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Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)

Goldman Sachs 33rd Annual Global Healthcare Conference

June 7, 2012 12:20 p.m. ET

Executives

Craig Wheeler - CEO

Analysts

Sapna Srivastava - Goldman Sachs

Sapna Srivastava - Goldman Sachs

Thank you. Good morning and thanks for joining us. I am Sapna Srivastava, biotech analyst at Goldman Sachs. And it’s my pleasure to host Craig Wheeler, CEO of Momenta. And thank you so much Craig for coming, really appreciate to know with the trip (indiscernible) with the morning here.

Before we go into the discussion, I just want to read this out to the audience. We’re required to make certain disclosures and public appearances about Goldman Sachs’ relationships with companies that we discuss. The disclosures relate to investment banking relationships’ compensation received or 1% or more ownership. I am prepared to read disclosures if anyone would like me to, however, these disclosures are available in our most recent reports available to U.S. clients on our firm’s portals. Views of non-Goldman Sachs personnel may not represent the company views.

And with that, I will kick it off, and just a reminder to the audience we would like this to be interactive. So please ask as many questions as you have. Craig, when we sat down here last year, it’s amazing to me how much has happened at Momenta since then, from the Lovenox side of it to the Baxter side of it. I would just love to get your views over like, this really I think a period of massive activity and evolution of the company, where do you see your most – your largest key opportunities now and where you are most focused for taking the company towards?

Craig Wheeler

Sure. Well, first let me say thanks very much for having us. I always love to come out to this conference, it’s got a wonderful location and a great set of investors we have to meet with. And of course, I have to say my (indiscernible) side as well to remind everybody that I will be making forward looking statements today, and we undertake no obligation to update these forward looking statements, and the rest of it, I haven’t memorized. So you can read.

So yeah, indeed it’s been a pretty amazing time at Momenta in the last year. We got ups and downs with, of course competition coming with enoxaparin. But what the success with enoxaparin has done is it’s basically allowed us to really begin to execute on the vision of the company. And I can’t really take credit for the founding vision of the company but we’ve done an awful lot to try to execute against it, and the moves that we made particularly towards the end of last year have really set us on the chorus that I think provides for us for the long term growth and let me talk about a few aspects of those.

And just to remind everybody, our company basically has three pieces of the company. The first is the complex generics business, I am sure we will talk in about enoxaparin, Copaxone as we get to the discussion. And that’s really designed to be the fuel for the company. The idea was, let’s make generics that are harder for other people to make use in our science and that allows us bring in revenues that fund the company. The second leg of that business is follow-on biologics. And that one – it’s been a little bit slow to start for a couple of reasons. One is before Enox was approved, we got to put in and invest a lot of money there, and secondly, without a pathway that was past couple of years ago, there was really no way to get these drugs approved. And so even though we knew it was coming, it was very hard to make the investment decisions or find partners before we had those things to fall into place.

And then the third and really the original founding purpose, with people working at MIT, when they founded this company, was to be able to use this deeper structural analysis to develop new drugs. And that one is probably the longer term vision but with the acquisition of the Virdante asset (indiscernible) going into the clinics et cetera, we’ve put a strong foundation in place in terms of the new drug business. So it’s pretty exciting.

Now let me just come back and talk about a couple of things that happened at the end of December in those two pieces and how they contribute to it. First, follow-on biologics. The follow-on biologics business for us is one where unlike Enox and Copaxone were they were really one-off. What I mean by one-off is scientifically one-off. There is not a lot of complex synthetic polypeptide around, you go after, see this full suite of technologies to like our product but you really can’t lever it. When we’ve looked at biologics, we’ve always seen that as a place to actually scale our operation, where we’re doing one show product, we can do six. We are looking across and saying there is real scale of synergies in these products from science side. And so to do that, we needed a partner and that’s what we set out to do is to find a partner. And we were very fortunate at the end of December to be able to sign a deal with Baxter Pharmaceuticals which, and we can go into this in later questions, I believe is the ideal partner for us in terms of a number of reasons that they bring and it’s very, very complementary to Momenta skill set.

