SNYNF - Regeneron: Solid Investment Based On Continued EYLEA Expansion

2023-06-13 17:55:37 ET

Summary

• Regeneron Pharmaceuticals, Inc. has potential to receive FDA approval of higher dosing of 8 mg of EYLEA, which has been set with an FDA target action date of June 27, 2023.
• The additional indication in preterm infants with retinopathy of prematurity makes it the fifth retinal disorder in which EYLEA has been approved for.
• Dupixent is another solid drug in the pipeline, where Regeneron and its collaboration partner recorded global net sales increase of 37% to $2.49 billion.
• Despite the decline of 5% in EYLEA sales to $1.43 billion, it still managed to finish its Q1 2023 earnings in strong fashion with a 7% increase in total revenues.

Regeneron Pharmaceuticals, Inc. ( REGN ) continues to be a solid investment opportunity, and this is just based on its continued EYLEA expansion. That's because it has been able to achieve FDA approval of this drug as a treatment for preterm infants with retinopathy of prematurity [ROP] in 2023.

This is good news for this company and its investors for two reasons. The first reason is that this is the first pediatric approval for EYLEA. Secondly, this becomes the 5th indication for which this drug has been approved for. Besides the ability to obtain regulatory approval for this indication, there is further expansion opportunity for this treatment. By that, I mean that the FDA had already accepted the Biologics Licensing Application [BLA] for 8 mg aflibercept for the treatment of patients with wet age-related macular degeneration [wAMD], diabetic macular edema [DME] and diabetic retinopathy.

The FDA has set a Priority Review date of 8 mg aflibercept for June 27, 2023. With continued expansion of EYLEA, plus other large market indications being targeted with Dupixent, these are the reasons why I believe that Regeneron Pharmaceuticals continues to be a solid investment opportunity.

Additional Indication Targets Rare Eye Disease And Also Adds EYLEA Expansion

One item of importance to note is that Regeneron has sole U.S. marketing rights of EYLEA. However, it has a license and collaboration agreement with Bayer for the global development and commercialization of EYLEA (aflibercept) and aflibercept 8 mg outside of the United States. As I noted above, one of the ways in which Regeneron is continuing to expand its EYLEA franchise is through regulatory approvals with new indications. One such indication in which it has been able to expand to would be with the FDA approval of EYLEA for preterm infants with retinopathy of prematurity. Retinopathy of prematurity [ROP] is an eye disorder that occurs when babies are either born premature or who weigh less than 3 pounds when they are born. Why this disorder occurs is because of abnormal blood vessels that grow in the retina.

One major item to point out is that ROP is the leading cause of childhood blindness worldwide. Before diving into the clinical data, it is important to understand what treatment options were available beforehand. The truth is that there were no FDA approved treatments for this eye disorder, before EYLEA was approved for it. The only option that these patients had was surgical, in which laser photocoagulation was done in this manner.

Having said that, there were two randomized global phase 3 studies, known as FIREFLEYE and BUTTERFLEYE , which tested the use of EYLEA for the treatment of preterm infants with ROP. That is, all infants were given 0.4 mg of EYLEA versus the laser photocoagulation surgery I stated directly above. The outcome was really good, in that 80% of these infants that received 0.4 mg of EYLEA achieved absence of ROP and unfavorable structural outcomes at 52 weeks of age. In other words, if these patients were just given laser photocoagulation they wouldn't have seen such an improvement as they did. The additional indication of preterm infants with retinopathy of prematurity makes it the fifth retinal disorder in which EYLEA has been approved for.

Expansion Of EYLEA Can Continue With Higher Dosing Option

Besides Regeneron having received its fifth approval indication of EYLEA, there is another way where it can continue to generate sales for shareholders. This involves the use of a higher dosing option of EYLEA (aflibercept). In regards to such an expansion, it is on the right track. Why is that? That's because the FDA just accepted the U.S. regulatory application for the higher 8 mg dose of aflibercept for the treatment of patients with wet age-related macular degeneration [wAMD], diabetic macular edema [DME] and diabetic retinopathy. Not only was the Biologics Licensing Application [BLA] accepted, but it was done so with Priority Review, with an FDA target action date set for June 27, 2023 .

The only reason why Priority Review was given was because there was a priority review voucher which was used in order to get such an earlier review time. Regeneron was able to file the BLA of 8 mg of aflibercept because of being able to meet the primary endpoint of non-inferiority in vision gains at both 12 weeks and 16 weeks of dosing regimen after initial monthly doses. Thus, non-inferiority of 8 mg of aflibercept was achieved compared to patients given an 8-week EYLEA dosing regimen.

