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Edited Transcript of MNTA earnings conference call or presentation 21-Feb-17 1:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Momenta Pharmaceuticals Inc Earnings Call

CAMBRIDGE Feb 21, 2017 (Thomson StreetEvents) -- Edited Transcript of Momenta Pharmaceuticals Inc earnings conference call or presentation Tuesday, February 21, 2017 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Sarah Carmody

Momenta - Associate Director, IR & Corporate Communications

* Craig Wheeler

Momenta - President & CEO

* Scott Storer

Momenta - CFO

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Conference Call Participants

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* Dana Flanders

JPMorgan - Analyst

* Sumant Kulkarni

BofA Merrill Lynch - Analyst

* Morgan Williams

Barclays Capital - Analyst

* Jason Gerberry

Leerink Partners - Analyst

* Tom Shrader

Stifel Nicolaus - Analyst

* Stephan Stewart

Goldman Sachs - Analyst

* Ami Fadia

UBS - Analyst

* Matt McLachlan

Aegis Capital - Analyst

* Manoj Garg

HealthCo - Analyst

* Liav Abraham

Citigroup - Analyst

* Gregg Gilbert

Deutsche Bank - Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Momenta Pharmaceuticals fourth-quarter 2016 earnings conference call.

(Operator Instructions)

This conference call is being recorded. I would now like to introduce your host for today's conference, Miss Sarah Carmody, Director of Investor Relations. Ma'am, you may begin.

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Sarah Carmody, Momenta - Associate Director, IR & Corporate Communications [2]

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Thank you, and good morning, everyone. Thank you for joining us today for Momenta's conference call to discuss financial results for the fourth-quarter and full-year 2016. Today's call is being webcast, and you can view the slides we will be presenting in the investor section of our website, at MomentaPharma.com.

Joining me on the call today with prepared remarks, are Craig Wheeler, President and CEO; Scott Storer, Chief Financial Officer; and Rick Shea, our former CFO, is also available for the Q&A portion of the call. Following our remarks, we will open the call to questions.

Before I begin, I'd like to mention that our call will contain forward-looking statements about the financial outlook, business plans and objectives, and other future events and developments. These statements include, for example, estimates regarding market share and future revenue from our approved products, plans for and timing of regulatory filings, regulatory approvals and launches of our product candidates, statements regarding the Glatopa fill/finish manufacturer, the timing and outcome of litigation and regulatory proceedings and related strategic decisions, plans for and progress in development of our product candidates, our regulatory pathway goals, our expectations regarding receipt of and the accounting treatment from payments from collaborators, plans for and timing of clinical trials and availability of clinical data, our goals and strategy, plans for our collaboration, updates regarding our product candidates, and guidance about our operating expenses and use of cash.

These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. These risks and uncertainties include those described in the slide entitled Cautionary Note Regarding Forward Looking Statements, included in the presentation accompanying this call and under the heading, Risk Factors in our most recent quarterly report on form 10-Q, for the quarter ended September 30, 2016, filed with the Securities and Exchange Commission, as well as other documents we may file from time to time with the SEC.

Any forward-looking statements speak only as of today's date, and we assume no obligation to update the forward-looking statements made on today's call. On the call, we also discuss non-GAAP operating expenses.

Please see the presentation accompanying the call for further information and reconciliation of this measure. With that, I'll turn the call over to Craig.

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Craig Wheeler, Momenta - President & CEO [3]

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Thank you, Sarah, and welcome, everybody. I'll begin today's call with a discussion of the regulatory and legal status of Glatopa 40 mg, and an update on the Glatopa 20 mg product.

Then I'll cover our biosimilars and novel drug programs, including our new collaboration with CSL. Then I'll wrap with a summary of our key goals and milestones for 2017.

Scott will discuss our financial results for the quarter. Including an accounting treatment of the Shire agreement, and provide guidance for 2017. Then we will open the call for questions.

I'll begin with the FDA warning letter that we announced last week. On Thursday evening, we were informed that Pfizer, Sandoz's contracted Glatopa fill/finish manufacturer in McPherson, Kansas, received an FDA warning letter that impacts the expected timing for approval of our Glatopa 40 mg product.

To start, I would like to clarify a few important facts. First, the FDA's warning letter does not restrict the production or shipment of the Glatopa 20 mg product.

Second, Glatopa was not specifically cited in the observations that led to the warning letter. And third, there were no patient safety concerns raised about the Glatopa 20 mg product. Sandoz continues to supply the US market with this important generic drug.

The warning letter relates to a May-to-June 2016 inspection of the facility. Pfizer has indicated to us that the site has already completed many of the commitments made to the FDA following that inspection. We are confident that Pfizer is working hard to identify further corrective and preventive actions to address the FDA's outstanding concerns.

As for our Glatopa 40 mg product candidate, the warning letter states that until the violations are corrected, the FDA, quote, may withhold approval of pending drug applications. Given this, we believe it is unlikely that Sandoz's ANDA for Glatopa 40 mg will be approved in the first quarter of 2017.

We do not yet have an estimate for the timing of resolution. We are working closely with Sandoz and Pfizer, as well as the FDA, to do what we can to help resolve this issue, and be able to bring a high-quality, more affordable generic version of COPAXONE 40 mg to market as soon as possible. The Glatopa 40 mg ANDA remains under regulatory review, and we believe the review portion could be completed at any time.

Now, to the legal status of Glatopa 40 mg. On January 30, the District Court of Delaware ruled in our favor, and found all of the asserted claims in four of Teva's method-of-use patents invalid due to obviousness. We were very pleased with the course decision, which we view as factual and balanced.

The District Court's ruling was in line with the previous PTAB decision, invalidating three of these four patents through an IPR. Teva has appealed the IPR and District Court decisions, and we expect the ruling of the US Court of Appeals to be issued within 12 to 18 months. We believe the opinions issued by the District Court and the PTAB were well reasoned, providing a strong basis for us to defend the decision on appeal.

We note that Teva has filed new suits against us and the other filers. One of these suits is on a patent related to those four invalidated by the PTAB in the District Court. The other relates to a filtration process Teva claims is used in the manufacture of GA.

