By almost all accounts, Regeneron Pharmaceuticals Inc (NASDAQ:REGN) should be tanking today. Fellow biopharma name Novartis AG (ADR) (NYSE:NVS) announced some trial results this morning that ultimately take aim at Regeneron’s macular degeneration drug Eylea. And, REGN stock was up 21% between the end of April and Monday’s close, ripe for some profit-taking.
Yet, there it is. REGN shares popped more than 6% on Tuesday, following an almost defiant call from Piper Jaffrey analyst Ed Tenthoff, who thinks REGN stock is worth 11% more than its current price even with Tuesday’s big gain.
Is there any chance he’s right?
The Pipeline Looks Pretty Full
To be fair, Regeneron was getting some help from an industry-wide tailwind that boosted most biotech stocks. Biotech funds and ETFs like the SPDR S&P Biotech (ETF) (NYSEARCA:XBI) and the iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) were up 2.5% and 2.1%, respectively, following whispers that President Trump’s plans for the future of the nation’s healthcare were going to be a little more company-friendly than had been expected.
There’s no empirical evidence to support the notion, but traders were making their bets all the same.
The crux of the gain REGN stock was able to muster on Tuesday, however, was indeed Tenthoff’s revised outlook. He explained:
“Novartis will not file a BLA until 2018 due to cGMP issues due to “the complexity of the formulation” of the humanized VEGF-A single chain antibody fragment. We continue to forecast EYLEA sales growth of 6.1% to $3.52 billion this year and 5.0% to peak at $3.7 billion in 2018 before RTH258 hits the market in 2019.
Own REGN for Dupixent. Dupixent is off to a strong launch in severe atopic dermatitis with U.S. adult sales of $951 million by 2023. We remain highly confident the Phase III LIBERTY ASTHMA QUEST trial (N=1,858) will meet the primary endpoint of annualized exacerbation rate with 200mg or 300mg subcu Dupixent q2W dosing this fall. We project peak U.S. adult asthma sales of $2.16 billion by 2025.”
The BLA from Novartis he was talking about is the one that would move RTH258, or brolucizumab, further down its development pipeline.
Brolucizumab performs similarly to Eylea as a treatment for age-related macular degeneration, but there is one stark difference — it doesn’t require an injection as often as Eylea does.
Eylea’s sales growth had already been tapering off after a pretty strong launch in late-2011. The upcoming launch of RTH258, if approved, can only further crimp its sales potential. Tenthoff doesn’t quite care, though, pointing out the potential of Dupixent as a way of offsetting Eylea’s lackluster growth.
Dupixent, jointly owned by Sanofi SA (ADR) (NYSE:SNY), was approved by the FDA as en eczema therapy in March of this year. Leerink analyst Geoffrey Porges believes the drug could generate more than $1 billion in revenue next year, and $3 billion in 2019.
A couple of things Tenthoff didn’t mention were Praluent and other studies looking at Eylea’s additional uses. Praluent, a cholesterol drug developed with Sanofi, performed well in follow-up studies of users with diabetes. Eylea is also being tried in conjunction with the angiopoietin2 (or Ang2) antibody nesvacumab as a macular edema and macular degeneration therapy for diabetics. The outlook is good on that front and, if nothing else, success in those trials will keep Eylea out in front of Novartis’ RTH258.
Bottom Line for REGN Stock
Is REGN stock worth Tenthoff’s new target of $557? Not right now, though the analyst didn’t suggest it was. It’s got the right stuff to get there in the foreseeable future, though, even with Novartis’ brolucizumab on the horizon.
Granted, Regeneron Pharmaceuticals is like all other biotech stocks in the sense that the story and the rhetoric is what drives it higher and lower. If the sentiment wind shifts in a new direction, don’t be shocked if Regeneron shares head south. As it stands right now, however, the company is lining up a lot of bullish things to tout. That’s half the battle.
In other words, Tenthoff may be on to something.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
