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Executives

Richard P. Shea – Senior Vice President and Chief Financial Officer

Analysts

Sumant S. Kulkarni – Bank America/Merrill Lynch

Momenta Pharmaceuticals, Inc.(MNTA) Bank of America Merrill Lynch 2012 Health Care Conference Call May 16, 2012 8:00 PM ET

Sumant S. Kulkarni – Bank America/Merrill Lynch

Good afternoon everyone. I’m very pleased to have Momenta here with us today. Thanks for taking the time and sticking around for this last presentation it’s going to be an interesting one because this is a really interesting company in the generic pharmaceuticals space. For those of you who that don’t know me I’m Sumant Kulkarni and I’m part of the specialty pharmaceuticals in U.S. major pharmaceuticals team here at the firm. So we have Rick Shea, who is the CFO and who is back with us this year and Lora Pike, who is with us for the first time this year is the IR for Momenta. Thanks.

Richard P. Shea

Thanks very much Sumant. I will draw your attention to our risk factors particularly as included within our SEC filings. Momenta was founded and built based on analytical technologies for deconvolution and characterizing complex mixture drugs and these complex mixture drugs include polysaccharides heparin based drugs, polypeptides as well as biologics which includes glycosylated proteins and antibodies and technology that we use is by understanding the drug and understanding the chemical structure of the drug we are able to analyze and recreate exact copies of a complex drug in order to make a generic version or a biosimilar version. But we are also able to do structure activity relationship analysis and whether to understand how to engineer novel drugs based on this technology.

So our highlights are we have a marketed product generic Enoxaparin was approved by the FDA in July of 2010 it was the most successful generic launch in history and it’s first running quarters have generated more than $1 billion in net sales by our partner Sandoz and we continue Sandoz continues to sell that product for us. We recently signed a significant follow on biologic collaboration with Baxter we received a $33 million upfront payment and have the potential for over $400 million in option fees and milestones as well as downstream royalties from this follow on biologics collaboration.

We have an ANDA under review for a generic Copaxone and we also have initiated a proof of concept clinical study for a novel product M402 a novel oncology product, which we are initiating a trial for in pancreatic cancer. We use intellectual property to protect our proprietary methods and approaches both to developing generic products as well as novel products and along those lines we have a litigation protecting our generic Lovenox and M-Enoxaparin product and that litigation is underway and we are also waiting litigation, offensive litigation against Teva’s Copaxone product in our generic Copaxone program.

We recently acquired technology relating to Sialic Switch, which this is slightly changing of the properties in this case a plasma product but also could be applied to antibodies with the Sialic Switch technology. It’s a platform that we can use in novel drug discovery. We have a strong cash position that was generated from the cash flow from the marketed generic Lovenox. At the end of the first quarter we had $382 million in cash in marketable securities and in addition $17.5 million of restricted cash with a total of just under $400 million in cash at the end of the first quarter. So our product portfolio includes generic products and marketed generic Lovenox, generic Copaxone, which we have an ANDA under review, follow on biologics or biosimilars in which we are working on up to six biosimilar products with Baxter and we are working on a couple of novel drug programs the M402 novel oncology product candidate as well as the Sialic Switch technology, which we are applying to IVIG.

So first to talk about our marketed products Enoxaparin sodium it’s being sold by Sandoz, the Sandoz generic division of Novartis on our behalf. In July 2010, when that product was launched we were the sole generic and under our collaboration agreement with Sandoz we are receiving a 45% profit share. This past January a competitor product was launched and that triggered a change in the economics to a straight royalty. So that market is changing it’s becoming more competitive and our economics have changed so our revenues that we are getting from generic Lovenox have declined substantially from the $75 million to $85 million a quarter range down to $22 million this past quarter.

However, we mentioned that we are litigating some manufacturing process message patents against these competitors. So there is still a possibility that at some point in the future we could restore our sole generic status. I will add to that we had approved a bio formulation of the product, which we launched in April and at that time the FDA approved that drug they granted us six months exclusivity on that product formulation.

M356 is our generic version of Teva’s MS drug Copaxone, Copaxone is a complex polypeptide it’s a synthetic polypeptide and it’s manufactured using four amino acids, which are then polymerized and depolymerized in a chemical manufacturing process. There are seven orange book patents and two non-orange book patents relating to Copaxone. We are litigating all nine of these patents and the trial for that litigation was held last September, September 2011 and we anticipate that the ruling from that litigation could be issued by the judge the district court judge sometime over the next two to four months.

