Regeneron Pharmaceuticals Stock Upgraded After Q3, But There Is A Headwind - Analyst Review

Thursday, Regeneron Pharmaceuticals Inc REGN reported better-than-expected Q3 earnings.

Piper Sandler notes that the most significant short-term driver for Regeneron is the impending interim analysis of the Phase 3 NOTUS study in chronic obstructive pulmonary disorder, scheduled for Q4 2023. 

Recent input from the FDA indicates that a favorable interim analysis of the NOTUS study, the analyst writes, combined with the positive Phase 3 BOREAS findings, could pave the way for an application submission.

Given the encouraging outcomes of the BOREAS study, Piper sees it reasonable to anticipate a successful interim analysis for NOTUS. 

Analysts Dane Leone and Laura Prendergast upgraded from Market Perform 3 to Outperform, with a price target of $950.

A potential headwind to the upgrade is the expected added R&D expenditures into 2024 suppressing earnings, as management now expects mid-teens growth Y/Y of R&D expenses during 2024, along with incremental spending on sales and marketing. 

Given the growing cash balance of REGN (estimated at $15 billion at year-end 2023), additional capital deployment to share repurchases, along with more aggressive M&A, is a reasonable expectation. 

Overall, the analyst views the momentum of new product launches and capital flexibility as outweighing the expected headwinds from aflibercept biosimilars. 

Price Action: REGN shares are down 0.39% at $815.63 on the last check Friday.