Regeneron (NASDAQ:REGN) Pharmaceuticals has recently experienced a boost in its future growth prospects, following a period of declining growth rate. The company's revenue had surged from $2 billion in 2013 to over $12 billion in the previous year but faced challenges due to a drop in COVID-19 treatment revenue and increased competition for its top-selling eye medication, Eylea.
The Food and Drug Administration (FDA) approved a higher dosage of Eylea in August, offering a more optimistic outlook for the company. The drug, previously approved at a 2mg dose, was given the green light for an 8mg injection. This approval came after an initial rejection in June due to issues with a third-party filler. The higher-dose version, now known as Eylea HD, is expected to require fewer injections and has shown similar results to the 2mg version in clinical trials.
This introduction of Eylea HD could help Regeneron stave off competition. The original lower-dose treatment was expected to face competition from biosimilars as early as next year. However, the new intellectual property, Eylea HD, will enjoy patent protection which should reduce this risk. The success of this strategy will largely depend on how effectively Regeneron can transition patients from the 2mg version to the 8mg one.
Over the past year, Regeneron's sales growth rate has been under pressure. Despite setbacks with its COVID-19 antibody treatment, REGN-COV, proving ineffective against the Omicron variant, Regeneron reported an 11% year-over-year increase in revenue to $3.2 billion for the period ending June 30. This occurred even with a 7% decline in U.S. revenue from Eylea, which totaled $1.5 billion. The reduced selling price of Eylea due to increased competition was a contributing factor. However, the launch of Eylea HD should help counter this and potentially boost the company's overall growth rate.
Regeneron has several ongoing trials that could lead to more products entering the market soon, including a "next-generation" COVID-19 antibody currently in early-stage trials.
Despite slightly trailing the S&P 500's gain of 16%, Regeneron shares have appreciated by 14% this year. With a valuation of 22 times earnings, below the industry average multiple of 26, Regeneron may present good value for investors. Market analysts have been raising their price targets for Regeneron following the recent FDA approval, with consensus estimates suggesting an upside of around 10% over the next 12 months. Further upgrades could be on the horizon if the company's performance and outlook improve.
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