What happened
Shares of biotech heavyweight Regeneron Pharmaceuticals (REGN -0.84%) lost 10% of their value over the first three and a half days of trading this week, according to data provided by S&P Global Market Intelligence. The double-digit decline came after the company announced that the Food and Drug Administration (FDA) issued a Complete Response Letter (i.e., a rejection) for its high-dose formulation of Eylea.
Eylea, a biologic therapy for various eye disorders like wet age-related macular degeneration (wet AMD), generated approximately $6.3 billion in net U.S. sales for the drugmaker in 2022. However, the drug's sales have been on the decline due to emerging competition. Regeneron was hoping this high-dose formulation could help it retain market share in key indications like wet AMD.
So what
The good news -- if you can call it that -- is this rejection only stems from a third-party manufacturing issue, according to the press release. Wall Street analysts, in turn, think this regulatory hurdle can be addressed fairly quickly. In fact, Cowen analysts noted that this setback should delay the drug's approval by no more than three months. The bad news is that even a minor delay is expected to result in additional market share losses for Eylea thanks to competition from Vabysmo, Roche's bispecific antibody.
Now what
Is Regeneron stock a buy on this pullback? I think so. With a projected earnings multiple of 16.6, Regeneron's shares are undervalued relative to its large-cap biotech peers (average forward P/E ratio of 20.2). Moreover, the biotech does have other growth drivers to lean on other than Eylea. This regulatory setback, in turn, should probably be viewed as a buying opportunity for savvy investors.
