Regeneron's Success Isn't Limited To Eylea

Biotech stocks have been star performers this quarter, with high profile FDA approvals moving plays such as Onyx (NASDAQ:ONXX), Vivus (NASDAQ:VVUS) and Arena (NASDAQ:ARNA).

While biotech stocks volatility isn't for the meek, finding quality biotech companies with solid revenue and rich pipelines can be profit friendly, especially as investors shun earnings report risk in favor of news flow related risk. One such biotech company is Regeneron (NASDAQ:REGN).

EYLEA is winning share from blockbuster Lucentis.

Regeneron's Eylea was approved last November in the U.S. for the treatment of wet age related macular degeneration ("AMD"), which affects roughly 800k people in the US. Over 200k new cases of wet AMD are diagnosed each year in the US alone. And, cases are likely to grow significantly as the number of Americans over 65 is doubles by mid century.

The disease, hallmarked by new blood vessels growing under the retina and leaking, propelled competitor Roche's (OTCQX:RHHBY) Lucentis to blockbuster status, with U.S. sales of $1.4 billion last year.

After six months on the market, Eylea, which carries a gross margin in excess of 90%, had captured 12% market share at the end of Q1 - significantly cutting into Lucentis and off-label Avastin sales. At the end of Q2, market share had increased to 14%.

Of those patients taking Eylea, 60% had switched from Lucentis or Avastin. In Q1, Roche, who owns Lucentis rights in the U.S., reported Lucentis sales dropped 6.89% from Q4 as units sold fell by 5.88%, a reflection of eroding market share.

Eylea's $124 million in Q1 sales came in above plan, allowing Regeneron to boost 2012 sales guidance to $500 to $550 million, up from $250-300 million at year end. The trend continued in Q2, as sales climbed to $194 million. The ongoing success allowed the company to bump up its guidance again, this time to $700-750 million.

One of the reasons the drug is enjoying success at Lucentis' expense is its dosing schedule.

Both drugs are injected into the eye, so Eylea's bi-monthly dosing is more palatable to patients than Lucentis monthly injections.

It's likely this advantage is being highly touted by Regeneron's 125 member sales team. As the team gains momentum with the 2500 retinal specialists here in the states, script growth is likely to accelerate. Such momentum will likely increase further as the drug's reimbursement code moves from the more onerous Q to the more physician friendly J early next year.

Look for overseas sales to ramp in 2013.

In the U.S., Regeneron captures 100% of Eylea sales. Overseas, the company has partnered with Goliath Bayer (OTCPK:BAYRY), who will market the drug and pay Regeneron a 50% royalty.

Worldwide, the market for wet AMD treatments exceeds $4 billion. In Q2, Novartis - owner of Lucentis ex-U.S. rights - generated $604 million from the drug, up 20% from the prior year. If Eylea has similar market share success globally to its results here in the states, revenue should push north of blockbuster status in short order given the drug has already been approved in Australia and Colombia and will likely gain approval in the EU and Japan later this year.

Eylea is likely to see sales growth as the label expands too. The FDA has set a PDUFA date of September 23rd for Eylea as a treatment for central retinal vein occlusion ("CRVO"). And, phase 3 trials for other indications including for diabetic macular degeneration and branch retinal vein occlusion are underway.

Even more compelling, REGN's pipeline offers considerable opportunity.

The company's Zaltrap, which treats previously treated colorectal cancer patients, received priority review designation from the FDA. The designation reflects the significant unmet need and hints at approval on its August 4th PDUFA date.

In the U.S., 103k new cases of colorectal cancer are diagnosed each year and 51k die annually from the disease. Given the mortality rate, there's a substantial market opportunity for new treatment options. However, the need isn't limited to the States. Regeneron filed for EU approval of Zaltrap in Q4 2011. If approved, Regeneron will collect a 50% royalty on sales by partner Sanofi (NYSE:SNY).

The company also has significant opportunity with its REGN727 drug, which just entered Phase III trials with 22k patients. The LDL-C drug could be the company's largest market opportunity behind Eylea given the significant interest in cholesterol lowering combination therapies and the fact some 63 million suffer from elevated LDL despite current treatment options.

In phase II trials, REGN727 reduced LDL-C by more than 70% when used with statins, significantly more than the 5% recorded in the placebo group.

The drug is part of a partnership with Sanofi to develop REGN antibody drugs. Sanofi contributes 100% of pre phase III development costs and $160 million annually through 2017 for antibody discovery. Overall, Regeneron hopes to see 20 antibody candidates in trials as a result of the partnership.

Finally, Regeneron also has Sarilumab for rheumatoid arthritis ("RA") in phase III trials. The disease affects 1 in 100 in the U.S. alone, supporting the company's belief the drug could eventually outsell Zaltrap. In phase II trials, the Sarilumab provided meaningful improvement in moderate and severe RA patients.

Overall, analysts expect Regeneron's EPS to climb from a loss of $-2.28 in 2011 to $1.02 this year and $2.63 in 2013. Those estimates are likely too conservative given Q2 EPS came in $0.45 above street forecasts. There are 5 days short heading into the August PDUFA date for Zaltrap. Given potential catalysts, investors should use weakness to build positions through summer.

Disclosure: I am long REGN.