Momenta Pharmaceuticals Inc. (MNTA)
Credit Suisse 2012 Healthcare Conference Transcript
November 15, 2012 12:30 AM ET
Rick Shea - Chief Financial Officer
Mike Faerm - Credit Suisse
Mike Faerm - Credit Suisse
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Thank you very much, Michael. I’d like to startup by drawing your attention to our Safe Harbor statement and the risk factors included in our SEC filings.
The Momenta Pharmaceuticals was founded based on analytical technologies developed at MIT. Company was founded in 2002, went public in 2004 and we’re using sophisticated analytical technologies to develop a portfolio of generic complex mixture drug, follow-on biologic and novel drug.
So when the company was founded, it was primarily founded based on novel drug technology, specifically around heparin. So we had a novel drug that was an anticoagulant M118, we had an idea for novel oncology drug, which became M402.
But in order to change the business model, in order to accelerate potential commercialization at an earlier stage, the company exploit going after a generic version of Lovenox with the expertise that the company had in analytic and in heparin. And so that was the business strategy is to use development of complex generic drug in order to provide funding for our novel drug discovery and development.
So there were three things that we had to prove in order to demonstrate the validity of that business model. And the first was, could we get a complex mixture product like Lovenox, approved in the generic form without clinical study and there were lot of skeptics out there that thought that clinical studies would be required for generic Lovenox and in July 2010, our generic Lovenox was approved and so we proved that point.
Second point was, could we be the first to be approved, would we be the standard setters, would we be the company with ANDA was used by the FDA to develop a standard of what an approvable equivalent version of generic Lovenox would look like.
And we proved as well. We were the only ANDA approved for period of 15 months following our approval. So during that time we earned a significant amount of profit share from our collaboration with the standard division of Novartis. We pulled in over $400 million in profit share revenue during that time.
Not the third proposition is still in the work and that is that could we create IP around a generic product for manufacturing method and could we enforce that IP against our potential competitors. And we thought to do that, when Amphastar was approved we successfully obtained a preliminary injunction keeping Amphastar and Watson off the market.
However, that preliminary injunction was overturned on appeal and it was overturned on the basis of a view that the Safe Harbor provision protects Hatch-Waxman apply to post commercial activity in a situation like this.
Now we believe and a lot of court observers believe that this is an outlier or this is a view that isn’t necessarily widely held, and so we’ll discuss a little bit the steps that we’re taking on that front. But certainly that’s going to be an important point for us to prove as we go forward.
So just a quick overview on third quarter results, the Enoxaparin market has been transformed by Amphastar and Watson coming on the market, and let me just recap the way that market develop.
Before we got approved, Lovenox sales were about $2.5 billion in United States, a few months after our approval, based on the price reduction of our product, the Sandoz product, the total market was something around $2 billion and we were sharing it roughly 50-50.
Now when Amphastar approve -- was approved that triggered a launch of an authorized generic and at that time the pricing in the market further eroded such that the market was roughly about $1.5 billion at that time.
Now since the preliminary injunction has been lifted and Amphastar and Watson have come on the market and have been aggressively trying to win customers that market has been further impacted by price reductions and I would estimate now that the market is roughly in the $1 billion year range.
So still a substantial market and the Sandoz unit market share according to recent IMS data is somewhere in the 30s in terms of percentage market share. So that’s kind of labeled in as far as where we are right now.
Now, what happened in the third quarter is that Sandoz net sales reported $34 million were hit kind of on two fronts for us that they had to reduce their prices on products that were sold during the quarter. They also had to reduce the price of what was in their customers’ in-stock inventory. And so that was kind of a double hit that affected their reported sales for the third quarter.
But we do expect that their sales, Sandoz sales for the fourth quarter will bounce back to the underlying run rate. And so we are hoping for that.
Now, right now, the economics for the deal mean that we’re in a straight royalty here. So the royalty is 10% to 12%. It resets every July 1. So at this point, I would be looking to earn 10% of Sandoz net sales for the fourth quarter.