WEDBUSH on MNTA
Momenta Pharmaceuticals (MNTA)
Copaxone Litigation Update: Court Denies Motion to AddAdditional Patents; Claim Construction Proceeding.
• Court denies latest TEVA motion. On November 9, Teva Pharmaceuticals (TEVA-Not
Rated) moved to have five additional patents added to its ongoing infringement claim
against Momenta and Sandoz. On November 30, 2009, the Court granted this order, only
to withdraw the order on the following day. In the revised order, the Court cited the undue
time constraints that would be placed on the parties if these patents were added, in light of
the impending completion of fact discovery. The Court’s refusal to allow TEVA to add the
five additional patents is a victory for Momenta and its partner Sandoz (generics division
of Novartis: NVS- Not Rated) in that it will likely allow the current litigation to proceed more
quickly to resolution and provide for a less complicated jury trial. However, TEVA may be
able to bring a separate lawsuit against Sandoz / Momenta in the future, alleging
infringement of these patents. That said, such a lawsuit would likely (but not necessarily)
be mooted by the outcome of the current litigation.
• Current focus on M-Enoxaparin and potential approval. While the outcome of the
TEVA lawsuit is certainly important to the future of MNTA, we note that M-Enoxaparin
approval remains the primary driver of MNTA shares in the near term. On that front, we
continue to await potential action from the FDA, although the timing of a government
decision is difficult to predict.
• Next milestones may be dramatic, but their timing is hard to pin down. We expect
potential approval for M-Enoxaparin in the next 6 months, as well as potential enactment
of a follow-on biologics legislation scheme next year, both of which could serve as major
catalysts for MNTA’s stock price. More moderate catalysts could include a M118
partnership, as well as progress in the Copaxone lawsuit.
• Our fair value of $16 per share suggests that Momenta holds the potential to
increase 70% in the near-term. Our fair value is calculated using a sum-of-parts
analysis, applying a 30% annual discount to our peak annual sales estimate for MEnoxaparin
in DVT and ACS, M356 in Relapse-Remitting MS, and M118 in ACS,
incorporating a 1-10 multiple for each based on stage of clinical risk. We reiterate our
OUTPERFORM rating, but caution that MNTA is best suited for relatively patient
investors, given the indefinite timing of the next major catalysts.
• Risks to the attainment of our fair value include risks that: Momenta’s product
candidates obtain disappointing clinical trial results and or fail to obtain regulatory
approval in a timely fashion; physician prescribers are not be impressed with the
products’ clinical profiles; Sandoz or another partner fails to effectively commercialize
Momenta’s drug candidates; third-party patents prevent the timely commercialization;
superior clinical results are obtained by a third-party competitor.
CLAIM CONSTRUCTION PROCEEDING
Litigation is proceeding steadily with the near closure of fact discovery (scheduled for December 31, 2009). Moreover, claim
construction briefing is now complete, although most of the papers are not readily available and/or were filed under seal. In review,
claim construction is a critical step in the patent litigation process where the court interprets the precise meaning of words used in the
Duane Nash, MD JD MBA (415) 263-6650 Momenta Pharmaceuticals | 3
patent claims-at-issue. For instance, if a patent were to claim “a vehicle with four wheels and an engine,” the court would use the
claim construction process to decide precisely what the term “wheel” means. Does it have to be round or could it be octagonal?
Does it need to be made of rubber? Must it be inflatable? As one can readily appreciate, the court’s interpretation of the word
“wheel” answers much of the question of whether or not a given defendant happens to infringe the claim above. For example, if the
court says that a wheel must be round, made of rubber and inflatable, a defendant whose vehicle contains wheel-like structures
made of wood would not infringe. In addition, claim construction can also be used to invalidate a patent by showing that the words
used in the claim are nonsensical, internally inconsistent, or would prevent the claim from fulfilling other requirements of patentability
such as novelty and non-obviousness.
At this point, we only have available Sandoz / Momenta’s opening claim construction brief. As a result, it is difficult to assess the
strength of the parties’ positions considering that we only know one side’s arguments. That said, we do find these arguments
compelling, and give them a greater-than-not likelihood of ultimately succeeding (either at claim construction or possibly at summary
judgment). Although the parties are disputing 38 separate claim terms, Sandoz / Momenta focus the majority of their arguments on
only two terms, “molecular weight” and “copolymer-1”, each of which are present in all asserted claims. As a result, if the court
adopts Sandoz / Momenta’s favored construction of either of these terms, Sandoz / Momenta win the entire lawsuit.
We find Sandoz / Momenta’s arguments with respect to both terms compelling. In brief, they point out that TEVA apparently made
inconsistent statements to the patent office with respect to the term “molecular weight,” and further provided additional limitations on
the term “copolymer-1” which appear to exclude Sandoz / Momenta’s formulation of copaxone. These arguments are straightforward,
and rely on reasonable interpretations of well-accepted caselaw. Moreover, comparable arguments have already prevented
the grant of analogous TEVA-licensed patents in India, employing similar but not-identical jurisprudence. Despite the limited
evidence at hand, we believe these arguments have a good chance of winning in the United States too. That said, we remain
somewhat circumspect in light of the unavailability of TEVA’s counterarguments.
COURT’S REFUSAL TO ALLOW TEVA TO AMEND COMPLAINT
The four patents initially asserted against Sandoz / Momenta belong to a family of at least nine patents in total. In their
counterclaims, Sandoz / Momenta alleged the invalidity, unenforceability and non-infringement by Sandoz / Momenta of all nine
patents, even though TEVA had not yet alleged infringement of the remaining five.
During the discovery process, TEVA purports to have uncovered information suggesting that Sandoz / Momenta infringed the five
additional patents, and subsequently sought to amends its complaint to add these patents. On November 30, 2009, the Court
granted this order, only to withdraw the order on the following day. In the revised order, the Court cited the undue time constraints
that would be placed on the parties if the patents were added, in light of the impending completion of fact discovery.
The Court’s refusal to allow TEVA to add the five additional patents is a victory in that it will likely allow the current litigation to
proceed more quickly to resolution and provide for a less complicated jury trial. However, TEVA will likely be free to bring a separate
lawsuit against Sandoz / Momenta in the future, alleging infringement of these patents. That said, such a lawsuit would likely (but not
necessarily) be mooted by the outcome of the current litigation.
NEAR-TERM EVENTS
In the near-term, we expect to focus on claim construction and summary judgment. The court’s initial scheduling order states that a
claim construction hearing would likely be heard in December 2009. Although we do not see anything in the docket to suggest a
delay, we do note that the Court has the authority to impose a delay. Moreover, such a delay would not be uncommon around the
holiday season.
Once the hearing takes place, we expect a ruling within 2-8 weeks. As noted above, we believe that this ruling has a meaningful
chance of eliminating TEVA’s chances of winning (absent appeal). However, because some of the arguments that Sandoz /
Momenta suggest in their briefing tend to appear more frequently at summary judgment, the litigation may persist several additional
months even if Sandoz / Momenta win at claim construction. In that event, we would expect Sandoz / Momenta to file a summary
judgment motion shortly after the claim construction ruling is filed. Although the current schedule does not list a deadline for
summary judgment motions, we would expect such a filing to occur in the first half of 2010.
AI
