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Morningstar | Regeneron's Narrow Moat Is Supported by Its Flagship Eylea Franchise and Growing Immunology Sales

Regeneron has leveraged its monoclonal antibody research and development platform to become one of the few biotechs to successfully emerge as a profitable commercial operation and establish a narrow moat. Lead drug Eylea has global sales north of $6 billion annually and is approved for wet age-related macular degeneration and other eye-related indications. The drug remains well positioned, as its 12-week dosing and potential high-dose formulation should allow it to continue to hold strong market share against Lucentis, Avastin, and Novartis' brolucizumab.Sales of Eylea have grown at a double-digit pace as sales outside the United States ramped up and usage in new indications like diabetic macular edema took hold. While positive data in the larger diabetic retinopathy population should provide another boost, we expect pricing pressure and competition (brolucizumab launching by late 2019) should push Eylea to single-digit growth through patent expiration in 2023. LDL cholesterol reduction drug Praluent, which has demonstrated impressive clinical results, saw a slow launch trajectory because of payer restrictions. We think the drug could provide a meaningful benefit to the millions of patients whose disease is still uncontrolled with statins, a market that has nearly $8 billion peak sales potential. Armed with strong cardiovascular outcomes data, Regeneron and partner Sanofi have negotiated an exclusive deal with Express Scripts that should open broader access and allow it to compete more closely with Amgen's Repatha, albeit at a lower price.The company has a full pipeline through its monoclonal antibody collaboration with Sanofi. Beyond Praluent, Regeneron's proprietary human monoclonal antibody technology has led to the launches of Dupixent (atopic dermatitis) and Kevzara (rheumatoid arthritis) in 2017, followed by launches of Dupixent (asthma) and Libtayo (oncology) in 2018. While the partnership with Sanofi for new pipeline products has been scaled back, this gives Regeneron several in-house opportunities, like lymphoma bispecific antibody REGN 1979. Despite competition, we think Regeneron's diverse pipeline and scientific leadership should comfort investors.