So that’s put us on the map and a deal that allows us to really try to take full advantage of the follow-on biologics potential but also limits the risk of investment if they go through that because of the terms of the deal. On the new drug side, that’s something we’ve been working on for a while. You remember, for those of who have been following the company is the M118 asset which is still there but because we’re having a partner that we are not taking it forward and we actually still are in discussions occasionally about that. But I’ve taken it out of our own planning because unless we find a partner, we’re taking it forward but we now have our cancer compound coming into the clinics. We announced last month that we’re now recruiting for patients for our first cancer trial, as well as a really exciting suite of technologies that we acquired, when we acquired the assets of Virdante around basically biobetters, modifying the Fc region of antibodies to allow us to actually change how they behave and inflammatory properties. So that actually opens a door – another door for us in the new drug front. So it’s pretty exciting.

As far as the company is going, it’s kind of crazy at the company and we are growing like mad. And right now we’ve just grown to 230 people to give you a reference, when we got enox approved, we’re probably 140, 160 somewhere in that range. And we’ll be north of 270 by the end of the year, and that’s because to go from a company that’s typically been working on products sequentially to also have to do six in parallel, we really needed to scale the operations. And so there’s a lot going on in Cambridge right now as well.

Sapna Srivastava - Goldman Sachs

Just stepping back a little away from the company itself, I have been caring to talk about Baxter and the biosimilar opportunity. I would like to get your views on the FDA draft guidance which came out, and I mean the one thing which has always struck to me is how much FDA cites your technology through its the new (indiscernible) medicine perspective or the guidance or the Lovenox approval as to how integrally your technology can be used to reduce clinical trial burdens or analytics and help us understand like, what you thought was good about the guidance and where do you think the challenges could be?

Craig Wheeler

Well, overall I am actually very pleased with the guidance. I think the guidance like the law comes out and where we wanted them to come out which basically says that there is going to be flexibility of the FDA for companies to bring technologies to the FDA to make a case for approval and substitute really a product. And so overall I am actually quite pleased with it. If you actually look through the guidance they have given, they have given a lot of examples in the guidance as well as talked about the fact that they will make clinical trial decision based upon the physical, chemical and biologic characterization data that companies bring to the FDA. So that is the core of what we want to do. That really allows us to take full advantage of our technology to hopefully reduce clinical trials, hopefully raise the bar and most certainly with an objective of trying to drive towards fully substitutable biologics.

So the guidelines are very good. I don’t think they are going to change that much from the dialogue that went in Washington. If you followed what happened a couple of weeks ago in Washington with the testimony and feedback on the guidelines, I don’t think there was anything surprising there. I think the feedback was right along party lines in terms of what people wanted, and it’s important to remember that before the comment period, the FDA in developing these guidelines spent a lot of time with GPA, J as well as Bio, basically opposing sides to iron out these guidelines. And so it’s not like the comment period was the first time they hadn’t heard some of these comments. I expect that they will actually come in pretty much the form, not pricking around the edges, made a little bit wordings on clinical trials and things, as we’ve seen them, and I think the real challenge beyond here is now how they’re going to implement those guidelines. And I think the guidelines are pretty stable at this point.

Sapna Srivastava - Goldman Sachs

What do you see – I mean is there any risk? If the Supreme Court reverses part of the healthcare reform, how the follow-on biologics may potentially get delayed a little bit more or you see kind of that get attached to another bill and kind of still stay on track just –

Craig Wheeler

Yeah, that’s a very good question. I have gotten that question a lot because obviously the Supreme Court is looking at healthcare reform and there is two questions there, is healthcare reform legal and is that separable? Meaning, can the different aspects of the bill be taken apart? And so I think the concern that’s been raised around the biologics bill is it’s not separable and healthcare reform get struck down, follow-on biologics get struck down as well.

We actually see that as – I mean there is certainly a risk that could happen but we see that as something that would be fixed very quickly. And let me give you the logic on that. The follow-on biologics bill is actually drafted as a separate bill. It went through Congress as a separate bill, it was conferenced as a separate bill, it’s a full standalone package that was negotiated in Congress with input from Bio, input from GPA, J and pharma and everybody else evolved in it. So even though it may not be separable from that, I think what would happen very quickly is that we get picked up and attached probably through the GDUFA bill, the reauthorization bill which may be the only bill that gets passed this year. That would very quickly get it back into effect.

So I think the most likely if that did happen is that there would be a bit of a operational challenge for a couple of months because the FDA has no legal authority without the bill in place. And so it may mean that the people who have meeting scheduled and they are trying to push their agenda through may get delayed, and they have to reschedule those meetings once the thing is back in place. But remember, we are at the beginning now. There is not a lot of resources that have been hired yet by the FDA, so it wouldn’t mean that there is a lot of appropriations that go in, and people will get laid off at the FDA, and those types of things. I mean the appropriations actually come with the passage of the reauthorization bill for FDA. So all that stuff is ahead of us now. So I think if it did come to pass, that’s a minor problem but not a big delay for follow-on biologics.

