On Jun 20, 2013, we retained our Neutral recommendation on biopharmaceutical company Regeneron Pharmaceuticals Inc. (REGN). Our investment thesis is supported by a Zacks Rank #3 (Hold).
Why the Reiteration?
Regeneron reported higher-than-expected earnings in the first quarter of 2013, on the back of strong sales of its eye-drug Eylea. The drug has performed well since its US launch in late 2011 for treating patients suffering from neovascular form of age-related macular degeneration (wet AMD). The European approval of the drug for the same indication came in Nov 2012.
Sales of Eylea in the US came in at $314 million in the first quarter of 2013, up 13.8% sequentially. Encouraged by the strong performance, the company raised its forecast for 2013 Eylea sales. Regeneron now expects 2013 sales of Eylea in the range of $1.25-$1.325 billion (old guidance: $1.2–$1.3 billion). We too expect Eylea to continue to perform well.
In Sep 2012, the US Food and Drug Administration (:FDA) approved the label expansion of Eylea into the macular edema following central retinal vein occlusion indication.
Zaltrap, co-developed with Sanofi (SNY), is another promising drug in Regeneron’s product portfolio. Zaltrap gained FDA approval in early Aug 2012 for treating previously treated patients suffering from metastatic colorectal cancer. As per Sanofi, sales of Zaltrap were $14 million in the first quarter of 2013.
The EU approval of Zaltrap for the same indication in Feb 2013 is another positive for Regeneron. However, we believe that the current price reflects all these positives. Hence, we retain our Neutral recommendation on the stock.
Stocks That Warrant a Look
While we expect Regeneron to perform in line with its peers and industry levels in the coming months and advice investors to wait for a better entry point before accumulating shares, one can look at Alexion Pharmaceuticals, Inc. (ALXN) as a good buying opportunity. This biopharmaceutical company – sporting a Zacks Rank #2 (Buy) – has performed encouragingly over the last few quarters with potential to rise significantly from current levels. Jazz Pharmaceuticals Public Limited Company (JAZZ) is another company that is favorably placed in the biopharma space with a Zacks Rank #1 (Strong Buy).
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