Momenta Pharmaceuticals' CEO Discusses Q3 2011 Results - Earnings Call Transcript

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

Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)

Q3 2011 Earnings Call

November 07, 2011 10:00 am ET

Executives

Beverly Holley - Director, IR

Craig Wheeler - President & CEO

Rick Shea - CFO

Analysts

Ritu Baral - Canaccord

Eric Schmidt - Cowen and Company

Sapna Srivastava - Goldman Sachs

Joseph Schwartz - Leerink

Bret Holley - Oppenheimer Securities

Duane Nash - Wedbush Securities

Ami Fadia - UBS

Avik Roy - Monness, Crespi

Operator

Good day, ladies and gentlemen, and welcome to the Momenta Pharmaceuticals third quarter 2011 earnings conference 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 is being recorded.

I would now like to introduce your host for today, Ms. Beverly Holley, Director of Investor Relations. Ma’am, please go ahead.

Beverly Holley

Thank you and good morning. I want to welcome all of you to Momenta’s conference call to discuss financial results for the third quarter of 2011 and to provide a corporate update. With me on the call today with prepared remarks, Mr. Craig Wheeler, President and Chief Executive Officer, and Rick Shea, Chief Financial Officer. Following our remarks, we’ll open the call to 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 statement including comments about our enoxaparin sodium injection commercial prospects and our generic competitors’ prospects for approval and commercialization; our generic Copaxone program, ANDA review and litigation expectations; and our other product development plans and expectations, including our future development, 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 for the quarter ended June 30, 2011 filed with the Securities and Exchange Commission under the section risks factors as well as documents that maybe filed by Momenta from time to time with the Securities and Exchange Commission.

As a result of such risks, the company’s actual results may different materially from those we will be discussing. We’re providing the information on this conference call as of today’s date and assume no obligation to update these comments.

With that, I will now turn this call over to Craig Wheeler, Momenta’s President and Chief Executive Officer.

Craig Wheeler

Thank you, Beverly and I must I really do like your streamlined forward-looking statements. Good morning everyone and thank you for joining us on the Q3 call. This morning I will be providing an update on recent corporate developments of Momenta and after that Rick will give an overview of our financials and we’ll take the questions.

This was a very eventful quarter for us and I’d like to walk you through what has transpired with enoxaparin and provide you with our perspective. First, from a financial standpoint, we reported that net income for the quarter exceeded $60 million. Earnings per fully diluted share were $1.18 and at quarter’s end, we had a cash balance of $308 million and $85 million in accounts receivable. Clearly, we enjoyed a very strong quarter.

Let me provide a synopsis of where we are with enoxaparin commercially right now. As you know, on October 28, we obtained a preliminary injunction against Amphastar and Watson preventing them from marketing their version of enoxaparin. I’ll briefly walk you through the events leading up to that ruling.

On September 19, Amphastar pharmaceuticals received FDA approval of its ANDA for enoxaparin sodium injection. Amphastar is partnered with Watson pharmaceuticals. On September 21, we sued Amphastar, Watson and Amphastar subsidiary International Medical Systems in the US District court for the District of Massachusetts for infringement of two Momenta patents. The patents cover innovative methods for producing enoxaparin which ensure that the commercial product meets standards for identity and quality.

On September 30, we filed for a temporary restraining order and preliminary injunction against the same parties seeking to prevent their launch of enoxaparin. On October 7, we were granted a temporary restraining order pending a hearing on October 20. Following the October 20 hearing, the court extended the TRO to October 28. And finally on October 28, the court granted our request for a preliminary injunction preventing Amphastar and Watson from launching their version of enoxaparin. The key basis for this ruling is the court’s finding that we have a reasonable likelihood of proving that our 866 patents is valid and is infringed by Amphastar Watson.

In his ruling, the judge noted that the defendants failed to raise a substantial question regarding the validity of the 866 patent. The Court also required a security bond of $100 billion to be deposited by November 13th to maintain the preliminary injunction. Sandoz and Momenta are responsible for funding this bond.

As we expect on October 28 Amphastar Watson filed a Notice of Appeal of the preliminary injunction and on November 2 filed an Emergency Motion to dissolve or stay the preliminary injunction. The Motion is now before the Court and preparations for trial will ordinarily proceed in parallel with the appeal.

