Regeneron Pharmaceuticals (REGN +0.69%) investors have lost a lot of money since 2015. However, shares are making back ground after key FDA drug approvals, and a number of intriguing drugs in its pipeline have me thinking that there's more room left in this stock to run higher.
Expanding its reach
For years, Regeneron Pharmaceuticals has been plowing revenue from its top-selling eye drug, Eylea, back into research and development, and those efforts are starting to pay off with a more diversified product lineup that now includes Praluent, Dupixent, and Kevzara, too.
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Praluent was the first of this group to win over FDA regulators when it won an OK in summer 2015. The drug belongs to a class of drugs known as PCSK9 inhibitors that help patients clear more bad cholesterol from the bloodstream by boosting the number of cholesterol receptors in the liver.
So far, Praluent's sales have been tepid, and that's hurt Regeneron's share price. Yet despite push-back from insurers that are unwilling to pay for the $14,000-per-year drug in anyone other than the toughest-to-treat cases of high cholesterol, it's still generating sales at over a $100 million annual clip, and its sales are growing. Last quarter, Praluent produced $36 million in revenue, nearly triple levels from the same quarter in 2016.
Dupixent is the second of its new drugs to score a FDA green light. The eczema drug inhibits interleukin-4 and interleukin-13, two anti-inflammatory proteins that can lead to eczema, a condition that causes itchy skin lesions and other symptoms that can take a big toll on patients' quality of life.
The FDA approved Dupixent in April based on trials showing that it might be a better option for patients who fail to respond or are intolerant to topical corticosteroids that are used to treat flares. In studies, the biweekly Dupixent delivered clear or nearly clear skin in almost 40% of patients and offered a 75% or better improvement in disease severity scores in more than 50% of patients.
Given that corticosteroids fall short for many patients, the company estimates 1 million patients could benefit from Dupixent, which costs $37,000 per year.
Last month, the FDA also approved Kevzara, the company's rheumatoid arthritis drug. The rheumatoid arthritis market is worth billions of dollars in drug sales annually, and Kevzara could carve away a nice slice of this market given it outperformed the $14 billion-per-year Humira in its trials, with similar safety.
More drugs are coming
Regeneron Pharmaceuticals has 16 products in clinical development, and many of them target similarly lucrative indications that could move sales and profit higher.
The company's trials include label expansion studies that could boost the addressable markets for Eylea, Dupixent, and Kevzara, and some of the more intriguing new pipeline candidates include REGN2810, suptavumab, and nesvacumab.
One of the most interesting of the expansion studies is evaluating Dupixent in asthma patients. The company expects to report late-stage trial results from this trial soon and, if data is positive, file an application for approval in this indication by the end of this year. The asthma market is big, and new treatment options are needed, so this could boost Dupixent's peak sales opportunity significantly.
REGN2810 is a checkpoint inhibitor targeting programmed cell death protein 1, or PD-1, that's being studied for use in cancer patients. The FDA has already approved PD-1 or PD-L1 drugs that work similarly, and those drugs, including Bristol-Myers Squibb's Opdivo and Merck & Co.'s Keytruda, are hauling in billions of dollars in sales annually. REGN2810 is being evaluated in a mid-stage study for use in patients with advanced cutaneous squamous-cell carcinoma, and depending on results, it could receive an accelerated FDA OK. Phase 1 studies of it in other indications are also ongoing, and a phase 3 study in non-small-cell lung cancer is planned to begin this year.
Suptavumab is a phase 3 drug that could combat respiratory syncytial virus-F, a potentially life-threatening virus in the elderly and in children. The study finished enrolling patients earlier this year, and results should be announced later this year.
Meanwhile, nesvacumab is a combination drug that pairs up an antibody to Ang2 with Eylea to potentially improve outcomes in patients with wet age-related macular degeneration and diabetic macular edema, two important indications that Eylea is already approved to treat. Phase 2 studies of this potential next-generation wet-AMD drug also recently completed enrollment, and we should know more about the commercial potential of this combination soon.
Finding its footing
Regeneron Pharmaceuticals' shares have been in the doldrums since 2015 because of Praluent's slow launch. In addition, shares have been weighed down because of a patent dispute that could eventually remove Praluent from the market.
I believe that shares have priced in the worst-case result for Praluent, and if I'm correct, then they'll trade more from here on Dupixent and Kevzara performance. In addition, while Praluent is at great risk, there's still an opportunity for a settlement or a patent victory that might not be priced into the shares right now.
Overall, Regeneron Pharmaceuticals has intriguing drugs hitting the market and in the pipeline, and because it's already kicking off plenty of cash flow and profit courtesy of Eylea, and some of these opportunities could generate hundreds of millions in additional sales, I think buying shares while they're still nicely off their peak prices from a couple years ago is wise.
