Regeneron Pharmaceuticals (REGN:NASDAQ) up 31% since our recommendation in last month's Taipan!

It wasn’t a realignment of the cosmos that pushed shares of obesity drugmaker Regeneron up more than 31% since our recommendation.

It appears that Taipan wasn’t alone in thinking that Regeneron would benefit from the increased media exposure of America’s bulging waistline crisis.

As Taipan was being mailed to you, several Wall Street analysts were quickly publishing reports about the tiny yet promising biotech company in New York. Better late than never, I suppose.

In any event, Regeneron is trading at US$21 a share as I write this.

And because of the rally… and the fact that it has sustained support at around US$20.50… I feel comfortable raising my buy limit to US$23 share.

Here’s why

If you don’t know the Regeneron story, let me give you a quick summary from last month’s recommendation.

There are currently two anti-obesity drugs on the market, Xenical and Meridia. They’re the only FDA approved anti-obesity drugs now on the market—and they’re huge cash cows, even though they aren’t exactly thwarting the fat epidemic in the U.S.

Xenical and Meridia reduce patients’ weight 13 pounds and 10 pounds on average, respectively. But that’s after a full year of taking the medication. Yet these two drugs generate a combined US$800 million in sales per year!

US$800 million sounds like a lot of cash—and it is. But it’s just a small fraction of the fat pie.

That’s about to change.

Regeneron’s drug, Axokine (currently in Phase III trials), is not only safer than Xenical and Meridia, it could be three to four times more effective at taking the pounds off!

I’m betting that if the drug gets approved, the company’s stock could rise at least 500%. And that’s conservative.

Get into their heads

Unlike other anti-obesity drugs, Axokine works by tricking the hypothalamus, a primitive region of the brain that’s important in many human urges, including hunger, thirst and sex.

Axokine’s mechanism is similar to that of leptin, a compound secreted by fat cells to signal the brain that the body has an adequate supply of calories.

Leptin gained public notoriety when it was widely reported that knockout mice that made no leptin protein (known as ob/ob mice) were morbidly obese, but returned to normal weight when given exogenous leptin.

Amgen is developing leptin in humans, but has experienced limited success in clinical trials to date. Obese people actually over-express leptin (there’s a higher-than-normal concentration of leptin in the blood and brains of obese people), suggesting that obesity is a condition of relative leptin resistance rather than leptin underproduction.

And that’s how Axokine works—by tricking the brain into thinking that the body isn’t hungry.

Could be 3 to 4 times better than anything on the market

In a Phase II clinical trial, obese people lost an average of 10 pounds during a 12-week treatment period with Axokine.

And here’s the juice: The weight loss seen at 12 weeks with Axokine was superior to what was seen at six months with Xenical and Meridia.

If patients on Axokine can shed 10 pounds in every 12-week period, it’s possible they could lose 30 to 40 pounds in a year.

And that’s the appeal of the drug… and Regeneron’s stock.

Buy Regeneron (REGN:NASDAQ) below US$22.