Biotech Values

[DewDiligence]

Did [channel stocking] artificially overstate 3Q profits by MNTA?

Yes.

I would assume that profits would not be booked until the drug was sold at retail.

That’s incorrect—NVS books sales of generic Lovenox when product is shipped to wholesalers, distributors, and hospital formularies.

Why would MNTA's partner pay royalties before that?

While there is only one generic Lovenox on the market, MNTA gets a 45% share of pre-tax profit, not a royalty. NVS does not actually pay MNTA its profit share until several weeks after the end of a quarter, but MNTA books the amount received from NVS for accounting purposes as soon as the quarterly amount is known. None of these events depend on the precise timing of Lovenox use by end users.

…if there is a delay between collecting accounts receivable and royalty payments to MNTA, then the start up royalties of the 3Q would have been understated not overstated.

See above.