Regeneron: A Great Lesson to Learn

First, we congratulate our subscribers who did not follow the skeptics and believed in the rationality of science and kept their Vertex' (NASDAQ:VRTX) and Regeneron's (NASDAQ:REGN) shares despite years of negative campaigns against the two firms. Following the rally in VRTX, another rally started in REGN for rational reasons. Both firms are among our TOP TEN selection.

Today, the spotlight belongs to Regeneron. The stock at this hour is up $17 for a good reason. As a matter of fact, the stock has rally for more than one reason, as we will see later in this article. Once again, Regeneron's Trap technology has succeeded while other targeted drugs aiming at the same targets, but developed through other technologies failed to be as effective. The story came in a press release from Regeneron and its partner Sanofi-Avantis announcing that results from Phase III VELOUR trials evaluating Regeneron's drug ZALTRAP (aflibercept), in combination with the FOLFIRI chemotherapy regimen versus a regimen of FOLFIRI plus placebo, demonstrated that the drug has met all endpoints of the trial as a second-line treatment for metastatic colorectal cancer. The medical community hailed the news for good reasons, and investors rushed to buy the stock, instigating a uniquely strong rally.

Is there any good lesson investors should learn here now? What happened here illustrates the importance of assessing the biotech firms with both the market factors and, the scientific criteria related to the therapeutic molecules, their targets, the affected organs and the cause for advanced cancer resistance to conventional drugs. Biotechnology is based on advanced biological disciplines and assessing its firms relying only on traders' practices and technical market considerations could be misleading to the assessors and, especially, to their followers.

The good news surprised some, but not all investors, especially those who knew about the capability of Regeneron's trap technology. These informed investors did not rush to sell the stock during the negative campaigns against Regeneron, especially that, which took the stock down from around $30 to $21.61 between June 1 and June 8, 2010. On the contrary, the savvy investors took advantage of the irrational selloff to buy the stock at a low price and then ride a bullish wave that corresponded with the results of clinical trials on the firm's drug. All attempts to get the stock down failed since that time except in convincing gullible investors not to buy the stock that happen to outperform all the biotech firms, small and large.

In their press release that announced that good results from Phase III VELOUR trial, Sanofi-Aventis (NYSE:SNY) and Regeneron Pharmaceuticals confirmed that the drug has improved overall survival, progression-free survival, response to treatment, and safety in patients with metastatic colorectal cancer (mCRC) that failed to respond to an oxaliplatin-based regimen.

The excitement of the scientific community and the euphoria of investors, which is reflected in REGN's rally emanated from the fact that patients with metastatic colorectal cancers have very limited treatment options. Colorectal cancer is recognized as curable in early stages. It becomes life threatening and a killer, though, when advanced and metastasized. George D. Yancopoulos, M.D., Ph.D., Chief Scientific Officer of Regeneron and President of Regeneron Research Laboratories said, "Sanofi-Aventis plans to submit regulatory applications for marketing approval to the U.S. Food and Drug Administration and the European Medicines Agency in second half of the year."

Debasish Roychowdhury, M.D Senior Vice President and Head, Global Oncology Division, Sanofi-aventis said, "We are pleased with the results of the ZALTRAP Phase III study in this group of patients. We are committed to bringing ZALTRAP to patients with advanced colorectal cancer and maximizing the therapeutic potential of this unique and exciting medicine."

The most frequent adverse events reported with ZALTRAP in combination with FOLFIRI were diarrhea, asthenia/fatigue, stomatitis and ulceration, nausea, infection, hypertension, gastrointestinal and abdominal pains, vomiting, decreased appetite, decreased weight, epistaxis (nose bleed) alopecia, and dysphonia. Most symptoms are side effects of the chemotherapeutics used in combination with Regeneron's anti-angiogenesis drug.

ZALTRAP (aflibercept), also known as VEGF Trap, is an angiogenesis inhibitor. What boosted our expectations on this drug and Regeneron's other investigational Trap drugs is that they each has unique mechanism of action. ZALTRAP, for example, binds all forms of vascular endothelial growth factors (VEGF's), which comprise VEGF-A and VEGF-B, as well as placental growth factors, additional angiogenic growth factors that accommodates cancers by increasing their blood supply through angiogenesis and inflammation. Important also was the fact that ZALTRAP has been shown to bind to VEGF growth factors and PlGF with a higher affinity than their native receptors.

The results of ZALTRAP on advanced metastatic colon cancer are made possible through the obvious capability of Regeneron Trap Technology and the binding affinity of the Trap drugs. These results solidified our expectation that Regeneron's VEGF TRAP EYE will also outperform the existing antiangiogenic drugs for macular degeneration and other eye diseases. As a matter of fact, the macular degeneration drug is also in trial for central retinal vein disease. We expect this drug to be approved soon.

Regeneron's cancer programs do not end with the (mCRC) drug. The firm has collaboration agreements with Sanofi-Aventis Oncology on a broad oncology development program, combining the investigational agent ZALTRAP with common chemotherapy regimens in the treatment of patients with advanced cancers. The program includes Phase III VENICE trials for first-line treatment of hormone-refractory metastatic prostate cancer in combination with docetaxel and prednisone. An interim analysis is expected to be conducted by an Independent Data Monitoring Committee in mid 2011, with final results anticipated in 2012. Also, the Phase II AFFIRM trial for first-line treatment of metastatic colorectal cancer in combination with 5-fluorouracil, leucovorin and oxaliplatin (FOLFOX). Final results are expected during the second half of 2011.

Regeneron's product pipeline represents a wealth in itself. Regeneron has struggled for long years to perfect its technologies, design and develop its products and advance them into clinical trials. Now is the time for the firm's scientists, management and shareholders to celebrate. They deserve a celebration. We congratulate our readers who did not succumb to fear when the stocks they believe in were taking some dives every now and then, which is a normal phenomenon in the biography of publicly-traded firms.

Disclosure: We are long Regeneron.

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