What Enbrel needs to do after its patent win

A US patent victory could give Amgen’s Enbrel another eight years’ patent exclusivity, but is the enthusiasm justified?

Developing groundbreaking drugs is biopharma’s core focus, but often it is the long-established, high-margin warhorses that bring the greatest returns. Step forward Amgen, whose established rheumatoid arthritis biological Enbrel on Friday scored a legal victory that could give the group a monopoly in the US for another eight years, to 2029.

Amgen’s stock climbed 6%, meaning that $6.7bn was added to the group’s market cap. This astonishing reaction shows how much mileage there is in wringing extra sales out of products first launched ages ago – but to match the enthusiasm Enbrel would have to do an extra $28bn of US sales between now and 2029, EvaluatePharma data suggest.

Though current consensus, as compiled by EvaluatePharma, cites Enbrel’s key US patent holding until 2029, the forecasts themselves would have reflected some degree of risk of earlier biosimilar competition. As such, in Amgen’s territory of US and Canada sales are forecast to fall 6% to $4.7bn this year, and to $2.8bn in 2024.

When the drug’s margins are taken into account, the resulting cash flow, discounted back at a 6.5% cost of capital, amounts to a current NPV of $7.6bn. But Amgen’s market cap increase suggests that the markets now assume that Enbrel’s NPV might be almost twice as large.

On Friday Amgen prevailed in the US District Court for the District of New Jersey, which ruled that two key Enbrel patents, Nos 8,063,182 and 8,163,522, were valid. These claim protection until 2029, and had been acquired from Roche; they had been challenged by Novartis’s Sandoz division, whose Enbrel biosimilar, Erelzi, is approved in the US, but which cannot be sold because it infringes this IP.

Evercore ISI analysts wrote on Friday that the ruling removed a major 2019 overhang for Amgen, and could add $200-500m to Enbrel’s consensus. One way to add another $6.7bn to Enbrel’s consensus-derived NPV is if instead of falling 6% in 2019 Enbrel sales climb 5%, to the peak of Evercore’s suggested range, and then maintain a 2% annual growth rate, at the same margins, until patent expiry in 2029.

Enbrel sales forecasts ($m)
  2019e 2021e 2023e 2025e 2027e 2029e 2031e
US sales (current forecast)* 4,531 3,741 2,983 2,571 2,365 1,946 1,413
Cash flow (current forecast)* 1,341 1,056 814 694 633 502 341
NPV (current forecast)* 7,624            
US sales (possible bull case) 5,031 5,235 5,446 5,666 5,895 6,133 4,431
Cash flow (possible bull case) 1,489 1,478 1,486 1,530 1,578 1,581 1,070
NPV (possible bull case) 14,230            
*Per EvaluatePharma sellside consensus.

This is clearly a lot more Enbrel sales than consensus currently assumes, and whether it is achieved depends on numerous factors, not least the level of discounting Amgen implements on its ageing franchise, and the success of Novartis’s appeal against the US ruling, on which a decision should come by mid-2020.

In the meantime, the extended exclusivity Enbrel is able to enjoy in the US typifies the global state of play for biosimilars. Two Enbrel biosimilars are approved and marketed in the EU: Erelzi and Biogen/Samsung Bioepis’s Benepali. The latter got a US green light under the name Eticovo in April, but is no nearer the market than Erelzi, which got its theoretical US green light back in 2016.

The impact of biosimilar availability on sales of the brand can be seen by looking at Enbrel revenue recorded by Pfizer, which sells the drug in Europe: Pfizer’s Enbrel sales peaked at nearly $3.9bn in 2014, but last year came in at $2.1bn. They are set to slip below the blockbuster barrier by 2024, according to EvaluatePharma consensus.

In bemoaning the latest court ruling Novartis said adoption into clinical practice of Zarxio, its biosimilar form of Amgen’s Neupogen, had saved the US healthcare system $500m in under two years. It claims that a biosimilar Enbrel could result in an annual saving of $1bn; the data above certainly support this argument.

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