Eylea Drives Regeneron to Profit

Regeneron Pharmaceuticals Inc.'s ( REGN - Analyst Report ) first quarter 2012 earnings (excluding special items but including stock-based compensation) of 15 cents per share compared favorably with the Zacks Consensus Estimate of a net loss of 24 cents and the year-ago loss of 49 cents. Higher revenues boosted earnings in the quarter.

Total revenue in the reported quarter soared 107% to $232.0 million driven by strong sales of eye-drug Eylea. This was the first full quarter of the drug in the market. The drug, launched in the US in November 2011, is marketed for treating patients suffering from the neovascular form of age-related macular degeneration.

Revenues handsomely beat the Zacks Consensus Estimate of $172 million. Total revenue included collaboration revenue, technology licensing revenue, net product sales and contract research and other revenue.

The Quarter in Details

Net product sales jumped to $128 million in the reported quarter from $4 million a year-ago. While Eylea sales came in at $124 million in the reported quarter, Arcalyst, Regeneron’s other marketed product for treating cryopyrin-associated periodic syndromes, contributed $4.0 million to product sales in the quarter

Collaboration revenues came in flat at $97 million. Collaboration revenues from Regeneron’s antibody collaboration with Sanofi ( SNY - Analyst Report ) came in at $85.0 million. $12.5 million came from Regeneron’s collaboration with the Healthcare unit of Bayer ( BAYRY - Analyst Report ) .

Revenues from technology licensing declined 25% to $5.9 million. Revenues from contract research and others accounted for the balance in the reported quarter.

Both research and development (R&D) expenses (up 7.3%) and selling, general and administrative (SG&A) expenses (up 149.6%) were on the upswing during the reported quarter.

The rise was primarily attributable to the higher R&D expenses incurred in connection with the efforts to develop the pipeline at Regeneron and the higher employee headcount in connection with the antibody collaboration with Sanofi. Higher costs related to the marketing of Eylea were primarily responsible for pushing the SG&A costs up.

Bright Outlook for Eylea

Apart from announcing financial results, Regeneron provided guidance for Eylea sales in 2012. Encouraged by the strong initial sales ramp of the drug, the company nearly doubled its 2012 projected Eylea sales to $500-$550 million from $250-$300 million provided while announcing the fourth quarter and full year 2011 results earlier in the year. Management expects strong Eylea sales to drive earnings in the remaining quarters of 2012 as well.

Neutral on Regeneron

Currently, we have a Neutral stance on Regeneron in the long run. The company carries a Zacks #3 Rank (Hold rating) for the short run.

2012 is expected to be a key year for Regeneron with a couple of action dates coming up. Regeneron and partner Bayer are seeking to expand Eylea’s label. The US Food and Drug Administration (FDA) is expected to decide on Regeneron’s application seeking approval to market Eylea for another eye disorder, central retinal vein occlusion by September 23, 2012. The companies are studying Eylea for other eye-disorders also.

Regeneron is also seeking to expand the label of Arcalyst into the gout indication in the US. The FDA is expected to give its decision by July 30, 2012. Positive news from the FDA will boost the stock. We are encouraged by Regeneron’s efforts to develop its pipeline.