Momenta Pharmaceuticals Inc. (MNTA- NASDAQ) Analyst Note

Transcription

1 February 19, 2015 Momenta Pharmaceuticals Inc. (MNTA- NASDAQ) Analyst Note Current Recommendation SUMMARY DATA NEUTRAL Prior Recommendation Underperform Date of Last Change 01/01/2013 Current Price (02/18/15) $13.02 Target Price $ Week High $ Week Low $9.90 One-Year Return (%) Beta 2.11 Average Daily Volume (sh) 703,757 Shares Outstanding (mil) 53 Market Capitalization ($mil) $691 Short Interest Ratio (days) Institutional Ownership (%) 85 Insider Ownership (%) 8 Annual Cash Dividend $0.00 Dividend Yield (%) Yr. Historical Growth Rates Sales (%) -5.9 Earnings Per Share (%) Dividend (%) using TTM EPS using 2015 Estimate 38.3 using 2016 Estimate 14.6 Zacks Rank *: Short Term 1 3 months outlook 4 - Sell * Definition / Disclosure on last page SUMMARY Momenta reported a loss of $0.31 per share in the fourth quarter of 2014, narrower than the year-ago loss of $0.59 but wider than the Zacks Consensus Estimate for a loss of $0.16. Revenues increased 66.1% to $21.2 million from the year-ago quarter. We remain concerned about the company s dependence on Enoxaparin for growth. Moreover, the company faced a setback regarding the lawsuit against Teva for its generic (once-daily) version of Teva s Copaxone. Therefore, a final decision in the case will be delayed. Additionally, the termination of Momenta s agreement with Baxter for the development of M834 may affect the candidate s development going forward. However, the company s progress in developing its novel candidate, necuparanib, is satisfactory. Hence, we are maintaining a Neutral recommendation on Momenta. Risk Level * Average Type of Stock Small-Blend Industry Med-Biomed/Gene Zacks Industry Rank * 71 out of 267 ZACKS CONSENSUS ESTIMATES Revenue Estimates (In millions of $) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) A 4 A 11 A 12 A 35 A A 11 A 9 A 21 A 52 A E E Earnings Per Share Estimates (EPS is operating earnings before non-recurring items, but including employee stock options expenses) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) $0.47 A -$0.57 A -$0.50 A -$0.59 A -$2.13 A $0.53 A -$0.51 A -$0.56 A -$0.31 A -$1.91 A 2015 $0.34 E 2016 $0.89 E Note: Quarterly numbers may not add to annual figs due to rounding off. Projected EPS Growth - Next 5 Years % 2015 Zacks Investment Research, All Rights reserved North Canal Street, Chicago IL 60606