On Friday evening, Teva filed papers seeking preliminary injunctive release to prevent the launch of Glatopa 40 mg product. We believe their filing is without merit, and are confident in our position. We look forward to aggressively defending our positions in each of these new suits.

Once approved, it is Sandoz's decision to launch Glatopa 40 mg. Sandoz has stated that it is prepared to launch in 2017, and we remain optimistic that following resolution of the issues at Pfizer's fill/finish manufacturing site and regulatory approval will be able to offer MS patients a more affordable, generic version of COPAXONE 40 mg.

We are confident in Sandoz's ability to commercialize Glatopa 40 mg based on their success, and establishing the Glatopa 20 mg product. Now, at over 40% share of the 20-milligram US glatiramer acetate market.

Turning now to the Glatopa 20 mg results. In the fourth-quarter of 2016, we recorded $16 million in product revenues from sales of the 20-milligram, net a deduction of $3.6 million for reimbursement to Sandoz for our share of Glatopa 40 mg legal expenses.

For the full-year 2016, we recorded $75 million in Glatopa 20 mg product revenues, compared to $43 million in 2015. Sandoz's estimate for Glatopa 20 mg now captures approximately 42% of the once-daily 20-milligram US glatiramer acetate market up from approximately 30% at the end of 2015.

We are very pleased with Glatopa 20 mg's steady increase in market penetration. To date, Glatopa 20 mg remains the only generic COPAXONE and MS therapy approved by the FDA, and we believe once our Glatopa 40 mg product is launched, it provides positive read-through for our chances of having some period of market exclusivity.

Turning to biosimilars, I'll start with our lead biosimilar candidate, M923, our biosimilar Humira candidate. In January, we announced that we had negotiated the early termination of our M923 collaboration agreement with Baxalta, wholly owned by Shire. The termination was first announced last September, at which time Shire was required to continue to advance and fund the program through September 2017.

We and Shire mutually decided to accelerate the transfer of responsibilities for M923 back to Momenta, as of December 31, 2016, to make sure the program remains on track. We successfully negotiated the early termination of the collaboration, including a one-time payment of $51.2 million from Shire to Momenta to fund the estimated costs of performing the development activities that would've been performed by Shire through September 2017.

With that, we now have a fully-owned biosimilar Humira program, for which we have already announced positive Phase 3 top-line results in patients with chronic plaque psoriasis. This program remains on track for our first submission for marketing approval in the mid- 2017 timeframe. With full ownership of M923, we can potentially capture significantly more value from this late-stage program.

We have received multiple inquiries about the program for potential collaboration partners, and we are evaluating all of our options, including keeping the program for ourselves in the US. In November 2016, we announced positive Phase 3 top-line results of M923 in patients with moderate to severe [chronic] plaque psoriasis, the top-line results showed that.

M923 met its primary endpoint, achieving at least 75% reduction in psoriasis area and severity index, or [PASI] 75, following 16 weeks of treatment. 80% of M923 subjects and 79% of Humira subjects were responders, and the estimated difference in responders was well within 90% and 95% confidence intervals.

Equivalence was also achieved in all secondary efficacy endpoints, including achievement of PASI 50, PASI 90, proportion achieving clear or non-clear skin, and change from baseline and absolute PASI score. And adverse events were comparable in terms of type, frequency, and severity, and were consistent with the published safety data for Humira. In addition, in late 2016, we received top-line data from a PK trial for the auto injector device to accompany M923, as well as data from an auto-injector clinical use trial, and both the studies achieved their primary objective.

I'll now turn to our biosimilars collaboration with Mylan, where we made significant progress in 2016, including the initiation of a Phase 1 trial for M834 our biosimilar ORENCIA candidate. To compare the [pharma co-kinetics] safety and immunogenicity of M834 versus US and EU-sourced ORENCIA. We expect to report top-line Phase 1 data in the second half of 2017.

However, a PTAB decision issued in January upheld the validity of Bristol Myers Squibb's 239 subcutaneous formulation patent for ORENCIA that expires in 2028. We are considering options for appeal of the decision to the US Court of Appeals. We remain confident in our development strategy for M834, and believe we have a pathway to launch M834 to market at market formation, or in the 2020 timeframe.

Under the Mylan collaboration in the fourth quarter, we received two milestone payments from Mylan totaling $60 million to be applied toward the funding of Mylan's 50% share of collaboration expenses. The first payment of $25 million was associated with a regulatory milestone achieved for M834.

A second payment of $35 million was associated with the development of M710, the second program we and Mylan are moving forward as part of this collaboration. We plan to disclose this product closer to the initiation of a clinical trial, which is currently targeted to begin in late 2017 or early 2018.

Lastly on biosimilars, the FDA recently issued its guidance on interchangeability. In general, the guidance is in line with what we expected. The FDA has maintained a high bar for obtaining interchangeability.

This is positive for Momenta, as it will allow us to continue to use our expertise in characterization, process development and analytics to strive for interchangeability and reduction in clinical trial requirements. Looking on to our novel drug pipeline.

I'll start with our recently-announced license agreement and collaboration with CSL for the development of M230 and other next-generation, FC multimer programs. As a reminder, M230 or SIF3 is a recombinant, homogenous Fc trimer that antagonizes the activating Fc gamma receptor system, and blocks immune complex mediated tissue damage. We believe this novel biologic has the potential to have broad applicability across a number of immune complex mediated diseases through a multi-targeted mechanism of action.

CSL a global leader in specialty biotherapeutics and vaccines also realized the potential of this molecule, and in January, we entered into a worldwide license agreement for an exclusive research collaboration to develop and commercialize Fc multimer proteins, including M230. The collaboration received clearance under Hart-Scott-Rodino Act, and became effective on February 17, 2017.

Under the terms of the agreement, we will receive a $50 million upfront license brief from CSL, and are eligible to receive up to $550 million in future development and commercial milestones. The base agreement provides for mid-single to low double-digit royalties.

In addition to advancing M230, the agreement initiates a research collaboration to develop additional Fc multimer proteins that may originate from Momenta or were CSL research efforts. We believe the upfront and milestone payments serve as an important validation of our autoimmunology research efforts, and also provide us with the financial flexibility necessary to further invest in our novel programs.

