- Amgen’s Enbrel patents held up in court, removing a major overhang on the stock. This has led to increased investor attention now that a major binary event is largely removed from the picture

- Amgen recently presented AMG510 results in NSCLC and CRC that were below high investor expectations. Results were still good, but durability remains the key unresolved question to focus on

- Omecamtiv and tezepelumab are interesting late-stage drugs in Amgen’s pipeline that will see additional readouts in 2020

When I last wrote about Amgen, I detailed Aimovig’s initial launch in migraine headaches and Neulasta’s defense against upcoming biosimilars.

In this note, I'll touch on two other key topics that have had significant stock-moving developments. First, I'll discuss the Enbrel patent battle which was recently resolved. Second, I'll detail recent updates in AMG 510, one of the most talked about pipeline drugs where expectations have dampened a bit, but remains a key focus for investors. Finally, I'll end on several updates in Amgen's other late stage pipeline candidates and new drug launches.

Overall, Amgen remains an interesting stock to monitor now that the Enbrel patent is resolved, but there are still several question marks around major growth drivers moving forward. My own view is that the stock potentially will look more interesting in 2020 when the company is expected to report several pipeline readouts and Repatha growth is expected to accelerate.

Enbrel Patents Hold Up in Court, Removing Overhang

In August, Amgen’s Enbrel patents held up in court against a challenge by Sandoz, a division of Novartis. The court ruled in favor of Amgen, upholding both the 8,063,182 (‘182) and 8,163,522 (‘522) patents. Recall that the ‘182 patent protect the Enbrel protein, while the ‘522 patent protect the method of production. Sandoz’s biosimilar, Erelzi, is in violation of both patents.

Sandoz has already noted that they will appeal the decision, but at this point not many investors expect this appeal to be successful. Amgen’s Enbrel has now been challenged two other times by Coherus and by Kyle Bass’ coalition for Affordable Drugs. With three successful court defenses, the patents are now well-validated.

This represented the best case scenario for the company, and was a significant win given the large overhang on the stock. In my conversations with institutional investors, many were concerned about the litigation and did not want to get involved in the stock until there was some resolution, and for good reason. Current Enbrel revenue estimates in the US sit at almost $5 billion for the year, and prior to the ruling, it appeared that consensus baked in loss of exclusivity (LOE) in the mid 2020s - a midway hedge given that the patents expire in 2028/2029. If Sandoz’s challenge was upheld, consensus estimates would have had to shift from an LOE in the mid 2020s to an LOE essentially today given that Erelzi had already received FDA approval. By some analyst estimates, a successful Sandoz challenge could have negatively impacted the stock price by as much as $30.

To be clear, consensus estimates still expect Enbrel to decline by about 6-7% annually going forward due to a mixture of biosimilars and other novel therapies. However, this trajectory is very different from a situation in which Erelzi entered the market. Additionally, investors are now free to invest in the stock, say, for the strength of its oncology pipeline, without worrying about the risk of a binary court case impacting the stock.

AMG 510 Results Dampen Expectations but Still Promising; Durability is Key

Amgen’s AMG 510 is one of the more promising biologics in its pipeline. Investors received several updates on the treatment over the last two months which dampened expectations a bit, but it remains a promising asset in the pipeline.

For background, AMG 510 targets the KRAS G12C mutation in cancer patients. The KRAS protein is a well-validated and highly-prized pathway, but has up to this point proved difficult to target. AMG 510 is perhaps the furthest-developed drug, using improved inhibition strategies to target the G12C mutation.

The addressable market is fairly large, with 14% of non-small-cell lung carcinoma (NSCLC) patients, 6% of colorectal cancer (CRC) patients, 5% of endometrial cancer patients, and 1% of pancreatic cancer patients with the G12C mutation, representing roughly 10-20K patients per year. For context, CDK4/6 drugs (another cancer mutation) make up 70-80K patients per year, and are expected to generate over $10B by 2023 according to Oppenheimer (see my prior article on Ibrance for Pfizer). As another datapoint, ALK drugs (another cancer mutation) make up <5K patients per year and are expected to generate a little over $2B sales per year. KRAS G12C can be thought of as somewhere between these two markets.

Prior to recent developments, the drug had presented strong NSCLC data at the American Society of Clinical Oncology (ASCO). AMG 510 showed a 50% objective response rate (ORR) at all doses, and a 100% (3/3) objective response rate (ORR) at the highest dose. Additionally, one partial response eventually evolved to a complete response after week 18. The results looked extremely promising, but investors were also careful to note that 1) sample sizes were small, and 2) durability still needed to be proved. Institutional investors went into the World Conference on Lung Cancer (WCLC) in early September hoping to see continued strength in ORR rates at the highest dose, and further evidence of durability with a larger sample size to continue the investor enthusiasm.