If the high 8 mg dose of aflibercept [EYLEA] is approved, of course that would be good news for the company and its shareholders. On the flip side, there might be some competition in the way. For instance, Roche ( RHHBY ) has Vabysmo which has already been approved for use in patients with wet or neovascular age-related macular degeneration and diabetic macular edema. In addition, the FDA just the other month accepted the application of Roche's Vabysmo for the treatment of macular edema following retinal vein occlusion [RVO]. This means that this company could provide some stiff competition for Regeneron's EYLEA. Even then, it's not like Vabysmo caused a massive decline in sales for Regeneron's eye drug. Thus, with expansion of EYLEA to higher dosing it might still fare well in the coming years. In the first quarter of 2023, EYLEA sales came in at $1.43 billion, which was a 5% decline . Not superb, but at the same time not that big of a decline in light of competition from Roche's Vabysmo.

Financials

The good thing about Regeneron Pharmaceuticals is that it already has several regulatory approvals that it has been able to get. Despite the decline of 5% in EYLEA sales to $1.43 billion, it still managed to finish Q1 2023 earnings in strong fashion. The reason why I say that is because it saw a 7% increase in total revenues in Q1 of 2023, compared to the same quarter in the prior year. Of course, this was thanks to other drugs it has been able to achieve regulatory approvals for, such as Dupixent. Global net sales of Dupixent, which were recorded by its global collaboration partner Sanofi ( SNY ), increased by 37% to $2.49 billion compared to the same quarter in 2022.

Risks To Business

There are several risks that traders and investors should be aware of before investing in Regeneron. The biggest risk of all to consider would be sales of EYLEA. Although I have high hopes that higher 8 mg dosing of aflibercept will keep sales steady for Regeneron, in light of competition this may not happen. It just honestly depends how well the higher dosing option of EYLEA does, if and once it is approved by the FDA.

A second risk to consider would be with respect to the newest indication of preterm infants with ROP for which EYLEA has been approved for. While this fifth indication is definitely a positive, there is no guarantee that it will help boost sales of the drug. Another risk to consider would be with respect to sales of Dupixent. It did achieve an increase of 37% in sales year over year in Q1 of 2023, but this growth may or may not continue in the coming quarters.

What might help is that there might be an expansion opportunity for Dupixent though. By that, I mean that both Regeneron and Sanofi achieved positive results from a phase 3 study using this drug to treat patients with chronic obstructive pulmonary disease [COPD]. There were a few firsts that were achieved with respect to this drug in COPD as well. One of them being that it is the first and only investigational biologic to achieve reduction in moderate or severe acute exacerbations by 30% compared to placebo.

In addition, it is the first investigational biologic to significantly improve lung function at weeks 12 and 52. It is a large market opportunity for it to go after. That's because it is expected that the global chronic obstructive pulmonary disease [COPD] treatment market could reach $29.88 billion by 2032 . Not only would this be a huge market to tap into, but it would be ideal because it has been more than a decade since a new treatment approach has been approved for this specific indication.

Conclusion

The final conclusion is that Regeneron Pharmaceuticals remains a great long-term investment. While it remains to be seen if the expansion of EYLEA can keep it above water in light of competition, it is good to see that it is at least attempting to expand to a higher dosing option. As I noted above, there are other growth drivers besides EYLEA, with Dupixent being one of them.

I believe Regeneron will be very good for the long-term, especially with the pipeline it has. It has achieved FDA approvals in the past year for other drugs such as Kevzara as the first and only biologic for the treatment of polymyalgia rheumatica and Evkeeza as an adjunct to other lipid-lower therapies to treat children with homozygous familial hypercholesterolemia [HoFH]. The Evkeeza approval in HoFH had its approval extended to children as young as 5 years of age.

Regeneron has been able to make collaboration agreements with Bayer and Sanofi, for EYLEA and Dupixent respectively. However, Regeneron has even gone on to form a collaboration agreement with Alnylam Pharmaceuticals ( ALNY ) so that they could develop RNAi drugs for several indications. Matter of fact, positive interim results were reported from a phase 1 study using ALN-APP for the treatment of early-onset Alzheimer's disease [AD]. Another solid RNAi program being advanced as part of this collaboration agreement would be ALN-HSD, which is being developed for the treatment of patients with non-alcoholic steatohepatitis [NASH].

With two items established to further expand sales of EYLEA, plus other large market indications being targeted with Dupixent, these are the reasons why I believe that Regeneron Pharmaceuticals continues to be a solid long-term investment opportunity.

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