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One's pain is another's gain, and this phrase ringed in true in the case of Regeneron Pharmaceuticals Inc (NASDAQ: REGN). Jefferies deemed fit to upgrade shares on improved prospects for its eye disorder drug Eylea following disclosure of adverse events associated with Novartis AG's (NYSE: NVS) rival drug Beovu.
The Regeneron Analyst
Biren Amin upgraded Regeneron from Hold to Buy and increased the price target from to $355 to $492.
The Regeneron Thesis
The adverse events reported for Beovu will likely reduce its uptake, thereby minimizing competitive risk to Regeneron's Eylea franchise, Amin said.
"Since Beovu's launch, there are 36 serious cases reported to AERS, with 2 cases (6%) of vasculitis, 6 cases (17%) of blindness and 4 cases (11%) of eye inflammation," the analyst wrote in the note. Beovu was launched earlier this year after receiving FDA nod in October.
More events may be reported in the coming weeks, given increased awareness, Amin said, citing two retina doctors. The doctors also see the risk of vasculitis increase with additional injections and feel the issue will take some time to resolve, the analyst said. Having shifted most of their patients to other anti-VEGF therapies, given the medico-legal risk, the doctors said they would want additional safety data before reconsidering Beovu.
With Beovu use likely to significantly reduce in the near term, Amin said Eylea consensus estimates appear conservative between 2020 and 2022 and provide for upside.
Jefferies adjusted its model to reflect only a moderate erosion to Eylea market share from Beovu, with its new Eylea estimates ahead of the consensus by $180 million in 2020 and by $450 million, each in 2021 and 2022.
REGN Price Action
Regeneron shares traded higher by 6% to $451.50 at time of publication.
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