Regeneron Beats on Q1 Earnings, Eylea 2015 View Upped - Analyst Blog

Regeneron PharmaceuticalsREGN reported first-quarter 2015 adjusted earnings (including stock-based compensation expense and tax adjustments) of $2.64 per share, up from $2.00 per share earned in the year-ago quarter. Earnings were also above the Zacks Consensus Estimate of $2.50.

Including one-time items, earnings increased 8% to 66 cents per share. Excluding stock-based compensation expenses, the company earned $2.88 per share in the first quarter of 2015, up 27%.

Total revenues in the reported quarter soared 39% year over year to $870 million driven by strong sales of eye drug, Eylea, as well as impressive collaboration revenues. We note that Regeneron has co-developed Eylea with the HealthCare unit of Bayer BAYRY . 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 sales.

Revenues beat the Zacks Consensus Estimate of $823 million. Total revenues included net product sales, collaboration revenues and technology licensing revenues.

Quarterly Highlights

Net product sales jumped to $544.6 million in the quarter from $362.4 million a year ago. The majority of sales came from Eylea in the U.S. ($551 million, up 50.7% year over year). Sales of Eylea in ex-U.S. markets were $292 million.

Collaboration revenues came in at $297 million in the quarter compared with $256 million a year ago. The increase was due to higher net profit from Eylea sales in ex-U.S. markets and reimbursement received from Sanofi SNY .

Regeneron is developing 15 human monoclonal antibodies, utilizing its VelocImmune technology. The company is developing five of the antibodies in partnership with Sanofi. Revenues from technology licensing increased from $7.5 million to $27.8 million.

Both research and development (R&D) and selling, general and administrative (SG&A) expenses were on the upswing during the reported quarter.

2015 Outlook

Regeneron increased its guidance for Eylea. In 2015, the company expects U.S. Eylea sales to grow 30-35% year on year, up from the prior forecast of 25-30%. The company continues to expect adjusted unreimbursed R&D expenses in the range of $525 million to $575 million. Adjusted SG&A costs are still projected in the band of $650 million to $725 million.

Our Take

In the reported quarter, U.S. sales of Eylea showed an improvement of approximately 6.4% sequentially. We believe sales of the eye drug could improve going forward benefiting from the inclusion of diabetic retinopathy, diabetic macular edema and macular edema after branch retinal vein occlusion indications in its label.

An upcoming pipeline catalyst for Regeneron includes a regulatory decision on the company's PCSK9 (proprotein convertase subtilisin/kexin type 9) antibody, Praluent, developed in collaboration with Sanofi. A decision is expected by Jul 24, 2015. The successful development of the candidates would boost the stock significantly.

Regeneron carries a Zack Rank #3 (Hold). Horizon Pharma HZNP is a better-ranked stock in the health care space carrying a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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