The Plot Thickens At Amgen; Piper Still Overweight

Piper Jaffray said the Street is underestimating the implications of the lawsuit of Amgen, Inc. AMGN against Regeneron Pharmaceuticals Inc REGN and its partner Sanofi SA (ADR) SNY over its cholesterol-lowering drug Repatha.

The District Court ruled in favor of Amgen in its patent litigation for PCSK9 (proprotein convertase subtilisin/kexin type 9) antibodies with Regeneron and Sanofi.

"The Street has broadly been downplaying potential implications of this case and assuming that at worst REGN/SNY may owe AMGN a low-single digit royalty on Praluent sales. However, because REGN/SNY never claimed non-infringement and the patents have been found valid, damages may be substantially higher than Street expectations even without treble damages / willful infringement, if upheld," analyst Joshua Schimmer wrote in a note.

Though both Sanofi and Regeneron said they strongly disagree with the ruling and plan to appeal the judgment, the analyst said this is still a win for Amgen.

Meanwhile, the launch of the PCSK9 class has been sluggish as there are still no outcomes data for the class but that should change later this year. After that, Amgen will have to figure out a reimbursement/access/affordability path with payors which enables broad uptake, the analyst said.

"While the trial design of the Repatha PCSK9 outcomes trial may suggest a Number Needed to Treat of 100 to prevent one MACE event, we believe a compromise can and will be struck for a higher risk population at lower price point that still can put the class on a trajectory to a multi-billion dollar opportunity," Schimmer noted.

Whether or not Praluent will participate in that remains to be seen, pending additional litigation and court proceedings. That said, this is an important step for Amgen in its efforts to establish PCSK9 dominance against any antibody competition, the analyst added.

Piper Jaffray has an Overweight rating on the stock, with a $191 price target.