Sanofi Collaboration Drives Regeneron’s Transformation From R&D House to Commercial Player

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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.”

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