With all the recent focus on COVID-19 vaccines and the successes of a new gene-based approach to developing drugs, it's understandable that investors might lose sight of companies that led earlier innovations in medicine. Monoclonal antibodies may sound like a recent innovation, but the first treatment using the technology was actually approved in 1986 -- the same year Top Gun led the box office. Regeneron (NASDAQ:REGN) -- an early pioneer in the field -- has delivered 1,530% returns to shareholders over the past decade. Unlike many biotechs with recently rising stock prices, it has been consistently growing sales and pumping out profits too. Can the company continue to deliver growth and be a millionaire-maker for investors from here?

A gloved hand holding a vial of monoclonal antibodies.

Image source: Getty Images

What is monoclonal antibody therapy?

Two proteins -- antibodies and antigens -- are key to explaining how the immune system can be harnessed to fight disease. Antibodies circulate throughout the body looking for antigens to stick to. Once the two bind, the antibodies then call on other mechanisms of the immune system to destroy the cells with the antigens. That process is what scientists use to target cancer and other diseases with engineered antibodies.

Researchers can design antibodies to target a specific antigen, such as one associated with a type of cancer, and infuse them into the patient. Monoclonal antibodies are just antibody cells cloned from a single original cell for a particular place in the body. Each time an army of these fighters is unleashed, it is designed for a specific disease. The goal is to help the immune system better identify the threat. Some of these specially designed antibodies are "naked" -- without any cargo -- while others can carry drugs or radioactive material like chemotherapy with them.

When you put two or more of these together for a treatment -- like Regeneron's COVID-19 treatment -- it is often called a "cocktail".

But let's talk about the business: Regeneron's Velocimmune technology -- part of its Velocisuite of tools -- is a proprietary technology for creating these monoclonal antibodies. By creating these therapies from immunized mice, researchers are able to avoid complications related to the human immune system and develop drug candidates that bind better and shorten the discovery-to-approval timeline. The company's treatments have helped it grow its sales at a 35% annual compound rate over the last decade. Whether it can keep up that growth rate and deliver share price outperformance over the next decade will depend largely on the pipeline.

Peak sales and the pipeline

Regeneron gained additional recognition this fall when its monoclonal antibody cocktail was given to an ailing President Trump. That drug was recently granted emergency use authorization for high-risk individuals with mild to moderate COVID. Analysts estimate the company could win about $1.7 billion from sales of the antibody cocktail next year. That's excellent, but the benefit is unlikely to last much beyond 2021. For reference, the company booked $9.2 billion in sales over the past year. For market outperformance, growth is going to have to come from other areas. 

For now, the product driving most of the company's sales -- 59% in 2019 -- is Eylea, which is used to combat vision loss in certain types of eye conditions affecting the retina. Partnerships with Sanofi (NASDAQ:SNY) and Bayer (OTC:BAYR.Y) account for almost all of the remaining annual revenue. 

Entering 2020, the company boasted seven FDA-approved treatments. The most promising are Dupixent and Libtayo. While year-over-year sales of Eylea increased 11% in the third quarter, those two look primed to fuel future growth. Sales of Dupixent, an eczema drug, grew 69% to an annualized level approaching $4 billion. Libtayo, a drug for skin cancer, was granted priority review by the FDA for non-small cell lung cancer. The agency plans to announce its decision on that indication in late February. An approval could dramatically increase the current $300 million-plus in annual sales for the drug.

Winners keep on winning

The drivers of growth in the near term for Regeneron are clear. The antibody cocktail to treat COVID-19 will give sales a boost in 2021 and the approval of Libtayo for additional diseases, especially lung cancer,  will help increase sales over the next couple of years. Beyond that, management will have to continue developing its pipeline of antibody candidates and finding new applications for its existing antibodies. And it has more than 20 investigational treatments in development.

Despite the uncertainties, I'm confident the company has the right culture to deliver. Regeneron was recently named the best company to work for by Science magazine, its tenth consecutive finish in first or second place. The company was also recognized with the Shingo Prize in 2019. This honor for operational excellence is given to only a handful of companies. Its proven science, great culture, and pipeline of promising candidates have convinced me that the stock can be a winner for patient investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.