Momenta Pharmaceuticals Inc.
) sees ever higher earnings expectations and fights a legal battle
to protect its sales and earnings.
Momenta Pharmaceuticals, Inc., a biotechnology company, specializes
in complex molecules including proteins, polypeptides and cell
surface polysaccharides. The company applies its technology for the
development and commercialization of generic versions of complex
drug products, as well as new drugs.
Estimates Move ... all over
2012 is not an easy year for analysts to get a handle on, and as a
result, the projected earnings for the company have seen
significant drops and even larger increases. In July of 2011, the
Zacks Consensus Estimate called for the company to earn $1.03 per
share, but by November of the estimate had swung lower to $0.49 per
share. That decrease of 50% was then trumped by an increase of 300%
to $1.53 in December and is currently at $1.90.
On September 21, 2011 Momenta announced that it was suing Amphastar
Pharmaceuticals, Watson Pharmaceuticals and International Medical
Systems for infringement of two Momenta patents.
A temporary injunction was issued on October 28, 2011 which
prevents Amphastar from selling a generic version of enoxaparin
pending outcome of the litigation.
At the time of writing of this article, there was no clear
indication as to the outcome of the court hearing scheduled for
January 24, 2012. This hearing was originally scheduled for
December 6, 2011. An analyst noted that this hearing was not likely
to carry a final ruling, an even that is likely to be one to three
MNTA didn't let the legal proceedings slow it down and moved to
acquire the Sialic Switch assets of Virdante Pharmaceuticals.
Momenta made an upfront payment of $4.5 million and may make
additional contingent milestone payments that could total $51.5
million. This early December acquisition was likely the catalyst
for the recent increase in analyst estimates.
Valuations for bio techs, and those that make generic drugs entail
more art than science. Looking at PE, MNTA is trading at a
substantial discount to the industry average on a trailing twelve
month basis, but is more or less in line with the industry on a
forward basis. Price to book, a more conservative measure, has the
company trading at 2.4x compared to the industry average of 1.8x,
so a slight premium is given there as well as in price to sales.
The outcome of the legal proceedings will undoubtedly change the
valuation landscape for this stock.
The chart below shows what happens to a bio tech company that
focuses on generic drugs and sees competition in one of its main
products. That drop off in September was quickly gotten back and
the legal outcome will determine what happens next. Be advised,
that an unfavorable outcome to the legal proceedings will likely
move the stock back to the lower teens, but few expect that. MNTA
is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for
Zacks.com. He is also the Editor in charge of the
Run Investor service
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