Regeneron Pharmaceuticals, Inc. REGN is scheduled to release second-quarter 2018 results on Aug 2, before the opening bell.
In the last reported quarter, Regeneron beat earnings expectations by 4.47%. The company’s performance has been excellent. In the last four quarters, it surpassed earnings estimates on all occasions, with an average beat of 12.02%. Let’s see how things are shaping up for this quarter.
Regeneron’s stock has lost 1.8% year to date compared with the industry’s decline of 4.9%.
Factors Influencing This Quarter
Regeneron’s key growth driver, Eylea, is likely to continue contributing 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.
The performance of Eylea is impressive and it should continue in the second quarter as well. Meanwhile, Regeneron is working on expanding Eylea label into additional indications. The company is seeking approval 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. Label expansion into additional indications would give Eylea access to higher patient population and increase the commercial potential of the drug.
Apart from Eylea’s performance and label expansion efforts, investors will remain focused on the uptake of new drugs — Kevzara and Dupixent. The company has a collaboration agreement with Sanofi SNY for both the drugs. The company increased its projection for collaboration revenues concurrent with first-quarter results. Collaboration revenues from Sanofi are now projected around $450-$485 million compared to the previous guidance of $450-$500 million.
The uptake of Dupixent has been encouraging so far and we expect the top line to get a further boost. The drug was approved for launch in Europe. The company is also working to expand the drug’s label. Dupixent is being studied in asthma, adolescent and pediatric atopic dermatitis, nasal polyps, and eosinophilic esophagitis (EoE), along with additional studies planned in 2018.
Data are expected to be reported from phase III studies in patients with nasal polyps and adolescent patients with atopic dermatitis during 2018. In March 2018, the sBLA for Dupixent as an add-on maintenance treatment in certain adults and adolescents (12 years of age and older) with moderate-to-severe asthma was filed with the FDA. The agency has set a target action date of Oct 20, 2018. The EMA has also accepted the company’s application for the review.
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 drug also contributes to the company’s top line.
In April 2018, the FDA accepted the priority review of the biologics license application (BLA) for cemiplimab for the treatment of patients with metastatic CSCC or patients with locally advanced CSCC. The target action date for the FDA decision is Oct 28, 2018
Hence, focus will be on the company’s performance, particularly on Eylea and Dupixient’s uptake during the earnings call. Investors are also expected to await updates on the company’s pipeline.
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.
Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.11%. This is because the Most Accurate estimate is $4.73, while the Zacks Consensus Estimate is $4.74. 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 #2 which increases the possibility of a beat. However, a negative Earnings ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) 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.
Pacira Pharmaceuticals, Inc. PCRX has an Earnings ESP of +42.86% and currently carries a Zacks Rank #2. The company is scheduled to release second-quarter report on Aug 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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