Shares of Gilead (GILD) and Celgene (CELG) have tumbled today after both companies revealed that they were facing patent pressures.
For Gilead, Idenix Pharmaceuticals (IDIX) filed a patent-infringement lawsuit that appears to target Gilead’s Sovaldi (someone please correct me if I’m wrong). For Celgene, it was the decision of a New Jersey court to schedule a hearing on a patent case for April 29, earlier than expected. It hasn’t helped that the UK’s National Institute for Health and Care Excellence also said that Celgene’s Revlimid doesn’t work well enough to be covered for “second line treatment of multiple myeloma.”
Bernstein’s Geoffrey Porges doesn’t expect the outcome of Celgene’s hearing to have a major impact:
Overall, the outcome of the case will likely not be impacted by the outcome of the Markman hearing. Revlimid is currently protected by some two dozen patents in the US. Our attorney consultants believe that the polymorph patent 7465800 (or ’800 patent) is a particularly solid pillar in the “dome” of patents that Celgene has built around Revlimid. Our outlook for Revlimid sales remains unchanged, we continue to project product sales growth from $9bn in 2015 to $16bn in 2019, and $21bn 2023. Based on our analysis of consensus expectations 2, we estimated that the stock had been already discounting a ~30% chance that Revlimid will lose its patent protection by 2019…
We continue to rate Celgene Outperform, with a target price of $214. We believe that the market’s concern about Revlimid’s patent protection and NICE recommendations is overdone. We see no reason to change our revenue and earnings forecasts for the stock and recommend investors add to positions on this temporary weakness.
Shares of Celgene have fallen 3.5% to $150.54, while Gilead has dropped 3.2% to $75.51 and Idenix Pharmaceuticals has declined 0.6% to $6.90.
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