Updates on Depomed and Momenta Print E-mail
By Patrick Crutcher   
Friday, 11 March 2011 03:07


Below we have some news and notes on two stocks that we have covered over the past several months, Depomed and Momenta. Both had some consequential updates recently that investors should keeping an eye on going forward. Pending catalysts at both are bound to attract a lot of attention. Depomed is still mediating with Abbott and Momenta is waiting on more Copaxone news.

First up, Depomed (NASDAQ: DEPO) had multiple updates this week that are of significant importance. First, Depomed confirmed receipt of their $48 million milestone payment from Abbott Labs(NYSE: ABT) for FDA approval of GRALISE(gabapentin) tablets for once-daily treatment of post-herpetic neuralgia (PHN), which is pain following healing of the rash associated with shingles. GRALISE has a great label that offers clear differentiation over generic gabapentin and Lyrica, especially in terms of convenience and safety profile.

During the recent 4th quarter conference call, management said they expect an outcome on the mediation process with ABT in the next 2-weeks. There are several possible outcomes of these talks, but the current consensus appears to be that Abbott walks and Depomed receives $50-80 million and the rights of GRALISE back. This allows Depomed to help fund and market GRALISE themselves, while also pursuing a new larger corporate partner to pick up the program. We also only expect a small delay in launching GRALISE, since Depomed is doing the manufacturing supply and management indicated they’re already working to meet pre-launch forecasts. It has a lot of potential in managed care, especially with the right pricing. Jason Napodano at Zack's believes it could have sales of $517 million by 2015; he also currently has them rated as "Outperform" with a $10 price target.

They recently reported total revenues $20.9 million for 4Q-2010( 58% increase over 4Q-2009). This was on slightly higher sales of Glumetza, $11.9 million, and higher licensing/milestone revenue(~$7.5 million). Depomed also earned a $3 million milestone payment from Santarus (NASDAQ: SNTS) for achieving Glumetza sales greater than $50 million from January 1st, 2010 to January 31st, 2011. Depomed had cash of $76.9 million as of December 31, 2010; including the recent GRALISE milestone payment, they have an estimated $120 million in cash now.

On March 3rd, they announced that they had completed enrollment of Breeze 3, their pivotal Phase 3 trial evaluating Serada® (extended release gabapentin tablets) for the non-hormonal treatment of menopausal hot flashes. Carl A. Pelzel, President and CEO of Depomed noted, "We continue to expect Breeze 3 will be successful based on our study design, and look forward to reporting results in the 4th quarter of this year.” Breeze 3 is a randomized, double-blind, placebo-controlled study of approximately 600 patients. It is also being conducted under a Special Protocol Assessment (SPA) agreement with the FDA. The treatment duration of the study is 24 weeks(6 months); the study should be completed sometime in middle to late August. The FDA’s approval of GRALISE certainly somewhat de-risks the whole program, especially if Breeze 3 is positive, since GRALISE and Serada are the same drug.

We also found that Momenta Pharmaceuticals (NASDAQ: MNTA) webcast last week at RBC Capital Markets was very informative and somewhat amusing. CFO Richard Shea, did an excellent job explaining their business, especially on the generic Copaxone and Follow-on Biologics(FoBs) programs. It was mainly amusing because the analyst was clearly misinformed about Momenta; she even asked if they would consider partnering with TEVA and several other odd questions. His comments regarding their development approach and partnership outlook with respect to FoBs was well-worth the time. They are hoping to find a partner interested in using their platform for multiple targets within the next year, but they are not rushing any deal. In regards to their approach, Momenta will be aiming to produce drugs that are equivalent, not just similar. This is a clear distinction over current development approaches; we think this will offer significant advantages when it comes time to market biosimilars. (Note: The FDA has yet to put out guidance on a biosimilar approval pathway.) For those still interested, we encourage you to listen to the Cowen webcast below.

Onto some of the legal matters that have been going on with Momenta. On March 4th, both MNTA and TEVA submitted prepared documents for the pretrial schedule in the Lovenox patent-infringement case. A pretrial scheduling hearing will take place on March 15th. The documents seem to suggest that both parties have agreed to a November 2012 timeline for the end of pretrial discovery, pushing a possible trial into 2013. This seems to indicate 2 important factors. (1) Novartis /Momenta must not believe that an imminent approval from TEVA is likely to happen. (2) Their acceptance of the pretrial timeline seems to confirm that aren't expecting approval to happen anytime soon either. If TEVA were to receive approval, some believe(eg. MNTA CEO Craig Wheeler) that TEVA would follow through with an at-risk launch. If so, Momenta would likely seek an injunction until a court ruling is made. This appears to be good news and confirms our suspicion that TEVA does not expect approval of their generic in 2011. Meanwhile, Momenta's generic Lovenox has had broad acceptance in the marketplace.

Momenta has a year full of potential news related to their Copaxone program. Last week, we learned that a trial date had been set in the ongoing patent litigation with Teva Pharmaceutical (Nasdaq: TEVA) over COPAXONE®. The United States District Court for the Southern District of New York has set a trial date of September 7, 2011 for TEVA’s litigation against Momenta Pharmaceuticals, Sandoz and Mylan Pharmaceuticals, regarding generic versions of COPAXONE® (glatiramer acetate injection). We are still expecting a US District Court ruling on the Markman hearing, which will give an initial indication of the potential outcome of the patent trial, with respect to the validity/enforceability of Teva’s Orange-Book and process patents. Analysts and those familiar with the case believe that Momenta stands a good chance of having a favorable ruling. Additionally, the 30-month moratorium on an FDA decision on their Copaxone ANDA has expired, thereby allowing the FDA to make a ruling on Momenta's generic Copaxone.

Rumors began about someone potentially starting a generic Copaxone trial during TEVA's Cowen presentation. This sounds like more smoke and mirrors out of TEVA, especially given their track record with comments relating to generic Copaxone and Momenta. CEO Craig Wheeler was even asked about this later during his presentation at Cowen. He reiterated that, "Our position continues to be on this that we're an injectable generic that should be eligible for the waiver. Any clinical work that's done here really is supportive of identity, which is what we do. So it is possible that the FDA could ask for some clinical work, we believe that would only be supportive of full identity rather than kind of a biosimilar track where you are doing efficacy trials to try to get approval." It appears that Wheeler confirmed Momenta is not running a safety and efficacy trial. If a potential trial is being run, it's possible they are considering running a bioequivalence study, although generally not required for approving generic injectables, they might be done as additonal support for their ANDA. We will have to wait and see if the FDA acts on their ANDA.

Disclosure: Long MNTA

Depomed reports Fourth Quarter and Year-End 2010 Financial Results - http://bit.ly/gl6mm5

Depomed announces completion in enrollment in BREEZE 3 study of Serada for hot flashes - http://bit.ly/ghVF1S

TEVA announces trial date set for Copaxone litigation - http://bit.ly/hEPW9P

MNTA webcast at RBC Capital Markets' Healthcare Conference on Wednesday, March 2, 2011 - http://www.wsw.com/webcast/rbc129/mnta/

MNTA webcast at Cowen and Cos. 31st Annual Healthcare Conference on Monday, March 7th, 2011 - http://www.wsw.com/webcast/cowen3/mnta/

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