We are reverting to a Neutral recommendation on
Regeneron Pharmaceuticals
(
REGN
) as we believe that all the positive news that led to our previous
Outperform recommendation on the stock are reflected in the current
price.
Regeneron performed impressively in the second quarter of 2012,
driven by strong sales of its eye drug Eylea. Sales of Eylea
launched in the US on November 21, 2011, for the treatment of the
neovascular form of age-related macular degeneration (wet AMD)
climbed 57% sequentially to $194 million in its second full quarter
on the market.
Encouraged by the strong performance of Eylea, the company
increased its forecast for 2012 US Eylea sales for the second
successive quarter. Management now expects the eye drug to record
2012 sales in the range of $700-$750 million as opposed to the
previously forecasted range of $500-$550 million. We, too, expect
Eylea to continue performing well.
The label expansion of Eylea in the US for the treatment of
macular edema following central retinal vein occlusion has further
boosted its sales potential. Regeneron is studying Eylea for other
indications as well such as diabetic macular edema (phase III) and
branch retinal vein occlusion (phase III). Moreover, the US
approval of Zaltrap for treating previously treated patients
suffering from metastatic colorectal cancer is another positive for
Regeneron. Zaltrap is under review in Europe for the indication.
Zaltrap is being studied for other oncology indications as
well.
However, we are mindful of the regulatory/pipeline setbacks at
Regeneron. In July 2012, Regeneron suffered a setback in its
efforts to expand the label of its marketed drug Arcalyst
(cryopyrin-associated periodic syndromes). The US Food and Drug
Administration (FDA) declined to approve Arcalyst for preventing
gout flares in patients initiating uric acid-lowering therapy on
the basis of the submitted data and issued a complete response
letter.
Moreover, in April 2012, Regeneron and partner
Sanofi
(
SNY
) suffered a pipeline setback when Zaltrap performed
disappointingly in a phase III study which evaluated the candidate
as a first-line therapy for metastatic castration-resistant
prostate cancer. Similar setbacks have the potential to pull down
Regeneron.
We note that all three marketed products at Regeneron -
Arcalyst, Eylea and Zaltrap face competition in their respective
areas. While Arcalyst is facing competition from
Novartis
' (
NVS
) Ilaris for cryopyrin-associated periodic syndromes, Eylea
competes with
Roche
(
RHHBY
)/Novartis' Lucentis in the wet AMD space and Zaltrap competes
primarily with Roche's Avastin in the colorectal cancer space.
NOVARTIS AG-ADR (NVS): Free Stock Analysis
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REGENERON PHARM (REGN): Free Stock Analysis
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(RHHBY): ETF Research Reports
SANOFI-AVENTIS (SNY): Free Stock Analysis
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