On Thursday, RBC Capital maintained its Sector Perform rating and $1,189.00 stock price target for Regeneron (NASDAQ:REGN) Pharmaceuticals shares, traded on NASDAQ:REGN, despite a recent legal development. The Department of Justice (DOJ) has filed a complaint against Regeneron, alleging the company fraudulently inflated Medicare reimbursement rates for its drug Eylea.
The complaint focuses on Regeneron's practice of reimbursing credit card transaction fees to distributors when physicians purchased Eylea using credit cards.
The DOJ highlighted that from 2012 to 2021, the largest of the five distributors received approximately $250 million in reimbursements. If Regeneron were to settle, the damages could be significant, potentially in the multi-billion-dollar range, considering treble damages across distributors and a $10,000 fine per claim. RBC Capital had discussions with Regeneron regarding the allegations.
Although the outcome is difficult to predict due to the lack of specific legal precedents and the Medicare Part B guidance not specifying about credit card fee reimbursements, RBC Capital believes there may be reasonable counter-arguments that Regeneron could present.
The analyst noted that it is unclear whether other manufacturers engage in similar practices and raised questions about the timing of the investigation several years after Eylea's launch. Additionally, the DOJ's complaint does not account for any Eylea sales post-2021, which could alleviate concerns about future revenues for the drug.
RBC Capital pointed out that Regeneron's stock price has been declining, making it increasingly attractive for investment (20.5x forward EPS, or 14.5x after Sanofi (NASDAQ:SNY) development payments are complete). They observed that the market has likely already priced in a worst-case scenario regarding the DOJ's complaint.
Despite legal uncertainties, which have historically affected other large biopharmaceutical companies, RBC Capital views the current situation as a buying opportunity due to Regeneron's strong fundamentals and its promising pipeline for cancer and obesity treatments.
InvestingPro Insights
In light of the recent legal challenges faced by Regeneron Pharmaceuticals, it is essential to consider the company's financial health and market performance to understand its investment potential fully. According to InvestingPro data, Regeneron boasts a market capitalization of $97.71 billion, with a P/E ratio standing at 24.65, reflecting investor expectations of future earnings.
Notably, the company's revenue has shown growth, with a 7.76% increase over the last twelve months as of Q4 2023. This suggests a solid financial base, which could support the company through any legal settlements that may arise.
InvestingPro Tips highlight that Regeneron has been actively buying back shares, signaling management's confidence in the company's value. Moreover, the stock is known for low price volatility, which may appeal to investors seeking stability in the biotechnology sector.
With a robust return over the last five years and analysts predicting profitability for the current year, these factors could mitigate concerns arising from the DOJ's complaint and support RBC Capital's view of the stock as a buying opportunity.
For investors looking to delve deeper into Regeneron's financials and market performance, InvestingPro offers additional insights. There are 9 more InvestingPro Tips available for Regeneron, which can be accessed through the platform. Interested readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing a more comprehensive investment analysis toolkit.
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