Replies to post #56272 on Biotech Values

[masterlongevity]

i don't think b is a possibility

[dewophile]

i'll give it a crack:

scenario 1: i agree this deserves mammoth valuation, not just because of the raw revenue stream to the company from being the sole generic, but due to validation of the platform (i.e. the FDA is saying MNTA can characterize the complex sugars in a satisfactory manner to prove "equvalence" in a way others can't - which also has carryover to the FoB arena in general, where variations in glycosylation is the main sticking point)

scenario 2: i think your valuation is excessive, mainly because of the reverse of the situation i lay out above - now the FDA is saying anyone can characterize sugars well enough to produce generics, and there is nothing special per se about MNTA's proprietary technology

case 3: MNTA slowly but surely drifts lower and lower as there seems to be no end in sight to the regulatory quagmire surrounding complex generics/FoBs

case 4: MNTA trades for little more than cash, as the entire EV is based on M118, which is itself questioned due to concerns surrounding the platform

[zipjet]

>> a) MNTA continues to make steady, but not spectacular, progress on M118 and its other non-Lovenox programs.

Very likely.

>> b) The US passes legislation enabling follow-on biologics during 2008.

You're kidding - Congress passes important legislation. Small chance. ;-)

>>c) MNTA does not sell shares during 2008 before the status of the Lovenox ANDA is cemented.

Likely.

>> d) SNY is unable to reinstate its US Lovenox patent during the appeal be heard in early 2008.

As close to certainty as patent cases get - call it 95%. The Court of Appeals will look really silly if they overturn this case.

>> e) MNTA does not receive a buyout offer.

Sandoz should buy them before they partner M118 with any one else. When does the stand-still end?

>>I see four cases according to the status of the Lovenox ANDA:

>> Case 1 – MNTA/Sandoz obtains approval for generic Lovenox and neither Teva nor Amphastar obtain approval: $57 ($2.1B MC). I would have an even higher valuation for this case were it not for the possibility of SNY’s launching a Lovenox “authorized” generic.

20%

I do not think that it would be economically advantageous for SNY to launch an "authorized" generic provided they did not expect FDA to quickly approve other generic L's. Doing it would be an extreme scorched-earth approach which is not typical of pharma.

>> Case 2 – MNTA/Sandoz obtains approval for generic Lovenox and Teva or Amphastar do also: $24 ($900M MC).

20%

>> Case 3 – Nobody obtains approval for generic Lovenox but the application from MNTA/Sandoz remains under consideration by the FDA pending resolution of certain issues: $11 ($400M MC). This case is essentially the status quo with some “regression to the mean” vis-à-vis the unduly negative sentiment toward the stock that is currently suppressing the valuation, IMO.

50%

>> Case 4 – MNTA/Sandoz receives an FDA rejection of the Lovenox ANDA with no likelihood of a resubmission: $5.50 ($200M MC).

10%

$22.25

Thanks for the work, DD. Very interesting and thought provoking.

ij

[ThomasS]

MNTA: It is abundantly clear that most do not even understand the company's technology, nor it's pipeline.
I like your analysis because it is essentially a baseline, conservative case. I do not expect b) occurring; however, this is a small issue since I expect it shall occur by mid 2009.

I do not expect case 3 & 4 valuations for the simple rationale that other pipeline programs will become more apparent by YE 2008. The generic Copaxone ANDA filing is a decent example. Item a) mitigates cases 3 & 4 for anything other than the short term, imo. I believe we are already off that $5.50 figure for the same reason (plus the obvious hope factor on M-Enox). Hence, YE 2008 PPS should be quite higher.

The Lovenox approval scenarios also depend somewhat on "when" the approvals/disapprovals occur.
We should finally have visibility on M-Enox soon enough.
(Regarding case 2 valuation: the approval will also have the immediate effect of validating MNTA's characterization platform somewhat, which is worth something. You may have already included that in your valuation.)

Thanks for the well-reasoned, refreshing opinion.
We need a RMF.

[Jonathan Robinson]

As requested, my thoughts on your analysis.

A. Expected. They may try to speed things up though given what is going on in generic land. Does raise question of resources as generics were supposed to fund M118.

B. No go until mid 2009 earliest.

C. Agreed unless they do a deal on M118 involving shares.

D. Agreed.

E. Disagree - actually agree as I think odds are ONLY one in three.

Case 1 Odds 10% (price $35 as you will never know that TEVA/Ampha got denied so always will be a discount)
Case 2 Odds 5% (price $20)
Case 3 Odds 85% (price $6-10 depending on market)
Case 4 Oddx 0% this year although I guess something analogous could come out of meeting (at most 5%) - initial price drop back to $5 or so

This puts my target range in $10-13 area. I put such low odds on all outcomes other than status quo given the politics, the slow timing to date, etc.

Jon

[ThomasS]

MNTA: Case 3 – Nobody obtains approval for generic Lovenox but the application from MNTA/Sandoz remains under consideration by the FDA pending resolution of certain issues: $11 ($400M MC). This case is essentially the status quo with some “regression to the mean” vis-à-vis the unduly negative sentiment toward the stock that is currently suppressing the valuation, IMO.


-- The "regression to the mean" analysis seems to be playing out pending further guidance. Slowly. I believe that any update on pathway will continue the trend.

[ThomasS]

MNTA: Case 1 – MNTA/Sandoz obtains approval for generic Lovenox and neither Teva nor Amphastar obtain approval: $57 ($2.1B MC). I would have an even higher valuation for this case were it not for the possibility of SNY’s launching a Lovenox “authorized” generic.

Craig Wheeler mentioned today that he wouldn't expect SNY to launch a generic, due to economics, unless there were several competitors on the market with generics...or something like that...