Shares of Regeneron Pharmaceuticals, Inc. REGN have dropped 35.6% in the past six months compared with the industry’s decline of 12.3%.

The stock has underperformed the sector and the S&P 500 Index during this timeframe. Eylea’s dismal performance in an increasingly competitive environment has dampened investors’ sentiment.

Regeneron Underperforms Industry, Sector and S&P 500

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Eylea’s Sales Decline Hampers REGN Ophthalmology Unit

Lead drug Eylea is an anti-vascular endothelial growth factor inhibitor approved for various ophthalmology indications. Eylea sales have boosted the company’s top line for many years. However, Eylea’s sales have been under pressure in the last couple of years due to competition from Roche’s RHHBY Vabysmo.

The uptake of Roche’s Vabysmo has been phenomenal. Roche has designed Vabysmo to block pathways involving Ang-2 and VEGF-A.

Biosimilar competition for Eylea is also worrisome. Since Eylea accounts for a majority of REGN’s sales, a rapid decline in sales has adversely impacted the company’s top line.

To counter the decline in Eylea sales, Regeneron developed a higher dose of the drug. While the initial uptake of Eylea HD was encouraging as Eylea patients transitioned to the higher dose, it now seems Eylea HD will take some time to offset the rapid erosion in Eylea sales.

Regeneron recently announced that the primary endpoint was achieved in a late-stage study evaluating Eylea HD to treat patients with macular edema following retinal vein occlusion.

Regeneron has a collaboration agreement with Bayer BAYRY for Eylea. Regeneron records the net product sales of Eylea and Eylea HD in the United States, and Bayer records its net product sales outside the country.

Regeneron records its share of profits in connection with Eylea’s sales outside the United States.

Dupixent Boosts REGN’s Top Line

REGN’s top line also comprises its share of profits/losses in connection with the global sales of Dupixent. Partner Sanofi SNY records global net product sales of Dupixent.

Solid sales of Dupixent (approved for use in certain patients with atopic dermatitis, asthma, chronic rhinosinusitis with nasal polyposis and eosinophilic esophagitis) have fueled the top line for Sanofi and Regeneron.

SNY and REGN are working to expand the drug’s label further. The FDA earlier approved Dupixent for chronic obstructive pulmonary disease (COPD). The approved indication is an add-on maintenance treatment for adults with inadequately controlled COPD and an eosinophilic phenotype.

The European Commission expanded Dupixent’s label to treat eosinophilic esophagitis in children as young as one year of age. Strong demand trends and consistent label expansion should fuel Dupixent sales.

REGN’s Focus on Oncology

The company also has other arrows in its quiver. It is looking to strengthen its oncology franchise, which currently comprises Libtayo (cemiplimab-rwlc), indicated in certain patients with advanced basal cell carcinoma, advanced cutaneous squamous cell carcinoma and advanced non-small cell lung cancer.

REGN’s oncology franchise got a boost with the European Commission's approval of odronextamab for treating adult patients with relapsed or refractory (R/R) follicular lymphoma (FL) or R/R diffuse large B-cell lymphoma (DLBCL) after two or more lines of systemic therapy. The drug has been approved under the brand name Ordspono.

However, the company’s efforts to get odronextamab approved in the United States suffered a setback. The regulatory body issued complete response letters (CRL) for its biologics license application (BLA) for odronextamab in March 2024.

The FDA issued a CRL for the BLA for linvoseltamab, a bispecific antibody targeting BCMA and CD3, in R/R multiple myeloma that has progressed after at least three prior therapies. The sole approvability issue identified is related to findings from a pre-approval inspection at a third-party fill/finish manufacturer. Resolution of this issue will be required for both FDA and EC regulatory approvals.

Earlier, a phase II study for fianlimab, an antibody to LAG-3, in combination with Libtayo for perioperative non-small cell lung cancer, and a phase II/III study for fianlimab, in combination with Libtayo for perioperative melanoma, were also initiated.

The successful development of these oncology drugs should be a great boost for REGN.

REGN: Valuation & Estimates

Going by the price/earnings ratio, REGN shares currently trade at 17.64 forward earnings, higher than its mean of 19.34 and the large-cap pharma industry’s 15.90.

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The Zacks Consensus Estimate for 2024 earnings per share has risen 39 cents to $45.25 over the past 60 days. The same for 2025 has increased 26 cents.

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Final Thoughts on Regeneron

Large biotech companies are considered safe havens for investors interested in this sector.

Regeneron is bearing the brunt of investors of late as Eylea’s sales witness a rapid decline. Earlier, the stock took a hit after an unfavorable ruling in its lawsuit against Amgen in the United States District Court for the Northern District of West Virginia related to a biosimilar of its Eylea.

The FDA also approved Amgen’s biosimilar of Eylea — Pavblu. This is the fifth biosimilar approved for Eylea.

While Regeneron has solid long-term growth prospects, the near-term pipeline setbacks and biosimilar challenges with Eylea weigh on the stock for now. We would advise investors to wait and watch for the time being. For investors already owning the stock, staying invested at current levels will be prudent.

REGN currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


 

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