Business Strategy and Outlook Karen Andersen, CF A, Analyst, 15 June 2020 Momenta's strategy is transitioning as the firm moves from complex generics and biosimilars into novel, branded autoimmune drugs, but its strong experience in characterizing complex proteins makes it a viable industry player and possible takeover target. Complex generics have faced higher development, manufacturing, and regulatory hurdles, which can reduce competition and pricing pressure relative to typical generic markets. However , Momenta and Sandoz's generic version of Sanofi's anticoagulant Lovenox, which was approved in 2010, saw short-lived success; Novartis withdrew the product from the market in 2018 because of expensive manufacturing contracts that weighed on profitability after competitors entered the market. Momenta and Sandoz also launched a 20 mg generic version of T eva's multiple sclerosis drug Copaxone in 2015, marketed as Glatopa; however , T eva's conversion of Copaxone patients to a newer and less frequently injected 40 mg formulation and Mylan's 40 mg generic launch in 2017 were headwinds for Momenta's own 40 mg product launch in 2018. Momenta has halted further generic and biosimilar pipeline investment, including a fully owned Humira biosimilar which was ready for filing, partly due to the competitive landscape. Momenta still has a phase 3 Eylea biosimilar partnered with Mylan; this biosimilar has better competitive positioning and is likely to launch in 2024 after Eylea patents expire. Momenta has two wholly owned novel pipeline candidates, M281 (nipocalimab) and M254, in midstage testing in autoimmune indications, as well as CSL-partnered M230 in a phase 1 trial. While the FcRn antibody pipeline is quite crowded, nipocalimab's fetal maternal program adds a unique angle and potential faster route to market. Recent positive data in myasthenia gravis put the firm in a strong position, despite Alexion's accelerating development programs and Argenx's potentially first-in-class program. Fc multimer M230 and modified immunoglobulin M254 could also compete in a Important Disclosure: The conduct of Morningstar’ s analysts is governed by Code of Ethics/Code of Conduct Policy , Personal Security T rading Policy (or an equivalent of), and Investment Research Policy For information regarding conflicts of interest, please visit http://global.morningstar .com/equitydisclosures Maintaining $41 Fair V alue Estimate for Momenta Despite Pandemic- Related T rial Delays Bulls Say O Momenta's protein engineering technology , which allowed it develop generic versions of complex drugs Lovenox and Copaxone, is guiding a promising branded pipeline in autoimmune diseases. O Momenta's nipocalimab is in midstage studies in myasthenia gravis, warm hemolytic anemia, and fetal maternal indications, and if data is positive, this opens the door to multiple additional autoimmune disease indications. O Momenta's partnership with CSL for M230 validates its technology and gives it a strong potential marketing partner , given CSL's leadership in the immunoglobulin market. Bears Say O Revenue from Momenta's agreement with Sandoz has declined, as Sandoz has removed generic Lovenox from the market, and competition in the generic Copaxone market has prevented strong uptake of Momenta's product. O Momenta's novel FcRn-targeting antibody had positive proof-of-concept data in 2020, but the competitive landscape is crowded, including Argenx's efgartigimod (to launch 2021) and Alexion's ALXN1830 (moving into phase 3). O With no manufacturing capabilities, no salesforce, and a declining cash balance, Momenta depends on manufacturing and marketing partnerships. Morningstar Pillars Analyst Quantitative Economic Moat None None V aluation QQQQ Fairly V alued Uncertainty V ery High High Financial Health — Moderate Current 5-Yr A vg Sector Country Price/Quant Fair V alue 0.98 0.98 0.82 0.83 Price/Earnings — — 26.5 20.1 Forward P/E -4.7 — 11.3 13.9 Price/Cash Flow — 39.4 18.4 13.1 Price/Free Cash Flow — 99.8 27.3 19.5 T railing Dividend Y ield% — — 1.50 2.35 $6 billion autoimmune immunoglobulin market, and recent data for M254 in ITP indicate that the drug could be much more potent than existing immunoglobulin treatment. Analyst Note Karen Andersen, CF A, Analyst, 10 August 2020 W e're maintaining our $41 Momenta fair value estimate following