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REGN vs. ALXN: Which Stock is Poised for Better Q4 Earnings?

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The fourth-quarter earnings season has crossed the halfway mark. So far, the results reflect a favorable trend, with an above average proportion of companies beating both top- and bottom-line expectations.

Per the latest Earnings Preview, total earnings for the 251 S&P members that have released results, are up 16% from the year-ago quarter on a 10.5% rise in revenues. The beat ratio for the bottom line is 80.5%, while that for the top line is 78.1%. The proportion of companies beating both EPS and revenue estimates is 64.9%.

Biotech companies Alexion Pharmaceuticals, Inc. and Regeneron Pharmaceuticals, Inc. (REGN - Free Report) are expected to report their Q4 numbers on Feb 8. Let's take a look at which of these biotech companies has an edge over the other ahead of their release.

However, before we look at the numbers, let us have a look at the biotech industry.

A Glance at the Industry

The biotech industry is seeing significant pickup in merger and acquisition (M&A) deals of late. The year started off with Celgene (CELG - Free Report) announcing plans to acquire Impact Biomedicines. The company revealed plans of acquiring Juno Therapeutics for approximately $9 billion.

The French pharma giant Sanofi (SNY - Free Report) also announced of buying biopharma company Bioverativ for $11.6 billion in January 2018. The same month Sanofi also announced plans to acquire the Belgian biotech company, Ablynx for €3.9 billion ($4.8 billion).

In the fourth quarter, the biotech sector is well poised. Of the major players in the biotech sector, Biogen (BIIB - Free Report) put a mixed show in the reported period with earnings lagging estimates while sales exceeding the same. However, Celgene and Vertex (VRTX - Free Report) outpaced both the metrics’ expectations.


New Haven, CT-based Alexion’s blockbuster drug, Soliris, continues to perform well. Alexion continues to identify and treat high number of new patients with paroxysmal nocturnal hemoglobinuria (“PNH”) and atypical hemolytic uremic syndrome (aHUS) with Soliris, across its 50-country operating platform. Alexion is working on expanding Soliris’ label into additional indications. The FDA recently approved the drug for the treatment of refractory gMG in patients who are anti-acetylcholine receptor antibody-positive. The drug was approved in Europe for this indication. Label expansion into additional indications will give Soliris access to a higher patient population and increase the commercial potential of the drug significantly.

The company also announced some restructuring initiatives. In this context, Alexion plans to focus on rare diseases businesses in core areas of hematology, nephrology, neurology and metabolic disorders to enhance productivity.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $878 million, marking an increase of 5.5% year over year. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.28 per share, marking an increase of 1.59% year over year.Alexion’s track record is excellent as it has topped estimates in the last four quarters, with an average positive earnings surprise of 11.91%.

Alexion has an Earnings ESP of +8.92% as the Most Accurate estimate is $1.40 and the Zacks Consensus Estimate is pegged at $1.28. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.



Regeneron’s key growth driver, Eylea, is likely to continue to contribute to the company’s top-line growth. Regeneron is working on expanding Eylea label into additional indications. While a phase III study (PANORAMA) is evaluating Eylea for the treatment of moderately severe to severe non-proliferative diabetic retinopathy in patients without DME, another phase III study (in Japan) is evaluating it for neovascular glaucoma. Label expansion into additional indications will give Eylea access to higher patient population and increase the commercial potential of the drug. 

Apart from Eylea, investors will remain focused on the uptake of new drugs — Kevzara and Dupixent. The FDA also approved Dupixent (dupilumab) Injection for the treatment of adults with moderate-to-severe atopic dermatitis.  The initial uptake of the drug is encouraging. The drug was approved in Europe also. The company is also evaluating the drug for treating asthma in adults (LIBERTY ASTHMA QUEST study). 

Hence, focus will be on the company’s performance, particularly Eylea and Dupixient uptake during the fourth-quarter earnings call. Investors are also expected to await updates on the company’s pipeline.

The Earnings ESP, for Regeneron is -1.04%. The company currently carries a Zacks Rank #4 (Sell). 

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $1.50 billion, marking an increase of 22.1% year over year. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $4.68 per share, marking an increase of 53.95% year over year.The company’s performance has been mixed so far. In the last four quarters, it surpassed earnings estimates on two occasions and missed in two, with an average positive surprise of 5.96%.


Our Take

During fourth-quarter 2017, Alexion’s price declined 14.8% compared with Regeneron’s fall of 15.9%. However, Alexion’s Zacks Rank #3, when combined with a positive ESP makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For Regeneron, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) before going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Therefore, per our proprietary model, we believe that Alexion is poised for better performance in the upcoming quarter.

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