These days, Regeneron (REGN 1.83%) seems to be the miracle stock that biotech investors are looking for. Sales of its biologic drug for ocular health, Eylea, and its anti-inflammatory drug, Dupixent, are soaring. Meanwhile, the company is also developing a promising antibody cocktail against COVID-19. In response, the market has pushed the shares up almost 60% year to date.

But I think the stock's momentum is not yet over, and now is an ideal time for investors who may have sat on the sidelines for too long to open a position. That's because of some crucial developments that may provide Regeneron's revenue and bottom line with another significant lift.

Blocks going up and to the right

Image Source: Getty Images.

The catalysts keep on coming

Regeneron's Libtayo is used as an immunotherapy for various forms of cancer. The biologic was initially approved in 2018 specifically to target metastatic cutaneous squamous cell carcinoma (CSCC), or CSCC that cannot be treated with radiation or surgery. In clinical studies, the biologic demonstrated a 3.7% complete response (defined as total eradication of a tumor), and 43.5% partial response (defined as 30% or more decrease in tumor diameter).

The company sought to expand its indication, and in April and May this year, Libtayo was successful in three clinical trials.

First was a phase 2 study in which Libtayo was used to treat advanced CSCC. In this investigation, 16% of patients who took Libtayo had a complete response, and 30% demonstrated a partial response. The average response time was just two months. For advanced cancer, the complete response rate shown here is very, very good.

Next was another phase 2 study, this time targeting basal cell carcinoma. In this investigation, Libtayo demonstrated a modest 29% overall response rate (defined as the combined rates of complete response and partial response). 

Last, and perhaps most important, was a phase 3 trial studying Libtayo as a first-line therapy for treating non-small-cell lung cancer (NSCLC). This trial was ended early because the drug demonstrated outstanding efficacy. In an interim analysis, patients who took Libtayo had a 32.4% lower risk of death compared with those in the placebo cohort. The difference was considered highly statistically significant.

One enormous market opportunity

Every day, about 9,500 people in the U.S. receive a diagnosis of skin cancer, and about 3 million Americans each year are diagnosed with either basal cell carcinoma or squamous cell carcinoma. NSCLC, meanwhile, accounts for 84% of the 228,820 cases of lung cancer each year in the U.S. Combined, the annual U.S. market size for Libtayo is about 3.2 million patients.

The drug costs $9,100 for a three-week treatment course, and it is recommended patients take a 30-minute intravenous infusion every three weeks. Hence, the annual treatment cost of Libtayo stands at about $158,000 before factors such as insurance and co-pay assistance play in.

Multiplying Libtayo's annual treatment cost by its total addressable patient size yields an overall potential market of well over 12 figures. This is obviously a very rosy scenario. But let's say Regeneron, for the sake of argument, manages to treat 10,000 carcinoma and NSCLC patients with Libtayo for one year. Even that will be enough to generate over $1.5 billion in revenue.

Before the April/May clinical trial results were released, Libtayo generated $61.7 million in revenue in the first quarter, which is 179% growth versus last year. Given these new potential indications, I think the biologic will experience even further growth. Hence, Regeneron is a solid pick for any biotech investors to have in their portfolios.