Momenta Pharmaceuticals, Inc. (MNTA)

[DewDiligence]

Re: NPV of MNTA’s Lovenox royalty stream

If we assume that's 30 millions revenue stream for the next 10 years...what's the NPV?

MNTA’s Lovenox royalty stream is not strictly limited to a 10-year duration insofar as Lovenox will surely continue to rack up sales much longer than that. However, increasing competition from the new oral anticoagulants (#msg-69173426) and the possibility of additional generic-Lovenox players in the US market are offsetting considerations. All told, therefore, applying a 10x multiple to the current annual royalty seems like a reasonable and conservative compromise to account for the time-discounted value of future cash flows and the uncertainties about the sales ramp for competing products.

Since MNTA’s net royalty averaged for each (July->June) launch year will be about 10% of NVS’ top-line sales (#msg-71975717), a 10x multiple of such an annual royalty yields a royalty-stream NPV for MNTA that is essentially the same as what you expect NVS to book in annual top-line sales.

For instance, if you conservatively figure that NVS will sell about $300M of US Lovenox annually in the new multi-player arena (SNY, NVS, Amphastar/WPI, and SNY AG), then the NPV of the Lovenox royalty stream for MNTA on a pre-tax basis is also about $300M.