The Food and Drug Administration rejected a high-dose version of Regeneron Pharmaceuticals' eye drug Eylea on Tuesday, sparking a drop in REGN stock.
Regeneron hoped to win approval for an 8-milligram dose of the blockbuster shot for patients with wet age-related macular degeneration, diabetic macular edema and diabetic retinopathy. But the company says the FDA has yet to review the inspection of a third-party manufacturer involved in the process.
Importantly, the rejection letter didn't note any issues with several key issues involving the shot. It didn't address effectiveness, safety, design, labeling or drug substance manufacturing issues.
REGN stock analyst Christopher Raymond with Piper Sandler says Regeneron has little room for error with high-dose Eylea. Sales of the approved version, a 2-milligram dose, have struggled amid new competition.
"While we've noted that any delay in the launch of high-dose (Eylea) is likely to have outsized implications, we do take comfort in the fact that it is something that — on the face of it — should be an easy fix," he said in a report to clients.
But on today's stock market, REGN stock tumbled 8.7% to close at 716.09. Meanwhile, shares of Regeneron's partner, Bayer, slid a fraction to 13.55.
REGN Stock: Competition With Roche
Eylea is now engrossed in a stiff competition with Roche's Vabysmo, which is approved as a treatment for wet age-related macular degeneration and diabetic macular edema. In the first quarter, total Eylea sales fell 4% to $2.28 billion. Further, that echoed a 4% dip in the fourth quarter to $2.34 billion.
Further, a recent survey suggests Vabysmo "appears to be gaining momentum vis a vis standard-dose Eylea," Raymond said. "Given this backdrop, we have long looked to the 8-milligram (Eylea) approval as coming not a moment too soon and believed Regeneron has very little margin for error with regard to the high-dose launch."
But Raymond kept his overweight rating on REGN stock.
"While this delay to the high-dose (Eylea) is clearly a disappointment, we do take comfort that the reason behind it appears, in our view, to be a relatively straightforward fix," he said.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
