3 Things to Watch at Momenta Pharmaceuticals, Inc. (MNTA)

Momenta is currently conducting a phase 1 trial for a novel multitarget oncology drug, M402, in conjunction with gemcitabine, a first-line chemotherapy treatment. Should the company bring several of the drugs in its pipeline to market in the next five years, there is no reason to believe it cannot achieve ridiculous profit margins as it did with enoxaparin. Steady product revenue will be critical in the potential advancement of its in-house oncology drug down the road.

All of that potential doesn’t change the current reality: The company has virtually no revenue and is bleeding cash. Management will have a difficult time trudging through this year and possibly 2014 as well.

3. Cash position
For most pharmaceutical companies trying to get their feet firmly on the ground, investors must be on the lookout for share offerings. At first glance, things look pretty good for Momenta, which had $362 million in current assets at the end of the third quarter of 2012. Nevertheless, management expects operating expenses to tally $30 million per quarter in 2013. Depending on how long the company floats along with one product, it is not difficult to imagine a scenario where it is forced to conduct an offering sometime by the end of 2015.

Foolish bottom line
The end of January proved that investing in pharmaceutical companies can be extremely difficult. In general, developing generic drugs takes much less time and money than novel compounds. Momenta gave investors a sneak peek at its cash-gushing potential with enoxaparin in 2011, but it could be years before it finds itself in a similar position. While I wouldn’t label Momenta worthy of an investment just yet, I will be keeping an eye on developments there.

The article 3 Things to Watch at Momenta Pharmaceuticals originally appeared on Fool.com and is written by Maxx Chatsko.

Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and emerging technologies.The Motley Fool recommends and owns shares of Momenta Pharmaceuticals.

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