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Why Is Regeneron (REGN) Up 7.9% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Regeneron Pharmaceuticals, Inc. (REGN - Free Report) . Shares have added about 7.9% in that time frame, outperforming the market.

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

Regeneron Beats on Earnings & Sales, Raises View

Regeneron reported second-quarter of 2017 results wherein both earnings and sales beat expectations on the back of strong performance of eye-care drug Eylea.

The company reported earnings (including the impact of share-based compensation expenses and tax adjustments) of $4.17 per share in the second-quarter beating the Zacks Consensus Estimate of $3.20.

Excluding share-based compensation expenses, Regeneron’s earnings came in at $4.17 per share, up from $2.82 reported in the year-ago quarter. Total revenue in the second quarter increased 21.2% year over year to $1.47 billion driven by strong sales of eye treatment drug, Eylea. Revenues were above the Zacks Consensus Estimate of $1.36 billion.

We note Regeneron has co-developed Eylea with the HealthCare unit of Bayer. The company is solely responsible for the U.S. sales of the eye drug and is entitled to profits. However, it shares profits and losses equally with Bayer from ex-U.S. Eylea sales, except in Japan, where the company receives a royalty on net sales.

Quarterly Highlights

Net product sales increased to $924.1 million in the reported quarter, up 10.8% year over year. The majority of sales came from Eylea in the U.S. ($919 million, up 10.6%). Sales of Eylea in ex-U.S. markets were $542 million, up from $486 million reported in the year-ago quarter.

Revenues also include Sanofi and Bayer collaboration revenues of $432 million, compared with $355 million in the year-ago quarter. Collaboration revenues from Sanofi were $222.1 million in the quarter, compared with $163.4 million a year ago. Praluent recorded global net sales of $46 million in the reported quarter, up from $24 in the year-ago quarter.  We note Praluent has been co-developed in collaboration with Sanofi. Product sales for Praluent are recorded by Sanofi, while Regeneron shares profits or losses from the commercialization of the drug.

Dupixent sales came in at $29 million. The drug was approved earlier in 2017 for the treatment of adults with moderate-to-severe atopic dermatitis (AD).

R&D expenses decreased 8.9% while selling, general and administrative (SG&A) increased 5.1% during the quarter.

2017 Outlook Updated

Based on a strong first half, the company raised its sales guidance for Eylea.  In 2017, Regeneron expects U.S. Eylea net sales to grow around 10% (earlier guidance: growth in single digits).  The company now expects adjusted unreimbursed R&D expenses in the range of $925–$965 million, down from the earlier guidance of $950–$1,025 million.

We note that the European Medicine Agency's Committee for Medicinal Products for Human Use (CHMP) rendered a positive opinion for the marketing authorization of Dupixent, recommending its approval for use in adults with moderate-to-severe atopic dermatitis who are candidates for systemic therapy in Jul 2017. Meanwhile, a phase III study of Dupixent in pediatric patients (6-11 years of age) with uncontrolled persistent asthma was initiated in second-quarter 2017.

In May 2017, the FDA approved Kevzara for the treatment of adult patients with moderately to severely active rheumatoid arthritis who have an inadequate response or intolerance to one or more disease modifying anti-rheumatic drugs (DMARDs). The drug was also approved in Europe in Jun 2017.

In Jun 2017, the European Commission granted marketing authorization for Kevzara in combination with methotrexate (MTX) for the treatment of moderately to severely active rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to one or more DMARDs; Kevzara may be used as monotherapy in case of intolerance to MTX or when treatment with MTX is inappropriate.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter compared to two lower. In the past month, the consensus estimate has shifted by 33.5% due to these changes.

VGM Scores

At this time, Regeneron's stock has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. The stock  was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

The company's stock is suitable solely for momentum investors based on our style scores.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy).




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