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Momenta Pharmaceuticals Inc. (NASDAQ:MNTA)

Morgan Stanley Global Healthcare Conference Call

September 11, 2012, 02:30 pm ET


Craig Wheeler - President and CEO


Dave Friedman - Morgan Stanley


Dave Friedman - Morgan Stanley

Hello, I think we will get started here and thanks everyone for joining us. Dave Friedman, one of the biotech analyst here and in terms of disclosures, you can find personnel and research at Morgan Stanley disclosures on So more exciting things, I've got Craig Wheeler here, CEO and President of Momenta Pharmaceuticals and we're very happy to have you here and the team and maybe if we can start if you can just give, you know, one or two minute overview of the company and you guys have a very unique approach to the drug development world and so maybe a quick intro and then we’ll just jump right in.

Craig Wheeler

Sure. I would be happy to. And for those of you that follow the company long time, you know, it's really a challenge to give a short intro on the complexity of our company in two minutes, but I'll give you just a quick profile of who Momenta is and we're a company that was found and based on really unraveling complexity. I think that’s a simplest way to put it where we look at complex problems like biologics, like heparins and try to understand in much more detail the structure, the manufacturing and the biology of this.

So we’re looking at a complex set of problem. We've parlayed that base in to kind of a three different business areas. The first, which I have always termed the fuel for the business is the complex generics business. These are drugs that are complex drugs that were filed as NDAs and therefore the generic path, the NDA pathway is available. And those two products that we're working on there are our launch product generic Enoxaparin and a filed product just generic Copaxone, both partners with Sandoz.

A second piece of our business which is up actually and we have working on it for a while has actually opened up recently. With the passing of the following biologic pathway is follow-on biologics, a natural extension from sugars to peptides to biologics, but a place where we can actually now capture scale because unlike the early products, these products actually have as many antibodies so we can go after and (inaudible) et cetera.

So there is actually scale in that for us and to capture that scale early this year signed a six product partnership with Baxter where we are working on developing our follow-on biologics business. We anticipate that we'll be working on those six products there and then if the business is successful, we will be able to expand it dramatically and we're only tied up with six programs at this point in time.

The third piece and really back at MIT where the company actually started is new drug where we are using this deep analytic understanding to be able to go back and look at structure activity in more complex way, complex molecules in different ways to hopefully get better programs out of it and our first program was M118 which is a program which we still hope to partner, but we parked at this point because I think we created a pretty good generic market in cardiovascular.

M402 which is our drug that is just entering Phase I now and we are currently recruiting patients is again an engineered molecule to take advantage of multi targets and most targeted biologic and then most recently the new thing we brought into the company is (inaudible) IBIG program which we brought the assets of another company for Virdante and are applying our technology to it. So we have those three pieces of the business that make up Momenta.

Question-and-Answer Session

Dave Friedman - Morgan Stanley

Great and we would love for this to be interactive. So anyone has any questions, please free to raise your hand and we'll make sure we can get your question out. So maybe if we can start with the drug you guys have on the market or share on the market which is Enoxaparin, if you could just discuss, you guys have had swings in your economics there which we can talk about, but also if you can just discuss where you are or where Sandoz is in the market in terms of share, has that been stable and are you at a run rate or are there still areas where you can try to make some headway?

Craig Wheeler

Sure, well to remind everybody Enoxaparin where we are the sole products in the marketplace was an extraordinary successful program for us, largest syringe launch ever in history, largest generic launch ever in history. We generated about $1.6 billion in sales in the first 16 months of the product. Since our competition has entered, obviously we had two things happen. One the price goes down because you have more competition then as well as our economics changed.

This is the deal that got the company on the map and so we signed a deal where if we weren’t the only one out there, our economics changes to a royalty, a lower royalty and so we not only got ahead of the market price erosion, but also significantly lower. Where that is right now, hit the price competitive market. Sandoz has done a great job in terms of maintaining share, that's come down a bit.

But latest numbers were 40% or little south of 40% which is actually a very good share of the marketplace considering competing against the authorized generic, the brand as well as (inaudible). The price I would say has been a bit more erosion than we had hoped for, it’s a generic marketplace. It’s not settled out yet, we are still trying to figure out share and price and all working.

