Biotech Values

[DewDiligence]

REGN's recent developments regenerate old credibility issue:

Regeneron (REGN) has been developing drugs for 15 years but has never produced a marketed product. One year ago, the dry spell appeared to be on the verge of ending as REGN released results from the phase-3 trials of the company’s lead drug, Axokine, for the treatment of obesity. In a PR on 3/31/03, REGN presented the Axokine results as a resounding success:

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AXOKINE treatment, when compared with placebo, achieved statistical significance with regard to both primary endpoints of the study
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http://www.regeneron.com/investor/press_detail.asp?v_c_id=169

Investors disagreed, however, and chopped 61% off the stock price during a two-day period. Notwithstanding the positive spin in the PR, Axokine produced only a minuscule reduction in weight and was immunogenic in a sizable proportion of patients.

Half a year later, REGN hit pay dirt with the signing of a blockbuster deal with Aventis for the development of its early-stage anti-angiogenesis drug, called VEGF-Trap:

http://www.regeneron.com/investor/press_detail.asp?v_c_id=181

REGN’s stock, which had soared amid the spring and summer fervor for Genentech’s Avastin, surged again on the news of the Aventis deal. The following day, perhaps feeling slap-happy over the Aventis deal, REGN announced that it would proceed with the Axokine program after all and run the additional clinical trials requested by the FDA:

http://www.regeneron.com/investor/press_detail.asp?v_c_id=182

The company’s credibility on Wall Street reached an all-time high.

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Fast forward to 2004. VEGF-Trap remains very much alive. (REGN has announced the start of human trials in AMD: #msg-2553391). However, in February, Novartis pulls out from its collaboration with REGN for the development of IL1-Trap (another drug from the “trap” platform), citing a disagreement over the robustness of the clinical data in rheumatoid arthritis:

http://www.regeneron.com/investor/press_detail.asp?v_c_id=191

Oh well. The company still has VEGF-Trap and Axokine, right?

Not exactly. Although REGN has maintained that the Axokine program is alive and well, CEO Len Schleifer mysteriously fails to mention Axokine in a half-hour presentation to investors at the SG Cowen conference on March 9. In the Q&A session, someone asks about Axokine and Schleifer replies that the Axokine program has “very low priority” because the company isn’t sure Axokine can ever be a commercial success. When the questioner asks for clarification, the CEO states that no money will be spent on Axokine development in the foreseeable future.

To recap: Axokine has gone from blockbuster in the making to dog to comeback story to very low priority. Perhaps in five years Axokine will graduate to defunct.

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I have to follow REGN because VEGF-Trap is a bona fide competitor to Squalamine. But I don’t have to like the way the company does business.