As COVID-19 hospitalizations soared last year and the world waited for news about vaccines, it seemed as though the news included daily updates on potential treatments. A lot of options were considered, among them the investigative monoclonal antibody cocktail from Regeneron Pharmaceuticals (NASDAQ:REGN).
After then-President Trump contracted COVID-19, he gave the REGN-COV antibody cocktail some credit for his recovery. Unlike some other, over-hyped alternatives, Regeneron’s offering was shown to be effective in well-designed clinical studies.
The Trump administration pushed for the treatment to receive an Emergency Use Authorization from the U.S. Food and Drug Administration (FDA) and made it available to U.S. COVID-19 patients for free. That support resulted in $3.15 billion worth of orders for 1.5 million doses at $2,100 each.
This is not a COVID company
All that pandemic-related publicity may have led many to believe Regeneron’s focus was primarily on COVID-19. In reality, it’s a diversified pharmaceutical business with a broad portfolio. Its core products, Eylea, Dupixent, and Libtayo, combined with another drug, a cholesterol treatment called Praluent, to help deliver $8.5 billion in sales and 30% revenue growth in 2020.
Eylea is the No. 1 prescribed anti-VEGF (vascular endothelial growth factor) treatment for eye conditions. Even in a year of pandemic headwinds, Eylea’s global net sales grew 5% to nearly $8 billion. In the U.S., net sales rose by 7% to close to $5 billion.
Dupixent treats inflammatory diseases such as eczema, asthma, and chronic rhinosinusitis with nasal polyps. In 2020, global net sales grew 75% to more than $4 billion. In the U.S. alone, more than 1 million prescriptions for Dupixent were written, yet it’s estimated that only 6% of eligible patients are being treated, leaving significant room for growth.
Libtayo is the No. 1 treatment for cutaneous squamous cell carcinoma, a form of skin cancer that’s likely to spread if not treated. In 2020, global net sales grew by 80% to approximately $348 million.
The future looks promising
In 2020, Regeneron generated $2 billion in free cash flow and ended the year with $4.7 billion in net cash. That strong performance will give it plenty of flexibility to invest in its own pipeline as well as collaborate with partners on therapies.
Regeneron will report quarterly earnings on Aug. 5. Investors should keep an eye on these three areas for signs that management is executing on the company’s long-term growth potential.
1. Continued revenue growth across its three core products
In 2020, more than 80% of Regeneron’s top-line growth came from products other than Eylea. Investors should look for sales of Eylea to grow as it’s prescribed to more diabetic patients. In addition, expect Dupixent and Libtayo to continue growing sales by 75% or more year over year through expansion into more disease types and geographies.
2. Expanded use of REGN-COV
In June, Regeneron received authorization from the FDA allowing the REGN-COV treatment to be used in a lower dosage and to be administered via injections as well as infusions. These advancements should reduce some of the barriers that have made it more difficult for healthcare providers to prescribe. In July, Regeneron received full approval, not just an emergency authorization, for REGN-COV’s use in Japan. Other countries should follow Japan’s lead, opening the potential for more global sales. Investors should look for continued government approvals and contracts, as well as signs that more healthcare providers are prescribing the treatment, or that they are prescribing it more often.
3. Progress on programs with Intellia and other partners
Regeneron is partnering with Intellia Therapeutics (NASDAQ:NTLA), a leader in CRISPR-Cas9 gene-editing technology that recently made headlines with solid results from clinical trials showing a single CRISPR infusion can be safe and effective. The hope is this positive development is not a one-off result, but rather the first success of many for the gene-editing platform. Investors should look for continued evidence the program is delivering safe, effective, and durable treatments.
An undervalued biotech?
The core treatments in Regeneron’s portfolio are performing well, and the company’s pipeline and partnerships carry substantial long-term growth potential. With shares trading at a P/E ratio of less than 12 and an authorization for $1.5 billion in share buybacks this year, this may be the rare undervalued biotech stock.
For patient buy-and-hold investors, Regeneron could generate great returns.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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