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Regeneron: Cancer, COVID, And More Could Be Breaking Its Way

DoctoRx profile picture


  • REGN saw strong sales in Q1, driven by Dupixent and Eylea.
  • Hopes that it can help solve the COVID crisis were just one of the reasons the stock has doubled in recent months.
  • Some of the potential future growth drivers are discussed.
  • REGN may be ahead of itself both technically and on valuation, but it also may have its mojo back on an intermediate and long-term basis.


Regeneron (NASDAQ:REGN) more than doubled from its depressed $272 early-October lows, initially because of risk-on sentiment returning to the market (SPY). The surge above $400 - which was my rough estimate of fair value as of Q4 last year - in Q1 was likely almost all due to its participation in the rush to deal with the COVID-19 pandemic.

As I will show next, REGN is suddenly trading as a glamour stock, not the value stock it has frequently been the prior few years.

If the only catalyst were the COVID story, then I would not be writing about REGN now, but there's more.

The main investment question I see, with REGN pushing toward a $70 B fully diluted market cap, is whether it can rapidly segue from being a value stock that got over-hyped to being viewed again as a growth vehicle that deserves a reasonable price:earnings:growth ("PEG") ratio.

I will discuss valuation in more detail later. For now, I'll just focus on Q1 revenue annualizing at $7.3 B. This metric puts REGN near a 10X price:revenue ratio, which is at the upper end of its multi-year trading range.

The next sections address REGN in several aspects, beginning with its hopes to contribute to the COVID crisis.

REGN: from Ebola to COVID? How pandemics play to its strength

REGN has devoted the past 20 years to building a better set of antibody development and manufacturing mousetraps. This allows it to respond ultra-fast to a new threat such as the novel coronavirus (n-COV).

While not a rush, REGN developed a successful treatment for Ebola, a technique it is replicating now for the n-COV. As Dr. Yancopoulos said in the Q1 conference call, it makes a group of antibodies (which it calls a cocktail):

... we have utilized our VelociSuite technologies

This article was written by

DoctoRx profile picture
Over 40 years of investing in individual stocks. Retired physician (cardiologist). Also retired from various roles in the US pharmaceutical industry. Main focus is on growth stocks, mostly biotech and tech, but with fundamental value considerations. Secondary focus on macro trends driving asset allocation.

Analyst’s Disclosure: I am/we are long REGN, RHHBY, MRK, GILD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Not investment advice. I am not an investment adviser.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (37)

terrific reporting as usual Doc Are we finally getting ready to take out the old intra-day high of 605.93 of Aug 4, 2015?
PACKER man profile picture
Doc, I always value your opinion highly and likewise your articles; just as a hedge, I opened a small spot in my portfolio for REGN...will follow and add if/when it falls considerable...this method forces me to follow the company!
As an ex-cardiologist, I wonder if you have a view on a 'booming' new stock name that I was not familiar with previously, its symbol is MYOK? I was simply amazed that it has been around for some 4+ years, and yet it has never been caught by any of the vast 'fishing' nets around, e.g. SA, Fool, Barrons, WSJ, etc.
Thank you for your thoughts.....
john edwin peterson profile picture
Thanks for the article DoctoRx. I think of REGN as a long term leader and follow the accumulate under 350 and take profits over 500 rule.Hopefully they can keep performing as a leader.The more I read about this virus the more questions I have.We learned from Kirkland Washington nursing homes that the elderly were vulnerable ,but we were more worried about models. The 35 year old who came from Wuhan to Washington state and ended up in Providence Regional hospital was given Remdisivir on the seventh evening in the hospital and improved but we still pursued the malaria drugs knowing the side effects.I guess what I learned is that one size does not fit all.People are coming out of lockdown and a lot of them have lost their manners. Hopefully the "Non Essential" man will not become "Obsolete"
DoctoRx profile picture
John - you're welcome! Thanks as always for your erudite and witty observations. Indeed, lots of people are non-essentials but if low risk for COVID complications, deserve a chance to work.

