Momenta Latest to Take Advantage of Teva's Patent Woes

The United States Court of Appeals is making this one miserable summer for Teva Pharmaceuticals (NYSE: TEVA  ) . In June, it was determined that Teva and Sun unlawfully launched (i.e. infringed on patents) generic versions of Protonix -- now part of Pfizer and Takeda -- and the pair received a bill for $2.15 billion. The Court of Appeals melted a second ice cream cone for Teva this week, when it invalidated several patents for the multiple sclerosis drug Copaxone. The company is on the other side of the fence this time, but is still on the wrong side of the ruling.

There are always winners, however, and this time, Momenta (NASDAQ: MNTA  )  , Novartis (NYSE: NVS  )  , and Mylan  (NASDAQ: MYL  ) came out on top. The first two (Novartis' generic business of Sandoz, really) developed M356, a generic version of Copaxone, while the latter wasn't too far behind. Both drugs were waiting until May 2014 to file Abbreviated New Drug Applications, and until the last Teva patent expired in September 2015 before launching. The recent decision advanced that schedule considerably, with market entry for both generics now possible as early as the end of May 2014.

It may not be all smooth sailing from here, though.

What it means
This is a huge deal for Momenta, which currently only has one product -- a generic form of Lovenox developed with Sandoz -- on the market. Unfortunately, Momenta's pipeline was, and is, still in the early stages of development, so margins and sales eroded quickly after additional generics for the deep vein thrombosis drug hit the market. That changes now.

Even if the company fails to launch M356 by May 2014, a delay of several months would still push market entry up by one year over the previously anticipated date. That shortens the time shareholders have to stick around for meaningful financial results. The excitement could be quelled depending on submissions to, and approval from, the FDA for both companies. To my knowledge, it doesn't seem like one would get a head start over the other, but hiccups could always occur. At any rate, investors need to remember that competition among generics exists from the beginning this time around. 

Not done yet?
If you think this is good news for Momenta, you should consider another Teva-inspired windfall for the biotech disruptor. When Teva's challenge to Protonix was first rebuffed in June, Foolish biotech guru Dr. Brian Orelli explained how the decision could have a ripple effect throughout the pharmaceutical industry. Ironically, Momenta and Sandoz could catch one of the first waves.

Remember that generic version of Lovenox mentioned a few paragraphs ago? Well, Momenta claims that later entrants infringed on its patents for manufacturing the drug. In a best-case scenario, those entrants would have to pay Momenta and Sandoz for lost sales from their competition, similar to Teva and Sun's payments to Pfizer and Takeda. That is, of course, just speculation at this point.

The only worrisome news for Momenta is that Mylan, being a bigger company, can absorb some competition. Momenta is much more desperate for immediate revenue. How does this end, er, begin? I'm afraid it will take several more months to determine exactly how things will play out. Still, Momenta investors can smile knowing that revenue will get here sooner rather than later.

Can you gain from Teva's pain? The best investment strategy is to pick great companies and stick with them for the long term, but if Momenta doesn't fit the bill, there are other options. The Motley Fool's free report, "3 Stocks That Will Help You Retire Rich," not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.


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