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Momenta Pharmaceuticals Inc. (NASDAQ:MNTA)

Deutsche Bank 2012 dbAccess BioFEST Conference Transcript

December 4, 2012 1:05 PM ET

Executives

Rick Shea - Senior Vice President and CFO

Analysts

Robyn Karnauskas - Deutsche Bank

Robyn Karnauskas - Deutsche Bank

Great. Good afternoon. My name is Robyn Karnauskas. I'm the Deutsche Bank, Biotechnology analyst. Next with us we have Momenta Pharmaceuticals and we the Chief Financial Officre Rick Shea.

For those of you who are listening to the webcast, feel free to email me with questions. My email address is robyn.karnauskas@db.com. And we'll read the questions anonymously. And of course if you are in the audience and you're (Inaudible) to ask a question feel free, just raise your hand and do so.

But thank you very much Rick, for doing it.

Rick Shea

Thank you, Robyn.

Robyn Karnauskas - Deutsche Bank

I know there's a lot of focus, I won't always focus is on the same things like the Copaxone clinical trial or ask them for clinical trial or [Copaxone] litigation and approval enoxaparin litigation, but I thought maybe we could just start with biosimilars. That's one part of your business, but it's going to be I think more relevant as biosimilars launched this year. So I think I guess first of all for people who are new, so maybe give a brief overview of the agreement you have with Baxter and I had some specific questions on some of the products.

Rick Shea

Okay, I can do that, Robyn. First, I just wanted to mention that I may make forward-looking statements so I draw your attention to our SEC filings and the risk factors included therein. The Baxter agreement was signed in the December of last year. It's a six product global collaboration, up to six biosimilars, two products were named at inception during the course of this year, when Baxter agreed on a third product that we would commence work on. They paid us $33 million dollars as an upfront fee, and we get development milestones that include technical progress milestones as well as regulatory progress, and the way those work is -- I would think about that as, each product that we develop has 3 milestones that has a kind of a medium term technical milestone that we could earn once we essentially establish proof of concept for the biosimilar.

And then when we file an IND we actually get two milestones, we get a technical milestone and then we get a milestone for filing the IND. And in the aggregate we disclose that the total of these milestones were of $92 million, over the six products actually for the first product some of those milestones were embedded in the upfront. Now in addition to that if we're able to substantially reduce the clinical program and particularly reducing from a phase 3 type of a clinical study to -- say a phase 2 type of a study we get to share and those cost savings with Baxter up to a maximum of $50 million per product.

And then finally upon commercialization we earn high single-digit royalty but that royalty rate could be more than doubled under some circumstances and that could be if we designated as interchangeable if we're the only product in the market or just only one competitor. So we do have upside in the commercial and now we fund the cost up through the IND filing, partly offset by the milestones and then post IND Baxter fund the programs.

Question-and-Answer Session

Robyn Karnauskas - Deutsche Bank

So the first question I had was, so what accounts, you talk a lot about on earnings calls doing technical proof of concept, what accounts were technical proof of concept, for biosimilars and is this different for antibodies versus just general protein biologics?

Rick Shea

Well the earlier stage, a technical proof of concept you as I said is, it's really having a product developed that we can demonstrate at a relatively small scale can hit our product quality attributes. And of course we are more rigorous in defining our product quality attributes, we believe then our competitors because of our characterization technologies, so that's a piece of it, there's an IP component, understanding the IP landscape on the product, and that's the earlier stage, now the technical milestone in connection with the IND, that really has to do with maintaining those product quality attribute at a higher scale. And therefore having a product that's ready to be filed with the FDA and ready to go into clinic.

Robyn Karnauskas - Deutsche Bank

And when you mention the IP component are you responsible of doing the work, the freedom to operate work around the IP or who is responsible for that, we do that initial work and then that's reviewed by Baxter in connection with that milestone. And when I think about your technology versus other technology in the past, you're able to do check signatures at the biologics there's a quite interest in the products -- the protein -- or the sugar structure over time, it's really consistent product made, the (Inaudible) else that over the last few years that you thought is important for ensuring quality, the quality control that you guys have implemented, anything else in addition to that do you think is important.

Rick Shea

Yeah, actually there's a lot that we consider important, we're not really revealing publically all of the test that we do, all of the [release] test that we'll be doing with our commercial product but we believe that those tests are substantially more robust and extensive than -- than our competitors would be using.

