Regeneron Stock May Need More Than the Coronavirus

The outlook is too cloudy for any real confidence

[Correction: This article was updated on March 11, 2020, to correct information about the treatment Regeneron is working on.]

Regeneron (NASDAQ:REGN) stock is being traded on the news of a potential treatment for the coronavirus. In February, the company’s stock moved up when it was named one of several biopharma firms that were looking at how to deal with the outbreak. However, shares came down when investors realized it may be months before the treatment was ready.

Regeneron May Need More Than the Coronavirus
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But Regeneron stock is getting a second wind on news that it may be ready by August. That surge is pushing the stock past a level of resistance. Shares of the company are up nearly 30% in 2020. In fact, as of this writing, the stock was trading at levels it had not seen in nearly two-and-a-half years.

The question for investors now is if the stock will push higher to approach all-time highs reached in 2013. Or, is the stock close to a top? That outlook, like the spread of the virus itself, is less clear than investors would like.

Tricky Propositions

Working on a coronavirus treatment is a high-risk, high-reward propositions for a biopharma company. The federal government, thankfully, does not pick and choose which private companies can develop one. To that end, Gilead Sciences (NASDAQ:GILD) is also testing a treatment.

The challenge is getting it to scale. And that means it’s a first-in-wins situation.

And whatever your personal level of anxiety is about the coronavirus, we have no reason to believe it will be anything other than a seasonal event. Of course, it could return. But by the time Regeneron’s treatment is available, we hope that investors’ focus will be focused elsewhere.

Regeneron Is Changing Its Partnership with Sanofi

Regeneron and Sanofi currently collaborate on Kevzara (for the treatment of rheumatoid arthritis) and Praluent (for the treatment of high cholesterol). In December, the two companies jointly announced a royalty-based agreement that will simplify their collaboration.

The proposed restructuring will give Sanofi sole global rights to Kevzara. Sanofi will also get sole ex-U.S. rights (i.e. foreign rights) to Praluent. For its part, Regeneron will get sole U.S. rights to Praluent. Each party will have to fund development and commercial expenses in their respective territories.

While analysts expect these changes to increase efficiency and streamline operations, it does have one drawback for Regeneron investors. In their most recent earnings report, the company announced that they would not release full-year 2020 forward guidance until the end of the first quarter.

“We continue to work constructively with Sanofi to finalize our modified antibody agreement for Praluent and Kevzara, which we expect to be accretive in 2020,” said Robert E. Landry, Executive Vice President, Finance and Chief Financial Officer of Regeneron. “We will provide financial guidance for full year 2020 by no later than the end of the first quarter.”

Wait a Quarter Before Making Your Decision

My colleague Josh Enomoto made the case that Regeneron stock is a solid buy if for no other reason than the coronavirus. This is because, even if Regeneron does not bring its coronavirus to scale, there will likely be more viruses in the years to come.

However, analysts are not giving Regeneron stock a ringing endorsement. The consensus rating for the stock is a buy. But analysts are giving REGN a 12-month price target of $452.09, which represents a nearly 7% drop from current levels.

At times like these, investment in a stock can be like hitting the “like” button. Investors are “voting with their money” and praising a stock for helping to alleviate uncertainty.

But just as a like on social media has no cash value, frequently investors exit a position as quickly as they enter it. It’s too early to tell if that’s the case with Regeneron stock, but ultimately investors will want to see if a potential treatment will boost earnings. I would wait until the company issues forward guidance before diving in.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/03/regeneron-stock-needs-more-than-vaccine/.

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