Will Regeneron Stock See Higher Levels After A 9% Rise In A Month?

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[Updated: 7/22/2021] REGN Stock Rise

The stock price of Regeneron (NASDAQ: REGN) has seen a 9% rise over the last twenty-one trading days, while it is down 8% over the last year. The volatility in REGN stock is being driven by the developments for REGEN-COV, its Covid-19 antibody cocktail. However, over the past few months we have maintained our view that REGN stock has more room for growth, given the long-term growth potential of some of its drugs, including Eylea and Dupixent. Eylea – an ophthalmology drug – is expected to continue to garner over $7 billion in annual sales for the next few years, while Dupixent – an eczema and asthma drug – is expected to garner over $12 billion in peak sales (the revenue splits between Regeneron and Sanofi). Looking forward, both of these drugs, along with some of the newer drugs, including Libtayo and REGEN-COV, will bolster the bottom-line growth for Regeneron.

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However, now that REGN stock has seen a rise of 9% in twenty-one trading days, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a higher chance of a rise in REGN stock over the next month. Out of 539 instances in the last ten years that REGN stock saw a twenty-one day rise of 9% or more, 330 of them resulted in REGN stock rising over the subsequent one month period (twenty-one trading days). This historical pattern reflects 330 out of 539, or about 61% chance of a rise in REGN stock over the coming month. See our analysis on Regeneron Stock Chances of A Rise for more details.

Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years data

  • After moving 1.8% or more over a five-day period, the stock rose in the next five days on 51% of the occasions.
  • After moving 0.9% or more over a ten-day period, the stock rose in the next ten days on 51% of the occasions
  • After moving 9.1% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 61% of the occasions.

Predict average return on Regeneron Pharmaceuticals Stock Return: AI Predicts REGN Average and Excess Return After a Fall or Rise

Regeneron Pharmaceuticals Stock Return (Recent) Comparison With Peers

  • Five-Day Return: REGN highest at 1.8%; BIIB lowest at -8.4%
  • Ten-Day Return: AMGN highest at 1.3%; BIIB lowest at -6.5%
  • Twenty-One Days Return: REGN highest at 9.2%; BIIB lowest at -17%

 

[Updated: 4/19/2021] Regeneron Covid-19 Antibody Cocktail Update

Over the past few months we have maintained our view that Regeneron stock (NASDAQ: REGN) looks undervalued. The stock has largely been in focus since last year amid the development of REGEN-COV, its Covid-19 antibody cocktail. While the treatment has already secured the U.S. FDA EUA (emergency use authorization) nod for treatment of mild-to-moderate Covid-19, the company is now looking for an extended use of the treatment based on its new findings from phase 3 trials, stating that a single shot of REGEN-COV is able to prevent symptomatic Covid-19 among people exposed to the virus.

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REGN stock has seen a 5.8% rise over the last five trading days, following the announcement. Looking at the recent rally, the 5.8% rise for REGN stock over the last five days compares with a 1.5% rise seen in the broader S&P 500 index. Now, is REGN stock poised to rise further? It looks that way. The company’s stock was already looking attractive based on its non-Covid treatments, including Eylea, Dupixent, and Libtayo (look at our update articles below for more details). And now with a massive surge in Covid-19 cases in some of the countries led by new variants of the virus, there is an increased focus on the treatment options, along with the vaccines. This clubbed with the current momentum should bode well for REGN stock in the near term. Furthermore, based on our machine learning analysis of trends in the stock price over the last few years, we believe that there is a 59% chance of a rise in REGN stock over the next month (twenty-one trading days).

Out of 355 instances in the last ten years that REGN stock saw a five-day rise of 5.8% or more, 208 of them resulted in REGN stock rising over the subsequent one month period (twenty-one trading days). This historical pattern reflects 208 out of 355, or about 59% chance of gain in REGN stock over the coming month. See our analysis on Regeneron Pharmaceuticals Stock Chances of Risefor more details.

Five Days: REGN 5.8%, vs. S&P500 1.5%; Outperformed market

(14% likelihood event)

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  • Regeneron Pharmaceuticals stock rose 5.8% over a five-day trading period ending 4/16/2021, compared to a broader market (S&P500) rise of 1.5%
  • A change of 5.8% or more over five trading days is a 14% likelihood event, which has occurred 356 times out of 2516 in the last ten years.

Ten Days: REGN 5.8%, vs. S&P500 4.3%; Outperformed market

(23% likelihood event)

  • Regeneron Pharmaceuticals stock rose 5.8% over the last ten trading days (two weeks), compared to broader market (S&P500) rise of 4.3%
  • A change of 5.8% or more over ten trading days is a 23% likelihood event, which has occurred 570 times out of 2511 in the last ten years.

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[Updated: 3/11/2021] Regeneron Update

A few months back in December 2020, we discussed why Regeneron stock (NASDAQ: REGN) looks undervalued. The stock since then has had a volatile ride with gains of 7% between early December 2020 and late January 2021, followed by a drop of 15% to $468 currently. In the first week of February 2021, Regeneron reported its Q4 results. topping street estimates. The company’s total revenue of $2.4 billion was up 30% y-o-y, driven by higher Eylea, a treatment for macular degeneration, and eczema drug – Dupixent – sales. Looking at the bottom line, non-GAAP earnings of $9.53 per share were up 27% y-o-y, and well above the consensus estimates of $8.39.

The company, during the same time, also announced positive results for its Covid-19 antibody cocktail in a late stage clinical trial. While REGN stock surely has seen ups and downs based on developments around its Covid-19 antibody cocktail, it isn’t really going to be a big boost for its top-line in the long run, in our view. The antibody garnered just $146 million in Q4 sales, and now with Covid-19 cases on a decline, and a rise in the vaccination rate, the demand will likely be lower than earlier anticipated, partly explaining the decline in REGN stock.

