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Regeneron Gets 'Encouraging' Judicial Decision, Could Still Lose Appeal

Regeneron Gets 'Encouraging' Judicial Decision, Could Still Lose Appeal
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Canaccord Genuity said in a note released Wednesday the decision by a federal appeals court to stay the Praluent injunction in a patent litigation versus Amgen, Inc. (NASDAQ: AMGN) is a moderate positive for Regeneron Pharmaceuticals Inc (NASDAQ: REGN). However, the firm did not rule out the possibility of the company losing the appeal on the Praluent infringement litigation.

Stay Encouraging; Settlement Likely

Analyst John Newman noted that the stay on the injunction, pending the appeal, would allow the Regeneron/Sanofi SA (ADR) (NYSE: SNY) combine to continue selling Praluent beyond February 21 the original sales injunction date. The analyst termed the development is encouraging.

Canaccord Genuity expects a settlement with Amgen, which could call for paying a low-teens royalty on Praluent sales. The firm is of the view that Regeneron and Sanofi are unlikely to allow the appeal to produce a final court decision, given the loss of the litigation would lead to Praluent being taken off the market permanently.

Positive Data On Praluent Likely; Growth To Be Slow

The firm also thinks Amgen's Repatha CV outcomes presentation at the ACC between March 17 and 19 may elicit read through to Praluent, lifting sales. However, the firm believes doctors may prefer to wait for Praluent-specific outcomes data.

Additionally, PBMs may not make any changes to Praluent prior authorizations or step edits until positive outcomes data are available, the firm added. This, according to the firm, could favor easier access to Repatha in the interim. Although the firm believes Praluent will show positive outcomes data, helping in sales ramp up, it is of the view that Praluent growth will be slow, requiring multiple years to reach meaningful revenues.

FDA Vets Sanofi Plant

The firm also noted that the FDA has now deemed the Sanofi manufacturing plant acceptable for sarilumab and dupilumab manufacturing. If the on-site visit by FDA, planned for the first quarter of 2017, produces positive outcome, the firm thinks it would ensure on-track submission for sarilumab approval and dupilumab approval by the end of the first quarter of 2017.

Rating/Price Target

Canaccord Genuity has a Hold rating and a $450 price target for the shares of Regeneron. The Hold rating is predicated on several uncertainties:

  • Negative data for Ang2 and EYLEA during the first half of 2017.
  • Possibility of losing the appeal on the Praluent infringement litigation.
  • Potentially higher percentage royalty that Regeneron and Sanofi would pay to Amgen.
  • Possible unfavorable plant review by the FDA.

At Last Check

  • Amgen was slipping 0.89 percent to $166.62.
  • Regeneron was tacking on 1.48 percent to $358.47.
  • Sanofi was gaining 3.49 percent to $42.65.

Latest Ratings for AMGN

Nov 2017ArgusDowngradesBuyHold
Oct 2017BMO CapitalMaintainsMarket Perform
Oct 2017Morgan StanleyMaintainsOverweight

View More Analyst Ratings for AMGN
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