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Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)

Q1 2012 Earnings Call

May 3, 2012 10:00 AM ET

Executives

Lora Pike – Senior Director, IR and Corporate Communications

Craig Wheeler – President and CEO

Rick Shea – SVP and CFO

Analysts

Sapna Srivastava – Goldman Sachs

Ritu Baral – Canaccord

Sumant Kulkarni – Bank of America

Eric Schmidt – Cowen & Company

Joseph Schwartz – Leerink Swann

Operator

Good day, ladies and gentlemen and thank you for your patience. You’ve joined the Momenta Pharmaceuticals First Quarter 2012 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference may be recorded.

I would now like to turn the call over to your host, the Senior Director of Investor Relations and Corporate Communications, Ms. Lora Pike. Ma’am, you may begin.

Lora Pike

Thank you and good morning, everyone. I want to welcome all of you to Momenta’s conference call to discuss financial results for the first quarter of 2011. With me on the call today with prepared remarks are Craig Wheeler, President and Chief Executive Officer, who will provide an update on our major programs. Followed by Rick Shea, Chief Financial Officer who will review our first quarter results and comment on our plans to reinvest in the company to drive future growth. Also joining us today for the Q&A portion of the call is Dr. Jim Roach, our Chief Medical Officer.

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, our generic Copaxone program, ANDA review and patent 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 annual report on Form 10-K for the year ended December 31, 2011, filed 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’re 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

Thank you, Lora and good morning, everyone. Thanks for joining us. I’d like to start today by introducing all of you to Lora Pike, our new Senior Director of Investor Relations and Corporate Communications. I’m sure many of you already know Lora from her Vertex experience. She has tremendous depth in the IR area and we’re thrilled that she has chosen to join us here at Momenta.

I’d also like to personally thank Beverly Holley, who has retired after a long and productive career, including the past five years ably serving as Momenta’s Senior IR executive. Her counsel will be missed and we offer her our best wishes.

Now, turning to the business at hand. The first quarter of 2012 was a period of significant transition for the company. First, in January, as a result of the Court of Appeals staying the preliminary injunction on our competitors’ launch of their generic Lovenox, Momenta’s enoxaparin revenues transition from a hybrid royalty profit to a tiered royalty-based arrangement.

Second, in February, our follow-on biologics deal with Baxter officially closed and we commenced our work in collaboration with Baxter to bring up the sixth biosimilar and potentially interchangeable drugs to market.

Third, during the first quarter, we began a research effort to apply our recently acquired Sialic Switch technology to the development of a sialylated related IDIG product.

And, finally we are presenting – presently screening patients in the next few weeks and expect to initiate dosing in a proof of concept phase I & II clinical trial for our novel drug M402, in people with metastatic pancreatic cancer.

I’d like to focus my prepared remarks today on a review of our three core areas, complex generics, Biosimilars and novel drugs.

First, our market drug, enoxaparin. We reported $22 million in enoxaparin product revenues, based on Sandoz reported net sales of $176 million. Our revenues included a hybrid profit share on net sales through late January, then a royalty in the balance of the quarter. Our reduced level of enoxaparin revenues in the first quarter of 2012 reflected the launch of our competitors in enoxoparin and the relaunch of Sanofi Winthrop’s authorized generic, Lovenox, which impacted Sandoz’s enoxaparin unit volume and pricing. Rick will provide additional context around these results in his remarks.

It’s important to note that as of today, the U. S. Court of Appeals has not issued a ruling regarding their rationale for staying in the preliminary injunction against Amphastar and Watson. That ruling could come at any time. In the underlying Enoxaparin patent litigation, there is a claims construction hearing tomorrow, May 4th. And the trial is scheduled for October of this year. So until we get a ruling in this litigation, Amphastar and Watson’s generic Lovenox is being marketed at risk.

On the commercial front, it’s still too early to predict how competition will evolve, but in the absence of an injunction, we expect to see an increasingly competitive environment. As I said last quarter, competition is a fact of life in the generics business. 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 more than 18 months.

Over that time, enoxaparin has provided the company with a significant cash balance that we can now draw on to invest in the company’s development programs. Most importantly, patients as well as the healthcare system have been and are continuing to benefit from reduced enoxaparin treatment costs.

Our second complex drug M356, our generic Copaxone, continues to advance. The FDA’s review of our ANDA is moving forward and we’re pleased with the constructive dialog we’re having with agency. We believe that our ANDA will be approved under the 505j pathway as an interchangeable generic Copaxone. As a reminder, there are nine Copaxone related patents that are being litigated, the last of which expires in the third quarter of 2015.