in line second-quarter results. While pandemic-related trial delays have slightly pushed back some of the firm's timelines for data readouts, management has also reduced operating expense guidance for the year (lower research and development expenses), and this had no significant impact on our valuation. W e continue to assume a 50% probability of approval for Momenta's FcRN antibody nipocalimab, which had positive phase 2 data in myasthenia gravis in June, and the firm plans to start phase 3 in the first quarter of 2021 following final data readouts and FDA meetings later this year Momenta expects proof of concept data in two other indications beyond this, including hemolytic disease of the fetus and newborn (2021) and warm hemolytic anemia (end of 2022). Our valuation includes a $29.50 stand-alone valuation and a 50% probability that Momenta is acquired at four times 2029 sales, or $52 per share. While Momenta will see significant net losses over the next several years and has not locked in an economic moat, we think the firm's advancing pipeline supports a positive moat trend. Momenta has enough cash to last through at least the third quarter of 2021, giving it time to generate more data for nipocalimab and mid-stage pipeline candidate and potential IVIG replacement M254 before a potential additional equity raise or collaboration deal. Economic Moat Karen Andersen, Analyst, 15 June 2020 W e don't think Momenta has an economic moat. Its two approved generic drugs (generic Lovenox and Copaxone) don't have patent protection. Although Momenta's focus on difficult-to-manufacture drugs limited initial competition, the company nonetheless has little pricing power Other generic entrants and incumbent branded versions have offered aggressive discounts, and Momenta's partner Sandoz has discontinued production Source: Morningstar Equity Research Source: Morningstar Undervalued Fairly V alued Overvalued Quantitative V aluation d USA MNT A Morningstar Equity Analyst Report | Report as of 10 Aug 2020 04:23, UTC | Page 1 of 13 Momenta Pharmaceuticals Inc MNT A (XNAS) Morningstar Rating Last Price Fair V alue Estimate Price/Fair V alue T railing Dividend Y ield % Forward Dividend Y ield % Market Cap (Bil) Industry Stewardship 07 Aug 2020 21:42, UTC 07 Aug 2020 15 Jun 2020 22:08, UTC 07 Aug 2020 07 Aug 2020 07 Aug 2020 QQQQ 32.99 USD 41.00 USD 0.80 — 0.00 3.88 Drug Manufacturers - Specialty & Generic Standard © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law , Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner , without the prior written consent of Morningstar Investment research is produced and issued by subsidiaries of Morningstar , Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. T o order reprints, call +1 312-696-6100. T o license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. ? of generic Lovenox as a result of this poor pricing environment. Momenta has scaled back its efforts in biosimilars, and the 2019 termination of the biosimilar Humira program (which was ready for filing) due to the competitive landscape left only one biosimilar , Eylea, in the pipeline. For Eylea, we think Momenta's competitive positioning could be stronger , as Momenta and partner Mylan are the first to enter pivotal trials with a biosimilar , and we expected branded Eylea sales to approach $8 billion by patent expiration in 2024. Momenta also has two fully owned branded pipeline candidates and one CSL-partnered branded drug in clinical development, and we think these programs are Momenta's best shot at building a long-term competitive advantage. However , Momenta's path to market is far from certain; lead drug candidate nipocalimab is just generating initial proof-of-concept data, and the coronavirus is delaying or stopping enrollment in some indications. In addition, while M254 looks relatively unique, there are several FcRn antibodies that could compete with nipocalimab, including drug candidates further along in development (Argenx's efgartigimod) or with better -funded sponsors (such as UCB and Alexion). Uncertain prospects for novel drugs in development suggest very high uncertainty for producing economic profits over an extended period. If Momenta can navigate clinical trials and bring one or more of its autoimmune disease therapies to the market, we could consider awarding the firm a