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Regeneron (REGN) Q1 Earnings Top, Sales Lag, Updates View

By Zacks Investment ResearchStock MarketsMay 02, 2018 10:27PM ET
Regeneron (REGN) Q1 Earnings Top, Sales Lag, Updates View
By Zacks Investment Research   |  May 02, 2018 10:27PM ET
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Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) reported mixed results for the first-quarter of 2018, wherein earnings topped expectations but sales missed the same.

Nevertheless, the company’s shares are trading up in the pre-market trading. Regeneron’s stock has lost 27.2% in the last six months compared with the industry’s 11.5% decline.

The company reported earnings of $4.67 per share in the quarter beating the Zacks Consensus Estimate of $4.51 and up from $2.92 recorded in the year-ago quarter.

Total revenues in the quarter increased 15% year over year to $1.51 billion driven by strong sales of Eylea. Revenues however missed the Zacks Consensus Estimate of $1.53 billion.

Regeneron has co-developed Eylea with the HealthCare unit of Bayer (DE:BAYGN) AG (OTC: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 $988 million in the quarter, up 15.1% year over year. The majority of sales came from Eylea in the United States ($984 million, up 15.2%).

Sales also include Sanofi (NYSE:SNY) and Bayer collaboration revenues of $437 million, compared with $404 million in the year-ago quarter. However, collaboration revenues from Sanofi decreased to $189.5 million from $210.4 million primarily due to the end of the Discovery and Preclinical Development Agreement with Sanofi on Dec 31, 2017, lower reimbursement for Dupixent development activities, and an increase in the company's share of the Dupixent commercialization expenses. Bayer collaboration revenue grew due to an increase in share of net profits in connection with higher sales of Eylea outside the United States.

Praluent recorded global net sales of $60 million in the quarter, up from $36 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 $131 million. The drug was approved in 2017 for the treatment of adults with moderate-to-severe atopic dermatitis. Kevzara recorded sales of $12 million.

R&D expenses decreased 1.7% while selling, general and administrative (SG&A) expenses increased 11.5% during the quarter. The decrease in R&D expenses were primarily due to due to a decrease in clinical manufacturing costs and a decrease in dupilumab development costs. SG&A expenses increased due to higher headcount and headcount-related costs and an increase in commercialization-related expenses to support the launch of Dupixent.

2018 Outlook Updated

Collaboration revenues from Sanofi are now projected around $450 - $485 million, compared to the previous guidance of $450-$500 million. The company now expects adjusted unreimbursed R&D expenses in the range of $1.23-$1.31 billion, compared to the previous projection of $1.2-$1.33 billion.

Pipeline Update

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.

During the first quarter, Regeneron announced positive top-line results from the phase III study, PANORAMA, on Eylea in moderately severe to severe non-proliferative diabetic retinopathy. The study results will form the basis of a sBLA which the company expects to submit to the FDA by the end of 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 in 2017 and is now looking to expand Dupixent’s label.

Dupilumab is being evaluated in asthma, adolescent and pediatric atopic dermatitis, nasal polyps, and eosinophilic esophagitis, with additional studies planned in 2018. Data from the phase III studies in patients with nasal polyps and adolescent patients with atopic dermatitis is expected during 2018. The sBLA for Dupixent as an add-on maintenance treatment in certain adults and adolescents (12 years of age and older) with moderate-to-severe asthma was filed with the FDA and the regulatory body has set a target action date of Oct 20, 2018. 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.

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 Aug 24, 2018. During the quarter, Regeneron and Sanofi announced that the ODYSSEY OUTCOMES trial met its primary endpoint. The trial showed that high-risk patients who added Praluent to maximally-tolerated statins experienced significantly fewer major adverse cardiovascular events compared to those on maximally-tolerated statins alone. In addition, in this study, adding Praluent to maximally-tolerated statins was associated with reduced death from any cause. Moreover, both the companies have decided to lower the net price of Praluent in exchange for straightforward, more affordable patient access from Express Scripts (NASDAQ:ESRX) . Praluent will become the exclusive PCSK9 inhibitor therapy on the Express Scripts national formulary.

The FDA also accepted for priority review the BLA for cemiplimab for the treatment of patients with metastatic CSCC or patients with locally advanced CSCC who are not candidates for surgery and set a target action date of Oct 28, 2018.

Our Take

Regeneron’s first-quarter results were mixed with earnings beating expectations while sales missed on the same. Nevertheless, we are encouraged by the pipeline progress. 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. A positive outcome will boost investor sentiment as well as the company had earlier suffered setback when it decided not to advance the nesvacumab and Eylea combination study to phase III development 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.

Meanwhile, 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.

Zacks Rank

Regeneron currently carries a Zacks Rank #3(Hold).You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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Regeneron (REGN) Q1 Earnings Top, Sales Lag, Updates View

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Regeneron (REGN) Q1 Earnings Top, Sales Lag, Updates View

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