Momenta Pharmaceuticals' (MNTA) CEO Craig Wheeler on Q1 2014 Results - Earnings Call Transcript

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 |  About: Momenta Pharmaceuticals, Inc. (MNTA)
by: SA Transcripts

Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)

Q1 2014 Earnings Conference Call

May 6, 2014 10:00 am ET

Executives

Eric Shaff - VP, Corporate Finance

Craig Wheeler - President & CEO

Rick Shea - CFO

Analysts

Ritu Baral - Canaccord

Jason Gerberry - Leerink Partners

Ronny Gal - Bernstein

Sumant Kulkarni - Bank of America

Difei Yang - R.F. Lafferty

Liav Abraham - Citi

Douglas Tsao - Barclays

Ken Cacciatore - Cowen

Chris Caponetti - Morgan Stanley

Operator

Good day, ladies and gentlemen, and welcome to the Momenta Pharmaceuticals’ First Quarter 2011 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Mr. Eric Shaff, Vice President of Corporate Finance. Sir, you may begin.

Eric Shaff

Thank you, operator, and good morning everyone. We thank you for joining us today for Momenta’s conference call to discuss financial results for the first quarter of 2014. Today’s call is being webcast and you can view the slides we will be presenting in the investor section of our website at momentapharma.com.

Joining me on the call with prepared remarks are Craig Wheeler, President and Chief Executive Officer; and Rick Shea, Chief Financial Officer. Following our remarks, we will open the call for questions.

Before we begin, I’d like to mention that our call today will contain forward-looking statements about management’s future expectations, beliefs, plans and prospects. These forward-looking statements include comments about our enoxaparin sodium injection commercial prospects and revenues, the timing of expectations regarding our generic Copaxone litigation and the potential impact of the litigation on product launch, potential launch revenue, anticipated achievement of development milestones, including milestones and revenue under the Baxter collaboration in 2014, comments regarding future operating expenses, cash burn and total operating expenses for 2014, our generic Copaxone ANDA review, potential sales under the ATM and the use proceeds on any sales, and comments regarding our other product research and development plans and expectations, including expectations of timing for clinical data results and our future development decisions, partnering and commercialization potential for our development programs.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors referred to in the company’s quarterly report on Form 10-Q filed on May 6, 2014 with the Securities and Exchange Commission under the section Risk Factors as well as other documents that may be filed by Momenta from time-to-time with the SEC. As a result of such risks, the company’s actual results may differ materially from those we will be discussing. We are providing the information on this conference call as of today’s date and we assume no obligation to update these comments.

With that, I will now turn the call over to Craig.

Craig Wheeler

Thanks, Eric, and welcome everyone. As you are all aware, Momenta is once again facing an unexpected legal situation. This time due to the Supreme Court's decision review the Federal Circuit ruling that Teva's Copaxone patent expiring in September, 2015 was invalid. We expect that this development will affect our operations and require adjustments for our plan to grow until we can resolve and move beyond the Supreme Court's review.

In this call, I will try to give you as much clarity as I can on the case, its expected timelines and possible outcomes and the operational steps we will need to take at Momenta to manage our business pending this resolution. I'll also give you a short update on the progress of our other programs. I want to emphasize, beyond this new legal uncertainty our business is progressing well with strong technical progress across the portfolio.

I'll start with a short review of the history of the patent litigation that led to the supreme court review, and I warn you guys its going to be fairly detailed so please have your pencils ready. Following the filing of the ANDA for generic Copaxone, Teva initiated a patent suit is under Hatch-Waxman Act. By suing Sandoz and Momenta in the District Court of New York in September, 2008 on Orange Book patents that expire on May 24, 2014. We and Sandoz added to that suit one additional non-Orange Book patent that expires in September of 2015. That case concluded in June of 2012 with a District Court ruling that all patents were valid and entrenched. The ruling enjoined the FDA from approving a generic Copaxone until the Orange Book patents expired in 2014 as required under Hatch-Waxman.

The ruling also enjoined Sandoz and Momenta from marking the product until September, 2015 because of the infringement finding on the 2015 patents. Sandoz and Momenta joint at this point with Mylan's case appeal to the ruling to the US Court of Appeals for the Federal Circuit, the CAFC.

In July, 2013, the CAFC issued a decision that affirmed the district court ruling on several of the Copaxone Orange Book patents that are expected to expire on May 24. But reversed the district court decision and found invalid several other 2014 Orange Book patents and including, importantly, the 808 patent that expires September 1, 2015.

The basis of the invalidity decision was that the patents were indefinite because a critical claim term was insolubly ambiguous. That is, it did not provide adequate notice of what the patent claimed. This unanimous decision by a three judge panel of the CAFC led to an amendment of the district court's injunction eliminating the barrier for launching following the expiration of the May 24 Orange Book patents.

Teva then requested that the CAFC review the decision en banc, which is a procedure where all CAFC judges review a case together. This was denied signaling the full CAFC court did not see merit in reviewing the decision. Normally, with the unanimous decision by the reviewing panel and a refusal to review the case en banc this would be end of litigation.

As expected, Teva filed petition acting the Supreme Court to review the CAFC decision which has given a very low probability of success. In a surprising decision on March 31, the Supreme Court granted Teva's request for cert. To better understand the Supreme Court we needed to step back from the case itself and under the other factors influencing the court. It is then the established law of the CAFC for 15 years the claims construction decisions are reviewed by the CAFC de novo with no difference to the district court's claim construction decisions. But this rule has been controversial with some legal scholars and some judges.

While our case was progressing to the CAFC another case called Lighting Ballast was being reviewed. After a panel decision in that case a rehearing en banc was granted in 2013 to consider whether difference should be given to any aspects of a district court's underlying claims construction findings. The CAFC en banc decisions in Lighting Ballast issued in February of this year upheld the standard of de novo review of claims construction, but in a 6-4 split decision.

This split at the CAFC provided a reason for the Supreme Court to pay attention to the underlying legal issue. Our case reached the Supreme Court docket at this time before the Light Ballast case. And it appears the Supreme Court shows our case to reassess the rules governing the CAFC's discretion when reviewing district court patent rulings on claims construction. This issue of changing the law on deference was not part of any previous decisions affecting our litigation until it was raised at the Supreme Court.

While all litigation has uncertainty, we believe that the CAFC's ruling on the 808 patent has properly decided. Claims construction has been considered a matter of legal interpretation has been within the scope of the CAFC's de novo review. While it is possible that the Supreme Court could alter the standard for deference, we believe the decision and outcome reached by CAFC on the 808 patent should continue to stand under all but the most extreme interpretations of the law by the Supreme Court.

I refer you to our recent briefs filed at the court for more background on why believe the CAFC's ruling on the 808 patent should stand.

Now I'll turn to the discussion of how this new proceeding could play out and the possible timelines for the case. The Supreme Court had issues its timeline for their review of the case. Briefs will be filed between June 13 and September 10. We anticipate oral arguments will occur in October and based on typical Supreme Court timelines a decision will be issued in the first half of 2015, but could come as early as December of this year.

The court could make one of the following four rulings. First, affirm the current law of no deference to district court rulings on claims construction, that is, reserving de novo review at the CAFC and thereby affirming to CAFC ruling of invalidity.

Two, adopt a new standard for deference in claims construction and remand the case to the CAFC for further proceeding based on the new standard.

Three, adopting new standard for deference claims construction, but conclude that the CAFC finding of invalidity was correct even under the new standard. Or four, which review at least likely, adopting new standards for deference in claims construction and rule that the CAFC erred in finding the patent invalid under the new standard.

In the cases where the Supreme Court rules directly we will have clarity on our situation when the Supreme Court decision issues at the latest during the first half of next year. In case two, where the standard is revived and the case is remanded to the CAFC for a rehearing a final decision on the patent case could take significantly more time, possibly well into 2016 and in any case beyond the September 25 patent expiry date.

Well, now that I have given you your legal tutorial under the watch by my IP counsel, I'll now shift discussing how we need to adjust Momenta's operations during the progress of the patent case.

We and Sandoz are evaluating the potential to launch prior to the Supreme Court's decision on Teva's cert petition. With the goal of barring the launch of a generic, Teva requested the Supreme Court to stay the CAFC's ruling allowing a launch at expiry of (inaudible) patent. On April 18, Chief Justice Robert denied Teva's request. We are pleased of course that the option to launch will not be prohibited by the court. However, if we do launch, it is important for our investors to know that we would likely agree to share in the upfront risk of potential damages with Sandoz.

Due to the potential direct expose to litigation damages, we would most likely set aside any product revenues we generate from the launch prior to resolution of the case or if not result at the time prior to the expiration of the 808 patent in September, 2015. This means that we will launch or not for the next 9 to 16 months, we would likely not have access to these revenues to invest into our development pipeline.

If our share of damages were higher than the amount of product revenues generated, we will pay Sandoz back prospectively by deductions up to 50% of our post decision M356 revenue stream until we have paid our 50% share.

As a result, because we can't plan to take advantage of potential revenues from the launch of our generic Copaxone product in the near term, we have implemented a series of actions at the company to help us bridge this gap.

First, we have taken that as internally to reduce our planned operating expenditures, including holding our headcount flat and reviewing project budgets for items that can be deferred or reduced. Second, we have established an at the market or ATM financing vehicle that allows us to raise limited amount of capital as need to ensure we can keep a healthy balance sheet and keep programs moving forward during this period of uncertainty. Rich, will talk more about this in his section.

And three, we are reviewing our non-partnered programs to determine if and when they could be partnered as a means to inject cash and offset future expenditures.

Though we have not yet finalized our revised operating plans, we anticipate with the above actions that we will be able to keep our portfolio moving forward during this period of uncertainty.

Let me move on now to talk about the progress we are making across the portfolio. As we have been talking about Copaxone, I'll start there.

On the regulatory side, the M356 application continues to be reviewed at the FDA as a high priority ANDA due to the expiry date of the Orange Book patent and because there was no generic currently available for MS patients. As a reminder, the 808 patent under consideration is a non-Orange Book patent. So the Supreme Court proceedings should not influence the pace of the FDA's review.

We continue to see progress in that review and are continuing to actively engage with the FDA. We expect approval under the 505(j) pathway this year and will be ready to launch once the approval is granted, should we and Sandoz to chose to launch prior to the Supreme Court's decision on Teva's cert petition.