narrow moat. Fair V alue & Profit Drivers Karen Andersen, Analyst, 15 June 2020 W e're raising our fair value estimate for Momenta to $41 per share from $35, as we have raised our estimates for FcRn antibody market shares and Momenta's share of this market folllowing positive phase 2 data from nipocalimab in myasthenia gravis. W e still assume a 50% probability of approval for the high-potency immunoglobulin, given positive early data in ITP and expansion of phase 2 testing in ITP and CIDP This leads to a stand-alone Momenta fair value estimate Close Competitors Currency (Mil) Market Cap TTM Sales Operating Margin TTM/PE T eva Pharmaceutical Industries Ltd TEV A USD 13,610 16,788 18.13 0.00 Mylan NV MYL USD 8,455 11,504 7.73 30.86 of $29.50 per share. W e also assume a 50% probability that Momenta is acquired at four times 2029 sales, or $52 per share. While generic Copaxone revenue will dominate the top line for the next few years, we assume novel drug candidates could begin to generate sales by 2023, with Momenta turning a profit by 2026. W e assume relatively minimal generic Copaxone revenue throughout our forecast period, remaining below $50 million annually W e assume a 70% probability of approval of biosimilar Eylea in 2023, with profit share (assuming a 50% profit split) beginning in 2024. W e think Momenta could gain half of the biosimilar Eylea market, resulting in total probability-adjusted revenue to Momenta of roughly $90 million by 2029. T o fund the firm's branded pipeline, we assume total annual operating costs remain near $200 million despite recent restructuring, as clinical trial costs counter lower overhead costs due to lower headcount. W e project the company will continue to post losses over the next few years, but that the launches of nipocalimab (50% probability of approval), M254 (50% probability), and M230 (25% probability) could quickly push the firm to profitability in 2026. W e think these drugs support $3.1 billion in potential sales by 2029, or $1.4 billion in probability-adjusted revenue. W e estimate Momenta's cost of equity at 11%. Risk & Uncertainty Karen Andersen, Analyst, 15 June 2020 Although Momenta has formed partnerships with Novartis (complex generics), Mylan (biosimilar Eylea), and CSL (branded drug M230), the firm operates in competitive marketplaces. Because Novartis has withdrawn Momenta's generic Lovenox from the market, Momenta's sole marketed product is generic Copaxone (also via Novartis), and the drug is struggling to compete with T eva's branded Copaxone and Mylan's generic version. Momenta's share of generic Copaxone profits is not sufficient to fund research and development for the firm's branded pipeline, which is expanding into larger and more numerous clinical trials over the next couple of years. As a result, Momenta could depend on future partnerships or the equity markets to support development. Momenta's lead drug candidate nipocalimab faces several potential FcRn-targeting competitors, and we're still waiting for data to clarify the potency and safety of nipocalimab. While M254 is more unique, there is no guarantee that it Morningstar Equity Analyst Report |Page 2 of 13 Momenta Pharmaceuticals Inc MNT A (XNAS) Morningstar Rating Last Price Fair V alue Estimate Price/Fair V alue T railing Dividend Y ield % Forward Dividend Y ield % Market Cap (Bil) Industry Stewardship 07 Aug 2020 21:42, UTC 07 Aug 2020 15 Jun 2020 22:08, UTC 07 Aug 2020 07 Aug 2020 07 Aug 2020 QQQQ 32.99 USD 41.00 USD 0.80 — 0.00 3.88 Drug Manufacturers - Specialty & Generic Standard © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law , Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner , without the prior written consent of Morningstar Investment research is produced and issued by subsidiaries of Morningstar , Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. T o order reprints, call +1 312-696-6100. T o license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. ? will be a significant enough improvement over plasma-derived immunoglobulin in larger trials to justify the modifications needed to manufacture the drug. Additionally , Momenta's lack of commercial manufacturing capabilities requires it to rely on partnerships to bring its products to market. Stewardship Karen Andersen, Analyst, 15 January 2020 W e give Momenta a Standard stewardship