This decision to grant the PI is a clear positive for us. It prevents Amphastar Watson for launching their product until a district court decision is reached or it is otherwise state dissolved to reverse on appeal, thereby preserving our current hybrid financial arrangement with Sandoz.

It is also significant endorsement of the value of our technology and the patents that protect it. Needless to say we are very pleased with the ruling.

I’ll now take a few moments to clarify the recent changes in our contractual payments with Sandoz. We announced in October that the marketing of an authorized Generic Lovenox by Sanofi-Aventis triggered a change in the contractual terms with our collaborative partners, Sandoz. Under the terms of our agreement, if an authorized generic Lovenox is launched, but no other third party competitor generic Lovenox has been launched, we cease to receive a straight profit share and move into a hybrid arrangement where we receive royalties until a threshold profit level is reached each year. Then we shift to profit share payment.

In his financial review, Rick will provide more detail on how this would play out going forward.

So to sum up, despite the introduction of authorized generic, enoxaparin remains a very significant product opportunity for us. As a reminder, even if a third party does launch, the product will continue to provide solid revenue streams for Momenta for the foreseeable future. We’re proud that the Sandoz Momenta ANDA for generic Lovenox was the first to receive FDA approval and was the sole generic Lovenox for over a year. Since approval, Sandoz has reported net sales of over $1.25 billion effectively created in a first ever generic blockbuster.

This was the core of our business strategy if revenues from the generic enoxaparin would allow us to build a company, whose technology to be applied to both complex generics and to novel drugs. And, this historic approval has changed the game for the approval of other complex drugs. The FDA has noted that the approval profits for enoxaparin may serve as a model for the future approval process for biosimilars.

And finally, the approval of this drug has had an impact beyond providing ourselves financial return on our significant investment in its development. Most importantly, patients are benefitting from reduced treatment costs.

I’ll now comment on the two other court cases concerning enoxaparin. We filed a suit against Teva in December 2010 for infringing of the same two Momenta patents. I’ll note that this suit is being heard in the same court and by the same judge of the Amphastar Watson suit.

In April 2011, we served Teva with claim-by-claim allegations of infringement and discoveries now under way. A trial date for this case has been set for February 2013, although the dates might change, if the hearing is consolidated with the Amphastar case by the Court.

Regarding the suits Sanofi-Aventis filed against the FDA following our Enoxaparin approval, oral arguments on the parties Cross Motions for Summary Judgment are scheduled for December 2011.

As a reminder, in August 2010 the Court denied Sanofi’s request for a preliminary injunction on the sale of enoxaparin. In April 2011, the parties each completed briefing of their Motions for Summary Judgment. We believe that Sanofi’s claims are without merit and continue to believe that the Court will ultimately agree.

I will now discuss M356, our generic version of Teva’s Copaxone, which we’re developing in collaboration with Sandoz.

As a reminder, the litigation with Teva involves seven orange book patents expiring in 2014 and two non-orange book patents, one expiring in 2014 and one in 2015. The trial began in July when the Court reviewed the inequitable conduct portion of the case. This was followed by a claims construction [doing] by the court to the main portion of the trial on all issues outside of an inequitable conduct took place in September.

Post trial briefings are now complete and we are waiting the Court’s ruling. It is important to note that no decisions on any portion of the trial have been issued to this point. The Court has no deadline to issue decisions, but we anticipate one may issue within a window of four to six months. It’s possible that this could take significantly longer.

The Copaxone ANDA is under active review and we’re doing all we can to support and expedite FDA’s review efforts. We continue to believe that ANDA will be approved under the 505 (j) pathway as interchangeable generic Copaxone.

I will now turn to follow-on biologics, which we view as a high potential opportunity for Momenta. To date, we have kept our product portfolio confidential for competitive reasons. However, I will try to give you a better sense of where we are with my comments today. We have been investing for several years to a adapt Momenta’s characterization and process engineering toolset the biologic products. In 2006, we started research efforts to determine whether we could achieve our goal of creating follow-on biologics that are equivalent to brand molecules.

This was a research, proof-of-concept effort, which due to our limited investments of time and the uncertainty of the pathway focused on defining the possibility of building a differentiated FOB business. The efforts we undertook included developing new analytic tools, new process control tools and new transfection and clonal expansion technologies for the characterization and production of biologic products.

Using these tools and technologies, we have developed a deep analytic understanding of multiple-brand of biologics. Currently, for our lead program, we’ve developed critical massive information that has been an important part of framing our approach to FDA meetings and collaboration discussions.

At this point in the business evolution of the FOB platform, we are focusing on a lead program which is currently being scaled-up or beginning to advance a series of others that we anticipate will be part of a broad collaboration in the near future. We like many companies, have been to the FDA to discuss our approach to follow-on biologics and feel even more confident that this is a business that can be very attractive for us.

To reiterate our goals for this business, we seek to differentiate Momenta FOB’s through our scientific and regulatory approach. Our goal is to create a substitutable biologic drug and to do so we’ll reduced clinical trials based on the strength of our physiochemical and biologic characterization, as well as our process engineering skills. As our programs mature and the development pathway becomes clear, I anticipate we’ll be able to give you increasing clarity on our FOB portfolio.

Regarding our novel drug program M402, our preclinical oncology candidate is advancing and we have plans to initiate clinical studies in 2012. We’re also investing in novel drug discovery focusing on two areas, heparan-sulfate product like chemometrics or HSPGs and novel biologics initially focused on Biobetters. Both of these areas leverage the tools and knowhow’s we have created in the development of our complex generics and follow-on biologics. And both discovery areas have the potential to generate multiple product candidates in the future.

I’ll now turn the call over to Rick for a financial update.

Rick Shea

Thanks, Craig. Revenue for the third quarter totaled $88 million and included just under $75 million in profit share revenues from sales of enoxaparin; a $10 million milestone from Sandoz and $3.2 million of collaborative revenues. Sandoz reported enoxaparin net sales of $259 million and as the sole generic through the third quarter of 2011 we earned 45% of the product’s contractual profit based on our profit share revenue of just under $75 million in the third quarter. You can calculate that the contractual profit for the quarter was approximately $166 million or 64% of net sales compared to last quarter’s percentage of net sales of 69%.

On the Novartis earnings call, Sandoz indicated that Q3 sales were impacted by the authorized generic competition, so I’ll point out that despite unit sales in Q3 being comparable to unit sales in Q2, 2011, the lower contractual profit percentage was impacted by some pricing pressure as well as by higher cost of goods.

As Craig mentioned in October, due to the Sanofi Winthrop authorized generic launch, our economics changed under our collaboration with Sandoz. Let me recap the change. The hybrid works like this; in each product year Sandoz is obligated to pay to Momenta 10% to 12% royalty on net sales of enoxaparin sodium until the products cumulative contractual profit reaches $135 million. Thereafter, for the balance of the product year, Sandoz is obligated to pay Momenta 45% profit share.

The contractual profit is determined by taking the total product net sales and subtracting the actual cost of goods and an SG&A allowance. The term product year means a 12 months period based on the date of approval for the product year begins each July and ends in June, because the authorized generic launch in October in the middle of the product year. The amount of profit required to trigger the shift back to profit share has been prorated for the current product year. This means that for the remainder of the product year ending June 30, 2012, Sandoz will pay Momenta the 10% to 12% royalty on net sales until the contractual profit beginning in October reaches a prorated amount of approximately $99 million.

Thereafter, provided that no other third party is marketing the generic Lovenox, Sandoz will pay Momenta 45% of contractual profits on net sales through the remainder of the product year. Let me emphasize that there is no contractual provision actual or implied under which the economics will revert back to a straight profit sled.

With respect to operating expenses, I had indicated that the 2011 we expected that operating expenses excluding non-cash stock-comp expense and net of collaborative revenues would run between $15 million and $18 million per quarter. The Q3 2011 total operating expenses excluding stock and net of collaborative revenues totaled $21.4 million.

While provided the operating expense guidance I was not considering the MIT royalties we pay on enox revenues, which totaled $2.9 million in Q3 or the amortization of the earnout payment we made to Parivid in connection with that acquisition, which was $1 million in Q3. So, excluding those two items, operating expenses ex-stock comp and net of collaborative revenues, totaled $17.5 million for Q3.

Research and development expenses for the third quarter of 2011 were $16.3 million compared to $12.5 million for the same period last year. Excluding stock comp and the Parivid related amortization, the 19% increase in R&D is due primarily to an increase in M356 manufacturing expenses and an increase in headcount and related expenses.

