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Image source: Regeneron Pharmaceuticals.

What: 2016 has been rough on shareholders of Regeneron Pharmaceuticals (NASDAQ:REGN). The company's stock has surrendered more than 35% of its value since the start of the year, according to data from S&P Global Market Intelligence.

REGN Chart

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So what: The year so far has been full of both positive and negative developments that pushed the company's shares in one direction or the other. Here's a recap of the year's top headlines:

  • Regeneron Pharmaceuticals and its collaboration partner Sanofi (NYSE:SNY) reported encouraging data from a phase 3 study involving their experimental compound Sarilumab. The study showed that the drug outperformed AbbVie's megablockbuster drug Humira at treating patients with active rheumatoid arthritis.
  • The company reported positive results from a phase 2/3 study using its experimental drug Fasinumab as a treatment for pain related to osteoarthritis. Data showed that all tested doses using Fasinumab significantly outperformed placebo in improvement pain relief.
  • Regeneron and Sanofi reported encouraging data from two phase 3 trials testing Dupilumab's ability to treat moderate to severe atopic dermatitis. Patients who used Dupilumab showed an improvement in skin clearing, itching, mental health, and overall disease severity. The company affirmed that it's on track for a third-quarter regulatory submission. 
  • The company inked a collaboration deal with the privately held Intellia Therapeutics to enter the exciting new gene editing field called CRISPR. 

On a clinical basis, the company is having a great year, but traders are far more focused on three recent negative developments:

  • First, a U.S. District Court ruled that the company's new cholesterol-busting drug Praluent infringes on two patents held by its main rival, Amgen. Damages have yet to be announced, but Amgen is calling for Praluent to be removed from the market completely.
  • Second, Regeneron is forecasting that U.S. sales of its best-selling drug, Eylea, will grow between 20% to 25% for the full year. That's a solid number in absolute terms, but it's a big deceleration from last year's torrid growth figures.
  • Finally, sales of Praluent are off to a slow start. 

Add in the fact that the company's shares have historically traded for a premium price, and it's not hard to understand why shares have cratered so far this year.

Now what: Biotech stocks in general have been sold off hard since the start of the year, so perhaps it's not surprising to see that Regeneron's shares have struggled. Despite the weakness, I think there are plenty of reasons to be bullish on the stock from here.

For one, Regeneron's management team has a history of under-promising and over-delivering, so it's possible they're being conservative with Eylea sales guidance. In addition, cardiovascular outcomes data will be available for Praluent in the next few quarters, which could help spur demand. In addition, Sarilumab and Dupilumab both look as if they'll be winners, and both could be on the market by the end of 2017.

That's a lot of potential growth for a company trading for about 21 times next year's estimated earnings. Investors with a long-term time horizon might want to consider picking up a few shares while the market remains skeptical of its chances of success.

 

Brian Feroldi has no position in any stocks mentioned. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.

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