Regeneron Earnings: Advancing Pipeline and New Obesity Program Ease Pressure From Eylea Competition

Strong growth of oncology drug Libtayo (reported revenue up 61%) and collaboration revenue from partner Sanofi largely tied to immunology drug Dupixent (up 19%) helped Regeneron achieve 1% top-line revenue growth in the fourth quarter, despite the loss of revenue from COVID-19 antibodies and competitive pressure on the firm’s Eylea-based ophthalmology business. We’re maintaining our $750 fair value estimate, as management’s guidance for operating expenses in 2024 was higher than our estimates, but our addition of an obesity program to our valuation model countered the effect. Regeneron’s Eylea and longer-acting Eylea HD (launched in August 2023) saw combined sales of nearly $1.5 billion in the quarter, but this still represented a 2% year-over-year decline due to competition from Roche’s Vabysmo. With recent approvals of the higher-dose Eylea in Europe and Japan as well as a new simplified billing code going into effect in April in the U.S., we think Regeneron can prevent further erosion of its U.S. sales from Vabysmo, with significant U.S. declines pushed back to 2028 in our model (Eylea biosimilars and/or potential Medicare negotiation). We continue to see Regeneron’s Eylea and Dupixent cash flows supporting a narrow moat, although the firm’s pipeline is rapidly advancing and could further diversify its growth.