Biotech Values

[ThomasS]

MNTA: Barrons' today: Momenta's Moment Is Here
{Barron's exposure is usually a positive}
http://online.barrons.com/article/SB50001424052970204860404576146722878510708.html?ru=yahoo&mod=yahoobarrons

Blood may be thicker than water but a blood thinner is producing thick wads of cash for Momenta Pharmaceuticals.

Momenta (ticker: MNTA) is a generic-drug maker that develops cheaper compounds of well-known prescription medications. Its primary product is enoxaparin – known as M-Enox – a generic version of the blood thinner Lovenox.

Momenta works with its partner Sandoz – a unit of Novartis (NVS) – to develop the primary product. Momenta captures 45% of the profit from the sales of its enoxaparin product.

When it reported fourth-quarter results last week, Momenta recorded sales of M-Enox totaling $170 million. Momenta's split of the sales realized $52 million. The company recorded a net profit of $36.3 million, or 77 cents per share.
Versus a year-earlier total of a loss of 34 cents, Momenta showed a big bulge in profit for the period. Profit came in as much as $5 million ahead of what Wall Street had been anticipating. A year ago, the company was lucky to be selling $5 million a year in products. The trajectory of the profit performance is remarkable, reports Robert Auer, senior portfolio manager of the SBAuer Funds.

''This is a name that's just starting to bear fruit,'' Auer says.

At less than seven times this year's expected earnings per share, Momenta is cheap – remarkably cheap for such a high-beta growth company. Even assuming it lives up to its blistering earnings growth – analysts assume the company will record 160% EPS growth this year – it's still trading at a modest 13 times expected 2012 earnings. Its enterprise value is a bit high – at 13 times enterprise value to Ebitda (earnings before interest, taxes, depreciation and amortization) – but not out of line with rivals.
A big overhang on the Momenta story is the prospect of competition. Teva Pharmaceutical Industries (TEVA) has asked the Federal Drug Administration for approval of a competing version of a blood thinner that would rival M-Enox.

That's prospectively a big problem for Momenta. Under terms of its deal with Sandoz, its share of royalties would drop precipitously if a competing product entered the market.

Right now, Teva has been held up by what's termed a ''deficiency letter'' that Teva received Jan. 25 from the FDA. Even analysts following both companies don't know the contents of the letter, or how long – if ever – Teva might take to redress the problems.

''It is impossible to predict if and when there may be a second generic enoxaparin in the U.S. market,'' Rodman & Renshaw says in a recent note.

The overhang has cost Momenta substantially. What was a $26 stock last year has dropped to roughly half that.

''Following approval of M-Enox last July, Momenta shares have been under constant pressure as Teva repeatedly stated that it expected to receive approval of its own generic in the near term,'' Wedbush Securities says in a recent note. ''While Teva's predictions have consistently failed to materialize so far, the overhang on Momenta's stock has persisted.''

Meanwhile, analysts see other encouraging catalysts for Momenta, aside from its relatively cheap valuation. Wedbush says it expects the company to sign additional development deals. ''We expect Momenta to sign one or more lucrative partnerships'' in 2011, the firm says, adding that the timing is difficult to predict.

''Given its best-in-class platform for copying the extraordinarily valuable field of complex therapeutics, Momenta remains one of our favorite long-term picks,'' Wedbush says.