Does Momenta Have Momentum?
by Andrew Vaino
Vaino's Biotech Corner
I like technical stock analysis, I really do. I spend money every month subscribing to a website that provides, what I think is, excellent advice on technical analysis. I’ve been pretty happy with it, all in all. But, just as I mistrust theoretical calculations in chemistry in the absence of experimental data I also mistrust technical analysis of stocks in the absence of fundamental value.
Case in point. Yesterday the technical stock service to which I subscribe suggested that, technically, Momenta Pharmaceuticals (MNTA) was a buy. This particular stock seems to have the technical analysts bedeviled. To wit, on October 3rd the stock, trading at $13.05, was downgraded to neutral from long. After climbing to $14.30 on October 5th it was downgraded all the way to avoid and promptly continued rising to $15.56 on October 19th when it was upgraded to neutral from avoid. With this upgrade the stock then fell back down to $13.59 on November 3rd before starting to move up again. It closed at $16.47 yesterday (November 15) and has been upgraded to long.
Momenta’s financials look pretty good. Current assets have been increasing steadily for the past few quarters, and they are as secure as any biotech company. They recently signed a major collaboration with Novartis (NVS) that gave the stock a spike.
I think Novartis has some great scientists working for them (in case my buddy Andreas is reading), but I’m not so sure about their acumen at making deals with biotech companies. Idenix (IDIX) was purchased by Novartis and was working on developing hepatitis drugs. Their stock plummeted 60% in March after a clinical failure. Novartis also signed a deal with Anadys (ANDS), also for hepatitis. Anadys plunged 70% in June of this year on a clinical failure. After Novartis inked a deal with SGX Pharmaceuticals (SGXP) to develop some kinase inhibitors the stock fell 60%, again on a clinical failure.
To be clear, Momenta is a different company. Their technology involves identification of sugars in complex carbohydrate drugs. Their most advanced drug candidate is M-Enoxaparin, a generic version of the anticoagulant heparin derivative Lovenox. Using their technology Momenta was able to identify the structure and produce a generic version of Lovenox.
Momenta has filed an Abbreviated New Drug Application, where an ANDA is equivalent to a NDA for a new drug with the FDA. If the application is accepted they will be able to sell the drug. Trouble here is it’s a generic. Now annual sales for Lovenox are close to $3B, which is appealing. But, as a generic competitive, threats are almost assured. An inviting aspect of pharmaceutical research is the patent protection that provides twenty years of monopoly. This doesn’t exist in the generic market. Viropharm (VPHM) found that out earlier this year when their stock plummeted on rumor another company was going to introduce a generic version of their drug Vancocin.
But it gets worse. Not only is their sole near-term product likely to be subject to competition (they just started a Phase 1 clinical trial on another drug), but there is some uncertainty as to whether they will have the right to sell it at all. Rights to low molecular weight heparin are the subject of a patent dispute between Sanofi-Aventis and both Amphastar Pharmaceuticals and Teva Pharmaceuticals, both of whom have submitted ANDAs on similar generics. In June 2005 a District Court ruled that Sanofi-Aventis’ patent was unenforceable. An appeal is set to begin in December. If the Appeal Court overturns the district courts ruling, commercialization of M-Enoxaparin would be further delayed even with FDA approval. Given that the basis for the ANDA is cutting edge technology this could present difficulties with an organization as conservative as the FDA. Worse yet for Momenta, it means there are other generic drug makers out there with whom they will likely have to compete. Competition is great for a lot of things, but a profit margin is not one of them.
I think the science behind Momenta is excellent, and carbohydrates will be the drugs of the future. But, aside from a single generic drug, whose prospects are far from certain, I don’t see any possibility of a product for years. Once the market stops booming, I think this will be a good short candidate
_
by Andrew Vaino
Vaino's Biotech Corner
I like technical stock analysis, I really do. I spend money every month subscribing to a website that provides, what I think is, excellent advice on technical analysis. I’ve been pretty happy with it, all in all. But, just as I mistrust theoretical calculations in chemistry in the absence of experimental data I also mistrust technical analysis of stocks in the absence of fundamental value.Case in point. Yesterday the technical stock service to which I subscribe suggested that, technically, Momenta Pharmaceuticals (MNTA) was a buy. This particular stock seems to have the technical analysts bedeviled. To wit, on October 3rd the stock, trading at $13.05, was downgraded to neutral from long. After climbing to $14.30 on October 5th it was downgraded all the way to avoid and promptly continued rising to $15.56 on October 19th when it was upgraded to neutral from avoid. With this upgrade the stock then fell back down to $13.59 on November 3rd before starting to move up again. It closed at $16.47 yesterday (November 15) and has been upgraded to long.
Momenta’s financials look pretty good. Current assets have been increasing steadily for the past few quarters, and they are as secure as any biotech company. They recently signed a major collaboration with Novartis (NVS) that gave the stock a spike.
I think Novartis has some great scientists working for them (in case my buddy Andreas is reading), but I’m not so sure about their acumen at making deals with biotech companies. Idenix (IDIX) was purchased by Novartis and was working on developing hepatitis drugs. Their stock plummeted 60% in March after a clinical failure. Novartis also signed a deal with Anadys (ANDS), also for hepatitis. Anadys plunged 70% in June of this year on a clinical failure. After Novartis inked a deal with SGX Pharmaceuticals (SGXP) to develop some kinase inhibitors the stock fell 60%, again on a clinical failure.
To be clear, Momenta is a different company. Their technology involves identification of sugars in complex carbohydrate drugs. Their most advanced drug candidate is M-Enoxaparin, a generic version of the anticoagulant heparin derivative Lovenox. Using their technology Momenta was able to identify the structure and produce a generic version of Lovenox.
Momenta has filed an Abbreviated New Drug Application, where an ANDA is equivalent to a NDA for a new drug with the FDA. If the application is accepted they will be able to sell the drug. Trouble here is it’s a generic. Now annual sales for Lovenox are close to $3B, which is appealing. But, as a generic competitive, threats are almost assured. An inviting aspect of pharmaceutical research is the patent protection that provides twenty years of monopoly. This doesn’t exist in the generic market. Viropharm (VPHM) found that out earlier this year when their stock plummeted on rumor another company was going to introduce a generic version of their drug Vancocin.
But it gets worse. Not only is their sole near-term product likely to be subject to competition (they just started a Phase 1 clinical trial on another drug), but there is some uncertainty as to whether they will have the right to sell it at all. Rights to low molecular weight heparin are the subject of a patent dispute between Sanofi-Aventis and both Amphastar Pharmaceuticals and Teva Pharmaceuticals, both of whom have submitted ANDAs on similar generics. In June 2005 a District Court ruled that Sanofi-Aventis’ patent was unenforceable. An appeal is set to begin in December. If the Appeal Court overturns the district courts ruling, commercialization of M-Enoxaparin would be further delayed even with FDA approval. Given that the basis for the ANDA is cutting edge technology this could present difficulties with an organization as conservative as the FDA. Worse yet for Momenta, it means there are other generic drug makers out there with whom they will likely have to compete. Competition is great for a lot of things, but a profit margin is not one of them.
I think the science behind Momenta is excellent, and carbohydrates will be the drugs of the future. But, aside from a single generic drug, whose prospects are far from certain, I don’t see any possibility of a product for years. Once the market stops booming, I think this will be a good short candidate
_
posted by Nico at
11:01 PM
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