Regeneron (NASDAQ:REGN), the New York biotech giant, released Q3 earnings before the bell on Tuesday morning that sent the stock flying.
It gapped up 4% on the report to start the day and was soon trading up 10% from Monday’s close.
Numbers-wise, revenue, and EPS beat estimates across the board. The former in particular printing an impressive +27% YOY number and the latter printing +13% YOY.
The company highlighted strong sales growth across two key products as the cornerstone of the quarter’s success. US net sales from EYLEA continued their march higher into $1 billion territory, posting a 16% jump compared to the same quarter last year. Any fears of generic competition from Novartis appear unfounded for now and the macular degeneration treatment is gaining substantial market share.
The company’s other flagship product is Dupixent and its sales growth was even better. Global net sales jumped over 140% YOY, largely driven by Regeneron’s ongoing collaboration with fellow pharma giant Sanofi on the product. In August the European Commission approved extending the drug’s use to adolescents, a move that will surely bear fruit with sales figures next quarter.
Positive Internal and External Signs
If the positive momentum and growth in the fundamentals weren’t enough to make investors sing and dance, then management’s announcement of a $1 billion share repurchase program surely did. These are often initiated by a company’s management who think their stock might be undervalued. Buybacks by their nature increase the demand and reduce the supply of shares so they tend to lend themselves to sustained periods of upward momentum in a stock.
But that’s not all investors have to look forward to. Regeneron is a company that was founded and is led by physician-scientists. They have a solid track record in drug development and investors should be excited about every one of the 24 products they have in clinical development.
Their on-going trials range from oncology medicines to cardiovascular treatments to pain management, with plenty in between. It’s safe to say they have a very diversified pipeline which should help investors sleep at night. This is not a one-trick pony biotech whose future is riding on positive results from a Phase 1 trial.
This is important because the stock has lagged the overall market and investors would be forgiven for getting impatient. While the S&P 500 can boast a 30% rally so far this year, Regeneron shares were down 16% going into these earnings. The stock is pretty correlated to the biotech industry as a whole which can be both good and bad.
Can Regeneron Shares Relive The Glory Days?
Regeneron shares hit all-time highs in the summer of 2015, right around the same time that IBB, the major biotech index, was printing all times highs too. When the biotech bubble in August 2015 popped on the back of price gouging allegations and promises from presidential candidates to take companies on, REGN quickly turned back from highs it hasn’t come close to scaling since.
That said, shares seem to be coming out of a multi-month base, having found support at the same levels it bounced off in May 2018 and December 2013 and these earnings could be the fuel the stock needs to push on.
A long term view on the chart shows a multi-year flag forming, with very obvious lower highs set since the glory days of July 2015 against this base around $280. Assuming support levels hold and shares keep setting lower highs, significant pressure will form as the two points meet. Ultimately, a breakout will be forced, one way or the other.
Short term, RSI at 75 is definitely towards the upper end of the range thanks to this earnings report. The stock was being bought all the way into Friday’s close and investors will be watching to see if shares can at least hold the level they gapped up to on Wednesday’s open.
For investors who like some company in their holdings, it’s worth noting that over 96% of Regeneron’s float is held by institutions. For those who like their metrics, the stock has a PE ratio of 19; noticeably low for a biotech and suggestive of the stock being undervalued compared to expected earnings. The pharma industry average PE ratio is 27.
Overall, Regeneron seems to be doing a lot of things right and there’s solid positive momentum building in all the right areas. The stock has lagged in recent years but as technical pressure builds on the shares, the odds favor an eventual move to the upside.
Companies Mentioned in This Article
|Regeneron Pharmaceuticals (REGN)||$372.26||+1.1%||N/A||18.80||Buy||$386.11|