G&A expenses for Q3 2011 were $11.5 million compared with $7.3 million for the prior year of third quarter, excluding the enox related royalty payable to MIT and its stock compensation, the increase was primarily due to increased litigation expenses due to the enoxaparin patent litigation.

The net income for the third quarter of 2011 was $60.3 million or a $1.21 per share basic EPS, a $1.18 fully diluted.

The Q3 2010, we recorded net income of $32.1 million or $0.72 per basic EPS and $0.70 fully diluted. As of December 31, 2010, the company had available net operating loss carry forwards in excess of $200 million, which can be applied to federal and state taxable income in 2011.

We ended the third quarter with $308 million in cash and marketable securities compared with $153 million at the end of 2010, the receivable at quarter-end from Sandoz is approximately $85 million. So this concludes my financial review and we will now open the call to questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) And our first question comes from the line of Ritu Baral of Canaccord.

Ritu Baral - Canaccord

Can you give us a little clarity on what you might be expecting as far as the timelines for Watson and Amphastar’s appeal for the preliminary injunction? The numbers that they have thrown out are basically three to twelve months on getting that sorted through and my follow-up question is on the Copaxone ruling. Will we know when fact finding is done in that portion such that it might indicate a ruling might come sooner rather than later/

Craig Wheeler

In terms of clarity for the timelines, well it really is up to the court. You know these court proceedings can have widely varying timelines. We expect the appeal will go in parallel with the overall case and so we are going to see both of those activities. I think the numbers they are putting out there are possible, but it’s really hard to predict, I mean usually these cases take well over a year and so we are going to have to see the case evolve.

I wish I could give you more clarity but I just don't have it myself. In terms of the Copaxone litigation the trial was done, the briefings are done. So everything is in the hands of the court at this point in time and so we are in a waiting mode for them to actually write their judgment on this one. So there's really no more activities that are necessary to do right now. As I said in the call, we are hoping to see that within four or six months, but I do caution that sometimes these things take much longer.

Ritu Baral - Canaccord

Is fact finding is complete at this stage?

Craig Wheeler

Yes.

Ritu Baral - Canaccord

And the last question, the M356 manufacturing expense increases that Rick mentioned could you further characterize what those might be?

Rick Shea

I am afraid, I don’t want to provide any further detail beyond that, but they are just manufacturing expenses related to M356 and I will leave it at that.

Operator

And our next question comes from the line of Eric Schmidt of Cowen and Company.

Eric Schmidt - Cowen and Company

Rick I am a little bit confused by what happened in the third quarter with regard to your bookings on enoxaparin. I understand that they, the profit share of 45% was an effect through the duration of the quarter. But I think you or maybe Novartis said that sales were impacted or margins in sales were impacted by the authorized generic?

Craig Wheeler

It was impacted by pricing pressures because of the approval of a generic competitor and I think Sanofi took some pretty aggressive pricing actions in marketplace and put some downwards pressure on the pricing.

Eric Schmidt - Cowen and Company

Okay, so Craig that was not the AG, but the brand?

Craig Wheeler

Yes, correct.

Eric Schmidt - Cowen and Company

Okay. Is there any insight into what’s been going on with pricing and to our volumes since the injunction put into place, have they pulled back at all or change their pricing?

Craig Wheeler

We don’t have any specific knowledge I mean Sandoz talked in their call about that they have seen some impact on prices continuing pressure, but we don’t have any real current knowledge. It seems like they had a limited launch, but we don’t really have the full data at this point.

Eric Schmidt - Cowen and Company

You don’t know what their capacity what they have in terms of the capacity, I mean I’ll just think it’s by the market, but you don’t know how much generic they have launched?

Craig Wheeler

No, we don’t know.

Eric Schmidt - Cowen and Company

Okay and then last question was, there’s been a little bit of concern in the marketplace that if Amphastar or some other competitor were to manufacture Lovenox outside the US it might enable them to circumventer patents, do you have any views on whether that’s the case or how and when we might see such manufacture overseas?

Craig Wheeler

Yeah, we feel quite confident about our patents and to remind you that you can’t manufacture products overseas to get around you as patents. So we still continue to be confident that our patents are valid.

Eric Schmidt - Cowen and Company

Even though your patents are safe for the analytical variety, no the process?

Craig Wheeler

Well, these are manufacturing patents, they’re tied to manufacturing.

Operator

Thank you and our next question comes from the line of Sapna Srivastava from Goldman Sachs.

