Replies to post #2421 on Momenta Pharmaceuticals, Inc. (MNTA)

[10nisman]

I am no financial analyst, so this might look like a novice's calculations.

You could say that again. If you haven't done so already, I would recommend you spend some time with the ReadMeFirst file. You failed to adjust your mL sales lower to take into consideration sales lost to other approved products in your scenarios. In addition, you're assuming that no matter what MNTA earns in EPS it deserves a 12 or 15 multiple. In addition, your estimated EPS for MNTA is too high for 2012 and beyond as you failed to factor in taxes (MNTA will likely start paying federal/state income taxes sometime in Q1 2012 as it burns thru its NOL's). I think its easier to understand MNTA's value by using a sum-of-the-parts calculation (mL + mC + FOB's + M118 + M402 + Net cash/AR's + IP) versus applying some multiple to EPS.

[jbog]

AHANDE,

I can sleep at night holding onto my MNTA shares knowing that in the worst case it can only go down $2 - $3. It will soon have nearly $4- $5 / share in cash. So the downside is limited. However, the upside is huge if they are the sole generic manufacturer of Lovenox and they get Copaxone approval or any partnerships.

I agree there could be a nice upside, but the downside is no where limited to the $2-$3 range. If the FDA decides a different filing route is needed for Copaxone and/or T-Enox is available this stock could be halved in a minute.

Let us look at several scenarios. One thing to keep in mind is that they have already earned about 0.85 cents (low estimate) for the previous quarter.

They have had 3 very nice quarters, and it hasn't made one iota of difference but you think the next quarter is going to make a difference?

Worst case scenario:

They already have 10 days earnings in this quarter as there is no T-Enox yet. In the worst possible case if Teva gets their approval next week and can market their product by April 20th or so (this is for the pessimists), we still already have about 0.15 to 0.20 cents for this quarter. So that makes it about $1 EPS for this year until April 20th.

We don't know exactly how much royalties MNTA will get once there is a second generic. Guesses are that it is about 10%. So, assuming about $220 mil M-Enox sales / quarter, MNTA can still earn about $22 mil royalty - $18 expenses = $4 million / quarter which comes to about 8 cents / quarter.
So, in the worst case we are still looking at about $1.25 EPS / share and about $4-$5 cash / share. With a 12 multiple I would say that gives us a stock price of $15 (TEVA has a 14-15 multiple) which is essentially where it is at today. .

No way is M-Enox going to do $220 mil/quarter with another generic in the field. Maybe half of that depending on the pricing.

Scenario 2: 2 quarters of sole generic; No Copaxone or partnerships

Assume $0.80 EPS / quarter for two quarters. Assume $0.08 for the 3rd and 4th quarter. That gives us $1.76. With a 12 multiple that gives us $21 stock price. Cash on hand will have grown to $5 to $6.

We've gone through 3 quarters as a sole generic and we haven't moved at all.

Scenario 3: 3 quarters of sole generic; No Copaxone or partnerships

3 * 0.80 + 0.08 = $2.48 EPS. 12 multiple gives us about $30 stock price. Cash on hand will have grown to $6 to $7.

Ditto

Scenario 4: Whole of 2011 as sole Lovenox generic manufacturer; No Copaxone or partnerships

4 * 0.80 = $3.2 EPS. 12 multiple gives us about $39 stock price. Cash on hand will have grown to $7 to $8

Ditto Ditto

Scenario 5: Sole generic for 2 years; (as many here predict) and we come to know in 2012 that Copaxone approval is coming in 2013;

So assuming $3.20 from just M-Enox and a 15 multiple (because the future is looking rosier) we have a stock price of around $48 in 2012.

Now, I'll agree this would be a great shot in the arm for Momenta. I'm not sure about the $48, but it would be positive. Just as positive would be the FDA outright rejecting T-Enox.

[IB2011]

Ahande,

MNTA has underperformed the market because TEVA poisoned the well. That's why so many analysts are focused on the risk from a TEVA entry into the generic enoxaparin market. This risk is probably overstated and it leads to "Mr. Market" ignoring the other components of MNTA. Try valuing MNTA like any other biotech with a huge patent portfolio and a technology platform that can develop new drugs. Then add several hundred million in cash. I'd stop worrying if I were you and sit back and enjoy the ride over the next 12 months.

[investorgold2002]

"So, in the worst case we are still looking at about $1.25 EPS / share and about $4-$5 cash / share. With a 12 multiple I would say that gives us a stock price of $15 (TEVA has a 14-15 multiple) which is essentially where it is at today. "


I think it's foolish to valuate this company by using a multiple. Multiples like 12 are used when their little risk to those earnings. If you still like to use multiple u would have to use a very low multiple because of risk to earnings. Now I am of the belief that it is unlikely TEVA would get it's product approved in next 3 months. But to totally not entertain the idea that TEVA would get FDA approval for their product is B.S. Now it's possible MNTA through their patents could still block TEVA.