Chardan Upgrades Regeneron Amid Relative Underperformance To Amgen Shares

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  • Regeneron Pharmaceuticals Inc REGN shares have been trending south in 2016, and are down 30 percent since January 4.
  • Chardan Capital’s Gbola Amusa upgraded the rating for the company from Sell to Neutral, while reducing the price target from $400 to $375.
  • Regeneron’s shares have recently underperformed other biotech stocks, Amusa stated, while adding that the company’s margins could come under pressure going ahead.

Regeneron’s partner Sanofi SA (ADR) SNY has publicly accepted to having infringed the PCSK9 patents of Amgen, Inc. AMGN.

Analyst Gbola Amusa believes that there is only a 10 percent chance of Sanofi Regeneron being allowed to stay in the market without paying any royalty. He expects the most likely outcome to be a settlement with the two partners having to pay significant royalties of about 11-20 percent. Such a settlement would mean negative estimate revisions for Regeneron.

The analyst upgraded the rating for Regeneron citing the stock’s underperformance over the past month. Regeneron’s shares had lost 21 percent, while Amgen’s shares declined only 5 percent. Moreover, this compares with Nasdaq Biotech down 14 percent and the DRG down 6 percent.

Amusa believes that 2016 is going to be a year of investment for Regeneron, which in turn will restrict margin expansion. He added that the catalysts next year “are likely to shift competitive dynamics in the anti-VEGF and combos ophthalmology markets” towards other players.

Regeneron is a key player in the high growth anti-VEGF and combos ophthalmology market. “We reiterate our caution on the ability for Eylea and combos to continue to drive long-term earnings momentum,” the Chardan Capital report noted.

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Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsChardan CapitalGbola Amusa
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