Analyst: Regeneron Is Undervalued By The Street

Regeneron Pharmaceuticals Inc REGN has been in steady decline since July, and one analyst, though conceding the selloff from $500 was justified, said the Street’s taken it too far.

The Rating

Baird Equity Research analyst Brian Skorney upgraded Regeneron from Neutral to Outperform and maintained a $408 price target.

The Thesis

By Skorney’s assessment, Regeneron sellers overshot the mark and swung the stock from overvalued to undervalued.

He blamed concerns of “far-off” competition for the Eylea and Dupixent franchises, which remain risks but are not seen to merit continued concessions.

“In real time, both franchises are looking great,” Skorney said in a Friday note. “We think the sour sentiment is disconnected from the realities of the company's financial performance and see the stock poised for rebound.”

The retinal disease drug Eylea, in particular, just posted more than $6 billion in annual global sales, and Skorney said the market overestimates threats from Hoffman-La Roche’s RG7716 and Novartis AG (ADR) NVS’s RTH258. The two aren’t expected to sell until 2023 and 2020, respectively, and even then, the analyst predicts the treatments will expand the market rather than dramatically impinge on Eylea.

Dupixent is outperforming Novartis’ Cosentyx, and prescriptions are seen to expand this year with potential approval for asthma.

“Mechanistically, it does appear to have a broad impact on numerous atopic diseases and should grow to be one of the bigger drugs on the market, over time,” Skorney said. 

At the same time, he expects Praluent to take a significant share of the burgeoning PCSK9 drug class; fasinumab to gain momentum from upcoming Phase 3 data in osteoarthritis; and the company’s bi-specifics to advance beyond cell therapies.

“If even one of these manages to spark investor interest, we could rapidly see shares start to climb out of the hole." 

Price Action

At the time of publication, shares were trading down more than 1 percent at $319.15. 

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