Our version of Copaxone our generic version of Copaxone has been filed with the FDA under the ANDA pathway. So the idea is to have this approved as a directly substitutable interchangeable version of Copaxone. And we believe that as we did with generic Lovenox we will show that we have met the standard the ANDA standard of sameness and we do this again through our characterization technology demonstrating that we have the same active ingredient or same chemical mixture as the branded product. This product is also partnered with Sandoz and it’s a 50/50 profit split under all competitive situations.

Moving on to follow on biologics, obviously, a large and growing global opportunity compared to most generics. We believe that the biosimilar market will have the opportunity for substantially better pricing we can see this in Europe where biosimilars are already beginning to enter the market. And the approach that we are taking is really very similar to what we did with generic Lovenox and what we are doing with generic Copaxone is we are using our advanced analytics technologies in order to gain a deep understanding of the branded products. We use that understanding to select a sell line, which will then be able to exactly replicate the branded product. We believe that this process is differentiated from our competitors and that our competitors are simply trying to achieve a similar product not an equivalent version of the branded product. So we spend more time and more money apply more sophisticated analytical technologies in order to understand and deconvolute the branded product so that we can make an exact copy.

So with most products there are portions of the product that are unknown and with biosimilars there are knowledge differences. We are going to be through our process moving towards interchangeable biologic products and in addition to, there is two advantages to developing a product that is more highly equivalent to the brand. One advantage would be is that we would work with the FDA to reduce the clinical trial requirements to get the drug approved and then once approved we would believe that we would have a better path to having the product designated by the FDA as interchangeable with the brand. We believe that that would clearly differentiate our product in the marketplace compared to the other biosimilar products.

The FDA guidelines are supporter of this the FDA had specifically talked about a two step approach in their review the first step is to look at the evidence that is provided on the structure of the drug of the biosimilar drugs. The FDA wants to have an idea of how similar or how equivalent that product is to the branded product. Only then will the FDA determine what’s an appropriate clinical path for that product, and many of the concepts that the FDA is applying to biosimilars were developed in their review of generic Lovenox.

And our collaboration with Baxter, we’re working on up to six products, two products have already been selected by Baxter and there are four additional products to be selected. Momenta will be responsible for the products and process development through IND filing. And financial responsibility for the program development will go to Baxter following the acceptance of the IND.

However, Momenta will continue to be deeply involved in the regulatory process getting the drug approved by the FDA, working through with the FDA, what the clinical pathway will be, working with the FDA to determine what will allow the FDA to designate the product as interchangeable. And we will also, certainly be working closely with Baxter on the supply chain for the product and ensuring that the product consistently replicates the branded product.

In this collaboration we earned a $33 million upfront payment. There is a potential for approximately $100 million in milestone through IND filing for the six products and then an additional $300 million in milestones related to the reduction of clinical work. Upon commercialization, we’ll receive a base royalty of high single-digit, but we the possibility of more than doubling that royalty based on interchangeable designation and number of competitors.

We also have the option with the four additional products to opt into a profit share arrangement up to a 30% profit share. So, we believe that the structure of this collaboration really fits with the value that we add and the approach that we bring.

We also believe that Baxter is an ideal partner because our expertise is complimentary, that we have the expertise in the process development, they have the clinical and commercial expertise. So we’re excited about this and we believe Baxter – so we’re looking forward to working with them on these biosimilar candidates.

In addition to our generic products and biosimiliar products we have two programs in novel drugs, M402 is a novel oncology candidate, Heparin, is a heparin based oncology candidate. And Heparins have been known to have anticancer properties including anti-metastatic and antiproliferative properties. And we are using this product in combination with gemcitabine and initially we’ll be starting a clinical trial in pancreatic cancer. So we expect to get data from this clinical study in the first half of 2013.

We also recently purchased technology from a startup company that was in license from Rockefeller University, it’s been dubbed to Sialic Switch technology and it's based on a principle of activating an anti-inflammatory pathway by sialylating the Fc-linked glycans of antibodies. And this technology has the potential to increase the potency of these products and in the case of IVIG, which is our first product that would be applying this technology to and has the potential tool to reduce the dose which could provide for a significantly enhanced benefit for patients and also for supply chain.

So this is one area that would be applying this technology because of the platform that can be applied broadly to many different types of antibodies. So in summary, we are continuing to work to support the commercialization of Enoxaparin Sodium and we're working to enforce patents, in order to improve our competitive situation with that product and potentially to restore our sole generic status.

