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Regeneron Pharma (RGEN): New Lipid Lowering Therapies Offer Long-Term Growth

 March 15, 2012 08:59 PM

Investors of Regeneron Pharmaceuticals, Inc. (NASDAQ:RGEN) have recently focused on the early success of the Eylea, which is indicated for neovascular (Wet) Age-related Macular Degeneration (AMD).

However, they might be overlooking the potential of REGN727, the company's first in a series of promising new lipid-lowering therapies.

In collaboration with Sanofi-Aventis, Regeneron is developing REGN727, a fully-human, subcutaneously administered antibody targeting PCSK9. Novel treatments, including PCSK9 inhibitors, may allow patients to achieve low levels of low-density lipoprotein Cholestrol (LDL-C).

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REGN727 has shown encouraging Phase II data in heterozygous familial hypercholesterolemia (heFH) and primary hypercholesterolemia. Phase III efficacy trials could begin in the second quarter of 2012. REGN727 is the most advanced PCSK9 inhibitor in development among its competitors and could be first-to-market in 2015.

"We believe REGN727 will show strong LDL-C reductions in Phase III," Jefferies analyst Biren Amin wrote in a note to clients.

REGN727 is expected to show positive results in the late-stage study. It has shown supportive Phase II data with strong reductions in LDL-C (low-density lipoprotein-cholesterol or bad cholesterol) in heFH and primary hypercholesterolemia who are statin-refractory.

About 77 million people in the U.S. over 20 years of age have high LDL-C according to National Health and Nutrition Examination Survey (NHANES) 2005-2008. Amin estimates there are about 3.4 million candidates for  PCSK9 inhibitors. These high-risk patients have the greatest need for aggressive LDL-C lowering therapies, despite being prescribed background statin therapy.

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Assuming REGN727 shows favorable results in Phase III studies, and U.S. regulatory approval in 2015 without cardiovascular (CV) outcomes data, the therapy could achieve U.S. sales of $2.1 billion in 2020, resulting in a profit of $733 million.

If FDA requires cardiovascular (CV) outcomes data for REGN727, approval could be pushed to 2017. Then, the analyst expects 2020 U.S. sales of $1.3 billion.

"While we await full Ph II data and possibly Ph III trial design to include REGN727, we estimate the program could be valued between $19-33/share on a risk-adjusted basis. We expect REGN727's valuation may start to creep into shares in the next 12-18 months," said Amin, who has a "buy" rating and $127 price target on Regeneron shares.

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