A federal judge has banned the sale of Regeneron Pharmaceuticals' (REGN - Get Report) cholesterol-lowering drug Praluent, handing a surprise and overwhelming victory to Amgen (AMGN - Get Report) and its competing drug Repatha in a long-running patent lawsuit.
Amgen had already won the trial in which Regeneron was shown to have infringed on two patents covering a class of cholesterol-lowering drugs known as PCSK9 inhibitors. Regeneron markets Praluent with the French drug maker Sanofi (SNY - Get Report) .
Thursday night's ruling by the judge in the case centered on the penalty Regeneron would have to pay to Amgen. Most investors believed the judge would require Regeneron to pay a royalty on sales of Praluent back to Amgen but would otherwise allow the drug to remain on the market.
The judge went further, ruling Regeneron "demonstrated irreparable harm" to Amgen and that money damages were inadequate compensation. Regeneron and Sanofi must stop selling Praluent in the U.S., although the ban has been delayed 30 days to allow the companies to appeal.
Removing a drug from the U.S. market over patent infringement occurs very rarely. In fact, the last major case also involved Amgen, which sued Roche and won, resulting in Roche being forced to pull an anemia drug from the U.S. market.
"We are pleased with today's decision that recognizes Amgen is entitled to an injunction against further infringement of our patent rights," said Amgen CEO Robert Bradway, in a statement. "Sanofi and Regeneron admitted that they had infringed our patents, and the jury upheld our patents as valid."
Regeneron and Sanofi intend to appeal both the original patent infringement decision and the judge's injunction against Praluent.
"We will immediately appeal today's ruling, along with the jury's earlier finding upholding the validity of Amgen's patents," said Karen Linehan, Sanofi's general counsel, in a statement. "It is our longstanding position that Amgen's patent claims are invalid and that the best interests of patients will be greatly disserved by an injunction preventing access to Praluent."
Amgen shares rose 5% to $160.54 following the dissemination of the judge's ruling. Regeneron shares were halted at $380.92. Sanofi is trading down in Europe on Friday morning.
Bruce Kamich, technical analyst for Real Money, our premium site for active investors, said that despite Friday's price weakness, this could be the right time to buy with a sell stop not miles away." Kamich added in his latest analysis of REGN's charts: "Usually I prefer to buy strength as opposed to buying weakness" but "for (REGN - Get Report) I want to depart from my normal behavior" because "prices are not poised to start a new leg to the downside."
For those not convinced, Kamich wrote in his analysis that the chart below indicates they can buy strength above $390, with a close below $345 as "a line in the sand."
Sales of both Praluent and Repatha have been minimal to date -- $75 million and $83 million through the first nine months of 2016, respectively -- because insurance companies have largely refused to provide reimbursement. Amgen and Regeneron are conducting separate follow-on studies aimed at demonstrating the use of PSCK9 inhibitors to lower cholesterol levels also provide more substantive benefits to patients in the form of lower rates of heart attacks, strokes and death.
Results from these cardiovascular outcomes studies are expected relatively soon, and if positive, could boost sales of the drugs into the billions of dollars, assuming broader insurance coverage.
"Running numbers on the back of the envelope, we estimate that if Praluent was gone from the market the long term peak sales for Repatha (Amgen) could move from $2B to $3-4B WW, in theory," said RBC Capital Market biotech analyst Michael Yee, in a note issued after the ruling.
A settlement that allows Praluent to remain on U.S. pharmacy shelves is still a possibility, says Baird analyst Brian Skorney.
"Though the risk of a true permanent injunction is higher now that we have a ruling back from the judge, we believe that ultimately, Praluent will be allowed to remain on the market. While the decision supports Amgen's position, the ruling does appear to have some questionable conclusions that look risky on appeal," Skorney said.