REGN stock: Riding Covid, with more below the surface
The price of Regenerate (NASDAQ:REGN) the stock in 2021 was based on REGEN-COV, its treatment for Covid-19. It shouldn’t be. There are other issues, positive and negative, that should be more interesting – or troubling – for biotech investors.
As I first wrote in 2018, Regeneron is not just a drug maker, but a drug discovery system. His Velocisuite uses mouse models as a test bed for new drugs. This has given him a large pipeline of potential blockbusters.
But Covid-19 is an all-consuming subject, so for the past year Regeneron has been a Covid play.
The Covid game
A glance at the Regeneron stock chart is all you need to see the importance of REGEN-COV to investors.
Stocks rose sharply in August on large government sales. They then fell sharply in October, as its REGEN-COV price was criticized. They increased again in November as it showed long term protective effects. Now he is falling back on concerns about its effectiveness against the Omicron variant.
Financial results have been volatile, but generally positive. Regeneron doubled first-quarter sales in the second quarter to $ 5.1 billion, but fell below $ 3.5 billion for the third quarter. Yet the transportation of more than $ 11 billion over nine months has already surpassed 2020’s $ 8.5 billion. Net profit of $ 5.8 billion has already passed the $ 3.5 billion of the last year. These second quarter sales were supported by the purchase of one million doses of the drug Covid-19 by the US government.
On the surface, that makes Regeneron a cheap stock, despite its December 2 opening price of $ 633 per share. The market capitalization is $ 68.4 billion, which is only 10.5 times the profits of the last few years. To keep the price high, Regeneron launched a $ 3 billion share buyback program.
Beyond the Covid
Beyond the Covid, Regeneron has a blockbuster whose future is threatened, but another behind the scenes.
Eylea, an injection that fights macular degeneration, has long been its biggest seller, with sales of nearly $ 5 billion in 2020. But the patents are nearing their expiration date. Viatris (NASDAQ:VTRS) challenges some of the patents and is preparing a biosimilar that will weigh on Eylea’s sales.
Dupixent, an autoimmune drug currently used to treat dermatitis, could be of even greater success for Regeneron. Sales of the new drug reached $ 1.7 billion in the third quarter. Regeneron says it has positive indications for 12 different conditions, many of which are life threatening. One analyst predicted Dupixent could be the world’s best-selling drug by 2030, with sales of $ 21 billion. It is a joint venture with Sanofi (NASDAQ:SNY).
There are other potential blockbusters. Fasinumab is said to treat osteoarthritis pain in the knee and hip. Itepekimab could treat chronic asthma. REGN1908-1909 would treat allergies to cats. Libtayo, an anticancer drug competing with Keytruda from Merck (NYSE:MRK), posted sales of $ 348 million last year, up 80%.
The result for the REGN stock
I compared the drug companies of today to the oil companies of the 1930s. They spend a lot of money making wild discoveries in the hope of finding a geyser.
I preferred Regeneron over other companies in the field because Velocisuite is a stellar method of finding drugs. But the results and the price of REGN shares are not based on a drug discovery method.
The results are based on his medications. When treatment comes in, like with REGEN-COV, billions of dollars come in all at once. When the patents start to expire, as with Eylea, the tide goes out. The trick is to keep bringing in spouts. Regeneron seems to have mastered the trick. As the tide comes down on his Covid game, it becomes cheap action again.
As of the publication date, Dana Blankenhorn does not hold any positions in any of the stocks mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
Dana blankenhorn has been a financial and tech journalist since 1978. Just in time for the holidays he has a collection of Covid-19 stories in the Amazon Kindle Store. Write to him at [email protected] or tweet it at @danablankenhorn. He writes a Substack newsletter, Facing the future, which covers technology, markets and politics.