Momenta Pharmaceuticals Management Presents at Bank of America Merrill Lynch Health Care Conference (Transcript)

Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)

Bank of America Merrill Lynch Health Care Conference Call

May 13, 2014 12:20 PM ET


Rick Shea – CFO


Sumant Kulkarni – Bank of America Merrill Lynch

Sumant Kulkarni – Bank of America Merrill Lynch

[Starts Abruptly] Sumant Kulkarni, the specialty pharmaceuticals analyst here at BoA Merrill Lynch. I'm very pleased to have Momenta Pharmaceuticals here. For Momenta, we have Rick Shea, the CFO. It's an interesting time in the company's evolution, so without further ado, I'll turn it over to Rick.

Rick Shea

Thank you. All right, I have no idea how I get this -- all right, just set it up here. There we go. Okay. Presenting for Momenta Pharmaceuticals and initially, I'd like to draw your attention to our Safe Harbor statement and the risk factors included in our SEC filings.

And Momenta Pharmaceuticals is a company that is a leader in analytical tools for the characterization, structural, physical characterization and biocharacterization of complex products. We have three product areas -- complex generics, ANDA generics, we have a generic Lovenox on the market partnered with Sandoz. We also have a generic Copaxone partnered with Sandoz that is under review at the FDA. We have a biosimilar program, three biosimilars, two of which are partnered with Baxter Pharmaceuticals. And we have a novel discovery and development program with an oncology drug candidate and a sialylation platform.

So the way we approach the design engineering development of our complex generic and biosimilar is a through very thorough, very detailed structural characterization of these complex products. Both looking at the physical chemical structural characterization as well as doing sophisticated biological comparisons of our products with the branded product. And in the area of biosimilars, we're doing the same thing of understanding the cell line, understanding the glycosylation on these products to a degree of higher resolution than has generally been accomplished.

And we apply this advanced structural and biocharacterization to our approach to novel drug discovery and development as well. So our lead product is the generic Lovenox, enoxaparin sodium injection. This product was approved in July of 2010. We were the first generic Lovenox to be approved on the market of solely generic for the first 15 months during that time period.

We took in over $400 million in profit share revenue from our collaboration with Sandoz, and one of the more successful generic products ever. And we're currently -- because this is a competitive market, we're earning about $4 million to $5 million per quarter in a royalty not from sales of generic Lovenox.

Our next product is a generic version of Teva's Copaxone indicated for multiple sclerosis, one of the leading selling MS drugs. And this is a complex polypeptide and again, we've applied our innovative structural and biocharacterization to developing a what we believe to be an equivalent version of Copaxone and that ANDA is under review with the FDA. We've said most recently that that review is progressing well and we're comfortable that this ANDA will be approved by the FDA and will be approved as an AB rated directly interchangeable generic product.

We do also have this product partnered with Sandoz generics division of Novartis. It's a 50-50 profit split and that's a global collaboration. And this product -- that's patents protecting the generic Copaxone which we're litigating that -- I'll discuss on the next slide, but I'll just mention that in connection Teva has filed citizens' petitions on this product but to date, those petitions have been rejected by the FDA. Most recently, Teva has filed a lawsuit against the FDA for their rejection of those CPs prior to the approval of the product, so we can talk about that a little bit in the Q&A.

A lot of litigation going on here. There's nine patents protecting the Copaxone product -- eight Orange Book patents, one non-Orange Book patents. These patents were litigated, they were upheld in a district court but at the appellate court, one group of patents, including the one patent that extends to September 2015 wasn't validated by the appellate court. Teva appealed that finding and the Supreme Court recently agreed to pick up that phase.

