Regeneron Q4 Earnings: Waiting For A More Lucrative Price To Buy

Background

My previous article devoted to Regeneron Pharmaceuticals (NASDAQ:REGN) was about my sale of REGN’s shares. At that moment, I saw a more lucrative upside in some other biotech companies (BMRN, INCY). While REGN’s shares have risen 9% since then, the growth of my BMRN’s shares was bigger. The positive 8-mg Eylea clinical effectiveness data was the main growth driver since then. Updated REGN’s investment case after the 4Q2022 results, I maintain my neutral view on company’s shares. However, if REGN shares fall in the price range of $550-650, I will seriously consider buying them again. Let’s take a look at REGN’s latest performance to see why I maintain my neutral view on the company shares.

4Q results

Revenue totalled $3.4 billion (-31% YoY, +17% QoQ), 10% better than the consensus expected. Excluding the sale of covid-19 drugs (REGN-COV2 and Ronapreve (partnership with Roche)) the company revenue grew by 17% YoY. Adjusted EBITDA was at $1.5 billion (-45% YoY, +9 QoQ). Free cash flow amounted to $1.56 billion (-29% YoY). The company ended the quarter with a net cash position of $11.6 billion (14% of market capitalization). In the 4Q , the company bought back shares for $431 million. The company announced a new 3 billion buyback program (3.7% of market capitalization).

Dupixent

Dupixent world sales in 2022 were at $8.7 billion (in line with consensus), a 44% YoY increase in constant currencies. In 4Q22, Dupixent’s global sales were at $2.45 billion (+42% YoY in fixed currencies), in line with consensus expectations. In the US, sales of the drug were at $1.94 billion (+44% YoY), drug’s TRx increased by 34% and new prescriptions increased by 48%. Sales outside the US were at $513 million (+37% YoY in fixed currencies). Revenue from Sanofi collaboration totalled $836 million (+61% YoY, +18% QoQ), 13% better than the consensus expected.

In 2022, the company received approval for Dupixent for the treatment of prurigo nodularis and eosinophilic esophagitis in the USA. In Europe, Dupixent’s approval for the PN indication was received in December, and at the end of January for the EE indication. The company has also applied for product approval for the treatment of chronic urticaria. The main anticipated event for this year will be the publication of Phase 3 data of Dupixent’s effectiveness for the COPD treatment (chronic obstructive pulmonary disease), which is expected in 1H23. If data is successful, the addressable market for Dupixent could increase by 500,000 patients.

EYLEA

Eylea’s US sales were at $1.49 billion (-3% YoY, -8% QoQ), 5% below the consensus forecast. Although Eylea’s market share declined early in the quarter due to Avastin’s biosimilar share growth, it returned to 50% of all injections administrated towards the end of the quarter. The share among branded drugs remains at 75% in the US. The main factor of Eylea’s revenue dynamics will be the possible approval of an increased dosage of the drug (8 mg versus the current 2 mg) for wet AMD and DME, which should make the drug more comfortable for patients. Recall that the form of administration of all drugs in the anti-VEGF category are injections into the eye, so increasing the intervals of dosing from the current 1 every 8 weeks (for a 2 mg dosage) to 1 every 12-16 weeks can significantly change the paradigm of wet AMD and DME treatment, maintaining Eylea’s leadership in this segment. The regulatory decision is expected in August 2023. Immediately after the possible launch, 8 mg dosages will be sold in vials, then there will be a transition to pre-filled syringes.

Libtayo

Global Libtayo sales were at $169 million (+44% YoY in fixed currencies) in the 4Q22. US sales of Libtayo totalled $110 million (+36% YoY, +16% QoQ), 13% better than consensus forecast. Outside the US, Libtayo sales increased 60% to $59 million. In November, the company received approval for Libtayo in combo with chemotherapy for a first-line treatment of non-small cell lung cancer. I think that the approvals of the drug in new indications should lead to an increase in total sales of the drug to the level of $1 billion a year over the next two years.

Final Thoughts

The publication of high-dose Eylea’s data mitigated the threat of potential dilution in sales from biosimilars and other branded drug competition. Dupixent remains the main growth driver for the business. I expect Dupixent to continue gaining approvals in the new indications and maintain leadership in the current indications. Although the company has a large pipeline of drugs, they are still far from entering the market, so I do not include most of them in my valuation. In the coming months, in my opinion, the upside potential of REGN’s stock is limited, so I remain neutral on the stock. On a separate note, the company has a large cash balance (>$11 billion) that it can use for the internal R&D or acquisition of other companies, but this is unlikely to have a positive impact on the shares in the coming months.