Regeneron Pharmaceuticals Inc.’s (REGN) fourth quarter 2013 earnings (including stock-based compensation expense but excluding other special items) of $1.75 per share breezed past the Zacks Consensus Estimate of 99 cents. The company earned $1.20 per share in the year-ago quarter. Higher revenues boosted earnings in the final quarter of 2013.
Total revenue in the reported quarter soared 47% year over year to $610 million, driven by strong sales of eye drug, Eylea. The drug was launched in the U.S. in Nov 2011 for treating patients suffering from the neovascular form of age-related macular degeneration. In Sep 2012, the label of the drug was successfully expanded to treat patients suffering from macular edema following central retinal vein occlusion.
We note that Regeneron has co-developed Eylea with the HealthCare unit of Bayer (BAYRY). Regeneron is solely responsible for the U.S. sales of the eye drug. The company is entitled to the entire profits arising from U.S. sales of Eylea. Regeneron and Bayer equally share the profits and losses from ex-US Eylea sales, except for Japan, where Regeneron receives a royalty on net sales.
Revenues easily beat the Zacks Consensus Estimate of $580 million. Total revenue included net product sales, collaboration revenue and technology licensing revenue.
The company’s full-year earnings were $6.38 per share (including stock-based compensation), way ahead of 2012 earnings of $3.78 and the Zacks Consensus Estimate of $3.90 per share. Revenues came in at $2.11 billion, up 53% and in line with the Zacks Consensus Estimate.
The Fourth Quarter in Detail
Net product sales jumped to $406 million in the final quarter of 2013 from $281 million a year ago. Bulk of the sales ($402 million) came from Eylea in the U.S. Sales of Regeneron’s Arcalyst (cryopyrin-associated periodic syndromes) came in at a mere $4 million in the fourth quarter of 2013. Sales of Eylea in ex-U.S. markets were $184 million.
Sales of oncology drug Zaltrap were $20 million in the fourth quarter of 2013 as per partner Sanofi (SNY). As per the terms of the agreement, both companies share profits and losses from commercialization of the drug excluding Japan, where Regeneron receives a royalty on sales.
Collaboration revenues came in at $197 million, up 55%. Revenues from technology licensing increased marginally at $7.7 million.
Both research and development (R&D) expenses and selling, general and administrative (SG&A) expenses were on the upswing during the reported quarter.
The increase in R&D expenses was primarily attributable to the company’s efforts to develop its pipeline. Higher costs related to the marketing of Eylea were primarily responsible for pushing the SG&A costs up.
Bright Outlook for Eylea in 2014
Encouraged by the strong performance of the eye drug, Regeneron expects Eylea sales in the range of $1.7–$1.8 billion in 2014, well above the $1.41 billion recorded in 2013.
Our Take
We are impressed by Regeneron’s fourth quarter results with both revenues and earnings coming in well above expectations. We expect Eylea to continue performing well, thereby driving growth at Regeneron. Bayer and Regeneron are looking to get the drug approved for additional indications.
Successful label expansion of Eylea will further boost its sales potential. Recently, the companies announced encouraging long-term data on Eylea in the diabetic macular edema indication. We believe investor focus will remain on the companies’ efforts to expand Eylea’s label.
Regeneron, a biopharmaceutical company, carries a Zacks Rank #3 (Hold). A better-ranked biopharma stock is Alexion Pharmaceuticals, Inc. (ALXN), carrying a Zacks Rank #1 (Strong Buy).
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