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Celgene vs. Regeneron: Which Stock is a Better Pick?

Zacks

It sure has been a tough year for biotech stocks but all that seems to have changed with the election results. Companies like Celgene Corporation CELG and Regeneron Pharmaceuticals, Inc. REGN, two key players in the industry, have seen a surge in their share prices post-election and look well-placed to enjoy a good run.

With both being Zacks Rank #2 (Buy) stocks, which one is a better choice for investors? Here is a look at a few factors that may help in making a choice.

Recent Earnings Performance

Celgene’s third quarter results were better-than-expected with the company beating both top- and bottom-line estimates. The company, which has a major presence in the cancer and immunology markets, benefited from the strong performance of its core products with growth being driven primarily by volume.

While blood cancer treatment, Revlimid, is the key contributor to the top-line and continues to deliver impressive growth, Celgene has been diversifying its portfolio with other drugs like Pomalyst and Otezla performing well too. Otezla (psoriasis, active psoriatic arthritis) has immense potential with sales being driven by demand, growing market share and an expanding global footprint. The product is comfortably on track to achieve blockbuster status in 2016.

Meanwhile, Regeneron topped earnings estimates though it missed on revenues. The company’s flagship product, eye treatment Eylea, continues to be the key financial driver. However, PCSK9 inhibitor, Praluent, is yet to show a significant ramp up in sales with scrips continuing to be impacted by reimbursement hurdles for physician offices and patients.

Guidance

Based on its performance, Celgene updated its 2016 outlook again. Continued momentum of core products should help the company achieve its raised outlook for 2016 as well as 2017.

Regeneron tightened its U.S. net product sales guidance range for Eylea to 23% – 25% growth over 2015 (old guidance: 20% – 25% growth). Eylea growth is expected to be driven by factors like demographics, an aging population and a higher number of patients with diabetic eye disease.

Pipeline Matters

For any pharma or biotech company, the pipeline is of utmost importance and plays an important role in investment decisions. So, it always makes sense to take a look at a company’s pipeline and upcoming catalysts.

Celgene has a rich and promising pipeline. In addition to working on expanding the labels of currently marketed products like Revlimid and Otezla, the company has phase III studies underway for ozanimod (ulcerative colitis and relapsing multiple sclerosis) and GED-0301 (Crohn’s disease) in the inflammation and immunology therapeutic area and for CC-486 (myelodysplastic syndromes and acute myeloid leukemia), enasidenib (acute myeloid leukemia) and luspatercept (myelodysplastic syndromes and beta-thalassemia) within hematology. What makes the pipeline more attractive is that some of these candidates have blockbuster potential.

Upcoming catalysts include a regulatory response in the U.S. (expected on Feb 24, 2017) and EU (first half of 2017) regarding the label expansion of Revlimid as maintenance treatment in newly diagnosed multiple myeloma patients after an autologous stem-cell transplant. Celgene also intends to seek FDA approval for enasidenib in relapsed and/or refractory acute myeloid leukemia with IDH2 mutation by year-end.

Regeneron has also been working on its pipeline and has sixteen product candidates in development including label expansion efforts for Eylea. But the company faced a few pipeline-related setbacks recently. Regeneron and its partner Sanofi SNY got a complete response letter from the FDA in late October for sarilumab (an IL-6R antibody for rheumatoid arthritis) due to manufacturing issues at a Sanofi plant.

Regeneron suffered another setback in October with a phase IIb study on fasinumab, an investigational nerve growth factor (NGF) antibody, in patients with chronic low back pain being placed on clinical hold.

A key catalyst for Regeneron would be the FDA approval of Dupixent, currently under priority review for atopic dermatitis with a response expected on Mar 29, 2017. Dupixent is being investigated for other indications as well including asthma, nasal polyps, and eosinophilic esophagitis. Another major catalyst would be positive cardiovascular outcomes data on Praluent as this would help boost sales significantly.

Regeneron is also looking to grow its ophthalmology segment and is evaluating Eylea in combination with other treatments.

Price and Valuation Perspective

A look at Celgene’s year-to-date (YTD) price performance shows that although the company has witnessed ups and downs over the course of the year, overall it has outperformed the Zacks categorized Medical/Biomedical Genetics industry. Towards the beginning of the year, Celgene’s shares had dropped after the company released preliminary fourth-quarter 2015 and full-year results and guidance for 2016 which fell short of expectations. However, better-than-expected second quarter results and a raised outlook helped the shares rally. Like other biotech stocks, Celgene saw a significant surge in its share price following the election results reflecting investor relief at a non-Clinton presidency.

CELGENE CORP Price

Meanwhile, a look at Regeneron’s chart shows that the company has underperformed the Zacks categorized Medical/Biomedical Genetics industry. Regeneron is one of the companies that had been under pressure due to the pre-election political rhetoric on rising drug prices. The company’s shares declined in February on disappointing fourth quarter results and guidance. Shares bounced back on first quarter results and a raised outlook for Eylea though the stock remained under pressure until the run up to the Presidential election. Shares shot up 13.8% immediately after election results were announced.


REGENERON PHARM Price

Based on current levels, Celgene is trading at a price earnings (P/E) multiple of 22.97 while Regeneron’s P/E multiple of 46.03 is much higher. Celgene looks cheaper from a PEG perspective as well given its PEG ratio of 1.07 compared to Regeneron’s PEG ratio of 2.12.

Bottom Line

Right now, Celgene looks like the better pick – the company has a lot going for it including a strong earnings track record, robust performance of core products, a diverse revenue stream, a rich pipeline with potential blockbuster candidates and an attractive valuation. As mentioned earlier, Celgene is a Zacks Rank #2 stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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