Shares of Regeneron Pharmaceuticals (REGN 0.82%), a large-cap biopharmaceutical company that develops treatments for eye disorders and other serious medical conditions, tumbled 10% during the month of November, according to data from S&P Global Market Intelligence. It appears that two factors were responsible for Regeneron's poor showing last month.
The biggest issue for Regeneron came toward the end of the month when it and development partner Bayer (BAYR.Y -0.52%) announced that combination treatments involving Eylea, Regeneron's lead drug that accounts for nearly 80% of total sales (including collaborative revenue), failed in two clinical studies. When combined with Bayer's angiopoietin2, the combination regimen failed to beat out Eylea as a monotherapy in midstage studies for diabetic macular edema and wet age-related macular degeneration. For some folks, the failure of this combination therapy wasn't a huge shock, with management talking down the combination following Regeneron's third-quarter earnings release. Nevertheless, it removes a pathway to higher sales growth for Eylea.
At the same time, Novartis (NVS -0.63%) announced at the beginning of the month that its experimental eye drug, RTH258, outperformed Eylea in a study designed to treat wet age-related macular degeneration. Active disease was observed in 23.5% of patients receiving RTH258, while 33.5% of Eylea patients at week 16 had active signs of disease. There was also encouraging data issued in June showing that RTH258 may require fewer eye injections than Eylea. Added together, Regeneron's Eylea could be staring down new competition in the not-so-distant future, which clearly has investors concerned.
The big issue moving forward for Regeneron, and what's troubling shareholders, is where growth will come from, if not from Eylea.
In the company's third-quarter operating report, Eylea sales galloped ahead by 12% to $953 million in the U.S., and by 20% in overseas markets where Bayer commercializes the drug. Demand and pricing power continue to fuel Eylea's sales, but it's pretty clear there needs to be added emphasis beyond Eylea.
A silver lining thus far has been the rapid uptake of eczema drug Dupixent, which generated net global sales of $89 million despite being launched just six months prior. Dupixent offers label expansion opportunities similar to Eylea, so there is hope.
Yet for each positive, Regeneron also has negatives. For instance, Praluent, a next-generation LDL-cholesterol-lowering injection, has been a major disappointment so far. It tallied just $49 million in sales during the latest quarter.
While I remain modestly optimistic about the company's future, I'd strongly suggest investors monitor Regeneron's efforts to differentiate its portfolio away from Eylea.