Why Is Regeneron (REGN) Up 9.2% Since Last Earnings Report?

It has been about a month since the last earnings report for Regeneron (REGN). Shares have added about 9.2% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Regeneron's Q1 Earnings & Sales Surpass Estimates

The company reported earnings of $6.60 per share in the first quarter, comfortably beating the Zacks Consensus Estimate of $5.73 and increasing from $4.45 in the year-ago quarter.

Total revenues in the reported quarter jumped 33% year over year to $1.8 billion and comfortably beat the Zacks Consensus Estimate of $1.7 billion. However, revenues were down sequentially from $2.2 billion.  The year-over-year growth was driven by strong Eylea and Dupixent sales.

Quarterly Highlights

Net product sales increased to $1.2 billion in the quarter, up from $1.1 billion in the year-ago quarter. Majority of sales in the United States came from Eylea ($1.17 billion, up from $1.07 billion in the year-ago quarter).

We note that Regeneron co-developed Eylea with the HealthCare unit of Bayer AG. 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 and Bayer’s collaboration revenues of $528 million compared with $246 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 $855.2 million, up from $373.7 million in the year-ago quarter and $751.5 million in the previous quarter. Kevzara recorded sales of $60.1 million, up from $33.7 million in the year-earlier quarter.

Praluent’s global net sales totaled $79.8 million in the reported quarter, up from $63.9 million in the prior-year quarter.

Libtayo sales in the quarter totaled $74.8 million, up from $26.8 million in the prior-year quarter.

R&D expenses increased to $527.2 million from $427.4 million, while SG&A expenses increased to $5306.8 million during the quarter from $242.3 million in the year-ago quarter.

Update on Sanofi Agreement

Regeneron and partner Sanofi restructured their antibody collaboration for Praluent. In the United States, Regeneron will be solely responsible for the development and commercialization of Praluent and record net product sales. Sanofi will have sole responsibility for the development and commercialization of the drug outside the United States and pay  Regeneron a 5% royalty on net product sales.

The agreement related to Kevzara is pending in light of the recently-launched clinical programs evaluating Kevzara in patients hospitalized with COVID-19.

COVID-19 Update

Regeneron is advancing REGN-COV2, a novel investigational antibody "cocktail" treatment designed to prevent and treat the SARS-CoV-2 virus. In April, Regeneron moved its leading neutralizing antibodies into pre-clinical and clinical-scale cell production lines and plans to begin clinical studies in June 2020.

Regeneron and Sanofi are also evaluating Kevzara for COVID-19. In April 2020, Regeneron provided an update on the adaptively-designed phase II/III U.S. study evaluating Kevzara  in patients hospitalized with COVID-19 infection. An Independent Data Monitoring Committee recommended continuing the ongoing phase III trial only in the more advanced "critical" group with the 400 mg dose of Kevzara and discontinuing the study in the less advanced "severe" group, based on initial phase II results.

Pipeline Update

In February 2020, Regeneron announced positive two-year results from the phase III PANORAMA study evaluating Eylea in patients with moderately severe to severe non-proliferative diabetic retinopathy (NPDR), wherein Eylea reduced the likelihood of developing vision-threatening events by at least 75% in patients with NPDR. 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 to 11 years, with a target action date of May 26, 2020. In addition, a Marketing Authorization Application (MAA) for the same indication has also been submitted in the European Union (EU).

The primary endpoint was met in the phase III study of Libtayo as monotherapy in first-line non-small cell lung cancer (NSCLC). The Independent Data Monitoring Committee recommended stopping the study early due to highly significant improvement in overall survival. The data from the study will form the basis of regulatory submissions in the United States and the EU in the second half of 2020.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 36.92% due to these changes.

VGM Scores

At this time, 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 B on the value side, putting it in the top 40% 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

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Regeneron has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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