Regeneron Settles Dispute

Recently, Regeneron Pharmaceuticals, Inc. (REGN">REGN) reached a non-exclusive license and partial settlement agreement with Genentech, Inc. {a wholly owned subsidiary of Roche (RHHBY">RHHBY)} regarding the sales of the former’s injectable eye drug Eylea (aflibercept or VEGF trap) in the US.

Following the agreement, Regeneron was granted a non-exclusive license to certain patents pertaining to VEGF receptor proteins (the Davis-Smyth patents) in addition to other technology patents. 

Per the clauses of the deal, Regeneron has to make payments to Roche until May 7, 2016 (the date of expiry of the Davis-Smyth patents) based on US sales of Eylea. Regeneron will have to shell out $60 million as soon as the cumulative US sales of the eye-drug touch $400 million. Between $400 million - $3 billion the royalty rate is 4.75%. If sales cross the $3 billion mark, the royalty rate becomes 5.5%.

Following the development, the dispute in the US regarding Eylea (only for opthalmic use) has been resolved. The agreement does not cover any other uses or non-US patents. Dispute between the two companies regarding matters not encompassed by the deal remain unresolved. Regeneron further stated that the fact that it has reached an agreement does not mean that the company has infringed the Davis-Smyth patents.

We remind investors that the US Food and Drug Administration (“FDA”) cleared Eylea in November 2011 for treating patients suffering from the neovascular form of age-related macular degeneration (wet AMD). The approval was based on positive 52-week results from two studies, VIEW 1 and VIEW 2 which evaluated the studies evaluated the efficacy of Eylea versus Roche/Novartis’ (NVS">NVS) Lucentis (ranibizumab), an anti-angiogenic agent approved for treating wet AMD.

Apart from wet AMD, Eylea is also being studied for other eye-disorders such as central retinal vein occlusion, diabetic macular edema and myopic choroidal neovascularization.

Our Recommendation

Currently, we have a Neutral stance on Regeneron in the long run. The company carries a Zacks #3 Rank (Hold rating) in the short run.

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