Thursday, August 31, 2006

Calls of Note Part 1

- I suspect the call of the day comes from Morgan Stanley saying their scenario analysis indicates a favorable risk-reward profile for Momenta Pharma (NASDAQ:MNTA) going into the remanded Teva/Amphastar vs. Sanofi-Aventis case (scheduled for October 10th; decides whether Lovenox patents are upheld). If the court upholds the previous decision of inequitable conduct (decisions could come within weeks), there is potential for significant upside as a meaningful hurdle towards M-enoxaparin approval is overcome. In contrast, the firm believes the downside is limited due to widely held street expectations of a full trial, which pushes the timelines for a final legal decision back by 12-18 months.

In this scenario analysis, the firm looked at the two outcomes of the remand decision.

Scenario 1) Bear Case: Judge Pfaelzer rules in favor of Sanofi-Aventis, leading to a full trial. In this scenario, the calculated Lovenox value is approximately equal to the implied Lovenox value. In firm's opinion, this is the scenario that is currently priced into the stock.

2) Bull Case: Judge Pfaelzer finds inequitable conduct and rules in favor of Teva/Amphastar. This scenario could result in 50% upside.

They note that the there is a potential that the street may move closer to assigning a 50/50 probability to the potential outcome as we get closer to the October date. If this occurs, the stock could see up to 25% upside before the trial starts.

Notablecalls: Actionable call! This one will move already in the pre mkt. I suggest you buy as much stock as you can. See no problem paying upto $0.50-0.60 above the close.

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