Regeneron $REGN has three positive catalysts ahead (linkto yesterday's post). The astute value stock holder will want to check the risk factors on the stock. Near yearly highs, what's the upside? The risks could lead to some profit-taking....Dupixent is a good drug, Eylea is currently a cash cow and the balance sheet is strong. These are positives for REGN. However, before anyone gets too bullish on the shares they should consider two important issues, neither of which are mentioned in the article above. First, while they have some promising drugs, the lion's share of REGN's bottom line is still strongly correlated to Elyea sales in the United States. Eylea revenue that comes from the Bayer collaboration is not nearly as important as U.S. sales. Eylea, for all its therapeutic indications, is paid for almost exclusively by Medicare through Medicare Part B coverage. On August 7, 2018, CMS gave all Medicare Advantage (MA) plans the option to use step-therapy for Part B drugs (i.e. those administered in a doctor's office) for new patients starting in 2019. This means doctors must seek exemptions if they want to use any drug that is not the lowest-priced (provided efficacy is similar) for a given indication for all new Part B-covered patients. MA is expected to cover 50% of Medicare lives by the end of 2020, up from about a third in 2017. REGN will dispute this, but the fact is that compounded Avasitin (essentially, Lucentis; Roche) is not clinically inferior to Eylea for wAMD (the vast majority of patients), yet it sells for a fraction of the price. As of the last enrollment date for MA plans in late 2018, all the major MA administrators announced they were indeed going to employ Part B step-therapy in their Annual Notice of Changes for 2019. The typical patient on Eylea is elderly and I believe the population census for this drug turns over once every four years. MA sponsors are likely to tell doctors to start patients on Avastin as the lower-priced alternative and only allow docs to switch them to Eylea if Avastin isn't effective. This means the penetration of Eylea in the patient population over the next several years is likely to decline. Of course, physicians make a 6% mark-up on each Eylea injection and are therefore likely to have a bias towards the higher-priced drug. However, Medicare Plan B sponsors are strongly incented to push doctors towards the lower-priced alternative, since they will be allowed to keep the savings. There is another $REGN issue. 2018 "adjusted earnings" omits $229mm in R&D share-based non-cash compensation and $169mm of SG&A share-based non-cash comp. I can only speak for myself, but I think excluding share-based comp from "adjusted earnings" is fallacious. If we add back both kinds of share-based non-cash comp expense and tax-affect them, diluted EPS is much closer to $20.00 per share than $22.84 (i.e. REGN's "adjusted figure" as reported on 2/6/19). Not overly expensive on its face for a "quality" name at ~20-21 P/E, but these shares could prove VERY expensive if Eylea sales start to decline in 2019. I have not seen much discussion of either of these issues in sell-side research, so the risks they represent are very possibly not reflected in the share price. Notes via JettGone Related:$XBIT topped over $10 on excitement over its clinical results treating atopic dermatitis.$ABBV continues to work on a JAK inhibitor for treating AD.$TEVA sells generic ointments that are cortisone-based.$BHC sells drugs treating psoriasis.$PFE launched an ointment, non-steroidal, for treating AD.