We and Sandoz are aware the MS market is evolving rapidly with the introduction of Teva's 3 times per week product and the success of oral MS therapies. We are looking at all options for maximizing our opportunity in this effective market. We feel strongly that real demand exists for a generic MS product. And we and Sandoz will continue to work with the FDA to bring this high quality U.S. manufactured generic Copaxone to the market as soon as possible.

Turning to the enoxaparin program, net sales for the quarter totaled $48 million, giving us royalty revenues of $4.8 million. On the enoxaparin litigation front, we continue to pursue our case against Amphastar. In January, the district court issued its final ruling in the summary judgment phase of our case. That ruling, as expected, follows the prior CAFC opinion that our enoxaparin manufacturing patents were not infringed on Hatch-Waxman Safe Harbor.

Following this district court ruling, we have filed an appeal with the CAFC and now the case will proceed to a hearing with a more complete record and argument specifically directed towards the safe harbor opinion. This could put us in a position to overturn what we believe was a flawed opinion that inappropriately broadened the scope of safe harbor. We anticipate the appeal process to take 12 to 18 months.

Now, I'll briefly discuss our biosimilars program. Under our collaboration with Baxter we're advancing two programs, M923 and M834 both in the autoimmune inflammatory space. Our lead program M923 is progressing towards a filing in Europe in the second half of 2014 which would trigger a milestone payment from Baxter and will mark a major accomplishment for our business. Based on our current plan, the likely timing for this filing is towards the end of the year.

I should note that while we expect to continue a productive dialogue with FDA on M923 throughout 2014 we do not expect to have firm guidance at the time we enter the clinic on a reduced trial package or the potential for interchangeability. The biosimilar is evolving on a case by case basis and we're confident in the sophistication of our approach.

With M293, we're preparing to conduct a targeted PK trial in normal healthy volunteers. As that study progresses, we will continue to engage in dialogue with FDA and EMEA about our approach, our extensive data packet, and the need, if any, to conduct further confirmatory clinical work.

Our second Baxter partnered program M834 is advancing towards achievement of a predefined minimum development criteria, milestone in the second half of 2014. The aggregate value to Momenta of the potential 2014 contractual milestones for M923 and M834 is $19 million. As a reminder, Baxter has rights for three additional programs by February, 2015.

We also continue to advance our own biosimilar program M511, a monoclonal antibody for oncology. Other biosimilar programs are at earlier stages of development and may be delayed or staged based on our recast budget due to the Supreme Court Copaxone litigation.

Finally, I'll highlight our new drug R&D where we've made exciting progress towards building a portfolio of products. A core premise of Moment's strategy has always been to build a new drug business whose foundation lies in the deep physicochemical and biological characterization toolset owned through the use in our complex generics and biosimilars program.

M402, our lead program, arose from our research in heparan biology. Building on our biosimilars research our work in autoimmune and inflammatory diseases is giving rise to an exciting new area of focus for the company encompassing sialylation of biologics such as IVIG, novel recombinant Fc product and an exciting push into Fc receptor biology.

I'll provide a few highlights of these programs here but I also want to let you know we're in the process of planning an Investor R&D Day for the fall to give you a chance to meet our scientific leaders and provide you with a deeper understanding of all we have done on the new drug side and the opportunity it creates for us.

Turning to the program, I'll start with M402. As a reminder, M402 is our heparan sulfate mimetic engineered to optimize heparin's natural antitumor effects while reducing its anticoagulation activity to allow for higher doses. We are nearing the end of our Part A study for M402 in metastatic pancreatic cancer. Part A is an open label ascending dose study of M402 administered with Abraxane plus gemcitabine. We have completed enrolment in six cohorts and I'm pleased with the tolerability profile seen thus far in the study. We have already reached the dose that we will be comfortable moving forward to Part B. However, we are still fine tuning the dose and expect to complete the Part A study in the next several months with data likely available in the second half of 2014.

The Part B study will be a randomized control study investigating the safety and antitumor activity of 402 administered in combination with Abraxane and gemcitabine compared with Abraxane and gemcitabine alone in patients with metastatic pancreatic cancer. We are excited to address the significant unmet need in this challenging disease area and look forward to presenting the Part A data later this year.

On the research front, we continue to build on last year's advancements and understand the biologic impact of sialylation on IVIG activity as well as the behavior of recombinant molecules engineered from the Fc region of IgG.

We are seeking a partner for the discovery work we have generated for SIVIG targeting companies already in this field with an established SIVIG supply chain. We've turned out primary research towards developing an engineered Fc region recombinant product candidate and this approach is giving us an opportunity to more carefully design a product candidate to target specific biologic effects we have observed as well as to give us the opportunity to take advantage of recombinant product.

Thank you. And I will now turn the call over to Rick.

Rick Shea

Thanks, Craig. We recorded a net loss for the first quarter of $27 million, comparable to the net loss of $24 million reported for the same quarter last year. Revenues for the first quarter were $11 million compared with $8 million of revenue for the first quarter of 2013, and included $5 million enoxaparin product revenues and $6 million of R&D collaborative revenues.

Sandoz recorded first quarter enoxaparin net sales of $48 million, leveled with $47 million for Q1 last year. Although enoxaparin pricing and share have stabilized over the past several quarters the market remains subject to competitive pricing pressure.

