Momenta Pharmaceuticals, Inc. (MNTA)

[tinkershaw]

The antitrust cops would not allow a company with a big-selling branded drug to acquire the only company capable of developing a generic version of that drug.

That is the thing, who says that MNTA is the only company capable of producing a generic copaxone? Mylan certainly says otherwise, and I'm sure they'd support such a merger, less competition for them were they to miraculously garner approval.

We may very much suspect this to be true, but in a court of law, if MNTA and TEva both want the merger, I doubt very much the FTC understands this to be the case, much less the ability to prove this to be the case. In fact it is so speculative, that it could not be proven because the FDA has not laid out the criteria for approval of a generic copaxone. And since generic copaxones exist in multiple other countries, I again question that this would not pass FTC scrutiny. Perhaps if MNTA were the only applicant, and if the FDA laid out its criteria, that would be a better case.

But, just as an example, until the FDA laid out its enoxaparin criteria, stock analysts had no idea if Teva's petition letters would be sufficient or not to sway the FDA to see things their way. If the FDA had decided to go Teva's way, then t-enoxaparin would be on the market, and prior to July, 2010, no one knew what the regulatory burden would be. Given that there were 3 legitimate applicants, you could not prove in the court of law that only MNTA was capable of meeting the FDA standard.

When litigation breaks out, when one company's stock is in the toilet due to issues that are directly related to the opposition in litigation, it si far from unprecedented for a settlement to produce some dramatic and unpredictable results.

My experience of incidents like this in the pharmaceutical world is to say the least, not extensive, but I can, for example, give you the example of ISRG. ISRG now, for all essential purposes, is monopoly and has been for years. It got that way when it merged with its only legitimate competitor at the time in 2003, which resulted from patent litigation.

The FTC had no insight into what they did to allow this merger, and by 2005 (very shortly thereafter) it became apparent.

I know you have dismissed my thoughts on the topic before, and maybe properly so, but I still don't see that as a given, not at all that the FTC would put a crimp in a merger.

This said, I doubt that MNTA wants to merge with TEVA, and it would have to be for a very pretty penny. A merger for Teva is worth, say $1 billion a year or so in Copaxone revenues, disregarding everything else, which can only be valued in the multi-billions for the buy out. If Teva were to make such a proffer, MNTA management could not with any sense of shareholder fiduciary responsibility not seriously consider it.

The deal would certainly be contingent on regulatory approval, and I am sure if such is being considered that TEVA's lawyers, at a minimum, are analyzing the situation.

I do not give the FTC as much credit as you for recognizing and appreciating the situation with copaxone. Further, it is not even certain that the copaxone market will be worthwhile the time of defending for the FTC into the future. At least TEVA will argue that they also have their new copaxone that will be on the market in a few years.

Point being, don't rule it out on regulatory grounds. On personal grounds, perhaps, but not on regulatory grounds. There certainly are many legitimate arguments on both sides, and quite frankly, proving, beyond a preponderance of the evidence that MNTA is the only company capable of producing a generic copaxone, is probably on eof the most difficult proofs that the FTC might every attempt. Particularly (1) with no FDA standard set for copaxone, (2) Mylan having something to say on this issue, and (3) multiple other generic copaxones approved in multiple other countries.

Perhaps I have not convinced you, but clearly there is a colorful and powerful case to enable the merger as well. Whatever the real world chances are.

Tinker