Goldman mnta

December 20, 2010

INITIATION
Momenta Pharmaceuticals (MNTA)
Neutral Equity Research

Initiate Neutral: Awaiting clarity on Lovenox and Copaxone
Investment view Investment Profile

We initiate on MNTA with a Neutral rating and $15 12-month price target. Low High

Growth Growth
We see MNTA as a high-quality story and amongst the first to benefit
Returns * Returns *
from the evolving landscape of biosimilars (generic versions of biologic
Multiple Multiple
drugs). The company’s proprietary technology could lead the way for Volatility Volatility
approval of biosimilars, as it did with generic Lovenox (the closest proxy Percentile 20th 40th 60th 80th 100th

for biosimilars, in our view). However, we believe near-term upside is Momenta Pharmaceuticals (MNTA)

Americas Healthcare Est. Market Leaders Peer Group Average
capped, given the risk that another company could enter the generic
* Returns = Return on Capital For a complete description of the
Lovenox market (either an authorized generic or a third-party generic investment profile measures please refer to
the disclosure section of this document.
company), thereby significantly diminishing Momenta’s economics.

Key data Current
Core drivers of growth Price ($) 15.45
A duopoly with Sanofi on the $1.8bn US market of Lovenox. We see 12 month price target ($) 15.00
Market cap ($ mn) 702.8
MNTA having a multi-year duopoly with Sanofi. However, if other Dividend yield (%) NM
competitors enter the market, MNTA’s earnings power would dramatically Net margin (%) 37.7
Debt/total capital (%) 0.0
decline (from $3 per share to $0.20 per share, in our estimation). While we
see low probability of a competitor approval in the next few years, we see 12/09 12/10E 12/11E 12/12E
the overhang only lifting with time, capping upside. High probability of Revenue ($ mn) 20.2 105.7 194.2 223.8
EPS ($) (1.33) 0.88 2.47 2.75
generic Copaxone approval. MNTA needs to overcome two hurdles: 1) P/E (X) NM 17.6 6.3 5.6
EV/EBITDA (X) NM 12.7 3.8 2.2
FDA approval – we are bullish given generic Lovenox approval and 2)
ROE (%) NM 26.9 45.3 32.8
Teva’s Copaxone patents – trial in 2011/12. We expect the market to give
9/10 12/10E 3/11E 6/11E
little credit for generic Copaxone until the litigation outcome is known. EPS ($) 0.75 0.63 0.43 0.64

Risks to the investment case Price performance chart
28 1,270
Downside: Competitors Teva and Amphastar gain approval of generic
26 1,240
Lovenox. Upside: Competitors’ Lovenox generics are rejected by the FDA. 24 1,210
22 1,180
20 1,150
Valuation 18 1,120
Our $15 12-month price target is derived from our DCF-based valuation. 16 1,090
14 1,060
12 1,030
Industry context 10 1,000
Dec-09 Mar-10 Jun-10 Oct-10
MNTA is a small-cap biotech developing generic biologic drugs.
Momenta Pharmaceuticals (L) S&P 500 (R)
INVESTMENT LIST MEMBERSHIP
Neutral
Share price performance (%) 3 month 6 month 12 month
Absolute 4.6 3.0 47.6
Rel. to S&P 500 (5.3) (7.6) 30.0
Coverage View: Cautious Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 12/17/2010 close.

Sapna Srivastava The Goldman Sachs Group, Inc. does and seeks to do business with
(212) 357-7528 sapna.srivastava@gs.com Goldman Sachs & Co. companies covered in its research reports. As a result, investors should
Hema Srinivasan be aware that the firm may have a conflict of interest that could affect the
(212) 902-6761 hema.srinivasan@gs.com Goldman Sachs & Co. objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision. For Reg AC
certification, see the end of the text. Other important disclosures follow
the Reg AC certification, or go to www.gs.com/research/hedge.html.
Analysts employed by non-US affiliates are not registered/qualified as
research analysts with FINRA in the U.S.

