Replies to post #84621 on Biotech Values

[zipjet]

>>FWIW, my take on the possibility of an "authorized generic" is that Sanofi launching an authorized generic would be quite unlikely in the "single generic" case but likely in the "multiple generic" case. The reason for this is that in the single generic case there would be duopoly pricing, and Sanofi would have little reason to further undercut the price.

I agree with that.

However, even in the "single generic" case it does depend on some acceptable competitive standoff being achieved. If MNTA priced too low, taking too much of the market share, Sanofi could be motivated to get more aggressive and they would have a number of alternatives to do that. But that could bring out price cuts by MNTA which ultimately could spiral out of control in a price war.

Long ago we played those kind of pricing games in school. I can only imagine the refinements that 40 years and computers have brought to the "game". :-)

ij

[DewDiligence]

More musings on MNTA’s valuation in the single-generic case:

In my view, the single most likely outcome is that MNTA's generic gets approved but we are left hanging as to whether other generics will ever receive approval or not. So then you would essentially have a blend between the single-generic case and the multiple-generic case, and the stock will trade as some blend of the two outcomes. Even though in that scenario MNTA's drug would be the only approved generic (at least for some time), there would always be an overhang of doubt about the possibility of later approvals of competitor drugs that would prevent it reaching the "single generic" range you are projecting.

In this scenario, MNTA’s share price would clearly end up below the high end of my single-generic NPV range ($87), but it might still be able to exceed the low end of the range ($55).

Although the risk of a deferred Lovenox approval by Teva or Amphastar would remain, investors would try to handicap this risk by:

• Parsing the FDA approval letter for any implicit opinions about the other applicants’ ANDA’s. For instance, if the approval letter stated or implied that the active ingredients in Lovenox are difficult to characterize, that would be bullish for MNTA. Similarly, if the approval letter mentioned that the MoA of Lovenox is complex and not limited to FXa/FIIa inhibition, that would be bullish.

• Taking note of any posturing by the FDA to reassure the public of the safety and purity of generic Lovenox. Any stated or implied tie-in between the approval of generic Lovenox and the FDA’s successful effort at solving the contaminated-heparin crisis would be bullish for MNTA. The more public the posturing, the stronger the indicator: e.g. a formal press conference led by Dr. Hamburg on the lawn in front of the FDA’s headquarters building would be a stronger indicator than a brief remark by the head of OGD, but even the latter would be meaningful, IMO.

• Assessing the reaction by executives at Novartis, who might have a better read on the FDA’s mindset vis-à-vis Lovenox than we do. For instance, if NVS raised the forward sales guidance for the Sandoz unit, that would be bullish, as would comments about wanting to ramp up production.

Although none of the individual items above would be probative, in the aggregate they could provide a basis for handicapping the likelihood of FDA approval of competing ANDA’s, thereby giving investors fodder to ascertain what MNTA’s fair value ought to be. I look forward to having such a problem :- )