This deal also provides us the option to fund 50% of the global research and development and US commercialization costs, in exchange for either a 50% share of the US profits, or a 30% share of U.S. profits, depending on the stage of development at which we make the decision. For co-funded products, royalties and milestones remain payable for territories outside of the US. In addition, we have the right to opt out of the co-fund arrangement, which would result in milestone payments and royalties reverting back to their prearrangement amounts.

We are very pleased with the terms of this deal and the flexibility it provides us in preserving the potential to co-invest and capture profit share, or to limit our investment, depending on our financial structure and capital needs in the coming years. As for next steps, we will begin working with CSL through a joint steering committee to finalize a development plan and advance [M230] into the clinic this year. The joint steering committee will also begin planning for the development of potential next-generation Fc multimer programs. I look forward to updating you on our progress throughout the year.

I'll now discuss M281, our recombinant anti-FcRn candidate, designed to be a novel best-in-class monoclonal antibody for the treatment of patients with antibody mediated diseases. In January, we announced that we had successfully completed five cohorts in the Phase 1 single ascending dose study in healthy volunteers. At this time, we show data through day 21 of the trial. Today, we updated those results to include data through the completion of this portion of the study on day 56.

These updated data continued to show that a single dose of 30 milligram per kilogram achieved up to 80% reduction in circulating IgG antibodies in approximately 10 days, and maintained approximately 50% reduction of IgG for about 20 days. M281 was well tolerated, and to date no serious adverse events were observed. In January, we initiated the multiple ascending dose portion of the study, and we're very pleased with the results to date, and expect to release top-line data from the single and multiple ascending dose portions of the study in the second half of 2017.

Finally, I'll provide an update on the status of M254, our hyper-sialylated IVIg program. M254 was designed as a potentially high-potency version of IVIg. We have continued to make some significant advances in our pre-clinical work on this program.

M254 has the potential to be a more potent, lower dose alternative for IVIg that can greatly benefit patients by providing better tolerability, improve safety and more consistent efficacy. In 2017, we plan to initiate an IND-enabling toxicology study, and expect to initiate a clinical trial in 2018. Our plan is to continue to advance M254 through a clinical proof-of-concept study.

We believe that we have the potential to derive much more value from this program following a successful proof-of-concept study than if we were to enter into a partnership at an earlier stage in development. We look forward to reporting on our progress on each of these novel programs going forward.

In closing, we made a lot of headway in 2016 in building a diverse company with a broad pipeline that we believe provides us, as well as our shareholders, an increased chance of realizing significant value over the long term. We also added two new important collaborative partners in 2016, Mylan for biosimilars and CSL for novel Fc drugs. Partnering is a key element in our overall strategy, but not only provides funding, but also the development, manufacturing scale and commercial expertise needed to help maximize the value of these programs.

In 2017, we will continue to focus on advancing our pipelines, and there are several milestones that we look forward to achieving in each area of our Business. Including Pfizer's resolution of the observations cited in the FDA warning at the Glatopa fill/finish manufacturing site, gaining approval of the ANDA for Glatopa 40 mg, and the potential launch of this product to provide a revenue boost to fund our advancing pipeline.

But first, submission for marketing approval of M923, our biosimilar Humira candidate in mid-2017, and the potential to repartner this program. Reporting Phase 1 data and progressing towards the initiation of a Phase 3 study for M834, our biosimilar ORENCIA program in collaboration with Mylan in the second half of 2017. Finalizing a development plan with CSL and initiating a Phase 1 trial for M230, our novel Fc multimer for autoimmune disease.

Completing the Phase 1 trial of M281, our novel anti-FcRn candidate, and reporting top-line data. And initiating an IND-enabling tox study for M254, our hyper-sialylated version of IVIg.

If we are successful in reaching these milestones, we will be on track to realize our goal of being able to launch one or more products per year to our biosimilar and novel drug Business, beginning in 2020. And building a diverse Business with multiple options to drive long-term shareholder value. And with that, I'll turn the call over to Scott.

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Scott Storer, Momenta - CFO [4]

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Thanks, Craig. Good morning, everyone.

As many of you know, I recently joined Momenta as Senior Vice President and Chief Financial Officer. While the recent Pfizer warning letter was clearly disappointing, I'm personally excited to be joining an innovative, purpose-driven company with a diverse pipeline spanning complex generics, biosimilars and novel autoimmune therapies that target areas of high unmet medical need. As CFO, you can expect me to support growth, effectively manage risk and complexity, reinforce a culture of accountability, and bring a disciplined approach to spending and investments, all in an effort to create value for investors, patients, and employees.

Now, back to the reason why we're here today, our Q4 and full-year 2016 results, as well as guidance for 2017. We reported net income for the fourth quarter of $42 million, compared to a net loss of $29 million for the same quarter last year. Fourth-quarter net income includes $51 million of other income from the termination payment from Shire for the M923 program.

Revenues for the fourth quarter totaled $34 million, compared to $22 million for the same period in 2015. Fourth-quarter 2016 revenue included $16 million in product revenue, all of which was profit share we earned from Sandoz sales of Glatopa 20 mg netted reduction of $3.6 million in reimbursement to Sandoz for our share of Glatopa-related legal expenses. This compares to $16 million in product revenue earned from the Sandoz sales of Glatopa 20 mg for the same period of 2015.

Collaborative research and development revenues increased from $5 million in the fourth-quarter of 2015 to $18 million in the fourth quarter of 2016. In the fourth-quarter of 2016, as a result of the Shire termination of the M923 collaboration, we recognize $14.6 million, which represents the remaining balance of Baxalta's upfront and license payments of $40 million. In addition, we recognized $1.8 million of revenue from Mylan's $45 million upfront payment to us.

In comparison, collaborative revenues for the fourth-quarter of 2015 included $2.4 million of amortization of Baxalta's upfront and license payment. Fourth-quarter R&D expense decreased to $26 million when compared to $38 million in the same period of 2015. The decrease in R&D expenses resulted from a decrease of $7 million for Mylan's 50% share of biosimilar collaboration costs, and a $3 million decrease of necuparanib Phase 2 clinical trial costs, as we discontinued development of the program, following the outcome of a planned futility analysis in Q3.

