Biotech Values

[MTdinanM3]

MNTA - Wedbush raises tgt to $20 (from $16)

Momenta Pharmaceuticals (MNTA)
Q4:2009 Earnings; Raising Fair Value to $20 in Anticipation of
M-Enoxaparin Approval

•MNTA reported Q4:2009 earnings roughly in line with our estimates. MNTA reported
Q4:2009 revenues and EPS of $5.6 million and ($0.34), slightly above our estimates of
$4.8 million and ($0.38). MNTA ended FY:2009 with $95.7 million in cash and marketable
securities. We predict cash runway for at least 2 years and likely into profitability,
provided M-Enoxaparin approval is not unduly delayed by the FDA.
•Key focus on M-Enoxaparin approval scenarios. While we fully expect M-Enoxaparin to
be approved in the near-term (Q1 or early Q2), the approval of TEVA’s generic remains a
key uncertainty. Should both ANDAs be approved simultaneously, we calculate MNTA’s
fair value at $20 per share. We think there is considerable upside potential if MNTA is
approved alone due to the improved economics from its partner Sandoz. However, the
potential launch of an authorized generic provides further uncertainty here. Finally, we note
that the outcome of TEVA’s ANDA also has implications for M356 (generic Copaxone).
•Outcome in Copaxone lawsuit approaching. A motion seeking summary judgment for
invalidity of the Copaxone patents was filed by Sandoz/Momenta in late December.
Moreover, a Markman Hearing for the ongoing lawsuit between TEVA and
Sandoz/Momenta was held in late January, and Momenta recently guided that it expects a
ruling by the court in 60-90 days. However, we expect a ruling on the Markman Hearing
could occur in late February or early March, which should provide a strong indication of the
ultimate outcome of the trial. Finally, earlier this week, Momenta/Sandoz proactively
provided the court with additional details of their inequitable conduct arguments, although
many of these details were filed under seal.
•Our new fair value of $20 per share is calculated using a sum-of-parts analysis, applying
a 30% annual discount to our peak annual sales estimate for M-Enoxaparin 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. Our fair value has increased from $16 due to our
increased confidence in near-term M-Enoxaparin approval (we have increased our multiple
from 8x to 9x). We note that our estimate for M-Enoxaparin revenues assumes co-approval
with TEVA’s generic Lovenox; therefore we believe additional upside to our fair value exists
should MNTA receive sole approval. However, the amount of this additional upside would
depend on how long Sandoz/MNTA market the sole generic, an issue which is currently
difficult to handicap. We reiterate our OUTPERFORM rating.
•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.