Regeneron: New Highs Following Dupixent's COPD Data

Shares of Regeneron (NASDAQ:REGN) jumped to new all-time highs when the company and partner Sanofi (SNY) reported positive phase 3 results of Dupixent (dupilumab) in patients with chronic obstructive pulmonary disease or COPD. The results put another large addressable market on the map for a product that could become one of the largest biotech products ever by the end of this decade.

Dupixent is the first and only biologic to demonstrate a statistically significant 30% reduction in pulmonary exacerbations compared to placebo and the first and only biologic to show rapid and significant improvement in lung function – 160mL in FEV1 compared to 77mL in FEV1 for placebo. Regeneron and Sanofi further claim significant improvements in quality of life and respiratory symptoms, but we have to wait for the presentation of these data at an upcoming medical conference.

There were no new safety signals and the most common adverse events with incidence higher than placebo were headache (8.1% vs 6.8%), diarrhea (5.3% vs 3.6%), and back pain (5.1% vs 3.4%). There were adverse events with a higher incidence in the placebo group – upper respiratory tract infection (9.8% placebo, 7.9% Dupixent), hypertension (6.0% placebo, 3.6% Dupixent) and COVID-19 (5.7% placebo vs 4.1% Dupixent) and adverse events leading to death were balanced with 1.7% rate in the placebo group and 1.5% in the Dupixent group.

I should also mention that these results were achieved on top of a triple therapy of inhaled corticosteroids, long-acting beta-agonists, and long-acting muscarinic antagonists. This should make commercialization easier as no switching is required and Dupixent should simply be added to the existing standard of care.

As I covered previously, Dupixent represents one of the two potential shots on goal for Regeneron in COPD. The second shot on goal is itepekimab, a monoclonal antibody that inhibits IL33. The success of itepekimab would mean even more to Regeneron since the addressable market is larger – approximately 600,000 non-type 2 COPD patients and another 350,000 Type 2 patients that both Dupixent and itepekimab could treat, and another 150,000 that Regeneron estimates will only be eligible for Dupixent.

With an estimated net price of approximately $30,000 per patient per year and 500,000 patients, the addressable market for Dupixent in COPD alone is $15 billion and 10% to 20% market penetration would add $1.5 billion to $3 billion in annual sales. Evercore ISI estimates that Dupixent’s peak sales in the United States will be $2.5 billion and that ex-U.S. markets will add another billion, and Jefferies believes COPD is a $4 billion a year opportunity for Dupixent.

If itepekimab is added and if it repeats the 42% reduction in exacerbations it achieved in the phase 2 trial, the COPD franchise could very well generate more than $8 billion in annual peak sales by the early 2030s.

As a reminder, Regeneron has good economics under the collaboration with Sanofi – a 50-50 profit split in the United States and a sliding scale in ex-U.S. markets that start at 65-35 in Sanofi’s favor and end at a 55-45 split in Sanofi’s favor. In 2022, Regeneron generated $2.07 billion in profits from the antibody collaboration with Sanofi and the profit margin has already reached 25% in the fourth quarter.

Dupixent itself has generated $8.7 billion in net sales in 2022 and I would have already expected it to exceed $20 billion in annual peak sales even without COPD, and I expect the success in COPD to push the global peak sales up to the mid-20s by the end of the decade with collaboration profits reaching or exceeding 35%.

Other recent developments

Since my last update in late January, Regeneron has reported Q4 2022 results but without major surprises as the company already pre-announced Eylea's net sales in early January.

The BLA application for high-dose Eylea was accepted by the FDA and the company used a Priority Review Voucher to expedite the review and the PDUFA date is June 27. This is the key regulatory event in the near term that is expected to strengthen the Eylea franchise and reduce erosion that might come from the launch of Roche’s Vabysmo.

And so far, Vabysmo has not caused significant erosion despite generating CHF591 million (approximately $650 million) in net sales in 2022. As mentioned in the January article, Eylea’s sequential and Y/Y decline in net sales in the fourth quarter of 2022 was unrelated to Vabysmo – it was due to a shift to off-label Avastin due to the temporary closing of a fund that provides patient co-pay assistance and management has said back in early January, and has since confirmed again in March, that this shift has nearly reversed and that Eylea has “substantially recovered” by early February.

Partner Sanofi expects Dupixent to generate more than 10 billion euros in net sales this year (approximately $11 billion) which would represent a greater than 25% increase over 2022.

Libtayo should get a boost from the recently expanded label and the company said on the Q4 2022 earnings call that “early launch indicators are positive.”

Overall, the company looks to be in good shape with several growth drivers in the following quarters and years (primarily Dupixent, but also Libtayo and in the medium-term itepekimab in COPD) that have the potential to push annual sales and profits higher despite the headwinds Eylea may face during the same period.

Conclusion

Shares of Regeneron have appreciated approximately 40% since I first wrote about the company in June 2022 but I believe the fundamental outlook has improved since then with the successful transition and indication expansion for Libtayo, additional approvals and continued strong growth of Dupixent, and the good high-dose Eylea data with a fast regulatory turnaround with a PDUFA date in late June. And more recently, the success of Dupixent in COPD which should push its peak sales well above $20 billion by the end of the decade and add billions in cash flow for Regeneron.

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