Regeneron Pharmaceuticals (REGN 0.45%) shares have made little headway since the disappointing launch of Praluent in 2015. Perhaps, the company's latest drug, cemiplimab, can change that. Regeneron and Sanofi (SNY -0.94%) reported updated data for cemiplimab in skin cancer earlier today and based on that data, the two companies have begun a rolling application for FDA approval. Will this drug move the needle for these companies?

What it does

Cemiplimab belongs to a class of drugs called PD-1 inhibitors that help disable a cancer's ability to escape detection by the immune system.

Scientists working together in a laboratory at a table.


The FDA has already approved a slate of PD-1 and PD-L1 drugs, and because of their efficacy and relative safety, these drugs are generating significant sales. For example, Bristol-Myers Squibb's (BMY -0.72%) Opdivo and Merck & Co.'s (MRK -1.22%) Keytruda are multibillion-dollar blockbusters.

PD-1 inhibitors' biggest commercial success has come from their use in treating more common cancer indications, including melanoma and non-small cell lung cancer.

Initially, Regeneron and Sanofi are taking a different approach with cemiplimab. The data that was presented today was for its use in advanced cutaneous squamous cell carcinoma (CSCC).

CSCC is the second most common skin cancer behind melanoma, but it's usually easily treated by surgery and radiation. In some patients, however, it can be deadly. There are between 5,000 to 10,000 advanced CSCC cases diagnosed annually in the U.S., and since there are few treatment options available, between 3,900 to 8,800 Americans die annually from this cancer.

Hopefully, cemiplimab can help that number drop. In its trials, cemiplimab delivered a 46.3% response rate in 82 patients diagnosed with advanced CSCC, and at the time of the analysis, 32 of 38 responses were ongoing, with a minimum follow-up of six months.

What's the impact for Regeneron?

Regeneron and Sanofi are aiming to complete their filing in the first quarter, so a speedy review could get cemiplimab on the market by the end of 2018. While there's no guarantee that the FDA will approve cemiplimab, the trial results are encouraging, and prior approvals of other PD-1s validate the drug's mechanism of action.

If it's approved, cemiplimab could produce hundreds of millions of dollars in annual sales. Existing PD-1 inhibitors cost about $150,000 per year, so cemiplimab's likely to be an expensive therapy, too. If we assume a net price of $100,000 and its use in 5,000 patients per year, it could generate about $300 million in U.S. sales.

What's next

Regeneron and Sanofi are big companies that are going to split profit on cemiplimab, so this drug's immediate impact on their top and bottom lines will be small.

Over time, however, it could become a significant driver of sales growth because it's being studied in treating other forms of cancer. The companies are already conducting pivotal studies in first-line non-small cell lung cancer, second-line cervical cancer, and advanced basal cell carcinoma. Additional studies that use the drug in combination with other medicines are ongoing in multiple myeloma and solid tumor cancer. If those studies pan out, then cemiplimab could be a multibillion-dollar drug.