Judge’s decision has broad implications for generic versions of biologic drugs and companies who make them

A judge’s decision will have vast implications for some of the biosimilar companies in the healthcare sector.

Shareholders of Sanofi-Aventis (NASDAQ:SNY) and Momenta Pharmaceuticals (NASDAQ:MNTA) are anxiously awaiting a judge’s decision on whether to block the sale of a generic version of SNY’s blockbuster Lovenox. This comes after MNTA gained FDA approval for their generic version of Lovenox, a biologic-like blood thinner, and SNY later sought a temporary restraining order and preliminary injunction directing the FDA to suspend and withdraw its approval of MNTA’s generic version. Many were caught off guard, since this was the first approval of a generic version of a complex-drug like Lovenox in over 10 years.

To be specific, biosimilars or follow-on biologics are essentially generic versions of biologic drugs. Essentially, biologics are genetically engineered proteins derived from genes(human, animal, micro-organism) and involve some type of biological process to produce the medicinal product. As you can tell, these are incredibly complex-drug process, which are vastly different from creating copycat versions of typical drugs that usually only involve chemical processes. This is why the significance of MNTA’s approval is shaking the market and causing SNY to seek legal action.

The implications for MNTA and other biosimilar companies are far reaching and complex. If the judge throws out the case, MNTA and their partner Sandoz of Novartis (NASDA:NVS) will be cleared to compete with Lovenox, which had worldwide sales of $4 billion and 60% of that was in the US. They are planning on selling their generic version at roughly 30-35% less than Lovenox’s price. MNTA also has a great pipeline full of other potential blockbuster biosimilars, so they want all the cash they can get to pay their development. MNTA has another biosimilar awaiting FDA approval – M356(partnered with Sandoz), which is a biosimilar of TEVA’s $2.8 billion blockbuster Copaxone. Additionally, they have M118, a novel anti-coagulant for patients with acute coronary syndrome and M402, a novel preclinical anti-cancer compound with anti-metastatic properties and low anticoagulant activity.

This will also set precedence for other biosimilar type companies seeking to compete with other blockbuster drugs that are close to coming off patent protection, in particular, Teva’s (NASDAQ:TEVA) $2.8 billion blockbuster Copaxone and Amgen’s Procrit/Epogen and Enbrel which had US sales of over $6.5 billion. These will certainly be main targets in the follow-on biologics war that is coming and other big pharmas have taken notice. In late 2009, Insmed Inc.(NASDAQ:INSM) sold off their follow-on biologics unit to Merck (NASDAQ:MRK) for $123M. A positive result from the case could also lead to more mergers and acquisitions in this biotech area, since some of the larger pharmas have expressed great interest in this area. Pfizer has expressed great interest in this area and Teva Pharmaceutical (Nasdaq: TEVA), Novartis (NYSE: NVS), and Hospira (NYSE: HSP) already have approvals in the European Union for biogenerics. Companies like Protalix BioTherapeutics Inc. (AMEX: PLX), Peregrine Pharmaceuticals, Inc. (NASDAQ: PPHM), PROLOR Biotech Inc. (AMEX: PBTH), Intellipharmaceutics (NasdaqCM: IPCI), and even iBio, Inc. (OTC: IBPM.OB) would certainly benefit from a positive opinion on the case. These companies pipelines and prospects would certainly warrant further attention from large pharmas.

A positive ruling for SNY would certainly send MNTA back down to the $10 range, since their future would be tied up in the courts. It would also cast into doubt a clear approval pathway for biosimilars, since the Pathway for Biosimilars Act of 2009 and Patient Protection and Affordable Care Act of 2010 would certainly come into question under U.S. Judge Emmet Sullivan’s ruling, if SNY were favored in the case.

The judge claims that he plans on delivering a decision soon. I imagine most investors in MNTA or SNY are wound tight, since it is not clear which way he is leaning on the issue. MNTA and SNY also have to worry about TEVA being close on their generic version of Lovenox, which I am sure will be stalled until a decision is made. One thing is for sure, either big pharma wins or biosimilars are on the way.

Disclosure: No positions.

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