rating. As a high-risk small biotech, Momenta's capital-allocation decisions are commensurate with its peers. W e generally like management's history of shared profit agreements with Novartis and Mylan, which have allowed Momenta to share in greater risk and rewards from these partnerships. Craig Wheeler has been CEO since 2006, and he also has a seat on the board. Wheeler was previously the president of Chiron Biopharmaceuticals and also a senior member at Boston Consulting Group. Anthony Manning is chief scientific officer , and brings previous research experience from Biogen and Roche. Bruce Downey is the chairman of the board, a role he has held since 2018. W e appreciate that the chairman and CEO roles were separated in 2005 and that management ceased paying consulting fees to board members, which helps bolster board independence. Executive compensation, which is largely in the form of stock options (common for small biotechs), is tied largely to development goals for drugs in the company's pipeline. Morningstar Equity Analyst Report |Page 3 of 13 Momenta Pharmaceuticals Inc MNT A (XNAS) Morningstar Rating Last Price Fair V alue Estimate Price/Fair V alue T railing Dividend Y ield % Forward Dividend Y ield % Market Cap (Bil) Industry Stewardship 07 Aug 2020 21:42, UTC 07 Aug 2020 15 Jun 2020 22:08, UTC 07 Aug 2020 07 Aug 2020 07 Aug 2020 QQQQ 32.99 USD 41.00 USD 0.80 — 0.00 3.88 Drug Manufacturers - Specialty & Generic Standard © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law , Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner , without the prior written consent of Morningstar Investment research is produced and issued by subsidiaries of Morningstar , Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. T o order reprints, call +1 312-696-6100. T o license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. ? Analyst Notes Archive Maintaining Momenta's Fair V alue Following Q4 Results; Bullish on Upcoming 2020 Catalysts Karen Andersen, Analyst, 26 February 2020 W e're maintaining our fair value estimate for Momenta Pharmaceuticals after fourth-quarter results that put full-year performance slightly ahead of our estimates and FactSet consensus on the top line but slightly below on the bottom line, largely due to a December legal expense of $35 million. The firm's guidance for non-GAAP operating expenses of $220 million-$240 million in 2020 is manageable, particularly given the $545 million in cash remaining at the end of 2019, boosted by a December 2019 equity issuance of $244 million. Management did not provide any additional data updates, and we're sticking with our $38 fair value estimate, which incorporates a 50% chance that Momenta is acquired ($26 per share stand-alone valuation in our DCF model). While Momenta will see significant net losses over the next several years and does not have an economic moat, we think the firm's advancing pipeline supports a positive moat trend. The pipeline has several catalysts over the remainder of 2020, on the heels of very promising data for hypersialylated (high potency) immunoglobulin M254 in ITP (bleeding disorder) released in January , and updated data from this study should be ready in the second quarter Momenta is also launching a phase 2 study of the drug in CIDP , one of the largest potential autoimmune indications, in the fourth quarter W e continue to see this program as promising, given the potential for it to become a more convenient subcutaneous competitor to plasma-derived treatments and relieve supply constraints on this $6 billion market, as well as efficacy that could surpass that of Fc-RN drugs (evidenced by recent data from UCB and Argenx). W e continue to think that Momenta will be able to source the immunoglobulin it needs to manufacture M254 from either a small or large plasma player , but that plasma firms and immunology-focused biotech/pharma firms could be interested in acquiring Momenta outright, as well. W e model a 50% probability of approval for M254. Maintaining $35 FVE for Momenta Following Steady 1Q, Only Slight Delays for Key Clinical Programs Karen Andersen, Analyst, 08 May 2020 W e're not making any changes to our $35 per share fair value estimate based on first-quarter results, and we continue to model a $23.50 per share stand-alone valuation combined with a 50% probability that Momenta