2017 was a good year for biotech investors. The iShares Nasdaq Biotechnology ETF (IBB 0.84%) rose 21%, which was a smidge ahead of the S&P 500's performance. However, investors in Regeneron Pharmaceuticals (REGN 0.80%) were largely left out of the prosperity. Shares rocketed higher in the first six months of the year and then came crashing back to earth toward the end of the year. The net result of all of that volatility was a 2% gain for the year.
Why did the biotech giant underperform so badly last year? Here's a look back at the key events that caused Regeneron's shares to rise and fall.
Image source: Getty Images.
The good
Regeneron shared a number of upbeat regulatory decisions with investors during the year, including:
- In March, Regeneron and collaboration partner Sanofi (SNY 1.07%) announced FDA approval for their new eczema drug Dupixent. This was big news since many analysts believe Dupixent holds megablockbuster potential.
- In April, Regeneron announced that its experiment hypercholesterolemia drug evinacumab had received Breakthrough Therapy Designation.
- Also in April, Regeneron and Sanofi won FDA approval for a monthly dosing option for their cholesterol-lowering drug Praluent.
- In May, Regeneron and Sanofi announced FDA Approval of Kevzara as a treatment for rheumatoid arthritis. This is another drug that many believe holds blockbuster potential.
- In September, Regeneron and Sanofi announced that their experimental cancer drug cemiplimab had also received Breakthrough Therapy Designation.
That's a lot of positive regulatory news to pack into a single year, so it makes sense that Regeneron's stock was trading at a fresh 52-week high in the summer months.
However, as you can probably guess, the good times didn't last.
The bad
That brings us to the second half of the year, which is when the news flow out of the company took a signifant turn for the worse:
- In August, Regeneron announced bummer news from a phase 3 studying evaluating its experimental treatment for respiratory syncytial virus. The data was so bad that management decided to abandon the compound altogether.
- In September, Regeneron and Sanofi shared data from a late-stage study involving Dupixent as a treatment for asthma that was good, but not great. Since there is so much competition in the asthma space, investors were worried that Dupixent's data might not have been strong enough to allow it to capture market share.
- In October, AnaptysBio (ANAB +1.57%) reported strong phase 2 data for a compound that is being studied as a treatment for eczema. That's troubling news since this drug could pose a real threat to Dupixent.
- In November, Regeneron and its development partner Bayer (BAYRY 0.54%) announced bad news from a late-stage trial involving their eye-disease drug Eylea. That's trouble because the majority of Regeneron's revenue still comes from Eylea. This clinical blunder removed a potential growth avenue for the drug.
- Also in November, Novartis (NVS 0.80%) announced that one of its experimental eye disease drugs outperformed Eylea in a late-stage study.
When combined, these developments raise legitimate concerns about Regeneron's ability to produce double-digit growth over the long term.
Image source: Getty Images.
Better times ahead?
While the last few months have been anything but blissful, this Regeneron shareholder still believes the stock is worth holding. My logic is that Praulent, Dupixent, and Kevzara all hold enough growth potential to move revenue and profits higher, even if Eylea's growth rate does slow significantly. In addition, it's also worth remembering that this founder-led business continues to boast a number of interesting products in its pipeline and remains highly profitable.
In total, while 2017 dealt shareholder a number of setbacks, I still think Regeneron remains one of the highest-quality biotechs on the market today. That's why I plan to stick with this perennial winner for the long term.
