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Is This Regeneron's Biggest Opportunity?

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It has been a phenomenal year for Regeneron (NASDAQ: REGN  ) . The company's shares have gained nearly 75% in 2013 so far on the back of some major developments. Regeneron's Eylea injection was approved by the European Commission for the treatment of visual impairment due to macular edema secondary to central retinal vein occlusion, or CVRO. Eylea has already received approval from the Food and Drug Administration for wet age-related macular degeneration and macular edema following CRVO. In addition, the company has reported positive phase 3 data for Eylea in additional indications. However, the company's biggest opportunity perhaps is in cholesterol management.

The big opportunity
Earlier this month, Regeneron released data on its experimental drug alirocumab. The data indicates that alirocumab may become the first-in-class PCSK9 inhibitor to get approved for cholesterol management.

Alirocumab is a PCSK9 targeting monoclonal antibody being developed by Regeneron in collaboration with Sanofi (NYSE: SNY  ) . Phase 3 trials of alirocumab showed that it reduced bad cholesterol, or LDL-C, three times more than Merck's Zetia, an add-on drug to statin therapy. The company lays significant importance to the results because most of alirocumab studies focus on "investigating alirocumab in combination with lipid-lowering therapies," whereas this data relates to the drug as a stand-alone therapy.

The need for alternative treatment options with additional benefits cannot be denied as there is a sizable patient population that does not respond to statin drugs. Ever since its discovery in 2003, PCSK9 has emerged as an attractive target and blocking it is considered to be the new approach to cholesterol management. The market potential of lipid-lowering drugs is huge -- $18.5 billion in the U.S. alone in 2011, according to IMS Health. U.S. doctors wrote nearly 250 million prescriptions for cholesterol-lowering drugs in 2011, notes IMS Health.

Amgen (NASDAQ: AMGN  ) has a PCSK9 inhibitor candidate, AMG 145, which has demonstrated significant reduction (up to 59%) in LDL-C in a study involving more than 1,200 patients. Roche also has RG7652, which is moving toward advanced trials after having demonstrated significant reduction in cholesterol levels.

Other opportunities for Regeneron
Alirocumab is also being tested in patients with heterozygous familial hypercholesterolemia, or HeFH, a common genetic disorder that results in elevated LDL cholesterol levels.

In mid-October, Regeneron also announced top-line late-stage results for Eylea for macular edema following branch retinal vein occlusion, a condition that blocks blood vessels branching out from the main vein draining the retina. The most common retinal vascular disorder, it is also a significant cause of vision impairment.

Eylea was initially approved for neovascular (wet) age-related macular degeneration and later for macular edema following central retinal vein occlusion. On both occasions, these approvals were instrumental in the spectacular rise in the price of Regeneron stock.

Alirocumab could significantly boost the top and bottom line if approved
The results from the phase 3 trial for alirocumab have been encouraging. If approved and successfully launched, alirocumab has the potential to significantly boost Regeneron's top line and bottom line. According to independent research firm BioMed Tracker, peak sales for alirocumab could reach $3.7 billion by 2023.

Given the prospects for alirocumab, it is therefore not surprising that Regeneron shares are currently hovering around all-time high levels. With the stock hovering around $300 a share, shares are currently trading at a P/E ratio of 39 and PEG of 1.34. This isn't cheap, even with the major long-term opportunities that the company has with alirocumab and its other drug candidates, so investors will want to be cautious considering this lofty valuation.

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