Shares of Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) created a high-water mark around three and a half years ago that's still 51% above recent prices. The drugs it outlicensed to its big pharma partner, Sanofi (NYSE: SNY), succeeded in the clinic. Unfortunately, commercial launches that take baby steps when investors expect giant leaps can pressure even a biotech's stock price no matter how productive its discovery engine may be.
The past few years have been disappointing, but there are reasons to suspect the younger members of Regeneron's family of innovative drugs are about to start climbing in the quarters ahead. Let's begin with recent developments that could finally kick the Sanofi collaboration into high gear.
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1. Praluent relaunch
Heart disease is still the leading cause of death for men and women in the U.S. and uncontrolled cholesterol plays a big role. Statins are a relatively cheap solution for some, but not all patients. Regeneron and Sanofi have plenty of data that show its next-generation cholesterol-lowering treatment can benefit this underserved group, but getting insurers to pay for it has been an uphill battle.
While there's little chance Praluent will become a megablockbuster that commands its original $14,600-per-year list price, Regeneron and Sanofi have finally made end payers an offer they'll find hard to refuse. Earlier this year, the partners showed that Praluent reduced a group of high-risk patients' risk of death by 29% when compared to statins alone. A nonprofit drug-pricing watchdog, the Institute for Clinical and Economic Review (ICER), used data from the 18,924-patient trial to come up with a value-based price for this group that starts at $4,500 per year for a group of between 300,000 and 400,000 patients.
Sanofi took the assessment and started engaging end payers to see if any would offer easy reimbursement for a lower net price that reflects ICER's assessment, and the industry listened. As of July 1, the partners will cut the net price of Praluent in return for straightforward access for around 25 million Americans covered by the Express Scripts (NASDAQ: ESRX) national formulary. The pharmacy benefits manager, and will also remove formulary access for its main competitor, Amgen's (NASDAQ: AMGN) Repatha.
If the sweetened offer works as intended, it could boost annual Praluent sales from a meager $195 million in 2017 past the $1 billion within a couple years. That's far less than the partners originally intended, but the royalty revenues will go a long way toward lifting Regeneron's bottom line.
2. Dupixent for asthma
Around a year ago, the partners launched an eczema drug that's already surpassed Praluent on the sales charts, and a possible expansion to asthma could send Dupixent sales through the roof. In studies supporting an application under review at the moment, Dupixent reduced severe attacks by up to 67% for some patients with uncontrolled asthma. It also led to lung function measurements that suggest it can compete with GlaxoSmithKline's (NYSE: GSK) Nucula for a slice of a global market for asthma treatments expected to reach $56.5 billion by 2025.
Estimates vary, but an approval for asthma could add several billion to Dupixent's annual sales figures, not that its launch needs a boost. As one of the first new eczema treatments for patients that aren't satisfied with topical steroids, Dupixent sales hit an annualized run rate of $556 million during its third quarter after earning approval in the U.S. That isn't nearly as fast as analysts had been predicted, but it still appears capable of generating more than $4 billion annually at its peak.
3. Eylea looks all right
Regeneron's revenue stream is awfully lopsided with U.S. sales of its blockbuster eye drug generating 65% of total revenue. The eyeball injection that slows down top causes of blindness among older adults could face some competition from Novartis' (NYSE: NVS) brolucizumab or Roche's (NASDAQOTH: RHHBY) RG7716, two candidates in late-stage development.
In February, both companies presented data from clinical trials with their respective candidates that weren't pretty good but failed to show any clear advantages over Regeneron's market leader. When it comes to regular eyeball injections intended for long-term blindness prevention, doctors aren't exactly itching to try something new without compelling reasons. Until brolucizumab or RG7716 provide some, I'm not going to worry about a sudden Eylea sales plunge.
Global Eylea sales rose 14% in 2017 to $5.9 billion and accelerated to 20% year-to-year growth based on first-quarter results. Investors still need to keep their eyes open for more definitive results from Eylea's potential competition. At the moment, though, it looks like sales of the pricey eye drug will continue rising along with increasing rates of diabetes, a condition that often leads older adults to seek the treatment.
I'm liking the new price
Even though Regeneron no longer commands an insane price-to-earnings ratio, the average analyst following the stock expects profits to grow at a speedy 12.7% rate over the next five years. Down the road, shareholders might not boast about megablockbusters from the Sanofi collaboration, but years of double-digit profit growth seems like a great consolation prize.
Following the recent dip, the stock trades at just 16.0 times this year's earnings estimates, which is a bit less than the average stock in the benchmark S&P 500 index. With a solid chance at generating above-average growth in the years ahead, this old favorite looks like a buy right now.
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