Wedbush coverage on Momenta 1-4-11
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Wedbush coverage on Momenta 1-4-11

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Wedbush coverage on Momenta 1-4-11 Wedbush coverage on Momenta 1-4-11 Document Transcript

  • Equity Research LOS ANGELES | SAN FRANCISCO | NEW YORK | BOSTON | SEATTLE | MINNEAPOLIS | DALLAS January 4, 2011 Momenta Pharmaceuticals (MNTA) Price Teva Fails to Secure Approval of Generic Enoxaparin $15.13 Before End of 2010; Expect M-Enox to Maintain Exclusivity Rating • M-Enox remains the sole approved generic five-months following launch; Outperform ultimate exclusivity likely longer than the street expects. We believe that the overhang in MTNA shares related to a near-term approval of a generic Enoxaparin from Teva should begin to diminish. Recall that following the launch of M-Enox in Fair Value Estimate late July, 2010, Teva was assuredly vocal that its generic version would be approved in the near-term. Indeed, Teva’s CEO of North America stated in early $27 November that he would be deeply disappointed if the company did not receive approval by the end of the year. With 2010 now in the past, we believe the street Duane Nash, MD JD MBA may begin to recognize that M-Enox could remain the sole approved generic for (415) 263-6650 some time. That said, we do expect Teva to eventually secure approval, although duane.nash@wedbush.com we believe M-Enox will maintain exclusivity until at least Q4:2011. Moreover, we Akiva Felt note that Teva may provide an update during an investor presentation on Jan 10, (415) 263-6648 2011. Should Teva announce a meaningful setback here, we would expect MNTA akiva.felt@wedbush.com shares to move above $20. • We estimate that MTNA will record between $60-70 million in M-Enox revenues until a second generic is approved. Recall that MNTA currently Company Information receives a 45% share of M-Enox profits from partner Sandoz, yet MNTA will be Shares Outst (M) 50.9 entitled to merely a 9-15% royalty should a second generic Enoxaparin be Market Cap (M) $770 approved. Our model currently suggests that MNTA will receive between $60-70 52-Wk Range $10.77 - $26.2 million per quarter in M-Enox revenues (Q4:10 estimate of $64.0 million) as long as Book Value/sh $2.11 M-Enox remains the sole generic. Cash/sh $3.04 • Potential near term partnerships could provide additional cash. We expect Enterprise Value (M) $615 MTNA to sign one or more lucrative partnerships for M-118 and/or follow-on- biologics in the near term, which would likely provide the company with additional LT Debt/Cap 0% cash in the form of an up-front milestone payment. Other potential near-term milestones include progress in the ongoing Copaxone lawsuit and potential updates from Teva regarding its generic Enoxaparin. Company Description • We reiterate our OUTERFORM rating fair value of $27. We continue to believe Momenta Pharmaceuticals is a leader in MNTA remains significantly undervalued and that the current share price presents a developing complex mixtures and follow-Cardiovascular, Devices and Regenerative very attractive opportunity for investors to acquire shares in a company positioned on biologic drugs. The company to benefit immensely from the encroachment of generic drugs and biologics. currently has two generic products, one approved, both directed to multi-billion dollar markets, and both already FYE Dec 2009A 2010E 2011E partnered with Sandoz. REV (M) ACTUAL CURR. PREV. CONS. CURR. PREV. CONS. Q1 Mar $4.0A $3.7A $65.9E Q2 Jun $6.6A $2.8A $66.5E Q3 Sep $4.0A $52.0A $66.9E Q4 Dec $5.6A $64.0E $68.4E $12.3E Year* $20.2A $122.4E $123.6E $211.6E $178.3E Change 37% 505% 73% 2009A 2010E 2011E EPS ACTUAL CURR. PREV. CONS. CURR. PREV. CONS. Q1 Mar $(0.46)A $(0.37)A $0.75E Q2 Jun $(0.43)A $(0.34)A $0.74E Q3 Sep $(0.38)A $0.70A $0.51E Q4 Dec $(0.34)A $0.88E $0.98E $(0.23)E Year* $(1.60)A $0.94E $1.17E $1.77E $1.68E P/E nmx 16.2x 8.6x Change nm nm nm Source: Thomson Reuters Consensus estimates are from Thomson First Call. * Numbers may not add up due to rounding. Wedbush Securities does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see page 4 of this report for analyst certification and important disclosure information.