As a reminder, costs incurred by the Company under the Mylan collaboration are recorded net of Mylan's 50% share of our expenses, plus our 50% share of any collaboration expenses incurred by Mylan. Fourth-quarter G&A expense increased to $18 million from $14 million in the same period in 2015. The increase was primarily due to an increase of $1.5 million and personnel-related expenses due to headcount growth, and a $2 million increase of legal and professional fees.

The Company previously gave operating expense guidance of an expected non-GAAP operating expenses for the fourth-quarter of 2016 to be approximately $40 million to $45 million per quarter. Our non-GAAP operating expense is defined as total operating expenses, less stock-based compensation, and less collaborative reimbursement revenues. For the fourth-quarter of 2016, our total operating expense of $45 million, less stock-based compensation of $4 million, and less collaborative reimbursement revenues of $2 million, totaled $39 million, just below the lower end of our guidance range.

We started the fourth quarter with $309 million in cash and ended the year with a cash balance of $353 million. In the fourth quarter, we received milestone payments totaling $60 million from Mylan, which are applied to the funding of Mylan's 50% share of collaboration expenses. As of December 31, 2016, of the $60 million, just over half remains, and will be applied towards future funding.

In January 2017, we received a one-time asset return payment of $51 million from Shire in connection with the early termination of the collaboration agreement for M923, and we expect to receive a $50 million upfront license fee from CSL in the first quarter of 2017. These payments are not reflected in our 2016 year-end cash balance.

Looking forward, we are projecting that the non-GAAP operating expenses will be approximately $200 million to $240 million for 2017. This range is somewhat wider than prior years, based on our expected gated spending approach for the year, due to the variable nature of our internal revenue projections for Glatopa. Our current spending projections include approximately $55 million of spending on M923, $51 million of which has already been paid by Shire as part of the termination agreement, and for which net income was realized in Q4 2016. The non-GAAP operating expense guidance does not assume that the upfront $50 million payment from CSL for the M230 collaboration is netted against operating expense.

Specifically for Q1, we expect non-GAAP operating expenses to be $50 million to $60 million. As noted earlier in the call, our deferred revenue balance related to the M923 Baxalta agreement was fully recognized in Q4 2016. With this recognition, the only remaining deferred revenue that we currently expect to recognize in our 2017 P&L is related to our Mylan collaboration.

We expect to recognize approximately $2 million per quarter. Consistent with prior years, we are not providing revenue guidance, but we look forward to discussing our actual results at future calls.

We will now open the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Our first question comes from Chris Schott of JPMorgan.

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Dana Flanders, JPMorgan - Analyst [2]

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Hi, thank you for the questions, this is Dana Flanders on for Chris. My first question just relating to the warning letter. Is there any color you can provide on the nature of the deficiencies and help frame what the observations relate to?

And then my follow-up, have you had any feedback from the FDA on your Glatopa ANDA? Just curious if there are other issues outstanding beyond the warning letter, or is that the only gating factor to approval at this point? Thank you.

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Craig Wheeler, Momenta - President & CEO [3]

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Sure, Dana, this is Craig. I can't really provide a lot of color on the nature of the deficiencies at this time, since we are under confidentiality and those observations were not on our product, so they are just general observations. However, that redacted letter should be available maybe even starting today at the FDA, and once it is public we can talk more about it, but until that point in time, we are under confidentiality with Pfizer, but you should be able to get clarity on that soon just directly from the FDA.

On our Glatopa application, we have no outstanding questions. We have answered everything, so we don't anticipate that there is anything significant beyond this warning letter, but of course it is an FDA application, so you can never be sure, because they have the right to ask a question up until the moment they actually give you the approval.

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Dana Flanders, JPMorgan - Analyst [4]

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That's all for me.

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Operator [5]

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Our next question comes from Sumant Kulkarni of Bank of America Merrill Lynch.

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Sumant Kulkarni, BofA Merrill Lynch - Analyst [6]

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Thanks for taking my questions. Could you give us some --or set context around how difficult it might be to do fill/finish on glatiramer, was this an exclusive fill/finish agreement or could other generic glatiramers be manufactured at the same facility, as well?

And a follow-up to that is, given Sandoz's expertise in manufacturing, was there any kind of redundant manufacturing put in place? It doesn't seem like it was.

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Craig Wheeler, Momenta - President & CEO [7]

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Sure, thanks for the questions. First, this is a pretty standard fill/finish operation, it's a syringe-filling operation. And Hospira has -- I should say Pfizer, it's [all at] the Hospira plant, but really has a lot of experience in doing sterile fill/finish, so there's nothing really specifically complicated as compared to a general fill/finish.

I really can't comment on the specific contracts that are in place with this. They are Sandoz contracts, and I think they'd prefer questions to them and on any contracts that they have with their manufacturers.

We do not at this point in time have redundant manufacturing in place. This is a facility that has been manufacturing our 20-milligram for some time now, but we do not at this point have another facility online.

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Sumant Kulkarni, BofA Merrill Lynch - Analyst [8]

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Thanks.

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Operator [9]

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Thank you. Our next question comes from Morgan Williams of Barclays.

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Morgan Williams, Barclays Capital - Analyst [10]

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Good morning. A couple questions. First of all, a follow-up on the previous question.

How long do you think it would take to transfer to a secondary site? And then just another question around the 40-milligram, as it pertains to the warning letter. Does this have any relation potentially to the Synthon-Pfizer filing on the 40-milligram, I'm not sure if you know whether they are planning to manufacture at the same Kansas site?

And finally, just how confident are you that you have shared first to file? I know you previously commented that you have no other outstanding questions on the ANDA.

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Craig Wheeler, Momenta - President & CEO [11]

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It's really hard to speculate how long it would take to transfer to a second site, because it really depends on the availability of the second site to be able to move something in. I think at this point in time, we remain pretty confident that we will be able to resolve whatever issues are existing in the McPherson plant, but obviously we'll be looking at all other options, depending on how this is. It is really early days.

