Biotech giant Regeneron Pharmaceuticals (REGN 1.30%) saw its fortunes reversed last year. Though the drugmaker had performed well since the beginning of the decade, it encountered issues that sank its stock price, mostly related to one of its biggest growth drivers (more on that below).
Regeneron’s shares are down by 30% over the trailing-12-month period. However, there are still excellent reasons to invest in this stock for the long run. Here’s the rundown.
Eylea’s losses and Dupixent’s gains
Regeneron’s issues in the past year are almost entirely related to Eylea, a medicine for wet age-related macular degeneration, which it co-markets with Bayer. The Eylea franchise — including a high-dose (HD) formulation that first earned approval in 2023 — is facing stiff competition, biosimilar and otherwise. The medicine’s sales growth has slowed considerably as a result. And it might even get worse for Regeneron since Amgen‘s Pavblu, a biosimilar version of Eylea, hit the market only six months ago. In the fourth quarter, combined U.S. sales of Eylea and Eylea HD increased by only 2% year over year to $1.5 billion.
Eylea has been one of Regeneron’s top growth drivers for a while, so its headwinds were naturally going to spook investors. However, the biotech can rely on Dupixent, an eczema treatment it co-markets with Sanofi, to pick up much of the slack. In fact, despite the Eylea franchise’s unimpressive performance in the fourth quarter, Regeneron’s total top line grew by a healthy 10% year over year to $3.8 billion.
That was because of Dupixent, whose global sales for the period (recorded by Sanofi) jumped by 15% year over year to $3.7 billion. Last year, Dupixent was among the 10 best-selling drugs in the world, and there’s more where that came from, considering recent clinical and regulatory wins. Though the most important is a new indication in COPD the drug earned last year, there are others.
Regeneron and Sanofi are also seeking a label expansion for Dupixent in treating a rare skin disease called bullous pemphigoid. If approved, it would become the first targeted medicine in this narrow indication in the U.S. Between the COPD label expansions and others, Dupixent’s sales will continue on their upward trajectory for a while; they should succeed in recouping some of Regeneron’s Eylea-related losses.
A promising gene therapy in the works
Another reason to be bullish on Regeneron is that the company can and will develop newer medicines. The biotech’s pipeline features several promising candidates. One of them is a gene therapy for a rare form of congenital deafness that is already producing highly encouraging results. Last year, Regeneron reported some data from an ongoing early-stage clinical trial for this product, showing that it had restored hearing in two patients who were deaf from birth.
The company recently shared even more data on 11 patients treated with this groundbreaking potential gene therapy who have undergone post-treatment follow-ups. According to Regeneron, 10 of these patients have experienced improvements in hearing at different levels. Several have reached near-normal levels of hearing. Furthermore, the medicine seems to be well tolerated.
There’s still plenty of work to do before this treatment hits the market. However, it highlights one of Regeneron’s strengths: its innovative abilities. This gene therapy and other brand-new treatments the company is working on should eventually help it perform well after Eylea and Dupixent are no longer growth drivers.
Returning capital to shareholders
Regeneron recently announced it would initiate a quarterly dividend of $0.88, a competitive amount for a company first starting to issue payouts. Given the strength of its underlying operations, it should be more than capable of sustaining a healthy dividend program.
It’s worth noting that the drugmaker also has a stock buyback program. Regeneron actively returns significant capital to its shareholders, a factor investors should consider before buying shares.
Regeneron has the ability to develop innovative new medicines, robust operations, and sensible capital allocation priorities. Those all make the biotech stock still look attractive, especially after the beating it took over the past year.
Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Regeneron Pharmaceuticals. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.