So it’s hard for me to give forward projections, it’s still going to be an important revenue stream for us, but it’s nowhere near where it was and we do expect it to settle out obviously. Teva has not yet seen an approval, so that could be another action that could come into the market ultimately. But we expect Sandoz will continue to do what they are very good at which is optimized share and try to maintain price point where they can and they have done a fantastic job for us so far.

Dave Friedman - Morgan Stanley

And then in terms of your guys response to these other companies coming into the market, may be if you can just describe the sort of you need to have a generic player than come in and sue other generics for infringing on their own patents. So if you can just explain you know how you guys have set up this really smart and innovative approach to protecting or trying to protect your market and then where you are in that process?

Craig Wheeler

So I will talk about the approach for us because it is a bit unusual, but important when you look into these complex molecules. In fact the process I described, if we end up knowing more about these molecules then the innovators themselves too. They never had to go to this deep into the molecules. We do if we are going to hope to reverse engineer them, so when we do that we generate a lot of knowledge that isn’t public knowledge.

People haven't known it before and we use that understanding to control our manufacturing processes. So basically think of it as when we are developing these, we develop manufacturing patterns for our process that allows us to duplicate the brand products. It makes sense because we are developing new things. It costs us a lot money to do and recreate those patterns. When I am saying that's the only way to do it, but certainly our way is our proprietary way of doing it and therefore we put the patents in place.

The challenge that we've run into is that we had competitors launch, the FDA probably was a bit more transparent than we would hope for in terms of what that special recipe was and their citizens petition response when get the products approved and our competitors are entering the market space.

You know we obviously sued to block those competitors, we got an injunctions against their ability to market the product. In January of this year that injunction was stayed and they were allowed to – that was appealed and it was stayed and they were allowed to launch the product. So we are continuing with our court to press our case. We are surprised that the injection was stayed and that they were launching but. We are pressing forward in the court. Until July of this year when we got an appellate court decision which actually was -- has broad reaching implications, not just for us but any company that is in pharmaceuticals and basically what the court said is our process patents are unenforceable under Safe Harbor and so the majority of opinion in this Appellate Court case basically said that their interpretation of the law said that any technology that any company might be asked for someday by the FDA, say for plant inspection or something like that. It was unenforceable technology and therefore Safe Harbor was expanded to commercial competition broadly.

It's a very interesting case to be in, it’s an [important] place for us because at the post trial, you know, we're clearly in something which is probably a potentially a Supreme Court case. It was written and if you would take the time to read these opinions are so diametrically opposed in the Appellate Court and it's also opposed to a prior decision and as the court is in two places. One is interpretive based upon how it was legislative intent of the law and the other is to interpret it based upon a reading that says that it means something else and therefore we’re in a situation where I think a lot of people are not going to be facing it just for us but for any manufacturing patents in place, process patents in place, which I would emphasize is particularly important for the brand manufacturers of Follow-On Biologics where many of those patents are process patents which will fall under this interpretation as unenforceable and (inaudible). So this is going to be a pretty high profile court set of proceedings.

Dave Friedman - Morgan Stanley

And so where are you in terms of next steps and timelines?

Craig Wheeler

So we filed last week for what's called [unbanked]. We pressed the question on [unbanked] which means the whole Appellate Court, we asked the whole Appellate Court all nine judges to look at it together. They will now review that, I will ask on the other side Amphastar/Watson to come in with a brief that will be a short period and then [listen] to their process where they have to decide if they’re going to take it [unbanked]. I handicap that as highly likely since the Chief Justice later, who wrote the descending opinion on this, was scaling descending in it and it all opposes what the previous decision of the court was.

So the chances that we will take it up pretty high and it goes into their queue, we expect that we would get through that queue into resolution with a year. So we're hopefully sooner it’s a high profile case so that's about the timeline that we expect.

Dave Friedman - Morgan Stanley

And then in terms of understanding the damages to the company and what you may or may not be able to recover, obviously one way to do would just be to estimate the revenue loss and obviously that’s easier than it sounds but is there an approach that you guys think is viable, is it of question of share prior to when they came in and price prior to when they came in given what may or may not be a static market or is it, are there subtleties to that, that you think are going to complicate that.

