The key driver behind the growth of biotech giant Regeneron Pharmaceuticals Inc. (REGN, Financial) may be facing competition, but not imminently.
Right now, Regeneron’s Eylea shares the top spot with Lucentis in the worldwide market for drugs to treat wet age-related macular degeneration (AMD). Lucentis is marketed by Novartis (NVS, Financial) outside North America and Roche (RHHBY, Financial) elsewhere in the world. In the past few years, Eylea has eaten into Lucentis' sales, even though the latter was first to market.
Both drugs are also used to treat diabetic eye disease and other problems of the retina. The drugs are injected into the eye to help slow vision loss from these and certain other diseases.
In the third quarter, Regeneron said worldwide sales of Eylea climbed 11% from the previous year to nearly $1.7 billion.
“This increase was driven by overall market growth in both wet AMD and diabetic macular edema DME, position preference and the aging population, as well as the increase in the prevalence of diabetes,” Marion McCourt, the company senior VP and head of commercial, told analysts on a conference call.
Regeneron isn’t worried about the competition, at least not in the short term. The company emphasized that Eylea’s safety and effectiveness can’t be matched. Some investors, however, were somewhat concerned that Eylea’s sales outside the U.S., which are reported by Bayer AG (XTER:BAYN, Financial), fell short of expectations.
Regeneron trades at about $385 a share, just about where it was a year ago and well off the $517 it commanded in June 2017. That’s when Hillary Clinton, the shoo-in to be nominated to be the Democratic candidate for president, dropped the hammer on the pharmaceutical industry, threatening to reign in prices. Shares of Regeneron and its colleagues in the iShares NASDAQ Biotech Index (IBB, Financial) plummeted.
Another leading Regenron drug is Dupixent, an eczema treatment. In a note to clients, Piper Jaffray analyst Christopher Raymond said he expects sales of Dupixent to reach $921 million in 2018 before becoming a massive blockbuster in 2019 with more than $2 billion in sales. He expects about $3.5 billion and $4.4 billion in 2020 and 2021 sales. He has an overweight rating on Regeneron.
Other analysts aren’t quite as bullish. Their average recommendation for the stock is between a between Buy and Hold, with an average target price of $410, according to Yahoo Finance.
The outlook for age-related macular degeneration drugs is quite healthy. The market could grow at a compound annual rate of nearly 9%, reaching $11.5 billion by 2026, according to a report by Global Data. The report includes seven of the major markets for the therapy: the U.S., France, Germany, Italy, Spain, the U.K. and Japan.
The market will be driven by the introduction of new drugs and the growth in the elderly population. No wonder, then, that a number of companies are hungering for a piece of the pie.
Among those testing new treatments are Switzerland's Roche and Novartis, according to a Reuters piece in late October. Roche has high hopes for its compound faricimab, which has shown long-lasting effectiveness and could cut the rate of shots that are given directly in the eye.
Give the size and projected growth rate of the market, investors may want to keep an eye on some of the other companies developing treatments. They include:
- Regenix Bio (RGNX, Financial)
- Apellis Pharmaceuticals (APLS, Financial)
- Ophthotech Corp. (OPHT, Financial)
- Allergan (AGN, Financial)
Disclosure: The author holds no positions in any of the stocks mentioned in this article.
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