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Biogen to Pay $1.25B to Forward Pharma in Tecfidera Lawsuit

Zacks Equity Research

Biogen Inc. BIIB recently entered into a settlement and license agreement with Danish biotech, Forward Pharma A/S FWP with respect to an ongoing patent dispute for Biogen’s best-selling multiple sclerosis (MS) drug, Tecfidera.

While Forward Pharma’s shares surged 48% on Tuesday, Biogen’s shares lost 0.7%. However, over the past one year, Biogen’s stock rose 4.9%, while the Zacks classified Biomed/Genetics industry declined 9.5%. Biogen’s outperformance was backed by consistently strong earnings results as well as regular positive news flow and regulatory updates.

Coming back to the settlement agreement, Biogen has agreed to pay $1.25 billion to buy the license to Forward Pharma’s intellectual property covering dimethyl fumarate (DMF), the active ingredient of Tecfidera.

Though an upfront payment of $1.25 billion sounds pretty hefty, the license will help Biogen extend the patent life of Tecfidera, which accounts for around 40% of its sales, thereby removing a major overhang from the stock. In the first nine months of 2016, Tecfidera recorded sales of $2.97 billion, up 12% year over year.

However, the settlement agreement is subject to the approval of Forward Pharma’s shareholders and other customary conditions.

Forward Pharma is challenging Biogen’s ‘514 patent covering the treatment of multiple sclerosis with 480mg of DMF as stated in Tecfidera label. A final decision is expected in the first quarter of this year. Separately, Forward Pharma alleged that Tecfidera infringes its European patent (the '355 patent). Note that the latest settlement agreement doesn't resolve these ongoing patent disputes in the U.S. or Europe.

If a company loses a patent dispute, it may be required to take its product off the market and pay hefty sums. However, depending on the outcome of the U.S. and European cases, Biogen will only be entitled to pay future royalties on sales of Tecfidera.

In a separate press release, Biogen announced an agreement with Siemens Healthineers, the healthcare business of Siemens AG, to jointly develop magnetic resonance imaging (MRI) tools to identify key markers of MS disease activity and progression.

Biogen carries a Zacks Rank #2 (Buy). A couple of other stocks worth considering in the health care sector include Anika Therapeutics, Inc. ANIK and Enzo Biochem, Inc. ENZ. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Anika Therapeutics’ earnings estimates increased by almost 4% for 2017 over the last 60 days. The company posted a positive surprise in all the four trailing quarters with an average beat of 33.14%. Its share price increased 35.3% in the past one year.

Enzo Biochem’s loss estimates narrowed from 17 cents to 16 cents for 2017 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 22.50%. Its shares rose 48.7% in the past one year.

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Enzo Biochem Inc. (ENZ): Free Stock Analysis Report
Biogen Inc. (BIIB): Free Stock Analysis Report
Anika Therapeutics Inc. (ANIK): Free Stock Analysis Report
FORWARD PHARMA (FWP): Free Stock Analysis Report
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