Shares of Alexion (ALXN) are on the rise on Thursday as analysts note documents posted by the Patent Trial and Appeal Board that seem to indicate an impending settlement of Amgen's (AMGN) inter partes review challenge for three U.S. Soliris patents. Commenting on the news, Piper Sandler analyst Christopher Raymond says that a settlement would be a "deck-clearing event" that could also make the Alexion "story cleaner for an acquirer." Soliris is a first-in-class terminal complement inhibitor commercialized by Alexion. Soliris works by selectively inhibiting activation of specific proteins in the complement system, which play a role in the pathophysiology of multiple rare diseases.
POTENTIAL SETTLEMENT DEAL: Stifel analyst Paul Matteis noted that Alexion and Amgen requested a trial postponement on Wednesday and he views filings with the Patent Trial and Appeal Board as suggesting that the parties appear to have agreed in principle on a settlement in Amgen's three PTAB challenges to Soliris patents. While the terms haven't been disclosed, the "bottom line for the stock" is that this is good news and Alexion shares "will likely deservedly trade higher," Matteis contended. Nonetheless, the analyst keeps a Hold rating on Alexion as he believes that it is debatable as to whether biosimilar or branded competition is the more salient threat and he would argue for the latter. Additionally, Matteis thinks that so far, the company's deals for Syntimmune, Affibody and Stealth "have been disappointing."
SETTLEMENT MAY YIELD UPSIDE SURPRISE: In a research note of his own, Cowen analyst Phil Nadeau said that most investors assume Alexion's patents would fall, so an agreement that preserves some of the term is an upside surprise. His preliminary sensitivity analysis suggests each year the generic entry is pushed past 2022 is worth $5 per share to Alexion. Nadeau has an Outperform rating and $165 price target on Alexion shares.
'CLEAR THE DECK' EVENT FOR ACQUIRER: Also commenting on the news of what appears to be an "impending settlement" of Amgen's inter partes review challenge for three U.S. Soliris patents, Piper Sandler analyst Christopher Raymond argued in a research note of his own that a settlement would be a "deck-clearing event." Given Elliott Management's involvement and this week's news that Sanofi (SNY) is monetizing its Regeneron (REGN) stake, "this possibility has to be front of mind," the analyst contended. Raymond also wonders why Alexion would settle now, three months before the PTAB's written decision was due. One possible consideration for Alexion "was to clear the deck to make the story cleaner for an acquirer," he added. The analyst keeps an Overweight rating on Alexion's shares.
Meanwhile, a spokesperson for activist Elliott Management said that "although Elliott believes the IPR overhang was overblown, a sensible settlement would remove a significant source of uncertainty and leave the door open for the company to explore strategic alternatives without further delay, the value maximizing pathway for the company in Elliott's view." In December, Alexion announced that even though Elliott recommended it "immediately launch a proactive sale process," its board "unanimously decided that conducting a proactive sale process would not be in the best interest of shareholders and the patients we serve at this time."
Contacted by The Fly, a spokesperson for Alexion said the company "can't comment on ongoing litigation."
PRICE ACTION: In late morning trading, shares of Alexion have jumped almost 9% to $115.40, while Amgen's stock is fractionally up at $224.83.
Published 05/28/2020 11:41 AM, edited 05/28/2020 12:22 PM to include company's statement
