Turning $1,000 into $2,400 in five years is no easy feat -- it requires a compound annual growth rate (CAGR) of 19.1%. However, both Regeneron (REGN -0.60%) and Moderna (MRNA -0.74%) have been able to pull that off (and then some) in the past half decade. Naturally, that doesn't automatically make these biotech stocks worth buying. Past performance isn't a guarantee of future success.
Can Regeneron and Moderna deliver similar returns in the next five years? Let's dig in and find out.
1. Regeneron
Regeneron has delivered a CAGR of 19.2% over the past five years, good enough to turn an initial investment of $1,000 into just a little more than $2,400. The biotech giant accomplished this feat thanks to two key growth drivers: eczema treatment Dupixent, and Eylea, which treats wet age-related macular degeneration. Regeneron shares the rights of the former with Sanofi, while it comarkets the latter with Bayer.
Regeneron did run into some issues with Eylea. A competing therapy named Vabysmo, marketed by Roche, has been eating its lunch, and it is also nearing a patent cliff. Thankfully, Regeneron earned approval for a high-dose formulation of Eylea that helps both issues. The high-dose formulation will attract more patients since it requires fewer annual doses, and it won't run out of patent exclusivity soon.
Meanwhile, Dupixent is still performing exceptionally well. In the third quarter, Regeneron's revenue increased by 15% year over year to $3.36 billion. Dupixent worldwide sales of $3.1 billion soared by 33% year over year. Further, the medicine could earn major label expansions, including in treating COPD. This should meaningfully improve Dupixent's sales.
What's more, Regeneron boasts many other pipeline candidates. The company has about a dozen late-stage programs and is targeting promising areas. Regeneron has also partnered with Intellia Therapeutics to develop a gene-editing therapy. The biotech is casting a wide net. While it won't have a 100% success rate -- no drugmaker does -- Regeneron should earn several important approvals in the next five years that will help bolster its business.
But can the company again deliver a CAGR of 19.22% over this period? My view is that this seems unlikely, especially given Eylea's challenges. While the high-dose formulation will help things, Vabysmo, approved in early 2022, isn't going anywhere. Considering Eylea's importance to Regeneron's results in the past five years, it's doubtful whether the company can record similarly impressive returns moving forward.
But a CAGR of 19.22% is an incredibly high bar. Even if Regeneron doesn't match this performance, its shares are still worth buying.
2. Moderna
Moderna had a successful IPO in December 2018; since then, the company has delivered superior returns, with an impressive CAGR of 48.9% or an ending amount of just over $7,300.
However, it hasn't been a smooth upward movement for Moderna's stock. The shares soared in the first couple of years of the pandemic thanks to its successful efforts to develop and market a vaccine for COVID-19. But now that the outbreak has largely subsided, sales are falling, and profitability is gone.
Moderna's revenue of $1.8 billion in the third quarter was down substantially from the $3.4 billion reported in the third quarter of 2022. The biotech's net earnings per share of $2.53 in last year's September quarter turned into a net loss per share of $9.53 this time around.
Fortunately, there is hope for Moderna. The company should earn approval for brand-new products. One of them is a vaccine for the respiratory syncytial virus, mRNA-1345, which Moderna could launch next year. The company is also developing a cytomegalovirus vaccine called mRNA-1647 that is currently undergoing a phase 3 study.
Research firm Evaluate Pharma thinks mRNA-1647 is one of the industry's top 10 most valuable R&D projects, with an estimated 2028 revenue of $1.5 billion. Moderna also kicked off a phase 3 study for its promising cancer vaccine, mRNA-4157, this year. It boasts many more programs in phase 2 studies. The biotech expects to return to top-line growth by 2025.
However, there is almost no chance Moderna will turn in a CAGR of 48.94% in the next half decade. The company's pandemic-related work was a major reason it was able to achieve that, and unless something similarly unusual happens, returns of this kind are out the window for a company of this size. Still, for patient investors, Moderna can still deliver good performances from here on out, given its highly innovative capabilities. This biotech stock is still worth investing in.
