An undervalued indication for Regeneron's Eylea could help it weather Novartis threat: analyst

With a rival Novartis drug heading to market, Regeneron recently disclosed that a bigger-than-expected portion of its Eylea revenue might be in jeopardy. But the eye drug might have a shot at a new indication that could save the day. 

As Leerink Partners’ Geoffrey Porges wrote in a Monday note to clients, Eylea is generating about 70% of its U.S. sales from patients with wet age-related macular degeneration (AMD)and that's a much bigger share than the 50% Porges had estimated.

We previously expected that the revenue split would be approaching parity” between wet AMD and diabetic macular edema, the analyst noted. Turns out, DME is only churning out 25% of Eylea sales.

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That’s not great news, considering that Novartis’ up-and-comer brolucizumab is gunning for a wet AMD nodand its less-frequent dosing could provide “a significant differentiator and competitive advantage," Jefferies analysts have said.

But there could be a dark horse in the picture, Porges positsand that’s a potential approval in nonproliferative diabetic retinopathy (NPDR) without DME. Eylea is currently in phase 3 trials that could lead to an approval if all goes well, and “we believe there is very little, if any, value being assigned to Eylea” in that area, he wrote.

It’s not hard to see why Wall Street may be undervaluing the commercial opportunity, Porges explained. “Limited evidence” of an efficacy benefit and “confusion about delineation” of NPDR and Eylea’s existing DME indication are both contributing to lackluster expectations. And archrival Lucentis, which won its own NPDR go-ahead in April, “has yet to see much inflection in sales.”

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The way Porges sees it, though, Eylea will be able to make a bigger splash. Data suggest Eylea may require “considerably fewer injections” than its peer NPDR treatments. Plus, those peers have only demonstrated that they’re not inferior to standard-of-care laser treatment; they haven't shown they can top it.

All things considered, Porges expects that in NPDR, Eylea could “achieve higher market share than it currently holds in its existing wet AMD indication” and that its sales in that department will offset the brolucizumab competition. He’s hiked his overall Eylea forecasts by 3% to 5% between 2019 and 2022, he wrote, and his Regeneron EPS estimates have risen accordingly by 3% to 4% over that span.