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Regeneron (REGN) to Report Q4 Earnings: Is a Beat in Store?

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Regeneron Pharmaceuticals, Inc. (REGN - Free Report) is likely to beat expectations when it releases fourth-quarter and full year 2018 results on Feb 6, before the opening bell.

In the last reported quarter, Regeneron beat earnings expectations by 12.7%. The company’s track record is excellent. In the last four quarters, it surpassed earnings estimates on all occasions, with average beat of 10.9%. Let’s see how things are shaping up for the to-be-reported quarter.

Why a Likely Positive Surprise?

Our proven model indicates that Regeneron is likely to beat earnings estimates this quarter because it has the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +6.8%. This is because the Most Accurate Estimate is $6.08, while the Zacks Consensus Estimate is $5.69. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Zacks Rank: Regeneron currently carries a Zacks Rank #3, which increases the possibility of a beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Influencing This Quarter

Regeneron’s key growth driver, Eylea is likely to continue contributing to the company’s top-line growth. Eylea is approved in the United States, EU, Japan and other countries for the treatment of neovascular age-related macular degeneration (wet AMD), diabetic macular edema (DME), and macular edema following retinal vein occlusion, which includes macular edema following central retinal vein occlusion and macular edema following branch retinal vein occlusion.

We note that Regeneron has a global development and commercialization agreement with Bayer AG, outside the United States, for Eylea. Product revenues from ex-U.S. Eylea sales are recorded by Bayer.

Meanwhile, Regeneron is working on expanding Eylea’s label into additional indications, which should further boost sales.  In August 2018, the FDA approved a 12-week dosing interval of Eylea injection in patients with wet age-related macular degeneration (wet AMD) based on physician's assessment. The FDA also accepted for review the supplemental Biologics License Application (sBLA) of Eylea for the treatment of diabetic retinopathy, with a target action date of May 13, 2019.

Apart from Eylea’s performance and label-expansion efforts, investors will be focussing on the uptake of Dupixent.

Strong Dupixent sales drove Regeneron’s impressive sales in the first nine months of 2018 and we expect the momentum to continue in the fourth quarter as well. The uptake of the drug has been strong after it obtained approval last year for the treatment of adults with moderate-to-severe atopic dermatitis (AD). The company and partner Sanofi (SNY - Free Report) are also working to expand Dupixent’s label, which should diversify the company’s revenue base and reduce dependence on the lead drug. The FDA has accepted for priority review the sBLA for AD in adolescent patients and set a target action date of Mar 11, 2019.

Kevzara, an anti-interleukin (IL)-6 receptor monoclonal antibody used for the treatment of adult patients with moderately to severely active rheumatoid arthritis, was approved by the FDA in May 2017. The uptake of the drug has been encouraging so far.

The company has a collaboration agreement with Sanofi for both the drugs. The company updated its projection for collaboration revenues along with the announcement of third-quarter results. Collaboration revenues from Sanofi are now projected around $430-$455 million compared with the previous guidance of $455-$485 million. Both the companies have restructured their existing global Immuno-oncology Discovery and Development Agreement for new immuno-oncology cancer treatments. The original agreement, which was signed in 2015, is scheduled to end around mid-2020.

Hence, the companies have revised the agreement and selected two clinical-stage bispecific antibody programs for further development. Per the revised agreement, Regeneron will retain all rights to its other immuno-oncology discovery and development programs. Sanofi can advance its early-stage immuno-oncology pipeline independently.

Meanwhile, Regeneron is working to expand its portfolio/pipeline. In September 2018, the FDA approved Libtayo for the treatment of patients with metastatic or locally advanced CSCC who are not candidates for curative surgery or curative radiation. The drug is also under review in Europe and a decision is expected in the first half of 2019. Libtayo is also being evaluated for the treatment of non-small cell lung cancer in a phase III study, which is currently enrolling.

The company is also working to expand its PCSK9 inhibitor, Praluent’s label. The FDA approved Praluent for the treatment of patients with heterozygous familial hypercholesterolemia (HeFH) undergoing apheresis. The agency also accepted an sBLA for Praluent as a potential treatment to reduce major adverse cardiovascular events and had set a target action date of Apr 28, 2019.

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

Share Price Performance

Regeneron’s stock has gained 10.3% in the past six months, against the industry’s decline of 12.5%.

 

Other Stocks That Warrant a Look

Here are a couple of health care stocks you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter.

Seattle Genetics (SGEN - Free Report) has an Earnings ESP of +12.82% and a Zacks Rank #2. The company is scheduled to report results on Feb 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vertex Pharmaceuticals (VRTX - Free Report) is scheduled to release its results on Feb 5. The company has an Earnings ESP of +4.52% and a Zacks Rank #3.

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