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European Approval for Eye-Drug Eylea

Zacks Equity Research

Regeneron Pharmaceuticals Inc. (REGN) and partner the HealthCare unit of Bayer (BAYRY) recently received some encouraging news with the European Commission (EC) clearing their eye-drug Eylea for treating patients suffering from neovascular (wet) age-related macular degeneration (wet AMD).

The recommended dosage for the injectable drug, also known as VEGF (vascular endothelial growth factor) trap-eye, is 2mg on a monthly basis for three successive months. The subsequent recommended dosage is 2 mg every 2 months. However, the interval between the Eylea injections may be extended after one year of treatment based on visual and anatomic outcomes.

The approval of Eylea by the EC for the wet AMD indication does not come as a surprise since in September 2012 the European Committee for Medicinal Products for Human Use (CHMP) had recommended its approval for indication.

We note that Eylea is already available in the US since November 2011. The drug has performed exceptionally well since its launch. We note that Eylea is also approved in countries, such as Australia, Japan and Switzerland

The sales potential of Eylea was boosted further by the US Food and Drug Administration’s (:FDA) clearance for an additional indication - macular edema following central retinal vein occlusion (:CRVO). Bayer intends to seek European approval for the CRVO indication by year end.

Eylea is also being studied for other indications, such as diabetic macular edema (phase III) and macular edema following branch retinal vein occlusion (phase III).

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 Bayer. The stock carries a Zacks #2 Rank (Buy rating) in the short run. We have Neutral stance on Regeneron, which too carries a Zacks #2 Rank (Buy rating) in the short run.

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