Craig Wheeler

Well, we think the damages here are pretty clear, right. It was actually a very stable market before they came in and our share was constant, our price points were relatively constant, so in contrast in many cases, it’s actually very easy to calculate damages because of the change in the market price but also the change in our royalty which is just a mathematical calculation. So we are not going to disclose the number but you can because its part of the legal proceeding you guys can do your math and see where we are now with much lower revenue versus we were possible last year in terms of we able to bring in. So the damages amounting are pretty significantly and it’s pretty clear that because the authorized (inaudible) and everything was not enticed to come in before that what the market price was before that. We think it’s an easy calculation.

Dave Friedman - Morgan Stanley

And in terms of the agreement, is there anyway to turn back the clock, say these other drugs were removed from the market?

Craig Wheeler

I will answer that in two ways, that was on the contingency that we anticipated and we would renegotiate obviously if that happen but from all of the experience that our partners have in the generics business, there is never been a setting back of clock and raising the prices again, these are long-term contracts in place the authorized generics, lower their price as well. I don’t think we can recreate the world that we have so you should think of this primarily as a damages case at this point.

Unidentified Analyst

Thank you. Craig I was wondering if you could just speak to [Teva's force] Copaxone citizen petition just interested in what you think anything new there and then is there any reason for the FDA not to issue alternative approval when the FDA responds to the CP in December?

Craig Wheeler

Sure, so I will address the citizen petition first. Every time they put a citizen petition and they add a few new things right around it. There is nothing that we see in there that concerns us in terms of our ability to demonstrate equivalents and gain approval for through the [A&D] pathway.

They are clearly trying, they are trying to throw everything they can to muddy the waters and try to, their intent is hopefully to get something in there that would ask more questions or change our approval pathway. They know the game pretty well, but so far we feel pretty confident of everything we have been able to do. We feel very confident that we have been able to fully characterize and understand product, make an approval in product here, so we will continue to retain lot of confidence there.

Your second question was around tentative approval. It’s something that certainly caught our attention now that we have till 2015 (inaudible). So we have been very proactive with the FDA on that and the FDA statutes very clear on that, that the FDA should not be prioritized because of patents because just as often they get overturned in the Appellate Court, it’s actually if go back and look at patent cases in the Appellate Court cases it’s a very high percentage to get overturned in the Appellate Court that’s because District Courts are typically not patent expert courts, the Federal Circuit is all patent experts and so there is a lot of room there for them to overrule matters of law.

So the FDA is not supposed to and we are certainly communicating with them and hearing back from them that this will not be prioritized for review. That being said, I always know people are people and when you got reviewers for 15 applications on your desk, how do they make individual decisions. We can’t answer that but we will keep the pressure on every bit as we go through here because we want to be ready. If we do win on the appeal to launch the product and it would be a shame if we did win the appeal and then the FDA puts the breaks on such that we are sitting around ready to launch but can’t. So that’s how we are thinking about it.

Unidentified Analyst

So mainly we can just take a step back this is about Copaxone, if you can just update here on as to what happened in the recent court decision that you are trying to appeal and then may be also if you could just discuss the agreement with Sandoz, is it the same as enoxaparin given the different sort of structures of economic.

Craig Wheeler

Let me do that first and then I will come back to the court. So this deal was signed a later point when Sandoz Novartis had a lot more confidence on our technology. We were very early company, we signed that first deal. This is a 50-50 profit share deal globally under any circumstance, any competitive scenario. So we are true 50-50 partners in this product. On the legal side, we actually got a decision from the District Court which said we lost on all counts on the patents; remind you there is a family of patents here, there were lot of claims in the patents. So we lost them all counts which was disappointing to us.

We actually thought we had a pretty good chance of winning at least a portion of those claims, but in some weird sort of way, it actually gives us potentially a better chance on appeal. If you read this opinion and it's a well written deep opinion about why this judge made this decision, many of the issues that were underneath technical issues were not considered.

