Part 2 - Leerink Swann
MNTA INVESTMENT THESIS
We rate MNTA shares Outperform with a 12-month valuation of $16 per share. We believe that MNTA has a high likelihood of clearing both regulatory (FDA) and legal (patent) hurdles for its lead product candidates M-Enoxaparin (generic Lovenox) and M-356 (generic Copaxone). Close collaboration with senior FDA officials to solve the heparin contaminant crisis, which was published in leading medical journals, bodes well for MNTA's potential to be the first generic Enoxaparin approved by the FDA. The 180-day period of generic market exclusivity granted to competitor. Amphastar expired on April 2, 2009, allowing MNTA to launch M-Enoxaparin upon FDA approval.
Excerpts from Janet Woodcock's letter to TEVA
Below we have excerpted the most salient parts of Janet Woodcock's letter to TEVA, dated May 11, 2009, re: Docket No. FDA-2009-P-0555, since it is unusually detailed and provides a potential window into the FDA's review of the M356 (generic Copaxone) ANDA. We have used underlining to call your attention to sections that we deemed particularly important.
Page 4: These statutory provisions do not, however, describe the type or amount of information that an ANDA applicant must submit to demonstrate that the active ingredient in the generic drug product is the same as the active ingredient in the RLD, nor do these provisions describe the type or amount of information on which FDA may rely in determining whether the ANDA applicant has provided sufficient information to show that the active ingredient is the same. Accordingly,Congress recognized that FDA must have broad discretion with respect to the information the Agency may consider in making a finding on the "sameness" of an active ingredient.6
Page 4: In the preamble to the final rule implementing title I of the Hatch-Waxman Amendments,FDA specifically rejected the suggestion that the Agency adopt a requirement that active
ingredients "exhibit the same physical and chemical characteristics, that no additional residues or impurities can result from the different manufacture or synthesis process; and that the stereochemistry characteristics and solid state forms of the drug have not been altered."7 Instead,FDA adopted a more flexible approach, stating that it would "consider an active ingredient (in a generic drug productJ to be the same as that of the reference listed drug if it meets the same standards for identity. " 8 FDA further stated that, in most cases, the standards for identity are described in the USP, although the Agency might prescribe "additional standards that are material to the ingredient's sameness..."9
Page 4-5: Thus, as FDA's regulations and preamble reflect, FDA has broad discretion in determining whether an ANDA applicant has submitted sufficient information upon which the Agency can reasonably conclude that the generic drug product's active ingredient is the "same as" that of the RLD.
Page 6: You assert that to date (the date the Petition was filed) you have been unable to fully characterize the polypeptides in glatiramer acetate due to their number, structural complexity, and
the current limitations of analytical technologies (Petition at 3).
Page 9-10: As FDA's regulations and preamble reflect, and as the court in Serono ruled, we have broad discretion in determining whether an ANDA applicant has submitted sufficient information
upon which we can reasonably conclude that the generic drug product's active ingredient is the "same as" that ofthe RLD. A finding of sameness does not, however, necessitate a finding of "complete chemical identity." Thus, the Agency may consider other criteria to determine sameness,taking into account the complexity of the active ingredient. Any such determination would be highly specific to the active ingredient.20 For instance, given the complexity of Copaxone, we may require that any ANDA sponsor demonstrate active ingredient sameness through a multi-criteria test or series of tests, each criterion of which captures different aspects of the active ingredient's "sameness," and which together would provide overlapping evidence by which an ANDA applicant could demonstrate active ingredient sameness within the meaning of the Act and FDA regulations.
Page 10 footnote 20: Your descriptions of FDA's consideration of ANDAs for Premarin and menotropins (Pergonal) support the Agency's view that any finding of active ingredient sameness
must be based on relevant scientific information specific to each active ingredient. Neither the Premarin nor menotropins example is directly on point for the Agency's consideration of glatiramer
MOMENTA PHARMA, INC. May 13, 2010 2 acetate... Glatiramer acetate, in contrast, is synthetically manufactured and has its own complex,heterogeneous molecular strcture. It is reasonable and appropriate for the Agency to take into account the differences among these drugs, and to establish approaches to the approval of ANDAs that are specific to each active ingredient.
Page 11: As described in section I.B of this response, section 505(q)(l)(F) of the Act requires FDA to take final Agency action on the Petition within 180 days of submission. Therefore, we must take action on the Petition at this time. However, FDA has made no final determination with respect to whether to approve or not approvè any ANDA for a glatiramer acetate injection drug product.
Page 11-12: We do not interpret section 505(q) to require that the Agency render a final Agency decision within 180 days on specific requirements for approval of any ANDA for a glatiramer
acetate injection drug product when a decision on the approvability of any such application has not yet been made. We therefore are denying your requests without comment on the specific requirements for approval of any ANDA for a glatiramer acetate injection drug product.
Page 12: Although we are denying your request that the Agency take specific actions with respect to ANDAs for glatiramer acetate injection at this time, FDA is actively considering what evidence would be sufficient to show that the active ingredient in a proposed product is the same as that in Copaxone. The information you have provided in your Petition regarding the complexity of these drug products and the scientific challenges they pose will inform FDA's assessment of the types of information needed to support generic glatiramer acetate injection products.
VALUATION
We derive a $16 per share value for MNTA shares in 12 months based on a discounted cash flow (DCF) analysis, probability-weighted to reflect the risks associated with FDA approval. We have assumed that M-Enoxaparin will have generic exclusivity for two quarters, while M-356 will have generic exclusivity for four quarters. Each drug and indication have been ascribed EBIT and
associated costs through a revenue mix analysis, resulting in $4/share for M-Enoxaparin, $4/share for M-356, $3/share for pipeline, $3/share for the platform, and $2/share in cash. We estimate an 85% probability of M-Enoxaparin approval based on extensive collaboration between management
and the FDA and a 65% probability for M-356.
RISKS TO VALUATION
Risks include the potential for losing lawsuits around Paragraph IV filings, disappointing regulatory setbacks, political uncertainty, and commercial shortfalls. The legal landscape for M-Enoxaparin cleared when Sanofi-Aventis lost in court on 9/25/08; however, the recent Paragraph IV filing for
Copaxone has just begun. MEDACorp physician specialists believe that MNTA has a valid strategyfor getting around the seven Copaxone patents using invalidity and non-infringement claims. We
are encouraged that MNTA has already worked extensively with FDA officials in characterizing the heparin contaminant. We expect FDA approval of M-Enoxaparin will significantly de-risk the
regulatory and political hurdles since it validates the 505j pathway for complex generics.Commercial risks are centered around the time of generic exclusivity that MNTA will maintain for
each complex generic it brings to market. We have conservatively estimated that M-Enoxaparin will have two quarters of generic exclusivity, while M-356 will have four quarters. Furthermore, the
180-day period of generic market exclusivity granted to competitor Amphastar expired on April 2,2009, allowing MNTA to launch M-Enoxaparin upon FDA approval.
MOMENTA PHARMA, INC. May 13, 2010
3
