Why the Amgen, Inc. (AMGN) Patent Case Is So Important

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Good news for Amgen, Inc. (NASDAQ:AMGN) shareholders … or, maybe it’s bad news for anyone who owns AMGN stock. Whatever the case, the nation’s judicial system is finally going to make legal sense of how the industry is supposed to make and market so-called “biologic” drugs — therapies created by a living, organic process instead of a chemical reaction.

Why the Amgen, Inc. (AMGN) Patent Case Is So Important

It’s a matter of particular interest to Amgen stock holders, as the biopharma company has a stake on the offensive and defensive side of the ball. It’s also a matter worth studying simply because biologics are the future, and what the Federal Court system decides later this year will set the stage for years (if not decades) to come.

Amgen vs. Sandoz

It was the proverbial shot heard ’round the world … or at least in the United States.

In March of 2015, the U.S. Food and Drug Administration approved a cancer support drug from Sandoz — a division of Novartis AG (ADR) (NYSE:NVS) — called Zarxio, which induces a patient’s production of white blood cells. It’s an important affect, as many cancer patients on chemotherapy are susceptible to infections.

It was remarkable simply because it was the FDA’s first-ever approved “biosimilar,” meaning it was for all intents and purposes (and effectiveness) the equivalent to Neupogen, or filgrastim, from AMGN. Being a biologic, Amgen was likely never expecting it to be copied when the drug first debuted back in 1991.

The introduction of Zarxio largely exposed just how unprepared the U.S. legal system was for biologics.

Amgen cried foul on Sandoz, claiming that not only had Sandoz not followed the disclosure protocol as prescribed by the 2010 Biologics Price Competition and Innovation Act (BPCIA), but it had also failed to give the required 180 days notice to AMGN that it intended to copy Neupogen with Zarxio. Specifically, Sandoz was supposed to provide Amgen with a list of all of its patents that might be violated, and it couldn’t provide the 180-day notice until after Zarxio had been approved; Sandoz provided it before the drug was approved by the FDA.

As it turns out, the court system didn’t quite know itself what the BPCIA meant, or of it was completely binding. Amgen, and by extension AMGN stock owners, have been up in the air ever since.

AMGN and the “Patent Dance”

It’s neither an official or a flattering title, but the entanglement of conflicting and unclear laws has come to be known as the “patent dance.”

The impending decision following a review of a previous appellate case is two-fold, and one of the matters isn’t as important as the other.

The lesser of the two questions that will be answered by the nation’s top court will determine exactly when the biopharma company endeavoring to market a biosimilar must inform the developer of the branded version. Amgen claims the 180-day notice clock starts following an approval, while Sandoz argued it could submit that notice anytime the drug had been developed in its final form.

The decision will only retard or accelerate the marketing date for a biologic biosimilar by six months … a drop in the bucket for a treatment that will be on pharmacy shelves for years if not decades.

The second issue is a more serious one.

The interpretations of this portion of the Biologics Price Competition and Innovation Act vary, but Amgen argues that it’s mandatory Sandoz disclose its manufacturing process for Zarxio while Sandoz argues it’s optional.

The purpose of this disclosure is ultimately for both parties to resolve any potential patent-infringement arguments. The court have thus far agreed with Sandoz that the BPCIA mandate for disclosure of the underlying science is optional, but that a failure to do so would leave the biosimilar developer wide open to a patent-infringement lawsuit.

It’s reasonable to assume any maker of a branded biologic will choose to create as much of a legal headwind as possible for any biosimilar maker that opts to not divulge its proprietary process.

Bottom Line for AMGN Stock

While the matter at hand directly involves Amgen and Sandoz along with AMGN and NVS shareholders, the entire pharmaceutical industry is anxiously awaiting the decisions that are expected by June. The rulings will clarify to what extent the legal system supports the idea of biosimilars. So far that the court system seems to generally favoring the companies that could lower biologic drug costs between 15% and 30%.

Don’t feel too bad for AMGN though. While it’s fighting Sandoz to protect its brand-name drug Neupogen, it’s also already won the approval for a biosimilar version of Humira, from AbbVie Inc (NYSE:ABBV). If Amgen loses the fight with Sandoz, it will likely mean it has won a different fight with Abbvie. Indeed, AMGN has six biosimilars in the pipeline, and could use a little help from the FDA with those.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/01/amgen-inc-amgn-patent-case-so-important/.

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