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Regeneron Inks Ophthalmology Deal

Zacks Equity Research

In a bid to boost its ophthalmology portfolio, Regeneron Pharmaceuticals, Inc. (REGN) inked a deal with privately held Avalanche Biotechnologies, Inc. Through the deal, Regeneron aims to jointly discover, develop (using Avalanche's Ocular BioFactory technology) and subsequently commercialize drugs for treating patients suffering from ophthalmologic diseases.

Under the terms of the deal, the private entity will receive an upfront payment in cash and contingent payments totaling up to $640 million following the achievement of certain development and regulatory milestones. Furthermore, Regeneron will have to shell out royalties on global net sales of drugs emanating from the partnership, which covers up to eight distinct therapeutic targets. Regeneron is entitled to exclusive global rights to each candidate under clinical development.

Moreover, the ophthalmology deal grants Avalanche the option to share costs of development and profits (following approval) with Regeneron pertaining to two collaboration therapeutic targets selected by the private entity. Furthermore, Regeneron will get a time-limited option to acquire rights to Avalanche‘s ophthalmology candidate AVA-101 following the completion of its phase IIa study in wet age-related macular degeneration (AMD).

Our Take

We are positive on the deal inked by Regeneron, which has already tasted stupendous success with its eye drug Eylea. The first approved indication for Eylea was wet AMD, the same indication for which AVA-101 is being studied. Regeneron is aiming to enhance its position in the lucrative ophthalmology market by successfully developing candidates under the deal.

We are highly optimistic about the success of the deal since Regeneron is vastly experienced in developing and subsequently commercializing eye disorder treatments as can be gauged by Eylea’s success. Regeneron has a partnership with Bayer (BAYRY) on Eylea.  

Regeneron carries a Zacks Rank #3 (Hold). Better-ranked stocks in the biopharma space include Alexion Pharmaceuticals (ALXN) and Gilead Sciences (GILD). Both stocks carry a Zacks Rank #1 (Strong Buy).

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