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Momenta Tops Q4 Earnings, Shares Down on Warning Letter

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Momenta Pharmaceuticals Inc. reported earnings of 60 cents per share in the fourth quarter of 2016. The Zacks Consensus Estimate was a loss of 23 cents. The company reported a loss of 43 cents in the year-ago quarter.

Moreover, revenues in the quarter surged 52.7% to $34.2 million and beat the Zacks Consensus Estimate of $30.5 million.

Shares of Momenta have outperformed the Zacks categorized Medical-Biomedical and Genetics industry in the past one year with the stock gaining 67.0% compared to the industry’s decline of 2%.

Quarter in Detail

Momenta’s top line comprised of product revenues of $15.8 million earned from Sandoz’s sales of Glatopa, a generic version of Copaxone (20 mg).

Collaborative research and development revenues came in at $18.4 million, up from $4.6 million in the year-ago quarter. The revenue reported in the quarter represented the remaining unamortized balance of the $40.0 million upfront and license payments from erstwhile Baxalta which is now a part of Shire plc SHPG

While research and development expenses were down 29.8% to $26.4 million, general and administrative expenses increased 26.4% to $18.2 million.

2016 Results

Revenues came in at $109.6 million, up from $89.6 million in 2015 and beat the Zacks Consensus Estimate of $105.89 million. The loss also narrowed to 31 cents from a  loss of $1.32 per share in 2015.

Outlook

Momenta expects operating expenses (excluding stock-based compensation and net of collaborative revenues) in the range of $200–$240 million in 2017. The guidance includes approximately $55 million of capital expenditure on M923 slated for 2017. Operating expenses in the first quarter of 2017 are projected around $50–$60 million. Collaboration revenues, under its agreement with Mylan MYL are anticipated to be $2 million per quarter.

Pipeline Update

Sandoz’s abbreviated New Drug Application (ANDA) for the 40-mg thrice-weekly formulation of Copaxone (Glatopa 40mg) was under FDA review. However, Momenta suffered a setback with the FDA issuing a warning letter to Pfizer PFE, Sandoz’s contracted fill/finish manufacturing partner for Glatopa.

The ANDA approval is now contingent on the satisfactory resolution of the compliance observations stated in the warning letter issued to Pfizer. The letter, however, does not restrict the production or shipment of Glatopa 20 mg which is currently marketed by Sandoz in the U.S and there were no patient safety concerns raised either.

Meanwhile, Momenta continues to progress with its other pipeline candidates. Under its collaboration with Mylan, the company initiated a phase I study on M834, a biosimilar version of Orencia (abatacept) in Nov 2016. Top-line data from the study are expected in the second half of 2017.

In Dec 2016, Momenta signed an early termination of the collaboration agreement with Shire, to develop and commercialize M923, a biosimilar version of Humira (adalimumab). In lieu, the company received a one-time asset return payment of $51.2 million from Shire.

Momenta’s M923 is currently being evaluated in a phase III study. The company announced positive results from a phase III study on M923 in patients suffering from moderate-to-severe chronic plaque psoriasis. The company plans to submit the candidate for approval to regulatory bodies by mid-2017.

Momenta’s novel autoimmune portfolio includes two recombinant molecules: M230, a Selective Immunomodulator of Fc receptors (SIF3) and M281, an anti-FcRn monoclonal antibody. In Jan 2017, the company entered into a research collaboration and license agreement with CSL for M230 and potential future Fc multimer programs. The candidate is expected to enter clinic in 2017.

Momenta has successfully completed a phase I single ascending dose study in healthy volunteers. The multiple ascending dose portion of the study was initiated in Jan 2017 and data from the single and multiple ascending dose portions of the study are projected in the second half of 2017.

Our Take

Although the fourth quarter results beat estimates by a wide-margin, the issuance of a warning letter to Pfizer for Glatopa was disappointing. The ANDA approval is now contingent on the satisfactory resolution of the compliance observations stated in the warning letter resulting in a delay in approval. The warning letter will remain a hangover on the shares till the issue is solved. Shares declined 15.5% on the news.

On the other hand, sales of Glatopa 20mg continue to do well. We note that as per estimates from Sandoz, Glatopa 20 mg product has now captured approximately 40% share of the 20 mg glatiramer acetate market in the U.S, up from 30% at the end of 2015.

In addition, a potential submission of M923 for approval in mid-2017 will boost investor confidence. Momenta may collaborate with some other company for the future development and commercialization of the drug.

Zacks Rank

Momenta currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 

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