Roche, Regeneron FVEs Hold After New REGN-COV2 Data

We're maintaining our CHF 417/$57 fair value estimates for Roche RHHBY and $500 fair value estimate for Regeneron REGN following data from a trial of SARS-CoV-2 antibody cocktail REGN-COV2 in nonhospitalized patients. Overall, we think the preliminary descriptive analysis--which included data on the first 275 patients in the trial--reflects a strong profile and solid potential to benefit patients with high viral loads who have failed to form an immune response to the virus. Potential sales of REGN-COV2 would provider further support to Roche's established wide moat and Regeneron's narrow moat.

Based on the data, we've increased our assumed probability of approval for REGN-COV2 to 100% from 60%, but we're maintaining our assumption for $6 billion in peak sales in 2021 (split between Roche and Regeneron). We expect the Food and Drug Administration could grant emergency use authorization this fall. While Regeneron expects to have supply to treat 300,000 patients later this year as part of the $450 million U.S. government contract, it remains unclear how much the partners will be able to ramp supply in 2021 (initially 250,000 doses per month, according to Regeneron's call on Sept 29). We continue to see Regeneron shares as slightly overvalued, given significant advancement with vaccines and potential emergency use authorizations of multiple vaccines later this year.

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