Is Momenta A Good Fit For Johnson & Johnson?


The stock price of Momenta Pharmaceuticals (NASDAQ:MNTA), a pharmaceutical company best known for its immunology therapies, has rallied around 26% over recent weeks (vs. about a 50% gain in the S&P 500) to $31 as of August 18, after falling to a low of $24 in late March, when a rapid increase in the number of Covid-19 cases outside China resulted in heightened fears of an imminent global economic downturn. However, the stock is up almost 70% today (Aug 19), as pharmaceutical bellwether Johnson & Johnson (NYSE:JNJ) agreed to acquire Momenta at $52 per share, and we believe it is a great fit for the company. Why such a hefty premium? Momenta recently received a rare pediatric disease designation for its therapy, Nipocalimab, by the U.S. FDA. Nipocalimab is an important therapy used to treat autoimmune disorders. The deal is expected to broaden the leadership of Johnson & Johnson in immune-mediated diseases and  expand into autoantibody-driven diseases.

Autoantibody-driven diseases include Myasthenia Gravis, Hemolytic Diseases of the fetus and newborn, warm Autoimmune Hemolytic Anemia, among other diseases. With Nipocalimab, Johnson & Johnson will likely come up with multiple launches, many of which could be blockbuster drugs. Also, Johnson & Johnson will get access to Momenta’s full pipeline, which also includes M254, with estimated peak sales of over $3.5 billion. M254 is an alternative to the current therapy, intravenous immunoglobulin, which itself is a $6 billion plus market.

For Johnson & Johnson, immunology is an important segment, and it accounts for one-third of its total pharmaceutical sales, and roughly 20% of company-wide sales. The company’s immunology portfolio includes not one but four blockbuster drugs – Remicade, Stelara, Simponi, and Tremfya. However, Remicade has lost its patent protection and it now faces biosimilar competition, and the drug’s sales have plunged from close to $7.0 billion in 2016 $4.4 billion in 2019, partly offsetting the gains from other drugs. Stelara targets an autoimmune disease – psoriatic arthritis. Now with Momenta’s drugs and pipeline, Johnson & Johnson’s immunology segment sales could see growth at a higher pace.

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Looking at Momenta, the fundamentals haven’t been great over the recent years, with revenues declining 87% between 2017-2019, though company made great investments in R&D, and it appears to be paying off well for the shareholders. Our dashboard, ‘What Factors Drove A Whopping 270% Change In Momenta Pharmaceuticals Stock Between 2017 And Now?‘ provides more detail on the stock performance.

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