Regeneron Pharmaceuticals (REGN 0.68%) has been making waves in the biotech industry, with a remarkable growth trajectory and a solid market capitalization exceeding $90 billion. Over the last five years, its stock has soared by nearly 130%, substantially outperforming the S&P 500. Investors are now eagerly anticipating what the next year holds for this healthcare giant.
A Potential Game-Changer
One of the most significant developments to watch for in 2024 is the potential approval and launch of odronextamab. Regeneron recently announced that the U.S. Food and Drug Administration (FDA) granted priority review for its Biologics License Application for odronextamab, a treatment designed for the two most common types of non-Hodgkin lymphoma: relapsed/refractory follicular lymphoma and relapsed/refractory diffuse large B-cell lymphoma. The scheduled PDUFA date falls on March 31, 2024.
Analysts at GlobalData project that, at its peak, odronextamab could generate a substantial $468 million in revenue by 2029. While this might not significantly impact Regeneron’s top-line earnings in the coming year, the approval alone could ignite bullish momentum for the stock.
Strategic Acquisitions
In September, Regeneron completed the acquisition of Decibel Therapeutics, marking its expansion into gene therapy programs aimed at treating hearing loss. Regeneron’s Chief Scientific Officer George D. Yancopoulos, M.D., has expressed the company’s commitment to expanding its expertise in cutting-edge genetic medicine approaches, including gene silencing, gene editing, and gene therapy technologies.
The potential payout for Decibel’s business could reach $213 million, a modest amount for a company that generated nearly $4.4 billion in free cash flow over the last 12 months and held close to $10 billion in cash and marketable securities at the end of September.
Anticipated Sales Growth
Regeneron’s most recent quarter, ending on September 30, saw revenues totaling $3.4 billion, reflecting a 15% year-over-year increase. However, the growth was primarily attributed to collaboration revenue, as net product sales amounted to just under $1.8 billion, declining by 1%.
Next year is expected to bring stronger numbers, as the company launched Eylea HD, a higher-dose version of its eye disease treatment, in August. This strategic move positions Regeneron to better compete against market rivals, especially since its lower-dose version of Eylea experienced an 11% decline in sales last quarter. Stronger growth prospects could subsequently lead to a more favorable bottom line, given Regeneron’s track record of maintaining a profit margin of at least 30%.
A Compelling Investment
Regeneron’s stock is currently trading at a forward price-to-earnings multiple of just under 20, consistent with the healthcare industry average. Although not considered a cheap buy, the company offers substantial value for long-term investors. With ample room for further growth and a potential to outperform the market, Regeneron remains an appealing candidate for those looking to build a robust portfolio in the healthcare sector.
As we approach 2024, all eyes are on the potential approval of odronextamab and the company’s strategic moves in the gene therapy arena, making it a stock to watch in the coming year.
