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Patent ruling a lucrative gift for Amgen

By   /   Friday, December 23rd, 2011  /   1 Comment

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Thousand Oaks-based Amgen made national headlines on Dec. 15 when it announced that Kevin Sharer, its longtime CEO who has drawn intense scrutiny for pay that ballooned while Amgen’s stock stagnated, will retire next year.

But the more critical news to the future of Amgen, the biggest private-sector employer in Ventura County, was not that Chief Operating Officer Robert Bradway will take over.

It was the obscure announcement several weeks earlier that a long-forgotten 1990s patent application for Enbrel, Amgen’s $3.5-billion-a-year rheumatoid arthritis drug, was granted, giving the firm renewed patent protection until 2028.

The result is that the second-best-selling drug at the world’s biggest biotechnology company will be essentially immune from generic competitors for “the foreseeable future.”

“[W]e have patents related to particular methods of making Enbrel, Enbrel formulations, and methods of treatment that provide protection against Enbrel biosimilars. This newly issued patent to the fusion protein that is etanercept adds to that patent protection,” an Amgen spokeswoman told the Business Times via e-mail. “We are confident in our ability to protect our products and, as we previously stated, we do not envision Enbrel biosimilar competition in the United States for the foreseeable future.”

A profitable drug

Analysts believe the new patent could bolster Amgen’s bottom line for years to come, to the tune of $6 a share.

“The significance of this patent appears to have been overlooked by investors and our further investigations suggest it has materially greater value than we originally estimated in our initial analysis,” Sanford C. Bernstein analyst Geoffrey Porges wrote in a research note reported on by Forbes.com. “Our updated analysis suggests that this extended patent protection for Enbrel could be worth as much as $6 per share in [net present value] to Amgen.”

But the new patent is a serious blow to a vital component of the health care reform acts passed in 2009 that is designed bring down the cost of biotechnology drugs through increased competition. As part of those health care reform acts, Congress for the first time empowered the U.S. Food and Drug Administration to approve so-called biosimilars, the biotech analogue to generic pharmaceuticals.

Much of how well Amgen defends against unbranded competitors depends on exactly how the FDA shapes the rules for biosimilars.“While I supported an alternative to the provision in the health care bill that I believed would get biosimilars to market sooner, creating the process in the first place was an important step in the right direction. I hope we can build on it in the future,” said Lois Capps, D-Santa Barbara.

But in the case of Enbrel, a sizable line item in Medicare’s reimbursement budget, the particulars of the new rules won’t really matter because Amgen will have strong patent protection.

Amgen secured 17 years of additional patent time for its blockbuster through propitious timing of its application. Before 1995, all U.S. patents were good from 17 years after the date of issue. In a reform designed to stop strategies that gamed patent rules to stretch out protections for many decades, Congress changed the rules such that patents now get 20 years of protection from the date the patent was filed, rather than approved, with adjustments made for how long it took to secure the patent.
fortuitous timing

Amgen got started on its Enbrel patents in 1990, but the particular patent approved this year was filed in May 1995, about a month before the law changed. Because of that filing date, it fell under the older rules and runs until November of 2028.

Steve Sereboff, a partner with Westlake Village and Santa Barbara-based SoCal IP Law Group, said it doesn’t appear there was any intentional foot-dragging to lengthen Amgen’s protections. Amgen does not own the patent. Instead, when Amgen bought Immunex in 2002, Amgen also got Immunex’s exclusive license to the patent.

The Patent Office and Roche, which owns the patent, each took several months to respond to each other throughout the process, which is normal for high-stakes drug patent applications.

“There was no abusive delay in examination,” Sereboff said. “This looks like a very hard fought case and was probably very complex.”

Change at the top

Kevin Sharer, chairman and CEO of Amgen, is set to retire in May.

Sharer led Amgen, the largest private-sector employer in Ventura County, for 11 years. He oversaw the company’s transition from the world’s largest biotechnology company to a blue-chip powerhouse that competes toe-to-toe with some of the most powerful players in Big Pharma.

On Sharer’s watch, Amgen faced repeated questions from federal regulators about the safety of its blockbuster anemia drugs and was forced to change the drugs’ labels. The company also set aside $780 million to settle federal and state charges that it engaged in an illegal kickback scheme, though the settlement is not yet final.

Sharer and Roger Perlmutter, the head of Amgen’s research efforts who is also retiring next year, leave Amgen at a pivotal time in the company’s history. After a decade of consistent profits but lackluster stock performance, Amgen instituted a dividend payment to return profits to its shareholders, who had questioned the company over Sharer’s pay, which amounted to $21 million last year.

It was under Sharer’s watch that activist institutional investors repeatedly tried to put executive pay on the shareholder ballot. They did not succeed, but the pressure, along with “say on pay” advisory vote rules from the U.S. Securities and Exchange Commission, may have been drivers behind the company’s decision to start returning more profits to shareholders, who had seen virtually no long-term share price increases for a almost a decade. Amgen recently wrapped up a $5 billion stock buyback at $60 a share –  near its peak price – and has instituted a quarterly cash dividend, currently at 36 cents a share.

Sharer, 63, joined Amgen in 1992 and served as president until 2000, when he was named chairman and CEO, the company said in a news release. During that time, Amgen grew from $3.6 billion in revenue with a presence in 17 countries to a company with revenues approaching $16 billion and operations in 55 countries.

Amgen observers have pegged Bradway, 48, as Sharer’s successor for several years as he rotated through various positions to deepen his knowledge of the company. Bradway joined the company as vice president in operations in 2006. He was appointed CFO in 2007 and named president and chief operating officer in 2010. Bradway worked for Morgan Stanley for 19 years before signing on with Amgen.

Amgen also announced that Perlmutter will retire from his position as executive vice president of research and development, effective February 12, 2012. Perlmutter, 59, will continue to work with Amgen as a consultant until February 2013.

Perlmutter, a Montecito resident, joined Amgen in 2000, and during his tenure Amgen has gained the approval for several new drugs. Sean Harper, the company’s current senior vice president of global development and chief medical officer, will step into Perlmutter’s position. Harper joined Amgen in 2002.

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1 Comment

  1. Karin says:

    Adios Kevin– Don’t let the door hit you on the way out. I wonder how he feels about presiding over Amgen’s lost decade. One of the worst CEOs ever and still was paid hundreds of millions of dollars by a rubber stamp Board of Directors. Pitiful performance at the helm of a once great company.

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