We are working with the FDA to move forward our ANDA for generic Copaxone and we are awaiting the District Court ruling on those Copaxone patents. We are also moving forward with the biosimilar collaboration with Baxter on moving those products toward IND, and we are advancing them forward to in the clinic and anticipate dosing out initial patient dosing shortly.

So this is the pipeline of Momenta, and we believe we have a significant opportunity here. We have lot of ways in which we can significantly increase the value of the company through these several programs. So at this point, I will turn it over to questions.

Question-and-Answer Session

Sumant S. Kulkarni – Bank America/Merrill Lynch

Thanks for that details. And before we begin the questions, I must remind everyone that we have an event tonight at Sorrento that’s from 6:30 pm to 9:30 pm, so you are welcome to join us. We do have a mic going around, so feel free to ask your questions. And I'll kick it off starting with Lovenox, generic Lovenox. Could you remind us on the timeline and scenarios around your case with the Watson, Amphastar and TEVA?

Richard P. Shea

Right now we have a trial scheduled for October of this year, a week ago, Friday we had a Markman hearing, and so sometime between now in that October trial, we expect to get the results from the claims construction portion of the trial and then the trial itself would be in October. Given an October trial date, we could expect a ruling from the District Court in the first half of 2013.

Sumant S. Kulkarni – Bank America/Merrill Lynch

And how about the appeals process, when could that come in, and could you go back to a [TRO] situation on the other generics?

Richard P. Shea

Typically the appeals, court decision following a District Court opinion is about 12 months process, so that could certainly be resolved by the first half of 2014. Certainly there is a possibility that an injunction could be restored if you were to say both decision in that case.

Sumant S. Kulkarni – Bank America/Merrill Lynch

And given that, this is not a typical type of situation in generic pharmaceuticals and that it was not part of when you signed the Sandoz contract. Have you had any updates on discussions there with Sandoz and going back potentially to a hybrid royalty structure?

Richard P. Shea

Yeah, I would say it’s premature for us to be discussing any discussions with Sandoz around the economics following a successful outcome and litigation. I think there’s a lot of thing that has to happen before we’re in that situation. So it's hard for us to predict exactly how that’s going to develop.

Sumant S. Kulkarni – Bank America/Merrill Lynch

And on the SQS front on Lovenox, have there been any development that might make that market more favorable to you relative to say, a year or two?

Richard P. Shea

Nothing that we’ve seen, I mean, the Sandoz takes the lead on day, I believe in Europe for generic Lovenox, and so far Sandoz has chosen not to pursue the product in Europe primarily because the pricing is not particularly attractive.

Sumant S. Kulkarni – Bank America/Merrill Lynch

So switching gears now to the Copaxone filing, could you just provide us an update to what's the latest there and have you had any further discussions after your call with the FDA?

Richard P. Shea

Well, what we’ve said consistently, I think certainly over the past 6 to 12 months is that we’re in very active dialogue with the FDA in the review of our generic Capoxone ANDA and we believe it's been a positive dialogue and it continues to be a positive dialogue, one thing that’s difficult to predict is the time table for the FDA's completion of their review and approval of the product.

Sumant S. Kulkarni – Bank America/Merrill Lynch

And is there any dependence from the FDA on the legal timeline or are they two separate things?

Richard P. Shea

I think they are totally separate pathways. I mean, I think the FDA is generally aware that there’s a legal process going on, but given where we are in that legal process, I think the FDA is progressing according to their own schedule now, which we don’t know is – see as moving very quickly. But I would say that, more recently the FDA has been very actively engaged, and so we have been comfortable with the progress that we’ve been making.

Sumant S. Kulkarni – Bank America/Merrill Lynch

It’s interesting as you said quickly, because I haven’t heard that – (inaudible) with FDA and the reason for us, given that biosimilar user fees and generic user fees could be implemented later this year, how do you think that could affect Momenta’s applications going forward?

Richard P. Shea

Well, I think the existence of generic user fees both for traditional ANDA generics as well as for biosimilars would be a positive, it’s positive for all the applicants including ours. But I think that will take some time to play out because first, have to be implemented and secondly they have to start collecting the fees themselves before they’re going to begin increasing their staff. So I see this as a process that still have some time to play out?

Sumant S. Kulkarni – Bank America/Merrill Lynch

And is there any incentive for the agency to wait around on the applications that are pending currently, just for the future kick-in so that they have an incentive to rule under the application?

Richard P. Shea

It appears to me that they are trying to move forward, but I think they’re moving forward with having initial meetings with companies, it remains to be seen how active they will be with actual reviews of filings?

