Exclusive: Biotech Regeneron on verge of big leagues

By Ransdell Pierson

NEW YORK (BestGrowthStock) – Regeneron Pharmaceuticals Inc (REGN.O: ), a relatively unknown biotechnology company based in sleepy Tarrytown, New York, is not exactly a household name. But that is likely to change fast.

The company plans to steal the limelight in the coming year with data from seven late-stage trials of its experimental drugs for gout, colon cancer and a leading cause of blindness. It is rare for a biotech of any size to have so much pivotal news coming out in such a short period of time.

“The cycle is getting to be in full swing,” said Chief Executive Leonard Schleifer. “We need a big hit on one of these drugs and then I think the world will start to pay a lot more attention to our pipeline” of new medicines.

In an exclusive interview with Reuters at company headquarters, Schleifer and his research chief George Yancopoulos outlined their plan for leaping from obscurity to the big leagues.

They know from experience, however, that in biotech there is no sure thing. In March 2003, when the company’s Axokine obesity treatment stumbled in clinical trials, Regeneron shares lost more than half their value.

But success in even one of its three treatments now in late-stage studies could propel Regeneron from a typical money-losing biotech into a profitable company with a bright future. Its products could eventually take on Roche Holding AG’s (ROG.VX: ) $6 billion cancer drug, Avastin, and $3 billion Lucentis eye-disease medicine. The gout drug could attract annual sales of $500 million or more, analysts estimate.

Regeneron on Wednesday said two other drugs in earlier-stage trials significantly cut levels of “bad” LDL cholesterol and eased knee pain from osteoarthritis.

But Wall Street is more focused on its drugs in late-stage trials.

“We believe that Regeneron should represent a core holding in biotechnology portfolios, based on the depth of its pipeline and its partnerships,” Roth Capital Partners analyst Joseph Pantginis said on Wednesday. He said he is encouraged by new data from the early-stage trials.

Regeneron has some big backers and one of the biggest research budgets of any biotech, at more than $700 million this year. That includes spending by collaborators and $160 million of support from research partner Sanofi-Aventis SA (SASY.PA: ).

It currently sells only one product, called Arcalyst, that brings in less than $20 million a year and treats a rare inherited inflammatory condition.

But the three drugs now wrapping up late-stage studies, the final step before seeking regulatory approval, have far bigger sales potential.

NOT IMMUNE TO FAILURE

Most biotech companies are staking their futures on only one or two drugs and many have gone bankrupt trying. Regeneron, which is now testing eight drugs, plans to have as many as 40 more in trials by 2017 under its lucrative deal with Sanofi to test Regeneron antibodies against a wide range of diseases.

Regeneron claims to have perhaps the most effective drug-making technology — mice with human immune-system genes that produce better antibodies than rival companies.

It cites another major weapon: the continual hands-on involvement of Merck & Co Inc’s (MRK.N: ) legendary former Chief Executive Roy Vagelos.

The stock, with big current stakes held by Sanofi, T. Rowe Price Group (TROW.O: ) affiliates and Carl Icahn, has risen 57 percent over the past year, compared with a 70 percent gain for the NYSARC Biotech Index (.BTK: ) and a 27 percent advance for the Standard & Poor’s 500. In morning trade, it rose a further $1.09 or 4.3 percent to $26.61 on Nasdaq.

Regeneron’s market capitalization is about $2 billion, far below industry leaders such as Amgen Inc (AMGN.O: ) at $53 billion and $129 billion for Roche, owner of Genentech, a biotech Regeneron emulates.

The company is based in the hometown of author Washington Irving, whose famous tale “Rip Van Winkle” concerns a man who falls asleep for 20 years and awakens to find everything changed. But unlike Rip, who was habitually idle, Regeneron has worked at a feverish pace since 1988 to change everything about drug development.

By next month, Regeneron plans to release data from Phase III trials of its drug to prevent and treat pain from gout, a form of arthritis that often hits the big toe. It uses the same active ingredient as Arcalyst, rilonacept, and works by blocking an inflammation-causing protein called Interleukin-1.

In the second half of the year it plans to provide data from late-stage trials of its macular degeneration product, called VEGF Trap, and its aflibercept drug for colon cancer. Both drugs, like Avastin, block the VEGF protein which is involved in growth of blood vessels.

Schleifer said the company’s top commercial opportunity is probably VEGF-Trap, being developed with Bayer AG (BAYGn.DE: ).

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Exclusive: Biotech Regeneron on verge of big leagues