June 2, 2023


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Why Regeneron Wasn’t a Healthy Stock Today

What happened

Regeneron Pharmaceuticals(NASDAQ: REGN) had a day to forget, at least as far as its stock was concerned. The company’s shares took a more than 4% hit after the company announced a pricey deal in the oncology space.

So what

Regeneron announced that it’s buying out its partner Sanofi‘s (NASDAQ: SNY) stake in Libtayo, the cancer drug on which they’ve collaborated.

Under the terms of the arrangement, Regeneron would hold the exclusive development, commercialization, and manufacturing rights to the medication worldwide. The pharmaceutical company will also take in 100% of global net sales. Conversely, it will also be solely responsible for expenses related to the drug.

Two people seated at a lab desk featuring a PC screen and microscope.

Image source: Getty Images.

This will cost Regeneron an upfront payment of $900 million, in addition to an 11% royalty on global net sales. Additionally, Sanofi will be eligible for a series of potential regulatory and sales milestone payments.

Libtayo has been approved by the U.S. Food and Drug Administration (FDA) as a monotherapy for patients afflicted by several different cancers, including non-small cell lung cancer (NSCLC). It’s also approved in over two dozen other jurisdictions. The drug is currently under review for Libtayo’s use in combination therapy as a first-line treatment for NSCLC in numerous markets, most notably the U.S. and the European Union.

Now what

Regeneron quoted its CEO Leonard Schleifer as saying that, “This strategic acquisition is a major step toward Regeneron’s goal of becoming a global oncology leader, centered on Libtayo as an important choice in settings where PD-1 inhibitors can be used as monotherapy and, excitingly, in potential new combinations with our differentiated and diverse pipeline of oncology assets.”

That may be true, but $900 million is a considerable amount of money — hence, the investor pullback. In 2021, Regeneron recorded $306 million in net sales for Libtayo.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.