Amgen, Inc. (NASDAQ: AMGN) and Sanofi SA (NYSE: SNY) are locked in a heated patent battle, and a judge's decision to halt sales of Sanofi's cholesterol-lowering drug, Praluent, which is co-marketed by Regeneron Pharmaceuticals Inc. (NASDAQ: REGN), puts Amgen firmly in the driver's seat in what could be a multibillion-dollar market for next-generation cholesterol-lowering medicine.
Continue Reading Below
Image source: Getty Images.
A massive opportunity
Over 25 million Americans take statins to control, and ideally lower, their cholesterol levels to prevent cardiovascular disease.
However, many patients discover that statins don't work for them, or that the side effects are so significant that they have to stop treatment. In cases where statins fall short, there's a real need for new treatment alternatives.
Furthermore, in cases where patients do continue taking statins, evidence suggests that many patients fail to achieve their cholesterol targets, suggesting that new cholesterol-lowering drugs could become widely used alongside statins.
Overall, it's estimated that 11 million of the 76 million people who may be eligible for statin therapy might benefit from alternative treatments, such as Amgen's Repatha.
Limited appeal (so far)
Amgen's Repatha and Sanofi and Regeneron's Praluent are PCSK9 inhibitors, monoclonal antibodies that prevent the PCSK9 gene from breaking down bad-cholesterol receptors in the liver. Since their use prevents the destruction of cholesterol receptors, patients can clear more bad cholesterol from their bloodstream.
This approach is unique and complex, and as a result, Repatha and Praluent launched last year with prices that are significantly higher than traditional statin therapy. Statins cost in the hundreds of dollars per year, but Repatha's and Praluent's list prices are around $14,000 per year.
Because of their high cost, insurers have been reluctant to reimburse for PCSK9 inhibitors. Insurers are requiring pre-authorization and often, they're rejecting initial prescriptions. This is limiting the use of Repatha and Praluent to the toughest-to-treat patients, which in turn, is crimping sales. In the third quarter, Repatha's sales were only $31 million and Praluent's sales were only $38 million.
Big news coming
Insurers may be forced to pay for PCSK9 drugs in more patients soon. Data is expected this year from trials that could show these drugs can prevent heart attack and stroke.
Amgen expects to report data on cardiovascular outcomes this quarter, and Sanofi and Regeneron expect to report on Praluent's cardiovascular outcomes late in 2017 or early in 2018.
If trials confirm that PCSK9 inhibitors help patients live longer, the news could significantly increase prescription volume and drive drug sales higher. However, it's far from a guarantee that these trials will pan out. Last year, Pfizer stopped developing its PCSK9 drug after concluding that its cardiovascular outcomes trial wouldn't succeed.
Patent power play
The potential for use in millions of patients makes it easy to understand why Amgen is engaging in a long and costly court battle to secure what's unquestionably a small market now.
At the heart of the dispute are two Amgen patents (U.S. Patent Numbers 8,829,165, and 8,859,741) that describe and claim the use of monoclonal antibodies for PCSK9 inhibition.
Amgen won the patent infringement trial against Sanofi and Regeneron in March, and at the time, Judge Sue Robinson encouraged the companies to settle. After they failed to come to an agreement, however, Robinson determined that royalties would inadequately compensate Amgen, prompting her to ban future sales of Praluent.
Eyes on the future
Sanofi and Regeneron are appealing the March trial verdict, and the two companies plan to file for a motion to suspend the implementation of the Praluent ban during the appeal process. As a result, Praluent is likely to remain on the market for a bit longer.
How long, however, may depend on whether Amgen thinks it can prevail in appeals court. If Amgen is confident of a win, then it's less likely the company's lawyers will negotiate for royalties. If Amgen thinks it could lose, then it might be willing to settle with Sanofi and Regeneron. Ultimately, a decision to negotiate may depend a lot on the pending cardiovascular outcomes data, too. If Repatha's trial is a success, then Amgen may be less likely to negotiate. If Repatha fails, however, Amgen may be more willing to negotiate ahead of Praluent's data.
10 stocks we like better than Amgen When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Amgen wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of January 4, 2017
Todd Campbell owns shares of Pfizer. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter, where he goes by the handle @ebcapital, to see more articles like this.
The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.