Avoid This Biotech Stock

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CompanyMomenta Pharmaceuticals (NAS: MNTA)
Submitted byzzlangerhans
Member Rating99.59
Submitted on10/31/2011
Stock Price at Underperform Recommendation$14.66

Momenta Pharmaceuticals Profile

Star Rating (out of 5)****
HeadquartersCambridge, Mass.
IndustryBiotechnology
Market Cap$740 million
Industry Peers (NAS: TEVA)
Spectrum Pharmaceuticals
(NAS: SPPI)
Biogen Idec
(NAS: BIIB)

Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS.

This Week's Pitch:

If you know anyone who claims to be an expert on biotech stocks, ask them if they know what's going to happen with Momenta Pharmaceuticals. If they start telling you what's going to happen, laugh and walk away, because no one knows where this is going.

If Momenta could just freeze the current situation for the foreseeable future, they would be in great shape. Their generic enoxaparin is a banging success, with about 85M in quarterly sales and operations near the maximum capability of the supply chain at 45-50% of the entire enoxaparin market. Unfortunately for Momenta, other pharmas saw the windfall and developed their own versions of generic enoxaparin, the first of which was approved by the FDA in September. That news clobbered the share price, which has since mostly recovered now that the company has obtained an injunction blocking sales of the other generic enoxaparins.

If that issue wasn't complex enough, Momenta still has to deal with a suit from Sanofi [ (NYS: SNY) ], the marketer of branded enoxaparin Lovenox. The company also has a patent infringement lawsuit against Teva regarding their generic enoxaparin, which is currently in the discovery phase. And finally Momenta is trying to avenge itself against Teva by getting a generic version of the MS drug Copaxone approved, which of course Teva is fighting tooth and nail. The first phase of the trial which dealt with inequitable conduct was completed in 7/11 but it is unclear to me if a ruling has been issued. A Markman hearing is scheduled for 12/11 and a preliminary trial date is set for 2/13.

Momenta's enoxaparin partner Sandoz has already announced that the royalty structure has already been altered by the Amphastar approval, and if another generic enoxaparin is approved it will affect Momenta's royalties much more significantly. Alternating negative and positive developments have pushed Momenta's share price up and down dramatically and I expect this pattern to continue in the near future.

Anyone claiming to know what will happen with Momenta is claiming to know the outcomes of at least four independent court cases, as well as multiple future FDA decisions. Not likely. And I wouldn't touch a ten foot pole that was touching Momenta stock with a ten foot pole. But for the purposes of CAPS, volatility is a bonus rather than a liability. With the latest development being positive and the momentum in Momenta's favor, the time has come for a red thumb before the next downward swing.

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At the time this article was published The Motley Fool is investors writing for investors. Dan Dzombak did not have a position in any of the companies mentioned in this article. Pitches must be compelling, made in the past 30 days, and be at least 400 words. The Motley Fool owns shares of Teva Pharmaceutical Industries and Momenta Pharmaceuticals. Motley Fool newsletter services have recommended buying shares of Teva Pharmaceutical Industries and Momenta Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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