB’s MNTA report

She [DB analyst Robyn Karnauskas] does assign a $9 NPV to M-118, plus $1 cash, plus (a generous) $2 to pipeline, plus $2 NOL. The NPV of Copaxone is variable - she links it to different scenarios, but overall it is $4. She then subtracts a variable amount between $9 and $14 for the costs of the base business. Thus, [she is] missing the NPV offset for the cost to run the business. In her "no generics" Scenario 1, she assumes no contribution from Copaxone or M-Enox, and hence a $5 fair value. In the "several generics" scenario she favors, she assigns $9 to M-Enox and $4 to Copaxone, ending up with a $18 fair value.

What I do find weird about her analysis is the way she has linked what happens with Lovenox and Copaxone. I grant that if the FDA rejects M-Enoxaparin, then the NPV for Copaxone would also be reduced. But it makes no sense to me to reduce the NPV for Copaxone if there are multiple Lovenox generics - no way there will be multiple Copaxone generics.

Thanks, Peter. I needlessly confused matters in my prior post by citing things Karnauskas said on the CC she hosted for investors Oct 1 to present and solicit feedback on the MNTA report she authored. In some case, what Karnauskas said on the CC differed from what she wrote in the report.

My main objection to Karnauskas’ statements on the CC pertains to her predicting that MNTA will trade down to $5-6 following an approval of multiple Lovenox generics even though she asserts that the stock would be worth $18 under such a scenario. She explains this apparent contradiction by saying that investors “need to become educated” about the value of the M118 and Copaxone programs and hence the stock would slowly rise following a sharp sell-off (in the multiple-generic case).

I think such analysis is dumb. It sounds to me as though Karnauskas is setting herself up to look right whether the stock goes down or the stock goes up! I would have had more respect for her if she had simply said that the multiple-generic case is difficult to handicap and she didn’t know how the market would react.

(Moreover, I find it curious for an analyst who is not fully up to speed on MNTA’s technology—see the second paragraph of #msg-42254935—to assert that investors “need to become educated” about MNTA’s non-Lovenox programs.)

The other complaint I have about her analysis is I think she overestimates the likelihood of multiple generics.

I concur. From a bottom-line standpoint, this is surely Karnauskas’ biggest error.

The issue here is that it is incumbent on a would-be generic to prove that the other components are not clinically meaningful if they cannot completely characterize the compound and show they are the same. Just look at Premarin for a good precedent. If "so little is known about the other activities" of the drug, that, to my mind is a good reason for the FDA to be cautious here.

Agree on all counts. To complete the picture for the benefit of other readers, the word cautious in your discussion means a higher bar for approval of generic Lovenox based on full characterization; this, of course, is bullish for MNTA as long as the bar is not unduly high :- )

Regards, Dew