Momenta Pharmaceuticals (Nasdaq: MNTA) was on a strong comeback after the company received bad news that a second generic version of Sanofi's (NYSE: SNY) Lovenox was approved by the Food and Drug Administration. After dipping on the news last month, shares were trading up 13.5% handily beating the Dow Jones (INDEX: ^DJI) over that timeframe.
Despite the eminent threat, investors were giddy about the possibility that Amphastar Pharmaceuticals and Watson Pharmaceuticals' (NYSE: WPI) generic version of Lovenox might never see the pharmacists shelves. A judge had issued a temporary restraining order barring them from launching and should rule shortly on a preliminary injunction that might keep it off the shelves until a final ruling about whether their generic version impedes on Momenta's patents.
But yesterday, Momenta gave back all the gains and then some after investors were informed that an authorized generic was launched. Authorized generics don't have to be approved by the FDA since the drug is made by the branded drug company. The company manufactures it like normal and just slaps a different label on it.
The name "authorized generic" comes because name-brand companies would authorize a generic-drug company to sell the drug, using their expertise to get the generic version into the correct sales channels. With pharmaceutical companies now having their own generic divisions -- Sanofi has Winthrop, Pfizer (NYSE: PFE) has Greenstone, and Momenta's partner Novartis (NYSE: NVS) has Sandoz -- it's often just kept in-house now. No authorization needed.
Sanofi hasn't bothered with launching a generic version until now, presumably because Momenta and Novartis hadn't taken enough of the market to make it worth cutting into its own branded sales; in the second quarter, sales were down 65% year over year in the U.S., but that still left $160 million of high-margin revenue.
Sanofi hasn't released third-quarter results, but Novartis said that sales of the duo's generic fell from the second to the third quarter; there are stocking issues and price changes that could account for the lower number, but it certainly doesn't look like Novartis and Momenta are cutting further into Sanofi's market share.
It seems, then, that the reason for the launch now is that Sanofi thinks there will be further competition taking market share. As I read it, Sanofi's launch is a sign that the company thinks that Amphastar and Watson will be able to launch soon.
If Sanofi's guess is right, that's really bad news for Momenta. The launch of an authorized generic switched its cut of the generic from a partnership to a hybrid royalty/profit sharing arrangement where Momenta gets a royalty up to a certain point and then shares in the profits. If another generic launches, it'll go to a straight royalty, and with three drugs competing, the price will presumably drop further.