Turning to collaborative revenues, the increase to $6 million reported in the first quarter compared with $2 million for Q1 2013 reflects increased reimbursement from Baxter for biosimilar development costs. Approximately $1 million of collaborative revenues in both quarters consists of the amortization of the 2006 Sandoz equity premium and the 2012 Baxter upfront payment.

First quarter 2014 R&D expense increased to $27 million compared with $22 million in the first quarter of 2013. The increase was primarily due to increased biosimilars process development expenditures and increased headcount facility related products.

Our G&A expense for the first quarter increased to $12 million from $10 million in the same quarter last year due the higher headcount related expenses and higher legal and other professional fees.

We ended the first quarter with a cash balance of $224 million. In the first quarter cash burn was $22 million.

Our operating expenses, net of stock compensation and collaborative revenues, totaled $29 million slightly less than our guidance of $30 million to $32 million. Our cash burn was lower than our quarterly guidance due to collecting the collaborative payments in Q1 that had been due in Q4 2013.

With the actions, Craig discussed to reduce operating expenses; we expect the quarterly operating expenses and cash burn for the balance of 2014 will be somewhat lower than our previous guidance. So we now expect the 2014 operating expenses, net of stock compensation and collaborative revenues, will be $28 million to $30 million per quarter a reduction from $30 million to $32 million. In 2014 cash burn excluding generic Copaxone revenues and Baxter milestones will average approximately $28 million per quarter down from 30 million per quarter.

As Craig mentioned today, we entered into an "At-the-market" equity financing facility or ATM. Under this facility, the company may sell from time-to-time up to an aggregate of $75 million of its common stock pursuant through a shelf registration statement previously filed with the SEC.

The Supreme Court's decision to review the Copaxone patent case means that until the case is resolved, we cannot plan on using revenues from a launch to fund our business prior to the Supreme Court's ruling. Given that we're hopeful that we will prevail in this case, we want to continue to fund our promising development programs although with some reductions to our planned expenditures. We have the cash to do this, but at the same time it's important during this period of uncertainty for us to maintain a strong balance sheet. Having the ATM facility in place, will allow us to have that financial flexibility.

In addition, an ATM is typically a lower cost alternative for accessing capital. Fees are lower than other financing alternative. And the program can result in lower delusion overtime relative to a traditional secondary financing as it allows us an opportunity to take advantage of higher stock prices and high trading volumes with no files to offer discount at the time of issuance.

This concludes my financial review. I will now turn it back to Craig.

Craig Wheeler

Thanks, Rick. In closing I want to thank our investors for continuing to support Momenta. The Supreme Court's decision was a disappointment for all of us and it had taken us toll, but we believe the setback is temporary. The capabilities we have built and the strength of our emerging pipeline will provide us with numerous value creation opportunities. Well we realize the current situation brings a lot of short-term uncertainty this is still a critical year for Momenta.

The progress we have achieved and will achieve with our pipeline this year provides a strong validation to the vision of our MIT founders that the power of our analytic platform and our approach. We are today realizing synergies across our programs that will underpin the value creation we expect to achieve for investors for many years. We will keep you updated as the story evolves.

Thank you and we will now move to Q&A.

Question-and-Answer Session

Operator

(Operator Instructions).

And our first question comes from Ritu Baral from Canaccord. Your line is now open.

Ritu Baral - Canaccord

Craig, how much your adjustments to OpEx are also a function of the I guess for my model higher than expected conversion of Copaxone to the three times weekly version and how does that affect, how you guys keep a value proposition of the generic going forward?

Craig Wheeler

Ritu, thanks for the question. I guess first of all we're pretty optimistic about what generic Copaxone have been doing in this marketplace. When we look at this marketplace overall, we certainly do see 3X and the orals and others but we see a very, very high price market across the board where there is no generic anywhere in the marketplace at this point in time. And so we think launching the generic creates opportunities not just for substitution but also potentially for broader use of Copaxone for use of Copaxone as a first line agent, potentially ahead of some of the other agents like the interferon so there is lots of opportunity that we see out there. So we are not at this point dramatically reducing what we think our expectations are for the molecules. We are not naïve to the success that Teva is having in launching this product. But we do think the need for generic out here is well documented across the point of community and therefore we have a good success once we launch it.

Ritu Baral - Canaccord

And moving on to 923 you mentioned that you expect a European filing in the second half of this year. Where is the U.S. and the EU sort of diverging in how they see these biosimilars application of yours and also can you give us an update about where you are with the FDA and when we might expect that type 3 meeting?

Craig Wheeler

Sure. So it's a difficult question, there is a lot of sub points it's gotten in there, but let me just kind of give you a frame for how we're viewing the world right now. I think the pathway in the U.S. is still evolving. And what we find in Europe is this more established pathway and so if you're thinking about a global program it's often times easier to start your trials earlier in Europe and we also think that as we're looking towards our ultimate goal of trying to drive towards interchangeability or to reduce clinical trials having some of that Phase 1 data will help us with the FDA.

So it's important that we actually get that Phase 1 trial up and running as soon as possible and it's easy to do that in Europe as many of the biosimilars players have found. So as we collect that data we will continue to have those dialogues with the FDA, we are actually anticipating we have multiple meetings over the course of good progress of this trial.

