Seeing Black Gives Regeneron a 9% Pop

Regeneron Pharmaceuticals' (Nasdaq: REGN  ) launch of Eylea has been nothing short of amazing. Sales haven't spiked up quite as fast as Vertex Pharmaceuticals' (Nasdaq: VRTX  ) Incivek, but Eylea was launching into direct competition from Roche's Lucentis and cheap off-label use of Roche's Avastin. By contrast, Incivek was an add-on therapy to the existing standard of care, so there wasn't an entrenched leader that it had to steal market share from.

In the first quarter, Regeneron registered sales of $124 million, a solid increase over the $72 million run rate it exited the fourth quarter with. The biotech estimates it's taken 10% of the macular degeneration market. The ability to inject the drug half as often is a clear advantage, so I'm not shocked it was able to reach that level of penetration -- I'm just surprised it happened so quickly.

Equally surprised, it seems, is Regeneron's management -- or they're just really cautious with guidance. After the solid quarter, Regeneron is guiding for sales between $500 million and $550 million this year, which is nearly double the guidance it put out in February. And that guidance was an increase from just a month prior.

The solid quarter allowed the biotech to become profitable for the first time in its history, which is always a monumental occasion. Given the continuing increase in sales, I imagine Regeneron will be able to stay in the black, something other fledgling biotechs like Onyx Pharmaceuticals (Nasdaq: ONXX  ) had trouble doing once they turned a profit; research and development for the next blockbuster isn't cheap.

Regeneron's secret to success is the pact it struck with Sanofi (NYSE: SNY  ) a few years ago that has the French pharma giant footing the bill for much of the biotech's research in exchange for a cut of the drugs that are developed. In the first quarter, about 70% of Regeneron's research and development costs were reimbursed by collaborators.

While the launch of Eylea has been nothing short of spectacular, investors' enthusiasm might be getting ahead of itself. With a market cap over $12 billion, Regeneron trades at a whopping 24 times this year's projected sales -- not earnings, sales. Investors are counting on Eylea to continue growing, which seems reasonable given the room to penetrate further, but the biotech will likely need a hit or two from the pipeline to justify that price as well.

Looking for a rule-breaking multibagger stock? Find out the name of this promising health care company and why Fool analysts like it so much in our free report: "Discover the Next Rule-Breaking Multibagger."

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1873831, ~/Articles/ArticleHandler.aspx, 9/17/2014 3:43:40 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement