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Regeneron Beats Both Earnings and Revs

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Regeneron Pharmaceuticals Inc.’s (REGN - Free Report) third quarter 2013 earnings (including stock-based compensation) of $2 per share breezed past the Zacks Consensus Estimate of 99 cents. The company earned $1.70 per share in the year-ago quarter. Higher revenues boosted earnings in the third quarter of 2013.

Total revenue in the reported quarter soared 40% year over year to $597 million, driven by strong sales of eye drug, Eylea. This was the seventh 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). Regeneron is solely responsible for the U.S. sales of the eye drug. The company is entitled to the entire profits arising from U.S. sales of Eylea. Regeneron and Bayer equally share the profits and losses from ex-US Eylea sales, except for Japan where Regeneron receives a royalty on net sales.

Revenues easily beat the Zacks Consensus Estimate of $510 million. Total revenue included net product sales, collaboration revenue, technology licensing revenue and other revenue.

The Quarter in Detail

Net product sales jumped to $367 million in the third quarter of 2013 from $249 million a year ago. Bulk of the sales ($363 million) came from Eylea in the U.S. Sales of Regeneron’s Arcalyst (cryopyrin-associated periodic syndromes) came in at a mere $4 million in the third quarter of 2013. Sales of Eylea in ex-U.S. markets were $125 million, as reported by partner Bayer.

Sales of oncology drug Zaltrap were $18 million in the third quarter of 2013 as per partner Sanofi (SNY - Free Report) . 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 $223 million, up 29.7%.  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 U.S. Eylea sales. Regeneron now expects 2013 sales of Eylea in the range of $1.35-$1.375 billion (old guidance: $1.3-$1.35 billion).

Regeneron, a biopharmaceutical company, currently carries a Zacks Rank #3 (Hold). Regeneron’s third quarter results were highly impressive with both revenues and earnings coming in well above expectations. We expect Eylea to continue performing well, thereby driving growth at Regeneron. Bayer and Regeneron are evaluating the drug for additional indications.

Apart from announcing earnings results, Regeneron announced that it is seeking U.S. approval for treating patients suffering from diabetic macular edema. Approval for additional indications will boost the drug’s sales potential.  

Actelion Ltd. appears to be well placed in the biopharma space with a Zacks Rank #1 (Strong Buy).

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