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Regeneron and Its Big Three Drugs

March 17, 2018 / By /
Stock (Symbol)

Regeneron (REGN)
Stock Price

$380
Sector
Healthcare
Data is as of
March 17, 2017
Expected to Report
May 3 – 8
Company Description
regeneron_drugsREGN, Inc. is an integrated biopharmaceutical company that discovers, invents, develops, manufactures and commercializes medicines for the treatment of serious medical conditions. REGN commercializes medicines for eye diseases, colorectal cancer, and a rare inflammatory condition and has product candidates under development in other areas, including hypercholesterolemia, oncology, rheumatoid arthritis (RA), asthma and atopic dermatitis. REGN’s marketed products include EYLEA (aflibercept) injection, ZALTRAP (ziv-aflibercept) injection for intravenous infusion and ARCALYST (rilonacept) injection for subcutaneous use. The Company has 17 product candidates in clinical development. Its product candidates consist of two trap-based clinical programs and 15 human monoclonal antibody product candidates. REGN has generated each of the antibodies using its VelocImmune technology. Source: Thomson Financial
Sharek’s Take
David SharekRegeneron (REGN) has 16 drugs in development, but the focus is on three main drugs that shape the company’s future: Eylea, Praluent and Dupixent.

  • Regeneron’s main source of revenue is Eylea which treats molecular degeneration, the leading cause of blindness in the US. Eyela made up 70% of REGN’s sales last qtr and is growing (+15% last qtr). There are expectations that this drug or a version of it could help other eye problems.
  • The company was expected to have another blockbuster in Praluent, which lowers “bad” LDL-cholesteral in patients with heart disease who need more than the standard treatment. But Amgen recently won a court battle with REGN as Praluent was infringing on Amgen’s patent. It seems like this drug might be off the market for 12 years.
  • Up on deck is Dupixent (dupilumab) which could help asthma and/or atopic dermatitis. Dupixent has achieved clearing or near-clearing of skin lesions in testing. This drug could receive FDA approval very soon (like any day). The company is also working to advance the drug for treatment of nasal polyps as well as asthma.

Regeneron does have a good pipeline of 15 other drugs in development, including Sarilumab, which treats rheumatoid arthritis, and was just approved by Health Canada. But this story is about three key drugs: one which is delivering results, one which is expected to be a leader, and another which probably can’t get past patent hurdles. In the meantime profit estimates are on a downward trend and I put my Fair Value at 30x earnings or $389 a share which is slightly above the current price.
One Year Chart
Last qtr the company delivered just 7% profit growth on a 12% rise in sales. Profits missed estimates, but these estimates got upped a qtr earlier. Afterwards, qtrly and annual profit estimates declined as shown here in the Earnings Table. 2017 estimates have declined in each of the last 4 qtrs from $15.42 to $14.49, $14.17 and $12.95. Qtrly estimates just got slashed too. Praluent is still being sold at this time, but sales are down (and could go away). The Est. LTG of 19% is good, and I feel this stock would be a good buy if it got down to support at $350 on the chart.
Fair Value
REGN stock soared after Eylea was approved by the FDA in 2011, as profits consistently came in way above expectations. More recently profit growth has slowed. My Fair Value of 30x earnings gives good upside to the stock for next year, but there are other variables that can affect this profit figure.
Bottom Line
Regeneron had a great run on the back of Eylea, and Dupixent should be the company’s next blockbuster. But with Praluent set to come off the market, I don’t have a gauge to what profits will be this year or next, and that’s a big unknown. With that being said, the stock is in a trading range right now and if I am going to buy with this much uncertainty I want to get in at the bottom of the range — which is around $350. REGN continues to be on my radar, and I may buy in if the stock got down to $350 or broke out past $400 on positive Dupixent news.
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