Regeneron Pharmaceuticals, Inc. REGN is scheduled to release third-quarter 2015 financial results before the opening bell on Nov 4, 2015.
The company has recorded a positive earnings surprise in one of the trailing four quarters with an average negative earnings surprise of 11.84%. Let’s see how things are shaping up for this announcement.
Eylea Holds the Key
Eye drug, Eylea, which was co-developed by Regeneron and the HealthCare unit of Bayer BAYRY, is the key growth driver at the company. Regeneron has rights to the entire U.S. sales of the drug, while Regeneron and Bayer equally share profits from its sale in ex-U.S territories.
In the second quarter, U.S. sales of Eylea showed a sequentially improvement of 21.1%. For 2015, the company expects Eylea’s U.S. sales to grow 45–50% year over year. We believe sales of the eye drug could improve going forward, benefiting from the inclusion of diabetic retinopathy, diabetic macular edema and macular edema after branch retinal vein occlusion indications in its label.
Regeneron received a major boost when its PCSK9 inhibitor, Praluent, gained approval in the U.S. for the reduction of high LDL cholesterol in adults. The cholesterol management market represents huge commercial potential and Praluent is expected to generate blockbuster sales.
What Our Model Indicates
Our proven model does not conclusively show that Regeneron is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to likely post an earnings beat. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.62.
Zacks Rank: Regeneron currently carries a Zacks Rank #2 (Buy). Although the company’s Zacks Rank #2 enhances the predictive power of the ESP, the company’s ESP of 0.00% makes a surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are a few health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
The Earnings ESP for Alnylam Pharmaceuticals, Inc. ALNY is +2.31% and it carries a Zacks Rank #3. The company is expected to release results on Nov 4.
Merrimack Pharmaceuticals, Inc. MACK has an Earnings ESP of +2.44% and a Zacks Rank #3. It is expected to release results on Nov 9.
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