Maintaining Our $620 Regeneron FVE; Eylea Growth to Moderate, but Oncology Pipeline Progressing

We're maintaining our $620 per share fair value estimate for Regeneron following a solid first quarter, with strong double-digit growth driven by the firm's core franchises, and we think shares look relatively fairly valued. Regeneron's top line grew 17% in the first quarter, or 25% excluding sales of the firm's COVID-19 antibody cocktail, which is likely to weigh on year-over-year comparisons for all of 2022 due to strong sales in 2021 and lack of demand this year (the product is not effective against newer, omicron-related variants). Focusing on the firm's core products, U.S. Eylea sales were up 13%, although we expect sales growth to moderate throughout the year, as Roche is in the process of launching two new competing therapies. Regeneron's high-dose Eylea data in the second half of 2022 would help the firm refresh its franchise and defend against competition, but ahead of this data, we're still assuming double-digit Eylea declines beginning in 2024 due to biosimilar competition. Revenue from the firm's collaboration with Sanofi grew 73%, largely due to increased profitability of the Dupixent franchise (which saw global sales rise 43% in the quarter). Dupixent has several years of strong growth ahead (patent expiration 2031), given the drug's solid safety and efficacy profile, the single-digit market penetration so far for the drug in key indications like atopic dermatitis and asthma, and multiple additional indications lined up for potential approval over the next two to three years (including data in the large COPD indication in 2023). In addition, oncology drug Libtayo is beginning to see uptake in lung cancer as a monotherapy, and the drug is poised to gain approval in this setting in combination with chemotherapy later this year. Even with potential upcoming biosimilar competition to Eylea, we think Regeneron's portfolio is growing nicely and supports a narrow moat.