2 RECENT NEWS Momenta Posts Wider-than-Expected Loss in Fourth Quarter Feb 17, 2015 Momenta Pharmaceuticals Inc. reported fourth-quarter 2014 loss of $0.31 per share, wider than the Zacks Consensus Estimate of a loss of $0.16. However, fourth-quarter loss was narrower than the yearago loss of $0.59 per share. Revenues increased 66.1% to $21.2 million from the year-ago quarter, but missed the Zacks Consensus Estimate of $28 million. Total revenue comprised product revenues ($4.7 million) and research and development revenues ($16.4 million). In 2014, Momenta s loss decreased to $1.91 per share from $2.13 per share in the previous year. Revenues increased 47.3% to $52.3 billion in In the fourth quarter of 2014, research and development expenses were $26.2 million, down 18.8% from the year-ago quarter. This was due to costs associated with research and biosimilars process development. General and administrative expenses increased 2.6% to $11.1 million from the year-ago quarter. Pipeline Update Momenta s lead candidate, necuparanib, is in the phase II portion of a randomized, controlled study in combination with Abraxane and Gemzar, compared to Abraxane plus Gemzar alone for the treatment of metastatic pancreatic cancer. Data from the study should be out in the first half of In Oct 2014, the company announced positive top-line results from the part A portion of a phase I/II study evaluating necuparanib plus Abraxane and Gemzar for metastatic pancreatic cancer. Mature data should be out by mid In Dec 2014, necuparanib received fast track status from the FDA as a first-line treatment in combination with Abraxane and Gemzar for patients suffering from this disease. Meanwhile, Momenta's generic version of Teva s Copaxone (M356) is currently under FDA review. In Jan 2015, the U.S. Supreme Court ruled in favor of Teva in the patent infringement lawsuit related to the once-daily (20 mg/ml) formulation of M356. The court s ruling has sent the case back to the Court of Appeals for the Federal Circuit (CAFC) for further review. With the expectation that a decision from the CAFC will be out within a year, Momenta and partner, Sandoz (the generics arm of Novartis are preparing to launch the generic version of Copaxone in 2015, if approved. Additionally, on Feb 16, 2015, Baxter International terminated its license to M834 (Momenta s early-stage biosimilar version of Orencia) due to its shift in focus to late-stage biosimilar candidates and restructuring of the company. However, the agreement between the companies for the development of M923 (a biosimilar version of Humira) remains intact. A clinical trial application has already been submitted to initiate a phase I study on M923 in Europe Guidance Momenta expects net cash usage in the first quarter of 2015 to be approximately $30 million. The company intends to reduce cash burn through new collaborative agreements for pipeline development. VALUATION Momenta reported a loss of $0.31 per share in the fourth quarter of 2014, narrower than the year-ago loss of $0.59 but wider than the Zacks Consensus Estimate at a loss of $0.16. Revenues increased 66.1% to $21.2 million from the year-ago quarter. In 2014, Momenta s loss decreased to $1.91 per share from $2.13 per share in the previous year. Revenues increased 47.3% to $52.3 billion in Equity Research MNTA Page 2

3 We remain concerned about the company s dependence on Enoxaparin for growth. Moreover, the company faced a setback regarding the lawsuit against Teva for its generic (once-daily) version of Teva s Copaxone, as the Supreme Court has sent the case back to the Court of Appeals for the Federal Circuit for review. Therefore, a final decision in the case will be delayed. Additionally, the termination of Momenta s agreement with Baxter for the development of M834 may affect the candidate s development going forward. However, the company s progress in developing its novel candidate, necuparanib, is satisfactory. Hence, we are maintaining a Neutral recommendation on Momenta. Momenta s current 2015 earnings multiple is 38.3x, compared to the industry average of 58.7x and the S&P s 16.7x. Over the last five years, shares of Momenta have traded in a range of 2.6x to 19.7x trailing 12-month earnings. Our $14.00 price target is based on 41.2x our 2015 EPS estimate. Key Indicators F1 F2 Est. 5-Yr EPS Gr% P/CF 5-Yr High 5-Yr Low Momenta Pharmaceuticals Inc. (MNTA) Industry Average S&P Biota Pharmaceuticals, Inc. (BOTA) Halozyme Therapeutics, Inc. (HALO) Alnylam Pharmaceuticals, Inc. (ALNY) OncoMed Pharmaceuticals, Inc. (OMED) 15.7 TTM is trailing 12 months; F1 is 2015 and F2 is 2016, CF is operating cash flow P/B Last Qtr. P/B 5-Yr High P/B 5-Yr Low ROE D/E Last Qtr. Div Yield Last Qtr. EV/EBITDA Momenta Pharmaceuticals Inc. (MNTA) N/M N/M Industry Average N/M N/M S&P Equity Research MNTA Page 3

4 Earnings Surprise and Estimate Revision History NOTE: THIS IS A NEWS-ONLY UPDATE; THE REST OF THIS REPORT HAS NOT BEEN UPDATED YET. Equity Research MNTA Page 4