We just saw the letter for the first time on Friday and got notification on Thursday evening, so I think we'll learn more in the coming week about exactly what issues have to be resolved there. I really have no information or no idea on the terms of the Synthon-Pfizer filing and manufacturing, so I would have to send you to them for questions, I just don't know.

The question on first to file has been one that has come up for the last couple of years on this program. I will tell you our view of it is that this is a shared first to file, and it is a shared first to file, because there was no Orange Book patent filed in the Orange Book when we and others first filed our applications. So, under the regulations of Paragraph IV, you cannot have first to file and certify, unless there is a patent in the Orange Book.

What we, and I imagine everyone else was doing, once they filed and there was no Orange Book patent, was continuing to file until that Orange Book patent was actually put into the Orange Book. I know we were there, and I suspect others were there, that's why I say I think there is a shared first to file. I have said continuously as I was pretty surprised that Teva actually dragged their feet in terms of putting that Orange Book patent in, but that is the facts, and that is what our view is.

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Morgan Williams, Barclays Capital - Analyst [12]

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Thanks, Craig, that's helpful.

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Operator [13]

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Our next question comes from Jason Gerberry of Leerink Partners.

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Jason Gerberry, Leerink Partners - Analyst [14]

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Good morning, thanks for taking my question. Craig, curious, given that this warning letter issue creates a risk of pushing out approval a couple years, potentially in a worst case, and this is obviously a source of potential business pressure and uncertainty for Teva.

What are the evolving thoughts on a settlement for an authorized generic? I feel like that could be a win-win solution for both parties. Curious if your thoughts around settlement have changed.

And did I hear you correctly that review of 40-milligram will be completed soon? I would've thought that the review would've been completed by now, so any color you can provide on what's going on in the review process would be helpful.

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Craig Wheeler, Momenta - President & CEO [15]

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Let me start off with the warning letter. I think it is really early days to say how long this will take, because we just don't really know the details of where Pfizer is, the details of what is behind the redacted letter, as well as the FDA's position. So, it's going to take a little while to figure out where that is, and I think we will be obviously watching that very carefully over the next month just trying to gauge where we are in the business.

In terms of thoughts on the settlement, to be honest with you, first, we don't specifically talk about any legal activity like that. But it's been a little busy around here since Friday to get ready for this call, so I don't think we put much thinking beyond getting everything adjusted for the call today based on what we learned on Friday. So, we will obviously be thinking about a lot of things going forward.

On the application, what we said is, it is very consistent with what we have said for a long time. We believe this is a straightforward application, and we believe we've answered all questions appropriately, and therefore, we are expecting approval, so I just wanted to point out that was the purpose of my comments in the script. Is that we have no outstanding questions.

We expect that the regulatory review is essentially close to done if not done, but the challenge we have is they won't tell us that. That won't come until an approval, and so with this warning letter, we won't find out any details on that until we actually get to an approval, because of the delay that's going to be imposed by the Pfizer facility.

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Jason Gerberry, Leerink Partners - Analyst [16]

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Thank you.

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Operator [17]

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Our next question comes from Tom Shrader of Stifel.

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Tom Shrader, Stifel Nicolaus - Analyst [18]

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Good morning, thanks for taking the questions. Can you remind us, Craig, is the ATI exactly the same in the two Glatopas? And you send it to one plant who can finish it at 20 milligrams, and you send it to another that can at 40 milligrams, is that what's going on, or is it manufactured differently?

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Craig Wheeler, Momenta - President & CEO [19]

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Tom, thanks. The API is the same API.

There is absolutely no difference. The fill/finish provider is the same fill/finish provider on the same line, so this 40-milligram will be manufactured on the same manufacturing line as the current 20-milligram product is.

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Tom Shrader, Stifel Nicolaus - Analyst [20]

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So, it's something specific to the formulation that the question arises, can you say that?

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Craig Wheeler, Momenta - President & CEO [21]

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On the warning letter?

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Tom Shrader, Stifel Nicolaus - Analyst [22]

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Yes.

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Craig Wheeler, Momenta - President & CEO [23]

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The warning letter there were no observations by the FDA on the Glatopa product. This is a warning letter -- that is a broad warning letter for the McPherson facility, which has many different products in it.

We are not privy to the specifics of other product lines that they're running there, because there's confidentiality as a contract manufacturer. So, what we know from them is that there were no questions specific to Glatopa, and that the FDA has clearly authorized the 20-milligram product to continue to be supplied to the market.

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Tom Shrader, Stifel Nicolaus - Analyst [24]

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Okay, and if I can break the tradition, can I ask a question on M281? It's 30 milligrams per kilogram, was that the dose you expected?

Are you happy with that dose? It seems like a lot of antibody. Any thoughts on whether that is a lot of antibody or whether that's what you expected going in?

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Craig Wheeler, Momenta - President & CEO [25]

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Because of the nature of the immune system, you can't really do the kind of scaling that you would typically do going from the animal models into humans, so I don't think we quite knew where we were going. Were we surprised to see that? No, but I think where we are at right now is trying to figure out what the appropriate dosing schedule is.

What we saw is with a single dose of antibodies at the 30 milligrams per kilogram that we are seeing sustained reduction of the IgG levels, and so we will have to figure out overall dosing. This one has every possibility of having a [loading] dose and then lower doses going forward to maintain or less-frequent dosing, we just don't know yet.

And that is part of what the multi-dose piece is designed to tell us, so we were quite happy with the results that came back that we were able to get down safely to the levels that we had hoped to get down to when you get to in plasmapheresis with a single dose. But the ultimate dosing schedule is going to take some time to figure out with multi-dose and maybe even Phase 2 to really understand it.

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Tom Shrader, Stifel Nicolaus - Analyst [26]

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Do you have a sense you will be competitive on price with that much antibody?

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Craig Wheeler, Momenta - President & CEO [27]

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We think we have a very good chance of being competitive on price with that much antibody. Our own evaluation of it is we're looking at an antibody which is an aglycosylate antibody, which we can actually put into a pretty efficient process, and compared to what other programs are out there, it looks like a pretty effective molecule.

