Why Is Regeneron (REGN) Up 26.8% Since Last Earnings Report?

It has been about a month since the last earnings report for Regeneron (REGN). Shares have added about 26.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Regeneron due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Regeneron's Q4 Earnings & Sales Surpass Estimates

Regeneron reported earnings of $7.50 per share in the fourth quarter, comfortably beating the Zacks Consensus Estimate of $6.90 and increasing from $6.84 in the year-ago quarter.

Total revenues in the reported quarter increased 13% year over year to $2.2 billion and comfortably beat the Zacks Consensus Estimate of $2.1 billion. The year-over-year growth was driven by strong Eylea and Dupixent sales.

Quarterly Highlights

Net product sales increased to $1.3 billion in the quarter under review, up from $1.1 billion in the year-ago quarter. Majority of sales in the United States came from Eylea ($1.22 billion, up from $1.08 billion in the year-ago quarter).

We note that Regeneron co-developed Eylea with the HealthCare unit of Bayer (DE:BAYGN). The company is solely responsible for sales of this eye drug and entitled to profits in the United States. However, it shares profits and losses from the ex-U.S. Eylea sales equally with Bayer, except in Japan where the company receives a royalty on net sales.

Total revenues also included Sanofi (PA:SASY) and Bayer’s collaboration revenues of $748 million compared with $729 million in the year-earlier quarter. The increase was primarily owing to higher net product sales of Dupixent.

We note that sale proceeds from drugs like Praluent, Dupixent and Kevzara are garnered by Sanofi, while Regeneron earns profits or incurs losses from the commercialization of the drugs.

Dupixent’s sales summed $751.5 million, up from $318.8 million a year ago. Kevzara recorded sales of $59.7 million, up from $35.2 million in the year-earlier quarter.

Praluent’s global net sales totaled $81.4 million in the reported quarter, down from $93.2 million in the prior-year quarter.

Libtayo sales in the quarter totaled $74.7 million, up from $14.8 million in the prior-year quarter.

R&D expenses were up 13.6% to $683 million, while SG&A expenses increased to $586.8 million during the quarter under consideration from $491.3 million in the year-ago quarter.

Update on Sanofi Agreement

Regeneron and partner Sanofi announced their intent to restructure their antibody collaboration for Kevzara and Praluent and enter into a royalty-based arrangement. Per the proposed terms of the agreement, Sanofi is expected to gain sole global rights to Kevzara and sole rights to Praluent outside of the United States. Meanwhile, Regeneron is expected to gain sole U.S. rights to Praluent. Both companies will be solely responsible for funding development and commercialization expenses in their respective territories. The proposed agreement, which is expected to be finalized in the first quarter of 2020, will not impact the companies' existing collaboration related to Dupixent and REGN3500.

2019 Results

Sales of $7.9 billion were up 17% from $6.7 billion in 2018. Earnings per share came in at $24.67 compared to $22.84 in 2018.

2020 outlook

Regeneron will provide financial guidance for 2020 by the end of the first quarter of 2020 due to the impending restructuring agreement with Sanofi for Kevzara and Praluent.

Pipeline Update

In December 2019, Regeneron launched the Eylea pre-filled syringe in the United States.

Regeneron is also working to expand Dupixent’s label. In October 2019, the European Commission (EC) approved Dupixent in chronic rhinosinusitis with nasal polyposis (CRSwNP). The FDA accepted for priority review the supplemental Biologics License Application (sBLA) for Dupixent for the indication of moderate-to-severe atopic dermatitis in children aged 6-11 years with a target action date of May 26, 2020. In addition, a Marketing Authorization Application (MAA) for the same was recently submitted in the European Union. A phase II/III study in bullous pemphigoid and phase III studies in prurigo nodularis and chronic spontaneous urticaria were initiated.

A phase II neoadjuvant study on Libtayo for the treatment of cutaneous squamous cell carcinoma (CSCC) was initiated.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 23.64% due to these changes.

VGM Scores

Currently, Regeneron has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Regeneron has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.