Again, our end goal is to at the end of this deal to have those discussions with both EMEA and FDA due to this an acceleration towards either approval or more focused or fewer trials or potential interchangeability.

Ritu Baral - Canaccord

And last question about 402 since Part A is open label, can you describe what you're seeing possibly on -- any efficacy signals that you might be seeing during Part A?

Craig Wheeler

Well, I'm smiling because I have this discussion with my head of clinical all the time. I think in the Phase 1 trial, it's important that you get the Phase -- the Phase 1 view in total and we will be sharing that all as we're looking at obviously we're encouraged by what we're seeing with the comments we're making in the script and are intent to move forward with Part B these randomized portion of Phase1/2 trial. So we are feeling pretty good about it and we will give you a good view of that hopefully in the fall either before or at R&D Day.

Operator

Thank you. And our next question comes from Jason Gerberry from Leerink Partners. Your line is open.

Jason Gerberry - Leerink Partners

In terms of Copaxone and I'm just trying to get your thoughts as you use the word uncertain a couple of times in the press release. Wanted to get your sense in terms of ability to get a timely FDA Regulatory approval, Mylan made some comments last Thursday about there being some FDA procedural issue and caution investors from assuming a 2Q launch and said that the issues were applicable to both you guys and Simpson. So I guess could you comment first it sounds like in your prepared remarks there are no complete response letters or deficiencies that you view as I guess an issue for timely approval but just kind of curious if you can confirm that? Thanks.

Craig Wheeler

Sure there are several parts to your question. So we're currently under active review and we're pleased with it. And as I said in the past if we encounter anything we think it's going to be meaningful delays from a point of approval we will talk about that. So right now we're still feeling our application is under review and things are going well on the FDA is engaged et cetera.

In terms of Mylan's comment, there are always procedural issues going on at the FDA with any application. I think firstly they've been pretty bullish in terms of at approval specifically on patent expirations and since we're getting close to it, they probably had the back off of that a little bit because that's uncertain. And we've never given specific guidance on dates of approval, but we're giving you a signal that we're positive about our application and we think they are not, at this point in time anything that we see their major barriers in front of us for that that approval.

Jason Gerberry - Leerink Partners

And may be as a follow-up can you comment when you said you're reviewing with Sandoz all option to maximize generic Copaxone. Could you elaborate may be what you mean there?

Craig Wheeler

Well obviously we're evaluating with them launching ahead of Supreme Court resolution Supreme Court cert issue. So that's one of them but the other is that we're looking probably at the marketplace and thinking about we know what would be the best use of a generic in the marketplace and thinking about those strategies in the different environments versus different drugs and formulas. We're thinking about all aspects of that because this is a market where unlike a typical generic market there have been no generic launches in the MS space and all of those drugs that you follow the pricing on those drugs that followed each other up to there about $50,000 a year for patient. So as we look at that we think there is a lot of different ways you can think about marketing this product as you get it into the clinical setting.

Jason Gerberry - Leerink Partners

And I guess this is the last question. If you could confirm I know that you incur I guess the liability there are 50:50 burden for both you and Sandoz. I assume that the 50:50 vote, both parties have to agree to launch at risk and is there a scenario where Sandoz could say we incur liability and we're making unilateral decision or is it definitely both parties have to agree? Thanks.

Craig Wheeler

So Sandoz does not incur all the liability, we are sharing the liability you're correct in that but the timing is different. We have some of that would be deducted later in terms of I guess these are revenue strengths. But contractually they have the authority and the right to make to the launch of risk decision. So this is even though we're jointly working together on this but it is a Sandoz decision. It is not a joint decision we're voting on it. So that's contractually specified in the agreement we have with them.

Operator

Thank you. And our next question comes from Ronny Gal from Bernstein.

Ronny Gal - Bernstein

I got three of them. First regarding Copaxone. Is there an amendment to your agreement with Sandoz per the decision by the Supreme Court or essentially was the decision (inaudible) or what you have written before. That is have you been the supplement here or has this been the agreement all along?

Second, if you can just give us update on the patent reissue effort Teva is making, is this essentially now dead given the Supreme Court review or is this ongoing? And last, just about the M923, the first anti-TNF, I guess the question I would have there is, I think that we were not specific about filing when you talk about -- especially filing for approval or filing an IND essentially starting the clinical trial in the second half of 2014, if you can just give us the information there? I am assuming you talk about starting trails, not about filing court approval, but just want to make sure.

Craig Wheeler

Yes, sure. So let me start with the first one, on the Copaxone. So we have no amendment in place for our contract with Sandoz. What I can state is that we would anticipate, should we launch in advance of the settlement of the cert issue, that we would share in those risks and, therefore, I have to reserve our revenues book. At this point in time, we have no amendment to our contract in place.

On the patent reissue, the patent, it was currently rejected by the patent office but the rules in the patent office are such that Teva could reopen and if they decide to by refilling it, but they were rejected which means its technically closed unless they reopen it.

And the finding on M923, I was talking about entry into the clinic, not filing.

Ronny Gal - Bernstein

Okay. Thank you very much.

Operator

Thank you. And our next question comes from Sumant Kulkarni from Bank of America. Your line is open.

Sumant Kulkarni - Bank of America

Good morning. Thanks for taking my question. First one is on in terms of financial planning, how many competitors are you assuming on Copaxone at market formation?

