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Analyst Blog

On Aug 26, 2014, we issued an updated research report on Regeneron Pharmaceuticals (REGN - Analyst Report).

The biopharmaceutical company reported earnings of $1.89 per share in the second quarter of 2014, missing the Zacks Consensus Estimate of $2.33 by a wide margin. Results were impacted by higher costs. Both research & development costs as well as selling, general and administrative (SG&A) expenses were on the upswing during the quarter. The company expects adjusted SG&A costs to rise further in the remaining quarters of 2014 due to higher pre-launch expenses related to alirocumab and sarilumab. Regeneron is developing the candidates with Sanofi (SNY - Analyst Report).

The huge earnings miss dented investors’ and analysts’ confidence in the stock. Hence, over the last 30 days, the analysts are bearish on Regeneron, leading to a decline in the Zacks Consensus Estimate. For 2014, the Zacks Consensus Estimate fell 14.4% to $7.95 per share, while for 2015 it decreased 18.4% to $9.53 per share.

Though second-quarter 2014 U.S. sales of the eye drug Eylea improved 15.6% sequentially after a disappointing first quarter, we believe sales of the drug will have to improve significantly in the remaining quarters in order to meet the 2014 guidance of $1.7 billion to $1.8 billion. Below par showing of the drug in the remaining quarters of 2014 would not only cause it to miss its sales guidance, but would also hurt the stock badly as Eylea is Regeneron’s key growth driver.

A key action date for Regeneron is coming up in October when the FDA will decide on expanding the label of Eylea into the macular edema after branch retinal vein occlusion indication. Any regulatory setback/hiccup in gaining approval would hurt the stock. Regeneron presently has a Zacks Rank #5 (Strong Sell).

Stocks That Warrant a Look

Some better-ranked biopharmaceutical stocks include Gilead Sciences (GILD - Analyst Report) and Celgene Corp. (CELG - Analyst Report). While Gilead carries a Zacks Rank #1 (Strong Buy), Celgene is a Zacks Ranked #2 (Buy) stock.

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