What’s in the Offing for Regeneron (REGN) in Q1 Earnings?

Regeneron Pharmaceuticals, Inc. REGN is scheduled to release first-quarter 2018 results on May 3, before the opening bell.

In the last reported quarter, Regeneron beat earnings expectations by 11.75%. The company’s performance has been decent so far. In the last four quarters, it surpassed earnings estimates on three occasions while missing in one, with an average beat of 9.15%. Let’s see how things are shaping up for this quarter.

Regeneron’s stock has lost 20.1% year to date compared with the industry’s decline of 8.8%.

Factors Influencing This Quarter

Regeneron’s key growth driver, Eylea, is likely to continue to contribute 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), 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 BAYRY 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 label into additional indications. The company is seeking approval a for a 12-week dosing interval of Eylea Injection in patients with wet AMD based on physician's assessment. The action date set by the FDA is Aug 11, 2018. A phase III study (in Japan) is evaluating it for neovascular glaucoma.

The PANORAMA study met its 24-week primary endpoint. 58% of the patients who were treated with Eylea achieved a two-step or greater improvement in DRSS score from baseline at week 24, compared to 6% of patients receiving sham injection. The company plans to submit a supplemental BLA to the FDA later in 2018. Label expansion into additional indications would 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 company has a collaboration agreement with Sanofi SNY for both drugs. Collaboration revenues from Sanofi are projected around $450-$500 million.

The initial uptake of Dupixent was encouraging in 2017 and we expect the top-line to get a further boost from the drug’s uptake. The drug was approved in Europe also and is being launched there. The company is also working to expand the drug’s label. A phase III study in pediatric patients (from six to 11 years of age) with severe atopic dermatitis was initiated in the fourth quarter of 2017.

Additionally, a phase II/III study in younger pediatric patients (from six months to five years of age) with severe atopic dermatitis was initiated in the first quarter of 2018. Regeneron also submitted a sBLA to the FDA for the use of Dupixent in the treatment of asthma in patients aged 12 and over and a decision is expected in October 2018.

The EMA has also accepted the company's application. The company also expects to initiate initiate a phase II study for desensitization of patients with allergies to airborne allergens later this year.

Kevzara, an anti interleukin (IL)-6 receptor monoclonal antibody for the treatment of adult patients with moderately to severely active rheumatoid arthritis was approved by the FDA in May 2017. The approval of Kevzara is expected to further boost the company's portfolio.

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

Meanwhile, Regeneron and partner Sanofi have been allowed to continue to sell their PCSK9 inhibitor, Praluent, in the United States by the Court of Appeals for the Federal Circuit following a favorable ruling. Regeneron along with partner Sanofi announced positive results from the ODYSSEY OUTCOMES study evaluating the long-term clinical benefit of Praluent initiation in patients with post-acute coronary syndrome.

Earnings Whispers

Our proven model does not show that Regeneron is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, 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 -4.45%. This is because the Most Accurate estimate is $4.31 while the Zacks Consensus Estimate is $4.51. 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 predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings beat.

Note that 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.

A Stock That Warrants a Look

Here is a health care stock that you may want to consider instead, as our model shows that it has the right combination of elements to post an earnings beat this quarter.

Emergent Biosolutions Inc. EBS has an Earnings ESP of +61.8% and a Zacks Rank #2. The company is scheduled to release Q1 results on May 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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