2 Reasons Regeneron Stock Could Crush the Market for the Next 10 Years

Healthcare stocks have underperformed broader equities in recent years. But plenty of companies in the sector still look like good long-term bets.

Take Regeneron Pharmaceuticals (NASDAQ: REGN), a biotech leader. Although it's faced its share of headwinds of late, the drugmaker could outperform the market through the next decade. Here are two potential reasons why.

Image source: Getty Images.

1. Regeneron's main growth driver has legs

Regeneron's most important product right now is Dupixent, a medicine approved to treat eczema; Regeneron shares the rights to the drug with Sanofi. Dupixent is a leader in this large market and is getting approval for additional indications, including an important label expansion in chronic obstructive pulmonary disease (COPD) in 2024.

Dupixent is currently the main asset responsible for Regeneron's top-line growth. In the fourth quarter, the company's revenue increased by 3% year over year to $3.9 billion.

That doesn't seem impressive, but it's worth pointing out that Regeneron's other growth franchise isn't performing well. Sales of Eylea, a therapy for several eye-related diseases, are moving in the wrong direction due to competition (biosimilar and otherwise). Regeneron launched a higher-dose formulation of Eylea in 2023, which is helping, but combined U.S. sales of Eylea and Eylea HD in the fourth quarter still declined 28% year over year.

Regeneron's revenue is inching slightly higher under these conditions, mainly due to Dupixent. This therapy should drive sales growth through the early 2030s, when it will lose patent exclusivity.

2. Regeneron is making progress on diversification

Dupixent will still drive growth in the next five years or so, and Eylea HD should, eventually, capture enough of the original formulation's market share to contribute as well. Beyond these products, though, Regeneron is working hard to develop and launch new ones. It has already been somewhat successful. Last year, the company earned approval for a brand-new cancer drug called Lynozyfic.

Regeneron's pipeline should help it unearth new gems that will eventually allow it to move beyond Dupixent and Eylea. The company's candidates span many areas, including weight management, oncology, immunology, and rare diseases. For instance, Regeneron is developing a promising gene therapy for one form of genetic deafness (although this is a rather rare disorder).

No biotech has a 100% success rate when it comes to developing new medicines. But Regeneron Pharmaceuticals has a deep enough pipeline (including late-stage programs) and enough time before its most important patent cliff, for Dupixent, to replenish its lineup. And over the next few years, the company's portfolio of approved drugs will likely be deeper and more diversified, helping it drive strong financial results and above-average market returns through 2036.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Regeneron Pharmaceuticals. The Motley Fool has a disclosure policy.