There were lots of places where we feel we have strong opportunities to appeal and therefore we will take full advantage of that at Appeals Court where we have a panel of judges who will be very much expert in this.

I think if I were to say, do I feel better going into the appeals process? No. You always want to win it at the District Court. You always lose a little bit of opportunity when you go to the appeals process but it’s far from over at this point. And I think we have, we're going to have a good day in court. (inaudible) who panel we drawn in the Appellate Court and then with a little bit of luck, we will be back in the game and hopefully be able to launch before 2015.

Unidentified Company Representative

Any other Copaxone related questions?

Unidentified Analyst

Thanks. Synthon who has also filed a Copaxone application in Europe and then in the US. They’re telling investors that they hope that US FDA requires a comparative clinical trial to generic Copaxone on the market, I guess extensively because they would be the only ones who have enrolled patients in such a comparative trial.

So I was just curious as to your thoughts about Synthon’s views there?

Craig Wheeler

Well, I think that Synthon needs that. You remember they filed an ANDA right in the US. The ANDA does not require you to file clinical trials. In fact, if they [require] efficacy trials, it's a [D2] not ANDA. So I suspect they did that to try to put their place [order] in the queue, but if you look at them, of course they would be saying that running the trials in Europe, they would like to have trials here and if everybody has to do trials then they have their trials. But I think as they have to do trials, those trials do not equivalent, those trials show you know [bII] or it has some efficacy but they are not powered to design to show equivalent.

So I don't know how get the substitute ability ever with that path way. Right and in some sense it sounds like they are trying to push it over to bII and then try to wining the bII again. We believe that this drug is if you can do the right analytics and process work fully substitutable approval through an ANDA pathway and that's the card we've chosen to play. We were successfully with enoxaparin, and continue to play here.

So I am not surprised in saying that, but everything that we have seen in working through this pathway has been positive in terms of our ability to actually use our science to get this approved. We are not approved yet obviously, but we feel very confident we get approved this pathway.

Dave Friedman - Morgan Stanley

So maybe we can move on to the 402 program given that that’s your most active internal program?

Craig Wheeler

Don't miss IVIG.

Dave Friedman - Morgan Stanley

So then maybe just quickly on this one; in terms of you know your approach is a sort of novel approach to oncology using heparin based drug. So what is your thought that underlies why that’s going to be potentially successful and how did you pick pancreatic cancer; was that a specific choice or just a cancer with a lot of run that may……?

Craig Wheeler

Yeah so let me first remind people 402 is a heparin that’s targeted towards cancer and to say its not totally novel because (inaudible) have known that they have activity and that abated for years, but they are never going to be optimized for cancer. So what we did is we went back and said knowing that there is activity in cancer how do we optimize for us, so this is optimized for cancer; it’s designed to take advantage of the natural processes in heparin which means that they actually have had multiple targets and they actually attenuated, they don’t push it down things which is what you want, you don’t want to shut everything off because you have lots of toxicities with it, you need these pathways, you want to get them more back into the normal zone.

So we put a research effort together to say what this heparin bind to and how can we design some of that is multi-targeted that can essentially modulate this over expression in cancer and therefore help it to suppress and cure the disease. The molecule we have in the clinic has multiple binding on everything from angiogenesis to hedge our pathways to matrix degradation types of activities that we are working on. Those activities we believe will be coupled with traditional chemotherapeutics, so we will be able to regulate the biology and the traditional chemotherapeutics would be sort of the toxically clarity in tumors we will prevent the cancer to spread and growing etcetera but the chemotherapeutics will be a combination with it.

So this trial we are doing in pancreatic cancer, we chose because we had very good results in pancreatic cancer model and so these models actually showed us that we had particularly in combination we could really significantly show advantages over the current combination therapies or single agent therapies. So it’s a good cancer from – no, its not a good cancer, but it’s a good cancer to go after because it’s a very aggressive cancer, so you seek quick readouts and we had very good readouts from the animal model so it was one that made a lot of sense for us to go do it first.

Dave Friedman - Morgan Stanley

And just to be clear given that these are optimized drug for cancer, the bleeding risks with giving a heparin based drug is that going to be an issue, did you see that pre-clinically or is that really optimized out?

