Summary

• Eylea faces increased competition, but is also benefiting from demographic tailwinds and additional line extensions. Future growth will depend on Beovu’s success.

• Dupixent is seeing strong adoption in atopic dermatitis driven by a differentiated clinical profile, and is being explored in numerous additional indications

• Investors are excited by REGN1979, which could challenge rituximab in non-Hodgkin’s Lymphoma. An update will be provided at ASH in early December

Eylea Continues to Grow, but Faces Upcoming Competition

The majority of Regeneron's revenue comes from Eylea, a drug used to treat several retinal diseases, including wet age-related macular degeneration (wAMD) and diabetic retinopathy. The drug continues to make up ~60% of Regeneron's revenue. My last article discussed this drug in detail, noting that upcoming competition was a potential concern among investors. Today, this debate still continues, as there is a number of potential competitive threats that could impact growth rates. On the other hand, the drug continues to outperform expectations in the near-term.

Eylea is expected to face competition primarily from Beovu, as well as from several other drugs (abicipar, faricimab). Eylea could also potentially face biosimilar competition, with up to six biosimilars under development and a composition of matter patent expiration in 2023. Beovu, developed by Novartis, represents the biggest threat and recently launched in October to strong physician interest. Beovu has shown strong efficacy on 12-week dosing, and superiority on secondary endpoints of intra-retinal fluid, sub-retinal fluid, and central subfield thickness.

However, the drug has also shown higher rates of inflammation and immunogenicity, and lacks the flexibility for more frequent dosing. As a result, Regeneron and bullish investors, do not see Beovu as meaningfully differentiated from Eylea. 

Additionally, looking in the very near-term, Eylea continues to exceed expectations, benefiting from a number of tailwinds. In particular, wAMD and diabetic eye disease continue to grow in prevalence. Sales of $1.2 billion in 3Q19 exceeded expectations by about 3%.

Regeneron is also pursuing several new line extensions and indications for the drug. In 3Q, Regeneron announced that they would be pursuing a phase 2 trial studying a higher dose formulation of Eylea for 12-week and 16-week dosing. Additionally, the company plans to launch prefilled syringes by year end after the company received approval in August.

Ultimately, the bull and bear revenue growth trajectory for the drug are very different, with bulls forecasting growth until the 2022-2023 time frame, whereas bears forecast annual declines from here on. The consensus view is for gradual declines starting in 2020. The actual trajectory will hinge on Beovu's ability to take share from Eylea.

Dupixent’s Differentiated Profile Driving Growth in Atopic Dermatitis

Dupixent is another drug that is expected to drive both near-term and long-term growth for Regeneron. Dupixent is a subcutaneously administered inhibitor targeting the alpha subunit of the IL-4 receptor. The drug is approved for adult atopic dermatitis (AD) and asthma, and has a strong, differentiated clinical profile. Much of the growth is currently coming from AD, where the drug is now 20% penetrated among adults in 3Q (vs. 18% in 2Q). Bulls see this drug becoming the standard of care, as the safety and efficacy are far better than alternative options in the space. Management has noted that they are seeing strong adoption by both allergists and ENTs so far. Additionally, beyond these indications, Regeneron is filing Dupixent in pediatric AD, enrolling phase 3 studies in eosinophilic esophagitis and chronic obstructive pulmonary disease, and studying the drug in numerous additional allergy indications. Consensus estimates call for $4.7 billion in Dupixent revenue by 2025. The street expects Regeneron to capture $1.6 billion of the total revenue by 2025 (the company has a profit sharing agreement with Sanofi on the drug).

Oncology Shows Promise; Updates at ASH

Several bulls have noted that the oncology pipeline is key to the company's diversification strategy away from Eylea, and a key driver of future stock upside. The most-often discussed portions of the oncology segment include Libtayo (currently the only approved oncology drug for the company, and quickly becoming the standard of care in cutaneous squamous cell carcinoma), and the two bispecific antibodies REGN1979 and REGN5458. The latter two will provide  updates at the American Society of Hematology (ASH) in early December. For this note, I will focus primarily on REGN1979.

REGN1979 is a bispecific antibody for the treatment of relapsed or refractory B-cell non-Hodgkin's lymphoma. The drug has shown promising efficacy in phase 1, with a 97% overall response rate (ORR) in follicular lymphoma (FL), a 100% ORR in mantle cell lymphoma, and a 57% ORR in diffuse large B-cell lymphoma (DLBCL). Within FL, REGN1979 saw a complete response (CR) in 11 of 14 patients.  Within DLBCL, 4 of 7 patients had a CR. These early results are superior to rituximab's, and suggest that REGN1979 could potentially challenge the drug, which is currently being used as first line and later-line treatments for numerous lymphoma indications.

Note that the drug has shown some safety issues with several adverse events - cytokine release syndrome (57%, with 7% grade 3+) and infection/infestation (49%, 15% with grade 3+). This will need to be monitored, but investors remain excited about the possibilities of the drug nonetheless.

As a result of the strong efficacy and high potential for the drug, investors are eager to hear updates at ASH. As mentioned previously, the company will also provide updates on their other bispecific antibody, REGN5458, and should garner increased investor attention. ASH will be held from December 7-10.

Conclusion

The primary concern for Regeneron is upcoming Eylea competition, especially from Beovu. However, there are reasons for optimism as the company drives continued growth through line extensions and growing prevalence in existing indications. Beyond Eylea, Regeneron has a strongly differentiated product in Dupixent, and promising assets in its oncology pipeline. The company will provide oncology updates at ASH that should be closely monitored.