Is a Soliris patent review that big a threat to Alexion? Analysts are split

Things haven’t gone Alexion’s way lately: After investors cheered the possibility of an Amgen merger, the hoped-for partner advanced its Soliris patent challenge. The possibility of losing that bestseller’s protection has spooked investors, but analysts wonder—is it that big of a deal?

Judging by stock prices, yes. The New Haven, Connecticut-based company's shares have dropped more than 15% since the U.S. Patent and Trademark Office said it would review key patents behind Soliris, which made up 88% of Alexion’s sales in 2018.

That’s unfortunate news for Alexion, but analysts have crunched their numbers and made a few prognostications. The upshot? There's no broad agreement on how the review might end up hurting Soliris sales—which amounted to $980.8 million in the second quarter—but also Alexion’s overall plan to switch patients to successor drug Ultomiris.

In a Tuesday note to investors, SVB Leerink analyst Geoffrey Porges updated Amgen’s patent challenge to a 50% chance of success and added an 8% to 12% “incremental erosion” to Soliris sales beyond 2022, when Amgen’s biosim challenger would likely hit the market.

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That updated forecast was a shift for Porges, who had, like many analysts, figured a review by the Patent Trial and Appeal Board (PTAB) was “unlikely."

Surprise or no, J.P. Morgan analyst Cory Kasimov called the investor reaction overblown.  Amgen’s winning inter partes review of Soliris patents was “not entirely unexpected," Kasimov said in a Friday note to investors. The “knee-jerk reaction” in share prices didn't reflect Soliris’ long-term chances, he said.

For one, Kasimov said Soliris’ “worst-case scenario” of a biosimilar launch in 2022 would give the drugmaker plenty of time to continue switching patients to Ultomiris—and Alexion is already ahead of schedule there.

As of July, around 40% of Soliris patients had switched to Ultomiris, putting Alexion well on track to hit its planned 70% conversion rate by mid-2020. Ultomiris already has a Soliris-matching approval for adult paroxysmal nocturnal hemoglobinuria (PNH) and a recent FDA approval in atypical hemolytic uremic syndrome (aHUS), as well as a cheaper price tag than the older drug.

RELATED: Alexion's beating forecasts with Soliris-to-Ultomiris switch. So what's up with its pesky stock price?

Ultomiris’ strong switching data was also a point of contention for Evercore ISI analyst Josh Schimmer, who said the stock drop “seems like an overreaction to us.”

“We already assume competitive pressure across (Alexion’s) C5 franchise so no change to estimates,” he said.

Even if Alexion doesn’t keep up with its switching plan, Schimmer noted that Soliris has orphan drug designations that would secure U.S. exclusivity in aHUS until November 2023, myasthenia gravis (MG) until October 2024 and neuromyelitis optica (NMO) until mid-2026.

Ultomiris, which is seeking approval in NMO and MG, could launch in those indications as soon as late 2022, giving Alexion an even better chance of switching patients away. For an Amgen biosim to counteract that trend, the copycat would need a compelling price point that Schimmer said would be “daunting” to achieve.

“Forced switching off Ultomiris to any product (biosimilar Soliris or new brand) will be challenging, and the battle will play out primarily at the level of new patients, for whom dosing frequency/modality will still be important,” he said. “Any competitor will need to offer competitive pricing to gain a toehold.”