Will Growing PCSK9 Competition Hinder Regeneron’s Stock?

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Regeneron Pharmaceuticals (NASDAQ:REGN) has enjoyed a large, five-year 2,000 percent return, and while much is tied to its current growth, the vast majority of Regeneron’s $30 billion market cap is more-so tied to its pipeline. With that said, one of its most promising Phase 3 products might not have a first-to-market advantage thanks to Amgen (NASDAQ:AMGN), and this could be bad news for Regeneron’s stock.

Regeneron markets three different drugs, with the most significant being Eylea, an injectable vaccine that treats rare diseases that cause blindness. Last year, Eylea grew 68 percent year-over-year and accounted for $1.4 billion of the company’s $2.1 billion in total revenue.

In an absolute best-case scenario, including success in all ongoing trials, Eylea could generate $3.5 billion in annual sales, according to most analysts. Clearly, the success of this one drug alone is not enough to support or even validate the company’s current market capitalization of $30 billion, meaning its pipeline must be successful.

While Regeneron is a leading biotechnology company in pipeline development, one of its most exciting candidates is called REGN727, or Alirocumab, which is a Phase 3 vaccine used to lower LDL (bad) cholesterol. Alirocumab is a fully human monoclonal antibody that binds a protein called PCSK9, which has been linked to lowering bad cholesterol and also preventing cardiac events.

In a Phase 1 study, Alirocumab was tested against Lipitor and lowered bad cholesterol by more than 70 percent versus Lipitor. As a result, and against the best-selling drug of all time, analysts believe that Alirocumab could create revenue in excess of $3.5 billion in the U.S. and up to $8 billion globally. Hence, this is a very important drug in maintaining Regeneron’s premium valuation and in keeping the stock price trending higher.

Unfortunately, Regeneron is not the only company that’s developing a PCSK9. Last weekend, Amgen reported that its PCSK9 Evolocumab decreased bad cholesterol by 55-60 percent against a placebo in three Phase 3 trials. Already, Amgen has tested its product on 4,000 patients, and given its most recent data, it has a leading edge on Regeneron, even if Alirocumab is eventually proven to be more effective. In the end, success in marketing new products is often just as much about getting to the market first as having a good drug, and this fact could hurt Regeneron and the peak revenue it’s “expected” to earn.

With that said, it’s not just Amgen that has a late-stage PCSK9, but also Pfizer (NYSE:PFE), giving Regeneron two large companies as competitors. However, it’s worth noting that analysts have said that the market opportunity for these three drugs could exceed $3 billion each in the U.S. alone — but as previously noted, much of this rests on which company has the best drug and which product is on the market first.

So if Eylea and Alirocumab reach peak global revenue at more than $11 billion, it means that Regeneron is currently trading at nearly three times peak sales on two of its most promising drugs. And while it has other promising products such as an asthma drug that reduces episodes in its pipeline, this recent news from Amgen could cause problems like the inability to meet expectations, which, long-term, could hinder Regeneron’s stock.

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