Regeneron is a role model for the biotech community. No biotech company wants to be Regeneron. "Becoming China's Regeneron" is the slogan of many domestic biotechs. However, such a Regeneron cannot escape its midlife crisis.

The attack of opponents, the victory of Eylea generic drugs, and the successive blows of dual-antibodies have put Regeneron in an extremely delicate stage. On the one hand, with two blockbuster drugs, Regeneron has completed the transformation from biotech to big pharma. In the first half of the year, its stock price continued to rise, successfully breaking through the $100 billion threshold, and its market value reached $133.2 billion. On the other hand, although the market believes in Regeneron's R&D and platform technology capabilities, how can a new billion-dollar blockbuster drug be so easy? And Regeneron's highly anticipated oncology business is not as glamorous as autoimmunity and ophthalmology, and its progress is also lackluster. So we see that when the market value reached $100 billion, the market has already had differences on the future direction of Regeneron. When the precarious growth encountered the failure of patent litigation and the third quarter report that was lower than expected, the anxiety was further amplified, resulting in a short-term continuous decline, and the market value of 50 billion US dollars evaporated.

For a long time, when we talk about the crisis of big pharmaceutical companies, we always can't do without a commonplace problem: the patent cliff. Regeneron's crisis today is also inseparable from the patent cliff. But if you change your perspective, you will find that big pharma's business philosophy is also very important. For Regeneron, the existing products (Eylea, Dupilumab) can guarantee a very high basic value, but how the subsequent value will be interpreted still depends on subsequent research and development. In the "survival of the fittest" business environment, the way for big pharma to survive is either to expand its scale by acquiring others, or to keep the highest research and development efficiency in the industry and leave its competitors far behind. Regeneron needs to maintain its research and development dream, but also consider reality.

In the past few years, Regeneron has continued to advance. With the stable output of the old ace Eylea, the new ace Dupixent has quickly grown into a blockbuster drug worth tens of billions of dollars, driving the continued growth of Regeneron's performance. Among them, Eylea's sales have experienced continuous declines under the dual impact of the patent cliff and Roche's ophthalmic dual antibody Vabysmo grabbing market share, and then returned to growth in the second quarter of this year with the launch of the high-dose version (Eylea HD).

Dupilumab, which cooperates with Sanofi, has been advancing all the way. In terms of sales, Dupilumab's sales in the first half of 2024 were 6.138 billion euros (about 6.663 billion US dollars), which has successfully surpassed Humira and became the new king of autoimmune drugs. In addition, Dupilumab is also constantly expanding its indications. Recently, the COPD indication has been approved in the European Union. The key clinical phase 3 data for indications such as bullous pemphigoid and chronic spontaneous urticaria will also be read out in the second half of the year. Dupilumab is ushering in an intensive harvest period.

This also means that Dupixent will be a more successful blockbuster than Eylea, with a sales peak forecast of $20 billion. Therefore, we can see that in the first half of this year, Regeneron has become a rare bright spot in the US pharmaceutical sector, apart from Eli Lilly and Novo Nordisk. Its stock price has continued to rise, successfully breaking through the $100 billion threshold, and its market value has reached $133.2 billion.

With two blockbuster drugs, Regeneron has completed the transformation from biotech to big pharma, and its market value once surpassed giants such as Bristol-Myers Squibb, closely following Pfizer. However, since the stock price reached a historical high of $1,211.2 per share on August 27, Regeneron has fallen by nearly 40% so far. In just two and a half months, it has almost halved. Today, Regeneron's market value is $83.7 billion, evaporating $50 billion from the high point.

Looking at Regeneron's historical candlestick chart, such a continuous and steep decline has almost never happened in the past. The patent cliff is something that every major pharmaceutical company must face, from Roche, Sanofi, AbbVie to Merck. The market has long anticipated Eylea's patent cliff. So why did Regeneron turn around and go down after the August high?

However, the successive blows, the attack of opponents, and the victory of generic drugs have put Regeneron in an extremely delicate stage. At present, Eylea and Dupilumab will still be the two absolute heavyweights that will drive Regeneron's performance growth in the short term. However, with the strong impact of Roche's Vabysmo and the continuous approval of biosimilars, Eylea's market share has been continuously compressed. Even if Eylea HD maintains high growth, it has been greatly reduced by Eylea's decline. The third quarter report shows that the total sales of the Eylea series only increased by 3% in the third quarter to US$1.54 billion.

Further exacerbating market concerns is that Amgen's Eylea biosimilar Pavblu is about to enter the market. Previously, Amgen, which won the lawsuit, said it plans to launch Pavblu in the United States as soon as possible. This is regarded as the largest exclusivity loss in the US pharmaceutical industry this year. Although Regeneron does not seem to be too worried about Eylea's performance, the CEO emphasized the company's "strong quarter" in the earnings call, with revenue of $3.72 billion in the third quarter, an increase of 11% year-on-year. Other products, including the PD-1 monoclonal antibody Libtayo, grew rapidly. However, the market did not buy it. On the day the earnings report was released, its stock price fell 9.2%.

