Regeneron Pharmaceuticals Inc (NASDAQ:REGN) peaked on May 14 with a price of $283.99, and has since pulled back to its current price of $260. The drugmaker has been one of the best-performing stocks of the last few years, trading higher regardless of market trend. After many years of gains, some are wondering whether now’s the time to take profits. Here’s why I think it’s not.
A Great Company With a Lot of Promise
Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is valued on its pipeline, and on the potential of its eye drug EYLEA. This treatment and its two other marketed drugs have produced revenue of $1.59 billion over the last 12 months, including almost $1 billion from EYLEA alone. Regeneron’s newly launched drug ZALTRAP, for colorectal cancer, has booked sales of $31 million during its first four months on sale.
Beyond these products, Regeneron Pharmaceuticals Inc (NASDAQ:REGN) also has a large pipeline and a developmental partnership with Sanofi. One of its more promising products, alirocumab/REGN727, is being developed to manage LDL cholesterol. It is believed to have blockbuster potential, with peak sales in the multibillions. Therefore, it is easy to see why this drugmaker has become an investor favorite over the last several years.
How Fundamentally Large Can This Company Become?
It doesn’t take a genius to look at Regeneron Pharmaceuticals Inc (NASDAQ:REGN) and its $25.5 billion market cap, compared to its $1.59 billion in revenue, to see that it’s pricey. Thus the company is expected to produce significant growth over a long period of time; as higher fundamentals/valuation ratios are typically awarded to companies with high growth rates.
In terms of expectations, the company’s blockbuster eye drug EYLEA has peak sales expectations of $4 billion. ZALTRAP is estimated to have peak sales of $500 million. Finally, ARCALYST rounds out its current offerings with a smaller $100 million in projected peak sales.
Beyond those three, Regeneron Pharmaceuticals Inc (NASDAQ:REGN) has a total of 12 products in its pipeline, most of which are very promising, but also early in the developmental process. They include Alirocuma, an antibody designed to lower cholesterol, which could produce peak U.S. sales of $3.5 billion, with up to $10 billion globally. Regeneron also has a Phase 3 product, Sarilumab, for the treatment of rheumatoid arthritis in patients that don’t respond to anti-rheumatic drugs. If successful this product, should reach sales between $500 million and $1 billion.
Is There Upside After Such Large Multi-Year Gains?
When you combine the sales potential of its current products with its two most advanced clinical products, you can see how Regeneron Pharmaceuticals Inc (NASDAQ:REGN) has significant revenue potential. Moreover, the company is classified as an orphan drug company, meaning it develops drugs to treat rare conditions. Orphan drugs enjoy longer exclusivity periods before other companies can sell generic versions of them.
When you consider its potential to generate at least $10 billion in sales from future products, Regeneron Pharmaceuticals Inc (NASDAQ:REGN) looks cheap. Sure, it’s expensive now, but the drugmaker still compares favorably to other high-profile companies in the sector with orphan drug classifications.