What happened
After a solid sales launch for the company's new eczema drug and a Food and Drug Administration approval for its new rheumatoid arthritis drug on May 22, shares of Regeneron Pharmaceuticals (REGN -0.01%) rallied by 15.9% last month, according to S&P Global Market Intelligence.
So what
The launch of Dupixent and the approval of Kevzara are important milestones for Regeneron Pharmaceuticals, a big-cap biotech that's long relied heavily on its top-selling age-related macular degeneration drug Eylea for revenue.
IMAGE SOURCE: GETTY IMAGES.
On May 4, management reported first-quarter financial results and updated investors on its progress in rolling out Dupixent, which was approved by the FDA in April. About 1,800 doctors have already written 3,500 Dupixent prescriptions following its green light, and with an addressable market of 1 million people in the U.S. alone and a price tag of $37,000 per year, early results suggest this drug has a good shot at becoming a best seller.
Kevzara could similarly move the company's profit needle higher. It outperformed the $14 billion-per-year rheumatoid arthritis drug Humira in clinical trials, and its different mechanism of action suggests it could play a valuable role in treating patients who no longer respond to drugs like Humira.
The prospect of launching two future blockbusters at once is undeniably good news for investors, many of whom suffered losses in the past year because of disappointing sales for Praluent, the company's cholesterol-lowering drug. Praluent launched to big-time expectations, but a $14,000-per-year price tag that's far north of commonly used statins has crimped demand. Praluent's sales last quarter were only $36 million.
Now what
Eylea will remain the company's big moneymaker for a while. It's widely prescribed, and last quarter, sales were $854 million in the United States alone. Regeneron Pharmaceuticals booked another $175 million in Eylea revenue from sales outside the U.S., where it's marketed by Bayer.
Dupixent and Kevzara target multibillion-dollar indications, and they appear differentiated enough from competitors for me to think they have a good shot at being nine-figure -- or higher -- drugs, but it will take a little time for them to reach their peak potential. Furthermore, Regeneron developed these drugs with Sanofi, so the two companies will split their profit. Meanwhile, Praluent's future is uncertain because of a patent dispute that could force it off the market someday.
Nevertheless, Regeneron's shares could still be a bargain. Despite their run-up last month, prices remain about 20% off their 2015 highs. If Dupixent and Kevzara succeed and earnings jump as a result, it wouldn't surprise me if shares continue to rally.
