Regeneron at $400

Regeneron (REGN) pushed through $400 last week after the company’s paid for study concluded REGN’s Eylea works better than competing drugs Avastin and Lucentis.  

REGN closed at $345 on October 16th, then ramped up on the 17th after the news hit. It pushed through $400 on October 24th.

I like Regeneron stock, but as a numbers guy I’m having trouble absorbing the drug news. I’m not a healthcare analyst, and it really takes one to digest this news and come up with a valid thesis on why (or if) the stock should go higher. I would have to obtain data on how much Avastin and Lucentis is sold, how much share Eylea will take, how much of those sales will flow to earnings. I racked my brain on this yesterday and didn’t come up with much.

But the big thing that stuck out was analysts didn’t increase their earnings estimates much, even with the news.

One Year Chart

Here’s REGN’s one year chart as of 2014 Q3. The data was compiled on August 22nd. Note 2014’s earnings estimate was $10.15. Today the 2014 estimate is $10.13.

Also, 2015’s estimate was $12.25 and now its $12.48. So a slight bump.

For a finance guy, I like to see more of an increase in annual estimates before I get excited about a hot stock. But REGN moves before the estimates increase, which makes it tough on me. For instance, when REGN was making its big move in 2013, the stock was flying higher when news broke the company was selling more drugs than had been expected. After the majority of the move was made, that’s wghen 2014’s earnings estimates went from $4.37 to $10.03. Had these estimates increased earlier, I might have gotten us in.

Fair Value

Last quarter I had REGN being worth 35 times earnings. The company is set to report earnings November 4th, and I’ll update my take on the stock afterwards. But for now, my 2015 Fair Value is $429, and the stock’s $401 now.

Sharek’s Take

The problem with Regeneron isn’t with the company or the stock, it’s with me. I don’t feel I’m enough of a healthcare expert to get a grasp of Eylea’s potential, or what that potential can do for the stock. Another issue I’ve had is I haven’t taken advantage of past pullbacks in the stock to get in as I should have. I’ll keep REGN at the top of my radar, and wait on another opportunity.