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However, the driving force for Regeneron’s business is its three drugs – Eylea, Dupixent, and Libtayo. Eylea is expected to continue to garner close to $8 billion in annual sales for next few years, while Dupixent’s peak sales are estimated to be north of $10 billion, as compared to $4.0 billion seen in 2020. Lastly, Libtayo, which recently secured the U.S. FDA approval for first-line treatment of a certain type of lung cancer, can see its peak sales north of $1 billion, compared to $348 million seen in 2020.

Now, 2021 revenues are estimated to see strong growth due to the Covid-19 antibody, and the sales will decline in 2022, following a drop in Covid-19 related demand. From a valuation point-of-view, it makes more sense to look at Regeneron’s 2022 earnings, rather than 2021. At the current price of $468, REGN stock is trading at 12x its expected adjusted earnings of $39.74 in 2022, compared to levels north of 15x seen in 2018 and 2019, implying the stock is undervalued currently. As such, we believe that REGN stock could see strong upside going forward. Our dashboard ’What Factors Drove 26% Change In Regeneron Stock Since 2018’ provides more details.

 

[Updated: 12/2/2020] Buy Or Sell REGN Stock

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While Regeneron stock (NASDAQ: REGN) is up 38% since the start of the year, it has dropped around 20% from its July highs of around $660. After the recent decline, REGN stock could offer an upside in the near term, as the company’s revenues in the last three quarters have grown by 29%, primarily aided by market share gains for Eylea, a treatment for serious eye conditions, including macular degeneration and diabetic retinopathy. This is likely to bolster the earnings growth rate of the company in the near term – leading to stock price growth.

While better than estimated earnings in Q2 and Q3 has helped REGN stock this year, much of the movement in the stock was based on the developments related to its Covid-19 treatment as well as vaccines developed by other pharmaceutical companies. The company in late November secured the U.S. FDA Emergency Use Authorization nod for its antibody cocktail of casirivimab and imdevimab for treating patients with mild to moderate Covid-19. Regeneron’s treatment appears to have more advantages compared to others that are being developed or approved. The Regeneron treatment may be useful in the long-run, as it can help elderly and patients with compromised immune systems, who often do not respond well to vaccines. However, given the development of vaccines. with Pfizer’s vaccine already being approved by the UK today, there will be lower reliance and need for the treatment options.

That said, companies such as Regeneron derive a bulk of their revenue from other established products and the markets likely weren’t assigning a big value to the Coronavirus treatments, in the first place, given the nebulous long-term demand. Also, many of the Coronavirus treatments are drugs that were initially developed for other diseases meaning that development-related costs likely aren’t high. REGN stock looks attractive at current levels despite the 38% rise this year, as it continues to sees market share gains for Eylea and other drugs. Our dashboard ‘Buy Or Sell Regeneron Stock provides the key numbers behind our thinking, and we explain more below.

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Looking at a wider time horizon, REGN stock is up 38% since early 2019. Some of the stock price rise over the last year or so is justified by the roughly 17% growth seen in Regeneron’s revenues from $6.7 billion in 2018 to $7.9 billion in 2019, and the figure is $9.2 billion for the last 4 quarters. However, the company’s Net Margin contracted 26% from 36% to 27%, resulting in an earnings decline of 13%. On a per share basis, earnings were down 14% from $22.65 to $19.38, partly due to a 1.4% growth in total shares outstanding due to share issuance. The margin contraction can primarily be attributed to a 39% jump in R&D expenses, due to a $400 million up-front payment to Alnylam related to the collaboration agreement between the two companies. Looking at the first nine months of 2020, R&D expense is up just 5% compared to total revenue growth of 29%.

Finally, Regeneron’s P/E ratio has expanded over the recent years. It grew from 16.5x in 2018 to 19.4x in 2019. While the company’s P/E has now increased to 26.5x trailing earnings, it could see further expansion given the benefit to its business from the expansion of Eylea, and higher revenues and earnings growth in 2020 and beyond.

How Is Coronavirus Impacting REGN Stock?

The global spread of Coronavirus has meant there just aren’t many people visiting doctors for non-emergency cases, and several types of elective surgeries are being postponed, impacting the sales growth of pharmaceutical companies, such as Regeneron. While the company’s Covid-19 treatment may not be a big drug in terms of sales after the vaccines hit the market, Regeneron’s Eylea looks reasonably strong and Dupixent – an antibody used for allergic diseases, co-developed with Sanofi – also holds significant promise. Eylea sales stood at about $4.6 billion and about $2.3 billion for Dupixent in 2019, with Sanofi indicating that Dupixent could have peak sales of over $10 billion. Now with economies opening up, Regeneron can see expansion of sales for these drugs.

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Looking at the broader economy, the actual recovery and its timing hinge on the containment of the coronavirus spread. Our dashboard Trends In U.S. Covid-19 Cases provides an overview of how the pandemic has been spreading in the U.S. and contrasts with trends in Brazil and Russia. Following the Fed stimulus — which set a floor on fear — the market has been willing to “look through” the current weak period and take a longer-term view. With investors focusing their attention on 2021 results, the valuations become important in finding value. Though market sentiment can be fickle, and evidence of an uptick in new cases could spook investors once again. Considering the near-term potential upside from expanding sales of Eylea and strong potential for Dupixent, the company looks like a reasonably good bet, with additional gains looking quite likely. At levels of $515, REGN stock is trading at 14x its 2021 estimated adjusted earnings of $36.81, compared to levels of 16x seen in 2018 and over 15x seen as recently as late 2019, implying the stock still has some room for growth.

While REGN stock may see higher levels, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Zoetis vs Regeneron

See all Trefis Featured Analyses and Download Trefis Data here

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