What happened

After presenting its plan earlier this month to restructure itself to conserve cash and updating investors on its pipeline projects this week, Momenta Pharmaceuticals (NASDAQ:MNTA) shares dropped 11.3% on Thursday and 13.5% on Friday. 

So what

Momenta's forward progress has been hampered by lackluster demand for its first biosimilar, a drug that works similarly to, but is an inexact copy of, Teva Pharmaceutical's multibillion-dollar blockbuster Copaxone. Momenta co-commercializes the drug, Glatopa, with Novartis.

A man sitting with head in hands in front of a giant monitor showing a declining share price.


Demand for Glatopa has been hampered by aggressive price cuts by Teva Pharmaceutical and the launch of Mylan's long-lasting Copaxone biosimilar last fall. Momenta won Food and Drug Administration (FDA) approval for its own long-lasting formulation earlier this year, but Glatopa revenue still totaled just $11.8 million in the second quarter of 2018, down 38% year over year.

In the face of lackluster revenue, Momenta has decided to refocus its research and development pipeline and reduce its workforce. 

Because it believes it has an opportunity in immune-mediated disorders, Momenta plans to usher M281, a monoclonal antibody that reduces circulating pathogenic IgG antibodies by completely blocking endogenous IgG recycling via FcRn, into mid-stage studies. One study will evaluate it in myasthenia gravis, while another will evaluate it in hemolytic disease of the fetus and newborn (HDFN), a rare disease characterized by a mother's antibodies attacking red blood cells of the fetus.

Momenta also plans to continue developing its wholly owned biosimilar to AbbVie's multibillion-dollar autoimmune disorder drug Humira, and M710, a biosimilar to the mega blockbuster age-related macular degeneration drug Eylea, which it's developing with Mylan. It hopes to find a partner to help it commercialize it's Humira biosimilar, soon.

Now what

We're years away from finding out if M281 is successful enough in studies to warrant an FDA OK, and that timeline is doing little to convince investors it's worth sticking with Momenta. That short-term thinking is understandable, but it may underestimate the potential for M281 to move the needle for the company's long-term investors.

It's also understandable why investors are unhappy with Glatopa's performance, but that doesn't necessarily indicate the company's biosimilars will struggle to carve away sales from Humira or Eylea someday. If Momenta can successfully develop alternatives to those two top sellers, it could generate hundreds of millions in sales per year.

Additionally, Momenta's plan to cut 50% of its workforce to capture approximately $250 million in cost savings should give the company flexibility to execute its new strategy because its balance sheet boasted $321 million in cash exiting Q2.

Overall, Momenta's new approach will take time, but it's on financially solid ground and could still be worth tucking away in long-term growth portfolios.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.