Analyst Note| Karen Andersen, CFA |
We're maintaining our $500 fair value estimate for Regeneron following solid first-quarter results that were boosted by revenue for COVID-19 antibody therapy REGEN-COV. Regeneron's revenue grew 38% (20% excluding REGEN-COV), with strong recovery in demand for the firm's core therapy, ophthalmology drug Eylea, leading to 15% growth in U.S. Eylea sales. Global sales of immunology drug Dupixent (booked by partner Sanofi) grew 48% as launches continue in new indications and penetration increases in the original atopic dermatitis indication, with younger age groups now included in the prescribing label. Regeneron saw the benefits of Dupixent's growth in its Sanofi collaboration revenue, which also grew 48%. While Regeneron has regained full rights to MUC16 (ovarian cancer) and BCMA (multiple myeloma) bispecific antibody programs from Sanofi, this does not change our valuation after factoring in higher research and development costs as well as our decision to raise Regeneron's long-term tax rate to 20% (to reflect potential U.S. tax reform). We continue to think that Regeneron's dominant Eylea franchise will perform well against new branded competition, and potential high-dose data later this year and a regulatory filing in 2022 could help lengthen the duration of efficacy and ward off biosimilar threats (likely in 2024). We continue to think that Eylea and Regeneron's growing oncology and immunology portfolio warrant a narrow moat rating.