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11 minutes ago4 min read

Regeneron’s 40% Stock Plunge: A Hidden Gem or a Risky Gamble?

"In the Middle of Difficulty Lies Opportunity" – Albert Einstein

Regeneron Pharmaceuticals, Inc. (REGN) has been in the spotlight recently, not for groundbreaking advances, but for its significant stock price decline. With a drop from its 52-week high of $1,211.20 in late August to $750.22 as of November 29, 2024, this biotech giant has captured the attention of investors seeking potential value amidst volatility. While the selloff raises questions, it also presents opportunities for long-term investors ready to navigate the challenges.




What’s Behind the Decline?

Several factors have contributed to Regeneron’s 40% stock price drop, reflecting a convergence of industry-specific and company-related challenges:


  1. Competition from Biosimilars: Regeneron's flagship product, Eylea, faces pressure from the introduction of biosimilar alternatives. Amgen’s recently launched Pavblu, for instance, threatens to erode Eylea’s market share, forcing Regeneron to adapt pricing strategies and brace for reduced revenues.

  2. Slower Uptake of Eylea HD: Eylea HD, the high-dose version designed to retain market dominance, has seen a lackluster launch. It generated $392 million in U.S. revenue in Q3, falling below analysts’ expectations of $415–$425 million. The slower-than-anticipated adoption rate underscores the challenges of competing in a crowded therapeutic space.

  3. Legal Challenges: The company is battling allegations of inflating Medicare reimbursement rates for Eylea by submitting false sales price reports. This legal scrutiny has weighed heavily on investor sentiment, raising concerns about potential fines and future regulatory hurdles.

  4. Broader Sector Weakness: Political and regulatory uncertainty has plagued the biotech sector. The potential appointment of RFK Jr. as Health Secretary has amplified volatility, causing panic in healthcare stocks, with declines across major players like Moderna, Pfizer, and Eli Lilly. Regeneron’s drop reflects this broader industry unease.



Why Regeneron May Be a Buy

Despite these headwinds, Regeneron’s fundamentals remain robust, and the current valuation offers an attractive entry point for investors:


1. Dupixent: A Blockbuster in the Making

Regeneron’s collaboration with Sanofi has borne fruit with Dupixent, which recently received FDA approval for chronic obstructive pulmonary disease (COPD). Analysts estimate that Dupixent could achieve $6 billion in long-term annual sales from COPD alone, adding to its already impressive revenue base. In Q3, Dupixent generated $3.82 billion, reflecting a 23% year-over-year increase.


2. A Strong Pipeline for Diversification

Regeneron’s pipeline remains a critical asset, with promising candidates across multiple therapeutic areas:


  • Trevogrumab for muscle preservation in obesity treatment.

  • Libtayo, a PD-1 inhibitor, with potential to expand into broader cancer treatments.

  • Garetosmab, targeting a rare connective tissue disease.

  • Gene-editing therapies in collaboration with Mammoth Biosciences.

This diversified portfolio mitigates over-reliance on Eylea and positions the company for future growth.


3. Attractive Valuation Metrics

Regeneron’s forward price-to-earnings (P/E) ratio of 15–17 is well below industry averages, especially for a biotech company with a proven track record. With estimated earnings per share (EPS) of $45–$50 in 2025 and $50–$60 by 2026, the stock’s current valuation appears highly compelling.


4. Technical Indicators Suggest Seller Exhaustion

Technical analysis indicates that Regeneron may have reached an oversold state, with a Relative Strength Index (RSI) near 15 during the decline—a rare occurrence in larger-cap stocks. The stabilization of trading volumes hints at potential bottoming, offering investors a window to buy.





Buy the Dip but DCA!


Regeneron’s sharp decline presents an opportunity for disciplined investors to accumulate shares at a discount. A dollar-cost averaging (DCA) approach over the next 2–3 weeks is recommended to mitigate market timing risks. Additionally, setting a six-month review period allows for profit-taking as the stock recovers and new catalysts emerge.


Risks to Consider

While Regeneron’s current valuation and prospects are appealing, investors should remain mindful of the risks:


  1. Ongoing Legal Challenges: The Department of Justice lawsuit surrounding Eylea’s Medicare pricing practices could lead to significant penalties. Even if the case results in a “one-time expense,” the reputational damage and potential regulatory changes might affect long-term operations.

  2. Competition in the Biotech Space: The growing availability of biosimilars, particularly for Eylea, represents a persistent threat to Regeneron’s revenue. Amgen’s Pavblu is only the first of many potential competitors aiming to undercut pricing and capture market share.

  3. Pipeline Uncertainty: While Regeneron’s pipeline is promising, success in drug development is never guaranteed. Delays in FDA approvals or failed clinical trials could undermine growth expectations and impact investor confidence.

  4. Sector Volatility: The broader biotech sector remains under pressure from political and regulatory uncertainty. Policy shifts, such as potential reforms in drug pricing or changes to healthcare regulations under new leadership, could negatively affect Regeneron and its peers.


Why the Long-Term Outlook Remains Bright

Despite these challenges, Regeneron has several strengths that position it well for long-term growth:


Strong Financials and Profitability

Regeneron remains a highly profitable company, boasting $4.65 billion in trailing 12-month net income. The firm has consistently exceeded EPS and sales estimates, a testament to its operational efficiency.


Dupixent’s Growth Potential

With multiple approved indications and ongoing expansions into new therapeutic areas, Dupixent represents a cornerstone of Regeneron’s growth strategy. The COPD approval, in particular, is expected to drive significant revenue increases, potentially offsetting any declines from Eylea.


Focus on Innovation

Regeneron’s emphasis on cutting-edge treatments, including gene-editing collaborations and rare disease therapies, demonstrates its commitment to staying at the forefront of biotech innovation. These efforts not only diversify its portfolio but also reinforce its reputation as a leader in the sector.


Price Targets and Valuation Projections

Based on Regeneron’s robust pipeline and expected EPS growth, analysts have set a 12-month price target of $1,111, representing over 50% upside from the current price of $750.22. Longer-term projections suggest continued appreciation:

Year

EPS

P/E Ratio

Stock Price

2025

$48

18

$972

2026

$54

19

$1,140

2027

$60

20

$1,320

These estimates illustrate the potential for steady returns, driven by revenue diversification and pipeline success.


Final Recommendation: Buy Now, Review Later


For investors with a long-term horizon, Regeneron’s current price offers a compelling entry point. The recommended strategy is to:


  • Dollar-Cost Average (DCA): Build a position gradually over 2–3 weeks to mitigate near-term volatility.

  • Review in 6 Months: Evaluate the stock’s performance and sector dynamics to decide whether to take profits or continue holding for further appreciation.


While risks remain, Regeneron’s combination of strong fundamentals, innovative pipeline, and attractive valuation makes it a BUY at current levels.


Thanks for reading, and as always, remember to invest wisely.




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