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Why Amgen Shares Jumped Today

By Keith Speights – Jul 1, 2020 at 3:30PM

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Investors reacted positively to a big patent litigation win for the biotech.

What happened

Shares of Amgen (AMGN 0.20%) were jumping 8.4% higher as of 3:09 p.m. EDT on Wednesday. The nice gain came after a U.S. appeals court ruled in Amgen's favor in a case challenging the validity of two patents for immunology drug Enbrel.

In 2019, the U.S. District Court for the District of New Jersey upheld two patents for Enbrel in litigation against Sandoz, a division of Novartis (NVS 1.54%). Sandoz developed a biosimilar version of Enbrel that Amgen believed infringed on key patents for its drug. The U.S. Court of Appeals for the Federal Circuit affirmed the district court ruling.

Businessman's finger pointing to the word "patent"

Image source: Getty Images.

So what

The latest court decision means that Sandoz can't make or sell its Enbrel biosimilar. That's good news for Amgen. Enbrel generated over $5.2 billion in sales for the biotech last year. The drug remains Amgen's top-selling product.

Amgen has been quite successful in protecting Enbrel from biosimilar competition. Earlier this year, the biotech reached an agreement that blocks Samsung Bioepis from marketing its Enbrel biosimilar while patent litigation proceeds. The Sandoz ruling appears to bode well for Amgen's chances of winning the case against Samsung Bioepis as well.

Defending Enbrel is key to Amgen's near-term fortunes. Several of the company's other drugs already face biosimilar and generic competition that's eroding sales.

Now what

It's possible that Sandoz could try to get the U.S. Supreme Court to review the U.S. Court of Appeals decision. However, that seems to be a long shot for the drugmaker. For now, Enbrel appears to be relatively safe from an immediate threat in the U.S. That should remove a dark cloud weighing on Amgen and clear the way for pipeline wins to potentially propel the biotech stock higher.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.

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