Regeneron Pharma Faces Margin Pressure as EYLEA Declines, But Growth Pipelines Offer Hope

Regeneron Pharmaceuticals (NASDAQ: REGN) has entered a pivotal phase in its lifecycle, balancing declining sales of its blockbuster drug EYLEA against promising advancements in its pipeline. The company’s Q1 2025 earnings revealed a 4% year-over-year revenue decline to $3.029 billion, driven primarily by a 26% drop in U.S. sales of its age-related macular degeneration (AMD) treatment EYLEA, which now faces intensified competition from biosimilars and cheaper alternatives. While margins have tightened—non-GAAP gross margin on net product sales fell to 81% from 86% in Q1 2024—the story is far from over. New formulations, regulatory wins, and a robust pipeline suggest Regeneron’s long-term prospects remain intact, even as short-term headwinds persist.

The EYLEA Dilemma: Biosimilars and Affordability Challenges

EYLEA’s struggles are central to Regeneron’s current struggles. U.S. sales of the original 2-mg formulation plunged 39% to $736 million in Q1 2025, as patients transition to the newer EYLEA HD (8 mg) and face affordability barriers. Compounded bevacizumab (a generic alternative) and biosimilars like Amgen’s Pavblu have eroded market share, while the loss of copay assistance programs has further dampened demand.

The shift to EYLEA HD, which allows patients to reduce injections from monthly to quarterly in some cases, saw sales surge 54% to $307 million. However, the transition has been bumpy. A recent FDA Complete Response Letter (CRL) for EYLEA HD’s pre-filled syringe—due to unresolved manufacturing issues—threatens to delay broader adoption. Meanwhile, the FDA also rejected an application to extend dosing intervals beyond 16 weeks, citing insufficient data.

These headwinds have pressured gross margins. Regeneron now expects 2025 non-GAAP gross margins of 86%–87%, down from prior guidance of 87%–88%, as inventory write-offs and biosimilar litigation costs (resolved post-Q1, delaying Biocon’s U.S. launch until 2026) weigh on profitability.

Dupixent: The Silver Lining in Autoimmune Therapies

While EYLEA falters, Dupixent—Regeneron’s co-developed autoimmune therapy with Sanofi—continues to shine. Global sales rose 19% to $3.67 billion in Q1 2025, driven by approvals for chronic spontaneous urticaria (CSU) in the U.S. and COPD in Japan. The FDA’s priority review for bullous pemphigoid (a severe skin condition) adds to its growth potential, with a decision expected by June 2025.

Dupixent’s versatility across dermatology, respiratory, and now oncology (via Libtayo) positions it as Regeneron’s key cash engine. Its expanding indications and global reach—now in 90+ countries—suggest it can offset EYLEA’s decline, though its $3.67 billion in annual sales still trail EYLEA’s peak of $8.6 billion.

Pipeline Progress: Oncology and Gene Therapy Breakthroughs

Beyond Dupixent, Regeneron’s pipeline is its most compelling asset. In oncology:
- Lynozyfic (linvoseltamab): Gained EU approval for relapsed multiple myeloma, a niche but underserved market.
- Libtayo (cemiplimab): Submitted for adjuvant treatment of high-risk cutaneous squamous cell carcinoma (CSCC), the first immunotherapy to show improved disease-free survival in early-stage cancer.

Gene therapy also shows promise. The Phase 1/2 trial of DB-OTO for profound genetic hearing loss saw 11 of 12 children regain near-normal hearing—a breakthrough in rare disease treatments.

Strategic Moves to Mitigate Risks

Regeneron is addressing its challenges proactively:
1. Manufacturing Expansion: A $7 billion investment in U.S. facilities with Fujifilm Diosynth aims to secure supply chains and support long-term growth.
2. Shareholder Returns: A $1.05 billion share repurchase in Q1 and a new $0.88 quarterly dividend signal confidence in cash flow, despite margin pressures.
3. Regulatory Offensives: The company is fighting Amgen’s Pavblu patent case, which could determine EYLEA’s fate post-2026.

The Bottom Line: Is Regeneron Worth Buying?

Regeneron’s stock faces near-term headwinds, with EYLEA’s decline and margin pressures likely to keep investors cautious. However, its pipeline—particularly Dupixent’s global expansion and oncology approvals—suggests it can sustain growth.

Crucial catalysts in 2025 include:
- FDA Decisions: EYLEA HD’s RVO indication (August 2025) and Dupixent’s bullous pemphigoid (June 2025).
- Litigation Outcomes: The Amgen patent case, which could stabilize EYLEA’s market share.

Conclusion: A Mixed Picture with Long-Term Potential

Regeneron’s Q1 results underscore the challenges of sustaining growth in a crowded biopharma market. With EYLEA’s decline dragging margins, the stock’s short-term performance hinges on overcoming regulatory hurdles and litigation. However, its deep pipeline—driven by Dupixent, oncology, and gene therapy—positions it as a long-term winner.

Investors seeking stability may find the stock undervalued at current levels, especially with a 0.8% dividend yield and $3.9 billion remaining in buyback programs. While near-term volatility is likely, the data suggests Regeneron is making strategic bets to transition from an EYLEA-dependent company to a diversified leader in immunology and rare diseases. For those with a multi-year horizon, the stock offers a compelling risk/reward trade-off—if the FDA and courts deliver the verdicts Regeneron hopes for.

Final Note: As of Q1 2025, Regeneron’s market cap stands at $54.5 billion. Analysts project a 50% upside to a $1,053 price target (per prior consensus), assuming favorable outcomes in pipeline milestones and litigation.