As for Dupilumab, expectations have been raised again and again, and Regeneron's share has continued to grow, but considering that the total growth rate will be dragged down by Eylea, and it and Sanofi "37" share, the part that can currently contribute to the company's performance needs to be discounted. Therefore, in order to maintain a market value of 100 billion, these two products alone are far from meeting expectations.

However, Regeneron's highly anticipated anti-tumor business is not as glamorous as autoimmune and ophthalmology. At present, only one anti-tumor drug can be ranked - Libtayo, but in a market where a number of PD-1 monoclonal antibodies are competing and bispecific antibodies are gradually coming out, it is difficult to support Regeneron's facade. In the first half of the year, Libtayo had sales of $561 million and $289 million in the third quarter. Six years after the first indication was approved for marketing, it is finally expected to break the $1 billion mark. Billion-dollar molecules are hard-won. This is also a microcosm of Regeneron's anti-tumor drug research and development.

After Libtayo, Regeneron will devote a large part of its energy to the development of bispecific antibodies in the research and development of anti-tumor drugs. 2024 is a very critical year for Regeneron - the two bispecific antibodies are only one step away from commercialization. But the year is not favorable, and Odronextamab and Linvoseltamab were both rejected by the FDA. Although this is not due to efficacy and safety issues, the reason for the rejection of Odronextamab can be attributed to the result of the FDA's re-examination of the fast-track approval channel, and Linvoseltamab is due to unreliable third-party manufacturers.

The FDA's two consecutive rejections have dealt a certain blow to Regeneron's bispecific business, and it has also caused it to lag behind Johnson & Johnson, Roche and AbbVie in the field of bispecific antibodies. It was not until the end of August that Odronextamab was successfully approved for marketing in the European Union, which was considered good news. To some extent, when the market value reached 100 billion US dollars, the market had already had differences about the future direction of Regeneron. And when the precarious growth encountered the failure of patent litigation and the third quarter report that was lower than expected, the anxiety was further amplified, creating a "tragedy" of 50 billion US dollars.

Has anything changed under such a rapid plunge? No, to a certain extent, Regeneron is still one of the best biotech companies. Revenue is still growing, R&D has not slackened, and the founding and R&D souls are still there. However, when everyone raises expectations too high, the prosperity in front of them will make everyone ignore the risks behind it, even if the probability is very low.

The development of innovative drugs has always been a high-risk and high-uncertainty business. Even Regeneron, which has the best antibody technology, cannot guarantee the success rate of its explosive products. What's more, in Regeneron's values, "business" is secondary, or business is a vassal of scientific value. In the face of the patent cliff, almost all major pharmaceutical companies are constantly buying, hoping to increase their chips for the future and trying to convince investors that when the next revenue gap comes, it will not be as bad as it seems.

Regeneron still maintains its own rhythm. "There have been many times in history when people do things because they have great business opportunities or based on ambiguous science... Many people who drive business with business thinking can only see where the industry has gone, but it is difficult to see where the industry should go... If we develop an important drug, then the business problems will be solved. This is why science should always lead." This is what Dr. George Yancopoulos, chief scientist of Regeneron in the United States, said in an interview with the media last year.

Under this creed, Regeneron developed two blockbuster products, Eylea and Dupilumab. Regeneron, which has a platform technology advantage, does not stop there. Since 2015, Regeneron has obtained FDA approval for at least one drug (new indication) almost every year. So far, 11 products have been launched (authorized), and there are more than 20 pipelines in Phase III and Phase II clinical trials.

However, this cannot make up for the market's anxiety about the patent cliff and growth. After all, new blockbusters are hard to come by. Regeneron's experience also tells us that it only takes two blockbusters to go from biotech to big pharma. However, this is far from enough to hold this position.

As Ren Zhengfei said, we must dare to break our own advantages to form new advantages, and the best defense is offense. In fact, it can be seen from AbbVie's exit from the patent cliff of Humira that it is very important for pharmaceutical companies to maintain an active offensive posture. This offense includes not only research and development, mergers and acquisitions, but also involves all aspects of business and patents. Of course, Regeneron has been attacking in the past two years. Although the progress of tumors is lackluster, it is also actively deploying other fields, such as weight loss and gene therapy.

Weight loss has been a research hotspot in the past year, and Regeneron focuses on the quality of weight loss, selectively reducing fat content while reducing muscle loss. A Phase 2 clinical study of Trevogrumab combined with Semaglutide±Garetosmab for the treatment of obesity has been launched. In addition, Regeneron has differentiated its GPR75 target and is developing a variety of drugs targeting GPR75, such as siRNA, small molecules, and antibodies.

Even outside of research and development, Regeneron has also started venture capital. In April, it announced the establishment of a venture capital fund, Regeneron Ventures, which focuses on promising biopharmaceutical, healthcare and technology companies. It said it would invest $100 million annually in the fund within five years. Regeneron is becoming more open and more diverse. However, this remains to be verified by time. Forever growing, forever anxious. Regeneron may be trying to re-understand the way of big pharma.

https://mp.weixin.qq.com/