Regeneron Pharmaceuticals Inc. reported fourth-quarter and full-year 2016 sales gains for Eylea (aflibercept) but surprised the Street with lighter than expected 2017 guidance, projecting single-digit percentage growth compared to the consensus forecast of 12 percent. That letdown was balanced by the decision, late Wednesday, by the U.S. Court of Appeals for the Federal Circuit to grant a stay of the permanent injunction against the manufacturing and marketing of Praluent (alirocumab) in the U.S. during an appeal by Regeneron and partner Sanofi SA, of Paris. The injunction was issued last month by the U.S. District Court in Delaware at the behest of Amgen Inc., which markets the competing protein convertase subtilisin/kexin type 9 (PCSK9) antibody, Repatha (evolocumab).

Unlike Gilead Sciences Inc., whose shares (NASDAQ:GILD) dropped 10 percent a day earlier following light guidance on 2017 sales of its hepatitis C virus drug franchise, Regeneron's shares (NASDAQ:REGN) opened lower but moved into the plus column by midday, gaining $6.75, or about 2 percent, to close at $360. (See BioWorld Today, Feb. 9, 2017.)

Regeneron, of Tarrytown, N.Y., said fourth-quarter U.S. net sales of Eylea increased 15 percent, to $858 million, compared to the same period in 2015, while full-year U.S. net sales increased 24 percent, to $3.32 billion, vs. the previous year. Fourth-quarter global net sales, as reported by partner Bayer AG, of Leverkusen, Germany, increased 17 percent, to $1.35 billion, compared to the fourth quarter of 2015, while full-year global net sales increased 27 percent, to $5.2 billion, compared to 2015.

Those figures represented "an overall slight top- and bottom-line miss," reported J.P. Morgan analyst Cory Kasimov in his first look at Regeneron's earnings, pointing out that the company pre-announced 2016 Eylea sales last month at the J.P. Morgan Healthcare Conference in San Francisco.

As for that guidance surprise, "there was some prevailing fear among investors that guidance could come in light," Kasimov added. "In our view, the Eylea guide is likely to offset the positive development announced last night – that Praluent can stay on the market during the appeal process."

For now, that offset is tipping toward Regeneron.

Revenues, including product sales, increased by 12 percent, to $1.227 billion, in the fourth quarter compared to $1.098 billion in the fourth quarter of 2015. Those revenues included collaboration fees from Bayer and Sanofi of $313 million in the fourth quarter, compared to $330 million in the fourth quarter of 2015. Full-year revenues increased by 18 percent, to $4.86 billion, compared to $4.104 billion for 2015, including collaboration revenues of $1.403 billion for 2016 compared to $1.339 billion for 2015.

Regeneron reported GAAP R&D expenses of $479 million in the fourth quarter and $2.052 billion for full-year 2016 compared to $461 million and $1.621 billion, respectively, in the fourth quarter and full year 2015. The company said higher full-year R&D expenses for 2016 were due principally to a $75 million up-front payment to gene-editing startup Intellia Therapeutics Inc. as part of a license and collaboration deal and a $25 million up-front payment as part of a five-year license and collaboration agreement with Adicet Bio Inc., along with higher development costs related to the nerve growth factor, fasinumab, and PD-1 inhibitor, REGN-2810. The company also had a higher head count to support increased R&D activities. Those expenses were partly offset by lower development costs related to Praluent. (See BioWorld Today, April 13, 2016, and Aug. 3, 2016.)

Last September, Regeneron enticed Teva Pharmaceutical Industries Ltd., of Jerusalem, to a potential $710 million development and commercialization deal to advance fasinumab, then in phase III for osteoarthritis (OA) and phase IIb for chronic low back pain. A month later, the FDA placed a clinical hold on the low back pain program, requesting an amendment of the study's protocol triggered by a single case of arthropathy observed in a patient who entered the study with OA and received a relatively high dose of fasinumab. The partners vowed to design a pivotal phase III chronic low back pain study that excludes patients with advanced OA. (See BioWorld Today, Sept. 21, 2016, and Oct. 18, 2016.)

REGN-2810 is part of a potential $2.2 billion immuno-oncology (I-O) development and commercialization collaboration with longtime partner Sanofi. The five-year pact, forged in 2015, included $640 million up front for Regeneron and reallocated some funds from a 2009 antibody deal to extend and deepen the commitment by the companies to I-O, covering both monoclonal and bispecific antibodies. (See BioWorld Today, July 29, 2015.)

Regeneron's GAAP selling, general and administrative expenses were $326 million in the fourth quarter of 2016 and $1.178 billion for the full year, compared to $295 million in the fourth quarter and $839 million for the full year 2015, with increases largely related to commercialization expenses for Eylea and Praluent and launch preparations for sarilumab and dupilumab.

In October, the biologics license application (BLA) for sarilumab, the interleukin-6 antibody to treat adults with moderate to severe rheumatoid arthritis, received a complete response letter from the FDA, which cited deficiencies identified during a routine good manufacturing practice inspection of Sanofi's Le Trait facility in France, where the drug is filled and finished. Regeneron expects to resubmit the BLA in the first quarter and anticipates a two-month review. (See BioWorld Today, Oct. 31, 2016.)

Dupilumab, also partnered with Sanofi, rang up successes last year in two phase III trials in moderate to severe atopic dermatitis. In September 2016, the FDA accepted the BLA for priority review, setting a PDUFA date of March 29. The antibody, which targets interleukin-4 and interleukin-13 signaling pathways, is branded Dupixent. (See BioWorld Today, April 4, 2016.)

