Regeneron (REGN) — one of our favorite biotech companies — reported an excellent third quarter, with revenue growing 51% on a year-over-year basis, notes Scott Chan, editor of Investing Daily's The Complete Investor.

Net income almost doubled to $1.6 billion, good for EPS of $15.37. Its top-two selling core drugs, Eylea and Duxipent, plus the Covid-19 cocktail, were the main forces driving the growth.

Even though contribution from the firm's Covid cocktail will fall (assuming no further new Covid wave), its core products have proven to be quite resilient, and its robust and diverse pipeline should soon produce new sources of revenue.

Eylea — a treatment for age-related macular degeneration (AMD) -- is Regeneron’s version of the Energizer Bunny; it just keeps going and going. Last year, global sales clocked in at $8.36 billion (split $4.95 billion and $3.41 billion, respectively, between Regeneron and its partner Bayer), a 7% improvement over 2019’s figures.

As for Dupixent, global net sales are up 54% through the first nine months of the year, attributable to the drug’s success in treating multiple diseases that don’t seem related on the surface but are caused by a certain type of inflammation as a result of the body’s immune response gone wrong. Such diseases are called type 2 inflammatory diseases.

Originally approved for eczema for adults in 2017, the label for Dupixent has quickly expanded. Dupixent has been subsequently approved for asthma and, in 2019, Dupixent  became the first approved drug for chronic rhinosinusitis with nasal polyposis.

Indeed, while diseases like eczema (skin) and asthma (lungs) may seem unrelated on the surface, they are caused by the same underlying cause of inflammation.

Dupixent is also being tested for eosinophilic esophagitis and, in separate studies, Regeneron is exploring Dupixent as treatment for prurigo nodularis (itchy skin rash and lumps) and chronic spontaneous urticaria (hives).

In recent months, Regeneron has reported positive Phase-3 data from all of these trials, a testament to the drug’s ability to combat multiple diseases that manifest in different ways due to its ability to address the common underlying cause.

Another late-stage study, Libtayo, is in Phase 3 trial in conjunction with chemotherapy as a first-line treatment for non-small cell lung cancer (NSCLC). This, too, is a label expansion study and an approval here would open up a larger NSCLC market.

In total, Regeneron’s pipeline has ten programs in Phase 3 and another thirteen in Phase 2, with a broad range of diseases targeted. We expect the pipeline will be able to at least produce enough incremental revenue to replace any potential loss from Eylea.

Although REGN is a high-priced stock, it’s not expensive. The stock only trades at a forward-twelve-month P/E of about 13 — assuming a 40%+ sales decline from Covid cocktail. By contrast, the same metric for the S&P 500 is at 21.

The company also boasts strong profitability metrics and a solid balance sheet. We regard Regeneron as a quality company with an undervalued stock. If its portfolio can continue to deliver expectation-beating results, we expect the valuation to increase, providing shareholders with an extra boost.

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