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Regeneron Pharma shares see a $63 price target cut as Truist updates DCF model

EditorAhmed Abdulazez Abdulkadir
Published 10/17/2024, 12:56 AM
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On Wednesday, Truist Securities revised its price target for Regeneron (NASDAQ:REGN) Pharmaceuticals (NASDAQ: REGN), lowering it to $1,137.00 from the previous $1,200.00. Despite the reduction in price target, the firm maintained a Buy rating on the stock.

The adjustment by Truist Securities is based on a detailed financial model. In their statement, the firm explained that the new price target is "derived by a probability adjusted Discounted Cash Flow (DCF)." This method is a valuation technique used to estimate the value of an investment based on its expected future cash flows.

The firm applies a standard discount rate of 9.0% to all large-cap biotech companies they cover, which was used in the valuation of Regeneron as well. This rate is used to discount future cash flows to their present value, a common practice in equity valuation.

In addition to the discount rate, Truist Securities also incorporates a 2% terminal growth rate in their model. This rate is intended to account for the long-term growth potential of Regeneron's pipeline, reflecting the firm's expectations for the company's performance beyond the immediate future.

Truist Securities forecasts the Net Present Value (NPV) of Regeneron's terminal value in the year 2033 to be approximately $76 billion. This projection forms a part of their valuation and underpins the price target set for the company's shares.

In other recent news, Regeneron Pharmaceuticals disclosed a pre-tax charge of approximately $56 million for acquired in-process research and development (IPR&D) related to collaboration and licensing agreements. This charge is expected to influence both GAAP and non-GAAP net income per diluted share by around $0.43 for the third quarter of 2024. Regeneron's total revenues have increased by 12% to $3.55 billion, with Dupixent global revenues witnessing a 29% surge to $3.56 billion.

The company's drug Dupixent was approved for treating Chronic Obstructive Pulmonary Disease (COPD) in the United States and China, a development that TD Cowen believes could represent a $2-3 billion opportunity. However, Regeneron faces a legal challenge from Amgen (NASDAQ:AMGN) over patents related to its product, Eylea.

A preliminary court decision favored Amgen, potentially impacting Regeneron's market share and sales growth, prompting Erste Group to downgrade Regeneron's rating from Buy to Hold. Despite these challenges, BMO Capital Markets maintained its Outperform rating and $1,300.00 price target for Regeneron. Other firms such as Goldman Sachs, Piper Sandler, and Truist Securities also maintained positive and neutral stances on Regeneron, respectively.

InvestingPro Insights

Complementing Truist Securities' analysis, recent data from InvestingPro sheds additional light on Regeneron Pharmaceuticals' financial position. The company boasts a substantial market capitalization of $109.72 billion, reflecting its significant presence in the biotechnology sector. Regeneron's P/E ratio stands at 25.15, indicating that investors are willing to pay a premium for the company's earnings, possibly due to its growth prospects and strong market position.

InvestingPro Tips highlight Regeneron's financial strength and market performance. The company's cash flows sufficiently cover interest payments, and its liquid assets exceed short-term obligations, suggesting a solid financial foundation. This aligns with Truist Securities' positive outlook and Buy rating. Additionally, Regeneron has demonstrated a strong return over the last five years, supporting the long-term growth expectations factored into Truist's valuation model.

It's worth noting that Regeneron's management has been aggressively buying back shares, which could potentially boost earnings per share and contribute to the company's valuation. This action may be seen as a sign of confidence in the company's future prospects.

For investors seeking a deeper understanding of Regeneron's financial health and market position, InvestingPro offers 11 additional tips, providing a comprehensive view of the company's strengths and potential challenges.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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