A ruling on the patent litigation could come at any time over the next several months, at which point, we will be able to define our strategy for the inevitable appeals process.

I’ll now turn our next core area of the business, follow-on biologics. As you know, in December, we signed a global collaboration with Baxter to develop up to 6 biosimilars with the goal of achieving interchangeability. We made considerable progress in the first two months, following the initiation of the collaboration at February and we’re pleased with the direction the programs are headed. The strategic alignment in spirit of cooperation across the new collaboration is notable and Baxter is going to be a great partner for this business.

We are investing significant resources to build our capabilities, so we can effectively execute against this ambitious agenda. We believe our unique technology positions us to become a leader in this emerging multi-billion dollar segment of the pharmaceutical industry. We continue to participate in active discussions with the FDA to help shape the newer abbreviate to approval pathway biosimilar and interchangeable biologics.

Our Chief Medical Officer, Dr. Jim Roach will be testifying at the FDA’s public hearing on May 11 to provide Momenta’s comments to the draft guidance the FDA issued in February. We are very pleased with this guidance and these documents the FDA continues to emphasize a science-based stepwise review process. Dr. Roach’s comments were to support FDA’s proposed approach.

The approach should allow us to take full advantage of our advanced characterization technology. The agency recognizes the importance of an African providing structural and functional characterization data as a means for reducing uncertainty and reducing our perhaps even waiting clinical development requirement. This approach ducktails with the FDA’s pre-application meeting process, which will enable us to early in the development process to propose our novel approach for proving biosimilarity and demonstrating potential interchangeability.

I’d now like to turn to the third core area of our business, our novel drug program. This program leverages the tools and know-how we have gone at in the development of our complex genetics and follow-on biologics. We now have novel drug efforts underway in two areas. The first leverages our understanding of (inaudible) biology as it relates to tumor growth and metastasis. We are advancing our first drug candidate M402 from this program. Our second effort is directed at developing improved and novel biologics by engineering the FC region of antibodies.

Let me tell you a bit more about these programs. Regarding M402 we have initiated Phase I, II proof of concept clinical trial in patients with metastatic pancreatic cancer. In non-clinical studies, M42 as shown reduced anti-colonial activity and potentially broad anti-angiogenic anti-metastatic properties to a disruption of multiple pathways. Patients screening has started the trial phase in the U. S. and we expect that those are the first patient in coming weeks. The Phase I/II trial consist of two parts and will evaluate the safety, efficacy, pharmacokinetics and pharmacodynamics of M42 in combination with (inaudible).

Part A of the study is an open label multiple ascending dose study designed to determine the best dose to take forward into Part B. We will be presenting some of the new non-clinical data at this year’s (inaudible) in Chicago. Now I’ll turn to our in highlighted VIG program. This program applies our recently acquired Sialic Switch technology to modify the FC region of the IGG antibodies in IVIG, which represents an exciting approach to regulate the anti-inflammatory activity of proteins and to potentially develop improve drugs for autoimmune and inflammatory diseases. We are advancing IVIG and other related research programs and look forward to updating you on our progress if the work advances.

Before I close, I’d like to highlight our efforts to prepare moment of the future. We are at a critical stage in the growth of the company. We have a technology platform validated by lunch of an enoxaparin and by major collaborations with the leading pharmaceuticals companies. The regulatory pathway for biosimilars is that it’s currently being implemented by the FDA provides an avenue for us to take advantage of our differentiated technology.

To capitalize on this opportunity we must expand our capabilities including our head count, advanced analytical equipment and the required facilities to help them. At this time, we are in the process in evaluating our long-term facility options and we’ll provide more detail on this process as it advances.

In summary, it’s an exciting time to be at Momenta. We continue to make progress towards our goals, becoming a diversified biotechnology company with a robust pipeline of complex generics, follow-on biologics and novel drug to bring value to patients and the healthcare system. We believe the deep technical capabilities create broad opportunities for Momenta and a verity of disease areas end-markets and also the potential to create significant value for the company and our shareholders. Thank you and now I’ll turn the call over to Rick.

Rick Shea

Thanks, Craig. We reported a net loss of $5 million for the first quarter of 2012. This compares to a net income of $57 million for the same quarter last year. The year-over-year change is due to loss of generic exclusivity for enoxaparin and related changes in the royalty structure from a straight profit share in last year’s first quarter to a hybrid profit share royalty in this year’s first quarter, as well as to an increase in operating expenses.

Last week, Sandoz reported a net sales of enoxaparin declined sequentially from $233 million in the fourth quarter of 2011 to $176 million in the first quarter of 2012. The decrease in net sales was due to lower unit sales and to reduced pricing, resulting from the launch of enoxaparin by Amphastar, Watson in late January, following the stay of the preliminary injunction. The $176 million of net sales translated to $22 million in enoxaparin product revenue for Momenta for the first quarter of 2012, compared to $26 million for the fourth quarter of 2011, both under the hybrid profit share royalty structure. The enoxaparin product revenue amounts are considerably below $76 million in product revenue that we earned under our profit share structure for the first quarter of last year.

In the first quarter of 2012, we also recognized $2.2 million of collaborative revenue that consisted of $1.1 million expense reimbursement from Sandoz under our enoxaparin and generic Copaxone collaborations. $0.5 million amortization of the equity premium we received in our 2006 Sandoz collaboration and $0.6 million for the initial amortization of the $33 million upfront payment from Baxter.

We expect that the collaborative expense reimbursements from Sandoz will continue at the $1 million to $2 million level per quarter for the balance of the year and the amortization of the 2006 Sandoz equity premium will continue at approximately $0.5 million per quarter. The $33 million upfront payment from Baxter will be spread over the development period of up to six biosimilar products, so the amortization will extend for several years. We estimate that for the rest of 2012, the amortization of the Baxter payment will be just under $1 million per quarter.

Our first quarter 2012 R&D expense, including stock-based compensation, was $18.6 million compared to $12.9 million in Q1, 2011. Approximately $4 million of the $5.7 million increase reflects the buildout of our biologics capabilities, including increased R&D head count and related laboratory and facility costs. We’re applying these biologics capabilities to both or by a similar development and our Novel drug development. Stock-based compensation increased by $0.5 million and about $400,000 in the R&D increased was due to start up cost for our phase I to clinical trials of M402.

In connection with discussing building out off biologics capabilities you may have noticed in our 2011, 10-K. That we recently leased some temporary expansions space nearby in Kendall Square. Since our growth in our present facilities constrained. As Craig mentioned, we’re presently reviewing our longer-term facility options.

Moving onto SG&A expenses for the first quarter, SG&A including stock – was $11 million compared to $8.3 million. An increase of $2.7 million. Stock compensation increased by $1 million and legal expenses increased by $1.3 million due to the enoxaparin litigation, head count personnel and facilities related expenses increased by approximately $1 million. This increase was offset by an $800,000 decrease in the enoxaparin royalty payable to MIT due to lower enoxaparin revenues.

Previously I’ve give in guidance at total operating expenses excluding stock compensation and the royalty payable to MIT and net collaborate revenues would be between $22 million and $28 million per quarter for 2012. Let me illustrate how I get that number for the first quarter of 2012. Operating expenses totaled $29.5 million that amount less stock-based compensation were $3.3 million less the MIT royalty of $0.4 million and net collaborative reimbursement revenue of $1.1 million equaled $24.7 million for the first quarter.

I’m still expecting to be within that guidance for the subsequent quarters of 2012. We ended the first quarter with cash and marketable securities of $382 million excluding the $17.5 million of cash that classified as restricted due to the bonds set up for the enoxaparin litigation. The $33 million up front from Baxter was paid to us in the first quarter. So excluding the restricted cash our cash balance increased from $348 million at year end to $382 million.

So the summarize our first quarter results 2012 was a year in which we’re increasing our operating expenses to realize the potential our pipeline. Our business model has been to used the funding from our two Sandoz Collaboration to build our early infrastructure and to advance the development of our two complex generics. The cash flow generated from the successful marketing of generic Lovenox is now being applied to fund the build-out of our biologics infrastructure to support our biosimilar and novel drug development. In the course of our conversations with investors, we are asked about our plans for the use of our present cash balance.

So I’d like to spend some time discussing how we think about capital allocation and deploying our cash to advance our development programs. Relative to many of the companies in biochip, we’re fortunate to have a cash position close to $400 million. Today’s cash position is a direct result of our differentiated technology and approach, which we’ve applied successfully to Enoxaparin. However, it’s important to point out that Momenta’s business strategy is to invest our cash to fund development programs directed at significant market opportunities that we expect will drive substantial shareholder value.