All told, Regeneron reported GAAP net income of $253 million, or $2.41 per basic share and $2.19 per diluted share, for the fourth quarter of 2016, compared to $155 million, or $1.49 per basic share and $1.34 per diluted share, in the same period in 2015. For the full year, GAAP net income was $896 million, or $8.55 per basic share and $7.70 per diluted share, compared to $636 million, or $6.17 per basic share and $5.52 per diluted share, for 2015.

'WE EXPECT LITIGATION TO REMAIN AN OVERHANG'

Praluent, approved in July 2015 to treat elevated low-density lipoprotein (LDL) cholesterol, remained an asterisk in Regeneron's earnings. Fourth-quarter global net sales were $41 million, compared to $7 million in the fourth quarter of 2015, while full-year sales hit $116 million, compared to $11 million for 2015. (See BioWorld Today, July 27, 2015.)

Regeneron and Sanofi are challenging both the injunction and a validity judgment during the appeal process for the drug, alleging in an ongoing U.S. patent infringement case that Amgen's asserted patent claims for antibodies targeting PCSK9 are invalid. The first round of that battle went to Amgen last year following a jury trial. (See BioWorld Today, March 17, 2016.)

Although the court's emergency stay on the permanent injunction enables Regeneron and Sanofi to dodge the bullet, for now, on continued marketing of their drug, the bigger challenge for the PCSK9 space remains payer pushback that translates into underwhelming sales. (See BioWorld Today, Jan. 9, 2017.)

Insurers and pharmacy benefit managers are awaiting findings from the ODYSSEY OUTCOMES (Evaluation of Cardiovascular Outcomes After an Acute Coronary Syndrome During Treatment With Alirocumab) trial, which is studying the potential of Praluent to demonstrate cardiovascular benefit in a population of about 18,600 patients. In November 2016, an independent data monitoring committee completed a second prespecified interim analysis, recommending the trial continue as planned.

On Regeneron's earnings call, Leonard Schleifer, president and CEO, nonetheless tipped his hat to Amgen, which reported success, based on top-line data, in its similarly designed cardiovascular outcomes trial (CVOT), FOURIER (Further Cardiovascular Outcomes Research with PCSK9 Inhibition in Subjects with Elevated Risk). (See BioWorld Today, Feb. 6, 2017.)

"This has been a terrific week for patients with high LDL cholesterol," Schleifer said, citing "validation" of the LDL hypothesis by Amgen and reiterating Regeneron's intention to report its own study data by year-end.

In the meantime, in the fourth quarter the European Commission approved a Praluent dosing regimen of 300 mg every four weeks. Last month, the FDA extended its review for a similar supplemental BLA for a monthly dosing regimen of Praluent, deciding that responses from Regeneron and Sanofi to its information requests constituted a major amendment and resetting the sBLA's PDUFA date to April 24.

A failure by Praluent to gain traction or a forced market withdrawal could be a real problem for Regeneron, in light of the fact that its cash cow, Eylea, faces a maturing market. Eylea has been a solid performer since its 2012 launch to treat wet age-related macular degeneration, gradually supplanting sales of competing VEGF inhibitor, Lucentis (ranibizumab, Roche Holding AG), according to Cortellis Competitive Intelligence. That cycle continued through last year, but Schleifer acknowledged on the earnings call that the company does not plan to provide guidance on the drug after 2017.

"The fact that Praluent can stay on the market is likely to reintroduce some optionality, but we expect litigation to remain an overhang until there is a settlement or a ruling favoring REGN/Sanofi," RBC Capital Markets analyst Adnan Butt wrote in a first glance on Regeneron's earnings report. He added, "We believe most of the Praluent optionality has been coming out of REGN shares."

Leerink Partners LLC's Geoffrey Porges, in a flash note following the stay of Praluent's injunction order, noted that the decision was governed largely by the court's determination of "a strong showing of likelihood of success on the merits" of the case and "whether the movant will be irreparably injured absent a stay," along with considerations for the prospect of injuring other parties in the case and for the need to consider the public's interest.

"In order to avoid 'prejudicing' the panel that will hear the case on its merits, the court did not provide a further explanation for granting the stay," Porges pointed out. "Investors are likely to remain cautious about the chances of REGN/SNY on appeal, but the stay removes a worst-case scenario that was beginning to be fully reflected in share prices."

Although, as Porges correctly predicted, Regeneron's shares reacted positively to the extended stay, "we are only incrementally more positive about the ultimate invalidity of Amgen's patents on appeal by the [Court of Appeals'] decision and vague verbiage," he added.

As the PCSK9 proceedings play out, "we expect all eyes to quickly turn to the presentation of Repatha's positive FOURIER cardiovascular outcomes trial in March at [the American College of Cardiology meeting] (which should also have favorable read through to Praluent's CVOT that is due to read out later in 2017)," Kasimov wrote in an email following the court's stay. "Investors broadly continue to suggest that they anticipate a relative risk reduction in excess of 20 percent. In our view the positive CVOT data is the first key step to potentially relaxing payer restrictions to help realize the mega-blockbuster estimates for both Repatha and Praluent that currently are modeled by the Street. The potential pie for PCSK9s is indeed large, but how it is ultimately split hinges on a number of factors including (but not limited to) this ongoing legal battle and more favorable payer coverage."