Regeneron Pharmaceuticals Inc

We added to our position in Regeneron Pharmaceuticals, a biotech company in the Health Care sector. The stock ranks high on multiple cash flow and forecasted earnings measures — two of our most important measures of valuation. While the company pays a below-average dividend, Regeneron has been buying back stock, which we view positively. Price momentum over the past 12 months has been strong. In addition, several indicators of operating momentum also are attractive with improving operating margins and growth in sales. Overall, the stock ranks in the top 10% in our stock-ranking universe, which led to the second quarter purchase.

Regeneron was a detractor in the quarter after disappointing trial results for one of its pipeline drugs. When we first invested in the company last year, the keys to the case were continued strength at Dupixent, Eylea stabilization, pipeline success, and intelligent capital allocation. Dupixent has outgrown our expectations, while Eylea has stabilized after some initial hiccups. However, the company has now gone one out of three on key pipeline readouts, which has led to a weaker near-term outlook. The market is currently focused on this weaker performance and ignoring Regeneron's strong long-term record.

Regeneron reported a quarter with good financial results, supported by Dupixent performance, but slower-than-expected conversion from Eylea to Eylea HD was a concern for some investors. The failure of its phase III LAG3 melanoma trial was a blow to investor confidence. Regeneron’s current cash balance and free cash flow generation provide a valuation floor as we await progress across the rest of its pipeline.

Regeneron reported a solid quarter, demonstrating resilience in a challenging market for healthcare companies. The manager highlights that while other firms may have overpaid for assets, Regeneron has maintained its value. This performance, coupled with the company's strong fundamentals, positions it well for future growth. The engagement with management and the positive trajectory of the company further reinforce the belief in its long-term potential.

After a slow start to our holding period this year, Regeneron has found its footing and grown its value per share back to above where we started the year in our opinion. We still do not have to pay anything for multiple high quality pipeline candidates, and the company has become one of our larger share repurchasers with its net cash balance sheet.

Regeneron is a newer holding for us, and despite a disappointing quarter, we see significant value in the company. It has a net cash balance sheet and strong owner-partners, which sets it apart in an industry often characterized by poor capital allocation. The company has committed to avoiding large M&A and has initiated a share repurchase program. The recent stock price decline, driven by a focus on Eylea and a negative clinical trial outcome, presented an opportunity for us to increase our position, as we believe the market's reaction was overly harsh compared to the actual value impacts.

Regeneron is a newer holding for us, and despite a disappointing quarter, we see significant value. The company has a net cash balance sheet and strong owner-partners, which sets it apart in the healthcare sector. Unlike many peers, Regeneron has committed to avoiding large M&A and has initiated a share repurchase program. The recent market reaction to its focus on Eylea and a negative clinical trial outcome provided us with an opportunity to increase our position, as the stock price decline was disproportionate to the actual value impacts.