The Goldman Sachs Group, Inc. Global Investment Research

December 20, 2010 Momenta Pharmaceuticals (MNTA)

Momenta Pharmaceuticals: Summary Financials
Profit model ($ mn) 12/09 12/10E 12/11E 12/12E Balance sheet ($ mn) 12/09 12/10E 12/11E 12/12E

Total revenue 20.2 105.7 194.2 223.8 Cash & equivalents 21.9 127.2 258.7 409.1
Cost of goods sold -- -- -- -- Accounts receivable 0.0 39.5 48.1 52.9
SG&A (17.4) (20.0) (20.3) (20.5) Inventory 0.0 0.0 0.0 0.0
R&D (56.2) (45.7) (47.6) (49.9) Other current assets 80.2 40.2 43.0 43.9
Other operating profit/(expense) 0.0 0.0 0.0 0.0 Total current assets 102.1 206.9 349.8 506.0
ESO expense -- -- -- -- Net PP&E 11.8 9.3 9.4 9.7
EBITDA (48.9) 44.3 129.1 156.3 Net intangibles 2.8 2.5 2.2 1.9
Depreciation & amortization (4.5) (4.3) (2.8) (3.0) Total investments 0.0 0.0 0.0 0.0
EBIT (53.4) 40.0 126.3 153.3 Other long-term assets 1.8 1.8 1.8 1.8
Net interest income/(expense) 0.3 (0.1) 0.4 0.7 Total assets 118.5 220.4 363.1 519.4
Income/(loss) from associates 0.0 0.0 0.0 0.0
Others (0.1) 0.0 0.0 0.0 Accounts payable 4.2 3.0 5.5 6.3
Pretax profits (53.3) 39.9 126.7 154.0 Short-term debt 0.0 0.0 0.0 0.0
Provision for taxes 0.0 0.0 (2.8) (15.4) Other current liabilities 12.1 11.3 11.3 11.3
Minority interest 0.0 0.0 0.0 0.0 Total current liabilities 16.3 14.3 16.8 17.6
Net income pre-preferred dividends (53.3) 39.9 123.9 138.6 Long-term debt 0.0 0.0 0.0 0.0
Preferred dividends 0.0 0.0 0.0 0.0 Other long-term liabilities 7.9 3.8 1.7 0.1
Net income (pre-exceptionals) (53.3) 39.9 123.9 138.6 Total long-term liabilities 7.9 3.8 1.7 0.1
Post tax exceptionals (10.8) (10.7) (7.9) (8.9) Total liabilities 24.3 18.1 18.5 17.8
Net income (post-exceptionals) (64.0) 29.2 115.9 129.7
Preferred shares 0.0 0.0 0.0 0.0
EPS (basic, pre-except) ($) (1.33) 0.89 2.54 2.83 Total common equity 94.2 202.3 344.6 501.6
EPS (diluted, pre-except) ($) (1.33) 0.88 2.47 2.75 Minority interest 0.0 0.0 0.0 0.0
EPS (basic, post-except) ($) (1.60) 0.65 2.38 2.65
EPS (diluted, post-except) ($) (1.60) 0.64 2.31 2.58 Total liabilities & equity 118.5 220.4 363.1 519.4
Common dividends paid -- -- -- --
DPS ($) 0.00 0.00 0.00 0.00
Dividend payout ratio (%) 0.0 0.0 0.0 0.0 Additional financials 12/09 12/10E 12/11E 12/12E
Net debt/equity (%) (23.3) (62.9) (75.1) (81.6)
Interest cover (X) (93.7) 131.5 829.2 1,006.3
Growth & margins (%) 12/09 12/10E 12/11E 12/12E Inventory days NM NM NM NM
Sales growth 39.0 422.1 83.7 15.2 Receivable days 4.1 68.2 82.3 82.4
EBITDA growth 6.1 190.6 191.2 21.1 BVPS ($) 2.35 4.45 6.86 9.97
EBIT growth 4.8 174.9 215.9 21.4
Net income (pre-except) growth 0.3 174.9 210.6 11.9 ROA (%) (42.5) 23.5 42.5 31.4
EPS growth 10.5 167.2 184.0 11.6 CROCI (%) (60.4) 47.4 123.1 125.5
Gross margin NM NM NM NM
EBITDA margin (241.7) 41.9 66.5 69.9 Dupont ROE (%) (56.6) 19.7 35.9 27.6
EBIT margin (263.8) 37.8 65.0 68.5 Margin (%) (263.0) 37.7 63.8 61.9
Turnover (X) 0.2 0.5 0.5 0.4
Cash flow statement ($ mn) 12/09 12/10E 12/11E 12/12E Leverage (X) 1.3 1.1 1.1 1.0
Net income (53.3) 39.9 123.9 138.6
D&A add-back (incl. ESO) 4.5 4.3 2.8 3.0 Free cash flow per share ($) (1.42) 0.02 2.32 2.70
Minority interest add-back 0.0 0.0 0.0 0.0 Free cash flow yield (%) (13.7) 0.1 15.0 17.5
Net (inc)/dec working capital (6.9) (42.4) (11.0) (6.5)
Other operating cash flow 0.4 1.0 0.3 0.3
Cash flow from operations (55.3) 2.8 116.0 135.4

