Narrower-than-Expected Loss at Momenta - Analyst Blog

Momenta Pharmaceuticals Inc. MNTA reported first quarter 2014 net loss per share of 53 cents, narrower than the Zacks Consensus Estimate of a loss of 55 cents but wider than the year-ago loss of 48 cents per share. First quarter revenues of $10.8 million were up 41.8% year over year. Revenues surpassed the Zacks Consensus Estimate of $9 million. Revenues comprised entirely of collaboration revenues which included product revenues and research and development revenues.

Product revenues represented royalty received from Novartis NVS pertaining to sales of the generic version of Lovenox. Product revenues were $4.8 million, below the year-ago revenues of $5.4 million.

Research and development expenses were $26.7 million, up from $22.3 million in the year-ago quarter. The increase was attributable to biosimilars process development and research costs, personnel expenses, facilities-related expenses and laboratory supplies. General and administrative expenses increased to $11.7 million from $9.7 million in the year-ago quarter. The increase was attributable to professional fees due to intellectual property work, personnel expenses, facilities-related expenses and stock-based compensation costs.

Pipeline

Apart from reporting first quarter earnings, Momenta provided an update on its pipeline. Momenta's generic version of Teva Pharmaceutical Industries Ltd.'s TEVA Copaxone (M356) is currently under FDA review. On Mar 31, 2014, the U.S. Supreme Court agreed to hear Teva's appeal of a decision from the U.S. Court of Appeals for the Federal Circuit that invalidated the claim of U.S. Patent 5,800,808 covering Copaxone. The Supreme Court is likely to hear the case in the fourth quarter of 2014.

Three biosimilar candidates are currently under development, namely, M923 and M834 for autoimmune and other inflammatory indications, and M511 for the treatment of cancer. As per the worldwide biosimilar collaboration with Baxter for M923 and M834, Momenta expects to achieve milestone payments worth $19 million in the second half of 2014. M923 will enter the clinic in Europe at the end of 2014. For M511, Momenta may seek a new collaboration partner to assist in its development and commercialization.

2014 Guidance Lowered

As the patent is under review, Momenta adjusted guidance. Total operating expenses, excluding stock-based compensation and net of collaborative revenues, are now expected in the range of $28–$30 million per quarter, below the prior guidance of $30–$32 million per quarter. Momenta expects average net cash usage (excluding revenue from the potential launch of M356) in the vicinity of $28 million per quarter, below the earlier forecast of $30 million per quarter.

Our Take

Momenta carries a Zacks Rank #2 (Buy). The approval of the generic version of Copaxone was a major development milestone for Momenta. However, the latest development on the Copaxone case will deter the company from launching its generic version before the Supreme Court's decision. Shares of Momenta fell 7.6% after the earnings release.

However, 2014 will be eventful for Momenta as its first biosimilar, M923, will enter the clinic, M402 (novel drug) will commence part B of its phase I/II trial and the Supreme Court hearing is expected before the year ends.

Investors looking for better-ranked stocks may consider Gilead Sciences Inc. GILD, which holds a Zacks Rank #1 (Strong Buy).