is acquired at four times 2029 sales, or $46 per share. In the quarter , Momenta's portion of revenue from Novartis' Copaxone biosimilar , Glatopa, increased significantly to $8.7 million, driven by demand. However , operating expenses are the main driver of Momenta's financials, as the firm is building its own proprietary pipeline in immunology Momenta expects non-GAAP operating expenses to be lower than the $220 million-$240 million guidance for full-year 2020 released in February , due to slower clinical trial progress tied to the pandemic, but management doesn't plan to quantify the range until its second-quarter call (we now assume roughly $205 million for the year). W e slightly lowered our Momenta fair value estimate in mid-April after assuming delays in pipeline progress due to the pandemic, but overall the firm's key programs are either moving forward as planned or experiencing roughly one-quarter delays. While the firm is in a key part of its development ramp and is burning through cash, we think it has a good buffer , with $488 million in cash at the end of the quarter expected to last at least through third-quarter 2021. While Momenta will see significant net losses over the next several years and has not locked in an economic moat, we think the firm's advancing pipeline supports a positive moat trend. Raising Our Fair V alue Estimate for Momenta to $41 Following Positive Nipocalimab Data Karen Andersen, Analyst, 15 June 2020 W e're raising our Momenta fair value estimate to $41 per share from $35 following positive data from the phase 2 study of FcRn antibody nipocalimab in myasthenia gravis. W e've raised both our estimates for the potential FcRn market and Momenta's share of this market, although we're maintaining our probability of approval at 50% as the firm continues to work through phase 2 data and finalize phase 3 plans later this year Our valuation includes a $29.50 stand-alone valuation (up from $23.50) and a 50% probability that Momenta is acquired at four times 2029 sales, or $52 per share (up from our prior assumption of $46 per share). While Momenta will see significant net losses over the next several years and has not locked in an economic moat, we think the firm's advancing pipeline supports a positive moat trend. Momenta's FcRn antibody nipocalimab is in a competitive class of therapies, with several other FcRn antibodies in Morningstar Equity Analyst Report |Page 4 of 13 Momenta Pharmaceuticals Inc MNT A (XNAS) Morningstar Rating Last Price Fair V alue Estimate Price/Fair V alue T railing Dividend Y ield % Forward Dividend Y ield % Market Cap (Bil) Industry Stewardship 07 Aug 2020 21:42, UTC 07 Aug 2020 15 Jun 2020 22:08, UTC 07 Aug 2020 07 Aug 2020 07 Aug 2020 QQQQ 32.99 USD 41.00 USD 0.80 — 0.00 3.88 Drug Manufacturers - Specialty & Generic Standard © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law , Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner , without the prior written consent of Morningstar Investment research is produced and issued by subsidiaries of Morningstar , Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. T o order reprints, call +1 312-696-6100. T o license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. ? development in myasthenia gravis, although today's data improves Momenta's competitive positioning. Argenx leads the pack, with phase 3 data for efgartigimod in May 2020 showing a response (based on MG-ADL score) in 68% of treated patients and 30% of placebo patients for this once-weekly infusion. Momenta's nipocalimab so far has shown a similar placebo-adjusted response on MG-ADL of (52% response on nipo versus 15% for placebo), but with infusions poised to be once monthly or less frequent. Argenx is filing for approval later in 2020, with approval expected in 2021, perhaps two years ahead of Momenta. Both Momenta and Argenx are using bridging studies to bring subcutaneous versions to the market, to enhance convenience. While cross-trial comparisons are difficult, we think nipo's efficacy so far looks similar to efgartigimod's, but we expect nipo could have a convenience benefit due to longer duration of activity W e expect more phase 2 data from nipo in the fourth quarter , as well as more information on phase 3 trial design. Maintaining $41 Fair V alue Estimate for Momenta Despite Pandemic-Related T rial