The runaway success of its vision-restoring drug, Eylea, turned Regeneron Pharmaceuticals (REGN -0.80%) into one of biotech's best performing stocks between 2012 to 2015. However, the company has lost luster with investors since then because of an anemic product launch and a slowing in Eylea's growth as it's matured.
As a result, Regeneron Pharmaceuticals is no longer at the forefront of investors' minds, and I think that could be creating a great opportunity for investors on the sidelines to step up and buy this company for their portfolios.
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Dominant position in a growth indication
Eylea's less frequent dosing schedule than Novartis' Lucentis and arguably better ability to restore vision in elderly patients suffering from common causes of vision loss, including wet age-related macular degeneration (AMD) and diabetic macular edema (DME), have made it one of the top-selling medications in the world.
In the second quarter, Eylea's net product sales in the U.S. alone were $992 million, up from $919 million last year. Regeneron pocketed $263 million in profit on Eylea's sales outside the U.S. last quarter, where Bayer AG (BAYR.Y -0.21%) markets it. Ex-U.S. revenue reported on Bayer sales in Q2 2017 was $204 million. Overall, Eylea's global sales totaled $1.66 billion in Q2, giving the drug an annualized sales run rate above $5.2 billion worldwide.
The number of people suffering vision loss from wet AMD continues to climb because of aging baby boomers, and the adoption of Western diets worldwide is increasing diabetes and its accompanying cases of vision loss, including DME.
Because these long-term trends are accelerating, rather than abating, it's a good bet that the Eylea's addressable market is going to increase, rather than shrink. If so, there's reason to believe Eylea will remain the cornerstone of Regeneron's product portfolio, at least until patents begin expiring in 2023.
Expanding its portfolio
Eylea is unquestionably the driver of Regeneron's fortunes, but the company's investing big money into research and development, and those investments have begun to pay off.
Through a collaboration with Sanofi SA (SNY -1.56%), Regeneron has successfully developed and launched a cholesterol-busting drug, Praluent, an eczema drug, Dupixent, and a rheumatoid arthritis drug, Kevzara. All three of those drugs target massive megablockbuster indications, but it's Praluent and Dupixent that I find most intriguing.
Initially, Praluent launched in 2015 to sky-high projections because it targets stubborn bad cholesterol levels in patients who are at risk of cardiovascular disease -- a patient population numbering in the millions. However, a $14,000 list price per year led to payer pushback that's crimped its use and hamstrung its sales.
Its lackluster launch isn't a secret, though, and now that its cardiovascular outcomes study has shown it lowers the risk of cardiovascular events including heart attack, stroke, and death, its sales are beginning to perk up. The FDA hasn't approved adding the outcomes data to Praluent's prescribing label yet (a decision is expected next April), but that hasn't stopped doctors from prescribing it more frequently, or payers from dropping barriers to its access. In Q2, Praluent's revenue was $73.5 million, a nearly $300 million annualized sales run rate, up from $46.1 million in the same quarter last year. Importantly, a deal with the nation's second-largest pharmacy benefit manager, Express Scripts (ESRX), makes it the preferred drug in its class for Express Scripts patients beginning in July, and that should provide a nice sales boost from here.
Dupixent's launch has gone better, but investors may still underappreciate its ability to move the revenue needle at Regeneron. Its sales were $209.2 million in Q2, up from $29 million year over year, and recently, Sanofi and Regeneron filed for FDA approval to expand Dupixent's use to asthma. If that indication is added to Dupixent's label, this could become a multibillion-dollar drug someday.
Kevzara hasn't been nearly as disruptive. However, it exited the second quarter at nearly a $100 million annualized sales run rate, so it's no slouch.
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The pipeline is progressing
In addition to expansion studies that could increase sales for its existing drugs, Regeneron is also researching new medicines that could contribute meaningfully to its future revenue.
It has 19 product candidates in clinical-stage development, the most advanced of which is cemiplimab, an anti-PD-1 drug that's under FDA review for metastatic or advanced cutaneous squamous cell cancer (CSCC), the second-most common skin cancer behind melanoma. Most CSCC patients can be cured by surgery, but up to 8,000 Americans die from it every year, in part because there aren't any therapies specifically approved to treat advanced cases.
Regeneron's conducting studies of cemiplimab as a first and second-line non-small-cell lung cancer treatment and as a second-line therapy for cervical cancer, too. Since anti-PD-1 drugs are among the most successful immuno-oncology class of drugs launched so far, with the two leading anti-PD-1s, Opdivo and Keytruda, generating more than a combined $12 billion in annualized sales, there's reason to think this may become a big seller someday.
What to keep an eye on
Arguably, the most important things for investors to be watching from here are three fast-approaching FDA decisions. A decision on dupixent in asthma is expected on Oct. 20, and a decision from the regulator on cemiplimab is scheduled to come on Oct. 28. Next year, the FDA will make a decision on including the Praluent outcomes study data on its label, and in May it's scheduled to decide whether to expand Eylea's label to include its use in patients with diabetic retinopathy (DR). About 3.5 million people suffer from DR without DME, so an OK for that indication could energize Eylea's sales.
Overall, approvals in these indications could be what's necessary to rekindle investors optimism in Regeneron Pharmaceuticals, so picking up some shares of it now could be a smart decision.