  • Figure 1: Near-Term Milestones Expected Date Event Jan 10, 2011 Potential Enoxaparin update from Teva at investor presentation Jan 12, 2011 Claim construction hearing for Mylan in ongoing Copaxone lawsuit vs. Teva Feb 14-18, 2011 Potential Enoxaparin update during Teva’s quarterly call Q1:2011 Court ruling on Markman hearing in ongoing Copaxone lawsuit vs. Teva H1:2011 Potential licensing deal for M118 H1:2011 Potential biosimilar partnership(s) H1:2011 Anticipated jury trial for M-356 (Generic Copaxone) Q4:2011 Potential approval of TEVA’s generic LovenoxSource: Company data, Wedbush Securities IncVALUATION AND RISKSOur fair value of $27 is calculated using a sum-of-parts analysis, applying a 30% annual discount to our peak annual sales estimate forM-Enoxaparin in DVT and ACS, M356 in Relapse-Remitting MS, and M118 in ACS, incorporating a 1-10 multiple for each based onstage of clinical risk.We use a probability weighted valuation for M-Enoxaparin, placing a 75% chance that another generic version will be approved in thefuture. Therefore, we believe significant upside to our fair value exists should M-Enox remain the sole generic on the market. In anyevent, however, we predict that M356 (generic Copaxone) will ultimately become MNTA’s most valuable drug.In light of the FDA’s validation of MNTA’s core technology, as well as the commercial promise of M-Enoxaparin, M356 (GenericCopaxone), and the company’s potential in creating follow-on Biologics, we reiterate our OUTPERFORM rating as MNTA remains oneof our favorite longer-term picks. That said, because a break-out in price may not occur until a partnership is announced for a follow-onbiologic or M118, or a positive Markman ruling is issued in the Copaxone litigation, the timing of which are difficult to predict, werecommend MNTA for more patient investors with at least a six-month time horizon.Risks to the attainment of our fair value include risks that: Momenta’s products obtain disappointing clinical trial results and/or failto obtain approval; physician prescribers are not be impressed with the products; Sandoz or another partner fails to effectivelycommercialize Momenta’s drug candidates; third-party patents or lawsuits prevent commercialization; superior clinical results and/orapproval are obtained by a competitor.Duane Nash, MD JD MBA (415) 263-6650 Momenta Pharmaceuticals | 2
  • We use multiples to account for clinical and regulatory risk at Today: 1/4/11 Stock MktCap ($000) Upside various stages of development. NOVEL DRUGS / BIOLOGICS GENERICS Wedbush Current Fair Value for MNTA $27.03 $1,375,276 79%1: in preclinical testing 6: In Pivotal Trial 1: Pre-ANDA 6: favorable trial verdict Current Full Pipeline Value: $27.03 $1,375,276 79%2: passed preclinical 7: Pivotal data Cash: $3.04 $154,9043: IND filing 8: regulatory review 3: ANDA filed 8: patent issues resolved MNTA Total Value: $30.07 $1,530,180 99%4: Phase 1 data 9: approved 4: ANDA accepted 9: approved Current MNTA Stock: $15.13 $769,8455: Phase 2 data 10: launched 5: favorable claim 10: launched construction MNTA Shares Outstanding (000): 50,882 Momenta Pharmaceuticals M-Enoxaparin Valuation Pricing $ MNTA Net Peak Gross WW Wedbush Wedbush Eligible # Annual per Patient Peak Revs Est/Actual Annual Product Indication WW Treatments Est per Year Penetration Peak Sales Est WW Launch Multiple Discount Rate MktCap Fair Stock Fair Est Est ($000) Value ($000) Value Est/Actual ($000) M-Enoxaparin Sole Generic DVT/ACS 5,000,000 $400 45% $900,000 $279,000 8/1/2010 10 30% $1,846,786 $36.30 Multiple M-Enoxaparin DVT/ACS 5,000,000 $250 30% $375,000 $56,250 8/1/2010 10 30% $372,336 $7.32 Generics Probability Weighted M-Enox Value Scenario Total Value P Adj. Value Sole Generic $36.30 25% $9.07 Multiple Generic $7.32 75% $5.49 Total: $14.56 Momenta Pharmaceuticals Remaining Product Pipeline Relapse-Remitting Generic Candidate M356 600,000 $7,000 30% $1,260,000 $419,580 1/1/2012 