Exactly How Bad Is Regeneron's Latest News?

By Keith SpeightsMarketsFool.com

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Are Regeneron Pharmaceuticals (NASDAQ: REGN) and partner Teva Pharmaceuticals (NYSE: TEVA) experiencing a case of deja vu?In 2011 and 2012, the FDA placed clinical holds on investigational drug fasinumab that were eventually lifted. Now, the FDA has placed another clinical hold on the drug, this time for a phase 2b study of fasinumab in treating patients with chronic low back pain.Exactly how bad is this latest news for Regeneron?

Now and then

The previous FDA clinical hold didn't only impact fasinumab. In 2012, the agency put all experimental treatments that blocked nerve growth factor (NGF) proteins on a partial clinical hold after reports of sympathetic nervous system toxicity in animals being treated with anti-NGF therapies. This time it's different.

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In the phase 2b study, a patient taking a high dose of fasinumab developed arthropathy, anadvanced joint disease. Because of this case, the FDA placed the study on clinical hold and asked that the study's protocol be changed.The one patient observed to develop arthropathy also hadadvanced osteoarthritis at the beginning of the phase 2b study.

Regeneron opted to perform an unplanned interim review of the study after the FDA's action. The company said that review "showed clear evidence of efficacy." However, Regeneron also stated safety results from the interim reviewwere "generally consistent with what has been previously reported with the class."

That last statement isn't great news. Anti-NGF drugs have raised safety concerns for years. Those concerns have focused oncases of joint destruction and osteonecrosis (reduced blood flow to joints) associated with the treatments.

Regeneron and Teva intend to design a late-stage study forfasinumab in treating chronic low back pain that excludes any patients with advanced osteoarthritis. Despite the latest setback, both companies still believe that there is a pathway to regulatory approval for the drug in the indication.

A worse pain?

More questions were raised in another update onfasinumab. Regeneron announced results from a phase 2/3 study of the drug in treatingosteoarthritis pain after 36 weeks.The company previously announced positive results from the study at 16 weeks in May.

Regeneron said that the latest results show that higher rates ofarthropathy could be dose-dependent. While only 2% of patients taking the 1-milligram dose offasinumab experiencedarthropathies, the percentage of patients with advanced joint disease increased at higher dosages. Around 12% of patients taking the 9-milligramdose of the drug experienced arthropathies.

The pattern was sufficiently clear that Regeneron and Teva are now changing course. Only lower doses offasinumab will be administered in the ongoing phase 3 study of the drug in treatingosteoarthritis.


The immediate impact of the FDA clinical hold and osteoarthritis study updatewas that Regeneron's stock price fell 1.3%. Teva's shares were hit a little harder, dropping nearly 3%.

How important isfasinumab to Regeneron? I'd say it's somewhat important but certainly not critical to the company's future. Credit Suisse doesn't even include the drug yet in its financial models for the biotech, citing skepticism about pain clinical studies.

On the other hand, if fasinumab fails to win approval because of safety issues, it would definitely hurt.Teva paid Regeneron $250 million up front just weeks ago for 50% of fasinumab'srevenue. Last year, Regeneron sold marketing rights for the drug in 11 Asian countries toMitsubishi Tanabe Pharma for $325 million. Those price tags hint that fasinumab should generate significant revenue if it can win approval.

The latest hurdle could ultimately prove to be a positive thing for Regeneron and Teva. Because the phase 3 studies forfasinumab are being changed in response to the safety concerns, it could increase the drug's chances for approval. If that happens, Regeneron's latest bad news might not be all that bad after all.

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Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.