It’s kind of stupid. They downgrade from a buy to neutral w a $21 price target. Not sure how that computes but I’m not a sell-side analyst…..here’s the first page
Summary and Highlights
While Teva has yet to gain FDA approval for their enoxaparin, investors have been afraid to own MNTA shares, wanting to wait until “the shoe drops” before getting involved. Similarly, consolidation of the Mylan and Momenta/Sandoz litigation regarding Teva’s Copaxone patents has likely delayed the outcome of that case until 2012. Hence, we are hard pressed to see an obvious path for substantial MNTA share appreciation this year.
The never-ending Lovenox soap opera. Ever since Teva declared last August that they were a month behind Momenta in launching their version of generic Lovenox, Momenta has been in the unfavorable position of having to disprove a negative. First, Teva claimed to be a month behind Momenta. When three months passed, Teva expressed optimism that they would gain approval by the end of 2010. In late January, Teva announced that they had received a “minor deficiency letter” from the FDA, implying that they could gain approval in a matter of weeks or months. We continue to model an April 1 Teva launch, but Teva’s latest FDA Warning Letter suggests that may be optimistic.
Momenta’s 4q10 run rate will last until Teva’s launch. We believe that Momenta’s reported 4q10 earnings of $36.3 million, or $0.79 per 4q10 share, should continue at a relatively stable rate until Teva gains FDA approval. We remind investors that Momenta conducted a 4.2 million-share secondary offering in December, which would imply a forward quarterly EPS of $0.73. Given that Momenta lost 34 and 37 cents in the two quarter preceding the launch of m-enoxaparin, each quarter in which Momenta retains generic exclusivity accounts for an earnings swing of $1.08 or more.
Results of Copaxone trial unlikely until 2012. Given the likely consolidation of the Mylan and Sandoz/Momenta Copaxone lawsuits, we don’t expect resolution of the litigation until the first half of 2012. While Teva believes Copaxone is “safer than ever before,” we believe their optimism is premature. However, as with the Lovenox situation, Momenta
is forced to disprove a negative to investors who otherwise remain on the sidelines.
Key Catalysts: News from Teva on their enoxaparin ANDA; progress on Copaxone patent litigation in 2011.
Valuation. We have projected Momenta’s income streams out to 2017, using a sum-of-the-parts approach, discounting future income by 12%. We assign no value to M-118, a proprietary anti-thrombotic agent with promising phase IIa data.
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