Regeneron storage may need more than Coronavirus

<p>[Correction: This article was updated on March 11, 2020, to correct information about the treatment Regeneron is working on.]

Regeneron (NASDAQ: REGN) stock is trading on news of a potential treatment for coronavirus. In February, the company’s stock rose when it was named one of several biopharmaceutical companies looking at how to deal with the outbreak. However, shares fell when investors realized that it could be months before the treatment was completed.

Source: madamF / Shutterstock.com

But the shares in Regeneron get a new wind on the news that it may be ready in August. That rise is pushing the stock past a resistance level. The shares in the company increased by almost 30% in 2020. In fact, at the time of writing, the share was trading at levels it had not seen in almost two and a half years.

The question for investors now is whether the stock will push higher to approach record highs reached in 2013. Or is the stock near a peak? That the prospects, such as the spread of the virus itself, are less clear than investors would like.

Tricky propositions

Working with a coronavirus treatment is a high-risk proposal with a high reward for a biopharmaceutical company. Thankfully, the federal government does not choose which private companies can develop one. To this end, Gilead Sciences (NASDAQ: GILD) is also testing a treatment.

The challenge is to get it to scale. And that means it’s a win-win situation.

And regardless of your personal anxiety level about the coronavirus, we have no reason to believe it will be anything other than a seasonal event. Of course, it can return. But when Regeneron’s treatment is available, we hope that investors’ focus will be focused elsewhere.

Regeneron changes partnership with Sanofi

Regeneron and Sanofi are currently collaborating on Kevzara (for the treatment of rheumatoid arthritis) and Praluent (for the treatment of high cholesterol). In December, the two companies jointly announced a royalty-based agreement that simplifies their cooperation.

The proposed restructuring will give Sanofi alone global rights to Kevzara. Sanofi also receives exclusive rights from the United States (ie foreign rights) to Praluent. For its part, Regeneron will have exclusive rights in the United States to Praluent. Each party must finance development and commercial costs within its respective territories.

While analysts expect these changes to increase efficiency and streamline operations, it has a downside for Regeneron investors. In its latest earnings report, the company announced that they would not release a full-year 2020 forecast until the end of the first quarter.

“We continue to work constructively with Sanofi to complete our modified Praluent and Kevzara antibody agreement, which we expect to be trusted by 2020,” said Robert E. Landry, Executive Vice President, Finance and Chief Financial Officer of Regeneron. “We will provide financial guidance for the full year 2020 by the end of the first quarter.”

Wait a quarter of an hour before making your decision

My colleague Josh Enomoto made the claim that the Regeneron share is a solid buy if for no other reason than coronavirus. This is because even if Regeneron does not scale its coronavirus, there are likely to be more viruses in the coming years.

However, analysts do not approve Regeneron shares. The consensus rating for the share is a purchase. But analysts give REGN a 12-month price target of $ 452.09, which is a decrease of almost 7% from current levels.

In times like these, investing in a stock can be like pressing the “like” button. Investors “vote with their money” and praise a stock to help alleviate uncertainty.

But just as a similar one on social media has no cash value, investors often leave a position as soon as they enter it. It is too early to say whether this is the case with the Regeneron share, but in the end investors want to see if a potential treatment will increase earnings. I would wait until the company issues guidance before I dive in.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. At the time of writing, he had no position in any of the above-mentioned securities.