Sapna Srivastava - Goldman Sachs

So when we have to think of, and what timeframe can this opportunity actually start being monetized, I mean it’s a big opportunity, you have made a big commitment to it along with Baxter. I mean how should we assess the timelines, like when we can start seeing success out of this, both from the legal side of like, actually being able to implement it from the technical side of getting something?

Craig Wheeler

Yes, we haven’t disclosed the product, so it’s little hard for me to kind of give you exact timelines and products. But let me talk about how we think about products and then you can kind of follow it along and I can talk about the deal in terms of how you can follow our process. So the way we – and when I say we, I said we and our partner Baxter, thinking about this is, we want to be competitive when we launch this product. And so we are trying to make sure that we are in the first wave of whatever products that we are working on at launch. And so if you want to be in the first wave, and we don’t have the pathways we’re going to work yet, we actually have to backup from that first wave and say, let’s assume we’re not successful, we have to do those clinical trials, because we’re just not having – not having the time to do it should we need to. So you kind of back up from when the patent expirations are, three, four years through the trials, maybe a year for the approval process and a couple years still line up to trial, you need to start these programs six or seven years before patent expiration.

And so that’s the kind of plan for when we would enter the market. Now there is upside to all that. Number one, if we skip clinical trials and challenge patents, we may be able to do some of that sooner. But that’s our current strategy as we don’t want to be out there later in the market. Now let’s talk about how we operationalize that strategy. Remember there’s two places that we create competitive advantages. One is, and I think it’s fair to say that’s probably happened in biologics as well, when we file an application we basically set that will raise the bar because we put all of the details about characterization, physical chemical characterization and that the FDA understands what’s appropriate there and tends to require others to do that as well. So that allows us to maybe equal or to pull ahead on others because of that, we hope.

And the other is to drive towards substitutability early or skip clinical trial. And those things are more unknown, right, because this is a new process. The FDA as an example has said that they are going to do these meetings, we think these meetings are very positive, the type 1, type 2, type 3 meetings but most of those meetings won’t – will happen before IND. So the investors are not going to have a good visibility to them because there’s no IND, right, unlike where you see in a NDA and then you can kind of follow the progress. But if you think about the type 3 meeting, what the FDA is asking for in type 3 is biologic characterization, physical chemical characterization, toxicology and process validation. That basically isn’t enox or Copaxone application. And then what they say is that they are going to take three months to review that and they’re going to have a meeting and tell us that we can reduce clinical trials and get to substitutability.

So I suspect given our history that, that’s probably not going to be a seamless process to start with. So what I would expect probably –

Sapna Srivastava - Goldman Sachs

Hopefully not an eight year process either.

Craig Wheeler

Yeah hopefully not eight years but we have – what will probably happen here is if that process does look it’s going to be protracted, we’ll probably start those clinical trials in parallel. So you will get to see some visibility from clinical trials and everything we start the clinical trials. But our first goal is to try to take advantage of this process to be able to reduce clinical trials. But I think you’re going to be better as you start, if all goes.

So you won’t be able to see specifically the products until we get to the clinic, and I do think these first products are certainly going to require some clinical work. But you will be able to track progress for us because of the way the milestones are phased out on the products.

Sapna Srivastava - Goldman Sachs

Can I ask it quickly, what does clinical work mean, do you mean really like follow-on efficacy trials and like when you say some clinical work, is it – how should we think about that?

Craig Wheeler

I’ll tell you how we think about at Momenta, and obviously I can’t speak for the FDA, how they are going to think about it. But in the context of being able to try to drive something into the window a variation of the brand, we are basically establishing equivalent with our physical chemical and our biologic characterization data. So if you buy that, that we can do that, then clinical trials are nothing more than confirmatory, they’re never going to be statistically more valid than the data you are putting in on the structural work et cetera. So our view is that it makes sense because this is unproven, and it’s a new pathway that the FDA should be asking for trials, but I would say my view on what’s necessary will be a PK/PD trial, maybe not going to phase 2 immunogenicity piece but not follow-on efficacy trial.

