Shares of Alexion Pharmaceuticals (ALXN) are under pressure on Tuesday morning after the European Patent Office revoked a patent held by the company related to Soliris. Commenting on the news, Credit Suisse analyst Martin Auster said he sees limited fundamental impact to Alexion from this EU IP setback and recommended owning the stock ahead of Ultomiris’ launch. Voicing a similar opinion, his peer at Piper Jaffray argued that while the headline is "scary," the impact "could be essentially zero."
EU REVOKES SOLIRIS PATENT: The European Patent Office revoked a patent held by Alexion related to Soliris "because at least one ground for opposition prejudices the maintenance of the European patent," according to a decision of an oral proceeding posted to the EPO site.
LIMITED IMPACT: After the European Patent Office revoked the new Soliris formulation patent previously granted following an opposition from potential competitors, Credit Suisse’s Auster noted that the company expects to receive the written decision over the next few weeks, when it will likely appeal the outcome, a process that could take 3-5 years. The analyst believes investors currently assign limited protective value from this formulation patent, with no change to his thesis from a fundamental perspective. Dates for the hearings covering new Composition of Matter and Methods patents are yet to be set, with the company indicating no read-through from EU’s decision to these hearings, which could still offer protection for Soliris against biosimilars into 2027, Auster added. The analyst highlighted that he continues to believe current levels overstate competitive threats, and would own the stock for Ultomiris’ launch and execution of the switching strategy. He reiterated an Outperform rating and $156 price target on the shares. Also commenting on the news, Piper Jaffray analyst Christopher Raymond noted that the patent has been the subject of an opposition by Amgen (AMGN) in its effort to introduce ABP 959, a biosimilar version of Soliris, in Europe. While the headline is "scary," the impact "could be essentially zero," as the appeals process could take 3-5 years and Soliris has EU Orphan data exclusivity for aHUS through November of 2023, which means the earliest a biosimilar could receive approval in this indication is likely 2024. Further, Raymond pointed out that Amgen still needs to run a trial. Amgen received authorization to commence a Phase 3 trial for ABP 959 back in August of 2017 but 18 months later has yet to commence enrollment, he added. Given that he sees "extremely limited impact" on Alexion's EU franchise from this decision, the analyst told investors that he would be a buyer on weakness and reiterated an Overweight rating on Alexion shares.
PRICE ACTION: In morning trading, shares of Alexion have slipped over 3% to $113.48.