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Regeneron (REGN) to Post Q1 Earnings: What's in the Cards?

Zacks Equity Research

Regeneron Pharmaceuticals, Inc. REGN is scheduled to release first-quarter 2017 results on May 4, before the opening bell. The company’s performance has been mixed so far. In the last four reported quarters, it surpassed earnings estimates on three occasions and missed the same once. Overall, the company has recorded an average positive earnings surprise of 8.1%.

Regeneron’s share price movement shows that the stock underperformed the Zacks categorized Medical-Biomedical/Genetics industry in the last six months. Specifically, the stock rallied 6.1% during this period, while the industry gained 7.9%.

Last quarter, Regeneron missed earnings expectations by 12.75%. Let’s see how things are shaping up for this quarter.

Factors Influencing This Quarter

Regeneron’s key growth driver, Eylea, should continue to contribute to the company’s top line growth. Regeneron continued to witness strong sales growth for the eye treatment in both the U.S. and ex-U.S. markets. However, growth for the drug has slowed down and the company expects growth in single digits in 2017. We note that Regeneron has a global development and commercialization agreement with Bayer AG BAYRY outside the U.S. for Eylea. Product revenues from ex-U.S. Eylea sales are recorded by Bayer.

The company is working on expanding Eylea’s label into diabetic retinopathy in an ongoing phase III study.

Apart from Eylea, investors will remain focused on the performance of the PCSK9 inhibitor, Praluent. The challenge for the PCSK9 inhibitor class continues to be the significant reimbursement hurdle for the physicians’ offices and patients which in turn have resulted in a low volume of prescriptions being dispensed.  Sales of Praluent have failed to impress so far.

On Feb 8, the United States Court of Appeals for the Federal Circuit stayed the injunction pending appeal. Hence, Regeneron and partner Sanofi SNY will continue marketing, selling, and manufacturing Praluent in the U.S. during the appeal process.

During the quarter, the FDA approved its Dupixent (dupilumab) Injection for the treatment of adults with moderate-to-severe atopic dermatitis (AD). Per the companies, this is the first and only biologic medicine approved for the treatment of adults suffering from AD. Regeneron and Sanofi will launch Dupixent in the U.S. at the Wholesale Acquisition Cost (WAC) of $37,000 annually. Pricing will play a key role in the uptake of the drug and we expect management to throw light on the same.

On the first-quarter earnings call, focus will be on the company’s performance, particularly Eylea and Praluent. The FDA has approved the new supplemental Biologics License Application (sBLA) for a once-monthly (every four weeks), 300 mg dose of Praluent (alirocumab) Injection for the treatment of adults with high low-density lipoprotein (LDL) cholesterol. The approval will expand the drug’s dosing options.

Investors are also expected to await updates on the company’s pipeline.  Earlier in the month, Regeneron and Sanofi announced that the European Medicine Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) has adopted a positive opinion for the marketing authorization of Kevzara (sarilumab), while the FDA has granted Breakthrough Therapy Designation status to its pipeline candidate evinacumab for the treatment of hypercholesterolemia in patients with Homozygous Familial Hypercholesterolemia (HoFH).

Earnings Whispers

Our proven model does not conclusively show that Regeneron is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.50. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Regeneron currently carries a Zacks Rank #2. Although the company’s rank is favorable, the 0.00% ESP makes surprise prediction difficult.

Note, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Regeneron Pharmaceuticals, Inc. Price and EPS Surprise


Regeneron Pharmaceuticals, Inc. Price and EPS Surprise | Regeneron Pharmaceuticals, Inc. Quote

A Stock That Warrants a Look

Here is a health care stock that you may want to consider instead, as our model shows that it has the right combination of elements to post an earnings beat this quarter.

Gilead Sciences, Inc. GILD has an Earnings ESP of +2.77% and a Zacks Rank #3. The company is likely to release results on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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