Regeneron Pharmaceuticals (
REGN
)
is an integrated biopharmaceutical company focusing on medicines
for the treatment of serious medical conditions. Following its
annual filing for 2011, the company stated its core business
value: "Our core business strategy is to maintain a strong
foundation in basic scientific research and discovery-enabling
technologies, to combine that foundation with our clinical
development and manufacturing capabilities, and to continue to
expand our commercialization capabilities in anticipation of
possible regulatory approval and launch of one or more of our
late-stage product candidates. Our long-term objective is to
build a successful, integrated, multi-product biopharmaceutical
company that provides patients and medical professionals with
innovative options for preventing and treating human diseases."
For 9 out of 10 years in the past, REGN has consistently making a
loss. Operating cash flow and free cash flow were negative most
of the time. Like other biopharmaceutical companies, the primary
expense has gone into research and development of new medicines.
The only thing in the income statement that investors should be
positive about is the growth in sales over years. The sales
revenue experienced 29% compounded annualized growth. One of the
company's key successes is the ability to introduce new drugs,
which are more advantageous over existing ones. The main driver
of the company growth was Eylea, wet age-related macular
degeneration drug.
|
USD millions
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
|
Revenue
|
22 |
57 |
174 |
66 |
63 |
125 |
238 |
379 |
459 |
446 |
|
Net Income
|
-124 |
-107 |
42 |
-95 |
-102 |
-106 |
-83 |
-68 |
-104 |
-222 |
|
OCF
|
-111 |
-6 |
-17 |
-30 |
23 |
27 |
-89 |
-72 |
96 |
-142 |
|
FCF
|
-145 |
-36 |
-23 |
-35 |
20 |
9 |
-124 |
-170 |
-3 |
-199 |
In the past 52 weeks, its share price has grown from $71.2 to
$152.45, marking the growth of 114%. Currently it is trading at
24.6x earnings.
Insider trades:
In August, insiders have actively sold out REGN share. The CFO,
Senior VP in R&D, Controller, Independent Director and VP in
Regulatory Development have combined sale value of more than
$11.5 million.
My take:
Even with its past success with stock performance and its
research and development in developing new medicines, I would not
touch this stock because of three main reasons:
- It is consistently making loss due to high R&D costs,
and creating no operating cash flow.
- High valuation, even compared with industry average (P/B of
REGN is 24.6x whereas industry average is 6.1x)
- It can be great if the R&D investments turned into
great products, which might bring long-term profits to the
company. However, there is no high certainty that it can be
successful with its next products.
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