Regeneron (REGN) Q1 Earnings Miss, Revenues Beat Estimates

Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) reported first-quarter 2017 results wherein earnings missed estimates while revenues beat expectations.

The company reported first-quarter 2017 earnings (including the impact of share-based compensation expenses and tax adjustments) of $2.16 per share, missing the Zacks Consensus Estimate of $2.50 and were up from $1.59 in the year-ago quarter.

Excluding share-based compensation expenses, Regeneron’s earnings came in at $2.92 per share, up from $2.40 reported in the year-ago quarter.

Total revenue in the first quarter increased 9.8% year over year to $1.32 billion driven by strong sales of eye treatment, Eylea. Revenues were above the Zacks Consensus Estimate of $1.29 billion. Total revenue comprises net product sales and collaboration revenues.

Regeneron’s share price movement shows that the stock has outperformed the Zacks categorized Medical-Biomedical and Genetics industry in the past one year. Specifically, the stock gained 13.2% during this period, while the industry declined 2.8%.

Regeneron has co-developed Eylea with the HealthCare unit of Bayer (DE:BAYGN) AG (OTC:BAYRY) . The company is solely responsible for the U.S. sales of the eye drug and is entitled to profits. 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 the net sales.

Quarterly Highlights

Net product sales increased to $858.2 million in the reported quarter, up 9.5% year over year. The majority of sales came from Eylea in the U.S. ($854 million, up 9.3%). Sales of Eylea in ex-U.S. markets were $484 million, up from $419 million reported in the year-ago quarter.

Revenues also include Sanofi (NYSE:SNY) and Bayer collaboration revenues of $404 million in first-quarter 2017, compared to $399 million in the year-ago quarter. Collaboration revenues from Sanofi were $210.4 million in the quarter, compared with $219.7 million a year ago. Praluent recorded global net sales of $36 million in the reported quarter, up from $13 in the year-ago quarter. We note Praluent has been co-developed in collaboration with Sanofi. Product sales for Praluent are recorded by Sanofi, while Regeneron shares profits or losses from the commercialization of the drug.

R&D expenses increased 7.9% while selling, general and administrative (SG&A) decreased 2.5% during the quarter.

2017 Outlook Updated

In 2017, Regeneron expects U.S. Eylea net sales to grow in single digits. The company now expects adjusted unreimbursed R&D expenses in the range of $950–$1,025 million. Adjusted SG&A costs are now projected in the range of $1.140–$1.200 billion compared to the earlier forecast $1.175–$1.250 billion.

We note that the European Commission approved a dosing regimen of 300mg for Praluent to be given every four weeks. The FDA recently approved Dupixent (dupilumab) Injection for the treatment of adults with moderate-to-severe atopic dermatitis (AD). Meanwhile, a phase III study of Dupixent in adolescent patients (12-17 years of age) with moderate-to-severe atopic dermatitis was initiated in first-quarter 2017.

A phase III study of Dupixent in pediatric patients (6-11 years of age) with uncontrolled persistent asthma was initiated in second-quarter 2017.

Our Take

Regeneron’s first-quarter results were mixed where earnings missed estimates while revenues beat expectations. The FDA’s approval of Dupixent was a major boost to the company’s portfolio. Regeneron has earlier suffered a few setbacks related to its pipeline. Hence, we expect investor focus to remain on the performance of Eylea and Praluent, along with other pipeline-related updates.

Zacks Rank

Regeneron currently carries a Zacks Rank #2 (Buy) stock. A better-ranked stock in the healthcare sector is Infinity Pharmaceuticals, Inc. (NASDAQ:INFI) which currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Infinity’ loss estimates narrowed to $1.03 from $1.43 for 2017 over the past 60 days. The company recorded a positive earnings surprise in three of the last four quarters, the average being 36.64%.Its share price increased 43.7% year to date.

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