SNY - Regeneron: Eylea Growth Scare And Many Other Developments

Summary

• Regeneron reported preliminary Eylea U.S. net sales in early January that were below expectations.
• The net sales miss was not driven by increasing pressure from Vabysmo but by a temporary shutdown of a fund that helps with patient copays.
• Management said they are already seeing a reversal of this downward trend.
• There is a lot more going on at Regeneron in other areas, and both Dupixent and Libtayo secured expansions of their product labels.
• Management also talked up its new COVID-19 antibody which could enter the clinic this year.

Regeneron ( REGN ) reported preliminary fourth-quarter U.S. revenues of Eylea that fell short of expectations. This scared the markets at first, but the weakness was short-lived as the reason for Eylea falling short was not due to the competitive pressure from Vabysmo, but due to a short-term shift to off-label use of compounded Avastin due to a temporary closing of a fund that provides patient co-pay assistance. The company also said that the most recent market data suggests that the shift to off-label Avastin is already beginning to reverse.

The company is otherwise doing well with Dupixent growing rapidly, Libtayo securing approvals for additional indications, and management has been talking up its costimulatory oncology pipeline and a new COVID-19 antibody that binds to a unique epitope that is highly conserved and that has a much lower risk of losing activity against future variants.

Temporary headwinds for Eylea in the fourth quarter

Regeneron expects to report approximately $1.5 billion in U.S. net sales of Eylea in Q4 2022 and $6.26 billion for the full year 2022. This would represent a 3% Y/Y decline in net sales and a sequential decline of 8% and compares badly to the low double-digit growth rates the company delivered in prior quarters.

This would be a bad sign if the weakness was driven by improved uptake of Vabysmo, but the company explained that this was due to increased off-label use of Avastin driven by a temporary closing of a fund that provides patient co-pay assistance. And, as mentioned in the introduction, management says that the recent market data suggest this shift is already beginning to reverse.

If that is really the case (and I have no reason to doubt it), Eylea remains generally resilient to pressure from Vabysmo. I previously assumed Eylea would face more erosion than it did since Vabysmo was launched and the continued strong growth of Eylea is still not part of my bullish case on Regeneron.

However, if the high-dose Eylea is approved later this year, it should become an important weapon to defend this franchise in 2024 and beyond. I wrote about the 8mg version of Eylea in my previous articles and there is nothing new to share today, but I will note that management is very enthusiastic about the data and they believe it could become the new standard of care.

Label expansion for Dupixent and Libtayo

Dupixent should continue to do very well in 2023 and beyond. Partner Sanofi ( SNY ) said at the JP Morgan Healthcare Conference in early January that global sales of Dupixent should exceed 10 billion euros this year, or almost $11 billion. That would represent an increase of nearly 30% compared to 2022.

The growth will be driven by continued market penetration in existing indications, but also in new indications. Since my late November 2022 article, Dupixent received EMA approval for the treatment of prurigo nodularis, EMA approval for eosinophilic esophagitis, and a positive CHMP opinion for patients as young as six months with severe atopic dermatitis. A positive opinion is the last step before formal EMA approval.

Libtayo’s growth could also accelerate in 2023, driven by the recent FDA approval in combination with chemotherapy for first-line advanced non-small cell lung cancer and the European Commission and approval in Japan for second-line cervical cancer.

Profits from the Dupixent collaboration and increasing revenue driven by Libtayo’s expanded label are the main growth drivers for Regeneron in the following quarters.

Management talks up the pipeline

Management has talked up the oncology pipeline at the JP Morgan Healthcare Conference and how its novel and unique combinations should lead to major advances in several areas. The PSMAxCD28 bispecific in combination with Libtayo was mentioned again – how it may allow “cold” tumors to respond to immunotherapy.

This is just the first combination of many. Ovarian cancer is next, followed by EGFR-positive solid tumors, and there are also shots on goal in hematology with odronextamab in combination with REGN5837 in diffuse large B-cell lymphoma and in multiple myeloma with a combination of two bispecifics.

Regeneron was also excited to share information on the new COVID-19 antibody candidate REGN14287 that binds outside of the variable receptor binding domain (‘RBD’) and which has demonstrated high neutralization activity against all known variants and lineages. The targeted epitope is highly conserved with over 99.9% conservation since the beginning of the pandemic. The market for this antibody should still be decent as there are millions of immuno-compromised people that do not adequately respond to vaccination and this antibody can also be dosed prophylactically to prevent infection and severe COVID-19 disease. Pending feedback from regulators, Regeneron intends to start clinical trials this year.

And while management spent very little time talking about the collaboration with Alnylam ( ALNY ), I believe this collaboration could become increasingly productive in the following quarters and years.

Alnylam should report preliminary phase 1/2 data of ALN-APP, the company’s first candidate targeting the central nervous system (‘CNS’), in the first half of the year. I do not expect to see a treatment benefit at this early stage of development and with very limited follow-up, but it will be important to see if ALN-APP can achieve significant target gene knockdown with no safety issues. This would have positive implications for the whole CNS platform and would lead to significant expansion of this part of the pipeline. This will also be important for Regeneron as it is jointly developing ALN-APP and other CNS candidates with Alnylam.

Other potentially valuable shots on goal with RNAi candidates and Alnylam are in the eye and liver. Specifically in the liver, the two companies are developing candidates for the treatment of NASH with ALN-HSD and ALN-PNP, and with the combination of Regeneron’s antibody pozelimab and Alnylam’s cemdisiran for the treatment of PNH and generalized myasthenia gravis. IgA nephropathy was another potential shot on goal for cemdisiran, but the two companies gave up despite positive phase 2 data as cemdisiran was not expected to be competitive with other drugs in development.

Conclusion

There will be no shortage of news from Regeneron in 2023. Eylea is more resilient than I thought it would be and Q1 2023 results in a few months should show whether the patient co-pay headwinds have appropriately reversed. In the near and medium term, I continue to expect Dupixent and Libtayo to be the main growth assets for Regeneron.

The pipeline should also be increasingly productive and the key readouts I would look out for are of ALN-APP in patients with early-onset Alzheimer’s disease (by partner Alnylam) and the phase 3 results of Dupixent in chronic obstructive pulmonary disease (‘COPD’) as positive results should open up another very significant market. Additional readouts of interest should be of odronextamab and linvoseltamab in lymphoma and multiple myeloma, respectively, and updates from the early-stage oncology pipeline with the mentioned bispecifics in combination with Libtayo in prostate cancer and EGFR-positive solid tumors.

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