Eylea Drives Regeneron

Zacks

Regeneron Pharmaceuticals Inc.'s (REGN) fourth quarter 2012 earnings (excluding special items but including stock-based compensation) of $1.21 per share breezed past the Zacks Consensus Estimate of $1.07. The company suffered an adjusted loss of $0.54 per share in the year-ago quarter. Higher revenues boosted earnings in the final quarter of 2012.

Total revenue in the reported quarter soared 237% to $415 million, driven by strong sales of eye drug, Eylea. This was the fourth full quarter of the drug in the market. The drug was launched in the US in Nov 2011 for treating patients suffering from the neovascular form of age-related macular degeneration.

In Sept 2012, the label of the drug was successfully expanded to treat patients suffering from macular edema following central retinal vein occlusion

Revenues handsomely beat the Zacks Consensus Estimate of $393 million. Total revenue included net product sales, collaboration revenue, technology licensing revenue and contract research and other revenue.

Full year earnings (excluding special items but including stock-based compensation expense) came in at $3.78 per share, $0.18 above the Zacks Consensus Estimate. The company suffered an adjusted loss of $2.41 per share in 2011. Revenues jumped 209% to $1.4 billion in 2012, edging past the Zacks Consensus Estimate of $1.36 billion.

The Quarter in Detail

Net product sales jumped to $281 million in the final quarter of 2012 from $30 million a year ago. Eylea sales came in at $276 million in the reported quarter, up 13% sequentially. Sales of Regeneron’s first marketed product, Arcalyst, for treating cryopyrin-associated periodic syndromes, accounted for the balance.

Moreover, Zaltrap was approved by the US Food and Drug Administration in Aug 2012 as a combination therapy for treating patients suffering from metastatic colorectal cancer, who are either resistant to or whose disease has progressed following treatment with an oxaliplatin-containing regimen. Zaltrap was approved for the metastatic colorectal cancer indication in the EU in Feb 2013. Regeneron co-developed Zaltrap with Sanofi (SNY).

As per the terms of the agreement, both companies share profits and losses from commercialization of the drug except for Japan, where Regeneron receives a royalty on sales. As per Sanofi, sales of Zaltrap were $23 million in the fourth quarter of 2012.

Collaboration revenues came in at $126.6 million, up 46%.  Revenues from technology licensing remained flat at $5.9 million. Revenues from contract research and others accounted for the balance in the reported quarter.

Both research and development (R&D) expenses and selling, general and administrative (SG&A) expenses were on the upswing during the reported quarter.

The increase in R&D expenses was primarily attributable to the efforts of the company to develop its pipeline. Higher costs related to the marketing of Eylea were primarily responsible for pushing the SG&A costs up.

Bright Outlook for Eylea

Regeneron expects sales of Eylea to increase by 50% in 2013 over 2012 levels ($838 million). Consequently, 2013 sales are expected in the range of $1.2-$1.3 billion.

Regeneron, a biopharmaceutical company, carries a Zacks Rank #3 (Hold) in the short run. Biopharma stocks, which are currently well placed include, Array Biopharma (ARRY) and Medivation, Inc. (MDVN). Both stocks carry a Zacks Rank #2.

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