) first quarter 2014 adjusted (including stock-based compensation
expense) earnings of $1.58 per share breezed past the Zacks
Consensus Estimate of 99 cents. The company earned $1.32 per share
in the year-ago quarter. Higher revenues boosted earnings in the
first quarter of 2014.
Including one-time items, earnings declined 35.6% to 58 cents per
share. Higher tax rate affected results.
Total revenue in the reported quarter soared 42% year over year to
$626 million driven by year-over-year growth in the sales of eye
drug, Eylea as well as impressive collaboration revenues. The drug
was launched in the U.S. in Nov 2011 for treating patients
suffering from the neovascular form of age-related macular
degeneration. In Sep 2012, the label of the drug was successfully
expanded to treat patients suffering from macular edema following
central retinal vein occlusion.
We note that Regeneron has co-developed Eylea with the HealthCare
). Regeneron is solely responsible for the U.S. sales of the eye
drug. The company is entitled to the entire profits arising from
U.S. sales of Eylea. Regeneron and Bayer equally share the profits
and losses from ex-US Eylea sales, except for Japan, where
Regeneron receives a royalty on net sales.
Revenues easily beat the Zacks Consensus Estimate of $602 million.
Total revenue included net product sales, collaboration revenue and
technology licensing revenue.
The First Quarter in Detail
Net product sales jumped to $362 million in the first quarter of
2014 from $319 million a year ago. Bulk of the sales ($359 million,
up 14% year over year) came from Eylea in the U.S. Sales of Eylea
in the U.S., however, declined 11% sequentially primarily due to a
reduction in distributor inventory. Soft U.S. sales of Eylea
adversely impacted the stock in pre market trading. Sales of Eylea
in ex-U.S. markets were $218 million.
Sales of Regeneron's Arcalyst (cryopyrin-associated periodic
syndromes) came in at a mere $3 million in the quarter.
Collaboration revenues came in at $256 million in the quarter
compared to $114 million a year ago. The huge increase was due to a
rise in Regeneron's net profit from Eylea sales in ex-U.S. markets
and higher reimbursement of costs pertaining to antibody
development by partner
Regeneron is developing fifteen human monoclonal antibodies,
utilizing its VelocImmune technology. The company is developing
eight of the antibodies in partnership with Sanofi. Collaboration
revenues in the quarter were also boosted by the receipt of sales
milestones worth $30 million from Bayer. Revenues from technology
licensing increased 11.9% to $7.5 million.
Both research and development (R&D) expenses and selling,
general and administrative (SG&A) expenses were on the upswing
during the reported quarter.
Outlook for Eylea Maintained
Regeneron continues to expect Eylea sales in the range of $1.7-$1.8
billion in 2014.
We are disappointed by the soft U.S. sales of Eylea in the quarter.
However, we expect Eylea sales to regain momentum in the coming
quarters. Regeneron is looking to get Eylea approved for other
indications as well such as diabetic macular edema (U.S. target
date: Aug 18, 2014) and macular edema after branch retinal vein
occlusion (target date: Oct 23, 2014).
Successful label expansion of Eylea will further boost its sales
potential. We believe investor focus will remain on the company's
efforts to expand Eylea's label.
Regeneron, a biopharmaceutical company, carries a Zacks Rank #2
(Buy). A better-ranked biopharma stock is
Alexion Pharmaceuticals, Inc.
), carrying a Zacks Rank #1 (Strong Buy).
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