Capital expenditures (1.7) (1.8) (2.9) (3.4)
Acquisitions 0.0 0.0 0.0 0.0
Divestitures 0.0 0.0 0.0 0.0
Others (20.6) 38.0 0.0 0.0
Cash flow from investing (22.3) 36.2 (2.9) (3.4)

Dividends paid (common & pref) 0.0 0.0 0.0 0.0
Inc/(dec) in debt 0.0 0.0 0.0 0.0
Other financing cash flows 44.4 66.2 18.4 18.4
Cash flow from financing 44.4 66.2 18.4 18.4
Total cash flow (33.1) 105.2 131.5 150.5
Note: Last actual year may include reported and estimated data.
Source: Company data, Goldman Sachs Research estimates.

Analyst Contributors

Sapna Srivastava
sapna.srivastava@gs.com

Hema Srinivasan
hema.srinivasan@gs.com

Goldman Sachs Global Investment Research 2


Key investment themes
Momenta was founded in 2001 based on technology characterizing complex mixtures
developed at Massachusetts Institute of Technology. This proprietary technology allowed
the company to be amongst the first to benefit from the evolving landscape of biosimilars.
The technology is capable of characterizing complex biologic aspects of certain drugs to
establish “sameness,” a key regulatory hurdle for approval of biosimilar drugs. Novartis’
generic drug unit Sandoz first partnered with Momenta in 2003 and has rights to M-
enoxaparin (generic Lovenox), M356 (generic Copaxone), and several unnamed product
candidates.

We saw the first proof-of-principle for this technology with the approval of
Momenta/Novartis’ generic Lovenox in July 2010. We see Lovenox, a complex mixture
of sugars derived from pig intestines, as a good proxy for the potential approval process
of biosimilar drugs. The key question was how to establish “sameness” for generic
Lovenox, as most current technologies are inadequate due to their inability to thoroughly
characterize sugars. We believe Momenta’s technology was capable of answering this
question and was the key reason why Momenta was the first company to gain approval
for generic Lovenox, even though it filed its ANDA over two years after competitors, Teva
and Amphastar.

The key question for Momenta now is whether other companies can gain approval
of generic Lovenox. The answer will define: (1) what value to ascribe to the generic
Lovenox opportunity, as different outcomes lead to significantly different economics for
Momenta, and (2) what value to assign to Momenta’s proprietary technology, contingent
on whether the tool can confer years of duopoly economics in other key biologic markets
(like Teva’s Copaxone) or could be easily duplicated by other generic companies.

Although we see Momenta’s technology creating a multi-year duopoly with Sanofi
on Lovenox and eventually with Teva on Copaxone, we are Neutral on the stock.
Given that there is no clarity on how the competitive process will evolve, we expect
limited credit from the Street until a substantial amount of time passes without Teva
(considered the most formidable competitor on generic Lovenox) gaining approval on its
application for generic Lovenox. Separately, Momenta sued Teva on 12/2/2010 for
infringing its patents covering innovative methods of producing Lovenox, the outcome of
which could be defining, but is also likely several years away.

Valuation: Though Momenta turned profitable last quarter, there is significant risk that
Teva or another third party could launch a generic version of Lovenox, thereby
diminishing Momenta’s economics from a 45% profit share to a high single digit royalty
on sales, according to the contract with Novartis. In this scenario (assuming market
dynamics are constant), we estimate the ultimate Lovenox earnings power would decline
from $3 per share to $0.20 per share.

In our view, this risk can be reflected in our DCF-based valuation in two ways: (1) by
forecasting a single-generic market for the foreseeable future and applying a large
discount rate (25-30%) to reflect the inherent risk or (2) by forecasting a third-party generic
launch within the next year and applying a 10-15% discount rate. Based on our thesis that
other companies will be unable to gain approvals of generic Lovenox in the near-term (as
they lack Momenta’s proprietary technology), we model a duopoly (single-generic) market
and assign a 30% discount rate to arrive at our $15 12-month, DCF-based price target.

Our 2010-2012E EPS estimates are $0.88, $2.47, and $2.75, with growth driven by
increasing enoxaparin utilization and market share expansion for Momenta’s M-
enoxaparin vs. branded Lovenox.