Delays Karen Andersen, Analyst, 10 August 2020 W e're maintaining our $41 Momenta fair value estimate following in line second-quarter results. While pandemic-related trial delays have slightly pushed back some of the firm's timelines for data readouts, management has also reduced operating expense guidance for the year (lower research and development expenses), and this had no significant impact on our valuation. W e continue to assume a 50% probability of approval for Momenta's FcRN antibody nipocalimab, which had positive phase 2 data in myasthenia gravis in June, and the firm plans to start phase 3 in the first quarter of 2021 following final data readouts and FDA meetings later this year Momenta expects proof of concept data in two other indications beyond this, including hemolytic disease of the fetus and newborn (2021) and warm hemolytic anemia (end of 2022). Our valuation includes a $29.50 stand-alone valuation and a 50% probability that Momenta is acquired at four times 2029 sales, or $52 per share. While Momenta will see significant net losses over the next several years and has not locked in an economic moat, we think the firm's advancing pipeline supports a positive moat trend. Momenta has enough cash to last through at least the third quarter of 2021, giving it time to generate more data for nipocalimab and mid-stage pipeline candidate and potential IVIG replacement M254 before a potential additional equity raise or collaboration deal. Morningstar Equity Analyst Report |Page 5 of 13 Momenta Pharmaceuticals Inc MNT A (XNAS) Morningstar Rating Last Price Fair V alue Estimate Price/Fair V alue T railing Dividend Y ield % Forward Dividend Y ield % Market Cap (Bil) Industry Stewardship 07 Aug 2020 21:42, UTC 07 Aug 2020 15 Jun 2020 22:08, UTC 07 Aug 2020 07 Aug 2020 07 Aug 2020 QQQQ 32.99 USD 41.00 USD 0.80 — 0.00 3.88 Drug Manufacturers - Specialty & Generic Standard © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law , Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner , without the prior written consent of Morningstar Investment research is produced and issued by subsidiaries of Morningstar , Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. T o order reprints, call +1 312-696-6100. T o license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. ? Momenta Pharmaceuticals Inc MNTA QQQ Q 10 Aug 2020 02:00 UTC Last Close Fair Value Q Market Cap Sector Industry Country of Domicile 07 Aug 2020 10 Aug 2020 02:00 UTC 07 Aug 2020 32.99 33.81 3,880.9 Mil d Healthcare Drug Manufacturers - Specialty & Generic USA United States There is no one analyst in which a Quantitative Fair Value Estimate and Quantitative Star Rating are attributed to; however, Mr. Lee Davidson, Head of Quantitative Research for Morningstar, Inc., is responsible for overseeing the methodology that supports the quantitative fair value. As an employee of Morningstar, Inc., Mr. Davidson is guided by Morningstar, Inc.’s Code of Ethics and Personal Securities Trading Policy in carrying out his responsibilities. For information regarding Conflicts of Interests, visit http://global.morningstar.com/equitydisclosures Company Profile Momenta is a biotechnology company focused on the characterization and development of innovative drugs in autoimmune diseases. Its legacy business includes complex generic versions of MS drug Copaxone and anticoagulant Lovenox, and it receives royalties for these products through a partnership with Novartis. While a biosimilar version of Eylea is in the pipeline, Momenta terminated future development in generics/biosimilars in 2018. Several innovative drugs, including nipocalimab, M254, and M230, are in development Quantitative Scores Scores All Rel Sector Rel Country Quantitative Moat None 1 1 1 Valuation Fairly Valued 19 34 25 Quantitative Uncertainty High 84 81 88 Financial Health Moderate 81 58 81 Source: Morningstar Equity Research d USA MNTA Undervalued Fairly Valued Overvalued Valuation Current 5-Yr Avg Sector Median Country Median Price/Quant Fair Value 0.98 0.98 0.82 0.83 Price/Earnings — — 26.5 20.1 Forward P/E -4.7 — 11.3 13.9 Price/Cash Flow — 39.4 18.4 13.1 Price/Free Cash Flow — 99.8 27.3 19.5 Trailing Dividend Yield % — — 1.50 2.35 Price/Book 9.1 3.7 3.4 2.4 Price/Sales 119.9 12.6 4.2 2.4 Profitability Current 5-Yr Avg Sector Median Country Median Return on Equity % -66.9 -32.7 12.4 12.9 Return on Assets % -50.5 -26.8 6.2 5.2 Revenue/Employee (K) 242.7 400.5 309.2 325.9 Financial Health Current 5-Yr Avg Sector Median Country Median Distance to Default 0.6 0.7 0.6 0.5 Solvency Score — — 494.6 552.4 Assets/Equity 1.4 1.2 1.4 1.7 Long-Term Debt/Equity — — 0.1 0.4 Price vs. Quantitative Fair Value 12 24 36 48 60 2016 2017 2018 2019 2020 2021 Quantitative Fair Value Estimate Total Return Sales/Share Forecast Range Forcasted Price Dividend Split Momentum: Positive Standard Deviation: 60.71 Liquidity: High 11.29 52-Wk 39.88 7.86 5-Yr 39.88 1.4 -7.3 -20.9 78.7 67.2 Total Return % -11.0 -28.8 -15.8 47.5 62.1 +/– Market (Morningstar US Index) — — — — — Trailing Dividend Yield % — — — — — Forward Dividend Yield % -11.1 -17.5 -5.5 -9.3 -11.8 Price/Earnings 10.5 9.2 8.6 31.8 119.9 Price/Revenue Morningstar Rating Q Q QQ QQQ QQQQ QQQQQ 2015 2016 2017 2018 2019 TTM Financials (Fiscal Year in K) 89,650 109,619 138,882 75,589 23,868 28,644 Revenue 71.6 22.3 26.7 -45.6 -68.4 20.0 % Change -84,434 -74,727 -92,551 -163,520 -311,701 -304,304 Operating Income — — — — — — % Change -83,313 -21,003 -88,096 -176,061 -290,055 -284,767 Net Income -71,515 7,888 -30,356 -155,590 -204,802 -231,825 Operating Cash Flow -4,068 -5,609 -17,127 -9,019 -1,776 -2,496 Capital Spending -75,583 2,279 -47,483 -164,609 -206,578 -234,321 Free Cash Flow -84.3 2.1 -34.2 -217.8 -865.5 -818.0 % Sales -1.32 -0.31 -1.20 -2.26 -2.92 -2.80 EPS — — — — — — % Change -0.90 -0.97 0.56 -2.31 -2.15 -2.25 Free Cash Flow/Share — — — — — — Dividends/Share 5.69 4.58 4.72 2.53 2.37 3.64 Book Value/Share 69,077 71,076 76,355 98,464 116,460 117,639 Shares Outstanding (K) Profitability -28.9 -5.7 -23.6 -42.2 -63.4 -66.9 Return on Equity % -24.6 -4.7 -18.8 -35.5 -50.5 -50.5 Return on Assets % -92.9 -19.2 -63.4 -232.9 -1,215.3 -994.2 Net Margin % 0.26 0.24 0.30 0.15 0.04 0.05 Asset Turnover 1.1 1.3 1.2 1.2 1.4 1.3 Financial Leverage -40.6 -9.4 -7.5 -64.1 -505.6 -426.4 Gross Margin % -94.2 -68.2 -66.6 -216.3 -1,305.9 -1,062.4 Operating Margin % — — — — — — Long-Term Debt 369,976 371,908 374,154 461,008 454,460 428,193 Total Equity 3.8 5.1 5.5 3.0 1.5 0.4 Fixed Asset Turns Growth Per Share 1-Year 3-Year 5-Year 10-Year Revenue % -68.4 -39.8 -14.5 1.7 Operating Income % — — — — Earnings % — — — — Dividends % — — — — Book Value % -16.7 -9.3 0.6 6.3 Stock Total Return % 179.1 26.6 8.4 6.2 Quarterly Revenue & EPS Revenue (Mil) Mar Jun Sep Dec Total 2020 8.9 — — — — 2019 4.1 5.2 6.4 8.2 23.9 2018 4.9 13.0 14.9 42.8 75.6 2017 26.6 23.6 24.1 64.6 138.9 Earnings Per Share () 2020 -0.34 — — — — 2019 -0.46 -1.16 -0.45 -0.85 -2.92 2018 -0.63 -0.91 -0.65 -0.10 -2.26 2017 -0.46 -0.50 -0.44 0.18 -1.20 Revenue Growth Year On Year % -81.8 -44.7 -38.2 -33.7 -15.2 -60.2 -57.1 -80.9 116.1 2018 2019 2020 Quantitative Equity Report | Release: 10 Aug 2020, 11:23 UTC | Reporting Currency: USD | Trading Currency: USD | Exchange:XNAS © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore is not an offer to buy or sell a security; are not warranted to be correct, complete or accurate; and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information herein may not be reproduced, in any manner without the prior written consent of Morningstar. Please see important disclosures at the end of this report. ß ® Page 1 of 1 Page 6 of 13 Research Methodology for Valuing Companies Qualitative Equity Research Overview At the heart of our valuation system is a detailed projection of a company's future cash flows, resulting from our analysts' research. Analysts create custom industry and company assumptions to feed income statement, balance sheet, and capital investment a ssumptions into our globally standardized, proprietary discounted cash flow, or DCF, modeling templates. We use scenario analysis, in - depth competitive advantage analysis, and a variety of other analytical tools to augment this process. We believe this bot tom - up, long - term, fundamentally based approach allows our analysts to focus on long - term business drivers, which have the greatest valuation impact, rather than short - term market noise. Morningstar's equity research group (“we," "our") believes th at a c ompany's intrinsic worth results from the future cash flows it can generate. The Morningstar Rating for stocks identifies stocks trading at a n uncertainty - adjusted discount or premium to their intrinsic worth — or fair value estimate, in Morningstar terminol ogy. Five - star stocks sell for the biggest risk - adjusted discount to their fair values whereas 1 - star stocks trade at premiums to their intrinsic worth. Four key components drive the Morningstar rating: (1) our assessment of the firm's economic moat, (2) our estimate of the stock's fair value, (3) our uncertainty around that fair value e stimate and (4) the current market price. This process ultimately culminates in our single - point star rating. 