Investing

Why Analysts Are Chasing Momenta Pharmaceuticals Even Higher

Chris Lange

Published: January 31, 2017 1:05 pm

Last Updated: January 12, 2020 3:18 pm

Shares of Momenta Pharmaceuticals Inc. (NASDAQ: MNTA) made a huge gain on Tuesday after the company reported a key legal decision in its favor. Essentially, the U.S. District Court for the District of Delaware found each of the Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) patents numbers 8,232,250, 8,399,413, 8,969,302 and 9,155,776 invalid as obvious over the prior art.

With the court invalidating Teva’s fourth method of use patents, Momenta is more apt to provide multiple sclerosis patients with a more affordable generic version of Copaxone following regulatory approval.

After this news, Momenta shares hit a new multiyear high in Tuesday’s session, one not been seen since mid-2015.

As a result of this incredible development in the courts and the new high, a few analysts took this opportunity to weigh in on Momenta:

• Barclays has an Overweight rating and raised the price target to $20 from $19.
• Goldman Sachs has a Neutral rating and raised its target to $16 from $14.
• JPMorgan raised its price target to $20 from $18.
• Leerink has an Outperform rating and raised the price target from $19 to $20.
• Stifel raised its price target to $30 from $20.

However, a couple of analysts actually defended Teva despite its shares falling. Merrill Lynch and Credit Suisse came to the aid of Teva, both seeing high value at the firm for long-term investors who are willing to look past the near term.

Merrill Lynch’s Sumant Kulkarni and Steve Chen upgraded the company to a Buy rating from Neutral with a price objective of $42. One point the analysts made was that the risk versus reward is actually now more favorable, but they admit that investors are going to need some patience. The plus side is that the patent loss actually removes some of the uncertainty around Teva, and the drug pipeline should help investors.

Credit Suisse reiterated its Outperform rating and has a $41 price target. Teva’s loss of Copaxone 40mg/mL patents is another step toward likely generic competition. Credit Suisse’s Vamil Divan already conservatively assumes 2017 generic competition in the base case for Teva, so the firm is not changing estimates.

Divan noted that there are still several steps still to go. The report said:

We spoke to Teva and expect them to appeal tonight’s decision, while also requesting a preliminary injunction preventing the launch of any generic version until the legal process around all of the outstanding patents has been completed. In addition to the four patents included in this decision, Teva has also filed suit against the potential competitors on a 5th and 6th patent, with court cases expected in the 2018 timeframe. The IPR appeals process is also ongoing, with a decision expected in late 2017/early 2018. Finally, beyond the legal decisions, the competitors all still need to obtain FDA approval prior to being able to launch.

Shares of Momenta were trading up 22% at $18.45 on Tuesday, with a consensus analyst price target of $15.10 and a 52-week trading range of $7.86 to $18.50.

Teva was down 3% to $33.46, in a 52-week range is $32.11 to $62.31. The consensus price target is $44.70.