5 OVERVIEW Cambridge, MA-based Momenta Pharmaceuticals, Inc. is a biotechnology company focused on designing products on the basis of a complex systems analysis platform, analyzing data to assess the biological function of these products and developing manufacturing processes for their production. The company operates in three areas Complex Generics, Biosimilars and Novel Drugs. Momenta s only approved product, Enoxaparin Sodium Injection (generic version of Sanofi s Lovenox), was developed in collaboration with Sandoz and received approval in Jul Meanwhile, the company is collaborating with Sandoz to develop M356 (generic version of Teva s Copaxone). The company is also looking forward to develop and commercialize two biosimilars, M923 (biosimilar version of AbbVie s Humira) and M834, for autoimmune and inflammatory diseases, under a global collaboration and license agreement with Baxter International. However, Momenta s proprietary candidate necuparanib, which is being evaluated as a first-line treatment of metastatic pancreatic cancer in combination with Abraxane and Gemzar, is the most advanced candidate in the company s pipeline. Momenta generated revenues of $35.5 million in fiscal 2013 (ended Dec 2013), down 44.5% from the year-ago period. REASONS TO BUY Necuparanib being developed for Pancreatic Cancer: Necuparanib, the company s lead pipeline candidate, is being evaluated as a first-line treatment in combination with Abraxane and Gemzar for the treatment of metastatic pancreatic cancer. Currently, necuparanib is in the part B (phase II proofof-concept) portion of a phase I/II study to evaluate the anti-tumor activity of the combination when compared to Abraxane and Gemzar alone. Data from the part B portion of the study should be out in the first half of It enjoys orphan drug designation in the U.S. for the treatment of pancreatic cancer. With the fast track status received in Dec 2014, we expect necuparanib s development process to expedite. Additionally, Momenta is looking to develop necuparanib for the treatment of other cancers as well namely breast, colorectal and ovarian cancers. Pipeline Progress beyond Oncology: Momenta is looking to build its pipeline beyond its novel candidate, necuparanib. Apart from its generic candidate, M356, the company has a solid pipeline of eight biosimilar programs, which at various stages of development. Additionally, three candidates are expected to enter the clinic over the next 24 months. Momenta intends to initiate studies on hyper-sialylated IVIg (hsivig), anti-fcrn antibody and selective immunomodulator of Fc receptors (SIF3) in Significant Opportunity in the Field of Biosimilars: We believe that biologics will hold an important position in the field of medicines in the future. Momenta said on its R&D Day in Oct 2014 that worldwide biologics sales are expected to reach $250 billion in Currently, Momenta is developing two biosimilars in collaboration with Baxter. While Momenta is responsible for development of the candidates till the submission of their investigational new drug applications, Baxter is responsible for developing, manufacturing and commercialization of the candidates globally. Baxter has already submitted a clinical trial application in Oct 2014 to initiate a phase I study on M923, the biosimilar for AbbVie s Humira, in the EU. Humira generated revenues of $12.5 billion in The other biosimilar, M834, designed to treat certain autoimmune and inflammatory Equity Research MNTA Page 5

6 diseases, is in the early stage of development. Momenta also plans to conduct four biosimilars development programs by REASONS TO SELL Unimpressive Enoxaparin Sales: Momenta earns product revenues in the form of royalties from Sandoz for the sales of enoxaparin sodium injection. However, enoxaparin sales by Sandoz are declining year over year due to lower prices and reduced market share following the FDA approval of Amphastar and Actavis generic versions of Lovenox in Development and Regulatory Setbacks: Momenta has a number of early- and mid-stage candidates in its pipeline. An unfavorable result from any of the development programs would adversely impact the company s shares. Meanwhile, Momenta received a bad news as the U.S. Supreme Court has ruled in favor of Teva in the patent infringement lawsuit related to the once-daily (20 mg/ml) formulation of M356. The court s ruling has sent the case back to the CAFC for further review. Although the Supreme Court has not taken any decision regarding the validity of Copaxone s patents, this action will cause delay in the approval of Momenta s generic version of the drug. Momenta expects a decision by the CAFC within a year. Meanwhile, Momenta has also submitted an ANDA to the FDA for its thrice-weekly (40 mg/ml) formulation of M356. DISCLOSURES & DEFINITIONS The analysts contributing to this report do not hold any shares of MNTA. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The current distribution of Zacks Ratings is as follows on the 1126 companies covered: Outperform %, Neutral %, Underperform 7.4%. Data is as of midnight on the business day immediately prior to this publication. Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5 th group has the highest values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the second, third, and fourth groups of stocks, respectively. Equity Research MNTA Page 6