Regeneron (REGN) is a leading biotechnology company that invents life-transforming medicines for people with serious diseases. Founded and led for over 30 years by physician-scientists, its unique ability to repeatedly and consistently translate science into medicine has led to eight FDA-approved treatments and numerous product candidates in development, all of which were homegrown in its laboratories. Its medicines and pipeline are designed to help patients with eye diseases, allergic and inflammatory diseases, cancer, cardiovascular and metabolic diseases, pain, infectious diseases, and rare diseases.

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Leading Innovation

Drawing its name from “regenerating neurons with gene in the middle,” Regeneron was founded in 1988 by Leonard S. Schleifer, M.D., Ph.D., a practicing neurologist and associate professor at Cornell Medical School. He had become frustrated by the absence of therapies for patients with serious neurodegenerative diseases. Believing that harnessing the new field of biotechnology would lead to effective treatments, Dr. Schleifer recruited three Nobel Laureates to the Board and George Yancopoulas, M.D., Ph.D., a highly regarded young molecular immunologist at Columbia University, as the company’s Founding Scientist. Thirty years later, Dr. Schleifer’s original vision of building a science and technology company that delivers life-transforming medicines for serious diseases became reality.

Regeneron’s science-driven approach has resulted in eight FDA-approved drugs and more than 20 product candidates in clinical development, including the COVID-19 antibody-drug cocktail just authorized by the FDA for emergency use. In addition to drugs, Regeneron’s innovations include world-class manufacturing operations and one of the largest human sequencing efforts in the world. In addition, Regeneron’s VelociSuite® technology provides proprietary drug discovery and development tools that allow for rapid identification of multiple antibody candidates against a variety of diseases. Regeneron also developed an innovative collaborative approach with other science-minded companies to fund research and development and commercialize discoveries.

Driving innovation is management’s commitment to R&D. Believing that scientific innovation and talent are the company’s greatest differentiators, Regeneron routinely reinvests 30% of revenues in R&D, compared to the industry average of about 20%.

Sales of Regeneron’s lead drug, EYLEA, approved to treat age-related macular degeneration and diabetic edema, have grown at double-digit rates for seven years without a single price increase. In 2019, EYLEA generated net product sales in the U.S. of $4.6 billion. Global sales of Dupixent, a first-in-class treatment option for several Type 2 inflammatory diseases, jumped 151% to $2.3 billion in 2019 with numerous new indications for the drug on the horizon. In 2019, Regeneron’s PD-1 inhibitor Libtayo launched just a year earlier, became the standard of care for advanced cutaneous squamous cell carcinoma, generating global net product sales of $194 million. Regeneron’s COVID-19 antibody drug was authorized on Nov. 22 by the FDA to treat patients 12 years of age and older—including people over 65, who are not hospitalized but are at high risk of the disease increasing in severity.

Profitable Growth

Regeneron generated healthy growth during the past five years with revenues compounding at an 18% annual rate as net income and EPS grew at a high 35% annual pace. Regeneron’s profitable operations consistently deliver double-digit net profit margins and returns on shareholder equity exceeding 20%. For the third quarter, Regeneron reported a 32% jump in revenues to $2.3 billion with net earnings and EPS increasing 26% to $842 million and $7.39, respectively.

Healthy Balance Sheet

Regeneron maintains a healthy balance sheet with nearly $6 billion in cash and marketable securities and $2 billion in long-term debt recently issued at historically low-interest rates. Year-to-date, the company generated $934 million in free cash flow, down 31% from last year, due to the extension of payment terms to support physician offices during COVID plus increased expenditures for COVID treatments. In May, Sanofi divested most of its 23% stake in Regeneron, while retaining 400,000 shares as part of a long-term collaboration with the company. As part of the divestment, Regeneron repurchased $5 billion of stock directly from Sanofi at a cost of $509 per share. During the first nine months of the year, Regeneron repurchased an additional $373 million of its shares at a cost of $415.24 per share.

Long-term investors seeking a profitable prescription should consider Regeneron, a high-quality innovator with profitable growth, and a healthy balance sheet. Buy.