Why The Amgen/Regeneron Patent Saga Is Far From Over

Despite the District Court’s ruling in favor of Amgen, Inc. AMGN over cholesterol drug Praluent, Leerink believes the patent dispute with Regeneron Pharmaceuticals Inc REGN and Sanofi SA (ADR) SNY is far from over given the possibility of appeal by these firms and Amgen’s firm stance against a settlement.

For Sanofi, the permanent injunction adds incremental uncertainty to its long-term top-line growth. Analyst Seamus Fernandez said completely removing Praluent U.S. sales would reduce his €91 price target by €3–€3.5.

“If the permanent injunction is enforced by the end of this month, which would surprise us, we would expect a substantial reduction of marketing costs behind the currently unprofitable franchise,” Fernandez wrote in a note.

Lackluster Sales

Meanwhile, sales of both Praluent and Amgen's Repatha have been lackluster since launch, and the analyst expects less than €200 million in U.S. Praluent sales for FY 2017. So, it would be positive for Sanofi earnings if Praluent were removed completely along with U.S. promotional spend.

“Assuming the R&D expenses remain unchanged, but removing U.S. Praluent sales and the associated SG&A cost would likely increase EPS by ~€0.03–0.05 in 2017E/18E. We currently forecast 2017 EPS of €5.53/shr,” Fernandez highlighted.

Fernandez also noted that it may not be financially viable for Sanofi/Regeneron to consider a high royalty payment of 20 percent or more to Amgen as the PCSK9 market opportunity has turned out be smaller than initial forecast.

“Similarly, such a royalty in a substantially smaller market likely would deliver much less value for AMGN than eliminating a competitor for market share with the ability to price Repatha without any competitive threat,” Fernandez added.

Fernandez has a Market Perform rating on Amgen, while being Outperform on both Sanofi and Regeneron.

At Last Check

• Shares of Amgen were up 0.46 percent at $157.50.
• Shares of Regeneron were down 1.52 percent at $353.23.
• Shares of Sanofi were up 1.18 percent at $40.82.