Momenta Continues To Have A Lot Of Upside

Summary

Approval of 40mg Glatopa will help fund research and development.

FDA guidance in interchangeability is a positive.

Novel autoimmune medications are progressing nicely.

Momenta (NASDAQ:MNTA) has been on a good run the last few months but I believe it has much more room to grow going through 2017. A number of catalyst should propel the stock further as the year progresses.

Glatopa 40mg

The first and biggest catalyst for 2017 will be the approval and launch of Glatopa 40mg. Glatopa is a generic version of Copaxone which is marketed by Teva. Glatopa 40mg is given three times a week versus every day for the 20mg injection. Currently Glatopa 20mg has about 40% market share according to Momenta and its partner Sandoz.

Glatopa 40mg is currently under ANDA review and could possibly launch in the first quarter of this year. However if Teva (NYSE:TEVA) fights it in court, which they probably will, it will be up to Momenta's partner Sandoz to decide if they want to do an at risk launch. Estimating how much revenue Momenta will earn from a launch is difficult. However if we make a few very conservative assumptions we can get a rough estimate of what is possible. Last quarter Momenta's share of the profit for Glatopa was 23 million. If we are conservative and estimate that the 40mg Glatopa will only capture 20% of the market and Momenta's percentage of profit is relatively the same as Glatopa 20mg it would mean an extra 46 million per quarter in revenue. This would be more than enough to cover Momenta's 18 million dollar loss in the third quarter. There are two scenarios that would hurt this projection. The first and most obvious is if the 40mg version of Glatopa did not reach the market for whatever reason, not approved, litigation, ect. I think this is unlikely. The second and more likely possibility is the approval of another generic version of Copaxone. This would hurt margins as well as sales as there would be 3 competitors on the market. Long term Momenta shareholders probably remember a similar situation that developed when a third generic version of Lovenox entered the market and Momenta's profit share took a drastic nose dive. I don't think this will happen until late 2018 at the earliest.

M923 (Biosimilar of Humira)

M923 is a biosimilar version of Humira, the best selling drug in the world and is owned by AbbVie (NYSE:ABBV). Momenta had originally partnered with Baxalta for this biosimilar with a royalty that was supposed to be in the high single digits. However when Shire purchased Baxalta last year they decided that M923 no longer fit in their strategic plan and cancelled the arrangement. I think most investors believe like me that the termination of their agreement is a positive for Momenta. As part of the deal Shire (NASDAQ:SHPG) will still have to fund a good portion of the development of M923. Momenta is now free to pursue a more lucrative deal or perhaps push on and develop M923 by themselves. I think in the end Momenta ends up finding a partner for M923. As Momenta has seen with Glatopa building patient assistance plans and a good relationship with clinicians is critical. Momenta doesn't really have any experience in these areas and they take time to develop. With pharmaceutical giants like Pfizer, Amgen, and Sandoz working on their own biosimilars of Humira, Momenta will want to hit the ground running or they run the risk of falling behind the competition. Unfortunately Glatopa partner Sandoz already has a biosimilar for Humira in development so they are not a potential partner.

Momenta has already completed a phase III trial of M923 and it met all primary and secondary end points for the treatment of moderate to severe chronic psoriasis compared to Humira. Momenta also included a arm in this trial in which patients received both M923 and Humira which will prove beneficial to achieve interchangeability status. So Momenta has a very good candidate on their hands and should be able to entice a partner and get favorable terms.

Lastly M923 is important because it will be Momenta's first pure biosimilar on the market. Glatopa and Lovenox are both much more complex than normal oral compounds but do not reach the complexity of biosimilars either. This will give Momenta a chance to prove their technology against a host of other biosimilars that will be coming out for Humira.

M834 (Biosimilar for Orencia)

M834 is a biosimilar of Orencia. Orencia is similar to Humira in that is used to treat autoimmune diseases, mostly rheumatoid arthritis. Orencia is produced by Bristol Myers and has about 2 billion in sales per year so it is a much smaller market than Humira. While a much smaller market, Momenta's biosimilar of Orencia will face little competition. It is currently the only biosimilar being developed for Orencia that I know of. Momenta and its partner Mylan just started a phase I trial involving M834 that should post results by the end of this year. Momenta and their partner Mylan (NASDAQ:MYL) also hope to initiate a phase III study by the end of this year.

Interchangeability Guidelines

The long awaited guidelines for interchangeability were recently published by the FDA. The guidelines availability alone is good for Momenta as it has been delayed multiple times. The other good news is that the FDA is pushing for "switching studies" where patients go back and forth between products. Once again Momenta is well positioned here as their study involving M923 had a third arm that involved switching patients back and forth. If Momenta could get interchangeability status for M923 it would be a huge catalyst for the company.

Novel Autoimmune Medications

In the long term don't sleep on Momenta's trio of novel medications which are being developed to treat a variety of autoimmune diseases. The three drugs in development are M281, M230, and M254. Recently Momenta signed an agreement with CSL Behring for the development of M230. The deal gave Momenta 50 million up front and up to 550 million in milestone payments. Momenta will also receive royalty payments of up to low double digits if approved. M230 is being developed to bind to Fc receptors. This is believed to be one of the mechanisms for IVIG's effectiveness in the treatment of ITP. Momenta's preclinical data has shown that M230 is more potent and efficacious than IVIG at a lower dose using the chronic ITP model. Look for a phase I trial of M230 to start this year. M281 had a phase I study that was initiated in June of 2016 and data should be ready by the end of 2017. Lastly M254 is a hyper sialylated, IVIG preclinical testing has shown to be very potent. Momenta has the complete rights to both M254 and M281 so a partnership announcement could come at anytime. A expanded partnership with CSL for these two drugs would make sense since Momenta and CSL already have a working relationship and there are few companies experienced in the manufacturing, marketing, and development of IVIG.

Conclusion

Momenta has had a nice run up recently, but I still think it has plenty of growth ahead. Momenta will have a lot of moving parts for 2017, and a number of these could propel the stock higher. Catalysis for 2017 include completion of M834 and M281 phase I trials, approval of Glatopa three times a week, initiation of M230 phase 1 trial, and a possible partnership for M923 (Humira Biosimilar). Longer-term investors should keep an eye out for Momenta's novel autoimmune medications, possible interchangeability status for M923, and further development of the other 5 biosimilars Momenta is working on with Mylan.

Disclosure: I am/we are long MNTA, PFE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , Biotechnology, Spring 2017 Northeastern University
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