Overview of the agreement between Regeneron and Teva
On September 20, 2016, Regeneron Pharmaceuticals (REGN) entered a collaboration agreement with Teva Pharmaceuticals (TEVA). The two companies will develop and commercialize Fasinumab for treating the pain associated with osteoarthritis. REGN’s Fasinumab is being investigated in two clinical trials, one for osteoarthritis pain and another for chronic low back pain. Fasinumab is in phase three for osteoarthritis pain and it’s in phase two for chronic low back pain.
Terms of the agreement
As per the terms of the agreement, Teva will pay Regeneron an upfront payment of $250 million and an equal share in global commercial value excluding Japan, Korea, and nine other Asian countries. Similarly, it will share the ongoing R&D (research and development) cost, which is ~$1 billion. Israel-based Teva has a dominance in generics as well as the specialty medicines business. Other specialty pharmaceutical companies that operate in pain management include Mallinckrodt (MNK) and Endo International (ENDP).
What is the opportunity for Fasinumab?
Fasinumab is a fully human monoclonal antibody that targets the nerve growth factor (or NGF). Generally, NGF levels are higher in patients with chronic pain. In the US, over 30 million people suffer from osteoarthritis pain. With the rising aging population, these numbers are expected to increase annually by low-single-digit percentages. Current treatment options for pain management include NSAIDs (non-steroidal anti-inflammatory drugs) and opioids. Opioid prescriptions hold a 40% share. Considering opioid abuse, Fasinumab should have an advantage over opioids.
EvaluatePharma’s analysts expect Fasinumab to fetch $105 million in 2022, while the deal suggests peak sales potential of $500 million. With changing market dynamics, the share price of the company fluctuates on a broader range. To mitigate this kind of direct risk of investing in an equity, investors can look for options such as the Health Care Select Sector SPDR Fund (XLV). The fund holds ~1.2% in Regeneron Pharmaceuticals. Let’s discuss REGN’s presence in the immuno-oncology space in the next article.