M356 – Wedbush 9.7.10 Update – Pretty positive IMO
M356 – Generic Copaxone
We believe that an even more compelling justification for owning MNTA is presented by M356, MNTA’s generic candidate of blockbuster drug Copaxone. Copaxone is marketed by TEVA for the treatment of Relapse-Remitting Multiple Sclerosis and brought in $1.9 billion in US revenues in 2009 (with Q2:10 US revenues up 21% y/y). While M-Enoxaparin is a complex mixture of sugars, Copaxone is formed from a complex mixture of amino acid polymers.
Given Copaxone’s market size, and the license agreement between MNTA and Sandoz, we believe that M356 will likely become an even more important drug for MNTA than M-Enoxaparin. Regarding the latter point, while MNTA enjoys a profit split for MEnoxaparin only while it is the only generic on the market, MNTA enjoys a profit split for M356 regardless of the presence of other generics. As a result, we predict peak royalties to MNTA of $420 million in 2015.
MNTA and Sandoz filed an ANDA for M356 on July 11, 2008, and TEVA responded on August 28 of that year with a lawsuit alleging infringement of 4 related patents.
In late December 2009, a motion seeking summary judgment for invalidity of the Copaxone patents was filed by Sandoz/Momenta on the issue of indefiniteness (35 U.S.C. section 112). Moreover, a Markman Hearing for the ongoing lawsuit between TEVA and Sandoz/Momenta was held in late January, and we expect a ruling by the court in the near future (the decision has already taken far longer than we already expected). The Markman Ruling should provide a strong indication of the ultimate outcome of the trial, which may proceed to a full jury trial in the second half of 2010.
Having reviewed the patents-at-issue, as well as the publicly available court filings, we strongly believe that MNTA has a better-than average chance of winning this litigation. We plan on watching developments here very closely. Of note, recent activity appears focused on one of Teva’s expert witnesses who unfortunately for Teva, was belatedly discovered by the parties to have been convicted of fraud. Understandably, Teva appears to be making every effort to find a replacement, which the court will likely permit.
In any event, this scenario can do nothing but benefit Sandoz and Momenta in their litigation efforts against Teva. Indeed, these sorts of last minute pre-trial disasters not infrequently force the associated party to settle.
Finally, we note that on September 7, 2010, the court denied Sandoz and MNTA’s motion for summary judgment on the issue of indefiniteness. This motion argued that the evidence was so clear that the patents-in-suit were invalid, that trial was simply unnecessary.
Courts are typically reluctant to grant motions for summary judgment (given the high burden of showing no facts in dispute), and we do not read anything into this particular ruling. Instead, we believe the most likely outcome will be victory for MNTA and Sandoz at trial, after a favorable Markman ruling is offered. Should this ruling appear negative, however (which we view as unlikely), MNTA and Sandoz’s chances of winning at trial will be greatly diminished. The court’s recent ruling on summary judgment may suggest that a Markman ruling can be expected in coming weeks.