As we discussed in our guidance for 2012, we expect our ongoing operating expense as a net of collaborative revenue to exceed the Enoxaparin royalty stream. Going forward, our Enoxaparin product revenue is expected to decline from the first quarter’s level due to the impact of the competitive product launch in January by Amphastar and Watson and potential for the pricing pressure from the authorized generic. So the $5 million net loss we recorded this quarter could possibly increase to the $10 million to $50 million range per quarter.

Our return to profitability will most likely come from the launch of our generic Copaxone, which if we’re not successful on our patent litigation, could be delayed until the expiration of the patent in the third quarter of 2015. During that time, over the next 3.5 years, our operating expenses will likely increase as we move up to six biosimilar product candidates through development and could further increase if we expand the number of products and our Baxter biosimilar collaboration or if we choose to develop biosimilars outside that collaboration. Our operating expenses are also likely to increase as M402 and potentially our (inaudible) or some other novel drug candidate advances in the clinic.

Furthermore, under our biosimilar collaboration with Baxter, we may have an opportunity in that timeframe to elect a cost sharing, profit sharing option. And that election would likely trigger increased operating expenses. That being said, we expect that these investments and product development could generate substantial value and overtime provide a significant return to our shareholders.

We recognize that as the regulatory or commercial environment changes and our investment opportunities become less attractive or not available, we have a fiduciary obligation to weigh our cash deployment against the best alternatives including return of cash to shareholders. But today, we believe it’s critical the Momenta retain the resources, and optionality to invest in these product development opportunities, who wish the company is uniquely positioned to create value.

We plan to continue to responsibly invest our cash in program development opportunities that position the company to provide the best potential return to shareholders. This concludes my financial review, I will now turn it back to Craig.

Craig Wheeler

Thank you Rick. At this time, we’ll open the call to questions. Operator?

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) Our first question comes from Sapna Srivastava of Goldman Sachs. Your line is open.

Sapna Srivastava – Goldman Sachs

Yeah, hi. Thanks for taking my question. I have a couple of questions, the first one just was on the Lovenox litigation, and the change in economics. From what I understand, I don’t think economics change even if you win this litigation. So I really want to understand the impact of potential intellectual property going forward as to how about the outcome of this litigation can imply.

And the second question is on the Copaxone patent. My understanding is main one is in 2014, and you seems the last patent also extended until 3Q 2015. Just how should we think about, when if you do not win the litigation on Copaxone, when should we think that is the first time you can enter into the market. Would that be 2014 or 2015?

Craig Wheeler

Sure, thanks for the question. So first, let me talk about the Lovenox litigation. So, what happened if the win depends upon how the case actually get resolved, of course the damages that we can collect, and we would collect those damages because we obviously we’ve had three significant opportunities to lose money here from what we are making, and so there is lot of damage that we could collect on that. Otherwise, they would actually pay royalties up for their products or those products could come up to market.

In terms of our contract with Sandoz, I would say if that would happen that’s a position that was not anticipated in the contract, and we would after our discussion with our partner about how we would handle, this was the victory, we had one. So we do actually view that as a lot of potential there depending on how this patent litigation comes out.

I think you also ask what the implications are for this litigation are for other patent sales. And actually thinks these are pretty independent and every case is based on the patent, but it’s litigated on so what see others case comes, and see if there is anything we can interpret.

We feel pretty good about Amphastar as well as in our future programs on the PacSun there are seven orange for patterns and those of the 2014 our families and then there are two process patterns that are non-orangeble patterns that expire in 2015. Both set the patterns are in the current litigation and so, we just have to see how it all comes out litigation in terms of where things stand on the patterns that both orange patterns for the non-orangeble patterns and of course where we to be approved we have to make a decision and that would decision will be taken with our progress (inaudible) we would launch at risk or not.

Sapna Srivastava – Goldman Sachs

Can I just ask one more question is in your bio similar program. At what point you think begin visibility on you know which compounds you plan to take forward in the clinic?

Craig Wheeler

So I think you take, you would probably begin that visibility when and if we actually put them into the clinic. Right now.

