What happened
While the bottom was falling out for a lot of stocks in March, shares of Regeneron Pharmaceuticals (REGN 0.11%) actually went up 10%, according to data provided by S&P Global Market Intelligence.
In mid-March, Regeneron announced progress in developing a multi-antibody cocktail to prevent infection from the coronavirus or to treat those already infected.
Separate from the antibody cocktail, Regeneron and collaborator Sanofi (SNY 0.07%) announced clinical trials to evaluate the drug Kevzara, currently used to treat patients with rheumatoid arthritis, as a treatment for COVID-19. The drug may help control the overactive inflammatory response in the lungs of severely ill COVID-19 patients. That means Kevzara may be able to prevent a critically ill patient's immune system from overreacting and attacking the body's own organs.
Finally, at the very end of February, Novartis (NVS 0.55%), a key competitor in the macular degeneration market, had a safety setback, which positions Regeneron's drug Eylea to outperform. With estimated 2020 revenue set at $4.58 billion, Eylea is the dominant player in macular degeneration treatment, and Regeneron wants it to stay that way.
Image source: Getty Images.
So what
Regeneron has a long list of successful drugs, but the potential COVID-19 vaccine and treatments have been driving the stock price up while most others are down sharply. Whichever drug company successfully produces the desperately needed treatment first will reap huge rewards, since the demand is worldwide.
In the race among pharmaceutical companies to come up with a successful vaccine and various treatments, I think Regeneron has the best shot at finding what is needed in the shortest period of time.
Why? First of all, the company has experience rapidly developing a successful treatment, as it did for the Ebola virus. And second, Regeneron's proprietary VelociMab technology can prepare cell lines ready for manufacturing as soon as lead antibodies are selected, so clinical-scale production can begin immediately.
Now what
Regeneron sports a price-to-earnings ratio of 27, versus a sector average of 28, and the S&P average of 27.
Regeneron's P/E seems pretty reasonable given the possible benefit of developing coronavirus treatments. And the underlying business, built over 30 years, has drugs in every phase of maturation. In addition, the drug pipeline of new treatments in clinical trials has over 20 products. Regeneron is a solid business even without coronavirus drugs.
Given the company's capabilities of moving quickly and safely toward both a coronavirus vaccine and treatments (not just one or the other) and Regeneron's solid business, the stock is attractive. Investors would do well to initiate or add to a position in this stock.
