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Celgene Corporation (CELG), Novartis AG (ADR) (NVS): Momenta Pharmaceuticals, Inc. (MNTA) Earnings Remind Investors of Growing Pains

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Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) The investing waters can get pretty choppy from time to time with a developmental stage company. A look at the five-year chart of Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) certainly echoes that statement. So while the company’s second-quarter earnings were deep in the red, it is important to remember that the entire pipeline is in preclinical to early stage development. Can the company squeak out a product in the near future to pay for an expensive research and development program? It may come sooner than you think.

Financially speaking…
It is always good to check up on financials for developmental stage companies to ensure management is spending money in a sustainable and responsible way. Other than that, though, I wouldn’t get too worked up over the exact numbers since most of the investment thesis revolves around potential.

2Q13 2Q13 % Growth
Total revenue $4.4 million $21.9 million (80%)
Operating expenses $33.5 million $32.4 million 3.4%
Net loss $28.8 million $10.2 million 182%
EPS ($0.57) ($0.20)

Source: Company release.

The big drop in revenue came from a reduced market share of its only approved product, a generic version of Enoxaparin Sodium Injection, which is marketed with Sandoz of Novartis AG (ADR) (NYSE:NVS). The two actually sued Amphastar Pharmaceuticals and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) for allegedly infringing on their manufacturing patents for the generic, but the U.S. Court of Appeals for the Federal Circuit ruled in Amphastar’s favor. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) could always appeal to the next highest court, but I’m not sure how successful that would be at this point.

The good news is that Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) burned through only about $40 million in cash in the first half of 2013 and still has $300 million in the coffers, so I would say the company is spending money pretty sustainably. Still, quarterly revenue of $4.4 million isn’t going to cut it for investors. Where is that revenue generating product the company so desperately needs?

Patent lawsuit to the rescue?
Although the patent infringement case against Amphastar doesn’t seem to be going Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)’s way another key case couldn’t have concluded more favorably. In late July the company announced that several patents for Teva’s multiple sclerosis drug Copaxone were invalidated, which should allow Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) and Sandoz to launch their generic version of the drug in the first half of 2014 — over a full year sooner than previously expected. Copaxone generated $4 billion in sales in 2012, so investors have good reason to be excited. Just remember that Mylan is also ready to launch a generic of its own.

Other development highlights that could impact operations in 2014 include the following:

Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) and Baxter International Inc. (NYSE:BAX) are currently developing up to six biosimilar drugs, three of which will make major progress in 2014. The lead drug, M923 for autoimmune indications, should have an Investigational New Drug application submitted next year. Two others may generate milestone payments, while the remaining three biosimilar to be included in the pact have yet to be determined. I am a big believer in the revenue potential of biosimilar programs and encourage investors to keep an eye on Momenta’s ambitious program. Depending on the compounds pursued, the effort could represent a billion-dollar opportunity.

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