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Tom Shrader, Stifel Nicolaus - Analyst [28]

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Thanks a lot.

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Operator [29]

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Our next question comes from Stephan Stewart from Goldman Sachs.

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Stephan Stewart, Goldman Sachs - Analyst [30]

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Thanks, good morning. Just one question on how this warning letter may change your thinking going forward, especially as it relates to maybe increased urgency to partner or sell M923 or sway your partnership decision on M230. Just given the exclusivity you may have had may be diminished at this point, because of these delays.

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Craig Wheeler, Momenta - President & CEO [31]

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It's a good question, and I'm going to let Scott talk a little bit about how we are looking forward, but I want to answer a couple of questions on the deals that we have. Part of the reason I was quite enthusiastic about both getting the 923, back and the 230 deal, was they do give us a lot of swing in terms of funding.

The repartnering, which could bring in revenue, and alleviate funding on 923, as well as M230, in terms of how we elect in the partnership. But there is a broader look that we are taking, now I'll let Scott talk a little bit about managing finances here.

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Scott Storer, Momenta - CFO [32]

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Stephan, that I think the way we have historically looked at this is, as we are looking at our quarterly and annual burn rate. There are some flexibility there, in terms of the pace and some of the spending we have across our portfolio, including our biosimilar programs and partnership with Mylan, as well as the novel programs. Clearly, there is going to be some variability in our revenue or cash inflow projections, so we're being pretty disciplined around how we are committing spending on a go-forward basis.

And as you picked up on, I think the structure of many of our transactions that we put in place right now, including the M230 agreement with CSL, gives us quite a bit of optionality of opting into 50/50 cost sharing or to fully out-license that product. That combined with potentially reviewing the structure for the M923 repartnering, that really allows us to maximize the value of the asset, I think gives us quite a bit of flexibility of how we are managing the cash burn or the cash inflows and outflow for 2017 and beyond.

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Stephan Stewart, Goldman Sachs - Analyst [33]

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Thanks.

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Operator [34]

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Our next question comes from Marc Goodman of UBS.

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Ami Fadia, UBS - Analyst [35]

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Hi, this is Ami on for Mark. I just wanted to understand from your perspective, it sounds like there were some observations on the fill/finish line, which is where Glatopa 40-milligram runs as well, but the observations were related to some other product, is that a good summation?

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Craig Wheeler, Momenta - President & CEO [36]

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I think the only change is the observations were made in the plant that Glatopa is manufactured in. I can't be specific, but there are multiple different fill/finish lines in the plant, and there were no observations on the Glatopa products. So, beyond that, I really can't specify for confidentiality reasons, that is Pfizer's question to answer, but you should think of this as there are multiple finish lines in the plant, and those observations accrued in the plant, but they did not accrue specifically to Glatopa.

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Ami Fadia, UBS - Analyst [37]

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But you cannot confirm whether or not they accrued to the same finish line as Glatopa?

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Craig Wheeler, Momenta - President & CEO [38]

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I cannot. I would love to, but I have been asked not to.

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Ami Fadia, UBS - Analyst [39]

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Right, okay. Just a second question, and some parts of it you probably addressed as well. With the warning letter and the uncertainty around when the FDA might clear that and approve Glatopa 40-milligram, how does that change your thinking, with respect to partnering some of the products or divesting some of the other products?

You do have some cash on the balance sheet to support development. Do you end up reprioritizing some of the work you were thinking of doing this year or into next year? [Do you think work would be developing differently?]

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Craig Wheeler, Momenta - President & CEO [40]

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I think I would refer back to the last answer that we just gave with Scott. We are looking at our numbers constantly. We have built into the deals we have already written, flexibility so that we can actually control spend.

We have assets that are on par here, so we have a lot of leverage we can pull. It is early days to be specific, because we just received this on Friday, and so we are going to be first trying to figure out exactly what the resolution of this would take and begin to get at least get a bead on how long this might take. And that will help guide us as we go through the quarters here in terms of what our spend profile is, as well as our business development agenda is.

All the things you spoke of are on our list to think about, but the first priority is beginning to understand what exactly the issues are that led to this warning letter, what the resolution could be. As a reminder, our communication with Pfizer, Pfizer has stated they had already resolved the majority of issues that were cited in their original inspection, so our hope is there is already a good leg up in terms of resolving the issues that were cited in the warning letter.

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Ami Fadia, UBS - Analyst [41]

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Thank you. One more question on Humira, you mentioned that you are considering various options, including keeping it in-house, could you elaborate on that a little bit? What are you evaluating and under what circumstances would you keep it in-house? That would be helpful.

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Craig Wheeler, Momenta - President & CEO [42]

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I don't think there is a scenario where we would keep it in-house globally. I think with the right revenue profile on three-times-a-week, there is a possibility that we would actually keep the US market for ourselves, because of the nature of, we believe it's going to be mostly a contracting market.

We have a very high-quality product here, but that's going to depend upon the terms of the different deals that we're presented with, and what our individual potential investment is as we go through the year. I think you would either see from us a global deal for that product, which would bring in obviously larger upfronts and more spending coverage. Or potentially a rest-of-world deal, where we've decided to keep some of the US market for ourselves, but that's another one of those variables that I think we will get a better bead on what the [right] course of the Company is, after we get in another month or two of understanding when we think we can get three-times-a-week revenue, and that is all part of the queue we're looking at.

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Ami Fadia, UBS - Analyst [43]

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Got it, thank you.

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Operator [44]

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(Operator Instructions)

Our next question comes from Difei Yang of Aegis Capital, your line is open.

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Matt McLachlan, Aegis Capital - Analyst [45]

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Good morning, thanks for taking the questions. This is Matt [McLachlan] on for Difei.

We just had a quick question for you, with regards to the process-related patents surrounding 40-milligram. For the filtration processes, do you typically think they will be more or less difficult to challenge than the original four?

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Craig Wheeler, Momenta - President & CEO [46]

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For the process related patents, we actually think the patent claims are not a problem for us. I really can't comment too much except to say we are confident on that, because it is active litigation right now, so anything I can we'll be able to get through by my general counsel, so I'm being a little cautious on that. But I will say that on that new patent, we feel very confident in our position against it.

