Update on Bayer/Regeneron's Eylea

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Bayer’s (BAYRY) HealthCare segment has been performing very well with the addition of new products like Xarelto (anticoagulant), Eylea (eye drug), Xofigo (oncology) and Stivarga (oncology). The new products are expected to contribute around €2.8 billion to segmental sales in 2014. The company is also looking to expand their label beyond current indications.

Earlier in the month, Bayer announced that it has submitted a marketing authorization application for Eylea in Japan for the treatment of patients suffering from diabetic macular edema (:DME). The submission was based on positive results from two phase III studies (VIVID-DME and VISTA-DME) on Eylea. Results showed that Eylea treatment resulted in greater improvements in best-corrected visual acuity at 52 weeks than laser photocoagulation.

Bayer has a collaboration agreement with Regeneron Pharmaceuticals Inc. (REGN) for the global development of Eylea. Per the terms of the agreement, Regeneron owns the entire U.S. rights pertaining to the eye drug. Bayer is however responsible for marketing Eylea in ex-U.S. markets. The profit earned from the sales of Eylea in those markets is shared equally by the companies. However, in Japan, Regeneron will receive royalties on Eylea’s net sales.

Eylea, a key product at the HealthCare segment, has performed really well since its launch in late 2011 for the neovascular (wet) age-related macular degeneration (AMD) indication. We note that Eylea is also approved for the treatment of visual impairment due to macular edema secondary to central retinal vein occlusion in several countries.

We note that U.S. approval for Eylea in the DME indication has already been sought, with a final decision expected by Aug 18, 2014. The drug is also under review in the EU for the same indication. Bayer is also looking to get Japanese approval of the drug for the treatment of choroidal neovascularization secondary to pathologic myopia (mCNV).

We are encouraged by Bayer’s progress with Eylea. Bayer recorded Eylea sales of €126 million in the fourth quarter of 2013. We expect the product to continue performing well.

Bayer presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Alexion Pharmaceuticals, Inc. (ALXN) and Novo Nordisk (NVO). While Alexion carries a Zacks Rank #1 (Strong Buy), Novo Nordisk holds a Zacks Rank #2 (Buy).

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