Abbott Laboratories

ABT Details

Abbott Laboratories (NYSE: ABT) is engaged in designing, manufacturing, and marketing various medical devices, testing kits, and generic drugs. The company operates in 4 types of segments viz, 1) Nutritional Products, the global sale of adult and pediatric nutritional products, 2) Established Pharmaceutical Products, worldwide sale of a broad range of medicinal products, 3) Diagnostic Products, universal sale of diagnostic systems and testing kits for blood banks, hospitals, and commercial laboratories, 4) Medical Devices, worldwide sale of electrophysiology, heart failure, vascular, structural heart, cardiac rhythm management, and diabetes care products, etc. As of June 02, 2021, the company’s market capitalization stood at USD 189.94 billion.

A Culture of Innovative Endeavors: On May 06, 2021, the company announced fresh trials to enhance the treatment for patients suffering from both atrial fibrillation (AFib) and heart failure. The novel TAP-CHF (Treatment of Atrial Fibrillation in Preserved Cardiac Function Heart Failure) trial aims to discover better treatment for patients with the complex combination of the two heart conditions.

Robust Q1FY21 Results: The company reported a 35.33% rise in net revenue to USD 10.45 billion in Q1FY21 (ending March 31, 2021) compared to USD 7.72 billion in Q1FY20 (ending March 31, 2020). The Diagnostic Products segment contributed 38.38%, the Medical Devices segment contributed 31.75%, the Nutritional Products segment contributed 19.47%, and the Established Pharmaceutical segment contributed 10.23% of the total revenues during the quarter. In addition, the company reported a steep threefold increase in net income to USD 1.79 billion in Q1FY21 compared to that of USD 0.56 billion in Q1FY20.

Key Risks: The company operates worldwide; it is exposed to several government regulations. The procedure of acquiring any regulatory approvals to sell a drug or medical device is both costly and time-consuming. Any delays or failure in approvals of any product might result in a potential revenue loss for the company.

Outlook: On June 01, 2021, the company lowered its outlook for FY21 due to substantially lower recent and estimated COVID-19 diagnostic testing demand. For FY21, the company is projecting its diluted EPS (GAAP) from continuing operations to be in the range of USD 2.75 to USD 2.95 and the corresponding adjusted number at USD 4.30 to USD 4.50. ABT anticipates that testing demand will continue to deteriorate because of the significant reduction in cases in the U.S. and other major countries, and the accelerated rollout of Covid-19 vaccines.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ABT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ABT has declined by 10.26% in the past three months and is currently trading at a mid-point of the 52-weeks range of USD 86.16 to USD 128.54. The stock is currently trading above its 200 DMA levels. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 125.40. Considering the decline in the stock price in the past three months, robust balance sheet, operating at strong margins, and market dominance, we recommend a “Buy” rating on the stock at the closing price of USD 106.90, up by 1.05% as of June 02, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

Regeneron Pharmaceuticals, Inc.

REGN Details

Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) is a biotechnology company involved in the drug discovery, development, manufacturing, and commercialization of medicines for patients associated with eye diseases, cancer, cardiovascular and metabolic diseases, infectious diseases, and other rare diseases. The company markets several products, including EYLEA injection, Dupixent injection, Libtayo injection, Praluent injection, Kevzara solution for Subcutaneous injection, Evkeeza injection, Regen-COV injection, ARCALYST injection for Subcutaneous use, and ZALTRAP injection for Intravenous Infusion. The company operates in one segment, i.e., Product sales. REGN generates the majority of its revenue from its EYLEA product sales. As of June 02, 2021, the company’s market capitalization stood at USD 53.60 billion.

REGN Broad Product Portfolio (Source: Company Presentation, May 2021)

Potential use of Libtayo therapy for cancer cells: Regeneron and Sanofi jointly develop Libtayo under a global collaboration contract. On May 24, 2021, the Company and Sanofi announced that the European Medical Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) had provided positive opinions for Libtayo medicine to be used as monotherapy for two advanced cancer cells. The positive opinion for Libtayo is based on the results from Phase-III clinical trials.

Q1FY21 Results: The company reported a 38.31% increase in total revenues to USD 2,528.70 million in Q1FY21 (ending March 31, 2021) compared to USD 1,828.20 million in Q1FY20 (ending March 31, 2020), primarily due to an increase in product sales. EYLEA product sales contributed 78.11% of the total product sales in Q1FY21. Operating income increased by 58.93% to USD 1,112.70 million in Q1FY21 compared to USD 700.10 million in Q1FY20. The company reported a 78.54% surge in net income to USD 1,115.20 million in Q1FY21 than USD 624.60 million in Q1FY20. As of March 31, 2020, the company stood with cash and cash equivalents of USD 1,437.90 million with long-term debt of USD 1,978.90 million.

Key Risks: The company’s sales generated from the EYLEA product in the United States contributed 53% and 64% of the total revenues for the Q1FY21 and Q1FY20, respectively. Further, the company also relies substantially on its share of profits from the commercialization of Dupixent under its Antibody Collaboration with Sanofi. Overdependence on a couple of products could adversely affect the financial health of the company at some point in time. Moreover, Besse Medical, a subsidiary of AmerisourceBergen Corporation, contributed around 46% and 54% of the company’s total gross product revenue in Q1FY21, and Q1FY20, respectively. Partial or total loss of business from major customers might result in a considerable decline in revenues for the company.

Outlook: In FY21, the company is expecting its capital expenditure to be in the range of USD 585 million to USD 650 million, primarily for continued expansion of manufacturing facilities and expansion of research facilities.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

REGN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: REGN’s stock price has already declined by 17.17% in the past nine months and is currently trading at a lower end of the 52-week range of USD 441.00 to USD 664.64. The stock is currently trading around its 200 DMA levels. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 575.95. Considering the significant correction in the stock price in the past nine-months, strong fundamental growth, robust balance sheet, and product portfolio, we recommend a “Buy” rating on the stock at the closing price of USD 505.36, up by 0.42% as of June 02, 2021.

* The reference data in this report has been partly sourced from REFINITIV.