Shares of Regeneron Pharmaceuticals Inc. (REGN -0.28%) took a hit last month as investors adjusted their outlook for a recently launched eczema drug with megablockbuster potential. According to data from S&P Global Market Intelligence, the stock slid 9.95% in October as investors fretted about Dupixent's ongoing commercial launch in light of surprisingly strong data from a potential competitor.
Dupixent is a twice-monthly injection expected to generate around $5 billion in annual sales by 2022 as a treatment for patients with moderate to severe cases of eczema and hopefully asthma. In September, Regeneron and its big pharma partner, Sanofi (SNY -0.28%), released late-stage data from an asthma trial that was good but not great. The observed 46% annual attack rate reduction might earn an approval for the indication, but it wasn't dramatic enough to make a big splash in a pool crowded with effective treatment options.
Regeneron shares have been trading around 27 times this year's earnings expectations. This sky-high multiple makes the stock extra sensitive to any forward outlook adjustments. Disparaging comments from Wall Street analysts citing potential competition for Dupixent from AnaptysBio (ANAB -4.20%) and its early-stage eczema candidate were all it took to knock Regeneron's price down a few pegs.
In the U.S. alone, around 3.2 million children have moderate to severe eczema, and the size of the adult population underserved by standard treatment is staggering. With an annual list price of around $36,000 in the U.S., this drug's sales potential is almost unlimited, at least in theory.
Unfortunately, Regeneron is becoming the poster child for a disturbing industry trend: End payers are pushing back harder than ever when it comes to pricey new drugs with big patient populations. Insurers and pharmacy benefits managers successfully stomped megablockbuster expectations for Sanofi and Regeneron's next-generation cholesterol drug Praluent. Investors will want to keep their eyes peeled for signs recently launched Dupixent can avoid the same fate when Regeneron reports third-quarter earnings on Wednesday, Nov. 8.