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Can Regeneron Pharma (REGN) Pull a Surprise in Q2 Earnings?

Regeneron Pharmaceuticals, Inc. REGN is scheduled to release second-quarter 2017 results on Aug 3, before the opening bell.

The company’s performance has been mixed so far. In the last four reported quarters, it surpassed earnings estimates on two occasions and missed in two. Overall, the company has recorded an average positive earnings surprise of 0.45%.

Regeneron’s share price movement shows that the stock outperformed the Zacks categorized industry in the year so far. Specifically, the stock has rallied 39.8% during this period, while the industry gained 11.5%.

Last quarter, Regeneron Pharma missed earnings expectations by 13.6%. Let’s see how things are shaping up for this quarter.

Factors Influencing This Quarter

Regeneron Pharma’s key growth driver, Eylea, is likely to continue to contribute to the company’s top line growth.  However, growth pace for the drug has slowed down and the company expects the same to be in single digits in 2017.

We note that Regeneron Pharma has a global development and commercialization agreement with Bayer AG BAYRY outside the U.S. for Eylea. Product revenues from ex-U.S. Eylea sales are recorded by Bayer.

The company is working on expanding Eylea’s label into diabetic retinopathy in an ongoing phase III study.

Apart from Eylea, investors will remain focused on the performance of the PCSK9 inhibitor, Praluent. Sales of Praluent have failed to impress so far.

In Jan 2017, Kevzara (sarilumab), an anti interleukin (IL)-6 receptor monoclonal antibody was approved in Canada for the treatment of adult patients with moderately to severely active rheumatoid arthritis who have an inadequate response to or intolerance to one or more biologic or non-biologic Disease-Modifying Anti-Rheumatic Drugs. In May 2017, the FDA also approved Kevzara for the same indication. 

In Jun 2017, the European Medicine Agency`s (EMA) also approved the drug for the same indication. The approval of Kevzara will further boost the company's portfolio. In addition, the company is currently enrolling patients in a study for the treatment of polyarticular-course juvenile idiopathic arthritis.

The company also received a boost when the FDA approved its Dupixent (dupilumab) Injection for the treatment of adults with moderate-to-severe atopic dermatitis (AD). Pricing will play a key role in the uptake of the drug and we expect the company to throw more light on the same.

During the second-quarter earnings call, focus will be on the company’s performance, particularly Eylea and Dupixient launch. Investors are also expected to await updates on the company’s pipeline. 

Earnings Whispers

Our proven model does not conclusively show that Regeneron Pharma 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.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.67. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Regeneron Pharma currently carries a Zacks Rank #3. Although the company’s rank is favorable, the 0.00% ESP makes surprise prediction difficult.

Note, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant 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.

Zoetis Inc. ZTS has an Earnings ESP of +1.89% and a Zacks Rank #3. The company is scheduled to release results on Aug 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intercept Pharmaceuticals, Inc. ICPT has an Earnings ESP of +9.39% and a Zacks Rank #3. The company is expected to release results on Aug 3.

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