Sumant S. Kulkarni – Bank America/Merrill Lynch

Mendy, here has a question.

Unidentified Analyst

Hi. On biosimilars, can you talk about the difference between, I guess in terms of commercialization the difference in how you achieve selling interchangeable biosimilar versus a non-interchangeable biosimilar. But then also we’ll see the difference if any between a generic-generic, and selling an interchangeable biosimilar?

Richard P. Shea

So you’re talking more about how the selling process occurs, I think a good example is the way the market has developed in Europe where the biosimilars that have been approved are being marketed as alternative branded biosimilars. And there has been at least initially a relatively slow up tick in market share although that is progressing now overtime.

So I think with the biosimilar, there is a belief that there is some work that will need to be done with patients, physicians and payers in order to convince them that the product is safe and effective because there could be some residual skepticism about that.

I think with a product that is designated as interchangeable by the FDA, I believe you could see a situation where the marketing and sales and distribution of the drug could be very similar to an interchangeable generic drug. So that other than perhaps some thought leader type of marketing effort, the payers would directly want to exchange the interchangeable designated drugs directly for the branded drug because of the cost differential.

Sumant S. Kulkarni – Bank America/Merrill Lynch

On that line, in the event that the Baxter products are not deemed interchangeable, how would you characterize Baxter’s infrastructure in terms of figures post?

Richard P. Shea

I think we’re confident that Baxter could have a commercial infrastructure in place to sell these products. Again that now will play into what products that they select. So they’re going to select products that they have or will be developing the commercial infrastructure itself.

Sumant S. Kulkarni – Bank America/Merrill Lynch

I know you’ve said in the past that we should wait for info from clinicaltrials.gov just in case some of your products show up, but at what point should we really be looking for a stuff like – is it every day or what kind of time line could you offer if any on that?

Richard P. Shea

We haven’t provided any timeline. I would say one thing that we have done is that we haven’t provided any positive guidance for earning milestones under the Baxter collaboration in 2012, and there are milestones to be earned upon the acceptance of an IND. So right now we’re being cautious with respect to timeline, and partly because the – the pathway itself is uncertain. So I think it would unwise to be too definitive in providing a timeline when the process itself is still somewhat up in the air.

Sumant S. Kulkarni – Bank America/Merrill Lynch

And I’m going to try to get this anyway, but has the teams decided clinical trials maybe necessary on the first two products or not?

Richard P. Shea

I think it’s too early to determine that. I think this truly will be a two-step process by the FDA, and we are going to provide the FDA with a data package that we think will be very compelling in terms of reducing the amount of clinical studies that should be required. But I think it’s probably unrealistic to think that the clinical requirement would be eliminated early in this process or even throughout the process.

But I think there is certainly a possibility for a significant reduction in clinical requirement, but it’s going to be evidence based. And so that is why we believe that it’s important to provide the FDA a substantially more robust data package, and this has to do not only with the structural analysis and comparison of our product to the branded product in terms of the chemical structure, but also in terms of biology in terms of functional analysis of the product. And we believe that there’s a lot that can be done, and we truly believe in the idea of the totality of the evidence, and that’s what we’re planning to do.

Sumant S. Kulkarni – Bank America/Merrill Lynch

And is it fair to assume that Momenta is waiting for the FDA to come out with something further in terms of guidelines or could you take the lead and submit the package before you get anything more from the FDA?

Richard P. Shea

We’re not looking for more guidance from the FDA, because we believe that the FDA’s approach is going to be case-by-case. In the case of generic Lovenox, there were no guidance that was provided in advance; in the generic Copaxone there was no guidance that provided in advance. So we’re not expecting that type of guidance on these products either.

Sumant S. Kulkarni – Bank America/Merrill Lynch

And this is more of bigger picture CFO priority type question, in the event that you have everything you need, you have some cash build up now given the Lovenox situation that’s been positive for you, what kinds of priorities come first to mind in terms of CFO allocation of fund?

Richard P. Shea

Our priorities are to get Copaxone, our generic Copaxone approved by the FDA. And that still takes some cost and resources. Secondarily, it’s building a biologics capacity, and that biologics capability expands the biosimilars effort as well as our efforts in novel drug discovery and biologics. So we have a lot of investments to make already in the programs that were currently running.

Sumant S. Kulkarni – Bank America/Merrill Lynch

Thanks Rick, for all the time.

Richard P. Shea

Thank you so much.

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