Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

You almost wouldn't know Regeneron had a decent first quarter based on Thursday's earnings call, which featured a series of gripes worthy of a dyspeptic uncle.

The drugmaker's revenue narrowly beat Wall Street estimates for the quarter, its lead drug Eylea surpassed sales expectations, and the company boosted sales guidance for the drug for the year. The stock rose 4.7 percent on the day.

But shares are down more than 30 percent so far this year, including Thursday's gain. And the company kvetched at some length about its fights with pharmacy benefit managers and the U.S. government -- both of which have current or potential chokeholds on its drug sales. Gaining coverage for the company's cholesterol lowering drug Praluent in the U.K. required a substantial price cut.

It's a reminder that often the biggest foes of biotech firms aren't just the FDA and each other, but also increasingly assertive penny-pinchers.

Off Peak
Regeneron has a growing main drug, a potential blockbuster approval, and more coming. But it's fighting battles with the government, pharmacy benefit managers, and Amgen all at the same time.
Source: Bloomberg

In March, the U.S. government proposed a pilot drug-pricing model for Medicare Part B, the drug benefit for seniors that pays for specialty drugs -- including the eye-disease drug Eylea, which accounted for 65 percent of Regeneron's sales last year. The proposed rules would reduce incentives for doctors to prescribe more-expensive drugs (such as Eylea) and encourage the use of cheaper options. Even without these rules, Eylea's sales growth is already slowing, from more than 50 percent last year to an anticipated 20 to 25 percent in 2016. 

Eylea is widely used by older patients; Medicare Part B paid Regeneron more than $1 billion for the drug in 2014. On the call, the company declared itself not a fan of the new rules, saying they could drive patients to medicines that don't work as well. Regeneron said it would fight the rule change and that the talk around Washington suggests the new rules won't stand. But it can't guarantee that. 

Meanwhile Praluent -- with a list price of more than $14,000 in the U.S. -- has run into trouble with PBMs. The company shares revenue on the drug with Sanofi. But there's not much to split; the drug took in just $13 million in sales in the first quarter. 

Regeneron blamed the poor sales on "unprecedented" barriers to patient access thrown up by PBMs and other private payers. Amgen, which makes a competing cholesterol drug that works in the same way, said on its earnings call last week that 77 percent of prescriptions for its drug get rejected because they don't pass payer muster. The company says it has managed to expand access to the drug recently. But boosting Praluent sales in the U.S. will likely be an uphill, potentially costly battle.

And PBM issues won't likely stop with Praluent. Regeneron's drug candidate for atopic dermatitis, dupilimab, is expected to launch next year. It has produced promising data in clinical trials, but Regeneron said on its call that it already expects access restrictions. 

This combination of risks is probably not the sort of thing biotech investors love -- particularly when a company has a rich valuation. Regeneron has the highest P/E ratio in the sector among companies with market caps of more than $25 billion, even after its recent stock-price dip.  

That's Rich
Regeneron has the highest price to earnings ratio among biotechs with more than $25 billion in market cap.

Regeneron is not alone in these struggles. Sales of Novartis' heart drug Entresto, another anticipated blockbuster, have also been glacial for similar reasons to those holding back Praluent. The proposed Medicare Part B rules could also hurt sales for companies such as Roche and Amgen. 

Regeneron is looking ahead to the approval of two more potential billion-dollar drugs by the FDA over the next year or so. But it's learning an industry lesson that keeps getting more painful: Potential blockbusters don't become real blockbusters if people refuse to pay for them.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Max Nisen in New York at

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