Regeneron Pharmaceuticals, Inc. (REGN) is scheduled to release its fourth-quarter 2014 financial results before the opening bell on Feb 10, 2015.
The company has recorded positive earnings surprises in two of the four trailing quarters with an average beat of 33.94%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Earnings Surprise?
Our proven model shows that Regeneron is likely to beat earnings as it has the required combination of two key components.
Zacks ESP: Regeneron has a positive Zacks ESP. That is because the Earnings ESP which represents the difference between the Most Accurate estimate of $2.26 per share and the Zacks Consensus Estimate of $2.08 is +8.65%.
Zacks Rank: Regeneron has a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings.
Sell-rated stocks (#4 and 5) should never be considered going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
The combination of Regeneron’s Zacks Rank #3 and +8.65% ESP makes us confident of a likely earnings beat this season.
Factors Indicating Better-than-Expected Earnings
Eye drug, Eylea is the key growth driver at Regeneron. Regeneron has co-developed Eylea with the HealthCare unit of Bayer (BAYRY). Regeneron records the entire U.S. sales, while Regeneron and Bayer equally share the profits and losses from ex-U.S territories.
In the third quarter, U.S. sales of Eylea showed an improvement of 7.2% sequentially. We believe sales of the eye drug could improve going forward. In the third quarter, the company received approval for Eylea in the U.S. for the treatment of diabetic macular edema (DME) and for the treatment of macular edema following retinal vein occlusion at the beginning of the fourth quarter of 2014. As per company sources, approximately 600,000 eyes are diagnosed with DME in the U.S. annually. Thus, DME represents a large potential market opportunity for Eylea. The company now expects U.S. Eylea sales in the range of $1.7 billion to $1.74 billion in 2014. Growth in Eylea revenues in ex-U.S should add on to Regeneron’s collaboration revenues.
Meanwhile, focus will remain on updates on the label expansion of Eylea. Regeneron is looking to get Eylea’s label expanded to include diabetic retinopathy in patients with DME. A final decision from the FDA is expected by Mar 30, 2015. A regulatory decision on the company’s PCSK9 (proprotein convertase subtilisin/kexin type 9) antibody, Praluent, is also expected in 2015. Investors are also looking forward to the company’s outlook for 2015, which is expected to be revealed along with the earnings release.
Stocks That Warrant a Look
Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat.
Acorda Therapeutics, Inc. (ACOR) has an Earnings ESP of +106.67% and a Zacks Rank #3. The company is expected to release results on Feb 12.
Actavis (ACT) has an earnings ESP of +4.38% and carries a Zacks Rank #2 (Buy). The company is expected to release fourth-quarter 2014 results on Feb 18.
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