Please ensure Javascript is enabled for purposes of website accessibility

Why Regeneron Pharmaceuticals Shares Fell 23% in January

By Todd Campbell – Feb 2, 2016 at 5:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The broad market sell-off hit biotech stocks hard last month.

Image source: Regeneron Pharmaceuticals.

What: Despite news that the FDA has accepted it and co-developer Sanofi's (SNY -1.87%) application for approval of a key drug last month, shares in Regeneron Pharmaceuticals (REGN 1.32%) fell 22.6% in January, according to S&P Capital IQ.

So what: On January 8, the FDA accepted the application for approval of sarilumab, a human monoclonal antibody therapy for use in patients with moderate to severe rheumatoid arthritis.

The rheumatoid arthritis market is valued at $18 billion annually (and growing), and if approved, sarilumab will compete against AbbVie Inc.'s (ABBV 0.04%) multibillion-dollar blockbuster Humira, which controls 22% market share in the indication.

Although sarilumab's opportunity is real, investors looked beyond that potential and sold their shares in Regeneron last month as part of a broader de-risking of portfolios that resulted in a 28% drop in the S&P Biotech ETF (XBI -1.84%).

Now what: A lot of investor attention this year will focus on how quickly demand and revenue grows for Sanofi and Regeneron's cholesterol-fighting drug Praluent.

Since winning FDA approval for Praluent last summer, the two companies have announced a slate of contract wins with pharmacy benefit managers that could help sales climb in 2016.

Because tens of millions of people suffer from high cholesterol, including millions who are categorized as tough-to-treat who could conceivably benefit from Praluent, industry watchers think Praluent could be a multibillion-dollar drug. If so, it would mean Regeneron could potentially have three billion-dollar blockbusters on the market in 2017.

That would be enviable product line, but it may be a while before investors send Regeneron's shares back to their prior highs. Despite January's retreat, Regeneron's shares still trade at about 30 times forward EPS. That's not that expensive for biotech, but it's not a bargain, either.

Regardless, Regeneron is building a first-class lineup of medicine that should provide revenue and profit tailwinds for years to come, and for that reason, I think Regeneron is one company growth investors should be socking away in portfolios for the long haul.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sanofi Stock Quote
$38.40 (-1.87%) $0.73
Regeneron Pharmaceuticals, Inc. Stock Quote
Regeneron Pharmaceuticals, Inc.
$697.33 (1.32%) $9.07
AbbVie Inc. Stock Quote
AbbVie Inc.
$143.06 (0.04%) $0.05
SPDR Series Trust - SPDR S&P Biotech ETF Stock Quote
SPDR Series Trust - SPDR S&P Biotech ETF
$76.65 (-1.84%) $-1.44

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.