Regeneron Downgraded At Morgan Stanley; Better Biotech Peer Plays Elsewhere

• Shares of Regeneron Pharmaceuticals, Inc. REGN have declined 11.33 percent in the last month, touching lows of $441.765 on September 28.
• Morgan Stanley’s Matthew Harrison has downgraded the rating on the company from Overweight to Equal-weight, with a price target of $593.
• Harrison believes that the lackluster launch feedback for PCSK9 would impact the stock’s near-term performance, and there were other stocks in the segment that were likely to outperform in the near term.

Analyst Matthew Harrison explained that while he continued to see “significant absolute upside in REGN based on long-term expectations for new product launch and pipeline developments,” some of the other stocks in the segment had greater potential for near-term upside.

For the near term, pricing concerns and the “tepid” launch feedback for Praulent were likely to limit upside for Regeneron. Early feedback suggest that Praulent or PCSK9 might underperform and was unlikely to be a driver of near-term earnings.

Harrison believes that the Street does not as yet fully appreciate the fact the Praulent would not offer any financial upside for the company in the near term and that it has “much lower economics than fully owned Eylea.”

The stock could even be pressured by the consensus expectations from Praulent, according to the Morgan Stanley report. On the other hand, the Street also does not fully appreciate the upside that Regeneron’s proprietary pipeline could drive.

“Key products such as REGN1500, REGN1908/1909 and REGN1979 represent $1B+ opportunities which are not modeled by consensus and could offer significant upside,” the report stated.

In addition, Harrison believes that Eylea could gain market share in DME and benefit from its leadership position in the wAMD market. “[W]e continue to see strong quarters based on solid Eylea results,” Harrison added.