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Regeneron-Avalanche Partnership Underscores Ohr Pharma's Eye-Disease Isolation

Regeneron Pharmaceuticals (REGN - Get Report) reported $1.4 billion in global sales of its eye-disease drug Eylea in 2013 and forecast $1.7 to $1.8 billion in sales this year. Eylea is obviously a very successful ophthalmology drug, so paying attention to how Regeneron develops follow-on products for eye diseases is important.

This morning, Regeneron announced a partnership with privately held Avalanche Biotechnologies, which is developing gene therapies for eye diseases. Under the terms of the agreement, Regeneron gets global rights to eight therapeutic targets for eye disease and a time-limited option to acquire rights to AVA-101, a gene therapy targeting VEGF, the same protein which Eylea works against. Avalanche is conducting a phase II study of AVA-101 in wet age-related macular degeneration (AMD) -- the same eyesight-robbing disease from which Regeneron generates the bulk of its Eylea revenue. 

In exchange, Avalanche gets an undisclosed upfront licensing payment and the potential to receive up to $640 million in milestone payments tied to the clinical development of these gene therapy products. Regeneron will also pay Avalanche royalties on sales of any gene therapies which are approved and sold commercially. 

Regeneron's decision to make a sizable bet on Avalanche and gene therapy for eye disease comes just two weeks after Avalanche raised $55 million in a Series B round of venture financing. The financing included money from some well-known healthcare public equity investment funds -- Deerfield, Adage Capital, Redmile Group and Sabby Capital. 

The Regeneron-Avalanche partnership and the hedge funds investment in the latter is more indirect evidence that Ohr Pharmaceuticals (OHRP) and its AMD eye drop Squalamine are not taken seriously. Think about this way: Regeneron -- and its competitor Roche -- are commercial and research powerhouses in eye diseases like AMD. They surely look at all emerging drugs and technologies. Regeneron could have licensed Squalamine, or even acquired Ohr Pharma outright. It didn't. Instead, Regeneron just partnered with Avalanche. 

Think about Ohr's relative isolation as the company nears the release of interim results from a Squalamine phase II study in AMD patients, expected in June. 

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.


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