1. Economic Moat The concept of an economic moat plays a vita l role not only in our qualitative assessment of a firm's long - term investment potential, but also in the actual calculation of our fair value estimates. An economic moat is a structural feature that allows a firm to sustain excess profits over a long per iod of time. We define excess economic profits as returns on invested capital (or ROIC) over and above our estimate of a firm's cost of capital, or weighted average cost of capital (or WACC). Without a moat, profits are more susceptible to competition. We have identified five sources of economic moats: intangible assets, switching costs, network effect, cost advantage, and efficient scale. Companies with a narrow moat are those we believe are more likely than not to achieve normalized excess returns for at least the next 10 years. Wide - moat companies are those in which we have very high confidence that excess returns will remain for 10 years , with excess returns more likely than not to remain for at least 20 years. The longer a firm generates economic profits, the higher its intrinsic value. We believe low - quality no - moat companies will see their normalized returns gravitate toward the firm's cost of capital more quickly than companies with moats. To assess the direction of the underlying competitive advantages , analysts perform ongoing assessments of the moat trend. A firm's moat trend is positive in cases where we think its sources of comp etitive advantage are growing stronger; stable where we don't anticipate changes to competitive advantages over the next several years; or negative when we see signs of deterioration. All the moat and moat trend ratings undergo periodic review and any changes must be approved by the Morningstar Economic Moat Committee, comprised of senior members of Morningstar's equity research department. 2. Estimated Fair Value Combining our analysts' financial forecasts with the firm's economic moat helps us assess how long returns on invested capital are likely to exceed the firm's cost of capital. Returns of firms with a wide economic moat rating are assumed to fade to the per petuity period over a longer period of time than the returns of narrow - moat firms, and both will fade slower than no - moat firms, increasing our estimate of their intrinsic value. Our model is divided into three distinct stages : Stage I: Explicit Foreca st In this stage, which can last five to 10 years, analysts make full financial statement forecasts, including items such as revenue, profit margins, tax rates, changes in working - capital accounts, and capital spending. Based on these projections, we calc ulate earnings before interest, after taxes, or EBI, and the net new investment, or NNI, to derive our annual free cash flow forecast. Stage II: Fade The second stage of our model is the period it will take the company's return on new invested capital — t he return on capital of the next dollar invested ("RONIC") — to decline (or rise) to its cost of capital. During the Stage II period, we use a formula to approximate cash flows in lieu of explicitly modeling the income statement, balance sheet, and cash flow statement as we do in Stage I. The length of the second stage depends on the strength of the company's economic moat. We forecast this period to last anywhere from one year (for companies with no economic moat) to 10 – 15 years or more (for wide - moat compan ies). During this period, cash flows are forecast using four assumptions: an average growth rate for EBI over the period, a normalized investment rate, average return on new invested capital, or RONIC, and the number of years until perpetuity, when excess returns cease. The investment rate and return on new invested capital decline until the perpetuity stage i