Lovenox: We see a duopoly but competitive threat limits upside
We believe Momenta/Novartis’s generic Lovenox will be the only generic version
approved for the next several years, potentially capturing up to 55% of the $1.8bn and
growing US market (achievable share is constrained by manufacturing capacity, with
current supply allowing for 35-40% share of the Lovenox market). We see Momenta’s
proprietary technology as unique in its ability to demonstrate that its generic version of
Lovenox is the same as branded Lovenox, a key regulatory hurdle that we do not see
competitors Teva and Amphastar overcoming.

A duopoly (in this case a single-generic market) allows Momenta to achieve $3 per share
in peak earnings power, in our estimate. We believe investors are concerned that
competitors could enter the market shortly (Teva has said by YE2010), which would
almost completely diminish the economics for Momenta (under contract with Novartis).
While we do not see that as a likely scenario, we see no way for this overhang to lift until
substantial time elapses, likely an additional six to twelve months, without competitor
approvals. In the interim, we expect the stock to remain largely range-bound.

Background
See Appendix for Lovenox (enoxaparin) is a low molecular weight heparin that is derived from pig
more on generic drug intestines. It is an anticoagulant used to prevent blood clots in a wide range of patients
approval process (including those on bed rest, those having hip/knee replacements or stomach surgery,
and patients post-angina or heart attack). Lovenox is rare in that it is a biologic drug that,
like the growth hormones, was approved under a new drug application (NDA), as the
biologic licensing application (BLA) regulatory path was not yet formed. Hence, there was
a pathway for generics to apply for approval. A similar path is not yet available for drugs
that are approved on the basis of a BLA.

Since the first ANDA filing for Lovenox in 2003 (and Momenta’s filing in 2005), the
approval process for generic Lovenox has been closely watched as reflective of what the
FDA will do with biosimilars. Approval of generic Lovenox reflected on the key question
for biosimilar drugs: how to establish “sameness” with drugs that themselves are not
fully characterized. It took the FDA seven years to get comfortable with the key issues and
approve the first generic Lovenox, Momenta and Novartis’s M-enoxaparin, in July 2010.
We note that the FDA approved the drug shortly after healthcare reform legislation (in
March 2010) gave the FDA the onus for developing a biosimilar pathway.

Exhibit 1: Timeline of events leading to Momenta’s generic Lovenox approval

March 2003: Teva & August 2005: Momenta March 2010:
Amphastar submit files ANDA for generic Healthcare reform bill
paragraph IV ANDA Lovenox (later added passed with biosimilar
filings for enoxaparin paragraph IV certification) provisions included
????: FDA resolution
of Teva and
August 2003: May 2008: Final court verdict Amphastar's
July 2010: FDA
Aventis sues Teva invalidates Sanofi's '618 application
approves
and Amphastar for patent on grounds of Momenta/Novartis'
patent infringement inequitable conduct generic Lovenox

2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Company data, Goldman Sachs Research



We see a multi-year duopoly based on proprietary technology
Duopoly is important, as economics change significantly with more competitors
Under Momenta’s contract with Novartis, there are three competitive scenarios that carry
different economics for Momenta. Continuation of the current market dynamics, in which
MNTA has the only approved generic, holds the best economics for the company (45%
profit share). In the event that Sanofi launches an authorized generic, Momenta would
receive a royalty on sales up to a certain threshold, and a profit share thereafter, according
to the contract. While exact economics have not been disclosed, we estimate Momenta
would receive a 10% royalty up to $1bn in sales and a 30% profit share thereafter. In the
final scenario, if third-parties launch generic versions of Lovenox, Momenta would only
receive a high single-digit royalty on sales (we estimate 8%) of a potentially smaller market,
as generic pricing generally deteriorates with multiple competitors.

Exhibit 2: Our estimate of Momenta’s economics in various competitive scenarios

Competitive scenario Royalty rate Profit share
1) MNTA is sole approved generic N/A 45%
2) Sanofi launches an authorized generic 10% up to $1bn 30% over $1bn
3) Third party generics launch (Teva, Amphastar, Hospira) 8% N/A

Source: Company data, Goldman Sachs Research estimates.