Sapna Srivastava - Goldman Sachs

One quick question just on the housekeeping side is on the royalty rate for MIT, just how should we think about it going forward and the second a little bit broader is on the follow on biologics platform. I just really wanted to understand what kind of drugs do you think that you could have an edge in and then the follow on biologics and you also mentioned a second program could be under a broader collaboration. Just wanted to get some clarity, is this a continued collaboration with Sandoz or are you thinking separately outside Sandoz, any color would be helpful?

Craig Wheeler

Sapna, on the MIT, there is a differential rate on the milestones versus the normal enox revenue. So you probably better off going forward for quarters that we don’t have milestones looking at the MIT royalty that we disclosed and our MD&A and compare that with the enox revenues and that would be the guide going forward.

Let me address your follow-on biologics question. So, first we believe we actually have the ability to work across a broad amount of portfolio of Biologic out there whether be antibody fusions proteins or native proteins, and so really, really we think the more complex molecules are the more we actually have the advantage in terms of the technology that we have depending on, but we have a pretty broad slot of the authorities to do that.

I mentioned the second program -- I mentioned that we have our lead program and then we have a series of other programs that we are initialing in the early stages that we hope to work on in partnership -- we are hoping to get in the near future, and we have certainly not indicated to anybody who that partner might be at this point, and I so I don’t want to tilt our hands at all in terms of biasing to that partner might be?

Sapna Srivastava - Goldman Sachs

And stipulated timeframes we can expect these announcements?

Craig Wheeler

You know, I am cautious on that for any deal discussions because as I have said in the past on these calls our primary objective at this point is to find the strategic alignment with our partner. Certainly the things that have happened over the course of year with the pathway that’s being discussed as well as the things that have transpired on Enoxaparin cases and the Enoxaparin product have brought a lot of interest to our door in terms people who are looking at partnering with us in biologics. But we are positive in terms of the potential to do in the relatively near future, but we are not giving any projection on that.

Sapna Srivastava - Goldman Sachs

If I make this my last clarification, I mean, the way that I look at the prior technology, I mean you have a stamp from the FDA and from the New England Journal of Medicine perspective, and now potentially at least have one very early indicator from the legal side with the PI, I mean when we think about monetizing this towards biosimilar or the bio theme opportunity, I mean, what else should we look for in terms of milestones that you look for, is it the guidance is it a full judgment on intellectual property, what would be the gaining factors towards monetizing this?

Craig Wheeler

Well, I don’t think there is any gaining factor in our way right now. There are certainly going to be things that influence -- the FDA pathway is just now moving around of the regulator FDA and in to the realm of the political on the hill. And that all has to be actually passed into Law which most likely would happen about a year from now, a year like next Octobers when we expect it would actually put into law where you actually have the pathway established.

So, there is no doubt a lot of things are going to happen on the regulatory front right now, but there is going to be a lot of debate because this is going to get tied up in everything else that’s going on in Washington.

So that’s certainly something we will be keeping a very close eye on, over the course of the next year.

Operator

Thank you. And our next question comes from the line of Joseph Schwartz from Leerink.

Joseph Schwartz - Leerink

Hi, congratulations on more good growth. I was wondering, first of all, on the M356 and some court filings, it was alluded that you may -- made in an amendment to your ANDA. I don’t expect you to disclose details of the ANDA in great substance, but I was wondering if you could give us an idea of how significant this is in a relative sense versus the [Enox] review process perhaps or something else that might be helpful? And why was this done and does this add to the review timeframe that you think might be required for the FDA?

Rick Shea

Sure, firstly we don’t comment directly on our regulatory filings, but we have said in the past developments past discussions in the past that there are technologies that we have that assure that we are not violating some patents out there and so we’ve actually adapted those technologies and brought them into our program. But, I don’t anticipate any significant impact on approval timelines. I know we are still working through the application and we think we are on track.

So, I don’t see any major disruptions caused by any changes that may or may not happen on the filings.

Joseph Schwartz - Leerink

Okay. And then on the follow-on biologics front, what we hear about the lead program that you intend to pursue before you file the ANDA, I think in the past that's been the coming out party? And I am wondering, how far are you away from that point, what sort of things need to happen before you are ready to do so and will a partnership most likely follow that, or any order of these things come in reverse?

