Sanofi Collaboration Drives Regeneron’s Transformation From R&D House to Commercial Player
As the stock market was closing yesterday, Regeneron (NASDAQ: REGN) announced long-awaited data from a mid-stage trial of a rheumatoid arthritis drug it is developing with French drug giant Sanofi-Aventis (NYSE: SNY). The companies said that patients taking the drug, an antibody called sarilumab (REGN88/SAR153191), along with the commonly used treatment methotrexate achieved a significant improvement in symptoms of the painful joint disease. The only spot of negative news was that the drug did not perform well in separate trial in patients with another inflammatory disease, ankylosing spondylitis.
Regeneron and Sanofi are now determining the optimal dose to move forward into a Phase 3 trial in rheumatoid arthritis, making sarilumab the latest in a string of late-stage drug candidates to come out of Regeneron and Sanofi’s eight-year development collaboration. The partnership is one of four key Big Pharma alliances that Tarrytown, NY-based Regeneron has formed. Those collaborations explain why the company is counted among the top 10 biotechs in the country, despite the fact that it only has one product on the market to treat a rare disease, says Murray Goldberg, Regeneron’s CFO. “Here’s little old Regeneron, with one product selling about $20 million a year, but if you look at employee count and R&D spend, we’re in the top tier,” Goldberg says. “We’ve only been able to do it because of the collaborations.”
Now Regeneron is on the cusp of becoming a fully commercial organization. The FDA is expected to approve Regeneron’s drug to treat age-related macular degeneration, aflibercept (Eyelea), by August 20. Regeneron developed the drug in a deal with Bayer HealthCare, which has the rights to market it overseas. But Regeneron is responsible for U.S. sales—a challenge that will bring it into a competitive market ruled by Roche subsidiary Genentech, which makes the $3-billion-a-year blockbuster ranibizumab (Lucentis). Regeneron is now in the process of building a salesforce armed to fight “a formidable competitor,” Goldberg says.
The impending approval marks a milestone in Regeneron’s history. Founded in 1988, the company first gained recognition for its technologies designed to develop protein-based drugs. One of those technology platforms, called Trap, blocks certain proteins from attaching to cell receptors and activating processes that may cause disease. Aflibercept is also known as VEGF Trap-Eye, because it binds VEGF and PIGF, two proteins that are involved in the abnormal blood-vessel growth that causes macular degeneration.
In 2003, Aventis (which was later acquired by Sanofi) signed a deal with Regeneron to apply the VEGF-Trap technology to oncology. Then, in 2007, Sanofi formed a much bigger collaboration with Regeneron—committing $85 million up front and about $100 million of research funding per year through 2012, with the goal of getting two or three antibodies into clinical testing every year. In late 2009, Sanofi extended the agreement through 2017, pledging $160 million in research funding per year, and upping the ante on the research goal by aiming to get four or five candidates into the clinic each year.
The Regeneron technology platform that Sanofi is banking on is called VelocImmune. It’s actually a mouse, which is specially engineered to have a part-human immune system. When VelocImmune mice mount immune responses to diseases, they produce antibodies that Regeneron scientists can then engineer to be fully human, resulting in drug candidates that are less likely to cause side effects seen with antibodies that are part-mouse. “We usually get thousands of antibodies against a target, which we can then sort through to find the one that has the optimum [drug] properties,” says Neil Stahl, Regeneron’s senior VP of R&D. “We’ve also developed other technologies to increase the repertoire of antibodies we get.” (AstraZeneca and Astellas have also formed research collaborations with Regeneron around VelocImmune.)
The expanded Regeneron/Sanofi alliance has produced eight drug candidates, currently in testing for a range of diseases, including cancer and inflammatory diseases. In addition to sarilumab, the rheumatoid arthritis drug, the companies are moving forward on REGN727, an antibody designed to decrease LDL, otherwise known as the “bad cholesterol.” The drug blocks PCSK9, a protein that prevents cells from being able to sweep LDL out of the body. Statins lower LDL levels, but they also inadvertently raise PCSK9 levels. Regeneron’s drug “is unleashing the statins’ full potential by blocking the extra PCSK9,” Stahl says.
Regeneron has tested the drug in patients who cannot take statins, and also as a combination treatment with statins. Regeneron’s scientists are still determining the best path for late-stage trials. There is competition—Pfizer (NYSE: PFE) and Amgen (NASDAQ: AMGN) are also developing drugs that target PCSK9—but Regeneron appears to be in the lead, Stahl says.
As for sarilumab, it has a similar mechanism of action to Roche’s tozilizumab (Actemra). But, says Stahl, “Ours has 35 times more affinity for the target. Having a higher affinity might offer an advantage in that you can use lower drug levels.”
Meanwhile, Regeneron and Sanofi are conducting late-stage trials of their Trap drug, aflibercept, in prostate and colorectal cancer. They announced on July 7 that a Phase 3 trial in prostate cancer would continue as planned, with no modifications due to efficacy or safety concerns. Results from the trial are expected to be announced next year. In April, Regeneron announced positive Phase 3 results of aflibercept in colorectal cancer—pushing the company’s shares to a one-year high of $71.74.
The stock has since fallen back to $57, as analysts have expressed some worries about Regeneron’s most immediate challenge—its ability to market its first big drug in the highly competitive world of macular degeneration. Regeneron hopes the FDA will approve aflibercept to be given every two months, instead of every month, as is recommended with ranibizumab. But in addition to competing with ranibizumab, aflibercept will be up against Genentech’s bevacizumab (Avastin), its VEGF oncology treatment that many eye doctors use as a low-cost alternative to ranibizumab—or as needed, depending on the doctors’ discretion. The study “delivered a blow to [aflibercept's] convenience hook,” wrote Robert W. Baird analyst Raymond Christopher in a June report. An “uphill battle awaits” Regeneron’s marketing team, he added.
Regeneron CFO Goldberg says he’s aware of the challenges ahead, but he believes the Sanofi relationship gives his company an advantage that is sometimes unappreciated. Unlike other biotechs, he says, “when we start getting drug approvals, we will not have to take all the cash that’s being thrown off and reinvest it in research. The great bulk of the research will be funded via our Sanofi collaboration.”
In 2010, Regeneron reported a $104 million loss on revenues of $459 million, most of which came from its collaboration payments. Analysts do not expect the company to turn profitable until after 2012. But Goldberg points out that the company’s cash burn has remained constant at about $125 million a year, thanks to the research funding provided by its partners. “We’ve been able to increase our spending over time while our cash burn stays in range. We call it R&D leverage.”
The Regeneron/Sanofi collaboration is often compared to Roche’s relationship with Genentech prior to their merger. But there are a few key differences: No one from Sanofi sits on Regeneron’s board. And though Sanofi owns about 19 percent of Regeneron’s stock, it’s not allowed to buy more than a 30 percent stake. “They have no opportunities to buy us out,” Goldberg says—an arrangement has been key to recruiting top talent, he says. “We wanted people to understand we were here for the long haul. We weren’t just doing this to sell out to some pharma company.”
Regeneron has grown from 680 employees in 2007 to 1,500 today. At its sprawling campus just north of New York City, it has expanded into two additional buildings to handle the growth. Unlike other biotech companies, where scientists are sometimes sequestered in crowded cubicles in non-descript labs, Regeneron’s scientists work in open spaces, designed to foster camaraderie, with glass walls that let in natural light and invite visitors to observe the discovery work that goes on there.
Goldberg, a 15-year veteran of Regeneron, says the company’s recent progress “is tremendously satisfying to the people who have been here so long. We came here to bring medicines to patients that have great need. It will be a good feeling when it all comes together.”