MNTA Key Points:
· Central Tenet To Our Investment Valuation Has Changed: M-enoxaparin royalties will be lower than what we had estimated (17%), and lower than St. estimates of between 12-20%. During investor meetings with management late last week, we confirmed M-enoxaparin royalties will start in the high single digits and will increase to mid-teens as sales increase. While we do not know the sales threshold for increasing royalty rates, investors should conservatively assume the lowest rate because of potential competition from multiple generics.
· M-Enoxaparin Approval Still Expected: We continue to remain confident of M-enoxaparin’s approval in 1H 2010, and management reiterated that approval was still possible this year. Because of the lower royalty rate, we believe share movement on approval (and in conjunction with approval of Teva’s generic) may be muted.
· Markman Hearing Probably Not In December: The Markman hearing for Copaxone litigation, which has been anticipated for December, has not been scheduled yet and may occur in January.
Conclusion:
Upon potential M-enoxaparin approval in 1H 2010 we believe upside from the binary event is limited based on a 9% royalty rate, and therefore lower our rating to Neutral from Buy. Upside beyond our new price target of $12 depend on sole M-enoxaparin approval (20% odds), a positive ruling from Markman (hard to call), and M-118 partnership (probably a 2H 2010 event).
