A legal dispute with the European Patent Office over the European patent for its lead product candidate surprisingly presents a strong buying opportunity for clinical stage biopharmaceutical company Alder Biopharmaceuticals, Inc. (NASDAQ: ALDR), according to an analysis report (http://nnw.fm/8j0TO) released by Aegis Capital Corp on November 23. As such, Aegis analysts reiterated a ‘Buy’ rating for the company and proposed a higher stock price target of $41, compared to the $25.28 stock price at the time the report was issued.
The report acknowledges that the ruling by the European Patent Office’s Opposition Division is unfavorable to product candidate ALD403 and a setback for Alder Biopharmaceuticals and Eli Lilly and Company (NYSE: LLY) in their intellectual property legal proceedings. However, Aegis analysts view the decision as a buying opportunity for Alder, as the valuation impact to the company is minimal. Since the primary market for ALD403, a promising innovative product for migraine prevention and treatment, is still the United States, the European Patent Office ruling is unlikely to have a major impact, the Aegis report says, estimating only an approximate $2 per share decrease from its expected target price.
The dispute stems from opposition to a European patent filed for ALD403 by Alder and Eli Lilly back in July 2014. The European Patent Office’s Opposition Division on November 18 of this year issued an oral ruling unfavorable to the product, insisting that the entire patent should be revoked because it puts forth claims that are too broad and go beyond what is allowed under the European Patent Convention. The patent in question initially claimed proprietary rights over the use of calcitonin gene-related peptide (CGRP) antibodies in therapies designed to prevent vasomotor symptoms associated with CGRP. In the meantime, it has been amended heavily to cover only narrower claims over the use of CGRP antagonist antibodies for the treatment and prevention of headaches, such as migraines and cluster headaches.
The European Patent Office’s Opposition Division’s written ruling is expected in the following weeks. In the meantime, Alder and Eli Lilly already have plans to file an appeal against the decision, based on their initial argument that the broad claims the European Patent Office granted originally should not have been allowed and therefore should be revoked entirely. According to the Aegis Capital Corp report, it’s very likely that the Technical Board of Appeal of the European Patent Office will not uphold the initial ruling of the Opposition Division, since the original claims made by the patent were indeed too broad and went against European Patent Convention provisions and requirements.
Regardless of the outcome, the Aegis report notes, it is unlikely to impact Alder’s U.S. business, given the substantial patent system differences between the United States and the European Union. So even if Alder loses the European Patent Office Case, this will not block the company’s right to move forward with ALD403 clinical development and eventual commercialization in the U.S.
The Aegis Capital Corp report also reiterated a ‘Buy’ rating with a stock price target of $41 for Alder and identified a series of potential risks for investors, including typical risks associated with investments into pre-clinical healthcare development companies (regulatory, research and development, commercialization and manufacturing) and specific risks associated with investing in Alder Biopharmaceuticals (intellectual property rights over ALD403, binary events related to the company’s development programs, the company showing no history of profitability and the possibility of needing more funds to commercialize its products).
For more information, visit the company’s website at www.alderbio.com
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