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Matt McLachlan, Aegis Capital - Analyst [47]

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Great, lastly, when you do get to market for 40-milligram, do you have a general number for the number of generics you anticipate? Let's say launch to six-month timeframe, and then one-year to 1.5-year timeframe?

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Craig Wheeler, Momenta - President & CEO [48]

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It's a really hard question to answer, so I'm not going to give you a satisfactory answer there. But we had said when we anticipated as I thought I would be on this earnings call, I'd be talking about an approval of our product, that because we have the 20-milligram on the market and other people still have to get their API proved, we felt we had a chance of having at least a period of sole generic in the marketplace exclusivity in the marketplace before others came in.

I think how many are present at launch depends on how long this takes to resolve. We have not seen any other 20 milligrams approved yet, which means others, unless they've dropped their 20-milligram program, do not have an API that is approved yet. Obviously, the more time we are delayed, the more chance that we will have competition in the marketplace, so that is one where we will have to get a pretty good read as we go through the next quarter or so and understand the resolution here.

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Matt McLachlan, Aegis Capital - Analyst [49]

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Thanks so much.

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Operator [50]

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Our next question comes from the line of Manoj Garg of HealthCo your line is open.

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Manoj Garg, HealthCo - Analyst [51]

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Hi, Craig. Two questions. One, I wanted to square away some of your thoughts.

On the Friday press release, all you would commit to was a five-week delay in the Copaxone 40, I think in the press release this morning, you were hopeful of a approval sometime in 2017, and then in your remarks you said it is still early and it's hard to pin down a timeline. So, I wanted to see if you could square away some of that commentary.

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Craig Wheeler, Momenta - President & CEO [52]

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Sure, I think what we put on Friday was, we didn't say a five-week delay, we just said that we didn't believe we would get approved in the first quarter. Our goal on that Friday release was to get it out to you as soon as possible to tell you that we were changing guidance in terms of when we thought we were actually going to get approved. We know nothing more now than we did then.

We did learn a little bit about warning letters and how long they would take to resolve, so we signaled in our release is we believe it is still possible to see an approval this year, but you shouldn't read too much into that. We haven't had deep conversations about the warning letter with our partner, with Pfizer, with the FDA at this point, because we just got a letter on Friday, so I wouldn't try to parse the comments. I think what we wanted to do was make sure that people knew as soon as possible we are changing guidance and that you knew our view was that it is still possible to get approved this year, but we will know a lot more once we dig into this.

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Manoj Garg, HealthCo - Analyst [53]

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Okay, the second question, just give your confidence that you thought you could be on the call talking about a 40-milligram approval, the warning letter stems from a June [43], which stems from a May inspection, so was that site being re-inspected for your approval?

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Craig Wheeler, Momenta - President & CEO [54]

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To my knowledge, that was a general inspection, and the way they typically work with these would be suppliers that they have to have a current inspection, so it's a risk-based inspection. They don't go back until they have finished every single supplier for every single approval, so we did have to have that facility current, but I don't think that was the inspection, in fact, I know that was not an inspection that was specific to Glatopa.

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Manoj Garg, HealthCo - Analyst [55]

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I will sneak in one more, given your partner here at Hospira/Pfizer has a long history with these [43s] and warning letters, have they indicated the level of severity of this particular warning letter?

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Craig Wheeler, Momenta - President & CEO [56]

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We have seen a redacted copy of it, and the severity really depends on what they have already resolved underneath it. There was no re-inspection from the last inspection that happened back in May.

Pfizer had reported to us they had already resolved most of those issues, so I think this was not just a surprise to us, but a surprise to them. I'm sure they will be working very hard to make sure that they can respond with the corrective actions that they put in place so far. It's hard for me to tell, because warning letters are always worded harshly, because of long-term observations, and the question was, what has Pfizer done in the intervening time since that original set of observations were given to them?

At least from what we have heard so far from them they have already resolved the majority issues that were cited in that inspection, that they are working very hard in making sure they have the corrective actions in place, but again, they just got this letter last week, as well, so it's a little early for me to be able to be more definitive on that.

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Manoj Garg, HealthCo - Analyst [57]

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Thank you for the added color.

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Operator [58]

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Our next question comes from Liav Abraham of Citi.

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Liav Abraham, Citigroup - Analyst [59]

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Good morning, Craig. You mentioned in your prepared remarks that Pfizer, Sandoz and yourselves are working hard to resolve the issues in the warning letter, can you just elaborate a little bit more on how involved you guys are in the process?

And secondly, regarding communication going forward, how can we expect to hear from you regarding updates either as it relates to the regulatory review of Glatopa 40-milligram or as the resolution of the warning letter plays out? Thank you.

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Craig Wheeler, Momenta - President & CEO [60]

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Sure. I would say we are offering any help that is needed by either Sandoz or Pfizer in this process. I guess we're standing by, ready to help wherever we can.

This is a more challenging one for us than the other things we have been able to jump in and resolve, because this is two steps removed, this a contract and a quality agreement between Sandoz and their fill/finish supplier, and so, we're working in partnership with Sandoz to be able to do anything we need to around our line, around the product, with the FDA, whatever is necessary. Obviously, conversations have started across all three companies at this point, but it's very hard to say exactly who is going to be doing what, because I think it's still an assessment phase, and I'm sure there will be conversations with the FDA on Pfizer's part around this warning letter, as well, so, more to come on that.

In terms of communication from us, on the regulatory review, I don't expect there will be much, to be honest with you. What we've said is we have no outstanding questions we think the regulatory review is basically ready or near ready to be approved. The problem is until this issue is resolved in the fill/finish facility, there is not much they can tell us, they're going to tell us that our application is pending the resolution of the facility.

They usually don't call you up and say everything is great and everything if fine, and all you need is that, because that is just not how they typically work. Unless we got some other major questions on the application, which I don't anticipate, then obviously we would come back and tell you that.

