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Regeneron Pharmaceuticals Inc.'s (REGN - Analyst Report) second quarter 2013 earnings (excluding special items but including stock-based compensation) of $1.33 per share breezed past the Zacks Consensus Estimate of 86 cents. The company earned 72 cents per share in the year-ago quarter. Higher revenues boosted earnings in the second quarter of 2013.

Total revenue in the reported quarter soared 50.7% year over year to $458 million, driven by strong sales of eye drug, Eylea. This was the sixth full quarter of the drug in the market. The drug was launched in the U.S. in Nov 2011 for treating patients suffering from the neovascular form of age-related macular degeneration. In Sep 2012, the label of the drug was successfully expanded to treat patients suffering from macular edema following central retinal vein occlusion.

We note that Regeneron has co-developed Eylea with the HealthCare unit of Bayer (BAYRY - Analyst Report). Regeneron is solely responsible for U.S. sales of the eye drug. Regeneron and Bayer equally share the profits from ex-US Eylea sales, except for Japan where Regeneron receives a royalty on net sales.

Revenues fell short the Zacks Consensus Estimate of $470 million. Total revenue included net product sales, collaboration revenue, technology licensing revenue and other revenue.

The Quarter in Detail

Net product sales jumped to $333.9 million in the second quarter of 2013 from $199.5 million a year ago. Bulk of the sales ($330 million) came from Eylea in the U.S. Sales of Arcalyst accounted for the balance. Eylea sales in ex-US markets were $65 million.

Moreover, Zaltrap was approved by the U.S 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. As per partner Sanofi (SNY - Analyst Report), sales of Zaltrap were $19 million in the second quarter of 2013.

As per the terms of the agreement, both companies share profits and losses from commercialization of the drug excluding Japan, where Regeneron receives a royalty on sales.

Collaboration revenues came in at $116.6 million, up 18.9%.  Revenues from technology licensing remained flat at $5.9 million. Other revenues 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 company’s efforts 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

Encouraged by the strong sales of the eye drug, Regeneron raised its forecast for 2013 Eylea sales. Regeneron now expects 2013 sales of Eylea in the range of $1.3-$1.35 billion (old guidance: $1.25–$1.325 billion).

Regeneron, a biopharmaceutical company, currently carries a Zacks Rank #3 (Hold). Regeneron’s second quarter results were mixed with earnings well above expectations and revenues lagging expectations. We believe that the revenue miss was primarily due to relatively soft Eylea sales in the second quarter. Sales of the drug improved by a modest 5.1% on a sequential basis in the second quarter of 2013. We believe that Eylea sales will rebound in the coming quarters. Bayer and Regeneron are evaluating the drug for additional indications. Approval for additional indications will boost the drug’s sales potential. The bright outlook provided by the company on Eylea is encouraging.

Gilead Sciences Inc. (GILD - Analyst Report) carries a Zacks Rank #1 (Strong Buy) in the biopharma space.

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