Is Regeneron Stock Fully Valued At $820?

Regeneron stock (NASDAQ
NDAQ
: REGN) has seen a 6% rise in a month, compared to a 1% fall for the broader S&P500 index. This outperformance can be attributed to earlier-than-expected regulatory approval for a high-dose version of its eye treatment – Eylea. In the longer term, REGN stock is up a solid 120% from levels seen in late 2019, far better than the S&P 500 index, up nearly 40%.

Interestingly, REGN stock has had a Sharpe Ratio of 0.5 since early 2017, slightly lower than 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.3 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

This 120% rise for Regeneron stock since late 2019 can primarily be attributed to 1. the company’s P/S ratio rising 50% to 12.6x revenues vs. 8.4x in 2019, 2. Regeneron’s revenue growth of 44% to $6.9 billion over the last twelve months, compared to $4.8 billion in 2019, and 3. a 1.5% fall in its total shares outstanding to 107 million. This has meant that the company’s revenue per share metric has risen 46% to $65.02 now, compared to $44.60 in 2019. Our dashboard on Why Regeneron Stock Moved has more details.

Regeneron saw its sales rise in recent years, led by its Covid-19 multi-antibody therapy, which garnered $6 billion in 2021 sales. However, with the pandemic now behind us, sales declined in 2022. Another contributor to its top-line growth is Eylea, garnering $6.3 billion in 2022. Eylea is approved for treating wet age-related macular degeneration. It is also used to treat diabetic eye disease and other retina problems. With its recent approval of a high-dose version of Eylea, sales will likely grow faster. However, Eylea could face biosimilar competition as early as next year. The company has another blockbuster drug – Dupixent (co-markets with Sanofi) – a treatment for eczema. The drug garnered $5.3 billion in sales in the first half of this year, reflecting a 35% y-o-y growth. Not only did Regeneron see its sales rise, but it also expanded its operating margin from 28.1% in 2019 to 39.9% in 2022.

After its recent rise, REGN stock looks like it has little room for growth. It trades at 13x revenues compared to its last five-year average of 9x. Our Regeneron Valuation Ratios Comparison dashboard has more details. Given the uptick in Dupixent sales, a slight upward revision in the sales multiple looks justified. That said, at its current level of $820, the positives appear to be priced in.

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