I agree w you in that there are more questions than answers in this mess.
stevevai1983 profile picture
Nice article doc,

REGN had an impressive run and it helped me went though Cov-19 crisis unharmed. I think the strong performance is due to 2 main factors.

1: if you follow wall street analyst KOLs in this sector, they conducted a lot of surveys before and after Beovu’s launch. The doctors feed back was extremely positive. So they though Eylea will lose a lot of market, just like what Eylea did to Lucentis.
The very serious safety warning for Beovu is unexpected for everyone. Thus everyone updated their sales number and provided huge upside for REGN.

2: Cov-19 antibody. Well, REGN is so good at producing top quality antibodies, and they had big success with Ebola. So everyone assume they will replicate the success for Cov-19.

Personally, I think currently REGN is a little bit expensive but not too expensive. I do believe they will produce very effective antibodies for Cov-19 which can produce unknown amount of upside. Also I believe they will be a major player in PD1 combination area. So I guess I will just be patient buy&hold for a long time.
DoctoRx profile picture
Steve, thanks for your kind comment on the article. Many thanks for the insights. I concur! I am seeing REGN mature as a business. It has great science for the past 10+ years; now it may have all the pieces of the puzzle coming together quite nicely. My perspective is now long-term more than what it has been the past few years (buy dips, sell rips). Glad we see it similarly.
Montana13 profile picture
Doc...when will REGN and BIIB succumb to parting with their cash for dividends? I will play the peripheral with RHHBY, GSK, JNJ, PFE, MRK, LLY, and definitely GILD. If I were to go for growth in REGN's field I would play IONS again. More proportional growth, but Stanley doesn't get any more of my investment money until he pays a dividend.
DoctoRx profile picture
Montana13, your guess is at least as good as mine re divvies.

Best of luck. I am long 3/6 of your dividend-paying names: GILD, RHHBY and MRK in descending order of dollars invested.
CaptainSolo profile picture
Hospitals that didn't get it (the free GILD remdesivir) are screaming for it NOW! But, can't get it!

I personally think running a placebo can be misleading, so as to be useless.

In the Chicago University Hospital trial of 120 patient two died. That's a mortality rate of 1.6%.

118 lived. Some placebos in different trials show 15% death rate. That's why the FDA approved remdesivir because they they it worked well and would reduce mortality rates significantly,

In the Chicago University trial:
"The patients taking part in a clinical trial of the drug have all had severe respiratory symptoms and fever, but were able to leave the hospital after less than a week of treatment, STAT quoted the doctor leading the trial as saying.

"The best news is that most of our patients have already been discharged, which is great. We've only had two patients perish," Dr. Kathleen Mullane, an infectious disease specialist at the University of Chicago who is leading the clinical trial, said in the video.


REMDESIVIR is being sold commercially around the world, and there is not enough supply to meat demand. The 140,000 treatments (for US hospitals only) they gave away means little to the real demand. Hospitals that didn't get it are screaming for it NOW!

So are hospitals WW.
DoctoRx profile picture
CaptainSolo, I would note that the U of Chicago Medicine mortality data was an outlier, based on mortality figures from the entire study.

Thanks for sharing your thoughts and insights re demand from treating MD's and hospitals for remdesivir.

Best regards -

DoctorRx, as usual a thoughtful, reasoned analysis.

A couple of points:

You conistently say that earnings are depressed because of the high spend on R&D. I don't follow that reasoning. Their net margins in Q1 were 42% and have been steadily rising, rivaling the best of other biotechs. How does that consistent with "depressed" earnings. Its clear that as they add revenue they have operating leverage.

