Sanofi SA (NYSE: SNY) said in a letter sent to customers dated Nov. 30 that it has discontinued selling the Authorized Generic version of Lovenox (Enoxaparin).
"We note that Sanofi's decision to discontinue the Authorized Generic was largely expected following a federal court injunction preventing sales of Amphastar's generic Enoxaparin," said Duane Nash, an analyst at Wedbush Securities.
In sum, Lovenox should be more profitable to Sanofi without an authorized generic, provided that Momenta Pharmaceuticals Inc.'s (NASDAQ: MNTA) M-Enox remains the sole third-party generic, said Nash.
That said there was a risk (albeit small) that Sanofi would choose to actively market the Authorized Generic in order to "punish" Momenta, or in anticipation of additional third party generic launches. These scenarios now appear off-the-table for the moment.
Nash said hybrid revenue sharing agreement remains in place but M-Enox continues to be very profitable as long as other generics remain off the market.
Even though the Authorized Generic is now off the market, Momenta's agreement with Sandoz does not contain a mechanism for reverting to the previous 45 percent profit share agreement which was in place as long as M-Enox remained the sole marketed generic.
Nash recalled that following the launch of Sanofi's Authorized Generic in October, Momenta's profit sharing agreement with Sandoz changed to a hybrid structure which features: 10 percent to 12 percent royalty rate applied to the first $135 million in annual contractual profit (prorated to $99 million for fiscal period ending June 2011) and 45 percent share of profits above this threshold.
As Nash expects M-Enox sales to continue at the current about $1 billion run rate, the threshold by which the agreement shifts to 45 percent profit-share should occur during the first quarter of each fiscal period (fourth quarter for 2011, third quarter for subsequent years).
In sum, Nash estimates that the new hybrid structure reduces Momenta's share by roughly $30 million to $35 million a year, assuming $1 billion in M-Enox sales and no changes to market share or pricing (which now looks to be intact following the recent news).
"Given that Momenta booked almost $300 million in M-Enox revenues over the past four quarters, the new profit-sharing structure retains the company's highly profitable status as long as generic challengers remain off the market, which appears likely for the near-term given Momenta's recent success in federal court," said Nash.
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