Craig Wheeler

So, I will start from the ANDA orders. These things certainly can come from reverse and part of the competitive reason that we want to make sure we talk about things at the right time is the partnership itself may impact which programs to work and how we talk about it, when we talk about it when we release it. So, that's certainly one thing for us that we are thinking about in terms of being out there publicly about things.

Operator

Thank you. And our next question comes from the line of Bret Holley from Oppenheimer.

Bret Holley - Oppenheimer Securities

Thanks for taking the question. I am just wondering what your current thoughts are relative to the, I guess the FDA review process for M356, and how that may or may not be independent or dependent on the promulgations FOB guidelines and whether you have kind of any updated thoughts there?

Craig Wheeler

Yeah. Our view is -- thanks for the question, Bret but I think our view is that it is completely independent, and we haven't seen any impact on discussions we've had. It’s really around the science and technology of complex polypeptides that we are dealing with here on this application, and we do not at least from our perspective, sense that there is any relation between what's happening on FOB guidelines, what's going on with Copaxone.

Bret Holley - Oppenheimer Securities

And I guess would you expect where that kind of political pressure or at least some kind -- and do you expect heads up or I mean, I guess just, I guess mechanistically what would you expect.

Craig Wheeler

Yeah, I have to say I don't know what I would expect or I mean, we certainly got some surprises on Enoxaparin. So the political process could -- head to where we might not expect it. But right now there is nothing that I am sensing that puts us off track.

Operator

Thank you. And our next question comes from the line of Duane Nash of Wedbush Securities.

Duane Nash - Wedbush Securities

Good morning and thanks for taking the question. The first question is a modeling one, it’s -- $100 million bond, how should we look at Momenta’s contribution to that as happened to Sandoz?

Craig Wheeler

Duane, we’re going to be sharing that with Sandoz, but we haven’t disclosed exactly what the basis for that sharing is going to be.

Duane Nash - Wedbush Securities

Okay. And then also on Enoxaparin, earlier this month there was some buzz that Amphastar may have indeed sold some small amount of Enoxaparin, from the Court’s ruling it looks like that was not the case, and it looks like your press release this morning was fairly unequivocal that they had not launched, how confident can we that there were no sales earlier?

Craig Wheeler

Well, I think what I can simply state on this from a business under contractual perspectives, our perspective is that there has been no launch there and joint from selling, and so we are pretty confident about this.

Operator

Thank you. And our next question comes from the line Ami Fadia of UBS.

Ami Fadia - UBS

Hi, good morning. I had a couple of questions. First of all, just a follow up from the previous question, if you look at IMS for the last two weeks. There seems to be a very small inventory launched by Amphastar and I was wondering if you would seen that and should it give us any color at all on that?

Craig Wheeler

Yeah. I don’t have any specific information on IMS, but from the prospective of the business shift we have, there is no launch.

Ami Fadia - UBS

And then just with respect to the increase in the manufacturing expenses for M356, was that just specific to this quarter or do you expect that to be an ongoing increase?

Craig Wheeler

Yeah, really that’s just a quarter-over-quarter, third quarter 2011 over third quarter 2010, so those expenses can really vary quite a bit from quarter-to-quarter depending on what kinds of runs that you’re doing. So I wouldn’t read anything too much into that.

Ami Fadia - UBS

And then could you give us some color on sort of the additional pricing pressure that you might be seeing or might be expecting with respect to the launch of the authorized generic? And if you sort of give us some sort of quantification or a frame of reference for the mode of pricing pressure you saw from the branded drug for enoxaparin?

Craig Wheeler

Yeah, that’s a very hard question to answer because we don’t know how they’re going to behave prospectively. It’s something that we’re going to have to see as it evolves overtime. As you know we’re in through that a pretty good position from having enjoying the launch of Amphastar and so we really have to see how they will react overtime in terms of pricing and (inaudible) I wish I did have better insight into that, but I don’t.

Ami Fadia - UBS

Have you seen them or do you have a sense of what prices they’ve come out with their limited inventory they’ve launched – sorry and this is the question for Winthrop, sorry?

Rick Shea

Yeah, well, we do know that they came out with discounted pricing from where we were in the market, but I don’t have specifics there was different pricing out there for different accounts things and that really is the question more for our commercial partner on that. We’ll get a better sense of that when it all gets rolled up into the payments for Momenta.