So for that reason, we're operating under a bit of uncertainty here with respect to the Supreme Court's review of those patents. And so consequently, upon FDA approval, if we and Sandoz were to launch the product, it would be considered a launch at risk relative to the September 2015 patents. So that's something also we can discuss a little bit further in the Q&A. But I will say that certainly in our recent earnings call, we not only indicated our confidence in the ANDA being approved, but we certainly believe that the appellate court ruling was in fact the correct ruling and we certainly think that that ruling has a very strong chance of surviving a Supreme Court review. So certainly, we, along with Sandoz and Novartis, are very seriously considering the launch at risk upon approval and that is certainly something that we would consider.

So I'll just move along to discuss our work in biosimilars. Obviously, a large market. Our approach in biosimilars is a little bit different than the competition because, again, with our advanced analytics, structural characterization, biocharacterization, we're looking to get two advantages in this market. One is we're hoping that with our advanced characterization that we can reduce or eliminate the requirements of Phase 3 support of studies. We also believe that we -- our products could be designated as interchangeable and directly substitutable with the branded product. The biologics act [ph] did include and provide for a interchangeability designation for biosimilars.

So with the FDA themselves and this is a slide from the FDA, has indicated that to the extent that your analytical work is of a superior quality, higher resolution and supported by PK/PD data, may reduce or eliminate the need for additional support of clinical studies. So that's certainly what we're going after. And we make a much more significant investment in the physical chemical characterization and a broad range of biological characterization. We use an engineering process development approach that tries to replicate specifically the branded products, our target being to replicate the product as closely as you would for an ANDA product.

And so, again, that is our hope and expectation that we could reduce the unknown portions of the product, demonstrate to the FDA that with respect to the product quality attributes that we are within the equivalence windows of the branded product and by reducing residual uncertainty, again, we could reduce or eliminate the need for support of Phase 3 studies and certainly argue for an interchangeability designation.

And here's this quote here from Steve Kozlowski and Janet Woodcock in discussing these issues and followed up here by Rachel Sherman and in developing some of these biosimilar guidelines, the FDA really goes [ph] upon the approach that they took in reviewing our generic Lovenox ANDA and, by extension, our generic Copaxone ANDA. So the FDA knows us very well. They know the quality of the work that we do.

What we have now in development is two products partnered with Baxter -- M923 and 834, both indicated for autoimmune inflammatory diseases. And our lead program, M923, we're looking to advance that into the clinic with the regulatory filing. We are going to be moving that into the clinic in Europe. So our initial regulatory filing will be a European filing that we're targeting for later this year. And that filing will generate a couple of milestones under our Baxter collaboration.

M511 is a monoclonal antibody for oncology that we're working on that presently is unpartnered and we have the rights to that product. In addition to these three programs, we have several other biosimilar programs at -- in earlier stage. But again, we think this is a great opportunity for us to take advantage of our differentiating capabilities.

Moving on to our novel drug program, clearly, with the work that we've done with generic Lovenox, we have a history of working with heparins. We know heparins very well and from the early days of the company, we had an idea of downregulating the anticoagulation in heparin in order to take advantage of the antiproliferative and antimetastatic properties that are known to be present in heparins.

And so we've done that with M402 which is derived from unfractionated heparin and we are presently studying M402 in pancreatic cancer. It's in the Phase 1/2 program. It's in Part A which is the dose escalation phase of that. We're getting very near to completing that dose escalation phase and plan to be moving in the second half of this year into our Part B study which would be a randomized controlled study of M402 along with Abraxane and gemcitabine versus Abraxane and gemcitabine alone and hoping to disclose and present the data from our Part A study in the second half of the year.

So this is an exciting to our candidate. It's very different -- the mechanism of action is very different than any product that was there. Obviously, heparins have been known to be safe and tolerable. So this is a product that could be used broadly across a wide range of cancer types. So this is a very interesting program for us, a little bit under the radar with all of the interest in our complex generics and biosimilar programs but one that we think could add a lot of value to shareholders.

