Oppenheimer lowered the firm’s price target on Regeneron (REGN) to $1,000 from $1,150 and keeps an Outperform rating on the shares. With the shares off about 30% since the surprising news of an at-risk biosimilar launch, the firm wanted to quantify the potential risks to EYLEA’s franchise in the near term. Using other biosimilar launches as a guide, Oppenheimer believes the selloff is somewhat overdone-and has updated our model to assume about 30% cannibalization to EYLEA sales within five years. The firm’s relatively benign impact also accounts for a unique dynamic in play, namely prescribers seem more excited about biosimilar EYLEA as an alternative to compounded AVASTIN, not branded EYLEA-and given the opaque and often misaligned incentives of PBMs, higher-priced biosimilars will likely get priority over AVASTIN on formularies. For Regeneron, the firm thinks “the enemy of its enemy is its friend.”
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