Regeneron (NASDAQ:REGN): Is This Stock-Split Contender a Strong Buy?
Stock Analysis & Ideas

Regeneron (NASDAQ:REGN): Is This Stock-Split Contender a Strong Buy?

Story Highlights

Regeneron stock has surged in recent years, partially thanks to the success of its COVID-19 treatment but also Dupixent. The company has a broad pipeline, but revenue could become rather concentrated in the near term.

Regeneron (NASDAQ:REGN) stock has more than tripled in value in the past five years, with the price of a single share now exceeding $1,000, putting it out of reach for many retail investors (although this makes it a stock-split contender). I’m mildly bullish on Regeneron, given the strength of blockbuster antibody Dupixent and the growth of Libtayo (an antibody), but I have some concerns about its concentration of revenues.

Regeneron’s Earnings Disappoint 

Regeneron stock fell in pre-market trading following its Q1 results on May 2 but has subsequently surged more than 10%. The company said that top-line revenue had contracted by 1% year-over-year, while sales excluding REGEN-COV grew by 7%. 

While management celebrated developments in the company’s pipeline, Regeneron’s non-GAAP net income per diluted share fell 5% year-over-year to $9.55, falling short of estimates at $10.10. Concurrently, Regeneron announced a $3 billion share buyback program, complementing the existing $1.2 billion announced in March.  

Is Regeneron Overly Concentrated?

As a British investor, I was first introduced to Regeneron during the pandemic. The company gained significant attention for its antibody treatment, REGEN-COV (casirivimab and imdevimab), which was used to treat COVID-19. Notably, former President Donald Trump received this treatment during his battle with the virus, and I recall the president touting it as a “cure” for the virus. 

REGEN-COV represents an ever-decreasing part of the portfolio, delivering $627 million in sales in 2022 but just $211 million in 2023. This reflects the reduced virulence of the virus and the reduced number of hospitalizations as a result. 

However, it does appear that Regeneron’s earnings rely heavily on just two drugs/treatments. The company’s biggest earners are EYLEA – a medication used to treat wet macular degeneration and metastatic colorectal cancer, marketed with Bayer (OTC:BAYRY) – and Dupixent – an antibody used for allergic diseases such as atopic dermatitis, asthma, and nasal polyps – which it shares with Sanofi (NASDAQ:SNY). 

In 2023, these drugs generated $9.2 billion and $11.8 billion in total sales for their respective owners. Regeneron’s collaborative revenue generated with Bayer (EYLEA) came in at $1.5 billion, and collaborative revenue from operations with Sanofi (Dupixent) hit $3.8 billion. With total revenue for 2023 at $13.1 billion, these two products represent more than a third of the portfolio’s sales.

Could Regeneron Revenues Become Even More Concentrated? 

It seems likely that revenues could get more concentrated in the coming years. While EYLEA is facing tough competition from Roche’s (OTC:RHHBY) Vabysmo, Dupixent could hit $20 billion in peak sales, say analysts at Evercore ISI. Dupixent has been a game-changer drug, and Regeneron is looking to expand its list of approved indications and its potential new uses. 

Analysts believe that the approval of Dupixent for the treatment of COPD could generate more than $2.5 billion in annual sales in the U.S. alone and $1 billion overseas. Dupixent is already among the fastest-growing parts of the portfolio, generating $804 million of collaboration profits in Q1 – up 26% year-over-year. 

However, several analysts have pointed to the strength of the company’s new products and pipeline. Libtayo – a monoclonal antibody that is a checkpoint inhibitor used for the treatment of various cancers – appears to be a very promising part of the portfolio, with first-quarter net sales rising by an impressive 45% year-over-year to $263 million. 

Regeneron also has a pipeline of 30+ new drugs and medicines – three of which appear to be label expansions for Dupixent and two of which are in the field of gene editing. Many of these drugs and medicines are in oncology. While I appreciate that there is plenty of optimism here, I’m also aware that many pipeline drugs don’t make it to market. 

Is Regeneron Stock Worth the Price Tag?

Regeneron stock is by no means cheap, but stocks in this part of the market simply aren’t cheap. The stock is currently trading at 30.6x TTM GAAP earnings and 30.64x forward earnings. This forward earnings multiple puts the stock at a 14.86% premium to the healthcare sector as a whole. 

However, as always, profitability and growth are key. Regeneron boasts a 33.77% EBITDA margin and an expected medium-term growth rate of 16.93%. Using the non-GAAP forward price-to-earnings ratio of 23.5x gives us a price-to-earnings-to-growth (PEG) ratio of 1.39x. While I understand that this is a non-GAAP figure, it’s still rather attractive for the sector, representing a 25.8% discount. On a GAAP basis, the forward PEG ratio is 1.8x. 

It’s worth adding that Regeneron stock is less affordable, as the price per share now exceeds $1,000. This puts it out of range for many retail investors. If a stock split were to occur, Regeneron may become more accessible to a broader range of investors, potentially increasing its liquidity and overall market participation.

Is Regeneron Stock a Buy According to Analysts?

On TipRanks, REGN comes in as a Strong Buy based on 18 Buys, two Holds, and one Sell rating assigned by analysts in the past three months. The average Regeneron stock price target is $1,071.95, implying 3.35% upside potential.

The Bottom Line on Regeneron Stock

Regeneron stock has been an outperformer over the past five years, with more than 200% share price growth during the period. However, a large part of the company’s revenue comes from two sources, and this concerns me. Nonetheless, I’m mildly bullish on the stock. It has a Strong Buy rating, according to Wall Street analysts, an attractive non-GAAP PEG ratio, and a promising pipeline. 


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