Health

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.

The problem with sky-high expectations is that you have to meet them. 

Regeneron Pharmaceuticals Inc. and its partner Sanofi on Monday released trial data for their drug Dupixent in treating severe asthma that, while likely good enough to net an FDA approval, fell short enough of very high hopes to send Regeneron shares down 5 percent.

Imperfect data on a pipeline darling is bad news for any company. But Dupixent is no ordinary drug -- it's one of the most heavily hyped medicines in all of pharma. And Monday's data reinforced a recent pattern of Regeneron having more hiccups than home runs. 

Deep Breath
Regeneron's shares fell Monday after data on an asthma treatment fell short of expectations
Source: Bloomberg

Expectations for Dupixent range from extremely high to ludicrously high. Analysts expect the medicine -- which was initially approved in March for ezcema, but is being tested in a variety of other conditions -- to hit $4.7 billion in annual sales by 2021. That would make it the best-selling drug of any medicine approved in the U.S. in 2016 or 2017. Leerink analyst Geoffrey Porges in June suggested Dupixent sales could peak at $12 billion in 2026.  

The Bluest Sky
Expectations for Regeneron and Sanofi's Dupixent are well into the stratosphere
Source: Bloomberg

Investors should be skeptical of any medicine projected to top $4 billion in annual sales within five years of approval. Monday's news gave them more reason to be wary.

While the trial data showed Dupixent helps asthma patients, the drug's effectiveness didn't live up to earlier results. That may give GlaxoSmithKline PLC's competing drug, Nucala -- which already has FDA approval in asthma -- and a pipeline joint-venture from AstraZeneca PLC and Amgen Inc. a better chance of keeping or taking market share.

It may also sow doubt that further trial disappointments await Dupixent in other diseases.

Meanwhile, the drug hasn't consistently lived up to expectations in eczema sales. AbbVie Inc. released promising data on a potential competing drug in that disease last week, sending Regeneron shares down nearly 6 percent. 

And Dupixent is not the only risk facing Regeneron. Growth of its current best-seller, the macular degeneration treatment Eylea, is slowing. Its other 2017 approval, the arthritis drug Kevzara,  has promising data and is priced below other popular medicines for the condition. But it may have trouble making headway in a crowded market with entrenched competitors.

A pain drug co-developed with Teva Pharmaceutical Industries Ltd. has had safety issues. Another Sanofi partnership, the cholesterol-lowering drug Praluent, faces sluggish sales, competition and a legal challenge from Amgen, and reluctance on the part of insurers to pay for it. 

These issues have contributed to a recent slump in Regeneron's valuation. But the company still trades at a huge premium to other established biotech peers. 

Still High
Regeneron's shares have taken a beating recently, but the stock still still commands a big premium
Source: Bloomberg
Next year's estimates

Regeneron deserves credit for a productive run of drug development -- the approval of two likely blockbusters in Kevzara and Dupixent in one year is an accomplishment.

But it may be time for investors to question whether they're putting too much emphasis on Regeneron's potential, while paying too little heed to its limited recent track record of delivering. 

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

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net