Shares of ENTA stock jumped Wednesday after Enanta Pharmaceuticals sued Pfizer over patent infringement. The suit claims that Pfizer's blockbuster Covid pill Paxlovid infringes on Enanta's recently won patent.
Although Paxlovid already is on the market and Enanta's pill is still in testing, the lawsuit revolves around the underlying technology for both. But it's not clear whether Enanta is in the right here, SVB Securities analyst Rosanna Ruiz said in a report to clients.
Enanta's patent pertains to the protease inhibitor, a key component in antiviral technology. The company asked for a provisional patent in July 2020. Pfizer followed, with its first paperwork in September 2020, Ruiz said. But rival Pardes asked for patent protection of its protease inhibitor before Enanta, in April 2020.
Further, those dates might not prove who "invented" the technology first, she said.
"Thus, Pfizer may still have a nonzero chance to show that it 'beat others to the punch' in developing (its protease inhibitor called) nirmatrelvir 'first,' which could possibly invalidate external overlapping patents that were filed at an earlier date by competitors for similar protease inhibitor molecules," she said.
On today's stock market, ENTA stock launched 3% higher to 41.49. Pfizer stock also rose 2% to 49.05.
ENTA Stock: Seeking Royalties
Enanta seeks damages that analysts say could lead to royalties on sales of Paxlovid. RBC Capital Markets analyst Brian Abrahams says it could take years for the lawsuit to reach a conclusion, even if just a settlement.
"A typical royalty rate might be in the 6% range, which on sales of Paxlovid's magnitude, could be more than $1 billion annually in its peak years and may speak to why it might be worth Enanta's time and expenses to pursue this," he said in a report to clients.
But the lawsuit's timing could be challenging for Enanta.
Enanta is working on a Covid antiviral pill called EDP-235 in early-stage testing. Phase 1 results are expected in July, Ruiz said. Enanta isn't seeking injunctive actions that would prevent Pfizer from selling Paxlovid.
Could End Up With Glass Half Empty
But that doesn't mean Enanta isn't at risk of a "glass half empty" scenario either, she said.
"If Pfizer responds assertively to defend its Paxlovid intellectual property, possibly seeking to invalidate Enanta's issued patent, this could negatively impact future development of EDP-235 in Covid-19," she said.
Ruiz has a market perform rating and price target of 44 on ENTA stock. She notes Enanta is also toeing a tricky public image problem.
"In our view, if (despite its best efforts) Enanta's suit somehow impairs Paxlovid's access/availability to physicians and patients, this could complicate Enanta's public image, as Paxlovid is broadly used to treat Covid-19 patients at risk for severe disease with seemingly good real-world benefit so far," Ruiz said.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
