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Regeneron to Lift Veil on Eye Drug Success

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Eylea faces a hurdle competing with Roche's Lucentis and the off-label use of Avastin. Investors are about to get first glimpse of the new drug's sales potential.

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Regeneron Pharmaceuticals (REGN) insists it has the best drug to treat the leading cause of blindness in the elderly, a newly approved treatment called Eylea. On Monday, investors will get a first glimpse at early sales of the product, and the stock likely will move on the news.

The Tarrytown, New York-based biotech plans to disclose sales at a late-afternoon presentation in San Francisco (7 p.m. EST). For Regeneron, this is a particularly important disclosure, especially given investors' skittishness about drug launches.

For months, analysts raised questions over Regeneron's ability to effectively compete with a leading (and very similar) drug on the market, Roche's Lucentis. Both products treat age-related macular degeneration, or AMD. Last month, Regeneron said a company study comparing the two therapies showed Eylea works just as well as Lucentis over two years and may require fewer injected doses. (See Regeneron Shares Drop as Study Shows Little Advantage Over Rival Eye Drug)

Though both drugs are very expensive, Regeneron priced its treatment at $1,850 a dose, which is less than Lucentis' $1,950 per injection. If patients truly need fewer doses of Eylea, than the drug provides an even greater value, Regeneron argues. Both drugs are approved for monthly dosing but the actual number of injections varies. Complicating the competitive landscape even further is the fact that many doctors use an unapproved, cheaper treatment for AMD: Roche's cancer drug Avastin. The widespread use of Avastin has raised some safety concerns. (See Avastin Problems Are No Panacea for Regeneron)

Yet with all the uncertainties facing Regeneron, some analysts came out this week to recommend buying the company's stock based on surveys of specialist doctors who say they intend to prescribe the treatment.

Jefferies analyst Biren Amin changed his recommendation Friday to a buy from a hold and raised his price target for the stock to $75 from $66. Amin says he thinks a number of doctors will prescribe the Regeneron drug -- an assumption based on a survey Jefferies conducted of 54 US opthalmologists. Using that survey, Amin predicts Eylea will capture almost a quarter of the market for AMD treatments its first year of sales and almost a third of the market in the second year.

"We raised our Eylea estimates to reflect higher market penetration predicted by our survey while accounting for launch ramp-up and execution risks," Amin says.

Shares of Regeneron rose 8% to $65.69 in early afternoon trading Friday. The stock is up more than 90% over the past year. (The shares dipped into the low $50s in December on worries about Eylea's sales launch.)

Amin predicts Eylea's US annual sales will rise to $1.2 billion by 2020.

In the short term, sales expectations are much lower given that the drug was just approved November 18. So the consensus estimates for only a few weeks at the end of 2011 is $3.3 million. Hitting that number and sending a message that demand is growing will be crucial for Regeneron on Monday.

Leerink Swann analyst Joshua Schimmer says his firm's survey of doctors signals "rapid adoption" of Eylea in new patients and for those people requiring the most frequent injections of either Lucentis or Avastin. Eylea's lower price and potential for fewer injections is appealing to the physicians, he says. Also, he notes a "lack of brand loyalty to Lucentis."

Schimmer recommends buying Regeneron's stock and set a 12-month price target in the low $70s.

Twitter: @brettchase

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No positions in stocks mentioned.
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