Biotech Values

[dewophile]

i don't know if you can call this report high quality. while the uncertainty regarding tL may continue to weigh on shares this year, and i can't really argue with their comments on mC (although mnta is hopeful for a 2011 trial still) or on the (lack of) valuation for m118, there is a gross error:

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.

they completely discount the ongoing revenuse stream from lovenox royalty in a multiple generic scenario (+73c/share to -35c/share = -1.08c/share).*
sure overhead is going up modestly - some 3M/quarter (which is presumably why they say "-1.08c OR MORE"), but even the most consevative estimates for royalty has MNTA generating >5M a quarter, and more likely 10M a quarter

perhaps later in the report they ascribe some residual value to lovenox if tL gets approved, but they don't in their numbers at all - a pretty simple and glaring flaw if you ask me

as an aside i think the assumption mL is worthless if tL wins approval seems like a prevasive mistake (the other is totally discounting the possibilty - however remote - that the lawsuit may bear fruitful discovery favorable to mnta)

*this also assumes no growth for mL which is also a mistake but i can give them a pass on that one for now..