Regeneron Blindsided By PDFUA Delay

Regeneron Pharmaceuticals REGN has been informed by the FDA that the PDFUA date for its Eylea drug, a treatment for age-related macular degeneration, has been extended three months to November 18th, 2011. The agency made the decision as "a result of classifying responses to questions regarding the chemistry, manufacturing, and controls section" of Regeneron's drug application. Regeneron CEO Leonard Schleifer responded to the delay, stating that "based on our detailed and frequent interactions with the FDA most of our application is in good shape. We are not aware of any safety or efficacy issues." Despite the delay, Regeneron is confident that Eylea will eventually be approved. An FDA advisory panel met in June and voted 10-0 to recommend approval of the drug. The FDA typically follows panel recommendations, especially when a panel is unanimously in favor. Schleifer is equally enthusiastic about the drug's prospects, stating that Regeneron will make Eylea available "almost immediately" after approval. Regeneron's shares have risen 49 percent over the past six months, signaling that the market also views the drug positively. However, Regeneron may not be facing an entirely sunny future. In a telephone interview with Bloomberg, Piper Jaffray analyst Edward Tenthoff projected that Eylea would cost nearly $2,000, a figure that is competitive with Lucentis, the current gold standard of macular degeneration treatment. Both drugs face threats in the marketplace from Avastin, a colon cancer drug which has proven to be equally effective in treating wet AMD patients in National Eye Institute clinical trials. Avastin is significantly more cost effective, as it costs only $50. Very early treatments for AMD merely slowed the pace in which patients lost their eyesight. However, all three drugs have proven to stop vision loss for nearly all patients. In a news teleconference, Daniel Martin, MD and chairman of the Cole Eye Institute stated that Lucentis and Avantis were virtually identical on all measures of visual acuity. Eylea has proven to be equally effective, as data from two Phase 3 trials showed that Eylea was non-inferior to Lucentis. Eylea's primary advantage is that it requires less frequent dosing (every other month vs. Lucentis monthly doses). Eylea has blockbuster potential, as Tenthoff has predicted $1.2 billion in U.S. sales in 2016. Regeneron has also pursued a pair of marketing opportunities for Eylea outside of the United States. The company has partnered with Bayer HealthCare to submit applications for approval in both Europe and Japan. Despite many favorable prospects, investors will want to consider the stock's recent run-up, as well as the delay of the PDFUA date. Without a catalyst for nearly three months, the momentum that Regeneron has shown over the past six months may slow to a halt. ACTION ITEMS Bullish: Traders who believe in Eylea's blockbuster potential will want to consider the following trades. • Regeneron is currently trading at $53.00, nearly 27% off its 52 week high. If REGN can obtain approval of Eylea and steal market share from Lucentis and Avantis, its shares may still have some upside. • Regeneron still has untapped market potential in Europe and Japan, given the pending status of its marketing applications in those countries. If Bayer HealthCare can secure marketing approval, Regeneron may be poised to increase Eylea revenue streams. Bearish: Traders who doubt Eylea's ability to capture significant market share will want to consider other alternatives. • Traders may want to consider shorting shares of Regeneron or buying put options. REGN has seen significant price appreciation and may have some downside, given a lack of catalysts in the near term. Many investors may also be pricing in Eylea's approval, given the unanimous panel vote. Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.