Momenta Pharmaceuticals, Inc. (MNTA)

zversyp (< 20) Submitted: 2/05/08 6:18 PM : Start Price: $9.60 MNTA Score: 19.19

This company has a lot of potential. They have a fairly decent pipeline of drugs, along with a good partnership with Sandoz. They have one drug candidate awaiting approval by the FDA, and another in Phase 2 trails. They also have several other candidates in development, and have partnered with Sandoz on at least 4 of them. They’re hitting a few bumps along the way, but over the long term I think that they’ll be able to work through them.

Momenta specializes in characterizing long chain carbohydrates and complex carbohydrate mixtures. This allows them to analyze complex drug mixtures for the purpose of producing generics, as well as identify novel drug compounds. The founders developed the technology at MIT, and it is solely Momenta’s intellectual property. This technology allows them to sequence long-chain carbohydrates in a short amount of time. I’m not going to get into what exactly that means here, you can Google it if you want. Just imagine doing 1000 times as much work as it took to decode the human genome in 1000th of the time. Their most advanced drug candidate, a generic enoxoparin, is currently stalled in FDA approval. This drug did upwards of $3 billion worth of business in 2007, and demand seems to grow every year. If the generic version is approved, it wouldn’t be hard for Momenta to capture 50% of the market, and given that their market cap is less than $300 million, I don’t think I have to go into what that kind of revenue would do for the stock price. There are a couple of problems, though.

Mainly, the technology has yet to be proven. The clinical trials went great, but there hasn’t been a generic version of a complex drug mixture approved yet, much less a generic that was produced by Momenta’s technology. The biggest hurdle to approval is the fact that generics are approved differently than novel compounds. Not only do they have to be proven safe and effective, they also have to be proven to be and exact copy of the original compound. The FDA doesn’t currently have a working pathway to approve drugs of this type, and the legislation to allow it isn’t making it through congress at the moment. In order to postpone the approval of Momenta’s generic, the FDA even went so far as to issue a non-approvable letter to the company, citing a failure to address “immunodeficiency issues”. Basically, they knew they had no pathway for approval, so they made the only action they could: they stalled. Several of the current presidential candidates for the upcoming election want to push for biogenerics, or so they say. Hopefully in the next few years the FDA will get some help with approval policies and these drugs can start making it onto the market.

If this doesn’t happen soon enough, quite frankly, Momenta may run out of cash for operations, and will either have to severely dilute their shares with an additional offering, sell some intellectual property, enter into a more restrictive partnership, or close their doors. They have a good hope though, since they have M118, their own novel compound, in Phase 2 trials right now. This drug doesn’t have to worry about the lack of biogenerics legislation; it just has to be safe and effective. Phase 1 trials looked good, and if this drug makes it through, it will give Momenta the chance to turn a profit. If they can turn a profit, then their worries are just about over. Not only would they be able to stop worrying about running out of cash, they would be able to plow a lot more money into R&D, which should produce a lot more lucrative compounds.

I own this stock, and plan to hold for 5-10 more years. I believe in this technology, and given the chance, I think it could be worth billions in the future. The pipeline is decent at the moment, and the room to grow is enormous.

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