Geoffrey Porges and his team of analysts at Sanford C. Bernstein took another look at the patent Amgen was issued last week on the top-selling drug Enbrel, used to treat rheumatoid arthritis, psoriasis, and other immune diseases. They found that the patent was more valuable than it initially appeared, because it would allow the biotechnology giant patent protection after its co-marketing deal with partner Pfizer ends. Porges writes:
Last Tuesday Amgen announced the issuance of a new composition of matter patent (#8063182) related to Enbrel, which describes and claims the fusion protein that is etanercept and has a 17-year term from this year (or to 2028). The significance of this patent appears to have been overlooked by investors and our further investigations suggest it has materially greater value than we originally estimated in our initial analysis.The application for this patent was first filed in 1990 and has been rejected, modified, re-submitted, opposed, and updated during the course of its prosecution. Now, with its issuance, however, Amgen appear to have a formidable piece of IP to defend against the incursions of erstwhile “biosimilar” or “biogeneric” competitors. Contrary to our initial quick take, conversations with the three involved parties (Roche, Amgen, Pfizer) suggest that the sunsetting of Amgen’s profit sharing obligation on Enbrel to Pfizer in the 2013-2015 period are unaffected by this patent, and Roche is not entitled to any royalties on Enbrel now or in the future. As such, this patent offers more upside than our initial cautious assessment.Our updated analysis suggests that this extended patent protection for Enbrel could be worth as much as $6per share in NPV to Amgen, assuming the patent held for its full term, Enbrel survived other branded competitors, and Amgen’s operating margins on Enbrel improve as we expect.
It will be interesting to watch whether the relationship between Pfizer and Amgen becomes strained. Pfizer is currently developing a pill, tofacitinib, that will compete with Enbrel in the rheumatoid arthritis market. Could that lead to tension in the future?
Source: Forbes.com
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