Regeneron Pharmaceuticals (REGN) reported fourth-quarter 2014 adjusted earnings (including stock-based compensation expense) of $2.16 per share, up from $1.81 per share earned in the year-ago quarter. Earnings were also above the Zacks Consensus Estimate of $2.08.
Including one-time items, earnings increased 12% to 96 cents per share. Excluding stock-based compensation expenses, the company earned $2.79 per share in the fourth quarter of 2014, up 25%.
Total revenues in the reported quarter soared 31% year over year to $802 million driven by strong sales of eye drug, Eylea, as well as impressive collaboration revenues. 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. The FDA approved Eylea for the treatment of diabetic macular edema (DME) in Jun 2014 and for the treatment of macular edema following retinal vein occlusion in Oct 2014.
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 and is entitled to the entire U.S. profits. Regeneron and Bayer equally share the profits and losses from ex-U.S. Eylea sales, except for Japan, where Regeneron receives a royalty on net sales.
Revenues beat the Zacks Consensus Estimate of $783 million. Total revenues included net product sales, collaboration revenues and technology licensing revenues.
The company’s full-year earnings were $7.65 per share (including stock-based compensation), way ahead of the 2013 earnings of $6.62 per share but short of the Zacks Consensus Estimate of $8.01. Revenues came in at $2.8 billion, up 34% and in line with the Zacks Consensus Estimate.
Quarterly Highlights
Net product sales jumped to $521 million in the quarter from $406 million a year ago. The majority of sales came from Eylea in the U.S. ($518 million, up 29% year over year). Sales of Eylea in ex-U.S. markets were $297 million.
Collaboration revenues came in at $272 million in the quarter compared with $197 million a year ago. The substantial rise was due to higher net profit from Eylea sales in ex-U.S. markets.
Regeneron is developing 15 human monoclonal antibodies, utilizing its VelocImmune technology. The company is developing five of the antibodies in partnership with Sanofi (SNY). Revenues from technology licensing increased 10% to $8.4 million.
Both research and development (R&D) and selling, general and administrative (SG&A) expenses were on the upswing during the reported quarter.
2015 Outlook
Regeneron provided guidance for Eylea. In 2015, the company expects U.S. Eylea sales to grow 25–30% year over year. The company now expects adjusted unreimbursed R&D expenses in the range of $525 million to $575 million. Adjusted SG&A costs are now projected in the band of $650 million to $725 million.
Our Take
In the reported quarter U.S. sales of Eylea showed an improvement of 16.4% sequentially. We believe sales of the eye drug could improve going forward benefiting from the inclusion of DME and macular edema after branch retinal vein occlusion indications in its label. 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.
Meanwhile, focus will remain on updates on the label expansion efforts 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, developed in collaboration with Sanofi is also expected in 2015.
Regeneron carries a Zack Rank #3 (Hold). A better-ranked stock in the health care space is Alnylam Pharmaceuticals, Inc. (ALNY) holding a Zacks Rank #2 (Buy).
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