What's in Regeneron's Pipes?

Regeneron (NASDAQ: REGN  ) will report its earnings this Friday and dazzle investors with another strong showing for vision treatment Eylea. The company's trading up more than 100% in the past year and has Sanofi (NYSE: SNY  ) backing many of its projects. It's not a bad time to be Regeneron. But selecting well-rounded investments means looking at the broader picture -- especially what products will define the company's future.

But before we start digging pipelines...

A quick note on Sanofi
Regeneron has several product deals going with Sanofi, and they all have the same basic terms. Sanofi has the option to co-develop pipeline drugs and would then pay all of the development costs up front. Regeneron will refund half from its future royalty payments if the drug make it to market. The companies would split profits in the U.S. and on a sliding scale basis in other countries.

Now on to the show...

Approved products
Regeneron superstar Eylea received its first approval for wet age-related macular degeneration, a common cause of vision loss, and its second  for macular edema following a retinal vein blockage. The drug's going up against Lucentis from Roche and Novartis (NYSE: NVS  ) . As Sean Williams explains, a funny thing happened when Eylea hit the market last year -- it expanded to accommodate both drugs.

Eylea pulled in $838 million domestically in 2012 and might hit in the area of $1.2 billion this year. Regeneron had to raise Eylea sales estimates three times last year, so this week's report could get interesting. This is a partnered project with Bayer and the powerful backer will help grow this initial growth.

The other approved products have hit some snags.

Colorectal drug Zaltrap faced a public outcry last year because its high price tag didn't come with higher efficacy. Sanofi responded with a 50% price slash that puts it closer to the price of Roche's Avastin, which had nearly identical trial results.

Arcalyst currently serves the niche market for a rare genetic inflammatory disease. But Regeneron's attempts at a gout label expansion received a unanimous panel vote against Food and Drug Administration approval. The FDA wants more trials and data that show that the seemingly minimal efficacy is worth the potential cancer risks.

Phase 3
Rheumatoid arthritis: Regeneron and Sanofi teamed up on the rheumatoid arthritis injectable drug sarilumab. Mid-stage trials showedpositive results for RA but flunked out with ankylosing spondylitis, a type of arthritis primarily affecting the spine. RA will remain the drug's focus in the future.

The mid-stage trial tested sarilumab in conjunction with traditional RA drug methotrexate. The primary endpoint was the portion of patients achieving symptom reduction of at least 20%. At the highest dose, 72% of patients met that endpoint. But the number slid to 49% at the lower dosage -- close to the 46% who achieved the endpoint with methotrexate alone.

If approved, sarilumab would enter a crowded RA market led by Humira from the Abbott spinoff AbbVie (NYSE: ABBV  ) . Future competition may come from more oral treatments approaching market that offer better dosage convenience than injections.

Hypercholesterolemia: I've previously covered the hot new class of cholesterol medications called PCSK9 inhibitors. Regeneron and Sanofi lead the pack with REGN727 with phase 3 under way and a final FDA push expected in 2015. While statins don't need to quake in their boots, these drugs could find a home among patients resistant to statins or with specific needs that require a bit more potency.

Here's a quick recap on their drug. Mid-stage trial results showed a "bad" cholesterol reduction of 40% to 72% in patients already taking Lipitor. That compares to a 5% reduction with placebo. Patients with the genetic condition heterozygous familial hypercholesterolemia had drops of 28.9% to 67.9% compared to 10.7% with the placebo. HeFH patients tend to need more treatment than what statins alone would provide, so that data is particularly promising.  

Regeneron's drug runs slightly ahead in the pipes of a competing project from Amgen.

Phases 2 & 1
Lower-stage drugs tend to have far less information than the late-stage drugs.

REGN688 is in phase 2 for a type of asthma and phase 1 for an inflammatory skin condition. Regeneron should report proof-of-concept data on this drug at health-care conferences this year.

The only other phase 2 project sits in limbo. REGN475 treats osteoporosis of the knee and other pain conditions. This drug belongs to the anti-nerve growth factor class that received an FDA hold in 2010 due to the discovery of serious joint issues. An FDA panel last spring voted to allow patient studies to continue. If Regeneron continues the project, REGN475 will have to return to early stage trials to reprove efficacy and safety.

Phase 1 involves a quartet of antibody projects for advanced malignancies and metabolic disorders. There's also a few projects with scant information. These projects won't become significant until mid-stage data becomes available.

Foolish bottom line
Eylea continues to dominate for Regeneron, but that alone doesn't merit the current share price. Regeneron's growth over the past year isn't sustainable, and its best pipeline project belongs to an unproven class of cholesterol medications. I would wait for the Eylea optimism to die down to purchase shares at a decent price.

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