Re: MNTA valuation and revenues from generic Lovenox
>Dew, you mentioned that you thought profit share would be around 50% of profits if no third party competition, and a mid- teens percentage (if I recall) royalty if there were third party competitors.<
The ~50/50 profit split in the case where there is a sole generic Lovenox in the US market is MNTA’s own guidance.
MNTA has issued no guidance on the royalty rate in the case where there are multiple generics. I don’t think I’ve ever posted my guess on what the royalty rate is, but I think it’s probably closer to 10% than 15%.
(If the only non-MNTA generic in the US market is an AG from SNY, the economics for MNTA are a hybrid of the two cases above.)
>I figure profits could be calculated at around 20% of gross sales, so give MNTA 10% of gross revenues as their share if they are the only generic Lovenox.<
This is much too low a profit margin, IMO, because generic Lovenox will incur zero selling and marketing expenses. The pre-tax profit margin for the JV will depend on how the up-front R&D and legal expenses are amortized, but I think 60% — of which MNTA gets half — is in the ballpark.
>Say the generic product brings in $1.5 billion (no other generic on the market)…<
$1.5B is a reasonable sales figure, IMO. Lovenox currently sells $2.6B annually in the US (#msg-28903176), but this can be expected to drop to, say, $2.0B from the somewhat lower average price with a sole generic on the market. Of this $2.0B, it’s not unreasonable to expect that Sandoz can garner a 75% share with its generic priced at a modest discount to the Sanofi brand.
>…that would be $150 million per year to MNTA, maybe up to $200 million if the profit margin is higher.<
MNTA’s share of the pre-tax profit from the JV would be a whopping $450M using a 60% pre-tax margin split two ways, as described above.
>That alone should put the share price at $750 million to $1.5 billion, on this revenue alone at 5-10x revenues.<
I think your 5-10x multiple is too high for several reasons:
i) the Lovenox revenue stream will not continue forever because newer anticoagulants—including perhaps MNTA’s M118—will eventually supplant it;
ii) there will be a continuing risk that the FDA will approve a second generic Lovenox;
iii) MNTA will eventually run out of tax-loss carryforwards and will begin paying a statutory tax rate; and
iv) MNTA may continue to run high R&D costs, offsetting a good-sized chunk of the Lovenox profits.
All told, I think a much lower multiple of around 3x is justified if you are trying to derive a valuation for the whole company from the Lovenox income alone. (In all scenarios, what happens with the M118 partnership and MNTA’s other programs will be highly relevant, of course, but we are ignoring these factors here for the sake of simplicity.)
>Is that about what you are calculating?<
In the four-case analysis in #msg-29008722, I assigned a $2.1B market cap ($57 share price) for the overall company in the case where MNTA/Sandoz obtain the sole US generic Lovenox. Using a 3x multiple of $450M, as described above, gives a $1.35B valuation for the US Lovenox program alone, according to my numbers. Hence, your ascribing a $750M-1.5B valuation for the US Lovenox program alone is not inconsistent with my number.
That we end up with numbers that are even in the same ballpark is somewhat surprising because my assumptions and intermediate calculations differ greatly from yours: I assume a very much higher pre-tax profit margin from the Lovenox JV and I apply a very much lower multiple to this income. However, these two differences in our models largely offset one another. Regards, Dew
News 
Market Data 
Discover 