And then finally, we're working a lot on sialylation technology. We have a platform and approach that we're applying initially to plasma-derived IVIG. But then we quickly discovered that if we deconstruct IVIG and kind of get at the component parts, we could get a very detailed understanding of what's in IVIG, what makes it work and rather than sialylating the plasma-derived IVIG across the entire IVIG product, we could find components within the IVIG and this would be the Fc portion of the antibody which would provide us more product opportunity.

So in effect here, we have a platform based on Fc antibody biology that could exploit the natural mechanism of the IgG function. So this would have the potential for lower dose, higher potency products. And we're seeing multiple factor potency increases with sialylating these Fc-based products.

So this is a very exciting area. It's relatively new for us and we're hoping that later this year, we're planning on having a company R&D day at which time we can talk in more detail about our approach to biosimilars, our progress on M402 and the data from that Phase 1 study as well as talking about this exciting new sialylation and Fc work that we're doing.

So just to recap, we're preparing to get our M356, generic Copaxone ANDA, approved by the FDA; potentially launch the product; continued royalties from the enoxaparin product; continuing to move forward our biosimilars and our novel drug programs. I just want to point out that cash at the end of the first quarter was $224 million. Our operating expenses are running $28 million, $30 million net per quarter. Cash usage from quarter to quarter will fluctuate around an average of approximately $28 million per quarter.

And so that's where we stand right now. So again, some exciting product opportunities across a wide range of complex generics, biosimilars and novel products. At this point, I'll open it to Sumant to ask some questions.

Question-and-Answer Session

Sumant Kulkarni – Bank of America Merrill Lynch

Thanks, Rick. And we do have a mike going around, so please feel free to raise your hand if you want to ask any questions. We're all waiting with bated breath for the Copaxone approval and our clock stopped working, so that probably says something. We have about 10 minutes with Q&A.

You mentioned that the review is progressing well on the ANDA for Copaxone. Given that we're under the new PDUFA regime where you don't really get that much visibility as you used to, how would you characterize progressing well and what types of interactions have you had with the agency?

Rick Shea

Well, we have had quite a bit of interaction with the agencies throughout the course of this review of this ANDA which has been over multiple years. But I would characterize our relationship with the FDA as very good. We're actually very much on the same page with them philosophically, technically, scientifically in our approach to these products.

As Craig has talked about frequently within the last year and a half or so, we switched to a process where previously the interaction with the FDA and particularly with the OGD, Office of Generic Drugs, was relatively informal. I mean you could pick up the phone and call your lead reviewer, project manager, you could set up teleconferences to discuss issues that were outstanding.

But more recently, FDA has gone over to this complete response letter approach. And I would just caution that in a generic world, our experience has been that this complete response letters have been anything but complete. They're actually really just been a tool. I mean I just really call them a response letter as opposed to a complete response letter because that's kind of colored with the new drug experience of a complete response letter being something very negative, indicating something seriously wrong with your application.

And that hasn't been the case. It's really just been a vehicle. It's just a letter. And it's been a vehicle for the FDA to communicate questions, request for data, all of that. So none of these have been, at least in our experience, have been anything that has been out of course or anything that wouldn't previously have been done through another communication vehicle.

So again, we continue to have interaction with the agency. And so far those interactions have been positive. And the review has been moving forward. We've always been cautious with giving a date certain as to the completion of the FDA review. I think it's highly inadvisable for companies to be predicting the timeframe for the FDA to get anything done.

But again, our experience has been positive. And not that it doesn't require a great deal of effort to keep things on track and to keep things moving forward, but again, our experience has been generally good.

Sumant Kulkarni – Bank of America Merrill Lynch

And on the potential at risk launch, you said that you and partner, Sandoz are very seriously considering it, so what about exit discussions that go into such a decision given that Sandoz has not been too investive [ph] in the past on at risk launches.

Rick Shea

Well certainly, this is a significant product. And I think there's two phases to considering whether to launch at risk. One is to analyze the legal situation and you've kind get your patent attorneys and your patent litigators and you look at the precedent cases and you try to get an understanding of what's the issue that the Supreme Court is trying to address, and you're making assessments of essentially will the appellate court's ruling stand with respect to this particular patent.