Robyn Karnauskas - Deutsche Bank

Okay, and then I guess when I think about -- the reason I wanted to start off, with the topic of biosimilars is because Neupogen, even though it fits probably not going to be approved under the interchangeable pathway, is launching next year and then you less than following year, and if these drugs take off more than what investors think, I'm sure investors will look at other companies that are doing this and of course you're one of the -- more in the ones that's very visible, I'm just wondering your thoughts first of all on to Biogen and Amgen if both talked very vaguely about how they're entering the biosimilar business. First of all, I understand that everyone is sort of quiet about their abilities but why you think everyone is so quiet? Do you think that people are working on the same biosimilars or do you think they just don't want -- do you think its targets themselves that you want to be cautious about or is it knowhow or more people will know what company will of the strength for biosimilar and [momentum] will have the strength for bioisimilar?

Rick Shea

I think every company has a different approach to biosimilars market depending on the company and what their primary focus is. Now obviously Amgen's primary focus is novel drug [Di Saporin] development and commercialization so that biosimilars is relatively modest line of business to them, it looks like in their partnership with Watson, they were looking more for cash and then maybe some downstream, commercial infrastructure maybe as the market at the biosimilar market or the specific products that they're working on become more like a generic market rather than branded market, on the other hand, Biogen indicated that they were more interested in biosimilars as a way to use excess manufacturing capacity. So they had a different objective with the partner like Samsung, that's kind of a different model for them.

Teva, Sandoz, they'll probably coming at it from a different perspective as well. So I think every company is coming at it in a different way and people I think right now are focusing very specifically on the FDA process and what will look up like what requirements will the FDA have how long will it take, the approval process, and I don't think the commercial side of it is really, very clear at all and as you were mentioning as once these products begin to be launched, we'll get an idea of, now these products will not be interchangeable its initial products so it'll be interesting to see, what the penetration looks like on these products say compared to Europe.

Robyn Karnauskas - Deutsche Bank

Is there higher -- does that suggest the interchangeability is not required or do you think its indications is the penetration higher than what we all expect?

Rick Shea

Yeah, I think its indication specific, I guess probably product specific as well too, and it's probably some consideration as to how complex the product is as well as the indication?

Robyn Karnauskas - Deutsche Bank

If they do think more share, does that influence at all how you develop products to maybe, you mentioned that it may be more costly to develop your products to do it your way or at least in -- in your recent earnings call it's what you've mentioned will there be less of an emphasis on interchangeability or do you think your plan will stay no matter what the outcome is for these biosimilar products?

Rick Shea

I think we're committed to our strategy and I don't think it will change it very much and again it's like Neupogen, our very late in their product lifecycle and the market dynamics there may be different than they are for say more complex antibody where the underlying product is not as far along in its product lifecycle.

Robyn Karnauskas - Deutsche Bank

Got it. It seems like you're really poised to benefit if you're doing an interchangeable product and you can win a clinical trial development, how soon you may learn that pretty early on in the discussions with the FDA after you file the IND in the clinic I assume like, when is that - I guess the question is when is the path determined with the FDA?

Rick Shea

The guidelines have multiple meetings with the FDA, you're a type one, two, three, four meetings and it's during the course of that process that you get a better understanding of what the requirements are going to be, but I would say, our learnings from the enoxaparin case and from Copaxone case are that the FDA is very data driven and you can have meetings in advance with them, but if you're just discussing something in theory or in concept, and you don't have the data to back it up, you're probably not going to get a very clear or definitive answer from them. So my guess is that you're not really going to get a definitive answer on what your clinical pathway is going to be until they see the data that's in your IND.

Robyn Karnauskas - Deutsche Bank

But right after IND, do you think you have a clear path and whether or not do you think it's market with juts the phase 2 trial or whether or not, will they be clear with you that you can go all the way to phase 3 or tell you what you need to do just do your phase 3 trial.

Rick Shea

Yeah, even there I would say the any guidance that you get from the FDA is always contingent upon them seeing the results of what it is that you do. So in other words if they ask you to some particular activity, some particular piece of work, they always want to see the data from that before they decide, if that was sufficient, so you don't essentially know that it was efficient until they tell you on the back-end that it is, but I think the way it will probably workout is it's the package that we'll be filing will be pretty extensive, it's going to have a lot of data, a lot of characterization data, a lot of bio-characterization data, so when we talk about characterization we talk about both the physiochemical side of the product as well as the biological side of it.

