Regeneron Pharmaceuticals Inc (REGN): Is This Momentum Stock’s Rally Over?

Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) makes the easiest comparison. Like Regeneron Pharmaceuticals Inc (NASDAQ:REGN), it owes its market cap of more than $20 billion to the success of one key product. Yet while Regeneron has three products that are FDA-approved (including one blockbuster), Alexion Pharmaceuticals has just one marketed orphan drug, Soliris. It treats paroxysmal nocturnal hemoglobinuria (PNH), a debilitating, ultra-rare and life-threatening blood disorder, but beyond its FDA-approved label, it’s also used to treat atypical hemolytic uremic syndrome (aHUS), and other rare genetic and blood-related diseases.

Alexion is expecting total sales from Soliris to reach $1.51 billion in 2013. The company does not have a large pipeline, so it’s basing all of its upside on the further development of this one product, which carries peak sales potential of $5 billion.

Alexion has one product with multiple uses, and is valued at 16.31 times that one product. Regeneron Pharmaceuticals Inc (NASDAQ:REGN) has an equally impressive blockbuster product, but trades at 15.88 times total sales. The only difference is that Regeneron has higher upside based on a diversified pipeline; Alexion does not. The two companies are valued very similarly, yet I believe that Regeneron is worth a far greater premium and will become the better investment long-term.

Conclusion

Biotechnology in particular trades with its own rules, based largely on speculation. Therefore, despite the fact that Regeneron is expensive by normal market standards, it is a hyper-growth company with an incredibly bright future that outshines its closest peers. After its recent pullback, now’s the time to buy Regeneron Pharmaceuticals Inc (NASDAQ:REGN), not sell it.

Brian Nichols is long REGN. The Motley Fool has no position in any of the stocks mentioned.

The article Is This Momentum Stock’s Rally Over? originally appeared on Fool.com.

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