The President accredits Regeneron’s antibody cocktail with curing him of COVID19 and helping him to feel better than he has ever felt. Could an FDA fast-track approval happen before the election? Will the treatment be free? The Cliff Notes are that the fast-track is pretty unlikely, and the first 70,000-300,000 doses will be free.
Regeneron filed for a fast-track approval under the Emergency Use Authorization from the FDA on Oct. 8, 2020. The FDA is under extreme pressure from the White House to approve a treatment before November 3, 2020. Whether or not this will happen is anyone’s guess. The trial results reported by Regeneron and the President were positive, but are not yet validated in a peer-review trial.
Typically, the FDA wants to see at least six-months of follow-up to ensure that there are no serious adverse events after the treatment. If that standard is applied, then the approval will not happen before the election. Regeneron began its first phase of trials on June 11, 2020. The 2/3 phases were launched on July 6, 2020.
How much money will the company get for potentially saving the President’s life? How can the drug be free, if the company wants to stay in business? According to Regeneron’s press release of Oct. 7, 2020, the government has committed to making the treatment available to Americans at no cost, if the REGN-COV2 investigational antibody combination for COVID-19 is granted an Emergency Use Authorization from the FDA. Regeneron received $450 million from the U.S. Department of Health and Human Services to manufacture 70,000 to 300,000 treatments of REGN-COV2, which will be owned by the government. So, this number of initial treatments will be free.
Many more doses will be needed, however. There have been 8.2 million COVID19 cases in the U.S., with 219,541 deaths (as of 10.19.2020). There are almost 50,000 new cases announced daily in the U.S. Sadly, even at the upper range of the deal – 300,000 – Regeneron’s therapies wouldn’t last a week. There are currently 50,000 doses of the drug available, with a goal of having 300,000 doses within a few months.
Will a Treatment Send Regeneron’s Stock Soaring?
Stocks are purchased by people, and people can be irrational. So, regardless of whether it is a good investment, an approval could positively impact Regeneron’s stock, even though the stock is already near an all-time high, with a price-earnings ratio of 23. A year ago, the stock was trading at half of today’s value.
The government deal will not dramatically increase Regeneron’s earnings – at least not in the near term. If the 3Q 2020 revenue is similar to 2Q 2020, then the year-over-year revenue will decline about 5%. That is including the government’s check.
If future treatments go through the normal pricing system, then this should help to boost Regeneron’s earnings and support a higher share price. However, if the government wants to keep the treatments free, then the price is fixed for Regeneron at lower than the normal marketplace.
As an example, when Gilead was approved for Sovaldi (a cure for Hepatits C) on December 6, 2013, the company’s share price went from $70/share to $114/share. In the months leading up to the approval, the share price doubled, just on the potential of the approval. However, Gilead was roundly censured for making the cost of the cure $84,000 or more. With the political heat of a pandemic, it is doubtful that Regeneron, or any other company, will attempt those kinds of profits.
Regeneron reports 3Q 2020 earnings on Nov. 5, 2020, two days after the election, before the markets open.
Smaller Companies Involved in the Race for a COVID Treatment and Vaccine
There are two other smaller companies with COVID partnerships with the NIH that are promising. Adaptive Biotechnology has a partnership with Amgen and Microsoft, among others. On August 4, 2020, the company announced the first T-cell monitoring tool that will be useful in developing a vaccine. Amgen is part of the NIH’s public-private partnership to advance a COVID treatment and cure.
Vir Biotechnology has a partnership with GlaxoSmithKline and is currently in a Phase 3 trial for a treatment for COVID called VIR-7831. Results on that study are expected to be available at the end of 2020. The Vir antibody treatment could be a competitor of Regeneron’s. Vir’s president and CEO is George Scangos, Ph.D. He was the former CEO of Biogen, a $44 billion company. Vir is part of the NIH’s public-private partnership to advance a COVID treatment and cure.
Finally, Inari Medical launched an IPO this year, and has gone on to see sales soar by 152%. The company is not a COVID contender. Rather they have an FDA-approved clot retriever product that helps patients suffering from venous diseases, without the use of thrombolytic drugs. The market is projected to be $3.6 billion annually. Inari’s trailing 12-month revenue is $86 million. So, the growth potential is noteworthy.
All three of these companies are still cash-negative. Inari and Adaptive are trading near their 52-week highs, while Vir Biotechnology is at $37.25, down from a high of $75.00 in August. All of these companies were trading at much lower prices in March 2020, during the stock market rout. Vir's price weakness has a lot to do with insider selling, which can be a red flag -- particularly when the company is promoting an effective treatment during a pandemic. The chief seller is Herbert Virgin, the Chief Scientist.
Large Companies Involved in the Race for a COVID Treatment and Vaccine
GlaxoSmithKline, Pfizer, Johnson and Johnson, Eli Lilly and more are also involved in the race for a COVID19 treatment and cure. As you might have heard, there was a patient with a serious adverse event (a disease that is not being disclosed due to patient confidentiality) that has paused the Johnson & Johnson Phase 3 clinical trials for a vaccine. Eli Lilly has also had a study paused.
The large biotechs will become distribution partners, if one of the smaller companies beats them to a treatment or vaccine. Like many massive companies, the large biotechs have slow or negative revenue growth. However, unlike a lot of other industries that have had to suspend or cut dividends this year, the companies mentioned directly above are still offering a dividend.
If you’re interested in viewing our Biotech Stock Report Card, please request for it on one of our social media platforms, or by emailing info@NataliePace.com. You can reach us at Twitter.com/NataliePace, Instagram.com/NatalieWynnePace and Facebook.com/TheABCsofMoney.
Full Disclosure: I own shares of some of the biotechnology companies mentioned in this blog.
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Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.