Regeneron Pharmaceuticals Reports Marked Improvement in Q2

The last time Regeneron Pharmaceuticals (NASDAQ: REGN) announced its quarterly results, they showed that revenue had increased 13% compared with the prior-year period, while adjusted earnings fell 5%. The biotech stock sank after those results were announced and hasn't bounced back.

Regeneron's story improved when the company reported its second-quarter results on Tuesday before the market opened. Here's what you need to know.

Scientists in lab with arms crossed

Image source: Getty Images.

By the numbers

Regeneron announced that its revenue jumped 20% year over year to $1.93 billion. Analysts estimated that revenue for the second quarter would come in at $1.8 billion.

The company reported Q2 net income under generally accepted accounting principles (GAAP) of $193 million, or $1.68 per share. In the prior-year period, net income was $551 million, or $4.82 per share.

On a non-GAAP (adjusted) basis, net income in the second quarter totaled $690 million, or $6.02 per share. This reflected an increase of close to 10.5% over the adjusted net income of $624 million, or $5.45 per share, reported in the prior-year period. Wall Street analysts had forecast earnings of $5.41 per share in the quarter.

Behind the numbers

Regeneron's net product sales increased by 21% year over year to $1.2 billion. This growth was driven primarily by eye-disease drug Eylea and to a lesser extent by cancer drug Libtayo.

The biotech also posted higher collaboration revenue in the second quarter from its partnerships with Sanofi and Bayer. Revenue from its collaboration with Sanofi soared 47% year over year to $349.1 million, thanks largely to higher sales of Dupixent. Revenue from its collaboration with Bayer increased by 10% to $289 million. Also of note, for the first time, Regeneron's antibody collaboration with Sanofi achieved profitability.

Despite this solid revenue increase, the bottom line deteriorated on a GAAP basis. The company's significant increase in spending was the culprit. Regeneron's research and development expenses nearly doubled from the prior-year period to $1.05 billion. This increase was primarily due to a $400 million up-front payment to Alnylam Pharmaceuticals for the two companies' collaboration agreement.

Selling, general, and administrative expenses increased 14% year over year to $417 million. The company attributed this increase to higher head count and related costs, plus commercialization-related costs for Dupixent. Cost of goods sold jumped 86% to $67 million primarily due to the U.S. commercialization of Libtayo.

Regeneron also received a couple of important regulatory approvals in the second quarter. The FDA approved Eylea for treating diabetic retinopathy and approved Dupixent for treating chronic rhinosinusitis with nasal polyposis. It also received European approval for Dupixent for use in adults and adolescents 12 and older as an add-on maintenance treatment for severe asthma, and for Libtayo in treating cutaneous squamous cell carcinoma (CSCC).

Looking ahead

Regeneron now anticipates Sanofi collaboration revenue for full-year 2019 will be between $500 million and $530 million. The previous outlook was $500 million to $535 million. 

Key things to look forward to with Regeneron include its pipeline and regulatory approval progress. The FDA is scheduled to decide on approval of Eylea in a pre-filled syringe by Aug. 12. The company's lead bispecific cancer therapy, REGN1979, is moving into a potentially pivotal phase 2 study in treating follicular lymphoma. Investors will also want to watch the continued efforts to expand the markets for Eylea and Dupixent, particularly by gaining additional approved indications for the drugs.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alnylam Pharmaceuticals. The Motley Fool has a disclosure policy.

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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