And I think you have to separate out what the Supreme Court is trying to do with this review which is more to reassess and redefine potentially the rules under which appellate courts review patent cases that they get from the district courts. And it's certainly our view that even if the rules were to be changed, that wouldn't necessarily change the underlying invalidity of particularly this one manufacturing process patent that expires in September 2015.

And we think that the appellate judge that wrote the opinion is highly educated and understands these issues. It was a unanimous decision by the three-judge panel and it was kind of floated to the en banc of the entire appellate court. And it was turned down. So again, we think that there's certainly a strong case to be made that if appellate court ruling was a good one. So that's one phase.

And then the second phase is to look at the commercial side of it. And I will point out that the treble damages has been mentioned as a possibility here. And certainly it's our view that treble damages are usually associated with a willful flaunting if you will of a valid patents or a patent that's currently enforced. And that's not what we have here. We have a patent that's been invalidated at the appellate level and it's been invalidated as I said with a unanimous decision with a ground for treble damage we think would be put in here and it's not something that we necessarily would expect and then even the damages themselves, you can have a broad range of damages. Anybody that follows these patent cases, it could range from a reasonable royalty to some level of lost profit. So there is a range here.

So all of that will go into the decision that we in Sandoz and Novartis ultimately make.

Sumant Kulkarni – Bank of America Merrill Lynch

And could you comment on the capacity that they'd have to supply the market and the number of competitors that you might expect on product like this?

Rick Shea

Yes. So first, in terms of capacity, ours is a US manufactured product. And because of that, because of the outstanding patents, the launch supply that we have available to us is essentially the validation batches that e made which are protected under the Safe Harbor of Hatch-Waxman beginning May 24th, we can kind of open the gates and start building additional inventory which we will certainly do expeditiously.

But we believe we have sufficient launch inventory just by using our validation batches to at least make inroads into the market. And again this is not generic Lovenox where we've got your 50% market share within three or four months.

The MS space is very different. So it would normally be expected that the market penetration would take place over a period of time, that wouldn't be necessarily immediate. So I think in that respect I think will be okay from supply point of view.

Sumant Kulkarni – Bank of America Merrill Lynch

And then switching gears a bit to your other program. We know that some of the revenues if they come in on Copaxone could be calculated at risk and not be available for use by the company. So what has been prioritized and what has been pushed back on the other program?

Rick Shea

As of right now, we've modestly cut back our spending. We've tried to do it by just deferring our non-prioritized activities. We're trying to be smarter about what we're doing. As of today, we haven't put any of our programs on the shelf. We're trying to move them all forward, but we're just keeping track of what exactly are the most initial activities and the timeframe here of uncertainty is from the point of a launch at risk to a decision by the Supreme Court, so that would be presumably sometime in the first half of 2015.

So we're kind of looking at a 12-month time period of uncertainty here. So it will be a little bit of a balancing act. But that's -- we're hopeful that we can retain the value and continue to build value in our other development program.

Sumant Kulkarni – Bank of America Merrill Lynch

And then three quick ones to finish off. On M511, how would you calculate where it is in the potential partnering? And on M402, when is the earliest that it could be partnered? And finally, when do you expect Baxter to convey a decision to you on the three additional biosimilars that they could take up?

Rick Shea

Okay, on the M511, well, I think the most favorable time to partner that product would be certainly once it progresses into the clinic and actually it would be ideal if we could progress it to the point where the clinical path is determined between us and the FDA depending on what that clinical requirement will be for that product.

The cancer product M402, again, most opportune time to partner would be upon completion of the phase 2 study. And then as far as the final three products that Baxter has to select, the present collaboration agreement calls for them to select those products in the February of next year. So that's the timeframe that we're currently operating under.

Sumant Kulkarni – Bank of America Merrill Lynch

Thanks, Rick.

Rick Shea

Thank you very much.

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