Amgen prevails in high-stakes PCSK9 patent fight with Sanofi, Regeneron

Amgen ($AMGN) just won the first battle in a cholesterol-drug patent war that could be worth hundreds of millions in royalties per year. A Delaware jury decided Sanofi ($SNY) and Regeneron's ($REGN) PCSK9 drug Praluent did indeed step on Amgen's patents in the field.

Later this month, Judge Sue Robinson will hear Amgen's case for a permanent injunction that could block Praluent sales unless the two sides come to terms on a royalty agreement.

Regeneron and Sanofi said in a statement that they "strongly disagree" with the decision and plan to appeal. The companies also stressed that "this decision is the first step in this ongoing litigation and does not impact Praluent (alirocumab) Injection or our ability to deliver it to physicians and patients at this time."

Trading was halted on Regeneron shares as news of the court decision broke. Analysts have estimated that the Praluent partners might have to pay 20% or more in royalties if the suit goes Amgen's favor; others figure on about 5%.

Chardan analyst Gbola Amusa, for one, pegged royalties at 10% to 20%-plus in a note to investors last month. Under that sort of settlement, Amgen could capture about $750 million in operating income per year, based on a $3.9 billion sales estimate for Praluent by 2023, Amusa said.

Praluent is an important drug for both Regeneron and Sanofi. Regeneron wants to diversify beyond its blockbuster eye injection Eylea, and the PCSK9 market is expected to deliver up to $10 billion in sales. Sanofi is working to build up its new drug sales to weather competition in its diabetes business, particularly from a forthcoming biosimilar version of its top-selling Lantus.

Praluent and Amgen's Repatha launched within a month of each other, and the competition between the two has been fierce. The two drugs have each racked up exclusive deals with some payers, though some top payers are covering both.

But sales haven't taken off yet, because patients often have to clear prior authorization hurdles to get their prescriptions covered. That's partly because the drugs both carry list prices of $14,000 or more, and partly because there's no proof yet that the drugs actually prevent heart attacks, strokes and the like--though they are immensely effective at lowering "bad" LDL cholesterol. Outcomes data are on their way, with Amgen likely to report first.

In the meantime, expect Sanofi and Regeneron to put up a fight in patent court. As ISI/Evercore analyst Mark Schoenebaum pointed out in a Wednesday note, an appeal could take 18 months to play out. And Sanofi maintains that Amgen's patents won't stand. "It has always been and remains our position that Amgen's asserted patent claims in this matter are invalid," Sanofi General Counsel Karen Linehan said.

- see the release from Sanofi and Regeneron