I think their communication is mostly going to be around resolution of this warning letter. I think in terms of communication and updates on that, I think you will probably hear from us once -- and if we can get comfortable with giving you a better sense in terms of the time of resolution of that.

So that's going to have to be first figured out, and then negotiated with Pfizer and Sandoz in terms of what exactly we can talk about there. But that would be my goal, is to be able to give you a sense of resolution time once we can, and that would help you and us get the clarity we need to understand what the market potential is for the product.

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Liav Abraham, Citigroup - Analyst [61]

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Thank you.

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Operator [62]

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Our next question comes from Gregg Gilbert of Deutsche Bank.

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Gregg Gilbert, Deutsche Bank - Analyst [63]

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Thanks, I have a couple. Can you talk about how the net price for your 20-milligram has evolved since launch?

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Craig Wheeler, Momenta - President & CEO [64]

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The simple answer is no. I can't talk about general or specific pricing of the product. That is basically Sandoz confidential.

The only thing I can say is that as in any generic market the pricing varies based upon the customers and market that get set into in the individual contracts that are negotiated. Beyond that, we haven't really talked about the specifics of the pricing for the 20-milligram.

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Gregg Gilbert, Deutsche Bank - Analyst [65]

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Okay, maybe you can comment more broadly on were you to talk about a launch today -- unfortunately you can't. But in terms of the launch curve that has a occurred in the 20-milligram and all the variables that have affected that.

You mentioned you are pleased with the steady progress of late, would you suggest that folks think about a launch for the 40-milligram that would emulate that of the 20-milligram, or would it go faster, because of the experience with the 20-milligram, and whatever comments you could add would be helpful. Then I have one more.

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Craig Wheeler, Momenta - President & CEO [66]

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This is a personal opinion. Obviously, Sandoz has the decision to launch, but I think the launch here could go faster. I don't want to undersell the 20-milligram, because we are at basically between 40% and 45% of the market on the 20-milligram, which is where you would expect first generic to get to in that range, so we are not in a bad place in terms of penetration of the 20-milligram.

If you recall when we launched the 20-milligram, we were launching into a market where we were facing two years of counter-detailing by Teva before we launched the product. We were facing contracts that tied contracting in place, we were facing a physician and patient market that didn't understand or weren't aware of all the patient services that Sandoz had in place at the hub, as well as co-pay assistance. Sandoz, in conjunction with they were helped by the Novartis MS sales force, they have done a tremendous job, not just of the 20-milligram, but actually in working with the patient communities to make sure that people understand the product, are confident in the product, know the patient services, get the co-pay assistance they need.

So, when we launch the 40-milligram, we won't be launching into any of that headwind. The accounts we are in are happy with the performance of the product, if you just say we could take the accounts would just switch us to the generic, then you could see some uptick right away. I think there is a possibility of penetrating this market more quickly, based upon the confidence that the medical community has and the patient community has, and the experience they've had with the Glatopa product, and that really is a complement to what Sandoz has been able to do in launching the 20-milligram.

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Gregg Gilbert, Deutsche Bank - Analyst [67]

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Last one, at the GPA SHEA meeting are now the AM meeting on a panel, I believe you were pointing to IP as potentially a bigger hurdle for biosimilars market formation, versus a technical and regulatory. Is there anything afoot to address that? Am I characterizing your feelings right?

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Craig Wheeler, Momenta - President & CEO [68]

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You are characterizing my comments correctly. I will give you two perspectives on it. I think there are things that are contemplated in terms of patent reform and what happens on both the IPRs, et cetera, it could simplify that.

The consideration by the court that looks at reasonable royalties as opposed to other methods of enforcing patents. But I also think this process could over the long term get easier, because if you think about products that are out there now and people are putting 110 patents in place for something like a Humira.

Sometimes there is a bit of a scorched-earth policy to try to protect today's products, because they're putting so many patents in place, they're creating tremendous amounts of [prior art] for future attempts at manufacturing and formulation patents. I think this is something that's going to be challenging and could get easier based upon some things that could happen in either the courts or in Congress, but it ultimately is going to create an opening, because people will have less room to patent as they create more prior art.

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Gregg Gilbert, Deutsche Bank - Analyst [69]

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Thanks for your thoughts.

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Operator [70]

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Our next question is a follow-up from Sumant Kulkarni of Bank of America Merrill Lynch.

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Sumant Kulkarni, BofA Merrill Lynch - Analyst [71]

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Thanks for the follow-up. First, as a clarification, is it safe to assume that the re-inspection of the Pfizer facility is necessary? And second, on your biosimilar Humira product, how would you characterize the potential stocks that you might have had on partnering that product, given that there are several other competing biosimilars Humiras in development out there?

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Craig Wheeler, Momenta - President & CEO [72]

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Thank you. First, on the Pfizer facility, I don't know yet.

Typically, in a warning letter, to resolve all the issues in the warning letter, you would expect another inspection to come in. However, it was very interesting in the warning letter, and I tried to highlight it in my text, that the FDA said they may restrict approval of new products in the plant, they didn't say they would.

We don't know what that means, and we are going to try to figure that out over the coming weeks and months, but it could mean a number of things, but we just don't know if it's going to require re-inspection or not, but typically, to fully close a warning letter, you would expect to see that. On Humira, in terms of repartnering, there are a lot of Humiras out there, you're correct. I can say that we have had [approaches] and are in active discussions with multiple partners at this point.

I think one of the reasons is that as I talked about in the clinical data as well as the analytic data we talked about before, we have a very high-quality product. It has really come out spectacular in the clinical results, as well as in the analytic work that we had done. I think people see a very good and viable biosimilar here, which bodes well for us, at least potentially repartnering the program.

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Sumant Kulkarni, BofA Merrill Lynch - Analyst [73]

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Thanks.

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Operator [74]

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I'm showing no further questions at this time. I would like to turn the call over to Mr. Craig Wheeler for closing remarks.

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Craig Wheeler, Momenta - President & CEO [75]

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I want to thank everybody for coming on to the call early today. I hope we were able to give some clarity in terms of what we know so far, and we look forward to updating you as things progress.

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Operator [76]

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Thank you for participating in today's conference. This concludes today's program. You may all disconnect.