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Biotech / Medical : Regeneron Pharmaceuticals

REGN 768.39

+1.7%

11:27 AM EST

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To: Miljenko Zuanic who wrote (1984)	12/14/2016 12:14:31 PM
From: Biotech Jim	Read Replies (1) of 3559

Influential analyst Michael Yee came out with an RBC report on the 12th with this perspective regarding REGN and the Fovista failure. REGN price target of $626. Fovista Phase 3 studies fail; Big overhang removed for REGN and Eylea Our view: Eylea should remain standard of care for wet AMD/DME, etc., especially for hard-to-treat patients, and concerns regarding top-line disruption if Fovista had succeeded are gone and the overhang removed. Other competitors are in Phase 3 as well but this could show superiority over current standard of care is a high bar. Remaining overhangs are less of a concern we believe. Key points: Fovista Phase 3 studies fail to demonstrate superiority over Lucentis (conf. call at 8:30 AM). Two Phase 3 studies comparing Ophthotech’s Fovista plus Lucentis to Lucentis alone did not meet the primary endpoint of demonstrating a better vision for the combination at 12 months. The improvements were 10.24 letters for the combo vs. 10.01 for Lucentis when the two Phase 3s were combined. Individually, one Phase 3 showed combo improvement of 10.74 letters vs. 9.82 letters alone and the second 9.91 letters vs. 10.36 letters with Lucentis alone. A third Phase 3 study combining Fovista with Eylea or Avastin is ongoing and the status of that program may be discussed on the 8:30 AM conference call by Ophthotech. Big overhang removed; shares should be up and then continue to rise with the focus moving to dupilumab. Overhang was that Fovista success and approval could disrupt the market for Eylea as more docs tried combining nearly free Avastin (off-label) with Fovista to improve outcomes with patients. We had always argued that even under that scenario Eylea would be used since it is the most potent agent. We are buyers at current level especially ahead of the upcoming dupilumab launch. Docs had seemed lukewarm and were recently more enthusiastic about anti-ang2. Previously REGN’s own anti-PDGFR combo with Eylea had failed and docs at recent meetings had emphasized anti-ang2 where REGN’s REGN910-3 (Eylea + anti-ang2) has two Phase 2 trials ongoing with data expected in 2017 (competitor Roche has a program too). Should this Phase 2 program succeed this would be a big driver for REGN shares too. Remaining overhangs are not as big a deal but still worth watching. There are more Phase 3 studies ongoing with competitor agents vs. Eylea including one reading out in 2017 but the bar would be presumed higher there now. Other overhangs such as Praluent litigation and outcomes data are also due, but we view those as lessor concerns since the Street has already cut Praluent numbers. Finally, there are concerns about sarilumab and dupilumab approval but that is due to potential manufacturing delays so not as big a deal and dupilumab could still be approved by its March PDUFA.

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