Momenta Pharmaceuticals, Inc., a biotechnology company, specializes in complex molecules including proteins, polypeptides and cell surface polysaccharides. The company applies its technology for the development and commercialization of generic versions of complex drug products, as well as new drugs.
Estimates Move ... all over
2012 is not an easy year for analysts to get a handle on, and as a result, the projected earnings for the company have seen significant drops and even larger increases. In July of 2011, the Zacks Consensus Estimate called for the company to earn $1.03 per share, but by November of the estimate had swung lower to $0.49 per share. That decrease of 50% was then trumped by an increase of 300% to $1.53 in December and is currently at $1.90.
On September 21, 2011 Momenta announced that it was suing Amphastar Pharmaceuticals, Watson Pharmaceuticals and International Medical Systems for infringement of two Momenta patents.
A temporary injunction was issued on October 28, 2011 which prevents Amphastar from selling a generic version of enoxaparin pending outcome of the litigation.
At the time of writing of this article, there was no clear indication as to the outcome of the court hearing scheduled for January 24, 2012. This hearing was originally scheduled for December 6, 2011. An analyst noted that this hearing was not likely to carry a final ruling, an even that is likely to be one to three months away.
MNTA didn't let the legal proceedings slow it down and moved to acquire the Sialic Switch assets of Virdante Pharmaceuticals. Momenta made an upfront payment of $4.5 million and may make additional contingent milestone payments that could total $51.5 million. This early December acquisition was likely the catalyst for the recent increase in analyst estimates.
Valuations for bio techs, and those that make generic drugs entail more art than science. Looking at PE, MNTA is trading at a substantial discount to the industry average on a trailing twelve month basis, but is more or less in line with the industry on a forward basis. Price to book, a more conservative measure, has the company trading at 2.4x compared to the industry average of 1.8x, so a slight premium is given there as well as in price to sales. The outcome of the legal proceedings will undoubtedly change the valuation landscape for this stock.
The chart below shows what happens to a bio tech company that focuses on generic drugs and sees competition in one of its main products. That drop off in September was quickly gotten back and the legal outcome will determine what happens next. Be advised, that an unfavorable outcome to the legal proceedings will likely move the stock back to the lower teens, but few expect that. MNTA is a Zacks #1 Rank (Strong Buy).