Biotech giant Regeneron Pharmaceuticals (REGN -0.60%) has performed pretty well this year and over the trailing-12-month period, thanks to solid financial results and exciting clinical and regulatory progress.

However, the company has encountered some headwinds with one of its most important medicines, Eylea, which treats an eye disease called wet age-related macular degeneration (AMD). And recently, Regeneron got more bad news on the Eylea front that led to its share price falling by about 5% in one day. For a company of this size, that's huge.

What exactly is going on with Regeneron's Eylea? Should investors consider buying the stock today? Let's try to answer these questions.

Some background on Eylea

Regeneron holds the licensing rights to Eylea in the U.S., and shares these rights with Bayer abroad. The medicine's first sign of trouble was the approval of Vabysmo, a competing medicine for wet AMD marketed by Roche (RHHBY 0.20%), which earned the green light in early 2022.

Thankfully, Regeneron was able to fend off the competition from Vabysmo somewhat, thanks to a higher-dose (8 milligrams versus the original 2 mg) formulation of Eylea that the U.S. Food and Drug Administration (FDA) approved a year ago. This higher-dose (HD) version could allow patients to undergo fewer doses per year without sacrificing efficacy, an important selling point in Regeneron's fight against Roche.

In the second quarter, combined U.S. sales of Eylea and Eylea HD came in at $1.53 billion, an increase of 2% compared to the year-ago period; Eylea's HD revenue accounted for $304 million of that amount. Regeneron's total revenue landed at $3.55 billion, 12% higher than the prior-year quarter. So, U.S. sales of Eylea and Eylea HD accounted for 43% of Regeneron's revenue.

Biosimilar competition incoming

Regeneron has been looking to enforce Eylea's patent exclusivity against companies seeking to market biosimilars for the medicine. In August, the FDA approved Pavblu, a biosimilar for the original (2 mg) formulation of Eylea.

Mere regulatory approval isn't a license for biosimilars to be on the market. That may have changed with a new court decision that favored Amgen (AMGN -0.20%), the maker of Pavblu. Regeneron failed to convince a judge to issue a preliminary injunction (a temporary court order to stop the defendant in a trial from engaging in damaging actions against the plaintiff) that would prevent Amgen from launching Pavblu.

Importantly, this decision applies only to Pavblu, even though other biosimilars have been approved by the FDA. This fight is far from over -- Regeneron filed an appeal. But the trial is still to come. What should investors make of this?

The path forward for Regeneron

It's impossible to predict how Regeneron's lawsuit against Amgen will end. Let's assume the worst-case scenario: Amgen resorts to an at-risk biosimilar launch. (It would be at risk because, if it loses the trial against Regeneron, it will be liable for damages.) But what if Amgen also wins? Where does Regeneron go from there?

First, Regeneron's Eylea HD is likely somewhat cannibalizing Eylea's sales. Many eligible patients will switch to the HD formulation to benefit from fewer annual injections.

Then it's crucial to consider Regeneron's other primary growth driver: eczema treatment Dupixent, the rights to which it shares with Sanofi. In the second quarter, global revenue from Dupixent reported by Sanofi grew by 27% year over year to $3.56 billion. Dupixent just earned a significant indication in treating chronic obstructive pulmonary disease (COPD) in the U.S; analysts believe that will add at least a few billion dollars to its yearly sales. So Dupixent should remain one of the top-selling drugs in the world for the foreseeable future, and help pull Regeneron's revenue in the right direction.

The loss of patent exclusivity for Eylea would be a blow to Regeneron, but between Eylea HD and Dupixent, the company should recover. And that's before we consider Regeneron's rich pipeline, which currently contains more than 50 programs. The company is especially looking to improve its position in oncology.

So don't give up on Regeneron because of its Eylea-related slump. I'd advise long-term biotech investors to purchase the company's shares on the dip.