Momenta Pharmaceuticals, Inc. (MNTA)

[Double_Bagel]

I guess I must missing something with the theory that you and 10nis are explaining. One year ago, Momenta was trading in the $15 dollar range, same as it is today.

Using that metric, I'd have to say that not only has Momenta's shareholders not benefited from Momenta improved financial performance but we missed out in benefiting from the 18% gain in the general markets.

I can sleep at night holding onto my MNTA shares knowing that in the worst case it can only go down $2 - $3. It will soon have nearly $4- $5 / share in cash. So the downside is limited. However, the upside is huge if they are the sole generic manufacturer of Lovenox and they get Copaxone approval or any partnerships.

Let us look at several scenarios. One thing to keep in mind is that they have already earned about 0.85 cents (low estimate) for the previous quarter.

Worst case scenario:
They already have 10 days earnings in this quarter as there is no T-Enox yet. In the worst possible case if Teva gets their approval next week and can market their product by April 20th or so (this is for the pessimists), we still already have about 0.15 to 0.20 cents for this quarter. So that makes it about $1 EPS for this year until April 20th.

We don't know exactly how much royalties MNTA will get once there is a second generic. Guesses are that it is about 10%. So, assuming about $220 mil M-Enox sales / quarter, MNTA can still earn about $22 mil royalty - $18 expenses = $4 million / quarter which comes to about 8 cents / quarter.

So, in the worst case we are still looking at about $1.25 EPS / share and about $4-$5 cash / share. With a 12 multiple I would say that gives us a stock price of $15 (TEVA has a 14-15 multiple) which is essentially where it is at today.

Scenario 2: 2 quarters of sole generic; No Copaxone or partnerships

Assume $0.80 EPS / quarter for two quarters. Assume $0.08 for the 3rd and 4th quarter. That gives us $1.76. With a 12 multiple that gives us $21 stock price. Cash on hand will have grown to $5 to $6.

Scenario 3: 3 quarters of sole generic; No Copaxone or partnerships

3 * 0.80 + 0.08 = $2.48 EPS. 12 multiple gives us about $30 stock price. Cash on hand will have grown to $6 to $7.

Scenario 4: Whole of 2011 as sole Lovenox generic manufacturer; No Copaxone or partnerships

4 * 0.80 = $3.2 EPS. 12 multiple gives us about $39 stock price. Cash on hand will have grown to $7 to $8

Obviously, this is very simplified. The market will assign a much higher multiple if these kind of earnings can be sustained and much lower if it cannot (which is what we are seeing now).

Scenario 5: Sole generic for 2 years; (as many here predict) and we come to know in 2012 that Copaxone approval is coming in 2013;

So assuming $3.20 from just M-Enox and a 15 multiple (because the future is looking rosier) we have a stock price of around $48 in 2012.

Good Scenario (6) for 2013: Sole generic for Lovenox; Copaxone approval in late 2012:

Possible EPS in the $6 - $7 range. With a 12 multiple, stock price could easily be in the $72 - $84 range.

So right now it is priced as if T-Enox is coming next week, and MNTA is not going to get Copaxone approval any time soon and there are no partnerships coming.

So each week with no T-Enox coming we are looking to get closer to scenario 2 or 3 or 4

So if you play the odds:

Downside risk: $2
Upside for 2012: anywhere from $21 - $15 = $6 (scenario 2) to $39 - $15 = $23 (Scenario 4)

i.e. $2 downside to $6 upside in scenario 2
i.e. $2 downside to $24 upside in scenario 4

These odds start looking much better when you throw in Copaxone or partnerships (i.e. Scenarios 5, 6, and beyond

So, you take your chances with Open Table and the market while I take my chances with MNTA.

Now, combine these odds with Options, you can start looking at a 5-10 bagger in no time.

PS: I am no financial analyst, so this might look like a novice's calculations. But I will take these over the RBC's calculations any day.