4 30% $588,895 $11.57 MS Acute Coronary Novel Drug M118 3,500,000 $786 12% $330,000 $82,500 6/1/2015 5 30% $45,432 $0.89 SyndromesSource: Company reports, Wedbush Securities estimatesMomenta Pharmaceuticals (NASDAQ: MNTA) Wedbush PacGrow LifeSciencesHistorical and Projected Income Statement Duane Nash, MD JD MBA(In thousands except per share data)(Fiscal Year Ends on December 31) 2009A 2010 2011E 2012E FY:09A Q1A Q2A Q3A Q4E FY:10E Q1 Q2 Q3 Q4 FY:11E FY:12ERevenues: Royalties on Product Sales $ - $ - $ - $ 44,188 $ 61,240 $ 105,428 $ 63,197 $ 63,770 $ 64,159 $ 9,582 $ 200,708 $ 86,804 M-Enoxaparin in DVT and ACS - - - 44,188 61,240 105,428 63,197 63,770 64,159 9,582 200,708 43,212 M356 in Relapse Remitting Multiple Sclerosis - - - - - - - - - - - 43,593 M118 in Acute Coronary Syndrome - - - - - - - - - - - - Collaboration Revenue $ 20,249 $ 3,690 $ 2,795 $ 7,773 $ 2,726 $ 16,984 $ 2,696 $ 2,748 $ 2,736 $ 2,726 $ 10,905 $ 10,920 Reimbursed development fees 20,249 3,690 2,795 2,773 2,726 11,984 2,696 2,748 2,736 2,726 10,905 10,920 Milestones - 5,000 - 5,000 - - Upfront License Fees - - - -Total Revenues $ 20,249 $ 3,690 $ 2,795 $ 51,961 $ 63,966 $ 122,412 $ 65,893 $ 66,517 $ 66,895 $ 12,308 $ 211,614 $ 97,724Operating ExpensesR&D 60,612 12,255 11,778 12,488 12,769 49,290 13,056 13,350 15,150 15,491 57,048 65,530Sales, General and Administrative 23,800 7,475 5,959 7,325 7,581 28,340 7,847 8,121 8,406 8,700 33,073 37,953Other - - - - - - - - - - - -Total Operating Expenses 84,412 19,730 17,737 19,813 20,350 77,630 20,903 21,471 23,556 24,191 90,122 103,483Operating Income (Loss) (64,163) (16,040) (14,942) 32,148 43,616 44,782 44,990 45,046 43,339 (11,883) 121,492 (5,758)Interest income 450 - - 46 69 115 69 69 69 69 276 276Interest expense (299) (44) (62) (74) (89) (269) (89) (89) (89) (89) (355) (355)Income Before Income Taxes (64,012) (16,084) (15,004) 32,120 43,596 44,628 44,970 45,026 43,319 (11,903) 121,413 (5,837)Other comprehensive income (loss)Provision for Income Taxes (benefit) - - - - 2,231 2,231 6,746 6,754 16,895 - 30,394 859Net Income (Loss) $ (64,012) $ (16,084) $ (15,004) $ 32,120 $ 41,364 $ 42,396 $ 38,225 $ 38,272 $ 26,425 $ (11,903) $ 91,019 $ (6,697)GAAP EPS (Taxed, Fully Diluted) (1.60) (0.37) (0.34) 0.70 0.88 0.94 0.75 0.74 0.51 (0.23) 1.77 (0.13)Weighted Shares Outstanding (Basic) 40,056 43,752 44,069 44,719 45,698 44,560 49,819 50,069 50,319 50,569 50,194 51,194Total Shares Outstanding (Diluted) 40,056 43,752 44,069 46,032 47,182 45,259 51,132 51,382 51,632 51,882 51,507 52,507 Net Cash $89,737 $81,719 $68,733 $65,686 $154,904 $150,599 $191,356 $229,243 $255,839 $298,718 $294,413 $291,021Source: Company reports, Wedbush Securities estimatesDuane Nash, MD JD MBA (415) 263-6650 Momenta Pharmaceuticals | 3
  • Analyst CertificationI, Duane Nash, MD JD MBA, Akiva Felt, certify that the views expressed in this report accurately reflect my personal opinion and that I have notand will not, directly or indirectly, receive compensation or other payments in connection with my specific recommendations or views containedin this report.Disclosure information regarding historical ratings and price targets is available at http://www.wedbush.com/ResearchDisclosure/DisclosureQ310.pdfInvestment Rating System:Outperform: Expect the total return of the stock to outperform relative to the median total return of the analyst’s (or the analyst’s team) coverageuniverse over the next 6-12 months.Neutral: Expect the total return of the stock to perform in-line with the median total return of the analyst’s (or the analyst’s team) coverageuniverse over the next 6-12 months.Underperform: Expect the total return of the stock to underperform relative to the median total return of the analyst’s (or the analyst’s team)coverage universe over the next 6-12 months.The Investment Ratings are based on the expected performance of a stock (based on anticipated total return to price target) relative to theother stocks in the analyst’s coverage universe (or the analyst’s team coverage).