Operator

Thank you. And our next question comes from the line of Avik Roy from Monness, Crespi.

Avik Roy - Monness, Crespi

Looking back on the quarterly data for the last two quarters Q2 and Q3 it appears that enoxaparin had something like 57% by dollar, by value 57% share of the market which would make it fairly logical that Sanofi would launch a authorized generic. Was that part of your strategy because it seems like you would have at least had the interest at that time in continuing to maintain your market share around the 50% range to avoid giving them the incentive to launch authorized generic?

Rick Shea

If you look at the timing of the launch of Sanofi’s authorized generic, it was launched after the approval of Amphastar. So there was clearly belief on their side that they had actually competition coming into the market. So I don’t think anything on the market share side did anything.

Craig Wheeler

We’ve said in the past, where unit supply constrained, but because Sandoz sells predominantly into the retail chain that has higher dosages, we do have on average higher average selling prices for the units that we’re selling because they are higher dosages so we do have a higher dollar share of the market than a higher unit share of the market. But I that’s been pretty stable over the past several quarters that haven’t changed all that much, we really think the AG launch as Greg said was more precipitated by the Amphastar approval and announcement that we’re going to launch in the Q4.

Operator

(Operator Instructions) Our next question comes from the line of [Mindy Huang] of Bank of America-Merrill Lynch.

Unidentified Analyst

Hi, guys this is Mindy for Sumant Kulkarni. So, I know you don’t provide formal guidance, but in the event of competition with other and the AG enters on generic Enox, how should we think about R&D and other operating expense levels on a go-forward basis?

Craig Wheeler

Well, as we’ve said in the past, we have managed our financials relatively conservatively. In other words, we haven’t dramatically increased our expenses expecting to have long term sole generic status. And so we’re pretty confident in terms of where we are right now that we can actually continue our programs, whether we have the continued benefit of hybrid structures we’re talking about or if we do have another generic competitor that enters the marketplace.

Obviously, the more cash we build up, the more opportunity we have for investments and those are the things that we always have taken into account here and what I’ve said in the past is when we look at where we are with Copaxone that we actually take up from a financial perspective the view that we’re not going to start anything unless we know have the cash that we can actually run through the period of when, even a pessimistic approach, even we did win the patent case, we’d have to fund the company, so we have got the Copaxone revenue. So, we’ve been running relatively conservatively so I don’t anticipate we’ll have any major shifts in how we’re spending our money at this point.

Unidentified Analyst

And I guess for modeling purposes, what type of launch would trigger a step down to 10% to 12% net sales royalty rate?

Craig Wheeler

A launch of a third party generic will trigger that.

Rick Shea

Yeah, and just to be clear, due to the AG launch, we’re effectively in a royalty situation right now until we trip that contractual profit level of $99 million and then we’ll go back to the profit share.

Unidentified Analyst

And I guess my last question is, do you have any update on having discussions on the branded products?

Craig Wheeler

Partnering the brand, no we have no updates at this point in time. We’re still working to try to find a partner for M118, that's gone slow, so we’re really not talking about it a lot right now. But obviously it’s still out there and we’re trying to partner it. So there is really no update at this point on the brand type.

Operator

Thank you. And our next question comes from the line of [Frank Rango of Purchase Capital Management]

Unidentified Analyst

Craig, in reviewing the preliminary injunction I saw that you managed to win entirely on the merits of the 866 patent or you originally filed claiming infringement on both the 466 and 866 and then you dropped the pursuit of the 466 claims. Its not that the 866 is in terrific [height], but I am curious as to why you chose not to pursue the intellectual property in the 466 in this case and now that you have not chosen not to go that way did that mean that the 466 is off the table for the appeal and the full trial that goes with that?

Craig Wheeler

No, actually the 466 is still very much on the table. We basically for simplification purposes had what we needed in 866 and we have not got all the discovery we needed on 466 so we went for the injunction with what we had, but it is not at all we can both the potential of the resolve in terms of taking that patent forward for the whole patent case.

Operator

Thank you. And I show no further questions at this time. I would like to turn the conference back to Mr. Craig Wheeler for any final remarks.

Craig Wheeler

Okay, guys, thanks. It’s been a great quarter for us and you know a lot of things happening at the company now. I am sure we’ll have a lot more to talk to you about at the end of the next quarter so we look forward to seeing you. Thanks for joining us today.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a good day.

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