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Beyond fighting Covid-19, the group’s expertise lies in eye disease and cancer treatment
July 9, 2020

Regeneron (US:REGN) is at the forefront of the battle against Covid-19. Just this week, the US biotech group revealed that its ‘antibody cocktail’ – a potential treatment for the virus – had entered late-stage clinical trials. In partnership with America’s National Institute for Allergy and Infectious Diseases, Regeneron hopes to gauge whether its therapy can help coronavirus patients, as well as preventing infection among healthy people.

IC TIP: Buy at $622
Tip style
Speculative
Risk rating
High
Timescale
Medium Term
Bull points

Tackling the Covid-19 pandemic
Proprietary antibody technology
Blockbuster drug driving revenues
Strong financial track record

Bear points

Risk of trial failure
Potential litigation risks

The group’s medicine is based on antibodies – proteins in the blood that develop naturally in response to infection. These antibodies are extracted from humans who have recovered from Covid-19, as well as mice  that have been genetically modified using Regeneron’s proprietary technology so that they have human immune systems.

One of the reasons Regeneron could square up so quickly to coronavirus is that it had already used a similar approach to create an antibody therapy for Ebola, which achieved positive results and is now undergoing regulatory review in the US. For Nina Deka, healthcare analyst at index-provider Robo Global, this shows “not just how [Regeneron] can treat one disease, but how they can get better, smarter and faster at developing treatments for other diseases in the future”.

Of course, a major risk of investing in healthcare stocks is that research can lead to dead-ends. Regeneron endured such a scenario earlier this month, when a US trial with French company Sanofi (FR:SAN) concluded after producing negative results for another potential Covid-19 medicine, ‘Kevzara’. Still, Regeneron and Sanofi continue to collaborate – even while the latter offloaded almost all of its 20.6 per cent holding in Regeneron in late May. Positive data recently emerged from another trial shared by the pair, studying the effectiveness of the drug ‘Libtayo’ against a type of skin cancer.

Libtayo illustrates the fact that Regeneron’s expertise extends far beyond coronavirus – spanning areas from eye disease to cancer. It currently has seven treatments approved by the US regulator. Moreover, as of 10 June, it had 30 products in development – hinting at the possible pipeline opportunities that lie ahead.  

The group’s top-selling, blockbuster treatment is the eye injection ‘Eylea’ – used to combat macular degeneration. This generated US net revenues of $1.2bn (£1bn) in the first quarter of 2020 alone – constituting the lion’s share of Regeneron’s overall three-month sales of $1.8bn. Such progress followed on from several years of expansion, with a compound annual revenue growth rate (CAGR) of 17 per cent between 2016 and 2019. Pre-tax profits enjoyed a CAGR of 35 per cent – albeit earnings slipped slightly in 2019, because of higher operating expenses.

Regeneron Pharmaceuticals, Inc. (REGN-USA) 
ORD PRICE:$622.45ȼMARKET VALUE:$69.8bn  
TOUCH:$614.67-$630.23ȼ12-MONTH HIGH:$646.33ȼLOW:$271.37ȼ
FORWARD DIVIDEND YIELD:nilFORWARD PE RATIO:20  
NET ASSET VALUE:$988.47ȼNET CASH:$3.3bn  
Year to 31 DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (ȼ)Dividend per share (ȼ) 
20175.872.081,127nil 
20186.712.552,265nil 
20197.862.431,938nil 
2020*7.833.472,765nil 
2021*8.783.913,082nil 
 +12+13+11- 
Beta:0.3    
*JPMorgan forecasts