Sapna Srivastava – Goldman Sachs

I’m sorry you filed be ending, sorry or –

Craig Wheeler

Yeah, exactly so we are keeping with where keeping things quite confidential at this point for competitive reasons. And I’m not going to be able give any specific guidance obviously working as quickly as you can but we’re also trying to take advantage of the new pathway, because we believe that our characterization physical and biologic characterization really gives us a potential to really significant reduce those trials and so we going need to go through this new process but the FDA put together. Not that been said of course it takes as long as taken from deserve applications we all – set the option to go direct with the trials but we are in keeping quiet until we actually figured exactly that clinical strategy is.

Sapna Srivastava – Goldman Sachs

Thank you so much.

Craig Wheeler

Thank you.

Operator

Thank you. Our next question comes from Ritu Baral of Canaccord. Your line is open.

Ritu Baral – Canaccord

Hi, guys. Thanks for taking the question. Craig, can you tell us a little bit about the strategy that you’re thinking about for four or two going forward. Are you thinking about partnering this product for later clinical development or may be using it is a proof of concept for your based platform and maybe selling the asset at some point?

Craig Wheeler

Yes. Our current strategy with (inaudible) is to actually take it through to proof of concepts because that’s oncology as I think many of you know the value of compounds really increases when – actually get that proof of concept and we do, we’re in a position where those trials are manageable particularly in indications we chosen at this point of time.

At that point, we would actually be able to look at the drug and to see what potential the drug has, as well as be able to look at our resources for in position where we have very good revenues coming in from PacSun or follow-on biologics and others may be take further so we would be able to assess partnering but that would not happen until we get proof of concepts.

Ritu Baral – Canaccord

And yet but is it something that you would consider taking all the way through your – therefore that’s having a commercial stage oncology product, it might be part of Momenta’s long-term strategy?

Craig Wheeler

I don’t think we’ve made that decision yet.

Ritu Baral – Canaccord

Okay.

Rick Shea

Now, clearly at this point we need to look at what it would take to bring that and if you are thinking about building out a commercial organization, it really depends on what is going to take the actually effective remarket at the program. So, I think we will make that decision in the best interest of maximizing the value of the compound rather than any desire to drive our social commercial organization.

Ritu Baral – Canaccord

Got it. And moving to the biosimilars guidelines that were issued very shortly after last quarter’s call. Can you go through what you think the high points of those very, very complex set of three guidelines are and, from what I understand, it seems like the agency is saying that every biosimilars will very likely had to do a one-year clinical study. What’s are the new ones around that and what are typically in this judgment should be?

Rick Shea

Sure. We should – I’m on to just take a brief comment and turn it over to Jim, is going to be or testify on that. But basically, I would reiterate that we are actually quite happy with the process of the FDA is putting in place. And there is a lot around that, a lot of descriptions which shows this to be FDAs thought deeply about the most important thing is that leaves flexibility for applicants to be able to take their technology into the agency. But only Jim comments in terms of what we see the high points there.

Craig Wheeler

However it so, we believed in the high points generally and that we are very pleased the guidance documents supported on quality by design approach. The recognition of the fundamental importance of structural and functional characterization, which ties very nicely into our approach. They certainly reiterated, that they retain scientific discussions review each program or each application on a case-by-case basis and they are looking at if it had risk-based totality of the evidence approach, proceeding in a set by fashion.

So although different people have commented about what may be in the guidance is, with respect to the mandate to our requirements for clinical trials. We actually don’t read it that way and don’t necessarily see that they are proceeding in that fashion. Certainly the commented “as a scientific matter”. It may be that, we’ve may proceed with the pk/pd study. I’ll be commenting on that specifically on May 11. But, I’m not aware yet of any specific mandate or requirement for a clinical trial. So, of course the burden will be on the sponsor, to put together a program that can support a reduction of uncertainties so that it wants a reduction and elimination in clinical trial requirements.

Ritu Baral – Canaccord

Great. Thanks, and last question. Your Sialic Switch IVIG. When do you see that might enter the clinic and what half way will you be pursing for development. Will that be the biosimilar approval pack lastly or will you be looking at this as a essentially a new drug ?

Craig Wheeler

Yeah. So I’ll answer to your last question for us, you should think this is a new drug program, because we’re actually modifying the chemical structure of the drug. So we would anticipate new drugs. It’s little early to tell when it would enter the current clinic. Our strategy here is number one, to actually validate the scientific results that have been in the university around this solid switch technology and its impact on the efficacy of the IDIG.

And once we’ve had number two, to picking and determine clinical path that we’ve like to take it and that will really pre-determine what we need to do before, we entered into the clinic. And so I think first thing we need to see is scientific re-reproducibility of results that were – the asset that we’re looking at here and then we’ll make the determination of clinical path and we will have a much better idea of time-line to clinic.

