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Regeneron (REGN) Q2 Earnings Top Estimates, Eylea Sales Solid

Zacks Equity Research

Regeneron Pharmaceuticals, Inc. REGN reported better-than-expected results in the second quarter of 2019, wherein both earnings and sales beat estimates.

However, the stock has lost 19.1% in the year so far compared with the industry’s decline of 4.5%.

Regeneron reported earnings of $6.02 per share in the second quarter, beating the Zacks Consensus Estimate of $5.42. The top line also increased from $5.45 in the year-ago quarter.

Total revenues in the reported quarter increased 20% year over year to $1.93 billion and comfortably beat the Zacks Consensus Estimate of $1.80 billion. The year-over-year growth was driven by strong Eylea and Dupixent sales.

Quarterly Highlights

Net product sales increased to $1.205 billion in the quarter under review, up from $996 million in the year-ago quarter. Majority of the sales came in from Eylea in the United States ($1.160 billion, up 16.9%).

We note that Regeneron co-developed Eylea with the HealthCare unit of Bayer AG BAYRY. The company is solely responsible for the sales of this eye drug and entitled to profits in the United States. However, it shares profits and losses from the ex-U.S. Eylea sales equally with Bayer, except in Japan where the company receives a royalty on net sales.

Total revenues also included Sanofi SNY and Bayer’s collaboration revenues of $638 million compared with $501 million in the year-earlier quarter. The increase was primarily driven by higher net product sales of Dupixent.

Dupixent’s sales summed $557.3 million, up from $209.2 million a year ago. The drug was approved in 2017 for treating adults with moderate-to-severe atopic dermatitis. Kevzara recorded sales of $58.5 million, up from $24.1 million in the year-earlier quarter.

Praluent’s global net sales logged $73.7 million in the reported quarter, up from $73.5 million in the prior-year quarter. Sale proceeds from products like Praluent, Dupixent and Kevzara are garnered by Sanofi, while Regeneron earns profits or incurs losses from the commercialization of all three drugs.

The FDA approved Libtayo last September for the treatment of patients with metastatic or locally advanced cutaneous squamous cell carcinoma (CSCC), who are not candidates for curative surgery or curative radiation. The drug’s sales in the quarter totaled $40.8 million, up from $26.8 million in the prior quarter.

R&D expenses almost doubled to $1.04 billion, while SG&A expenses increased 14.4% to $417.3 million during the quarter under consideration.

2019 Outlook Updated

Collaboration revenues from Sanofi are projected to be $500-$530 million (previous guidance: $500-$535 million). The company expects adjusted unreimbursed R&D expenses of $1.65-$1.71 billion. Adjusted unreimbursed SG&A expenses are anticipated to be $1.53-$1.58 billion.

Pipeline Update

The pipeline progress in the second quarter was encouraging.

The FDA approved the label expansion of Eylea for the treatment of diabetic retinopathy. Regeneron resubmitted a supplemental BLA for Eylea in a pre-filled syringe and the FDA has set a target action date of Aug 12, 2019.

Regeneron is also working to expand Dupixent’s label. In May 2019, the European Commission (EC) approved Dupixent for use in adults and adolescents aged 12 years or older as an add-on maintenance treatment for severe asthma. The EC also approved the drug for use in adolescents aged 12-17 years with moderate-to-severe atopic dermatitis, who are candidates for systemic therapy. In June 2019, the FDA approved the drug for use with other medicines to treat chronic rhinosinusitis with nasal polyposis (CRSwNP) in adults, whose disease is not controlled. Meanwhile, a phase III trial on the drug to treat severe atopic dermatitis in children 6-11 years of age met its primary and secondary endpoints.

The EC also approved Libtayo for the treatment of adult patients with metastatic or locally-advanced CSCC, who are not candidates for curative surgery or curative radiation. A phase III adjuvant study in CSCC was initiated as well.

Moreover, the FDA approved Praluent to reduce the risk of heart attack, stroke and unstable angina, requiring hospitalization of adults with established cardiovascular disease. The updated label included data showing that treatment with Praluent was associated with a reduction in death from any cause.

Meanwhile, Regeneron and Sanofi announced that the phase II study in asthma on pipeline candidate, REGN3500, met the primary endpoint of improvement in loss of asthma control compared to placebo.

Our Take

Regeneron’s second-quarter results were impressive as the company beat on both sales and earnings, driven by the label expansion of Eylea and strong Dupixent sales in moderate-to-severe atopic dermatitis and asthma. The company’s efforts to expand the label of its approved drugs (Eylea and Dupixent) and concurrently develop the pipeline are encouraging. The immuno-oncology platform, which includes Libtayo and a wide portfolio of bispecific antibodies, is progressing well, with the most advanced bispecific candidate, REGN1979 (CD20xCD3), being evaluated in a phase II trial in follicular lymphoma.

Earlier, Regeneron inked a collaboration agreement with Alnylam Pharmaceuticals, Inc. ALNY to discover, develop and commercialize the new RNA interference (RNAi) therapeutics for diseases of the eye and the central nervous system.

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

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