Regeneron Pharmaceuticals (REGN -0.84%) has made for a fantastic growth story over the years. From just over $2 billion in revenue in 2013, the company's top line rose to more than $12 billion last year. And that's even after a drop due to declining revenue from its COVID-19 treatment.
There have been concerns, however, that its growth rate could continue to slow down, especially as competition wrestles away market share from its top-selling eye medication, Eylea. But there's reason for investors to be more optimistic about the company's growth prospects moving forward.
The FDA has approved a higher-dose version of Eylea
In August, the Food and Drug Administration (FDA) granted approval for Eylea at a higher dosage. It was already approved at a 2 mg dose, but Regeneron recently filed a new drug application for an 8 mg injection. This is a quick turnaround as the FDA rejected the higher-dose version in June due to issues related to a third-party filler. Regeneron moved quickly to address the issues, however, resulting in the approval of what will now be known as Eylea HD.
This is an important development for Regeneron because Eylea HD will require fewer injections, and in clinical trials it showed similar results to the 2 mg version of the treatment. And for the company, it gives Regeneron a way to fend off some competition. The lower-dose treatment was facing the prospect of competition from biosimilars as early as next year.
Eylea HD, which is a new intellectual property, will have patent protection that will minimize that risk. It will depend, however, on how successful Regeneron will be in transitioning patients from the 2 mg version to the 8 mg version.
The company's growth rate has been falling
Regeneron can definitely use a growth catalyst. Its sales growth rate has been struggling over the past year.
REGN Revenue (Quarterly YoY Growth) data by YCharts
Last year, the company's revenue fell significantly after its COVID-19 antibody treatment, REGN-COV, was no longer effective against the omicron variant.
For the period ended June 30, Regeneron's revenue of $3.2 billion rose by 11% year over year, and that was with a 7% decline in Eylea's revenue in the U.S., which totaled $1.5 billion. The drug remains a big piece of the company's business, and Regeneron said the selling price was lower because it was already starting to struggle against competing products. Eylea HD should help offset that and potentially improve the company's overall growth rate.
The company also has dozens of ongoing trials it is working on that could result in even more products coming to market in the near future, including what it calls a "next generation" COVID-19 antibody -- although that's still in early-stage trials.
Is Regeneron stock a buy?
This year, shares of Regeneron have risen by 14%, which is only slightly less than the S&P 500's gain of 16%. At 22 times earnings, the healthcare stock provides good value for investors as the industry averages a multiple of 26.
Analysts have been boosting their price targets for Regeneron in light of the recent FDA approval. The consensus analyst price target is now over $900, implying an upside of around 10% from where the stock trades right now. And price targets usually cover a period of 12 months; Regeneron's gains could be much higher in the long run. Plus, there could be more upgrades in the future should the company's results and outlook improve.
Overall, Regeneron is a good value buy with some promising growth prospects ahead and investors should consider adding it to their portfolios today.
