Bernstein says to 'take a breather' on Regeneron as competition heats up

Published Wed, Dec 15 20218:16 AM EST

Bernstein said it is "time to take a breather" on shares of Regeneron as the pharmaceutical company's major drugs face increasing competition. "Regeneron is on the tail end of a ... period where everything has worked," Bernstein's Aaron Gal said in a note. "However, beyond that, it feels like the number of negative catalysts is overwhelming – Eylea competition, Dupixent competition – all seem to be circulating the name." Bernstein downgraded the stock to a market-perform rating from outperform. The firm also maintained a price target of $660 on Regeneron, 1.6% lower than the stock's Wednesday close. Eylea, Regeneron's flagship drug that treats a condition called wet age-related macular degeneration, is facing new competition. That could have big implications for Regeneron's sales, as Eylea drives about 50% of total revenue and roughly 80% of operating profit, according to Bernstein. "We can't ignore the Eylea risk," Gal said, adding that it is "hard to see how Regeneron will avoid the decline." Dupixent, a Regeneron drug used to treat eczema, also has competition coming down the pipeline. "There will likely be competition to Dupixent, and they will enter the market at roughly the same time Eylea biosimilars are due to enter (2024-2025). Eventually folks will begin to factor those in, potentiating the negative argument," Gal said. Plus, Regeneron's REGEN-CoV Covid antibody cocktail will likely lose steam as Pfizer and Merck's antiviral pills come into use, Bernstein said. "REGEN-CoV will continue to beat expectations near-term, but the tail won't last forever. ...It seems clear that with orals widely available, the acute use of the antibody cocktail will drop," Gal said. Despite moving Regeneron to the sidelines, Bernstein said it is positive on the name overall. "We love Regeneron. It is one of the only true innovators out there, with management interests well-aligned with investors and a can-do attitude. However, it feels like the risk-reward is fair," Gal said. Shares of Regeneron have outperformed the market in 2021, up 38.9% compared with the S & P 500's 23% gain. —CNBC's Michael Bloom contributed reporting.

A view of the Regeneron Pharmaceuticals headquarters in Tarrytown, New York.

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Bernstein said it is "time to take a breather" on shares of Regeneron as the pharmaceutical company's major drugs face increasing competition.