Regeneron Pharmaceuticals experienced a setback recently when the Food and Drug Administration (FDA) rejected its application for a higher-dose version of its eye medication, Eylea. The rejection came as a result of an ongoing review of inspection findings at a third-party filler, with no issues related to labeling, efficacy, or safety. While this may be a temporary delay in getting the higher-dose drug to market, it does raise concerns for investors.
Regeneron has been relying on Eylea to generate the bulk of its product revenue, but its sales growth has been lackluster in recent quarters. In the first quarter of this year, Eylea’s sales in the US market were down 6% compared to the previous year. The company’s total net product sales grew by just 2%, with collaboration and other revenue driving much of Regeneron’s growth.
The rejection from the FDA adds to the challenge of Regeneron’s slow growth rate. With the loss of patent protection for the current version of Eylea looming in a few years, the company needs a boost to its top line. A higher-dose version of aflibercept could have provided that boost. It is crucial for Regeneron to obtain FDA approval for the higher-dose drug sooner rather than later to justify its stock’s valuation and to shore up its growth.
Currently, Regeneron’s stock is trading at about 20 times earnings, above its five-year average. If the company fails to generate growth and strengthen its bottom line, the stock’s valuation multiple will continue to rise. However, it is worth noting that the average healthcare stock trades at 24 times earnings, making Regeneron’s stock still relatively less expensive despite the recent FDA rejection.
Investors should remain cautiously optimistic as approval from the FDA for the higher-dose version of Eylea could still be granted. The company has a portfolio of solid assets and an ongoing pipeline of trials, providing room for growth in the coming years. It is important to consider the potential risks but also the long-term potential of Regeneron in making investment decisions.
In conclusion, while the FDA rejection of Regeneron’s higher-dose version of Eylea is a setback for the company, it is not yet in trouble. With ongoing efforts to address concerns raised by the FDA, there is still a chance for approval and future growth. Investors should keep a close eye on upcoming developments and consider the overall potential of Regeneron when making investment decisions.
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