After a strong third quarter with a 7-percent revenue increase, Regeneron Pharmaceuticals Inc (NASDAQ: REGN) justifies a Buy rating from Argus analysts with a $450 target.

Analysts also increased Regeneron's 2016 EPS estimate from $11 to $11.58 after the company's GAAP EPS rose 25 percent.

Although shares fell 8 percent during the last quarter and about 30 percent year-to-date, the positive position was justified by Regeneron's product pipeline and potential for growth.

A Turnaround

Analyst Jacob Kilstein attributed Regeneron's poor performance in 2016 to failure to secure approval of a rheumatoid arthritis drug, sarilumab. According to the Argus report, the FDA's ruling was inspired by manufacturing problems unrelated to the drug's safety or efficacy, and Kilstein predicts potential market approval in 2017.

"We think that company fundamentals are sound and that the current valuation presents a buying opportunity," the Argus report read.

Kilstein forecasts a five-year earnings growth rate of 20 percent fostered by Regeneron's release of three "$1 billion blockbuster drugs" in the coming years. He also offered a 2017 EPS estimate of $14.57, which suggests a growth of 26 percent.

Product Pipeline

Kilstein predicted continued gains from Regeneron's main product, Eylea, a treatment for age-related macular degeneration. The company is also expected to profit from its recently released cholesterol reducer, Praluent, and the potential release of an atopic dermatitis drug, Dupixent. Dupixent could contribute $800 million in revenue.

Eylea and Praluent both surpassed third-quarter profit estimates, with Eylea sales increasing 16 percent in the U.S. market and beating the consensus estimate by $1 million. Kilstein predicts its continued growth partly inspired by the recent Phase 3 failure of a competing drug by Ophthotech Corp (NASDAQ: OPHT).

Praluent, which hit the market it July 2015, surpassed third-quarter expectations by $3 million. Although the drug lost 75 percent of users between initial prescription and pharmacy filling, analysts foresee more favorable futures due to physician wariness about the Amgen, Inc. (NASDAQ: AMGN) equivalent.

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