Stock Details

Regeneron Pharmaceuticals Inc

Libtayo Reduces Risk of Death: Regeneron Pharmaceuticals Inc (NASDAQ: REGN) is a biotechnology company focused on improving the traditional drug development process through its proprietary VelociSuite® technologies. As on 25 September 2020, the market capitalization of the company stood at ~US$61.07 billion. In a recent update on a trial for investigational use of PD-1 inhibitor Libtayo® (cemiplimab) in first-line locally advanced or metastatic non-small cell lung cancer, the company informed that Libtayo reduced the risk of death by 32% as compared to chemotherapy. As per the recently released clinical data, Libtayo reduced the risk of death by 43% in patients whose cancer had confirmed PD-L1 expression of 50% or greater. Earlier, the company had received positive results from the pivotal Phase 2 trial for the PD-1 inhibitor Libtayo® (cemiplimab) in patients.

Q2FY20 Result Highlights: For Q2FY20, the company reported increased total revenue of US$1,952 million, as compared to US$1,578 million in the pcp, driven by increased sales from Sanofi, EYLEA and income from other sources. Net income from operations increased to US$897.3 million in 2Q FY20 from US$193.1 million in 2Q FY19, partially offset by marginally increased total operating expenses to US$1,295.6 million from US$1,262.2 million in the pcp. At the end of June 2020 quarter, the company had cash and cash equivalents of US$1,992.2 million with net debt of $1,500 million.

Outlook: With a robust balance sheet, improved competitive outlook, increasingly diversified commercial portfolio, and robust pipeline position, the company seems to be well placed for long-term growth.

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

P/BV Multiple Based Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last six months, the stock has provided a return of 27.7% and has corrected by 6.1% in the last three-months period. The stock of REGN is inclined towards its 52-weeks’ high level of US$664.64. On a technical front, the stock of REGN has a support level of ~US$518.98 and a resistance level of ~US$582.69. We have valued the stock using the price to book Value multiple based illustrative relative valuation method, offering a limited upside of mid-single-digit (in % terms). Considering, the company’s current trading levels and valuation, we give an “Expensive” rating on the stock at the closing price of $574.06, up by 2.98% on 25 September2020. However, investors, willing to punt on this stock, may take the position for limited upside (% terms).

Illumina, Inc.

Illumina to acquire GRAIL: Illumina, Inc. (NYSE: ILMN) is an American company that develops, manufactures, and sells integrated systems for the analysis of genetic variation and biological function. As on 25 September 2020, the market capitalization of the company stood at ~US$43.89 billion. On 21 September 2020, the Illumina, Inc. announced that it is going to acquire GRAIL for cash and stock consideration of $8 billion. The GRAIL is focused on multi-cancer early detection and utilizing capabilities of the power of Next-Generation Sequencing (NGS). The company has signed a definitive agreement to acquire GRAIL and it has already been approved by the Boards of Directors of Illumina and GRAIL. This acquisition increases ILMN’s accessible total addressable market and offers multiple future growth opportunities.

Quarterly Performance (For the Period ended 28 June 2020): The company reported a net income of $47 million in June 2020 quarter, significantly lower than if compared to the net income of $296 million in pcp. For the quarter, the total revenues stood at $633 million, down by 25% on pcp, due to the decline in the deliverables of consumables and instruments to customers, caused by COVID-19 restrictions. For the six months ended 28 June 2020, the company’s gross margin stood at 70.2%, up from 68.7% in pcp, driven by the increase in sequencing consumables and licensing agreements. For the June quarter, the company’s free cash flow stood at $202 million, compared to $96 million in pcp. At the end of the June quarter, the company had cash, cash equivalents, and short-term investments of $3.3 billion.

Quarterly Financial Highlights (Source: Company Reports)

Outlook: Due to the uncertainties surrounding the impacts of COVID-19 pandemic, the company has withdrawn its FY20 revenue and earnings. The acquisition of GRAIL is expected to accelerate the company’s revenue growth over time.

Valuation Methodology: P/BV Multiple Based Relative Valuation (illustrative)

P/BV Multiple Based Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last three months, the stock of ILMN has corrected by 16.71% and in the last one month it has corrected by 15.17%. The stock is currently trading lower than the average 52-week band, offering investors a decent opportunity for accumulation. On the technical analysis front, the stock is trading at a support level of ~$265.4 and a resistance level of ~$306. We have valued the stock using the price to book value multiple based illustrative valuation method and have arrived at a target price with low double digit-upside (in % terms). For the purpose, we have taken peers like Thermo Fisher Scientific Inc (NYSE: TMO), Agilent Technologies Inc (NYSE: A), Qiagen NV (NYSE: QGEN). Considering the company’s current trading levels, rise in gross margin, expected revenue growth from the acquisition of GRAIL, and current trading levels, we give a “Buy” recommendation on the stock at the closing price of $299.89, up by 4.74% on 25 September 2020.

BioMarin Pharmaceutical Inc

BioMarin Announces Vosoritide Phase 3 trial testing: BioMarin Pharmaceutical, Inc. (NYSE: BMRN) is an American biotechnology company headquartered in San Rafael, California that develops and commercializes innovative therapies for people with severe and life-threatening rare diseases and medical conditions. As on 25 September 2020, the market capitalization of the company stood at ~US$14.03 billion. The company is currently undertaking a BMN 307 Clinical Program to evaluate the safety, efficacy, and tolerability of a single intravenous administration of BMN 307, an AAV5-phenylalanine hydroxylase (PAH) gene therapy designed to normalize blood phenylalanine (Phe) concentration levels in patients with PKU. On 24 September 2020, the company announced it has dosed the first participant in the global PHEARLESS Phase 1/2 study with BMN 307.

Quarterly Performance (For the Quarter ended 30 June 2020): During the second quarter ended 30 June 2020, the company reported a 11% growth in total revenues to $430 million in Q2 FY20 from $387.8 million in Q2 FY19 driven by increased sales of the products during the lockdown. The non-GAAP income has been increased to $57.4 million from $17.1 million in pcp, mainly due to decreased R&D expense and higher gross profit, partially offset by higher SG&A expense.

Quarterly Financial Highlights (Source: Company Reports)

Outlook: - The group expects the intangible asset transfers to occur in the second half of 2020, which will generate non-cash income tax benefit of approx.—$ 700 million to $900 million. As a result, the full-year GAAP net income is expected to be in range of $720 million and $980 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (illustrative)

EV/Sales Multiple Based Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last three months, the stock of BMRN has corrected by 37.59% and it is currently inclined towards its 52-weeks low price, offering a decent opportunity for accumulation. On a technical analysis front, the stock of BMRN has a support level of ~$72.335 and a resistance level of ~$82.30. We have valued the stock using EV/Sales multiple based illustrative valuation method and have arrived at a target price with low double digit-upside (in % terms). For the purpose, we have taken peers Alnylam Pharmaceuticals Inc (NASDAQ: ALNY), Ascendis Pharma A/S (NASDAQ: ASND), Sangamo Therapeutics Inc (NASDAQ: SGMO). Considering the company’s decent performance in Q2FY20, decent outlook and current trading levels, we give a “Buy” recommendation on the stock at the closing price of $77.39, up by 1.06% on 25 September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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