Regeneron Tops, Lifts Eylea View - Analyst Blog

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Regeneron Pharmaceuticals Inc. 's ( REGN ) second quarter 2012 earnings (excluding special items but including stock-based compensation) of 71 cents per share blew past the Zacks Consensus Estimate of 25 cents. The company suffered an adjusted loss of 69 cents per share in the year-ago quarter. Higher revenues boosted earnings in the second quarter of 2012.

Total revenue in the reported quarter soared 182.3% to $304.4 million, driven by strong sales of eye drug, Eylea. This was the second full quarter of the drug in the market. The drug, launched in the US in November 2011, is marketed for treating patients suffering from the neovascular form of age-related macular degeneration.

Revenues handsomely beat the Zacks Consensus Estimate of $259 million. Total revenue included collaboration revenue, technology licensing revenue, net product sales and contract research and other revenue.

The Quarter in Details

Net product sales jumped to $199.5 million in the reported quarter from $5 million a year-ago. Eylea sales came in at $194 million in the reported quarter, up 57% sequentially. Arcalyst, Regeneron's other marketed product for treating cryopyrin-associated periodic syndromes, accounted for the remaining product sales in the quarter

Collaboration revenues came in at $98.1 million, up 2.6%. This included $89 million in collaboration revenues from Regeneron's antibody collaboration with Sanofi ( SNY ) and $9.1 million under Regeneron's collaboration with the Healthcare unit of Bayer ( BAYRY ).

Revenues from technology licensing climbed 12.7% to $5.9 million. Revenues from contract research and others accounted for the balance in the reported quarter.

Both research and development (R&D) expenses (up 3%) and selling, general and administrative (SG&A) expenses (up 94%) - including stock-based compensation expenses- were on the upswing during the reported quarter.

The rise was primarily attributable to the higher R&D expenses incurred in connection with the efforts to develop the pipeline at Regeneron and the higher employee headcount in connection with the antibody collaboration with Sanofi. Higher costs related to the marketing of Eylea were primarily responsible for pushing the SG&A costs up.

Bright Outlook for Eylea

Encouraged by the strong performance of Eylea, since its US launch, the company increased its forecast for 2012 US Eylea sales for the second successive quarter. Management now expects the eye drug to record 2012 sales in the range of $700-$750 million as opposed to the previously forecasted range of $500-$550 million. Regeneron expects to be profitable in 2012

Remainder of 2012 Promises to be Exciting

The promising Eylea performance apart, Regeneron boasts a robust pipeline. It has three key action dates lined up in 2012. The US Food and Drug Administration (FDA) is expected to decide on whether to approve Zaltrap for treating previously treated patients suffering from metastatic colorectal cancer by August 4, 2012.

The other two action dates correspond to Regeneron's efforts to expand the label of both its marketed products - Arcalyst and Eylea. While Regeneron is looking to get Arcalyst approved for preventing gout flares in patients initiating uric acid-lowering therapy (action date: July 30), the company is looking to get Eylea approved for central retinal vein occlusion in the US (action date: September 23). Positive news from the FDA would boost the stock.

Our Recommendation

In view of the positives mentioned above, we upgraded Regeneron to Outperform from Neutral earlier in the month. Our long term recommendation is in line with the Zacks #1 Rank (Strong Buy) carried by the stock in the short run.

BAYER A G -ADR (BAYRY): Free Stock Analysis Report

REGENERON PHARM (REGN): Free Stock Analysis Report

SANOFI-AVENTIS (SNY): Free Stock Analysis Report

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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.

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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