Sapna Srivastava - Goldman Sachs

For that you don’t need seven years ahead of the patent –

Craig Wheeler

That’s correct but we can’t plan on that yet. Right, so if you think about the deal, we haven’t talked about the deal terms yet. Baxter’s planning on this is a biosimilars business. Even if we don’t, they don’t have all the Momenta advantage, they are better positioned than most companies. I mean, Baxter, why they are such a good partner for us, then why this product is a multi-source product. They compete in the hospital business. Everything they do is cost competitive. They are global. You walk into a hospital in China or India, Baxter products are there. Brand recognition is global, so they are perfect for trying to build global biologics but they are also very cost competitive. They are very cost focused, they always have been as a corporation. So that makes them very, very good as a partner for follow-on biologics.

Therefore their view is they can compete in, just like everything else in biosimilars and if we are right, they have a huge competitive advantage. So the deal structure is okay, Momenta brings some advantages of potentially getting cell lines quicker, getting, potentially raising the bar but if they don’t succeed, we’re still going to do the phase 3s and still going to go out there, and Momenta is still going to get paid, we’ll still get our base royalties, so this is the baseline business there for us.

So we don’t know how the regulatory path is going to work yet. We have to plan for that phase 3 even though our operational goal is fully to skip those phase 3s. And if we proved we can do that, then later products we can actually do in a shorter timeframe.

Sapna Srivastava - Goldman Sachs

And what kind of products are most attractive to you? And I know you won’t talk about the specific product but like, do you look at complex products, simpler products, I mean, just how should we think of that value proposition given your technology edge?

Craig Wheeler

Yeah, our competitive advantage is definitely in the more complex products. So that’s where we are going, and when we look at antibodies, fusion proteins, those types of products, those are great because they are very complex. And that’s where our technology really shines and it allows us to differentiate ourselves.

I never say never in any of these but if you go back and look at some of the E. coli products which are non-glycosylated, they are basically backbone molecules that are expressed, there is a lot less complexity they have to deal within those products. I am not saying they are simple but it’s not the place where we have the best competitive advantage and so we are – you will probably see us in a more complex products first.

Sapna Srivastava - Goldman Sachs

Theoretically, either we should see in the next couple of years you’re getting milestones for technical hurdles being achieved by Baxter or we should also see probably something gets to put into the clinical trials and those are the two ways to assess how you are progressing.

Craig Wheeler

That’s correct.

Sapna Srivastava - Goldman Sachs

And could you give us a sense on what the technical hurdle milestones are for?

Craig Wheeler

Maybe I can just give you paint the picture of the whole deal, it’s kind of three components to it. The first component is basically what we do, right, that’s the characterization work, the cell line work, and the intermediate scale up work. And those technical milestones, each product has three milestones, and opt-in milestone which the first two are paid by the upfront, and then the next four will be an opt-in milestone. And then two technical milestones. And I can’t give you specifics because they are developed for each product but they are basically around getting to a certain level of choosing and following the scale and then the second is a higher scale getting ready for clinical there. So it’s that kind of milestone.

So the nice thing about it is they are all pre-clinical, they are all fully within our control based upon our science and technology. And the intent was to design a deal which should we be successful in delivering the products to them to put into the clinic that they would pay for part of our efforts in doing that. So that is designed if they pay their share but they only paid in arrear after we meet those technical hurdles. And so what you will see in the numbers is an investment and then in arrears but hitting those milestones, those milestones are covered part of the costs that we’re going to incur. That’s the first part of the deal.

The second is the clinical part of the deal, so all the clinical, (indiscernible) manufacturing, and all the clinical trials, Baxter paid the 100% of those costs in the base deal. And not only that, but on approval if we succeeded in actually reducing those clinical trials, let’s say we only do that PK/PD trial I talked about, then we can get up to $50 million per product paid to us, and I know what Baxter is going to pay us a portion of the savings that we would generate for them and not having to do the trials, you would assume, in effect phase 3 trial is probably $100 million in trials. And so they will give us half of that back, essentially how that was negotiated. So they will pay us on approval the money for the ability – because we are able to skip the trial, and then the last part is the commercial part where there is a baseline royalty in high single digits that we get in any event, so let’s say none of our technology gave us advantages, we weren’t first to market, we didn’t get substitutability, we still get that baseline royalty, and then that royalty can be over doubled that baseline, slightly over double of that baseline royalty, if we are out there and substitutable, the first to market et cetera. So it’s kind of tiered based upon where we are, how we come into the marketplace.

