Regeneron Pharmaceuticals Inc.’s (REGN) third quarter 2011 net loss of $0.68 per share was wider than the year-ago loss of $0.41 per share. The wider year over year loss suffered by the company was attributable to lower revenues and higher operating expenses. The Zacks Consensus Estimate hinted at a loss of $0.75 per share for the reported quarter.
Quarterly Results in Detail
Total revenue in the reported quarter declined 3% to $107.8 million. Revenues also fell short of the Zacks Consensus Estimate of $115 million. Total revenues included collaboration revenue, technology licensing revenue, net product sales and contract research and other revenue.
The decline in total revenue was primarily attributable to lower technology licensing revenue (down 41.3% to $5.9 million) due to the end of the VelocImmune license agreement with AstraZeneca (AZN). The agreement ended in February 2011. Collaboration revenues were almost flat at $89.9 million in the third quarter of 2011.
Net product sales from the company’s only marketed product, Arcalyst climbed 12.2% to $5.5 million. Arcalyst is marketed in the US for treating patients suffering from Cryopyrin-Associated Periodic Syndromes (CAPS). Revenues from contract research and others accounted for the balance in the reported quarter.
Both research and development (R&D) expenses (up 4.8%) and selling, general and administrative (SG&A) expenses (up 110%) were on the upswing during the reported quarter. Total operating expenses in the quarter climbed 16.8% to $161.3 million.
R&D expenses increased in the reported quarter primarily due to the higher employee headcount in the R&D wing and activities pertaining to the antibody collaboration with Sanofi-Aventis (SNY). The massive jump in SG&A expenses in the third quarter of 2011 was attributable to the increase in the work-force at Regeneron.
Moreover, higher costs incurred in relation to the anticipated launch of Eylea, co-developed with Bayer (BAYRY), for treating patients suffering from the neovascular form of age-related macular degeneration (wet AMD) also contributed to the rise. Eylea is also being studied for other eye disorders.
Our Take & Recommendation
We believe that the earnings report is a non-event for Regeneron as investor focus will be on the fate of Eylea for the treatment of wet AMD. The candidate is currently under review in the US for the wet AMD indication. A response should be out by November 18, 2011.
Currently, we have a Neutral stance on Regeneron in the long run. The company carries a Zacks #3 Rank (Hold rating) in the short run.
ASTRAZENECA PLC (AZN): Free Stock Analysis Report
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