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Regeneron Acquires 23andMe: Implications for Investors

Regeneron's potential acquisition of 23andMe for $256 million offers intriguing opportunities in genetic research. While this move could eventually lead to new treatments, factors like declining sales of Eylea and limited immediate revenue from 23andMe should raise caution for investors.

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AI Rating:   5

Earnings Potential: Regeneron's acquisition of 23andMe for $256 million indicates a strategic interest in genetic data that could bolster its drug development pipeline. However, while this acquisition could theoretically lead to new blockbusters, the immediate earnings impact may not be substantial, as it will take years to see any resultant profits from newly developed drugs.

Revenue Growth: The report highlights that 23andMe's most recent revenue reached $60.1 million, predominantly driven by its gene testing services. However, this is marginal compared to Regeneron's existing portfolio, which includes blockbuster drugs that generate over $1 billion in annual sales. A sale increase in Eylea HD of 54% year-over-year to an annualized $1.2 billion and a 30% surge in revenue from Dupixent indicate positive revenue growth for Regeneron, yet the acquisition has uncertain immediate benefits.

Market Competition: While Regeneron stands to gain significant insight from 23andMe’s genetic data, it also faces increased competition. The report mentions that Regeneron’s former top-selling treatment, Eylea, is losing market share to biosimilars, suggesting potential challenges that could impact revenues if the acquisition does not yield timely results. Additionally, with only a $20 million annual data value from GSK's collaboration, Regeneron’s decision to invest $256 million could lead to questions about the return on investment.

Investment Perspective: Investors should adopt a cautious stance towards Regeneron amidst this acquisition. The potential $256 million transaction, although seemingly low for the data acquired, may not substantially enhance Regeneron’s financial profile in the near term. Therefore, the existing dynamics raise concerns regarding short-term profitability and growth, emphasizing the need for long-term outlook when considering an investment in Regeneron.

Stocks:  REGN GSK