The company ended up reporting solid results at WCLC, but arguably not to the same degree. ORR at the highest 960mg dose was 54% (7 of 13) - a strong result, but roughly in line with high expectations. Importantly, in terms of durability, the median follow up for responding patients was just 15 weeks, leaving the durability question unanswered. And, of the 3 responding patients at the highest dose at ASCO, 2 saw progression, which caused some worry.

On the positive side, the remaining 6 patients at the highest dose saw stable disease (SD), and therefore the drug had a 100% disease control rate (DCR). While results overall may have missed high expectations, this still puts the drug on a promising path to commercialization, and the results are still extremely strong in this difficult setting.

Next, the company reported additional results in CRC at the European Society for Medical Oncology (ESMO) in late September. Again, investors hoped to see additional clarity on durability and continued validation in ORR and DCR. This time, results were a larger disappointment relative to high expectations, but still fairly solid. The drug saw a 9% ORR (1 of 12 patients) at 960mg. This was lower than expected (my sense was that investors were looking for 3-4 patients with a partial response, at a minimum), and AMGN and their KOL noted that they believed this was due to a difference in the underlying CRC disease compared to NSCLC and its stronger result. On the positive side, AMG 510 saw a 92% DCR at the highest dose. Based on these results, many analysts believe that AMG 510 would be best pursued as a combination therapy as opposed to a monotherapy, but the company is still exploring if monotherapy would be feasible.

Taking these two results into account, analysts are still largely positive about the potential for AMG 510. While results do dampen expectations a bit, it should be noted that results still look strong when considering the setting - patients with the G12C mutation often undergo multiple lines of therapy and are in advanced stages. For example, patients with previously-treated metastatic CRC have a median progression-free survival of just 2 months on Lonsurf and Stivarga. Stivarga also showed just a 41% DCR. AMG 510 within this context just needs to meet that hurdle in order to get the drug to market.

In terms of catalysts, there’s a chance we see some update (perhaps additional color on the commercial pathway) in December at the American Society of Hematology (ASH), but analysts are largely looking to 2020 for additional data on durability and development strategy for the drug. Durability remains the key focus among investors, in particular. Additionally, we may get an update on the other major KRAS G12C drug, Mirati’s MRTX849, at some point in 2H19. This would be one to watch for additional validation. Very strong results however could also bode negatively for AMG 510 in terms of market share.

Other Tidbits

- Omecamtiv mecarbil. Omecamtiv is a late-stage drug targeting heart failure (HF). The drug is a novel cardiac myosin activator that specifically targets the heart muscle, differentiating itself from other HF drugs on the market. The drug has shown efficacy in a phase 2 clinical trial (COSMIC-HF). In terms of safety, there were some signs of elevated troponin levels which will require further monitoring. There are currently two ongoing phase 3 studies expected to complete in 2021 - GALACTIC-HF and METEORIC-HF. GALACTIC could potentially have an interim readout in 1H20, which, if positive, could drive further investor attention to the drug ahead of readouts in 2021. Consensus estimates currently call for $650M in risk-adjusted sales by 2025.

- Tezepelumab. Tezepelumab is a biologic used to treat patients with severe asthma. This is a first-in-class inhibitor of thymic stromal lymphopoietin (TSLP). The market opportunity is attractive as existing IL4/5 therapies are approved in the high-eosinophil population, while tezepelumab has shown a 67% rate reduction in low-eosinophil patients. Safety however is a key issue as the drug has had several severe events, including Guillain Barr syndrome, low white blood cells, and pneumonia. This will be key to watch for during upcoming phase 3 pivotal trials NAVIGATOR and SOURCE, which are expected to readout in late 2020. Consensus estimates currently call for $785M in risk-adjusted sales by 2025.

- Repatha, Aimovig. These two drugs represent key near-term revenue growth drivers. For Repatha, investors have been frustrated with reimbursement issues that have slowed the launch, but management and bulls seem confident that the drug will see higher growth rates from lower pricing and changes in recent cholesterol guidelines. For Aimovig, investors expect pressure for the remainder of the year due to high patient churn in the now-competitive anti-calcitonin gene related peptide (anti-CGRP) class (I’ve written at length about Eli Lilly's galcanezumab, Teva's fremanezumab), oral anti-CGRPs, and Botox).