Pharma Stock Ideas: Why BMO Is Recommending Regeneron, Constellation

After strong performance in 2020, biopharma stocks are expected to continue their winning run in the new year.

Among the companies in the space, analysts at BMO Capital Markets are particularly bullish on Regeneron Pharmaceuticals Inc (NASDAQ: REGN and Constellation Pharmaceuticals Inc (NASDAQ: CNST).

The Regeneron, Constellation Analysts: Analyst Matthew Luchini upgraded Regeneron from Neutral to Outperform and maintained the price target at $630.

Analyst Do Kim upgraded Constellation shares from Market Perform to Outperform and increased the price target from $27 to $50.

The Regeneron Thesis: The potential exists for continued strong performance from Regeneron's retinal disorder treatment Eylea, the dermatitis and asthma drug Dupixent and the advanced cutaneous squamous cell carcinoma treatment Libtayo, Luchini said in the upgrade note.

Additional opportunities are available in the form of ongoing Dupixent label expansion efforts and a combined-focused oncology pipeline, the analyst said. 

The COVID-19 antibody treatment REGN-CoV2, though not central to BMO's thesis, provides near-term profit, Luchini said.

Regeneron, the analyst said, is well-positioned heading into 2021.

"Given our positive view on Regeneron's fundamentals and optionality provided by the pipeline we believe current levels provide an attractive entry point." 

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The Constellation Thesis: Following Constellation's decision to start a Phase 2 study evaluating CPI-0209 in in EZH2-mutated diffuse large B-cell lymphoma, prostate cancer and solid tumors, BMO has included revenue estimates for the candidate in its model, Kim said.

The analyst estimates worldwide peak sales of $2.3 billion, with a blended 24% probability of success.

Clinical benefit from EZH2 inhibition has been validated by Epizyme Inc's EPZM Tazverik, which is approved in EZH2-mutated follicular lymphoma, he said.

CPI-0209's more potent inhibition has a better chance of showing improved benefit in the aggressive NHL subtype, Kim said. 

Interim CPI-0209 Phase 1 data is expected in mid-2021, with a Phase 2 start shortly after, the analyst said. 

The upwardly revised price target reflects the addition of probability-adjusted CPI-0209 revenues, according to BMO. 

The Regeneron, Constellation Price Action: At last check, Regeneron shares were advancing 0.51% to $540.51 and Constellation shares were down 1.24% at $224.09. 

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