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Good News for Regeneron/Sanofi

Zacks Equity Research

Regeneron Pharmaceuticals Inc. (REGN) and partner Sanofi (SNY) recently received some good news from the US Food and Drug Administration (:FDA) with the regulatory body clearing their oncology candidate, Zaltrap. The FDA approved Zaltrap as a combination therapy for treating patients suffering from metastatic colorectal cancer who are either resistant to or whose disease has progressed following treatment with an oxaliplatin-containing regimen.

We note that the FDA reviewed the new drug application (:NDA), submitted in February 2012, for Zaltrap on a priority basis, since metastatic colorectal cancer has few treatment options. The US regulatory authority generally reviews those drugs on a priority basis which offer major advances in treating diseases that do not have adequate therapy. The priority review designation implied a six-month review period of the NDA from the date of its submission by the companies.

The FDA cleared Zaltrap for the indication on the basis of encouraging data from a phase III study (n=1,226: VELOUR). Zaltrap’s approval for the indication will be a major boost for Regeneron/Sanofi as the metastatic colorectal cancer market represents significant commercial opportunity. Zaltrap is under review in Europe for the indication.

Sanofi intends to launch Zaltrap in the US shortly. Per the agreement between Regeneron and Sanofi, the companies will share the profits from global Zaltrap sales equally after Regeneron's obligation to repay its share of development costs.

The approval of Zaltrap makes it the third FDA-approved drug at Regeneron after Arcalyst (cryopyrin-associated periodic syndromes) and Eylea (neovascular form of age-related macular degeneration). Eylea has performed exceptionally well since its US launch in November 2011.

Regeneron is seeking to expand Eylea’s label into other indications. A key action date is coming up in September this year when the FDA is expected to decide on approving Eylea for central retinal vein occlusion. Positive news from the FDA would boost the stock.

Our Recommendation

We have an Outperform recommendation on Regeneron due to the strong performance of Eylea and the robust pipeline. Our long-term recommendation is in line with the Zacks #1 Rank (Strong Buy) carried by the stock in the short run.

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