Ritu Baral – Canaccord

Great. Thanks for taking the question folks.

Craig Wheeler

Sure. Thank you.

Operator

Thank you. Our next question comes from (inaudible). Your line is open.

Unidentified Analyst

This is Allan (inaudible). Thanks so much for taking the questions. Just to – first is on as you look at the Lovenox market and you have Watson hasn’t made great progress. Do you look at – how do you look at Teva’s market or Teva’s product. Do you expect that product to be entering in the near term?

Craig Wheeler

Well, it’s very hard for us to predict when Teva’s product was entering in that third development program I (inaudible) that question. Right now, this is actually beginning to develop as a relatively classic generic market, you see the prices are rose in as people come in and use the MC market shares, the allocate among the competitors. So we’re not a competitor to come in, you certainly begin to see market share allocated among those competitors. But I think, from where we say we have no visibility if a vendor expect to have it.

Unidentified Analyst

And, other question on your highest strategy. One of the products, I don’t know if you guys have mentioned this is insulin, which is clearly has that stability. Have you thought about looking at the insulin market?

Craig Wheeler

We haven’t commented specifically on the markets we are looking at, I will say that we are casting abroad net on the things that we’re thinking about. But we commented specifically on programs yet.

Unidentified Analyst

Great. Thank you very much for taking the questions.

Craig Wheeler

Sure. Thank you, Alan.

Lora Pike

Operator next question.

Craig Wheeler

Hello.

Operator

Our next question comes from Sumant Kulkarni of Bank of America. Your line is open.

Sumant Kulkarni – Bank of America

Good morning. Thanks for taking my questions. The first one is a simple one on Lovenox. Do you think the pricing has remind rational, given the level of competition that’s out there right now on the product?

Craig Wheeler

Well, I can’t comment on of these specific strategies on generics. I’m kind of smiling, because I never think it is rational to what’s happening out there. Competitors are left to make their own decisions in this market, that’s all I can say.

Sumant Kulkarni – Bank of America

And, have you specifically started discussions with Sandoz, given that there were some things that happened, that were not envision as part of your original contract?

Craig Wheeler

I think – it’s very difficult to determine what might happen there. So we its–we don’t know what we’re at this point. We have to wait and see how things play out in the marketplace, and then in the court cases. It’s certainly an ongoing point of discussion between the partners, but intact. Anything I can comment on specifically.

Sumant Kulkarni – Bank of America

On Copaxone could you remind us if you still have the 180 days there, or is that technically forfeited right now. Because, Mylan has said that they could potentially get approval in the second half of this year?

Craig Wheeler

Yeah. From a timeline perspective the 180 days has expired at this point, so it’s theoretically so possible, because they can take a restore. The timeline is based on regulatory time, so it happened before, but it is technically at this point time has expired. But they’d have to do replacement of it based upon on time of approval, and that’s when they consider it.

Rick Shea

Sumant, I would mention on that front too bit. Ours and Sandoz A&DA for the Enoxaparin vial was approved with 180 days exclusively because, we were the first to file. So that the FDA is selectively granting that 180 days exclusivity even when the one 30 months period has expired.

Sumant Kulkarni – Bank of America

That’s good to know. Thanks. And, on your and Biosimilar’s discussions with the FDA posted publication of the new guidelines. Would you say your discussions have been more general or have you had any specific preapplication meetings already?

Rick Shea

Well, we haven’t disclosed what meetings we’ve had at this point of time. I would say, our applications have been –our discussions have been positive, but we haven’t talked about general or application-specific or anything at this point of time.

Sumant Kulkarni – Bank of America

And, on a long-term facility option, I know we have to wait for some more color, but if you have to think about it today in terms of outlays for you. Would you say those would be transformational or just something that will help you to grow bigger just as the company prepares for the future?

Craig Wheeler

Sumant, I think expenses will be really scaled to the head count. I don’t see a dramatic increase in the facility cost per employee, but we are increasing our headcounts, I would say mid-last year we will probably add about 180 head count. And, you know we’re certainly heading north of about 250 employees, in the second half of this year. So I think, you’ll just see that scale more or less proportionally?

Rick Shea

Yeah. And I would also mention that, the numbers differentiating on head count of – based upon what facts that doesn’t opting into programs it could up to – it could grow about that as well. So, we’re having the things through flexible facilities and I would going to handle that and – because we’re make it, and scale up ahead of some of those efficient, but that part will remain.

