Regeneron Pharma on a High

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Good news flowed in at Regeneron Pharmaceuticals, Inc. (REGN) from both the US and Europe regarding its eye drug Eylea (aflibercept). While the US Food and Drug Administration (:FDA) cleared Eylea for treating patients suffering from macular edema following central retinal vein occlusion (:CRVO), the European Committee for Medicinal Products for Human Use (CHMP) backed its approval for the treatment of the neovascular form of age-related macular degeneration (wet AMD) in the EU. A final decision from the European Commission (EC) is expected by year end.

We note that Eylea is already marketed in the US for the wet AMD indication since late last year. The drug has performed exceptionally well since its launch. Encouraged by the strong performance of Eylea, the company increased its forecast for 2012 US Eylea sales for the second successive quarter. Management stated on the second quarter 2012 conference call that it 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. Eylea, which is also available in some ex-US markets, is under review in Japan for the indication.

The sales potential of the injectable eye drug has been boosted further by the FDA clearance for an additional indication - macular edema following CRVO. The recommended dosage for Eylea is 2mg on a monthly basis. The approval was based on encouraging 24 week data from two phase III studies, COPERNICUS and GALILEO.  Data from the studies from week 24 to 52 have not yet been reviewed by the US regulatory body. European approval for the CRVO indication will be sought shortly by Regeneron’s partner on Eylea - the HealthCare unit of Bayer (BAYRY), once the EC clears Eylea for the wet AMD indication in the EU.

Per the agreement, Bayer is responsible for marketing Eylea in ex-US markets on approval. The profit earned from the sales of the drug in those markets will be shared equally by the companies. In Japan, Regeneron will receive royalties on Eylea’s net sales. However, Regeneron owns the entire US rights pertaining to the eye drug.

Our Recommendation

We have an Outperform recommendation on Regeneron driven by the strong performance of Eylea along with its robust pipeline. The stock carries a Zacks #1 Rank (Strong Buy) in the short run.

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