Regeneron Is 'One Of The Stronger Growers In Biotech'

Bernstein has initiated coverage of Regeneron Pharmaceuticals Inc (NASDAQ: REGN) with an Outperform rating and $400 price target, citing a "good entry point for one of stronger growers in biotech."

"Regeneron is a growth-phase biopharma with one large successful first product (Eylea) and two potential blockbusters recently launched or soon to reach market (Praluent and Dupilumab)," according to the analyst note.

Few Risks

Bernstein, however, said there exists a couple of risks for Regeneron that the market appears less concerned about. These include CMS action impacting Eylea and Praluent royalties to Amgen, Inc. (NASDAQ: AMGN).

"However, our growth forecasts more than justify its current price, and it is rare to find companies with multiple potential blockbusters and by-inference, a scientific team capable of producing breakthroughs. We launch at outperform," analyst Aaron "Ronny" Gal wrote in a note.

Related Link: Regeneron CEO And CFO Met With Cit: Here Are The Takeaways

Gal expects "a slowdown in Eylea sales growth due first to gradual exhaustion" of the wet Age-related Macular Degeneration (AMD) prevalence pool and the more gradual growth in Diabetic Macular Edema (DME), and later due to upcoming competition from Novartis AG (ADR) (NYSE: NVS) and Allergan.

'Fairly Bullish'

However, Gal is "fairly bullish" on Praluent, a cholesterol-lowering drug in studies.

"Given the size of the patient population, it is very hard for us to see peak sales for the market coming in below $10 billion. We expect the anti-PCSK9 market could be $12 billion globally and Praluent could reach $4.4 billion by 2025," Gal highlighted.

"Overall, we are 25–30 percent above consensus for Praluent revenue by around 2020," Gal added.

However, the analyst is "somewhat less optimistic" over the likelihood of Regeneron will need to pay substantial royalties to Amgen. Gal estimates a royalty rate of 15 percent.

That said, Gal expects Regeneron to grow revenue at about 17 percent CAGR to 2020 with half the growth coming from Eylea and the other half the Sanofi collaboration, driven by Praluent and Dupilumab (being studied for treatment of atopic diseases).

At time of writing, shares of Regeneron were up 3.30 percent on the day at $350.99.