Regeneron (NASDAQ: REGN) CEO Leonard Schleifer was on the hot seat Monday at the Morgan Stanley healthcare conference. And the timing was either terrific or terrible, depending on your perspective. Regeneron stock opened more than 4% below its previous close, and things got worse during intraday trading.
The big drop came after Regeneron and partner Sanofi (NYSE: SNY) announced phase 3 results for Dupixent in treating asthma. While the study found that the drug reduced severe asthma attacks and improved lung function, some of the results raised concerns. Here's what Regeneron's CEO had to say as the biotech's stock sank.
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1. About those results
Schleifer understandably played up the fact that Dupixent demonstrated a positive effect in a broad group of patients with a strong safety profile. In fact, the drug reduced severe asthma attacks in patients with 300 eosinophilic cells/microliter or greater by 67%. Dupixent also improved lung function in this group by 18%.
However, Dupixent appeared to be less effective in subgroups of patients with lower levels of eosinophilic cells. Schleifer didn't really have an answer as to why, but agreed that the results tend show better effects as levels of eosinophilic cells increased.
When asked about why phase 2 results showed a higher decline in exacerbation rates for asthma patients, Schleifer said it's too early to know what caused the difference. He did note, though, that "estimates have ranges." The bottom line, in his view, was that Regeneron and Sanofi have two studies pointing to robust proof of activity for Dupixent in treating asthma with a "clean safety profile."
2. Competitors' data
Schleifer stated that he thought data from AstraZeneca's (NYSE: AZN) and Amgen's (NASDAQ: AMGN) phase 2 study of tezepelumab announced last week was "pretty interesting" and "showed activity." He offered a tepid congratulations to the potential competitors before adding that he's also "interested in what wasn't talked about in that drug," referring to results from an atopic dermatitis study that haven't been highlighted by AstraZeneca.
Regeneron's CEO was even less charitable when it came to AbbVie (NYSE: ABBV), which recently announced phase 3 results from a phase 2b study of upadacitinib in treating atopic dermatitis. Schleifer said that he's "not one to talk about other people's problems" as he mentioned AbbVie, then referred to the company's inclusion of data for Dupixent and upadacitinib on the same graph as "a pretty big sin" that was "a little annoying." He added that he "would talk about their safety data, but [he's] not that kind of person."
Some analysts think that Dupixent could lose market share to the AstraZeneca/Amgen drug and AbbVie's upadacitinib if they're both approved. One particular perceived benefit for AbbVie's drug is that it is taken orally rather than injected as Dupixent is.
3. Original agreement with Sanofi ending
Regeneron recently announced that its antibody discovery agreement with Sanofi will end at the end of 2017. This collaboration between the two companies was initially forged in 2007 and extended in 2010. When asked about this, Schleifer maintained that Regeneron and Sanofi continue to have "a very good relationship."
He went on to say that the two companies' partnership had "morphed" into a focus on immuno-oncology (I-O). Schleifer added that while Regeneron and Sanofi had a long-term partnership, there was "a limit to what [Sanofi] can do and a limit to what a company our size should do with one company."
4. Regeneron's I-O strategy
Schleifer's comments about the Sanofi relationship now focusing more on immuno-oncology led to a follow-up question about Regeneron's I-O strategy. He stated that Regeneron placed its bet on PD1 as a target rather than PD-L1 and that the data is beginning to show his company was right, a likely reference to problems experienced by AstraZeneca and others with their PD-L1 inhibitors.
Regeneron's I-O strategy, according to Schleifer, is to first get to market fast with a niche indication. The next step is to expand into other indications. After that, the company intends to start combination studies with its own pipeline candidates. Schleifer added that having internally developed drugs to use in I-O combinations was very important because of pricing concerns.
He pointed to the announcement by Regeneron and Sanofi last week that cemiplimab had received breakthrough designation from the Food and Drug Administration for treating metastatic cutaneous squamous cell carcinoma, the second-deadliest skin cancer after melanoma. Schleifer said that the companies hoped to submit the drug for approval in the first quarter of 2018 and hopefully win approval sometime next year.
5. What differentiates Regeneron
Not all of the questions for Leonard Schleifer were tough. He received at least one softball question about what differentiates Regeneron from other biopharmaceutical companies. His one-word answer: George. That response referred to Regeneron's co-founder, president, and chief scientific officer, George Yancopoulos.
Expanding on what sets Regeneron apart, Schleifer said that the company focuses on two principles: have a deep understanding of biology, and have world-class technology. Finally, he stated that the "secret sauce" for Regeneron was focusing on the long term rather than managing the business quarter by quarter. Whatever else you might think about Schleifer's answers and possible challenges for Dupixent, that secret sauce is one that all investors should follow also.
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