And the important thing to remember is we get a higher percentage of the profits in a place where we’d offset a much higher price and higher part of the share. So those are really big upsize for us. And there is one other component of the deal which is, I actually think it was a great opportunity for us to negotiate this, and the first two products that we only get the base deal, products three through six, we have a one-time option when the third product gets IND to choose to invest, co-invest with them for the prospective clinical costs that we are not paying for now up to 30%. So if we choose 30% that point, we pay 30% for all of the next four products and we get a 30% profit share plus a pro-rated portion of our royalties which is about 60% of the original royalties. So if you do that on a profit share, that’s 40% to 45% of the profit that we would be able to pull in from the products.

The nice thing is we get to make that decision, after we see what happens on one and two to see if we can actually reduce those clinical trials. And so it’s a really easy choice for us, if we are only doing PK/PD, or early phase two trials, if it’s $200 million of product in phase three, Baxter can take a 12 month to lower the base deal. So it’s a nicely structured deal with us. You will be able to see those milestones, even though you won’t see them, once the IND is, you will be able to see the products.

Sapna Srivastava - Goldman Sachs

And just last question on this, how fast do you think we can see the INDs?

Craig Wheeler

That depends, and I will give you just a little bit of explanation why that depends. We probably could go it pretty quickly. If you see IND really quickly, that’s probably not the best thing, because what we want to do is test the path with the FDA and see if we can get prior agreement at the trial, and then if that’s not working, start something in parallel. So we don’t want to just rush into the clinic and not take advantage of the type 3 meetings. So we will have to make a game day call based on how those discussions are going when we are going to put something in.

So it’s one of those paradoxes where – I’d love to say we’re going to put it in six months although if we did, then you probably would assume that those type 3 meetings are not going that well.

Sapna Srivastava - Goldman Sachs

So maybe you gave just a little bit, not a little bit, a lot though, the generic Copaxone, and I would love to your views on approvability of it, and what timeframe do you think the approvability can come if it comes? And I think there’s always been a big question for just analyzing your company, the difficulty in understanding when can this thing happen?

Craig Wheeler

So I will give you my bias on approvability and where I think the application is but I am not going to give you a lot of satisfaction on – because I don’t know, and it’s not, so I am not hiding, I just don’t know. Around last October, I have been saying, my bias changed significantly in terms of how I have been talking about the FDA. And because before that we weren’t really sure we were, now I think the dialogue has been very positive, we have been moving forward on the application, it feels very good. It feels like where we were enoxaparin, we’re really pushing forward in cooperative effort and making sure, and they get what we are doing and they understand the science, it feels all good, I think I am quite positive in terms of where that’s going.

The reason it is very hard for me to predict when the approval process is, we learned our lesson in enoxaparin is that lots of things happened with these applications, particularly as controversial complex applications in political realm and what’s happening now. We don’t have China heparin supply to deal with this time, that’s good. But I still am very hesitant to say is it six months, is it a year, is it two years, because there are so many things that could happen at the FDA. And I was quite bullish if you remember back in 2007 and we ended up in immunogenicity, so suffice to say I feel pretty good about where we are with OGD. We are hopeful and we’ve encouraged FDA to be a lot more smarter or aware of things that might happen outside of OGD when this application comes forward, but I don’t have visibility to that, therefore it’s very hard for me to say when.

Sapna Srivastava - Goldman Sachs

But if I had to ask you, is your confidence in approvability of Copaxone like eventually getting there just on that?

Craig Wheeler

Absolutely. There is -- my view on the interactions right now is the agency wants to approve this drug, as we filed with J (ph) that we see no indications, not that they were going to push us over to file IB2 and after clinical trials et cetera. Could it happen with the FDA? Sure, things could happen, but I would suspect of the fact they had meetings before this application was accepted between new drugs and the opposite generic drugs inside of second J pathway, and the fact that we have been very actively working with them, you would think they were expecting clinical trials, they might have asked by now. Right, I actually see this path of J, agency is motivated to do with that way and I see our science is fully enabling that. So I am very bullish on the approvability.

Sapna Srivastava - Goldman Sachs

Is there anything on the biosimilar guidance which could prove to be that a challenge or is a positive for Copaxone, or is it just –

Craig Wheeler

I think if that’s the other way around, I think that biosimilar guidance has probably been a lot formed by enox and Copaxone. I don’t think the guidance is actually at all dictating what happens in enox and Copaxone application. I think this is what has actually given the agency to confront to actually create the flexibility in the biosimilar guidance, and I think actually agency took great care in trying to carve out synthetic polypeptides in their guidance to say, this is an OGD problem, this is 505(j), so I don’t see we back to Copaxone, anything different than we’ve already given.

