Biotech giant Renegeron Pharmaceuticals (REGN 3.62%) reported its fourth-quarter and full-year 2024 earnings on Feb. 4. The company's results were strong, coming in ahead of analyst estimates. Regeneron's shares jumped by about 5% as a result.
Besides the earnings beat, the drugmaker announced another bit of good news that also had the market excited. Regeneron is now a dividend-paying company. The stock has lagged the market over the last year, and that remains true after the post-earnings rise.
Does Regeneron's initiation of a quarterly dividend make it worth investing in at current levels?
Starting out with a (little) bang
It takes years to build a reputation as a strong dividend stock. Regeneron isn't there yet, having just announced it will join the ranks of dividend payers. But for what it's worth, the company's start in this endeavor looks fairly promising, at least judging by its somewhat competitive dividend per share of $0.88. Here's how that compares to several of the largest biotech and pharmaceutical companies.
| Company | Dividend Per Share (Quarterly) | Forward Dividend Yield |
|---|---|---|
| Regeneron | $0.88 | 0.50% |
| Eli Lilly | $1.50 | 0.70% |
| Gilead Sciences | $0.79 | 3.3% |
| Pfizer | $0.43 | 6.7% |
| Amgen | $2.38 | 3.2% |
| Johnson & Johnson | $1.24 | 3.2% |
| Merck | $0.81 | 3.8% |
| Bristol Myers Squibb | $0.62 | 4.2% |
| AbbVie | $1.64 | 3.4% |
Data source: Table by author, data from Yahoo! Finance.
Note that most of these drugmakers have been in the dividend business for years and have typically increased their payouts over time. Yet, several don't offer a dividend per share as high as newcomer Regeneron. True, some of these companies' share prices are lower than Regeneron's. One could invest in two shares of Bristol Myers -- for just under $54 a pop each -- and end up with a total quarterly dividend amount of $1.24, cheaper than investing in just one share of Regeneron for about $674 with its dividend per share of $0.88.
The point, though, is that Regeneron's dividend amount is pretty strong for a company just starting out. Here's more evidence. Facebook parent Meta Platforms initiated a dividend about a year ago and recently raised it. The tech giant's dividend per share is $0.525, while its stock price is about $736. Alphabet, Google's parent company, also initiated a quarterly dividend last year and currently sports a dividend per share of $0.20 along with a stock price of $187.
Regeneron's competitive dividend per share is no guarantee that the biotech will one day be an outstanding income stock, but it's a pretty promising debut in the dividend-paying business. However, all that will mean very little to income seekers unless Regeneron can maintain, and even increase, its payouts consistently. This will depend on at least two things: the strength of the company's business and management's willingness to return capital to shareholders via dividends.
Let's briefly discuss those two aspects, starting with the biotech's business.
Regeneron's business remains strong
Regeneron's troubles over the past year were due to Eylea, a medicine for wet age-related macular degeneration (an eye disease), the rights of which it shares with Bayer. Eylea is currently approved in two formulations, including a high-dose (HD) version. However, Regeneron has to contend with competition from Roche for both formulations, while the original version is dealing with the biosimilar challenge from Amgen's Pavblu. Despite these issues, Regeneron performed well in the fourth quarter.
The company's revenue increased by 10% year over year to $3.79 billion. Combined U.S. sales of Eylea and Eylea HD came in at $1.5 billion, 2% higher than the year-ago period. Amgen only launched Pavblu in the fourth quarter. Its true impact on Eylea's revenue has yet to be seen. Still, here are three reasons Regeneron should be fine in the mid-term.
NASDAQ: REGN
Key Data Points
First, the company is increasingly ramping up Eylea HD, which benefits from more dosing flexibility than the original formulation without sacrificing efficacy. In the fourth quarter, Eylea HD accounted for just 20% of combined sales between the two versions. But it has only been on the market for a little more than a year.With time, it will attract more of Eylea's current patients and new ones.
Second, Regeneron's other growth driver, eczema treatment Dupixent -- the rights of which it shares with Sanofi -- is doing great. Fresh off a label expansion in treating COPD last year, the medicine is the star of the show for Regeneron. Dupixent's fourth-quarter global sales, recorded by Sanofi, were up 15% year over year to $3.7 billion.
Some analysts believe it could eventually reach $20 billion in annual sales thanks to the new COPD indication (compared to $14.15 billion last year). So, Dupixent will help Regeneron make up some of the Eylea-related losses. Third, Regeneron has a deep pipeline and is especially looking to grow its presence in oncology. The company's several dozen programs should lead to more significant approvals down the road.
Don't buy the stock for the dividend
What about management's willingness to maintain or increase payouts over time? Note that Regeneron also has a share repurchase program.
In the announcement of its fourth-quarter results, the company said it was also increasing its share repurchase capacity by $3 billion to $4.5 billion. There is nothing wrong with paying dividends and buying back shares, but in Regeneron's case, management is, apparently, prioritizing the latter. As the company's CEO, Leonard Schleifer, said, "We anticipate that share repurchases will remain the primary means of returning capital to shareholders."
Regeneron might still increase its dividend over time, but there are far better income stocks. While the dividend doesn't make the company less attractive, investors should focus on the biotech's strong operations and solid prospects. Regeneron looks like a buy for those reasons. The dividend is just icing on the cake.
