Regeneron Earnings: Maintaining Our $750 FVE as Dupixent Strength Countered by Increasing Expenses

Regeneron saw stronger growth than we had expected in the third quarter as both sales and profitability from immunology drug Dupixent rose, but we’re not making any changes to our $750 fair value estimate, as operating expenses are also rising slightly faster than we had anticipated. Regeneron’s third-quarter revenue grew 15% to nearly $3.4 billion, driven by the firm’s profit share on Dupixent from partner Sanofi, with Regeneron’s portion of profits growing 57% to $863 million. We expect future Dupixent profit share growth will be largely driven by Dupixent revenue growth, as profit margins are already over 50%, although we anticipate a step up in Regeneron’s share of profits in 2026. Sales of ophthalmology drug Eylea in the U.S. declined in the third quarter as competition with Roche’s new drug Vabysmo continued, and Regeneron took additional discounts to preserve share. The new high-dose Eylea saw revenue of $43 million in the quarter, and we expect it to help Regeneron maintain ophthalmology sales despite Vabysmo and upcoming biosimilar Eylea competition in 2024. Management nudged its operating expense guidance for 2023 toward the end of its prior range and also guided to midteens R&D expenses growth in 2024, which was higher than we had modeled. Overall, we think Dupixent and high-dose Eylea help support the foundation of Regeneron’s narrow moat, although we see potential support in both oncology and potentially genetic medicines.