Good News for Regeneron - Analyst Blog

Recently, Regeneron Pharmaceuticals (REGN) and partner Sanofi-Aventis (SNY) announced that the late-stage study (n=1,226) of their candidate aflibercept (VEGF trap) will continue without any modifications. The decision followed the favorable recommendation of an independent data monitoring committee (IDMC) after a planned interim analysis. However, both companies are unaware of the results of the interim study results. Final data from the study are expected in the second half of 2011.

The study (VELOUR) is evaluating the safety and efficacy of the candidate as a combination therapy in patients suffering from metastatic colorectal cancer (mCRC) who have previously undergone treatment with an oxaliplatin-based regimen. Improvement in overall survival is the primary endpoint of the study whereas progression-free survival, response to treatment and safety are the secondary objectives.

Colorectal cancer is the third most common cancer in men and the second in women across the globe. The disease is responsible for approximately 8% of all cancer related deaths. This makes it the fourth most common cause for cancer related deaths.

The candidate is also being developed, as a combination therapy, for the second-line treatment of non-small cell lung cancer (VITAL - phase III) and the first-line treatment of hormone-refractory metastatic prostate cancer (VENICE - phase III) and as a first-line therapy for treating patients suffering from mCRC (AFFIRM- phase II). Regeneron expects results from all these studies, which have completed enrolling patients, within the next couple of years.

While complete data from the VITAL study are expected in the first half of 2011, results from the AFFIRM study are expected in the second half of the same year. The IDMC is expected to conduct an interim analysis of the data from the VENICE study in mid-2011. Complete results are expected in 2012.

We believe that the successful development and commercialization of aflibercept will boost Regeneron’s top line significantly. Currently, the company, which has only one product in the market -- Arcalyst, used in treating cryopyrin-associated periodic syndromes (CAPS) -- is highly dependent on collaboration revenues and technology licensing revenues.

Neutral on Regeneron & Sanofi

Currently, we have a Neutral recommendation on Regeneron, which is supported by a Zacks #3 Rank (short-term Hold rating). We are pleased with the approval of Arcalyst for CAPS. Furthermore, the expansion of the antibody agreement with Sanofi and the extension of the antibody technology deal with Astellas also please us. However, even though the drug has been approved in the European Union in 2009, it has not yet hit the European markets, which we believe is a dampener on its sales potential.

We are also concerned about the potential competition awaiting Regeneron’s pipeline candidates. The company’s fundamentals lead us to believe that the risk/reward profile at Regeneron is balanced and forms the basis of the short-term and long-term stance on the stock.

We currently have a Neutral recommendation on Sanofi, which is supplemented by a Zacks #3 Rank (short-term Hold rating). Our biggest concern for Sanofi is the high exposure to generic risk on many of its leading franchises. The entry of generic Lovenox (an anti-coagulant/blood thinner) is a huge setback for the company. However, we are encouraged to see Sanofi’s progress with its pipeline.