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Regeneron (REGN) Down 7.1% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Regeneron (REGN - Free Report) . Shares have lost about 7.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Regeneron due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Regeneron's Q2 Earnings & Sales Surpass Estimates

Regeneron reported earnings of $7.16 per share in the second quarter, comfortably beating the Zacks Consensus Estimate of $6.23 and increasing from $6.02 in the year-ago quarter.

Total revenues in the reported quarter increased 24% year over year to $1.9 billion and comfortably beat the Zacks Consensus Estimate of $1.8 billion. The year-over-year growth was driven by strong Dupixent sales.

Quarterly Highlights

Net product sales increased to $1.22 billion in the quarter under review, up from $1.2 billion in the year-ago quarter.  Lead drug Eylea’s sales in the United States were $1.114 billion compared with $1.160 billion in the year-ago quarter. Sales in the United States were negatively impacted by the COVID-19 pandemic.

Total revenues also included Sanofi and Bayer’s collaboration revenues of $513 million compared with $353 million in the year-earlier quarter. The increase was primarily owing to higher net product sales of Dupixent.

Notably, Regeneron records net product sales of Libtayo in the United States. Sanofi records net product sales of Libtayo outside the country and global net product sales of Dupixent, Kevzara and Zaltrap. Regeneron records its share of profits/losses in connection with sales of Libtayo outside the United States, and global sales of Dupixent and Kevzara, within collaboration revenues.

Dupixent’s sales summed $945 million, up from $557.3 million in the year-ago quarter. Kevzara recorded sales of $68.3 million, up from $58.5 million in the year-earlier quarter.

Praluent’s global net sales totaled $86.6 million in the reported quarter, up from $73.7 million in the prior-year quarter.

Libtayo sales in the quarter totaled $80 million, up from $40.8 million in the prior-year quarter.

R&D expenses increased to $580 million from $426 million, while SG&A expenses grew to $301 million during the quarter from $252 million in the year-ago quarter.

COVID-19 Update

Regeneron initiated studies on REGN-COV2, a novel investigational antibody "cocktail" treatment designed to prevent and treat the SARS-CoV-2 virus.  A phase III study to evaluate REGN-COV2's ability to prevent infection among uninfected people who have had close exposure to a COVID-19 patient (such as the patient's housemate) was initiated following review of the REGN-COV2 phase I safety results by the Independent Data Monitoring Committee (IDMC). The study is being run jointly with the National Institute of Allergy and Infectious Diseases (NIAID). In addition, REGN-COV2 moved into the phase II/III portion of two adaptive phase I/II/III studies testing the cocktail's ability to treat hospitalized and non-hospitalized patients with COVID-19. Regeneron plans to report initial virology and biomarker results from the REGN-COV2 treatment trials in September 2020.

Regeneron and partner Sanofi reported that the U.S phase III study of Kevzara 400 mg in COVID-19 patients requiring mechanical ventilation, led by the former, did not meet its primary and key secondary endpoints. Based on the results, the U.S.-based trial has been stopped.

Pipeline Update

Phase III studies evaluating frequent dosing intervals, using a high-dose formulation of Eylea in neovascular age-related macular degeneration (wet AMD) and diabetic macular edema (DME), were initiated.

In May 2020, the FDA approved Dupixent as the first biologic medicine for children aged 6 to 11 years with moderate-to-severe atopic dermatitis. Results from Part A of the phase III studies in patients 12 years and older with eosinophilic esophagitis (EoE) were also announced. The study met both co-primary endpoints as well as all key secondary endpoints. A late-stage study in pediatric patients with EoE was initiated.

In June, the FDA approved a 300-mg, single-dose, pre-filled pen for Dupixent.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted 55.81% due to these changes.

VGM Scores

At this time, Regeneron has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Regeneron has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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