You use price/sales ratio using consensus 2020 revenues of $7.7 Billion. My model shows revenues of $8.4 Billion leaving ratio at 8 times. A better way to look at the valuation may be on EPS, which I (along with long time analyst Geoff Porges from Leerink) have at over $35/sharethis year. That is over a 40% growth rate yr to yr. On the currrent price of $560, that is 16 times expected earnings. If 40% doesn't represent a growth stock, then I don't know what does.

You rightly note the longstanding concerns that Eyelea is subject to competitive and other challenges, challenges that diminished when the Novartis drug has been show to have serious safety issue. You could almost envision George Yoncopolous when he talked about how Eyelea has only had safety issues once per 6 million does taking his gun out of his holster, shooting, blowing the smoke off the gun and then reholstering his gun. We're a long way away from patents being seriously challenged. And biosimilars have different hurdles to jump over than traditional generic pharmaceuticals do.

That said, Eyelea will have less impact on overall revenues in the longer term. Its clear how Regeneron feels about the potenital of the oncology franchise with many of those coming drugs, solely owned. In addition the upcoming Phase 3 trial results for the pain drug, approval for the Ebola drug and next years potential approval for the rare disease FOP will begin to add revenues over the next few years.

All of this is before we even put the antibody cocktail for Covid19 on the table. Regeneron has worked hard for 30 years now to develop a platform that has the ability to put a potentially world saving drug in the clinic in five months. That is truly astounding. It is clear with their public comments that they believe they have something that can work. Let us pray that their confidence is well founded and correct.
DoctoRx profile picture
SNLesser, thanks for sharing your detailed thoughts. I use consensus revenue #'s as presented by ETrade. ETrade is now showing $26.77 and $30.69 EPS for 2020 and 2021; I believe these are non-GAAP. FWIW, I focus on GAAP EPS.

Agree about REGN's hoped-for, or prayed-for, success re COVID.
MyPrivilegeIsShowing profile picture
@DoctoRx I too am a physician. I specialize in Allergy and immunology. Now that I have used Dupixent for several patients with nasal polyps, it appears to shrink the polyps well and get rid of the sensation of stuffy nose. However, anosmia (inability to smell) continues. At first I thought maybe the patients’ olfactory bulb was damaged, but if this were the case, the sense of smell would not return when the patient is on prednisone. This observation is a negative for Regeneron in my opinion.
DoctoRx profile picture
MyPrivilegeIsShowing, could you perhaps clarify why this is a negative for REGN? Is there a superior treatment for chronic use than Dupixent for the nasal polyposis indication? Or, are you implying that anosmia is such an important symptom that the failure to improve it means that patients just don't want Dupixent for relief of the other symptoms? Or... ?

Thanks in advance if you have time to respond.
MyPrivilegeIsShowing profile picture
@DoctoRx I feel it is a negative in that Dupixent lacks the efficacy of corticosteroids to return the sense of smell. Each patient has told me they were looking forward to being able to taste their food again. Granted, Dupixent is safe for long-term use and steroids aren't, but putting someone of 8 mg Medrol q o day isn't very high risk. Not to mention way cheaper than Dupixent's $30,000 + price tag each year.

In summary, yes, that anosmia and inability to taste are very important to many folks.
DoctoRx profile picture
Thanks for clarifying.

My understanding - perhaps incomplete as practiced in the real world, was that Dupixent is used for chronic conditions. From the PI:

"as an add-on maintenance treatment in adult patients with inadequately controlled chronic rhinosinusitis with nasal polyposis (CRSwNP). "

Since REGN's +ves have long been known, it might be more useful if you could tell us when or shortly after you've sold off your position in this stock?
DoctoRx profile picture
Alpine, years ago I did some of that sort of thing on the SA blog. Then I saw the stats that almost no one read the blog posts.

Since I do not run a model portfolio, it's not practical to disclose when I make a trade.

May I also suggest that since you are so very familiar with REGN, you may perceive that its positives are well-known, but not everyone listens to conference calls or reads the transcripts, so for many people, what I reported in this article are new news.