Craig Wheeler

So obviously, we are thinking like you guys are in scenarios. Our sincere hope and we think it is -- certainly a possibility is that we are likely to first out on market formation. But we are thinking about multiple options in terms of how we would have to launch that depending upon what we find when we actually do get into the market.

Sumant Kulkarni - Bank of America

And given that this is a non-Orange Book patent that expires in September, 2015, are there any new ones to set on the calculation at risk or trouble damages or does that remain the same?

Craig Wheeler

No. I mean its -- we have -- remember that the patents right now don't -- are at the appellate court, they were overturned, right. So they do that they reinstate it. So the risks obviously are there, but we have a pretty good chance of actually wining and prevailing in this case. And I think damages are quite a ways down the road in terms of thinking about it.

Sumant Kulkarni - Bank of America

And switching gears, there have been some changes in the business at Baxter, has that had any impact in a way that that company is thinking about biosimilars in general?

Craig Wheeler

That is a good question. And I don't know if I have a good answer for you. But let me tray to just give you a perspective on where Baxter is. From where we are, this relationship is going well, right, that they are continuing to work on our programs together.

As a small company, you always get nervous when you are back -- your -- or if actually your partner, I mean, go through any major strategic restructuring or changes and that is what's happening in Baxter right now. So we expect as I go through that but that will slow down decision making and what they are restructuring and finding where executive set and figuring out how to pull the companies apart. And so that could delay potentially selection of additional progress. But -- on the other side of it, as a restructured company under BioTime, as you might find them actually more entrusted in accelerating there plunge into biosimilar. And so, the long and the short of it is that the programs we have ongoing they are going well now. Baxter is certainly going through a transition and we don't know what that mean yet, and we took it the longer term.

Sumant Kulkarni - Bank of America

And then, final question is the financial one for Rick. At what point would you need to as a pose to want to access the ATM? And what kind of dilution should be expected that seems to be function of the price at that point in time?

Rick Shea - Chief Financial Officer

Well, clearly the dilution would be a function of the price at the time. I don't think there is any express formula for when or how much we would wan to access. I think we are just always going to have to look at our programs, our planned expenditures, what we are trying to accomplish, value that we are trying to build and our development programs, as well as what is happening in the market both within the MS market as well as in the financial markets. So it don't think there is any express formula there.

Sumant Kulkarni - Bank of America

Thank you.

Operator

Thank you. And our next question comes from Difei Yang from R.F. Lafferty. Your line is open.

Difei Yang - R.F. Lafferty

Thank you. And thanks for taking my question. Just a feel on generic Copaxone. So with regard to the Supreme Court the case, that is pending with the Supreme Court. Is there can we assume in the worst-case scenario that Supreme Court overturns the lower court's decision but, nonetheless, the patent expires in September 2015. So can we assume September 2015 is really the latest, the possible time for you guys to launch generic Copaxone without consequences?

Craig Wheeler

Sure. So the patent that is in the date here is really the 2015 patent, the September 2015 patent. So in a worst-case, if we lost and the Supreme Court or did not like I said did over the term the appellate court's decision I'm not really correct that we could not launch against that patent without potential damages I believe occur until 2015. But I will remind you that right now that that patent is already been overturned at the appellate court. And so, if -- there is a process, it's going to have to go through here. And we are still considering whether we are going to launch before we actually get a Supreme Court decision on this cert petition. So even though that is kind of the worse case that we decided not to launch the vehicle in 2015, we still have options open to us to be able to launch earlier than that.

Difei Yang - R.F. Lafferty

And then follow-up question is with regards to a potential FDA approval. Well in theory, the FDA approval should be independent of the patent litigation. But from your experience have you ever observed cases whether FDA actually pays attention to the patent litigation process and try to coincide their approval with the litigation outcome?

Craig Wheeler

The FDA specifically from a statutory perspective is supposed to be separate from courts, but there is no doubt that they sometimes pay attention to what's going with a Orange Book patent. In this case, this patent, this 2015 patent is non-Orange Book patent. It was never filed to the FDA as an Orange Book patent. And therefore, it does not factor at all into the decision-making process and we've had no indication if there's anything that's delaying anything because of the Supreme Court cert petition.

Difei Yang - R.F. Lafferty

I have a question with regards to pricing. So lately we all have been hearing a lot with regards to pharmaceutical drug pricing especially related to specialty drugs. I think Copaxone is certainly one of those. And in the current pricing environment, do you see any indication there is a potential when the generic version comes out to the market that some of Teva's three weekly dosing can be converted back to the generic? Are you seeing any indication?

Craig Wheeler

Well we're not in the market yet. So it's very hard to say if we have any indication as that would happen. But I will say that we are -- as we explored different avenues to launch, we do see opportunities not just against something like three times per week but against other products that are out there where every product in this marketplace is priced very high. And the physicians have the discretion on which product to start patients on. So you actually made find paradoxically that there is actually increases to use of Copaxone because now you have a lower cost version a bunch of drugs that are all priced at $60,000 a year. And so there's lot of things that could happen in the market and we're not there yet. So we can't really answer that but we are thinking about a lot of different options for this product.

Operator

Thank you. And our next question comes from Mark Fram[ph] from Cowen and Company. Your line is open.

