SA: Momenta Pharmaceuticals Heading For A Repeat

While most promising young biotechs devote all resources to development of new drugs, Momenta Pharmaceuticals (NASDAQ:MNTA) is adopting a fairly unusual strategy of aiming for the middle. Its plan for developing biosimilars -- generic versions of complex biologics -- yielded short lived success in the past, and another winner is likely on the way.

Unlike small molecule generics, biosimilars have a much higher barrier to entry, offering jucier margins in return. Deep-pocketed partners Baxter (NYSE:BAX) and Novartis (NYSE:NVS) are eager to exploit Momenta's proprietary platform, as it may offer significant savings on development costs. If those savings don't materialize, Momenta could find itself in trouble.

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Biosimilars Pose A Mild Threat Compared With Generic Small Molecule Drugs

The first rule of investing in pharmaceuticals is that when a drug loses patent protection, the drug maker loses sales. Remsima, a biosimilar version of Remicade, has been on sale in Korea since September 2012. Why haven't Remicade sales there fallen off a cliff?

Small molecule drugs get immediately hammered by generic competition, losing as much as 90% of sales within a year of losing patent protection. Here's why the makers of some of the world's best selling biologics aren't sweating the competition.