And we're planning on submitting a package that's comprehensively looks at the product in relation to the branded product. You know, I could certainly envision a situation where the FDA is going to take some time, to understand that to absorb that and maybe in the meantime if they go ahead, do a phase 1 safety study, just you can see how that plays out and then while you're doing that we'll take a look and see whether this is going to be going into a phase 3 study or whether a phase 2 study will be sufficient and I think is smaller study, are there ways that we can define that study or direct that study to get at exactly what we're looking at.

Now one thing the FDA has talked about is the process is two steps and that they're looking first, at the product and the comparison of your product with the branded product and it's those -- what they call residual differences, that the clinical effort is directed towards so, if we're demonstrating the FDA that our residual differences are minimal or even non-existent then that's going to dictate what the FDA exactly -- what types of supplemental clinical work would get them completely comfortable that they can approve the product.

Now you mentioned that interchangeability is probably, also what that time -- that we're trying to get from the guidance as to how to design the clinical path that also arise interchangeability as an outcome at the time of the approval, if that can be done.

Robyn Karnauskas - Deutsche Bank

Okay. And so I think 93 is the first one [2014] commission of the goal. And win and it how much of those we provide as far as what the responsive, I assume is going to get more and more competitive time to resolve with biosimilar and I know it's very meaningful to you of that cases up interchangeable product and you don't have Phase III it's very meaningful for your royalties, how much information is Baxter is going to late.

Rick Shea

Well, it's a good point, because in a collaboration it's always joint decision as to what get disclosed I would say certainly August period that in our collaborations with larger companies, pharmaceutical companies or in case the Sandoz generic division of pharmaceutical company.

They tend to whole things back to more confidential, the individual program is not as material to their operations that they are so that's always a little bit of give and take between us and partner as to how much we want to disclose.

But I would think these days where the clinical programs and there has to be out there and on the website then it is going to be made public and certainly I would think it would be in Baxter's interest as well as our interest if that we have some better idea over timeline for when the how long the clinical program would take and what timeframe we could get approve, so.

Robyn Karnauskas - Deutsche Bank

When we told the target when you file the IND or feel after you get feedback from the FDA?

Rick Shea

I would assume that the latest that we will disclose the target would be at the IND filing, and I said to somebody this morning, I'd love to tell you tomorrow, what products we're working on but again that something that's we and Baxter, have decided we want to hold back for competitive purposes and confidentiality but I think as we move forward I think we'll decide what's the right time to make that disclosure.

Robyn Karnauskas - Deutsche Bank

Okay, that's helpful. And then any thoughts on when you're product 511 is an antibody the FDA has not given their guidance for antibodies in as much detail as Europe any thoughts on what the requirements will be for the FDA versus EMA?

Rick Shea

When we say what the requirements are that almost by definition means minimum requirements and since our intention, our strategy, the differentiation that we have, the advantage that we have is going far beyond minimum requirements, I'm not so sure it's going to apply that much to us.

Robyn Karnauskas - Deutsche Bank

Okay. And other companies like Celltrion are going after antibodies, they're being very loud about which antibodies they're going after on either other pharma companies, as well being a little bit more vocal about what they're getting after. Do you think -- or all of them will going to be able to play on the international stage, I mean obviously there's different requirement sometimes different products that you sell for Europe and U.S. different products if the different biosimilar products, I mean so how do you view your technology and the ability to compete globally versus some of the other companies that are just more vocal about their biosimilar [forays].

Rick Shea

Right, I think in general those competitors or international competitors are largely taking a European type development approach, and regulatory approach. And they're taking those products that they're primarily designing for European regulatory approach and then filing it in the U.S. So to extent that we're different is we're essentially taking U.S. for us to approach.

So let me give you a hypothetical example, let's say we file an IND on a product we have discussions with the FDA and they say Phase 2 was going to be sufficient, but for that particular product or that class of product the EMA has decided that Phase 3 is required, well would it make sense for us to do a phase 3 just to get the product on the market in Europe or we better at just doing the Phase 2 get in the market in the U.S. and then approach the EMA post launch saying, we've got an approved product here, the number of patients that might be receiving the product in the first three four months would far exceed the phase 3 clinical study.

So that actually happened with an enoxaparin they initially had guidelines requiring a Phase 3 study but after we were approved in the U.S. they issued revised guidelines that opened the possibility of not doing the phase 3 study. So I think this is something that's fluid and I think we're just going to have to take a look at it on a case by case basis.