See Appendix for We see MNTA’s proprietary technology as the basis of approval
more on MNTA’s Momenta’s technology, exclusively in-licensed from Massachusetts Institute of
technology Technology, enables it to sequence complex mixtures. This technology has been shown
to sequence complex sugars (published in leading journals Science and Nature), and we
believe it can be extended to other complex mixtures as well. To our knowledge, no other
technology can so thoroughly characterize sugars, making Momenta unique in its ability
to fully characterize Lovenox (a mixture of polysaccharides, also known as sugar chains)
to demonstrate sameness. We believe that competitors do not have this technology and
will therefore be unable to gain approval for the next several years.

Moreover, Momenta recently sued Teva for infringement of two patents covering the
company’s proprietary methods of producing enoxaparin. If Teva is found to infringe
these patents, we believe it is less likely that Teva will be able to demonstrate the
interchangeability of its generic version with branded Lovenox.

Citizen petitions (CP) (1) FDA’s citizen petition response – Momenta’s technology was key to approval
allow citizens to raise In its response to the Aventis citizen petition (CP) upon approval of M-enoxaparin, the
issues relating to FDA laid out five criteria used to evaluate active ingredient sameness to enoxaparin: “(1)
products that the FDA the physical and chemical characteristics of enoxaparin, (2) the nature of the source
regulates.
material and the method used to break up the polysaccharide chains into smaller
fragments, (3) the nature and arrangement of components that constitute enoxaparin, (4)
The FDA cannot
approve a drug certain laboratory measurements of anticoagulant activity, and (5) certain aspects of the
without resolving any drug’s effect in humans.”
outstanding CPs
We believe Momenta’s proprietary technology was instrumental in helping it address
blocking approval.
these criteria. For example, Momenta is able to sequence complex sugars, allowing it to
specifically address criterion (3), which requires a generic Lovenox to demonstrate
“equivalence in disaccharide building blocks, fragment mapping, and sequence of
oligosaccharide species.” The technology Momenta in-licensed from MIT has been shown
as the first to sequence complex sugar chains longer than 10 saccharide units (Lovenox is
a combination of sugars that range between 2 and 32 sugar units), and the FDA response
to the Lovenox CP references the original publications of this technology multiple times.



Moreover, Momenta’s ability to identify and link specific sugar structures with their
corresponding biological function (the technology was validated by being used to identify
the key contaminant of source material during the heparin contamination crisis) could
also uniquely addresses the different criteria, an edge which we believe competitors lack.

(2) FDA also relied on Momenta’s technology during the heparin crisis
The FDA used Momenta’s technology in 2007-2008 when the heparin crisis broke out.
Contamination of heparin, the source product for Lovenox, was responsible for 247
deaths. The source material is generally manufactured in China. At that time, there was
significant debate over whether it was contamination of source material or processing in
the US that was responsible for these deaths.

The FDA partially relied on Momenta’s technology to discover the source of
contamination and co-authored a paper with Momenta demonstrating the power of the
company’s assays in detecting the key contaminant causing the severe reactions and
deaths that were observed in late 2007/early 2008. In the publications, Momenta’s
technology was used to demonstrate the mechanism by which the key contaminant
(oversulfated chondroitin sulfate) generated adverse reactions in humans and to elucidate
which assays could be used to test the global supply of heparin.

(3) FDA approved Momenta’s application significantly faster than competitors
Although Teva and Amphastar filed their ANDAs almost two years before Momenta did,
their generic versions have not yet been approved. It has been about 4.5 months since
Momenta’s product was approved. We believe this is a clear reflection of the higher
quality application that Momenta/Novartis had versus competitors.

While Amphastar has been mired in Chinese heparin supplier issues, Teva management
has always said that they believe themselves to be similarly situated to Momenta.
Nevertheless, there was no mention of the status of the Teva or Amphastar ANDAs in the
FDA documents released upon approval of M-enoxaparin in July, 2010. As of its 3Q
conference call, Teva management continued to remain optimistic that they would receive
approval for their generic Lovenox by year-end. Still, we have heard no indication of this
from the FDA. We also note that both Momenta and Teva expected approval for years
before the FDA took any action on either ANDA or Sanofi’s citizen petition.

However, we see limited upside until time removes the competitive overhang
We believe that for Momenta to receive full credit, investors need to be convinced that: (1)
Sanofi will not launch an authorized generic, and (2) competitors Teva and Amphastar will
not receive FDA approval. While Sanofi can launch an authorized generic at anytime, it
may not make sense to do so in the absence of other generic approvals. An authorized
generic is generally priced in line with other generics – at around a 15-20% discount to the
branded drug in the case of Lovenox. Therefore, if Sanofi can retain reasonable market
share of branded Lovenox at the full price, it would not have a strong incentive to launch
an authorized generic and reduce its average price per Lovenox prescription.

