In early May, biotech giant Regeneron Pharmaceuticals (NASDAQ: REGN) posted excellent financial results for the first quarter of 2021. Notably, the drug maker’s revenue rose 38% (year on year) to $ 2.53 billion. And one of the main reasons for this effectiveness was the cocktail of REGEN-COV antibodies developed by the company for the treatment and prevention of COVID-19.
But this product and its significant impact on the financial performance of Regeneron was not enough for the stock market. Regeneron shares are down 7.6% in the past 12 months. This despite the fact that over the same period of time, the S&P 500 index rose by 37.6%. It currently has an attractive PEG of 0.21 (values less than 1 indicate an undervalued stock). Is the market missing out on the potential of the Regeneron?
Rise on the COVID-19 Front
In early June, Regeneron announced that US Food and Drug Administration (FDA) updated its Emergency Use Authorization (EUA) for REGEN-COV. The regulatory agency has given the green light to the antibody cocktail, which must now be administered at a dose of 1200 mg (up from the previously established 2400 mg dose). In addition, it is now allowed to be administered by injection, whereas previously it was assumed that REGEN-COV should be injected intravenously (a process that can sometimes take several hours).
These changes, combined with the fact that thousands of people are still contracting the disease (due in part to new variants of the SARS-CoV-2 virus), could significantly increase the number of REGEN-COV drugs being released, according to company management. Updated Emergency Use Permit could have a measurable impact on Regeneron’s earnings.
Other reasons for optimism
In addition to REGEN-COV, Regeneron can boast of other drugs – growth drivers. One of these is Dupixent – a remedy for the treatment of atopic dermatitis. The commercial rights to Dupixent are owned by Sanofi (NASDAQ: SNY), but Regeneron equally shares the profits and losses associated with the manufacture and sale of the drug in the United States. At the same time, Regeneron is entitled to 35% -45% of the profits generated from Dupixent sales outside the United States. And as sales of atopic dermatitis treatments increase, so will Regeneron’s related revenues.
And apparently this is exactly what will happen. According to research firm Evaluate Pharma, sales of Dupixent will continue to grow at a good pace in the next five years, and in 2026 it will enter the top 10 best-selling drugs in the United States. In the first quarter of this year, Dupixent’s sales were $ 1.3 billion, up 48% from the same period last year.
In the arsenal of the company there are other interesting, promising products:
- For example, Eylea is used to treat several eye conditions. Regeneron owns the rights to this product in the United States, while Bayer (OTC: BAYR.Y) owns the rights to commercialize it outside the United States. Regeneron’s first-quarter revenue from Eylea jumped 15% to $ 1.35 billion;
- Or the drug for the treatment of cancer – Libtayo (the rights to which Regeneron also shares with Sanofi). Regeneron markets the drug in the United States, while Sanofi owns the marketing rights outside the United States. In the first quarter of this year, Libtayo’s sales were $ 69 million, up 11% from last year.
In addition, it should be noted that Regeneron has more than two dozen products in development. Even a few new approvals for them will bring the company tangible dividends.
Regeneron now looks like a great investment for at least three reasons:
- The renewed FDA approval for REGEN-COV is likely to increase sales of this drug (at least in the short term);
- Sales of Dupixent, Eylea and Libtayo also continue to grow;
- This biotech stock looks undervalued at the moment.
All in all, taking all of the above together, we can say that Regeneron shares definitely deserve the attention of investors.
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