Mylan bets $245M on a 50/50 biosimilar development pact with Momenta

Mylan ($MYL) has stepped up to partner with Cambridge, MA-based Momenta Pharmaceuticals ($MNTA) on a portfolio of 6 biosimilars, handing over a $45 million upfront, a commitment to cover half of the costs and a promise to provide up to $200 million more in milestones. The two partners will also split any profits.

Momenta and Sandoz won a key approval for a Copaxone knockoff last summer, leaving them aligned against Teva ($TEVA) as they started out to carve out market share for themselves in the big MS market.

In the new deal, Mylan is grabbing on to a split for a biosimilar of the rheumatoid arthritis drug Orencia (abatacept), which earned $1.6 billion for Bristol-Myers Squibb in 2014. The two didn't reveal the other 5 biologics they're taking on, but Umer Raffat at Evercore ISI noted that Momenta's patent filings indicate that the remaining 5 products may include biosimilars for Rituxan, Prolia/Xgeva, Vectibix, Xolair and Campath.

As Bernstein analyst Ronny Gal noted this morning, the two partners make a powerful pair in the biosimilars business. Momenta has a track record on developing biosimilars that indicates a good relationship with the FDA, and Mylan has a solid manufacturing rep that will help the partners argue for interchangeability with the branded biologic, which would give them a big advantage with payers.

Gal also noted the increased chances of seeing Mylan bid for a Momenta takeover, with a better argument to pitch on its long-term prospects as it squares off against some blockbuster franchises.

"For Mylan it adds to the long-term value an argument of the company beyond the 2017-2018 wave of launches," writes Gal. "As a biosimilar player, the company had standing with potential clients, but was at a disadvantage as it came to 'scientific standing' vs. Biogen, Novartis and Pfizer. The added capabilities of Momenta puts them, in our view, at the same scientific credibility starting point as the biotech incumbents."

The biosimilars business has been building steam for several years now. Developers are able to concentrate on a late-stage program to generate the data needed for an approval, and some of the discounts available will likely inflict heavy damage on some of the biggest biologics franchises in the business.

- here's the release