) second quarter 2014 adjusted earnings (including stock-based
compensation expense) of $1.89 per share were well short of the
Zacks Consensus Estimate of $2.33. The company had earned $1.36 per
share in the year-ago quarter. Results were impacted by higher
Regeneron Pharmaceuticals Inc - Earnings
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Including one-time items, earnings increased 3.8% to 82 cents
per share. A higher tax rate affected results. Excluding stock
based compensation expenses the company earned $2.47 per share in
the second quarter of 2014, up 42.8%.
Total revenue in the reported quarter soared 45% year over year to
$666 million driven by strong 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. In Jul 2014, the FDA approved Eylea for the treatment of
diabetic macular edema (DME).
We note that Regeneron has co-developed Eylea with the HealthCare
unit of Bayer (
). Regeneron is solely responsible for the U.S. sales of the eye
drug and is entitled to the entire U.S. profits. Regeneron and
Bayer equally share the profits and losses from ex-U.S. Eylea
sales, except for Japan, where Regeneron receives a royalty on net
Revenues easily beat the Zacks Consensus Estimate of $642 million.
The stock gained in early trading thanks to strong Eylea sales in
the second quarter of 2014.
Total revenue included net product sales, collaboration revenue and
technology licensing revenue.
Net product sales jumped to $418 million in the quarter from $334
million a year ago. The majority of sales ($415 million, up 25.8%
year over year) came from Eylea in the U.S. Sales of Eylea in
ex-U.S. markets were $247 million.
Collaboration revenues came in at $240 million in the quarter
compared with $117 million a year ago. The substantial rise was due
to higher net profit from Eylea sales in the ex-U.S. markets and
higher reimbursement of costs pertaining to antibody development by
partner Sanofi (
Regeneron is developing 14 human monoclonal antibodies, utilizing
its VelocImmune technology. The company is developing six of the
antibodies in partnership with Sanofi. Collaboration revenues in
the quarter were also boosted by the receipt of sales milestones
worth $15 million from Bayer. Revenues from technology licensing
increased 9.4% to $7.8 million.
Both research and development (R&D) expenses and selling,
general and administrative (SG&A) expenses were on the upswing
during the reported quarter.
Regeneron continues to expect U.S. Eylea sales in the range of $1.7
billion to $1.8 billion in 2014. The company now expects adjusted
unreimbursed R&D expenses in the range of $470 million to $510
million (previous guidance: $425 million to $475 million). Adjusted
SG&A costs are now projected in the band of $310 million to
$350 million (old guidance: $330 million to $380 million).
Though U.S. sales of Eylea in the second quarter improved 15.6%
sequentially after a disappointing first quarter, we believe sales
of the eye drug will have to improve significantly in the remaining
quarters in order to meet the 2014 guidance. The FDA approval for
the DME indication will come in handy in this respect. Regeneron is
looking to get Eylea approved for the macular edema after branch
retinal vein occlusion indication (target date: Oct 23, 2014).
Favorable FDA decision will further boost the drug's sales
potential. We believe investor focus will remain on the company's
efforts to expand Eylea's label.
Regeneron carries a Zack Rank #3 (Hold). Some better-ranked stocks
in the health care sector are Actelion (
) and Celgene Corp. (
). While Actelion carries a Zacks Rank #1 (Strong Buy), Celgene
sports a Zacks Rank #2 (Buy).
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