What do you think of MRK's quarter. MRK took a dive because people stopped vaccinating anyone who is older than 2 years. Hope we don't have a children's pandemic because of the stopped vaccinations.

Keytruda patent expires in 2028 but MRK is the cheapest major biotech other than patent-challenged ALXN and BIIB. SA reports an EV/EBITDA of 10.9 for MRK.
DoctoRx profile picture
Greedyfellow, I like MRK as a value play with safe current income. I am long MRK. Currently, there are a few negatives that the Street has been focusing on, and I hope to outwait its focus on those negatives. I'll get to a writeup on MRK as time permits.

I just don't see any competition for Keytruda anywhere. The noise about anti-TIGIT seems to be just noise:

"Neither is it known why SCLC is Roche’s first targeted indication. Tecentriq secured a first-line SCLC label on the back of the Impower-133 study, and its only threat here, Atrazeneca’s Imfinzi, looks like it might not amount to much "

IMO dividend paying companies like Merck will see a big comeback. The speculative frenzy in the NASDAQ is unsustainable. Institutional investors need the income and I don't see where else they can get it once the tech bubble pops. Insurance companies are getting wiped out due to the pandemic and they need the income. You would never think Uber and Lyft would go up a lot even when they said their rides were down 75-80%. That means they are burning billions in cash this quarter. The bubble can't get any bigger.

Getting back to Merck, are schools going to reopen without vaccinations? Is Covid worse than polio?


"Pediatricians say delays in immunizations for highly contagious diseases including the measles, rotavirus and whooping cough risk outbreaks of those illnesses as social-distancing orders lift.

The immunization rate for all recommended childhood vaccines declined about 40% in the U.S. from late February through mid-April, according to Physician’s Computer Co., a provider of electronic health-record systems.

Many parents take vaccines for granted because they have become so routine and effective that outbreaks of infectious diseases are fairly rare, pediatricians say. They warn that serious diseases such as the measles and polio haven’t been eradicated, just kept at bay by preventative shots."

You have to be really stupid or crazy to delay polio vaccinations in fear of Covid.
5ofDiamonds profile picture
I have noticed that my purchases of healthcare stocks in 2019 - $JNJ, $BMY, $REGN - have done a lot better during 2020-Pandemic @DoctoRx Eyeing $AZN.
DoctoRx profile picture
5ofDiamonds, they are defensives. I have tilted toward them as well.

I am long AZN. CEO has reshaped this company very adroitly.
5ofDiamonds profile picture
Nice @DoctoRx The last 401K I had with an employer, I only chose to invest in Tech and Healthcare sector ETFs that they allowed. Most of my other IRAs are in SPY. This might feel like 2000 when Tech stocks were crazy overpriced, but I think there is a transition going on within tech sector to Cloud/Cyber security. And there is a transition going on in Biotech sector as well.
DoctoRx profile picture
50fDiamonds, I don't think tech is homogeneously wild and crazy as it was in 2000, but FWIW, in this economy and at today's stock price levels, I have begun to tilt toward biotech over tech. GLTU.
Interesting article Doc. Thanks...Wish I could answer the question.
DoctoRx profile picture
Al, you're welcome, as always. Wish I knew lots of answers...
gelstretch profile picture
Thanks Doc. Your comprehensive exposure of the underlying potential profit areas that are enjoyed by REGN is very enlightening. The company recently reported earnings and this represented a very positive "beat" of the estimated earnings to be reported, and the stock responded well. Their "cocktail" for the post exposure treatment, as well as the prophylaxis potential is very interesting as a revenue source. I have stock in REGN and now feel "enlightened".
DoctoRx profile picture
Gelstretch, you're very welcome; thanks in return for your positive comment. Glad you got something worthwhile out of the article. Continued good luck with this science-driven company.
west281356 profile picture
Thanks for a nice article as usual.
DoctoRx profile picture
You're very welcome, West; thanks for the kind comment.
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