Sapna Srivastava - Goldman Sachs

And how should we think about the trial timelines on Copaxone? I mean I know that you expected just the core decisions, but I am pretty sure it gets a peanut valve (ph).

Craig Wheeler

Well, let me talk about how we think about it because this is one where it maybe is useful to spend a couple of months, I get a sense that at least a certain portion of our investors are looking at the district court decision as the big milestone for Momenta and what’s going to happen. And I actually – we don’t view at that way. Because we basically view it as a 100% probability of an appeal here. 100%. It’s going to get appealed. If we went, Teva is going to get appealed, if they went, we’re going to appeal. If we win on some, they win on some, we’ll probably both go on an appeal.

So basically, we are expecting a decision and in fact, in some of those things, where we win it may not be the best for us in terms of the appeal process, in some of the things where we lose it, actually it really strengthens our hands in the appeal process. So there’s going to be a decision and that decision is merely a point along the way and we are looking for it as soon as possible because we want to be able to start that appeals process. So we are hopeful that we will see a decision in the next couple of months. I mean it’s now kind of in that time zone where the judge usually renders her opinions and if you’ve usually known as a slow judge in terms of formulating opinion, people thought it might happen early because of (indiscernible) that didn’t happen. So we are in that window now, we expect it soon. And we are looking that as a place where we can now culminate our strategy for appeal. And so obviously what I love to say, yeah we win all points, yeah but where we are not, I have no idea. And I actually think some places where we don’t win everything, it strengthens our hand in the appeal process. And so we are just looking it as a point along the way and the real is what’s the strategy going to be in appeal, and some of our investors have really focused on really understanding this trial, and understand what I say, when I said there are lots of interplays here, we are winning in one place, where we content on another place. So we have lots of opportunities.

That appeal process, if we start tomorrow we’ll probably take about a year. So that’s why we want it to happen as soon as possible.

Sapna Srivastava - Goldman Sachs

Are there questions from the audience?

Question-and-Answer Session

Unidentified Analyst

Yes, do you have for Copaxone a similar structure with Sandoz like with enoxaparin?

Craig Wheeler

Actually it’s a very different structure. We were a more mature company when we signed this deal. They had more confidence in the technology, so we were able to negotiate the deal where we have 50:50 profit share globally for the life of the product. So there is no cliff like we faced with enoxaparin. So it’s a much better place for us because hopefully that will be able to bring us to sustainable profitability. We will see them, on the competition on it but the deal times are a much more favourable for that.

Sapna Srivastava - Goldman Sachs

I guess in terms of, that we know the place of Biogen Idec, Amylin, and how should we think about competitiveness of their products? I mean what’s your competitive intelligence, the potential that another player can’t get them.

Craig Wheeler

Well, I don’t have any visibility into Amylin product. So I think where their product is, this is probably a question for them. I would be impressed if they were able to do the depth of science that we are doing. That’s not something that Amylin is typically gone in terms of the programs that they brought forth. And they are behind it. So I do expect that we have an advantage over them. How long that advantage is, I don’t know. Obviously we have two tools on that, one is how we prosecute our application with the FDA and the other is our patents around our processes.

And one thing I will say about the Copaxone program is that our patents are even better written than enoxaparin patents in terms of protecting our process for manufacturing Copaxone. So we have our patents to stay, and some of that you’ve already seen and we also have the approval process which will distance us or differentiate us from competitors. So we are hopeful we will be out there ahead of and for some time before we see competition here. The caveat I will make though is even if they are approved, we are not expecting there to be a ton of competitors in the marketplace. And so we think even with a third product approved, this is a very, very perfect product for us. And I think in the generic world, if you look at Teva, Sandoz, Amylin, you have to be very experienced generic player, and the market will be an attractive market for some time even if they were in the marketplace.

Sapna Srivastava - Goldman Sachs

The one thing which I will say still surprises me is Watson, Amphastar option in terms of sitting against the generic Lovenox, in theory it just seems to be question with intellectual property I think which is outstanding and how it gets resolved. But I guess the one big question that comes back to is what is the durability of intellectual property when you are following this compound? And just maybe less of a question now for generic Lovenox but definitely a much larger question for the follow-on generics Copaxone.

