Keeping an eye on Eylea

Regeneron’s ophthalmology drug posts strong Q1 earnings

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TARRYTOWN, N.Y.—Regeneron Pharmaceuticals Inc.’s Eylea, a VEGF inhibitor for the treatment of age-related macular degeneration, macular edema and diabetic retinopathy, saw impressive results for the first quarter of fiscal 2016, with net sales up 44 percent to $781 million from $541 million in Q1 2015. The company reported that overall distributor inventory levels remained within its one- to two-week targeted range. In addition, Bayer has begun commercializing Eylea outside of the United States, and for the quarter, ex-U.S. net sales were $419 million, up from $292 million in Q1 2015. Regeneron saw $146 million from its share of net profit from ex-U.S. Eylea sales for the quarter, a 64-percent increase over the $89 million recorded in the first quarter of 2015.
All told, Regeneron saw net product sales of $784 million for the first quarter, and total revenues, including the aforementioned product revenues, rose 38 percent to $1.201 billion for the quarter. This means Eylea U.S. net product sales comprised approximately 99 percent of net sales for the quarter and 65 percent of total revenue.
Regeneron’s management had issued financial guidance previously expecting growth of just 20 percent for the drug. In light of these results, the company has raised its guidance for U.S. net sales for 2016, with a new expectation that sales will grow 20 to 25 percent year over year. Additionally, the first quarter of this year also saw Regeneron kick off a Phase 3 study of Eylea for the treatment of non-proliferative diabetic retinopathy in patients without diabetic macular edema.
“The year is off to a very productive start at Regeneron. This quarter, we saw continued strong sales growth with Eylea, made additional launch progress with Praluent, prepared for the potential launch of sarilumab, and reported important new data across our pipeline,” Dr. Leonard S. Schleifer, president and CEO of Regeneron, said in a press release. “Our innovative new therapy dupilumab showed positive results across two Phase 3 trials in moderate-to-severe atopic dermatitis, a debilitating disease with very limited treatment options, and we look forward to submitting a Biologics License Application to the U.S. FDA in the third quarter.”
When it comes to industry analysts, however, opinions are split on if—or how long—this flush of success will last for Eylea.
A May 6 article by Max Nisen of Bloomberg noted that the U.S. government proposed a pilot drug-pricing model for Medicare Part B in March, which pays for specialty drugs like Eylea. This model would “reduce incentives for doctors to prescribe more-expensive drugs (such as Eylea) and encourage the use of cheaper options. Even without these rules, Eylea’s sales growth is already slowing, from more than 50 percent last year to an anticipated 20 to 25 percent in 2016. Eylea is widely used by older patients; Medicare Part B paid Regeneron more than $1 billion for the drug in 2014.”
Geoffrey Porges of Leerink Partners commented in an analyst note that “The key events remain the threat of a major change in the reimbursement landscape for Medicare Part B, which finances almost 70 percent of Eylea’s use in the U.S., the additional trials and progress to filing and approval for dupilumab and lastly, the results of the respective cardiovascular outcomes studies for Praluent and its rival Amgen’s Repatha.” Porges is still optimistic with regards to Regeneron’s future, however, adding that “All these issues should be clarified in the second half of 2016, and we believe that most of them should fall in favor of Regeneron’s long-term value. Based on the surprisingly strong Q1, and updated guidance, we are increasing our revenue forecast by 1-2 percent, increased our EPS forecasts by 3-5 percent and raised our target price by 2 percent to $530.”
Fortunately, for its sake, Regeneron hasn’t been resting on its laurels on the drug development front, so it may have other drug candidates to fall back on in coming years if Eylea’s sales growth continues to slow. The company currently has 11 drug candidates in its portfolio in Phases 1 to 3 of clinical development for indications such as rheumatoid arthritis, atopic dermatitis, RSV, wet age-related macular degeneration and advanced cutaneous squamous cell carcinoma, among others. Regeneron also recently launched Praluent, though it is facing its own issues. On March 16, it lost its patent infringement litigation against Amgen and its drug Repatha. In addition, Praluent only saw net sales of $13 million for the quarter. Schleifer said in the company’s May 5 investor conference call that “Praluent’s launch is still ongoing, and it’s obviously faced a difficult reimbursement environment. While we fully understand payers’ efforts to control costs, we do have serious concerns that appropriate patients are having undue difficulty getting approval for Praluent.”
Brian Feroldi of Motley Fool wrote recently that despite the roadblocks, “Regeneron and Sanofi have been successful with their efforts to expand the drug’s reimbursement, as they now believe that 74 percent of commercially insured lives and 91 percent of Medicare-insured lives can access coverage. Still, most insurers continue to require a lengthy approval process before they will cover a patient.”
Regeneron is also working to complete a long-term cardiovascular outcomes study to prove that Praluent can reduce the risk of heart attack or stroke, and Feroldi wrote that “[M]anagement stated that Praluent is available in a number of countries, but reimbursement negotiations are still under way. Management noted that some countries are waiting for the cardiovascular outcomes study to be completed before they are willing to make a reimbursement decision.”

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