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Bull of the Day: Regeneron Pharmaceuticals, Inc. (REGN)

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Regeneron Pharmaceuticals, Inc. (REGN - Free Report) shares have surged 30% in 2020 as investors clamor for stocks that appear immune to the coronavirus economic downturn. Regeneron is one of multiple pharmaceutical and biotech firms that is working on possible treatments for COVID-19 and it announced recently that its “antibody cocktail therapy” could enter “human clinical studies by early summer.”

Coronavirus Response Potential

Regeneron all the way back on February 4—which seems like years ago at this point—announced that it expanded its agreement with the U.S. Department of Health and Human Services to “develop new treatments combating the novel coronavirus.” The company has a recent track record in these outbreak scenarios since its investigational Ebola treatment demonstrated positive clinical data in 2019.

REGN is working with its proprietary rapid response-capable VelociSuite technologies in its efforts to fight back against the novel coronavirus that has already killed thousands of people around the world and brought the global economy to as much of a halt as many thought possible. The company utilizes “genetically-engineered mice” with a “humanized immune system that can be challenged with all or parts of a virus of interest.”

The company boasts that its techniques and technologies are well-suited in “quickly-developing outbreak situations.” On March 17, Regeneron announced that it had “identified hundreds of virus-neutralizing antibodies,” and “plans to initiate large-scale manufacturing by mid-April with antibody cocktail therapy.”

On top of that, REGN said it had “potential to enter human clinical studies by early summer.”

Separately, the company said in a statement that alongside its collaborator Sanofi it initiated “a Phase 2/3 clinical trial evaluating Kevzara in patients hospitalized with severe COVID-19. Kevzara inhibits interleukin-6 (IL-6), which may play a role in driving the overactive inflammatory response in the lungs of patients who are severely or critically ill with COVID-19.”

Regeneron hopes that Kevzara will prove helpful in treating lung inflammation in coronavirus patients, which could help potentially keep them off ventilators and out of overwhelmed ICUs.






Other Fundamentals

Regeneron clearly appears to be at the forefront of possible COVID-19 treatments. Gilead Sciences (GILD - Free Report) and other giants such as Amgen (AMGN - Free Report) and Johnson & Johnson (JNJ - Free Report) have also joined the fight against the global pandemic.

More broadly, Regeneron is a biotech firm that has seven FDA-approved treatments and “numerous product candidates in development.” The company’s current offerings and pipeline aim to help people with everything from allergic and inflammatory diseases to cancer, infectious diseases, and more.

REGN’s proprietary VelociSuite technologies, which we already touched on, utilize “genetically-humanized mice” to help produce optimized “fully-human antibodies” and "bispecific antibodies."

Regeneron topped our Q4 fiscal 2019 earnings and revenue estimates in early February, with fourth quarter sales up 13% to $2.17 billion. The chart above also shows that REGN stock has crushed its industry in 2020, up roughly 30%, against its Bio-Med industry’s 11% average decline.

Regeneron shares have now surged nearly 50% in the last two years to crush its industry’s 22% downturn and the S&P 500’s 6% decline.

Despite resting near its 52-week highs, REGN’s valuation picture looks more attractive than it did a year ago. The stock is trading at 18.2X forward 12-month Zacks earnings estimates.

This comes in below its 12-month high of 22X and not too far off from the S&P 500 average. Plus, it trades at a massive discount compared to its Medical - Biomedical and Genetics industry's sky-high forward earnings multiples.





Bottom Line

The nearby chart shows investors that REGN’s longer-term earnings revisions activity has remained more positive, especially for fiscal 2021—with its consensus estimate up roughly 8%. This positivity helps Regeneron, which has also topped our bottom-line estimates in the trailing three quarters, hold a Zacks Rank #1 (Strong Buy) at the moment.

Looking ahead, our Zacks estimates call for the company’s adjusted fiscal 2020 earnings to jump 16%, with FY21 set to pop another 8.5% higher. On the sales front, Regeneron’s revenue is projected to surge 11.6% this year and an additional 9% in fiscal 2021 to reach $9.56 billion.

In the end, Regeneron operates a recession-resilient business and its stock price has climbed as it works on helping battle the coronavirus. Plus, REGN is part of an industry that rests in the top 13% of our more than 250 Zacks industries and sports a “B” grade for Growth in our Style Scores system. Therefore, it might be worth considering at the moment, but amid the volatility it likely isn’t wise to take too large of a position.

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