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Allergan delays drug that would rival Regeneron's Eylea

David Pyott, CEO of Allergan, speaks during the Reuters Health Summit in New York, May 9, 2011. REUTERS/Brendan McDermid
David Pyott, CEO of Allergan, speaks during the Reuters Health Summit in New York, May 9, 2011. REUTERS/Brendan McDermid

By Esha Dey and Ransdell Pierson

(Reuters) - Allergan Inc said approval of its Darpin eye drug could be delayed up to two years, providing a new boost to Regeneron Pharmaceuticals Inc whose successful treatment, Eylea, stands to gain from a lack of new competition.

Shares of Allergan, which makes wrinkle treatment Botox, fell 13.1 percent after the company said mid-stage trial results of Darpin did not warrant an immediate move into far larger late-stage trials. Regeneron shares closed up 10.3 percent.

If eventually approved, Darpin would also compete with Roche Holding AG's, Lucentis, to treat age-related macular degeneration - the most common form of blindness in the elderly.

Adnan Butt, an analyst with RBC Capital Markets, said Darpin's delay was "great news" for Regeneron. He noted that Wall Street had feared the Allergan drug might have a superior clinical profile to Eylea.

"This gives Eylea even more time to become entrenched as the drug to beat," Butt said.

He estimates that each year of Darpin delay will translate into an upside of about $15 to $20 for Regeneron shares, now trading at about $240.

Eylea, which was approved in November 2011, had sales last year of $838 million. Regeneron expects 2013 Eylea sales of $1.2 billion to $1.3 billion. Company officials would not comment on the setback for Allergan's drug.

Regeneron is expected to report first quarter results on Friday and could update its sales projections.

Allergan Chief Executive David Pyott said on a conference call that a mid-stage trial of Darpin showed some product differentiation over Lucentis, but did not support directly moving to late-stage development.

The company now plans to perform additional mid-stage trials to assess Darpin, which will delay its potential approval by one to two years.

"There was a rush to ascribe a lot of value to Darpin and our view is that this is still very much an unproven asset with limited data," Piper Jaffray analyst David Amsellem said.

"The earliest it could get to market now is likely 2019," Amsellem said. "If you couple that with the setback of the hair loss product, the late-stage pipeline for Allergan right now is really quite thin."

A mid-stage trial of Allergan's hair loss treatment Bimatoprost Scalp also failed to provide sufficient efficacy to proceed to a late-stage study, further weighing on company shares.

ROOM TO GROW

Regeneron in the past two years has vaulted seemingly out of nowhere to become one of the world's biggest biotechnology companies, thanks largely to Eylea.

The company has repeatedly raised its sales forecasts for the drug, which is injected into the eye, as it steadily steals market share from Lucentis.

Some specialty pharmacies also use Roche's Avastin cancer drug, which works the same way as Lucentis, but is far less expensive, when divided into smaller portions for treating macular degeneration.

Roche has said that dividing Avastin through a procedure not closely monitored by health regulators, called compounding, could compromise its sterility.

Regeneron Chief Executive Leonard Schleifer said in a recent interview that sales of Eylea could jump sharply if potential rivals stumble, or if U.S. regulators clamp down on the compounding of Avastin for eye use.

Moreover, he said some analysts believe Eylea sales could swell if it is approved for a new indication called diabetic macular edema now in late-stage trials. Lucentis is already approved for the condition.

"So Eylea is a growth story unto itself, with lots of room to still grow," Schleifer said.

Allergan on Wednesday also posted a higher-than-expected quarterly profit, helped by strong sales of Botox.

Net income for the first quarter fell to $12.5 million, or 4 cents per share, due to a loss of $259 million from discontinued operations. Profit was $229.8 million, or 74 cents per share, a year earlier.

Excluding special items, Allergan earned 98 cents per share. Analysts were expecting 96 cents, according to Thomson Reuters I/B/E/S.

Global company sales rose 8 percent to $1.46 billion, above Wall Street's average estimate of $1.44 billion.

Sales of Botox, which is also approved for treating migraine headaches, overactive bladder and underarm sweating, rose 15 percent to $457.9 million.

Allergan said it now expects 2013 adjusted earnings of $4.70 to $4.76 per share, compared with its prior outlook of $4.75 to $4.83 a share.

The company forecast a second-quarter profit of $1.18 to $1.20 per share, below analysts' average estimate of $1.22 a share. The new forecasts reflect the impact of its MAP Pharmaceuticals acquisition earlier this year.

Allergan shares fell $14.88 to $98.67 on the New York Stock Exchange, while Regeneron shares rose $25.15 to $237.29.

(Reporting by Esha Dey in Bangalore and Bill Berkrot in New York; Editing by Michele Gershberg, Sreejiraj Eluvangal, Carol Bishopric and Andre Grenon)

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