Momenta Pharma has a market cap of $811.6 million; its shares were traded at around $13.92 with a P/E ratio of 4.3 and P/S ratio of 2.9.
Highlight of Business Operations:Pursuant to the terms of the Stock Purchase Agreement, the Company sold 4,708,679 shares of common stock to Novartis Pharma AG, an affiliate of Sandoz AG, at a per share price of $15.93 (the closing price of the Companys common stock on the NASDAQ Global Market was $13.05 on the date of the Stock Purchase Agreement) for an aggregate purchase price of $75.0 million, resulting in a paid premium of $13.6 million. The Company recognizes revenue from the $13.6 million paid premium on a straight-line basis over the estimated development period of approximately six years beginning in June 2007. The Company recognized research and development revenue relating to this paid premium of approximately $0.5 million for each of the three months ended March 31, 2012 and 2011. Under the 2006 Sandoz Collaboration, the Company and Sandoz AG expanded the geographic markets for enoxaparin sodium injection covered by the 2003 Sandoz Collaboration to include the European Union and further agreed to exclusively collaborate on the development and commercialization of M356 for sale in specified regions of the world. Each party has granted the other an exclusive license under its intellectual property rights to develop and commercialize such products for all medical indications in the relevant regions. The Company has agreed to provide development and related services on a commercially reasonable basis, which includes developing a manufacturing process to make the products, scaling up the process, contributing to the preparation of regulatory filings, further scaling up the manufacturing process to commercial scale, and related development of intellectual property. The Company has the right to participate in a joint steering committee, which is responsible for overseeing development, legal and commercial activities and which approves the annual collaboration plan. Sandoz AG is responsible for commercialization activities and will exclusively distribute and market any products covered by the 2006 Sandoz Collaboration. The Company identified two significant deliverables in this arrangement consisting of (i) a license and (ii) the development and related services. The Company determined that the license did not meet the criteria for separation as it does not have stand-alone value apart from the development services, which are proprietary to the Company. Therefore, the Company has determined that a single unit of accounting exists with respect to the 2006 Sandoz Collaboration.
In accordance with ASU No. 2009-13, the Company identified all of the deliverables at the inception of the Baxter Agreement. The deliverables were determined to include (i) the development and product licenses to the two initial follow-on biologic products and the four additional follow-on biologic products, (ii) the research and development services related to the two initial follow-on biologic products and the four additional follow-on biologic products and (iii) the Companys participation in a joint steering committee. The Company has determined that each of the license deliverables do not have stand-alone value apart from the related research and development services deliverables as there are no other vendors selling similar, competing products on a stand-alone basis, Baxter does not have the contractual right to resell the license, and Baxter is unable to use the license for its intended purpose without the Companys performance of research and development services. As such, the Company determined that separate units of accounting exist for each of the six licenses together with the related research and development services, as well as the joint steering committee with respect to this arrangement. The estimated selling prices for these units of accounting were determined based on similar license arrangements and the nature of the research and development services to be performed for Baxter and market rates for similar services. The arrangement consideration of $61 million, which includes the $33 million upfront payment and aggregate option payments of $28 million, was allocated to the units of accounting based on the relative selling price method. Of the $61 million, $10.3 million has been allocated to the first initial product license together with the related research and development services, $10.3 million to each of the four additional product licenses with the related research and development services, $9.4 million has been allocated to the second initial product license together with the related research and development services due to that products stage of development at the time the license was delivered, and $114,000 has been allocated to the joint steering committee unit of accounting. The Company will commence revenue recognition for each of the six units of accounting related to the products upon delivery of the related development and product license and will record this revenue on a straight-line basis over the applicable performance period during which the research and development services will be delivered. The Company will recognize the revenue related to the joint steering committee deliverable over the applicable performance period during which the research and development services will be delivered. The Company has commenced recognition of the revenue allocated to the two initial products but not for the four additional products as those licenses have not been delivered. The Company recognized revenue relating to this agreement of approximately $0.6 million for the three months ended March 31, 2012. The portion of the upfront payment that is unearned at March 31, 2012 is included in deferred revenue.
General and administrative expense for the three months ended March 31, 2012 was $11.0 million, compared to $8.3 million for the three months ended March 31, 2011. General and administrative expense increased by $2.7 million, or 33%, from the 2011 period to the 2012 period due to increases of: $1.6 million in professional fees principally due to increased legal fees relating to enoxaparin litigation; $1.0 million in share-based compensation expense principally associated with grants of performance-based restricted stock; $0.4 million in facility-related expenses principally due to increased rent and operating costs for our headquarters and the commencement in the first quarter of 2012 of a short-term sublease for expansion space; and $0.3 million in personnel and related costs associated with our headcount growth. These increases were offset by a decrease of $0.8 million in royalty and license fees payable primarily to Massachusetts Institute of Technology based on a decrease in Sandozs net sales of enoxaparin sodium injection.
For the three months ended March 31, 2012, our net loss adjusted for non-cash items was $0.3 million. For the three months ended March 31, 2012, non-cash items include share-based compensation of $3.3 million, depreciation and amortization of our property, equipment and intangible assets of $1.5 million and amortization of purchased premiums on our marketable securities of $0.5 million. In addition, the net change in our operating assets and liabilities provided cash of $41.4 million and resulted from: a decrease in accounts receivable of $5.8 million, due to a decrease in net sales of enoxaparin by Sandoz, due primarily to lower unit sales and pricing, and by a contractual change in the basis of calculating our enoxaparin product revenue, both related to the launch of a competitors generic Lovenox in January 2012; a decrease in unbilled revenue of $1.7 million, resulting from lower first-quarter reimbursable manufacturing activities for our M356 program; an increase in prepaid expenses and other current assets of $0.5 million, primarily due to advance payments made for renewals of vendor maintenance agreements; an increase in accounts payable of $4.7 million, primarily due to the timing of payments to vendors for leasehold improvements and purchases of laboratory equipment; a decrease in accrued expenses of $2.3 million resulting from the payment of annual bonuses earned during 2011 and the timing of manufacturing activities for our M356 program; and an increase in deferred revenue of $31.9 million, primarily due to the $33.0 million upfront payment under the Baxter Agreement.
For the three months ended March 31, 2011, our net income adjusted for non-cash items was $60.2 million. For the three months ended March 31, 2011, non-cash items include share-based compensation of $1.8 million, depreciation and amortization of our property, equipment and intangible assets of $1.2 million and amortization of purchased premiums on our marketable securities of $0.2 million. In addition, the net change in our operating assets and liabilities used cash of $28.5 million and resulted from: an increase in accounts receivable of $27.9 million, due to an increase in our quarterly profit-share for sales of enoxaparin sodium injection; a decrease in unbilled revenue of $3.3 million, resulting from decreased reimbursable manufacturing activities for our M356 program; an increase in prepaid expenses and other current assets
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