Regeneron Pharmaceuticals Inc. (REGN, Financial) is one of the biggest names in the biotechnology sector. The company has already-approved assets (of which there are six so far) and pipeline-based development drugs (of which there are around 15 right now) designed to target a whole host of different indications, from eye disease to heart disease, to pain, cancer, infectious diseases and rare diseases.
You name it, Regeneron is likely going after it.
Well, the company just made an announcement that adds another indication target to the above list and, on the back of the development, has made a move rarely seen in the biotechnology and health care sectors these days -- but one that was incredibly popular during the latter third of last century.
Here is a look at the development in question with a discussion of what it means for Regeneron and for the patients that form the population that the company is now targeting.
The announcement details a collaboration deal with a privately held entity called Decibel Therapeutics, which is a Massachusetts-based biotech company that – as its name aptly suggests – is trying to develop a range of treatments targeting problems with the ear and hearing. Some reading may already be familiar with this company for a couple of reasons.
First, it' CEO is Steve Holtzman, who served as executive vice president of corporate development at biotech behemoth Biogen (BIIB) until March last year (when he took the job at Decibel).
Second, the company has some very large and well-known backers including Third Rock and GV, the venture capital arm of Alphabet (GOOGL, Financial).
These are some pretty strong endorsements and, as per the latest news, we can add Regeneron to the list of big-name backers. The news details the fact that the two companies will team up to develop a suite of novel therapies to protect, repair and restore hearing, with the development assets rooted in Decibel's current pipeline -- but with the support of Regeneron's world-leading technological capabilities in genetics research, drug discovery, and antibody development and manufacturing.
When you are looking to develop a suite of treatments targeting something as complicated hearing, you want access to the sort of technology that Regeneron has built, and that's what Decibel now has. And there's more. In addition to R&D funding, Regeneron has also pledged milestone payments for development successes and, in return, will claim royalties on any products that make it through to market.
And this is a huge market.
According to the World Health Organization, over 5% of the world's population – 360 million people – have disabling hearing loss and economically, global costs secondary to hearing loss exceed $750 billion.
Right now, there are no medicines available to protect, repair or restore hearing.
All this seems pretty standard, so why is the development unusual?
Well, because as was announced in this company communication, Decibel “retains exclusive, worldwide commercialization rights for all hearing drug candidates discovered in the collaboration."
This is pretty much unheard of these days in the health care sector, with the company doing the majority of the funding (as Regeneron is here) generally picking up rights to assets (at least in some global regions) when the collaboration bears fruit.
Instead of this, however, and in this instance, Regeneron has reportedly taken a sizable (but not controlling) stake in Decibel, meaning the company's exposure to the latter is rooted in valuation going forward.
So what does this tell us about Decibel, then?
Well, it hints that we may see an IPO at some point in the near future -- likely subsequent to the company having picked up some early-stage data that points towards efficacy in one of its target elements of hearing loss.
If Decibel did conduct an IPO, Regeneron's position would be converted to ordinary (or even preferred) shares, and that's where the company will get its return.
For the target market -- those suffering from hearing loss -- this is a great bit of news. To have a company backed by Google and Third Rock given access to Regeneron's technology and set to work focusing entirely on bringing drugs to market that can improve your condition is a best-case scenario.
Now we've got to wait and see which assets hit the clinic first.
Disclosure: The author has no positions in any of the stocks mentioned in this piece.
