Regeneron Pharmaceuticals (REGN +0.61%) is a top pharmaceutical company with many promising assets in its portfolio. Its diverse business has enabled the business to grow over the years. In the past decade, the stock has risen by more than 185%, outperforming the S&P 500's 155% gain over the same stretch. With more growth still on the way, can this be an investment that helps make you a millionaire in the future?
Where the business is today
Regeneron's business centers around its eye medication, Eylea, which treats wet age-related macular degeneration. It recently obtained approval for a higher-dose (8 mg) version of the drug, which bolsters its growth prospects. Otherwise, its prospects would have been concerning, with cheaper biosimilars entering the market next year to compete alongside the standard dose (2 mg).
But Regeneron's business is broader than just Eylea. If it weren't, the company's results wouldn't be as impressive as they are. In its most recent quarter, for the period ended Sept. 30, Regeneron brought in $3.4 billion in revenue, which was up 15% year over year. Collaboration revenue has been a key driver for the company of late as agreements with Sanofi and Bayer have allowed Regeneron to grow despite lackluster product sales during the quarter, which were down 1% year over year. Sales of the standard-dose Eylea were down 11%, falling to $1.4 billion.
What's encouraging about the business is that Regeneron also generates strong free cash flow (FCF), which can give it the resources it needs to pursue acquisitions in the future or invest in its pipeline. Year to date, the company's FCF has totaled just over $3 billion, up from $2.9 billion a year ago. With no dividend to worry about, Regeneron is able to use that cash to expand its prospects further. And there's a lot of potential within the business.
NASDAQ: REGN
Key Data Points
Regeneron has a lot of room to grow
One of the reasons investors may feel bullish about Regeneron's long-term prospects is that the company has a sizable pipeline, including more than 35 ongoing clinical trials.
The company anticipates several regulatory filings in the years ahead, including several to expand the label for Dupixent, an eczema medication that the company has developed with Sanofi. Dupixent is a key asset for the two companies, which share in its profits, as analysts project that, should it also obtain approval as a treatment for chronic obstructive pulmonary disease, it could reach peak annual sales of $20 billion and higher.
Regeneron is still on the hunt for even more growth. It recently acquired Decibel Therapeutics, which makes genetic medicines, which can further expand its already diverse business. In October, it said it was going to work with Intellia Therapeutics, an existing partner, to expand its research efforts to develop CRISPR-based gene-editing therapies for neurological and muscular diseases.
With plenty of diversification already and Regeneron looking at some potentially high-growth opportunities in gene-editing therapies, there are plenty of reasons to expect that this could be a much more valuable business in the future.
Can the stock have what it takes to get to $1 million?
Regeneron's growth prospects are encouraging. It also has multiple collaboration agreements with other pharmaceutical companies that can lead to even more opportunities in the future. The downside for growth investors is that Regeneron is already worth $90 billion today. At that size, it won't have as much runway as a smaller, fast-growing business may have.
While Regeneron stock can be part of a broader strategy to get your portfolio to more than $1 million, I'm not confident that it alone can get you there. Assuming you invest $20,000 into the stock and don't make a larger investment than that, you would need this stock to be a 50-bagger, meaning that its valuation would need to grow to close to $4.5 trillion for that size of an investment to become worth $1 million. It's possible over a period of 30-plus years, but it's not probable.
Regeneron is a solid company with good growth prospects; they simply may not be that good. Overall, this is a good healthcare stock to buy and hold for the long term, but given its already sizable valuation, investors shouldn't get their hopes up for this stock alone being enough to get to $1 million. Combined with other quality investments, however, Regeneron's stock can be a helpful asset in helping you get to that milestone.
