Regeneron pumps $300M-plus into Ocular Therapeutix for new Eylea formulation

Regeneron ($REGN) is investing hundreds of millions of dollars into troubled small cap Ocular Therapeutix ($OCUL) as it looks to develop a new form of its blockbuster eye drug Eylea (aflibercept).

Regeneron and Bedford, MA-based Ocular Therapeutix have signed a “strategic collaboration, option and license agreement” to work on a sustained-release formulation of the vascular endothelial growth factor (VEGF) trap med Eylea in wet AMD, as well as other retinal diseases.

Eylea is already approved in the U.S. and across global markets, where it is co-marketed with German pharma Bayer for a host of eye conditions, with wet AMD chief among them. Eylea made U.S. sales of $2.6 billion in 2015.

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The med works by intravitreal (in the eye) injection every month initially, and then every other month in wet AMD, and typically continues as long as the patient needs it.

This has long been a difficult administration route for patients and increases the risk of side effects such as inflammation; the whole point here is to create a new, easier route for the drug to be administered, lowering the need for patients to have a needle injected into their eye.

Any approval will however be some time off, as this is an early-stage formulation and currently in preclinical development.

Ocular Therapeutix works on sustained-release hydrogel-based drug delivery depots for intravitreal injection that can be formulated with both small and large molecule meds, such as tyrosine kinase inhibitors (TKIs) and protein-based anti-VEGFs.

But the co has endured some tough times, and a year ago it plunged 40% after its sustained-release formulation of the anti-inflammatory dexamethasone came through with mixed results in a Phase III study on allergic conjunctivitis. 

At the same time, the company's treatment for glaucoma and ocular hypertension also performed worse than the generic eye drop timolol in a Phase IIb study. These setbacks came hot on the heels of a prior Phase III misstep for Dextenza, formerly OTX-DP, in its postoperative pain and inflammation program, announced in April of last year. 

The biotech has one product on the market, ReSure Sealant, which is approved to close corneal incisions after cataract surgery.

Before the April setback Ocular was riding high at just under $43 a share, but it has been falling since the spring of 2016 and as of yesterday was trading at $6.31 a share. 

Under the deal, which will be a big boost to Ocular given its recent problems, Regeneron has the option to obtain an exclusive license to use Ocular Therapeutix’s hydrogel-based tech for Eylea, as well as other biologics targeting VEGF, specifically for eye disorder indications.

Ocular Therapeutix will however retain all rights to develop its sustained-release hydrogel-based platform with all other non-VEGF targeting compounds, as well as with small molecule pharmaceuticals, including TKIs, for other retinal diseases.

The company is eligible for $10 million payment from Regeneron but will be responsible for funding development through Phase I, although Regeneron will pay for future development and commercialization costs.

If all goes according to plan, Ocular can get up to $305 million in milestone payments from its partner. In addition to these biobucks, the company can also get its hands on tiered high-single-digit to low- to mid-teen-digit royalties on future sales, should it gain approval.

“We have made considerable progress in developing our protein drug delivery platform at Ocular Therapeutix, so it is good to see an industry leader such as Regeneron recognizing the potential of this technology,” said Amar Sawhney, president, CEO and chairman of Ocular Therapeutix, in a statement. “We are excited to partner with Regeneron to develop a potential first-in-class sustained release protein-based anti-VEGF hydrogel injection for wet AMD, DME, RVO, and other serious retinal diseases. This sustained release formulation could have the potential to significantly reduce dosing frequency and subsequently reduce doctor visits, thus reducing the burden of care for patients, caregivers and physicians, and may decrease the likelihood of certain side effects associated with frequent intravitreal injections.”

The global market for anti-VEGF drugs, which can also be used against certain cancers, is over $7.5 billion, according to Regeneron’s figures.

Eylea currently competes with Roche ($RHHBY) and Novartis’ ($NVS) Lucentis (ranibizumab) in wet AMD and other eye disorder licenses, although a large number of ophthalmologists have been using Roche’s Avastin (bevacizumab), a “chemical cousin” of ranibizumab, off-label for wet AMD for years, given that it works out as a cheaper alternative.

Roche and Novartis, unsurprisingly, have argued against this use as it undercuts Lucentis, and they argue that it can risk more side effects as it has not been set up for this indication. Roche has said it has no plans to test Avastin as a treatment for wet AMD or other ophthalmic conditions, although government-backed trials have been ongoing to assess whether it is worthy as a cheaper alternative to Lucentis.

Ocular ended the day down by just over 3% last night, before the news was released, with a market cap of just $149 million, but was up more than 28% premarket this morning. Regeneron was also down by around the same amount last night, with a market cap of $38.5 billion. 

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