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Regeneron (REGN) Q4 Earnings & Revenues Top, Eylea Sales Grow


Regeneron Pharmaceuticals, Inc. REGN reported fourth-quarter of 2017 results wherein both earnings and sales beat expectations on the back of strong performance of eye-care drug Eylea.

The company’s shares moved up in the pre-market trading and we expect shares to gain further momentum.

Regeneron’s stock has lost 28.7% in the last six months compared with the industry’s 3.5% decline.

The company reported earnings of $5.23 per share in the fourth-quarter beating the Zacks Consensus Estimate of $4.68 and up from $3.04 recorded in the year-ago quarter.

Total revenues in the fourth quarter increased 29% year over year to $1.6 billion driven by strong sales of Eylea. Revenues surpassed the Zacks Consensus Estimate of $1.5 billion.

Regeneron has co-developed Eylea with the HealthCare unit of Bayer AG BAYRY. The company is solely responsible for the sales of the eye drug and is entitled to the profits in the United States. However, it shares profits and losses equally with Bayer from ex-U.S. Eylea sales, except in Japan, where the company receives a royalty on net sales.

Quarterly Highlights

Net product sales increased to $978.7 million in the quarter, up 13.5% year over year. The majority of sales came from Eylea in the United States ($975 million, up 13.6%).

Sales also include Sanofi SNY and Bayer collaboration revenues of $497 million, compared with $313 million in the year-ago quarter. Collaboration revenues from Sanofi were $199.5 million in the quarter, compared with $131.2 million a year ago. Praluent recorded global net sales of $63 million in the quarter, up from $41 in the year-ago quarter. We note Praluent has been developed in collaboration with Sanofi. Product sales for Praluent, Dupixent, and Kevzara are recorded by Sanofi, while Regeneron shares profits or losses from the commercialization of the drug.

Dupixent sales came in at $139 million. The drug was approved in 2017 for the treatment of adults with moderate-to-severe atopic dermatitis. Kevzara recorded sales of $9 million.

R&D expenses increased 10.3% while selling, general and administrative (SG&A) expenses increased 25.7% during the quarter. The increase in R&D expenses were primarily due to an increase in cemiplimab and fasinumab clinical trial costs and a $25 million up-front payment made in connection with the Decibel Therapeutics agreement. SG&A expenses increased due to the launches of Dupixent and Kevzara, an increase in commercialization-related expenses associated with Eylea.

2017 Results

Total revenues of $5.9 billion were up 21% from 2016 and surpassed the Zacks Consensus Estimate of $5.78 billion. Earnings per share of $16.32 were up from $11.32 reported in 2016 and topped the Zacks Consensus Estimate of $15.82

2018 Outlook

Collaboration revenues from Sanofi are projected around $450-$500 million. The company now expects adjusted unreimbursed R&D expenses in the range of $1.2-$1.33 billion.

The FDA has accepted for review the company's supplemental Biologics License Application (sBLA) for the label expansion of Eylea Injection. The company is seeking approval a for a 12-week dosing interval of Eylea Injection in patients with wet age-related macular degeneration (wet AMD) based on physician's assessment. The action date set by the FDA is Aug 11, 2018.

The company received a significant boost when the FDA approved Dupixent (dupilumab) injection for the treatment of adults with moderate-to-severe atopic dermatitis and is now looking to expand Dupixent’s label. phase III study in pediatric patients (from six to 11 years of age) with severe atopic dermatitis was initiated in the fourth quarter of 2017. Additionally, a phase II/III study in younger pediatric patients (from six months to five years of age) with severe atopic dermatitis was initiated in the first quarter of 2018. Regeneron also submitted a sBLA to the FDA for the use of Dupixent in the treatment of asthma in patients aged 12 and over in the fourth quarter of 2017.

A phase III study evaluating Praluent in homozygous familial hypercholesterolemia was initiated in fourth-quarter 2017. The sBLA for use of Praluent with apheresis was filed with the FDA, which has set a target action date of August 24, 2018. In October 2017, the U.S. Court of Appeals for the Federal Circuit ordered a new trial on the issues of written description and enablement and vacated the permanent injunction in the ongoing PCSK9 litigation.

Our Take

Regeneron’s fourth-quarter results were impressive as both earnings and sales beat estimates driven by strong Eylea sales. The potential label expansion of Eylea in patients with wet age-related macular degeneration will further boost sales. The action date set by the FDA is Aug 11, 2018. Dupixent uptake in the United States for moderate-to-severe atopic dermatitis was encouraging. Moreover, the company is also looking to expand Dupixent’s label in uncontrolled asthma.

However, the company suffered a setback when it decided not to advance the nesvacumab and Eylea combination study to phase III development. The decision was taken after two phase II studies evaluating the combination therapy failed to show additional benefit over Eylea monotherapy in patients with diabetic macular edema or wet age-related macular degeneration.

Zacks Rank& Key Pick

Regeneron currently carries a Zacks Rank #4 (Sell).

A better-ranked stock in the health care sector is Exelixis EXEL, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Exelixis’ earnings per share estimates increased from 72 cents to 77 cents for 2018 over the last 60 days.

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