Regeneron's Dupixent Passes The FDA Muster; Baird Sees Strong Launch

Atopic dermatitis treatment candidate Dupixent jointly developed by Regeneron Pharmaceuticals Inc (NASDAQ: REGN) and Sanofi SA (ADR)(NYSE: SNY) has scaled the regulatory hurdle, a day ahead of the scheduled FDA examination day.

The companies said the FDA has okayed Dupixent Injection, the first and only biologic medicine approved for the treatment of adults with moderate-to-severe atopic dermatitis.

Dupixent was granted Priority Review following FDA's 2014 Breakthrough Therapy designation for it for inadequately controlled moderate-to-severe AD.

"DUPIXENT is the result of years of tireless research by our scientists into the underlying causes of allergic and atopic
diseases. In atopic dermatitis, DUPIXENT was shown to help clear the skin and manage the intense itch caused by the
disease," said George D. Yancopoulos, M.D., Ph.D., founding scientist, president, and chief scientific officer, Regeneron.
"Today's approval would not be possible without the dedication of the clinical investigators and the participation of the
patients who took part in the global LIBERTY AD clinical program."

Baird Sees Strong Launch

In a note released on Tuesday ahead of the approval, Baird said it expects Regeneron to see an exceptionally strong launch for its Dupixent. The firm indicated that the consensus expectations have already factored in that.

Atopic dermatitis, or AD, is inflammation of the skin, characterized by an inherited tendency to develop other allergic conditions. It is supposed to be the most common form of eczema. Dupixent is an investigational monoclonal antibody that is designed to specifically inhibit overactive signaling of two key proteins, IL-4 and IL-13, which causes persistent underlying inflammation in AD.

Dupixent comes in a pre-filled syringe and can be self-administered as a subcutaneous injection every other week after an initial loading dose.

Docs' Estimate Aligns With Management Guidance

Baird analyst Brian Skorney noted that his survey of dermatologist, soliciting their expectations around the launches of Pfizer Inc. (NYSE: PFE)'s Eucrisa and Regeneron/Sanofi's Dupixent, showed that there is a need for significant mechanisms and therapeutic alternatives.

Citing the views of doctors, Baird said Dupixent has a market potential of 300,000 to 350,000 patients, in line with management's expectations. "Docs indicated that "moderate-to-severe" patients make up about 43 percent of their practice, while moderate and severe separately add up to about 60 percent of their patient pool," the firm said.

"As Dupixent becomes available, we wouldn't be surprised to see more of these patients, as some who are discouraged by or unable to tolerate existing options seek treatment."

High Rate Of Adoption Foreseen, Though Price A Deterrent

On the awareness among dermatologists, Baird said about 87 percent of the surveyed dermatologists have heard of Dupixent. If approved, the firm noted that two-thirds of the surveyed dermatologist said they would immediately prescribe it. Those who were reluctant to prescribe, according to the firm, offered the cost and potential complications around reimbursement as deterrents. Eventually, the firm said 93 percent of the dermatologists planed to prescribe Dupixent eventually.

Regeneron and Sanofi said following the approval that the Wholesale Acquisition Cost, or WAC, of Dupixent in the United States is $37,000 annually. Actual costs to patients, payers and health systems are anticipated to be lower as WAC pricing does not reflect discounts, rebates or patient assistance programs, the firms clarified.

"Though we have no doubt the launch will be strong, sky-high expectations may leave little room for sales to beat. 2017 consensus of $207 million seems achievable," Baird opined. The firm noted that the consensus is modeling more than $3 billion in 2020, with contributions from asthma, starting in 2019.

Baird has a Neutral rating and a $369 price target for the shares of Regeneron.

At Time Of Publication

• Sanofi shares were up 0.24 percent at $45.49.
• Regeneron shares, which were halted ahead of the announcement but have since then resumed trading, were down 1.77 percent at $376.88.

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