Unidentified Analyst

I was wondering given the success that Teva has had with the three times weekly formulation if there is any plans to try to convert your application or your product into formulation as well?

Craig Wheeler

Well I think you should probably take with confidence that we look at every opportunity in the generic space and so there is the potential and attractive market there and we will take a very, very hard look at that.

Unidentified Analyst

Okay. And then also you keep saying that you see opportunity to expand the Copaxone market against some of the other product in the MS space. Can you give a little more color on comments coming from conversations with managed care, with doctors, and where that’s coming from?

Craig Wheeler

I think probably some of our investors were up add a panel I was on MS pricing and it was actually not neither were saying that it was actually people from pairs of physicians that we are working at a very high price that they were paying and the patients were paying for specialty drugs. And they were debating among themselves about how you think about tiering therapies and how you select therapies and first therapies. And the advantage that Copaxone has is that Copaxone is a very safe first line therapy compared to some of the other agents out there. And so, it's certainly something that should a managed care organization or group of payors or physicians be looking actually to cost down in MS therapy can give an efficacious agent that could be cheaper and safe in first line. And so that kind of along a line that I've been thinking that I have.

Again, we don't really have good information in this, Sandoz doesn’t have good information until they actually get into the marketplace, but it’s in an interesting category when you look at the cost that it happened and the price increases that's happened in it that its started to I think create a lot of creative thinking in terms of physicians in that space of how to do they treat things differently.

You see similar things are getting to begin in the oncology space where people are thinking about how do they get payments in group risk differently where you just have only a preparatory very high priced drugs available to you. So that’s why I try to point towards that as the opportunity. If not more forms in that at this point because we don't have a product in the market yet.

Unidentified Analyst

In the last one you've mentioned that Sandoz is the only company (inaudible) and sole decision maker for an at risk launch, in the event that there was like a settlement between Sandoz and Copaxone; how is that decision made? And also would the payment flow through to Momenta?

Craig Wheeler

Sure. Any legal settlement is a decision for both of us and any legal settlement would accrue to both companies. So that's very different from a launch decision.

Unidentified Analyst

Thank You.

Craig Wheeler

Certainly.

Operator

And our next question comes from Liav Abraham with Citi. Your line is now open.

Liav Abraham - Citi

Good morning. Just a couple of questions of generic Copaxone. Can you comment on Teva's remarks on its (inaudible) last week that it has the option to potentially pursue damages pertaining to lost profits from both the 20mg and 40mg Copaxone formulation. And how does this inform your Sandoz thinking regarding a launch at risk?

And then my second question I will just ask upfront. You mentioned that you are in very active dialogue with the FDA. Can you provide a little bit more color around this given that the IP expiry and therefore a potential regulatory approval is only a few weeks away, I mean what exactly does active dialogue mean and where in the process are you to the extent that you can provide more color. Thank you.

Craig Wheeler

Sure. So let me take the first one on whatever we're saying on their call. So we and Sandoz particularly not naïve in terms of any potential litigation and so on and so whatever doing instead of trying to assert any possible damage that they could possibly think of and you would expect any generic litigation that will be the first ones to put on the table. We would have our own positions on that and certainly would have different perspectives on that work, but they are viewing and alleging.

We think there are legal analysis on some of those things that they are saying is lacking comparing to our view in terms of what we're thinking. But I don't think it changes anything you would expect them to actually be thinking about how to position for any lawsuit that might come up. And of course we're thinking about all the different scenarios that we see in the marketplace and I think you can be pretty assured because you've heard Sandoz say that this turns out to be a positive attractive opportunity for them that they would be willing to take that decision. So I don't take any remarks on seeing companies say out there as anything that we wouldn't be already expecting them to throw into a sort of discussions I'm thinking about.

On the FDA, an active dialogue I mean, I think we usually don't go beyond that in terms of active dialogue. But one thing I would say is what we do know is that because of the patent expiration date this is a high priority application for the FDA that's what they said. They pay attention to when patent expiration are and they try to prioritize applications. One thing the FDA has never said and that's why we've been very careful not to give guidance is therefore it will be approved on the date of patent expiration.

We don't know that and there are certainly processes that we saw we're not preparing that the agency has to go through and not only review but thinking about responding to citizen's petitions et cetera that have to all come together for an approval here. We don't see any barriers to that. But we have never looked at the patent base as a date of approval just a way that the FDA used to prioritize the applications and so we don't know exactly when that approval is coming. Hopefully it will come soon. We don't see any major warning signs, but the date certain is not something that the FDA thinks about so therefore nor are we.

Operator

Thank you. (Operator Instructions).

And our next question comes from Douglas Tsao from Barclays. Your line is open.

Douglas Tsao - Barclays

Following up on the last question in terms of the dialogue Craig that you had with the FDA, I think one of the complaints that we certainly heard recently from many generic manufacturers is that the dialogue with OGD had sort of declined in terms of frequency especially if they are increasingly sort of relying on the sort of complete response letter process. And so perhaps if you could give us some additional clarity or sort of additional details in terms of key points of dialogue that you had with the FDA as well as CRLs that you might have had over the last 12 to 18 months that would be helpful?

Craig Wheeler

Yes, I wish I can give you more about as the policy we do not give any specifics about direct contact and communications we have had with the FDA nor on anything to do with the complete response letter unless we have confirmation that in our possession that says this will likely delay it significantly the approval.