Robyn Karnauskas - Deutsche Bank

Are there many products, I know speaking with you in the past some products, again they have very different is different products they once [for Europe] it's made one manufacturing facility, one sold in the U.S. and I don't think people really realize that, in those parts, are there still, can you get - can your technology get around that where you can make one product globally, can anyone get around that or for those cases, do they have to make two products for interchangeability or for approval?

Rick Shea

Again in that case, I think it could be more important to design the product for the U.S. market. And then if there are small differences between U.S. product and European product, I think it will be up us to characterize those differences and to have a position on whether those physicochemical differences have a clinical effect and have a position on that and maybe it might be possible to do some work in order to demonstrate comparability with the European product. So again that scenario where I think it's going to have to just play out and we're going to have to be communicating with the regulators.

Robyn Karnauskas - Deutsche Bank

Okay, before I move onto other things. I wanted to ask you one other, I think key question. Has it yet been determined how you're going to deal with, what is comparability to the brands like if you compare it to the current drug that's floating around or the original product, is that clear yet?

Rick Shea

I think the only way you can look at is is the product that it's been sold in market because when you think about it, how else can we do characterization with about by products and that's the product that we do our characterization on, so we're not going to be able to find 1992 EPO.

Robyn Karnauskas - Deutsche Bank

Okay, fair. I guess before I ask you about some regular other key products and topics. So I think it's a very, I believe of the vascular program is extremely exciting and of course the thing settled and merge with other people with other promoters really again to be the stuff even just (inaudible) even though your father wait from R&D. So how you think about past getting through there, where are your other products, how do your other products helped you as far as getting to enough cash and sort of get to that point, the buyers from the program?

Rick Shea

First of all we have a reasonable amount of cash and I think in the third quarter, we had $218 million in total cash $382 million of total cash, $362 million unrestricted cash, so we have a very substantial cash runway. Our operating expenses are being offset by royalties (inaudible) and we are not comparing, so even though that market that has diminished substantially a half ago, its still providing reasonable offset to our operating expenses. And obviously the approval launched of the generic (inaudible) sound is going to be important to us. So if you assume that to hold up and we can't launch that product until September 2015, we have ample cash run rate that to September 2015.

Robyn Karnauskas - Deutsche Bank

Okay, so you get, even getting through your first R&D which is you are having that. All right, so been going to together, I think people ask you about all the time, which I feel like you should have some (inaudible) into lot of this questions, so the timeline for the enoxaparin, (inaudible) case and this is?

Rick Shea

So I guess I have one global comment on that situation. So I think its possible to take a look at Momenta and completely take the litigation that were involved in out of the evaluation analysis, just assumed that we are not going to be successful and anything any litigation that involved in just hold that to upside, okay.

So this two areas of litigation that were involved in one is trying to overturn the CapEx on tab. So if we’re successful in overturning those patents on appeal, it simply means that, if we get FDA approval, we can launch earlier then September 2015. So, again, I would see that is upside, model it -- model it as of September 2015.

In the case of Enoxaparin litigation, what we are trying to do is, we are trying to uphold the principle that we can create IP around our generic products, having to do with our manufacturing methods and that IP will be enforceable.

And we were able to get support to that at District Court initially. Now that was overturn on appeal and we think that the basis for it, the basis for overturning that was an incorrect reading of the Hatch-Waxman Safe Harbor provision.

So and in fact there is another case that you are aware of the Classen case in which the court of appeal came to an exact opposite conclusion. So that conclusion being that IP is enforceable post-commercialization.

In other words, if I’m a manufacturer, whether generic manufacturer, I have a Safe Harbor up into the point of my commercial activity. At that point, I cannot infringe that with patent.

The ruling that went against us was that Safe Harbor extents into commercial activity. So, again, we don’t believe that that’s correct legal interpretation, certainly is not what was intended by the Hatch-Waxman law.

Now that’s going to take many months and perhaps a year to resolve. Certainly, the pharmaceutical industry in general it is very interested and has been very supportive in filing abacus briefs and working with that case, in order to make sure that Safe Harbor provision of Hatch-Waxman are appropriately defined. So we think that ultimately, that’s going to be the -- we are going to have a right answer there one way or another and our ability to enforce our patent is going to be upheld.

But, again, it’s going to play over such a long period of time. I’d again caution you, don’t worry about it too much. Don’t put it in your model. It’s upside and if we can have that goal in our direction downstream, it may help us to win some damages against Amphastar and Watson, but its not going to bring back Enoxaparin market, where it was.

