Image Source: Regeneron
The legal battle between two of the titans of the biotech world heated up further with a recent ruling overturning the injunction of a critical asset. We are updating our thesis in light of current events.
By Alexander J. Poulos
Legal Battle
Amgen (AMGN) is locked in a protracted battle with Regeneron Pharmaceuticals (REGN) and its partner Sanofi (SNY) over a potential patent infringement. The asset in question is Praluent which belongs to the PCSK9 inhibitor, which is approved for the patient class afflicted with heterozygous familial hypercholesterolemia or clinical atherosclerotic cardiovascular disease, which require additional lowering of LDL-C. The nexus of Amgen’s complaint is Praluent infringes on some of the intellectual property (IP) that backs its competing remedy sold under the trade name Repatha.
The stakes in this battle are elevated for Amgen, as Repatha remains the cornerstone of Amgen’s future revenue growth potential. Amgen remains in dire need of replacing soon-to-be-lost revenue as its product suite is on the cusp of biosimilar challengers in addition to more efficacious products that are poised to steal market share. Amgen has shifted its focus into the realm of cardiovascular disease, with an ambitious attempt to break into this rapidly-growing area of need.
Thus far, the results are less-than-promising for Amgen as the side-effect profile of Corlanor–a separate product in the Cardiovascular field will limit the utilization of the products, thus placing additional focus in Repatha. Repatha gained approval a month after Praluent as Sanofi/Regeneron decided to use a priority review voucher to gain a head start in marketing the treatment.
Script Volume
With little to differentiate the two products in the initial approval label, marketing is the key to establish a lead in the field. We continue to track the IMS data for the class with little to differentiate the two products with a slight bias towards Praluent until rumors of a potential injunction, and possible removal of Praluent from the market began to circle.
Amgen won a temporary injunction in January of this year which has dulled the continued uptake of Praluent. Amgen has used the timing of the injunction to capture a more significant percentage of the overall PCSK9 inhibitor market, but the total uptake remains tepid due to cost constraints.
Amgen suffered a clinical setback as chronicled in a recent piece “Analyzing Amgen’s Sudden Fall,” as the Fourier outcomes data underwhelmed. Amgen was optimistic a sharp reduction in MACE would ignite sales which unfortunately were not validated by the data. Praluent is in the midst of concluding its own outcomes trial with a data read expected in the first quarter of 2018.
Data Is the Key
We feel in light of the recent Appeals Court decision vacating the injunction and remanding the trial back to the district court the odds of a deal is elevated. A new trial is expected to last between 1-2 years opening the door for a host of possible outcomes.
Our initial view of the potential outcome of the legal maneuvers remains unchanged.
The most immediate threat to Repatha dominance in the PCSK9 class is Praluent which is marketed by Sanofi (SNY). Amgen is looking to bar the sale of Praluent claiming the product infringes on some of its patent estates, a point a recent court decision found to be valid. The case is highly technical, yet Amgen is playing hardball to dominate the class.
We feel the most likely outcome is a royalty will be paid to Amgen with both products remaining in the marketplace. We find it a stretch to believe the US government will remove a competing product from the market in what could potentially evolve into a 10 billion dollar market with Amgen handed supreme pricing power and virtual monopoly as other competitors remain in the distance.
Quote attributed to Alexander Poulos.
We would not be surprised if a deal is reached before Praluent’s outcomes data is revealed. The basis of our thesis revolves around the potential for a more-robust lowering of MACE than Repatha which can be inferred that Praluent is the superior product. If this scenario were to play out, Sanofi/Regeneron case that Praluent does not infringe is bolstered. Sanofi can provide evidence that Praluent is a superior therapy and thus should be allowed to stay on the market due to unmet patient need.
Royalty Agreement
We remain committed to the idea the ultimate outcome will be a royalty deal between both parties whereas Amgen would receive a percentage of Praluent’s sales over a period. A similar arrangement was struck recently between Merck (MRK) and Bristol-Myers Squibb (BMY) over the PD-1 class whereas Merck will pay a percentage of Keytruda’s sales as a royalty to Bristol. In this case, there is a clear difference in efficacy of the treatments as the products have progressed through the various stages of post-marketing testing in order to expand the prescribing label.
Concluding Thoughts
We are pleased to see the verdict come in as we initially expected. While sales of Repatha and Praluent remain in their infancy, we feel the class has a viable place in the emerging new paradigm to treat Cardiovascular Disease. The biotech space continues to levitate along with the overall market. While the entire market is becoming more expensive, we continue to see pockets of exciting developments that we are following such as the recent review of the prospects of Global Blood Therapeutics (GBT). We will update our thesis on Regeneron and Amgen post the upcoming earnings release.
Independent Healthcare and Biotech Contributor Alexander J. Poulos is long shares of Regeneron Pharmaceuticals and Global Blood Therapeutics.