So as you know the CRL comes irretrievably at this point in time and therefore you got serious of questions that the way they ask questions and so it really doesn't mean what it used to mean, but it's kind of like the verbal questions that you used to get. So we don't specifically comment on it because it's not a good significance, it used to be a much unless we saw something that said well this was really something that's going to impact our approval. So I can't give you more than that.

Douglas Tsao - Barclays

And then in terms of on the commercialization side, just curious if you had gotten any feedback from managed care in terms of how they're thinking about this product in terms of obviously you're seeking AB-rated substitutable product. Are they thinking about doing that and how are they thinking about a Momenta product and Mylan product, and potentially even a Teva product as well as others on the market or are they thinking if you could look at this more along the lines of a biosimilar product in which some will be on formulary and sort of mechanisms to assure that a patient to get prescribed one particular generic doesn't end up on another version. Thank you.

Craig Wheeler

Sure thanks. And I guess I'm not going to reveal any specific conversations that we have had with pairs and those are mostly standout discussions because they are the commercial partner on it, but what I can tell you for sure in this marketplace in the world that we are living in today with healthcare costs an AB-rated generic is an AB-rated generic and that the pairs are going to take advantage of every opportunity they have to be able to reduce cost.

So I would anticipate that from the pair perspective that this will be accepted as a substitute one to changeable generic and not treated more like a biosimilar which is something that you're describing with trying to track et cetera.

And the other thing I would say is on tracking and knowing which drug the patient is on that happens for every drug today. So when every drug is prescribed at the pharmacy it is tracked what product is, but there is not specific barrier to use of an AB product or any kind of product at that level.

Operator

Thank you. And our next question comes from Ken Cacciatore from Cowen. Your line is open.

Ken Cacciatore - Cowen

Hey Craig, just listening to the conversation, I am trying to understand if you have a very successful launch on approval and I guess you cannot completely discount treble damages, doesn’t the kind of the difficult nature of having an exceedingly successful launch and treble damages potentially put the overall company at risk? How do you deal with that conundrum of getting a lot of share, lot of sales, not discounting the three times potential damages on a company of your size? Thanks.

Craig Wheeler

Yes. Well, first of all, I think we are not going to comment specifically, but we think that the issues around three times damages and what the damages are, there is lot and lots of issues that play into that. And so, we are not -- you can obviously view everything as a worst case, we kind of look at things as a probable worst case, et cetera. So you should not really focus on just the worst case here.

In terms of us as a company, that specifically why we are taking the steps that we are talking about here is. So as I described in our call, in my prepared comments, that we are going to hold in kind of reserve our revenues that we are getting from any launch of Copaxone until this legal situation clarifies. So that would be our kind of first tranche, right, and we are able to fund this program.

Beyond that, then, it's a deduction again a portion of our revenue. So it is not something that you have to put the whole company at risk. It certainly puts us in a more difficult position in terms of potentially in defiance and those types of things, but we still would get a portion of our revenues above and beyond that after the patent expires, and we have flexibility to think about things like deals and financing, et cetera. So it's not like the -- if we would be assessed a huge amount of damages and all of sudden it would be all doing the company with go away because we are -- and how our terms work.

Operator

Thank you. And our next question comes from Chris Caponetti from Morgan Stanley. Your line is open.

Chris Caponetti - Morgan Stanley

Hi. Thanks very much for taking my question. Going back to Sandoz's decision as to whether or not to launch if approved, is the risk in your mind the potential for -- more so the potential for damages or the fact that this may be in fact a now or never situation, an opportunity to launch, given the conversion to the 40 milligram product? Thank you.

Craig Wheeler

Sure. Well, I think you are pointing out the nature of the calculation and I think, therefore, that's what Sandoz has said is that they are looking at that what the opportunity is versus the opportunity in the future and thinking about what they might do. And I think that is all going to come into the calculations that they do. And as just said, if it looks like an attractive opportunity based on that then you will probably see that decision coming in the future. But it really is a set of calculation that any company in the situation have to do in terms of probabilities and markets, etc cetera and you are exactly thinking that in the right direction. So I -- those are the kinds of things that we are thinking about.

Chris Caponetti - Morgan Stanley

And if you were in driver seat, do you have any view on either of those two?

Craig Wheeler

I do but I -- but in deference to my partner, I probably should not comment.

Operator

Thank you. And we have a follow-up question from Ronny Gal from Bernstein. Your line is open.

Ronny Gal - Bernstein

Hi. And thanks for the follow-up. It's actually a very simple question. Are there any ongoing discussions with Teva today about potential settlement?

Craig Wheeler

Ronny, if there were, we could not say that. So it's a court case. So those things all oftentimes come up at any point during the case when people think they have advantages or not thereon, but we would not comment any specific conversation.

Ronny Gal - Bernstein

Great. Thank you.

Craig Wheeler

Sure. Thanks.

Operator

Thank you. And I'd now like to turn the call back over to management for any closing remark.

Craig Wheeler

Thank you for all good questions, and thank you for your patience through long call here. I appreciate all the continued support. And we will keep you all posted. Thanks again.

Operator

Thank you. Ladies and gentlemen, this does conclude your program. You may all disconnect. Everyone have a wonderful day.

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