Sumant Kulkarni – Bank of America

Right. And my last one is a bigger picture one on biosimilars, I know that the ideal situation would probably be interchange ability for a biologic product, but when you close the FDA, at what point does that company makes the decision whether it’s going to take as much time or lesser time to do full clinical trials than to convince the FDA that an interchangeable is actually possible?

Craig Wheeler

Well. I think, that something that you’re going to have to adjustment on all the way through the dialogues of the FDA. We would make that in conjunction with our partner Baxter. It is a new process and a new program, and so we’re hoping the FDA can operationlize if they having their goals, could they actually put quite aggressive timelines for review on decision-making in here. Or we do have another pieces of (inaudible) and so we’re going to have to keep at assessing that all the way through the process.

Sumant Kulkarni – Bank of America

Thank you.

Craig Wheeler

Sure.

Operator

Thank you. Our next question comes from Eric Schmidt of Cowen and Company. Your line is open.

Eric Schmidt – Cowen & Company

Again that continues to move forward at the FDA, I mean, from the outside we don’t have a lot of visibility on what’s going on. Is there anything you can try to us is a evidence to support the moving forward assertion?

Craig Wheeler

Yeah, Eric. It’s – really can’t. I mean, let’s see on the issue as we have to keep recessions with them on a comprehensive, particularly since there is litigation going on and we have competition looking to go through the FDA as well. I will note that, I have shifted in the – I think, it’s probably been in the past nine months, I would say that, I would be a positive adviser. So, it should take down that we are an active dialogue and happy with that dialogue, but I beyond that, I – I’ve understand the difficulty it created, but we really can’t give more detail on that.

Eric Schmidt – Cowen & Company

Okay. And second question maybe unanswerable as well, but I’m just hoping if you could say something about the sort of current state of the enoxaparin market. Can you talk about whether pricing continues to erode or could Rick potentially divide that $22 million in sales you had in Q1 of between the profit share and royalty amount?

Craig Wheeler

Yeah. So, I’ll let Rick comment on what’s just do rough the quarter, but I think this is behaving pretty difficult that market. When you see competition come in the first impact as on pricing and then shares settle out. So, yeah I do see that, this market is going to continue to settle out if you well, but I think there’s been a lot of pressure on that already because typically when you get authorized in launches as well as well as competitors launching that price pressure comes across the whole market, but it’s not on settling it, so we’re going to have wait and see how it all plays out over the next 3 to 6 months we’re able to be clear in terms of so exactly what it’s going to look like.

Rick Shea

Eric, as you know, the temporary injunction was lifted January, I believe, it was 25th and Amphastar Watson launch was shortly after that. Sandoz shipments of enox during that part of January were relatively light. So, most of the sales for the quarter fell into the royalty structure.

Eric Schmidt – Cowen & Company

Okay. That’s helpful. Thanks. Rick, on the royalty structure, I think you said 10% to 12% and that’s a tier? Can you elaborate further on whether were it 10% or 12% and what the tiers are triggered by?

Rick Shea

The tiers are triggered by a sales cut off, but we’re not at liberty to disclose what that sales cut off is.

Eric Schmidt – Cowen & Company

And you also can’t disclose whether you are at 10% or 12% or somewhere in between.

Rick Shea

We wouldn’t be in between.

Eric Schmidt – Cowen & Company

Okay. I guess it will be pretty clear from next quarter sales, where do you are.

Craig Wheeler

It will be an easy calculation. We are just constrained by what was agreed to disclose or not to disclose to our partner.

Eric Schmidt – Cowen & Company

I understood. I appreciate the comments that you are able to provide.

Craig Wheeler

Sure. Thanks.

Operator

Thank you. Your next question comes from Joseph Schwartz of Leerink Swann. Your line is open.

Joseph Schwartz – Leerink Swann

I was wondering if I could ask about your latest expectations for timing on the District Court ruling on the Copaxone patents. Has there been any update to your thinking there, has there been any more activity in the quarters. Is everything submitted and we are really just waiting?

Craig Wheeler

So, we’re really just waiting. I think, when we had first given our thoughts on that, we said it was probably going to be in the 6 to 12 month, based on historical rulings from this judge, we are in that zone now. So, it could come at any time really, but we don’t – we don’t have any insight information that would tell us who is going to come tomorrow or in three months from now or next month. I will say there was quite a bit of buzz in the investor community that we are going to get it in December because of a clerk leaving. I would say that clerk has left and it didn’t happen. So, now, we’re kind of looking to a more standard what we expected originally at the 6 to 12 months. So, we are in that zone now. So, it really could come at any day.

