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Shares of Regeneron Pharmaceuticals Inc. (REGN - Analyst Report) have been on the upswing since the beginning of the year, primarily driven by strong sales of its eye drug Eylea. This biopharmaceutical stock, which is expected to release its second quarter 2012 results on July 25, has grown more than two-fold year-to-date.
The company has delivered three straight positive earnings surprises; the first quarter of 2012 being the brightest with a massive earnings surprise of 166.7%. With an average earnings surprise of 30.5% over the past four quarters and an encouraging sales forecast revision for 2012, this Zacks #1 (Strong Buy) stock looks like a solid growth pick.
Solid First Quarter with Upbeat Guidance
On April 26, Regeneron reported first quarter 2012 adjusted earnings per share of 16 cents, which compared favorably with the Zacks Consensus Estimate for a loss of 24 cents. It was also a strong improvement from the year-ago loss of 49 cents. The stock hit its 52-week high of $145.04 on the same day of its earnings announcement.
Encouraged by the strong initial sales ramp of the drug, the company nearly doubled its 2012 sales projection for Eylea to between $500 million and $550 million from the previous projection of $250 million to $300 million. Management expects strong Eylea sales to drive the bottom line results as well.
Total revenue in the first quarter soared 107% to $232.0 million and surpassed the Zacks Consensus Estimate by 34.9%, driven by strong sales of Eylea. This was the first full quarter of the drug in the market, which posted sales of $124 million.
Earnings Estimates Are Climbing
Over the last 90 days, the Zacks Consensus Estimate for 2012 has climbed to a profit of $1.07 from a loss of 24 cents. For 2013, the estimate has jumped 65.5% to $2.93 per share over the same time period. While the estimate for 2012 represents a year-over-year jump of 144.4%, the estimate for 2013 represents a year-over-year increase of approximately 174.0%.
Remainder of 2012 Promises to be Exciting
The promising Eylea performance apart, Regeneron boasts of a robust pipeline. It has three key action dates lined up in 2012. The US Food and Drug Administration (FDA) is expected to decide on whether to approve Zaltrap for treating previously treated patients suffering from metastatic colorectal cancer by August 4, 2012.
The other two action dates correspond to Regenerons efforts to expand the label of both its marketed products Arcalyst and Eylea. While Regeneron is looking to get Arcalyst approved for preventing gout flares in patients initiating uric acid-lowering therapy (action date: July 30), the company is also looking to get Eylea approved for central retinal vein occlusion in the US (action date: September 23). Positive news from the FDA would boost the stock.
Premium Valuation Justified
Regeneron currently trades at a forward P/E of 115.9x, reflecting a substantial premium to the peer group average of 27.9x. Also, on a price-to-book basis, shares are trading at 23.1x, compared with the peer group average of 5.6x.
However, the premium valuation looks justified given the excellent growth prospects of Eylea and its promising late-stage pipeline.
The strong initial sales ramp of the companys key product Eylea has contributed to the strong showing by the stock since the beginning of the year. The stock has been consistently trading above its 200-day moving average in that time. Moreover, the year-to-date return for the stock is approximately 119.6%, compared with the S&P 500s return of 7.5%.
Regeneron, which has a market cap of $11.79 billion, is a biopharmaceutical company focused on the discovery, development, and commercialization of pharmaceutical products for the treatment of serious medical conditions. Regeneron was founded in 1988 and is based in Tarrytown, New York.
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