Three short years ago, Regeneron Pharmaceuticals (NASDAQ: REGN) was a $25 stock that seemed to have priced in the market potential of a wet age-related macular degeneration (AMD) drug known as "VEGF Trap" which was targeting the progressive disease with a very similar mechanism-of-action relative to other products that were already on the market (or on the verge of coming to the market).
As of last Friday's (May 3rd) close, REGN closed at $266.16 - nearly 10x higher after a 7th consecutive beat in last week's quarterly financials. Investors who bought Regeneron during the early clinical development of its current pipeline (~10 years ago) would have multiplied their wealth about 40x.
Biotech and small pharma investors who have long-term perspectives are constantly looking for the next sleeper-hit drug (or company), although they're not easy to spot. While the stereotypically bullish Wall Street analysts were generally optimistic on the 2-month dosing and non-inferior efficacy/safety profile that Eylea established after Phase III trials, nobody was able to factor in how important these competitive advantages would be for taking market share away from blockbuster VEGF inhibitor Lucentis.
Specifically, it was the notion that wet AMD patients could receive an EYLEA injection (into their eyeball) once every two months for the same price as Lucentis (another eyeball injection) without compromising the efficacy of the therapeutic regimen. Although eyeball injections are more of a psychological terror than a physically painful procedure, they are quite unpopular.
This simple dosing improvement offered by Eylea has lead the company to ~$314 million in quarterly revenues (and growing), and has financially supported the bulk of Regeneron's current $26 billion valuation.
Eventually Regeneron wants to bring Eylea into the market for diabetic macular edema, which gives the company an attempt to knock Lucentis off its perch in that indication as well. Based on estimates, this new indication could probably make Eylea a $2 billion/year drug - if not more. Even better for the company's financials is the low cost of manufacturing Eylea.
So, until another company offers a VEGF-inhibiting eyeball injection that can be administered in less frequent intervals while inducing the same therapeutic effect, Eylea will retain a simple but extremely important advantage over its competitors. While Regeneron is no longer a stock that can multiply ten-fold in valuation over just a few years, investors ought to realize that the recent 52-week high was a reaction to the company's fundamentals - not its chart or its recent headlines.
Regeneron is a textbook example of a small-cap success story in the healthcare space, although the company didn't have to cure an untreatable disease to generate immense value for its shareholders. Sometimes, it just boils down to a simple/small improvement.