Joseph Schwartz – Leerink Swann

Okay. And as far as the Markman hearing tomorrow goes in the Lovenox patent case. Can you give us a sense of what terms or constructions we should look forward as being instrumental in your case there?

Rick Shea

Yeah. So, what we expect tomorrow is this is going to be – there will be some testimony for the judge and then the judge will take it under advisement as usual on this. Without saying too much, I mean this is a typical patent case. It’s going to be – the parties are going to be trying to determine how broadly the claims are how narrow. Obviously, we’ll be pushing for board, they’ll be pushing for narrow.

We actually view this as a good opportunity because it gets our lawyers in front of the judge again, really talk about the story of what we’ve done with these patents and what the patents are for and how they were designed and so we view it as a positive because we view any opportunity get our legal team in front of these judges as positive. We don’t expect a decision to come from the bench tomorrow and it really is, I don’t want to get more specific than broad versus narrow, that’s the typical pattern (inaudible) discussion.

Joseph Schwartz – Leerink Swann

Okay. Thank you.

Craig Wheeler

Sure.

Operator

Thank you. We have a follow-up question from Ritu Baral. Your line is open.

Ritu Baral – Canaccord

Thanks for taking the follow-up. Can you guys talk about how you and Sandoz have recently discussed the changing potential for Copaxone in the next two or three years as sort of the MS treatment landscape itself sort of shifts or those discussions that you’ve had at this point, or is it something that you’re more likely to address on the outside of – on the far side of a court ruling? And also where do you tell us sort of strategies on low volume and less frequent Copaxone treatment fall into this (inaudible) programs. Could there be potential block even in light of a positive court ruling?

Craig Wheeler

So let me – I think two really pre separate issues there. I mean one I’d say is we are always looking at the market. It’s something you always do in these cases in terms of what it’s going to take to compete and the what the market looks like and what the shares of the market are. We actually see this market as certainly very good for those patients – that you’re saying new therapies, but those therapies are not going obsolete Copaxone. We expect actually Copaxone maybe a combination potential for some of those programs and so we’re looking at this as continuing to be a major drug.

There will some share shifts as these products enter but we’re well aware of them, they could actually complement Copaxone. It’s actually – the advantage of Copaxone as compared to the Interferon, it’s actually the lower toxicity product that actually be used and that’s typically is used early and actually made because it has a complementary mode of action become potentially a combination product to some of these. So we still see that as a significant market. I’m sorry (inaudible) question.

Ritu Baral – Canaccord

Oh, sure. It was basically we have a sort of low volume and less frequent injection development strategy (inaudible) data program?

Craig Wheeler

So obviously that trial is enrolled and so we don’t – we anticipate that would come out, I think that – is going to come out some time later this year. So we’re expecting them to try to launch it into the marketplace, we don’t anticipate that it’s going to close out the opportunities for our product, but we – if we’re successful and we actually point to previous attempts to get these products approved that have not been successful in terms of different formulations, but we think it’s complementary, it certainly would be some time maybe trying to use, but we don’t – close off out our opportunity to market that product.

Ritu Baral – Canaccord

Great Thanks for taking the follow up.

Craig Wheeler

Sure. Thank you.

Operator

Ladies and gentlemen. Our next question comes from Sumant Kulkarni of Bank of America. Your line is open.

Sumant Kulkarni – Bank of America

Ben, how early the next Baxter payment could come through to the company.

Craig Wheeler

Well, what we’ve said earlier that we are right now in the process of gearing up and scaling up and getting all of the capabilities to bring this program forward, newer, programs to be upfront payment really it was designed to get us going in this and we have said before and I think it’s probably true. We don’t anticipate that we will receive any of those traditional payment this year. Could happen, but we’re anticipating it so, certainly a little bit further out and that we’re working pretty aggressively to bring them as soon as possible.

Sumant Kulkarni – Bank of America

Thanks.

Craig Wheeler

Sure.

Operator

Ladies and gentleman, this concludes our question-and-answer session and today’s Momenta Pharmaceuticals first quarter 2012 earnings call. Thank you for your participation and have a wonderful day. You may disconnect your lines at this time.

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