Momenta Pharmaceuticals, Inc. (MNTA)

[DewDiligence]

Are you comfortable sharing with the board how this most recent court decision affects your view of things going forward and what your plans are regarding a potential shift in your portfolio?

You’ve asked two separate questions—one about the effect of the recent Court ruling and one about MNTA’s valuation—so let me answer them in turn.

The Copaxone ruling is a setback but it is not the colossal setback that some people imagine it to be. Most sell-side analysts expected Teva to win the patent case (e.g. #msg-72925141, #msg-72926198); to my knowledge, the only analyst who predicted a win by NVS/MNTA/MYL was Ritu Baral of Canaccord (#msg-72951709).

Losing a case most investors expected MNTA to lose ought to have less of an effect on the share price than a losing a case most investors expected to win; therefore, when the dust settles, I don’t think the sustained hit to MNTA’s share price will be as severe as some have predicted.

Moreover, as noted in #msg-76904920, the FDA can approve NVS/MNTA’s Copaxone ANDA (as well as MYL’s) irrespective of the District Court ruling, which would certainly boost MNTA’s share price despite the fact that NVS/MNTA do not intend to launch generic Copaxone “at risk.”

Turning to the subject of valuation, when you subtract MNTA’s cash on hand from its fully-diluted market cap, the resulting enterprise value is pretty darn cheap, IMO. For the sake of discussion, let’s say you can buy MNTA for $15; inasmuch as there are ~54M shares on a fully-diluted basis and $400M in cash on hand (at the end of 1Q12), MNTA’s enterprise value at $15/sh is only $410M.

So, the question for investors to ask is: How does the sum of MNTA’s non-financial assets compare to $410M? To answer, add the value of:

• The Lovenox franchise—including potential damage awards and royalties from Amphastar/WPI for infringing MNTA’s patents;

• The Copaxone program, which could be a major profit contributor in a few years even if MNTA loses the patent appeal and has to wait for Teva’s patents to expire;

• The FoB partnership with BAX;

• The M402 and IVIG programs; and

• The ever-present buyout vig.

Do these items sum to more than $410M? I think the answer is that they do by a wide margin, which is why I intend that MNTA will continue to be one of my largest holdings.