Craig Wheeler

Well, I will answer that in two components. Number one is we certainly have got to be aware of what the FDA may be telling our competitors. One of the notable things in the enoxaparin trial is that not once in this trial that people said they are not using our technology. Not one. All the arguments in all of hearings not once have they said that they are not using our technology, they made cases about safe harbor, they made cases about we need to redefine the patents, but not once have anybody said, so that tells.

And obviously I talked about the fact that, that 38-page CP response that the FDA put out with the criteria, with a lot of stuff that we to get out with necessarily characterize it. So one is try to make sure that, that doesn’t happen again. Not totally in our control but certainly something that we are encouraging the FDA not to do with it. The second is our IP, and I would say even though I have good confidence in the trials of enoxaparin that we have learned a lot about how these patents are going to be used versus (indiscernible) and so we are thinking very explicitly about how to patent manufacturing so that people cannot buy with our manufacturing process. So you will see more robust patenting efforts, you will see us really trying to both our patents and our technology of trying to manufacturing as well as trying to protect the knowledge and IP (indiscernible). Those are two weapons that we have.

Sapna Srivastava - Goldman Sachs

And maybe talking about the generic Lovenox, this litigation, at this point if you win the litigation, what do you get?

Craig Wheeler

Well, this is a classic IP litigation, so it’s a damages case. And so obviously we would be arguing for damage. Our damage is very calculative. Every investor has done it and all the analysts have done it.

Sapna Srivastava - Goldman Sachs

And that’s a big question, I mean how much can Watson be eventually held liable as well?

Craig Wheeler

I got the question for the layer but I would say Amphastar can indemnify, really they can indemnify them and beyond that, there is a party behind that.

Sapna Srivastava - Goldman Sachs

Given the damages, what do you think led to at-risk launch?

Craig Wheeler

I really can’t comment on that. That’s not --

Sapna Srivastava - Goldman Sachs

That’s fair. Maybe just speak on that, we’re almost running out of time, I do want to have the opportunity to talk about your new drugs because we’ve kind of just started hearing about them. Also just from a pure strategic perspective, do you think you get to trend when you start going into such multiple avenues?

Craig Wheeler

Well, I will answer that first. There is always at risk, and so we need to actually prioritize, and I would say if you look at our prioritization right now, our prioritization is number one to make sure we get that Copaxone approved and follow-on biologics, that’s the core. And the new drug piece, once that’s secured, it’s what we will do. So if we need to, we will de-emphasize some of the new drug research and make sure follow-on biologics piece (indiscernible). So we are careful of that in the company.

But remember, new drugs is a long term piece of the business, that sort of leg, so we now are in the place where we can judiciously begin to invest. So we have 402 going into the clinic which is really exciting. 402 is a molecule which comes back to Lovenox, right, where we knew that happens actually heading to cancer properties but we couldn’t test them because of the anti-coagulant activity. So we are able to design that and bring that anti-coagulant down but also tailor what these molecules are after. So we have a multi-targeted drug that goes after the growth factors, adhesive molecule cytokine that actually has effect in animal models on angiogenesis, tumor growth and metastasis. So it actually is something where if it works, it’s certainly going to be a combination drug with toxic agents, could be broadly used. So we are pretty excited about that but it’s early stage.

And equally excited this technology that we are able to bring in from Virdante, that, I will tell you quick story and that we were actually – weren’t looking at buying the assets of Virdante, we were looking for trying to get access to the IP they had around violation because we were doing our own engineering work on biobetters. And the company didn’t get funded, so we had a chance to buy all the assets of the company. And so we were able to bring it on the development portfolio as well. And that gives us something where should it work, should we actually be able to get this really to work effectively, we have a very direct path to the clinic in a very large product, so that’s really exciting for us, IVIG and sialylated FCB (ph), and some offerings in something that is already partly through, that hopefully clinical set of activity. It’s one of those products where kind of sleeping now but as the research plays out over the next year, year and a half, it could be one of the biggest growth drivers for the company. And so there is a lot in research that I could talk about, I won’t go into it now but at some point, I will probably do, try to bring investors again talk more deeply about our research. There’s a lot going on in the company.

Sapna Srivastava - Goldman Sachs

Great. Thank you so much for your time. We are almost out of time. But thanks again. Thank you everybody.

Craig Wheeler

Yeah, thanks guys.

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