Expectations For Regeneron No Longer Realistic; Analyst Downgrades

Analysts at Baird Equity Research turned bearish on Regeneron Pharmaceuticals Inc (NASDAQ: REGN) as investor expectation for a recently launched drug may be too high. The firm's Brian Skorney downgrades Regeneron's stock rating from Neutral to Underperform with an unchanged $408 price target.

Regeneron and Sanofi SA (ADR) (NYSE: SNY) announced in DUPIXENT (dupilumab), the first and only biologic medicine approved for the treatment of adults with moderate-to-severe atopic dermatitis. The therapy began selling within a week and on Monday Sanofi provided an update to the therapy's performance in conjunction with its second quarter results.

Sales of Dupixent totaled $30 million in the second quarter, which is "nothing to scoff at," Skorney said in his downgrade note. However, investor expectations for a strong performance has "stretched the valuation beyond what is reasonable" based on the initial launch metrics (see Skorney's track record here).

In fact, investor expectation shifted from "high" in late April/May to "extraordinary" today, the analyst added. Meanwhile, buy-side analysts may have also gotten ahead of themselves in predicting Dupixent to outperform Novartis' blockbuster therapy, Cosentyx.

"We believe shares reflect a greater degree of optimism than is warranted," Skorney emphasized. "We continue to believe Dupixent will be a big drug, as reflected by our reiterated target price of $408."

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