Robyn Karnauskas - Deutsche Bank

And so when you think about, so those things are ongoing, we just don’t know when Copaxone will get approve. I think, you will update us as far as whether or not the FDA cares about the legal case. There are some early comments by the FDA that they would prioritize applications that had a clear past approval? Do you have any update or thoughts on whether or not the outcome of the legal case and having a clear and accretive deals has any impact on the FDA need sort of deal with that approval?

Rick Shea

Right. FDA is a large organization. They go…

Robyn Karnauskas - Deutsche Bank

Certainly.

Rick Shea

There is a lot of things going on there and there is a lot of different departments and levels. And certainly, in order to be made that because of the legal situation and the outstanding patent on Copaxone that the FDA was slow to pick up their review of our ANDA initially in its early years actually their review went pretty slowly.

But I think we have been saying pretty consistently now for the last year and half to two years that the FDA’s review has been active, that they are very engaged, we have been engaged, it’s been a lot of active dialogue.

So, you could also take the view that, is a possibility at maybe not a high likely, but there is a possibility that we can overturn expect some patents in the second half of 2013, appeals court’s decision.

While, the FDA should have a decision by then if they are watching what’s going on in the court, because that is a possibility. So, again, I don’t think there is a direct correlation there. But I will say that the FDA is actively involved. We think that the review is clearly moving forward and we always hesitant to give a specific guidance or predictions at the how long the process is going to take. We think it’s moving along. It’s moving in a right direction and we continue to be confident that our ANDA will be approved.

Robyn Karnauskas - Deutsche Bank

Okay. Then last question on, if we think, sorry, let just say working scenario, okay, so no news out of Copaxone and then for the IND you don’t get a lot of color that’s filed in 2014, you still really good clarity on whether or not there is an accelerate pattern changeability? And say you need more cash, but don’t want to go the market? What about for us you and IVIG, you think by then, there will be able to many play contributed someway whether through partnership alike we think?

Rick Shea

Yeah. I think that’s certainly a possibility. I mean I think on the novel drug side, I always be hesitant to think that we could sign a partnership that would provide so much cash that we’d ask that program as largest as they follow-on biologics program. So that might be a little bit of stretch. But certainly, collaborations could be signed on either of those products that would offset the expenses of those development programs, and that’s a possibility.

But, again, when thinking about collaboration and partnership discussions, generally the long ways the better returns that you get. If because working in an area that’s particularly exciting, it’s a good results that get generate a lot of interest sometime, you can accelerate that process, because of that competitive dynamic and because of that interest and that’s always a possibility.

Robyn Karnauskas - Deutsche Bank

And I guess, I think, speaking last one last question. If you think about how investors see Momenta. I mean, how should we view this, should we view this company as half Copaxone with the big option for revenue in the near-term and half biosimilars maybe in emerging new products. I mean, how do we view this company are there something that we should focus on that maybe investors are not focused on over the next two years?

Rick Shea

I think with Momenta what you see is what you get. I don’t think there is anything hidden that investors are particularly missing. So I think it really comes down to really whether you have a mid-to-longer term perspective and time horizon for your investment. And I think it’s really trusting that the example of our success in Enoxaparin can be replicated both with Copaxone and in follow-on biologics.

Robyn Karnauskas - Deutsche Bank

Did Baxter look very carefully with Enoxaparin and that was pretty incredible that we’re able to pass cash returns to the market. That becomes the product type but how to launch a biosimilar sync or people have a different opinion. How do launch biosimilars and how did they fair? They did some incredible. They compared the market really quickly over ….

Rick Shea

50%

Robyn Karnauskas - Deutsche Bank

50%, it just seems to us. I’m just wondering whether or not do you think other companies or even Baxter has most of that as a case study or whether or not they’re just looking at everything very differently?

Rick Shea

Well, I mean, I think two things we’re working in favor of the Enoxaparin, one is that it was interchangeable with AB rated and secondly, it is a product that’s used relatively short term and certainly the patients don’t have the visibility into whether they’re using a branded product or the generic, I think they are cardiovascular doctors. We’re comfortable that the generic product was going to be saved. I think with -- in MS, and the patient-doctor dynamic, I think we and send those who are going to have be more work to get the efficacy groups as well as the patients payors, positions, comfortable that this product really is equivalent to the brand in every respect. So I think that’s work that we’ll have to do but I think we can do that work. I think we can get to the essentially same type of market penetration.

Robyn Karnauskas - Deutsche Bank

Well, thank you, very much. I appreciate it.

Rick Shea

Thank you, Robyn.

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