Regeneron Shares Rising After Sanofi Collaboration Revealed: Good News For Shareholders?

Shares of Regeneron Pharmaceuticals Inc REGN were trading higher by more than 3 percent Tuesday after the company announced a new global collaboration with Sanofi SNY to "discover, develop and commercialize new antibody cancer treatments in the emerging field of immune-oncology."

In a report published Tuesday, Roth Capital analyst Joseph Pantginis commented that Regeneron's third major collaboration to develop antibodies is "another impressive deal" for Regeneron's discovery platform. As part of the agreement, Regeneron will receive an upfront payment of $640 million and can receive a one-time $375 million milestone payment if a PD-1 product or antibody in combination with a PD-1 product reaches $2 billion in revenue for any consecutive 12 month period.

Pantginis said that as part of prior agreements, Sanofi can purchase up to 30 percent of Regeneron (the company already owns 22.6 percent), which is capped until December 2020 unless negotiated ahead of time. As such, the analyst believes the latest collaboration will "renew speculation that Sanofi ultimately purchases Regeneron outright."

Nevertheless, shares were maintained with a Neutral rating and $485 price target. The analyst noted that the valuation is based on a probability-weighted clinical net present value model that is "appropriate in capturing the value of the clinical stage pipeline." Naturally, any positive or native news from any of the clinical trial readouts could cause shares to "significantly" deviate from the price target.

Northland: Regeneron ‘Years Behind The Competition'

Also commenting on Regeneron's collaboration, James Kuo of Northland Capital Markets argued in a note that the company will be joining a "crowded field," with Merck & Co., Inc. MRK's Keyruda and Bristol-Myers Squibb Co BMY's Opdivo already on the market with their PD-1 compounds.

On the other hand, Kuo noted that Regeneron's agreement covers a PD-1 mAB in Phase I (in clinic in 2016), and others (LAG4, GITR and PD-L1, bi-specific) in pre-clinical.

Bottom line, Kuo stated that Regeneron is "years behind the competition" that also includes a host of other companies in late stage development for the ligand, PD-L1.

Shares are Market Perform rated with an unchanged $500 price target.