How does Regeneron’s share price play into the wider biotech theme?

Regeneron Pharmaceuticals’ [REGN] share price has been in rude health across the first three weeks of 2021, buoyed by soaring demand for its coronavirus antibody treatment.

This followed a wavering performance in 2020, which first saw Regeneron’s share price rise from $373.35 on 2 January last year to hit $658.21 on 20 July. However, and despite a boost in sentiment triggered by the Federal Drugs Agency granting its treatment Emergency Use Authorisation at the end of November, the stock failed to make any further large gains by the end of the year. Regeneron’s share price reversed in the second half of 2020 and ended the year at $483.11.

Regeneron’s share price opened 2021 at $486.85 on 4 January and climbed as high as $543.99 on 20 January, before closing the day at $542.27. The stock had been boosted by an announcement on 12 January that the US Department of Health and Human Services as well as the Department of Defense would buy an additional 1.25 million doses of its COVID-19 antibody cocktail, at a value of up to $2.6bn. This brings the total US supply of the treatment, which was used to help former US president Donald Trump recover from the virus, to over 1.5 million doses.

Building on biotech’s momentum

Regeneron was just one of several biotech stocks to enjoy a strong 2020, as investors speculated on which companies would come up with the vaccine or treatment to free the world of the coronavirus.

This growth can best be seen in the performance of thematic ETFs focused on biotech, such as the iShares Nasdaq Biotechnology ETF [IBB], which has risen 75% from a low of $94.16 on 16 March 2020 to $164.69 by 22 January this year.

The fund’s top holdings include Regeneron, with a 4.2% weighting, as well as Gilead Sciences [GILD], Moderna [MRNA] and AstraZeneca [AZN]. All these companies have developed COVID-19 vaccines and treatments.  

Like Regeneron’s share price, the iShares Nasdaq Biotechnology ETF performed well in the spring before falling from $145.67 on 20 July to $130.38 on 2 November. However, the second wave of coronavirus and successful trial results have seen biotech stocks regaining composure.

Another top performer was the iShares Genomics Immunology and Healthcare ETF [IDNA], which saw its share price accelerate from $22.51 on 16 March last year to $52.20 on 20 January 2021. Top holdings include Regeneron and CRISPR Therapeutics [CRSP].

Biotech’s vital role in modern society

“There is no doubt that the healthcare and biotech sectors have proven their vital role in today's modern society,” Casey Murphy wrote in Investopedia. He expects investors to allocate some extra funds to biotech as they rebalance their portfolios.

Research from Fior Markets forecasts the global biotechnology market to grow from $447bn in 2019 to $833bn by 2027, driven by innovative technologies and treatments.

Meanwhile, analysts appear to be bullish on Regeneron’s share price. According to Market Screener, 27 analysts have a consensus outperform rating on the stock and an average target price of $654.96.

Buoyed by the government’s purchase, Aydin Huseynov, an analyst at The Benchmark Company, raised his target price to $590 at the start of the year. “Government dollars are always welcome. This new agreement effectively pushes the price of the cocktail to $2,100 per dose which seems to be higher than the price of other antibodies purchased by the government,” he said, as reported by The Motley Fool.

Cory Renauer, writing in The Motley Fool, believes Regeneron’s share price could hit $590: “[It] might not happen overnight, but it isn't going to be a problem”. He sees rising demand not just for Regeneron’s COVID-19 cocktail but its eczema treatment Dupixent, which grew sales by 69% in the third quarter, and lung cancer treatment Libtayo.