From what we understand, it is rare for the FDA to give a non-approvable letter to generic
applications, making time the only way to gauge the approvability of Teva’s and
Amphastar’s applications. We believe a lack of competitor approvals in the next 6-12
months is necessary for the Street to gain confidence that Momenta’s generic Lovenox
could have a duopoly for the foreseeable future. Until then, we see the overhang as
limiting upside.



Copaxone: Positive on FDA approval, but could be a while away
We believe the probability is high that Momenta (again partnered with Novartis) receive
FDA approval of M356, its generic version of Teva’s Copaxone. The key reasons for our
positive outlook are: (1) the FDA’s rejection of Teva’s citizen petition (CP), which sought to
prevent any approvals of generic Copaxone (received 180 days after filing versus 7 years
in the case of the Lovenox CP), (2) Momenta’s proprietary complex mixture sequencing
technology, which we see as the basis for approval of generic Lovenox, and (3) the FDA’s
increasing willingness to approve interchangeable versions of complex biologics; generic
Lovenox can be see as the first. However, the ongoing litigation of Teva’s 2014 patents is
a key gating factor. The trial is expected to start in 2011-2012.

Background
Momenta is seeking FDA approval for a generic equivalent of Teva’s branded multiple
sclerosis (MS) drug Copaxone ($2.2 bn in estimated 2010 US sales). Momenta filed its
Copaxone ANDA with a paragraph IV certification on July 11, 2008 and notified Teva in a
letter received on July 14, 2008, dating the 30-month stay expiration (the earliest possible
approval date) December 13, 2010. Teva filed suit against Sandoz and Momenta on
August 28, 2008.

In order to launch, Momenta and Sandoz must receive FDA approval for M356 (the
generic version of Copaxone) and must not infringe any Orange Book-listed patents,
which extend to 2014. Momenta has to show that either the patents are not infringed or
are unenforceable due to inequitable conduct. The trial is expected to begin in the 2011-
2012 timeframe. We believe a tentative FDA approval is very unlikely before the litigation
outcome is known, as the agency has little incentive to act on applications that are not
actionable.

Exhibit 3: Timeline of key events related to generic Copaxone

January 2011: MYL
August 2008: Teva files October 2010: MNTA May 2014: Copaxone
claims construction
patent infringement suit and Mylan cases are Orange Book patents
hearing; Teva's low-dose
against Sandoz/MNTA consolidated expire
Copaxone PDUFA

July 2008: Momenta September 2009: December 2010: MNTA's 2011/12?:
November 2014: Copaxone
and Sandoz submit Mylan submits 30-month stay on MNTA/MYL case
patent expiration if PED
paragraph IV ANDA paragraph IV ANDA approval expires (at-risk potentially
exclusivity is granted
filing for Copaxone filing for Copaxone launches possible) proceeds to trial

2008 2009 2010 2011 2012 2013 2014 2015

Source: Company data, FDA’s Orange Book, Goldman Sachs Research

We see FDA approval as likely, given Lovenox precedent
(1) FDA rejected Teva’s citizen petition on Copaxone
The FDA took 7 years to render a final decision on the Aventis’ Lovenox CP (releasing its
decision concurrent with final approval of M-enoxaparin). In contrast, the FDA resolved
Teva’s CP within 180 days of filing. We believe that this shows the FDA may now have
more clarity on what it takes to approve complex mixture drugs like Lovenox and
Copaxone. We highlight the noteworthy points from the FDA’s response that we see as
positive for Momenta, which are very similar to the points the FDA made in its rationale
for the approval of generic Lovenox.



The FDA rejected the idea that the absence of pharmacodynamic markers (PD markers,
measures of what a drug does in the body) for Copaxone precludes establishing
“sameness.” Moreover, the FDA specifically notes, “given the complexity of Copaxone,
we may require that any ANDA sponsor demonstrate active ingredient sameness through
a multi-criteria test or series of tests, each criterion of which captures different aspects of
the active ingredient’s ‘sameness’.” The FDA specifically asserts that sameness does not
necessitate a finding of “complete chemical identity.”

(2) Generic Lovenox approval gives us confidence in Momenta’s technology
Generic drug approvals are driven by establishing “sameness” of active ingredients and
bioequivalence. We note that using these criteria, Momenta was much better positioned
for approval of generic Lovenox than it is for Copaxone. The publications on Momenta’s
technology focus on characterizing sugars, and Lovenox is a sugar while Copaxone is a
polypeptide (though most peptide characterization work was done after the company was
founded and began actively protecting its trade secrets). Lovenox also has a clear PD
marker to establish bioequivalence. Copaxone is a synthetic polypeptide with no PD
markers.

