Sanofi and Regeneron likely to cough up royalties to end Amgen's PCSK9 patent suit: Analyst

One of the hottest races for market share in pharma these days is between Amgen's ($AMGN) cholesterol-fighter Repatha and Praluent, from Sanofi ($SNY) and Regeneron ($REGN). They're apparently neck and neck with payers, and their script numbers aren't much different either, at least so far.

But when it comes to sales that drop to the bottom line, Amgen may end up winning. The biotech giant's PCSK9 patent-infringement suit against its rivals, set for trial in March, could yield a chunk of royalties, cutting into Sanofi and Regeneron's final take.

In fact, the chances of Amgen succeeding are high enough that one analyst has downgraded Regeneron shares.

"Since our work with expert legal counsel suggests that Sanofi/Regeneron likely infringe Amgen's Repatha patents, we believe the most likely outcome is for Sanofi/Regeneron to settle ahead of trial and pay 10% to 20%-plus royalties to Amgen for U.S. Praluent sales," Chardan analyst Gbola Amusa wrote in a note to investors, as reported by Barron's.

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.

For Amgen and Sanofi, the potential blockbusters are key to growth as copies of their current multibillion-dollar sellers start hitting the market. Sanofi in particular is facing a big sales hit from biosimilar versions of its diabetes superstar Lantus, with Eli Lilly ($LLY) and Boehringer Ingelheim set to launch their Basaglar this December under a patent settlement with the French drugmaker.

Praluent and Repatha were FDA-approved within a month of each other, and their list prices--both above $14,000 per year--are similar enough as to be almost identical when it comes to negotiations with payers. The two meds have divvied up payer contracts, with pharmacy benefits manager Express Scripts ($ESRX) covering both, UnitedHealthcare ($UNH) putting Praluent in the pole position and CVS Health ($CVS) striking an exclusive deal on Repatha.

A 7-day jury trial is scheduled in the patent case for March 7, and a hearing for a permanent injunction is on the calendar for March 23, Chardan notes. The two sides are now arguing over expert witnesses and details of the patent claim that will be debated in court.

Not all market-watchers see Amgen prevailing in the case. Some patent-oriented investment funds figure Sanofi and Regeneron have gained an advantage from some of the decisions about the patent claim. And early on in the patent fight, Evercore/ISI Group analyst Mark Schoenebaum suggested that Amgen's patents are so broad in this case that they could be vulnerable.

"Of course, this may be perfectly acceptable in the eyes of the court, and if that is true, then Amgen's patents appear fairly robust," he wrote. "However, common sense tells us that such broad patents may just as likely be susceptible to criticism because of the magnitude of how broad they actually are (or appear to us, at least)."

- see the Barron's post