Craig Wheeler

No it shouldn’t be an issue at all, because what we have done is we have significantly down regulated the anticoagulant portion of the molecule; in fact actually you want a little bit in there because in fact one of the main treatments for cancer patient is some anticoagulant therapy, but you couldn’t dose up against the cancer targets for the traditional molecule excitement because you get bleeding risks and so we engineered out a lot of the bleeding risks with the engineering of the molecules.

Dave Friedman - Morgan Stanley

And then may be in the last couple of minutes we can touch on the IVIG program; and IVIG has a number of uses non-label, lot of off label and what’s the most efficient and highly likelihood of succeeding approach for you guys with potentially a novel IVIG?

Craig Wheeler

Yeah so I can’t give you an answer yet in terms of specific error that we go after but I’ll tell you the process for we go after. So to remind everybody we bought the set of assets from a company called Virdante; which went out of business and we bought their assets. The technology basically is changing using a sialic called sialic acid switch technology to change the form of the glycoforms on the antibody, the lgG antibodies in IVIG.

And by doing that there was pretty good data from the Rockefeller University that it significantly changes the anti-inflammatory properties perpetuated so that you could use significantly less IVIG and get similar efficacy or potentially enhance the efficacy.

To remind you IVIG is about $4.5 billion or $5 billion product globally; it’s isolated from plasma; it has two big markets, one is immune replacement market and that’s about $2 billion and the rest of it is whole (inaudible) stuff that is a kind of anti-inflammatory. So to figure out where to go with this first we need to get the proof of concept which we hope to get by the end of the year or beginning next year that says we know how to reproduce with our very promising lab results.

Once we know that, the second onus of work will be able to understand in more detail, much more detail on the prior company I was working on this all has been done in Rockefeller University; why it has the effects, what does it change? And then that by matching that with the biology and help dictate what direction we take, so if you think of this as proof of concepts, end of this year, beginning next year, fourth quarter next year, biology work just probably a nine to 12 months of work, to really figure out what molecules, say for how to target it and then we will be able to be very predictive in terms of the path forward.

Obviously it's a wide field. There is a lot of places going in the existing and there is a lot of promising data announcement, as well as coming out and also I always look at this as one of those representing the company which, you know, it's a research program right, so you’re not going to get a lot of valuation for it, but that card could turn over very, very quickly for us because it's a known pathway and it could really open up a new source of value for the company.

Dave Friedman - Morgan Stanley

And in terms of the IVIG M402 programs, is ultimately partnership after some amount of proof of concept plan or is there an intention at some point to try to build out some commercial infrastructure as well?

Craig Wheeler

Yeah, I think, we think about it in terms of what's the maximum value generation we can create for our shareholders. You know, if you are looking at a broad market compound that requires a primary care sales force, we're not going to try to hold on to that, I mean, there is something we don’t have the capabilities to do. But if it's a focus market and it's the best way to optimize the value for it, no question we’ll go after it.

I think a lot also depends on the successful of the other parts of our business, I mean, you know, if we are cash generating in a way that it actually allows us to fund most Phase III’s and go, then why not. If we are not, we have continuously of modulating our cash flow by taking them to an inflection point and then finding a partner to carry it forward. So, it creates optionality for the business, but we're not closing the door, but we’re also saying you know we’re not trying to drive just for purposes or ego to have our sales force out there to be a marketing company as well. We will do it if it makes sense for our investors.

Dave Friedman - Morgan Stanley

And then, the last, any desire to tell every one what 923, 834 or 511 are?

Craig Wheeler

What I’ll tell you is, giving you some pretty good hint. This was negotiated with our partner. Obviously, they would like to keep it quite. We would like to talk about it. So we’ve said there is two in information and one in oncology. So if you know your information area and read the word that we say carefully about, you know antibody or not antibody, you can get pretty good idea what we are working on down keeping narrowing down; we can’t go beyond that, because of our partnership agreement. But we have tried to be as revealing as we can to and we'll continue to make that right for the investors.

Dave Friedman - Morgan Stanley

Alright, so I think we are out of time, so thanks very much for joining us. Thank you for coming.

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