Will Regeneron’s (REGN) Newly Approved Drugs Drive Growth?

We issued an updated report on Regeneron Pharmaceuticals, Inc. REGN on May 29.

Regeneron’s key growth driver, Eylea, continues to drive revenues. Eylea is approved in the U.S., EU, Japan as well as in other countries for the treatment of neovascular age-related macular degeneration (wet AMD), diabetic macular edema (DME). The drug is also instrumental in treating macular edema following retinal vein occlusion, which includes macular edema following central retinal vein occlusion.

Shares of Regeneron have significantly outperformed the Zacks classified Medical-Biomed/Genetics industry so far this year. The stock has gained 24.0% during the period, while the broader industry witnessed a decline of 0.3%.

With the company’s first regulatory approval of Eylea in wet AMD, business was initially more concentrated toward the elderly, the majority of whom were Medicare patients. However, with subsequent approvals in DME and diabetic retinopathy in DME and retinal vein occlusion, the company has diversified its customer base to patient groups where there is less reliance on Medicare. We note that Regeneron has co-developed Eylea with Bayer’s BAYRY) HealthCare unit.

The company received a boost when the FDA approved its Dupixent (dupilumab) Injection for the treatment of adults with moderate-to-severe atopic dermatitis (AD). Both Dupixent and Kevzara were developed in collaboration with Sanofi SNY.

Per the companies, this is the first and only biologic medicine approved for the treatment of adults suffering from AD. Regeneron and Sanofi will launch Dupixent in the U.S. at Wholesale Acquisition Cost (WAC) of $37,000 annually. Pricing will play a key role in the uptake of the drug. The company is evaluating the drug for treating asthma in adults (LIBERTY ASTHMA QUEST study, fully enroled with data expected later in 2017). Assuming positive data, a regulatory submission in the U.S is scheduled for the fourth quarter of this year. A phase III study is pediatric patients is currently enrolling, Dupixent is also currently being evaluated for nasal polyps (phase III studies are enrolling) and eosinophilic esophagitis (phase II).

Further, in May 2017, the FDA approved Kevzara for the treatment of adult patients with moderately to severely active rheumatoid arthritis who have an inadequate response to or intolerance to one or more biologic or non-biologic Disease-Modifying Anti-Rheumatic Drugs. The drug is still under review in the U.S. In April 2017, the European Medicine Agency`s (EMA) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for the marketing authorization of Kevzara recommending its approval for use in adult patients with moderately to severely active RA.

With Eylea accounting for the majority of revenues at Regeneron, the company relies heavily on the drug for growth. Approval of new drugs will lessen the company’s dependence on Eylea.

Sales of Praluent have failed to impress as the drug is facing significant payer utilization management restrictions in the U.S. and limited market access in Europe, which is resulting in a low volume of prescriptions being dispensed.

Zacks Rank & Key Pick

Regeneron currently carries a Zacks Rank #2 (Buy).

A top ranked stock in the healthcare sector worth considering is VIVUS, Inc. VVUS which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

VIVUS’ loss per share estimates narrowed from 50 cents to 39 cents for 2017 over the last 30 days. The company posted positive earnings surprises in each of the trailing four quarters, with an average beat of 233.69%.

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