*Rating Distribution Investment Banking Relationships(as of September 30, 2010) (as of September 30, 2010)Outperform: 53% Outperform: 11%Neutral: 38% Neutral: 2%Underperform: 9% Underperform: 3%The Distribution of Ratings is required by FINRA rules; however, WS’ stock ratings of Outperform, Neutral, and Underperform most closelyconform to Buy, Hold, and Sell, respectively. Please note, however, the definitions are not the same as WS’ stock ratings are on a relativebasis.The analysts responsible for preparing research reports do not receive compensation based on specific investment banking activity. Theanalysts receive compensation that is based upon various factors including WS’ total revenues, a portion of which are generated by WS’investment banking activities.Capital Markets Disclosures as of January 4, 2011 Company Disclosure Momenta Pharmaceuticals 1Research Disclosure Legend 1. WS makes a market in the securities of the subject company. 2. WS managed a public offering of securities within the last 12 months. 3. WS co-managed a public offering of securities within the last 12 months. 4. WS has received compensation for investment banking services within the last 12 months. 5. WS provided investment banking services within the last 12 months. 6. WS is acting as financial advisor. 7. WS expects to receive compensation for investment banking services within the next 3 months. 8. WS provided non-investment banking securities-related services within the past 12 months. 9. WS has received compensation for products and services other than investment banking services within the past 12 months. 10. The research analyst, a member of the research analyst’s household, any associate of the research analyst, or any individual directly involved in the preparation of this report has a long position in the common stocks. 11. WS or one of its affiliates beneficially own 1% or more of the common equity securities. 12. Lou Kerner maintains a position in shares of Facebook (private)Price ChartsWedbush disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA regulations. Price charts forcompanies initiated upon in the current quarter, and rating and target price changes occurring in the current quarter, will not be displayed untilthe following quarter. Additional information on recommended securities is available on request.Duane Nash, MD JD MBA (415) 263-6650 Momenta Pharmaceuticals | 4
  • * WS changed its rating system from (Strong Buy/Buy/Hold/Sell) to (Outperform/ Neutral/Underperform) on July 14, 2009.Please access the attached hyperlink for WS’ Coverage Universe: http://www.wedbush.com/services/cmg/equities-division/research/equity-research Applicable disclosure information is also available upon request by contacting Ellen Kang in the Research Department at (213) 688-4529, by email to ellen.kang@wedbush.com, or the Business Conduct Department at (213) 688-8090. You may also submit a written requestto the following: Business Conduct Department, 1000 Wilshire Blvd., Los Angeles, CA 90017. OTHER DISCLOSURES RESEARCH DEPT. * (213) 688-4505 * www.wedbush.com EQUITY TRADING Los Angeles (213) 688-4470 / (800) 421-0178 * EQUITY SALES Los Angeles (800) 444-8076 CORPORATE HEADQUARTERS (213) 688-8000The information herein is based on sources that we consider reliable, but its accuracy is not guaranteed. The information contained herein is not arepresentation by this corporation, nor is any recommendation made herein based on any privileged information. This information is not intended to benor should it be relied upon as a complete record or analysis; neither is it an offer nor a solicitation of an offer to sell or buy any security mentionedherein. This firm, Wedbush Securities, its officers, employees, and members of their families, or any one or more of them, and its discretionary andadvisory accounts, may have a position in any security discussed herein or in related securities and may make, from time to time, purchases or salesthereof in the open market or otherwise. The information and expressions of opinion contained herein are subject to change without further notice. Theherein mentioned securities may be sold to or bought from customers on a principal basis by this firm. Additional information with respect to theinformation contained herein may be obtained upon request.Duane Nash, MD JD MBA (415) 263-6650 Momenta Pharmaceuticals | 5
