Alexion Sags as Investors Set Sights on Looming Patent Fight

(Bloomberg) -- The wind has been sucked out of the sails at Alexion Pharmaceuticals Inc. after Amgen Inc.’s Otezla deal dashed merger hopes that fueled last week’s rally in the maker of Soliris, leaving investors to turn a wary eye once again to a dispute over Alexion’s top-selling drug.

Alexion and Amgen have been locking horns over three patents tied to Soliris in the U.S. Amgen claimed that the patents don’t cover new ideas and should be canceled.

The U.S. Patent Trial and Appeal Board could announce as early as next week whether it will undertake a review of the patents. Some worry that a separate fight in Europe may be even more of a threat. A hearing over Alexion’s composition of matter patent application with the European Patent Office is expected to kick off Sept. 5.

Meanwhile, Alexion has been trying to switch patients to its follow-on formulation, Ultomiris. Analysts are not all that rosy on Alexion’s plan. Even if Alexion keeps its hold on the patient populations Soliris serves, biosimilars as well as new medicines in development “will likely cause active pricing pressure” on both Soliris and Ultomiris, producing a meaningful impact on the drugmaker’s “long-term revenue potential,” Jefferies analyst Eun Yang cautioned in a note from July. She rates Alexion a hold.

Options in Alexion set to expire Sept. 6 imply shares could move about 9% between now and then. Soliris makes up most of Alexion’s revenue. Analysts surveyed by Bloomberg expect it to account for $3.96 billion, or nearly 82%, of the Boston-based biotech’s 2019 revenue. That percentage is projected to decline to about 73% in 2020.

In Monday trading, shares of Alexion fell 2.6% as of 2:07 p.m. in New York. Last week, the stock rose 4% for its best weekly performance since June.

--With assistance from Susan Decker and Gregory Calderone.

To contact the reporter on this story: Cristin Flanagan in New York at cflanagan1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jeremy R. Cooke, Steven Fromm

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