Regeneron Pharmaceuticals (REGN 1.61%) is a top pharmaceutical company with many promising assets in its portfolio. Its diverse business areas have enabled the company to grow over the years. Over the last decade, the stock has risen more than 185%, outperforming S&P 500155% profit over the same distance. With more growth to come, can this be an investment that will make you a millionaire in the future?
Where the company stands today
Regeneron’s business focuses on its eye drug Eylea, which treats wet age-related macular degeneration. The company recently received approval for a higher-dose (8 mg) version of the drug, strengthening its growth prospects. Otherwise, the outlook would have been worrying, with cheaper biosimilars coming onto the market next year to compete alongside the standard dose (2 mg).
But Regeneron’s business goes beyond Eylea’s. Otherwise, the company’s results wouldn’t be as impressive as they are. In its most recent quarter ended Sept. 30, Regeneron reported revenue of $3.4 billion, up 15% year over year. Collaboration revenue has been a key driver for the company recently, with agreements reached with Sanofi and Bavarian enabled Regeneron to grow despite weak product sales in the quarter, which fell 1% year-over-year. Sales of the standard dose Eylea fell 11%, falling to $1.4 billion.
What’s encouraging about the company is that Regeneron also generates strong free cash flow (FCF), which can give it the resources it needs for future acquisitions or investments in its pipeline. The company’s FCF for the year to date was just over $3 billion, up from $2.9 billion a year ago. Regeneron doesn’t have to worry about a dividend and can use that money to further expand its prospects. And there is a lot of potential in the company.
Regeneron has plenty of room to grow
One of the reasons investors might be optimistic about Regeneron’s long-term prospects is that the company has a significant pipeline, including more than 35 ongoing clinical trials.
The company expects to file several regulatory filings in the coming years, including several to expand the label for Dupixent, an eczema drug the company has developed Sanofi. Dupixent is an important asset for the two companies, sharing in the company’s profits. Analysts predict that if Dupixent also receives approval to treat chronic obstructive pulmonary disease, it could achieve peak annual sales of $20 billion or more.
Regeneron is still looking for even more growth. The company recently acquired Decibel Therapeutics, which makes genetic medicines, which can further expand its already diverse business. In October we said it would work Intellia Therapeuticsan existing partner, is expanding its research efforts to develop CRISPR-based gene editing therapies for neurological and muscle diseases.
Given its already extensive diversification and the fact that Regeneron is exploring some potentially high-growth opportunities in gene editing therapies, there are many reasons to believe that this could be a much more valuable business in the future.
Can the stock have what it takes to reach $1 million?
Regeneron’s growth prospects are encouraging. In addition, there are numerous cooperation agreements with other pharmaceutical companies, which may lead to even more opportunities in the future. The downside for growth investors is that Regeneron is already worth $90 billion today. At that size, it won’t have as much runway as a smaller, fast-growing company.
While Regeneron stock can be part of a larger strategy that can help you grow your portfolio to more than $1 million, I’m not sure that alone can get you there. Assuming you invest $20,000 in the stock and don’t make a major investment, then that stock would have to have a 50-bagger, meaning its valuation would have to rise to nearly $4.5 trillion for that investment size to $1 million become worth. It is possible, but not likely, over a period of more than 30 years.
Regeneron is a solid company with good growth prospects; Maybe they just aren’t The Good. Overall, this is a healthcare stock to buy and hold for the long term, but given its already high valuation, investors shouldn’t hope that this stock alone will be enough to get to $1 million. However, when combined with other quality investments, Regeneron stock can be useful in helping you reach this milestone.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intellia Therapeutics. The Motley Fool has a disclosure policy.