On Wednesday, Citi initiated coverage on Regeneron (NASDAQ:REGN) Pharmaceuticals (NASDAQ:REGN), starting with a Neutral rating and setting a price target of $895.00. The action follows a period of underperformance for Regeneron's shares, which have seen a decline of 30% since late August, compared to a 1% drop in the Nasdaq Biotechnology Index over the same timeframe.
The analyst from Citi attributed the stock's underperformance to concerns over potential market share erosion due to the entry of biosimilars, such as Amgen (NASDAQ:AMGN)'s Pavblu, and ongoing competition from branded products in the wet age-related macular degeneration (wAMD) and diabetic macular edema (DME) markets, notably Roche (LON:0QQ6)'s Vabysmo. These factors could accelerate market share loss for Regeneron's Eylea, with projections indicating a combined erosion of 5% for Eylea from 2024 to 2029, compared to a consensus of 4%.
Despite the near-term challenges, Citi sees a more positive long-term outlook for Regeneron, particularly in the inflammation and immunology (I&I) segment with drugs like Dupixent and Itipekimab, as well as in oncology with Libtayo. These products are expected to contribute to significant growth, with Dupixent and Libtayo forecasted to outperform consensus estimates during the 2024-2029 period.
Regeneron's pipeline includes multiple potential treatments in oncology, ophthalmology, and obesity that are likely to maintain investor interest. The company's long-term prospects appear promising, with a projected 5-year compound annual growth rate (CAGR) of 7% in revenue and 10% in non-GAAP earnings per share, which is notably differentiated from peers.
The Citi analyst concluded that although the long-term growth potential is evident, the current uncertainty surrounding Eylea's market position justifies a cautious stance, supporting the Neutral rating and the $895 price target.
InvestingPro Insights
Recent InvestingPro data and tips provide additional context to Citi's analysis of Regeneron Pharmaceuticals. Despite the recent stock underperformance noted in the article, InvestingPro data shows that Regeneron maintains a strong financial position with a market capitalization of $86.61 billion. The company's P/E ratio of 18.7 suggests a reasonable valuation relative to its earnings, especially considering its position as a prominent player in the biotechnology industry.
InvestingPro Tips highlight that Regeneron's management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's future prospects. This aligns with the article's mention of promising long-term outlook in inflammation, immunology, and oncology segments. Additionally, the tip indicating that Regeneron operates with a moderate level of debt supports the company's financial stability as it navigates near-term challenges in the Eylea market.
It's worth noting that while the stock has faced recent pressures, InvestingPro data shows a strong return over the last five years, suggesting resilience in the face of market fluctuations. For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Regeneron Pharmaceuticals, providing a deeper understanding of the company's financial health and market position.
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