Send me real-time posts from this site at my email
Motley Fool

5 Reasons to Buy Regeneron Stock and Never Sell

Regeneron Pharmaceuticals (NASDAQ: REGN) is arguably one of the best-performing biotech stocks of the past decade, with its shares up more than 2,050% since 2010, beating the S&P 500's 192% return in the same period hands down. An initial investment of $10,000 in 2010 would have turned into more than $215,000 as of Sept. 29.

While many biotech stocks quickly lose their revenue momentum after patents on their biologics expire, Regeneron is constantly reinvesting a significant portion of its cash flows back into its business for the sake of innovation. Today, let us look at why Regeneron is a glimpse of what the high-flying biotech sector has to offer, and why you should buy and hold its shares forever.

Image Source: Getty Images.

1. A sound business

In the first half of 2020, Regeneron's revenue was up 28% year over year to $3.8 billion and its earnings per share (EPS) by 30% annually to $13.03. The growth was primarily driven by its anti-allergy drug Dupixent, which generates nearly $4 billion in annualized revenue just three years after its approval in 2017.

A rising star in the company's portfolio is Libtayo, an immunotherapy that's now the No. 1 treatment for squamous-cell skin cancer in the U.S., with over 52% market share and $80 million in revenue in Q2 2020.

That's not all; Libtayo also met all of its primary endpoints in phase 3 for the treatment of basal cell carcinoma (BCC) and non-small-cell lung carcinoma (NSCLC). Between 21% and 29% of BCC patients who took the drug responded to treatment, while patients with NSCLC who took it had a 32.4% reduction in risk of death compared with patients who received standard-of-care treatments.

It is highly likely Libtayo will see its label expanded and become a blockbuster drug. The current market size for drugs in its category is more than $21 billion worldwide, with growth of 42% in just the past year.

2. Commitment to research and development

A key reason behind Regeneron's success is its commitment to developing new drugs and therapies. In the first half of 2020, the company spent a whopping 34.5% of its $3.8 billion in revenue on research and development expenses. Regeneron currently has nine drugs in phase 3 clinical trials and a target of five regulatory submissions per year from now to 2022.

3. Reasonable price for superb results

Right now, Regeneron trades for about 8 times price-to-sales and 22 times price-to-earnings, which is at a significant discount to the S&P 500's P/E of 29. That is also an excellent price to pay for a company with a net profit margin of 46%. Regeneron also posts a substantial profit of $0.28 for every dollar in shareholder's equity (ROE).

4. A long decade of growth

Regeneron's sales and bottom line have witnessed significant growth over the past decade. In the 12 months preceding Q2 2010 (TTM), Regeneron had only $434 million in revenue and generated negative $1.16 in EPS. By the end of TTM Q2 2020, the company increased its revenue by more than 20 times, to $8.7 billion, and flipped its EPS to a positive $25.83.

5. A healthy balance sheet

As of June 30, Regeneron has more than $5.7 billion in cash and investments on its balance sheet, which is more than enough to offset its long-term debt of $1.5 billion and $716 million in financial liabilities. The company's net cash decreased from Q1 to Q2 because it acquired Sanofi's (NASDAQ: SNY) entire $5 billion stake in the company. By buying back stock, Regeneron will increase its earnings per share for the future, making its P/E even cheaper.

10 stocks we like better than Regeneron Pharmaceuticals
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Regeneron Pharmaceuticals wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of September 24, 2020

Zhiyuan Sun has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue