Is Regeneron Pharmaceuticals Really Worth More Than $180?

With an eye on additional indications granted in the future, Regeneron Pharmaceuticals (NASDAQ: REGN  ) is looking at blockbuster status with its age-related macular degeneration therapy Eylea.

Despite what had seemed like rosier-than-possible sales expectations earlier this year, the eye disease treatment has gone on to exceed them. Sales have already reached $562 million, which gives it a run rate in excess of $1 billion, and it's only just received European clearance for treating patients with neovascular (wet) age-related macular degeneration, or wet AMD. Following expansion of indications for which it's approved here at home, Regeneron is now looking for additional clearances elsewhere around the globe.

So with growth potential seemingly unstoppable, let's take a closer look at whether Regeneron will soon put its latest sales projections to shame.

Regeneron Pharmaceuticals snapshot

Market Cap

$17.4 billion

Revenues (TTM)

$1.1 billion

1-Year Stock Return

246.5%

Return on Investment

19.4%

Estimated 5-Year EPS Growth

50.6%

Dividend and Yield

N/A

Recent Price

$180.02

CAPS Rating (out of 5)

*

Source: FinViz.com. N/A = not available; Regeneron does not pay a dividend.

High-falutin' honeys
Following the successful launch of its first major product, Regeneron is looking to be profitable this year with greater growth to come.

The biotech has notably taken on Lucentis, the eye disease therapy marketed by Roche and Novartis (NYSE: NVS  ) , which has seen sales falter, and has left in the dust Macugen, a one-time leading treatment that not even Pfizer's (NYSE: PFE  ) international muscle could rescue. Last year, the pharma pulled its application with European regulators to extend the indications to diabetic macular edema because its risk-benefit profile was lacking. Lucentis received such approval just this past August, and Regeneron will be pushing for approval as well and is in late stage trials.

Wet AMD is the leading cause of blindness in people over 60 and is characterized by the abnormal growth of blood vessels in the eye. When these vessels leak fluid and blood, they damage the macula, the spot at the center of the retina that is responsible for acute central vision. While it's responsible for only 10% of all AMD cases, it accounts for 90% of the severe vision loss associated with the disease. Diabetes is the leading cause of blindness in all people from 20 to 74. 

Horse of a different color
What's perhaps truly exciting about Regeneron is that it's not a one-trick pony, but has a number of drug candidates in its pipeline and on the market that can add to its top and bottom lines. There's the cancer drug Zaltrap that was developed in conjunction with Sanofi (NYSE: SNY  ) and received FDA approval this year, and it has Arcalyst, a treatment currently approved only for certain genetic conditions. While expanded use for patients undergoing gout treatments was shot down by the FDA back in May, it generated about $20 million in revenues in 2011.

The most common comment about Regeneron is that it appears to be ridiculously overvalued, carrying a P/E ratio of 92, and the stock trades at 16 times its sales. I'd dismiss concerns about its market multiple since companies just coming into profitability will often exhibit sky-high valuations, and though the P/S ratio is elevated, it's less than half of what it was back in February. As sales continue to grow, we're likely to see that number become even more reasonable.

I think the potential for much higher growth is possible as indications widen and it broadens the number of countries it's sold into. I'm rating Regeneron Pharmaceuticals to outperform the broad market indexes on Motley Fool CAPS, the 180,000 member-driven investor community that translates informed opinion into stock ratings of one to five stars. The fact that the biotech carries the lowest one-star rating suggests investors think there are better places for your money, but you can tell me in the comments section below whether you agree its potential goes as far as the eye can see.

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