However, the generic Lovenox approval elucidated the process that the FDA defined to
establish “sameness” of active ingredients. It was a five-step process, which heavily
relied on technology, placing limited weight on PD markers. Our analysis shows that
Momenta’s technology can be extended to sequence complex mixtures like Copaxone,
and the FDA’s response to Teva’s CP shows that the absence of a PD marker is not an
insurmountable hurdle.

(3) Generic Lovenox decision shows that the FDA is willing to be bold
In our view, the approval of generic Lovenox signaled that the FDA may be willing to
move forward with biosimilars more aggressively than previously thought. The FDA
approved generic Lovenox without clinical trials, knowing that it would be fully
substitutable with branded Lovenox in complex and even life-threatening indications.
Combined with the rejection of Teva’s CP on Copaxone within 180 days, we believe this
indicates the FDA’s willingness to move forward with biosimilars, and generic Copaxone
is the next application in line.

We also note that the recent passage of biosimilar provisions within broader healthcare
reform gives the FDA the onus for developing biogeneric pathways. We note that the FDA
approved generic Lovenox shortly following passage of health reform legislation. In our
view, a decision of this magnitude likely had the backing of multiple authorities,
particularly as the contamination of heparin (the source product for Lovenox) was
responsible for 247 deaths in 2007/08, placing generic Lovenox in the center of a high-
profile safety issue for the agency. We believe this demonstrates that regulatory
authorities are willing to take an aggressive stance on follow-on biologics, which we view
as a negative for branded Copaxone.

Trial outcome is tough to gauge – many risks to success remain
(1) Trial timelines are extended – Decision could come as late as 2012
Momenta’s patent litigation case on Copaxone has been consolidated with Mylan’s. While
Momenta’s case has gone through several required steps including claims construction
and summary judgment (September 2010), Mylan has yet to complete the process. Its
summary judgment hearing is scheduled for January 2011. As a result, the trial that was
originally expected to start in January 2011 will be delayed. Momenta management
believes that the trial could start as early as 1Q2011 and finish by 3Q2011, with a final
District Court judgment within 4 months (around YE2011 or 1Q2012). Teva management
indicated on its 3Q earnings call that consolidation with Mylan could push the start of the
trial to 2012.



Depending on the duration of the trial and the time Judge Jones requires to render a
decision, this could push an outcome out to 2012 or 2013. In the interim, we see little
room for Momenta to receive credit for the generic Copaxone opportunity. However, we
note that if Momenta’s projections are correct, a District Court judgment could come by
2012, followed by the appeals case. We note that if Momenta/Sandoz were successful in
the District Court case, they could decide to launch at-risk (contingent on FDA approval of
M356), as the 30-month stay expired in December 2010.

(2) Hard to assess the strength of the Momenta/Mylan case
In the summary judgment, the District Court denied Momenta’s motion that the Copaxone
patents are invalid for indefiniteness (a patent claim must be definite to be valid, i.e., a
person of ordinary skill in the art must be able to determine whether a specific device or
method is covered by the claim or not). This was largely expected, as summary
judgments are most often rendered in clear-cut cases and not in such complex cases. We
expect Momenta to continue to make its case on invalidity on the basis of indefiniteness.
However, we are unable to gain further clarity on the strength of Momenta’s case.

We note that there is a clear risk that the Momenta/Mylan defense could now rely more
heavily on inequitable conduct. This will pose a high hurdle for generics, as it requires
proving that Teva (1) failed to disclose material information and (2) intended to deceive
the USPTO. However, we also note that the Lovenox patent trial was won on inequitable
conduct, so a victory for the generic companies would not be unprecedented.

Teva’s life cycle management strategy could be successful
We believe this risk is worth highlighting, as Teva is working on several extensions of its
Copaxone franchise, including several new formulations and devices. The most advanced
program is the new 20mg/0.5mL low-volume injection (the marketed product has a
concentration of 20mg/1mL), with a PDUFA date of 1/1/2011. If Teva gains approval for
this product and FDA determines it is not therapeutically equivalent to the existing
product, the FDA can grant Teva 3-year data exclusivity.

If Teva acquires this exclusivity AND is successful in converting the MS market to this
new formulation, then even if Momenta gains approval of its generic Copaxone, it may
not be commercially meaningful. In this scenario, Momenta may need to file a separate
ANDA on the new formulation and wait out the 3-year exclusivity before potentially
launching a generic version of the new formulation.

Other key risks: (1) Momenta is unable to find a reliable biomarker for
pharmacodynamics, the complexity of which is addressed in Teva’s Copaxone CP; (2)
Momenta is unsuccessful in trial, likely postponing any FDA decision until at least 2014;
(3) Other generic competitors can enter the Copaxone market (Mylan has already filed its
ANDA, and other companies like Hospira could do the same); (4) Copaxone market share
(and sales potential) could erode over time due to the advent of oral therapies like Gilenya
in the multiple sclerosis market.

Appendix

Generic drug approval process
ANDA filing: The approval process requires that a generic company file an abbreviated
new drug application (ANDA) demonstrating the generic product’s substitutability with
the reference (or branded) product.

Paragraph IV certification: Concurrent with the ANDA filing, the generic company must
certify against the patents listed in the Orange Book. A Paragraph III certification seeks



FDA approval of the generic version after the last patent expires, while a Paragraph IV
certification states that the generic version does not infringe on the patents or that the
patents are unenforceable.

Notification of ANDA filing: After filing an ANDA, the generic company must notify the
branded manufacturer within 20 days. Upon receipt of the letter, two events are triggered:
(1) the branded company has 45 days to initiate a patent infringement suit against the
generic company, and (2) the FDA cannot approve the ANDA for 30 months unless the
generic company wins the suit. The first generic company to file an ANDA also receives
180 days of marketing exclusivity upon approval (with a few exceptions).

Patent infringement suit: The patent infringement suit starts in the District Court. If the
District Court ruling is positive, generic companies will sometimes request that the FDA
grant them final approval of their drug to launch “at-risk.” This term reflects the fact that
if the generic company loses on appeal, it will likely have to pull its drug from the market
and pay the branded company significant damages.

Appeals Court decision: After the District Court ruling, the case will proceed to the
Appellate Court, which renders a final decision on the case. At this time, if the ruling is in
favor of the generic company, it is free to launch (as long as it is first to file or the first
filer’s exclusivity has expired). If the ruling is in favor of the branded company, the
generic company will have to wait until all patents expire to launch its version of the drug.

Exhibit 4: Generic drug approval process flowchart

In favor of generic co. Generic company
can launch upon
FDA approval
Generic company Branded company Appeals court makes
District court makes
Paragraph IV notifies branded co. has 45 days to file a final decision on
decision on patent
certification within 20 days of patent infringment patent infringement
infringement case
filing suit against generic case
Generic company
can launch only
Triggers 180‐day Triggers 30‐ Generic company can request
Generic company In favor of branded co. after patents
exclusivity for month stay on FDA approval to launch at‐risk
files ANDA with the expire
first filer ANDA approval
FDA

Generic company
FDA makes final
Paragraph III waits until all Orange
approval decision
certification Book listed patents
upon patent expiry
expire

Source: Company data, FDA.gov, Goldman Sachs Research

Key features of Momenta’s technology
(1) Fast and accurate sequencing – Momenta’s technology enables rapid sequencing of
complex sugars with 6 to 8 sugar units and can sequence sugar chains longer than 10
saccharide units, which had never been done before. The technology also allows for
sequencing of linear and branched sugars that had previously never been characterized.

(2) Sensitive analytical techniques – Momenta has developed techniques to analyze
small quantities of biological samples to identify and link sugar structures with
corresponding biological functions.

(3) Comprehensive analysis of molecules – Momenta’s technology can identify detailed
sequences and complete chemical structures of complex sugars, not just the underlying
backbone of the sugar chain.

Many components of this technology are protected by Momenta’s intellectual property
estate. In particular, Momenta has numerous patents covering its chain mapping
technology as well as identity patents on enoxaparin and other compounds. While these



patents likely pertain mostly to the sequencing of complex sugars (particularly Lovenox),
Momenta likely also has patents on its polypeptide sequencing technology (applicable to
Copaxone), but there is very little information in the public realm, as these discoveries
occurred after Momenta was founded and began actively protecting its trade secrets.



Reg AC
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Sapna Srivastava: America-Biotechnology US.
America-Biotechnology US: Alexion Pharmaceuticals, Inc., Amgen Inc., Biogen Idec, Inc., Celgene Corp., Gilead Sciences Inc., Momenta
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