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.
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.
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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.