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Regeneron Earnings Soar As Eylea Sales Skyrocket

Regeneron Pharmaceuticals shares vaulted to another new high Friday after the biotech beat analysts' Q1 estimates and expanded its ophthalmology portfolio with two acquisitions.

Regeneron's (REGN) quarterly sales rose nearly 90% over the year-earlier quarter to $440 million, handily beating analysts' consensus of $424 million. EPS on a GAAP basis fell short of estimates at 90 cents a share, but that included stock-based compensation expenses. Excluding those expenses, EPS nearly quadrupled to $1.78 a share.

Most of the revenue came from Eylea, a treatment for wet age-related macular degeneration, which leads to vision loss. Eylea sales beat analysts' estimates in the U.S. — $314 million vs. $297.5 million — and thoroughly stomped them in Europe, where the $65 million in revenue was 65% more than expected.

Regeneron had been guiding full-year Eylea sales at $1 billion, but on Friday lifted that to a range of $1.25 billion to $1.325 billion.

Regeneron shot up 7% to 266.16, hitting a fresh high on the stock market Friday. Shares surged 23% for the week, helped by news that Allergan's (AGN) potential Eylea rival faces delays.

Global Opportunity On the conference call with analysts, CEO Leonard Schleifer said that while there were "some head winds" for Eylea in the U.S., including a trim in Medicare reimbursement rates due to the sequester, its rollout in the rest of the world should more than make up for it. Eylea has been on the U.S. market for 18 months, but was only approved in Japan in September and in the EU in late November. Bayer (BAYRY) handles the overseas marketing.

Schleifer contrasted Eylea's $379 million in total sales to the $1.4 billion of its chief competitor Lucentis, sold by Roche (RHHBY) and Novartis (NVS).

"So we believe Eylea, over time, has significant room to grow, particularly outside of the U.S., where Eylea has only about 10% of the total sales reported for (Lucentis) and Eylea combined," he said.

Compounding Factor Eylea's other significant rival is a specially compounded version of Avastin, another Roche drug better known as a cancer fighter. Compounding pharmacies have become more controversial since last fall, when a meningitis outbreak was traced to a steroid compounded at the New England Compounding Center. Schleifer noted that Congress is discussing tighter compounding regulation, but "there can be no assurance that any legislation will be passed that will change the market dynamics.

In a client note, RBC Capital Markets analyst Adnan Butt wrote that it's one factor giving Regeneron a competitive edge.

"The biggest near-term opportunities for Eylea remain uptake and use in new as well as experienced patients who are refractory or stop responding to Lucentis and Avastin, as well as a slow but steady shift away from compounded Avastin, which is growing the market," he wrote.

Regeneron also announced that it acquired full rights to two novel antibodies from its big pharma partner Sanofi (SNY), which it says are in preclinical development for ophthalmology uses. It will pay $10 million upfront for each drug, with further payments if they achieve certain milestones.

Chief Scientific Officer George Yancopoulos said both antibodies play a key role in the creation of blood vessels, a line of research that previously led to Eylea. Yancopoulos said they could eventually add to Eylea's benefits.