Regeneron Pharmaceuticals REGN reported second-quarter 2015 adjusted earnings (including stock-based compensation expense) of $2.12 per share, up from $1.99 per share earned in the year-ago quarter. Earnings were also above the Zacks Consensus Estimate of $1.81.
Including one-time items, earnings increased 99% to $1.69 per share. Excluding stock-based compensation expenses, the company earned $2.89 per share in the second quarter of 2015, up 17%.
Total revenues in the reported quarter soared 50% year over year to $998.6 million driven by strong sales of eye drug, Eylea, as well as impressive collaboration revenues. 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 $891 million. Total revenues included net product sales, collaboration revenues and technology licensing revenues.
Quarterly Highlights
Net product sales jumped to $657.8 million in the quarter from $418 million a year ago. The majority of sales came from Eylea in the U.S. ($655 million, up 58% year over year). Sales of Eylea in ex-U.S. markets were $338 million.
Collaboration revenues came in at $329 million in the quarter compared with $240 million a year ago. The increase was due to higher net profit from Eylea sales in ex-U.S. markets and reimbursement received from Sanofi SNY.
Regeneron is developing 15 human monoclonal antibodies, utilizing its VelocImmune technology. The company is developing five of the antibodies in partnership with Sanofi. Revenues from technology licensing increased from $7.8 million to $11.5 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 increased its guidance for Eylea. For 2015, the company expects U.S. Eylea sales to grow 45–50% year on year, up from the prior forecast of 30–35%. The company revised the guidance for both R&D and SG&A expenses downward. The company now expects adjusted unreimbursed R&D expenses in the range of $510 million to $550 million (previous guidance: $525 million to $575 million). Adjusted SG&A costs are now projected in the band of $610 million to $650 million (previous guidance: $650 million to $725 million).
Our Take
In the reported quarter, U.S. sales of Eylea showed an improvement of approximately 21.1% sequentially. 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, for the treatment of high LDL cholesterol in adults gained approval in the U.S. The cholesterol management market represents huge commercial potential and Praluent is expected to generate blockbuster sales.
Regeneron carries a Zack Rank #3 (Hold). Ligand Pharmaceuticals Incorporated LGND is a better-ranked stock in the health care sector. Ligand carries a Zacks Rank #1 (Strong Buy).
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