Regeneron Pharmaceuticals (NASDAQ: REGN) is a New York-based biotechnology company that discovers, develops, manufactures, and commercializes medicines for the treatment of various medical conditions.
Its product portfolio includes the following brands: EYLEA, Dupixent, Praluent, Kevzara, Libtayo, ARCALYST, and ZALTRAP. The company was founded in 1988.
I am bullish on REGN stock. The biotechnology company has strong fundamentals, an attractive valuation, and very strong EPS growth.
Regeneron Pharmaceuticals Business News
Regeneron and Ultragenyx announced on January 7 “a license and collaboration agreement for Ultragenyx to clinically develop, commercialize and distribute Evkeeza® (evinacumab) in countries outside of the U.S.” including the European Economic Area.
Regeneron Pharmaceuticals has also been listed for a third consecutive year on the Dow Jones Sustainability World Index (DJSI World).
Other notable business news includes a $3-billion share repurchase program and that “that the European Commission (EC) has approved the casirivimab and imdevimab antibody cocktail, known as REGEN-COV® in the U.S. and Ronapreve™ in the European Union (EU) and other countries.”
Q3 2021 Results
REGN stock earnings have a strong track record of beating estimates with seven consecutive beats. In Q3 2021, Regeneron Pharmaceuticals reported normalized EPS of $15.37 (a beat of $5.43), and GAAP EPS of $14.33 (a beat of $3.60). There was also a beat on revenue, which came in at $3.45 billion, a surprise of $652.4 million.
Year-over-year, Regeneron reported a 51% increase in revenue, a 94% increase in GAAP net income to $1.632 billion, and an 84% increase in non-GAAP net income per share (diluted) to $15.37.
GAAP net income per share (diluted) increased 94% to $14.33, from $7.39 in the same period a year ago.
Risks
The firm reported it has a strong pipeline of 30 product candidates in clinical development. I like the strong fundamentals, even though the gross margin has been in long-term decline. In FY 2016, gross margin reported was 93.8%, and in FY 2020 it had declined to 86.8%.
The company has a strong balance sheet with a D/E ratio of 0.11, an operating margin that is expanding, and very strong profitability.
Net margin in FY 2020 increased to 41.35% from 26.91% in FY 2019. The free cash flow trend is also positive and strong. The recent announcement of share buybacks is also positive for the stock price.
The company has been delivering a strong financial performance in key metrics such as revenue, operating income, and EPS. The five-year average growth of EPS, operating income, and revenue is 40.78%, 23.36%, and 15.67%, respectively.
REGN stock is a growth stock but its valuation is very attractive. You can Compare Stocks and use a stock screener to check that this biotechnology company has not only plenty of growth, but trades at a reasonable price.
Valuation
REGN stock is attractive based on its P/E Ratio (9.9x) compared to the U.S. Biotech industry average (25x).
The stock seems relatively expensive based on its P/B Ratio (3.7x) compared to the U.S. Biotech industry average (2.3x), though.
Wall Street’s Take
Regeneron has a Moderate Buy consensus based on 10 Buys, six Holds, and one Sell ratings. The average Regeneron price target of $689.07 represents 9.9% upside potential.
Bottom Line
Regeneron Pharmaceuticals has very strong fundamentals, an attractive price, a lot of growth in key metrics, and a P/E ratio close to a 10-year low of 8.78. It is a very interesting biotech stock play in 2022.
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