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Is Momenta Pharmaceuticals' Stock a Buy?

By Zhiyuan Sun – Jun 3, 2020 at 8:08AM

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Here’s why this drugmaker targeting autoimmune conditions and rare diseases is a solid buy.

Despite disruptions from the COVID-19 pandemic, Momenta Pharmaceuticals' (MNTA) clinical trials investigating experimental therapies for a variety of autoimmune conditions and rare diseases are still going strong. The company will be announcing top-line phase 2 results for the treatment of myasthenia gravis (an autoimmune disorder affecting skeletal muscles) in the third quarter of 2020. 

Will the company's pipeline candidates be successful in their clinical trials? Let's see what we can find out. 

Clipboard with article titled Autoimmune Disease, surrounded by syringes and pills

Image source: Getty Images.

A leader in treating autoimmune diseases

The company's flagship candidate is nipocalimab, a monoclonal antibody that targets the receptor responsible for the transfer of immunity from mother to newborn in rodents and humans. While it has obvious benefits, the receptor is also known to prolong the serum half-life of immunoglobulin (IgG) autoantibodies that can, in turn, cause autoimmune diseases. 

In phase 1 clinical trials, healthy volunteers who took nipocalimab reported an 85% reduction in serum IgG levels after a single dose, maintained one month after infusion. The biologic was also well-tolerated among trial participants, achieving significant IgG reduction levels after intravenous dosage of 7.5 minutes.  

Some speculate the biologic is best-in-class for the indications it is being investigated to target. However, the current evidence is not conclusive that a reduction in pathogenic IgG alleviates certain autoimmune diseases.  That means it's possible that Momenta may not succeed in using the biologic to target myasthenia gravis.

Fortunately, the company is targeting two more autoimmune diseases, Hemolytic Disease of Fetus and Newborn and Warm Autoimmune Hemolytic Anemia, with the biologic. Both investigations are in phase 2 clinical trials with data set to be released in one to two years. 

Even if just one of the three indications succeeds in clinical trials, the subsequent market opportunity could be huge. The total addressable market for myasthenia gravis alone is estimated at $1.16 billion globally. 

A gigantic biosimilar opportunity 

Another highlight of the company's research candidates is M710. M710 is a potential biosimilar for Regeneron's (REGN 0.60%) Eylea and is being investigated in phase 3 clinical trials in a joint effort with Mylan (MYL). Eylea is an injection used to treat various diseases in the retina, such as macular degeneration. In 2019, the biologic generated $7.5 billion in revenue worldwide. 

If successful, Mylan aims to submit the biosimilar to the U.S. Food and Drug Administration in 2021. Under its partnership, Momenta will be responsible for 50% of the biosimilar's commercialization expenses and be entitled to 50% of its profits, which is a very lucrative deal for the company. 

Takeaways for investors

Currently, Momenta is projecting a loss of $220 million to $240 million this year. But it does have $487.9 million in cash and investments to keep the risk of dilution at bay. The indications targeted by Momenta are more than enough to justify its $3.73 billion valuation. Its profit-sharing plan with Mylan for M710 may alone be enough to lift shares to new levels in the event of clinical trial success. 

Momenta presents an enticing choice for biotech investors with a high risk tolerance. In the next two years, the company has at least three clinical trial readouts pending, with the potential for a massive opportunity in competing with Regeneron's Eylea. Additionally, investors interested in Momenta's stock should also check out the potential for its pipeline candidate M254 to combat a variety of rare diseases. 

Zhiyuan Sun has no position in any of the stocks mentioned. The Motley Fool recommends Momenta Pharmaceuticals and Mylan. The Motley Fool has a disclosure policy.

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