  • EQUITY RESEARCH DEPARTMENT (213) 688-4529 DIRECTOR OF RESEARCH Mark D. Benson (213) 688-4435CONSUMER PRODUCTS AND SERVICES TECHNOLOGY, MEDIA AND TELECOM LIFE SCIENCESConsumer Products Communications Equipment Biotechnology/BiopharmaceuticalsRommel T. Dionisio (212) 938-9934 Rohit Chopra (212) 668-9871 Gregory R. Wade, Ph.D. (415) 274-6863Kurt M. Frederick, CFA CPA (213) 688-4459 Sanjit Singh (212) 938-9922 Christopher Marai, Ph.D. (415) 274-6861E-Commerce Datacenter Technologies Y. Katherine Xu, Ph.D. (212) 938-9955Edward Woo, CFA (213) 688-4382 Kaushik Roy (415) 274-6873Nick McKay (213) 688-4343 David Kaczorowski (415) 274-6883 Cardiovascular, Devices and Regenerative Duane Nash, MD JD MBA (415) 263-6650Entertainment: Toys Enterprise Software Akiva Felt (415) 263-6648Edward Woo, CFA (213) 688-4382 Michael B. Nemeroff (212) 668-9876Nick McKay (213) 688-4343 Michael J. Anderson (212) 668-9778 Emerging Pharmaceuticals Liana Moussatos, Ph.D. (415) 263-6626Footwear and Apparel Entertainment: Retail Richard Lau (415) 274-6851Camilo Lyon (212) 938-9924 Michael Pachter (213) 688-4474 Christopher Marai, Ph.D. (415) 274-6861Alicia Jenks (213) 688-4355 Entertainment: Software Healthcare Services - Managed CareHealthy Lifestyles Michael Pachter (213) 688-4474 Sarah James (213) 688-4503Kurt M. Frederick, CFA CPA (213) 688-4459 Edward Woo, CFA (213) 688-4382 Nick McKay (213) 688-4343 Medical TechnologySpecialty Retail: Hardlines Phillip Nalbone (415) 274-6884Joan L. Storms, CFA (213) 688-4537 Financial Technology Jeffrey Chu (415) 274-6885John Garrett (213) 688-4523 Gil B. Luria (213) 688-4501 Nick Setyan (213) 688-4519 Medical Diagnostics and Life Sciences ToolsCamilo Lyon (212) 938-9924 Zarak Khurshid (415) 274-6823Alicia Jenks (213) 688-4355 Internet and Social Media Lou Kerner (212) 668-9874Specialty Retail: Softlines Ed Arce (212) 938-9928Betty Chen (415) 273-7328Connie Wong (415) 273-7315 Edward Woo, CFA (213) 688-4382 Nick McKay (213) 688-4343Specialty Retail: Sporting GoodsCamilo Lyon (212) 938-9924 Internet and Media TechnologiesAlicia Jenks (213) 688-4355 Kerry Rice, CPA (213) 688-4538RETAIL/CONSUMER MARKET RESEARCH Media James Dix, CFA (213) 688-4315Gabriella Santaniello (213) 688-4557 Movies and EntertainmentCLEAN TECHNOLOGY AND INDUSTRIAL GROWTH Michael Pachter (213) 688-4474 Edward Woo, CFA (213) 688-4382Aerospace and Defense Nick McKay (213) 688-4343Kenneth Herbert (415) 274-6875Andrew Doupé (415) 274-6876 Semiconductors Patrick Wang (212) 938-9938Clean Technology Michael Lucarelli (212) 938-9927Craig Irwin (212) 938-9926David Giesecke (212) 938-9925 Betsy Van Hees (415) 274-6869 Ryan Jue (415) 263-6669Environmental ServicesAl Kaschalk (213) 688-4539 Telecommunications SoftwareKevin Lee (213) 688-4303 Scott P. Sutherland, CFA (213) 688-4522 Suhail Chandy (213) 688-4380Solar TechnologyChristine Hersey (213) 688-4311 Wireless Equipment Scott P. Sutherland, CFA (213) 688-4522Water and Renewable Energy Solutions Suhail Chandy (213) 688-4380David Rose, CFA (213) 688-4319 EQUITY SALES EQUITY TRADING Los Angeles (213) 688-4470 / (800) 444-8076 Los Angeles (213) 688-4470 / (800) 421-0178 San Francisco (415) 274-6800 San Francisco (415) 274-6811 New York (212) 938-9931 New York (212) 344-2382 Boston (617) 832-3700 Boston (617) 832-3700 CORPORATE HEADQUARTERS 1000 Wilshire Blvd., Los Angeles, CA 90017-2465 Tel: (213) 688-8000 www.wedbush.com